PUBLISHED BY THE PUBLIC RISK MANAGEMENT ASSOCIATION APRIL 2018
FALSELY ACCUSED and NOT IN THE WRONG?
FLEET SAFETY PRACTICES to SAVE TIME and MONEY
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ALSO IN THIS ISSUE
DATA-CHARGED RISK MITIGATION IN SCHOOLS
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THE FAST LANE AND UNEMPLOYMENT DRAIN
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APRIL 2018 | Volume 34, No. 4 | www.primacentral.org
CONTENTS
PRESIDENT Amy J. Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN PAST PRESIDENT Terri L. Evans Risk Manager City of Kingsport Kingsport, TN PRESIDENT-ELECT Jani J. Jennings, ARM Risk Manager City of Bellevue Bellevue, NE DIRECTORS Brenda Cogdell, AIS, AIC, SPHR Risk Manager, Human Resources City of Manassas Manassas, VA Scott J. Kramer, MBA, ARM City/County Director of Risk Mgmt Montgomery County Commission Montgomery, AL
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Falsely Accused and Not in the Wrong? FLEET SAFETY PRACTICES TO SAVE TIME AND MONEY By Jason Palmer
Forestine Carroll Risk Manager Memphis Housing Authority Memphis, TN Sheri Swain Director of Enterprise Risk Management Maricopa County Community College District Tempe, AZ Lori J. Gray Risk Manager County of Prince William Woodbridge, VA Donna Capria, CRM, CIC, AINS Risk & Insurance Coordinator WaterOne of Johnson County Lenexa, KS NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Jennifer Ackerman, CAE 703.253.1267 • jackerman@primacentral.org
11 Data-Charged Risk Mitigation in Schools By Charlie Wund
IN EVERY ISSUE
16 The Fast Lane and Unemployment Drain By Sheldon Altshuler, ARM
Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314. Copyright 2018 Public Risk Management Association
| 4 NEWS BRIEFS | 19 ADVERTISER INDEX
APRIL 2018 | PUBLIC RISK
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JUNE 3–6, 2018 Managing risk in our cities, counties, schools, states and tribal nations presents unique challenges and PRIMA’s Annual Conference is the only conference dedicated to YOU: public sector risk management professionals. Join more than 1,000 of your public risk management colleagues, leaders and experts for an exceptional learning and networking opportunity in Indianapolis.
conference.primacentral.org
MESSAGE FROM PRIMA PRESIDENT AMY J. L ARSON, ESQ.
I
Change is Hard
n March, we lost an hour of sleep to Daylight Saving Time. While I don’t remember Daylight Saving Time (DST) having this big of an impact on my life in the past, this year I found adjusting to the time change was very difficult. While trying to adjust to DST, it got me thinking about change in general and how change impacts my job. What I came up with during my lengthy pondering were these three words: Change Is Hard.
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While pondering, I started looking back at some of the highlights of my 20+ year career in risk management (I know, hard to believe since I look so young!) and found that like adjusting to DST, there have been some significant changes that have taken place in how I do my job. For example, if you had asked me what my job entailed back in the 1990s, I would have told you, “I’m responsible for safety and claims at all of our locations and also responsible for purchasing insurance to cover our exposures.” My job was reactive and seldom proactive. However, sometime around 2012–2014, I started to hear something about the ISO 31000 Standard and Enterprise Risk Management (ERM), and wondered how this would revolutionize the way we do our jobs. Webster defines risk as the “possibility of loss or injury.” ISO 31000 re-defines risk as the “effect of uncertainty on objectives.”
three words: Change Is Hard… While change
thinking about change in general and how change impacts my job. What I came up with during my lengthy pondering were these is hard, PRIMA is here to help.
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In 2014, PRIMA launched its ERM program to help the public sector understand its roles and relationships in managing risk throughout our organizations. Initially this training was two two-day training sessions with a break after the first session for attendees to return to their organization to try and implement what they learned. As PRIMA learned that the budget constraints were just too much for two
While trying to adjust to DST, it got me
sessions, we implemented the single two-day ERM training program. In the new and improved ERM training, attendees are taught how to strategically manage risks by creating an organizational understanding of risks and interdependencies. PRIMA has also recently implemented an “in-house training” program that benefits both individuals, and organizations as a whole, by providing on-site training related to ERM without having to incur out-of-town travel costs. In fact, a number of PRIMA chapters have offered this in-house training to its members! What a great “perk” for being a PRIMA chapter member!
attending PRIMA Institute, November 5–9 in West Palm Beach, Fla., or by listening to an archived webcast or podcast. While change is hard, PRIMA is here to help. Contact PRIMA’s education and training department for additional information on PRIMA’s ERM programs.
