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State of Arizona Office of the Auditor General PERFORMANCE AUDIT Report to the Arizona Legislature By Debra K. Davenport Auditor General June 2000 Report No. 00-7 DEPARTMENT OF PUBLIC SAFETY AVIATION SECTION The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. His mission is to provide independent and impar-tial information and specific recommendations to improve the operations of state and local government entities. To this end, he provides financial audits and accounting services to the state and political subdivisions and performance audits of state agencies and the programs they administer. The Joint Legislative Audit Committee Representative Roberta L. Voss, Chairman Senator Tom Smith, Vice-Chairman Representative Robert Burns Senator Keith Bee Representative Ken Cheuvront Senator Herb Guenther Representative Andy Nichols Senator Darden Hamilton Representative Barry Wong Senator Pete Rios Representative Jeff Groscost Senator Brenda Burns (ex-officio) (ex-officio) Audit Staff Dot Reinhard—Manager and Contact Person (602) 553-0333 Michele Diamond—Audit Senior Tanya Nieri—Staff Copies of the Auditor General’s reports are free. You may request them by contacting us at: Office of the Auditor General 2910 N. 44th Street, Suite 410 Phoenix, AZ 85018 (602) 553-0333 Additionally, many of our reports can be found in electronic format at: www.auditorgen.state.az.us 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL June 2, 2000 Members of the Legislature The Honorable Jane Dee Hull, Governor Mr. Dennis Garrett, Director Department of Public Safety Transmitted herewith is a report of the Auditor General, A Performance Audit of the Department of Public Safety’s Aviation Section. This report is in response to a June 16, 1999, resolution of the Joint Legislative Audit Committee. The performance audit was conducted as part of the Sunset review set forth in A.R.S. §41-2951 et seq. I am also transmitting a copy of the Report Highlights to provide a quick summary for your convenience. This is the first in a series of reports to be issued on the Department of Public Safety. As outlined in its response, the agency agrees with most of the findings and will implement, or implement using a different method, nine of the ten recommendations. However, it disagrees with the recommendation that the Aviation Section rewrite its mission statement to change its role in the air ambulance industry to that of a backup provider. My staff and I will be pleased to discuss or clarify items in the report. This report will be released to the public on June 5, 2000. Sincerely, Debbie Davenport Auditor General Enclosure OFFICE OF THE AUDITOR GENERAL Program Fact Sheet Department of Public Safety Aviation Section (DPSA) Services: DPSA is one of 23 programs within DPS. It offers the following aviation services: 1) Air transport—DPSA provides transportation and protection to the Governor and trans-portation to Department staff and other state agency staff; 2) Air ambulance—DPSA pro-vides emergency medical services and air medical transport; 3) Search and rescue—DPSA performs technical rescue and search-and-rescue support service operations for overdue, lost, or injured parties; and 4) Law enforcement—DPSA supports federal, state, and local law enforcement agencies with activities such as aerial pursuits and surveillance. Program Revenue: $4.6 million (fiscal year 2000) $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 1998 1999 2000 General Fund Intergovernmental Program Goals (Fiscal Year 1999-2001): 1. To enhance public safety in Arizona through enhanced air rescue operations and im-proved first-responder emergency medical services. 2. To improve support to the Department and to other criminal justice agencies through enhanced air support aerial surveillance op-erations. 3. To improve the subprogram’s effectiveness through replacement of obsolete equipment and acquisition and allocation of appropriate staffing resources. 4. To improve the subprogram’s administrative effectiveness through automation. Personnel: 54 full-time staff (fiscal year 2000) Paramedics (19) Administrative (4) Pilots (26) Mechanics (5) $3.9 $5.2 $4.6 Facilities: 5 locations, 0 are state-owned. Facilities: 5 locations, 0 owned. Insert State Map Here Central Air Rescue (North Phoenix) Administration and Support (Phoenix, Sky Harbor International Airport) Northern Air Rescue (Flagstaff) Western Air Rescue (Kingman) Southern Air Rescue (Tucson) OFFICE OF THE AUDITOR GENERAL Adequacy of Performance Measures: DPSA’s four goals (see the front of this page) appear reasonably aligned with its mission. To help it accomplish these goals, DPSA has es-tablished 7 objectives and 33 performance measures. However, our review of its perform-ance measures identified the following prob-lems. n DPSA’s performance measures primarily focus on short-term, often one-time activi-ties rather than focusing on its ongoing services. For example, DPSA has estab-lished performance measures to develop legislative proposals for additional em-ployees and aircraft. n DPSA has not developed performance measures to cover all four of its key service areas (air transport, air ambulance, search and rescue, and law enforcement). n DPSA’s measures are not well defined. DPSA has incorrectly categorized several measures as outcome measures. These measures do not address the program’s impacts or benefits. In addition, DPSA’s quality measures do not assess customers’ and stakeholders’ satisfaction with serv-ices. n DPSA’s measures do not include efficiency measures. Efficiency measures assess pro-ductivity and the cost of providing prod-ucts and services such as the cost-per-aircraft service provided. Equipment: 9 aircraft 5 single-engine helicop-ters, configured as air ambulances. Estimated replacement value is $2 million each. 2 single-engine air-planes, seating 3 to 4 passengers each. Esti-mated replacement value is $170,000 to $280,000 each. 2 twin-engine airplanes, seating 9 to 10 passen-gers each. Estimated replacement value is $2 to $4 million each. i OFFICE OF THE AUDITOR GENERAL SUMMARY The Office of the Auditor General has conducted a performance audit of the Department of Public Safety’s Aviation Section (DPSA) as part of a Sunset review of the agency. This audit was conducted pursuant to a June 16, 1999, resolution of the Joint Legislative Audit Committee. This audit was conducted under the authority vested in the Auditor General by Arizona Revised Statutes §41-2951 et seq. This is the first of several audits of the Department of Public Safety. The Department of Public Safety’s Aviation Section (DPSA) is part of the Highway Patrol Division. DPSA employs 52 full-time staff and provides a variety of airplane and helicopter services from several locations across the State. The Aviation Section’s administrative office and airplane (or fixed-wing) services are located in Phoenix at the Sky Harbor International Airport. Us-ing four fixed-wing airplanes, DPSA primarily provides trans-portation and protection for the Governor and transportation to Department staff and other state agency staff, and it also assists in law enforcement activities when needed. DPSA’s helicopter services are provided from four regional Air Rescue Units: Cen-tral Air Rescue in Phoenix, Northern Air Rescue in Flagstaff, Southern Air Rescue in Tucson, and Western Air Rescue in Kingman. A pilot and paramedic are always on duty at each of the four units to provide air ambulance (highway automobile accidents), search-and-rescue (missing hikers), or law enforce-ment services (aerial pursuits, surveillance, and tactical support). DPSA Should Serve As Backup Air Ambulance Provider to the Private Sector (See pages 9 through 17) The expansion of the private air ambulance industry has reduced the need for DPSA to provide air ambulance services. Although Summary ii OFFICE OF THE AUDITOR GENERAL DPSA was initially the sole provider of air ambulance services, today there are also 12 private providers, operating 28 helicopter air ambulances in the State, and several additional private pro-viders from California, Nevada, and New Mexico who respond to calls along Arizona’s borders. The private sector not only of-fers air ambulance services similar to DPSA’s, but, in many cases, it can provide more enhanced services than DPSA can. For ex-ample, 75 percent of private providers in Arizona use helicopters that are more powerful than DPSA’s helicopters, allowing them to carry greater patient loads. Private providers also regularly staff their ambulance crews with two medical personnel, usually a paramedic and flight nurse. Only two of DPSA’s four air rescue units regularly staff their crews with two medical personnel, and only one of those two units utilizes a flight nurse. Despite private air ambulance industry growth, DPSA continues to operate as a primary provider, offering costly services that private air ambulance providers could provide. Several factors encourage DPSA to continue operating as a primary provider. n First, although DPSA has a policy intended to discourage competition with the private sector, the policy does not effec-tively discourage DPSA from taking calls the private sector could take. n Second, emergency-response dispatching practices favor DPSA. n Finally, DPSA has the ability to respond to an accident with-out being formally dispatched or without confirming the need for an air ambulance. When utilized, this practice gives DPSA a competitive advantage over private providers be-cause when an air ambulance is needed, DPSA is more likely to be closer to the scene. However, this practice can be costly when an air ambulance is not needed. During fiscal year 1999, 43 percent of DPSA’s emergency medical missions ended in cancellation because an air ambulance was not needed. Other states’ police agencies and private air ambu-lance providers generally do not proceed to an accident without formal dispatch and consequently reported much lower cancellation rates. Summary iii OFFICE OF THE AUDITOR GENERAL Although DPSA defends its continued provision of air ambu-lance services as a primary provider, its services are costly. The Air Rescue Units cost about $1,081 per flight hour to operate and maintain. Last year, DPSA flew 678 hours on medical missions, costing the State about $733,000. Further, DPSA does not recu-perate any of these costs because, unlike the private sector, DPSA does not charge for its air ambulance services. To ensure DPSA’s resources are used where needed most, DPSA should act as a backup air ambulance provider, providing serv-ices only when the private sector is unavailable or unable to re-spond in a timely manner. By serving as backup provider, DPSA can focus its efforts on providing search-and-rescue and law enforcement services because many entities, such as county sheriff’s offices, rely on DPSA to provide aerial support for these services. DPSA Needs More Powerful Helicopters to Conduct Some Missions (See pages 19 through 24) DPSA uses helicopters primarily to conduct air ambulance, search-and-rescue, and law enforcement missions. Its fiscal year 1999 fleet consisted of four single-engine Bell 206 helicopters. Historically, these helicopters have not been powerful enough to conduct some of DPSA’s missions safely and efficiently. As early as 1989, an aviation consultant found DPSA’s helicopters to be underpowered. DPSA continues to struggle with these power limitations by sometimes leaving behind equipment, staff, and fuel to accommodate patient loads. However, other entities, such as the Maryland State Police and private sector companies, which offer similar services, use more powerful helicopters. In fact, 75 percent of Arizona’s private air ambulance providers use heli-copters that are more powerful than DPSA’s helicopters. To make its fleet of helicopters safe and efficient, DPSA will need additional funding to purchase up to three more powerful heli-copters. Although DPSA recently purchased or is in the process of purchasing two new, more powerful single-engine helicopters (Bell 407s) to replace some of its current fleet, additional replace-ment helicopters will be needed. Because the cost of replacing and Summary iv OFFICE OF THE AUDITOR GENERAL upgrading its helicopters will be significant, DPSA will need to seek an increase in its General Fund appropriation to address any equipment replacement needs. However, DPSA should continue to research the feasibility of using other monies to help offset a portion of its helicopter re-placement costs. For example, DPSA used Racketeering Influ-enced Corrupt Organization (RICO) monies to offset the costs of an airplane in the past. The Department is eligible to receive RICO monies when it participates in investigations of state or federal racketeering crimes that result in forfeitures. However, relying on RICO monies as a primary funding source would be difficult since there are restrictive guidelines for their use and the amount of monies available from year to year varies. DPSA Not Charging Enough to Support Air Transport Activities (See pages 25 through 30) DPSA does not charge enough for its air transport services to cover the cost of providing this service to other governmental entities. DPSA’s cost-recovery model—its method for determining what to charge for the air transport services it provides—captures only a small percentage of the costs associated with providing this service. DPSA’s model includes only the costs for pilot overtime, maintenance (labor and parts) and fuel. In contrast, the cost-recovery model that federal agencies use includes many more categories, such as crew costs (salaries, benefits, training, etc.), insurance, and depreciation. If DPSA were to compute its rates using the federal model developed by the United States Office of Management and Budget (OMB), its rates would be much higher and its reimbursements would almost triple. Specifically, in fiscal year 1999, using full-cost rates, DPSA would have received $111,085 instead of only $37,261. Although problems with DPSA’s cost model were identified as early as 1992, DPSA has not significantly altered its model to more fully recover costs. To ensure that it charges sufficiently to cover its air transport expenses, DPSA should adopt a more comprehen-sive cost model that includes all the elements in the OMB’s full cost-recovery model. v OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS Page Introduction and Background ......................... 1 Finding I: DPSA Should Serve As Backup Air Ambulance Provider to the Private Sector .................................... 9 The Need for DPSA Air Ambulance Services Has Decreased ................................................................ 9 Despite Industry Growth, DPSA Continues As a Primary Provider............................................................ 10 Serving As a Backup Provider Would Free up Resources for Other Missions ........................... 13 Recommendations .......................................................... 17 Finding II: DPSA Needs More Powerful Helicopters to Conduct Some Missions ............................. 19 Underpowered Helicopters a Continual Problem for DPSA......................................... 19 Additional Resources Needed to Replace Old, Underpowered Helicopters ........................................... 22 Recommendations .......................................................... 24 Table of Contents vi OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS (cont’d) Page Finding III: DPSA Not Charging Enough to Support Air Transport Activities...................................... 25 DPSA Can Charge for Many Air Transport Services ......................................... 25 DPSA Cost-Recovery Model Does Not Reflect True Costs .......................................... 25 DPSA Needs to Adopt Better Model.................................................................... 29 Recommendations .......................................................... 30 Agency Response Photos Photo 1 DPSA’s Twin-engine King Air E-90................... 2 Photo 2 Single-engine Bell 206 helicopter in maintenance hangar ....................................... 20 Photo 3 Cessna 210 sometimes used for air transport flights................................................... 26 Table of Contents vii OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS (concl’d) Page Tables and Figures Table 1 Department of Public Safety— Aviation Section Statement of Revenues, Expenditures, and Changes in Fund Balance Years Ended or Ending June 30, 1998, 1999, and 2000 (Unaudited)......................................................... 5 Table 2 Department of Public Safety— Aviation Section Summary of Age and Flight Hours for Bell 206 Helicopters As of December 1, 1999 ...................................... 23 Table 3 Department of Public Safety— Aviation Section The United States Office of Management and Budget’s Full Cost-Recovery Model As of May 22, 1992.............................................. 27 Figure 1 Department of Public Safety— Aviation Section Comparison of Primary Helicopter Missions Flown by Type and Regional Unit Year Ended June 30, 1999................................... 4 Figure 2 Department of Public Safety— Aviation Section Comparison of Department’s Hourly Aircraft Rates to Full-Cost Hourly Rates Year Ended June 30, 1999................................... 28 viii OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 1 OFFICE OF THE AUDITOR GENERAL INTRODUCTION AND BACKGROUND The Office of the Auditor General has conducted a performance audit of the Department of Public Safety’s Aviation Section as part of a Sunset review of the agency. This audit was conducted pursuant to a June 16, 1999, resolution of the Joint Legislative Audit Committee. This audit was conducted under the authority vested in the Auditor General by Arizona Revised Statutes §§41- 2951 through 41-2958. This is the first of several audits of the Department of Public Safety. Aviation Section Provides a Variety of Services The Department of Public Safety Aviation Section (DPSA) is part of the Highway Patrol Division, which enforces Arizona’s traffic and criminal laws and federal commercial vehicle regulations on state and federal highways.1 DPSA provides a variety of services using both airplanes and helicopters. These services include the following: n Air transport—The Aviation Section uses its airplanes to help the Department fulfill its statutory mandate to provide transportation and protection for the Governor. DPSA also transports Department staff and makes its planes available to other state agencies through intergovernmental agreements for air charter services. n Air ambulance—Once the only air ambulance service in the State, DPSA still provides this service, administering on-site medical help and using its helicopters to transport sick or in-jured people for treatment. 