HomeMy WebLinkAbout04.a. Follow-up on various matters discussed at the August 24, 2021 Finance Committee meeting Page 1 of 9
Item 4.a.
CENTRAL SAN
September 28, 2021
TO: FINANCE COMMITTEE
FROM: KEVIN MIZUNO, FINANCE MANAGER
REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: FOLLOW-UP ON VARIOUS MATTERS DISCUSSED AT THE PRIOR
FINANCE COMMITTEE MEETING HELD ONAUGUST24, 2021
At the August 24, 2021 Finance Committee meeting, questions were posed to staff that required
additional research. This memo serves as a follow-up to such questions posed at the previous meeting.
1. Hazardous Materials Permitting Costs
Several invoices were selected by the Finance Committee for further discussion that pertained to
hazardous material (Hazmat) permit fees and staff was asked to provide an update at a forthcoming
committee meeting on various Hazmat questions including the following:
Question 1 - Can staff provide additional general background information on Hazmat
requirements and costs?
Staff Response: Hazmat regulatory fees are generated and due for each site with a designated
identification number issued by the Environmental Protection Agency (EPA). Central San has
several EPA identification numbers including one for each of the following sites: Treatment Plant,
Household Hazardous Waste Collection Facility, the Environmental Compliance Work Group,
Collection System Operations (CSO) Headquarters (2), and each Pumping Station (18 total).
Central San pays annual permit fees to the EPA, the California Department of Tax and Fee
Administration (CDTFA, formerly Board of Equalization), and Contra Costa County Health Services.
Each of the fees are based on either the volume of waste generated or number of manifests that are
processed each year. An EPA identification number is required for anyone who generates,
transports, offers for transport, treats, stores, or disposes of Hazmat waste. The I D number is used
to identify hazmat waste handlers and track hazmat waste from the point of origin to its final disposal.
The purpose of this verification fee is to ensure that the information on record for the EPA I D number
is correct and current. In contrast, the CDTFA fee (the "hazardous waste generator fee") is imposed
on anyone who generates five or more tons of hazmat waste at a site in California within a calendar
year. This includes recycled waste, treated wood waste, and waste sent outside California for
treatment or disposal. Lastly, as a Certified Unified Program Agency (CUPA) certified by the state to
regulate the Above-Ground Petroleum Storage Act (APSA), hazardous waste generators, hazardous
material business plans, underground storage tanks, and incident responses. The County permit fee
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 4 of 170
Page 2 of 9
covers oversight costs associated with CUPA.
Question 2- What has been the historical cost for Hazmat permit compliance?
Staff Response: Attachment 1 provides a historical cost trend utilizing information maintained by
Central San's Safety team. The annual average cost over the four-year time span presented was
$31,356.
Question 3 -Per review of the Board Expenditures packet presented to the Finance Committee
in August, why was the CSO division not listed as being costed?
Staff Response: The CSO site has two EPA sites that must pay a fee; one for the lower yard and
another for the vehicle service shop. As the costs associated with these two sites are relatively
immaterial, they have historically been budgeted in the Safety cost center.
Question 4 -A large spoils pile cost with the Keller Landfill was observed on the Board
Expenditures packet presented to the Finance Committee in August. Does this activity
necessitate any Hazmat compliance requirements?
Staff Response: The CSO spoils hauled to the Keller Landfill are not considered a "Class 1"
hazardous material, and therefore do not trigger compliance with Hazmat program permitting and
reporting requirements. The Keller Landfill is considered a "Class 2" landfill and can accept the
CSO spoils, which are sampled.
2. Assessment of Historical Legal Costs
Upon review of the Board Expenditures packet, the Finance Committee noted that there are several legal
firms utilized by staff and inquired about the total amount of legal costs incurred by Central San as a
whole. Staff was asked to provide information illustrating the historical trend of legal costs incurred by
Central San to provide additional context on the issue. As summarized in Attachment 2, staff prepared a
four-year trend analysis of legal costs (three years of actual cost and one year of budget) separated by
type. The various "types" of legal costs being tracked in the accounting system include "Board advice"
and "staff advice" (both of which are reported in the O&M fund), and legal services associated with
"litigation" which is reported in the Self-I nsurance fund. Legal costs fluctuate significantly, driven largely by
incidents of contested claims, compliance with new laws/regulations, new significant/unforeseen
circumstances requiring legal consultation to develop policy or strategy(i.e. the COVI D-19 pandemic),
and labor negotiations every few years. As illustrated in Attachment 2, the average total annual legal costs
incurred by Central San was approximately$691,887, with a high of $850,080 and a low of$404,618 over
the four-year time frame presented.