If you don’t think that you are ready for the ERM training program, you can learn more about ERM by attending the Annual Conference, June 3–6 in Indianapolis, Ind.,
Amy J. Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN
Until next time…
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NEWS BRIEFS
NEWS Briefs FEDS ISSUE SPLIT DECISION ON ARKANSAS MEDICAID WAIVER The Trump administration approved Arkansas’ request for a Medicaid work requirement but deferred a decision on the state’s request to roll back its Medicaid expansion that has added 300,000 adults to the program. Arkansas had sought to reduce the number of people eligible for Medicaid by allowing only those with incomes below the federal poverty level, or about $12,140 for an individual, to qualify. For the past four years, Arkansas Medicaid covered everyone with incomes under 138 percent of the poverty level, or about $16,750. The new policy would have cut the number of
people eligible for Medicaid in the state by about 60,000. Seema Verma, administrator of the Centers for Medicare & Medicaid Services, who announced the decision, has said her goal as head of the program was to grant states more flexibility in running their Medicaid programs than they’ve had before. Arkansas follows Indiana and Kentucky this year in winning CMS’ approval for the work requirement. Arkansas plans to start the new requirement affecting adults under age 50 by June, making it the first to do so.
OREGON CLOSES ‘BOYFRIEND’ LOOPHOLE IN GUN LAWS A bill prohibiting domestic abusers and people under restraining orders from owning firearms became America’s first new gun control law since the Feb. 14 Florida high school massacre, reports Oregon Public Broadcasting. “Well done, Oregon,” Democratic Gov. Kate Brown exclaimed after signing the law on the steps of the state capitol as some 200 people, including victims of domestic abuse and high school students, applauded and cheered.
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State Sen. Floyd Prozanski, whose sister was fatally shot by her boyfriend, and Rep. Janeen Sollman, who fled her home as a child when her father was in a violent rage, hugged as they stood behind the governor. The shooting at Marjory Stoneman Douglas High School in Parkland, Florida, that killed 17 people has created a wave of young anti-gun activists that has now reached cross-country into Oregon.
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PUBLIC RISK | APRIL 2018
RANSOMWARE STRIKES COLORADO’S TRANSPORTATION DEPARTMENT FOR A SECOND TIME As state security officials mopped up ransomware that attacked Colorado Department of Transportation (CDOT) computers last week, malware struck again. The original attack, a variant of the malicious SamSam ransomware, has morphed into something new and reinfected CDOT computers that had been cleaned, said Brandi Simmons, a spokeswoman for the state’s Office of Information Technology (OIT). “We had 20 percent of the computers up and running when our security tools detected malicious activity. And sure enough, the variant of SamSam ransomware just keeps changing,” Simmons said. “The tools we have in place didn’t work. It’s ahead of our tools.”
Simmons said security officials continue to work around the clock to contain the new variant and recover damaged files. The agencies have reached out to other security companies and are also getting help from the FBI and the National Guard. Several dozen OIT employees and
an unknown number of CDOT workers are working on the SamSam issue. SamSam ransomware has been infecting computers in government, healthcare and other industries since 2015. SamSam wormed its way into some hospital computer systems because of a misconfigured web server or, more recently, through a vendor’s username and password. Security researchers with Cisco’s Talos reported in January that the new SamSam variant had so far collected 30.4 bitcoin, or about $325,217. To minimize an attack by malware or ransomware, computer users should keep all their software updated, avoid phishing emails and maintain strong passwords.
To minimize an attack by malware or ransomware, computer users should keep all their software updated, avoid phishing emails and maintain strong passwords.
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The agency took 2,000 CDOT employee computers offline after discovering the SamSam variant had locked computer files and demanded bitcoin for their safe return. The state said it did not pay hackers a cent nor does it plan to. Only back-office and internal computer systems using Windows software were impacted. CDOT employees began using personal devices for email or accessing shared documents through Google. Critical transportation systems, like road alerts or CoTrip, were not affected.