1 The Aviation Section was transferred from the Criminal Justice Support Division to the Highway Patrol Division effective April 1, 2000. Introduction and Background 2 OFFICE OF THE AUDITOR GENERAL n Search and rescue—These activities involve searching for downed airplanes, assisting stranded boaters, or rescuing injured hikers. Numerous first-responder agencies such as fire departments and county sheriff’s offices rely on DPSA for technical rescue and search-and-rescue assistance. n Law enforcement—DPSA supports federal, state, and local law enforcement agencies with activities such as aerial pur-suits and surveillance. Organization, Equipment, and Staffing DPSA employs 54 full-time staff and provides its airplane and helicopter services from several locations across the State. n Administration and airplane services (9 FTEs)—The Aviation Section’s administrative office and airplane services are located in Phoenix at the Sky Harbor International Air-port. A commander, assisted by two support staff, adminis-ters the program. Airplane services includes three pilots, two mechanics, and a supply specialist (vacant). They operate and maintain four airplanes—two single-engine planes ca-pable of carrying a pilot and three or four passengers, and two twin-engine aircraft capable of carrying nine to ten pas- Photo 1: DPSA’s Twin-engine King Air E-90 DPSA uses this King Air for executive air transport. Introduction and Background 3 OFFICE OF THE AUDITOR GENERAL sengers in addition to the pilots. During fiscal year 1999, the airplane crew flew 368 flights. The majority of these flights (57 percent) provided transportation to the Governor and her staff, Department of Public Safety officials, or other state agency personnel. The airplane crew also participated in some law enforcement missions, such as aerial surveillance of Arizona’s highways and transporting investigators to crime scenes. n Helicopter services (45 FTEs)—DPSA’s helicopter services are provided from four regional Air Rescue Units: Central Air Rescue in Phoenix, Northern Air Rescue in Flagstaff, Southern Air Rescue in Tucson, and Western Air Rescue in Kingman. The Air Rescue Units include 23 pilots, 19 para-medics, and 3 mechanics. A pilot and paramedic are always on duty at each of the four units to provide air ambulance, search-and-rescue, or law enforcement services. DPSA has one single-engine helicopter stationed at each of the four air rescue units. When a unit’s helicopter is undergoing mainte-nance or repair work, another unit will cover its missions. DPSA’s fifth helicopter is being completed with the necessary equipment. When completed, it will allow one of the existing helicopters to serve as a spare for use when a unit’s helicopter is undergoing maintenance. The four rescue units flew 3,284 missions during fiscal year 1999.1 Figure 1 (see page 4) depicts the top three helicopter mission categories (air ambulance, law enforcement, and search and rescue) by regional unit. These missions account for about two-thirds (or 2,260) of DPSA’s 3,284 helicopter missions flown in fiscal year 1999. The remaining missions encompass flights for training, maintenance, public education, and other miscellaneous duties. As illustrated in this chart, the number and type of mis-sions performed varies by regional unit. For example, the Central Air Rescue unit performed the most law enforcement missions (300 of 848) and the Western Air Rescue has the most air ambu-lance missions (436 of 990) during fiscal year 1999. 1 Although DPSA helicopter mission logs show that 3,673 missions were requested, only 3,284 of these missions have flight time because some were canceled before departure. Introduction and Background 4 OFFICE OF THE AUDITOR GENERAL Budget DPSA received $5.1 million in General Fund monies for fiscal year 1999 (see Table 1, page 5). The program expends the major-ity of its monies on salaries. During fiscal year 1999, the program received $1,050,000 toward the purchase of a new helicopter, and during fiscal year 2000, the program received $600,000 for the first of three lease payments on a second new helicopter. Both helicopters cost approximately $1.5 million after DPSA was credited about $500,000 each for trade-in helicopters. DPSA also bills other state agencies for air charter services (see Finding III, pages 25 through 30), and is eligible to receive reim-bursement for search-and-rescue operations. During fiscal year 1999, the Department received $94,828 for its air charter and search-and-rescue services. Figure 1 Department of Public Safety—Aviation Section Comparison of Primary Helicopter Missions Flown by Type and Regional Unit Year Ended June 30, 1999 Source: Auditor General staff analysis of mission data from the Aviation Section’s Alpha IV rotary-wing database for the year ended June 30, 1999. 140 300 114 287 126 82 127 259 147 436 163 79 0 50 100 150 200 250 300 350 400 450 Number of Missions Flown Central Northern Southern Western Air Ambulance Law Enforcement Search and Rescue Introduction and Background 5 OFFICE OF THE AUDITOR GENERAL Audit Scope and Methodology The audit focused on DPSA’s need to provide air ambulance services and its ability to perform its missions safely and effi-ciently. Competition with private-sector air ambulance operators Table 1 Department of Public Safety—Aviation Section Statement of Revenues, Expenditures, and Changes in Fund Balance 1 Years Ended or Ending June 30, 1998, 1999, and 2000 (Unaudited) 1998 1999 2000 (Actual) (Actual) (Estimated) Revenues: State General Fund appropriations 2 $3,740,200 $5,114,100 $4,514,300 Intergovernmental 149,388 95,671 100,000 Total revenues 3,889,588 5,209,771 4,614,300 Expenditures: Personal services 2,431,778 2,452,387 2,533,200 Employee related 460,053 476,899 506,600 Professional and outside services 45,010 29,623 18,500 Travel, in-state 19,993 20,846 17,500 Travel, out-of-state 14,377 38,037 8,500 Aid to organizations 180 Other operating 909,439 835,732 930,000 Equipment 2 8,204 1,017,297 820,000 Total expenditures 3,889,034 4,870,821 4,834,300 Excess of revenues over (under) expenditures 554 338,950 (220,000) Reversions to the State General Fund 13 118,950 Excess of revenues over (under) expenditures and reversions to the State General Fund 541 220,000 (220,000) Fund balance (deficit), beginning of year (541) 220,000 Fund balance, end of year $ 0 $ 220,000 $ 0 1 The Department calculated the Aviation Section’s revenues and expenditures by allocating revenues and expenditures recorded in the Department’s Joint Account. The Joint Account is a commingled account primarily funded from State General Fund appropriations and other appropriated monies, such as Criminal Justice Enhancement monies. 2 The Department received appropriations of $1,050,000 in 1999 and $600,000 in 2000 toward the purchase of additional helicopters, including necessary modifications. The helicopter payments are included in the equipment expenditures. In addition, the estimated equipment expenditures in 2000 include $220,000 to complete necessary modifications to one of the new helicopters. Source: Auditor General staff analysis of financial information provided by the Department of Public Safety. Introduction and Background 6 OFFICE OF THE AUDITOR GENERAL has been noted in previous reports discussing the Aviation Sec-tion. 1 However, audit work was completed to assess the ongoing need for DPSA to provide air ambulance services and included such steps as the following: n Interviewing private air ambulance providers and emer-gency response agencies such as fire departments to assess DPSA’s current role and the need for DPSA’s continued in-volvement. n Contacting private providers to determine the stability of the industry, future availability of their services, and coverage throughout the State. n Reviewing helicopter mission logs from DPSA’s Central and Northern Air Rescue Units and the State’s four major private providers to determine whether the private sector could have responded to the air ambulance calls taken by these two DPSA units during August and September 1999.2 n Surveying 22 other states to determine if their state police agencies provided aviation services similar to DPSA’s.3 Audit work conducted to assess the safety and efficiency of DPSA’s missions included the following: 1 Office of the Auditor General (Report No. 91-2), April 1991 and the State of Arizona’s Project S.L.I.M. Report on the Department of Public Safety, July 1992. 2 The analysis excluded two DPSA air ambulance missions because these missions were not included in its database even though they were re-corded on its mission logs. 3 Eighteen states were selected because, similar to Arizona, they have large amounts of public lands or natural areas over which services must be provided: Alaska, California, Colorado, Florida, Idaho, Illinois, Maine, Maryland, Montana, Nevada, New Mexico, North Carolina, Oregon, Tennessee, Texas, Utah, Washington, and Wyoming. Four additional states were selected based on referrals from interview sources because they had state police agencies that provided air ambulance services: Delaware, New Jersey, New York, and Virginia. Introduction and Background 7 OFFICE OF THE AUDITOR GENERAL n Reviewing regulations promulgated by the Federal Aviation Administration (FAA) and interviewing FAA personnel to determine the safety and operating standards that apply to DPSA. n Reviewing complaints and insurance claims against DPSA. n Comparing DPSA’s method for setting reimbursement rates for its air charter services with a cost model developed by the U.S. Office of Management and Budget and used by federal agencies to determine what costs to recover. n Surveying county officials to assess their use of DPSA for search-and-rescue missions. n Reviewing the type of helicopters used by other agencies providing similar services to obtain a range of equipment and costs associated with emergency missions. This report presents findings and recommendations in three areas: n The need for DPSA to serve as a backup provider for air am-bulance services, providing services only when private air ambulance companies are unavailable or unable to provide timely service. n The need for DPSA to replace some of its helicopter fleet to ensure that it can safely and efficiently perform its missions. n The need for DPSA to improve its cost model for its air transport services. The audit was conducted in accordance with government auditing standards. The Auditor General and staff express appreciation to the Di-rector and staff of the Arizona Department of Public Safety for their cooperation and assistance during the course of the audit. 8 OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 9 OFFICE OF THE AUDITOR GENERAL FINDING I DPSA SHOULD SERVE AS BACKUP AIR AMBULANCE PROVIDER TO THE PRIVATE SECTOR DPSA is no longer needed as a primary air ambulance provider in many parts of the State. Because the private air ambulance industry has grown steadily in recent years, the need for DPSA to provide air ambulance services has decreased. Currently, the private sector could handle many of the air ambulance missions DPSA takes. To ensure that DPSA meets the State’s current needs, it should serve as a backup to private air ambulance pro-viders, providing service only when the private sector is un-available or unable to respond timely. By providing backup air ambulance services only, DPSA will be able to expand its search-and- rescue and law enforcement services. The Need for DPSA Air Ambulance Services Has Decreased Although DPSA was initially the sole provider of air ambulance services in the State, the need for its services has decreased as the private air ambulance industry has expanded. Air ambulance services are considered to be a vital part of Arizona’s emergency response system. They can improve the chances of survival, especially in rural or remote areas, by providing patients with rapid advanced medical treatment and transport. In 1972, when DPSA began offering air ambulance services, it was the sole pro-vider of these services and had only two helicopters to cover the State. Today, however, in addition to DPSA, there are 12 private air ambulance providers, operating 28 helicopter air ambulances. In addition, several private providers from California, Nevada, and New Mexico respond to calls in Arizona along state borders. Together, these services cover most parts of the State. In addition, industry growth in recent years has been particularly significant. Finding I 10 OFFICE OF THE AUDITOR GENERAL For example, among the four major private providers alone, the number of helicopter air ambulances in operation has grown 47 percent since 1997. The private sector not only offers air ambulance services similar to DPSA’s; in many cases, it can also provide more enhanced services than DPSA can. For example, 75 percent of private pro-viders in Arizona use helicopters that are more powerful than DPSA’s helicopters. Typically, more powerful aircraft are better equipped to handle heavy patient loads and high altitudes, such as those in northern Arizona. Private providers also regularly staff their ambulance crews with two medical personnel, usually a paramedic and flight nurse. Two medical crewmembers can more easily handle the multiple tasks involved in providing emergency medical care, especially if there are two patients on board. Furthermore, while both paramedics and flight nurses are capable of providing advanced life support, flight nurses are authorized to perform a broader range of medical procedures, including administering certain medications. Only two of DPSA’s four air rescue units regularly staff their crews with two medical personnel, and only one of those two units utilizes a flight nurse. Despite Industry Growth, DPSA Continues As a Primary Provider Although DPSA has reduced some services in response to pri-vate sector expansion, it continues to serve as a primary provider offering services that private air ambulance companies could provide. Several factors, including internal practices and ambu-lance dispatching practices, encourage DPSA to continue oper-ating as a primary provider. This continued service is costly for the State. Private sector could take many calls DPSA currently takes— Although DPSA has reduced its interfacility transport services (the transport of sick or injured patients between care facilities) in response to private sector expansion, DPSA continues to respond to many medical emergencies the private sector could handle. For example, auditors reviewed the helicopter mission logs from Finding I 11 OFFICE OF THE AUDITOR GENERAL DPSA’s Central and Northern Air Rescue Units and the State’s four major private providers to determine whether the private sector could have responded to the air ambulance calls taken by these two DPSA units during August and September 1999. The review revealed that private providers could have taken many of the medical calls DPSA took during this time. For example, the private sector was available and could have responded to 100 percent of the 26 medical missions taken by DPSA’s Central Air Rescue (located in metropolitan Phoenix). In many cases, more than one private provider was available. In Flagstaff, the private sector was available to respond to 64 percent of DPSA’s North-ern Air Rescue’s 79 medical missions.1 Several factors encourage DPSA to continue operating as a pri-mary provider—DPSA continues to operate as a primary pro-vider for several reasons. n Crew response policy—Although a DPS official indicated that its crew response policy is intended to discourage com-petition with the private sector, auditors found that the policy does not effectively prevent DPSA from taking calls the pri-vate sector could take.2 For example, the policy states that when an Air Rescue crew is committed to a previous or on-going mission, it should defer the call first to other DPSA Air Rescue Units before deferring the call to other service provid-ers. Furthermore, the policy requires that private providers be not only available but also airborne before DPSA can defer a call to them. Yet, because private providers await formal dispatching, they are less likely than DPSA to be airborne when a request is made, reducing the chances that DPSA will defer a call to them when it receives a request for service. 1 The Southern and Western Air Rescue Units, located in Tucson and Kingman, were not included in the analysis. Including these units would not have allowed for a comparable analysis. The Southern Air Rescue Unit is on a rotational dispatching list and, therefore, is less likely to take calls the private sector could handle. Furthermore, the Western Air Res-cue Unit’s closest private provider is in another city, which makes a dif-ference in who is dispatched since response time is a determining factor. 2 DPSA can provide air ambulance services even though private sector companies exist because DPSA is exempt from state regulation prohib-iting public-private competition. Finding I 12 OFFICE OF THE AUDITOR GENERAL n Emergency response dispatching practices—Emergency response dispatching practices favor DPSA. When Arizona’s Emergency Medical Services Communication System (EMSCOM)1 receives a call about an emergency, it sends the closest available helicopter, be it public or private. However, if a DPSA helicopter is specifically requested, EMSCOM will often comply with the request even when a private provider is available to respond. Although not formally tracked, spe-cific requests for DPSA are common, especially from DPS Highway Patrol. Other requesting agencies, such as some sheriff’s offices and fire departments, also commonly request DPSA. The preference for DPSA appears to be due, in part, to the feeling of affiliation between law enforcement and other civil agencies and DPSA. n Response practices—DPSA has the ability to respond to calls, even when the need for an air ambulance is uncertain at the time of launching. In some cases, this can result in DPSA initiating a response to medical emergencies even when it has not been formally dispatched. This practice, called “launching off the scanner,” occurs when DPSA Air Rescue crews hear of emergencies on the radio and initiate a re-sponse without waiting for a formal request or knowing for certain that an air ambulance will be needed. The ability to launch at will gives DPSA an advantage over private provid-ers since the prevailing dispatching standard is to utilize the closest medical help available. Although private providers may be available at their bases, DPSA is more likely to be utilized because it is already airborne and closer to the scene. DPSA’s provision of air ambulance services is expensive—Al-though DPSA defends its continued provision of air ambulance services, its services are costly to the State. DPSA justifies its on-going provision of air ambulance services and specifically, its response practices by arguing that its Air Rescue crews, as both law enforcement and air ambulance providers, can assist in other capacities if not needed for emergency medical services. DPSA further argues that it would rather respond and turn back if not 1 The Department of Public Safety, Operational Communications Section operates the Emergency Medical Services Communication System. Finding I 13 OFFICE OF THE AUDITOR GENERAL needed than delay response until the need is confirmed. How-ever, DPSA’s services are expensive to provide. The Air Rescue Units cost about $1,081 per flight hour to operate and maintain.1 Last year, DPSA flew 678 hours on medical missions, costing the State about $733,000. This expenditure is considerable given that DPSA does not recuperate any costs because its services are free to the public. The private sector charges between $2,000 to $4,000 for an air ambulance mission. DPSA’s response practices are also costly. The costs associated with launching off the scanner can be significant when many responses result in cancellation. In fiscal year 1999, for instance, 43 percent of DPSA responses to emergency medical calls ended in cancellations while en route or at the scene because an air ambulance was not needed. These canceled air ambulance mis-sions cost the State about $179,000 in operating costs. Other states’ police agencies providing air ambulances reported that they usually do not launch off the scanner. Furthermore, private providers do not regularly launch off the scanner because they receive no payment if a flight is canceled. In contrast to DPSA, the private sector has cancellation rates of around 5 percent. Serving as a Backup Provider Would Free up Resources for Other Missions Because the need for DPSA’s air ambulance services has de-creased and its services are costly, DPSA should act as a backup air ambulance provider only. By providing backup services only, DPSA will be more available to respond to search-and-rescue and law enforcement calls. DPSA should provide backup air ambulance service only—Be-cause the need for DPSA as a primary air ambulance provider 1 Operating costs for the Air Rescue Units were determined by totaling all costs including crew and mechanic salaries, maintenance parts, fuel, op-erations overhead, rent, and insurance, and dividing by the number of hours flown annually. Depreciation was not included because the heli-copters it operated during fiscal year 1999 would be fully depreciated due to their age. Finding I 14 OFFICE OF THE AUDITOR GENERAL has decreased in many parts of the State, DPSA should act as a backup provider only. In fact, very few state police agencies provide air ambulance services. In a review of 22 other states, auditors found only 6 states whose police agency regularly pro-vides air ambulance services.1 Furthermore, unlike DPSA, the 6 police agencies operate as either the sole air ambulance provider (Delaware, Maryland, and New Jersey) or as a limited provider filling gaps in coverage or sharing service according to specific coordination agreements with the private sector (California, New York, Virginia). DPSA is needed as a backup air ambulance provider because the private sector alone may not currently be able to provide full coverage for the State or may need help when multiple-injury accidents occur. Rural areas of the State, such as those in north-western Arizona, still rely heavily on DPSA. The remoteness of these areas makes air medical transport a necessity. Yet, because these areas have resident populations that are less likely to have health insurance or be able to afford private air ambulance serv-ice, private providers operate less frequently in these areas. Even in urban areas with a greater number of providers, DPSA may still be needed to fill gaps in coverage when private providers are unavailable. Furthermore, DPSA may be needed temporarily in other areas if a private provider leaves the industry. DPSA management has expressed concern that if DPSA is a backup air ambulance provider only, its Air Rescue medical crews will lose their proficiency due to the reduction in the medical missions they will handle. However, several factors can minimize any loss in skills. As backup providers, crewmembers will continue to respond to medical missions, albeit less fre-quently. In addition, they can utilize their skills on search-and-rescue and law enforcement missions as needed. Finally, con-tinuing education courses, which they are already required to take to keep their medical certifications current, can help maintain skills. 