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HomeMy WebLinkAboutFinance MINUTES 06-22-21 Page 2 of 8 I CENTRAL SAN CONTRACENTRAL •STA SANITARY DISTRICT 5019 IMHOFF REGULAR MEETING OF THE BOARD OF DIRECTORS: TAD J PILECKI CENTRAL CONTRA COSTA President SANITARY DISTRICT DAVID R. WILLIAMS President Pro Tens FINANCE COMMITTEE BARBARA D.HocKETT MARIAHN LAURITZEN MICHAEL R.MCGILL MINUTES PHONE: (925)228-9500 Tuesday, June 22, 2021 FAX: (925)372-0192 2:00 p.m. www.centralsan.org (All attendees participated via videoconference) Committee: Chair Tad Pilecki Member Mike McGill Guest: Erika Armstrong, Relationship Manger, Mission Square Retirement (formerly ICMA-RC) (joined during Item 5.a., left after Item 5.c) Staff. Roger S. Bailey, General Manager Philip Leiber, Director of Finance and Administration Steve McDonald, Director of Operations (left after Item 5.c) Jean-Marc Petit, Director of Engineering and Technical Services John Huie, Informational Technology Manager Stephanie King, Purchasing and Materials Manager Edgar Lopez, Capital Projects Division Manager (joined during Item 4.a.) Kevin Mizuno, Finance Manager Teji O'Malley, Human Resources and Organizational Development Manager Amelia Berumen, Assistant to the Secretary of the District 1. Notice This meeting was held in accordance with the Brown Act as in effect under the State Emergency Services Act, the Governor's Emergency Declaration related to COVID-19, and the Governor's Executive Order N-29-20 issued on March 17, 2020 that allowed attendance by Board Members, District staff, and the public to participate and conduct the meeting by teleconference, videoconference, or both. The agenda included instructions for options in which the public could participate in the meeting. July 1, 2021 Regular Board Meeting Agenda Packet- Page 225 of 231 Page 3 of 8 Finance Committee Minutes June 22, 2021 Page 2 2. Call Meeting to Order Due to technical difficulty, Chair Pilecki requested Member McGill lead the meeting on his behalf. Member McGill called the meeting to order at 2:10 p.m. 3. Public Comments — None. 4. Old Business a. Follow-up to questions asked at the May 25, 2021 meeting regarding certain expenditures Mr. Mizuno provided a comprehensive overview of the memorandum included with the agenda material. In regard to Response 1, pertaining to consolidating payments to vendors with high-volume invoices, the Committee concurred to defer to staff to reconcile the manner in which invoices are to be processed, noting that staff has matters well in hand with system limitations. Regarding Response 3, Chair Pilecki stated he is fine with the P-Card summary reports as they are. Member McGill indicated his appreciation for the reconciliation report that is provided to show the expenses tie-out. COMMITTEE ACTION: Received the information. 5. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred May 14, 2021 through June 10, 2021 Mr. Leiber and Mr. Mizuno responded to questions posed by Chair Pilecki in advance of the meeting. Of particular note, two of the discussions are summarized below.- Check elow.Check No. 302589 (Wire Transfer to Contra Costa Co.) for$5,010.18 (Pape 11 of 65): Mr. Leiber explained this transfer related to a reimbursement to the third-party administrator(TPA) [Benefit Coordinators Corporation (BCC)]for employee Flexible Spending Account (FSA) activities, where the District pays an aggregated figure for the prior month. Mr. Mizuno stated a wire transfer is the contractually obligated manner to reimburse the FSA expenses to BCC. Ms. O'Malley offered that BCC also handles the Medicare reimbursements, retiree billings, COBRA benefits, and commuter program in addition to the FSA oversight for the District. July 1, 2021 Regular Board Meeting Agenda Packet- Page 226 of 231 Page 4 of 8 Finance Committee Minutes June 22, 2021 Page 3 Chair Pilecki noted other expenditures made to BCC in this report, as shown on page 7 of 65 (Check Nos. 302569-302570), and asked how those expenditures differed. It was noted the vendor description implied different entities. Ms. O'Malley stated she would research and report back to the Committee. Update: Toward the meeting end, Ms. O'Malley announced an update to the earlier question. By coincidence, the long-term disability (LTD) administrator VOYA also contracts with BCC as a TPA. Therefore, the payment made for the May LTD premiums was paid to VOYA through BCC. The other payment is for BCC's TPA administration of other benefit services mentioned earlier. Check No. 302618, Information and Computer Services for$36,000 (Pape 17 of 65): Mr. Leiber stated the conversion to the Oracle Enterprise Resource Planning (ERP) system did not provide the stock-inventory functionality that the former SunGard system provided. Staff had to contract with a third-party vendor to help streamline the ability to perform the important internal control function to reconcile stock on-hand vs. system- count