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FALSELY ACCUSED AND NOT IN THE WRONG? FLEET SAFETY PRACTICES to SAVE TIME and MONEY BY JASON PALMER
W
hether you manage a transit, waste/recycling, road construction/ snow removal or other type of fleet, many of the challenges that fleet, operations and safety managers face are the same:
They are blamed for accidents that were not their drivers’ fault They had reached a safety plateau and were simply not getting better They are always looking for ways to improve the safety and efficiency of their fleet Although it has been shown that 80% of car-truck crashes are caused by car drivers, truck drivers are repeatedly being blamed for the accident.
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FALSELY ACCUSED AND NOT IN THE WRONG? FLEET SAFETY PRACTICES TO SAVE TIME AND MONEY
With cities having hundreds—or even thousands—of vehicles, the time and cost to defend these accusations can be astronomical. In many cases, there are no witnesses, so it comes down to he said/she said. Even multiple witnesses can provide different stories as to what actually happened when a collision occurs. More times than not, video helps exonerate drivers who are not at fault. In fact, video is the only eye-witness that shows exactly what happened and can be provided in near real-time after the accident. With video, you’re able to reduce (and oftentimes, eliminate) the cost of resources to investigate the accident onsite, along with the cost of accident triage and sending field agents, adjusters, safety coordinators, leaders and reconstructionists to the accident scene. And, when exoneration occurs, you avoid the legal costs of fighting a claim while getting your damages covered by the claimant. Let’s take a closer look …
PREDICT AND PREVENT
As AAA has stated, the use of onboard video-based safety systems can prevent as many as 63,000 crashes, 17,733 injuries and 293 deaths each year.1 Many agencies have a safety culture reinforced with safety programs specifically for their drivers, including initial driver orientation, on-going training, ridealongs, and—in some departments—reward and recognition programs. But, after a while, many realize that their safety stats are not improving and they’re no longer progressing in the right direction. This is when fleets begin to realize they need a safety solution that tells them why problems are occurring—before they occur. Some facts to consider2: • 37% of drivers report having fallen asleep behind the wheel at some point in their lives; 11% report having fallen asleep behind the wheel in the past year • Drivers distracted by mobile devices are 2.5 times more likely to run a stop sign or red light, increasing the risk and severity of collisions • It’s estimated that 10% of all fatal crashes and 17% of all accidents that caused injuries are the result of distracted driving • After getting only 5 to 6 hours of sleep, crash risk increased by 1.9 times compared to getting normal sleep of 7 hours Video provides the opportunity to see those driver habits that are leading to collisions, such as mobile phone use, food and drink, lack of sleep, following too close, speeding and more. Similar to sports teams that use game-day films to review a game, by understanding the problem and coaching drivers with the video so they can see what’s causing collisions, you quickly improve driver performance and the overall safety results throughout your fleet. In fleets that adopt a video-based safety program, improvements are often seen, not only in risk and crash reduction, but across a wide array of safety-related areas. For instance, waste and recycling is one of the
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most challenging in the United States. Collection fleet vehicles frequently operate in congested and hazardous environments and face significant risk tied to collisions, personal injury and property damage. For these reasons, fleets approach managing risk and operating safely very seriously, not only to ensure the safety of their employees and the general public, but also to reduce costs, fleet claims and litigation, while improving operational efficiency. Adding to the complexity of an already risky operating environment is new technology. With a wide range of vehicle and safety technologies available, many fleets today take advantage of advanced solutions that help to prevent accidents and deliver additional operational benefits. Video-based safety programs have emerged at the forefront, and many progressive waste and recycling departments have realized the safety and cost benefits of the technology. The combination of immediate video-based insights and transportation intelligence, which transforms massive volumes of data generated by fleets into real-time actionable information, provides fleets with predictive analysis and prescriptive actions, leading to significant business results.
A variety of sensors identify and capture risk.
Experts review and score incidents for risk. The program then prioritizes drivers for coaching.
Managers coach drivers on areas for improvement.
The results: safer drivers, lower risk, fewer collisions.
Video is the only way to show what actually happened and to prove driver innocence when collisions occur.
WHY VIDEO?
