Response to the Audit
October 12, 2016
Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle,
Response to the California State Auditor Draft Audit Report, “Department of Developmental Services: It Cannot Verify That Vendor Rates for In‑Home Respite Services Are Appropriate and That Regional Centers and Vendors Meet Applicable Requirements"
Thank you for the opportunity to respond to the Draft Audit Report (Audit or Report) for the Department of Developmental Services’ (DDS or Department) of the rate-setting policies and expenditures of in‑home respite services. The Department appreciates the State Auditor’s review of in-home respite services. While the Department does not agree with some of the conclusions and recommendations of the audit, there are other recommendations with which we agree and will address. Our response will provide clarifying information where appropriate for the recommendations.
Department Response to Recommendations to the Legislature
Recommendation 1: To ensure that vendors’ in‑home respite hourly payment rates are reasonable and appropriate, particularly when compared to their administrative costs and the hourly wages they pay to respite workers, the Legislature should require DDS to conduct an in‑depth review of its in-home respite rates by November 1, 2017. In conducting this review, the Legislature should require DDS to perform the following:
- Obtain and analyze all vendors’ cost statements to determine their costs of providing services and whether vendors’ administrative costs are reasonable.
- Obtain information from vendors on the hourly wages they pay to respite workers and analyze this information to determine whether vendors’ hourly rates are reasonable.
- Using information from the cost statements, identify whether vendors’ temporary hourly rates should be converted to permanent hourly rates.
- Submit a report to the Legislature on the results of its review, including a proposal on the extent to which legislative changes are needed to ensure that in‑home respite rates are reasonable.
Response: The recommendation indicates the Legislature should require DDS to perform, as part of this review:
- An analysis of vendor cost statements to determine if vendor’s administrative costs are reasonable.
- An analysis of hourly wages paid to respite workers to determine whether vendors’ hourly rates are reasonable.
- A proposal on the extent to which legislative changes are needed to ensure that in‑home hourly respite rates are appropriate.
Although this recommendation is directed to the Legislature, DDS believes it is important to provide follow‑up comments for consideration. As noted in the report, Section 4519.8 was added (Statutes of 2016, 2nd Extraordinary Session, Chapter 3, Section 2,) to the Welfare and Institutions (W&C) Code, requiring DDS to conduct a rate study by March 1, 2019, addressing the sustainability, quality, and transparency of community-based services for individuals with developmental disabilities. This comprehensive study will include:
- an assessment of the effectiveness of the methods used to establish all service rates;
- whether the current rate setting methods provides an adequate supply of providers; and
- a comparison of the estimated fiscal effects of alternative rate methodologies.
The recommendation by the Auditor is limited to a review of rates for only one service and does not include the important considerations of providing access to respite services or an assessment of alternative rate methodologies. Further, the report does not justify why a prioritized review of rates for this one service, over all others, is warranted. DDS believes the comprehensive rate study required by W&I Code section 4519.8 is the more efficient approach as opposed to looking at rates for a single service without consideration of the potential impact to other services with similar rate setting methodologies. Completion of this study is required by March 1, 2019, to allow the time necessary to provide a thorough review of service rates and access to all services. Additionally, DDS received funding through the current Budget Act to hire a contractor to undertake this comprehensive rate study. The recommendation to the Legislature does not address the resources needed to complete a focused review of in‑home respite rates.
Recommendation 2: The Legislature should require workers who provide in-home respite services to consumers to undergo a criminal background check to ensure the health and safety of individuals with developmental disabilities. For the other programs that fall under the Lanterman Act, the Legislature should require DDS to conduct a review of the types of services provided directly to consumers and whether any oversight mechanisms are in place to ensure that workers providing these services do not have criminal backgrounds. The Legislature should require DDS to report the results of this review no later than December 31, 2017, and, using the results of this review, determine whether legislation requiring such workers to undergo criminal background checks is necessary to protect the health and safety of individuals with developmental disabilities.
Response: The Department agrees the recommendation to require criminal background checks for workers who provide direct services to individuals with developmental disabilities has merit. However, depending upon how a background check program is implemented it could have costs for service providers, employees, DDS and other state departments. DDS currently requires Family Home Agencies (FHAs) to perform criminal background checks on employees and family mentors. Assuming all programs that provide direct services to consumers were required to perform similar checks, there would be a cost to either the service provider or the employee for the fee associated with performing the background check. This will increase provider costs, or if the employee is required to assume the cost, it could reduce the number of individuals willing to work in these program areas.
