07-19-2022 Searchable Packet.pdf — Cupertino City Council, July 19, 2022 (part 6 of 6)

SIGNED:

Darcy Paul, Mayor
City of Cupertino
Date
ATTEST:

Kirsten Squarcia, City Clerk
Date
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SECOND AMENDMENT TO EMPLOYMENT AGREEMENT FOR CITY ATTORNEY This Second Amendment to Employment Agreement ( the “ Agreement”) is made and entered into this 20th day of July, 2022, by and between the CITY OF CUPERTINO, STATE OF CALIFORNIA, A Municipal Corporation, by and through its City Council (“ EMPLOYER”), and Christopher D. Jensen EMPLOYEE” and, together with EMPLOYER, the “ PARTIES”).

RECITALS:

A. EMPLOYER is a Municipal Corporation of the State of California.

B. The City Council of the City of Cupertino, in accordance with the provisions of its Municipal Code, desires to employ the services of EMPLOYEE as City Attorney.

C. EMPLOYEE desires to accept employment as Cupertino City Attorney.

D. It is the desire of both EMPLOYER and EMPLOYEE to set forth the terms and conditions of said employment.

E. The PARTIES now wish to amend the Agreement with this Second Amendment to Agreement.

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:

ARTICLE III: COMPENSATION
Section 3.01. Compensation:

1. EMPLOYER agrees to pay to EMPLOYEE for services rendered by him pursuant to this Contract an annual base salary of $280,000, payable in installments at the time as other employees of EMPLOYER are paid.

2. All other terms and conditions of the Agreement and any amendments shall be unchanged and remain in full force and effect.

IN WITNESS WHEREOF, EMPLOYER has caused this Agreement to be signed and executed in its behalf by its Mayor, and duly attested by its City Clerk, and EMPLOYEE has signed and executed this Contract, both in duplicate, to be effective the day and year first above written.

ATTEST: CITY OF CUPERTINO
Date: ____________________________ Date: ____________________________ EMPLOYEE” Mayor
Christopher D. Jensen
Jul 14, 2022
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City Clerk
APPROVED AS TO FORM:

Senior Assistant City Attorney
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CA Second amendment to agreement
Final Audit Report 2022- 07-14
Created: 2022- 07-14
By: Araceli Alejandre ( aracelia@cupertino. org)
Status: Signed
Transaction ID: CBJCHBCAABAAVkmNAarKlNGqivpYIZfFI- 4_CVFE- 5ag CA Second amendment to agreement" History
Document created by Araceli Alejandre ([email protected]) 2022- 07- 14 - 9:56:12 PM GMT- IP address: 73.170. 27.253 Document emailed to [email protected] for signature 2022- 07- 14 - 9:57:36 PM GMT
Email viewed by christopherj@cupertino. org
2022- 07- 14 - 10:16:58 PM GMT- IP address: 104. 47.74.126 Document e-signed by Christopher D. Jensen ([email protected]) Signature Date: 2022- 07-14 - 10:17:17 PM GMT - Time Source: server- IP address: 136. 24.42.212 Agreement completed.
2022- 07- 14 - 10:17:17 PM GMT
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RESOLUTION NO. 22-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO AMENDING THE APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
WHEREAS, the City Council desires to amend the Appointed Employees’ Compensation Program.

NOW, THEREFORE, BE IT RESOLVED that the Appointed Compensation Program be amended which is incorporated in this resolution by this reference and attached as Exhibit E.

PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 19
th day of July 2022 by the following vote:

Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:

Darcy Paul, Mayor
City of Cupertino
Date
ATTEST:

Kirsten Squarcia, City Clerk Date
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1 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 1

PROGRAM PURPOSE AND DEFINITIONS FOR ELIGIBILITY
It is City of Cupertino policy that those certain persons holding positions hereinafter defined and designated as appointed management employees by the City Council in the City Manager's Office and the City Attorney’s Office shall be eligible for participation in the Appointed Employees' Compensation Program as hereby adopted by action of the City Council and as same may be amended or as otherwise modified from time to time.

Eligibility for inclusion in this Compensation program is limited to persons appointed by the City Council and holding positions as management employees in the City Manager’s Office and the City Attorney’s Office, as defined under section 2.52.290 of the Cupertino Municipal Code. Eligible persons are designated by the Appointing Authority and may be modified as circumstances warrant.

Although subject to change in accordance with the Personnel Code, the positions in the following classifications have been designated as appointed employees.

MANAGEMENT CLASSIFICATIONS:

Classification Title
City Manager
City Attorney
In the event of any inconsistency between the Compensation Program and any Employment Contracts, the provisions of the Employment Contract and any amendments thereto control.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019, August 18, 2020, June 15, 2021, November 16, 2021, July 19, 2022 762
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2 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 2

SALARY SCHEDULE

AND OTHER SALARY RATES
It is City of Cupertino policy that eligible persons under this Compensation Program shall be compensated for services rendered to and on behalf of the City on the basis of equitable pay for duties and responsibilities assigned, meritorious service and comparability with similar work in other public and private employment in the same labor market; all of which is contingent upon the City's ability to pay consistent with its fiscal policies. The City Manager and City Attorney salaries will be set by contract.

Adopted by Action of the City Council July 1, 2010
Revised October 2, 2012
Revised December 18, 2012, October 2016, September 6, 2017, November 6, 2017, January 7, 2019, July 16, 2019, August 18, 2020, November 16, 2021, July 19, 2022 763
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3 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 3

TRAINING AND CONFERENCES
I. POLICY
It is City of Cupertino policy that eligible persons under this Compensation Program shall be reimbursed or receive advances in accordance with the schedules, terms and conditions as set forth herein for attendance at conferences, meetings and training sessions as defined below for each. It is the intent of this policy to encourage the continuing education and awareness of said persons in the technical improvements and innovations in their fields of endeavor as they apply to the City or to implement a City approved strategy for attracting and retaining businesses in the City. One means of implementing this encouragement is through a formal reimbursement and advance schedule for authorized attendance at such conferences, meetings and training sessions.

II DEFINITIONS
A. Conferences
A conference is an annual meeting of a work related organization the membership of which may be held in the name of the City or the individual.

B. Local Area
The local area is defined to be within Santa Clara and San Mateo Counties and within a 40-mile distance from Cupertino when traveling to Alameda County.

C. Meetings
A "meeting" shall mean a convention, conference, seminar, workshop, meal, or like assembly having to do with municipal government operations. An employee serving on a panel for interviews of job applicants shall not come under this definition.

D. Training Session
A training session is any type of seminar or workshop the attendance at which is for the purpose of obtaining information of a work related nature to benefit the City's operations or to enhance the attendee's capabilities in the discharge of assigned duties and responsibilities. 764
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4 III REIMBURSEMENT AND ADVANCE PAYMENT SCHEDULE
A. Intent
This schedule is written with the intent that the employee will make every effort to find the lowest possible cost to the City for traveling on City business. For example, if paying for parking at the airport is less expensive that paying for a taxi or airport shuttle, then the employee should drive their car and park at the airport; or if renting a car is lower than taking taxis at the out-of-town location, then a car should be rented; or air reservations should be booked in advance to obtain discounted fares. The following procedures apply whether the expense is being paid through a reimbursement or a direct advance.

B. Registration
Registration fees for authorized attendance at a meeting or training session will be paid by the City.

C. Transportation
The City will pay transportation costs on the basis of the lowest cost intent stated in paragraph A. Eligible transportation costs include airfare (with coach fare being the maximum), van or taxi service to and from the attendee's home and airport, destination or airport parking charges, taxi and shuttle services at the out-of-town location, trains, tolls, or rental cars. Use of a personal automobile for City business shall be reimbursed or advanced at the rate per mile in effect for such use, except in no case shall it exceed air coach fare if the vehicle is being used for getting to the destination. Government or group rates offered by a provider of transportation must be used when available.

Reimbursement or advances for use of a personal automobile on City business within a local area will not be made so as to supplement that already being paid to those persons receiving a monthly mileage allowance.

D. Lodging
Hotel or lodging expenses of the employee resulting from the authorized event or activity defined in this policy will be reimbursed or advanced if the lodging and event occurs outside of the local area. Not covered will be lodging expenses related to person(s) who are accompanying the City member, but who themselves are not on City business. In this instance, for example, the difference between single and multiple occupancy rates for a room will not be reimbursed.

Where the lodging is in connection with a conference or other organized educational activity, City-paid lodging costs shall not exceed the maximum group rate published by the conference or activity sponsor, providing that lodging at the group rate is available at the time of booking.

If the group rate at the conference hotel is not available, then the non-conference lodging policy described in the next paragraph should be followed to find another comparable hotel. 765
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5 Where lodging is necessary for an activity that is not related to a conference or other organized educational activity, reimbursement or advances shall be limited to the actual cost of the room at a group or government rate. In the event that a group or government rate is not available, lodging rates that do not exceed the median price for lodging for that area and time period listed on travel websites like www.hotels.com, www.expedia.com or an equivalent service shall be eligible for reimbursement or advancement.

E. Meals

1. With No Conference
Payments toward or reimbursement of meals related to authorized activities or events shall be at the Internal Revenue Service per diem rate for meals and incidental expenses for a given location, as stated by IRS publications 463 and 1542 and by the U.S. General Services Administration. The per diem shall be split among meals as reasonably desired and reduced accordingly for less than full travel days. If per diem is claimed, no receipts are necessary. Alternatively, the actual cost of a meal can be claimed, within a standard of reasonableness, but receipts must be kept and submitted for the expense incurred.

2. As Part of a Conference
When City personnel are attending a conference or other organized educational activity, they shall be reimbursed or advanced for meals not provided by the activity, on a per diem or actual cost basis. The per diem and actual cost rate shall follow the rules described in the meals with no conference paragraph.

F. Other Expenses
Payments toward or reimbursement of expenses at such functions shall be limited to the actual costs consistent with the application of reasonable standards.

Other reasonable expenses related to business purposes shall be paid consistent with this policy.

No payments shall be made unless, where available, receipts are kept and submitted for all expenses incurred. When receipts are not available, qualifying expenditures shall be reimbursed upon signing of an affidavit of expenditure.

No payment shall be made for any expenses incurred which are of a personal nature or not within a standard of reasonableness for the situation as may be defined by the Finance Department.

G. Non-Reimbursable Expenses
The City will not reimburse or advance payment toward expenses including, but not limited to:

1. The personal portion of any trip;
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6 2. Political or charitable contributions or events;

3. Family expenses, including those of a partner when accompanying the employee on Cityrelated business, as well as child or pet-related expenses;

4. Entertainment expenses, including theatre, shows, movies, sporting events, golf, spa treatments, etc.

5. Gifts of any kind for any purpose;

6. Service club meals;

7. Alcoholic beverages;

8. Non-mileage personal automobile expenses including repairs, insurance, gasoline, traffic citations; and

9. Personal losses incurred while on City business.

IV ATTENDANCE
A. Budgetary Limitations
Reimbursement or advances for expenses relative to conferences, meeting or training sessions shall not exceed the budgetary limitations.

V. FUNDING
A. Appropriation Policy
It shall be the policy of the City to appropriate funds subject to availability of resources.

B. Training Sessions
Payments toward or reimbursement of expenses incurred in attendance at training sessions, will be appropriated annually through the budget process.

VI. DIRECT CASH ADVANCE POLICY
From time to time, it may be necessary for a City employee to request a direct cash advance to cover anticipated expenses while traveling or doing business on the City's behalf. Such request for an advance should be submitted to their supervisor no less than seven days prior to the need for the advance with the following information: 1) Purpose of the expenditure; 2) The anticipated amount of the expenditure (for example, hotel rates, meal costs, and transportation expenses); and 3) The dates of the expenditure. An accounting of expenses and return of any unused advance must be reported to the City within 30 calendar days of the employee's return on the expense report described in Section VII.
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7 VII. EXPENSE REPORT REQUIREMENTS
All expense reimbursement requests or final accounting of advances received must be approved by the Mayor or their designee, on forms determined by the Administrative Services Department, within 30 calendar days of an expense incurred, and accompanied by a business purpose for all expenditures and a receipt for each non- per diem item.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, August 18, 2020
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8 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 4

AUTOMOBILE ALLOWANCES AND

MILEAGE REIMBURSEMENTS
It is City of Cupertino policy that under this Compensation Program the City Manager shall be compensated fairly for the use of personal automotive vehicles on City business. In many instances the use of personal vehicles is a condition of employment due to the absence of sufficient City owned vehicles for general transportation purposes. It is not intended, however, that such a condition of employment should work an undue hardship. For this reason, the following policies shall apply for mileage reimbursements.

Those persons who occasionally are required to use their personal automobiles for City business shall be reimbursed for such use at an appropriate rate established by the City Council.

Submission of reimbursement requests must be approved by the City Council.

The City Manager shall be paid a monthly automobile allowance of $500.

The City Attorney shall be paid a monthly automobile allowance of $350.

Employees receiving automobile allowance shall be eligible for reimbursement for travel that exceeds two hundred miles round trip.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012
Revised October 20, 2015
Revised November 6, 2017
Revised August, 18, 2020
Revised June 15, 2021, November 16, 2021
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APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 5

ASSOCIATION MEMBERSHIPS AND

PROFESSIONAL PUBLICATIONS
It is City of Cupertino policy under this Compensation Program that the City Manager and City Attorney shall be entitled to City sponsored association memberships as well as receiving subscriptions to professional and technical publications. Such sponsorship, however, shall be conditioned upon the several factors as set forth below.

Each association for which membership is claimed must be directly related to the field of endeavor of the person to be benefited.

Subscriptions to or purchase of professional and technical publications may be provided at City expense providing the subject matter and material generally contained therein are related to municipal governmental operations.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, June 15,
2021
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10 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 6

OVERTIME WORKED
Management employees are ineligible for overtime payments for time worked in excess of what otherwise would be considered as a normal work day or work week for other employees.

However, no deduction from leave balances are made when such an employee is absent for less than a regular work day as long as the employee has his/her supervisor's approval. Nothing in this policy precludes the alternative work schedule, which may include an absence of a full eight hour day, when forty hours have been worked in the same seven day work period.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012
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APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 7

HEALTH BENEFITS PLAN - EMPLOYER CONTRIBUTION
It is the policy of the City of Cupertino to provide group hospital and medical insurance under which eligible persons under this Compensation Program and their dependents may be covered. The purpose of this program is to promote and preserve the health of employees and their families through comprehensive health plans available only through employer sponsorship.

Although the premium cost for the insurance provided remains the ultimate responsibility of the employee in these positions, the City shall contribute the amounts listed below towards the premium or pay the full cost of the premium if less than the stated amounts. If the premium amounts for any employee covered by this policy are less than the amounts listed below per month, the difference between the premium amount and the stated amounts will be included in the employee's gross pay.

Effective
January 1,
2020
City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 848.87 126.78 975.65
Employee +1 1,443.09 126.78 1,569.87
Employee +2 1,876.01 126.78 2,002.79
January 1, 2021 City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 891.32 126.78 1,018.10
Employee +1 1,515.24 126.78 1,642.02
Employee +2 1,969.81 126.78 2,096.59
January 1, 2022 City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 935.88 126.78 1,062.66
Employee +1 1,591.01 126.78 1,717.79
Employee +2 2,068.31 126.78 2,195.09
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12 Appointed employees in the City Manager and City Attorney positions will have immediate vesting of retiree medical benefits, subject to said employee retiring from City service and CalPERS.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, July 2013, October 2016, July 2019; December 2019, June 15, 2021, November 16, 2021
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13 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 8

FIXED HOLIDAYS
It is the policy of the City of Cupertino to recognize days of historical and national significance as holidays of the City without loss of pay or benefits. Recognizing the desirable times throughout the year, it is the policy of the City of Cupertino to provide days off in lieu of holidays for management and confidential employees at such times as are convenient for each employee and supervisor, when such policy is compatible with the workload and schedule of the City.

The City provides the following fixed paid holidays for eligible employees covered by this agreement:

1. New Year's Day

2. Martin Luther King Day

3. Presidents' Day

4. Memorial Day

5. Independence day

6. Labor Day

7. Veteran's Day

8. Thanksgiving Day

9. Day Following Thanksgiving

10. Christmas Eve

11. Christmas Day

12. New Year's Eve
When a holiday falls on a Sunday, the following Monday shall be observed as the non-work day. When a holiday falls on a Saturday, the previous Friday shall be observed as the non-work day.

FLOATING HOLIDAY
In addition to the paid holidays, employees occupying these positions shall be provided 20 floating hours per calendar year as non-work time with full pay and benefits. Employees may accumulate floating holiday hours up to two times their annual accrual.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, July 2013
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APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 9

LIFE, LONG TERM DISABILITY INSURANCE, AND SHORT TERM DISABILITY INSURANCE It is the policy of the City of Cupertino to make available group insurance for eligible persons under this Compensation Program that will mitigate the personal and family financial hardships resulting from continuing disability that prevents an employee from performing gainfully in his or her occupation. It is further the policy of the City of Cupertino to provide life insurance benefits in an amount of two and one half times the employee's annual salary to a maximum of $250,000.00 The City Manager and City Attorney will participate in California State Disability Insurance (SDI).

SDI weekly benefits are determined by the State of California and information is available on the State of California Employment Development Department website. Employee may use leave banks to supplement lost salary during the 7-day elimination period. City Manager and City Attorney shall pay the employee contribution rate of CA SDI, which will be deducted from their biweekly paychecks.

The City shall provide Long Term Disability (LTD) insurance for employees. LTD income protection coverage shall be up to $7,000 of covered monthly salary. City Manager and City Attorney may use sick leave and/or vacation leave to supplement lost salary during the 90 day elimination period.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, October
2016, July 2019, August 18, 2020,
June 15, 2021
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15 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 10

DEFERRED COMPENSATION
It is the policy of the City of Cupertino to provide equitable current compensation and reasonable retirement security for eligible persons under this Compensation Program for services performed for the City. The City participates in the California Public Employees' Retirement System (PERS) and deferred compensation plans have been established. Both the employee and employer may make contributions from current earnings to these plans. The purpose of this policy is to promote means by which compensation may be provided in such manner and form to best meet the requirements of the City and the needs of individual employees, thereby increasing the ability, to attract and retain competent employees.

The City shall maintain and administer means by which employees in these positions may defer portions of their current earnings for future utilization. Usage of such plans shall be subject to such agreements, rules and procedures as are necessary to properly administer each plan.

Employee contributions to such plans may be made in such amounts as felt proper and necessary to the employee. Employer contributions shall be as determined by the City Council.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019
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16 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 11

PUBLIC EMPLOYEES' RETIREMENT SYSTEM CONTRIBUTION
A. Employees hired on or before December 29, 2012 Only:

For employees hired on or before December 29, 2012, the City has contracted with CalPERS for a

2.7% @55 formula.

Effective in the first full pay period in July 2017, each employee shall pay the full 8.0% of applicable salary of the employee’s contribution towards CalPERS.

B. For Employees hired by the City of Cupertino on December 30, 2012 or December 31, 2012 or a current CalPERS employee who qualifies as a classic member under CalPERS Regulations Only:

For Employees hired by the City of Cupertino on December 30, 2012 or December 31, 2012 or a current CalPERS employee who qualifies as a classic member under CalPERS Regulations only the City has contracted with CalPERS for a 2.0% @ 60 retirement formula, three year average compensation.-
Effective October 1, 2016, the City shall not pay the employee’s contribution rate to the California Public Employees Retirement System (CalPERS) and each employee shall pay the full 7% of applicable salary of the employee’s contribution towards CalPERS.

C. For new employees hired by the City of Cupertino on or after January 1, 2013 and do not qualify as Classic members Only:

For new employees hired by the City of Cupertino on or after January 1, 2013 and do not qualify as classic members as defined by CalPERS, CalPERS has by statute implemented a 2% @ 62 formula, three year average and employees in this category shall pay 50% of the normal cost rate as determined by CalPERS.

Adopted by Action of the City Council
July 1, 2010
Revised October 2, 2012; December 18, 2012, July 2013, October 2016, July 2019 777
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17 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 12

DENTAL INSURANCE - EMPLOYER CONTRIBUTION
It is the policy of the City of Cupertino to provide dental insurance under which eligible persons under this Compensation Program and their dependents may be covered. The purpose of this program is to promote and preserve the health of employees.

The premium cost for the insurance provided by the City shall not exceed $126.78* per month per employee. Enrollment in the plan or plans made available pursuant to this policy shall be in accordance with Personnel Rules of the City and the provisions of the contract for such insurance between the City and carrier or carriers.*Dental Coverage: Effective the first month after Council adoption of agreement, dental coverage is capped at $2,500.00 per dependent per annual plan year for the term of this contract.

Adopted by Action of City Council
July 1, 2010
Revised October 2, 2012; December 18, 2012,
October 2016, July 2019
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18 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 13

ADMINISTRATIVE LEAVE
Eligible persons under this Compensation Program shall accrue eighty (80) hours of administrative leave with pay per year.

Employees may accumulate administrative leave hours up to two times their annual accrual.

Employees shall be eligible to convert administrative leave hours to pay one time each calendar year.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, October
2016; July 2019, November 16, 2021
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19 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 14

EMPLOYEE ASSISTANCE PROGRAM
It is the policy of the City of Cupertino to provide an Employee Assistance Program for the benefit of eligible persons under this Compensation Program and their eligible dependents.

The purpose of this program is to provide professional assistance and counseling concerning financial, legal, pre-retirement, and other matters of a personal nature.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019
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20 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 15

HOUSING ASSISTANCE PROGRAM
Housing assistance may be offered to eligible persons under this Compensation Program pursuant to Resolution No. 15-092 as amended.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012
Revised October 20, 2015; July 2019
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APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 16
VISION INSURANCE — EMPLOYER CONTRIBUTION
It is the policy of the City of Cupertino to provide vision insurance under which employees and their dependents may be covered. The purpose of this program is to promote and preserve the health of employees.

The premium cost for the insurance provided by the City shall not exceed $14.94 per month per employee. Enrollment in the plan or plans made available pursuant to this policy shall be in accordance with the provisions of the contract between the City and carrier or carriers providing vision insurance coverage,
Adopted by Action of the City Council July 1, 2010
Revised October 2, 2012; December 18, 2012

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22 City of Cupertino
APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 17

EDUCATION REIMBURSEMENT PROGRAM
It is the intent of the City to recognize the value of continuing education and professional development of its employees; and to adopt an Education Reimbursement Program which will encourage employees to avail themselves of City job related educational opportunities that will advance their knowledge and interests in the direction of their career path. Courses should either: a) maintain or improve job skills in the employee’s current position; b) be expressly required by the City or by law; or c) prepare the employee to become a competitive applicant for a different position with the City.

The Education Reimbursement Program is a benefit to all eligible, full time benefited employees and provides education reimbursement of up to two thousand dollars ($2,000) per calendar year for the cost of registration, required textbooks and/or materials and parking.

Employees who wish to seek reimbursement from the City for educational program costs shall provide a written request for reimbursement in advance of enrollment to the Human Resources Division. The form provided shall include the type of training, sponsoring organization or institution, meeting times and costs. Human Resources and the employee’s department head will make the determination if the chosen education program is eligible for reimbursement.

No employee shall receive any reimbursement until they have provided satisfactory proof of successful completion of the coursework with a grade of “C” or above, or “Pass” in the case of a Pass/Fail course. Such proof of completion shall be provided within 30 days of the conclusion of the course.

Education reimbursement is a taxable benefit under IRS Code. Education reimbursement will be applied to the calendar year in which the course is passed and satisfactory proof of completion is submitted.

Mandatory or annual coursework, attendance at conferences and training required to maintain job specific certifications or proficiencies are not included in the Education Reimbursement Program.

Adopted by Action of the City Council July 16, 2019
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23 City of Cupertino
APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 18

CITY SPONSORED RECREATION AND WELLNESS PROGRAMS
Eligible appointed employees shall have the privilege of enrollment in City sponsored recreation programs at the City residents’ fee structure and in preference to non-residents wishing to enroll. Each calendar year, employees and family members on the employee’s dental plan are eligible to be reimbursed up to $500 per employee in Rec Bucks. Employees shall be reimbursed for approved recreation services in accordance with the City’s Recreation Buck Policies. Programs allowing for preregistration will be reimbursed after completion of the program, including those allowing for or requiring preregistration in the calendar year prior to reimbursement. Reimbursements shall be applied to the year in which they are received.

Benefited employees will also receive a free employee-only annual Cupertino Sports Center membership. Part-time benefited employees will have the annual amount of Recreation Bucks prorated based on number of hours worked. Recreation Bucks are a taxable benefit under IRS Code, and must be used by the employee within the calendar year and are non-transferrable.

City employees are eligible to participate in the City’s wellness program as provided for in the City’s Administrative Rules and Regulations.

Adopted by Action of the City Council July 16, 2019
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24 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM

EXEMPT POSITIONS
The salaries, wages, or rates of pay for City Attorney and City Manager employees whose positions are exempt under the provisions of the Cupertino Municipal Code, are set forth below. Only the City Council can modify these rates.

Monthly Salary Effective June 3, 2019
Classification Step 1 Step 2 Step 3 Step 4 Step 5
City Manager $0 $0 $0 $0 $19,916.67
Monthly Salary Effective June 3, 2020
Classification Step 1 Step 2 Step 3 Step 4 Step 5
City Manager $0 $0 $0 $0 $22,916.66
Monthly Salary Effective June 15, 2021
Classification Step 1 Step 2 Step 3 Step 4 Step 5
City Manager $0 $0 $0 $0 $22,916.66
City Attorney $0 $0 $0 $0 $21,250.00
Monthly Salary Effective January 3, 2022
Classification Step 1 Step 2 Step 3 Step 4 Step 5
City Manager $0 $0 $0 $0 $24,000.00
City Attorney $0 $0 $0 $0 $21,250.00
Monthly Salary Effective July 20, 2022
Classification Step 1 Step 2 Step 3 Step 4 Step 5
City Manager $0 $0 $0 $0 $24,833.33
City Attorney $0 $0 $0 $0 $23,333.33
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1 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 1

Although subject to change in accordance with the Personnel Code, the positions in the following classifications have been designated as appointed employees.

MANAGEMENT CLASSIFICATIONS:

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019, August 18, 2020, June 15, 2021, November 16, 2021, July 19, 2022 786
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2 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 2

SALARY SCHEDULE

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 3

II DEFINITIONS
A. Conferences
A conference is an annual meeting of a work related organization the membership of which may be held in the name of the City or the individual.

B. Local Area
The local area is defined to be within Santa Clara and San Mateo Counties and within a 40-mile distance from Cupertino when traveling to Alameda County.

D. Training Session
A training session is any type of seminar or workshop the attendance at which is for the purpose of obtaining information of a work related nature to benefit the City's operations or to enhance the attendee's capabilities in the discharge of assigned duties and responsibilities. 788
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4 III REIMBURSEMENT AND ADVANCE PAYMENT SCHEDULE
A. Intent
This schedule is written with the intent that the employee will make every effort to find the lowest possible cost to the City for traveling on City business. For example, if paying for parking at the airport is less expensive that paying for a taxi or airport shuttle, then the employee should drive their car and park at the airport; or if renting a car is lower than taking taxis at the out-of-town location, then a car should be rented; or air reservations should be booked in advance to obtain discounted fares. The following procedures apply whether the expense is being paid through a reimbursement or a direct advance.

B. Registration
Registration fees for authorized attendance at a meeting or training session will be paid by the City.

If the group rate at the conference hotel is not available, then the non-conference lodging policy described in the next paragraph should be followed to find another comparable hotel. 789
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5 Where lodging is necessary for an activity that is not related to a conference or other organized educational activity, reimbursement or advances shall be limited to the actual cost of the room at a group or government rate. In the event that a group or government rate is not available, lodging rates that do not exceed the median price for lodging for that area and time period listed on travel websites like www.hotels.com, www.expedia.com or an equivalent service shall be eligible for reimbursement or advancement.

E. Meals

F. Other Expenses
Payments toward or reimbursement of expenses at such functions shall be limited to the actual costs consistent with the application of reasonable standards.

Other reasonable expenses related to business purposes shall be paid consistent with this policy.

No payment shall be made for any expenses incurred which are of a personal nature or not within a standard of reasonableness for the situation as may be defined by the Finance Department.

G. Non-Reimbursable Expenses
The City will not reimburse or advance payment toward expenses including, but not limited to:

1. The personal portion of any trip;
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6 2. Political or charitable contributions or events;

3. Family expenses, including those of a partner when accompanying the employee on Cityrelated business, as well as child or pet-related expenses;

4. Entertainment expenses, including theatre, shows, movies, sporting events, golf, spa treatments, etc.

5. Gifts of any kind for any purpose;

6. Service club meals;

7. Alcoholic beverages;

8. Non-mileage personal automobile expenses including repairs, insurance, gasoline, traffic citations; and

9. Personal losses incurred while on City business.

IV ATTENDANCE
A. Budgetary Limitations
Reimbursement or advances for expenses relative to conferences, meeting or training sessions shall not exceed the budgetary limitations.

V. FUNDING
A. Appropriation Policy
It shall be the policy of the City to appropriate funds subject to availability of resources.

B. Training Sessions
Payments toward or reimbursement of expenses incurred in attendance at training sessions, will be appropriated annually through the budget process.