Drivers represent the biggest opportunity to improve agency safety and efficiency. Video-based safety systems offer the context, flexibility and insights that enable a host of benefits, from driver exoneration and improvements in driver performance, to compliance with standard operating procedures, improved customer service and even the identification of new revenue streams. Video provides valuable insight that traditional tabular “critical event” reports cannot, saving time and allowing for more effective driver coaching. As a result, departments can reduce collision frequency, lower fuel consumption and bring drivers home safely. Perhaps the most obvious rationale for adopting a video safety and analytics solution is driver exoneration. All too often, when drivers are involved in an accident—whether minor or involving a fatality, assignment of blame comes down to “he said/she said.” In fact, many times, the driver is automatically assumed to be at fault. When this occurs, it can be difficult to know what really happened. With video, managers know within minutes what actually transpired and can determine whether their driver was at fault. When not at fault, the driver can be exonerated quickly, preventing a costly claim or enabling the fleet to file a claim for damages. If the driver is at fault, video enables virtually
FALSELY ACCUSED AND NOT IN THE WRONG? FLEET SAFETY PRACTICES TO SAVE TIME AND MONEY
immediate knowledge of the circumstances, speeding the claim resolution process.
1 MINUTE AFTER THE COLLISION: Video automatically offloads 18 MINUTES LATER: Safety manager alerted, has access to video 44 MINUTES: Law enforcement watch video, clear driver 90 MINUTES: Driver back on the road
Video safety shows what really happened and helps reduce collisions and near collisions. Improve driver behavior through driver coaching results and realize less claims and a safer fleet.
RESOURCE MAGNIFIER
Keeping expenses front-of-mind requires continued focus on resources, managing both overhead and technology investments. As fleets expand, drivers, dispatchers and managers must collaborate in order to grow together in a way that achieves safety goals without increasing cost. Video can be an important resource that helps facilitate a productive conversation between coach and driver by clearly showing what happened. When considering video-based safety options, it’s important to choose recording capabilities that best align with specific agency or departmental needs. Fleets can choose to only record if triggered by a G-force movement such as swerving, hard braking, collision, etc.; or to record everything across all cameras. Continuous recording is helpful in that it provides a clear record of all activity and incidents, however this produces a mountain of video footage, most of which is not helpful in identifying potentially unsafe situations or employees who need to improve on certain skills. This is why the best configuration for most waste fleets is to have a robust exception-based video recording system combined with continuous recording. The most advanced exception-based recording systems have a finely tuned triggering mechanism that can detect if the vehicle is driving on the street, at the transfer station or at a customer location (landfill, construction site, etc.). Because these surfaces are extremely different, a G-force movement on one might be completely normal, whereas it could indicate an unsafe situation on another. Combining exception-based and continuous recording, areas of risk can be identified and addressed in a timely manner, and the full record of activity is available for reference when needed. Another option is to have video aligned with a department’s specific routes, enabling managers to quickly identify and access video associated with a customer location and time. To optimize the value of an investment in video-based safety, fleets are wise to look for a managed service program—one with a team of experts reviewing, scoring and prioritizing events according to a consistent set of standards that focus on the risk areas that have the biggest impact on each fleet. By alleviating the fleet of the burden of extensive video review and
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analysis, these programs act as a resource magnifier—saving time while delivering results, and building a real and sustainable competitive advantage. Coaching is key to the success of any video-based safety program. An intuitive coaching workflow, which is a critical component of a managed service solution, combined with easy-to-use tools, helps ensure continual improvement and bottom-line results. Together, these efforts ensure driver understanding and strengthen the relationship between drivers and managers, while speeding up the roll-out and adoption of the program, maximizing on-going results.
