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HomeMy WebLinkAboutFinance (Risk Management) FY2013-2014 DEPARTMENTAL BUDGET CALL-BACKS April 19, 2013 Finance—Risk Management (ss) Page 1 The departmental budget call-backs reconvened on April 19, 2013 at 10:26 a.m., and proceeded as follows: Finance — Risk Management Honorable Tim Bynum Honorable Gary L. Hooser Honorable Nadine K. Nakamura Honorable Mel Rapozo Honorable JoAnn A. Yukimura Honorable Jay Furfaro Excused: Honorable Ross Kagawa Chair Furfaro: Gerald, are you going to come and join Steve? Welcome, Gerald. Steve we have a narrative here from you? STEVE A. HUNT, Director of Finance: Yes, thank you. Chair Furfaro: You have 35 minutes. Mr. Hunt: I will be brief. I guess during the transition going from Real Property Tax Manager to Director of Finance, I really did not have a lot of time, aside from preparing budget to really look at the Risk Management Division. It is a Division of one. There was a plan with a more expansive look that involved Human Resources (HR) and Personnel risk and some other things that were kind of looked at more globally. Since then HR has gone in a different direction and taking some of the human training and risk management with them. Some of the leftover, I guess has been left with Gerald in terms of the back-end processing, but in reality, this Division per se, will likely fall back under the Administration as an another task of the Finance Administration,not a Division. So in our formal presentation, this actually was not included. It is today. I do not want to call it a "position description" of what Gerald does, but in reality we are just going over what some of the processes are in Risk Management. Chair Furfaro: I would like to make note that your example of staffing levels on your graph on page three, I guess, explains some of that. Mr. Hunt: Yes. Chair Furfaro: Thank you. • Mr. Hunt: Okay. The mission statement of the Risk Management Division is to protect the County assets, the human, physical and financial through comprehensive and cost-effective insurance and risk management programs. Risk Management is an integral part of good management practices and essential to the success of the overall management of the County. We are looking always to minimize exposure and potential losses to the County by incorporating sound risk management practices in the everyday functions and operations within the Departments and the decision-making processes. This is accomplished through an effective management of the County property April 19, 2013 Finance —Risk Management (ss) Page 2 and liability insurance programs. And then the identifiers, there are six risk management identifiers that Gerald engages in. First is risk identification that is identifying any exposure, unanticipated potential losses. Next is risk analysis, looking at again potential loss versus the County's ability to mitigate loss and provide services that might be cost-effective. Then is risk control, these are select techniques to develop policies and procedures to minimize the frequency and severity of potential losses. Risk transfer and that refers to Exhibit 1 on the back, which is our cooperating insurance, where we transfer our liability to others that we pay for that service. Risk financing, and this is to determine the County's ability to finance losses and purchase insurance. And then risk administration, and that is the formal risk management policy staffing, Risk Management Committee Advisory Board and Risk Management Information System. The County's major exposures fall in various categories of course property, which is your physical, the buildings, equipment, and contents of the buildings. General liability that is injury or personal...sorry property damage to the public occurring on County premises, as a,result of our operations or due to actions of the County or its employees. Automotive liability, this is liability to third parties and physical damage to County vehicles. Human Resources and Worker's Compensation, the medical payment and loss time claims for injuries to workers sustained on the job. And then human resources and employee practice liability is exposure and control of employment-related to discrimination, sexual harassment, stress, and wrongful discharge shared by HR. Finally, the aircraft, physical damage to the hull of our helicopter, passenger liability, and third party liability. The function of risk services to purchase and administer excess liability, general and automobile and law enforcement liability, public officials and professional liabilities and employee benefits administration liability. And then property, government crime, aircraft and excess workers' compensation insurance policies. Also to reconcile the insurance fund with the Department's workers' compensation fund and with the general ledger and prepare financial reports to the external auditors at the end of the fiscal year. Provide internal consulting services for