3. Minor revision to format of p-card expense report
Staff was asked to look into alternatives for modifying the existing system-generated P-Card expense
report allowing for transactions to be more easily traced to the associated check register. Reconciliations
between the two different reports sourced from two different accounting sub-ledgers are somewhat
difficult as the custom developed P-Card expense reports are sorted by P-Card expense report number,
while the check register is unable present the P-Card expense report numbers. As such, the only way to
reconcile the detail presented between each of the two reports is by using individual P-Card statement
totals, which is a somewhat difficult task.
Staff shared this concern with Oracle implementation consultants, Emtec, who reconfigured the
customized P-Card expense reports to be sorted by expense report total and include the cardholder
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 5 of 170
Page 3 of 9
name, which also appears on the check register. Following testing and validation efforts by the Finance
division and Emtec staff, the new system-generated P-Card expense reports work correctly and can now
be quickly and easily reconciled to the associated US Bank charges appearing on the check register.
While the customized P-Card expense reports were already a significant improvement from what was
previously available in the old legacy system, staff appreciates the feedback from the Finance Committee
and is hopeful this improvement makes the reports more transparent and user friendly.
4. Temporary financial reporting delays attributable to Oracle transition
As announced at the August 24, 2021 Finance Committee meeting, staff communicated that,
unsurprisingly, it was taking longer than normal to complete the first year close of the fiscal year-end books
following the implementation of Oracle Cloud Fusion during FY 2020-21 (September 1, 2020). At that
meeting, the Finance Committee asked for a more detailed assessment of the causes of this delay and
the potential impacts, if any.
The following is a listing of the primary drivers that are causing the year-end accounting close process to
take longer than normal:
A. New accounting systems and processes - Unlike Central San's legacy accounting system
from of the past two decades, the new accounting system is a fully integrated cloud-based enterprise
resource system (ERP)that allows for document uploads (i.e. invoices,journal support, etc.) as well
as automated logic-based electronic approval controls with an audit trail. A significant advantage of
the system sub-modules being fully integrated and requiring customized electronic approvals is that
core accounting operations transactions (i.e. payroll, accounts payable, P-Cards, etc.) require
multiple layers of approval to be posted/finalized. Conversely, with such an integrated and complex
system, if everything is not"perfect" it takes additional time to identify, investigate, and resolve
issues. For instance, previously an invoice's approval status did not significantly impact the year-end
accounts payable close process. Regardless of an invoice's approval status, if it was a cost
belonging in the prior fiscal year, it would be accrued (if material). In Oracle, an invoice cannot be
posted and accrued by the sub-ledger until it has been approved in the system by the appropriate
employee. This new configuration necessitated new efforts by Finance staff to run system queries
to isolate invoices and follow up with the underlying approving parties. Similar new efforts were
needed for the Expenses module, used to process P-Card and employee reimbursements.
B. Implementation of Fixed Assets Module -While not critical for interim accounting and financial
reporting purposes (i.e. July through May), the recording of new assets, the disposition of old assets,
and calculation of depreciation is a critical component of the fiscal year-end closing and annual
financial reporting process. Given more critical operational priorities faced during the implementation
of the ERP's core systems in September 2020, staff opted to defer full implementation of the Fixed
Assets sub-module to June 2021. In doing so, its completion would not interfere with that of more
essential sub-modules in September 2021, or the later implementation of the new Oracle PBCS
budget module needed for budget development in the January through May period. Roll-out of the
new Fixed Assets module was not completed until mid-August, delaying the close of the June 2021
financials and preventing staff from delivering the trial balance to Central San's independent auditors
until September 3, 2021.
C. New Chart of Accounts - Beyond the complications of implementing a new state-of-the-art ERP
system, another massive undertaking associated with this project was the design, rollout, and post-
implementation management of a new chart of accounts. A staff presentation to the Board was
delivered on September 3, 2020, that outlined the major impacts arising from the implementation of
the new chart of accounts. Some complications encountered included: the consolidation of several
redundant and excessively detailed accounts into a single account, the splitting of vague accounts
into new ones, and the creation of new accounts to improve data collection and reporting abilities.
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 6 of 170
Page 4 of 9
While this necessitated increased efforts during interim month close periods to ensure the new
accounts were being used properly, the workload to review accounts was significantly expanded
during the fiscal year-end close process, where the balance sheet is much more scrutinized prior to
the independent audit. When problems were identified, these also had to be corrected. This took
extra time, and was another additional step that was not necessary in prior years.