COUNTERACT DATA OVERLOAD
Vehicles are loaded with sensors that deliver massive volumes of rich data. Add to this multiple new technologies and fleets can face data overload. By transforming data into insights that can be leveraged across the operation, fleets are able to discover new, untapped opportunities that materially improve efficiency and overall financial performance. When considering new technology, be sure it provides: • Unbiased, contextual and actionable data—to benchmark performance and quickly isolate what’s working and what isn’t • Integrated performance management—to close the loop with safety, fuel and operational KPIs, measuring whether actions were taken and if they were effective • Flexibility—to choose from prebuilt analytics or combine the vendor’s data feeds with proprietary fleet-owned data and other third-party data • Interactive data visualizations and dashboards—to explore data at different levels in order to spot trends, identify opportunities and make data-driven decisions Instead of drowning in big data, be sure you get value from your technology investments and shared intelligence across your fleet. Since government agencies are concerned about budget and costs—and how services are delivered to their constituents, ROI with a video safety program can be instantaneous. Many fleets have commented that the cost of one accident pays for the cost of the program or the savings from a video-based safety program can be used in other ways to benefit their fleet including funding new equipment. It’s important to note that bottom-line savings are also enhanced through the data that results from a video-based safety program. The data that’s captured contains a wealth of insight that fleets leverage to understand vehicle use and driver performance. These insights can be leveraged across a fleet’s organization to help improve both fleet efficiency and overall fleet performance. Jason Palmer is the chief operating officer with SmartDrive Systems. FOOTNOTES
1 http://newsroom.aaa.com/2017/09/truck-safety-technology-can-prevent63000-crashes-year/ 2 Facts from SmartDrive Distracted Driving SmartIQ, April 2017; https:/www. aaafoundation.org/drowsy-driving and https:/crashstats.nhtsa.dot.gov/Api/ Public/ViewPublication/812318
RISK MITIGATION BY CHARLIE WUND
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ISK IS EVERYWHERE. An invisible, ever-shifting layer of chance influencing outcomes for everyone, every day. Infinite variables, real consequences. Accelerating through a yellow light. One quick text while driving. An oblivious millisecond thrown onto the mountain of life’s insignificant moments, or a sudden life-changing event. Risk happens fast. The best we can do is understand our risks and use the best tools and information at hand to manage them. So‌ are we deploying the best tools and information to manage them in our schools?
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DATA-CHARGED RISK MITIGATION IN SCHOOLS
We make our choices based on available information. Individuals aggregate information and process risk differently, and at different speeds. Inexperience or incomplete data affect those choices and outcomes. Whereas a system of cumulative experience and cumulative data increase the likelihood of desirable outcomes. That’s the promise of “big data.” The aggregation of vast statistics and increased processing speeds for improved results.
janitors, and medical staff have the highest exposure to valuable risk data in our schools every day. The process for student accident reporting needs a holistic update. During the early phases of product development, we assessed district processes for student accident form deployment and collection. Paper [or PDF] forms are filled out, sent to a central office, then processed into
Any epidemiologist will tell you “dirty data” is the worst. Establishing a structured data set of “dropdown” choices satisfies district requirements for basic accident reporting, while allowing apples-to-apples comparison across districts. This standardization adds efficiency and a new level of useful risk data. In 2013, using this standardized system, one school reported eight concussions from a
One industry behind the curve in big data is education. Not for a lack of data, rather education is simply not on innovation’s leading edge. It is largely paper-based, where informative data is held in rows of filing cabinets at schools and district offices—an inefficient, costly, and remote system of record.
Many industries, after years of deploying data-aggregation strategies, are finding they have more information than they can handle. This [structured and unstructured] data must be mined and interpreted to uncover the true value. Artificial intelligence and machine learning techniques have been employed to make sense of the information and guide decisions. The most critical part of the whole endeavor, is the proper analysis and communication of that knowledge and instruction. One industry behind the curve in big data is education. Not for a lack of data, rather education is simply not on innovation’s leading edge. It is largely paper-based, where informative data is held in rows of filing cabinets at schools and district offices—an inefficient, costly and remote system of record. Many Student Information Systems [SIS] have been developed to take education from paper to paperless, but these digital platforms don’t solve the communication rift between employees and district’s risk management office. Teachers,
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a district-wide database and/or placed in the file cabinet. District forms often don’t meet school nurse or athletic trainer reporting requirements, creating a duplication of data-entry effort. The significant communication time lag [as emails, faxes, or postage mail are sent to each child’s caregiver] introduces risk into the system. The demands of informing each coach, teacher, nurse, athletic trainer, parent, and administrator of a student’s RemovalFrom-Activity increases the chance messages aren’t received and medical instructions aren’t followed. How can we leverage technology to establish a new communication paradigm and unburden this system? After examining student accident forms from districts across the country, we discovered similar “information basics” regarding an incident: names, date, care/treatment, etc. Slight variations existed, but by and large the same 15 data points were collected across the spectrum. There was an opportunity to streamline the accident reporting process and improve communication, by standardizing data collection.
