Internal Audit Report

Transcription

1 Los Angeles Unified School District Office of the Inspector General Audit Unit Internal Audit Report Performance Audit of the Management of Insurance Requirements for Civic Center Permits and Special Events OA June 7, 2017

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3 About the Office of the Inspector General The Office of the Inspector General reports directly to the Board of Education. We conduct independent audits, reviews and investigations of District operations, contracts and vendors in order to: Find ways to improve processes, programs, functions and activities. Provide information that supports effective decision making. Identify real or potential misuse of District resources. Prevent and detect waste, fraud and abuse within the District. Through our work, we strive to encourage a culture of accountability, transparency, collaboration and excellence and to assist the Board and the Superintendent in their efforts to provide a high quality education for the students and parents of the Los Angeles Unified School District.

4 EXECUTIVE SUMMARY We have conducted an audit of the Risk Finance and Insurance Branch (RFIB) with regard to its management of insurance requirements. The objectives of the audit were to determine whether: (i) controls over requests to use District facilities were adequate to ensure that all applications are approved and accounted for; (ii) the insurance approval and recordkeeping processes for the use of District facilities were adequate; and (iii) the review of insurance requirements for the use of District facilities was effective. Based on our audit, we found that controls over requests to use District facilities were not adequate to ensure that the RFIB accounts for and approves all applications. The insurance approval and recordkeeping processes used by the RFIB did not provide adequate assurance that the risks inherent in permitted activities are effectively assessed. The review of insurance requirements for applications conducted by the RFIB was not properly monitored to ensure that adequate insurance existed for each event. We found that: 1. The application process for the use of District facilities requires re-examination and reassessment. In order to properly assess the risks related to a facility s use by internal and external requestors, the RFIB needs to have a complete understanding and knowledge of all the activities occurring on District premises. Presently, three departments (Civic Center Permit Office, Leasing and Space Utilization Unit, and RFIB) can each accept and process applications and maintain their own individual records. The Division of Risk Management and Insurance Services has not created a centralized database for the different departments involved in the process to share new application requests and all supporting documents. 2. The recordkeeping method of the Insurance Section of the RFIB is inadequate. The manner in which the data is stored does not allow for efficient report generation. A centralized database system, which would share documentation internally and with other departments that process applications for the use of District facilities, does not exist. 3. The RFIB does not follow or record the results of events held at District facilities. In instances when an event s insurance requirements were not met and the event was not approved by the Insurance Section, staff did not keep a record in the RFIB on whether the event was approved by the Leasing and Space Utilization Unit or the Civic Center Permit Office and/or whether the event was actually held. Claims associated with particular events were not recorded and tracked to facilitate future risk analysis. A macro-level review of claims information was not performed due to the categorization of claims by cause and not by type of event. 4. The review of insurance requirements requires strengthening and improvement. Almost every application we reviewed had deficiencies related to insurance requirements. Some of the deficiencies included missing Certificates of Insurance, missing waivers, and insufficient insurance coverage. The Management of Insurance Requirements Page 1 of 38 OA

5 Recommendations We provided the Risk Finance and Insurance Branch with 12 recommendations. Some of the more significant recommendations included the following: 1. The Insurance Section of the RFIB should create a formal process to ensure that it received any new requests for the use of a District facility from the Civic Center Permit Office or the Leasing and Space Utilization Unit. When received, such requests should be properly documented in a database or log and followed up on to document the result of the application. 2. The RFIB, the Civic Center Permit Office and the Leasing and Space Utilization Unit should collaborate on creating a centralized computer system that tracks and retains applications and supporting records for requests to use District facilities. 3. The Risk Finance and Insurance Branch should, on a periodic basis, randomly select approved applications for review to ensure that all insurance requirements were met. Any deficiencies should be identified and communicated to staff to improve future review and assessment decisions. Division of Risk Management and Insurance Services Response The Division of Risk Management and Insurance Services agreed with all 12 recommendations. They stated that they either have taken or would take corrective actions. The department s full response is attached as Exhibit A of this report. INTRODUCTION Every year, the District receives thousands of requests from third parties and District schools to use its facilities and grounds for recreational, educational, and fundraising activities. These activities pose risks to the District for expected and unexpected injuries and liabilities. The primary responsibility of the Risk Finance and Insurance Branch (RFIB) is the administration of the District s self-insurance property and casualty insurance programs. For each program, the RFIB 1 sets the minimum insurance requirements that an applicant needs to have in order to conduct its activities on a District facility. If a claim occurs relating to any one of the permitted activities, the District is able to transfer risks and liabilities to the activities owner and remain intact financially. The RFIB is tasked to review every request for the use of a District facility for insurance requirements to aid in the management of asset protection and risk minimization. According to the Civic Center Act 2, There is a civic center at each and every public school facility and grounds within the state 3 The Civic Center Act further states, The governing 1 The Risk Finance and Insurance Branch is one branch under the Division of Risk Management and Insurance Services. 2 California Education Code Section Ibid Section 38131(a) The Management of Insurance Requirements Page 2 of 38 OA

6 board of any school district may grant the use of school facilities or grounds as a civic center upon the terms and conditions the board deems proper 4 Chapter 6 of the LAUSD s Board of Education rules provide guidance to District management for the use of school facilities for nonschool purposes. 5 Appendix 4 provides pertinent Board Rules regarding the use of school facilities for non-school purposes. There are three departments where an applicant can apply for the use of District facilities and applications can be processed, these are: (i) The Civic Center Permit Office, (ii) the Leasing and Space Utilization Unit, and (iii) the Risk Finance and Insurance Branch. SCOPE AND OBJECTIVE The objectives of the audit were to determine whether: (i) controls over requests to use District facilities were adequate to ensure that all applications are approved and accounted for; (ii) the insurance approval and recordkeeping processes for the use of District facilities were adequate; and (iii) the review of insurance requirements for the use of District facilities was effective. We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards (GAGAS). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The audit covered the period from March 1, 2015 through June 30, We conducted the audit from June 2016 to November METHODOLOGY To accomplish our audit objectives, we (i) reviewed relevant LAUSD policies and procedures; (ii) reviewed applicable State laws and regulations; (iii) conducted necessary inquiries with key personnel of the Risk Finance and Insurance Branch, the Civic Center Permit Office, and the Leasing and Space Utilization Unit to obtain an understanding of the current processes and internal controls related to the (1) Application process, (2) Approval process, (3) Recordkeeping process, and (4) Monitoring process; (iv) judgmentally selected applications in all three areas (Civic Center Permits, School Sponsored Special Events, and Third Party Special Events) to perform testing to determine if policies and procedures were adhered to; (v) obtained and reviewed supporting documents of selected application packages to determine if insurance requirements were met according to District policies; (vi) conducted research to compare the District s facilities-use application process with that of other California school districts; (vii) performed fraud inquiries; and (viii) identified weaknesses. 4 Ibid Section 38131(b) 5 Rules of the Board of Education, Administrative Guide, Los Angeles Unified School District, by Jefferson Crain, Executive Officer of the Board, September 8, 2014 The Management of Insurance Requirements Page 3 of 38 OA

7 EVALUATION OF INTERNAL CONTROLS In accordance with Government Auditing Standards, we obtained an understanding of internal control that is significant within the context of the audit objectives. We assessed whether internal control was properly designed and implemented. For those controls that were deemed significant, we obtained sufficient, appropriate evidence to support our assessment about the effectiveness of those controls. We are required to report deficiencies in internal control that are significant within the context of the audit objectives. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct (i) impairments of effectiveness or efficiency of operations, (ii) misstatements in financial or performance information; or (iii) noncompliance with provisions of laws, regulations, contracts, or grant agreements on a timely basis. Based on our audit, we found deficiencies in internal control that are significant to the objectives of this audit. Those deficiencies are reported in the Results of Audit section. RESULTS OF AUDIT Controls over Requests to Use District Facilities The Insurance Section within the Risk Finance and Insurance Branch (RFIB) does not have controls in place to ensure that all requests for events occurring at District facilities (schools and offices) are accounted for, approved, and adequately insured. The RFIB is tasked to review every request for a District facility s use in order to determine their insurance requirements to aid the District in effectively protecting its assets and minimizing risk. The Division of Risk Management and Insurance Services (DRMIS) publishes GUIDELINES FOR SPECIAL EVENTS. According to the Guidelines, all non-lausd groups must obtain either a civic center permit or license agreement in order to use District property. The guidelines require the Principal and/or the Local District Superintendent s designee to refer any non- LAUSD group to the Civic Center Office or Leasing and Asset Management (Real Estate). It also states that liability insurance is required for civic center permits and short-term license agreements. We determined, however, that there is no clear set of instructions for a School Principal and/or the Local District Superintendent s designee to determine if a specific event should be referred to the Civic Center Permit Office or the Leasing and Space Utilization Unit. There is no control in place to ensure that the RFIB is notified by other departments when a request for use of a District facility is initially made. Furthermore, the Insurance Section does not have a formalized process in place to regularly check with the Civic Center Permit Office or the Leasing and Space Utilization Unit to determine whether any new applications have been received by external stakeholders. In addition, the Insurance Section does not have access to any new applications or the supporting records at both offices on a shared server or by any other means. The Management of Insurance Requirements Page 4 of 38 OA