Additionally, this will increase administrative costs to DDS and other state departments. For example, the background checks performed on potential FHA employees and family mentors are sent to the California Department of Justice for review. Those with a criminal history are referred to DDS for further review, resulting in an exemption or denial of the person working in that setting. DDS may also have to coordinate background checks with licensing agencies such as the Department of Social Services or the Department of Public Health.
Department Response to Recommendations to DDS
Specific responses to the recommendations to DDS are as follows:
Recommendation 1: To ensure that regional centers are aware of the benefits, including cost savings to the State, that can be realized by using Financial Management Service (FMS) vendors, DDS should formally communicate to regional centers regarding the model.
Response: DDS will formally communicate to regional centers a reminder that participant‑direction of respite, through the use of FMS vendors, is an option for the delivery of this service. The communication will note that, as stated in regulation, “…the regional center may offer Participant-Directed Services to allow the adult consumer and/or family member to procure their own …respite…services.”
Recommendation 2: To ensure that in‑home respite vendors are providing quality services and that vendors are adhering to state requirements, DDS should issue regulations requiring regional centers to conduct periodic and ongoing reviews of vendors’ programs, employees, and consumer records.
Response: As noted in the response to recommendation #3 below, there are existing regulations for periodic reviews of some vendor requirements, although perhaps not as expansive as envisioned by the Auditor’s recommendations. The Auditor points out in the report that some regional centers reported they previously completed more expanded reviews of all providers but no longer do because of a lack of resources. Therefore, it is likely that compliance with any potential new requirements would pose a significant challenge for regional centers without an associated increase in funding.
Recommendation 3: To ensure that in‑home respite vendors comply with vendor requirements on an on‑going basis, DDS should require the regional centers to develop a process to conduct biennial reviews of the vendor files the regional centers maintain and document the outcome of the review in the files. DDS should require the regional centers to take appropriate action to ensure that vendors comply and, if necessary, terminate the vendorization.
Response: Pursuant to Title 17 Section 54332 (b), regional centers are required to review, at least biennially or sooner upon notification by DDS, Department of Health Care Services, or any governing licensing or certification board or entity, all vendor files maintained by the regional center to determine that:
- The information required for vendorization is current, completed and accurate;
- At least one consumer has been provided services by the vendor within the last 24 months;
- The service currently provided by the vendor is the same service approved for vendorization;
- Vendors meet the minimum program standards as specified in Sections 56710 through 56802 of these regulations, if applicable;
- The vendor has signed the Home and Community Based Services Provider Agreement (6/99), if applicable; and
- The vendor is not in violation of the requirement stated in Section 54314(a)(7).
In response to the concern raised by the Auditor, the Department will send a directive to regional centers reminding them of their responsibility to review vendor files, at least biennially, to ensure compliance with the above section.
Recommendation 4: To ensure that it is providing oversight in accordance with state law and federal requirements, DDS should ensure that it performs audits of each regional center every two years as required. In conducting these audits, DDS should consistently include a review of in-home respite services.
Response: DDS agrees with the Auditor that audits of all regional centers should be conducted every two years to ensure proper oversight in accordance with state and federal requirements. However, DDS disagrees with the Auditor’s finding that DDS has only completed 14 of the 21 fiscal audits for fiscal years 2013-14 and 2014-15. Per the Home and Community‑Based Services Waiver agreement, DDS has consistently ensured that regional centers are audited every two years. The audits are conducted within the two‑year timeframe, however, for some audits the issuance and posting of the final report has been protracted due to the internal review process and evaluation of additional information from the regional centers. While there may be delays in issuing the audit reports, during the fieldwork process, regional centers are consistently updated weekly on all issues identified during the audit and DDS program staff are informed of audit issues that may require immediate attention. Nonetheless, as stated in the audit report, DDS is working to have a more efficient review process, whereby regional center audit reports would be completed in a timelier manner.
Although the current audit program does not include a separate review of the in‑home respite services, the current fiscal audits of the regional centers does include the review of numerous service programs which would include in‑home respite services as part of the sampling testing. One specific program included in the regional center audit is the Family Cost Participation Program (FCPP) which contains the in-home respite service. In performing the review of the FCPP, the audit staff would incorporate in their testing, the in-home respite service codes 420, 862 and 864. This testing would include the review of vendor files to verify that contracts/rate letters, Home and Community Base Service Provider Agreement Forms, Vendor Application and Applicant/Vendor Disclosure Statement Forms are on file. Furthermore, the testing will also include ensuring services are properly authorized and payments are supported with invoices and attendance records. In addition, under the State contract with the regional centers, Article III, Vendor Fiscal Monitoring, Section 10(c), regional centers are required to conduct a minimum number of audits annually which includes the service category 862, in‑home respite service agencies.