population of 150 football players during the first three weeks of practice. At that rate, an alarmingly high 37 concussions were projected over the remainder of the season. This trend triggered alerts to district administrators, warranting further investigation. Inquiry revealed a specific [non school-issued] football helmet being worn by the concussed students. All eight injury reports indicated the child was using a high-quality helmet bought by the parents at a local sporting goods store, with further discovery of a store salesperson insufficiently trained in properly fitting the helmets. Improper fitting equipment is a known cause for injury and avoidable with annual training. The school sent an email alert to team parents instructing their child to see the athletic trainer if they weren’t using a district-issued helmet. Three concussions were reported during the remaining 12 weeks of the season. The scaling of standardized data to a state or regional level establishes year-over-year comparison, tracks user reporting behaviors, allows readers to digest the information, and
provides a running log of policy impact. Decision makers can proactively identify areas of concern [before claims occur] and measure the impact deployed interventions have, both intended and not. This process is referred to as Continuous Quality Improvement [CQI]. While this digital recordkeeping and CQI makes sense across all health and safety matters, no specific application seems more important than concussions and the rising concern for CTE. Insurers have referred this as the “ticking time-bomb” of youth sports. Allegations for improper care, delivery and transparency were the backbone of the NFL litigation settlement, yet many haven’t updated their injury recordkeeping behavior. Districts taking a proactive approach to improving their incident reporting methods stand to significantly reduce future claim and litigation costs. System reporting that provides continuous updates (through a documented clear bill of health) avoids the need for witness interviews and attorneys with their enormous hourly cost. Further, proper documentation provides benefits in the actuarial process. Historically, claims
have driven rates. Reviewing the number of claims and total claim cost is a retroactive process. When attempting to project risk, the number of accidents/claims avoided isn’t statistically easy to measure. It’s “counting zeros.” It’s measuring the value of something that didn’t happen, and it’s abstract and elusive. But with proper documentation, we can come close. By actively monitoring “flow” of accident reports, districts can intervene before claims mount and reduce losses. Without this reporting and data aggregation, insurance providers have no rate metric other than 10-year historicals. As an example of “new insight,” three different schools in the same geographic region are now able to monitor the total injury reports and compare them to injuries requiring medical follow-up (potential claim). After applying regional care costs [for the service provided], a Cost-Per-Student [CPS] can be established. Additionally, data reveals the distribution of care service, private versus public school, and insurance information. Layer in such empirical evidence as smaller schools, with a smaller pool of students to field athletic programs, increases
overuse injuries and associated ligament repair surgery and the discussion becomes more robust and informed. Knowing what risks a population is at elevated exposure to and having real-time data support, suddenly a healthy debate that improves student safety is possible. It’s critical for community leaders to be aware, evaluate, and use available resources in providing the safest possible environment. Many still rely on historical, national norms because accessing data was previously burdensome and labor intensive. Technology is changing this and new tools are available. For those choosing “ignorance,” the clock is ticking and liability is swinging upward. Years back, meeting with the lead council for a county Office of Education, he said, “If I’m defending two districts and the first has access to data and is doing everything they can to act in the student’s best interest, and the other has no idea what’s going on… I’d rather be defending the first.” Agreed. Charlie Wund is the president and CEO of the Agency for Student Health Research.
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CURRENT PODCAST TOPICS INCLUDE: School Risk Management Workers' Comp Best Practices
AND MORE!
APRIL 2018 | PUBLIC RISK
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Further your public sector risk management education without leaving the office! This Webinar series features top presenters delivering risk knowledge to your desktop!
PRIMA’S 2018 RISK MANAGEMENT
WEBINAR SERIES PRIMA WEBINARS ARE FREE FOR MEMBERS! Visit www.primacentral.org today to register for individual Webinars or for the entire program!