1 The 22 states reviewed include Alaska, California, Colorado, Delaware, Florida, Idaho, Illinois, Maine, Maryland, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming. Finding I 15 OFFICE OF THE AUDITOR GENERAL DPSA should expand its search-and-rescue and law enforcement services—By providing backup air ambulance services only, DPSA will be able to increase its search-and-rescue and law en-forcement services. Search-and-rescue services include activities such as searching for downed airplanes, assisting stranded boat-ers, or rescuing injured hikers from steep canyons. Numerous first-responder agencies, such as fire departments and county sheriff’s offices, depend on DPSA for aerial support in search-and-rescue activities. Specifically, 14 of Arizona’s 15 counties rely on DPSA for search-and-rescue assistance.1 Although all counties are statutorily responsible for search-and-rescue activities, only 4 have some aviation resources.2 In Arizona, DPSA is a primary search-and- rescue provider because it is one of the few with aerial capa-bility and the only entity that consistently offers emergency medi-cal services (paramedics) simultaneously. Furthermore, DPSA has special search tools that other agencies do not have, including Forward-Looking Infra Red (FLIR) equipment, which helps locate ground objects by identifying heat sources, and night vision gog-gles, which improve visibility during night searches. Because DPSA handles many air ambulance calls, it may not always be available for search-and-rescue missions. Although DPSA does not track missions declined due to unavailability, several counties reported that DPSA has sometimes been unavailable and that they have had to rely on alternate providers with fewer resources. In addition to expanding its search-and-rescue services, DPSA could increase its law enforcement missions to help meet the de-mand for aerial law enforcement support. Law enforcement is DPSA’s second most common mission type, comprising ap-proximately one-fifth of all its missions in fiscal year 1999, and may include aerial pursuits, traffic observation, and personnel transport (transporting a tactical team, such as a SWAT team, to a crime scene). In providing aerial law enforcement services, DPSA supports the efforts of other DPS sections and other law enforce-ment agencies, few of which, particularly in rural areas, have their own aviation resources. Even those that do, such as the Maricopa 1 Yuma County does not utilize DPSA’s search-and-rescue services. It utilizes the Marine Corps Air Station, which is closer to Yuma than DPSA is. 2 La Paz, Maricopa, Mohave, and Yuma. Finding I 16 OFFICE OF THE AUDITOR GENERAL County Sheriff’s Office, sometimes rely on DPSA for backup as-sistance. Furthermore, few agencies have some of the specialized tools that DPSA has. DPSA’s FLIR equipment and night vision goggles, for instance, may also be used on law enforcement mis-sions, such as aerial pursuits. Due to its enhanced capability, DPSA frequently receives calls for assistance from other law en-forcement agencies. In fact, in fiscal year 1999, 53 percent of DPSA’s law enforcement missions supported other agencies’ efforts. Changes are needed to ensure DPSA meets the State’s current needs—To ensure that DPSA’s limited resources are directed to where they are needed most, DPSA will have to make some changes. n First, DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider. DPSA should provide air ambulance services only when the private sector is unavailable or unable to provide timely serv-ice. n Second, DPS should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a policy or written directive to be used by EMSCOM that states that DPSA serves as a backup air ambulance provider. The policy or directive should further indicate that private providers are contacted first and DPSA is contacted only if private providers are unavailable or unable to provide timely service. Request-ing agencies (fire departments, ground ambulance companies, and sheriff’s offices) should be provided a copy of this new policy. n Finally, DPSA should ensure that its Air Rescue Units do not launch off the scanner. Specifically, DPSA should establish a written policy that states that Air Rescue Units should initiate flights only when they are formally dispatched. All Air Rescue Units should be provided a copy of this policy. Once DPSA redirects its efforts to search and rescue and law en-forcement, further assessment of its resources may be needed. Although DPSA plays an important role in these two areas, the level of resources needed will not be clear until it readjusts its role Finding I 17 OFFICE OF THE AUDITOR GENERAL in air ambulance to that of a backup provider. Therefore, after making the recommended changes, DPSA should assess whether its services are sufficiently utilized to warrant the present level of resources. Recommendations 1. DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider unless the private sector is unavailable or unable to respond in a timely manner.. 2. DPSA should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a written policy to be used by EMSCOM that states that private providers are to be contacted first and that DPSA is to be contacted only if private providers are unavailable or unable to provide timely service. Requesting agencies (fire departments, ground am-bulances and sheriff’s offices, etc.) should be provided a copy of this new policy. 3. DPSA should seek to ensure that the practice of “launching off the scanner” does not occur. Specifically, DPSA should estab-lish a written policy stating that this practice is not appropriate and that staff should not initiate a flight without first verifying the need for an emergency helicopter. All air units should be provided a copy of this policy. 4. After implementing the other recommendations, DPSA should assess whether its services are used enough to warrant the present level of resources, and if not, how to reduce un-warranted expenditures. 18 OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 19 OFFICE OF THE AUDITOR GENERAL FINDING II DPSA NEEDS MORE POWERFUL HELICOPTERS TO CONDUCT SOME MISSIONS DPSA needs more powerful helicopters to perform some of its missions adequately. DPSA uses helicopters primarily to con-duct air ambulance, search-and-rescue, and law enforcement missions. However, for more than ten years, DPSA’s helicopters have not been powerful enough to conduct some of these mis-sions safely and efficiently. For example, DPSA’s crews some-times must leave behind equipment, staff, and fuel to accommo-date greater patient loads. Although DPSA recently purchased two more powerful helicopters, additional resources will be needed to address the replacement of the remaining underpow-ered helicopters. Underpowered Helicopters a Continual Problem for DPSA DPSA has been using underpowered helicopters for many years. As early as 1989, a consultant found DPSA’s helicopters inade-quate for performing some missions safely. Specifically, using underpowered aircraft can result in delayed medical treatment and unsafe flights. In contrast, other entities use more powerful helicopters to complete similar missions. DPSA continues to use underpowered helicopters—DPSA has historically used helicopters that are not powerful enough to conduct some of its air ambulance and air search-and-rescue missions safely or efficiently. DPSA’s fiscal year 1999 helicopter fleet consisted of five single-engine Bell 206 helicopters. These helicopters were found to be underpowered as early as 1989 by a private aviation consulting firm. Specifically, this firm deter-mined that DPSA’s helicopters do “not have the power and ca-pability to safely land, takeoff and perform its primary mission over much of the terrain in which it operates. High density alti-tudes, high desert temperatures, gusty winds, heavy payloads Finding II 20 OFFICE OF THE AUDITOR GENERAL and a variety of conditions places the aircrews and aircraft in jeopardy on many flights.”1 A 1991 Auditor General Report (No. 91-2) also identified similar aircraft deficiencies. n Underpowered helicopters can result in unsafe and ineffi-cient flights—Because of its aircraft’s limitations, DPSA can-not always carry the equipment, staff, and fuel needed to complete some of its missions safely and in a timely manner. To compensate for the lack of power, DPSA sometimes leaves equipment, staff, or fuel behind to accommodate greater patient loads. For example, the Central Air Rescue unit, located in Phoenix, regularly uses only about half of its fuel capacity so that it can adequately carry the weight of patients, medical equipment, and crew. However, some-times even these actions do not help. For example, even with reduced loads, sometimes DPSA must decline missions that require transporting patient loads weighing over 350 lbs., 1 The higher the density altitude, the thinner the air becomes. As such, the aircraft’s engine, propeller, and wings must work harder to produce an equal amount of power and lift. Photo 2: Single-engine Bell 206 helicopter in maintenance hangar The Bell 206 helicopter is underpowered for some of DPSA’s missions. Finding II 21 OFFICE OF THE AUDITOR GENERAL even with reduced loads. Further, operating with reduced fuel can cause a need for more frequent refuelings, which in turn can lengthen missions and delay patient care. Other entities use more powerful helicopters for similar mis-sions— Other entities surveyed for this audit use more powerful aircraft to conduct similar missions. Few states’ police agencies are involved in providing air ambulance services. However, the Maryland State Police, who conduct similar missions, use more powerful helicopters. After three fatal crashes, Maryland sought safer helicopters that were more appropriate for the type of mis-sions it conducts. It switched from single-engine Bell helicopters to twin-engine helicopters in the mid-1980’s. The private sector also uses more powerful helicopters to pro-vide similar services. Seventy-five percent of Arizona’s private air ambulance providers use more powerful helicopters than DPSA. In addition, if private providers conduct “external load” operations, federal aviation regulations require them to use powerful twin-engine aircraft to increase the safety margin of these high-risk flights. External load operations are sometimes necessary when DPSA conducts air rescue flights (for example, rescuing a stranded mountain climber). During these operations, DPSA removes the doors of the helicopter and attaches a long rope to the aircraft. The victim is then attached to the end of the rope and remains swinging below until the helicopter arrives at a safe place to set the victim down. While DPSA will not perform any operations it feels are unsafe, federal aviation regulations require twin-engine aircraft for similar operations if performed by commercial operations.1 1 DPSA is exempt from most federal aviation regulations applicable to private and commercial aircraft because it operates publicly owned air-craft. Finding II 22 OFFICE OF THE AUDITOR GENERAL Additional Resources Needed to Replace Old, Underpowered Helicopters To make its fleet of helicopters safe and efficient, DPSA will need additional funding to purchase up to three more powerful heli-copters. Even though DPSA will have received two newer, more powerful helicopters by the end of fiscal year 2000, it will still have three remaining Bell 206 helicopters. Because DPSA is sup-ported by the General Fund, it will need to seek an increase in its appropriation to cover the cost of any new helicopters. However, because the cost for replacing and upgrading its helicopters is so significant, the DPSA should also research the feasibility of using other monies to help offset the costs. Further upgrades needed—Although the DPSA has long ac-knowledged the need for better helicopters, due to state and Department budget constraints over the past several years, it has only recently begun to upgrade its fleet. DPSA has pur-chased a more powerful Bell 407 single-engine helicopter, and is in the process of purchasing another to replace some of its older, less powerful Bell 206 helicopters. It placed one of these new helicopters at the Northern Air Rescue Unit in Flagstaff in October 1999. The second new helicopter is being completed with the necessary equipment to make it operational, and DPSA expects it to be ready for use by May 2000. When ready, this helicopter will replace the Central Air Rescue Unit’s heli-copter, allowing the older, existing aircraft to serve as a spare when the other helicopters are undergoing maintenance. These new 407 helicopters represent an increase in horsepower from 450 to 675 and an increase in weight capacity from 4,150 to 5,250 lbs. The Bell 407 or its equivalent is also commonly used in the private sector for air ambulance missions. While these new helicopters provide DPSA with two more powerful aircraft, the three remaining Bell 206 helicopters will reach the end of their service lives over the next three years. One standard for replacing helicopters is 10,000 flight hours, or 10 years. However, according to DPSA maintenance staff and other public safety entities, the type of flight hours should also be considered when determining aircraft replacement. For ex-ample, if the flight hours consist primarily of air transport, re- Finding II 23 OFFICE OF THE AUDITOR GENERAL placement could safely be extended beyond the 10-year, 10,000 hours standard. On the other hand, if the flight hours consisted primarily of more demanding missions, such as search-and-rescue flights, replacement should occur earlier. Based on the 10,000 flight hour standard, as demonstrated in Table 2, DPSA’s remaining Bell 206 helicopters will be due for replacement within the next three years if flight hours remain relatively constant. Additional resources needed—Because General Fund monies support the DPSA program, the Department will need to seek an increase in its General Fund appropriation to cover any equipment replacement needs. DPSA indicates that it needs two additional Bell 407 helicopters and one powerful twin-engine helicopter to increase the safety of its higher-risk rescue flights, such as external load operations that carry crew and victims on the outside of the aircraft. Twin engines allow the aircraft to continue to hover or fly if one of the helicopter’s en-gines fail. As noted earlier, Maryland State Police replaced its entire fleet of single-engine helicopters with twin-engine ones. Table 2 Department of Public Safety—Aviation Section Summary of Age and Flight Hours for Bell 206 Helicopters As of December 1, 1999 Year Manufactured/Year Purchased Cumulative Flight Hours Hours Flown in Fiscal Year 1999 Year Cumulative Flight Hours Expected to Exceed 10,0001 1982/1982 10,403 648 1999 1982/1987 8,777 818 2001 1984/1987 7,952 756 2002 1 Date calculated using cumulative flight hours and assuming the hours flown in fiscal year 1999 are repre-sentative of the hours flown each year. Source: Auditor General staff analysis of helicopter flight data from the Aviation Section’s Alpha IV database. Base location information was provided by Aviation Section Administrative staff, and cumulative flight hours, and year of manufacture and purchase were provided by Aviation Section mechanics. Finding II 24 OFFICE OF THE AUDITOR GENERAL While DPSA needs to conduct more research to determine the specific twin-engine helicopter it needs, the cost to purchase any remaining equipment will be significant. For example, cost estimates for twin-engine helicopters range from $3.8 to $5.9 million. In addition, one Bell 407 single-engine helicopter costs approximately $1.5 million.1 Because the cost for replacing heli-copters is so significant, the DPSA should continue to research the feasibility of using other funding sources to help offset a portion of these costs. For example, the DPSA has used Racket-eering Influenced Corrupt Organization (RICO) monies in the past to help offset the cost of replacing an airplane. The De-partment is eligible to receive RICO monies when it participates in investigations of state or federal racketeering crimes that result in forfeitures. However, relying on these monies as a primary funding source would be difficult since there are re-strictive guidelines for their use and the amount of money available varies from year to year. Recommendations 1. DPSA should seek an increase in its General Fund appro-priation to help cover the costs of replacing any of its three remaining Bell 206 helicopters. 2. DPSA should also continue to research the feasibility of using other funding sources such as RICO to help offset the costs of replacing helicopters. 1 This figure represents the cost after the trade-in value of one Bell 206 helicopter (approximately $500,000.) 