that was used in SunGard. This cost relates to the barcode and scanners needed for cycle counts to be more easily managed. There was a discussion about cycle counts and Member McGill's recollection of past issues. Ms. King stated the Warehouse counts every inventory item at least once a year, with higher-dollar and volume items counted twice per year. Mr. Bailey recalled the issue mentioned and stated a prior Committee had been informed of what appeared to be a significant discrepancy, but further investigation showed there was none. Since that time, inventory on- hand versus system recorded amounts have been tracked as a Strategic Plan metric and discrepancies found to be minimal. The Committee requested an update on future inventory count activities, not necessarily quantities but outcome, be brought forward for informational purposes. Ms. King replied she would provide an update moving forward. Member McGill complimented staff on their work to update the expense descriptions which has helped with the Committee's review. COMMITTEE ACTION: Recommended Board approval and requested periodic updates on the status of inventory count report outcomes. July 1, 2021 Regular Board Meeting Agenda Packet- Page 227 of 231 Page 5 of 8 Finance Committee Minutes June 22, 2021 Page 4 b. Receive April 2021 Budget-to-Actual Financial Overview Mr. Mizuno provided an overview of the April report and highlighted that spending remains under projection. With respect to revenues, he advised the report reflects higher than normal Sewer Service Charge (SSC) funds being maintained in the Operations and Maintenance (O&M) fund in preparation for a UAAL' payoff to CCCERA2, which was approved by the Board last week and will be paid by month end. The higher than budgeted revenues in the O&M fund are offset by the negative variance in the Sewer Construction (SC) fund. Mr. Leiber stated that the June report for Sewer Construction will show an additional line item as a funding source to reflect the bond proceeds as part of the UAAL payoff decision. He replied to Chair Pilecki's inquiry that the $58 million bond proceeds will be reflected in the SC fund over a two-year span (FY 2020-21 and FY 2021-22). No money was borrowed for purposes of funding O&M expenditures. Mr. Bailey stated, as an update to the last Finance Committee and last week's Board meeting of bond issuance, that the bond documents have been signed and receipt of funds is expected in the coming days. All the logistical issues have been prepared to get the monies to CCCERA. On that note, Mr. Bailey expressed his appreciation to the team for all the hard work and many tough questions which had to be answered behind the scenes, which were resolved and led to this effort being on the road to success. Moreover, he thanked Mr. Leiber for his tireless work and dedication on the entire process. COMMITTEE ACTION: Recommended Board receipt. C. Review draft Position Paper to adopt Resolution 2021- adopting ICMA- RC's (ICMA) model 457 Plan and Trust document and discontinue maintaining the Plan document in-house Mr. Mizuno stated this matter is more of a housekeeping item that was recently brought to attention to reconcile a decision in 2018 to use the TPA's plan document form; however, no resolution was included with that decision to authorize its use. He indicated no plan changes are proposed by this request. At this time, Central San is considered to be maintaining its own plan. It is recommended by staff and ICMA to adopt 1CMA's model plan to avoid any potential IRS complications. Moreover, Central San does not have an UAAL- Unfunded Actuarial Accrued Liability 2 CCCERA- Contra Costa County Employees' Retirement Association July 1, 2021 Regular Board Meeting Agenda Packet- Page 228 of 231 Page 6 of 8 Finance Committee Minutes June 22, 2021 Page 5 inhouse attorney seasoned in 457 plan matters to constantly monitor IRS changes and any actions needed. By adopting this model by resolution, ICMA monitors and incorporates such changes and would make the plan easier to maintain compliance. Chair Pilecki inquired about Appendix A to the Plan and Trust Document. In past conversations, the minimum dispersal age was raised from 70.5 to 72 years of age; this refers to 70.5 years and asked if the most current version of this document is being used. Ms. Armstrong responded yes. Ms. Armstrong explained that while the SECURE Act went into effect January 2020 (increasing the required minimum distribution (RMD) age to 72 for individuals who attain age 70.5 after December 31, 2019), the model plan document is dated 2017 and does not need to be updated until 2024 to reflect this change per the law. Another recent change under the CARES Act, implemented to address adverse impacts of the pandemic, was the freezing of RMDs during 2020. This provision also is not included in the model plan document nor needs to be. Chair Pilecki requested this clarification be added