8 The conditions described above occurred because there is no policy or procedure in place requiring that the Insurance Section of the RFIB be notified when an initial request is received from an internal or external party, and there is no procedure in place requiring the Insurance Section to make inquiries of the other two departments on a regular basis whether any new applications have been received. In addition, there are many access points to apply for the use of District facilities and many different terminologies used for the same kinds of requests. There are also more than one set of application forms and instructions. (See Appendix 1 for Details of our observations). As a result of the conditions described above, there is a likelihood that an event can take place at a school or office without approval by the RFIB. There is also the likelihood that the Insurance Section may have inadequate lead time to perform its functions within the time constraints based on the event s date. Without a clearly defined set of procedures, applicants may be confused with regard to where to apply, what forms should be filled out, and which instructions should be followed. Also, there is a heightened risk that an accident could occur at an event without adequate insurance coverage, leaving the District liable for damages. Recommendation The RFIB should collaborate with the Civic Center Permit Office and the Leasing and Space Utilization Unit to create a process of sharing information directly or through a server which would contain all applications and requests for the use of District facilities including all related supporting documentation. The shared server should be reviewed by the Insurance Section on a periodic basis (daily, weekly, etc.) to allow for adequate lead time and staffing to ensure that applications are reviewed in a timely manner. Division of Risk Management and Insurance Services Response The Division of Risk Management and Insurance Services (DRMIS) agreed with our recommendation and stated that the RFIB, the Civic Center Permit Office, and the Leasing and Space Utilization Unit had been working collaboratively together to create a One-stop shop process for all Civic Center Permits, Leasing and Special Events. The workflow will include a (1) single application, (2) one depository where the applications are submitted, (3) an internal distribution process to the appropriate department to review and process in a timely manner, (4) updated policies and procedures, and (5) a method to track all requests and generate management reports. The DRMIS also stated that the goal is the development of an online application and tracking system, and that the team has had discussions with the Information Technology Division to develop and create such a system. However, with limited resources both in personnel and funding, and time constraints, the decision was made to implement the process outlined above as a priority with a target date of July 1, The Management of Insurance Requirements Page 5 of 38 OA

9 Recommendation The RFIB should ensure that the Civic Center Permit Office and the Leasing and Space Utilization Unit comply with Board Rules in processing requests to use District facilities. Board Rules require that: a) Leasing and Space Utilization will process all requests that (1) require a charge of fair market value fee, (2) relate to child care/day care programs, and (3) relate to religious-related activities. b) Civic Center Permit Office will process all requests for the use of District facilities except for the ones that will be processed by Leasing. Division of Risk Management and Insurance Services Response The Division of Risk Management and Insurance Services agreed with our recommendation and stated that although Risk Management did not have any oversight or authority over the Civic Center Permit Office or the Leasing and Space Utilization Unit, the collaborative approach that DRMIS has implemented would ensure compliance with the Board Rules. The Civic Center Permit Office has agreed to process all requests that meet the requirements of the Civic Center Act. Recommendation The RFIB should create a central location on the District s website where an applicant can go to find all necessary information. At the central location, all the necessary information and instructions and the related forms should be provided and be up-to-date. Division of Risk Management and Insurance Services Response The Division of Risk Management and Insurance Services agreed with our recommendation and stated that once the final policies and procedures were finalized, the RFIB team will ensure all the information, instructions and forms were readily accessible and remained up-to-date. The Manual System Limits the Efficiency of Approving Applications The current manual and recordkeeping process not only limits the efficiency of the insurance approval operation, but also hinders management s ability to effectively manage related risks. General Process for Review of Insurance Requirements The following is a description of the general process of reviewing insurance requirements for Civic Center Permits or Special Events: The Management of Insurance Requirements Page 6 of 38 OA

10 Step 1 An is usually received by the Insurance Section of the RFIB from the Civic Center Permit Office, the Leasing and Space Utilization Unit, or from the external applicant directly. Usually the contains relevant information about the request, such as application forms and insurance information. Step 2 These ed requests are distributed to individual Insurance Section staff for assessing insurance requirements. Depending on the type of request, (such as Civic Center Permits, School Sponsored Special Events, or Third Party Special Events), designated staff will perform their respective insurance review tasks. Step 3 Conduct preliminary review for necessary information. The Insurance Section encourages applicants to provide all the required information at once in order to gain efficiencies. However, in practice, the requested information often is not all included and the Insurance Section regularly needs to follow up for additional information. Step 4 Once the reviews are completed, an Insurance Section staff moves the application and attached documents to a Pending folder located in a shared drive. Insurance staff (i) reviews supporting documents (Certificate of Insurance and risk management related information), (ii) lists any missing documents, and (iii) s a request to the applicant with copies to the appropriate departments. Step 5 Once required documents are received, the following steps are carried out depending on the type of application: (a) For Special Events, an Insurance Section staff prepares an approval sheet, which is forwarded to the Insurance Coordinator for signature. Once the Insurance Coordinator signs the sheet, the applicants and the department that processes the application is notified of the approval of the insurance requirements for the event. (b) For Civic Center Permits, an Insurance Section staff prepares an approval sheet, however it is not signed by the Insurance Coordinator. Once an Insurance Section staff is satisfied with the insurance requirement review, the approval notification is sent directly to the applicants and the Civic Center Permit Office. Step 6 Insurance Section staff scans the application and supporting documentation and saves the file in a shared folder titled Complete. The shared drive holds layers of folders containing different types of records such as lists of events at individual schools and past event records. The Management of Insurance Requirements Page 7 of 38 OA

11 Step 7 After the application receives approval, on a weekly basis, Insurance Section staff input certain basic information about a completed and approved application in a Microsoft Access database. During the audit, Insurance Section staff did not know how the information was used or whether the information in this database is used by other staff. Depending on the type of application, the Insurance Section of the RFIB has different operational processes and recordkeeping practices: Civic Center Permits For Civic Center Permits, the Insurance Section determines whether: a) The Certificate of Insurance meets its minimum requirements, and b) Certain required language is included in the Certificate of Insurance and properly stated. Recordkeeping at the Civic Center Permit Office is arranged based on seasonal sports periods such as baseball, basketball, soccer, and football. Period A covers the four months of July, August, September, and October; Period B covers the four months of November, December, January and February; and Period C covers the four months of March, April, May, and June. The Insurance Section uses an Excel spreadsheet to record all events for which Civic Center Permits are requested. This information is accessible by all Insurance Section staff who work on Civic Center Permits. The Insurance Section is small and depending on workload demands, Insurance staff may be working on either Field Trips, Civic Center Permits, or Special Events. According to Insurance Section staff, the Chief Risk Officer created a shared folder in March of 2016 so that relevant information can be accessed through this shared folder. Also, a previous period s spreadsheet is used to form a base for the current period. The Insurance Section uses a color-coding system to indicate the status of an application request on the spreadsheet for recordkeeping purposes as follows: Color Green Yellow Red Table 1 Color Scheme Description Represents approved applications with proper Certificate of Insurance requirements. Represents applications pending additional information. Once the pending information is received, the highlight will be changed to Green. Represents applications that require follow up verification. Sometimes the insurance renewal date matched (or straddled) with the Civic Center Permit period, while other insurance policies sometimes did not match with the permit s period. This The Management of Insurance Requirements Page 8 of 38 OA

12 condition required the Insurance Section staff to follow up and determine whether additional insurance was purchased. When the periods, A, B, or C had passed, and a new period began, the previous period s spreadsheet would be used as a base and all highlights would be erased. Based on available information, approximately 2,000 Civic Center Permit applications were processed in the 16- month period from March 2015 through June Special Events The review of insurance requirements for Special Events can be more involved and detailed because each Special Event has different circumstances. For example, if a Special Event is for a barbeque, the Insurance Section needs to ensure that the requestor contacted the Fire Department, If a Special Event is for day-care services, the Insurance Section needs to ensure that there is Child Molestation Insurance, and If parking is involved, the Insurance Section needs to ensure that related insurance is managed. The Insurance Section complies with LAUSD Special Events Guidelines for Insurance Requirements. 6 Once Insurance Section staff has completed the initial review of insurance requirements for Special Events, a second review of insurance requirements is usually performed by the Insurance Coordinator. In addition to the Certificate of Insurance that covers the applicant organization, there are usually additional certificates of insurance to cover any vendors or contractors that the applicant organization engages for the event. For an event that has 100 or more participants, there should be requirements for crowd control which indicate a need for security guards. The Volunteer Waiver form must be completed and signed if volunteers perform services at an event. Parking requests are often sought and additional insurance coverage is required if valet parking is involved. The Insurance Section requires at least two weeks lead time for review and approval of the insurance requirements of Special Events. There are two types of Special Events: 1. School Sponsored Special Event: This involves a program initiated by a school principal or sometimes by teachers at a school. The Insurance Section processes these applications from start to finish. Schools are not required to provide a Certificate of Insurance because all schools are covered by the District. However, if the activity involves external vendors or professionals, a Certificate of Insurance must be provided for each vendor or professional. In addition, depending on the nature or type of event that is held, the insurance approval process may also involve crowd control requirements and volunteer waivers. 6 Issued by the Division of Risk Management and Insurance Services. The Management of Insurance Requirements Page 9 of 38 OA