VI. DIRECT CASH ADVANCE POLICY
From time to time, it may be necessary for a City employee to request a direct cash advance to cover anticipated expenses while traveling or doing business on the City's behalf. Such request for an advance should be submitted to their supervisor no less than seven days prior to the need for the advance with the following information: 1) Purpose of the expenditure; 2) The anticipated amount of the expenditure (for example, hotel rates, meal costs, and transportation expenses); and 3) The dates of the expenditure. An accounting of expenses and return of any unused advance must be reported to the City within 30 calendar days of the employee's return on the expense report described in Section VII.
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7 VII. EXPENSE REPORT REQUIREMENTS
All expense reimbursement requests or final accounting of advances received must be approved by the Mayor or their designee, on forms determined by the Administrative Services Department, within 30 calendar days of an expense incurred, and accompanied by a business purpose for all expenditures and a receipt for each non- per diem item.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, August 18, 2020
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8 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 4

AUTOMOBILE ALLOWANCES AND

Those persons who occasionally are required to use their personal automobiles for City business shall be reimbursed for such use at an appropriate rate established by the City Council.

Submission of reimbursement requests must be approved by the City Council.

The City Manager shall be paid a monthly automobile allowance of $500.

The City Attorney shall be paid a monthly automobile allowance of $350.

Employees receiving automobile allowance shall be eligible for reimbursement for travel that exceeds two hundred miles round trip.

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 5

ASSOCIATION MEMBERSHIPS AND

Each association for which membership is claimed must be directly related to the field of endeavor of the person to be benefited.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, June 15,
2021
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10 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 6

OVERTIME WORKED
Management employees are ineligible for overtime payments for time worked in excess of what otherwise would be considered as a normal work day or work week for other employees.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012
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11 City of Cupertino
APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 7

Effective
January 1,
2020
City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 848.87 126.78 975.65
Employee +1 1,443.09 126.78 1,569.87
Employee +2 1,876.01 126.78 2,002.79
January 1, 2021 City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 891.32 126.78 1,018.10
Employee +1 1,515.24 126.78 1,642.02
Employee +2 1,969.81 126.78 2,096.59
January 1, 2022 City Max Health
Contribution
City Max *Dental
Contribution
City Total Max
Contribution
Employee 935.88 126.78 1,062.66
Employee +1 1,591.01 126.78 1,717.79
Employee +2 2,068.31 126.78 2,195.09
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12 Appointed employees in the City Manager and City Attorney positions will have immediate vesting of retiree medical benefits, subject to said employee retiring from City service and CalPERS.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, July 2013, October 2016, July 2019; December 2019, June 15, 2021, November 16, 2021
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13 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 8

The City provides the following fixed paid holidays for eligible employees covered by this agreement:

1. New Year's Day

2. Martin Luther King Day

3. Presidents' Day

4. Memorial Day

5. Independence day

6. Labor Day

7. Veteran's Day

8. Thanksgiving Day

9. Day Following Thanksgiving

10. Christmas Eve

11. Christmas Day

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, July 2013
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14 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 9

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, October
2016, July 2019, August 18, 2020,
June 15, 2021
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APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 10

Employee contributions to such plans may be made in such amounts as felt proper and necessary to the employee. Employer contributions shall be as determined by the City Council.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019
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16 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 11

PUBLIC EMPLOYEES' RETIREMENT SYSTEM CONTRIBUTION
A. Employees hired on or before December 29, 2012 Only:

For employees hired on or before December 29, 2012, the City has contracted with CalPERS for a

2.7% @55 formula.

Effective in the first full pay period in July 2017, each employee shall pay the full 8.0% of applicable salary of the employee’s contribution towards CalPERS.

B. For Employees hired by the City of Cupertino on December 30, 2012 or December 31, 2012 or a current CalPERS employee who qualifies as a classic member under CalPERS Regulations Only:

Effective October 1, 2016, the City shall not pay the employee’s contribution rate to the California Public Employees Retirement System (CalPERS) and each employee shall pay the full 7% of applicable salary of the employee’s contribution towards CalPERS.

C. For new employees hired by the City of Cupertino on or after January 1, 2013 and do not qualify as Classic members Only:

Adopted by Action of the City Council
July 1, 2010
Revised October 2, 2012; December 18, 2012, July 2013, October 2016, July 2019 801
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17 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 12

Adopted by Action of City Council
July 1, 2010
Revised October 2, 2012; December 18, 2012,
October 2016, July 2019
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18 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 13

ADMINISTRATIVE LEAVE
Eligible persons under this Compensation Program shall accrue eighty (80) hours of administrative leave with pay per year.

Employees may accumulate administrative leave hours up to two times their annual accrual.

Employees shall be eligible to convert administrative leave hours to pay one time each calendar year.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012, October
2016; July 2019, November 16, 2021
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19 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 14

The purpose of this program is to provide professional assistance and counseling concerning financial, legal, pre-retirement, and other matters of a personal nature.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012; July 2019
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20 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM
Policy No. 15

HOUSING ASSISTANCE PROGRAM
Housing assistance may be offered to eligible persons under this Compensation Program pursuant to Resolution No. 15-092 as amended.

Adopted by Action of the City Council
July 1, 2010
Revised December 18, 2012
Revised October 20, 2015; July 2019
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21 City of Cupertino

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22 City of Cupertino
APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 17

Mandatory or annual coursework, attendance at conferences and training required to maintain job specific certifications or proficiencies are not included in the Education Reimbursement Program.

Adopted by Action of the City Council July 16, 2019
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23 City of Cupertino
APPOINTED EMPLOYEES’ COMPENSATION PROGRAM
Policy No. 18

City employees are eligible to participate in the City’s wellness program as provided for in the City’s Administrative Rules and Regulations.

Adopted by Action of the City Council July 16, 2019
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24 City of Cupertino

APPOINTED EMPLOYEES' COMPENSATION PROGRAM

A RESOLUTION OF THE CUPERTINO CITY COUNCIL AMENDING THE OPERATING BUDGET FOR FISCAL YEAR 2022-23 BY APPROPRIATING

MONIES FOR INCREASED SALARY AND BENEFIT COSTS
WHEREAS, the orderly administration of municipal government depends on a sound fiscal policy of maintaining a proper ratio of expenditures within anticipated revenues and available monies; and
WHEREAS, accomplishing City Council directives, projects, and programs and performing staff duties and responsibilities likewise depends on the monies available for that purpose; and
WHEREAS, the City Manager has determined that the balances from the funds specified in this resolution are adequate to cover the proposed amended appropriations, and therefore recommends the fund reallocations described herein.

NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby approve the recommended fund allocations and ratifies the attached amended appropriations as set forth in Exhibit A.

PASSED AND ADOPTED at a special meeting of the City Council of the City of Cupertino this 19th day of July, 2022, by the following vote:

Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:
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Resolution No. __________________
SIGNED:
________
Darcy Paul, Mayor
City of Cupertino
________________________
Date
ATTEST:
________
Kirsten Squarcia, City Clerk
________________________
Date
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EXHIBIT A
Appropriation
Amendment by
Fund
Appropriation
Amendment
Revenue
Amendment
Fund Balance
(Use of)
General Fund $24,192 $0 $24,192
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CITY OF CUPERTINO
Agenda Item
22-11196 Agenda Date: 7/19/2022
Agenda #: 30.

Subject: Consider adopting a position on Senate Bill 1338 (Umberg) - The Community Assistance, Recovery, And Empowerment (Care) Court Program
Consider adopting a position on SB 1338 and authorizing the Mayor to send letters to the State Legislature regarding the proposed legislation.

Presenter: Astrid Robles, Acting Assistant to the City Manager CITY OF CUPERTINO Page 1 of 1 Printed on 7/14/2022
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider adopting a position on Senate Bill 1338 (Umberg And Eggman), The Community Assistance, Recovery, and Empowerment (CARE) Court Program Recommended Action
Consider adopting a position on SB 1338 and authorizing the Mayor to send letters to the State Legislature regarding the proposed legislation.

Discussion
At the June 27, 2022 Legislative Review Committee (LRC) meeting, the LRC voted to take a watch position on SB 1338 until the entire Council could adopt a position.

SB 1338, sponsored by Governor Newsom creates a new program – the Community Assistance, Recovery, and Empowerment (CARE) Court program. Under the CARE Court program, civil courts could order those suffering from certain mental illnesses into a treatment program at the community level. This is similar to today’s Assisted Outpatient Treatment under the LantermanPetris Short (LPS) Act, but with more community-based support and services and more ongoing court oversight. Under the bill, a broad range of individuals, including family members, behavioral health professionals, and first responders with knowledge of the person, can petition the civil court to have a person suffering from severe mental illness and a current diagnosis of schizophrenia spectrum or other psychotic disorder ordered into either a voluntary CARE agreement, or a courtordered treatment plan for one year or, if renewed, two years.

On June 20, California announced $518.5 million in grants, which includes over $54 million to Santa Clara County, to help provide services and housing options to persons with severe mental illness or substance abuse problems, including those who are unhoused. This is part of a $2.2 billion effort to expand mental health housing and services across California, including CARE Court. More information can be found in the report in Attachment A from the City’s legislative consultant, Joe A. Gonsalves & Son.

When discussed at the LRC meeting, the LRC unanimously recommended that the full Council consider a position on SB 1338.

Sustainability Impact
None anticipated.
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2 Fiscal Impact
None anticipated.

Prepared by: Astrid Robles, Acting Assistant to the City Manager Approved by: Dianne Thompson, Acting City Manager
Attachments:

A – SB 1338 Summary Report by Joe A. Gonsalves and Son
B – SB 1338 Assembly Committee on Health Bill Analysis
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TO: City of Cupertino, City Council Meeting
FROM: Anthony, Jason, and Paul Gonsalves
SUBJECT: SB 1338 (Umberg And Eggman) The Community
Assistance, Recovery, And Empowerment (CARE)
Court Program
DATE: July 19, 2022
Bill Information:

The official text of SB 1338 can be found here1:

Summary:

SB 1338, sponsored by Governor Newsom creates a new program – the Community Assistance, Recovery, and Empowerment (CARE) Court program.

Under the CARE Court program, civil courts could order those suffering from certain mental illnesses into a treatment program at the community level. This is similar to today’s Assisted Outpatient Treatment under the LPS Act, but with more community-based support and services and more ongoing court oversight.

Under the bill, a broad range of individuals, including family members, behavioral health professionals, and first responders with knowledge of the person, can petition the civil court to have a person suffering from severe mental illness and a current diagnosis of schizophrenia spectrum or other psychotic disorder ordered into either a voluntary CARE agreement, or a court-ordered treatment plan for one year or, if renewed, two years.
1 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB1 338
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Support:

The Governor states, “CARE Court is a paradigm shift, providing a new pathway for seriously ill individuals before they end up cycling through prison, emergency rooms, or homeless encampments.” The bill is supported by Big City Mayors and many cities; business, travel, and tourism groups; some psychiatrists; and several groups that represent the family members of those with severe mental illness.

Cities and counties have split positions on CARE Courts, which may raise questions about their ability to work together cooperatively to ensure needed housing and services are provided to CARE Court participants.

Generally, cities support the legislation, but counties and their associated entities, while not opposed, have raised many issues of concern with the legislation. The exception is San Diego, where both the cities and county submitted a joint letter of support. The split is likely due to the fact that many unhoused individuals with mental illness can be found in cities, while the counties will be called upon to provide the support and services required by the bill.

City support is exemplified by the City of Santee, which recognizes the bill as “an important measure to provide California’s civil courts with a new process for earlier action, support, and accountability to protect and care for some of our state’s most vulnerable residents.” SB 1338 would provide individuals with a clinically appropriate, community-based, court-ordered care plan, including behavioral health care, stabilization medication, and housing. SB 1338 supports adults who are suffering from specified mental health disorders (schizophrenia spectrum and psychotic disorders) and who lack medical decision-making capacity. As this legislation could serve as an important tool to help the City’s effort to help address the challenges of homelessness and increase services and safety for those experiencing homelessness, the City Council of the City of Santee passed a unanimous resolution in support of SB 1338.

Supporters:

Alameda County, Families Advocating for the Seriously Mentally Ill, Bay Area Council, Big City Mayors, Building Owners and Managers Association, California Association of Code Enforcement Officers, California Chamber of Commerce, California Downtown Association, California Hospital Association, California Professional Firefighters, California Travel Association, Central City Association of Los Angeles, City of Alhambra, City of Bakersfield, City of Berkeley, City of Beverly Hills, City of Buena Park, City of Carlsbad, City of Chino Hills, City of Chula Vista, City of Concord, City of Corona, City of Coronado, City of Del Mar, City of El Cajon, City of Encinitas, City of Escondido, City of Fontana, City of Fullerton, City of Garden Grove, City of Half Moon Bay, City of Huntington Beach, City of Imperial Beach, City of Irvine, City of La Mesa, City of Lemon 817
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Grove, City of Mission Viejo, City of Montclair, National City, City of Oceanside, City of Ontario, City of Paramount, City of Poway, City of Rancho Palos Verdes, Redwood City, City of San Diego, City of San Marcos, City of Santa Monica, City of Santa Rosa, City of Santee, City of Solana Beach, City of Upland, City of Vista, Contra Costa County, Marin County, San Diego County, Family & Consumer Advocates for California’s Severely Mentally Ill, Family Services Association, Fontana Chamber of Commerce, Fremont Chamber of Commerce, Garden Grove Chamber of Commerce, Golden Gate Restaurant Association, Govern for California, Harbor Association of Industry and Commerce, Hotel Council of San Francisco, Inland Empire Economic Partnership, Laguna Niguel Chamber of Commerce, Lake Elsinore Valley Chamber of Commerce, Los Angeles Area Chamber of Commerce, Los Angeles Business Council, Los Angeles County Business Federation, National Alliance on Mental Illness – California (NAMI-CA), Neighborhood Partnership Housing Services, Inc., Oceanside Chamber of Commerce, Orange County Business Council, Orange County Hispanic Chamber of Commerce, Palos Verdes Peninsula Chamber of Commerce, Psychiatric Physicians Alliance of California, Redondo Beach Chamber of Commerce, Sage Leadership Academy, San Diego County District Attorney's Office, San Diego Regional Chamber of Commerce, San Francisco Chamber of Commerce, San Francisco Travel Association, San Pedro Chamber of Commerce, Santa Clarita Valley Chamber of Commerce, Santa Rosa Metro Chamber of Commerce, Santee Chamber of Commerce, South Bay Association of Chambers of Commerce, Tulare Chamber of Commerce, Valley Industry and Commerce Association, West Ventura County Business Alliance.

Oppose:

The county’s opposition/concerns are highlighted from the following statement from the County of Humboldt: “As you know, Humboldt County strongly supports a comprehensive, holistic approach to addressing the homeless crisis. However, this bill so far fails to include additional funding for the impact CARE Court would have on our behavioral health, public defender and public guardian offices.

Additionally, while we and the cities are working to build our housing stock and behavioral health workforce and infrastructure utilizing recent state investments, we are not yet prepared or funded to implement this new program effectively or operate it ongoing. New expectations, whether for CARE Court or other programs, require new resources to meet them, especially given decades of underfunding for behavioral health services and zero state investment in the county public guardian offices. Importantly, much of the work envisioned by the CARE Court proposal is not reimbursed by Medi-Cal or private insurance.

Opposition:

A & L Association, Abolition Study Group of Psychologists for Social Responsibility, American Civil Liberties Union (ACLU) Center for Advocacy & Policy CA, American Civil Liberties Union California Action, American Civil Liberties Union of California, Anti Police-terror Project, Bay Area Legal Aid, California Behavioral Health Planning Council, Cal Voices, California Advocates for Nursing Home Reform, California Assoc. of Mental Health Peer Run Organizations (CAMHPRO), California Democratic Party Black Caucus Legislative Committee, California Pan-ethnic Health Network, Caravan 4 Justice, Care First California, Corporation for Supportive Housing (CSH), County of Humboldt, Depression and Bipolar Support Alliance, Dignity and Power Now, Disability Rights Advocates, Disability Rights California, Disability Rights Education & Defense Fund (DREDF), Disability Rights Legal Center, Drug Policy Alliance, Ella Baker Center for Human Rights, Funders Together to End Homelessness San Diego, Housing California, Housing Is a Human Right - Orange County, Human Rights Watch, Inland Equity Partnership, Justice in Aging, Justice LA, Justice Teams Network, Justice2jobs Coalition, Kelechi Ubozoh Consulting, LA Defensa, Law Foundation of Silicon Valley, Los Angeles Community Action Network, Lotus Collective, Love and Justice in The Streets, Loyola Law School, Mental Health Advocacy Services, Mental Health America of California, NAACP San Mateo Branch #1068 Housing Committee, National Association of Social Workers California Chapter, National Health Law Program, National Homelessness Law Center, Nextgen California, No CARE Court California Coalition, Norcal Resist, Peers Envisioning and Engaging in Recovery Services (PEERS), People's Budget Orange County, People's Homeless Task Force Orange County, Project Amiga, Public Interest Law Project, Racial and Ethnic Mental Health Disparities Coalition, Rosen Bien Galvan & Grunfeld LLP, Sacramento Homeless Organizing Committee, Sacramento LGBT Community Center, Sacramento Regional Coalition to End Homelessness, San Bernardino Free Them All, San Francisco Pretrial Diversion Project, San Francisco Public Defender's Office, Senior & Disability Action, Senior and Disability Action, Starting Over INC., Stop the Musick Coalition, Street Watch LA, Stronger Women United, The Bar Association of San Francisco, The Coelho Center for Disability Law Policy and Innovation, Western Center on Law & Poverty, Western Regional Advocacy Project, Women's Wisdom Art, 10 individuals.

Status:

On June 20, California announced $518.5 million in grants to help provide services and housing options to persons with severe mental illness or substance abuse problems, including those who are unhoused. This is part of a $2.2 billion 819
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effort to expand mental health housing and services across California, including CARE Court.

Grants were awarded in the following counties:
• Alameda County – $18,405,122
• El Dorado County – $2,852,182
• Humboldt County – $4,170,560
• Kern County – $3,138,065
• Los Angeles County – $155,172,811
• Madera County – $2,035,512
• Mendocino County – $7,711,800
• Monterey County – $3,558,670
• Nevada County – $4,458,799
• Orange County – $10,000,000
• Placer County – $6,519,015
• Riverside County – $103,181,728
• Sacramento County – $30,553,889
• San Diego County – $30,874,411
• San Francisco County – $6,750,000
• Santa Barbara County – $2,914,224
• Santa Clara County – $54,074,660
• Solano County – $14,332,411
• Sonoma County – $9,751,915
• Stanislaus County – $33,369,900
• Yolo County – $12,500,000
SB 1338 passed out of the Assembly Health Committee on June 29, 2022 and is pending in the Assembly Appropriations Committee.

Legislative Platform:

This bill falls under Cupertino’s 2022 Legislative Platform in the Homelessness Section on page 6:

1. Support legislation that provides funding to create pathways to permanent housing and supportive services.

2. Support legislation and funding to help facilitate and promote regional efforts to address homelessness.

3. Support legislation to address issues affecting the homeless population, including mental health and substance abuse.
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SB 1338

Page 1 ends

Date of Hearing: June 28, 2022

ASSEMBLY COMMITTEE ON HEALTH
Jim Wood, Chair
SB 1338(Umberg) – As Amended June 16, 2022

AS PROPOSED TO BE AMENDED
SENATE VOTE: Not relevant
SUBJECT: Community Assistance, Recovery, and Empowerment (CARE) Court Program.

SUMMARY: Establishes the Community Assistance, Recovery, and Empowerment (CARE) Court Program and the CARE Act to provide comprehensive treatment, housing and support services to Californians with complex behavioral health care needs. Specifically, this bill:

I. Specifies the Following Findings and Declarations
1) That thousands of Californians are suffering from untreated schizophrenia spectrum and psychotic disorders, leading to risks to their health and safety and increased homelessness, incarceration, hospitalization, conservatorship, and premature death. These individuals, families, and communities deserve a path to care and wellness. 2) With advancements in behavioral health treatments, many people with untreated schizophrenia spectrum and psychotic disorders can stabilize, begin healing, and thrive in community-based settings, with the support of behavioral health services, stabilizing medications, and housing. Too often, this comprehensive care is only provided after arrest, conservatorship, or institutionalization.

California has made unprecedented investments in behavioral health, housing, and combating homelessness and CARE Court helps those with the greatest needs access these resources and services. CARE Court provides a framework to ensure counties and other local government entities focus their efforts to provide comprehensive treatment, housing and support services to Californians with complex behavioral health care needs so they can stabilize and find a path to wellness and recover.
3) A new approach is needed to act earlier and to provide support and accountability, both to individuals with these untreated severe mental illnesses (SMI) and to local governments with the responsibility to provide behavioral health services. California’s civil courts will provide a new process for earlier action, support, and accountability, through a new CARE Court Program.
4) Self-determination and civil liberties are important California values that can be advanced and protected for individuals with these untreated SMI with the establishment of a new CARE Supporter role, in addition to legal counsel, for CARE proceedings. 5) California continues to act with urgency to expand behavioral health services and to increase housing choices and end homelessness for all Californians. CARE provides a vital solution for some of the most ill and most vulnerable Californians.

II. General Provisions
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1) Establishes the CARE Act and states it is the intent of the Legislature that the CARE Act be implemented in a manner that ensures it is effective.
2) Requires the CARE Act to be implemented, with technical assistance and continuous quality improvement as follows:
a) A first cohort of counties, representing at least half of the population of the State, will begin no later than July 1, 2023, with additional funding provided to support the earlier implementation date; and,
b) A second cohort of counties, representing the remaining population of the State, will begin no later than July 1, 2024.
3) Defines, for purposes of this bill, certain terms, including:
a) “CARE agreement” means a voluntary settlement agreement, which includes the same elements as a CARE plan in accessing community-based services and supports; b) “CARE plan” means an individualized, appropriate range of community-based services and supports as set forth in the CARE Act, which includes clinically appropriate behavioral health care and stabilization medications, housing and other supportive services as appropriate;
c) “Counsel” means the attorney representing the respondent, as provided by the CARE Act or chosen by the respondent, in CARE proceedings and matters related to CARE agreements and CARE plans;
d) “County behavioral health agency” means the local director of mental health services, the local behavioral health director or both as applicable, or their designee; e) “Court-ordered evaluation” means an evaluation ordered by a superior court under the CARE Act.
f) “Graduation plan” means a voluntary agreement entered into by the parties at the end of the CARE program that shall include a strategy to support a successful transition out of court jurisdiction and may include a psychiatric advance directive. A graduation plan includes the same elements as a CARE plan to support the respondent in accessing services and supports. A graduation plan may not place additional requirements on local government entities and is not enforceable by the court; g) “Indian health care provider” means a health care program operated by the Indian Health Services, an Indian tribe, a tribal organization, or urban Indian organization, as specified in the federal Indian Health Care Improvement Act;
h) “Licensed behavioral health professional” means either of the following:
i) A licensed mental health professional, as defined; or, ii) A person who has been granted a waiver of licensure requirements by the California Department of Health Care Services (DHCS).
i) “Parties” means the respondent, the county behavioral health agency in the county where CARE Court proceedings under the CARE Act are pending, and other parties that the court may add if they are providing services to the respondent; j) “Psychiatric advance directive” means a legal document, executed on a voluntary basis by a person who has the capacity to make medical decisions that allows a person with mental illness to protect their autonomy and ability to self-direct care by documenting their preferences for treatment in advance of a mental health crisis; k) “Respondent” means the person who is subject to the petition for CARE Court proceedings;
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l) “Stabilization medications” means medications included in the CARE plan that primarily consist of antipsychotic medication to reduce symptoms of hallucinations, delusions, and disorganized thinking. Stabilization medications may be administered as long acting injections if clinically indicated. Stabilization medication cannot be forcibly administered;
m) “Supporter” means an adult, as designated, who assists the respondent to include supporting the person to understand, make, communicate, implement, or act on their own life decisions during the CARE Court process, including a CARE agreement, a CARE plan, and developing a graduation plan. A supporter may not act independently. n) “Trauma-informed care” means practices that recognize and respond to the signs, symptoms, and risks of trauma to better support the health needs of patients who have experienced Adverse Childhood Experiences (ACEs) and toxic stress.