25 OFFICE OF THE AUDITOR GENERAL FINDING III DPSA NOT CHARGING ENOUGH TO SUPPORT AIR TRANSPORT ACTIVITIES DPSA does not charge enough to the cover the cost of the air transport services it provides to other governmental entities. Although DPSA has authority to seek reimbursement for many of the air transport sources it provides, the cost-recovery model DPSA uses does not reflect the actual costs of providing these services. By charging full cost, DPSA would almost triple the reimbursement amount it receives, based on fiscal year 1999 records. DPSA Can Charge for Many Air Transport Services DPSA has authority to seek reimbursement for many of the air transport services it provides. In all, DPSA provides air transport services to the Governor’s Office, its own internal staff, and 24 other state agencies for which it has intergovernmental service agreements (ISAs) and has authority to seek reimbursement.1 DPSA Cost-Recovery Model Does Not Reflect True Costs DPSA’s cost-recovery model—its method for determining what to charge for the air transport services it provides—captures only a small percentage of the costs associated with providing these services. DPSA’s model includes only three elements: pilot over- 1 DPSA does not charge the Governor for flights as DPS is statutorily required to provide her with transportation. It also does not charge itself or other DPS sections for air transport services. Finding III 26 OFFICE OF THE AUDITOR GENERAL time pay, maintenance (labor and parts), and fuel. In contrast, the cost-recovery model used by federal agencies to fully recover such costs includes many more categories, such as crew costs (salaries, benefits, training, etc.), insurance, and depreciation. The rates that would be computed under this federal model are sev-eral times higher than the rates under DPSA’s model. Based on air transport services provided during fiscal year 1999, DPSA could triple its air transport revenue by using these full-cost rates. Federal cost-recovery model is more comprehensive than DPSA’s—The United States Office of Management and Budget (OMB) has developed a comprehensive cost-recovery model to help federal agencies capture the full cost of providing aviation services. Federal agencies are required to justify the need to pur-chase or use internal aircraft as well as recover operating costs when providing services to other agencies. Table 3 (see page 27) lists the various categories contained in the OMB’s full cost-recovery model and explains the elements included in those categories. Photo 3: Cessna 210 sometimes used for air transport flights DPSA’s cost-recovery model for this Cessna, used for air transport, does not reflect the true costs of operation. Finding III 27 OFFICE OF THE AUDITOR GENERAL Table 3 Department of Public Safety—Aviation Section The United States Office of Management and Budget’s Full Cost-Recovery Model As of May 22, 1992 Cost Category Elements Crew Salaries, benefits, training, per diem expenses, equipment, charts, uni-forms, overtime charges, and wages of crew members hired on an hourly or part-time basis Maintenance Maintenance labor (salaries, benefits, travel, and training), parts, con-tracted maintenance assistance, engine overhaul, and aircraft refurbish-ment Fuel and other fluids Gasoline, oil, and other fluids consumed by the aircraft Operations overhead All costs associated with direct management and support of the aircraft program, such as personnel costs for management and administrative personnel directly responsible for the aircraft program, and rental costs for hangars and office space Administrative overhead A pro-rated share of salaries, office supplies, and other expenses of fiscal, accounting, management, and similar common services performed out-side of the aircraft program but which support the program Insurance Self-insurance or private insurance to cover casualty losses and liability claims Leases The aircrafts’ associated lease or rental costs Landing and tie down fees The landing and/or tie down fees associated with aircraft usage Depreciation The reduction of an aircraft’s value (purchase price less residual value) over its useful life Source: Auditor General staff analysis of Office of Management and Budget Circular No. A-126, Accounting for Aircraft Costs. Under more comprehensive model, DPSA’s rates and reim-bursements would be much higher—If DPSA were to compute its air transport rates using the OMB cost-recovery model, its rates would be much higher and its air transport revenue would al-most triple. Figure 2 (see page 28) compares the hourly rates charged by DPSA for its air transport services to the rates that would be charged using the OMB’s full cost-recovery model.1 As 1 The full-cost hourly rates for the DPSA’s airplanes do not include ad-ministrative overhead costs. The OMB model states “agencies should ex-ercise their own judgment as to the extent to which aircraft users should bear the administrative overhead costs.” Also, depreciation costs are in-cluded for only one airplane because, based on their ages, the remaining three would have been fully depreciated. Finding III 28 OFFICE OF THE AUDITOR GENERAL the figure shows, the hourly rates for airplanes under the OMB model are two to seven times higher than DPSA’s rates. Using the OMB’s rates, DPSA’s reimbursements would almost triple. Specifically, DPSA received $37,261 in air transport reimburse-ments for fiscal year 1999 and it could have received $111,085 using full-cost rates. Figure 2 Department of Public Safety—Aviation Section Comparison of Department’s Hourly Aircraft Rates to Full-Cost Hourly Rates Year Ended June 30, 1999 $526 $1,719 $464 $918 $173 $733 $82 $623 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 King Air B-200 King Air E-90 Cessna 210 Cessna 182 DPSA Hourly Rate OMB Full-Cost Hourly Rate 1 Full-cost rates were calculated using Aviation Section Expenditure data for fiscal year 1999 and the Office of Management and Budget’s full cost-recovery model described in Table 3 (see page 27). The full-cost rates do not include administrative overhead costs. The OMB model states, “agencies should exercise their own judgment as to the extent to which aircraft users should bear the administrative overhead costs.” In addition, depreciation costs are included only for the King Air B-200 as the three other aircraft have been fully depreciated based on their age. Source: Auditor General staff analysis of financial information provided by the Department of Public Safety. Finding III 29 OFFICE OF THE AUDITOR GENERAL Problems with DPSA’s cost model were identified as early as 1992. In that year, the Governor’s State Long-Term Improved Management (SLIM) project recommended that DPSA charge sufficiently to cover the operating costs of air transport services provided to other agencies. In response, DPSA indicated that it would increase its rates to include direct operating costs, rent, insurance, and replacement costs as well as the cost of one pilot. While DPSA increased most of its rates slightly from its 1992 rates, it did not implement the rates it proposed in response to the SLIM report, and it did not change its model to include the elements it stated it would. DPSA indicated it did not implement full-cost rates because it believes many of these costs, such as insurance, would exist whether or not it provided air transport services to other agencies. However, since DPSA is not man-dated to provide air transport services (except for the Governor), it is not clear that all of these costs would exist or exist at current levels if it did not provide these services for other agencies. DPSA Needs to Adopt Better Model To ensure that charges are sufficient to cover the expenses of its air transport activities, DPSA should adopt a more comprehen-sive cost model that includes all of the elements in OMB’s full cost-recovery model. To make these changes, however, DPSA would need to update its cost information and develop a method for capturing the necessary costs. n Cost information needs to be more current—DPSA used annual costs for maintenance and fuel over a three-year pe-riod to set its airplane and helicopter rates. However, its cur-rent rates are obsolete as they are based on expenditures from fiscal years 1994 through 1996. n Additional cost categories needed—The budget reports used to develop the existing rates do not separate all costs by aircraft or capture the expenditures by the categories in-cluded in the OMB’s full cost model. Therefore, DPSA will need to implement an accounting system or software pro- Finding III 30 OFFICE OF THE AUDITOR GENERAL gram that captures all the necessary costs by aircraft. These costs can then be used to update its air charter rates when its intergovernmental service agreements expire. The new, higher rates may impact the extent to which other agencies use DPSA’s air transport services. Specifically, the large increase in rates may reduce demand, as it will likely cause users to compare the cost of using DPSA services to a commercial or charter airline service. While presumably one aircraft is needed to fulfill DPS’ statutory mandate to transport the Governor, the remaining aircraft should be self-supporting, because they are not used to fulfill the agency's mandate. Consequently, if de-mand is reduced, DPSA should consider disposing of aircraft that are not self-supporting in an appropriate and legal manner. Recommendations 1. DPSA should expand its existing cost-recovery model to include all elements suggested by OMB’s full cost-recovery model. 2. DPSA should establish an accounting mechanism to capture all costs included in the OMB model for each of its airplanes. 3. DPSA should review these costs and use this information as the basis for establishing new rates for its intergovernmental service agreements with the agencies that utilize its air trans-port services when the agreements expire. 4. If demand is reduced as a result of increasing rates, DPSA should dispose of any aircraft that are not used to fulfill its mandate and that are not self-supporting. OFFICE OF THE AUDITOR GENERAL Agency Response OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) May 12, 2000 Ms. Debra K. Davenport, CPA Auditor General State of Arizona Office of the Auditor General 2910 N. 44th Street Phoenix, Arizona 85018 Dear Ms. Davenport: Enclosed you will find my written comments in response to the revised preliminary report draft of the performance audit of the Department of Public Safety’s Aviation Section (DPSA). Please feel free to contact my office at (602) 223-2464 if you have any questions. Sincerely, Dennis A. Garrett, Colonel Director gk Enclosures: Response Disk RESPONSE TO THE PRELIMINARY REPORT OF THE OFFICE OF THE AUDITOR GENERAL’S PERFORMANCE AUDIT OF THE DEPARTMENT OF PUBLIC SAFETY - AVIATION SECTION FINDING I: DPSA should serve as backup air ambulance provider to the private sector. Recommendation 1: DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider unless the private sector is unavailable or unable to respond in a timely manner. Response: The finding of the Auditor General is not agreed to and the recommendation will not be implemented. Title 41, Chapter 12.1, Article 1, Paragraph 41-1834: A. For the primary purpose of providing the most timely, efficient and comprehensive emergency medical services possible, the director may, subject to the availability of funds, purchase, equip, staff and be responsible for maintaining aircraft, including helicopters, or may lease or contract for such equipment and services. Aircraft and helicopters shall also be used in law enforcement activities. The aircraft provided by this section may be made available for emergency services at any time there is a medical emergency requiring the use of evacuation aircraft, as determined by a law enforcement agency or a physician. Emergency medical air evacuation shall normally take precedence over routine law enforcement missions. The director shall make the final decision relative to such aircraft utilization. B. Each medical evacuation aircraft or helicopter shall be capable of carrying two litter patients and one paramedic in addition to the ambulance pilot. C. The director may contract with a private firm, a corporation, or an individual for the maintenance of the aircraft, including helicopters. D. The director may enter into contracts with private firms or individuals for emergency surface or air ambulance services when no other such services are readily available or when deemed to be in the best interests of the state. E. Medical evacuation aircraft, including helicopters, operated by the department shall not be used to provide transportation for officials of the state or any of its political subdivisions. This does not preclude the use of medical evacuation aircraft by such officials when required in the course of a law enforcement function or emergency or when such official is the victim of an emergency medical situation. F. Notwithstanding subsection E, the director may enter into interagency service agreements with other state agencies for the use of helicopters and other aircraft that the department will operate to provide aviation services on an availability basis when the department deems that these services are in the best interests of this state. These services may be in addition to the services the department provides pursuant to this chapter but shall not preclude the delivery of emergency evacuation services provided for under this chapter. The amount of monies collected from state agencies for aviation services shall not exceed the operational costs of the aircraft. Comments: The Department of Public Safety’s long-standing interpretation of the above statutory reference, continually reinforced by the legislature, is that DPS is statutorily mandated to provide the most timely, efficient and comprehensive emergency medical air evacuation services possible, and secondly, that emergency medical air evacuation services normally take priority over law enforcement missions. In this regard, the authority to change this aspect of DPSA’s mission rests solely with the legislature which must effect changes to enabling statutes. 2 Recommendation 2: DPS should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a written policy to be used by EMSCOM that states that private providers are to be contacted first and that DPSA is to be contacted only if private providers are unavailable or unable to provide timely service. Requesting agencies (fire departments, ground ambulances and sheriff’s offices, etc.) should be provided a copy of this new policy. Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA is unaware of any existing policy or practice which is specifically designed to favor the dispatch of a DPSA helicopter, rather than a private sector air ambulance, to the scene of a medical emergency. Existing dispatch practices are intended to ensure the most rapid emergency medical response available. Dispatching the closest available appropriate emergency medical helicopter, public or private, is the only reasonable and medically defensible procedure. DPSA will work with DPS Operational Communications managers to develop a policy and procedure designed to ensure the dispatch of the closest available appropriate emergency medical helicopter, be it public or private, when a request for emergency medical air evacuation services is received by DPS. In cases where a private sector air ambulance and a DPSA helicopter have the same estimated time of arrival (ETA) at a scene, policy will require that the call for service be deferred to the private sector provider. Recommendation 3: DPSA should seek to ensure that the practice of “launching off the scanner” does not occur. Specifically, DPSA should establish a written policy stating that this practice is not appropriate and that staff should not initiate a flight without first verifying the need for an emergency helicopter. All air units should be provided a copy of this policy. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA will develop a written standard operating procedure establishing appropriate criterion for responding to medical emergencies. Recommendation 4: After implementing the other recommendations, DPSA should assess whether its services are used enough to warrant the present level of resources, and if not, how to reduce unwarranted expenditures. 3 Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA is engaged in a continuous effort to maximize the use of available resources and reduce unwarranted expenditures. FINDING II: DPSA needs more powerful helicopters to conduct some missions. Recommendation 1: DPSA should seek an increase in its General Fund appropriation to help cover the costs of replacing any of its three remaining Bell 206 helicopters. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPS is currently working with the State Legislature to replace DPSA’s three remaining Bell 206L helicopters. Optimally, DPSA would like to complete its fleet replacement program by July 2002, in accordance with the Auditor’s recommendation. It should be noted that, while the limited performance capabilities of DPSA’s remaining Bell 206L helicopters adversely effect DPSA’s ability to perform some missions efficiently and effectively, DPSA Air Rescue crews will not engage in missions that are inherently unsafe. Recommendation 2: DPSA should also continue to research the feasibility of using other funding sources such as RICO to help offset the costs of replacing helicopters. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA will continue to seek out every available appropriate funding source to supplement the cost of helicopters. FINDING III: DPSA is not charging enough to support air transport activities. Recommendation 1: DPSA should expand its existing cost-recovery model to include all elements suggested by OMB’s full cost-recovery model. 4 Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA will reevaluate its existing cost-recovery model for air transport services and will expand it as necessary to include all appropriate elements suggested by the OMB’s full cost-recovery model. Recommendation 2: DPSA should establish an accounting mechanism to capture all costs included in the OMB model for each of its airplanes. Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA is in the process of making improvements in automated data collection; replacing its current data collection system with Microsoft Access. Anticipated delivery date is in late June 2000. The new system will be designed to capture all appropriate costs included in the OMB model for each of its airplanes. Recommendation 3: DPSA should review these costs annually and use this information as the basis for establishing new rates for its intergovernmental service agreements with the agencies that utilize its air transport services when they expire. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Recommendation 4: If demand is reduced as a result of increasing rates, DPSA should dispose of any aircraft that are not used to fulfill its mandate and that are not self-supporting. Response: The finding of the Auditor General is agreed to and the recommendation will be implemented. Comments: All DPSA aircraft are currently used to fulfill the DPS mandate. If aircraft become excess to the Agency’s needs in the future, DPSA will dispose of them. Other Performance Audit Reports Issued Within the Last 12 Months 99-7 Arizona Drug and Gang Policy Council 99-8 Department of Water Resources 99-9 Department of Health Services— Arizona State Hospital 99-10 Residential Utility Consumer Office/Residential Utility Consumer Board 99-11 Department of Economic Security— Child Support Enforcement 99-12 Department of Health Services— Division of Behavioral Health Services 99-13 Board of Psychologist Examiners 99-14 Arizona Council for the Hearing Impaired 99-15 Arizona Board of Dental Examiners 99-16 Department of Building and Fire Safety 99-17 Department of Health Services’ Tobacco Education and Prevention Program 99-18 Department of Health Services— Bureau of Epidemiology and Disease Control Services 99-19 Department of Health Services— Sunset Factors 99-20 Arizona State Board of Accountancy 99-21 Department of Environmental Quality—Aquifer Protection Permit Program, Water Quality Assurance Revolving Fund Program, and Underground Storage Tank Program 99-22 Arizona Department of Transportation A+B Bidding 00-1 Healthy Families Program 00-2 Behavioral Health Services— Interagency Coordination of Services 00-3 Arizona’s Family Literacy Program 00-4 Family Builders Pilot Program 00-5 Department of Agriculture— Licensing Functions 00-6 Board of Medical Student Loans Future Performance Audit Reports Department of Agriculture’s Animal Disease, Ownership and Welfare Protection Program Department of Agriculture’s Food Safety and Quality Assurance Program
