HomeMy WebLinkAboutMINUTES - 08162005 - C97 TO: BOARD OF SUPERVISORS
Contra
FROM: JOHN SWEETEN County Administrator
osta
• - County
DATE: AUGUST 8, 2005 °SrA-0010
SUBJECT: RESPONSE TO GRAND JURY REPORT NO. 0506, ENTITLED '
"FIX WORKERS' COMPENSATION NOW!"
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
APPROVE response to Grand Jury Report No. 0506, entitled "Fix Workers' Compensation Now!",
and DIRECT the Clerk of the Board to forward the response to the Superior Court no later than
August 23, 2005.
BACKGROUND:
The 2004/2005 Grand Jury filed the above-referenced report on May 26, 2005,which was reviewed
by the Board of Supervisors and subsequently referred to the County Administrator, who prepared the
attached response that clearly specifies:
A. Whether the finding or recommendation is accepted or will be implemented;
B. If a recommendation is accepted, a statement as to who will be responsible for
implementation and a definite target date;
C. A delineation of the constraints if a recommendation is accepted but cannot be implemented
within a six-month period; and
D. The reason for not accepting or adopting a finding recommend on.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMEN ION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
-----------------------------------------&W%u7-�?
---------- - --------------------- --------- -------------------------
ACTION OF BOARD ON_ APPROVE AS RECOMMENDED _ OTHER �C
The Board requested this topic be brought back as a Short Discussion item at a meeting in the near future for a broader
discussion.Public comment provided by Kris Hunt of the Contra Costa Taxras Association.
VOTE OF SUPERVISORS I BY CERTIFY THAT THIS 1S A TRUE
AND CORRECT COPY OF AN ACTION TAKEN
UNANIMOUS(ABSENT ND t%f,- ) AND ENTERED ON THE MINUTES OF THE
BOARD OF SUPERVISORS ON THE DATE
AYES: NOES: SHOWN.
ABSENT: ABSTAIN:
ATTESTED: AUGUST 16,2005
CONTACT: JULIE ENEA(925)335-1077 JOHN SWEETEN,CLERK OF THE BOARD OF
SUPERVISORS AND COUNTY ADMINISTRATOR
CC: PRESIDING JUDGE OF THE GRAND JURY
GRAND JURY FOREMAN
COUNTY ADMINISTRATOR-ADMIN
COUNTY ADMINISTRATOR-BUDGETS
RISK MANAGER
B DEPUTY
BOARD OF SUPERVISORS RESPONSE TO
GRAND JURY REPORT NO. 0506
FIX WORKERS' COMPENSATION NOW!
FINDINGS
Funding
1. The County is self-insured for its Workers' Compensation claims,maintaining excess
coverage with commercial insurance carriers for large claims.
Response: Agree.,
2. The table below contains key financial information with respect to the self-insured program
for Workers' Compensation for the County(including Fire Protection Districts). The source
of the information is the County's Comprehensive Annual Financial Report.
County Workers' Compensation Financial Data
(In thousands)
Fiscal Year Ending June 30
2001 2002 2003 2004
Revenue:
Premiums Charged to Departments
Regular Charges $14,238 $15,779 $22,017 $22,313
Interest Earned/Other 2.690 2,083 1,092 802
Total Revenue $1650928 $17,862 $23,109 $23,115
Expense:
Claims Paid $14,786 $1850175 $23,117 $23,648
Increase in Claims Payable 1,421 10,616 18,388 17.714
Total Claims Expense $1611207 $28,791 $41,505 $41,362
Administrative Expense 2,859 3,037 3,692 41813
Total Expense $19,066 $31,1828 $45,197 $46,175
Profit or(Loss): $(2,138) $(13,966) $(22,088) $(23,060)
Balance Sheet:
Assets $45,658 $42,013 $3850805 $33,046
Liabilities 503696 615017 79,897 979198
Net Assets (Deficit) $(510038) $(19,004) $(41,092) $(64,152)
Response: Agree.