III. Process:
1) Requires a respondent to qualify for CARE proceedings only if all of the following criteria are met:
a) The person is 18 years of age or older;
b) The person is currently experiencing a SMI, as defined and has a diagnosis of schizophrenia spectrum or other psychotic disorder as defined in the most current version of the Diagnostic and Statistical Manual of Mental Disorders, provided that nothing is construed to establish respondent eligibility based upon a psychotic disorder that is due to a medical condition or is not primarily psychiatric in nature, including but not limited to physical health conditions such as traumatic brain injury, autism, dementia, or neurologic conditions. Prohibits a person who has a current diagnosis of substance use disorder (SUD) as defined but who does not meet the required criteria above, from qualifying for CARE proceedings;
c) The person is not clinically stabilized in on-going treatment; d) At least one of the following is true:
i) The person is unlikely to survive safely in the community without supervision and the person’s condition is substantially deteriorating; and/or, ii) The person is in need of services and supports in order to prevent a relapse or deterioration that would be likely to result in grave disability or serious harm to the person or to others;
e) Participation in the CARE proceedings would be the least restrictive alternative necessary to ensure the person’s recovery and stability; and,
f) It is likely that the person will benefit from CARE proceedings. 2) Permits proceedings to commence in any of the following:
a) The county in which the respondent resides;
b) The county where the respondent is found. If the respondent does not reside in the county in which proceedings are initiated under the CARE Act and, and the CARE Act is operative in the respondent’s county of residence, the proceeding will, with the respondent’s consent, be transferred to the county of residence as soon as reasonably feasible. Should the respondent not provide consent to the transfer, the proceedings will continue in the county where the respondent was found; and, c) The county where the respondent is facing criminal or civil proceedings. 823
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3) Allows a petition to initiate a CARE proceedings to be brought by:
a) A person 18 years of age or older with whom the respondent resides or a spouse, parent, adult sibling, adult child, or grandparent of the respondent, or another adult who stands in loco parentis to the respondent;
b) The director of a hospital, or their designee, in which the respondent is hospitalized, or the director of a public or charitable organization, agency, or home, or their designee, that is currently, or within the previous 30 days, providing behavioral health services to the respondent or in whose institution the respondent resides; c) A licensed behavioral health professional, or their designee, who is treating, or has been treating within the last 30 days, the respondent for a mental illness; d) A first responder, including a peace officer, firefighter, paramedic, emergency medical technician, mobile crisis response worker, or homeless outreach worker who has had repeated interactions with the respondent in the form of multiple arrests, multiple detentions and transportation under the Lanterman-Petris-Short (LPS) Act, multiple attempts to engage the respondent in voluntary treatment or other repeated efforts to aid the respondent in obtaining professional assistance;
e) The public guardian or public conservator, or their designee of the county in which the respondent is present or reasonably believed to be present (a respondent may be referred from conservatorship proceedings);
f) The director of a county behavioral health agency, or their designee, of the county in which the respondent resides or is found (a respondent may be referred from assisted outpatient treatment (AOT) proceedings);
g) The director of the county Adult Protective Services or their designee of the county in which the respondent resides or is found;
h) The director of a California Indian health services program, California tribal behavioral health department, or their designee;
i) The judge of a tribal court that is located in California, or their designee; j) A prosecuting attorney (a respondent may be referred from misdemeanor proceedings, as provided); and,
k) The respondent.
4) Requires the CARE petition to be signed under penalty of perjury and to contain all of the following:
a) The name of the respondent, their address, if known, and the petitioner’s relationship with the respondent;
b) Facts that support petitioner’s allegation that the respondent meets the criteria in III.1) above; and,
c) Either of the following:
i) An affidavit of a licensed behavioral health professional stating that the health professional or their designee has examined the respondent within 60 days of the submission of the petition, or has made multiple attempts to examine, but has not been successful in eliciting the cooperation of the respondent to submit to an examination, within 60 days of submission of the petition, and that the licensed behavioral health professional has determined that the respondent meets, or has reason to believe, explained with specificity in the affidavit, that the respondent meets, the diagnostic criteria for CARE proceedings; or, 824
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ii) Evidence that the respondent was detained for a minimum of two intensive treatments pursuant to the LPS Act, the most recent of which must be within 60 days from the date of the petition.
5) Provides that if a person other than the respondent files a petition for CARE proceedings that is unmeritorious or intended to harass or annoy the respondent, and that person had previously filed petitions for CARE proceedings that were unmeritorious or intended to harass or annoy the respondent, the petition is grounds to declare the person a vexatious litigant, as provided.
6) Requires the respondent to:
a) Receive notice of the hearings;
b) Receive a copy of the court-ordered evaluation;
c) Be represented by counsel at all stages of a proceeding regardless of the ability to pay; d) Be allowed to have a supporter;
e) Be present at the hearing unless the respondent waives the right to be present; f) Have the right to present evidence;
g) Have the right to all witnesses; and,
h) Have the right to appeal decisions, and to be informed of the right to appeal. 7) Requires all CARE Court hearings to be presumptively closed to the public. Allows the respondent to demand that the hearings be public and allows them to request the presence of a family member or friend without waiving their right to keep the hearing closed to the rest of the public. Permits a request by another party to make a hearing public to be granted if the judge conducting the hearing finds that the public interest clearly outweighs the respondent’s privacy interest. Requires before commencing a hearing, the judge to inform the respondent of their rights.
8) Requires upon receipt of a CARE Court petition, the court to promptly review the petition to determine if it meets the requirements in III. 4) above. Specifies the following about the petition:
a) If the court finds the petition does not meet the requirements in III. 4) above , the court is to dismiss without prejudice, subject to III. 5) above; and, b) If the court finds that the petition may meet the requirements in III. 4) above, the court is to order a county agency, or their designee, as determined by the judge, to investigate as necessary and file a written report with the court within 21 days that includes:
i) A determination as to whether the respondent meets, or is likely to meet, the criteria for CARE proceedings; and,
ii) The outcome of efforts made to voluntarily engage the respondent during the 21-day report period. Requires the court to provide notice to the respondent and petitioner that a report has been ordered.
9) Requires the agency in III. 8 b) above to submit a written report to the court with the findings and conclusions of its investigation, along with any recommendations. Provides that if the agency is making progress to engage the respondent, it may request up to an additional 30 days to continue to engage and enroll the individual in treatment and services. 825
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10) Requires the court within five days of the receipt of the report in III. 9) above, to review the report and do one of the following:
a) If the court determines that respondent meets, or likely meets, the CARE criteria, and engagement is not effective, the court is to do the following:
i) Set an initial hearing within 14 days;
ii) Appoint counsel, unless the respondent has their own counsel; (1) If the respondent has not retained legal counsel and does not plan to retain legal counsel, whether or not the respondent lacks or appears to lack legal capacity, the court is to, before the time of the initial hearing, appoint a qualified legal services project, as defined, or if no legal services project has agreed to accept such appointments a public defender to represent the respondent for all purposes related to the CARE Act, including appeals; and,
(2) Counsel appointed in this case will have the authority to represent the individual in any proceeding the CARE Act, and will have the authority to represent the individual, as needed, in matters related to CARE agreements and CARE plans. iii) Allows the respondent to select a supporter, unless the respondent chooses not to have one; and,
iv) Provide notice of the hearing to the petitioner, the respondent, the appointed counsel, the supporter, and the county behavioral health agency in the county where the respondent resides and, if different, the county where the CARE Court proceedings have commenced.
b) Requires the court, if it determines that the individual meets, or likely meets the CARE criteria, that voluntary engagement is effective, and that the individual has enrolled in behavioral health treatment, to dismiss the matter; or, c) Requires the court, if it determines that the individual does not meet, or is likely not to meet the CARE criteria, to dismiss the matter. Requires the court to notify the petitioner and the respondent of the dismissal and the reason for dismissal. Provides that the petitioner may request reconsideration of the dismissal within 10 days. 11) Provides that the court may at the initial hearing, permit the respondent to substitute their own counsel for appointed counsel and substitute their own supporter for the appointed CARE supporter or elect to proceed without a supporter. 12) Specifies that all of the following apply at the initial hearing:
a) If the petitioner is not present, allows the court to dismiss the matter; b) The respondent may waive their appearance and appear through their counsel. If the respondent elects not to waive their appearance and is not present, and appropriate attempts to elicit the attendance of the respondent have failed, allows the court to conduct the hearing in the respondent’s absence. If the hearing is conducted without the respondent present, requires the court to set forth the factual basis for doing so and the reasons the proceedings will be successful without the respondent’s presence; c) Requires a county behavioral health agency representative to be present; d) Allows a supporter to be present, subject to the consent of the respondent; e) Allows a tribal representative to attend for a respondent who is tribal member, as provided, and subject to the respondent’s consent;
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f) Requires the court to make a determination whether the petitioner has presented prima facie evidence that the respondent meets the CARE criteria. In making the determination, the court is to consider all evidence properly before it, including the report from the county and any additional evidence presented by the parties; g) If the court finds there is no reason to believe that the facts stated in the petition are true, requires the court is to dismiss the case without prejudice, unless the court makes a finding on the record that the petitioner’s filing was not in good faith. Requires any new petition to be based on changed circumstances that warrant a new petition; h) If the court finds there is reason to believe that the facts stated in the petition appear to be true, the court is to order the county behavioral health agency to work with the respondent and the respondent’s counsel and supporter to engage in behavioral health treatment. Requires the court to set a case management hearing within 14 days; and, i) If the respondent is enrolled in a federally recognized Indian tribe, the court is to provide notice of the case management hearing to the tribe subject to the respondent’s consent. 13) Requires at the case management hearing for the court to make a determination whether the parties may enter into a CARE agreement and requires a recitation of all terms and conditions on the record.
14) Requires the court, if the parties have agreed to a CARE agreement and the court agrees with the terms, to stay the matter and set a progress hearing in 60 days. 15) Requires the court, if the court finds that the parties have not and are not likely to reach a CARE agreement, to order a clinical evaluation of the respondent, as provided. Requires the evaluation to address the clinical diagnosis and the issue of whether the defendant has capacity to give informed consent regarding psychotropic medication. 16) Requires the county behavioral health agency, through a licensed behavioral health professional, to conduct the evaluation unless there is an existing clinical evaluation of the respondent completed within the last 30 days and the parties stipulate to the use of that evaluation. Requires the court to set a clinical evaluation hearing to review the evaluation within 14 days.
17) Requires the court to review the evaluation and any other evidence from the petitioner, the county behavioral health agency, the respondent, and, if requested by the respondent, the supporter.
18) Permits the petitioner and the respondent to present evidence and call witnesses, including the person who conducted the evaluation.
19) Requires the court to only consider relevant and admissible evidence that fully complies with the rules of evidence.
20) Permits the clinical evaluation hearing to be continued for a maximum of 14 days upon stipulation of the respondent and the county behavioral health agency, unless there is good cause for a longer extension.
21) Requires, if the court finds, by clear and convincing evidence, that the respondent meets the CARE criteria, the court to order the county behavioral health agency, the respondent, and the respondent’s counsel and supporter to jointly develop a CARE plan. Allows, if another 827
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entity will provide services or supports under the CARE plan, that entity to be joined as a party.
22) Requires if the court finds that the evidence does not, by clear and convincing evidence, support that the respondent meets the CARE criteria, the court to dismiss the petition. 23) Allows the respondent and the county behavioral health agency to request appellate review of an order to develop a CARE plan.
24) Requires if the respondent is an American Indian or Alaska Native individual as defined, or is otherwise receiving services from an Indian health care provider or tribal court, the county behavioral health agency is to use best efforts to meaningfully consult with and incorporate the Indian health care provider or tribal court available to the respondent to develop the CARE plan.
25) Requires the date for the hearing to review and consider approval of the proposed CARE plan not be set more than 14 days from the date of the order to develop a CARE plan, unless there is good cause for an extension.
26) Permits the county behavioral health agency or the respondent, or both, to present a proposed CARE plan.
27) Allows the court to issue any orders necessary to support the respondent in accessing appropriate services and supports, including prioritization for those services and supports, subject to applicable laws and available funding, as provided. 28) Allows a court to order medication if it finds, upon review of the court-ordered evaluation and hearing from the parties that, by clear and convincing evidence, the respondent lacks the capacity to give informed consent to the administration of medically necessary medication, including antipsychotic medication. Requires that to the extent that the court orders medically necessary stabilization medications, the medication may not be forcibly administered and the respondent’s failure to comply with a medication order shall not result in a penalty, including but not limited to contempt or the accountability measures in IV. 1) and IV. 2) below.
29) Allows supplemental information to be provided to the court, as provided. 30) Specifies that the issuance of any orders in III. 27) above begins the “up to one-year CARE program” timeline.
31) Requires that a status review hearing occur at least every 60 days during the CARE plan implementation.
32) Requires county behavioral health agency to file with the court, and serve on the respondent and the respondent’s counsel and supporter, a report not less than seven days prior to the hearing, with specified information, including progress the respondent has made on the CARE plan, what services and supports in the CARE plan were provided, and what services and supports were not provided, any issues the respondent expressed or exhibited in adhering to the CARE plan; and, recommendations for changes to the services and supports to make the CARE plan more successful.
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33) Requires that, subject to applicable law, intermittent lapses or setbacks described in the report may not impact access to services, treatment, or housing 34) Requires the status review hearing to occur unless waived by all parties and approved by the court.
35) Allows the county behavioral health agency, the respondent, or the court to request more frequent reviews, as necessary.
36) Requires the court, in the 11th month of the program, to hold a one-year status hearing, which is an evidentiary hearing, to determine if the respondent graduates from the CARE plan or should be reappointed for another year.
37) Requires that at least seven days prior to the one-year status hearing, the county behavioral health agency to submit to the court, the respondent, the respondent’s counsel, and the respondent’s supporter, a report on the progress the respondent has made on the CARE plan as provided in III.32) above.
38) Grants the respondent the right to call witnesses and present evidence information at the oneyear status hearing as to whether or not the respondent agrees with the report. 39) Specifies that if the respondent has successfully completed the CARE program, the respondent will not be reappointed to the program. Requires the court to review with the parties the voluntary agreement for a graduation plan to support a successful transition out of court jurisdiction and which may include a psychiatric advance directive. Prohibits the graduation plan from placing additional requirements on local government entities and is not enforceable by the court.
40) Permits at the one-year status hearing, the respondent to request reappointment to the CARE proceedings.
a) If the respondent elects to accept voluntary reappointment to the program, the respondent can request to be re-appointed to the CARE program for up to one additional year; and, b) Allows the court to reappoint the respondent to the CARE program for up to one year if the court finds, by clear and convincing evidence, that: i) the respondent did not successfully complete the program; ii) all of the required services and supports were provided to the respondent; iii) the respondent would benefit from continuation of the CARE program; and, iv) the respondent currently meets the requirements in III. 1) above. 41) Provides that a respondent can only be reappointed to the CARE program for up to one additional year.
42) Specifies mandatory timeframes, as well as continuances for good cause, throughout the CARE Court proceedings.
43) Requires hearings to occur in person unless the court allows a party or a witness to appear remotely. Provides the respondent with the right to be in-person for all hearings. 44) Allows the Judicial Council to adopt rules to implement the CARE Court provisions. 829
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45) Requires, for all CARE proceedings, the judge to control all hearings with a view to the expeditious and effective ascertainment of the jurisdictional facts and the ascertainment of all information relative to the present condition and future welfare of the respondent. Requires where there is a contested issue of fact or law, the proceedings to be conducted in an informal, non-adversarial atmosphere with a view to obtaining the maximum cooperation of the respondent, all persons interested in respondent’s welfare, and all other parties, with any provisions that the court may make for the disposition and care of the respondent. 46) Requires all evaluations and reports, documents, and filings submitted to the court pursuant to CARE proceedings to be confidential.

IV. Accountability
1) Allows the court, at any point in the proceedings, if it determines, by clear and convincing evidence, that the respondent, after receiving notice, is not participating in the CARE proceedings, to terminate respondent’s participation in the CARE program. Allows the court to make a referral under the LPS Act, as provided.
2) Requires that, if a respondent was provided timely with all of the services and supports required by the CARE plan, the fact that the respondent failed to successfully complete their CARE plan, including the reasons for that failure: a) is a fact considered by a court in a subsequent hearing under the LPS Act, provided that hearing occurs within six months of termination of the CARE plan; and, b) creates a presumption at that hearing that the respondent needs additional interventions beyond the supports and services provided by the CARE plan.
3) Allows the court, at any time in the proceeding, if it finds that the county, or other local government entity, is not complying with its orders, to fine the county, or other local government entity, up to $1,000 per day for noncompliance. Allows the court, if a county is found to be persistently noncompliant, to appoint a receiver to secure court-ordered care for the respondent at the county’s cost. In determining the application of the remedies available, requires the court to consider whether there are any mitigating circumstances impairing the ability of the county agency or local government entity to fully comply with the CARE Act requirements.
4) Establishes the CARE Act Accountability Fund (fund) in the State Treasury to receive penalty payments from each county as collected. Requires that all monies in the fund are reserved and continuously appropriated, without regard to fiscal years. Requires that subject to approval from the Department of Finance, DHCS will determine the use of the funds to support local government efforts that will serve individuals who have schizophrenia or other psychotic disorders who experience or are at risk of homelessness, criminal justice involvement, hospitalization or conservatorship.

V. The Supporter and Counsel
1) Requires, subject to appropriation, DHCS to provide optional training and technical resources for volunteer supporters on CARE Act proceedings, community services and supports, Supported Decision Making, and people with behavioral health conditions, traumainformed care and psychiatric advance directives, with support and input from relevant stakeholders. Allows DHCS to enter into a technical assistance and training agreement. 830
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2) Provides that the supporter is designed to do all of the following:
a) Offer the respondent flexible and culturally responsive ways to maintain autonomy and decisionmaking authority over their own life by developing and maintaining voluntary supports to assist them in understanding, making, communicating and implementation their own informed choices;
b) Strengthen the respondent’s capacity to engage in and exercise autonomous decisionmaking and prevent or remove the need to use more restrictive protective mechanisms, such as conservatorship; and,
c) Assist the respondent with understanding, making and communicating decisions, and expressing preferences throughout the CARE Court process. 3) Permits that notwithstanding any other provisions of the CARE Act, the respondent to have a supporter present in any meeting, judicial proceeding, status hearings, or communications related to an evaluation, development of a CARE agreement or CARE plan; establishing a psychiatric advance directive; and, development of a graduation plan. 4) Specifies that a supporter is intended to do all of the following:
a) Support the will and preferences of the respondent to the best of their ability and to the extent reasonably possible;
b) Respect the values, beliefs, and preferences of the respondent; c) Act honestly, diligently, and in good faith; and,
d) Avoid, minimize and manage, to the greatest extent possible, conflicts of interest.

Disclose conflicts of interest to the court, the respondent and the respondent’s counsel.

Allows a court to remove a supporter because of any conflict of interest with the respondent, and to remove the supporter if the conflict cannot be managed in such a way to avoid any possible harm to the respondent.
5) Prohibits a supporter, without explicit authorization by the respondent with capacity to make that authorization from making decisions for, or on behalf of, the respondent, except when necessary to prevent imminent bodily harm or injury, and to sign documents on behalf of the respondent.
6) Provides that in addition to the obligations specified, a supporter is bound by all existing obligations and prohibitions otherwise applicable by law that protect people with disabilities and the elderly from fraud, abuse, neglect, coercion, or mistreatment. Specifies that the CARE Act does not limit a supporter’s civil or criminal liability for prohibited conduct against the respondent, including liability for fraud, abuse, neglect, coercion or mistreatment including liability under the Elder Abuse and Dependent Adult Civil Protection Act. 7) Requires subject to appropriation, the Judicial Council to provide funding to qualified legal services projects, as defined to be used to provide legal counsel appointed under III. 10) a) above for representation in CARE proceedings, matters related to CARE agreements and CARE plans, and to qualified support center as defined for training, support and coordination.

VI. Care Plan
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1) Requires the CARE plan to only include the following:
a) Behavioral health services funded through the 1991 and 2011 Realignment, Medi-Cal behavioral health, health care plans and insurers, services provided as specified within portions of the County Aid and Relief to Indigents and services supported by the Mental Health Services Act (MHSA) as specified;
b) Medically necessary stabilization medication to the extent not described in VI. 1) above; c) Housing resources funded through programs as specified including but not limited to the No Place Like Home Program; the California Housing Accelerator; the Homeless Housing Assistance and Prevention Program, the Project Roomkey and Rehousing Program; the Community Care Expansion Program; the Transitional Housing Placement Program; the Behavioral Health Continuum Infrastructure Program; and, the Community Development Block Grant Program; and,
d) Social services funded through the Supplemental Security Income/State Supplementary Payment Case Assistance program for Immigrants, CalWORKs, California Food Assistance Program, In-Home Supportive Services. and Cal Fresh. 2) Requires individuals who are CARE program participants to be prioritized for any appropriate bridge housing funded by the Behavioral Health Bridge Housing program. 3) Requires all CARE plan services and supports ordered by the court to be subject to all applicable federal and state statutes and regulations, contractual provisions and policy guidance governing program eligibility and available funds. Requires that in addition to the resourced funded through programs listed in VI. 1) above, DHCS to identify other adjacent covered Medi-Cal services, including but not limited to, enhanced case management and available community supports, which may be provided, although not ordered by the court, subject to all applicable federal and state statute, regulations contractual provisions, and policy guidance.
4) Requires that for respondents who are Medi-Cal beneficiaries, the county in which the respondent resides is the county of responsibility, as defined. 5) Provides that if a proceeding commences in a county where the respondent is found or is facing criminal or civil proceedings that is different than the county in which the respondent resides, the county in which the respondent is found or is facing criminal or civil proceedings cannot delay proceedings and is the responsible county behavioral health agency for providing or coordinating all components of the CARE agreement and CARE plan. 6) Provides that the county in which respondent resides as defined in VI. 4) above is responsible for the costs of providing all CARE agreement or CARE plan behavioral health services as defined in V.1) a) above.
7) Requires, in the event of a dispute over responsibility for any costs of providing components of the CARE agreement or CARE plan, the impacted counties to resolve the dispute in accordance with the arbitration process established for county mental health plans, including for respondents who are not Medi-Cal beneficiaries.

VII. Technical Assistance and Administration:
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1) Requires, subject to appropriation, the California Health and Human Services Agency (CHSSA) or a designated department within CHSSA to:
a) Engage an independent, research-based entity, as described in VII. 12) below, to advise on the development of data-driven process and outcome measures to guide the planning, collaboration, reporting, and evaluation of the CARE Act; and, b) Provide coordination, on-going engagement, and support collaboration among relevant state and local partners and other stakeholders throughout the phases of county implementation to support the successful implementation of the CARE Act. 2) Requires, subject to appropriation, DHCS to provide training and technical assistance to county behavioral health agencies to support the implementation of the CARE Act, including training regarding the CARE statute, CARE plan services and supports, supported decision making, the supporter role, trauma-informed care, elimination of bias, psychiatric advance directives, and data collection.
3) Requires, subject to appropriation, the Judicial Council, in consultation with DHCS, other relevant state entities, and the County Behavioral Health Directors Association, to provide training and technical assistance to judges to support the implementation of the CARE Act, including training regarding the CARE statutes, CARE plan services and supports, working with the supporter, supported decision making, the role of the supporter, trauma -informed care, elimination of bias, best practices, and evidence-based models of care for people with severe behavioral health conditions.
4) Permits for purposes of implementing the CARE Act, the CHSSA and DHCS to enter into exclusive or nonexclusive contracts, or amend existing contracts, on a bid or negotiated basis. 5) Permits CHHSA and DHCS to implement, interpret, or make specific the CARE Act, by means of plan letters, information notices, provider bulletins, or other similar instructions, without taking any further regulatory action.
6) Requires DHCS to develop, in consultation with county behavioral health agencies, other relevant state or local government entities, disability rights groups, individuals with lived experience, families, counsel, and other appropriate stakeholders, an annual report. Requires DHCS to post the annual report on its internet website. 7) Requires county behavioral health agencies and any other state or local governmental entity, as identified by DHCS to provide to DHCS data related to the CARE Act participants, services, and supports. Requires DHCS to determine the data measures and specifications, and publish through guidance.
8) Requires each county behavioral health department and any other state and local governmental entity, as identified by DHCS, to provide the required data in a format and frequency as directed by DHCS
9) Requires DHCS to provide information on the populations served and demographic data, stratified by age, sex, race, ethnicity, languages spoken, disability, sexual orientation and gender identity, and county, to the extent statistically relevant data is available. 833
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10) Requires the report to include, at a minimum, information on the effectiveness of the CARE Act model in improving outcomes and reducing homelessness, criminal justice involvement, conservatorships, and hospitalization of participants. Requires the annual report to include process measures to examine the scope of impact and monitor the performance of the CARE Act model implementation, such as the number and source of petitions filed for CARE Court; the number, rates, and trends of petitions resulting in dismissal and hearings; the number, rates, and trends of supporters; the number, rates, and trends of voluntary CARE agreements; the number, rates, and trends of ordered and completed CARE plans; the services and supports included in CARE plans, including court orders for stabilizing medications; the rates of adherence to medication; the number, rates, and trends of psychiatric advance directives; and, the number, rates, and trends of developed graduation plans. Requires the report to include outcome measures to assess the effectiveness of the model, such as improvement in housing status, gaining and maintaining housing; reductions in emergency department visits and inpatient hospitalizations; reductions in law enforcement encounters and incarceration; reductions in involuntary treatment and conservatorship; and reduction in substance use. Requires the annual report to examine these data through the lens of health equity to identify racial/ethnic and other demographic disparities and inform disparity reduction efforts.
11) Requires that the outcomes be presented to relevant state oversight bodies, including, but not limited to, the California Interagency Council on Homelessness. 12) Requires that an independent, research-based entity be retained by DHCS to develop, in consultation with county behavioral health agencies, county CARE Courts, and other appropriate stakeholders, an independent evaluation of the effectiveness of the CARE Act. 13) Requires the independent evaluation to employ statistical research methodology and include a logic model, hypotheses, comparative and/or quasi-experimental analyses, and conclusions regarding the extent to which the CARE Act model is associated, correlated, and causally related with the performance of the outcome measures included in the annual reports.

Requires the independent evaluation to highlight racial/ethnic and other demographic disparities, and include causal inference or descriptive analyses regarding the impact of the CARE Act on disparity reduction efforts.
14) Requires DHCS to provide a preliminary report to the Legislature three years after the implementation date of the CARE Act and a final report to the Legislature five years after the implementation date of the CARE Act. Requires DHCS to post the preliminary and final reports on its internet website.
15) Requires each county behavioral health department, each county CARE Court, and any other state or local governmental entity, as determined by DHCS, to provide the required data to DHCS, in a format and frequency as directed by DHCS.

VIII. Health Plans and Insurance
1) Requires a health care service plan (health plan) contract that covers hospital, medical, or surgical expenses and an insurance policy, issued, amended, renewed, or delivered on or after July 1, 2023, to cover the cost of developing an evaluation as defined in III. 15) above and the provision of all health care services for an enrollee when required or recommended for 834
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the enrollee under a CARE agreement or a CARE plan approved by a court in accordance with the court’s authority under the CARE Act regardless of whether the services are provided by an in-network or out-of-network provider.
2) Prohibits a health care service plan or an insurer from requiring prior authorization for services, other than prescription drugs, required under a CARE agreement or CARE plan approved by a court under the CARE Act.
3) Permits a health plan or an insurer to conduct a postclaim review to determine appropriate payment of a claim. Allows payment for services to be denied only if the health plan or insurer reasonably determines the enrollee was not enrolled at the time the services were rendered, the services were never performed, or the services were not provided by a health care provider appropriately licensed or authorized to provide the services. 4) Permits, notwithstanding VIII. 2) above, a health plan or insurer to require prior authorization for services as permitted by the Department of Managed Health Care (DMHC) or the Department of Insurance (CDI) under VIII. 9) below.
5) Requires a health plan or insurer to provide for reimbursement of services provided to an enrollee under the CARE Act, other than prescription drugs, at the greater of either of the following amounts:
a) The health plan’s or insurer’s contracted rate with the provider; or, b) The fee-for-service or case reimbursement rate paid in the Medi-Cal program for the same or similar services as identified by the DHCS.
6) Requires a health plan or insurer to provide for reimbursement of prescription drugs provided to an enrollee under the CARE Act at the contracted rate of the health plan/insurer. 7) Requires a health plan or insurer to provide reimbursement for services provided under the CARE Act in compliance with the requirements for timely payment of claims, as specified. 8) Prohibits from subjecting services provided to an enrollee pursuant to a CARE agreement or CARE plan, excluding prescription drugs, to copayment, coinsurance, deductible, or any other form of cost sharing. Prohibits an individual or entity from billing the enrollee or subscriber, nor seek reimbursement from the enrollee or subscriber, for services provided pursuant to a CARE agreement or CARE plan regardless of whether such service is delivered by an in-network or out-of-network provider.
9) Requires no later than July 1, 2023, DMHC and CDI to issue guidance to health plans or insurers regarding compliance with the CARE Act. Exempts the guidance from being subject to the Administrative Procedure Act (APA). Provides that such guidance is effective only until DMHC and CDI adopt regulations under the APA.
10) Requires a health plan or insurer to comply with the California Mental Health Parity Act of 2020.
11) Specifies that the health plan/insurer provision does not apply to Medi-Cal managed care contracts between DHCS and a health plan for enrolled Medi-Cal beneficiaries as specified. 835
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12) Specifies that the health plan/insurer provisions become operative on July 1, 2023.

IX. Miscellaneous
1) Permits, if a person who is charged with a misdemeanor or misdemeanors only, or a violation of formal or informal probation for a misdemeanor, where the judge finds reason to believe that the defendant has a mental health disorder, and may, as a result of the mental health disorder, be incompetent to stand trial, and the individual after a hearing is determined to be ineligible for diversion, the court to refer the defendant to the CARE Program. 2) Requires that a hearing to determine eligibility for the CARE Program to be held within 14 days after the date of the referral in IX. 1) above. Requires that if the hearing is delayed beyond 14 days, the court to order the defendant, if confined in a county jail, to be released on their own recognizance pending that hearing. Requires that if the defendant is accepted into CARE Program, the charges pending against the defendant to be dismissed. 3) Expands the systems of care for adults and older adults with SMI that calls for a client to be fully informed and volunteer for all treatment provided, unless danger to self or others or gravely disabled requiring temporary involuntary treatment to also include if the client is under a court order for CARE Court and prior to the court-ordered CARE plan, the client has been offered an opportunity to enter into a CARE agreement on a voluntary basis and has declined to do so.
4) Permits when included in a county’s MHSA County Plan and annual update, MHSA funds to be used for the provisions of services to clients under the CARE Program.