Object Description
TITLE | Performance audit, Department of Public Safety aviation section |
CREATOR | Office of the Auditor General |
SUBJECT | Arizona--Department of Public Safety; Aeronautics--Arizona; Municipal services--Arizona; |
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Government and politics |
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Language | English |
Publisher | Office of the Auditor General |
Material Collection | State Documents |
Acquisition Note | Report No. 00-7 |
Source Identifier | LG 6.2:R 36 |
Location | o44489211 |
REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library |
Description
TITLE | Performance audit, Department of Public Safety aviation section |
DESCRIPTION | 51 pages (PDF version). File size: 498 KB |
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Text |
Acquisition Note | Report No. 00-7 |
RIGHTS MANAGEMENT | Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution. |
DATE ORIGINAL | 2000-06 |
Time Period |
2000s (2000-2009) |
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Source Identifier | LG 6.2:R 36 |
Location | o44489211 |
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Full Text | State of Arizona Office of the Auditor General PERFORMANCE AUDIT Report to the Arizona Legislature By Debra K. Davenport Auditor General June 2000 Report No. 00-7 DEPARTMENT OF PUBLIC SAFETY AVIATION SECTION The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators and five representatives. His mission is to provide independent and impar-tial information and specific recommendations to improve the operations of state and local government entities. To this end, he provides financial audits and accounting services to the state and political subdivisions and performance audits of state agencies and the programs they administer. The Joint Legislative Audit Committee Representative Roberta L. Voss, Chairman Senator Tom Smith, Vice-Chairman Representative Robert Burns Senator Keith Bee Representative Ken Cheuvront Senator Herb Guenther Representative Andy Nichols Senator Darden Hamilton Representative Barry Wong Senator Pete Rios Representative Jeff Groscost Senator Brenda Burns (ex-officio) (ex-officio) Audit Staff Dot Reinhard—Manager and Contact Person (602) 553-0333 Michele Diamond—Audit Senior Tanya Nieri—Staff Copies of the Auditor General’s reports are free. You may request them by contacting us at: Office of the Auditor General 2910 N. 44th Street, Suite 410 Phoenix, AZ 85018 (602) 553-0333 Additionally, many of our reports can be found in electronic format at: www.auditorgen.state.az.us 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL June 2, 2000 Members of the Legislature The Honorable Jane Dee Hull, Governor Mr. Dennis Garrett, Director Department of Public Safety Transmitted herewith is a report of the Auditor General, A Performance Audit of the Department of Public Safety’s Aviation Section. This report is in response to a June 16, 1999, resolution of the Joint Legislative Audit Committee. The performance audit was conducted as part of the Sunset review set forth in A.R.S. §41-2951 et seq. I am also transmitting a copy of the Report Highlights to provide a quick summary for your convenience. This is the first in a series of reports to be issued on the Department of Public Safety. As outlined in its response, the agency agrees with most of the findings and will implement, or implement using a different method, nine of the ten recommendations. However, it disagrees with the recommendation that the Aviation Section rewrite its mission statement to change its role in the air ambulance industry to that of a backup provider. My staff and I will be pleased to discuss or clarify items in the report. This report will be released to the public on June 5, 2000. Sincerely, Debbie Davenport Auditor General Enclosure OFFICE OF THE AUDITOR GENERAL Program Fact Sheet Department of Public Safety Aviation Section (DPSA) Services: DPSA is one of 23 programs within DPS. It offers the following aviation services: 1) Air transport—DPSA provides transportation and protection to the Governor and trans-portation to Department staff and other state agency staff; 2) Air ambulance—DPSA pro-vides emergency medical services and air medical transport; 3) Search and rescue—DPSA performs technical rescue and search-and-rescue support service operations for overdue, lost, or injured parties; and 4) Law enforcement—DPSA supports federal, state, and local law enforcement agencies with activities such as aerial pursuits and surveillance. Program Revenue: $4.6 million (fiscal year 2000) $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 1998 1999 2000 General Fund Intergovernmental Program Goals (Fiscal Year 1999-2001): 1. To enhance public safety in Arizona through enhanced air rescue operations and im-proved first-responder emergency medical services. 2. To improve support to the Department and to other criminal justice agencies through enhanced air support aerial surveillance op-erations. 3. To improve the subprogram’s effectiveness through replacement of obsolete equipment and acquisition and allocation of appropriate staffing resources. 4. To improve the subprogram’s administrative effectiveness through automation. Personnel: 54 full-time staff (fiscal year 2000) Paramedics (19) Administrative (4) Pilots (26) Mechanics (5) $3.9 $5.2 $4.6 Facilities: 5 locations, 0 are state-owned. Facilities: 5 locations, 0 owned. Insert State Map Here Central Air Rescue (North Phoenix) Administration and Support (Phoenix, Sky Harbor International Airport) Northern Air Rescue (Flagstaff) Western Air Rescue (Kingman) Southern Air Rescue (Tucson) OFFICE OF THE AUDITOR GENERAL Adequacy of Performance Measures: DPSA’s four goals (see the front of this page) appear reasonably aligned with its mission. To help it accomplish these goals, DPSA has es-tablished 7 objectives and 33 performance measures. However, our review of its perform-ance measures identified the following prob-lems. n DPSA’s performance measures primarily focus on short-term, often one-time activi-ties rather than focusing on its ongoing services. For example, DPSA has estab-lished performance measures to develop legislative proposals for additional em-ployees and aircraft. n DPSA has not developed performance measures to cover all four of its key service areas (air transport, air ambulance, search and rescue, and law enforcement). n DPSA’s measures are not well defined. DPSA has incorrectly categorized several measures as outcome measures. These measures do not address the program’s impacts or benefits. In addition, DPSA’s quality measures do not assess customers’ and stakeholders’ satisfaction with serv-ices. n DPSA’s measures do not include efficiency measures. Efficiency measures assess pro-ductivity and the cost of providing prod-ucts and services such as the cost-per-aircraft service provided. Equipment: 9 aircraft 5 single-engine helicop-ters, configured as air ambulances. Estimated replacement value is $2 million each. 2 single-engine air-planes, seating 3 to 4 passengers each. Esti-mated replacement value is $170,000 to $280,000 each. 2 twin-engine airplanes, seating 9 to 10 passen-gers each. Estimated replacement value is $2 to $4 million each. i OFFICE OF THE AUDITOR GENERAL SUMMARY The Office of the Auditor General has conducted a performance audit of the Department of Public Safety’s Aviation Section (DPSA) as part of a Sunset review of the agency. This audit was conducted pursuant to a June 16, 1999, resolution of the Joint Legislative Audit Committee. This audit was conducted under the authority vested in the Auditor General by Arizona Revised Statutes §41-2951 et seq. This is the first of several audits of the Department of Public Safety. The Department of Public Safety’s Aviation Section (DPSA) is part of the Highway Patrol Division. DPSA employs 52 full-time staff and provides a variety of airplane and helicopter services from several locations across the State. The Aviation Section’s administrative office and airplane (or fixed-wing) services are located in Phoenix at the Sky Harbor International Airport. Us-ing four fixed-wing airplanes, DPSA primarily provides trans-portation and protection for the Governor and transportation to Department staff and other state agency staff, and it also assists in law enforcement activities when needed. DPSA’s helicopter services are provided from four regional Air Rescue Units: Cen-tral Air Rescue in Phoenix, Northern Air Rescue in Flagstaff, Southern Air Rescue in Tucson, and Western Air Rescue in Kingman. A pilot and paramedic are always on duty at each of the four units to provide air ambulance (highway automobile accidents), search-and-rescue (missing hikers), or law enforce-ment services (aerial pursuits, surveillance, and tactical support). DPSA Should Serve As Backup Air Ambulance Provider to the Private Sector (See pages 9 through 17) The expansion of the private air ambulance industry has reduced the need for DPSA to provide air ambulance services. Although Summary ii OFFICE OF THE AUDITOR GENERAL DPSA was initially the sole provider of air ambulance services, today there are also 12 private providers, operating 28 helicopter air ambulances in the State, and several additional private pro-viders from California, Nevada, and New Mexico who respond to calls along Arizona’s borders. The private sector not only of-fers air ambulance services similar to DPSA’s, but, in many cases, it can provide more enhanced services than DPSA can. For ex-ample, 75 percent of private providers in Arizona use helicopters that are more powerful than DPSA’s helicopters, allowing them to carry greater patient loads. Private providers also regularly staff their ambulance crews with two medical personnel, usually a paramedic and flight nurse. Only two of DPSA’s four air rescue units regularly staff their crews with two medical personnel, and only one of those two units utilizes a flight nurse. Despite private air ambulance industry growth, DPSA continues to operate as a primary provider, offering costly services that private air ambulance providers could provide. Several factors encourage DPSA to continue operating as a primary provider. n First, although DPSA has a policy intended to discourage competition with the private sector, the policy does not effec-tively discourage DPSA from taking calls the private sector could take. n Second, emergency-response dispatching practices favor DPSA. n Finally, DPSA has the ability to respond to an accident with-out being formally dispatched or without confirming the need for an air ambulance. When utilized, this practice gives DPSA a competitive advantage over private providers be-cause when an air ambulance is needed, DPSA is more likely to be closer to the scene. However, this practice can be costly when an air ambulance is not needed. During fiscal year 1999, 43 percent of DPSA’s emergency medical missions ended in cancellation because an air ambulance was not needed. Other states’ police agencies and private air ambu-lance providers generally do not proceed to an accident without formal dispatch and consequently reported much lower cancellation rates. Summary iii OFFICE OF THE AUDITOR GENERAL Although DPSA defends its continued provision of air ambu-lance services as a primary provider, its services are costly. The Air Rescue Units cost about $1,081 per flight hour to operate and maintain. Last year, DPSA flew 678 hours on medical missions, costing the State about $733,000. Further, DPSA does not recu-perate any of these costs because, unlike the private sector, DPSA does not charge for its air ambulance services. To ensure DPSA’s resources are used where needed most, DPSA should act as a backup air ambulance provider, providing serv-ices only when the private sector is unavailable or unable to re-spond in a timely manner. By serving as backup provider, DPSA can focus its efforts on providing search-and-rescue and law enforcement services because many entities, such as county sheriff’s offices, rely on DPSA to provide aerial support for these services. DPSA Needs More Powerful Helicopters to Conduct Some Missions (See pages 19 through 24) DPSA uses helicopters primarily to conduct air ambulance, search-and-rescue, and law enforcement missions. Its fiscal year 1999 fleet consisted of four single-engine Bell 206 helicopters. Historically, these helicopters have not been powerful enough to conduct some of DPSA’s missions safely and efficiently. As early as 1989, an aviation consultant found DPSA’s helicopters to be underpowered. DPSA continues to struggle with these power limitations by sometimes leaving behind equipment, staff, and fuel to accommodate patient loads. However, other entities, such as the Maryland State Police and private sector companies, which offer similar services, use more powerful helicopters. In fact, 75 percent of Arizona’s private air ambulance providers use heli-copters that are more powerful than DPSA’s helicopters. To make its fleet of helicopters safe and efficient, DPSA will need additional funding to purchase up to three more powerful heli-copters. Although DPSA recently purchased or is in the process of purchasing two new, more powerful single-engine helicopters (Bell 407s) to replace some of its current fleet, additional replace-ment helicopters will be needed. Because the cost of replacing and Summary iv OFFICE OF THE AUDITOR GENERAL upgrading its helicopters will be significant, DPSA will need to seek an increase in its General Fund appropriation to address any equipment replacement needs. However, DPSA should continue to research the feasibility of using other monies to help offset a portion of its helicopter re-placement costs. For example, DPSA used Racketeering Influ-enced Corrupt Organization (RICO) monies to offset the costs of an airplane in the past. The Department is eligible to receive RICO monies when it participates in investigations of state or federal racketeering crimes that result in forfeitures. However, relying on RICO monies as a primary funding source would be difficult since there are restrictive guidelines for their use and the amount of monies available from year to year varies. DPSA Not Charging Enough to Support Air Transport Activities (See pages 25 through 30) DPSA does not charge enough for its air transport services to cover the cost of providing this service to other governmental entities. DPSA’s cost-recovery model—its method for determining what to charge for the air transport services it provides—captures only a small percentage of the costs associated with providing this service. DPSA’s model includes only the costs for pilot overtime, maintenance (labor and parts) and fuel. In contrast, the cost-recovery model that federal agencies use includes many more categories, such as crew costs (salaries, benefits, training, etc.), insurance, and depreciation. If DPSA were to compute its rates using the federal model developed by the United States Office of Management and Budget (OMB), its rates would be much higher and its reimbursements would almost triple. Specifically, in fiscal year 1999, using full-cost rates, DPSA would have received $111,085 instead of only $37,261. Although problems with DPSA’s cost model were identified as early as 1992, DPSA has not significantly altered its model to more fully recover costs. To ensure that it charges sufficiently to cover its air transport expenses, DPSA should adopt a more comprehen-sive cost model that includes all the elements in the OMB’s full cost-recovery model. v OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS Page Introduction and Background ......................... 1 Finding I: DPSA Should Serve As Backup Air Ambulance Provider to the Private Sector .................................... 9 The Need for DPSA Air Ambulance Services Has Decreased ................................................................ 9 Despite Industry Growth, DPSA Continues As a Primary Provider............................................................ 10 Serving As a Backup Provider Would Free up Resources for Other Missions ........................... 13 Recommendations .......................................................... 17 Finding II: DPSA Needs More Powerful Helicopters to Conduct Some Missions ............................. 19 Underpowered Helicopters a Continual Problem for DPSA......................................... 19 Additional Resources Needed to Replace Old, Underpowered Helicopters ........................................... 22 Recommendations .......................................................... 24 Table of Contents vi OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS (cont’d) Page Finding III: DPSA Not Charging Enough to Support Air Transport Activities...................................... 25 DPSA Can Charge for Many Air Transport Services ......................................... 25 DPSA Cost-Recovery Model Does Not Reflect True Costs .......................................... 25 DPSA Needs to Adopt Better Model.................................................................... 29 Recommendations .......................................................... 30 Agency Response Photos Photo 1 DPSA’s Twin-engine King Air E-90................... 2 Photo 2 Single-engine Bell 206 helicopter in maintenance hangar ....................................... 20 Photo 3 Cessna 210 sometimes used for air transport flights................................................... 26 Table of Contents vii OFFICE OF THE AUDITOR GENERAL TABLE OF CONTENTS (concl’d) Page Tables and Figures Table 1 Department of Public Safety— Aviation Section Statement of Revenues, Expenditures, and Changes in Fund Balance Years Ended or Ending June 30, 1998, 1999, and 2000 (Unaudited)......................................................... 5 Table 2 Department of Public Safety— Aviation Section Summary of Age and Flight Hours for Bell 206 Helicopters As of December 1, 1999 ...................................... 23 Table 3 Department of Public Safety— Aviation Section The United States Office of Management and Budget’s Full Cost-Recovery Model As of May 22, 1992.............................................. 27 Figure 1 Department of Public Safety— Aviation Section Comparison of Primary Helicopter Missions Flown by Type and Regional Unit Year Ended June 30, 1999................................... 4 Figure 2 Department of Public Safety— Aviation Section Comparison of Department’s Hourly Aircraft Rates to Full-Cost Hourly Rates Year Ended June 30, 1999................................... 28 viii OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 1 OFFICE OF THE AUDITOR GENERAL INTRODUCTION AND BACKGROUND The Office of the Auditor General has conducted a performance audit of the Department of Public Safety’s Aviation Section as part of a Sunset review of the agency. This audit was conducted pursuant to a June 16, 1999, resolution of the Joint Legislative Audit Committee. This audit was conducted under the authority vested in the Auditor General by Arizona Revised Statutes §§41- 2951 through 41-2958. This is the first of several audits of the Department of Public Safety. Aviation Section Provides a Variety of Services The Department of Public Safety Aviation Section (DPSA) is part of the Highway Patrol Division, which enforces Arizona’s traffic and criminal laws and federal commercial vehicle regulations on state and federal highways.1 DPSA provides a variety of services using both airplanes and helicopters. These services include the following: n Air transport—The Aviation Section uses its airplanes to help the Department fulfill its statutory mandate to provide transportation and protection for the Governor. DPSA also transports Department staff and makes its planes available to other state agencies through intergovernmental agreements for air charter services. n Air ambulance—Once the only air ambulance service in the State, DPSA still provides this service, administering on-site medical help and using its helicopters to transport sick or in-jured people for treatment. 