In closing, DDS appreciates the Auditor’s review and, where we agree, will implement the Auditor’s recommendations to address the findings identified in the Audit Report. Thank you for the opportunity for DDS to provide input to the Draft Audit Report. Please contact me or John Doyle, Chief Deputy Director, at (916) 654-1897, if you have any questions.
Original signed by John Doyle for
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE DEPARTMENT OF DEVELOPMENTAL SERVICES
To provide clarity and perspective, we are commenting on the response to our audit report from the Department of Developmental Services (DDS). The numbers below correspond to the numbers we have placed in the margin of DDS’s response.
We disagree with DDS and continue to believe it is important that it assesses the hourly rates it pays to vendors for the in‑home respite services program (in‑home respite services) sooner than March 2019. As we note in the Audit Results, DDS has not assessed the appropriateness of the hourly rates it pays to vendors for in‑home respite services in more than a decade. Specifically, as we state in the Audit Results, DDS changed its approach to calculating payment rates and no longer requires vendors to submit cost statements. Rather, DDS currently adjusts the hourly rates—whether they are temporary or permanent—based on legislatively approved rate adjustments and changes to minimum wage or labor laws. As we also state in the Audit Results, we believe obtaining and evaluating cost statements is the first step in assessing whether in‑home respite hourly rates are appropriate, particularly as related to economy and whether they are sufficient to enlist enough providers. Finally, although DDS contends that our recommendation does not include certain considerations, to the extent the Legislature implements our recommendation, DDS is not precluded from considering any other factors in its review of in‑home respite service rates that it believes are necessary. Further, nothing prevents DDS from revisiting its calculation of in‑home respite rates to the extent the rate study it is required to complete by March 2019 identifies a reason to revisit this calculation. In fact, beginning its efforts by focusing on one service, in this case in‑home respite service, could inform DDS’s efforts to evaluate the appropriateness of its rates for other services.
Although we acknowledge there may be additional costs involved with performing background checks on in‑home respite workers, we made this recommendation to the Legislature to ensure the health and safety of individuals with developmental disabilities. Additionally, to the extent the Legislature chooses to require DDS to conduct a review of the other services that fall under the Lanterman Developmental Disabilities Services Act, DDS can comment in the results of its review on any increased costs or other obstacles it believes the State will face by requiring background checks on workers providing these services.
As stated in the Audit Results, although there are no requirements that regional centers monitor vendors, they are not precluded from doing so, and we found that two regional centers had previously performed reviews of vendors that led to important conclusions. For example, here we describe that in 2011 Inland Regional Center formally conducted quality assurance audits of the program, employee, and consumer records for two of the five vendors we selected for review. One of these audits concluded that the respective vendor should require all routine respite workers to have ongoing training on developmental disability topics and that not all of the employee files contained required documentation, including CPR and first aid certifications. In light of these conclusions and regional centers’ minimal monitoring of vendors in general, which we describe here, we encourage DDS to identify cost‑effective methods to help ensure regional centers conduct periodic and ongoing reviews of vendors to identify key areas for needed improvement in in‑home respite service delivery.
DDS’s planned action does not fully address this recommendation. Specifically, as we state in the Audit Results, our review found that regional centers could not demonstrate adequately, if at all, that they conduct reviews of vendor files at least every two years as required to ensure that vendors continue to comply with the vendorization requirements. In its response, DDS states that it will send a directive to regional centers to remind them of their responsibility to review vendor files; however, this action falls significantly short of our recommendation as DDS does not indicate the steps it will take to ensure regional centers develop a process to conduct biennial reviews as required.
DDS contends in its response that it is complying with the requirement that it conduct audits of regional centers every two years. DDS also acknowledges various reasons for delays in completing and issuing the audit reports, which we describe here. Although DDS indicates it is working to minimize these delays, until it completes and issues audit reports of regional centers to the public every two years, it will continue to not meet the requirement. Further, as we point out here, these audits do not always include a review of vendor files maintained by the regional center or a review of expenditures related to vendors that provide in‑home respite services. Thus, until DDS consistently includes a review of in‑home respite services in its audits, we remain concerned that any fiscal problems or other issues these audits may otherwise reveal could continue to go undetected.
The fiscal monitoring that DDS points to in its response is limited to a review of vendors’ billings for services, which may or may not include in‑home respite services. However, as we indicate here, we focused our review on more extensive monitoring efforts by determining whether regional centers ensure vendors provide sufficient training to respite workers, that respite workers obtain the required certifications, and that the quality of services provided by the vendor for in‑home respite care is adequate and consistent across consumers.