EXISTING LAW:
1) Establishes the LPS Act to end inappropriate, indefinite, and involuntary commitment of mentally disordered persons, developmentally disabled persons, and persons impaired by chronic alcoholism, and to provide prompt evaluation and treatment of those with mental health disorders or impaired by chronic alcoholism.
2) Defines, as a basis for involuntary commitment under the LPS Act, “grave disability” as a condition in which a person, as a result of a mental disorder, or impairment by chronic alcoholism, is unable to provide for their basic personal needs for food, clothing, or shelter, or is found to be mentally incompetent under the Penal Code. Excludes from that definition persons with intellectual disabilities by reason of that disability alone. 3) Provides that if a person is gravely disabled as a result of mental illness, or a danger to self or others, then a peace officer, staff of a designated treatment facility or crisis team, or other professional person designated by the county, may, upon probable cause, take that person into custody for a period of up to 72 hours for assessment, evaluation, crisis intervention, or placement in a designated treatment facility.
4) Allows a person who has been detained for 72 hours to be detained for up to 14 days of intensive treatment if the person continues to pose a danger to self or others, or to be gravely disabled, and the person has been unwilling or unable to accept voluntary treatment. 836
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5) Allows a person to be held at the expiration of a 14-day period of intensive treatment for further intensive treatment of up to 14 days if, during the detention period, a person threatened or attempted to take their own life or was detained because they threatened or attempted to their own life and continues to present an imminent threat of taking their own life and other specified condition.
6) Allows a person who has been detained for 14 days of intensive treatment to be detained for up to 30 additional days of intensive treatment if the person remains gravely disabled and is unwilling or unable to voluntarily accept treatment.
7) Requires a certification review hearing to be held within four days of the date on which a person is certified for a 14-day period of intensive treatment or 30 additional days of intensive treatment unless judicial review has been requested or a postponement is requested by a person or their attorney or advocate.
8) Grants every person detained by certification for intensive treatment with a right to a hearing by writ of habeas corpus for their release. Enumerates specified requirements and procedures for judicial review.
9) Allows for antipsychotic medication to be administered to any person subject to specified detentions under the LPS Act if that person does not refuse that medication. Allows antipsychotic medication to be administered when a detained individual indicates refusal of that medication only when the treatment staff have considered and determined that treatment alternatives to involuntary medication are unlikely to meet the needs of the patient and upon a determination of that person’s incapacity to refuse the treatment in a hearing. In the case of emergency, allows for antipsychotic medication to be administered over a detained person’s objection prior to a capacity hearing if the medication is required to treat the emergency and is provided in the manner least restrictive to the personal liberty of the patient. Enumerates specified requirements and procedures for capacity hearings pertaining to administering antipsychotic medication.
10) Allows, under the LPS Act, a court to order an imminently dangerous person to be confined under a conservatorship for further inpatient intensive health treatment for an additional 180 days, as provided.
11) Allows the professional person in charge of a facility providing 72-hour, 14-day, or 30-day treatment to recommend an LPS conservatorship to the county conservatorship investigator for a person who is gravely disabled and is unwilling or unable to voluntarily accept treatment; and requires the conservatorship investigator, if they concur with the recommendation, to petition the superior court to establish an LPS conservatorship. Provides that a person for whom an LPS conservatorship is sought has the right to demand a court or jury trial on the issue of whether they are gravely disabled. 12) Requires an officer providing conservatorship investigation to investigate all available alternatives to conservatorship and recommend conservatorship to the court only if no suitable alternatives are available. Requires the officer to render to the court a comprehensive written report containing all relevant aspects of the person’s medical, psychological, financial, family, vocational, and social condition, information concerning the person’s property, and information obtained from the person’s family members, close friends, social 837
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worker, or principal therapist. Requires the officer, if they recommend against conservatorship, to set forth all alternatives available. 13) Requires a conservator under an LPS conservatorship to place the conservatee in the least restrictive alternative placement, as provided. Gives the LPS conservator the right, if specified in the court order, to require the conservatee to receive treatment related specifically to remedying or preventing the recurrence of the conservatee’s being gravely disabled.
14) Requires counties, unless they opt out, to provide AOT, also known as “Laura’s Law,” for people with serious mental illnesses when a court determines that a person’s recent history of hospitalizations or violent behavior, and noncompliance with voluntary treatment, indicates the person is likely to become dangerous or gravely disabled without the court-ordered outpatient treatment.
15) Establishes a pilot program, until January 1, 2024, for Los Angeles and San Diego Counties, and the City and County of San Francisco, upon authorization by their respective boards of supervisors, to implement a “housing conservatorship” procedure for a person who is incapable of caring for their health and well-being due to a serious mental illness and substance use disorder, as evidenced by eight or more detentions for evaluation and treatment under Section 5150 in the preceding 12 months.
16) Permits, under the Probate Code, any interested person to petition the court for the appointment of a “conservator of the person” for a person who is unable to provide properly for their personal needs for physical health, food, clothing, or shelter, and permits the appointment of a “conservator of the estate” for a person who is unable to manage their financial resources or resist fraud or undue influence. Provides that no conservatorship of the person or of the estate may be granted by the court unless the court makes an express finding that the granting of the conservatorship is the least restrictive alternative needed for the protection of the conservatee.
17) Creates a court diversion program for those charged with certain drug offenses. 18) Creates a court diversion program for those with “mental disorders,” as defined. 19) Allows a court, if a criminal defendant is found to be mentally incompetent, to, among other things, determine if the defendant is eligible for a diversion program, or, if ineligible, to, among other things, refer the defendant to AOT or to an LPS conservatorship investigation. 20) Defines “Housing First” to mean the evidence-based model that uses housing as a tool, rather than a reward, for recovery and that centers on providing or connecting homeless people to permanent housing as quickly as possible. States that Housing First providers offer services as needed and requested on a voluntary basis and do not make housing contingent on participation in services.
21) Requires all agencies and departments administering state programs, created on or after July 1, 2017, to collaborate with the California Interagency Council on Homelessness to adopt guidelines and regulations to incorporate core components of Housing First. 838
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22) Establishes the Medi-Cal program, which is administered by DHCS, under which qualified low-income individuals receive health care services.
23) Makes children age 18 and under with family incomes up to 266% of the federal poverty level eligible for Medi-Cal.
24) Establishes a schedule of benefits in the Medi-Cal program, which includes mental health and SUD services included in the essential health benefits package adopted by the state for purposes of implementing the federal Patient Protection and Affordable Care (ACA) requirement for benefits that must be included in health plans offered in the private individual and small group market and to the Medicaid expansion population. 25) Requires DHCS to implement managed mental health care for Medi-Cal beneficiaries through contracts with mental health plans (MHPs). Permits MHPs to include individual counties, counties acting jointly, or an organization or nongovernmental entity determined by DHCS to meet MHP standards. Permits a contract to be exclusive and may be awarded on a geographic basis. Requires MHPs to be responsible for providing Specialty Mental Health Services (SMHS) to enrollees.
26) Requires county MHPs to be governed by specified guidelines, which include a requirement that MHPs provide SMHS to eligible Medi-Cal beneficiaries, including both adults and children.
28) Establishes the DMHC to regulate health plans and the CDI to regulate health insurers. 29) Requires health plans and health insurers providing health coverage in the individual and small group markets to cover, at a minimum, essential health benefits (EHBs), including the 10 EHB benefit categories in the ACA, as specified in state law, which include the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; Mental Health and SUD services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and, pediatric services, including oral and vision care.
30) Requires health plans to provide basic health care services, including: physician services; hospital inpatient and ambulatory care services; diagnostic laboratory and diagnostic and therapeutic radiologic services; home health services; preventive health services; emergency health care services; and, hospice care.
31) Requires emergency health care services to be available and accessible to enrollees on a 24 hour a day, seven days a week, basis within the health plan area. Requires emergency health care services to include ambulance services for the area served by the plan to transport the enrollee to the nearest 24 hour emergency facility with physician coverage, designated by the health plan.
32) Requires every health plan contract issued, amended, or renewed on or after January 1, 2021 to provide coverage for medically necessary treatment of Mental Health and SUD under the same terms and conditions applied to other medical conditions, as specified. 839
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33) Defines medically necessary treatment of mental health and SUD as a service or product addressing the specific needs of that patient, for the purposes of preventing, diagnosing, or treating an illness, injury, condition, or its symptoms, including minimizing the progression of that illness, injury, condition, or its symptoms, in a manner as specified. 35) Establishes the MHSA, enacted by voters in 2004 as Proposition 63, to provide funds to counties to expand services, develop innovative programs, and integrated service plans for mentally ill children, adults, and seniors through a 1% income tax on personal income above $1 million.
36) Specifies that the MHSA can only be amended by a two-thirds vote of both houses of the Legislature and only as long as the amendment is consistent with and furthers the intent of the MHSA. Permits provisions clarifying the procedures and terms of the MHSA to be amended by majority vote.

FISCAL EFFECT: Unknown. This bill, as amended, has not been analyzed by a fiscal committee.

COMMENTS:
1) PURPOSE OF THIS BILL. According to the author, county behavioral health departments provide Medi-Cal specialty mental health services to those who are enrolled in Medi-Cal and have severe mental illness. However, many of the most impaired and vulnerable individuals remain under or un-served because: a) the individual is so impaired they do not seek out services; b) the necessary services are not available at the right time due to administrative complexities and/or legal barriers; c) client care lacks coordination among providers and services, resulting in fragmentation among provided services; and, d) little accountability at various levels of the system results in poor outcomes for the client, who is often living on the streets. The author concludes, this bill seeks to overcome these barriers by connecting individuals to services, requiring coordination, and adding a necessary layer of accountability through the courts.

Governor Newsom, when introducing his CARE Court proposal, stated that sadly, the status quo provides support only after a criminal justice intervention or conservatorship. CARE Court is a paradigm shift, providing a new pathway for seriously ill individuals before they end up cycling through prison, emergency rooms, or homeless encampments. He further stated that, CARE Court is about meeting people where they are and acting with compassion to support the thousands of Californians living on our streets with severe mental health and substance use disorders. The Governor concluded by stating that we are taking action to break the pattern that leaves people without hope and cycling repeatedly through homelessness and incarceration. CARE Court is a new approach to stabilize people with the hardest-to-treat behavioral health conditions.
2) BACKGROUND.
a) CARE Court proposal. In early 2022, Governor Newsom proposed the CARE Court program to help connect a person in crisis with a court-ordered CARE plan for up to 12 months, with the possibility to extend for an additional 12 months. The framework provides individuals with a clinically appropriate, community-based set of services and 840
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supports that are culturally and linguistically competent, which includes short-term stabilization medications, wellness and recovery supports, and connection to social services and a housing plan. According to the CHHSA’s website, housing is an important component—finding stability and staying connected to treatment, even with the proper supports, is next to impossible while living outdoors, in a tent, or in a vehicle. CHHSA states that CARE Court is an upstream diversion to prevent more restrictive conservatorships or incarceration, based on evidence that demonstrates many people can stabilize, begin healing, and exit homelessness in less restrictive, community-based care settings. With advances in treatment models, new longer-acting antipsychotic treatments, and the right clinical team and housing plan, individuals who have historically suffered tremendously on the streets or during avoidable incarceration can be successfully stabilized and supported in the community. CHHSA further states that CARE Court is not for everyone experiencing homelessness or mental illness; rather it focuses on people with schizophrenia spectrum or other psychotic disorders who lack medical decisionmaking capacity, before they enter the criminal justice system or become so impaired that they end up in a LPS conservatorship due to mental illness. CHSSA states that although homelessness has many faces in California, among the most tragic is the face of the sickest who suffer from treatable mental health conditions, and the CARE Court proposal aims to connect these individuals to effective treatment and support, mapping a path to long-term recovery. CARE Court is estimated to help thousands of Californians on their journey to sustained wellness. SB 1338 (Umberg and Eggman) and AB 2830 (Bloom) of this Legislative Session implement the CARE Court proposal. b) Housing First: In 2016, the state’s efforts to address homelessness shifted to the use of Housing First core components. SB 1380 (Mitchell) Chapter 847, Statutes of 2016, which created the California Interagency Council on Homelessness to oversee implementation of the Housing First regulations and coordinate the state’s response to homelessness, as well as create partnerships among state agencies and departments, local government agencies, nonprofits, and federal agencies to prevent and end homelessness in California.

SB 1380 also aligned the Housing First guidelines for any state program that provides housing and supportive services to people experiencing homelessness. Housing First is an evidence-based model that uses housing as a tool, rather than a reward, for recovery and that centers on providing or connecting homeless people to permanent housing as quickly as possible. Housing First providers offer services as needed and requested on a voluntary basis and do not make housing contingent on participation in services.

As currently in print, this bill includes a housing plan as part of the respondent’s CARE plan. This bill provides for the housing plan to describe the housing needs of the respondent and the housing resources that will be considered in support of an appropriate housing placement. It also gives the respondent diverse housing options, including, but not limited to, housing in clinically enhanced interim or bridge housing, licensed adult and senior care settings, and supportive housing. Since this bill goes on to state that “counties may offer appropriate housing placements in the region as early as feasible in the engagement process” it appears this provision “does not allow the court to order housing or to require the county to provide housing,” thus an individual could be participating in CARE Court, be required to meet certain treatment plan goals and requirements, and yet remain unhoused. Under the existing Housing First framework, the state is supposed to be working with local governments and Continuums of Care to ensure housing is used as a tool in an individuals’ overall path to wellness rather than as a 841
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reward for recovery, even for those with SUD or SMI.

It is unclear how an individual meeting the requirements for participation in CARE Court can truly make progress, in terms of complying with the components of their CARE plan, if they remain unhoused. Additionally, the language of this bill is currently silent on whether an individual who is housed through the CARE Court program may lose their housing if they fail to comply with their CARE plan, stop taking their psychotropic medications, or experience a relapse. These raise questions on how the program complies with existing Housing First principals.
c) California’s mental health crisis. Mental illness is pervasive in California. About one in six Californians experience mental illness and one in 25 experience a SMI. (California Budget & Policy Center, “Mental Health in California: Understanding Prevalence, System Connections, Service Delivery, and Funding” (March 2020)). These rates are higher among people of color and those living below the poverty line. Among those experiencing homelessness, one in four individuals report having a SMI.

The COVID-19 pandemic exacerbated mental illness rates in California, and the state continues to face a shortage of facilities, services, and workers to appropriately care for its mentally ill population. For example, since 1995, the number of inpatient psychiatric beds in California has been decreasing, despite population growth and increased rates of mental illness. The state is projected to continue to face a shortfall of thousands of psychiatric beds for adult inpatient and residential care. Despite the high rates of mental illness among individuals experiencing homelessness, there is a dire shortage of supportive housing and wrap-around services to adequately treat mental illness within this population. Further, the behavioral health workforce is insufficient to meet the growing demand for mental healthcare. One report projected that, if current trends continue, by 2028 California will have 41% fewer psychiatrists and 1% fewer psychologists, therapists, and social workers than are likely to be needed. The growing mental health crisis has led to calls for reforming the mental healthcare system in California, including reforming existing law providing for involuntary detentions and treatment due to mental illness.
d) A significant portion of California’s homeless population is severely mentally ill.

While accurate data on the number of people among California’s unhoused population who are mentally ill is available, it is clear that a significant portion of that population has mental health disabilities. According to the 2019 annual point-in-time count, 23% of California’s homelessness population is severely mentally ill. A Los Angeles Times review of the 2019 point-in-time homelessness count for Los Angeles County found that 51% of homeless were either reported or observed to be affected by mental illness; 46% were affected by substance abuse; and, 67% were affected by either mental illness or substance abuse. A study from the University of California’s California Policy Lab, linking Los Angeles County Department of Mental Health records to Street Outreach data, found that 20% of Street Outreach clients had been diagnosed with a SMI within the previous 12 months. That study also found that homeless clients of the Street Outreach program waited, on average, 101 days for interim housing; 112 days for rapid re-housing; and, 188 days for permanent housing.
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e) LPS ACT: mandatory treatment options for those with mental illness. California law provides a number of options for forcibly detaining and treating individuals with SMI.

The primary option is the 1967 LPS Act, which provides for involuntary commitment for varying lengths of time for the purpose of treatment and evaluation, provided that certain requirements or preconditions are met. The goal of the LPS Act is to “end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders, developmental disabilities, and chronic alcoholism, and to eliminate legal disabilities.”
i) LPS involuntary holds and conservatorships. Under the LPS Act, an individual may be involuntary committed for varying lengths of time for the purpose of treatment and evaluation, provided that certain requirements are met. Additionally, the LPS Act provides for LPS conservatorships, resulting in involuntary commitment for the purposes of treatment, if an individual is found to meet the “grave disability” standard in which a person, as a result of a mental disorder or impairment by chronic alcoholism, is unable to provide for their basic personal needs for food, clothing, or shelter.

Typically, a person’s first interaction with the LPS Act is through what is commonly referred to as a 5150 hold. This allows an approved facility to involuntarily commit a person for up to 72 hours for evaluation and treatment if they are determined to be, as a result of a mental health disorder, a threat to themselves or others, or gravely disabled. (Section 5150.) The peace officer, or other authorized person, who detains the individual must know of facts that would lead a person of ordinary care and prudence to believe that the individual meets this standard. When making this determination, the peace officer, or other authorized person, may consider the individual’s past conduct, character, and reputation, so long as the case is decided on facts and circumstances presented to the detaining person at the time of detention.

Following a 72-hour hold, the individual may be held for an additional 14-days, without court review, if they are found to still be, as a result of a mental health disorder, a threat to themselves or others, or gravely disabled. (Section 5250.) When determining whether the individual is eligible for an additional 14-day confinement, the professional staff of the agency or facility providing evaluation services must find that the individual has additionally been advised of the need for, but has not been willing or able to accept, treatment on a voluntary basis. Additionally, the individual cannot be found at this point to be gravely disabled if they can survive safely without involuntary detention with the help of responsible family, friends, or third parties who are both willing and able to help. The individual may request judicial review of this involuntary detention, and if judicial review is not requested, the individual must be provided a certification review hearing.

If a person is still found to remain gravely disabled and unwilling or unable to accept voluntary treatment following their additional 14 days of intensive treatment, they may be certified for an additional period of not more than 30 days of intensive treatment. (Section 5270) The individual may request judicial review of this involuntary detention, and if judicial review is not requested, the individual must be provided a certification review hearing. Additionally, the professional staff of the agency or facility providing the treatment, must analyze the person’s condition at 843
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intervals not to exceed 10 days, and determine whether the person continues to meet the criteria for continued confinement. If the person is found to no longer meet the requirements of the 30-day hold, then their certification should be terminated.

Finally, the LPS Act provides for a conservator of the person, of the estate, or of both the person and the estate for a person who is gravely disabled as a result of a mental health disorder or impairment by chronic alcoholism. (Section 5350.) The purpose of an LPS conservatorship is to provide individualized treatment, supervision, and placement for the gravely disabled individual. The individual for whom such a conservatorship is sought has the right to demand a court or jury trial on the issue of whether they meet the gravely disabled requirement, and they have the right to be represented by counsel. An LPS conservatorship lasts for one year, but can be renewed.
ii) Laura’s Law. As an alternative to an LPS conservatorship, current law provides for court-ordered outpatient treatment through Laura’s Law, or the AOT Demonstration Project, enacted in 2002. In participating counties, the court may order a person into an AOT program if the court finds that the person either meets existing involuntary commitment requirements under the LPS Act or the person meets non-involuntary commitment requirements, including that the person has refused treatment, their mental health condition is substantially deteriorating, and AOT would be the least restrictive level of care necessary to ensure the person’s recovery and stability in the community. Originally, Laura’s Law was only operative in those counties in which the county board of supervisors, by resolution, authorized its application and made a finding that no voluntary mental health program serving adults and no children’s mental health program would be reduced in order to implement the law. The initial sunset provision provided for within Laura’s Law was extended several times until 2020 when legislation was passed requiring that, rather than counties opting into Laura’s Law, counties have to, by board of supervisors resolution, opt out of the program. Additionally, the sunset provision was removed, making the program permanent.

Laura’s Law is designed to provide counties with tools for early intervention in mental health crises. It allows for family members, relatives, cohabitants, treatment providers, or peace officers to initiate the AOT process with a petition to the county behavioral health director or the director’s designee. The health director or designee must then determine how to proceed. If the individual is found to meet the AOT eligibility requirements, a preliminary care plan is developed to meet that person’s needs. If this process results in the person voluntarily engaging with treatment, then the patient is deemed to no longer meet the criteria and the petition is no longer available. However, if the client declines their preliminary plan, then a public defender is assigned and the petition process proceeds. A judge either grants or rejects the AOT petition; and if an AOT petition is approved, treatment is ordered and continues for up to 180 days.
iii) Housing Conservatorship Pilot. In 2018, the Legislature created a pilot project, known as the “housing conservatorship,” for those who have both SMI and SUD (SB 1045 (Wiener & Stern) Chapter 845, Statutes of 2018, and SB 40 (Wiener & Stern) Chapter 467, Statutes of 2019) The counties of Los Angeles, San Diego, and San 844
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Francisco may, through January 1, 2024, elect to establish this new conservatorship, but only after, among other requirements, the board of supervisors determines that money will not be taken from other mental health and conservatorship programs and the board of supervisors ensures that necessary services are available in sufficient quantity, resources, and funding levels to serve the identified population, including access to supportive community housing with wraparound services, public conservators, mental health services, substance use disorder services, and service planning and delivery services.

This new six-month conservatorship, which may be established following a 28-day temporary conservatorship, is designed for those who are incapable of caring for their own health and well-being due to a SMI and SUD, as evidenced not by a contemporary grave disability, but by at least eight 72-hour involuntary holds under Section 5150 in the preceding 12 months. To ensure that this new conservatorship is truly filling a gap and not replacing any existing conservatorship or program, the investigator must consider all alternatives to the proposed conservatorship and only recommend the new conservatorship if no less restrictive alternatives exist and it appears the individual will not qualify for a conservatorship under the Probate Code or the LPS Act. So far, only San Francisco has elected to participate in the pilot and, as of earlier this year, it appears that only two individuals have been conserved under the program, though more individuals could soon be eligible because they are approaching the requisite number of 5150 holds. The pilot requires a thorough evaluation, which should assist the Legislature in determining the need for, and success of, the program.
iv) Probate Conservatorship. In California, if an adult is, based on clear and convincing evidence, unable to provide properly for their personal needs for physical health, food, clothing, or shelter, a conservator of the person may be appointed by the court.

If an adult who is, based on clear and convincing evidence, substantially unable to manage their own financial resources or resist fraud or undue influence, a conservator of the estate may be appointed by a court to manage the adult’s financial matters. The appointment process requires an investigation by a court investigator and approval by the court. The conservator can be a family member, friend, a professional fiduciary, or, more rarely, a county public conservator. A conservatorship involves a courtappointed third party – the conservator – making far-reaching, life-changing decisions on behalf of the conservatee. Historically, a conservatorship lasts until the death of the conservatee or a court order terminating it, based on someone seeking a petition for termination. However, AB 1194 (Low) Chapter 417, Statutes of 2021, requires that these conservatorships be reviewed annually by the probate court and terminated unless the court can legally reestablish them. AB 1194 cannot be implemented until the Legislature specifically allocates funding for it, thus allowing conservatorships to continue indefinitely, despite the recent change in state law. f) California State Auditor (CSA) report on the LPS. In July of 2020, the CSA released a report entitled, “Lanterman-Petris-Short Act: California Has Not Ensured That Individuals with Serious Mental Illnesses Receive Adequate Ongoing Care.” The Joint Legislative Audit Committee called for the audit and the CSA examined the implementation of the LPS Act in Los Angeles County, San Francisco County, and Shasta County. Essentially the audit found that California has not ensured adequate care 845
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of individuals with SMI in its broader mental health system. The audit found that, “perhaps most troublingly, many individuals were subjected to repeated instances of involuntary treatment without being connected to ongoing care that could help them live safely in their communities.” The CSA found that the LPS Act’s criteria for involuntary mental health treatment allows counties sufficient authority to provide involuntary treatment to people who need it and no evidence was found to justify expanding the “grave disability” criteria, which could “potentially infringe upon people’s liberties.” However, while the LPS Act’s criteria are sufficient for involuntary holds and conservatorships, significant issues were found with how Californians with SMI are cared for in the LPS system:
i) Individuals on conservatorships have limited treatment options – many could not receive specialized care in state hospital facilities for an average of one year because of a shortage of available treatment beds;
ii) Individual existing involuntary holds have not been enrolled consistently in subsequent care to help them live safely in their communities – in two counties, no more than 9% of these individuals were connected to ongoing services and supports; and,
iii) Less than one-third of the State’s counties – only 19 at the time of the audit – had adopted AOT even though it is an effective community-based approach to mental health treatment to help prevent future involuntary holds and conservatorships. g) Non-mandatory options for treating those with mental illness. Today there are a number of alternatives to the court-ordered involuntary holds or treatment that provide more autonomy, or advance choice, to the individual, while still providing them with necessary treatment and support. These include a durable power of attorney and advance health care directive, as well as supported decisionmaking. More broadly, there are voluntary, community-based supports and services. In addition to other community-based voluntary mental health services and supports, in 2004 California voters adopted Proposition 63, which created the MHSA. The MHSA imposed a one-percent surtax on the wealthiest Californians in order to fund mental health programs and services across the state. Under the MHSA, the DHCS allocates Proposition 63 funds to mental health programs and services through contracts with individual counties.

MHSA programs have three key components: community services and support (CSS); prevention and early intervention (PEI); and innovation. CSS programs, which account for about 80% of allocated funds, provide direct services to individuals with SMI. The guiding concept of CSS programs is to do “whatever it takes” to meet the mental health needs of those who are unserved or underserved. PEI programs, which may account for up to 20% of a county’s funding, seek to identify early mental illness (especially in children and young adults) before it becomes severe and disabling. Finally, counties may use up to 5% of their funding for “innovation,” or developing, testing, and implementing new approaches that may not yet have demonstrated effectiveness.

While the LPS Act and MHSA have different histories and functions, they share the common goal of helping people obtain treatment for mental illness in the least restrictive and most effective manner possible. The MHSA has the potential to provide alternatives to the choices presented by the LPS system.
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h) California’s muddled mental health system. While the CSA rightly noted the shortcomings of LPS holds and conservatorships, those shortcomings are not solely attributable to problems within the LPS Act, its definitions, or its implementation. LPS cannot “connect” persons to “ongoing care” if such care does not exist. The LPS Act, was enacted to “end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders.” Its primary purpose is not to provide mental health services per se, but to establish commitment criteria that protect the due process rights of persons who are experiencing a dangerous or debilitating mental health crisis. In the absence of voluntary and less restrictive treatment options, the various professionals who make determinations under the LPS Act too often face the choice of releasing a seriously mentally ill person back into the community, or committing them against their will to a locked psychiatric facility.

It was precisely this lack of alternatives in the wider mental health system that prompted California voters in 2004 to adopt the MHSA. A 2016 report by the Little Hoover Commission (Commission) cites several successful and promising local programs developed through the MHSA, but the Commission’s overall conclusion was that a “muddled” governance structure makes it difficult to determine if counties use MHSA funds in the most efficient and effective manner, and who should be held accountable when they do not. For example, current law assigns various responsibilities for implementation of the MHSA to three different agencies: DHCS, which absorbed the administrative responsibilities of the now-disbanded Department of Mental Health Services in 2012; the Mental Health Services Oversight and Accountability Commission (MHSOAC), which although created by Proposition 63, has oversight responsibilities for the mental health care system as a whole; and the Mental Health Planning Council, which reviews program performance of the overall mental health system, including MHSA programs. Unfortunately, members of these three agencies informed the Commission that the broad and sometimes overlapping responsibilities mean, in practice, that there is no clear designation of who is responsible for what.

On one key issue, the Commission’s report on MHSA found (and the same problem that the State Auditor found in the LPS system) was insufficient data collection. “Despite compelling claims that the MHSA has transformed mental health services in communities across California,” the Commission stated, “the state cannot yet demonstrate meaningful, statewide outcomes across the range of programs and services supported by Proposition 63 dollars.” Without robust data, policymakers cannot know which programs work with which specific populations. The Commission found that some counties – Los Angeles in particular – have done better than others in tracking outcomes of specific programs. The Commission recommended that the Legislature establish a MHSA data working group within DHCS to build upon the best of the county programs and develop a statewide MHSA database. As guidance, the Commission suggested that the Legislature look to the experience of a working group established in 2014 to collect data on the effectiveness of juvenile justice programs.

If effectively utilized, the MHSA programs may well obviate the need for an LPS hold or conservatorship in the first place, or they might provide less expensive and more effective alternatives to the choice of either releasing or committing persons who are experiencing mental illness. However, LPS decision-makers must first have knowledge of these 847
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programs and their effectiveness with various populations, which would require much more data and analysis, as well as cooperation and collaboration. i) Cities and counties have a split position on CARE Courts. Cities tend to support the legislation and counties and their associated entities, while not opposed, have raised many issues of concern with the legislation. This split is likely due to the fact that many unhoused individuals with mental illness can be found in cities, while the counties will be called upon to provide the supports and services required by the bill (although creation of housing, in large part, is limited by cities).

City support is exemplified by the City of Santee, which recognizes the bill as:
“An important measure to provide California’s civil courts with a new process for earlier action, support, and accountability to protect and care for some of our State’s most vulnerable residents. This bill would provide individuals with a clinically appropriate, community-based, court-ordered care plan, including behavioral health care, stabilization medication, and housing support to adults who are suffering from specified mental health disorders (schizophrenia spectrum and psychotic disorders) and who lack medical decision making capacity.

As this legislation could serve as an important tool to help in the City’s effort to help address the challenges of homelessness and increase services and safety for those experiencing homelessness, the City Council of the City of Santee passed a unanimous resolution in support of the bill.”
County concerns are well illustrated by the letter from the County of Humboldt:
“…Humboldt County strongly supports a comprehensive, holistic approach to addressing the homeless crisis. However, this bill so far fails to include additional funding for the impact CARE Court would have on our behavioral health, public defender and public guardian offices. Additionally, while we and the cities are working to build our housing stock and behavioral health workforce and infrastructure utilizing recent state investments, we are not yet prepared or funded to implement this new program effectively or operate it ongoing.

New expectations, whether for CARE Court or other programs, require new resources to meet them, especially given decades of underfunding for behavioral health services and zero state investment in the county public guardian offices. Importantly, much of the work envisioned by the CARE Court proposal is not reimbursed by Medi-Cal or private insurance.

Additionally, the proposed sanctions are not appropriate. Our county cannot bear sanctions related to an entirely new program in which we lack the sole authority, housing units and funding to implement. Sanctions would exacerbate the issues our overloaded and underfunded public defender and behavioral health departments are already experiencing, including a severe workforce shortage.” If cities (who may be focused on moving out their unhoused residents) and counties (who will be required to place and serve those individuals) cannot work together to support 848
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CARE Court participants, the program will most likely experience difficulties in succeeding, helping neither counties nor cities, nor, most importantly, the program participants themselves.
j) CARE Court Allocations in Budget. The Governor’s May Revision (reflecting the April 7, 2022 version of this bill) includes a total of $64.7 million General Fund in 2022- 23 for the support of a new CARE Court process. This amount includes: i) $39.5 million ($37.7 million ongoing) to the judicial branch for court proceedings; ii) $15.2 million (about $1 million ongoing) to the DHCS for training, technical assistance, and data collection; and, iii) $10 million ongoing to the Department of Aging (DOA) for the CARE Court Supporter program (DOA responsibility for the supporter role has been removed from the most recent bill version so it is unknown if these monies will be transferred to DHCS who in this version of the bill is charged with facilitating the supporter role.
3) SUPPORT. Over 45 cities, including the Big City Mayor Coalition write in support of the bill. Specifically, local governments from San Diego, including the City and County of San Diego County (SD), state in support that the creation of CARE Courts represents a thoughtful approach to addressing the behavioral health crisis we are witnessing on our streets and getting people connected with the care they need earlier. It appropriately recognizes the continuum of care that this small but highly visible segment of the population with significant mental health disorders deserve. As with local agencies throughout the State, SD’s communities are facing a daunting homelessness crisis. However, the unsheltered population is as diverse as the general population, all who come to their housing situation with different backgrounds, upbringings, and traumas. It is imperative that we provide multi-faceted solutions to help the myriad situations our fellow Californians face. Some unsheltered individuals recently lost a job and need quick and focused assistance; some have SMI and SUD issues that have developed over many years resulting in an inability to care for themselves. SD states that CARE Court will provide a new and focused civil justice alternative to those struggling with schizophrenia spectrum or psychotic disorders and who lack medical decision-making capacity. The CARE plan envisioned by this bill provides numerous safeguards to ensure personal civil liberties are respected and protected.