1 The Aviation Section was transferred from the Criminal Justice Support Division to the Highway Patrol Division effective April 1, 2000. Introduction and Background 2 OFFICE OF THE AUDITOR GENERAL n Search and rescue—These activities involve searching for downed airplanes, assisting stranded boaters, or rescuing injured hikers. Numerous first-responder agencies such as fire departments and county sheriff’s offices rely on DPSA for technical rescue and search-and-rescue assistance. n Law enforcement—DPSA supports federal, state, and local law enforcement agencies with activities such as aerial pur-suits and surveillance. Organization, Equipment, and Staffing DPSA employs 54 full-time staff and provides its airplane and helicopter services from several locations across the State. n Administration and airplane services (9 FTEs)—The Aviation Section’s administrative office and airplane services are located in Phoenix at the Sky Harbor International Air-port. A commander, assisted by two support staff, adminis-ters the program. Airplane services includes three pilots, two mechanics, and a supply specialist (vacant). They operate and maintain four airplanes—two single-engine planes ca-pable of carrying a pilot and three or four passengers, and two twin-engine aircraft capable of carrying nine to ten pas- Photo 1: DPSA’s Twin-engine King Air E-90 DPSA uses this King Air for executive air transport. Introduction and Background 3 OFFICE OF THE AUDITOR GENERAL sengers in addition to the pilots. During fiscal year 1999, the airplane crew flew 368 flights. The majority of these flights (57 percent) provided transportation to the Governor and her staff, Department of Public Safety officials, or other state agency personnel. The airplane crew also participated in some law enforcement missions, such as aerial surveillance of Arizona’s highways and transporting investigators to crime scenes. n Helicopter services (45 FTEs)—DPSA’s helicopter services are provided from four regional Air Rescue Units: Central Air Rescue in Phoenix, Northern Air Rescue in Flagstaff, Southern Air Rescue in Tucson, and Western Air Rescue in Kingman. The Air Rescue Units include 23 pilots, 19 para-medics, and 3 mechanics. A pilot and paramedic are always on duty at each of the four units to provide air ambulance, search-and-rescue, or law enforcement services. DPSA has one single-engine helicopter stationed at each of the four air rescue units. When a unit’s helicopter is undergoing mainte-nance or repair work, another unit will cover its missions. DPSA’s fifth helicopter is being completed with the necessary equipment. When completed, it will allow one of the existing helicopters to serve as a spare for use when a unit’s helicopter is undergoing maintenance. The four rescue units flew 3,284 missions during fiscal year 1999.1 Figure 1 (see page 4) depicts the top three helicopter mission categories (air ambulance, law enforcement, and search and rescue) by regional unit. These missions account for about two-thirds (or 2,260) of DPSA’s 3,284 helicopter missions flown in fiscal year 1999. The remaining missions encompass flights for training, maintenance, public education, and other miscellaneous duties. As illustrated in this chart, the number and type of mis-sions performed varies by regional unit. For example, the Central Air Rescue unit performed the most law enforcement missions (300 of 848) and the Western Air Rescue has the most air ambu-lance missions (436 of 990) during fiscal year 1999. 1 Although DPSA helicopter mission logs show that 3,673 missions were requested, only 3,284 of these missions have flight time because some were canceled before departure. Introduction and Background 4 OFFICE OF THE AUDITOR GENERAL Budget DPSA received $5.1 million in General Fund monies for fiscal year 1999 (see Table 1, page 5). The program expends the major-ity of its monies on salaries. During fiscal year 1999, the program received $1,050,000 toward the purchase of a new helicopter, and during fiscal year 2000, the program received $600,000 for the first of three lease payments on a second new helicopter. Both helicopters cost approximately $1.5 million after DPSA was credited about $500,000 each for trade-in helicopters. DPSA also bills other state agencies for air charter services (see Finding III, pages 25 through 30), and is eligible to receive reim-bursement for search-and-rescue operations. During fiscal year 1999, the Department received $94,828 for its air charter and search-and-rescue services. Figure 1 Department of Public Safety—Aviation Section Comparison of Primary Helicopter Missions Flown by Type and Regional Unit Year Ended June 30, 1999 Source: Auditor General staff analysis of mission data from the Aviation Section’s Alpha IV rotary-wing database for the year ended June 30, 1999. 140 300 114 287 126 82 127 259 147 436 163 79 0 50 100 150 200 250 300 350 400 450 Number of Missions Flown Central Northern Southern Western Air Ambulance Law Enforcement Search and Rescue Introduction and Background 5 OFFICE OF THE AUDITOR GENERAL Audit Scope and Methodology The audit focused on DPSA’s need to provide air ambulance services and its ability to perform its missions safely and effi-ciently. Competition with private-sector air ambulance operators Table 1 Department of Public Safety—Aviation Section Statement of Revenues, Expenditures, and Changes in Fund Balance 1 Years Ended or Ending June 30, 1998, 1999, and 2000 (Unaudited) 1998 1999 2000 (Actual) (Actual) (Estimated) Revenues: State General Fund appropriations 2 $3,740,200 $5,114,100 $4,514,300 Intergovernmental 149,388 95,671 100,000 Total revenues 3,889,588 5,209,771 4,614,300 Expenditures: Personal services 2,431,778 2,452,387 2,533,200 Employee related 460,053 476,899 506,600 Professional and outside services 45,010 29,623 18,500 Travel, in-state 19,993 20,846 17,500 Travel, out-of-state 14,377 38,037 8,500 Aid to organizations 180 Other operating 909,439 835,732 930,000 Equipment 2 8,204 1,017,297 820,000 Total expenditures 3,889,034 4,870,821 4,834,300 Excess of revenues over (under) expenditures 554 338,950 (220,000) Reversions to the State General Fund 13 118,950 Excess of revenues over (under) expenditures and reversions to the State General Fund 541 220,000 (220,000) Fund balance (deficit), beginning of year (541) 220,000 Fund balance, end of year $ 0 $ 220,000 $ 0 1 The Department calculated the Aviation Section’s revenues and expenditures by allocating revenues and expenditures recorded in the Department’s Joint Account. The Joint Account is a commingled account primarily funded from State General Fund appropriations and other appropriated monies, such as Criminal Justice Enhancement monies. 2 The Department received appropriations of $1,050,000 in 1999 and $600,000 in 2000 toward the purchase of additional helicopters, including necessary modifications. The helicopter payments are included in the equipment expenditures. In addition, the estimated equipment expenditures in 2000 include $220,000 to complete necessary modifications to one of the new helicopters. Source: Auditor General staff analysis of financial information provided by the Department of Public Safety. Introduction and Background 6 OFFICE OF THE AUDITOR GENERAL has been noted in previous reports discussing the Aviation Sec-tion. 1 However, audit work was completed to assess the ongoing need for DPSA to provide air ambulance services and included such steps as the following: n Interviewing private air ambulance providers and emer-gency response agencies such as fire departments to assess DPSA’s current role and the need for DPSA’s continued in-volvement. n Contacting private providers to determine the stability of the industry, future availability of their services, and coverage throughout the State. n Reviewing helicopter mission logs from DPSA’s Central and Northern Air Rescue Units and the State’s four major private providers to determine whether the private sector could have responded to the air ambulance calls taken by these two DPSA units during August and September 1999.2 n Surveying 22 other states to determine if their state police agencies provided aviation services similar to DPSA’s.3 Audit work conducted to assess the safety and efficiency of DPSA’s missions included the following: 1 Office of the Auditor General (Report No. 91-2), April 1991 and the State of Arizona’s Project S.L.I.M. Report on the Department of Public Safety, July 1992. 2 The analysis excluded two DPSA air ambulance missions because these missions were not included in its database even though they were re-corded on its mission logs. 3 Eighteen states were selected because, similar to Arizona, they have large amounts of public lands or natural areas over which services must be provided: Alaska, California, Colorado, Florida, Idaho, Illinois, Maine, Maryland, Montana, Nevada, New Mexico, North Carolina, Oregon, Tennessee, Texas, Utah, Washington, and Wyoming. Four additional states were selected based on referrals from interview sources because they had state police agencies that provided air ambulance services: Delaware, New Jersey, New York, and Virginia. Introduction and Background 7 OFFICE OF THE AUDITOR GENERAL n Reviewing regulations promulgated by the Federal Aviation Administration (FAA) and interviewing FAA personnel to determine the safety and operating standards that apply to DPSA. n Reviewing complaints and insurance claims against DPSA. n Comparing DPSA’s method for setting reimbursement rates for its air charter services with a cost model developed by the U.S. Office of Management and Budget and used by federal agencies to determine what costs to recover. n Surveying county officials to assess their use of DPSA for search-and-rescue missions. n Reviewing the type of helicopters used by other agencies providing similar services to obtain a range of equipment and costs associated with emergency missions. This report presents findings and recommendations in three areas: n The need for DPSA to serve as a backup provider for air am-bulance services, providing services only when private air ambulance companies are unavailable or unable to provide timely service. n The need for DPSA to replace some of its helicopter fleet to ensure that it can safely and efficiently perform its missions. n The need for DPSA to improve its cost model for its air transport services. The audit was conducted in accordance with government auditing standards. The Auditor General and staff express appreciation to the Di-rector and staff of the Arizona Department of Public Safety for their cooperation and assistance during the course of the audit. 8 OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 9 OFFICE OF THE AUDITOR GENERAL FINDING I DPSA SHOULD SERVE AS BACKUP AIR AMBULANCE PROVIDER TO THE PRIVATE SECTOR DPSA is no longer needed as a primary air ambulance provider in many parts of the State. Because the private air ambulance industry has grown steadily in recent years, the need for DPSA to provide air ambulance services has decreased. Currently, the private sector could handle many of the air ambulance missions DPSA takes. To ensure that DPSA meets the State’s current needs, it should serve as a backup to private air ambulance pro-viders, providing service only when the private sector is un-available or unable to respond timely. By providing backup air ambulance services only, DPSA will be able to expand its search-and- rescue and law enforcement services. The Need for DPSA Air Ambulance Services Has Decreased Although DPSA was initially the sole provider of air ambulance services in the State, the need for its services has decreased as the private air ambulance industry has expanded. Air ambulance services are considered to be a vital part of Arizona’s emergency response system. They can improve the chances of survival, especially in rural or remote areas, by providing patients with rapid advanced medical treatment and transport. In 1972, when DPSA began offering air ambulance services, it was the sole pro-vider of these services and had only two helicopters to cover the State. Today, however, in addition to DPSA, there are 12 private air ambulance providers, operating 28 helicopter air ambulances. In addition, several private providers from California, Nevada, and New Mexico respond to calls in Arizona along state borders. Together, these services cover most parts of the State. In addition, industry growth in recent years has been particularly significant. Finding I 10 OFFICE OF THE AUDITOR GENERAL For example, among the four major private providers alone, the number of helicopter air ambulances in operation has grown 47 percent since 1997. The private sector not only offers air ambulance services similar to DPSA’s; in many cases, it can also provide more enhanced services than DPSA can. For example, 75 percent of private pro-viders in Arizona use helicopters that are more powerful than DPSA’s helicopters. Typically, more powerful aircraft are better equipped to handle heavy patient loads and high altitudes, such as those in northern Arizona. Private providers also regularly staff their ambulance crews with two medical personnel, usually a paramedic and flight nurse. Two medical crewmembers can more easily handle the multiple tasks involved in providing emergency medical care, especially if there are two patients on board. Furthermore, while both paramedics and flight nurses are capable of providing advanced life support, flight nurses are authorized to perform a broader range of medical procedures, including administering certain medications. Only two of DPSA’s four air rescue units regularly staff their crews with two medical personnel, and only one of those two units utilizes a flight nurse. Despite Industry Growth, DPSA Continues As a Primary Provider Although DPSA has reduced some services in response to pri-vate sector expansion, it continues to serve as a primary provider offering services that private air ambulance companies could provide. Several factors, including internal practices and ambu-lance dispatching practices, encourage DPSA to continue oper-ating as a primary provider. This continued service is costly for the State. Private sector could take many calls DPSA currently takes— Although DPSA has reduced its interfacility transport services (the transport of sick or injured patients between care facilities) in response to private sector expansion, DPSA continues to respond to many medical emergencies the private sector could handle. For example, auditors reviewed the helicopter mission logs from Finding I 11 OFFICE OF THE AUDITOR GENERAL DPSA’s Central and Northern Air Rescue Units and the State’s four major private providers to determine whether the private sector could have responded to the air ambulance calls taken by these two DPSA units during August and September 1999. The review revealed that private providers could have taken many of the medical calls DPSA took during this time. For example, the private sector was available and could have responded to 100 percent of the 26 medical missions taken by DPSA’s Central Air Rescue (located in metropolitan Phoenix). In many cases, more than one private provider was available. In Flagstaff, the private sector was available to respond to 64 percent of DPSA’s North-ern Air Rescue’s 79 medical missions.1 Several factors encourage DPSA to continue operating as a pri-mary provider—DPSA continues to operate as a primary pro-vider for several reasons. n Crew response policy—Although a DPS official indicated that its crew response policy is intended to discourage com-petition with the private sector, auditors found that the policy does not effectively prevent DPSA from taking calls the pri-vate sector could take.2 For example, the policy states that when an Air Rescue crew is committed to a previous or on-going mission, it should defer the call first to other DPSA Air Rescue Units before deferring the call to other service provid-ers. Furthermore, the policy requires that private providers be not only available but also airborne before DPSA can defer a call to them. Yet, because private providers await formal dispatching, they are less likely than DPSA to be airborne when a request is made, reducing the chances that DPSA will defer a call to them when it receives a request for service. 1 The Southern and Western Air Rescue Units, located in Tucson and Kingman, were not included in the analysis. Including these units would not have allowed for a comparable analysis. The Southern Air Rescue Unit is on a rotational dispatching list and, therefore, is less likely to take calls the private sector could handle. Furthermore, the Western Air Res-cue Unit’s closest private provider is in another city, which makes a dif-ference in who is dispatched since response time is a determining factor. 2 DPSA can provide air ambulance services even though private sector companies exist because DPSA is exempt from state regulation prohib-iting public-private competition. Finding I 12 OFFICE OF THE AUDITOR GENERAL n Emergency response dispatching practices—Emergency response dispatching practices favor DPSA. When Arizona’s Emergency Medical Services Communication System (EMSCOM)1 receives a call about an emergency, it sends the closest available helicopter, be it public or private. However, if a DPSA helicopter is specifically requested, EMSCOM will often comply with the request even when a private provider is available to respond. Although not formally tracked, spe-cific requests for DPSA are common, especially from DPS Highway Patrol. Other requesting agencies, such as some sheriff’s offices and fire departments, also commonly request DPSA. The preference for DPSA appears to be due, in part, to the feeling of affiliation between law enforcement and other civil agencies and DPSA. n Response practices—DPSA has the ability to respond to calls, even when the need for an air ambulance is uncertain at the time of launching. In some cases, this can result in DPSA initiating a response to medical emergencies even when it has not been formally dispatched. This practice, called “launching off the scanner,” occurs when DPSA Air Rescue crews hear of emergencies on the radio and initiate a re-sponse without waiting for a formal request or knowing for certain that an air ambulance will be needed. The ability to launch at will gives DPSA an advantage over private provid-ers since the prevailing dispatching standard is to utilize the closest medical help available. Although private providers may be available at their bases, DPSA is more likely to be utilized because it is already airborne and closer to the scene. DPSA’s provision of air ambulance services is expensive—Al-though DPSA defends its continued provision of air ambulance services, its services are costly to the State. DPSA justifies its on-going provision of air ambulance services and specifically, its response practices by arguing that its Air Rescue crews, as both law enforcement and air ambulance providers, can assist in other capacities if not needed for emergency medical services. DPSA further argues that it would rather respond and turn back if not 1 The Department of Public Safety, Operational Communications Section operates the Emergency Medical Services Communication System. Finding I 13 OFFICE OF THE AUDITOR GENERAL needed than delay response until the need is confirmed. How-ever, DPSA’s services are expensive to provide. The Air Rescue Units cost about $1,081 per flight hour to operate and maintain.1 Last year, DPSA flew 678 hours on medical missions, costing the State about $733,000. This expenditure is considerable given that DPSA does not recuperate any costs because its services are free to the public. The private sector charges between $2,000 to $4,000 for an air ambulance mission. DPSA’s response practices are also costly. The costs associated with launching off the scanner can be significant when many responses result