Department and Agency operations on loss control, liability exposures, and policy development. To review contracts for insurance requirements and indemnification agreements refer to the back exhibit. Periodically update property and automobile schedules for insurance coverage. Coordinate with the Office of the County Attorney on reporting liability claims to insurance carriers and third party administrators and serve as the County liaison to brokers, third party administrators, and government agencies on insurance and risk management services. Goals and objectives. To minimize potential risks relate to property, liabilities, and human resource. Promote risk management as a component of strategic planning and as a major budget item. Strive for a unified focus on cost reduction by Departments. Educate Departments on risk management and enlist support for adoption of risk-management programs and determine and evaluate the total cost of risk. Page 3 gives a brief synopsis and again staffing, we have a Division of one here. He reports directly to me. And below you will see the Division's budget comparison for the past two years and proposal for Fiscal Year 2014. The Division budget is merely the cost of personnel, along with a $5,000 consulting service allowance. The expense for the insurance premium is domiciled with the Finance Administration and the actual polices themselves are not within this Division, but fall under "Finance Administration." The insurance programs continue to follow a dual strategy of self-insuring the normal operating recurring claims from third parties and its April 19, 2013 Finance—Risk Management (ss) Page 3 employees while purchasing excess insurance layers to protect the County from catastrophic losses. Various insurance policies purchased by the County have emphasized purchasing adequate limits to cover potential losses and exposures and employing risk versus reward analysis to determine the various program premium outlays are effective to the County assets. The public entity insurance marketplace has been trending upwards as underwriters are demanding and receiving premium increases as demonstrated on the following chart on page 4. The forecast for the premium increase are based on our broker experience with a class of business and significant amount of public entity placed in the United States. And again on page 4 you will see the insurance premium trend the last three years...has been relatively stable. The overall cost estimates have not gone up that much. We are including in the budget request excess liability insurance for crime, Hawai`i joint underwriting, driver's education fee, property insurance includes the aircraft hull and liability. And excess workers compensation insurance includes the State of Hawai`i Special Compensation Fund. On page 5 is a list...Okay. Page 5 is a list of the carriers, and the property types of insurance with our limits and coverage. That continues to page 6. Again on page 6, just going through a little bit more about the coverage that we include and our self-insurance, the compensation that we have done each year for the last few years we have replenished the third party agreement fund. $691,669 in Fiscal 2011, $916,389 in Fiscal 2012 and thus far $858,163 in Fiscal 2013. It is noted again that the workers' compensation oversight has been moved to the HR—Personnel Department. Chair Furfaro: Can I ask a question before we go further? Mr. Hunt: Sure. Chair Furfaro: I want to make sure when he look at the general property premiums that the $31,000 increase from $445,587 to $476,000 and that $31,000 now includes the helicopter? Mr. Hunt: What page? Chair Furfaro: I am on a e 4 under insurance p g premiums for property insurance. Top chart. There is a $31,000 increase and I want to make where we are covering the helicopter at. GERALD ESTENZO, Risk Management Coordinator: That includes the helicopter. Chair Furfaro: Okay. Same chart, workers compensation, $219,000 has been moved to HR, Steve? Mr. Estenzo: No, this is excess workers compensation that has not been moved to HR, the over sight of the self-insured workers' compensation is in HR. April 19, 2013 Finance —Risk Management (ss) Page 4 Chair Furfaro: So this is just additional workers' compensation. Mr. Estenzo: Yes in excess of the $500,000. Chair Furfaro: Got it. I am clear. Thank you for letting me get those two clarified. Okay. Steve, you can continue. Mr. Hunt: Thank you. On page 7 now, it goes over the workers' compensation summary and this is where the biggest increases have been coming. There has been ongoing education through Aon, I believe is the contract that does the training for managers so that we are awarding some of the workers compensation related to discrimination and harassment policies. Mr. Estenzo: It was our old broker. It is Gallagher now. Mr. Hunt: Gallagher, sorry. These are the areas in workers' compensation that seem to be the areas that have been on the rise in terms of our