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HomeMy WebLinkAbout19.b. Committee Minutes-Finance 05-24-2022 Page 1 of 7 Item 19.b. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT June 2, 2022 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARYOF THE DISTRICT SUBJECT: MAY 24, 2022 - FINANCE COMMITTEE - CHAIR MCGILLAND PRESIDENT WILLIAMS Attached are minutes of the above Committee meeting. ATTACHMENTS: 1. Minutes of 05-24-22 meeting June 2, 2022 Regular Board Meeting Agenda Packet- Page 230 of 236 Page 2 of 7 -= I CENTRAL SAN CENTRAL CONTRA COSTA SANITARY DISTRICT 5019 IMHOFF PLACE, MARTINEZ, CA 9,45.53-4392 REGULAR MEETING OF THE BOARD OF DIRECTORS: DAVID R. WILLIAMS CENTRAL CONTRA COSTA President SANITARY DISTRICT BARBARA D.HocKETT President Pro Tent FINANCE COMMITTEE MARIAHNLAURITZEN MICHAEL R.MCGILL TAD J PILECKI MINUTES PHONE: (925)228-9500 Tuesday, May 24, 2022 FAX..- (925)372-0192 2:00 p.m. www.centralsan.org (All attendees participated via videoconference) Committee: Chair Mike McGill Member David Williams Staff. Roger S. Bailey, General Manager Philip Leiber, Director of Finance and Administration Steve McDonald, Director of Operations Jean-Marc Petit, Director of Engineering and Technical Services (joined during Item 4.a.) Danea Gemmell, Planning and Development Services Division Manager (left after Item 6.a.) Stephanie King, Purchasing and Materials Manager Edgar Lopez, Capital Projects Division Manager (joined during Item 4.a.) Kevin Mizuno, Finance Manager Benjamin Johnson, Internal Auditor Olivia Ruiz, Accounting Supervisor Chris Thomas, Accounting Supervisor Shari Deutsch, Risk Management Administrator Amelia Berumen, Assistant to the Secretary of the District 1. Notice This meeting was conducted virtually in accordance with the provisions stipulated in Assembly Bill 361 and adopted by the Central San Board of Directors on May 5, 2022. The agenda included instructions for options in which the public could participate. 2. Call Meeting to Order Chair McGill called the meeting to order at 2:00 p.m. June 2, 2022 Regular Board Meeting Agenda Packet- Page 231 of 236 Page 3 of 7 Finance Committee Minutes May 24, 2022 Page 2 3. Public Comments None. 4. Old Business a. Receive update on question posed at April 19, 2022 Finance Committee meeting regarding an invoice paid for annual soil cap maintenance Mr. Mizuno reviewed the information provided in the agenda materials related to the work activities that were required as part of the 2021 Basin A South soil cap annual maintenance. Chair McGill commented the update was informational and provided more insight and detail than what the invoice description depicted. He opined new Committee Members may also find this information helpful when such tasks are again performed and paid. COMMITTEE ACTION: Received the update. 5. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred April 8, 2022 through May 12, 2022 Staff responded to questions posed of various expenditures to which the Committee was satisfied with the responses. Items requiring staff research are described below. Check 305667 to D&L Supply for$9,420.08 (p. 21 of 78) Chair McGill inquired whether the manhole covers and frames ordered were for the new artistic design type recently approved. Mr. Mizuno stated the invoice description does not clearly define what style, other than the quantity ordered. The intent has been to use the new template moving forward. Staff will confirm and provide an update at the next meeting of the style purchased. Check 201353 to Zentner& Zentner for$5,291.57 (p. 76 of 78) Chair McGill asked for clarification of the "March Testing Services"described for work performed as part of the Outfall Monitoring Improvements capital project. Mr. Lopez advised this firm is under contract to provide environmental permitting services and has supported reviews on the Outfall project, and that the contract is managed by the Regulatory Compliance division. June 2, 2022 Regular Board Meeting Agenda Packet- Page 232 of 236 Page 4 of 7 Finance Committee Minutes May 24, 2022 Page 3 Mr. Mizuno stated the invoice outlined the work performed, which included site review, drone photography of the leveling monuments, various analyses, permit application drafting, and other tasks. This led to a question by Chair McGill of how the approval process works for different departments approving an invoice and `who approves the approvals.'During the discussion, it was questioned whether the invoice was coded to the correct account. Mr. Mizuno clarified that Accounts Payable staff are unable to change the expense account in Oracle if an invoice is linked to a Purchase Order, which was the case for this payment. Mr. Mizuno highlighted that regardless of the code discrepancy, the payment drew properly from the Sewer Construction Fund, was charged to the correct project, and will be capitalized. He emphasized that those characteristics are the most important, and the fact that the "testing"expense code was selected is highly unlikely to cause an issue or trigger an audit concern. Staff was requested to follow-up and provide clarification at the next meeting. COMMITTEE ACTION: Recommended Board approval; requested staff provide an update at a future meeting of the items described above. b. Receive Quarterly Financial Review for quarter ending March 31, 2022 Mr. Mizuno reviewed the quarterly report information provided in the agenda materials. As it pertained to Section 2, on page 4 of the report, Mr. Mizuno advised that the actuals are on target and there was nothing notable found,- assumptions ound,assumptions and trends have been incorporated into the draft FY 2022-23 Budget that the Board will be presented later this week at its Board meeting. He noted there were no indications that spending will exceed the appropriations limit or is not meeting revenue targets sufficient to meet obligations. Other than pulling all the figures and validating the reports are correct, Chair McGill inquired whether this report content provides staff helpful information to assist with managing the District. Mr. Mizuno stated that, internally, staff typically relies on direct access to more detailed information in Oracle to manage their budgets, but this information (quarterly financial packet) is pulled from the same information and provides higher level