to the final Position Paper. Chair Pilecki inquired about impacts to the participant loan cap and whether 1CMA's model continued to provide protections to the District against member loans that become delinquent. Ms. Armstrong replied that ICMA maintains a loan provision within the model loan and trust document. The option remains; however, she would need to review timing. She further explained that the IRS sets the maximum loan amount in this scenario, that is why$50,000 is listed. She stated 1CMA will always use the amount the IRS would allow in its standard document in order to remain in compliance. Member McGill noted the IRS letter of opinion on the TPA's plan and asked if Central San had its own. ICMA received a private letter ruling from the IRS following their most recent review of the plan and trust document. Mr. Mizuno stated IRS review is requested on an as-needed basis; however, the District does not have one in-hand. It was concurred that receiving such a letter from the IRS is preferable. Upon inquiry by Member McGill of why it took so long to get to this reconciliation, the joint answer from Mr. Mizuno and Ms. Armstrong explained reasoning as oversight with turnover in staff at both agencies over the past few years; however, by adopting this resolution, the matter would be resolved. COMMITTEE ACTION: Recommended Board approval. July 1, 2021 Regular Board Meeting Agenda Packet- Page 229 of 231 Page 7 of 8 Finance Committee Minutes June 22, 2021 Page 6 6. Other Items a. Receive overview of Accounts Payable internal controls Mr. Mizuno provided an in-depth and thorough explanation of the presentation provided in the agenda materials and responded to questions from the Committee during the review. For reference, Attachment 1 to the memorandum provided a comprehensive overview of the risk assessment staff conducted. During overview of internal control measures in place over this process, he noted the classic preventative control is the importance of segregation of duties so that not one person has control over all of the processing steps. Some controls are manual, some automated; the preference is automated controls. In slide 10, Mr. Mizuno highlighted the District has very strict and safe protocols in place regarding staff accessibility for manual checks, which are not issued often. Chair Pilecki asked how the $2,500 invoice threshold for Finance Manager review was determined as he thought it was a low amount. Mr. Mizuno was unaware of a source document but apparently it has been a longstanding past practice at the District. Chair Pilecki offered that if staff would like to bring an item back to propose raising the limit, it could do so. Discussion followed in slide 11 regarding upcoming processes, such as the current audit that is underway. With implementation to the new ERP system, an auditing standard governing the external financial statement audit includes a comprehensive examination of the internal controls, including the new ERP system. However, since the auditors are not part of the internal control structure, they will not provide a separate report on the internal controls but will note any issues they find as part of the standard report to Management and the Board. The District's internal auditor will not coordinate or rely on the upcoming external auditors'internal control review but may conduct independent reviews of certain areas as part of the annual internal audit plan. Staff noted a separate report on the internal controls related to the ERP will not be provided; however, staff anticipates the typical audit letter addressing observed internal control matters is likely to be available sometime in November or December. Member McGill commented about the concept of public perception of fund expenditures mentioned during the presentation, but also a public perception whether the Board is monitoring expenses. He referred to the Risk Assessment Report provided in Attachment 1 and stated he thoroughly July 1, 2021 Regular Board Meeting Agenda Packet- Page 230 of 231 Page 8 of 8 Finance Committee Minutes June 22, 2021 Page 7 reviewed the material and was satisfied with the content and called attention to the thoroughness of the report. He was pleased the Committee requested this update and staff's compilation of the materials. Chair Pilecki concurred and opined the District is moving in the right direction. COMMITTEE ACTION: Received the report. 7. Announcements — None. 8. Suggestions for Future Agenda Items a. Receive list of upcoming agenda items and provide suggestions for any other future agenda items COMMITTEE ACTION: Received the list. 9. Future Scheduled Meetings Wednesday, li ly 14, 2021 at 1 0:00 � m cancelled v-r , , cmc-rcrr-r-�-vv-u��-r. Tuesday, July 27, 2021 at 2:00 p.m. Tuesday, August 10, 2021 at 2:00 p.m. Tuesday, August 24, 2021 at 2:00 p.m. 10. Adjournment— at 4:10 p.m. July 1, 2021 Regular Board Meeting Agenda Packet- Page 231 of 231