13 School Sponsored Special Event Recordkeeping: The records for School Sponsored Special Events are maintained in shared drive folders within the Insurance Section, arranged by school names. For Fiscal Year 2016, there were 243 items listed in the Fiscal Year folder. Two of the folders were titled Not Approved Cancelled and Non-Sponsored. The remaining folders are labeled by the school name or school location. For School Sponsored Special Events, the Insurance Section used a tracking list similar to the list used for Civic Center Permits. The events were tracked by using an Excel spreadsheet using a color coding scheme to indicate the status of the particular event. Green, Yellow, and Red were used to indicate Approved, Pending, and Expired Certificate of Insurance (COI) applications, respectively. 2. Third Party Special Event: This involves a request made by a third party external to the schools. These requests are processed by the Leasing and Space Utilization Unit. Insurance Section staff often ask applicants to provide an event flyer or itinerary because the description on the application form may not be detailed enough or comprehensive. Third Party Special Event - Recordkeeping Insurance Section staff did not maintain a list of approved Third Party Special Events. Staff was not able to provide auditors with a list of approved Third Party Special Events (processed by the Leasing and Space Utilization unit) for a specific period. Records of Third Party Special Events were maintained in separate folders within a shared server and were arranged by school names and fiscal year. The folder for Special Events (Leasing) for Fiscal Year contained a list of school names and each school could have more than one event application. There were about 434 locations (schools). In December 2015, the Insurance Section staff started a monthly folder that contained all completed, cancelled, non-approved, and non-responsive applications. A list of individual applications was found within each monthly folder. We were able to decipher the information from these monthly folders and found that there were about 1,200 applications for Special Events (Leasing) for Fiscal Year (See Appendix 2) We noted the following conditions related to the Insurance Approval Process and Recordkeeping Practices: (a) The Insurance Section has not developed a manual for routine and non-routine procedures pertaining to the assessment of insurance requirements for Civic Center Permits and Special Events. There is a lack of consistency in the process since policies and procedures are lacking. For example, some staff copy updated information from other staff to maintain continuity, while some staff may not. (b) The Insurance Section is understaffed. In order to mitigate the risk of a lack of continuity of service, (due to staffing shortages), the Insurance Section developed an Box in March 2016 to improve communication and aid in continuity in case an Insurance Section staff The Management of Insurance Requirements Page 10 of 38 OA

14 member (who is the main person working on a particular case) is not available when a question related to the case is raised. The staff copies communications to this Box whenever communicating with external parties. According to the Insurance Coordinator, due to staff shortages, occasionally, insurance clearances were not issued before the event date. In other words, the RFIB was occasionally not able to verify the insurance before the event took place. Regarding Third Party (Non-School Sponsored) Special Events: (a) The Insurance Section staff estimated that about 95% of the time, the Leasing and Space Utilization Unit followed the RFIB s recommendation on whether to approve the event or not. However, there were times when the Leasing and Space Utilization Unit acted without the insurance approval from the RFIB. (b) The Insurance Section staff occasionally received requests from the Claims and Liability Section to check if a Certificate of Insurance was on file for a specific case. Typically, the staff was given a location (school name) or the name of a sponsoring organization and asked if there was a valid Certificate of Insurance for a specific time period on file. The staff then searched the shared drive which contains all the approved and unapproved applications and supporting documents based on school name and location. The staff stated that they receive approximately five such requests every six months. Staff had experienced situations where a valid certificate was found and where the certificate was not found. (c) Frequently school principals would submit a School Sponsored Special Event request to the RFIB, when in fact, the request was actually a Third Party Special Event. In such cases, the staff would need to consult with the Leasing and Space Utilization Unit to determine if the particular event was actually a School Sponsored Special Event or a Third Party Special Event. (d) The Insurance Section s recordkeeping is inadequate for the review of insurance requirements. The current storage of data does not allow for efficient management report generation. Currently, management does not know how significant or insignificant claims are related to Civic Center Permits and Special Events. The management s general impression is that liability claims related to Civic Center Permits and Special Events are few in number, but it did not have any management reports to offer as evidence. It appears that an attempt was made sometime in the past to generate a database for reports and analysis purposes, but it was never operational. According to the Insurance Coordinator, the Insurance Section has used an internally developed program in Access created in 2006 to record data related to the insurance requirements, and Claims information. However, RFIB Management is not certain if this program can produce meaningful reports showing statistical analysis for insurance-related needs. Management is aware that the program can generate a Claims list, but the list is not categorized by different types of activities such as Field Trips, Civic Center Permits, or Special Events. Instead it categorizes claims based on causes of injury such as abduction, act of nature, animal/insectrelated, arson, athletic related, construction, stabbing, jumping, etc. The Management of Insurance Requirements Page 11 of 38 OA

15 (e) Event results were not followed up on and recorded. When an event s insurance requirements were not met and the event was not approved by the RFIB, there was no record at the RFIB that documented whether the event was approved by the Leasing and Space Utilization Unit or the Civic Center Permit Office and/or whether the event was actually held. There were occasions where certain applications that were received by the Insurance Section were later referred to another department. However, there was no record or evidence showing whether the application was successfully completed. (f) We noted the following positive condition following the appointment of the Chief Risk Officer who has provided oversight of the RFIB. The Chief Risk Officer is very much involved in the process to achieve an efficient and effective operation for the assessment of insurance requirements. The conditions described above occurred due to several conditions including the fact that adequate policies and procedures were not in place, and the fact that the Insurance Section struggled with inadequate resources and managed its operation in a manner akin to putting out fires. As a result, any operational improvements such as reviewing and evaluating adequacy and consistency of policies and procedures, reviewing and updating related web information, and creating desk manuals was delayed. We also noted that the RFIB received applications for events that should have been directed to other offices due in part to the existence of multiple access points from which applicants could apply. Also, the loss of knowledgeable employees to other organizations caused the discontinuation of certain operational improvement initiatives such as a centralized database system, establishment of policies and procedures, and website information updates. In addition, a management reporting system on claims associated with events at District facilities was unavailable due in part to a highly manualized recordkeeping system and a lack of a centralized database capable of generating reports. Event results were also not available at the Insurance Section because there was no feedback from other departments. As a result of the conditions described above, there is a lack of consistency in operation due to a lack of well-developed policies and procedures. There is also a risk that quality information is not generated and used for management decision making and effective monitoring. In addition, there is a heightened risk that an accident could occur at an event without adequate insurance coverage, leaving the District responsible for damages. Recommendation The RFIB, the Civic Center Permit Office and the Leasing and Space Utilization Unit should collaborate and implement a centralized computer system that tracks and retains application requests for District facilities and supporting records. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and responded that as stated in its response to the first recommendation, the goal was to leverage technology to create efficiencies. The Management of Insurance Requirements Page 12 of 38 OA

16 Recommendation The RFIB should develop policies and procedures and manuals for consistency and continuity of operation within the Insurance Section of the RFIB. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the RFIB had already drafted internal policies and procedures for determining the risk of loss for civic center permits, leasing and special events. Once District policies and procedures are approved, the draft internal procedures/manuals will be reviewed for consistency and accuracy before finalizing. Recommendation The RFIB should provide training to Insurance Section staff to improve their ability to assess insurance requirements. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that Risk Management, as a Division, would be focusing on staff development to improve the skills and knowledge of staff, build confidence and credibility, and increase efficiency. Recommendation For internal control purposes, the Director of the Risk Finance and Insurance Branch should, on a periodic basis, randomly select approved applications for review to ensure that all insurance requirements were met. Any deficiencies should be identified and communicated to staff to improve future review and assessment decisions. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the RFIB would include periodic audit procedures in the internal manual to ensure the reviews of insurance requirements were accurate and consistent. Recommendation The RFIB should communicate with the Civic Center Permit Office to reconsider the Period System to align the application process with all other requests to use District facilities. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the Civic Center Permit Office was planning to revise the Period System to align the application process as indicated. Applicants will have 30 days before the first requested use to submit an application. Approved uses will be The Management of Insurance Requirements Page 13 of 38 OA