exposure. Chair Furfaro: So let me get clarification again. So we are comparing these, but we have a different broker for the year 2013-2014? Mr. Estenzo: Yes, the current broker is Gallagher Risk Management Services. It used to be Aon before. Chair Furfaro: Okay. And this was through a competitive bid process? Yes. Mr. Bynum. Mr. Bynum: The training you just referred, to, is that the training that was required by the EEOC? Mr. Hunt: The online training, yes and I believe all County employees are receiving. I think that is still administered through Aon. Mr. Estenzo: That was the Aon's program, Yes. Safetylogic training. Mr. Bynum: So that is the training that was a result of a civil rights settlement? Mr. Estenzo: No, it was part of Aon's services for the County at time. Mr. Bynum: Okay. Well, I will ask that question in writing. Mr. Estenzo: I think that Safetylogic is administered by Janine in HR. April 19, 2013 Finance —Risk Management (ss) Page 5 Chair Furfaro: We think or we are sure? Mr. Estenzo: It is in HR. To be definite about it is in HR. Mr. Hunt: To confirm, we will ask HR that question. Chair Furfaro: They will be here next week. Go ahead, Mel and then JoAnn, you had your hand up? Ms. Yukimura: Steve is done and we are starting questions now? Mr. Rapozo: I had a follow-up question on the online train and I know it is HR. Chair Furfaro: Are you involved with the online training and the coordinating of that effort and expense? Mr. Estenzo: No. Mr. Rapozo: I am just interested in the cost. Do we know how much we paid for the training? Is that part of the fees that we paid or is that a separate fee in addition to? Mr. Estenzo: I believe it is a separate fee. Mr. Rapozo: Do you know how much that fee is? Mr. Hunt: I do not know offhand. I think that would be domiciled in the HR - Personnel. Mr. Estenzo: They should have more information about the cost of it. I think it is a three-year program. Chair Furfaro: We will save that one for HR. JoAnn you have the floor. Ms. Yukimura: Yes. Perhaps this has to be deferred also, but my questions are regarding your workers' compensation summaries on page 7. As I think you have said, either one of you that the costs of this have jumped tremendously. If I am reading this correctly, permanent partial disability in Fiscal Year...from Fiscal Year 2011 to 2012 has jumped 400% and then the next year it jumped 100%. Am I correct in my interpretation? Mr. Estenzo: You are looking at what Fiscal Year? The first chart? April 19, 2013 Finance—Risk Management (ss) Page 6 Ms. Yukimura: Page 7 shows first Fiscal Year 2011-2012 and then Fiscal Year 2012-2013. If you take the jump of 2011 to 2013, it is like a 500% increase. Mr. Estenzo: Permanent partial disabilities are those awards that were part of when the complaints are closed. So a lot of those complaints were settled or closed during the fiscal year. Ms. Yukimura: I know, my question is have we done an analysis how we can prevent this kind of workers' compensation claims? Mr. Estenzo: That should be answered by the HR Department. Ms. Yukimura: Okay. Mr. Estenzo: They are now into more proactive employment- related training for the employees. Mr. Hunt: And part of that is a timing issue, because some of the claims were many fiscal years ago. Chair Furfaro: I think we understand. That was discussed in Executive Session. The $64,850, that number is depressed because there was a carry over and that is the explanation we got from Brandvold. For the chart, so that we are comparing an understanding. I think Councilwoman Yukimura has this right on point, we would like to know on the 323, how many are carry over settlements? Ms. Yukimura: If this is an accumulation of previous years, then we need to remove... we need to look at the chronology of those events and put them in the right years, so we actually see a proper year-over-year story. Chair Furfaro: Scott, can we send that over as I question? Do you see what I mean, Steve? The Councilmember has a good point with the dragging and delays of the settlements. Should have been settled whether our number was depressed at $64,000. Nice to see that. We will send that over as a question. Ms. Yukimura: Thank you. But even if it is a 10-year summary, it may show that we need to address this issue more proactively and I will hold that question for Human Resources. I have another question, but I would rather see a roundabout first. Chair Furfaro: Staff you did understand the note we are wanting? Thank you very much. You can have the floor again, JoAnn. Ms. Yukimura: What are our indicators for how well we are managing risk? April 19, 2013 Finance—Risk Management (ss) Page 7 Mr. Estenzo: The measurement, risk involved liability claims, auto liability claims, workers' compensation. As far as how much we paid out for liability claims, I have no access to that information. It is with the County Attorney's Office. Ms. Yukimura: I think I requested that information and we got a preliminary. Can