The California Chamber of Commerce (Chamber), along with 27 local chambers of commerce and business associations, also in support state, the CARE Court is a thoughtful, measured response to the tragedy of homeless mentally ill or substance abuse disordered individuals. It attempts to thread the needle of providing necessary care and treatment in an environment appropriate to deliver those services; that is, a supportive setting that is neither outdoors or incarcerated. Importantly, the individuals to be served by this approach lack the capacity to make medical decisions for themselves; the only alternatives are the status quo, which is continued desperate deterioration living outdoors, or in a far more restrictive conservatorship or incarceration. The Chamber states in conclusion that California employers have a clear stake in improving the treatment and outcomes for severely mentally disabled individuals without a fixed residence. First, they are our fellow Californians, in severe need, for whom we have an obligation of care. Second, many employers share neighborhoods with mentally disabled or substance abuse disordered individuals, so have first-hand experience with the failure of our institutions to adequately serve them and address their misery. Finally, as taxpayers and business leaders, employers want to see their private investment return healthy, thriving communities.
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4) OPPOSITION. A coalition of over 40 advocacy groups, including Disability Rights California, American Civil Liberties Union, and the Depression and Bipolar Support Alliance (Coalition), write in opposition to this bill. The Coalition states that the CARE Court framework this bill seeks to establish is unacceptable for a number of reasons:
a) It perpetuates institutional racism through a system of coerced treatment and worsens health disparities, directly harming Black, Indigenous and People of Color; b) It denies a person’s right to choose and have autonomy over personal healthcare decisions;
c) It does not guarantee housing provided with fidelity to principles that prioritize voluntary services, an approach that is backed by evidence;
d) Community evidence-based practices and scientific studies show that adequatelyresourced intensive voluntary outpatient treatment is more effective than court-ordered treatment; and,
e) It will not matter that the terms used are called “Supportive Decision-Making” and “Supporter” because the Supporter’s role is to implement an involuntary medical plan ordered by a civil court, and disregards the importance of voluntary decisions in mental health treatment.

The Coalition continues that CARE Court is antithetical to recovery principles, which are based on self-determination and self-direction. The CARE Court proposal is based on stigma and stereotypes of people living with mental health disabilities and experiencing homelessness. While the Coalition agrees that State resources must be urgently allocated towards addressing homelessness, incarceration, hospitalization, conservatorship, and premature death of Californians living with SMI, CARE Court is the wrong framework. The right framework allows people with disabilities to retain autonomy over their own lives by providing them with meaningful and reliable access to affordable, accessible, integrated housing combined with voluntary services. In concluding, the Coalition states that because CARE Court will harm Californians with disabilities, they strongly oppose this bill and instead, would welcome a proposal developed with input from the people CARE Court seeks to help. The Coalition believes a community-based approach would be far more likely to succeed. Such an approach would expand resources for permanent affordable housing with voluntary supports and increase early access to voluntary, community-based treatment based on principles of trauma-informed care and the complete removal of law enforcement and the courts from the process.
5) CONCERNS. Numerous organizations write in with significant concerns regarding this bill, including 13 individual counties. One County Coalition (CC) representing the California State Association of Counties, the Rural County Representatives of California, the Urban Counties of California, the County Behavioral Health Director’s Association, the County Welfare Directors Association and the California State Association of Public Administrators, Public Guardians and Public Conservators. CC states that as currently drafted, this bill requires all 58 counties to establish a CARE Court. Counties would play a key and substantial role in implementation as the state’s partners in providing critical behavioral health and social services. For these reasons, CC strongly advocates the adoption of the following policy recommendations and local investments to help ensure CARE Courts can be implemented in a practical and achievable manner in all 58 counties:
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a) Phased-In Implementation: The path to success for counties – more importantly, for those who stand to benefit from CARE Court – must be grounded in an incremental phase-in model, in which counties most prepared to implement are the first adopters. This includes, but is not limited to, the resources and ability of courts to establish the new processes and procedures without contributing to further court backlogs; the staffing and funding capacity for behavioral health and social services to provide the necessary services to existing and new populations; and local solutions for ongoing housing shortages, which presents one of the biggest challenges and most critical elements for program success;
b) Resources: The CARE Court program includes new responsibilities and obligations imposed on counties that require additional resources and ongoing funding, likely in the hundreds of millions of dollars. Adequate and sustainable funding, as well as start-up funding is required across multiple departments, including county behavioral health, public defender, county counsel, public guardians and conservators, and county social services. This is in addition to funding required for court administration, operation, and staffing;
c) Fiscal Protections: The CARE Court proposal must provide protections to counties for any new responsibilities and costs. To ensure our counties have the appropriate long-term resources, we recommend fiscal provisions that preserve current funding and services, while also providing a mechanism for determining and allocating supplementary annual funding for new activities and duties required by this bill; d) Sanctions: Sanctions should be reserved for deliberate and chronic deficiencies, imposed only after meaningful engagement within the existing regulatory framework along with the appropriate procedural safeguards. In addition, sanctions should not begin until after the program has been fully funded and implemented; and, e) Housing: Housing is imperative for the successful treatment of those with SMI and foundational to addressing the larger problem of homelessness across California. To ensure that the state’s recent housing investments are available to serve the CARE population, counties support recent amendments authorizing the Superior Court to order housing providers that have received specified state funds to accept placement of CARE participants at any available housing option or program as appropriate to meet the respondent’s needs.
6) DOUBLE REFERRAL. This bill is double referred. It passed out of the Assembly Judiciary Committee with a 9-1 vote on June 21, 2022.
7) RELATED LEGISLATION.
a) AB 2220 (Muratsuchi) creates the Homeless Courts Pilot Program, which would be administered by the Judicial Council for the purpose of providing comprehensive community-based services to achieve stabilization for, and address the specific legal needs of, individuals who are chronically involved with the criminal justice system. AB 2220 was held in the Assembly Appropriations Committee. b) AB 2830 (Bloom) is identical to the April 7, 2022, version of this bill. AB 2830 was pulled from hearing in the Assembly Judiciary Committee by the author. c) SB 1416 (Eggman) expands the definition of “gravely disabled” to include the inability of an individual to provide for their basic personal needs for medical care for the purpose of involuntarily detaining the individual for evaluation and treatment of a mental health 851
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condition, as specified. SB 1416 was not set for hearing in the Assembly Judiciary Committee.
8) COMMITTEE CONCERNS. Given the very significant concerns that continue to be raised about the bill by the opposition and those with concerns (many of whom will be required to implement CARE Courts), the authors and the Governor may consider further amending the bill as it moves forward, to address those concerns and other issues, including the following:
a) Further extend the phased-in implementation period to ensure that counties have adequate time to establish the requisite infrastructure needed to meet the needs of program participants, including all needed housing, supports and services, and sufficient staff to ensure the supports and services are provided timely;
b) Not order any unhoused individual to participate in the CARE Court unless and until housing, with wrap-around supportive services, can be guaranteed for the duration of the court order and, ideally, even after completion of the program; c) Revise the sanctions against counties to ensure that no county is sanctioned unless it has sufficient housing, available services, and other resources to provide the necessary supports and services to program participants. If a fine were necessary, ensure that the fine would not reduce funding for voluntary behavioral health services and supports; d) Ensure that funding for voluntary, community-based services is not reduced as a result of CARE Court. Reduction of voluntary services would be counterproductive and would increase the need for more expensive and likely less effective involuntary treatment; and, e) Provide indemnification for licensed professionals participating in the CARE Court processes, similar to that which is contained in the LPS Act.

REGISTERED SUPPORT / OPPOSITION:

Support
Alameda County Families Advocating for The Seriously Mentally Ill Bay Area Council
Big City Mayors
Building Owners and Managers Association
California Association of Code Enforcement Officers
California Chamber of Commerce
California Downtown Association
California Hospital Association
California Professional Firefighters
California Travel Association (CALTRAVEL)
Central City Association of Los Angeles
City of Alhambra
City of Bakersfield
City of Berkeley
City of Beverly Hills
City of Buena Park
City of Carlsbad
City of Chino Hills
City of Chula Vista
City of Concord
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City of Corona
City of Coronado
City of Del Mar
City of El Cajon
City of Encinitas
City of Escondido
City of Fontana
City of Fullerton
City of Garden Grove
City of Half Moon Bay
City of Huntington Beach
City of Imperial Beach
City of Irvine
City of La Mesa
City of Lemon Grove
City of Mission Viejo
City of Montclair
City of National City
City of Oceanside
City of Ontario
City of Paramount
City of Poway
City of Rancho Palos Verdes
City of Redwood City
City of Riverside
City of San Diego
City of San Marcos
City of Santa Monica
City of Santa Rosa
City of Santee
City of Solana Beach
City of Upland
City of Vista
County of Contra Costa
County of Marin
County of San Diego
Family and Consumer Advocates for The Severely Mentally Ill Family Services Association
Fontana Chamber of Commerce
Fremont Chamber of Commerce
Garden Grove Chamber of Commerce
Golden Gate Restaurant Association (GGRA)
Govern for California
Harbor Association of Industry & Commerce
Hotel Council of San Francisco
Inland Empire Economic Partnership (IEEP)
Laguna Niguel Chamber of Commerce
Lake Elsinore Valley Chamber of Commerce
Los Angeles Area Chamber of Commerce
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Los Angeles Business Council
Los Angeles County Business Federation (BIZFED)
National Alliance on Mental Illness (NAMI-CA)
Neighborhood Partnership Housing Services, INC.

Oceanside Chamber of Commerce
Orange County Business Council
Orange County Hispanic Chamber of Commerce
Palos Verdes Peninsula Chamber of Commerce
Psychiatric Physicians Alliance of California (PPAC)
Redondo Beach Chamber of Commerce
Sage Leadership Academy
San Diego County District Attorney's Office
San Diego Regional Chamber of Commerce
San Francisco Chamber of Commerce
San Francisco Travel Association
San Pedro Chamber of Commerce
Santa Clarita Valley Chamber of Commerce
Santa Rosa Metro Chamber of Commerce
Santee Chamber of Commerce
South Bay Association of Chambers of Commerce
Tulare Chamber of Commerce
Valley Industry and Commerce Association
West Ventura County Business Alliance
Opposition
A & L Association
Abolition Study Group of Psychologists for Social Responsibility American Civil Liberties Union (ACLU), Center for Advocacy & Policy CA American Civil Liberties Union California Action
American Civil Liberties Union of California
Anti Police-terror Project
Bay Area Legal Aid
California Behavioral Health Planning Council
Cal Voices
California Advocates for Nursing Home Reform
California Assoc. of Mental Health Peer Run Organizations (CAMHPRO) California Democratic Party Black Caucus Legislative Committee California Pan-ethnic Health Network
Caravan 4 Justice
Care First California
Corporation for Supportive Housing (CSH)
County of Humboldt
Depression and Bipolar Support Alliance
Dignity and Power Now
Disability Rights Advocates
Disability Rights California
Disability Rights Education & Defense Fund (DREDF)
Disability Rights Legal Center
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Drug Policy Alliance
Ella Baker Center for Human Rights
Funders Together to End Homelessness San Diego
Housing California
Housing Is a Human Right - Orange County
Human Rights Watch
Inland Equity Partnership
Justice in Aging
Justice LA
Justice Teams Network
Justice2jobs Coalition
Kelechi Ubozoh Consulting
LA Defensa
Law Foundation of Silicon Valley
Los Angeles Community Action Network
Lotus Collective
Love and Justice in The Streets
Loyola Law School
Mental Health Advocacy Services
Mental Health America of California
NAACP San Mateo Branch #1068 Housing Committee
National Association of Social Workers, California Chapter National Health Law Program
National Homelessness Law Center
Nextgen California
No CARE Court California Coalition
Norcal Resist
Peers Envisioning and Engaging in Recovery Services (PEERS) People's Budget Orange County
People's Homeless Task Force Orange County
Project Amiga
Public Interest Law Project
Racial and Ethnic Mental Health Disparities Coalition
Rosen Bien Galvan & Grunfeld, LLP
Sacramento Homeless Organizing Committee
Sacramento LGBT Community Center
Sacramento Regional Coalition to End Homelessness
San Bernardino Free Them All
San Francisco Pretrial Diversion Project
San Francisco Public Defender's Office
Senior & Disability Action
Senior and Disability Action
Starting Over INC.

Stop the Musick Coalition
Street Watch LA
Stronger Women United
The Bar Association of San Francisco
The Coelho Center for Disability Law Policy and Innovation Western Center on Law & Poverty
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Western Regional Advocacy Project
Women's Wisdom Art
10 individuals
Analysis Prepared by: Judith Babcock / HEALTH / (916) 319-2097 856
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CITY OF CUPERTINO
Agenda Item
22-11004 Agenda Date: 7/19/2022
Agenda #: 31.

Subject: Consider the Fiscal Policy Inventory and Gap Analysis Final Report Receive the Fiscal Policy Inventory and Gap Analysis Final Report Presenter: Thomas Leung, Senior Management Analyst
CITY OF CUPERTINO Page 1 of 1 Printed on 7/14/2022
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider the Fiscal Policy Inventory and Gap Analysis Final Report Recommended Action
Receive the Fiscal Policy Inventory and Gap Analysis Final Report Discussion
Background
In Fiscal Year (FY) 2019-20, the City began an internal audit program and issued a Request for Proposal (RFP) for internal audit services. After reviewing the proposals, the evaluation committee selected Moss Adams as the City’s Internal Auditor. Moss Adams serves as the City’s designated Internal Auditor and conducts projects focusing on:
 Risks
 Internal controls
 Efficiency and effectiveness
 Best practices
 Compliance
Moss Adams reports to the City Council’s Audit Committee, which oversees the work and approves the annual internal audit work plan.

Project Scope
This project was limited in scope to the City’s finance and accounting (fiscal) functional areas. All fiscal P&Ps available as of October 2021 were provided to Moss Adams to assess as part of this project. Other P&P documents, informal process documentation, or guideline documents that are not approved formal P&Ps at the City level may exist; however, they were not included in Moss Adams’ analysis and are therefore not included in the results presented in Moss Adams’ report.

Project Results
Moss Adams identified eight high-risk policy areas:
 Accounting and Financial Reporting
 Accounts Payable
 Budgeting
 Capital Assets
 Cash Management
 Payroll and Timekeeping
 Procurement
 Revenue and Accounts Receivable
The attached Moss Adams report includes a prioritized P&P work plan for all policy areas and recommendations for high-risk policy areas.
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Management Response
Management agrees that formalized P&Ps are needed in the above areas. Staff currently utilizes non-formalized procedures. In response to the report, staff has drafted P&Ps for the high-risk policy areas mentioned above. The P&Ps are in the review process and expected to be approved by the Director of Administrative Services and the City Manager.

Staff plans to implement formalized P&Ps for the high-risk policy areas at the beginning of FY 2022-23. Formalized P&Ps for the medium and low-risk policy areas are expected to be implemented by the end of FY 2023-24.

Next Steps
Staff will develop an implementation plan to implement the report’s recommendations.

The implementation plan and status reports will be available on the City’s website at cupertino.org/budget under Internal Audit.

In addition, if approved as part of the FY 2022-23 internal audit work plan, Moss Adams would review the City’s formalized P&Ps and report back to the Audit Committee and City Council on the status of the P&Ps.

Sustainability Impact
No sustainability impact.

Fiscal Impact
No fiscal impact. The City’s Internal Audit contract is included in the contracts category of the accounting program in the FY 2022-23 Adopted Budget. _____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Acting City Manager Attachments:

A – Fiscal Policy Inventory and Gap Analysis Final Report 860
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FINAL REPORT
City of Cupertino

FISCAL POLICY INVENTORY AND GAP ANALYSIS
May 5, 2022
Moss Adams LLP
999 Third Avenue, Suite 2800
Seattle, WA 98104
(206) 302-6500
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Fiscal Policy Inventory and Gap Analysis

FOR INTERNAL USE OF CITY OF CUPERTINO ONLY
Table of Contents
Background, Scope, and Methodology 1
A. Background 1
B. Scope and Methodology 1
Overall Results 3
Prioritized P&P Work Plan 4
Summary of Recommendations 5
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Fiscal Policy Inventory and Gap Analysis | 1

FOR INTERNAL USE OF CITY OF CUPERTINO ONLY

BACKGROUND, SCOPE, AND METHODOLOGY
The City of Cupertino (the City) requested that Moss Adams LLP (Moss Adams), as the City’s internal auditor, perform an inventory of all City fiscal policies and procedures (P&Ps) and a gap analysis to determine what gaps in coverage exist, and develop a prioritized P&P work plan to support the City in addressing identified gaps. The objectives of this project were to:
 Determine which fiscal areas are adequately covered by comprehensive current P&Ps.  Identify policy gaps, including areas where no policies to support fiscal functions are documented, existing policies are outdated or in need of minor updates or additions, and current internal control or gap coverage are missing key components.
 Prioritize policy gaps based on overall risk, and develop an implementation plan to provide the City with recommendations for prioritizing and addressing the identified policy gaps.

This engagement was performed in accordance with Standards for Consulting Services established by the American Institute of Certified Public Accountants. Accordingly, we provide no opinion, attestation, or other form of assurance with respect to our work or the information upon which our work is based. This report was developed based on our assessment of the City’s fiscal P&Ps as of October 2021. The procedures we performed do not constitute an examination in accordance with generally accepted auditing standards or attestation standards.

This project was limited in scope to the City’s finance and accounting (fiscal) functional areas. All fiscal P&Ps available as of October 2021 were provided to Moss Adams to assess as part of this project. Other P&P documents, informal process documentation, or guideline documents that are not approved formal P&Ps at the City level may exist; however, they were not included in this analysis and are therefore not included in the results presented in this report.

The procedures performed included:
 Fiscal P&P Inventory – We worked with City management to develop a full listing of finance and accounting policy areas that were applicable to the City and that would be included in the scope of this project. For each area, we performed the following:
○ Obtained all supporting/related P&P documents available ○ Documented a full inventory of the current existing P&P documents, including a summary of the coverage areas of each.
○ Discussed the full inventory of results with management to ensure that all P&P documents were provided and included in the inventory.
 P&P Gap Analysis – We assessed the inventory results and performed a full gap analysis, including:
○ Assessed the current content of each area to identify potential gaps in coverage. 863
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○ Assessed existing P&P documents for opportunities to improve the overall content and flow/structure, incorporate best practices, and improve internal controls, where possible, to provide for effective resources for employees.
○ Summarized the gaps identified for each P&P area.
○ Categorized the significance and extent of the identified gaps as follows: full gaps, major gaps, or minor gaps. We also noted areas only in need of an update.  Prioritized P&P Work Plan Development – Based on the results of the P&P inventory and gap analysis performed, we developed detailed recommendations, by area, for the City to use as a road map for developing, amending, or updating P&Ps. We assigned a risk level (high, medium, or low), as described in the table below, and a recommended priority order by phase based on the risk level. We discussed the prioritized P&P work plan with management, gathered input on the work plan, and made updates, as appropriate.

Gaps identified during the analysis were categorized as follows:
 Full Gap – Documented policies and procedures do not exist for the area.  Major Gap – Some P&P documentation exists; however, there are major gaps in overall coverage.
 Minor Gap – P&Ps cover most of the key areas but require some updating or additional coverage.
 Update Needed – The P&P needs to be reviewed for potential updates.

The assessed risk level, category descriptions, and recommended phases/timing for addressing the gaps and related recommendations are described in the table below. The risk levels were assigned based on our understanding of the City, insights gained from management, the inherent risk in each area, and the level and significance of gaps identified.

Assessed
Risk Level Category Description Recommended Phase/Timing High Risk
● Area is inherently high risk
● Gaps identified were either full gaps (i.e., no P&P coverage) or major gaps
● Area is a high priority for the City’s operations and structure Phase One
(within 12 months)
Medium Risk
● Area is inherently high or medium risk; however, a lack of documented P&Ps may only represent a medium risk to the City ● Gaps identified were either full gaps or major gaps
● Area is a high priority for the City’s operations and structure Phase Two
(within 18 months)
Low Risk
● Area is inherently low risk
● Gaps identified were either minor in significance or magnitude, or the area only needed review or updating
● Area is a low priority for the City’s operations and structure Phase Three
(within 24 months)

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OVERALL RESULTS
Throughout the P&P inventory and gap analysis, we found that the City has a variety of P&P documents; however, they are not consistently utilized, structured, or based on standard templates.

Although the City appears to have consistent practices established and has approvals/process flows setup within the enterprise resource planning (ERP) system, the City does not have a defined P&P framework and as a result, in many cases it was unclear what level of policy a document fell under.

Some of the City’s documents identified as “policies” included administrative procedures. In some areas, the City uses the notes included in their financial statements as “policies”, as well as Council Resolutions, memos, or email to communicate requirements. The City does not have a standard template/format and there does not appear to be a structure for ensuring all policies are supported by underlying procedures. Additionally, there is no consistent means of identifying when policies are approved and effective. The effective date on most policies is not complete.

Utilizing a defined P&P framework with standard templates will help streamline the City’s P&P resources. This framework can be used to define responsibilities at both the City Council and management level.

The City can utilize the Prioritized P&P Work Plan presented on the following page to carry out their efforts to develop and update their fiscal P&Ps. In addition to following summary table, we have provided management with a detailed Prioritized P&P Work Plan, which includes all results from the inventory and gap analysis performed and detailed recommendations by area. 865
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PRIORITIZED P&P WORK PLAN
Policy Area Type of Gap Associated
Risk
Recommended
Priority Level
Accounting and Financial Reporting Major Gaps High 1
Accounts Payable Full Gap High 1
Budgeting Major Gaps High 1
Capital Assets Major Gaps High 1
Cash Management Major Gaps High 1
Payroll and Timekeeping Full Gap High 1
Procurement Major Gaps High 1
Revenue and Accounts Receivable Full Gap High 1
Debt Management/Tax Bond Compliance Major Gaps Medium 2 Gifts and Donations Major Gaps Medium 2
Grant Management Full Gap Medium 2
Investment Management Minor Gaps Medium 2
Credit Cards Minor Gaps Low 3
Inventory Full Gap Low 3
Travel and Expense Reimbursement Minor Gaps Low 3
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SUMMARY OF RECOMMENDATIONS
The following table summarizes the recommendations related to high-risk policy areas. A detailed listing of full recommendations was provided separately to management.

Policy Area Summary of Recommendations
Accounting
and
Financial
Reporting
Expand and develop full Accounting and Financial Reporting P&Ps that address, at a minimum, the following key areas:
● Chart of account maintenance, setup, and structure.
● Fund structures, including the definition and use of each City fund, and required fund reconciliations. Information on this topic that is currently presented in the Financial Policies can be used as a starting point and expanded upon. ● Journal entry preparation, approval, and posting.
● Month-end and year-end close procedures, including timing, responsibilities for performing each procedure, review/approval responsibilities, and monitoring. ● Financial Reporting: which reports will be prepared and on what basis (monthly, quarterly, etc.), who will be responsible for their review and approval, which reports will be presented to the City Council and/or Committees, and how frequently. ● Audit requirements and auditor selection.
● Significant Accounting Policies and Procedures: The City can utilize notes to audited financial statements as a starting point to accumulate significant accounting policies, then expand to address detailed procedures that will be applied to ensure compliance.
● Account Reconciliations: Which balance sheet accounts are reviewed monthly; responsibility for preparation, review and approval; and procedures on performing reconciliations and addressing variances.
● Monitoring controls including financial trend analysis (year to year, budget to actual, monthly fluctuations) and key performance indicators.
● Unclaimed property handling, including any rules on forfeiture of property to the State Controller’s Office.

Accounts
Payable
Develop full, comprehensive AP P&Ps that include all significant areas within the AP function including, but not limited to, the following:
● Vendor Management: New vendor setup and vendor changes, including required supporting documentation, approvals, and segregation of duties, vendor master list controls and annual reviews, and dormant vendors. In general, vendor management should be controlled by individuals independent of the AP process. ● Invoice receipt, approval, and routing (manual or electronically) to AP for payment processing.
● Reconciliation between invoice and purchase requisition (PR)/purchase order (PO), receiving documentation, etc. and documentation required to support this three-way match process.
● Invoice coding and system entry.
● A/P processing including required reviews/approvals, invoice tie-out, and pre- and post-check register reviews/approvals.
● Check printing, signature, and check stock maintenance controls. ● ACH payment processing and related controls.
● Check mailing and support filing.
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Policy Area Summary of Recommendations
● Monitoring controls over the disbursement function, such as vendor file changes/addition reviews and trend analysis (i.e., total payments by vendor). ● Record retention requirements to support the AP process/function. ● Other key controls and internal procedures over the disbursement function.

Budgeting
Expand and develop full, comprehensive Budget Management P&Ps that include all significant areas within the budget function including, but not limited to, the following key areas:
● Budget Preparation Process: How individual departments/programs should prepare their budgets, what data/historical and upcoming information should be used, and resources available to employees responsible for aspects of the budget process ● Budget Calendar: Including a snapshot of all key dates in the process (initial budget notifications from Finance, department/program due dates, original draft budget submission, internal reviews/approvals, Council presentation and budget adoption/approval, budget finalization, system entry, etc.) ● How to address budgeting for new funding identified during the year (resources greater than budget estimates, new appropriations or new grants/donations, etc.), including timeline requirements, reviews/approvals, and system entry ● Budget monitoring, including budget-to-actual reporting, use and responsibilities, required reviews, justification for budget overages, and anticipating changes throughout the year
● City-mandated budget requirements and how each will be considered and applied to ensure compliance
● Budget amendment and transfer processing, including the documentation and approvals required and responsibilities for each
● Overall roles and responsibilities within the budget function, including budget establishment, monitoring, etc.
● Required budget-to-actual reporting to leadership and/or City Council, including what information is to be reported and at what frequency
Capital
Assets
Expand and develop a full, comprehensive Capital Asset P&P that includes all significant areas within the Capital Asset function including, but not limited to, the following:
● Capital budgeting (incorporate the existing Capital Improvement Policy located within Financial Policies)
● Depreciation: Methods used, determination of useful lives, entering during asset setup, depreciation expense entry preparation, review, approval and posting, etc. ● Capital asset receiving process, including physical receipt and documentation of receipt
● Reporting new fixed assets to Accounting and issuing asset tags (including who issues tags, tracking tags, placement on assets, and recording tag numbers in ERP system)
● New asset setup in the City ERP system (including required information, supporting documentation submitted/maintained, etc.)
● Reconciliation between G/L and capital asset data in the ERP system, and reviews to ensure all capital assets are captured
● Policies regarding capital asset reviews, their purpose, who is responsible for performing reconciliations, identifying variances, repairs/maintenance expense review and documentation, etc.
● Capital Asset Custodians: Assignment and accountability of those responsible for capital assets in each department/division/site
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Policy Area Summary of Recommendations
● Capital Asset Transfer and Disposal Procedures: Reporting disposals/transfers to Accounting, updating in the ERP system, changes in accountability, methods of disposal including documentation requirements and approvals, lost/stolen asset handling/reporting, etc.
● Annual Inventory Count: Procedures, condition assessment, and segregation of duties (including having an independent person perform count, identify assets damaged or not tagged, add assets, verify asset details, reconcile information, and make updates in the ERP).
● Record retention for capital assets
Cash
Management
Incorporate the existing Cash Receipts/Handling Policy into a full Cash Management P&P. A comprehensive set of Cash Management P&Ps should be developed and should cover, at a minimum, the following:
● Bank account setup, cancelling, access monitoring, etc. ● Bank reconciliations, including responsibility for preparation, supporting documentation required, outstanding items monitoring, variance handling, review, and approvals
● Bank account signature authority
● Change fund policy (for sites that handle cash payments) ● Payment acceptance, including types of payments accepted (cash, checks, credit cards, ACH, etc.) and requirements for processing/accepting each type ● Cash reconciliations, deposits, and variance reporting (reporting overages/shortages) ● Counterfeit detection requirements
● Required frequency for remitting cash to Cashiering for deposit ● Segregation of duties
● Monitoring of locations’ deposit frequency
● Consequences for non-compliance
● Minimum security requirements for transporting deposits ● Petty cash handling
The City should also consider developing site/location-specific P&Ps that apply to all City locations that accept or handle monies. Each site that handles payments should be required to develop internal Cash Handling P&Ps to show how they will ensure compliance with City-wide policies. Detailed Cash Handling P&Ps, by site, would include areas such as the following:
● How receipts are issued and reconciled
● Where payments are recorded (manual log, system, etc.) upon receipt ● Responsibilities for cash handling and daily reconciliations ● Daily reconciliation procedures (i.e., base funds, system/log totals for receipts, payments being deposited, etc.)
● Detailed procedures for storing payments, closing credit card machines, etc.

Payroll and
Timekeeping
Develop comprehensive Payroll & Timekeeping P&Ps to help ensure that time worked is properly accounted for, reviewed, and approved; that pay rates are properly controlled and applied; and that employees are ultimately paid appropriately and accurately.

Payroll and Timekeeping P&Ps should cover, at a minimum, the following:
● New employee setup and pay rate adjustments (in general, this duty should be performed by someone independent of the payroll processing function to ensure that duties are adequately segregated)
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Policy Area Summary of Recommendations
● Time recording for exempt and non-exempt employees
● Time reviews and approvals
● Timecard edits or corrections before/after payroll processing ● Transfer of time detail to process payroll
● Payroll processing (including required reviews/approvals pre and post processing, reconciliations, general ledger posting, reporting, etc.) ● Direct deposit setup and processing
● Check printing, signature, and distribution
● Payroll tax reporting and tracking and accrual account reconciliations ● PTO accruals, use and recording, monitoring of PTO balances, etc. ● Payroll monitoring and oversight (including pay rate change report reviews; timecard edit reviews; systems access monitoring; payroll trend analysis by employee, position, department, etc.; and other reviews/reporting performed to ensure the payroll function is well-controlled)
Procurement
Expand and develop a full comprehensive set of Procurement P&Ps and include, at minimum, the following key areas:
● Due diligence thresholds, including online/verbal quotes, format written quotes, Requests for Proposal (RFPs), and a dollar threshold for each level of due diligence.