17 for a period of 4 months from that date. This process closely aligns with the short term License Agreement process. The current Permit Period schedule will be eliminated. Recommendation The Insurance Section should collect feedback information recorded in documentation, such as approved or not, cancelled or not, event held or not, accident or not, type and nature of accident, payout, reimbursed or not to facilitate analysis for future decision making, including future insurance requirement designs. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that from a Risk Management and Loss Control/Prevention standpoint, the information would have been valuable to collect and analyze. However, with the current limited resources, the additional work to gather the information would not be feasible at this time. Recommendation The RFIB should communicate with the Civic Center Permit Office to incorporate the cost of computer software purchases and maintenance into the calculation of direct cost reimbursements. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the RFIB, in conjunction with the Civic Center Permit Office and the Leasing and Space Utilization Unit, had not only been evaluating the cost of computer software and maintenance but all costs, including labor associated with operating and maintaining the Program. Recommendation The RFIB should inform the Civic Center Permit Office that it should continue and strengthen after-school and weekend campus walk arounds by designated Civic Center Permit staff or school security personnel, and report back any activities without permits or lease agreements. Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the Civic Center Permit Office had agreed to establish protocols to strengthen after-school and weekend campus walk arounds to identify activities being conducted without a user agreement. Recommendation The RFIB should communicate with the Division of District Operations to update the Principal s Handbook regarding the use of District facilities and how requests to use District facilities should be processed. The Management of Insurance Requirements Page 14 of 38 OA

18 Division of Risk Management and Insurance Services Response The DRMIS agreed with our recommendation and stated that the RFIB would engage District Operations to ensure updated information, policies and procedures on the use of District facilities was incorporated into the Principal s Handbook. Inadequate Controls over Staff s Review of Insurance Requirements The review of insurance requirements needs to be strengthened and improved. In our examination, we noted deficiencies such as missing Certificates of Insurance, missing waivers, and insufficient insurance coverage. According to the Standards for Internal Control in the Federal Government, management designs control activities in response to the entity s objectives and risks to achieve an effective internal control system. Control activities are the policies, procedures, techniques, and mechanisms that enforce management s directives to achieve the entity s objectives and address related risks. 7 Control activities can be either preventive or detective. The main difference between preventive and detective control activities is the timing of a control activity within an entity s operations. A preventive control activity prevents an entity from failing to achieve an objective or address a risk. A detective control activity discovers when an entity is not achieving an objective or addressing a risk before the entity s operation has concluded and corrects the actions so that the entity achieves the objective or addresses the risk. 8 Control activities can be implemented in either an automated or a manual manner. Automated control activities are either wholly or partially automated through the entity s information technology. Manual control activities are performed by individuals with minor use of the entity s information technology. Automated control activities tend to be more reliable because they are less susceptible to human error and are typically more efficient. If the entity relies on information technology in its operation, management designs control activities so that the information technology continues to operate properly. 9 Management performs ongoing monitoring of the design and operating effectiveness of the internal control system as part of the normal course of operations. Ongoing monitoring includes regular management and supervisory activities, comparisons, reconciliations, and other routine actions. Ongoing monitoring may include automated tools, which can increase objectivity and efficiency by electronically compiling evaluations of controls and transactions. 10 We randomly selected 19 applications (seven Civic Center Permits, seven Third Party Special Events, and five School Sponsored Special Events) from completed folders in the shared drive for the period March 1, 2015 through June 30, 2016 to review if Certificates of Insurance were 7 Standards for Internal Control in the Fed. Government, Published by the GAO, dated September 2014, page Standards for Internal Control in the Fed. Government, Published by the GAO, dated September 2014, page Ibid, 10 Ibid, 65. The Management of Insurance Requirements Page 15 of 38 OA

19 on file and whether insurance-related requirements were fulfilled. The following details our review results: Civic Center Permits (CCP) We obtained application lists for Period A (July 2015 October 2015); Period B (November 2015 February 2016); Period C (March 2015 June 2015) and Period C (March 2016 June 2016). We reviewed spreadsheets for these periods and found that (1) the green highlights were not applied consistently. Some rows had partial green highlights and staff could not explain inconsistent highlighting except that many people have worked on the spreadsheet and mistakes may have been made, (2) yellow highlights were still in the spreadsheets for those periods that had passed and for events that had already occurred, and (3) red highlights were present for events that did not happen for that particular period. Application Identification Approval Result CCP Application 1 No record* CCP Application 2 Yes CCP Application 3 No record* CCP Application 4 Yes CCP Application 5 No record* CCP Application 6 No record* CCP Application 7 No record* * No record indicates that there was no indication of approval in the retained file records. Period A (July 2015 October 2015) -: CCP Application 1 (Soccer Games) This event was still highlighted in yellow on the Excel spreadsheet. The Certificate of Insurance expiration date was recorded as 10/1/2015. However, according to the application, there were events scheduled for October 4, 11, 18, and 25, 2015 which were not covered by the Certificate of Insurance on file. Period B (November 2015 February 2016): CCP Application 2 (Free Information Seminar) Location change was not properly reflected on the Certificate of Insurance. Should a claim arise out of this event, the District might have difficulty enforcing the insurance policy. Additional Insured The Certificate of Insurance stated that the Certificate Holder was also named as Additional Insured. However, we were not able to determine whether there was an endorsement, because there was none on file. Policy Cancellation The cancellation section stated that should any of the above described policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provision. The RFIB does not have the actual policy; therefore, it would not know the details of the provisions regarding cancellation. The Management of Insurance Requirements Page 16 of 38 OA

20 CCP Application 3 (Basketball, Volleyballs, and Tennis) (1) Information provided on the application form was not consistent. The applicant indicated on one part of the application that all participants were 18 years of age or under (Youth Group) and on another part of the application indicated that at least one participant was 19 years of age or older (Adult Group). There was no indication that this inconsistency was resolved. (2) There was no record on the application regarding who received and approved the event. (3) This application requested to use the facility from Monday through Friday for the entire Period (Period B November through February), even though it stated that any day Big Gym is available 6:00 PM to 9:00 PM. If no one was actively tracking the applications related to this site, this group could have the exclusive use of the facility. According to the CCP application instruction, Usage of school by a single organization or activity may be limited in order to ensure an equitable distribution of Civic Center Permits among the various organizations and activities. (4) The applicant organization did not have an adequate amount of Worker s Compensation insurance required by the District. (5) This application did not have an Automobile Liability Waiver. Additional Insured The Certificate of Insurance stated that the Certificate Holder was also named as Additional Insured. However, we were unable to determine whether there was an endorsement since the endorsement was not on file. Policy Cancellation The RFIB did not have the actual policy, therefore, it would not know the details of the provisions regarding cancellation. CCP Application 4 (Community Meeting) There was no record on the application regarding who received and approved the event and the applicant was self-insured. CCP Application 5 (Track & Field Practices and Meets) (1) This application was still highlighted in yellow on the spreadsheet; however, the requested event dates had already passed. (2) There was no record on the application regarding who received and approved the event. (3) The Certificate of Insurance did not name the District as the Certificate Holder and did not contain an additional insured endorsement in favor of Los Angeles Unified School District and the Board of Education of the City of Los Angeles. (4) Policy Cancellation The RFIB did not have the actual policy; therefore, it would not know the details of the provisions regarding cancellation. The Management of Insurance Requirements Page 17 of 38 OA

21 Period C (March 2015 June 2015): CCP Application 6 (Adult Basketball) (1) This application was still highlighted in yellow indicating a pending application; however, the period had passed. (2) The application did not specify the date of the event requested. The Certificate of Insurance covered one specific date (02:05PM ET 03/16/2015 to 12:01 AM ET 03/06/2016); we were unable to verify if the Certificate of Insurance covered the date of the event. The Insurance Units spreadsheet records showed that the Certificate of Insurance expired on 4/23/2015, which did not correspond to the COI date. (3) Policy Cancellation The RFIB did not have the actual policy; therefore, it would not know the details of the provisions regarding cancellation. Period C (March 2016 June 2016): CCP Application 7 (Free Classes) (1) This application was marked in yellow indicating a pending application. However, the period had passed. (2) The spreadsheet did not show an approval date. (3) The Commercial General Liability Certificate of Insurance was missing and not available for review. Third Party Special Events (TPSSE) TPSSE Application 1 TPSSE Application 2 TPSSE Application 3 TPSSE Application 4 TPSSE Application 5 TPSSE Application 6 TPSSE Application 7 Approval Yes Yes Yes Yes Yes No Record Not Approved TPSSE Application 1 (Community Antiques and Collectibles Market by Booster Club) (1) The Booster Club s COI did not have the Cancellation statement. (2) Los Angeles Unified School District was named as additional insured instead of Los Angeles Unified School District and the Board of Education of the City of Los Angeles in the endorsement document. (3) The application package did not have a detailed itinerary and/or flyer of all planned activities and participants. (4) According to the retained records, there were 48 vendors. None of these 48 vendors provided a COI. The Management of Insurance Requirements Page 18 of 38 OA