we retrieve that information and make that available to everybody? I think I asked for liability. Mr. Hunt: Special counsel costs? Ms. Yukimura: Yes. But what I am asking how do we measure against other Counties of similar population and operations? Or even private corporations of similar sizes and I do not know if you can find similar operations, but how do we know whether we are managing our risks well or we are not? Mr. Estenzo: I can provide that information by working with our broker and network with my counterparts in the other Counties. Ms. Yukimura: That would be really interesting information for us to get. Mr. Estenzo: One of the projects I am trying to do with our insurance broker is to do an analysis on the internal cost of risk. It is called TCOR, and I think they will be doing that this year, soon. They are the experts. Chair Furfaro: But they should be doing that for us as part of their contract. Mr. Estenzo: They will be doing that. Chair Furfaro: Oh, okay. Ms. Yukimura: That sounds like a good idea to figure out what our total cost of risk is. Mr. Estenzo: Yes. Ms. Yukimura: And then is there a way to break down the total cost to show us the causes of the cost or what areas of risk management or risk taking is causing is contributing to the total cost? Mr. Estenzo: I have your point JoAnn. That is the part of the work with TCOR. Ms. Yukimura: What kind of timetable are we going to be able to see this information? April 19, 2013 Finance—Risk Management (ss) Page 8 Mr. Estenzo: I am hoping soon, sometime this year. Ms. Yukimura: That the analysis would be completed? Mr. Estenzo: Yes. It would be involved with a lot of things, working with the Departments and going there with the financial statements and the exposures. Ms. Yukimura: Well the total cost of risk must be is not that just a fiscal accounting procedure? Chair Furfaro: No, actually there is a chart, Steve, if I recall, that actually indicates your past trend. Because they have to use it to base their bid on. Mr. Hunt: Premiums. Chair Furfaro: Right? So if you go back and pursue what was...you told me was a bid process that would reflect how they measured that risk based on your performance. And that would substantiate the premium that they bid on. So that should be available somewhere. Ms. Yukimura: So the total cost of risk factor is a performance measure and not just fiscal accounting of looking at where you are... Mr. Estenzo: It involves a lot of things, including payroll, the benefits. Ms. Yukimura: Payroll or peril? Mr. Estenzo: Payroll, the employee benefits. It is part of the total cost of the risk? As far as my understanding. Ms. Yukimura: Okay. Thank you. Chair Furfaro: Let me clarify this for us here. When they bid on taking us on as their client, it is a competitive bid, but their bid is based on a three-year history. That three-year history you have a trend that goes on with your insurance, that when they see an improvement in that liability you have to recreate another trend for a couple of years,before they actually address the premium again. So these bid processes and reporting, they report on your exposure based on history and I think this is what Councilmember Yukimura is getting at, if all the Department Heads show improvement, but not for one year, over history again and that should be available to them when they bid is what I am saying. They should have those indicators. Mr. Hunt: I was not around when this went out bid, but I think the premium would be an indirect reflection on your performance. April 19, 2013 Finance —Risk Management (ss) Page 9 Chair Furfaro: Yes. Mr. Hunt: If the premiums were increasing every year and substantially spiking you are obviously not go doing a good job, but if they are stable it is probably cost of living and if you are getting discounts it means that you are well performing under. Chair Furfaro: For this discussion, Steve I am going to ask you to look at that bid process for any of the indicators and then it might be good to have a separate discussion going forward. If there is nothing there that is going to change a premium bid for only six weeks of history let alone six months. It's going to be a yearly trend. Mr. Estenzo: The premiums for liability are based on what we paid out on the settlement, on the claims. Chair Furfaro: Understood, understood. But I think what we are getting at is where do we see future savings in insurance? And that we have to have some dialogue with the trend reports that were used for bids. If I could ask you folks we will send it over as a question, if you can gather that information. We can have a discussion on the competitiveness of our Staff when it comes to preventing accidents in a longer term trend. Okay?Vice Chair and then Mr. Rapozo. Ms. Nakamura: I was looking at page 8 and I think these are all good upcoming initiatives. I was particularly looking at number three about working with the County Attorney's Office, to revise contract insurance