State Risk Management Practices in Washington

1. State Risk Management Practices in Washington Preliminary Report Joint Legislative Audit & Review Committee June 23, 2011 Stacia Hollar, JLARC Staff

2. The Study Addressed Three Major Areas • Washington has broader tort liability than other states • The Office of Financial Management and the agencies we reviewed (WSDOT, DOC and DSHS) are conducting post-incident reviews • WSDOT, DOC and DSHS are employing risk management best practices, but DOC and DSHS should strengthen some practices State Risk Management Practices in Washington

3. JLARC Directed to Review the Effect of Risk Management Practices on Tort Payouts • A tort is a legal action brought to recover damages for bodily injury, death, or property loss • Prior to 1961, the state could not be sued for torts because of sovereign immunity • Legislature waived immunity, providing the state can be sued to the same extent as other persons • Example: sue WSDOT for crash on highway • $399 million in tort payouts and defense costs during fiscal years 2004–2010 Report Pages 3-5 State Risk Management Practices in Washington

4. Three State Agencies Accounted for 75 Percent of the State’s Payouts 2004 – 2010 All Other Agencies $98 M DSHS $141 M 25% 35% 18% DOC $73 M 22% WSDOT $87 M Total: $399 M Source: Office of Financial Management. Report Page 4 State Risk Management Practices in Washington

5. Risk Management Has Both Centralized and Decentralized Components • The Office of Financial Management provides statewide risk management guidance Risk management responsibilities Before 2002 Department of General Administration Since 2002 Office of Financial Management Starting 2011 Office of Enterprise Services • The three state agencies we reviewed also engage in risk management activities Report Page 12 State Risk Management Practices in Washington

6. Washington and Other States’ Tort Liability Laws

7. Washington’s Tort Liability Differs From That of Other States in Six General Categories • Broad waiver of “Sovereign Immunity” • Lack of “Discretionary Immunity” defense • Court’s determination of a duty to protect the general public from supervised offenders • No damage caps • Has “Joint and Several Liability” in which state may pay whole award not just the state’s percentage • Fewer procedural protections Report Page 5-6 State Risk Management Practices in Washington

8. Other States Reviewed Lack Broad Liability Provisions # of categories in common with WA 0 categories (14 states) 1 category (11 states) 2 categories (9 states) 3 categories (2 states) Reviewed (36 states) NH VT WA ME MT ND MT OR MN MA ID NY WI SD MA WY MI RI NY CT IA PA NE NV NJ OH CT IA IL IN UT DE CA CO WV VA MD KS MO KY CA NC TN AZ OK NC NM AR SC GA MS AL LA TX AK FL AK HI HI Source: JLARC analysis of other states’ liability laws.

9. Tort Payouts Are Not the Best Measure of Risk Management Practices • Some liability categories such as damage caps do not relate to management practices • A consistently small number of events result in majority of tort payouts • Example: Five or fewer DOC incidents per year cause total payout • Does not include information to be gained from incidents that don’t result in lawsuits Report Page 13 State Risk Management Practices in Washington

10. Risk Management Practices: Post-Incident Reviews by Office of Financial Management Dept of Transportation Dept of Corrections Dept of Social & Health Services

11. OFM and State Agencies Conduct Post-Incident Reviews • Incident occurs • Post-incident review performed • Future incidents avoided or reduced • OFM required by law to conduct post-incident reviews through the use of independent Loss Prevention Review Teams (LPRT) • Agencies conduct other reviews under internal policies Report Page 7 State Risk Management Practices in Washington

12. OFM is Conducting Fewer Post-Incident Reviews Than Expected • Fiscal note related to the enacting bill anticipated 12 LPRT reviews per year, but over seven years (2003-2009) OFM has completed a total of 10 reviews • Law allows OFM discretion to decide when to investigate • OFM states the most frequent reasons for not conducting LPRT review: • Agency had addressed the risk • Already reviewed by agency or outside group Report Pages 7-8 State Risk Management Practices in Washington

13. State Law Limits the Use of LPRT Reviews in Litigation • The LPRT report is not admissible as evidence in either court or administrative proceedings • Report is available to the public • Members of the LPRT may not be questioned in a proceeding regarding • the work of the team; • the incident under review, or • the statements of anyone providing information to the team. Report Page 7 State Risk Management Practices in Washington

14. WSDOT Uses Post-Incident Reviews to Design Highway Projects WSDOT’s tort payouts and defense costs Other Highway Safety Program 32% 68% Over the past seven years Source: OFM. • WSDOT maintains databases regarding frequency, location, and contributing causes of crashes • Data is used to determine patterns and contributing factors in order to design effective engineering approaches Report Page 9 State Risk Management Practices in Washington