The existing chart defines thresholds but does not provide details on how a user should complete the various methods. The attachments to the current policy, address some specific procedures (e.g., Formal Bid Procedures) but they need to be updated and organized.
● Approval thresholds and a clear definition of the workflow process for obtaining all required approvals. In addition, definition of approvals that may be required for certain types of purchases, based on G/L code (i.e., IT, fixed assets, and/or grantrelated). ● Sole-source and emergency purchase procedures (justifications and documentation requirements, approvals, etc.) that define their appropriate use(criteria, etc.). ● Initiating Purchase Requisitions (PRs), and a clear definition of the process for PRs and POs.
● Receiving procedures and related documentation requirements (on packing slips/receiving reports and in the system, if applicable). ● Segregation of duties between Purchasing and Receiving. ● Documentation requirements and methods of storing information. ● Suspension and Debarment Checks: The threshold for when to perform checks and responsibility for performing them, when they must occur in the procurement process, documentation required to support they were performed, how/where documentation will be maintained to support new vendor setup, and the reverification process to confirm that vendors used for longer than a specified period (e.g., one year) are reconfirmed and the results of the review are documented. ● Specific requirements for certain high-risk purchases. ● Specific restrictions and unallowable purchases (alcohol or other).

Revenue and
Accounts
Receivable
Develop a comprehensive set of Revenue and A/R P&Ps at a City-wide level to address, at a minimum, the following:
● Defining the specific types of revenue throughout the City, referencing Department and Division-specific P&Ps where appropriate
● Revenue recognition and accounting for revenue
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Policy Area Summary of Recommendations
● Customer account setup and requirements
● Overall monitoring of revenue activity
● Defining the City's requirements for billing and collection activities (including defining roles and responsibilities, documentation requirements, frequency, etc.) ● Accounts receivable management, including tracking and reporting A/R, requiring aging analysis, reporting on delinquent accounts, etc.
● Systems access related to A/R management systems, to ensure proper segregation of duties
● Allowance for doubtful accounts establishment, recording of bad debt expense, criteria for estimate development, etc.
● Handling refunds and account credits, including required documentation, approvals, etc.
● Guidance to Departments/Divisions for developing their specific billing policies/procedures, and for ensuring consistency and enhancing revenue capture ● Establishing criteria to determine when past due/delinquent accounts are sent to collection agencies and how revenue collection service providers are engaged and monitored
● Defining when account write-offs can occur, what approvals are required, and how write-offs/account adjustments must be documented and controlled ● Unclaimed Refunds: Procedures to follow when customers don’t cash refund checks or checks are returned to the City Utility Bills, when to waive late fees, when to credit overcharged customers, when to invoice undercharged customers ● General Bills and Taxes: When to waive late fees and allow for payment plans Given the various types of revenue across the City, it may be appropriate for individual revenue-generating Departments/Divisions to develop their own specific P&Ps. These should cover how the Departments/Divisions will implement specific P&Ps and monitor for compliance with City-wide P&Ps, including the use of account management systems, reconciliations to the City's ERP system, specific billing/collection activities, etc. 871
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Appendix A – Management Responses to Fiscal Policy Inventory and Gap Analysis:

1. Accounting and Financial Reporting
Management Response:

Management agrees that formalized policy and procedures are needed in Accounting and Financial Reporting. Currently, staff utilizes non-formalized procedures for the processes listed above. Staff created polices in these areas the review process and expected to be approved by the Director of Administrative Services and the City Manager.

2. Accounts Payable
Management Response:

Management agrees that formalized policy and procedures are needed in Accounts Payables.

Currently, staff utilizes system set up and security and non-formalized procedures for the processes listed above. Staff created polices in these areas the review process and expected to be approved by the Director of Administrative Services and the City Manager.

3. Budgeting
Management Response:

Management agrees that formalized policy and procedures are needed in Budgeting. Currently, staff utilizes system security and non-formalized procedures for the processes listed above. Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager.

4. Capital Assets
●
Management Response:

Management agrees that formalized policy and procedures are needed in Capital Assets. Currently, staff utilizes non-formalized procedures for the processes listed above. Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager.

5. Cash Management
Management Response:

Management agrees that formalized policy and procedures are needed in Cash Management.

Currently, staff utilizes non-formalized procedures for the processes listed above. Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager.

6. Payroll and Timekeeping
Management Response:

Management agrees that formalized policy and procedures are needed in Payroll and Timekeeping.

Currently, staff utilizes system security and non-formalized procedures for the processes listed above.

Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager.

7. Procurement
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Management Response:

Management agrees that formalized policy and procedures are needed in Procurement. Currently, staff utilizes system security and non-formalized procedures for the processes listed above. Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager. These changes will be delayed as the City prioritizes findings from the procurement audit and has requested a Purchasing Manager as part of the Proposed Budget. To minimize changes and potential confusion all changes to procurement will occur at one time and after the review of the new Purchasing Manager should the position be approved.

8. Revenue and Accounts Receivable
Management Response:

Management agrees that formalized policy and procedures are needed in Revenue and Account Receivable. Currently, staff utilizes system security and non-formalized procedures for the processes listed above. Staff created polices in these areas are in the review process and expected to be approved by the Director of Administrative Services and the City Manager. 873
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CITY OF CUPERTINO
Agenda Item
22-11003 Agenda Date: 7/19/2022
Agenda #: 32.

Subject: Consider the Capital Program Effectiveness Study Final Report Receive Capital Program Effectiveness Study Final Report Presenter: Thomas Leung, Senior Management Analyst
CITY OF CUPERTINO Page 1 of 1 Printed on 7/14/2022
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider the Capital Program Effectiveness Study Final Report Recommended Action
Receive the Capital Program Effectiveness Study Final Report Discussion
Background
In Fiscal Year (FY) 2019-20, the City began an internal audit program and issued a Request for Proposal (RFP) for internal audit services. After reviewing the proposals, the evaluation committee selected Moss Adams as the City’s Internal Auditor. Moss Adams serves as the City’s designated Internal Auditor and conducts projects focusing on:
 Risks
 Internal controls
 Efficiency and effectiveness
 Best practices
 Compliance
Moss Adams reports to the City Council’s Audit Committee, which oversees the work and approves the annual internal audit work plan.

Project Scope
As part of the FY 2021-22 internal audit work plan, the Audit Committee and City Council approved a CIP study to identify opportunities for improvement to the CIP’s operations, structure, service delivery, and process efficiency. Moss Adams conducted this engagement between October 2021 and February 2022. For this study, Moss Adams evaluated the structure, function, and role of the CIP Division to improve the operational effectiveness and efficiency of its program.

Within the past several years, the CIP Division has experienced significant staff turnover.

The current team has been making progress toward improving the consistency and efficiency of its operations. The attached report details additional steps that can be taken by the CIP Division and City leadership to continue the positive trajectory of this work and ensure that this team has the resources it needs to be highly successful.

Project Observations and Recommendations
Based on the input gathered from interviews, document reviews, and focus groups, as well as comparisons to best practices, Moss Adams prepared a comprehensive set of observations and recommendations. The attached report discusses the observations and recommendations for the following areas:
 Capital Planning and Prioritization
 Capital Program Funding
 Infrastructure Maintenance
 Staffing
 Policies and Procedures
 Procurement and Contract Management
 Information Technology Systems
 Communication and Reporting
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Management Response
In response to the report, the FY 2022-23 Adopted Budget, which City Council approved on June 9, 2022, included:
 A Management Analyst position in Public Works to support the Public Works Senior Management Analyst
 A Purchasing Manager position in Administrative Services to provide a centralized role for purchasing compliance, administration, and policy development
 A one-time special project for grant management in Administrative Services to help identify citywide grant funding opportunities
 A $2.5 million annual transfer to the Capital Reserve in the FY 2022-23 Adopted Budget and ten-year forecast to facilitate CIP financial forecasting Next Steps
Staff will develop an implementation plan to implement the report’s recommendations.

The implementation plan and status reports will be available on the City’s website at cupertino.org/budget under Internal Audit.

Sustainability Impact
No sustainability impact.

A – Capital Program Effectiveness Study Final Report
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This report is intended for the internal use of City of Cupertino, and may not be provided to, used, or relied upon by any third parties.

FINAL REPORT
City of Cupertino

CAPITAL PROGRAM EFFECTIVENESS STUDY
April 2022
Moss Adams LLP
999 Third Ave, Suite 2800
Seattle, WA 98104
(206) 302-6500
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Capital Program Effectiveness Study Report

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Table of Contents
Executive Summary 1
A. Introduction 1
B. Summary of Observations and Recommendations 1
Project overview 4
A. Background 4
B. Scope and Methodology 4
C. Commendations 5
Observations and Recommendations 6
A. Planning and Prioritization 6
B. People 10
C. Processes and Systems 13
Appendix A: Sample Prioritization Matrix 20
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EXECUTIVE SUMMARY
The City of Cupertino’s (the City) Capital Improvement Program (CIP) Division is responsible for managing the City’s capital projects, including the planning, permitting, environmental, design, and construction of buildings, parks, streets, utilities, and other facilities owned and operated by the City.

Moss Adams LLP (Moss Adams) partnered with the City to evaluate the capital improvement program’s people, processes, and systems. The goal of this engagement was to identify opportunities to improve the efficiency and effectiveness of the program.

As part of the assessment, we conducted planning, data collection, and analysis to gain an understanding of the existing environment, identify opportunities for improvement, and provide practical recommendations in this report. This engagement was conducted between October 2021 and February 2022.

Within the past several years, the CIP Division has experienced significant staff turnover. The current team has been making progress toward improving the consistency and efficiency of its operations.

This report details additional steps that can be taken by the CIP Division and City leadership to continue the positive trajectory of this work and ensure that this team has the resources it needs to be highly successful.

The observations and recommendations are grouped into three major categories: Planning and Prioritization, People, and Processes and Systems. A summary is provided in the table below, and full details are outlined in Section III.

OBSERVATIONS AND RECOMMENDATIONS

PLANNING AND PRIORITIZATION

1. Observation The City primarily relies on the Annual CIP Budget document to guide yearly operations but has not yet developed a long-range CIP plan.

Recommendation
A. Develop long-range CIP plan to strategically guide capital improvement investments.

B. Increase the standardization and transparency of the CIP project prioritization process.

2. Observation
The CIP financial forecasting process is short-term and prone to yearly variability. Long-term planning and stability in the program are hindered by fluctuations in annual budget allocation and City priorities.

Recommendation
A. Implement a multi-year financial forecast for CIP projects to analyze CIP and budget implications for future operating years.

B. Create a citywide grant strategy to fully leverage grant funding opportunities.
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OBSERVATIONS AND RECOMMENDATIONS

3. Observation
A Facility Condition and Use Efficiency Assessment was completed in December 2018 and identified more than $78 million dollars of required maintenance. However, this assessment is not meeting current needs and is out of date.

Recommendation Continue efforts to commission a new facility conditions assessment.

PEOPLE

4. Observation
The City’s CIP team is sufficiently staffed to meet the needs of its current workload. However, the team is not staffed to provide backup for key roles and relies heavily on select individuals for essential institutional knowledge.

Recommendation
Consider the following staffing changes:

A. Pursue retaining the two limited-term project managers as full-time City employees.

B. Immediately hire support for the Public Works senior management analyst.

C. Establish a senior project manager position.

D. Hire a grant management position to support City operations.

PROCESSES AND SYSTEMS

5. Observation
The CIP team has yet to develop updated and comprehensive policies and procedures, hindering the team’s ability to execute operational activities quickly and consistently.

Recommendation Inventory current policies and procedures and create a prioritized schedule for policy and procedure development.

6. Observation
The CIP Division has strong expertise in managing procurements and contracts. However, as a result of the City’s decentralized procurement model, the CIP team is experiencing similar challenges within their purchasing processes as other departments across the City.

Recommendation
Maintain strong collaboration with the City’s Finance department to remain up to date on procurement changes resulting from the 2022 Procurement Operational Review.

7. Observation The CIP Division’s systems are insufficient to meet the team’s need for comprehensive project and budget management.

Recommendation
Continue current efforts to develop a comprehensive CIP Management solution and clarify expectations for use of the current systems until the new solution is implemented.

8. Observation
While the CIP Division uses a variety of tools to report project progress, staff note that there are barriers to effectively communicating program needs and trade-offs to City leadership.
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OBSERVATIONS AND RECOMMENDATIONS
Recommendation
A. Establish an annual CIP report detailing project progress, prior year expenditures, and CIP accomplishments to effectively communicate opportunities and challenges to stakeholders, including City leaders, internal staff, and the public.

B. Correct the data accuracy issues in the community-facing dashboard to ensure public information is always current and accurate. 883
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PROJECT OVERVIEW
The City’s CIP Division provides design and construction administration for all capital improvement projects, including streets, sidewalks, storm drainage, buildings, parks, bicycle and pedestrian infrastructure, and other public facilities. The CIP Division ensures that all public improvements are designed and constructed in accordance with community expectations and City standards, and places safety of the public, City employees, and workers as the highest priority in the delivery of capital projects.

Each year, the CIP Division develops a schedule of proposed capital improvement projects ranked by priority and an estimate of project costs and financing sources. The CIP plan is reviewed and approved by the City Council along with the CIP budget. Annually, the CIP plan is reviewed and updated to reflect changing community needs, priorities, and funding opportunities.

Moss Adams serves as the outsourced internal auditor for the City of Cupertino (the City), and reports to the City Council’s Audit Committee. As part of the 2021–22 internal audit work plan, the Audit Committee approved a Capital Improvement Program (CIP) study to identify opportunities for improvement to the CIP’s operations, structure, service delivery, and process efficiency.

Moss Adams conducted this engagement between October 2021 and February 2022. For this study, Moss Adams evaluated the structure, function, and role of the CIP Division to improve the operational effectiveness and efficiency of its program. The project consisted of four major phases.

PHASE DESCRIPTION
1 Start-Up and
Management
 Project initiation consisted of collaborative project planning with the City and project management, including developing our scope of work and final work plan.
2 Fact-Finding and
Data Collection
 The second phase included interviews, document review, and best practice research. We worked with City staff to obtain the most current information and insights.
• Interviews: We conducted interviews and focus groups with 21 members of City staff.
• Document review: We received documents including policies, procedures, planning documents, reports, and others.
• Best practice research: Based on the opportunities for improvement identified, we conducted research to ascertain best practices within the public sector.
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PHASE DESCRIPTION
3 Analysis  Based on the information gained during our fieldwork phase, we assessed the current conditions and identified opportunities for improvement.

Leveraging best practice information and our own experience from working with similar entities, we developed practical recommendations. 4 Reporting Results  We communicated the results of our analysis with observations and recommendations presented first in a draft report that was reviewed with management to confirm the practicality and relevance of recommendations before finalizing the report.

Based on the insights gathered through interviews and document review, it is evident that the City’s CIP Division has many commendable organizational attributes. Some examples are provided below. • Good Collaboration: Interviewed staff generally noted that the CIP Division is a collaborative partner that strives to build constructive relationships. This group has placed emphasis on improving collaboration by establishing practices like holding regular meetings with key internal stakeholder groups.
• Healthy Investment: The City has made strong financial investments into capital infrastructure to improve streets, sidewalks, storm drainage, buildings, parks, bicycle and pedestrian infrastructure, and other public facilities.
• Strong Project Management: The CIP Division is currently supporting 42 active projects. The group has also made significant improvements to the number of projects that are completed on time and on budget—shifting from 70% of projects completed on time and 62% of projects completed on budget in fiscal year 2019, to 93% and 81%, respectively, in fiscal year 2020. • Dedication to Continual Improvement: Interviewed staff within the CIP Division were uniformly interested and invested in making improvements to increase the efficiency and effectiveness of the team. When speaking with key partners in other divisions and departments, a consistent theme was that the CIP team has made continual improvements over the past year and is on a strong, positive trajectory.

We would like to thank City leadership and staff for their willingness to assist in this assessment. 885
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OBSERVATIONS AND RECOMMENDATIONS
Based on the input gathered from interviews, document review, and focus groups, as well as comparisons to best practices, we prepared a comprehensive set of observations and recommendations.

1. Observation The City relies on the Annual CIP Budget document to prioritize projects and guide yearly operations but has not yet developed a long-range CIP plan.

Recommendation A. Develop a long-range CIP plan to strategically guide capital improvement investments.

B. Increase the standardization and transparency of the CIP project prioritization process.

The City’s capital planning process is well-defined but lacks two industry standard best practices: a long-range CIP plan and a standardized project prioritization process.

Capital Planning
To guide CIP activities, the City creates an Annual CIP Budget document that outlines the capital projects that will be initiated within the next 12 months. The Annual CIP Budget document focuses on the current fiscal year and includes new projects and existing projects with identified internal and external funding. While the plan does include existing projects with multi-year funding that are intended to be in-progress or completed over the course of the next five years, the plan does not provide a clear view of the City’s planned capital improvements beyond the immediate upcoming year. The document does not include planning for projects starting in later years and does not maintain future estimates of CIP project impacts on the City’s operating budget.

Industry best practice recommends that all municipalities develop a long-range (five- to ten-year) CIP plan. However, the City has historically placed a high value on responsiveness and flexibility to meet emergent needs. Continued changing priorities has made it difficult to prioritize or develop a useful long-range plan. In addition, the City’s current funding structure (see Recommendation 3) creates barriers to effectively forecasting funding levels to support a realistic planning process. Despite these conditions, the City does have a Capital Improvement Policy that states the “City will prepare and update a five-year Capital Improvement Plan (CIP) encompassing all City facilities.” The policy indicates that the plan shall encompass “all anticipated Capital Improvement Projects for the current fiscal year plus four additional fiscal years.”
As noted in the 2020 Enterprise Risk Assessment, short-term planning for capital improvement projects can increase risks of higher long-term costs, reduce the City’s ability to make strategic longterm investments, and can increase threats to health and safety. For example, employees reported 886
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concerns about the safety of City Hall and the continued deferral of the City Hall project in favor of other CIP projects.

In alignment with industry best practice, the City should develop a five-year CIP plan and related financial forecast (see Recommendation 2). A prudent multi-year capital plan identifies projects beginning in later planning years (not just those starting in the current year’s budget) and identifies and prioritizes expected needs based on the long-range vision articulated in the City’s strategic plan and/or comprehensive plan. A CIP typically identifies capital project and acquisition needs; provides cost or expenditure estimates for those needs; identifies probable sources of financing; evaluates, prioritizes, and schedules projects and acquisitions; and forecasts the impact of projects and acquisitions on the operating budget.

A long-term CIP plan enables the City to be more strategic when prioritizing and planning for upcoming projects and is designed to be amended on an annual basis. Projects can be added or subtracted as the needs and resources of the community adjust. Typically, only the projects included in the first year of long-range CIP plans are legal appropriations. The second, third, fourth, and fifth years of the plan represent the City’s best estimate of a fundable plan for capital improvements.

Project Prioritization
Another critical element of the City’s CIP planning process is the prioritization of potential projects.

Interviewed staff report that the current project selection and prioritization process functions well but is not highly formalized. The selection of CIP projects is informed by needs identified in various planning documents—including the City’s General Plan, Parks and Recreation System Master Plan, Bicycle Transportation Plan, and Climate Action Plan—and an annual process by which individual departments submit project requests. Identified projects are then prioritized by the CIP Division staff who evaluate various factors including health and safety, available funding and grant opportunities, and political and community interest. High-priority projects are then submitted to City Council for approval. While the CIP Budget document lists several principles for project evaluation (like health and safety and funding availability), the City has not yet adopted a standardized or quantitative set of evaluative criteria to guide the prioritization process. As a result, some staff reported concerns that critical criteria—like sustainability—were inconsistently prioritized.

The CIP Division should create a scoring framework that can be applied to all projects and form the primary basis for prioritization. The criteria used to determine capital project prioritization varies across the industry with some cities simply utilizing a list of general criteria that a project must meet to be approved, while others have developed more complex ranking systems. Best practice is to use a rating system that assigns a quantitative value to a project priority. A decision-making tool such as a weighted decision matrix can be useful in attributing value to higher-priority criteria in the rating scale.

The rating system helps facilitate decision making and standardizes the project prioritization process.

When evaluating capital project requests, the Government Finance Officers Association (GFOA) recommends that capital projects be prioritized by:
• Health and Safety – Priority should be given to high-risk safety issues that require a capital project to correct
• Asset Preservation – Capital assets that require renewal or replacement based on capital asset life cycle
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• Service/Asset Expansion/Addition – Infrastructure improvements needed to support government’s policies, plans, and studies
Other common criteria to consider include:
• Input from major stakeholders and the community
• Submitting department initial prioritization
• The impact on operating budget
• Analytical techniques such as life cycle costing, cost-benefit analysis, and cash flow modeling • Number of positively impacted residents
Appendix A contains a sample quantitative rating scale used by Chatham County, North Carolina.

2. Observation The CIP financial forecasting process is short-term and prone to yearly variability. Long-term planning and stability in the program are hindered by fluctuations in annual budget allocation and City priorities.

Recommendation A. Implement a multi-year financial forecast for CIP projects to analyze CIP and budget implications for future operating years.

B. Create a citywide grant strategy to fully leverage grant funding opportunities.

Financial Forecasting
In line with budget policy, the City uses a “pay as you go” funding approach for the CIP where project funds are approved on an annual basis. For multi-year projects, the City Council approves funding of capital improvements on a total project basis but allocates the funding annually. Within this context, the CIP fund allocation process is short-term and prone to change year-over-year, as there is no longterm CIP plan.

Capital projects are funded from a variety of sources including the General Fund, the Capital Reserve Fund, and external funds such as grants. The General Fund allocation is typically capped at $1.5 million per year (which is fairly low in relation to the City’s capital improvement needs and activities), with the potential for additional mid-year transfers. While mid-year fund transfers are typically significant (the mid-year transfer for FY 2021 was around $5 million), staff note that there can be a high degree of variability. The variation in the mid-year transfer makes developing accurate financial forecasts to support long-term CIP planning a challenging task.

This funding method enables the City to take a cautious approach to potential shortfalls in future revenue, and this strategy was developed, in part, to mitigate risks related to the City’s heavy reliance on revenue generated by the presence of Apple Inc. headquarters. However, without the ability to create a stable forecast for future projects, the City will not be able to develop a long-term CIP plan or make the most strategic long-term investments.
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In alignment with developing a multi-year CIP Plan (Recommendation 1), a multi-year financial forecast for CIP projects should be implemented. A financial forecast puts local officials in a better position to select strategies that can be sustained over time as the forecast will assist in identifying opportunities, challenges, and limits that are likely to occur.

Financial forecasts are important tools to inform elected officials about revenue and spending trends and how changes in the local economy and environment are likely to affect future revenues and expenditures. A multi-year financial forecast can reveal whether future estimated revenues and other financing sources will support debt service, lease payment obligations, and pay-as-you-go capital financing on top of the continuation of current services in future years.

To support the forecast, the City can use trendlines to predict average CIP mid-year transfers. Trend analysis of historic revenue and expenditures data from prior fiscal years along with judgment-based forecasting are the industry standard for small- and medium-sized governments. For example, staff report that the average mid-year transfer was around $9.6 million over the last five years, so $7-$9 million could be a reasonable estimate. Considering a practical implementation, the City should strive for the most realistic and accurate forecast that can reliably be used to make budgeting decisions.

The assumptions used to forecast revenue and expenditure categories should be documented as the assumptions provide important context for interpreting the results and having buy in from stakeholders.

Grant Strategy
The City has not yet developed a comprehensive grant strategy to take advantage of CIP funding opportunities outside of City revenues. While grant funding is currently being used on CIP projects, staff report that there are large grant funding sources that have not yet been tapped into due to lack of staff capacity.

The City should develop a citywide grant strategy to utilize grant funding opportunities available to supplement City revenue and add stability to CIP funding and multi-year budgets. Diversifying CIP funding by adding a grant strategy would reduce some risk caused by the City’s reliance on Applerelated revenue. This strategy could be led and supported by a grant manager position (see Recommendation 4).

3. Observation A Facility Condition and Use Efficiency Assessment was completed in December 2018 and identified more than $78 million dollars of required maintenance. However, this assessment is not meeting current needs and is out of date.

Recommendation Continue efforts to commission a new facility conditions assessment.

Facility maintenance is overseen by the Public Works Department. As part of this work, the City commissioned a Comprehensive Facility Condition and Use Efficiency Assessment that was completed in December 2018. The intent of the study was to develop a long-range planning tool for investments needed to keep City facilities maintained and functioning adequately. The report 889
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estimates that the ten-year cost for currently identified required maintenance is above $78 million dollars.

These types of assessments are a critical tool to help City leadership identify pressing infrastructure needs that could result in major capital improvement projects. As such, this tool it impacts the CIP group’s work, as well as the City’s ability to develop a strategic long-range CIP plan based on current infrastructure needs (see Recommendation 1).

However, multiple interviewed staff noted that the Comprehensive Facility Condition and Use Efficiency Assessment report is out of date and does not meeting staff needs. In particular, staff have questioned the methodology around how project needs are prioritized within the report, given that the assessment encompassed both building related issues and site-specific issues.

The City needs to have an up-to-date source of information to quantify relative needs and anticipated costs of current, future, and deferred maintenance. As such, the CIP team is currently developing a scope of work to commission a new analysis to capture all current and upcoming maintenance needs for City-owned buildings. The goal of this work would be to provide an updated understanding of deferred, current, and future infrastructure maintenance expenses. In general, the industry-standard recommendation is to reassess facility conditions every five years, so the timing of this work is appropriate.

4. Observation The City’s CIP team is sufficiently staffed to meet the needs of its current workload. However, the team is not staffed to provide backup for key roles and relies heavily on select individuals for essential institutional knowledge.

Recommendation Consider the following staffing changes:

A. Pursue retaining the two limited-term project managers as full-time City employees.

B. Immediately hire support for the Public Works senior management analyst.

C. Establish a senior project manager position.

D. Hire a grant management position to support City operations.

CIP Structure
The CIP team is situated in the City’s Public Works Department and consists of a CIP manager, five full-time project managers, two limited-term project managers, and an assistant engineer whose work is split evenly between the CIP and Transportation divisions. The CIP Division is further supported by the Public Works senior management analyst represented in the following graphic. 890
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The overall staffing structure for the CIP Division is sufficient to accomplish the annual CIP plan.

However, project volume, the lack of backups for key positions, and the flat structure present heightened areas of risk for the CIP Division. There are three key opportunities for the department to mitigate these risk areas and improve the overall efficiency of CIP operations. These are:
• Convert the limited-term project managers to permanent positions. • Hire a project coordinator to provide critical support for the senior management analyst’s tasks, including budget preparation and financial reporting, RFQ processing, and contract development and administration.
• Establish a senior project manager role by elevating a current project manager role.

Project Managers
The full-time and limited-term project managers, in addition to the assistant engineer, are responsible for managing the City’s 42 active CIP projects. This results in a ratio of approximately 5.6 projects per individual. While current staffing levels are reportedly sufficient to manage the City’s workload, staff expressed concern that workloads could become unsustainable if the two limited-term positions are not extended or made permanent.

The number of projects a person can simultaneously manage is an important element for departmental planning and resourcing. While there is no formalized standard, there are several methodologies that can help guide an individual’s project load. For example, the Construction Management Guide recommends that 10% of the hours estimated for a project are for the project manager’s work. The total volume of projects per individual can be calculated based on the total project hours and a standard 1,800-hour work year. However, this does not take into consideration project complexity or experience of the project manager. 1 Other studies of various industries indicate
that three major projects at one time resulted in optimal efficiency.2 However, several factors including project size, complexity, phasing, departmental structure, and the experience of the project manager can greatly influence the number of projects that should be managed by an individual.

Based on this information, the current number of projects per person is higher than industry standards. However, as mentioned above, interviewed staff noted that the current workload is manageable. If the City plans to continue investing in capital infrastructure projects at its current rate, leadership City should consider transitioning the two limited-term project managers into permanent 1 Cabanis-Brewin, J. (2016, January 27). How many projects per pm? It depends. PMSolutions. Accessed February 23, 2022. https://www.pmsolutions.com/blog/view/optimal-project-manager-load. 2 Patanakul, P. & Milosevic, D. (2009). The effectiveness in managing a group of multiple projects: Factors of influence and measurement criteria. International Journal of Project Management, 27, pp 216-233.

CIP Manager
(1)
Project Manager
(5)
Assistant Engineer
(.5)
LTD Project Manager
(2)
Public Works Senior
Management Analyst
(1)
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roles. If these positions are not converted to permanent roles, it is likely that the CIP Division will experience turnover in the limited-term positions. If the overall volume of project work does not decrease, that will require the CIP Division to continually onboard new limited-term roles—a process is inefficient and disruptive to ongoing projects.

When evaluating the optimal number of projects under management by one person, the CIP Division can use the 10% method as a baseline, then assess the experience of its managers, phasing, and complexity of projects, in addition to staff feedback to determine the target project load per person.

This should be tracked over time to provide a baseline for the City’s CIP team.

In addition, if the City invests in the creation of a multi-year CIP plan (see Recommendation 1), the Department will be significantly better equipped to forecast staffing needs and ensure that staffing levels are appropriate.

Administrative Support
The Public Works senior management analyst provides critical support to the entire Public Works function, and the CIP team, for many key activities, including budget preparation and financial reporting, RFQ processing, and contract development and administration. This individual is also often the sole Public Works user of the City’s contract management and financial systems. This role is central to the success of several essential workflows for a large and complex department, and yet does not have a backup or counterpart in the City that can provide the same level of service if the need arises. For example, staff across the organization report that the senior management analyst is on call, even when taking time off, because no other staff members have the experience to take over these types of tasks. The lack of support and backup for this role has also resulted in extremely high workloads. This type of sole contributor role creates significant risks for the organization.