in cancellation. In fiscal year 1999, for instance, 43 percent of DPSA responses to emergency medical calls ended in cancellations while en route or at the scene because an air ambulance was not needed. These canceled air ambulance mis-sions cost the State about $179,000 in operating costs. Other states’ police agencies providing air ambulances reported that they usually do not launch off the scanner. Furthermore, private providers do not regularly launch off the scanner because they receive no payment if a flight is canceled. In contrast to DPSA, the private sector has cancellation rates of around 5 percent. Serving as a Backup Provider Would Free up Resources for Other Missions Because the need for DPSA’s air ambulance services has de-creased and its services are costly, DPSA should act as a backup air ambulance provider only. By providing backup services only, DPSA will be more available to respond to search-and-rescue and law enforcement calls. DPSA should provide backup air ambulance service only—Be-cause the need for DPSA as a primary air ambulance provider 1 Operating costs for the Air Rescue Units were determined by totaling all costs including crew and mechanic salaries, maintenance parts, fuel, op-erations overhead, rent, and insurance, and dividing by the number of hours flown annually. Depreciation was not included because the heli-copters it operated during fiscal year 1999 would be fully depreciated due to their age. Finding I 14 OFFICE OF THE AUDITOR GENERAL has decreased in many parts of the State, DPSA should act as a backup provider only. In fact, very few state police agencies provide air ambulance services. In a review of 22 other states, auditors found only 6 states whose police agency regularly pro-vides air ambulance services.1 Furthermore, unlike DPSA, the 6 police agencies operate as either the sole air ambulance provider (Delaware, Maryland, and New Jersey) or as a limited provider filling gaps in coverage or sharing service according to specific coordination agreements with the private sector (California, New York, Virginia). DPSA is needed as a backup air ambulance provider because the private sector alone may not currently be able to provide full coverage for the State or may need help when multiple-injury accidents occur. Rural areas of the State, such as those in north-western Arizona, still rely heavily on DPSA. The remoteness of these areas makes air medical transport a necessity. Yet, because these areas have resident populations that are less likely to have health insurance or be able to afford private air ambulance serv-ice, private providers operate less frequently in these areas. Even in urban areas with a greater number of providers, DPSA may still be needed to fill gaps in coverage when private providers are unavailable. Furthermore, DPSA may be needed temporarily in other areas if a private provider leaves the industry. DPSA management has expressed concern that if DPSA is a backup air ambulance provider only, its Air Rescue medical crews will lose their proficiency due to the reduction in the medical missions they will handle. However, several factors can minimize any loss in skills. As backup providers, crewmembers will continue to respond to medical missions, albeit less fre-quently. In addition, they can utilize their skills on search-and-rescue and law enforcement missions as needed. Finally, con-tinuing education courses, which they are already required to take to keep their medical certifications current, can help maintain skills. 1 The 22 states reviewed include Alaska, California, Colorado, Delaware, Florida, Idaho, Illinois, Maine, Maryland, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming. Finding I 15 OFFICE OF THE AUDITOR GENERAL DPSA should expand its search-and-rescue and law enforcement services—By providing backup air ambulance services only, DPSA will be able to increase its search-and-rescue and law en-forcement services. Search-and-rescue services include activities such as searching for downed airplanes, assisting stranded boat-ers, or rescuing injured hikers from steep canyons. Numerous first-responder agencies, such as fire departments and county sheriff’s offices, depend on DPSA for aerial support in search-and-rescue activities. Specifically, 14 of Arizona’s 15 counties rely on DPSA for search-and-rescue assistance.1 Although all counties are statutorily responsible for search-and-rescue activities, only 4 have some aviation resources.2 In Arizona, DPSA is a primary search-and- rescue provider because it is one of the few with aerial capa-bility and the only entity that consistently offers emergency medi-cal services (paramedics) simultaneously. Furthermore, DPSA has special search tools that other agencies do not have, including Forward-Looking Infra Red (FLIR) equipment, which helps locate ground objects by identifying heat sources, and night vision gog-gles, which improve visibility during night searches. Because DPSA handles many air ambulance calls, it may not always be available for search-and-rescue missions. Although DPSA does not track missions declined due to unavailability, several counties reported that DPSA has sometimes been unavailable and that they have had to rely on alternate providers with fewer resources. In addition to expanding its search-and-rescue services, DPSA could increase its law enforcement missions to help meet the de-mand for aerial law enforcement support. Law enforcement is DPSA’s second most common mission type, comprising ap-proximately one-fifth of all its missions in fiscal year 1999, and may include aerial pursuits, traffic observation, and personnel transport (transporting a tactical team, such as a SWAT team, to a crime scene). In providing aerial law enforcement services, DPSA supports the efforts of other DPS sections and other law enforce-ment agencies, few of which, particularly in rural areas, have their own aviation resources. Even those that do, such as the Maricopa 1 Yuma County does not utilize DPSA’s search-and-rescue services. It utilizes the Marine Corps Air Station, which is closer to Yuma than DPSA is. 2 La Paz, Maricopa, Mohave, and Yuma. Finding I 16 OFFICE OF THE AUDITOR GENERAL County Sheriff’s Office, sometimes rely on DPSA for backup as-sistance. Furthermore, few agencies have some of the specialized tools that DPSA has. DPSA’s FLIR equipment and night vision goggles, for instance, may also be used on law enforcement mis-sions, such as aerial pursuits. Due to its enhanced capability, DPSA frequently receives calls for assistance from other law en-forcement agencies. In fact, in fiscal year 1999, 53 percent of DPSA’s law enforcement missions supported other agencies’ efforts. Changes are needed to ensure DPSA meets the State’s current needs—To ensure that DPSA’s limited resources are directed to where they are needed most, DPSA will have to make some changes. n First, DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider. DPSA should provide air ambulance services only when the private sector is unavailable or unable to provide timely serv-ice. n Second, DPS should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a policy or written directive to be used by EMSCOM that states that DPSA serves as a backup air ambulance provider. The policy or directive should further indicate that private providers are contacted first and DPSA is contacted only if private providers are unavailable or unable to provide timely service. Request-ing agencies (fire departments, ground ambulance companies, and sheriff’s offices) should be provided a copy of this new policy. n Finally, DPSA should ensure that its Air Rescue Units do not launch off the scanner. Specifically, DPSA should establish a written policy that states that Air Rescue Units should initiate flights only when they are formally dispatched. All Air Rescue Units should be provided a copy of this policy. Once DPSA redirects its efforts to search and rescue and law en-forcement, further assessment of its resources may be needed. Although DPSA plays an important role in these two areas, the level of resources needed will not be clear until it readjusts its role Finding I 17 OFFICE OF THE AUDITOR GENERAL in air ambulance to that of a backup provider. Therefore, after making the recommended changes, DPSA should assess whether its services are sufficiently utilized to warrant the present level of resources. Recommendations 1. DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider unless the private sector is unavailable or unable to respond in a timely manner.. 2. DPSA should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a written policy to be used by EMSCOM that states that private providers are to be contacted first and that DPSA is to be contacted only if private providers are unavailable or unable to provide timely service. Requesting agencies (fire departments, ground am-bulances and sheriff’s offices, etc.) should be provided a copy of this new policy. 3. DPSA should seek to ensure that the practice of “launching off the scanner” does not occur. Specifically, DPSA should estab-lish a written policy stating that this practice is not appropriate and that staff should not initiate a flight without first verifying the need for an emergency helicopter. All air units should be provided a copy of this policy. 4. After implementing the other recommendations, DPSA should assess whether its services are used enough to warrant the present level of resources, and if not, how to reduce un-warranted expenditures. 18 OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) 19 OFFICE OF THE AUDITOR GENERAL FINDING II DPSA NEEDS MORE POWERFUL HELICOPTERS TO CONDUCT SOME MISSIONS DPSA needs more powerful helicopters to perform some of its missions adequately. DPSA uses helicopters primarily to con-duct air ambulance, search-and-rescue, and law enforcement missions. However, for more than ten years, DPSA’s helicopters have not been powerful enough to conduct some of these mis-sions safely and efficiently. For example, DPSA’s crews some-times must leave behind equipment, staff, and fuel to accommo-date greater patient loads. Although DPSA recently purchased two more powerful helicopters, additional resources will be needed to address the replacement of the remaining underpow-ered helicopters. Underpowered Helicopters a Continual Problem for DPSA DPSA has been using underpowered helicopters for many years. As early as 1989, a consultant found DPSA’s helicopters inade-quate for performing some missions safely. Specifically, using underpowered aircraft can result in delayed medical treatment and unsafe flights. In contrast, other entities use more powerful helicopters to complete similar missions. DPSA continues to use underpowered helicopters—DPSA has historically used helicopters that are not powerful enough to conduct some of its air ambulance and air search-and-rescue missions safely or efficiently. DPSA’s fiscal year 1999 helicopter fleet consisted of five single-engine Bell 206 helicopters. These helicopters were found to be underpowered as early as 1989 by a private aviation consulting firm. Specifically, this firm deter-mined that DPSA’s helicopters do “not have the power and ca-pability to safely land, takeoff and perform its primary mission over much of the terrain in which it operates. High density alti-tudes, high desert temperatures, gusty winds, heavy payloads Finding II 20 OFFICE OF THE AUDITOR GENERAL and a variety of conditions places the aircrews and aircraft in jeopardy on many flights.”1 A 1991 Auditor General Report (No. 91-2) also identified similar aircraft deficiencies. n Underpowered helicopters can result in unsafe and ineffi-cient flights—Because of its aircraft’s limitations, DPSA can-not always carry the equipment, staff, and fuel needed to complete some of its missions safely and in a timely manner. To compensate for the lack of power, DPSA sometimes leaves equipment, staff, or fuel behind to accommodate greater patient loads. For example, the Central Air Rescue unit, located in Phoenix, regularly uses only about half of its fuel capacity so that it can adequately carry the weight of patients, medical equipment, and crew. However, some-times even these actions do not help. For example, even with reduced loads, sometimes DPSA must decline missions that require transporting patient loads weighing over 350 lbs., 1 The higher the density altitude, the thinner the air becomes. As such, the aircraft’s engine, propeller, and wings must work harder to produce an equal amount of power and lift. Photo 2: Single-engine Bell 206 helicopter in maintenance hangar The Bell 206 helicopter is underpowered for some of DPSA’s missions. Finding II 21 OFFICE OF THE AUDITOR GENERAL even with reduced loads. Further, operating with reduced fuel can cause a need for more frequent refuelings, which in turn can lengthen missions and delay patient care. Other entities use more powerful helicopters for similar mis-sions— Other entities surveyed for this audit use more powerful aircraft to conduct similar missions. Few states’ police agencies are involved in providing air ambulance services. However, the Maryland State Police, who conduct similar missions, use more powerful helicopters. After three fatal crashes, Maryland sought safer helicopters that were more appropriate for the type of mis-sions it conducts. It switched from single-engine Bell helicopters to twin-engine helicopters in the mid-1980’s. The private sector also uses more powerful helicopters to pro-vide similar services. Seventy-five percent of Arizona’s private air ambulance providers use more powerful helicopters than DPSA. In addition, if private providers conduct “external load” operations, federal aviation regulations require them to use powerful twin-engine aircraft to increase the safety margin of these high-risk flights. External load operations are sometimes necessary when DPSA conducts air rescue flights (for example, rescuing a stranded mountain climber). During these operations, DPSA removes the doors of the helicopter and attaches a long rope to the aircraft. The victim is then attached to the end of the rope and remains swinging below until the helicopter arrives at a safe place to set the victim down. While DPSA will not perform any operations it feels are unsafe, federal aviation regulations require twin-engine aircraft for similar operations if performed by commercial operations.1 1 DPSA is exempt from most federal aviation regulations applicable to private and commercial aircraft because it operates publicly owned air-craft. Finding II 22 OFFICE OF THE AUDITOR GENERAL Additional Resources Needed to Replace Old, Underpowered Helicopters To make its fleet of helicopters safe and efficient, DPSA will need additional funding to purchase up to three more powerful heli-copters. Even though DPSA will have received two newer, more powerful helicopters by the end of fiscal year 2000, it will still have three remaining Bell 206 helicopters. Because DPSA is sup-ported by the General Fund, it will need to seek an increase in its appropriation to cover the cost of any new helicopters. However, because the cost for replacing and upgrading its helicopters is so significant, the DPSA should also research the feasibility of using other monies to help offset the costs. Further upgrades needed—Although the DPSA has long ac-knowledged the need for better helicopters, due to state and Department budget constraints over the past several years, it has only recently begun to upgrade its fleet. DPSA has pur-chased a more powerful Bell 407 single-engine helicopter, and is in the process of purchasing another to replace some of its older, less powerful Bell 206 helicopters. It placed one of these new helicopters at the Northern Air Rescue Unit in Flagstaff in October 1999. The second new helicopter is being completed with the necessary equipment to make it operational, and DPSA expects it to be ready for use by May 2000. When ready, this helicopter will replace the Central Air Rescue Unit’s heli-copter, allowing the older, existing aircraft to serve as a spare when the other helicopters are undergoing maintenance. These new 407 helicopters represent an increase in horsepower from 450 to 675 and an increase in weight capacity from 4,150 to 5,250 lbs. The Bell 407 or its equivalent is also commonly used in the private sector for air ambulance missions. While these new helicopters provide DPSA with two more powerful aircraft, the three remaining Bell 206 helicopters will reach the end of their service lives over the next three years. One standard for replacing helicopters is 10,000 flight hours, or 10 years. However, according to DPSA maintenance staff and other public safety entities, the type of flight hours should also be considered when determining aircraft replacement. For ex-ample, if the flight hours consist primarily of air transport, re- Finding II 23 OFFICE OF THE AUDITOR GENERAL placement could safely be extended beyond the 10-year, 10,000 hours standard. On the other hand, if the flight hours consisted primarily of more demanding missions, such as search-and-rescue flights, replacement should occur earlier. Based on the 10,000 flight hour standard, as demonstrated in Table 2, DPSA’s remaining Bell 206 helicopters will be due for replacement within the next three years if flight hours remain relatively constant. Additional resources needed—Because General Fund monies support the DPSA program, the Department will need to seek an increase in its General Fund appropriation to cover any equipment replacement needs. DPSA indicates that it needs two additional Bell 407 helicopters and one powerful twin-engine helicopter to increase the safety of its higher-risk rescue flights, such as external load operations that carry crew and victims on the outside of the aircraft. Twin engines allow the aircraft to continue to hover or fly if one of the helicopter’s en-gines fail. As noted earlier, Maryland State Police replaced its entire fleet of single-engine helicopters with twin-engine ones. Table 2 Department of Public Safety—Aviation Section Summary of Age and Flight Hours for Bell 206 Helicopters As of December 1, 1999 Year Manufactured/Year Purchased Cumulative Flight Hours Hours Flown in Fiscal Year 1999 Year Cumulative Flight Hours Expected to Exceed 10,0001 1982/1982 10,403 648 1999 1982/1987 8,777 818 2001 1984/1987 7,952 756 2002 1 Date calculated using cumulative flight hours and assuming the hours flown in fiscal year 1999 are repre-sentative of the hours flown each year. Source: Auditor General staff analysis of helicopter flight data from the Aviation Section’s Alpha IV database. Base location information was provided by Aviation Section Administrative staff, and cumulative flight hours, and year of manufacture and purchase were provided by Aviation Section mechanics. Finding II 24 OFFICE OF THE AUDITOR GENERAL While DPSA needs to conduct more research to determine the specific twin-engine helicopter it needs, the cost to purchase any remaining equipment will be significant. For example, cost estimates for twin-engine helicopters range from $3.8 to $5.9 million. In addition, one Bell 407 single-engine helicopter costs approximately $1.5 million.1 Because the cost for replacing heli-copters is so significant, the DPSA should continue to research the feasibility of using other funding sources to help offset a portion of these costs. For example, the DPSA has used Racket-eering Influenced Corrupt Organization (RICO) monies in the past to help offset the cost of replacing an airplane. The De-partment is eligible to receive RICO monies when it participates in investigations of state or federal racketeering crimes that result in forfeitures. However, relying on these monies as a primary funding source would be difficult since there are re-strictive guidelines for their use and the amount of money available varies from year to year. Recommendations 1. DPSA should seek an increase in its General Fund appro-priation to help cover the costs of replacing any of its three remaining Bell 206 helicopters. 