22 (5) The application indicated that there were about 300 customers. However, there was no indication in the retained records that a detailed plan for supervision and crowd control was provided for the RFIB review. TPSSE Application 2 (Fall Family Festival including inflatable equipment): (1) Inadequate insurance: LAUSD requirement for inflatable equipment vendor is as follows: Insurance Amount Per Occurrence Limit $ 1,000,000 Products & Completed Operations 1,000,000 Personal & Advertising Injury 1,000,000 General Aggregate Limit 2,000,000 Fire Damage (Any One Fire) 100,000 Medical Payments (Any One Person) 5,000 The Vendor s Insurance for the event was inadequate as shown below: Insurance Amount Commercial Liability Limit Per Person $ 250,000 Commercial Liability Limit Per Accident 1,000,000 Commercial Liability Limit Policy Aggregate 2,000,000 (2) This application used three types of application forms: one for school sponsored, one for nonschool sponsored, and one from the Leasing and Space Utilization Unit. (3) This application stated that parents and volunteers will prepare all foods. According to OEHS, all food or beverages that have been stored or prepared in a private home may not be offered for sale or given away. The only exception is non-potentially hazardous baked goods or candy. This application had many recreational activities and offered many kinds of homemade foods at the event. TPSSE Application 3 (Booster Club Carnival): (1) The organizer s insurance for File Damage (any one fire) was $50,000. The District s requirement was $100,000. (2) Additional Insured Same as in CCP Application 2 for the organizer. (3) Additional Insured Same as in CCP Application 2 for the equipment vendor of the carnival. (4) Policy Cancellation Same as in CCP Application 2. (5) The Participant s designated area of assignment was not specified on the Crowd Control Participants Waiver and Release of Liability form. (6) Two of the vendors that were listed as service providers for the event did not have any insurance information on file. (7) A detailed itinerary and/or flyer of all planned activities and participants were not on file. The Management of Insurance Requirements Page 19 of 38 OA

23 Application 4 (PTSA Haunted House): (1) The organizer s Certificate of Insurance did not specify that Los Angeles Unified School District & the Board of Education of the City of Los Angeles was the Certificate Holder. (2) Additional Insured Same as in CCP Application 2. (3) Policy Cancellation Same as in CCP Application 2. Application 5 (Play Time for Preschoolers): (1) Additional Insured Same as in CCP Application 2. (2) Policy Cancellation Same as in CCP Application 2. (3) The activity lasted for one year from 7/01/2015 to 6/30/2016. However, the Commercial General Liability expired on 6/01/2016, and the Workers Compensation and Employers Liability expired on 1/01/2016. Therefore, there was insufficient evidence to determine whether the event was covered by adequate Workers Compensation and Employers Liability insurance for the entire duration. (4) The rental License Agreement was dated June 17, However, The Automobile Liability Statement was dated July 30, Therefore, there was insufficient evidence to determine whether the event was covered by adequate Automobile insurance for the entire duration. Application 6 (Dance Lessons): (1) This application was marked as Approved by Eileen. The documents on file included a License application, the Facility Use Authorization form, a COI, an endorsement for additional insured, and an event flyer. (2) The Waiver of Liability, Assumption of Risk, and Indemnity Agreement was not on file. (3) There was no Approval of Insurance Requirements from the Risk Finance and Insurance Branch on file. (4) There was insufficient evidence to verify that the Risk Finance and Insurance Branch reviewed and approved the event s insurance requirements. Application 7 (Annual Spring Festival): (1) This application was marked as Non-Responsive. The documents on file included: (1) a License application, (2) the Facility Use Authorization form, (3) an OEHS Activity Checklist for Carnivals and Other Events, (4) a Request for General Liability Insurance Quote, (5) the Inter-office Memo form, (6) a Certificate of Insurance, (7) a List of Vendors for Special Event, (8) a detailed description of activities, and (9) the event flyer. (2) The Waiver of Liability, Assumption of Risk, and Indemnity Agreement was not on file for the organizer. The Management of Insurance Requirements Page 20 of 38 OA

24 (3) There were four outside vendors listed. None of their Certificates of Insurance were on file, nor were their Waivers of Liability, Assumption of Risk, and Indemnity Agreements. (4) Volunteers were said to provide services, but no list of volunteers or their waivers were on file. (5) No crowd control arrangement was documented and retained on file. (6) There was insufficient evidence to verify that the Risk Finance and Insurance Branch reviewed and approved the event s insurance requirements. Application 8 (Fencing Tournament): (1) This application was marked as Not Approved. The staff stated that this event was not approved because it was a fencing activity. No additional explanation was given. (2) There was no indication in the retained documentation if the event was cancelled or held. School Sponsored Special Events (SSSE) Application SSSE Application 1 SSSE Application 2 SSSE Application 3 SSSE Application 4 SSSE Application 5 Signed Approval Yes Yes No No Yes Application 1 (Senior Prom): (1) Participant s designated area of assignment on the CROWD CONTROL Participants Waiver and Release of Liability form was not filled out. According to the policy published by the Division of Risk Management and Insurance Services entitled LAUSD INSURANCE GUIDELINES (02/12), page 4, If your event is scheduled to host a crowd of more than 100 people, please provide a copy of your security/crowd control plan or a listing of your cadre of volunteers and their designated areas of assignment for approval by Risk Management. The estimated number of participants on the application was 150. (2) Insurance for Digishots Photography (a vendor for this event) carried an insurance coverage for property damage for $50,000 per occurrence. However, the LAUSD INSURANCE GUIDELINES requires $100,000 for fire damage of any one fire. (3) Insurance for Access Guard and Patrol did not have adequate automobile insurance. LAUSD requires a Combined Single Limit of $1,000,000. The vendor only had Scheduled Autos coverage for Bodily Injury (per person) of $100,000, Bodily Injury (per accident) of $300,000 and Property Damage (per accident) of $50,000. (4) Additional Insured Same as in CCP Application 2 for all outside vendors: Digishots, Access Guard and Patrol. The Management of Insurance Requirements Page 21 of 38 OA

25 (5) Policy Cancellation Same as in CCP Application 2 for all outside vendors: Digishots, Access Guard and Patrol. Application 2 (Animal on Campus): (1) Vendor, Reptacular Animals Corp. did not have adequate automobile liability coverage. The vendor only had Scheduled and Non-Owned autos coverage for Bodily Injury (per person) of $100,000, Bodily Injury (per accident) of $300,000, and Property Damage (per accident) of $50,000. (2) A Blanket Additional Insured endorsement was provided which did not comply with the LAUSD requirement that specifically names Los Angeles Unified School District and the Board of Education of the City of Los Angeles be contained in the endorsement. (3) Policy Cancellation Same as in CCP Application 2. Application 3 (Space for Interview): (1) This application did not have Risk Management s approval signature; and therefore, we were unable to verify whether the event occurred. The SSSE Unit staff did not know either, because there was no documentation from the SSSE Unit indicating whether the event occurred or not. (2) This application did not have a Certificate of Insurance on file. (3) This application was not a school sponsored activity. The SSSE Unit should have referred this application to the Leasing and Space Utilization Unit. There was no documentation from the SSSE Unit indicating so. (4) The Principal used the wrong application form. Instead of using the FACILITY USE AUTHORIZATION form from the Leasing and Space Utilization Unit, the Principal used the REQUEST FOR APPROVAL OF SPECIAL EVENT form from the Division of Risk Management and Insurance Services. Internally, Risk Management processed these two forms differently and by different staff. The first form was processed by the Leasing and Space Utilization Unit and the latter was by the SSSE Unit. Application 4 (School-Wide Carnival Fundraising by PTA): (1) This application did not have Risk Management s approval signature; we were not able to determine whether the event was conducted. SSSE Unit staff did not know either. There was no documentation from the SSSE Unit indicating either way. (2) This application was not a school sponsored activity. The SSSE Unit should have referred this application to the Leasing and Space Utilization Unit for insurance approval. There was no documentation from the SSSE Unit indicating so. (3) The Principal used the wrong application form. Instead of using the FACILITY USE AUTHORIZATION form from the Leasing and Space Utilization Unit, the Principal used the REQUEST FOR APPROVAL OF SPECIAL EVENT form from the Division of Risk The Management of Insurance Requirements Page 22 of 38 OA