The CIP team does not have additional support staff or project coordinators to assist with administrative tasks such as scheduling, filing, and document management become the responsibility of the project manager. As a result, CIP staff report that they spend a significant amount of time coordinating these tactical tasks rather than completing higher-priority items. The volume of administrative work a project manager must conduct is an important factor that significantly impacts the projects-to-project-manager ratio.

The City should establish a project coordinator position and/or additional management analyst role to provide backup and additional support to the senior management analyst, CIP manager, and project managers. Shifting tactical coordination responsibilities to this role could help:
• Generate the capacity needed for the senior management analyst to focus on more strategic priorities.
• Provide essential backup of for the senior management analyst, and possibly a succession pathway.
• Improve operational continuity by supporting the whole CIP team with project coordination tasks.

Senior Project Manager
The CIP team operates in a flat organizational structure consisting of two levels, project managers and the CIP Manager. Under this current structure, the CIP Manager has eight direct reports. Industry best practices suggest that the ideal direct report ratio is no more than 1:7. While the number of direct reports is within an acceptable range, the additional administrative tasks required by the CIP manger 892
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to successfully lead the team has resulted in a high workload for this position. Additionally, there is little career growth for project managers within the team.

This environment presents an opportunity for the CIP Division to establish a senior project management position. Senior project manager roles are common within municipal CIP divisions and have several benefits:
• They can provide oversight, coaching, and management to project managers, providing back-up and succession planning options for the CIP Manager.
• Establishing this position can help create a stronger career growth pathway within the CIP Division which can motivate employees and provide additional incentive to retain tenured staff who possess significant institutional knowledge.

Currently, the project manager with the most tenure in the group is informally undertaking additional leadership, coordination, and mentorship responsibilities. The City should consider elevating one of the currently approved project manager roles rather than adding an additional FTE to the team.

Grant Management
The CIP team—and Public Works, in general—does not have a grant management position. Without dedicated resources for this function, staff report that there are likely large grant funding sources that have not yet been tapped into due to lack of staff bandwidth (see additional details related to grant strategy in Recommendation 1).

The City as a whole would benefit from a grant manager position. While this role could the enterprisewide, the size and volume of projects conducted by Public Works will make it important for the individual who fills this role to have considerable experience with Public Works grants. This role would be responsible for identifying grant opportunities, writing proposals, and providing support for grant coordination across the City. This role could also develop an overarching grant strategy for the City.

Typically, the salary for grant management positions can be offset by grants awarded to the City.

5. Observation The CIP team has yet to develop updated and comprehensive policies and procedures, hindering the team’s ability to execute operational activities quickly and consistently.

Recommendation Inventory current policies and procedures and create a prioritized schedule for policy and procedure development.

Because of high levels of turnover and growth in the CIP team, several new CIP staff have been onboarded at varying stages of the program life cycle. During the onboarding period, staff report having limited documentation of standard operating procedures (SOPs) and rely on tenured team members to learn project processes. This is hindering the team’s ability to perform the following functions quickly and consistently:
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• Transition project knowledge among team members and departments. Historical project data and decision-making context is not always documented and stored in the project’s folder. • Manage project documents. While the CIP team has developed a standardized file structure, staff report that it is ungainly and has not been consistent adopted. The CIP Manager is in the process of developing a more streamlined standardized file structure to improve information management. • Develop and administer contracts. The City has taken steps to update its contract templates and provide updated information to guide the contract development process. However, staff noted that not all templates have been updated and they continue to rely on peers for best practices.

There have been past efforts by administrative staff to document team SOPs, and the City is undertaking a broader effort to update and clarify citywide project processes, including contract development, purchasing, and budgeting. To support this process, the CIP team should inventory all current policies and procedures, determine what additional policies and procedures need to be created, and create a prioritized schedule for policy and procedure development and updates, starting with the procedures which will have the greatest impact on the efficiency of the team. Interviewed CIP staff highlighted opportunities to develop the following guidelines:
• Document management: This includes establishing standards for file naming, file structure, and guidelines for the types of documents contained in each folder, digitization, and retention requirements.
• CIP technology: This could include an overview of the various systems the team uses, their place in the project life cycle, and a superuser who can be contacted for training and questions. • Review and approval: For example, a flowchart for decision-making requirements and approvals at different stages of the project life cycle.
• Reference materials: GL codes, phase checklists, and project templates are some examples of opportunities to optimize project operations.
• Interviewed staff also noted opportunities to develop policies and procedures related to the following topics:
○ Cost estimates: Developing a methodology to standardize and capture cost estimates can allow the team to track variances over time and determine if any issues arise. ○ Project prioritization: The team is mostly aligned on the informal elements that contribute to project prioritization. Formalizing this procedure will strengthen the team’s planning abilities and lead to more consistently reproducible results.
○ Lessons learned: Capturing institutional knowledge is a valuable element to project management and the ability of the CIP team to advance its CIP program.

Prioritizing the development or updates to these guidelines will help the CIP Division to improve tactical capabilities, streamline operations, and onboard new staff more quickly. 894
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6. Observation The CIP Division has strong expertise in managing procurements and contracts. However, as a result of the City’s decentralized procurement model, the CIP team is experiencing similar challenges within their purchasing processes as other departments across the City.

Recommendation Maintain strong collaboration with the City’s Finance department to remain up to date on procurement changes resulting from the 2022 Procurement Operational Review.

Under the City’s decentralized procurement model, CIP staff are the drivers of purchasing and contracting activities throughout the procurement life cycle. Other departments in the City use the CIP team as subject matter experts and as the primary source of updated information and best practices for the RFP/RFQ process because of the high volume of contracts and significant procurement the Public Works Department regularly processes. In addition, at times the CIP team has been asked to take on contract and procurement management for other departments, either because the department is short-staffed or their current staff is not as knowledgeable as the CIP division in this area. As a result, the CIP team sometimes performs work on non-CIP projects because of their specific skillset.

Throughout various stages of procurement, including budgeting, invoicing, and contract development, the CIP Division works closely with Finance and the City Attorney’s Office. When partnering with other departments, interviewed staff positively characterized these relationships, and noted strong communication, collaboration, and responsiveness to CIP needs.

In conjunction with this engagement, Moss Adams conducted a Procurement Operational Review that captures the challenges experienced by CIP staff related to contract management, timely invoicing, and clear roles and responsibilities. The recommendations outlined in the 2022 Procurement Operational Review address the contracting and procurement process challenges experienced by the CIP team. The CIP team should maintain its strong collaboration with the City’s Finance department to remain up to date on process changes.

The procurement operational review further recommends establishing a centralized purchasing authority, such as a procurement officer. If this happens, this role would be well positioned to take over leadership and guidance for procurement and contracting processes from the CIP team. If the City does not establish a centralized procurement role, the CIP team and other key contracting and procurement personnel across the City should continue to collaborate to develop self-serve guidance for procurement and contracting activities. In addition, the City should work to ensure that the CIP team is primarily focused on supporting procurement and contracting for CIP-related projects and that other departments can manage their own procurement and contracts. 895
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7. Observation The CIP Division’s systems are insufficient to meet the team’s need for comprehensive project and budget management.

Recommendation Continue current efforts to develop a comprehensive CIP Management solution and clarify expectations for use of the current systems until the new solution is implemented.

Project Management System
The CIP Division lacks a comprehensive project and budget management system. Historically, project managers have developed personal systems individually to manage projects and budgets outside any centralized system. For example, most project managers track project financials in Excel, passing along data to the senior management analyst, and then checking the financial reports generated out of New World Systems against their data. CIP Division project managers do not actively use New World Systems and rely on the senior management analyst to pull financial reports as needed (which interviewed staff report is the preferred method for all involved).

During the course of this assessment, the CIP Division began using Microsoft Project to provide updates on projects related to the City Council’s Work Program. However, adoption of Microsoft Project for general project management is highly uneven, and staff report that expectations are not yet clear. This is exacerbated by the fact that Microsoft Projects does not currently integrate with New World Systems, so project financials must still be tracked manually outside the system.

In collaboration with information technology (IT), the CIP Division recently gained approval for a custom-built CIP Management solution. As described in the project charter, the goals for this implementation are that the management system will enable project managers to:
• Manage all project details including scheduling, budgeting, scope documents, reporting, and archiving.
• Enter project details such as project type, phase, project numbers, descriptions, and year initiated, as well as access a project document library, project-related links to Council Actions, and contract items.
• Pull in the pertinent financial data from New World Systems, such as approved budget, expense and encumbrance amounts, budget year, and funding sources. • Provide an online portal for contractors/developers to upload submittals and invoices for City staff approval. Transitions will be set up to trigger notifications, log history, and display status. This process will also trigger and track the upload of financial records to New World Systems for processing.
• Access extensive reporting capabilities, including a view of entire CIP program and overviews of specific project scheduling and funds.

The City should continue current efforts to develop a comprehensive CIP Management solution, as many historical issues with IT systems will be resolved if the system meets the goals detailed in the project charter. Until the CIP Management solution is implemented, expectations for how the CIP Division project managers should be using Microsoft Project should be clarified. 896
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Until the CIP Management solution is in place, the Public Works Department should consider establishing regular financial reports that are provided on a monthly basis to each project manager rather than relying on ad hoc requests. As part of this work, expectations should be set for what information each project manager should be reviewing monthly.

Other Systems
The CIP Division utilizes a variety of other systems to support their work. • Contracts: In 2021, the City implemented Cobblestone software to improve the contract management process. The Public Works senior management analyst is the primary user of the Cobblestone system. No CIP Division staff have direct access to this system. Instead, information is routed through the senior management analyst. While this can create bottlenecks, staff generally appreciate the current process, as the senior management analyst provides a valuable quality control review.
• Document Management: The CIP Division uses Laserfiche as its primary document management system, and there are ongoing efforts to digitize and store all paper documents in the Laserfiche system. However, staff report that the group has struggled to implement an easy-to-navigate file structure. As a result, it has been challenging for new employees to find necessary information.

In collaboration with IT, efforts are currently underway to standardize the file naming and structure for all CIP Division project documents.

The CIP Division should continue current efforts digitize all CIP documents and standardize the file naming and structure for easy navigation.

8. Observation While the CIP Division uses a variety of tools to report project progress, staff note that there are barriers to effectively communicating program needs and trade-offs to City leadership.

Recommendation A. Establish an annual CIP report detailing project progress, prior year expenditures, and CIP accomplishments to effectively communicate opportunities and challenges to stakeholders, including City leaders, internal staff, and the public.

B. Correct the data accuracy issues in the community-facing dashboard to ensure public information is always current and accurate.

The CIP Division uses a variety of tools to communicate project progress to City leadership and members of the public. These tools include:
• CIP Adopted Budget document
• A section within the City’s Adopted Budget document and an annual presentation to City Council as part of the budget development process
• A public-facing CIP dashboard
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The CIP Adopted Budget document includes a narrative of Division accomplishments, descriptions and the status of currently budgeted projects, and proposed projects for the upcoming fiscal year.

However, given that this report focuses primarily on the projects planned for the upcoming year, there is limited discussion on the performance of the previous year and forecasts for future year projects.

The City’s Adopted Budget document includes two key performance indicators (KPIs) to measure CIP performance: percentage of projects completed on budget and percentage of construction projects completed on time.

The CIP Manager makes an annual presentation to the City Council of the proposed projects for the next fiscal year. However, staff report that this annual presentation is too short to effectively present City Council with a holistic picture of the work performed by the CIP team.

Consistent with the City’s emphasis on public transparency, the City has developed a communityfacing dashboard to give Cupertino residents a snapshot of how taxes and fees are being used to maintain and improve the City's facilities and assets. This public dashboard is currently populated by data in an Excel spreadsheet, although there are plans in place to shift the data source to a more formalized system. The data is currently updated and reconciled with information from the financial system on a quarterly basis. However, this means that information provided to the public may be incorrect or incomplete between the quarterly reconciliations.

Despite the tools noted above, staff report challenges with clearly communicating CIP successes, challenges, and trade-offs to City leadership. While some of these issues may be resolved through the establishment of a multi-year CIP Plan (see Recommendation 2), CIP and Public Works management will need to place continued focus on ensuring that City leadership fully understands the opportunities and challenges associated with capital improvement efforts.

To enhance the City’s communication efforts, the CIP Division should consider establishing an annual report detailing CIP accomplishments, prior year project expenditures, project progress, and expanded KPIs. The report should be presented to the City Council as an opportunity to represent CIP accomplishments and set expectations for the CIP budget. This is also an opportunity to articulate the City’s total investments more clearly into capital improvements, which can be an important data point for members of the public. This report could be a standalone tool or part of an expanded Annual CIP Budget document.

Regardless of the specific format, for the annual report to be an effective tool, it is important to use plain language, be consistent, and provide project information to clearly communicate project status and activities to multiple stakeholders, including City leaders, internal staff, and the public. The report should highlight significant changes to project scope, scheduling, costs, or funding. It is best practice to report on project status by providing a comparison of actual results to the project plan. Those comparisons should include:
• Percent of project completed
• Progress on key project milestones
• Percent of project budget expended
• Contract status information including time remaining and percentage used • Revenue and expenditure activity
• Cash flow and investment maturities
• Funding commitments
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FOR INTERNAL USE CITY OF CUPERTINO ONLY
• Available appropriation
• Comparison of results in relation to established performance measures In addition, the CIP Division should continue efforts to ensure that the community-facing dashboard can provide current, accurate CIP project data to the public. The data accuracy issues in the dashboard should be resolved to ensure the intention of the dashboard is realized. 899
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FOR INTERNAL USE CITY OF CUPERTINO ONLY
APPENDIX A: SAMPLE PRIORITIZATION MATRIX
Source: ICMA Capital Budgeting and Finance: A Guide for Local Governments, page 92.

Rating Criteria Definition/Explanation Maximum
Points
Percentage
Weighting
Functional area
priority
Priority of project among requests in functional area: 5 for top-ranked project to 0 for any project ranked sixth or below in priority.
5 3.79
Safety Extent to which project eliminates, prevents, or reduces an immediate hazard to safety.
14 10.61
Mandates Extent to which project helps county meet existing or new mandates.
13 9.83
Timing/linkages Extent to which project is timely, a continuation of a project currently under way, related to other highpriority projects, etc. 12 9.09
Economic impact Extent to which project enhances economic development in county, while it protects the
environment or directly or indirectly adds to the tax
base.
11 8.33
Efficiencies Extent to which project contributes to savings in county operating or capital spending.
10 7.58
Maintaining current
level of service
Extent to which project is necessary for county to
continue to provide one or more services at current
standards.
9 6.82
Improving access Extent to which project improves citizen access to current services.
8 6.10
Service improvement Extent to which project improves the quality of existing services.
7 5.30
Service addition Extent to which project increases the quantity of existing services.
3 2.30
Operating budget
impact
Projects that decrease future operating expenses
receive a positive score, ranging from 0 to 15.

Projects that have no effect on operating expenses
receive a score of 0. Projects that increase operating
expenses score anywhere from 0 to –15.
0 to 15, 0,
or 0 to –15

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Rating Criteria Definition/Explanation Maximum
Points
Percentage
Weighting
Community support
and county long-term
plans
Extent to which project has broad and/or strong
support from the community and is consistent with the
county strategic plan or other long-term plans.
10 7.58
Financing Extent to which project can be financed with nongeneral fund revenue sources.15 11.34 Maximum points, all categories 132 100.00
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CITY OF CUPERTINO
Agenda Item
22-11124 Agenda Date: 7/19/2022
Agenda #: 33.

Subject: Consider establishing a Fraud, Waste, and Abuse Program and conducting a first reading of an ordinance amending Municipal Code Section 2.88.100 (Audit Committee - Duties-Powers-Responsibilities) Conduct the first reading of Ordinance No. 22-2243: “An ordinance of the City Council of the City of Cupertino Amending Municipal Code Section 2.88.100: Audit Committee - Duties-Powers-Responsibilities.” Presenter: Thomas Leung, Senior Management Analyst
CITY OF CUPERTINO Page 1 of 1 Printed on 7/14/2022
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider establishing a Fraud, Waste, and Abuse Program and conducting a first reading of an ordinance amending Municipal Code Section 2.88.100 (Audit Committee – Duties–Powers–Responsibilities)
Recommended Action
Conduct the first reading of Ordinance No. 22-________: “An ordinance of the City Council of the City of Cupertino amending Municipal Code Section 2.88.100: Audit Committee – Duties–Powers–Responsibilities.”
Discussion
Background
In Fiscal Year (FY) 2019-20, the City began an internal audit program and issued a Request for Proposal (RFP) for internal audit services. After reviewing the proposals, the evaluation committee selected Moss Adams as the City’s Internal Auditor. Moss Adams serves as the City’s designated Internal Auditor and conducts projects focusing on:
 Risks
 Internal controls
 Efficiency and effectiveness
 Best practices
 Compliance
Moss Adams reports to the City Council’s Audit Committee, which oversees the work and approves the annual internal audit work plan.

Enterprise Risk Assessment
In 2020, Moss Adams conducted an Enterprise Risk Assessment (ERA) to analyze the City’s risk areas. For each risk category assessed, the risk assessment included an overview of the risk condition in the City, including the current risk level, likelihood, impact, preparedness, and trajectory. In the ERA, Moss Adams identified “ethics and fraud, waste, and abuse” as a moderate risk area.
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Internal Audit Work Plan
In 2021, Moss Adams developed an internal audit work plan to guide activities for FY 2021-22. The Audit Committee and City Council approved the FY 2021-22 internal audit work plan, which included the following projects:
 Procurement Operational Review
 Policy Inventory and Plan
 Capital Program Effectiveness Study
 Fraud, Waste, and Abuse Program
Fraud, Waste, and Abuse Program
In conjunction with staff, Moss Adams has developed a Fraud, Waste, and Abuse (FWA) Program. The attached program description describes the FWA Program, including:
 Fraud, Waste, and Abuse Definitions
 Fraud Categories
 Ethics
 Implementation
 Whistleblower Protection Policy
 Training
To improve transparency and provide oversight of the FWA Program, the Internal Auditor will prepare quarterly FWA Program reports. The quarterly FWA Program reports would include:
 Statistics of calls received by the third-party hotline or the City’s Internal Auditor  Summaries of completed investigations of fraud, waste, and abuse, where disclosure is permitted by law and would not materially jeopardize any pending or anticipated civil, criminal, or administrative proceeding Staff recommends an amendment to the City’s Municipal Code to allow the Audit Committee to review the quarterly FWA Program reports. The proposed Ordinance would amend Section 2.88.100 (Audit Committee Duties–Powers–Responsibilities) to include an additional duty: “To review quarterly Fraud, Waste, and Abuse Program reports.”
Third-Party Hotline Administrator
The City has elected to contract with a third-party vendor to administer the offsite reporting system. Incident reports can be submitted in a number of ways and allow employees or members of the public to call and speak to an operator via a designated phone number staffed by the vendor. Services are available 24 hours a day, 7 days a week, 365 days a year. The vendor receives calls on the FWA hotline and forwards the incident report to the City’s Internal Auditor (Moss Adams).
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After researching and obtaining quotes for companies that provide FWA hotline services, staff selected Syntrio Lighthouse Services. The cost for the hotline is $5,505 per year.

Sustainability Impact
No sustainability impact.

Fiscal Impact
The City has budgeted for the FWA Program in the contracts category of the accounting program in FY 2021-22. Unspent FWA Program funds will be recommended for carryover to FY 2022-23 for implementation and ongoing support of the FWA Program. _____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Acting City Manager Attachments:

A – Draft Fraud, Waste, and Abuse Program Description
B – Draft Ordinance
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DRAFT PROGRAM DESCRIPTION
FOR

CITY OF CUPERTINO
Fraud, Waste, and Abuse Program
July 13, 2022
Adopted:

Moss Adams LLP
999 Third Avenue, Suite 2800
Seattle, WA 98104
(206) 302-6500
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Fraud, Waste, and Abuse Program Description for City of Cupertino Table of Contents
I. Executive Summary 1
II. Fraud, Waste, and Abuse Definitions 2
| A. Fraud Definition 2
| B. Waste Definition 2
| C. Abuse Definition 2
III. Fraud Categories 4
| A. Financial Statement Fraud 4
| B. Asset Misappropriation 4
| C. Corruption 5
IV. Ethics 6
V. Implementation 7
| A. Planning 7
| B. Fraud Hotline 9
| C. Methods for Capturing Complaints 10
| D. Program Review 10
| E. Communication Plan 11
| F. Reacting to Complaints 11
VI. Whistleblower Protection Policy 14
VII.Training 15
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Fraud, Waste, and Abuse Program Description for City of Cupertino 1 I. EXECUTIVE SUMMARY
All City of Cupertino (City) employees share the common purpose of serving the public and ensuring public funds are spent wisely. The work of the City should be conducted fairly, equitably, ethically, and transparently. Proactive steps must be taken to ensure community commitments and management objectives are met. It is important for employees and the public to be provided a mechanism to voice appropriate concerns when they see or feel something is not right.

As a result, the City has established a Fraud, Waste, and Abuse Program that is available to all City employees and the public. The program operates 24 hours a day, 7 days a week. Reports of suspected inappropriate activity can be made using the City’s toll-free number, mail, phone, or in-person. All reports submitted are treated confidentially.

City employees are entrusted with public funds and have a duty to use those funds economically, efficiently, effectively, and ethically. If City employees do not honor that obligation, then it is imperative to identify and correct those actions. The City is committed to reviewing all complaints and investigating all legitimate concerns.

PURPOSE OF A FRAUD, WASTE, AND ABUSE PROGRAM
A Fraud, Waste, and Abuse (FWA) Program is a mechanism for employees or members of the public to report activities perceived to be misconduct, violations of City policy or ethics, theft, waste, or misuse of City assets. The objective of a FWA program is to identify and stop loss of City resources and act as a deterrent to fraud, waste, and abuse.

In order to facilitate reports of fraud, waste, or abuse, a FWA hotline is administered by a hotline vendor.

The vendor receives calls on the FWA hotline and forwards the incident report to the City’s Internal Auditor. Please do not use this program to report grievable labor issues, which should be reported to the Human Resources Department. Matters of threat to a person should be reported to the Police Department by calling 911.

BENEFITS OF A FRAUD, WASTE, AND ABUSE PROGRAM
There are numerous benefits to a FWA Program. It is important for not only identifying and quantifying losses to the City, but also preventing future losses. Specific benefits include:
 Identification and termination of occurrences of fraud, waste, and abuse.  Recovery of funds as a result of investigations.
 Deterrence of inappropriate behavior by increasing awareness of these actions.  A safe mechanism for employees and the public to voice concerns and report suspected inappropriate activity.
 Commitment to the City’s core values through the promotion of the program.  Improvement in the City’s internal control processes.  Enforcement of an ethical work environment.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 2 II. FRAUD, WASTE, AND ABUSE

DEFINITIONS
A. FRAUD DEFINITION
Fraud is defined as a dishonest and deliberate course of action that results in obtaining money, property, or an advantage to which City employees or officials committing the action would not normally be entitled. Fraud also encompasses intentional misleading or deceitful conduct that deprives the City of its resources or rights. There are three categories of fraud. They include 1) financial statement fraud, 2) misappropriation of assets, and 3) corruption. Examples of fraud include, but are not limited to:
 Falsifying financial records to cover up theft.
 Theft or misuse of City money, equipment, supplies, and/or other materials.  Intentionally misrepresenting the costs of goods or services provided.  Falsifying payroll information.
 Use of City equipment or property for personal use/gain or non-business reasons.  Submitting false vouchers for reimbursements.
 Soliciting or accepting a bribe or kickback.
 Intentional use of false weight or measures.

B. WASTE DEFINITION
Waste is defined as the needless, careless, or extravagant expenditure of City funds, incurring of unnecessary expenses, or mismanagement of City resources or property. Waste does not necessarily involve private use or personal gain, but it almost always signifies poor management decisions, practices, or controls. Examples of waste include, but are not limited to:
 Purchase of unneeded supplies or equipment outside of established limits.  Purchase of goods at inflated prices without appropriate bids or research.

C. ABUSE DEFINITION
Abuse is defined as the intentional, wrongful, or improper use or destruction of City resources, or improper practice that does not involve prosecutable fraud. Abuse can include the excessive or improper use of an employee or official's position in a manner other than its rightful or legal use. Examples of abuse include, but are not limited to:
 Failure to report damage to City equipment or property.  Using one's position in one City department to gain an advantage over another City resident when conducting personal business in another City department.  Abuse of City time such as significant unauthorized time away from work or significant use of City time for personal business.
 Abusing the system of travel reimbursement.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 3  Receiving favors for awarding contracts to certain vendors.  Using City property, information, or position for personal gain or resulting in extra or special charges to the City.
 Appropriating or diverting any business opportunity or idea in which the City might have an interest.
 Competing with the City in an inappropriate way.
 Failure to disclose a conflict of interest.
 Participating in decision making where a conflict of interest resides.  Improper use of supervisory authority in response to an employee taking action or refusing to take action.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 4 III. FRAUD CATEGORIES
A. FINANCIAL STATEMENT FRAUD
Financial statement fraud includes intentional misstatements, omissions, or disclosures in financial statements designed to deceive financial statement users. Fraudulent financial reporting often involves upper management and management override of controls that otherwise may appear to be operating effectively. Common occurrences include overstating revenues and understating liabilities or expenses.

Examples include:
 Manipulation, falsification, or alteration of accounting records or supporting documents from which financial statements are prepared, such as overstating assets and understating liabilities.  Misrepresentation in or an intentional omission from the financial statements of events, transactions, or other significant information.
 Intentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure.

B. ASSET MISAPPROPRIATION
Asset misappropriation is theft of an entity's assets that causes the financial statements not to be presented in conformity with Generally Accepted Accounting Principles. False or misleading records or documents, possibly created by circumventing controls, may accompany misappropriation of assets.

Examples include:
 Embezzlement of cash where accounts have been manipulated or false invoices have been created  Skimming revenue before the funds have been recorded in the City’s financial records  Cash larceny
 Lapping accounts receivable
 Check tampering
 Over-billing customers
 Stealing assets such as office supplies or computer equipment  Causing the City to pay for goods and services that have not been received  Data theft or intellectual property
 False expense claims
 Duplicate reimbursements
 Payroll fraud
 Paying personal expenses with the City’s resources
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Fraud, Waste, and Abuse Program Description for City of Cupertino 5 C. CORRUPTION
Corruption is the wrongfully use of influence in a business transaction in order to procure some benefit and contrary to their duty to their employer or the rights of another. Examples include:
 Seeking or accepting kickbacks
 Engaging in conflicts of interest
 Bid rigging
 Contract manipulation
 Economic extortion
 Illegal gratuities
 Hiring or promotion based on personal relationship (known or unknown) 913
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Fraud, Waste, and Abuse Program Description for City of Cupertino 6 IV. ETHICS

BUSINESS ETHICS
Business ethics apply to right and wrong behavior in the business world and take on different meanings in different cultures, making it challenging to truly define business ethics. However, there are a number of areas where unethical practices may occur more frequently, including human resources and accounting.

HUMAN RESOURCES ETHICS
Interactions between managers and employees create opportunities for breaches of ethics, such as discrimination based on ethnicity, gender, age, or other factors. Managers who discriminate against minority groups in hiring practices, compensation decisions, and terms of employment can face legal and social consequences. Dishonesty and manipulation are also examples of unethical workplace behavior.

ACCOUNTING ETHICS
Financial accounting is a major ethical issue, and no amount of industry or government regulation seems able to prevent dishonest people from reporting financial information in unethical ways. Certain unethical accounting practices are illegal, such as misrepresenting income or expenses in financial statements through unjustifiable shifting of expenses to inappropriate periods to influence current financial results, obtain a better debt rate, or to maintain debt covenant requirements. 914
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Fraud, Waste, and Abuse Program Description for City of Cupertino 7 V. IMPLEMENTATION
A. PLANNING

ROLES AND RESPONSIBILITIES
The FWA Program will be administered and managed as follows:
 City Council – requires and funds a FWA Program.
 City Manager – sets the tone for the program, provides messaging on the City’s intranet page promoting ethical behavior with appropriate links for reporting, reviews all recommended actions by the Internal Auditor regarding how to respond to complaints, and provides recommendations to the City Council (but does not participate in conducting investigations).  Internal Auditor –coordinates the FWA Program; monitors, triages, and disseminates complaints to appropriate City personnel; conducts investigations as appropriate; monitors and reports on the progress of addressing complaints received; and performs follow-up procedures as appropriate.
 City Attorney– reviews FWA Program reports, as necessary, to determine if there are civil matters to be addressed and takes appropriate action(s) in collaboration with the Internal Auditor.  Sheriff’s Office – reviews applicable reports to determine if there are criminal matters to be addressed and takes appropriate actions.
 Director of Administrative Services – reviews FWA Program reports and works with Internal Audit, Human Resources, and Finance to take appropriate action as a result of substantiated complaints.
 Human Resources Department – receives complaints and works with management and bargaining unit representatives to take appropriate action as a result of substantiated complaints.  Department Heads –support the FWA Program and cooperate with an investigation should one occur within their Department, and work with management regarding insurance coverage and claims.
 City employees –report suspected inappropriate activity.