3. At the end of each fiscal year during this period,the County established a Reserve for
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County Response to Grand Jury Report No.0506 Page 2
Benefits and Claims based on the expected cost of incurred benefits and claims, as determined
by an independent actuary.
Response: Agree.
4. Between June 30, 2001, and June 30, 2004, Liabilities (primarily the Reserve for Benefits and
Claims) increased from$50.7 million to $97.2 million, while Assets(primarily Cash and
Investments)to pay them decreased from$45.7 million to $33.0 million. Thus,the net deficit
grew from$5.0 million to $64.2 million.
Response: Agree. The estimated unfunded liability was created primarily due to the passage
of State Assembly Bill(AB)749, which granted large annual increases in benefit payments and
impacted not only Contra Costa County, but all California employers.
Fiscal year 2004/05, however, appears to be a turning point for the County's workers'
compensation program, with several changes both internally and externally. The impact of
State Senate Bill(SB) 899, combined with continued rate increases from AB 749, created a
very dynamic environment The Countyfocused on implementation of the Utilization Review
provisions of SB 899, as these regulations appeared to provide the greatest opportunityfor
medical cost containment with a minimum of administrative overhead This strategy has made
a material difference in the cost of claims not only for fiscal year 2004/05, but on prior year
claims as well. Several positive trends have appeared during the year including continued
declines in claim frequency, improved claim closure rates, and the beginning of a decline in
open claim inventory. In fiscal year 2004/05, the County's annual workers'compensation
payments declined by a substantial 13.6%, the first decline in payments in at least six years.
5. In the Notes to its Basic Financial Statements for each of the last three fiscal years(starting in
2002),the County listed the actions it was taking to reverse the negative trend in net assets
such as: increasing premium charges to departments,continuing an aggressive loss control
program, and conducting further negotiations with represented labor groups.Notwithstanding
these actions (as shown in the table above),between June 30, 2001 and June 30, 2004,there
has been an increase in the net deficit of$59.1 million.
Response: Agree. To address the negative trend, the Board of Supervisors increased premium
charges to County departments by$10 million forfiscal year 2004/05, and retained that
increased charge in the 2005/06 budged Additionally, on April 20, 2004,the Board authorized
the County Administrator to approach the County's labor organizations with an offer to re-
open the labor contracts for the purpose of discussing strategies that could reduce the costs of
the workers'compensation program. Labor representatives declined to re-open the labor
contracts.
As a result of measures that were taken by the County and a 13.6% decrease in payments
issued from the fund,frscal year 2004/05 showed an improvement in the workers
compensation fund balance. The slowdown of payments from the fund was due primarily to a
dramatic reduction in medical payments. After growing more than 68% in three years,
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County Response to Grand Jury Report No.0506 Page 3
medical costs actually fell 23% in fiscal year 2004/05. SB 899, which limited certain types of
physical therapy treatments, appears to have positively affected medical claim payments.
6. For the first nine months of the fiscal year 2004-2005,the County's Workers' Compensation
claim payments were 10%below those of the previous year.
Response: Agree.
7. In the independent actuary's June 30,2004 report to the County, it recommended that the
County strive to fund its incurred benefits and claims at the 80%confidence level or higher.
(A"confidence level" is a measure of the probability that the Workers' Compensation Trust
Fund("'Fund")will have enough money to cover all benefits and claims that have been
incurred).
Response: Agree.
8. In April 20, 2004,the County Administrator advised the Board of Supervisors that the
confidence level had dropped in the previous four years from 90 percent to 35 percent, and
that in fiscal year 2004-2005 a$10 million increase over the then projected $20 million
County contribution was required to elevate the Fund to a 50 percent confidence level. He
also reported that the contribution would need to be increased again in 2005-2006 by a similar
amount.
Response: Agree. Note, however, that on June 28, 2005, the County Administrator advised the
Board of Supervisors that the workers'compensation fund balance had increased from $29
million to $37.8 million during fiscal year 2004/05. In addition, the County's actuary on June
20, 2005,predicted that the expected liabilities would be substantially lower than previously
anticipated. Based upon this new information, the Board of Supervisors determined that an
increase in the County's annual contribution forfLvcal year 2005/06 would not be necessary.