15. Examples of Actions Resulting From WSDOT Reviews • Installation of highway cable median barriers • Actions to mitigate rock slides • Placement of rumble strips • WSDOT estimated that its costs for the 2009-11 biennium were $4.5 million, which includes its entire safety program Report Page 9 State Risk Management Practices in Washington

16. DOC Conducts Critical Incident Reviews within Community Corrections Division DOC’s tort payouts and defense costs Other 43% Supervision of Offenders 57% Over the past seven years Source: OFM. • Critical Incident Reviews are conducted by Community Corrections Division staff • Reviews include written action plans • Agency policy requires the Assistant Secretary to review and identify trends, and ensure issues are addressed Report Pages 9-10 State Risk Management Practices in Washington

17. Example of Action Resulting From DOC Reviews • Issue identified: Possible coverage gaps when community corrections officers are on leave • Response: Modification of policy to ensure coverage of supervised offenders • DOC estimated that costs for the Community Corrections Division to perform post-incident reviews for the 2009-11 Biennium were $279,000 Report Page 10 State Risk Management Practices in Washington

18. DSHS Conducts Reviews Based on Statute and Internal Policies DSHS’s tort payouts and defense costs Other 28% Children’s Administration 72% Over the past seven years Source: OFM. • Children’s Administration conducts reviews • As the result of internal policies • Pursuant to the statutory requirement to conduct Child Fatality Reviews (CFR) Report Pages 10-11 State Risk Management Practices in Washington

19. Requirements for Child Fatality Reviews Changed During the 2011 Session • State law required that DSHS conduct CFRs on unexpected deaths of children who had been in the care of, or received services from, Children’s Administration in the past 12 months • New law requires CFRs only where the death was suspected to be the result of abuse or neglect • Law also contains restrictions on litigation use of reports and witnesses similar to LPRT Report Pages 10-11 State Risk Management Practices in Washington

20. Example of Action Resulting From DSHS Reviews • Issue identified: not all complaints of bruises to infants being investigated • Response: Children’s Administration revised its policy to ensure that all reports were being investigated • DSHS estimated that the costs in the 2009-11 Biennium for performing CFRs were $538,000 Report Page 11 State Risk Management Practices in Washington

21. Risk Management Best Practices: Enterprise Risk Management (ERM)

22. Review & Report Analyze Risk Address Risk Prioritize Risk Enterprise Risk Management: A Continuous Process for Managing Risk Identify Risk Source: JLARC analysis of ERM process. Report Page 14 State Risk Management Practices in Washington

23. Enterprise Risk Management is a Best Practice • Used in private business as well as other governmental entities • Looks broadly at risks and provides a framework for managing them • OFM began implementation in Washington in 2006 • JLARC used the five Enterprise Risk Management principles to evaluate practices of WSDOT, DOC and DSHS Report Pages 14-15 State Risk Management Practices in Washington

24. WSDOT Applies All Five Principles in its Highway Safety Program Report Page 16 State Risk Management Practices in Washington

25. DOC Needs to Strengthen Application of Review and Reporting Principles Report Page 17 State Risk Management Practices in Washington

26. Recommendation to DOC • The Department of Corrections should develop and implement a policy for the consistent review of, and reporting on, the effects of actionstaken in the Community Corrections Division to address risks. Report Page 18 State Risk Management Practices in Washington

27. DSHS Should Strengthen Policies and Practices in Two Areas Report Page 19 State Risk Management Practices in Washington

28. Recommendations to DSHS • The Department of Social and Health Services should address the risks identified in the RSVP report regarding Children’s Protective Services investigations and report its results to the Legislature by December 2011. • The Department of Social and Health Services should develop a method for reviewing and reportingon the effect of actions taken in the Children's Administration to address risks. Report Page 20 State Risk Management Practices in Washington

29. The Study Addressed Three Major Areas • Washington has broader tort liability than other states • The Office of Financial Management and the agencies we reviewed (WSDOT, DOC and DSHS) and are conducting post-incident reviews • WSDOT, DOC and DSHS are employing risk management best practices, but DOC and DSHS should strengthen some practices State Risk Management Practices in Washington

30. Next Steps and Contact Information Proposed Final Report: July 2011 Stacia E. Hollar 360-786-5191 stacia.hollar@leg.wa.gov www.jlarc.leg.wa.gov State Risk Management Practices in Washington