A PR I L 18 | 1 2 : 0 0 P M – 1 : 3 0 P M E ST PROPERTY CONSERVATION: PROTECTING PUBLIC ASSETS SPEAKERS: Bill Magoon, Property Conservation Consultant, TML Risk Management Pool Andy Lacewell, Property Conservation Consultant, TML Risk Management Pool DESCRIPTION: Property conservation is the organized and managed effort directed toward loss prevention and pre-planned emergency action. The purpose is to preserve the public assets of towns, cities and counties. A property conservation program is a planned, positive approach toward the elimination of conditions that can cause a crippling financial loss to a town, city or county. Property conservation can be a vital force in guarding against the danger of unforeseen loss. This webinar is designed to help the public entity put a property conservation program into place and identify some of the more common property exposures (i.e. hazards) for a public entity. AT T E N D E E TA K E AWAYS : Understand the concept of property conservation. Understand the purpose of a property conservation program. Identify some common property hazards/risks. Implement common property loss control recommendations.
For more information, or to register, visit primacentral.org/webinars.
PRIMA Community Collaborate. Communicate. Network.
PRIMA Community, a social media and content website dedicated to the needs of PRIMA members. This platform provides a virtual meeting place to get the latest developments in public sector risk management, share your knowledge and increase your connections. PRIMA Community lets you: • Connect with your peers and share information on risk management • Participate in discussion groups/communities • Post questions or respond to others’ questions • Obtain access to an exclusive member directory • Access documents from digital libraries • Create private and public groups to network online with your peers • View member blogs or create your own JOIN YOUR PEERS TODAY! community.primacentral.org
THE FAST LANE AND UNEMPLOYMENT DRAIN
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In this world nothing can be said to be certain, except death and taxes. – Benjamin Franklin
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BY SHELDON ALTSHULER, ARM
EN FRANKLIN WAS MAN OF MANY TALENTS — a scientist,
legislator, diplomat, swimming hall of fame member (believe it or not) and, of course, one of the Founding Fathers and as such, an originator of public entity leadership. It is a convincing argument as well that he was America’s original risk manager, employing risk management, mitigation and financing techniques before it was a crucial component of any entity or enterprise. While we can all agree that death is a sad certainty, taxes do not have to necessarily be an unavoidable fate. As it relates to public entities, certain statutory taxes can indeed can be avoided allowing for favorable financial outcomes that lend support to public entity budgetary mandates and demands in a time of ever-increasing service demands and scope of mission. In fairness to Ben Franklin, a clear legal allowance for the circumvention of tax may not have existed during his lifetime and this cost reduction option, available only to 501(c)3 entities, including public entities, is linked directly to the statutory State Unemployment Insurance system (established 150 years after Franklin’s own inevitable death). Success in realizing the hard financial savings of this option are entirely dependent on employing successful risk management techniques.
RISK MANAGEMENT’S IMPACT ON UNEMPLOYMENT COST
Within the customary structure of the State Unemployment Insurance system—entities pay unemployment taxes prior to any claims, at a potentially inflated rate, that are generally based on payroll and prior year unemployment activity. The funds go to the state’s unemployment compensation pool to pay benefits on all statewide employees. Rates are based on a combination of the overall risk of the unemployment pool and an individual employer’s experience—with factors outside of an entities control leading to increased program costs (state borrowing, subsidizing other employers, surcharges etc.). Any balance remaining in an entity’s account is happily assumed by the state as their surplus and to pay for any non-related poor performers in the unemployment pool. On top of this, many states have borrowed from the feds to fund any negative stress to the pool— essentially a punitive tax on all tax paying entities regardless of their individual outcomes. However, the weighted punitive nature of the state Unemployment Insurance Tax can be avoided by public entities who elect to become a “reimbursing employer.” A reimbursing employer (or opt-out) is
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THE FAST L ANE AND UNEMPLOYMENT DRAIN
a public entity that pays the state only for its own unemployment claims, dollar-for-dollar, thereby potentially reducing their unemployment costs if their claims experience is lower than what they are paying into the state system. Recent studies have shown that entities pay $2 for every $1 in benefits payable. Opting out of the tax system cuts that inflated burden in half. So the reward is there for an entity who wishes to opt out and file as a reimbursable employer— a likely 50 percent reduction in cost as it relates to this budget line-item. But where there is reward, there is ultimately risk. Reimbursing entities face potential financial risk should benefits paid to separated (terminated, laid-off, seasonal or reduction in force) personnel exceed what their tax rate would have been. Loss of funding for services, outsourcing of job functions, or poor hiring practices all impact outcomes. But these triggers that