9. As of June 30, 2004,the actuary's estimate of discounted benefits and claims at the 80
percent confidence level (discounted at a 5.5 percent interest rate) was $90.7 million-- $57.7
million more than the assets available to pay these benefits and claims.
Response: Agree. Note, however, that since the June 30, 2004 report, the workers'
compensation fund balance has improved The County's actuary, on June 20, 2005,predicted
that the expected liabilities would be substantially lower than previously anticipated, resulting
in a modest improvement in the fund.
Benefits
10. The County pays enhanced Workers' Compensation benefits in accordance with its union
contracts, Memorandums of Understanding("',MOUs"), greater than required by state statute
for those injured on the job and out of work.No charge is made against the injured
employees' sick leave or vacation accruals for this program. The key components of this are:
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County Response to Grand Jury Report No.0506 Page 4
a. The County's Salary Continuation Program provides, in lieu of the employee's salary,
86% of an employee's regular salary,tax-free, during any period of temporary
disability for up to one year. An example follows, using the County's average monthly
salary of$4,703 and a combined federal and state tax rate of 20%.
Uninjured Employee Employees Injured on the Job
Average Monthly"take- Mandated State Current County
Monthly home"pay Temporary Salary
Earnings Disability Continuation
(gross) Monthly"take- Monthly"take-
home"pay home"pay
$4,703 $3,762 $3,135 $4,045
b. Workers are provided up to three hours paid time-off per day for medical
appointments including chiropractic or physical therapy sessions.
Response: Partially Agree. The salary continuation is paid for 365 days on an aggregate
basis.
11. Since Salary Continuation payments are income tax free,the"take-home"pay for an
employee on Salary Continuation can be greater than the employee's regular"take-home"pay
(e.g. $283 for the average employee as shown in the table),providing a disincentive for the
employee to return to work.
Response: Agree.
12. A Risk Management survey in 2003 reported that County Workers' Compensation benefits
exceeded those of five similar counties in Northern California. In fact,three of those five
counties offered only the state mandated benefits.
Response: Agree.
13. A significant number of the County's MOUs expire on September 30, 2005.
Response: Agree.
Loss Control
14. The best way to reduce Workers' Compensation costs is to prevent injuries in the workplace.
Response: Agree.
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15. In addition to the payments to medical providers and to the injured employee, injuries cause
additional costs from hiring temporary replacements for an injured employee and/or from
overtime.
Response: Agree.
16. Risk Management implemented an aggressive approach to injury prevention by:
• initiating web-based ergonomic training.
• organizing a task force that ergonomically evaluates an employee's work station upon
request.
• capturing, recording, and distributing data on injury frequency and type to departments.
• working with departmental Loss Control Coordinators to evaluate work activities and
work stations for risk of injury,to develop training programs, and to conduct Safety
Meetings that are focused on injury prevention.
• initiating formal training for Loss Control Coordinators.
Response: Agree.
17. In its report to the Board of Supervisors on April 12, 2005, Risk Management estimated that
1200 claims will be filed for the fiscal year ending June 30th-the lowest"claim frequency" in
the past four years.
Response: Agree. A total of 1,233 claims were actually filed in fiscal year 2004/05.
18. The Sheriff s Department has responded to the challenge of injury prevention by designating
a full time Safety Services Manager, by developing its own injury monitoring database
emphasizing injury cause, and by identifying measures to prevent injury reoccurrence.
Response: Agree.
19. Departmental Safety Programs are in various stages of development and efforts to enhance
them are evident.
Response: Agree.
20. Safety is usually not the primary function of the department Loss Control Coordinator. Other
job responsibilities may diminish the effectiveness of the Loss Control Coordinator in
reducing injuries, relegating safety/loss control to a duty to be performed if their primary job
duties permit.
Response: Agree.
21. Sharing capabilities, training, and safety program ideas between departments is infrequent.
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County Response to Grand Jury Report No.0506 Page 6
Response: Disagree. The Loss Control unit has implemented two well-attended forums to
encourage departments to share safety and risk management information.