requirements and excess liability claims. I think that is really important just from what we have been seeing on this side. But I think what is needed and this is probably to follow-up with Councilmember Yukimura's comment, is what would be the indicators of your performance? How would we know what you have accomplished? So what are your goals over this next year? I think it would be good to be able to see that. What would be your training targets? As we see some of these claims increasing over the years, settlements, I think there is going to be...I think there should be a relationship between the number of trainings that we can do and then the amount that we need to reimburse others. So that is one thing. And the question that I have has to do with the Self-Insurance Fund. I wanted to find out what is the balance on the Fund? I noticed on the Ordinance that we are making a $14,900 contribution to the Self- Insurance Fund, but I was not sure what the balance was. Mr. Hunt: I believe it gets us whole at $1 million. Mr. Estenzo: I am not privy to the Self-Insurance Fund. Ms. Nakamura: Is there somebody that can answer that? Or we will send it over as a question. Chair Furfaro: Ken you should be able to answer that. April 19, 2013 Finance —Risk Management (ss) Page 10 KEN SHIMONISHI, Budget Analyst: That is contained in the proviso and we would retain up to the $1 million. Ms. Nakamura: Out of that, we use that pay out which claims? Mr. Shimonishi: I believe it is related to when we have property damage issues or County property. I think a Police vehicle was partially covered or paid for out of there and some other miscellaneous items, but I do not have a detailed list in front of me, just what I remember seeing in the prior year. Ms. Nakamura: That would be separate from workers' compensation claims? Mr. Shimonishi: Correct. Ms. Nakamura: I have another question, but go ahead. Chair Furfaro: Mr. Rapozo. Mr. Rapozo: I have a broader question regarding the duties between the Risk Management Coordinator and where you are sitting with the Finance Administration and Risk Management in HR. Years ago the Council approved a position as the Risk Management Coordinator and I do not know if you remember that? Mr. Estenzo: I think that was Risk Manager. Mr. Rapozo: I mean a Risk Manager that would bring that level of expertise, not saying that you are not qualified Gerald, but the Big Island had a Risk Manager and that is where we got the job description that, in fact, the one on the Big Island was an Attorney and Insurance Attorney. I do not know if you remember the discussion, but that was the plan to bring over a Risk Manager to manage the Office along with the Risk Management Coordinator that would work on ways to reduce our risks, because it came with the insurance background of analyzing insurance policies. What I see here, Gerald is that you are pretty much the back office on HR. Right. But a lot of the risk management involves HR. Mr. Rapozo: So do we even have that level of expertise of a Risk Manager in this County?An Insurance Attorney? Mr. Estenzo: To a certain extent I am. Mr. Rapozo: The questions that we are asking you basically have to be asked of HR, but the total cost of risk studied that is going to be done by the broker, which is a new broker? Mr. Estenzo: Yes. With Gallagher and that is what we agreed upon to do a study, to introduce that TCOR. April 19, 2013 Finance —Risk Management (ss) Page 11 Mr. Rapozo: When did this new broker? Mr. Estenzo: Last year, they have been here a year. Mr. Rapozo: The things that affect your risk management program, how much involvement do you have? Mr. Estenzo: Well, the training...the employment-related training has been moved to HR and have I no budget for that training. You can see that. Mr. Rapozo: I can see your training budget was removed. That is what I can see. Mr. Estenzo: That is correct. Mr. Rapozo: I believe...I do not know, I guess the separation between Risk Management and Administration and HR, confuses me and if it is the best use of those two functions. Where are you physically located? Mr. Estenzo: I am sharing offices with the Life's g Choices, with Theresa. Mr. Rapozo: You share an office? Mr. Estenzo: Between the Mayor and Attorney's Office. Life's Choices. Mr. Rapozo: So you share an office with Theresa Koki? Mr. Estenzo: I was moved there with the Risk Management Administrator at the time. The intent was to move me and the position to HR, correct? That was part of the transition. I was left there, and the other position was moved to HR. Mr. Rapozo: So it is just you? Just you? Mr. Estenzo: Just me, just me. Mr. Rapozo: Do you have any supporting staff? Mr. Estenzo: No. Mr. Rapozo: I just see you. Mr. Estenzo: There is no space to have a supporting staff there. It would be nice though. April 19, 2013 Finance —Risk Management (ss) Page 12 Mr. Rapozo: I mean whether or not you get space, do you have access to shared staff? Mr. Estenzo: No. Mr. Rapozo: Just