Report 2018-102 Recommendation 2 Responses

Report 2018-102: Tulare Local Healthcare District: Past Poor Decisions Contributed to the Closure of the Medical Center, and Licensing Issues May Delay Its Reopening (Release Date: October 2018)

Recommendation #2 To: Tulare Local Healthcare District

To ensure that the district pays only reasonable and appropriate contract administrative costs, before the district signs any future management contract, it should prepare estimates of the costs for all proposed contract terms related to compensation.

Annual Follow-Up Agency Response From February 2023

2) Contract disbursements not requiring Construction Management participation will be reviewed as compared to original bids by TLHCD staff (CEO and Project Manager) and Owner's Representative before disbursement and after inspection of completed work. A minimum of at least two signatures/approvals of TLHCD representatives will be required prior to the disbursement of funds. As applicable, IOR and/or AOR signatures/approvals will also be required.

Under a scenario in which TLHCD engages a Construction Management firm, bids will be solicited and reviewed in a manner similar to that noted in response 1 above. Board approval will be required at this level to engage a Construction Management firm, and the board (or designee committee) will participate in the selection process of such a firm. In addition to CEO and/or Project Manager approvals for disbursement, approval by an Owner's Representative or Independent Qualified Inspector will also be required. As applicable, IOR and/or AOR signatures/approvals will also be required.

In order to address projects of increasing complexity in the future, TLHCD retains the option to purchase or otherwise engage necessary project tracking software to accurately assess one or more of the following: percentage of completion as compared to budget; reconciliation with original bid submission; application, and outcome of change orders; retention of contractor's profits (as agreed under contract); and accuracy of scheduling. Some or all disbursements may be curtailed or delayed if agreed-upon terms are not met or changes are not approved.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2021

Progress has been delayed due to COVID-19 but the District is beginning to develop new policies and creating new and/or augmenting existing procedures to provide details and documentation for a thorough evaluation process to award future management contracts.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From November 2020

The District is beginning to develop new policies and creating new and/or augmenting existing procedures to provide details and documentation for a thorough evaluation process to award future management contracts.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

Written policy approved by the Tulare Local Healthcare District Board on 24 April 2019.

California State Auditor's Assessment of 1-Year Status: No Action Taken

The district's policy does not address our recommendation that it prepare estimates of the costs for all proposed contract terms related to compensation.

6-Month Agency Response

We were delayed in bringing on new staff to implement the appropriate recommendations, but Board members are working to amend our policies and hope to approve them at our next regular board meeting on April 24.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The District concurs with the recommendation and will update its policies to conform.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2018-102

Agency responses received are posted verbatim.