The first forum is a series of annual Loss Control/Safety Coordinator meetings. The purpose
of these meetings is to provide safety coordinators with information about new regulations, risk
management updates, claim trends, introduce guest speakers, and encourage networking
between safety coordinators. The meetings are approximately four hours long and are
scheduled at least annually, and more frequently if circumstances warrant it. Since fiscal year
2002/03,Loss Control/Safety Coordinator meetings were held on October 3, 2002;April 9 and
October 16, 2003;June 30, 2004; and April 28, 2005.
The second forum is a series of special sessions with the high-and medium-hazard
departments. These departments are identified by their high frequency of claims or substantial
claim costs, as well as high-risk job categories. Departments invited to these sessions include:
Agriculture,Animal Services,Building Inspection, Contra Costa County Fire Protection
District,East Contra Costa Fire Protection District,Employment& Human Services, General
Services,Health Services,Probation,Public Works, and the Office of the Sheriff. Th e p urpose
of these meetings is to identify and concentrate on the sources of work-related injuries for
these departments; discuss safety program issues,particularly issues common to these
departments;provide a focused opportunity for departments to share experiences and
concerns; and brainstorm ideas to improve Risk Management's role in providing expert
assistance. Higher-Risk Department Loss Control/Safety Coordinator meetings were initially
held semiannually but were increased to quarterly for 2005 due to new measures that were
implemented to help control costs related to on-the-job injuries. Since fiscal year 2003/04,
meetings were held on the following dates: December 3, 2003;February 19 and September 14,
2004; and January 7,March 23, and May 26, 2005.
22. A number of Loss Control Coordinators do not use the data available on the Risk
Management"Nature of Injury vs. Cost"report to focus training on the reduction of the most
frequent and most costly injuries for their departments. In fact, some Loss Control
Coordinators were unaware of this data.
Response: Partially disagree. The Loss Control/Safety Coordinator for each department has
been provided historical data showing the department's most frequent and costly injuries.
Over time, the reports have been refined and more data elements have been added,such as lost
time, cause of injury, location of injury,job classification, etc. The spreadsheet report can be
sorted and analyzed on the basis of any data element, e.g., by injury type,job classification,job
location, to better assist departments in recognizing significant injury trends. The County's
Risk Management Division continues to work with departments to improve the utility of the
reports.
The higher-risk department Coordinators have all undergone training on the data and the
trends, and additional training is available for lower-risk departments. Departments can use
the experience data to develop customized training that focuses and attempts to prevent
common workplace injuries.
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For example, the County's Ergonomic Lab was instituted in recognition of the Countywide
trend over the last four years showing that over 50% of injuries are related to repetitive motion
and repetitive stress injuries. These injuries can be caused by any number of reasons
including improper postures, infrequent breaks to relieve muscle fatigue, improperly sized
equipment, inefficient equipment placement or the lack of training. Overall, the County
ergonomics program was established using the injury trend information, and addresses some
of the leading factors that contribute to ergonomic-related injuries at the County. The County
ergonomics program focuses on ergonomic evaluations, web-based training, classroom
training, equipment(as needed), and managing ergonomic equipment costs.
23. The "Nature of Injury vs. Cost"report identifies"injury type" (i.e. back strain), rather than
"injury cause" (i.e. dealing with an unruly prisoner).
Response: Partially disagree. Cause of injury data, as described in the department injury
reports (AK-30s), is provided to high-risk1high-experience departments on a spreadsheet and
discussed at the higher-risk department meetings referenced in the County's response to
Finding No. 21.
24. Risk Management reports show total injuries and costs and don't show information per 100
employees, making it difficult to compare different sized departments.
Response: Agree.
Claims
25. March, 2005 Workers' Compensation claims audit conducted by an independent Workers'
Compensation consultant reflected overall ". . . excellent performance results"by the Risk
Management Claims Department.
Response: Agree.
26. Claim adjusters in Risk Management are the only employees authorized to contact the
employee's physician to maintain compliance with the Health Information Protection Act.
Response: Agree.