you? Mr. Estenzo: Just me. So I am talking to Steve, it should not be a Division,but you compare risk management with the other Counties, Maui has a Risk Manager, a Loss Control Specialist, and Support Clerk. Big Island, similar to ours has Workers' compensation and safety-related training, a Risk Manager and a support clerk. Mr. Rapozo: I am very familiar with the Big Island because I know we went to a conference many years ago, a PRIMA Conference which is the Public Risk Management Association and at that time I met with him and I realized that we had no control over premiums and we had no one overseeing how to reduce it and yes, we can do that train and online training and I don't know how many of us do, but this Risk Manager from the Big Island was an insurance attorney and came back from the conference and put it back on the table and this Council funded and it never got implemented. Now I am questioning how these two entities, Risk Management Coordinator and HR, how do you operate separately and it is even more disturbing to know that you do not have any support at all. You do all of your clerical? Mr. Estenzo: I do everything, Mel. Mr. Rapozo: That is all have I, Mr. Chair. Chair Furfaro: You have another follow-up? Ms. Yukimura: Thank you. So I see various references to aircraft of aviation and it just reminds me that we are expecting from the Fire Department a list of total costs of the helicopter? And Staff, have we received anything? I would assume these costs have been included? Did we have any of aviation aircraft before we got the helicopter? Mr. Estenzo: We used to lease or rent from private helicopter companies. We do have now a helicopter. That is why we have this insurance. Ms. Yukimura: The purchasing of a helicopter necessitating getting other insurance, right? Chair Furfaro: I want to make sure we are really clear here. When we used to contract the service out, we had helicopter insurance, but it was third p arty. Mr. Estenzo: Yes, third party. April 19, 2013 Finance—Risk Management (ss) Page 13 Chair Furfaro: We had some. Ms. Yukimura: I think he mentioned that but I presume that the premiums jumped considerably when we went to ownership. Mr. Estenzo: It is in the chart as far as the helicopter. Ms. Yukimura: Did we not get the helicopter before 2011? Mr. Estenzo: I am not sure of the date. At the time, the insurance was non-owned insurance. Chair Furfaro: Third party. Mr. Estenzo: And when we owned the helicopter, it is also included...everything is included there. Owned, non-owned because sometimes we still contract outside helicopters. Ms. Yukimura: I will ask to see the difference between when we did not own a helicopter and when we do. So I will ask for that? Mr. Estenzo: The difference? Ms. Yukimura: The difference in premium. Mr. Estenzo: Oh, okay, if you look at the chart from 2011, 2012, 2013. The last two fiscal years it is flat. Ms. Yukimura: When did we purchase the helicopter? Mr. Hunt: We will look into that and get back. Looking from going to a third party to owner what the increase in premium was? Ms. Yukimura: If any. I am assuming it was a significant increase, but I would like to see that. Chair Furfaro: Steve we want to know when we have third party additional insured, what that premium was, what is the new one, and the variance between the two? Mr. Hunt: And probably the most germane was the year of transition as premiums rise there may be an escalation in policies too, so we will try to tell you what that was at the time of transition. Ms. Yukimura: Thank you. Chair Furfaro: Vice Chair you have a follow-up question? April 19, 2013 Finance —Risk Management (ss) Page 14 Ms. Nakamura: Actually a new question. Chair Furfaro: Then Mr. Bynum after you. Go ahead Vice Chair. Ms. Nakamura: I wanted to ask where is the insurance premium in the budget? I do not see it in your risk management. Mr. Hunt: It is under "Finance Administration." Ms. Nakamura: Under what category? Mr. Hunt: "Insurance Premiums" I think. Ms. Nakamura: It is broken down by the type of insurance. Mr. Hunt: Yes. Ms. Nakamura: I see that. Thank you for that clarification. I wanted to ask, what is the driver education fee premium? What does that cover? Mr. Estenzo: The driver education, that is because we are self- insurer on our auto. That is part of the premiums that we paid out to the State. We are self-insured on our automobiles. Ms. Nakamura: What does that cover? If is there an accident? Mr. Estenzo: We are self-insured on the auto. We fix our own property damage and that is part of the State's requirement for self-insurer. It is the same thing as Hawai`i Joint Underwriting. We are self-insured also on the liability part and the same thing as Hawaii State Comp, that were paid out to the State because we are self- insured under Workers' compensation under $500,000. Ms. Nakamura: Is it your Office and I am trying to find out for the signage, both the beach safety signage and the signs that have deteriorated