2. DPSA should also continue to research the feasibility of using other funding sources such as RICO to help offset the costs of replacing helicopters. 1 This figure represents the cost after the trade-in value of one Bell 206 helicopter (approximately $500,000.) 25 OFFICE OF THE AUDITOR GENERAL FINDING III DPSA NOT CHARGING ENOUGH TO SUPPORT AIR TRANSPORT ACTIVITIES DPSA does not charge enough to the cover the cost of the air transport services it provides to other governmental entities. Although DPSA has authority to seek reimbursement for many of the air transport sources it provides, the cost-recovery model DPSA uses does not reflect the actual costs of providing these services. By charging full cost, DPSA would almost triple the reimbursement amount it receives, based on fiscal year 1999 records. DPSA Can Charge for Many Air Transport Services DPSA has authority to seek reimbursement for many of the air transport services it provides. In all, DPSA provides air transport services to the Governor’s Office, its own internal staff, and 24 other state agencies for which it has intergovernmental service agreements (ISAs) and has authority to seek reimbursement.1 DPSA Cost-Recovery Model Does Not Reflect True Costs DPSA’s cost-recovery model—its method for determining what to charge for the air transport services it provides—captures only a small percentage of the costs associated with providing these services. DPSA’s model includes only three elements: pilot over- 1 DPSA does not charge the Governor for flights as DPS is statutorily required to provide her with transportation. It also does not charge itself or other DPS sections for air transport services. Finding III 26 OFFICE OF THE AUDITOR GENERAL time pay, maintenance (labor and parts), and fuel. In contrast, the cost-recovery model used by federal agencies to fully recover such costs includes many more categories, such as crew costs (salaries, benefits, training, etc.), insurance, and depreciation. The rates that would be computed under this federal model are sev-eral times higher than the rates under DPSA’s model. Based on air transport services provided during fiscal year 1999, DPSA could triple its air transport revenue by using these full-cost rates. Federal cost-recovery model is more comprehensive than DPSA’s—The United States Office of Management and Budget (OMB) has developed a comprehensive cost-recovery model to help federal agencies capture the full cost of providing aviation services. Federal agencies are required to justify the need to pur-chase or use internal aircraft as well as recover operating costs when providing services to other agencies. Table 3 (see page 27) lists the various categories contained in the OMB’s full cost-recovery model and explains the elements included in those categories. Photo 3: Cessna 210 sometimes used for air transport flights DPSA’s cost-recovery model for this Cessna, used for air transport, does not reflect the true costs of operation. Finding III 27 OFFICE OF THE AUDITOR GENERAL Table 3 Department of Public Safety—Aviation Section The United States Office of Management and Budget’s Full Cost-Recovery Model As of May 22, 1992 Cost Category Elements Crew Salaries, benefits, training, per diem expenses, equipment, charts, uni-forms, overtime charges, and wages of crew members hired on an hourly or part-time basis Maintenance Maintenance labor (salaries, benefits, travel, and training), parts, con-tracted maintenance assistance, engine overhaul, and aircraft refurbish-ment Fuel and other fluids Gasoline, oil, and other fluids consumed by the aircraft Operations overhead All costs associated with direct management and support of the aircraft program, such as personnel costs for management and administrative personnel directly responsible for the aircraft program, and rental costs for hangars and office space Administrative overhead A pro-rated share of salaries, office supplies, and other expenses of fiscal, accounting, management, and similar common services performed out-side of the aircraft program but which support the program Insurance Self-insurance or private insurance to cover casualty losses and liability claims Leases The aircrafts’ associated lease or rental costs Landing and tie down fees The landing and/or tie down fees associated with aircraft usage Depreciation The reduction of an aircraft’s value (purchase price less residual value) over its useful life Source: Auditor General staff analysis of Office of Management and Budget Circular No. A-126, Accounting for Aircraft Costs. Under more comprehensive model, DPSA’s rates and reim-bursements would be much higher—If DPSA were to compute its air transport rates using the OMB cost-recovery model, its rates would be much higher and its air transport revenue would al-most triple. Figure 2 (see page 28) compares the hourly rates charged by DPSA for its air transport services to the rates that would be charged using the OMB’s full cost-recovery model.1 As 1 The full-cost hourly rates for the DPSA’s airplanes do not include ad-ministrative overhead costs. The OMB model states “agencies should ex-ercise their own judgment as to the extent to which aircraft users should bear the administrative overhead costs.” Also, depreciation costs are in-cluded for only one airplane because, based on their ages, the remaining three would have been fully depreciated. Finding III 28 OFFICE OF THE AUDITOR GENERAL the figure shows, the hourly rates for airplanes under the OMB model are two to seven times higher than DPSA’s rates. Using the OMB’s rates, DPSA’s reimbursements would almost triple. Specifically, DPSA received $37,261 in air transport reimburse-ments for fiscal year 1999 and it could have received $111,085 using full-cost rates. Figure 2 Department of Public Safety—Aviation Section Comparison of Department’s Hourly Aircraft Rates to Full-Cost Hourly Rates Year Ended June 30, 1999 $526 $1,719 $464 $918 $173 $733 $82 $623 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 King Air B-200 King Air E-90 Cessna 210 Cessna 182 DPSA Hourly Rate OMB Full-Cost Hourly Rate 1 Full-cost rates were calculated using Aviation Section Expenditure data for fiscal year 1999 and the Office of Management and Budget’s full cost-recovery model described in Table 3 (see page 27). The full-cost rates do not include administrative overhead costs. The OMB model states, “agencies should exercise their own judgment as to the extent to which aircraft users should bear the administrative overhead costs.” In addition, depreciation costs are included only for the King Air B-200 as the three other aircraft have been fully depreciated based on their age. Source: Auditor General staff analysis of financial information provided by the Department of Public Safety. Finding III 29 OFFICE OF THE AUDITOR GENERAL Problems with DPSA’s cost model were identified as early as 1992. In that year, the Governor’s State Long-Term Improved Management (SLIM) project recommended that DPSA charge sufficiently to cover the operating costs of air transport services provided to other agencies. In response, DPSA indicated that it would increase its rates to include direct operating costs, rent, insurance, and replacement costs as well as the cost of one pilot. While DPSA increased most of its rates slightly from its 1992 rates, it did not implement the rates it proposed in response to the SLIM report, and it did not change its model to include the elements it stated it would. DPSA indicated it did not implement full-cost rates because it believes many of these costs, such as insurance, would exist whether or not it provided air transport services to other agencies. However, since DPSA is not man-dated to provide air transport services (except for the Governor), it is not clear that all of these costs would exist or exist at current levels if it did not provide these services for other agencies. DPSA Needs to Adopt Better Model To ensure that charges are sufficient to cover the expenses of its air transport activities, DPSA should adopt a more comprehen-sive cost model that includes all of the elements in OMB’s full cost-recovery model. To make these changes, however, DPSA would need to update its cost information and develop a method for capturing the necessary costs. n Cost information needs to be more current—DPSA used annual costs for maintenance and fuel over a three-year pe-riod to set its airplane and helicopter rates. However, its cur-rent rates are obsolete as they are based on expenditures from fiscal years 1994 through 1996. n Additional cost categories needed—The budget reports used to develop the existing rates do not separate all costs by aircraft or capture the expenditures by the categories in-cluded in the OMB’s full cost model. Therefore, DPSA will need to implement an accounting system or software pro- Finding III 30 OFFICE OF THE AUDITOR GENERAL gram that captures all the necessary costs by aircraft. These costs can then be used to update its air charter rates when its intergovernmental service agreements expire. The new, higher rates may impact the extent to which other agencies use DPSA’s air transport services. Specifically, the large increase in rates may reduce demand, as it will likely cause users to compare the cost of using DPSA services to a commercial or charter airline service. While presumably one aircraft is needed to fulfill DPS’ statutory mandate to transport the Governor, the remaining aircraft should be self-supporting, because they are not used to fulfill the agency's mandate. Consequently, if de-mand is reduced, DPSA should consider disposing of aircraft that are not self-supporting in an appropriate and legal manner. Recommendations 1. DPSA should expand its existing cost-recovery model to include all elements suggested by OMB’s full cost-recovery model. 2. DPSA should establish an accounting mechanism to capture all costs included in the OMB model for each of its airplanes. 3. DPSA should review these costs and use this information as the basis for establishing new rates for its intergovernmental service agreements with the agencies that utilize its air trans-port services when the agreements expire. 4. If demand is reduced as a result of increasing rates, DPSA should dispose of any aircraft that are not used to fulfill its mandate and that are not self-supporting. OFFICE OF THE AUDITOR GENERAL Agency Response OFFICE OF THE AUDITOR GENERAL (This Page Intentionally Left Blank) May 12, 2000 Ms. Debra K. Davenport, CPA Auditor General State of Arizona Office of the Auditor General 2910 N. 44th Street Phoenix, Arizona 85018 Dear Ms. Davenport: Enclosed you will find my written comments in response to the revised preliminary report draft of the performance audit of the Department of Public Safety’s Aviation Section (DPSA). Please feel free to contact my office at (602) 223-2464 if you have any questions. Sincerely, Dennis A. Garrett, Colonel Director gk Enclosures: Response Disk RESPONSE TO THE PRELIMINARY REPORT OF THE OFFICE OF THE AUDITOR GENERAL’S PERFORMANCE AUDIT OF THE DEPARTMENT OF PUBLIC SAFETY - AVIATION SECTION FINDING I: DPSA should serve as backup air ambulance provider to the private sector. Recommendation 1: DPSA should rewrite its mission statement to change its role in air ambulance services to that of a backup provider unless the private sector is unavailable or unable to respond in a timely manner. Response: The finding of the Auditor General is not agreed to and the recommendation will not be implemented. Title 41, Chapter 12.1, Article 1, Paragraph 41-1834: A. For the primary purpose of providing the most timely, efficient and comprehensive emergency medical services possible, the director may, subject to the availability of funds, purchase, equip, staff and be responsible for maintaining aircraft, including helicopters, or may lease or contract for such equipment and services. Aircraft and helicopters shall also be used in law enforcement activities. The aircraft provided by this section may be made available for emergency services at any time there is a medical emergency requiring the use of evacuation aircraft, as determined by a law enforcement agency or a physician. Emergency medical air evacuation shall normally take precedence over routine law enforcement missions. The director shall make the final decision relative to such aircraft utilization. B. Each medical evacuation aircraft or helicopter shall be capable of carrying two litter patients and one paramedic in addition to the ambulance pilot. C. The director may contract with a private firm, a corporation, or an individual for the maintenance of the aircraft, including helicopters. D. The director may enter into contracts with private firms or individuals for emergency surface or air ambulance services when no other such services are readily available or when deemed to be in the best interests of the state. E. Medical evacuation aircraft, including helicopters, operated by the department shall not be used to provide transportation for officials of the state or any of its political subdivisions. This does not preclude the use of medical evacuation aircraft by such officials when required in the course of a law enforcement function or emergency or when such official is the victim of an emergency medical situation. F. Notwithstanding subsection E, the director may enter into interagency service agreements with other state agencies for the use of helicopters and other aircraft that the department will operate to provide aviation services on an availability basis when the department deems that these services are in the best interests of this state. These services may be in addition to the services the department provides pursuant to this chapter but shall not preclude the delivery of emergency evacuation services provided for under this chapter. The amount of monies collected from state agencies for aviation services shall not exceed the operational costs of the aircraft. Comments: The Department of Public Safety’s long-standing interpretation of the above statutory reference, continually reinforced by the legislature, is that DPS is statutorily mandated to provide the most timely, efficient and comprehensive emergency medical air evacuation services possible, and secondly, that emergency medical air evacuation services normally take priority over law enforcement missions. In this regard, the authority to change this aspect of DPSA’s mission rests solely with the legislature which must effect changes to enabling statutes. 2 Recommendation 2: DPS should work to eliminate dispatching practices that favor DPSA. Specifically, DPS should establish a written policy to be used by EMSCOM that states that private providers are to be contacted first and that DPSA is to be contacted only if private providers are unavailable or unable to provide timely service. Requesting agencies (fire departments, ground ambulances and sheriff’s offices, etc.) should be provided a copy of this new policy. Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA is unaware of any existing policy or practice which is specifically designed to favor the dispatch of a DPSA helicopter, rather than a private sector air ambulance, to the scene of a medical emergency. Existing dispatch practices are intended to ensure the most rapid emergency medical response available. Dispatching the closest available appropriate emergency medical helicopter, public or private, is the only reasonable and medically defensible procedure. DPSA will work with DPS Operational Communications managers to develop a policy and procedure designed to ensure the dispatch of the closest available appropriate emergency medical helicopter, be it public or private, when a request for emergency medical air evacuation services is received by DPS. In cases where a private sector air ambulance and a DPSA helicopter have the same estimated time of arrival (ETA) at a scene, policy will require that the call for service be deferred to the private sector provider. Recommendation 3: DPSA should seek to ensure that the practice of “launching off the scanner” does not occur. Specifically, DPSA should establish a written policy stating that this practice is not appropriate and that staff should not initiate a flight without first verifying the need for an emergency helicopter. All air units should be provided a copy of this policy. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA will develop a written standard operating procedure establishing appropriate criterion for responding to medical emergencies. Recommendation 4: After implementing the other recommendations, DPSA should assess whether its services are used enough to warrant the present level of resources, and if not, how to reduce unwarranted expenditures. 3 Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA is engaged in a continuous effort to maximize the use of available resources and reduce unwarranted expenditures. FINDING II: DPSA needs more powerful helicopters to conduct some missions. Recommendation 1: DPSA should seek an increase in its General Fund appropriation to help cover the costs of replacing any of its three remaining Bell 206 helicopters. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPS is currently working with the State Legislature to replace DPSA’s three remaining Bell 206L helicopters. Optimally, DPSA would like to complete its fleet replacement program by July 2002, in accordance with the Auditor’s recommendation. It should be noted that, while the limited performance capabilities of DPSA’s remaining Bell 206L helicopters adversely effect DPSA’s ability to perform some missions efficiently and effectively, DPSA Air Rescue crews will not engage in missions that are inherently unsafe. Recommendation 2: DPSA should also continue to research the feasibility of using other funding sources such as RICO to help offset the costs of replacing helicopters. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Comments: DPSA will continue to seek out every available appropriate funding source to supplement the cost of helicopters. FINDING III: DPSA is not charging enough to support air transport activities. Recommendation 1: DPSA should expand its existing cost-recovery model to include all elements suggested by OMB’s full cost-recovery model. 4 Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA will reevaluate its existing cost-recovery model for air transport services and will expand it as necessary to include all appropriate elements suggested by the OMB’s full cost-recovery model. Recommendation 2: DPSA should establish an accounting mechanism to capture all costs included in the OMB model for each of its airplanes. Response: The finding of the Auditor General is agreed to and a different method of dealing with the finding will be implemented. Comments: DPSA is in the process of making improvements in automated data collection; replacing its current data collection system with Microsoft Access. Anticipated delivery date is in late June 2000. The new system will be designed to capture all appropriate costs included in the OMB model for each of its airplanes. Recommendation 3: DPSA should review these costs annually and use this information as the basis for establishing new rates for its intergovernmental service agreements with the agencies that utilize its air transport services when they expire. Response: The finding of the Auditor General is agreed to and the audit recommendation will be implemented. Recommendation 4: If demand is reduced as a result of increasing rates, DPSA should dispose of any aircraft that are not used to fulfill its mandate and that are not self-supporting. Response: The finding of the Auditor General is agreed to and the recommendation will be implemented. Comments: All DPSA aircraft are currently used to fulfill the DPS mandate. If aircraft become excess to the Agency’s needs in the future, DPSA will dispose of them. 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