TRACKING AND MONITORING OF COMPLAINTS
The City has established a case management process to capture, track, and report the following elements to the audit committee on a quarterly basis, as meeting schedules allow:

A. Complaints received by category and sub-categories, as desired.  Fraud: expense reimbursements, cash, and skimming
 Wasteful spending and abuse
 Ethics
 Threats: City, people, property
B. Complaint triage and recommended action will be made by the Internal Auditor. Otherwise, the Internal Auditor will determine that no action is needed because:
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Fraud, Waste, and Abuse Program Description for City of Cupertino 8  Information is insufficient for investigation
 Complaint does not pertain to the City government
 Compliant should be referred to another department
C. Referrals will be made by the Internal Auditor as deemed appropriate to the situation. Specific examples of referrals include:
 Referrals will be made to the Sheriff’s Office if the complaint indicates a life threatening situation or other type of crime
 Labor relations and other personnel matters and grievances may be referred to the City’s Human Resources Department or appropriate department head, depending on the nature of the complaint.
 Financial complaints may be referred to the Director of Administrative Services or his/her designee.

D. Investigations by the Internal Auditor
 Determine the methodology for investigation. Procedures may include, but not be limited to, the following types of activities that specifically relate to the allegation received:
- Interviews of individuals deemed to have direct knowledge of the matter - Interview with the employee(s) named in the complaint - Interview with the person(s) who made the complaint, if known - Interview with person(s) external to the City deemed to have direct knowledge of the matter at hand
- Review of documentation supporting the transaction(s) questioned - Review of City policies and procedures
- Review of City Council meeting minutes
- Review of emails
- Confirmation from third parties substantiating transactional activity such as financial institutions, investment administrators, and vendors
- Testing of internal controls and/or transaction details - Electronic analysis of transactions utilizing automated tools deemed appropriate to the situation
E. Final disposition or conclusion by the Internal Auditor  Substantiated matters will be reported based on relevant standards, including the following elements:
- Condition – what really happened
- Criteria – what is expected to happen, including identification of laws, rules, regulations, statutes, and generally accepted accounting principles
- Effect – financial impact to the City
- Cause – why the condition happened, including weaknesses in internal controls or override of internal controls
- Recommendations – address changes to internal control structure, assignment of duties and responsibilities, training, disciplinary action, or referral to the City Attorney for civil or criminal action
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Fraud, Waste, and Abuse Program Description for City of Cupertino 9  Unsubstantiated matters will be reported in a manner that protects the subject of the complaint. Elements reported may include the following:
- Date the complaint was received
- Period of time Internal Auditors conducted the investigation - Summary of actions taken to investigate the complaint - Conclusion regarding evidence of criminal or civil wrongdoing - Recommendations for improvement in internal controls or operations, if warranted F. The frequency and content of FWA Program reporting may include:
 Number of hotline reports received during each reporting period  General nature of reports
 General actions taken
 Report recipients, as appropriate
 Reporting forum
- Open public meeting
- Closed session discussion (nondisclosure to public), as required B. FRAUD HOTLINE
Providing individuals with a means to report suspicious activity is a critical part of an anti-fraud program.

Fraud reporting mechanisms, such as hotlines, are set up to receive tips from both internal and external sources and support anonymity and confidentiality. Management encourages employees to report suspicious activity, as well as enact and emphasize an anti-retaliation policy. According to the Association of Certified Fraud Examiners, the number one source for the initial detection of fraud is through a tip, with over 50% of tips coming from employees.

THIRD-PARTY HOTLINE ADMINISTRATOR
The City has elected to contract with a third-party vendor (vendor) to administer the offsite reporting system. Incident reports can be submitted in a number of ways and allows employees or members of the public to call and speak to an operator via a designated phone number staffed by the vendor. There are distinct benefits to managing the hotline in this manner. Examples include:
 Services are available 24 hours a day/7 days a week/365 days a year.  The persons receiving the calls are hotline professionals, trained in how to obtain the information necessary for the City to determine an appropriate course of action.  The Vendor has the ability to receive documents (Word, Excel, and PDF) and forward them to the City as evidence for the complaint, while maintaining the privacy of the caller.  The Vendor has the ability to communicate back and forth with the caller without revealing the identity of the caller.
 The Vendor will provide notification of the incident and the incident report to the City’s Internal Auditor.
 The Vendor will provide case management of calls received, including archiving and data retention.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 10 C. METHODS FOR CAPTURING COMPLAINTS
The City is providing employees and members of the public a variety of methods for reporting suspected inappropriate activity and behavior. These methods include:
 Hotline (anonymous reporting mechanism, internal vs. external) – all incident reports are forwarded to the City’s Internal Auditor.
 Phone call – if received by the City’s Internal Auditor, then the caller will be encouraged to call the FWA hotline, or the City’s Internal Auditor will handle the call by obtaining the information required to determine if an investigation is necessary. If a call is received by City personnel, then the incident/complaint will be forward to the FWA hotline or the City’s Internal Auditor.  Face-to-face – City personnel will take appropriate notes of the meeting and encourage the complainant to report the matter through the FWA hotline.  Mail – mail will be forwarded to the City’s Internal Auditor for investigation, as appropriate.

D. PROGRAM REVIEW
The City Council will periodically, at least annually, review the program to validate that the FWA Program is meeting City Council and management objectives and providing useful information. The review will include confirmation of individual roles and responsibilities, policies and procedures, and the results of investigations. Statistical information will also be reported, such as the following:
 Number of complaints received
- Referred – non-City, information requests, etc.
- Under investigation
- Open – pending additional information
- Closed
 Sources of complaints
- Hotline
- Phone
- Face-to-face
- Mail
- Other
 Types of complaints
- Non-City issues
- Referral to other department
- Internal auditor investigation for fraud, waste, or abuse - Other
 Cases closed and reason for closing
- Investigated – substantiated
- Investigated – not substantiated
- Referred
- Insufficient information – no action taken
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Fraud, Waste, and Abuse Program Description for City of Cupertino 11  Case Highlights – Investigations conducted – loss substantiated - Identified loss and impact to the City
- Finding elements – condition, criteria, effect, cause - Recommendations in internal controls
 Program Implementation Status – Implementation of recommendations resulting from an investigation may take 2-3 years.
- Summary of recommendations
- Management’s response
- Actions taken to date
- Estimation from management of when implementation will be completed E. COMMUNICATION PLAN
The City launched the FWA Program in 2022. The program incorporates the City’s tone from the top.

Consideration is also being given to the following:
 Intranet/Internet page link to reporting options for employees and the public  Whistleblower protection policy
 Plan for ongoing support and communication about the program  Message on payroll stubs
 Posters
 Newsletters
 New hire training
 Annual training
F. REACTING TO COMPLAINTS
Regardless of the mechanism through which the City receives a complaint, the following procedures are established for triaging complaints, performing investigations, and communicating investigation results.

TRIAGE ESCALATION
The City has established escalation for complaints as follows:
 Immediate response – call indicates misappropriation of the City’s assets, false reporting, misuse of City assets, etc.
 Referral – based on the circumstances of the complaint, reports may be referred to other departments or outside the City. In such instances, the caller will be notified of the referral if the caller requests. The call can be closed upon referral but should be reported as such, or it may remain open until the final resolution is communicated to the City. Matters indicating a personal emergency will be forwarded to the appropriate party for action (for example, a life threatening situation or child abuse).
 Annual audit plan – call indicates the need for a process redesign or modification to internal controls but no financial loss to the City.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 12  Follow-up – call requires additional information before appropriate action can be determined.  Closed as received – including but not limited to:
- Call is incomplete
- Caller did not provide sufficient information to determine the appropriate action and caller has not elected for two-way anonymous communication - Matters regarding non-audit issues (i.e., request for the number of a local dump)

INVESTIGATING COMPLAINTS
The complaint will be forwarded to the appropriate party for investigation. If the City’s Internal Auditor investigates, then the following activities will be performed:
 Read the initial hotline report.
 Obtain any supporting documents provided by the caller through the Vendor.  Identify additional evidence needed to resolve the complaint, including but not limited to:
- City policies and procedures
- Copy of or access to Council meeting minutes
- Copies of invoices, receipts, contracts, etc.
- Other documentation deemed necessary to determine validity of the incident report  Identify who will be contacted during the investigation, including but not limited to:
- Suspect to the allegation
- Victim(s)
- Witnesses
- Complainant, if known and the individual wishes to be interviewed - Those who are part of the internal control process, but who may not have knowledge of the specific complaint
- Law enforcement, if appropriate
- Others as determined necessary
 Perform investigative procedures to determine the validity of the complaint and documenting:
- Steps taken
- Evidence gathered – chain of custody
- Conclusions reached
- Quantification of financial loss to the City, if any
- Criteria, condition, cause, effect, and recommendations, as appropriate  Keep the appropriate parties informed of the progress of the investigation. - Communicate the final results of the investigation, including notification and reporting, as appropriate, including, but not limited to the City Council, City Manager (or designee), Administrative Services Director, and city management. - Manage information on a need-to-know basis.
 Maintain case files for an appropriate period. This may be driven by whether or not the case results in civil or criminal charges.
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Fraud, Waste, and Abuse Program Description for City of Cupertino 13

COMMUNICATION
Within the escalation process, the City has created a reporting structure. The City will continue to modify that structure as appropriate. The current structure includes reporting to the following:
 City Attorney – potential activity that would result in civil liability  Sheriff’s Office – potential criminal activity
 Director of Administrative Services and Human Resources Department – employee disciplinary action
 City Manager (or designee) – consideration of audits performed and status of investigations (care will be taken to ensure the detail provided does not violate privacy laws)  City Council/Audit Committee – periodic reporting of activity - Statistics of calls received by the third-party hotline or the City’s Internal Auditor - Summaries of completed investigations of fraud, waste, and abuse, where disclosure is permitted by law and would not materially jeopardize any pending or anticipated civil, criminal, or administrative proceeding
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Fraud, Waste, and Abuse Program Description for City of Cupertino 14 VI. WHISTLEBLOWER PROTECTION POLICY
The risk and fear of retribution can deter many people from reporting allegations of wrongdoing against a colleague, manager, Council member, or a City vendor. The public policy of the State is to encourage state and local officers and employees to disclose improper governmental action and protect the rights of persons making such disclosures.

The City’s Whistleblower Protection Policy and prohibits retribution against any employee who may have made a report of suspected inappropriate activity. The City will take each call seriously and investigate as the issue warrants and evidence is available. The City has made available an anonymous reporting mechanism to facilitate this process.

If an individual makes a report through the FWA hotline, then the Internal Auditor will not make any effort to identify the complainant. If the individual wishes to be contact by the Internal Auditor, then the individual should leave contact information at the time of the FWA hotline call. The Internal Auditor will not reveal the identity of the individual(s) unless required to do so by law. 922
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Fraud, Waste, and Abuse Program Description for City of Cupertino 15 VII. TRAINING
The City is providing initial and ongoing training to all City employees on the FWA Program.

INITIAL TRAINING
Initial training includes discussion of the following:
 Program purpose and benefits
 Roles and responsibilities
 Employee responsibilities for reporting suspected inappropriate activity  How to make a report using all various methods (hotline, web, or face-to-face)  Investigation considerations
 Reporting of investigation results – public vs. private information.

ONGOING TRAINING
Ongoing training is important to reinforce management’s commitment to reducing loss of resources to the City. The training can be part of the City’s training program or specific to a Department. A fraud, waste, and abuse training webinar will be accessible by all employees via the Internal Auditor.

In order for City employees to understand when and what to report, employees need to receive fraud awareness training. Consideration should be given to which employees should receive training (managers, directors, supervisors, line employees, etc.). Training could include the following topics:
 Definition of fraud, waste, and abuse with examples of each  Fraud triangle, fraud environment, and why fraud happens  Opportunity points for fraud to occur
 Internal controls intended to prevent and detect fraud  The importance of corrective controls and the message it sends to employees  Fraud schemes – what does fraud look like, how to identify and understand various schemes  Characteristics and red flags of perpetrators
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1 ORDINANCE NO. 22-________________

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF CUPERTINO AMENDING MUNICIPAL CODE SECTION 2.88.100: AUDIT COMMITTEE – DUTIES–POWERS–RESPONSIBILITIES
The City Council of the City of Cupertino finds that:

1. In 2021, the Audit Committee and City Council approved a Fraud, Waste, and Abuse Program as part of the FY 2021-22 internal audit work plan.

2. The City’s Internal Auditor, in conjunction with City staff, has developed a Fraud, Waste, and Abuse Program and will be preparing quarterly Fraud, Waste, and Abuse Program reports to facilitate transparency and oversight.

3. To improve transparency and provide oversight of the Fraud, Waste, and Abuse Program, the City Council desires to amend Section 2.88.100 of the Municipal Code to expand the Audit Committee’s duties to include the review of quarterly Fraud, Waste, and Abuse Program reports.

NOW, THEREFORE, THE CITY COUNCIL OF THE OF CITY OF CUPERTINO DOES ORDAIN AS FOLLOWS:

SECTION 1. Adoption.

Cupertino Municipal Code Section 2.88.100 is hereby amended as set forth below:

2.88.100 Duties–Powers–Responsibilities
The powers and functions of the Audit Committee shall be as follows:

A. To review the annual audit report and management letter; B. To recommend appointment of auditors;
C. To review the monthly Treasurer’s report;
D. To recommend a budget format;
E. To review City investment policies and internal controls of such policies; F. To recommend appointment of internal auditors;
G. To review internal audit reports.

H. To review quarterly Fraud, Waste, and Abuse Program reports. 925
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2 SECTION 2: Severability and Continuity.

The City Council declares that each section, sub-section, paragraph, sub-paragraph, sentence, clause and phrase of this ordinance is severable and independent of every other section, sub-section, paragraph, sub-paragraph, sentence, clause and phrase of this ordinance. If any section, sub-section, paragraph, sub-paragraph, sentence, clause or phrase of this ordinance is held invalid, or its application to any person or circumstance, be determined by a court of competent jurisdiction to be unlawful, unenforceable or otherwise void, the City Council declares that it would have adopted the remaining provisions of this ordinance irrespective of such portion, and further declares its express intent that the remaining portions of this ordinance should remain in effect after the invalid portion has been eliminated. To the extent the provisions of this Ordinance are substantially the same as previous provisions of the Cupertino Municipal Code, these provisions shall be construed as continuations of those provisions and not as an amendment to or readoption of the earlier provisions.

SECTION 3: California Environmental Quality Act.

This Ordinance is not a project under the requirements of the California Environmental Quality Act, together with related State CEQA Guidelines (collectively, “CEQA”) because it has no potential for resulting in physical change in the environment. In the event that this Ordinance is found to be a project under CEQA, it is subject to the CEQA exemption contained in CEQA Guidelines section 15061(b)(3) because it can be seen with certainty to have no possibility that the action approved may have a significant effect on the environment. CEQA applies only to actions which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. In this circumstance, the amendments to the City Code would have no or only a de minimis impact on the environment. The foregoing determination is made by the City Council in its independent judgment.

SECTION 4: Effective Date.

This Ordinance shall take effect thirty days after adoption as provided by Government Code Section 36937.

SECTION 5: Publication.

The City Clerk shall give notice of adoption of this Ordinance as required by law.

Pursuant to Government Code Section 36933, a summary of this Ordinance may be 926
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3 prepared by the City Clerk and published in lieu of publication of the entire text. The City Clerk shall post in the office of the City Clerk a certified copy of the full text of the Ordinance listing the names of the City Council members voting for and against the ordinance.

INTRODUCED at a regular meeting of the Cupertino City Council on July 19, 2022 and ENACTED at a regular meeting of the Cupertino City Council on August 16, 2022 by the following vote:

Members of the City Council
AYES:

NOES:

ABSENT:

ABSTAIN:

SIGNED:
______________________
Darcy Paul, Mayor
City of Cupertino
________________________
Date
ATTEST:
_______________________
Kirsten Squarcia, City Clerk
________________________
Date
APPROVED AS TO FORM:
_______________________
Christopher D. Jensen, City Attorney
________________________
Date
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CITY OF CUPERTINO
Agenda Item
22-11180 Agenda Date: 7/19/2022
Agenda #: 34.

Subject: Consider approving the FY 2022-23 Internal Audit Program Approve the FY 2022-23 Internal Audit Program
Presenter: Thomas Leung, Senior Management Analyst
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider approving the FY 2022-23 Internal Audit Program Recommended Action
Approve the FY 2022-23 Internal Audit Program
Discussion
Background
In Fiscal Year (FY) 2019-20, the City began an internal audit program and issued a Request for Proposal (RFP) for internal audit services. After reviewing the proposals, the evaluation committee selected Moss Adams as the City’s Internal Auditor. Moss Adams serves as the City’s designated Internal Auditor and conducts projects focusing on:
 Risks
 Internal controls
 Efficiency and effectiveness
 Best practices
 Compliance
Moss Adams reports to the City Council’s Audit Committee, which oversees the work and approves the annual internal audit work plan.

Internal Audit Work Plan
In 2021, Moss Adams developed an internal audit work plan to guide activities for FY 2021-22. The Audit Committee and City Council approved the FY 2021-22 internal audit work plan, which included the following projects:
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 Procurement Operational Review
 Policy Inventory and Plan
 Capital Program Effectiveness Study
 Fraud, Waste, and Abuse Program
For FY 2022-23, Moss Adams recommended the following internal audit work plan, in chronological order:
 Ongoing Internal Audit Services: Attend Audit Committee and Council meetings; prepare status reports, manage internal audit program, and prepare FY 23-24 internal audit plan. (52 weeks)
 Policy Review Ongoing Support: As the City updates and develops draft financial policies based on the prioritized inventory, review drafts and provide recommendations to align policies with best practice. (52 weeks)  Library Construction Audit: Perform audit of library construction to review reporting, project accounting consistency controls, and related construction controls; identify non-compliant project charges and change orders and control improvement opportunities. (8 weeks)
 Budget Process Review: Document and review the City’s budget process, compare to best practice, and provide recommendations for improvements in efficiency and effectiveness. (6 weeks)
 Enterprise Leadership Effectiveness Study: Assess the effectiveness of the City’s management and governance collaboration framework and provide recommendations to strengthen and streamline procedures to align with best practices for municipal leadership. (15 weeks)
Audit Committee Recommendation
On June 27, 2022, Moss Adams presented the proposed FY 2022-23 program to the Audit Committee. After discussion, the Audit Committee carried a motion to recommend the following program:
 FY 2022-23 Program:
o Ongoing Support:
 Ongoing Internal Audit Services
 Policy Review Ongoing Support
o Budget Process Review
o Enterprise Leadership Effectiveness Study
o Library Construction Audit
 Potential Future Internal Audit Projects:
o Grants Management Performance Audit
o IT General Controls Review
o Cybersecurity Review
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Next Steps
As noted in the ERA, there are many potential internal audits across several risk areas.

However, time and resources are important considerations when developing and approving an internal audit work plan. Adding additional projects to the proposed plan would impact the availability of budget as well as the timing of completion for the recommended projects listed above. If a potential project identified by Moss Adams, the Audit Committee, or the City Council is not included in the FY 2022-23 internal audit work plan, it does not mean it will not be completed; instead, it will be considered as part of the FY 2023-24 internal audit work plan.

If City Council approves the internal audit program, Moss Adams will complete the recommended projects and present the audit reports to the Audit Committee for review and City Council for acceptance. The audit reports will be available on the City’s website at cupertino.org/budget under Internal Audit.

Sustainability Impact
No sustainability impact.

Fiscal Impact
No fiscal impact. In the FY 2022-23 Adopted Budget, the City has budgeted $100,000 for the internal audit contract in the contracts category of the accounting program. _____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Acting City Manager Attachments:

A – FY 22-23 Internal Audit Program
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City of Cupertino
FY 22-23 Internal Audit Program
City Council Committee Meeting
July 19, 2022
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Overview

1. Introduction

2. Internal Audit Program Components

3. Internal Audit Program Review

4. Internal Audit Departments Covered

5. Recommended Internal Audit Plan

6. Recommended Internal Audit Plan Timing

7. Audit Committee Prioritization
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3 1. Introduction
• The City retained Moss Adams to serve as the designated Internal Auditor and conduct projects focusing on:
o Risks
o Internal controls
o Efficiency and effectiveness
o Best practices
o Compliance
• Work is being completed under appropriate industry standards 3 934
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4 2. Internal Audit Program Components
4 Internal Audit Plan
Risks Internal
Controls Compliance Performance
Accounting and financial reporting, asset management, capital programs, compliance, economics and funding, fraud, governance, human resources, internal controls, maintenance and operations, management, operations and service delivery, organization and staffing, processes and procedures, procurement, public safety, risk management, and technology
Functions Components Plan
City Internal Audit Annual
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5 3. Internal Audit Program Review
Focus Accomplishments
• Enterprise Risk Assessments 2021
• Internal Controls Projects Completed 1
• Performance/Efficiency Projects Completed 2
• Policies Reviewed To Come
• Recommendations Delivered 27
• Ethics Hotline To Come
• Recommendations Validated To Come
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6 4. Internal Audit Departments Covered
Department Projects
Administrative Services Procurement (22), Finance P&Ps (22) City Clerk
City Manager’s Office FWA Program (22)
Community Development
Communications
Innovation & Technology
Parks & Recreation
Public Works Capital Program (22)
Enterprise Projects: Risk Assessment (21)
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7 5. Recommended Internal Audit Plan: Chronological Order • Ongoing Internal Audit Services: Attend Audit Committee and Council meetings; prepare status reports, manage internal audit program, and prepare FY 23-24 internal audit plan. (52 weeks)
• Policy Review Ongoing Support: As the City updates and develops draft financial policies based on the prioritized inventory, review drafts and provide recommendations to align policies with best practice. (52 weeks)
• Library Construction Audit: Perform audit of library construction to review reporting, project accounting consistency controls, and related construction controls; identify noncompliant project charges and change orders and control improvement opportunities. (8 weeks)
• Budget Process Review: Document and review the City’s budget process, compare to best practice, and provide recommendations for improvements in efficiency and effectiveness. (6 weeks)
• Enterprise Leadership Effectiveness Study: Assess the effectiveness of the City’s management and governance collaboration framework and provide recommendations to strengthen and streamline procedures to align with best practices for municipal leadership. (15 weeks)
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8 6. Recommended Internal Audit Plan Timing
Project 7-9/22 10-12/22 1-3/23 4-6/23
Fraud, Waste, & Abuse Program (FY 22-23
carryover)
Library Construction Audit
Budget Process Review
Enterprise Leadership Effectiveness Study
Policy Review Ongoing Support
Ongoing Internal Audit Services
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9 7. Audit Committee Prioritization
9 Fiscal Year 2022-2023 Program:
• Ongoing Support: o Ongoing Internal Audit Services o Policy Review Ongoing Support • Budget Process Review • Enterprise Leadership Effectiveness Study • Library Construction Audit Potential Future Internal Audit Projects: • Grants Management Performance Audit • IT General Controls Review • Cybersecurity Review 940
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The material appearing in this presentation is for informational purposes only and is not legal or accounting advice. Communication of this information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials may have been prepared by professionals, they should not be used as a substitute for professional services. If legal, accounting, or other professional advice is required, the services of a professional should be sought.
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CITY OF CUPERTINO
Agenda Item
22-11212 Agenda Date: 7/19/2022
Agenda #: 35.

Subject: Consider accepting the Monthly Treasurer's Report Subcommittee's recommendation to include Accounts Payable reports with the monthly Treasurer's Report reviewed by the Audit Committee and accepting staff's recommendation to not include Accounts Receivable reports and checking account statements with the monthly Treasurer's Report

1. Accept the Monthly Treasurer's Report Subcommittee's recommendation to include Accounts Payable reports with the monthly Treasurer's Report reviewed by the Audit Committee

2. Accept staff's recommendation to not include Accounts Receivable reports and checking account statements with the monthly Treasurer's Report
Presenter: Thomas Leung, Senior Management Analyst
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CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider accepting the Monthly Treasurer's Report Subcommittee's recommendation to include Accounts Payable reports with the monthly Treasurer's Report reviewed by the Audit Committee and accepting staff's recommendation to not include Accounts Receivable reports and checking account statements with the monthly Treasurer's Report
Recommended Action

1. Accept the Monthly Treasurer's Report Subcommittee's recommendation to include Accounts Payable reports with the monthly Treasurer's Report reviewed by the Audit Committee

2. Accept staff's recommendation to not include Accounts Receivable reports and checking account statements with the monthly Treasurer's Report Discussion
Background
Monthly Treasurer's Report
California Government Code Section 41004 states:

Regularly, at least once each month, the city treasurer shall submit to the city clerk a written report and accounting of all receipts, disbursements, and fund balances.

The city treasurer shall file a copy with the legislative body.

The City's Municipal Code Section 2.24.030 Monthly Reports states:

The Treasurer shall make monthly reports which conform to the requirements of Government Code Section 41004. Said reports shall be delivered to the City Council, the City Manager and made available for review by such other persons who may so request.

Lastly, the City's Municipal Code Section 2.88.100 Duties-Powers-Responsibilities lists one of the powers and functions of the Audit Committee is "to review the monthly Treasurer's report."
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On December 13, 2021, the Audit Committee brought State and City code provisions regarding monthly reporting to City staff's attention. The City now submits monthly Treasurer's Reports of receipts, disbursements, and fund balance to the Audit Committee and City Council. As a result, the City is now compliant with State and City code provisions.

Monthly Treasurer's Report Subcommittee
On April 19, 2022, City Council created a subcommittee of the Audit Committee to examine the Monthly Treasurer's Report requirements. The subcommittee comprised Mayor Darcy Paul and Audit Committee Chair and Councilmember Kitty Moore. On May 10, 2022, the subcommittee met with City staff to discuss their recommendations, which included:
 Include Accounts Payable reports with the monthly Treasurer's Report  Include Accounts Receivable reports with the monthly Treasurer's Report  Include account statements with the monthly Treasurer's Report Other recommendations from members of the Audit Committee and City Council included:
 Publish the monthly Treasurer's Reports on the City's website  Add a link to definitions of funds on the City's website Management Responses
Include Accounts Payable reports with the monthly Treasurer's Report Currently, the City submits weekly Accounts Payable registers to the City Council to ratify the claims and demands described in the registers. The subcommittee recommended that the Audit Committee review the Accounts Payable reports monthly before the reports are submitted to the City Council.

The Audit Committee meets monthly on the fourth Monday of each month. If City Council approves the recommendation, staff will submit the Accounts Payable reports with the monthly Treasurer's Reports for the Audit Committee's review moving forward.

After the Accounts Payable reports are reviewed by the Audit Committee, they will be reviewed by City Council. Due to the additional review, City Council's review would move to a later meeting. The following tentative schedule shows when the Audit Committee and City Council would review the Accounts Payable reports, assuming there are no changes to meeting dates:
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Tentative Schedule
Accounts Payable for the
Month Ending
Date Reviewed by Audit
Committee
Date Reviewed by City
Council
June 30, 2022 July 25, 2022 August 16, 2022
July 31, 2022 August 22, 2022 September 6, 2022
August 31, 2022 September 26, 2022 October 18, 2022
September 30, 2022 October 24, 2022 November 15, 2022
October 31, 2022 November 28, 2022 December 20, 2022
Include Accounts Receivable reports with the monthly Treasurer's Report Staff does not recommend including Accounts Receivable reports. In researching neighboring jurisdictions, staff found no other agency provides Accounts Receivable reports with their Treasurer's Reports. Lastly, Government Code Section 41004 does not require these reports.

Include account statements with the monthly Treasurer's Report After discussion with the City's bank, staff does not recommend including checking account statements. The City’s bank advised against including the checking account statements because doing so may increase risk to the City and any government agencies, businesses, and residents who engage in financial transactions with the City. The account statements provide additional financial information that may be used to impersonate a company or individual. In researching neighboring jurisdictions, staff found no other agency provides checking account statements with their Treasurer's Reports. Lastly, Government Code Section 41004 does not require these reports.

Investment account statements and reports would continue to be provided with the monthly Treasurer's Investment Reports.

Publish the monthly Treasurer's Reports on the City's website Staff does not recommend publishing the monthly Treasurer's Reports on the City's website. While the staff reports can be posted on the City's website, publishing Accounts Payable reports, Accounts Receivable reports, or checking account statements on the City's website would make it easier for potential cybercriminals to harvest the City's financial data. Publishing the information on the City’s website may increase risk to the City and any government agencies, businesses, and residents who engage in financial transactions with the City.

Add a link to definitions of funds on the City's website Staff is working on adding definitions of funds to the City's website. Currently, descriptions of funds are available in the budget document and Annual Comprehensive Financial Report (ACFR).

Sustainability Impact
No sustainability impact.
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Fiscal Impact
No fiscal impact.
_____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Acting City Manager 946
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CITY OF CUPERTINO
Agenda Item
22-11237 Agenda Date: 7/19/2022
Agenda #: 36.

Subject: Consider selection of Councilmembers to serve on the City Hall Project Subcommittee Appoint two Councilmembers to serve on the City Hall Project Subcommittee Presenter: Kirsten Squarcia, City Clerk
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1 CITY COUNCIL STAFF REPORT
Meeting: July 19, 2022
Subject
Consider selection of Councilmembers to serve on the City Hall Project Subcommittee Recommended Action
Appoint two Councilmembers to serve on the City Hall Project Subcommittee Description
On May 17, 2022, Council approved the formation of a City Council Subcommittee to be comprised of two Councilmembers to work with the City Manager and Director of Public Works to review potential upgrades to City Hall. Council did not make appointments to the Subcommittee during the May 17 meeting.

Staff recommends that Council appoint two members to fill the Subcommittee seats.

Fiscal Impact
None
Sustainability Impact
None
_____________________________________
Prepared by: Kirsten Squarcia, City Clerk
Approved for Submission by: Dianne Thompson, Acting City Manager Attachments:
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Cupertino City CouncilJuly 19, 2022

Cupertino City Council
July 19, 2022