27. Managers are not always aware of the expected duration for which an injured employee may
be absent from work with a work related injury, creating difficulty for managers to manage
their workload.
Response: Agree. The duration of disability is determined by the physician's work
restrictions. These restrictions may affect the length of disability during the course of medical
treatment. The County concurs that managers face a difficult situation because the Health
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Information Protection Act prohibits management from receiving any medical information
other than the actual work restrictions.
28. Departmental contact with an injured employee may reduce the length of time that an
employee is off work and make the transition back to work easier.
Response: Agree, with the clarification that the employee's physician determines the length of
time an employee is off work. Management contact and concern may improve employee
morale and assist in transitioning the employee back to work.
29. Contact between department supervisors and injured County employees is often infrequent or,
at times,nonexistent.
Response: Agree.
30. The County has a"limited duty"Return-to-Work program which allows an injured
employee to return to work for as little as two hours per day.
Response: Agree.
31. On April 20, 2004, the Board of Supervisors considered and accepted the report on Workers'
Compensation costs from the County Administrator recommending to the Board of
Supervisors that he be directed to work with employee organizations to implement a modified
Return-To-Work program.
Response: Agree. The County Administrator has authorized implementation of the "Our
System"Return-to-Work Program on a pilot basis with the Health Services,Employment and
Human Services, and Sheriffs departments—the three largest departments in the County. If
the program demonstrates the anticipated savings, then it will be implemented on a County-
wide basis.
CONCLUSIONS
While not a requirement, the County provides the following comments to some of the conclusions
of the Grand Jury:
1. Even with recent improvement in claim experience, and the $20 million additional
contribution projected for fiscal year 2005-2006 made,the Trust Fund will still be
significantly under funded.
Response: Agree. However,fiscal year 2004/05 cost data indicates that the rate of growth in
workers'compensation costs is decreasing. This decrease, when combined with the increases
in County contribution to the workers'compensation fund in fiscal years 2004/05 and 2005/06,
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County Response to Grand Jury Report No.0506, Page 9
is projected to close the gap between fund assets and claims exposure by $3.4 million in fiscal
year 2005106.
6. Since many departments conduct training without referring to historical loss statistics and
virtually all conduct training without cause of injury data, department safety training may not
always be focused on preventing the injuries that have been the most frequent and/or costly.
Response: Reference the County's response to Finding No. 22.
"COMMENDATIONS
Coun&Comment: The Grand Jury has made many recommendations worthy of further
consideration by the County. The Board of Supervisors notes, however, that some of the Grand
Jury's recommendations pertain to issues which are the subject of the County's current
negotiations with employee organizations. While the Board makes every effort to provide direct
and complete responses to the Grand Jury's recommendations, it is limited in its ability to respond
to those recommendations before concluding its obligations under the Meyers-Milias-Brown Act
("IMMBA'). In order to bargain in good faith under the MMBA, the County may not take a
specific position on matters that are or may be the subject of labor negotiations before concluding
its bargaining obligations. In those instances, the County has indicated in its responses that it may
not directly respond to the Grand Jury's recommendation.
The 2004-2005 Contra Costa County Grand Jury recommends*
1. Establish a target for the funding level of the Workers' Compensation Trust Fund of not less
than the 80%"confidence level"recommended by the independent actuary.
Res onse: Will not be implemented because it is not reasonable or warranted. An 80%
IMP
confidence level is unattainable given the current State and County fiscal circumstances.
The concept of"confidence level"recognizes that an agency does not have sufficient fiscal
assets in hand to coverall known and predicted liabilities at a particular point in time. The
ideal confidence level Is 100%. However, very few, fany,public agencies maintain a 100%
confidence level for their workers'compensation programs. The amount of funds allocated to
pay current and future workers'compensation costs is a policy issue that must be determined
by the Board of Supervisors annually in the context of all of the program demands in the
County Budget.
2. Develop a specific plan, including ongoing monitoring steps and a timetable,to increase the
Fund to the established target(see Recommendation 1)by June 30, 2008.