that warn people not to jump off of Kealia Bridge. Is it Risk Management's role to be overseeing those signs or is it the specific Department relating to? Mr. Estenzo: It is the Department like Public Works or Parks as far as with signage. Ms. Nakamura: That will prevent loss of life or potential accidents? Mr. Estenzo: I think it is not even an Office. Risk management is more like I am a staff person, and I give advice to the Department, working with the Department. April 19, 2013 Finance —Risk Management (ss) Page 15 Ms. Nakamura: I think that goes back to your concern about making sure that every Department incorporates risk management into their strategic thinking. And I guess that is something that we have not really seen and I think maybe as we move forward, we can specifically ask for that. Like, how we asked for them to address Succession Planning and ask for each Department in the future how do you plan to address that based on the driver of your past performance and what are you going to do about it and maybe we can work in the next budget process, incorporating that into your thinking. Mr. Estenzo: That is well-put Nadine. If you look at the first page on my report, on the "Risk Administration." that is one of my goals to accomplish. I 1? g Y p � Yg p cannot do it by myself, I need the support of the management and working with the Departments. Ms. Nakamura: Gerald, I think that is right. It has to be a deliberate focus, you know, from the County saying this is important. This is a line item we should try to reduce over time, rather than see it increase and what can we do about it? And you need that support. Mr. Estenzo: That is correct. Risk management is a shared responsible and not only by one person. Chair Furfaro: We are getting close to the Civil Defense presentation. We are a little bit past it. Steve you know, a few questions are coming over. I want to mention to all of you folks as I was trying to express to you what happens in insurance cycles, depending on various types of insurance. Also in the private sector, you have what is called a TOPS plan, Total Operating Performance Standards. It is a mutually- agreed item where you make a statement about the team's responsibility in reducing premiums, and premium costs that are measured through reducing workers' compensation, reducing loss-prevention, because people are jumping off bridges. And that ask a practice in most private areas, but it is something that we want Brandvold to get us to. We should have a 10-point risk management review that our insurance broker does some work for us and it is part of his bid to do the work. You know, to have somebody just to go out in the field, 10, 12 times a year, do not necessarily give the bite, unless you are talking to the broker from insurance, who says this is what will make a difference in your premium. And premium has to be measured just like payroll, just like benefits, you know? Because it is a cost that we can control. We are going to need to take a caption break. We are going to wrap this up and come back to Civil Defense. Questions? You have a question? Mr. Bynum: I just have one final one. Chair Furfaro: Go right ahead. Mr. Bynum: When I look at report, it talks about the risk management techniques, risk analysis, but it appears over the years Gerald has been managing the insurance premiums and I am concerned that his role has not been fully integrated into the whole risk management thing and seems like the function of risk services is an HR kind of thing. Have I got this right? April 19, 2013 Finance—Risk Management (ss) Page 16 Mr. Estenzo: No. Mr. Bynum: Because? When you look at the actual functions of risk service, I believe that is what Gerald has been doing and not so much focusing on these other thing as one individual. Mr. Hunt: I believe Gerald's role has been to look Countywide at the best combination of mitigation and cost control and policy and excess coverage to put us in a position that is the most cost-effective plan as a County. The actual HR component has been moved in terms of Workers compensation to reduce that the training for that in the HR Personnel side. Mr. Bynum: Steve you said in the beginning your intention is to move this position into Finance Administration. Mr. Hunt: Pull it back in. Mr. Bynum: So primarily, you will be administering these liability contracts, right? Mr. Hunt: But I am also looking at as we get this survey back and ways that we might be able to again have conversations with our insurance people to find ways to reduce premiums, that that is looked at. At a Department Head level that recommendations are coming from Gerald as to recognizing potential pitfalls and exposures that we maybe have not addressed that may be a risk management plan from a Department Head standpoint. Mr. Bynum: So that is a lot of interplay between your Department, and HR, right? I am concerned that has not been happening and Gerald has been doing a critical and more than