While each of these factors has attributed to closing the annual books taking longer than normal, staff is
confident the consequences will be largely insignificant. At this time, staff is still confident Central San will
be able to issue the FY 2020-21 annual audited financial statements to the Board by December 2021.
However, should staff require additional time, there are three primary deadlines to consider: (1) California
Government Code section 26909 requires an audit to be completed and filed with the State Controller's
Office (SCO)within twelve months after the close of the fiscal year, (2) California Government Code
section 53891 requires an annual Financial Transactions Report (FTR)for each local agency be submitted
to the SCO within seven months of the fiscal year end, and (3)to be eligible to apply for the Certificate of
Achievement for Excellence in Financial Reporting award issued by the Government Finance Officers
Association (GFOA)the audit must be completed no later than six months after fiscal year end. As the
GFOA grants 30-day extensions to award applicants with reasonable circumstances, the absolute deadline
to complete and issue the audited financial statements is by the close of January 2022, a deadline staff is
confident Central San will meet.
In regards to interim financial reports, while the June unaudited quarterly results are expected to be
presented at the September 28, 2021 Finance Committee meeting, it is expected that the July and August
financials will be delivered to the Finance Committee for review at the October 26, 2021 Committee
meeting. The delay in wrapping up these early interim financial reports does not have any impacts on the
Finance division's ability to monitor cash flows and internal financials for operational purposes.
Furthermore, these early interim financial reports do not contain a significant amount of predictive
information on expenses and revenues given how early in the fiscal year they are, and considering that the
bulk of operational revenues are not received until December of each year.
5. Follow=up on Recoup of 200/210 Porter Drive, San Ramon, Sewer Service Charge
Reimbursement
At the July 27, 2021 Finance Committee meeting, upon review of the Board Expenditures packet
Committee members selected a payment made to Jackie Howes in the amount of$54,039.76 for the
reimbursement of sewer service charge sewer fees. At that time, Planning and Development staff clarified
that the overcharge arose from a parcel split resulting in Ms. Howes' parcel incorrectly being assigned
fixed a residential bill rate and adjacent parcel being charged a commercial volumetric rate. Finance
Committee members requested staff provide a follow-up at a later date on efforts to collect the under-
billed amount on the adjacent parcel (APN 208-500-005).
Following consultation with legal counsel, pursuant to California Code of Civil Procedure section 338(d),
staff has taken the position that Central San is entitled to bill and collect for three years of corrected
charges, which amounts to $42,111.50. On September 8, 2021, staff submitted an invoice to the property
manager of 200/210 Porter Drive in San Ramon including a cover letter(Attachment 3) providing a
synopsis of the issue, the amount due in arrears, and providing contact information should they have
additional questions or concerns. While the attached invoice specified payment terms of 90 days, as of
the date of this memo staff has not received a response from the customer. Staff intends to contact the
customer by the close of September 2021 if a response or payment is not received by then.
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 7 of 170
Page 5 of 9
Strategic Plan Tie-In
GOAL THREE: Fiscal Responsibility
Strategy 2—Ensure integrity and transparency in financial management
ATTACHMENTS:
1. Hazardous Materials Compliance Historical Cost Trend
2. Legal Expense Historical Trend Analysis
3. Porter Drive SSC Recovery Letter dated 09-08-21
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 8 of 170
Attachment 1
Central Contra Costa Sanitary District
Hazardous Materials Compliance Historical Cost Trend
Treatment Plant Hazardous Waste Fee
2017 2018 2019 2020
Total Tons of Hazardous Waste
Calendar Year 221.02 3.49 9.65 292.41
DTSC EPA ID Verification Fee $247 $225 $225 $360
CDTFA Hazardous Waste Generator Fee $4,488 $230 $239 $24,660
County Hazardous Material Program
Permit Fee by Fiscal Year $17,040 $19,256 $24,276 $34,177
Total Fees $21,775 $19,711 $24,740 $59,197
Notes:
• Tons are calculated by calendar year.
• California Department of Tax and Fee Administration (CDTFA) Hazardous Waste Generator Fee is based on the amount (tons)
of hazardous waste generated during a specified calendar year.
• 2017 and 2020 had larger volumes due to soil removal and tank cleanings which increased the number to tons of hazardous
waste.