Response: Has been implemented. The Board of Supervisors approved a plan in fiscal year
2004105 to increase the County's contribution (via departmental payments) to the workers'
compensation fund by $10 million over the $20 million it was contributing at the time. The
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higher contribution was retained for the fiscal year 2005/06 budget The higher contribution
in combination with the decelerating growth in claims costs is helping to close the gap between
fund assets and claims exposures.
3. Eliminate the County's Salary Continuation Program from future MOUs.
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives as
required by State law.
4. Eliminate the County's three-hour medical appointment benefit from future MOUs.
Response: The County may not respond because to do so would prevent the Board of
Supervisors from engaging in "good faith negotiations"with employee representatives as
required by State law.
5. Implement a new Return-to-Work program for injured employees as follows:
a. Evaluate existing jobs and tasks to develop listings of j ob tasks that can be linked
with those activities not restricted by an injured employee's physician.
b. Institute a Return-to-Work program that utilizes the above listings and requires a
minimum of four hours per day commitment by the injured employee.
C. Test and evaluate the proposed Return-to-Work program in selected departments;
modify it as appropriate; expand it to all County departments.
Response: Has been implemented. Reference the County's response to Finding No.
31. The County Administrator authorized the implementation of the "Our System"
Return-to-Work Program on a pilot basis in May 2005.
6. Reduce claims costs by accelerating the return to work of injured employees though improved
communication as follows:
a. Require work unit managers to maintain regular communication with injured
employees to maintain rapport and to keep the injured employee informed of
workplace activities and developments.
Response: Has not been implemented, but will be implemented in the next six months.
Managers should keep in closer contact with injured employees to maintain employee
morale and encourage their return to work.
b. Implement standards for timely communication between the claims adjusters and each
of the following: department managers, injured employees, injured employees'
physicians, and Loss Control Coordinators.
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Response: Has not been implemented, but will be implemented as the law permits. The
Health Insurance Portability and Accountability Act(HIPAA)prohibits managers
from contacting the employee physician for any information other than to determine
work restrictions. It is the practice of the County to have Risk Management adjusters
contact physicians for work restrictions to avoid HIPAA violations.
7. Enhance the current momentum in reducing injuries and future claims as follows:
a. Require each department to establish measurable goals for the reduction of injuries
and costs.
b. Evaluate the cost-benefit tradeoffs of designating a full time Loss Control Coordinator
in larger departments.
Response: With regard to (a) and(b), the recommendations require further analysis.
The Risk Management Division will study trends in the frequency and cost of workers'
compensation claims by department, in conjunction with the time and effort spent to
train current loss control coordinators, to determine the cost effectiveness of assigning
one or more full time loss control coordinators in large departments. Additional costs
for establishing full time loss control coordinators (b) would need to be charged to the
workers'compensation fund. Identification of those costs would help to determine the
minimum cost reduction targets (a) that must be achieved to justify the additional costs
of full time department loss control coordinators. This analysis will be completed by
November 1,2005.
C. Expand loss data already provided to County departments to include cause of injury
and injury frequency per 100 employees.
Response: Has not been implemented, but will be implemented within 90 days. The
County currently provides data on the cause of injury and continues to refine data
made available in periodic reports. The Risk Management Division will develop injury
frequency data per 100 employees and provide that information to departments on a
regular basis.
d. Provide periodic reports so that the County Administrator, department managers, and
Risk Management can compare departments and monitor how each department is
meeting its goals.
Response: Has not been implemented, but will be implemented within 90 days. Loss
experience reports are currently provided to departmental loss control coordinators.
Countywide loss experience reports summarized by department will be provided to
department heads and the County Administrator by the Risk Manager.
e. Continue formal training for all Loss Control Coordinators to:
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• bring uniformity to the Loss Control Program.
• develop loss control training that is focused on those areas that have the greatest
impact on reducing injury frequency and costs.
f. Develop a forum for Loss Control Coordinators to share"best practices" and remain
abreast of safety resources available.
Response: With regard to (e) and(f), the recommendations have been implemented.
See the County's response to Finding No. 21 for a summary of implemented actions.
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