ultimately impact cost can be well managed through some of the key risk management practices: identification, assessment, and control. IDENTIFY THE RISK: What is your cost? The hard numbers come from the state agency responsible for unemployment insurance and may be provided with various form headings (Experience Tax Rate or Contribution Rate Notice being the most common). All these forms, no matter the issuing state, will provide you with a tax rate percent that when applied to your state specific wage base will give you the hard dollar cost for your unemployment tax burden. For example, an employee making $35,000 in New Jersey will “only” be taxed on the state specific wage base of ($33,700—again state specific as states have varying wage bases)—if the tax rate is assigned at 3 percent, the ultimate cost burden for this employee would be $1,011. If your entity has 500 employees with income near or at the wage base, the total tax burden would be around $500,000 annually. ASSESS AND ANALYZE: What are the actual outcomes? How many claims does your entity assume a year for unemployment benefits? What is the hard cost of those claims? Remember that your tax rate does not necessarily reflect your specific outcomes as additional
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PUBLIC RISK | APRIL 2018
tax burdens and rate formulas are applied to maintain the solvency of any given state systems. Looking at our New Jersey entity, it is entirely plausible that their total benefits paid would have been half of the total tax bill of $500,000. Determining the exact number of claims paid over a historical basis and aligning their direct benefit charges is essential in calculating the opportunity (or exposure) that opting out of the state tax system offers. The tax rate notices should provide some basis for this review including prior year benefit charges but ultimately state supplied data can be lacking (and erroneous). A depository for this information should be any given entity’s human resource department (or sometimes finance) who should have detail on claims filed and outcome detail. The end-goal of the analysis should focus on the following—does my tax burden exceed my claims payment? Is there a strong degree of certainty that past results have consistently been maintained under the tax burden? And, is there a basis for the assumption that future claim counts and benefits will mirror historical outcomes? Digging deeper into the outcomes is essential— what is causing claims? Is the public entity doing what they need to avoid claims or achieve a better win ratio for filed claims? Is the public entity aware of any changes in budgetary funding that can lead to increased claims? The numbers tell volumes, but understanding what drives those numbers past, present and future is critical. CONTROL: Whether or not an entity chooses to pursue an opt-out/reimbursing employer status, a prudent entity’s risk management team should assure that the unemployment process is managed and outcomes reviewed in order to maximize the reduction of these cost burdens. It is necessary for the HR department to align with risk management to achieve these goals and is a partnership that both groups play integral functions. The more significant control strategies include: Clearly defining employee expectations Does your entity have detailed job descriptions? An updated employee handbook with clearly defined policies? Do employees sign off job descriptions, policies and handbook?
While these endeavors typically fall under the domain of the human resource department, risk management would be well served to conduct audits in partnership with HR to assure that best practices are implemented and that all personnel related documents are in place, utilized and meet statutory expectations. Facts, Facts and more facts Every entity will have an unemployment claim (or many more!). The reduction of that financial exposure will rely on providing the documentation to support an argument that benefits should be denied. This includes written proof of the employee’s acknowledgement of policies, reports of unsatisfactory work or misconduct, and documentation of all warnings or discipline that occurred, whether verbal or written. The more facts, the better and any documentation directed toward employee performance should allow for an acknowledgement of receipt, review and understanding by that employee. Review Human Resource Practices The intent of the State Unemployment Insurance system is inherently noble - to help workers who are out of a job. Those clearly protected under the various state specific statutes are employees who suffer layoffs, workforce reduction, and seasonal lulls. And rightly so. In conjunction with a public entity’s human resource department, risk management should review outcomes for trends—with an eye on causation—is there unwarranted hiring based on budget realities? How are pending reductions in grants or the loss of funding sources communicated in advance of hiring or firing? Is there adequate representation at hearings to assure that claims that should be denied are denied? Who is responsible for responding to claims? Is that response timely? Each of these queries needs to be clearly vetted. Returning to Ben Franklin’s words of wisdom, we may find that his assertion of death and taxes is partially correct, but we can agree that a “Penny saved is a penny earned.” Employing risk management techniques to the ownership— financially and procedurally—of the public entity unemployment tax burden can indeed lead to a positive financial outcomes. Sheldon Altschuler, ARM, is the president of Infiniti Insurance Trust.
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