• DTSC EPA ID Verification fee is based on the number of hazard waste manifests processed per calendar year
• Contra Costa County Hazardous Material Program Permit Fee is calculated on tons of hazardous Waste, APSA, Volume
Hazardous Material Stored on site.
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 9 of 170
Central Contra Costa Sanitary District Attachment 2
Historical Legal Cost Trend
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22
Fund Type Actual Actual Actual Budget
O&M Legal Services- Board Advice $ 107,405 $ 66,913 $ 254,578 (1) $ 250,000 (1)
Legal Services-Staff Advice 474,663 (2) 171,952 350,141 460,080 (3)
582,067 238,865 604,720 710,080
Self Insurance Legal Services- Litigation 141,706 165,753 184,358 140,000
Total Legal Costs $ 723,773 $ 404,618 $ 789,077 $ 850,080
Foot Notes:
(1) Increases in FY 20-21 and FY 21-22 primarily attributable to CVRA compliance
(2) Increase in FY 18-19 largely attributable to transition to legal consultation in relation to CaIPERS healthcare transition as well as
implementing the tail end of several provisions negotiated in the 2017 MOUS (HRA, cafeteria plan changes, etc.)
(3) Increase in FY 21-22 largely attributable to transition COVID labor and payroll law compliance, prepping for labor negotiations, and
implementing constructive compliance issues.
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
FY 2018-19 Actual FY 2019-20 Actual FY 2020-21 Actual FY 2021-22 Budget
■Legal Services-Board Advice ■Legal Services-Staff Advice ■Legal Services-Litigation
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 10 of 170
Page 8 of 9
ICENTRAL SAN Attachment 3
CONTRACENTRAL •STA SANITARY DISTRICT 5019 IMHOFF
September 8, 2021 PHONE: (925)228-9500
FAX: (925)228-4624
www.ceiitralsan.org
ROGER S.BAILEY
Ms. Cindy Casha, Property Manager General Manager
L.
Deerwood Investors/The Five Company xENTONALM
Y p Y Counsel for the DDistrict
210 Porter Drive (510)375-4577
San Ramon, CA 94583 KATIE YOUNG
Secretary of the District
Dear Ms. Casha:
SUBJECT: ANNUAL SEWER SERVICE CHARGES FOR 200 and 210 PORTER DRIVE,
SAN RAMON; APN 208-500-005
Central Contra Costa Sanitary District recently reviewed our billing records and determined that
your parcel on Porter Drive has been billed incorrectly for the past several years. We believe
that a parcel split in 2015 caused the incorrect water meter to be linked to your parcel in our
billing system. Sewer service charges for non-residential parcels are calculated based on
domestic water consumption, and the use of the wrong meter for sewer billing resulted in
abnormally low charges for four years. The table below shows the annual Sewer Service
Charges billed to your parcel.
Incorrectly
billed to
Billed to the adjacent Difference
your parcel parcel (3 prior years)
FY 2014-15 $10,687.82
FY 2015-16 14,147.36
FY 2016-17 12,574.50
FY 2017-18 530.00 $12,458.26
FY 2018-19 566.00 11,893.20 $11,327.20
FY 2019-20 566.00 15,244.82 14,678.82
FY 2020-21 566.00 16,671.48 16,105.48
FY 2021-22 18,356.64
TOTAL $42,111.50
The water meter issue has been corrected in our billing system. As seen from the table, the
FY 2021-22 Sewer Service Charge will increase significantly from the previous four years. The
FY 2021-22 charge will appear on your property tax bill, which you should receive this fall.
By way of this letter, Central San is billing you for the difference between the correct amounts
and the amounts that you were actually charged for fiscal years (FY) 2018-19, 2019-20, and
2020-21. Central San believes that we are entitled to bill and collect these three years of
corrected charges under California Code of Civil Procedure Section 338(d) which allows a
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 11 of 170
Ms. Cindy Casha
Page 2 Page 9 of 9
September 8, 2021
three-year window for "an action for relief on the ground of fraud or mistake."
If you need to discuss payment terms or you have any questions regarding this issue, please
feel free to contact Senior Engineer Thomas Brightbill by e-mail (tbrightbill@centralsan.org) or
telephone (925 229-7338.)
Sincerely,
Danea S. Gemmell
Planning and Development Services Division Manager
DSG:TB:nc
encl. Invoice
cc: Kent Alm, Central San District Legal Counsel
Job File 3349
September 28, 2021 Regular FINANCE Committee Meeting Agenda Packet- Page 12 of 170