26 Management and Insurance Services. Internally, Risk Management processed these two forms differently and by different staff. The first form was processed by the Leasing and Space Utilization Unit and the latter was by the SSSE Unit. Application 5 (College and Career Fair): The LIST OF VENDORS FOR SPECIAL EVENT form was not complete. Missing information included whether or not an organization or vendor is LAUSD insured, organization or vendor contact information, and whether or not a school belonged to the LAUSD. Maher Elias (dba Gourmet Genie) (Food Truck) (1) The Public Health Permit provided by the food vendor Maher Elias (dba Gourmet Genie) was issued to Eagle Foods, Inc. (2) The additional insured endorsement in favor of Los Angeles Unified School District and the Board of Education of the City of Los Angeles was not included. Sabores De Mexico (Food Truck) (1) The Certificate of Insurance listed Benjamin Martinez as the insured and there was no mention of Sabores De Mexico on the certificate. (2) The additional insured endorsement in favor of Los Angeles Unified School District and the Board of Education of the City of Los Angeles was not included. (3) The Health Permit document was missing. Paradise Fine Cookies & Ice Cream/Austyn s Gourmet Burgers (Food Trucks) (1) The application stated that these two vendors were under the same business license and the same owner. However, the Certificate of Insurance stated that Paradise Worldwide, Inc. was the named insured. There was no evidence on file that Paradise Fine Cookies & Ice Cream and Austyn s Gourmet Burgers were members of Paradise Worldwide, Inc. (2) The additional insured endorsement was not included. (3) Only Paradise Cookies Inc. had a Business Certificate on file. The Business Certificate for Austyn s Burger was not available for review. Valeria Market (Food Sale) (1) The insurance for Product/Completed operations aggregate was stated on its COI as $1,000,000, each occurrence was $500,000, and the General Aggregate was $1,000,000. The District s minimum requirement is $2,000,000 for Product/Completed operations aggregate, $1,000,000 for each occurrence, and $2,000,000 for General Aggregate. (2) The additional insured endorsement was not included. The Management of Insurance Requirements Page 23 of 38 OA

27 Pizza & Co, LLC The following were missing: (a.) Waiver of Liability, (b.) Assumption of Risk, (c.) Indemnity Agreement, (d.) Additional Insured Endorsement, (e.) Certificate Holder not specified as LAUSD, (f.) Public Health Permit, and (g.) Business Certificate or Seller s Permit. Andy Gump, Inc. (Portable Restroom) The following were missing: (a.) Waiver of Liability, (b.) Assumption of Risk, and (c.) Indemnity Agreement. In summary, we found that almost every application we reviewed had deficiencies, some more and some less, in their insurance requirements such as missing Certificates of Insurance and/or waivers and insufficient insurance coverage. We believe that it was inefficient for the Leasing and Space Utilization Unit and the Civic Center Permit Office to process the applications before basic insurance requirements were met. The Insurance Section did not insist that the copy of the endorsement for additional insured be included as part of the insurance requirements. The cancellation section of the Certificate of Insurance states that should any of the above described policies be cancelled before the expiration date, notice will be delivered in accordance with the policy provision. We were unable to verify what the policy provisions dictated. The conditions described above occurred because: (1) there was a lack of clear and coherent policies and procedures, (2) there were no monitoring activities to ensure policies and procedures are strictly followed, (3) the staff s knowledge of insurance requirements was limited, and (4) staff shortage and turnover created a situation where there was no continuity of processing applications. New staff also needs to be trained. As a result of the conditions described above, there was a potential risk that insurance requirements were not met. Payouts for claims associated with these events may not have been reimbursed by the applicants and could have become an additional burden to the District. REPORT DISTRIBUTION This report is intended solely for the information and use of the Division of Risk Management and Insurance Services and is not intended to be and should not be used for any other purpose. This report may not be released in full or in part, to any entity outside LAUSD or to any internal department without the prior approval of the Office of the Inspector General. AUDIT TEAM This audit was conducted by the Office of the Inspector s General Audit Unit team: Katharine Monishi, Audit Manager Wan Yu Liu, Principal Auditor The Management of Insurance Requirements Page 24 of 38 OA

28 Appendix 1 Operational Background Observations: Observation 1 Unclear Instructions The Division of Risk Management and Insurance Services publishes GUIDELINES FOR SPECIAL EVENTS. According to Item 4 of the Guidelines: All non-lausd groups must also obtain either a civic center permit or license agreement in order to use District property. The Principal and/or the Local District Superintendent s designee should refer any non-lausd group to the Civic Center Office at (818) or Leasing and Asset Management (Real Estate) at (213) Liability insurance is required for civic center permits and short-term license agreements. There is a lack of clear instructions for the Principal and/or the Local District Superintendent s designee to determine if a specific event should be referred to the Civic Center Permit Office or the Leasing and Space Utilization Unit. Observation 2 Inconsistent Instructions There are inconsistencies in the policies published by the Division of Risk Management and Insurance Services. The Division of Risk Management and Insurance Services publishes the following bulletins: LIABILITY NOTICE TO: BOOSTER CLUBS, PARENT/TEACHER ORGANIZATIONS, STUDENT BODY GROUPS, and LAUSD INSURANCE GUIDELINES. In the former publication, the policy states, The Division of Risk Management and Insurance Services (DRMIS) has set minimum insurance requirements for sponsors of special events, which is one set of Commercial General Liability Insurance. However, in the latter publication, insurance requirements are categorized into different types of activities, which may or may not have the same requirements: Short-Term license agreements through the Leasing & Space Utilization Unit Parking Lot Use Concerts (Non-Instructional Times) Live Animal on LAUSD Property & Field Trips Health Fairs (Sponsored by Non-LAUSD Entities) Athletic Sports/Tournaments School Carnivals or Fires Including any Participating Food Vendors Inflatable Equipment Fireworks Aquatic Activity/Swimming Pool The Management of Insurance Requirements Page 25 of 38 OA

29 Boating Activity Filming on LAUSD Property (No Students Involved), Filming on LAUSD (Students Involved) Professional Service Contracts Basic Insurance Requirements May Vary Depending on Contract Requirements and Actual Scope of Work Purchasing Contracts Basic Insurance Requirements May Vary Depending on Contract Terms and Actual Scope of Work We noted that the forms for outside parties to verify waiver of liability, assumption of risks, and indemnification are different depending on the department that an applicant applies to. The insurance requirements from the Civic Center Permit Office specify that the Certificate Holder portion of the insurance certificate must be Beyond the Bell Branch, 333 South Beaudry Ave., 29 th Fl., Los Angeles, CA 90017, Ref: School Name. However, according to the staff at the Risk Finance and Insurance Branch (RFIB), their package does not require the specification of the school site. Observation 3 Multiple Website Portals to Request for Permits and Event Approvals There are many places on District websites to obtain information, instructions, and applications for both Civic Center Permits and Special Event approvals. An applicant can apply to any of the following departments: (1) Civic Center Permit Office of the Beyond the Bell Branch, (2) Leasing and Space Utilization of the Division of District Operations, or (3) Risk Management office directly. The information, instructions, and applications are not always the same. Some of the instructions are outdated. Many website references for insurance requirements refer to an Insurance Coordinator/Manager who has left the District for more than a year. Observation 4 No clear distinction between a Civic Center Permit and Special Event Approval For Civic Center Permits, the District website states: The major function of the Civic Center Permit Office is the issuance of permits to allow for the use of school facilities in conformance with the California Education Code and the Board of Education rules, which require that each and every public school facility be made available as a civic center to members of the community and non-profit organizations for supervised recreational activities, meetings and public discussion, without disruption to regular school activities. To qualify for a permit, the website also states, Activity must be not-for-profit and open to the public. The Management of Insurance Requirements Page 26 of 38 OA

30 For Special Events, the District website states: Many School Booster Clubs, PTOs and Student Body Groups regularly sponsor extracurricular activities, special events and/or fundraisers that pose liability risks to LAUSD owned property, its employees, students and the sponsoring organization. If the event or the sponsoring organization is improperly insured and there are allegations of negligence that result in liability claims, the members of the sponsoring organization could find that their personal assets are at risk. Additionally, as the owner of the property, the District may also incur expenses related to defense of a liability claim. The description are not mutually exclusive. In other words, an applicant can take either route to obtain either a Civic Center Permit or Special Event approval. We conducted a close review of both Civic Center Permits and Special Events, and found that the same type of organizations requested either a Civic Center Permit or Special Event approval. (See Table 2 below in Appendix 1) The Leasing and Space Utilization Unit processed similar kinds of events that the Civic Center Permit Office processed. (See Table 3 below in Appendix 1) Staff stated that fees are not charged for Civic Center Permit activities, while fees are charged for Special Event activities. However, we found that some of the Special Event activities that we reviewed were not charged fees either. (See Table 4 below in Appendix 1) Civic Center Permits are processed by the Civic Center Permit Office within the Division of District Operations and it has its own application package. Applications for Special Events are directed first to the School Principal or the Local District Superintendent (or their designees) and then to the the Leasing and Space Utilization Unit for processing. Again, the Leasing and Space Utilization Unit has its own application forms for applicants requesting use of District facilities. Observation 5 No mention of the Difference between School Sponsored Special Events and Third Party Special Events on the District website The District website does not make a distinction between School Sponsored Special Events and Third Party (non-school sponsored) Special Events. Yet, internally, staff processes these two types of Special Events differently. The applications and approval forms used for these two types of Special Events are different. Internally, applications for Special Events are differentiated between School Sponsored Special Events and Third Party Special Events. Within the RFIB, there are different operational processes for these two types of applications. For a School Sponsored Special Event application, an applicant should apply directly through the RFIB and use the form Request for Approval of Special Event. These types of special event applications are not processed by the Leasing and Space Utilization Unit. However, the form does not specify that it is for school sponsored activities only. Several times, applicants used this form to apply for Third Party Special Events causing additional processing time and confusion. The Management of Insurance Requirements Page 27 of 38 OA