adequate job at managing these contracts, but not integrated into the whole picture. That is my concern. Maybe I am wrong, but I wanted to express that. Mr. Estenzo: Mr. Bynum, with the transition of the position of Risk Administrator to HR, it is in the works on...I am amending my position description to make it clear or to differentiate in with what the HR Risk Manager is doing compared to my role. I have been waiting for that and it is almost a year, but what I have been doing right now is what I have been doing except for the oversight of the workers' compensation claims, which was moved to HR as of July 2012. Mr. Hunt: That is my intent to pull it back under Finance Administration. Physically, we are somewhat challenged with space, but if possible we may try to pull physically back as well. But that is a space planning issue as you all know, we have those challenges. Mr. Bynum: And then he would be answering directly to you? April 19, 2013 Finance —Risk Management ss g � ) Page 17 Mr. Hunt: He does now. Mr. Bynum: Oh, right. Thank you. Mr. Estenzo: It was like that years ago. I was with Wally at the time. Chair Furfaro: We are ood there, Gerald. Jo Ann? g Ms. Yukimura: I think the whole...well, if I can pick up the concerns around the table is the County's overall approach to risk management and I mean, I for one think it is good that the Human Resource Division has been tasked with focusing on workers' compensation and that kind of issue. Because they are tied to personnel management, and there is no question about that. but beyond that, the other non-personnel risk management, what is the best organizational structure and capacity issues in terms of how we can best as a county address that and so as you pull administratively instead of it is now not a division, but part of the Finance Administration. I would like to ask that you give some thought to how we need to develop this whole very critical area of County management? And I just wanted to ask a factual question. What is on page 4, "unused fund?" Mr. Estenzo: That was what the unused fund...if you look at it, 2012-2013, for what was budgeted for the insurance premiums. Ms. Yukimura: What was unused? Mr. Estenzo: Yes. Ms. Yukimura: So the 46% increase is a positive? We did not use that money for liability payments? Mr. Estenzo: It was leftover, the unused funds. The budget was cut from 2012-2013, if you see that. It was cut by $324,000. And what we paid out was the premiums were decreasing in the last two fiscal years. Ms. Yukimura: That is a good sign if the premiums are decreasing. Mr. Estenzo: Yes, because we have a surplus. We have a surplus here in the unused fund. Chair Furfaro: I think you are going into areas... Ms. Yukimura: Okay. Chair Furfaro: I really want to say something. I deal with insurance in my business. Okay? Steve, it starts from having a team that reviews the bid. April 19, 2013 Finance —Risk Management (ss) Page 18 Ernie, yourself, Gerald, HR, you folks should be on a team that is reviewing our proposals. And in the bid, you should be telling them about the expectations that you have about monitoring, reporting, and recommending. Okay? That is part of the piece. Gerald, you can go back and say, we did not use this amount and so forth. We might have had some reserves for some catastrophes that have happened on this island and I think you know my point. Let us understand the risk management is being able to protect us from future losses. All right? That is the part and that includes HR being involved. Okay? Mr. Estenzo: That is correct. Chair Furfaro: The bid process for the right insurance policies deals with set something standards that then Departments understand what we have to do to be seen as a lower risk by the guys that give us our insurance broker quotes. They have to look at us and say oh, they have a program that takes care of signs. Oh, they have a program about fire inspections. Oh, they have a program about public building bathhouses that expand from spalling. That has to be your team and Gerald has to be on team. So make sure we are very clear. There are two very distinct parts, managing our employees and their involvement and having a program that sets performance standards, because you are not going to see the change in the first year. Usually they are lower your premium because you have changed your performance record over a period of three or four or five years. And those are real long-term goals, but you have to start with that premium team. Go ahead JoAnn. Ms. Yukimura: As the Chair was speaking I got the phrase "Risk Management is Everybody's Business." And I think that is what we are doing throughout the County system so everybody is thinking that. Thank you. Chair Furfaro: Questions going on? If not, we have questions coming over to you Steve. Thank you everyone. We a going to take a 10-minute caption break and take the next hour for Civil Defense. There being no objections, the Committee recessed at 11:19 a.m.