information. Mr. Mizuno emphasized that while not legally required, high level publicly-available interim financial reports, such as this, provide transparency on spending and revenues, and that reviewing this information helps to fulfill fiduciary obligations of the Board. He said that these type of reports are common for agencies similar to Central San. June 2, 2022 Regular Board Meeting Agenda Packet- Page 233 of 236 Page 5 of 7 Finance Committee Minutes May 24, 2022 Page 4 Chair McGill then asked what staff expects of the Finance Committee of this information. Mr. Leiber responded the information is provided for an overall awareness. Any indication that staff may exceed the budget that would require Board approval or have extraordinary expenses would be specifically brought to the Committee's attention. Mr. Bailey stated he finds this high level overview beneficial to the Finance Committee and management team to see the spending in various categories and how it compared to the budget. He added that, for him, reviewing this content is important, even if it may not necessarily be used by the day-to-day user. Mr. Mizuno and Mr. Leiber reviewed some of the additional graphs provided in the report. Mr. Mizuno stated staff is on target and noted that spending projections for the draft FY 2022-23 Budget have been tightened; currently, there is a 3.5% spending variance projected for FY 2021-22. Chair McGill appreciated the staff insights provided. Member Williams stated he finds the charts and information helpful. COMMITTEE ACTION: Recommended Board receipt. C. Receive Financial Overview through the month of April 2022 Mr. Mizuno reviewed the April financial overview graphs. He stated there was an increase from March in expenditures. As it pertained to the capital expenditures, he noted a slight uptick in April from the 64% target hit in March. He stated the proposed draft Budget for next fiscal year reflects this fiscal year's spending at $83 million, about 73% of the current year target. He estimated the percentage to go up significantly at the fiscal year end, but may be shy of the goal. He confirmed the targeted spending figure backed out $20 million related to the Solids Handling Facility Improvements Project, given the revised scope from the September 2021 decision to reject bids for the project. In reply to Chair McGill's question of what is causing the underspend in capital, Mr. Lopez stated one of the largest drivers in the capital budget is construction projects, some with large contracts. Contractors are having difficulties acquiring necessary equipment, schedules have been difficult. Some spending has not gone as planned, however, staff expects to complete the projects on time although spending has been a challenge. Mr. Lopez stated that despite the many challenges being faced, staff has been working in close partnership with the contractors to find solutions to maintain a schedule without sacrificing design intent or quality. Member Williams inquired about any impacts this may create on rates, especially with a recent Board action to approve a fourth year on the June 2, 2022 Regular Board Meeting Agenda Packet- Page 234 of 236 Page 6 of 7 Finance Committee Minutes May 24, 2022 Page 5 schedule. Mr. Mizuno provided a brief overview of prior year capital roll overs and that due to the many challenges of the pandemic, last year's capital roll over was higher than normal. There was some discussion on this matter. Mr. Lopez advised the Capital Projects Division has several projects ready to close and he is working with staff to reduce the amount of carry forward and is keeping a mindful watch as projects close. He stated the Collection System Program has received many favorable bids and the cost savings are being returned. Lastly, he stated moving forward, staff has adjusted the Capital Improvement Plan for next fiscal year with lowered spending. Member Williams added that if the rollover is the difference, the funds remain and expressed concern that it may pose a stance that the District should not raise rates. Mr. Bailey noted the point made and stated staff reconciles annually and will ensure additional projects are strategically added based on the capacity to execute. COMMITTEE ACTION: Recommended Board receipt. 6. Other Items a. Receive Highmark Other Post-Employment Benefits (OPEB) and Pension Prefunding Sub-trust Reports for the First Quarter of calendar year 2022 Mr. Leiber provided an overview of the information, focusing on the OPEB quarterly update. He explained the first attachment in the agenda packet is commentary information and the second provides investment detail. As anticipated for a challenged market of late, the OPEB fund balance is down 5.3% for the first quarter, consistent with both equity and bond markets being down. Mr. Leiber advised the second quarter is also estimated to be a challenge and may be further down at that quarter's end. He stated with inflation concerns, that were already of concern prior to the Ukraine crisis, the equity and bond market returns are hit hard. Cash was the preferred place to be, but being in cash in an inflationary environment is also not an appealing option either. Overall, Mr. Leiber stated Central San is investing for the long-term and short-term variances are to be expected. He stated the OPEB trust returns have well exceeded expectations since inception in 2009, even with a challenging quarter. Lastly, he advised the District has a well-diversified portfolio and should stay the course. COMMITTEE ACTION: Received the reports. June 2, 2022 Regular Board Meeting Agenda Packet- Page 235 of 236 Page 7 of 7 Finance Committee Minutes May 24, 2022 Page 6 b. Review Risk Management Loss Control Report as of May 11, 2022 Ms. Deutsch stated the Board would receive information of some claim items later this week during a closed session at the May 26 Board meeting. 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 Tuesday, June 21, 2022 at 2:00 p.m. Tuesday, July 26, 2022 at 2:00 p.m. Tuesday, August 23, 2022 at 2:00 p.m. Member Williams announced he will be unable to attend the June 21 and August 23 Committee meetings, and requested staff to coordinate an alternate representative to maintain the Committee schedule. 10. Adjournment— at 3:20 p.m. June 2, 2022 Regular Board Meeting Agenda Packet- Page 236 of 236