31 For Third Party Special Events, the Leasing and Space Utilization Unit has its own application forms and approval processes for Principals and Local Superintendents or their designees. The initial form is an Interoffice Memo from the Principal to the Deputy Director of Leasing & Space Utilization. It is then followed by a form titled Facility Use Authorization. These two forms contain very similar information. Benchmarking We performed research related to practices that other large California school districts used to comply with the California Education Code, Section , the Civic Center Act. Table 5 in Appendix 1 summarizes the results of our research. All other school districts we reviewed have only one set of rules. Most of them have only one application and one set of instructions. If multiple applications are offered, they are mutually exclusive because each application deals with a specific situation. Code Organization Table 2 Types of Organizations Civic Center Permits Third Party Special Events School Sponsored Special Events S Sports Organizations 2 2 EG Ethnic groups 2 City Cities 1 R Churches/Religious Services 1 1 C Commercial groups 1 6 B Booster Clubs 4 NP Nonprofits 7 1 PTSA PTSA 1 PTA PTA 3 1 SLD Schools/Local Districts 3 Total Number of Applications The Management of Insurance Requirements Page 28 of 38 OA

32 Code Activities Table 3 Types of Activities Civic Center Permits Third Party Special Events School Sponsored Special Events S Sports Games/Competitions 4 4 SEM Seminars 1 M Meetings 1 1 R Religious Services 1 1 C Festivals/Carnivals 7 ECC Early Child Care Programs 1 ASP After-School Programs 2 SC Summer Camps 3 BS Beautification of School Site 1 HS Holiday shows 1 FR Fundraising Events (Walkathon, Car Shows, Animal Shows, etc.) 4 2 P Proms 1 CD Career Days 1 Total Number of Applications a. Civic Center Permits Table 4 Summary of Applications Reviewed by the OIG Organizer Org. Type Activity Act. Type Duration Additional Vendor Rental Fee 1 America Soccer League of S. F. S Soccer Games S Every Sunday for No No Valley 4 months 2 Serenity Wealth Management C Free Information SEM Two hours No No Seminar (Wealth management) 3 Assyrian American Association of Southern California EG S No No Basketball, volleyball, and tennis Any day Big Gym is available from 6-9 PM for four months 4 City of Los Angeles CITY Community M Two hours No No meeting 5 Chatsworth Youth Sports Track S Track & Field S One month No No practice and meets 6 Amigo Associates EG Gymnasium S Two hours No No Adult Basketball 7 Bishop Theological Seminary R Free classes R Two half days No No The Management of Insurance Requirements Page 29 of 38 OA

33 b. School Sponsored Special Events Organizer Org. Outside Rental Activity Act. Type Duration Type Vendor Fee 1 School Sponsored SLD Senior Prom P One evening Yes No FR Yes No 2 School Sponsored SLD Animal show on campus 3 The Los Angeles-Nagoya Sister City Affiliation s Teacher Exchange (No Approval from RM) 4 Horace Mann Panther PTA (NO Approval from RM) 5 School Sponsored (by Local District East) c. Third Party Special Events Organizer 1 Gondolier Booster Club 2 Friends of the Open School 3 Booster Club for Eagle Rock HS 4 Lawrence School PTSA 5 Spirit Child Development Ctr. One and half hours NP Interview M Two evenings N/A N/A PTA Carnival FR One weekend Yes N/A fundraiser SLD Career Day CD One day Yes No Org. Type Activity Act. Type Duration Vendor Admission Charge Rental Fee License B Open Market FR Approximatel Yes Yes No (Fair License y two days Rental) Application per month for 6 months PTA Fall Festival C One day Yes No No License Application B Festival C One weekend Yes Did not Yes (Cost License (Inflatable) specify on Incurred Agreement PTS A C Festival (Haunted House) Play time for preschoolers 6 Sky High Dance C After-school Hip Hop classes 7 Booster Club of Playa Del Rey 8 SoCal Scholastic Fencing League B S Spring fundraiser & festival Fencing tournament 9 Kids Kor C Summer Camp 10 Adair Spanish R Religious Congregation of Service application Only) C Two days Yes Yes No (Direct Cost) ECC ASP C One fiscal year, one hour for two days per week Fridays for two months One afternoon The Management of Insurance Requirements Page 30 of 38 OA No Missing application form Yes No Yes Approved by Leasing; No record of License Agreemen t Yes No N/A (Nonresponsive ) S One day No No N/A (Not approved by RM) SC Three weeks No Yes No (Fair Rental) R One evening No No No (Fair Rental) License Application License Agreement License Application License Application License Application License Application License Application

34 Organizer Org. Type Activity Act. Type Duration Vendor Admission Charge Rental Fee Jehovah Witness 11 Cheer Pros C Cheer Camp SC Two days No Yes No (Fair Rental) 12 Kids Protectors of the Environment 13 Carson High School Booster Club C B After School Structured Program Football Game 14 Enrich LA NP Beautification of school garden area 15 F. Ruth Moore Volunteer Service Organization Inc. NP Christmas Party (Holiday show and toy giveaway) 16 Grand View PTA PTA Sweetheart Dance 17 Planet Bravo C Summer Camp 18 USA Swimming S Swimming competition 19 Dancing Classrooms Los Angeles 20 American Cancer Society Inc. NP Dance competition ASP S One academic year, four days a week, afternoon Every Friday of October and November No Yes No (Fair Rental) Yes Yes No (Direct Cost) License License Application License Application License Application BS One day No No No License Application Informatio n Sheet HS One day No No No License Application FR Half day Yes No No License Application SC Three weeks No Yes No (Fair Rental) S Late No Yes No (Direct afternoon Cost) swimming, Monday through Friday for two months S Two days afternoon and evening NP Relay for Life FR Two-day walking event (Fundraising) 21 Mar Vista PTA PTA Festival C One day event 22 Community NP Fall Festival C One day Partners event 23 Friends of Playa NP C One day Vista event 24 Ricardo Alvarado Oldies Car Club Boo Fest (Classroom Booth Festival) NP Car Show FR One day event License Application License Application No No No License Application Yes No No License Application Yes No No License Application Yes No No License Application Yes No No License Application No No No License Application The Management of Insurance Requirements Page 31 of 38 OA

35 Table 5 Civic Center Act Matrix with Unified School District Peers California School District Terminology Used Access Path to Request for Use of School Facilities Application Form 1 LAUSD Civic Center Permit Home > Office > Facilities Services Division > Asset Management > Leasing & Space Utilization > Civic Center Permits > Civic Center Permit Office Application and instruction for Civic Center Permits Lease Home > Office > Facilities Services Division > Asset Management > Leasing & Application and instruction for 2 San Diego Unified 3 Long Beach Unified 4 Fresno Unified 5 Elk Grove Unified 6 Corona- Norco Unified 7 Santa Ana Unified Agreement Special Events School Sponsored Special Events Civic Center Permits Community Use of School Facilities Space Utilization > License Agreements Home > Office > Facilities Services Division > Asset Management > Leasing & Space Utilization > Filming Permits Home > Office > Office of Risk Management > Risk Finance and Insurance Services > Risk Finance > Civic Center Program > Civic Center Permit Office Home > Office > Office of Risk Management > Risk Finance and Insurance Services > Risk Finance > Special Events Home > Office > Beyond The Bell > Student Auxiliary Services > Civic Center Permit Office Home > Doing Business with San Diego Unified School District > Facilities rentals-civic Center Permits Home > Index > Facility Planning & Management > Purchasing and Contracts > Community Use of School Facilities License Agreements Application for Filming, photography, and filming related parking Request for Approval of Special Events and Guidelines Rental Request Form Two different applications: 1. Recreation Facilities 2. All other permits Request for Use Form Civic Center (use of school facilities) Home > Community > Use of Facilities > Facilities Management & Planning > Civic Center Facilities Use Home > Community > Facilities Use Non-Sports related Sports related Indoor facilities Outdoor facilities Use of Facilities Home > Our Department > Facilities > Use of Facilities Application for Use of District Facilities Civic Permits Home > Community > Doing Business with SAUSD > Facility Rentals > Civic Permits Online application * (See Note 1) 8 Capistrano Unified 9 South San Francisco Unified Civic Permits Home > Facility Use Permits > Civic Permits Online application* (See Note 1) Civic Permits Home > Parent and Community Resources > Facility Use Permits > Civic Permits Online application* (See Note 1) The Management of Insurance Requirements Page 32 of 38 OA

36 *Note 1: We noted that these three school districts used similar computer system applications because their application webpages appear identical. The following description shows the different arrangement each school district used for their Civic Center Permits: Santa Ana Unified Applicants are required to select the type of group it represents: Class 1 SAUSD Schools Only Class 2 Nonprofit Class 3 Community Organizations Class 4 Commercial groups Capistrano Unified Applicants are required to select the type of group it represents: Class A Youth-Serving Nonprofit Class B Nonprofit Class C Commercial Class D School Affiliated/Government In-Kind: In-Kind class A Groups only South San Francisco Unified Applicants are required to select the type of group it represents: Level 1 Education of District Students (such as School athletic teams, school clubs, parent clubs, and school site councils.) Level 2 Non-Curricular Direct Support of District Sites (such as After school programs, Boys & Girls club, Girl Scouts, Boy Scouts, Camp Fire.) Level 3 Youth Recreation (such as Youth Sports Leagues, Summer Camps.) Level 4 Other Nonprofit (such as Adult sports, community groups, Relay for Life, Churches, charitable fundraising.) Level 5 For profit or nonprofit with admission fee (such as Local community organizations that charge participation fees; Concerts; Trainings.) We also reviewed two other large school districts within the United States to see how they process requests for use of their school facilities. Chicago Public Schools (CPS) The request forms to use school facilities appear to be straightforward with all related information shown at one central website: CPS Guide to Renting Property. The access path to request for use of school facilities is as follows: Home > Topics > Facilities > Facilities Real Estate > Temporary Usage Permit/CPS Guide to Renting Property Miami-Dade County Public Schools The request forms to use school facilities appear to be straightforward as well with all related information shown at one central website: Temporary Use of School Building Facilities of the Miami- Dade County Public Schools Temporary Use Agreement. The access path to request for use of school facilities is as follows: Home > Site Search (use of school facilities) > Application for Temporary use of School Building Facilities of the Miami-Dade County Public Schools Temporary Use Agreement The Management of Insurance Requirements Page 33 of 38 OA

37 Appendix 2 Calculation of Number of Special Event Applications Processed by Leasing Folder Name Total Approved by Non- Items Leasing Responsive Cancelled Postponed Revised Extension December January February March April May June We estimated that there were about 1,200 applications for Special Events (from Leasing) for Fiscal Year [( )/7*12=1,207 applications] The Management of Insurance Requirements Page 34 of 38 OA

38 Additional Insured Status Appendix 3 General Information on Certificates of Insurance 11 Some liability policies contain language that includes certain parties automatically as additional insureds without the need for an endorsement. For example, suppose XYZ Inc. s policy states that it covers, as an insured, any person or organization for which XYZ Inc. has agreed in a written contract to include as an insured, but only with respect to XYZ Inc. s ongoing operations for that insured. A party that meets this description should be covered automatically as an additional insured. Certificate is Not an Endorsement Suppose that you have been asked to provide a certificate of liability insurance to XYZ Inc. You have also been asked to include XYZ Inc. as an additional insured under your liability policy. Your agent issues a certificate stating that XYZ Inc. is an additional insured under your policy. However, your agent never sends a request to your insurer asking for an additional insured endorsement. Your policy does not contain any automatic additional insured language. No one notices the error. Six months later XYZ Inc. is sued because of your negligence and demands coverage under your liability policy. Will XYZ be covered as an additional insured based on the statement in the certificate? The answer is probably not. A certificate is not an endorsement. It does not change the policy. If the coverage described in a certificate is not contained in the policy, the coverage is unlikely to be provided. Notice of Cancellation Until 2009, the standard form used to issue certificates of liability insurance contained a policy cancellation provision. This provision stated that if any of the policies listed in the certificate was cancelled before its intended expiration date, the insurer would endeavor to notify the certificate holder a specified number of days in advance. Numerous certificate holders believed that this wording ensured they would be notified if the policyholder s liability policy was cancelled before its expiration date. However, many certificate holders were not notified when policies were cancelled. Why? Insurers followed the cancellation provisions in the policy. Under the standard liability policy, only you (the named insured) receive notice if the policy is cancelled. The current form used for certificates of liability insurance states that if any of the policies listed in the certificate is cancelled mid-term, notice will be delivered in accordance with the policy provisions. In other words, additional insureds will be provided notice of cancellation only if the policy states they will be notified The Management of Insurance Requirements Page 35 of 38 OA

39 Appendix 4 Board Rules Regarding the Use of District Facilities Chapter 6 of the Rules of The Board of Education (Rules) (dated September 8, 2014) sets out directions for the use of school facilities for non-school purposes. The Rules specify that: An application must be filed by the requesting organization for each intended use to the: A. Civic Center Permit Office, Student Auxiliary Services Branch. B. To the Real Estate Section, Facilities Planning and Real Estate Branch, for the lease of any facility as referenced in Board Rule 1302-C USE OF SCHOOL PROPERTY AS CIVIC CENTERS The use of Los Angeles Unified School District property may be granted to members of the public and to organization formed for recreational, educational, political, economic, artistic, charitable, or moral activities of the this District. These persons and/or organizations may engage in supervised recreational activities, or may meet and discuss subjects and questions which pertain to the educational, political, economic, artistic, charitable, or moral activities of the members of the communities. Such use shall be: (Board Rule) 1302-A Without charge, if the group holding the meeting or activity is a non-profit organization, conducts a public meeting, and discusses matters of general or specific interest with the people of the community in which they reside. Such groups shall be granted facility use without charge, when an alternative location is not available, and when such organizations, clubs or associations are organized to promote youth and school activities. Such groups include but are not limited to Girl Scouts, Boy Scouts, Camp Fire Girls, Inc., etc., Parent-Teachers Associations, and School Community Advisory Councils. (Board Rule) 1302-B Computed at direct cost, if the group holding a meeting or activity on District property charges admission or collects a contribution or charges any fee for membership or any other charges for other than the groups enumerated above. However, where the net receipts or not less than 75 percent of the gross receipts, whichever is greater, are expended for the welfare of the pupils of the District or for charitable purposes, as determined by the Civic Center Permit Office prior to the scheduled event, then a reduced direct cost fee will be levied for use of school facilities which would include costs for custodial and/or supervising services. District costs are defined as those generated from the costs for maintenance, supervision, and utilities, as determined by the Board of Education. These costs will be revised effective July 1, annually by the Civic Center Permit Office, based upon information received pertaining to cost of living, salary and utility cost increases from offices responsible for such information in the Business Services Center, Student Auxiliary Services Branch and Budget Division. Managed by the Leasing Section of the Real Estate Branch: (Board Rule) 1302-C states: Computed at fair rental value when the use of the school facilities or grounds is authorized for the purpose specified in Board Rule 1301-C and D, and/or in case of entertainments, The Management of Insurance Requirements Page 36 of 38 OA

40 activities or meetings where admission fees are charged, sales completed or contributions solicited, and where the meeting is exclusive and not open to the general public, a charge shall be levied equal to an amount of the direct costs, as referenced in Section B of this Rule, plus a charge of fair rental value as determined by the Board. Groups falling into this category shall be referred to the Real Estate Branch for lease determination. These costs will be received annually based upon information received pertaining to cost of living, salary and utility cost increases form office responsible for such information in the Business Services Center, Student Auxiliary Services and Budget Division. (Board Rule) 1301-C states: The conduct of religious services for temporary periods, on a one time renewable basis, by any church or religious organization provided the church or religious organization using the school facilities or grounds be charged a fair rental value fee (Board Rule) 1301-D states: Child care or day care programs to provide supervision and activities for children of preschool and elementary school age as established by the Leasing Section of the Real Estate Branch. Conclusion In summary, the Board Rules cited above can be simplified as follows: All applications to use District facilities should be processed by the Civic Center Permit Office, Student Auxiliary Services Branch or the Leasing Section of the Facilities Planning and Real Estate Branch: Civic Center Permit Office All applications except for the ones processed by the Leasing Section. Leasing Section Applications where a fair rental value fee will be charged including religious services (Board Rule 1301-C) and child care or day care programs (Board Rule 1301-D). The Management of Insurance Requirements Page 37 of 38 OA

41 APPENDIX 5 Possible Operation Flowchart Risk Finance and Insurance Branch Stage One: Preliminary Review for Organizer s COI Stage Two: Detailed Review, Assessment, and Approval for Entire Event School Sponsored Applications A Designated unit Preliminary Review* CCPO Detailed Review and Process Permit Principal s Approval Leasing Detailed Review and Process Lease Agreement *A designated unit could preliminarily review all requests for use of a District facility After a preliminary review, the designated unit will determine whether a particular application will be processed by the Leasing and Space Utilization Unit, the Civic Center Permit Office, or the Risk Finance and Insurance Branch based on the Board Rules. The Management of Insurance Requirements Page 38 of 38 OA

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