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HomeMy WebLinkAbout19.b. Committee Minutes-Finance 11-21-2022 Page 1 of 7 Item 19.b. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT December 1, 2022 TO: HONORABLE BOARD OF DIRECTORS FROM: KATIE YOUNG, SECRETARYOF THE DISTRICT SUBJECT: NOVEMBER 21, 2022 - FINANCE COMMITTEE - PRESIDENT WILLIAMS AND MEMBER HOCKETT (ALTERNATE) Attached are minutes of the above Committee meeting. ATTACHMENTS: 1. Minutes of 11-21-22 meeting December 1, 2022 Regular Board Meeting Agenda Packet- Page 149 of 157 Page 2 of 7 r CENTRAL SAN CONTRACENTRAL •STA SANITARY DISTRICT 5019 IMHOFF REGULAR MEETING OF THE BOARD OF DIRECTORS: DAVID R. WILLIAMS CENTRAL CONTRA COSTA President SANITARY DISTRICT BARBARA D.HOCKETT President Pro Tena FINANCE COMMITTEE MARIAHNLAURITZEN MICHAEL R.MCGILL TAD J PILECKI MINUTES PHONE: (925)228-9500 Monday, November 21, 2022 FAX.- (925)372-0192 2:00 p.m. www.eentralsan.org (All attendees participated via videoconference) Committee: Member Barbara Hockett (alternate for Chair M. McGill) Member David Williams Staff. Roger S. Bailey, General Manager Katie Young, Secretary of the District Philip Leiber, Director of Finance and Administration Benjamin Johnson, Internal Auditor Edgar Lopez, Capital Projects Division Manager (left after Item 5.a.) Kevin Mizuno, Finance Manager Christopher Thomas, Accounting Supervisor Olivia Ruiz, Accounting Supervisor Laci Kolc, Risk Management Specialist Amelia Berumen, Assistant to the Secretary of the District Eileen Hansen, Records Program Administrator 1. Notice This meeting was conducted virtually in accordance with the provisions stipulated in Assembly Bill 361 and adopted on November 3, 2022 by the Central San Board of Directors. The agenda included instructions for options in which the public could participate. 2. Call Meeting to Order Member Williams called the meeting to order at 2:04 p.m. December 1, 2022 Regular Board Meeting Agenda Packet- Page 150 of 157 Page 3 of 7 Finance Committee Minutes November 21, 2022 Page 2 3. Public Comments None. 4. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred October 12, 2022 through November 10, 2022 The Committee had no questions. COMMITTEE ACTION: Recommended Board approval. b. Receive Quarterly Financial Review for quarter ending September 30, 2022 Mr. Mizuno provided an in-depth review of the unaudited quarterly financial report through September and noted staff is wrapping up the prior fiscal year's ACFRI that will be presented to the Committee next month. This year, staff planned in advance for a new GASB2 pronouncement (GASB 87) by retaining a consultant to assist with implementation. Accordingly, no delays are anticipated to the ACFR audit in dealing with the new reporting standard. As it pertained to actual expenditures for the first quarter of the fiscal year, expenditures are slightly under budget, resulting in a favorable year-to-date budget variance. There are three primary underspending categories.- 1) ategories.1) purchased property services; 2) other purchased services; and 3) supplies/materials. The Operations department is responsible for over three-quarters of this favorable variance through the first quarter. Regarding capital expenditures, staff has been collaborating and reviewing details of capital projects and expenditures. Of the 85 active capital projects (shown on page 15 of the report), the remaining budget for only eight projects is responsible for 54% of the total budget remaining in FY 2022-23. The top three projects with the largest unspent balances in the current fiscal year are (in order). Solids Handling Facility Improvements; Pump Station Upgrades; and the Filter Plant/Clearwell Improvements. Member Williams recollected the numerous discussions of underspending and inquired when staff anticipates to being back on track, noting his expectancy that the trend may likely continue this fiscal year. A discussion ensued regarding capital projects and the upcoming two-year rate setting Board action next year. ACFR defined as Annual Comprehensive Financial Report 2 GASB defined as Governmental Accounting Standards Board December 1, 2022 Regular Board Meeting Agenda Packet- Page 151 of 157 Page 4 of 7 Finance Committee Minutes November 21, 2022 Page 3 Mr. Leiber acknowledged this is a significant issue and staff has been actively reviewing and planning, not only for budget setting but on how much can be completed in the near term. He noted that over time, the overall Capital Improvement Budget has increased significantly; however, the 90% budget expenditure achievement has declined due to market challenges. Mr. Bailey added that in addition to the internal work group reviewing the delicacies involved, on a macro level, they will also determine how much work can be completed and ensure the proposed budget is reconciled against the reality seen over the last few years, and decide whether to include new projects into the budget planning that cannot be achieved within the same period. These decisions will be reflected in proposed rate adjustments that will be presented to the Board for consideration. Mr. Lopez concurred and added that the Board will still see the same projects discussed; future projects will be the easier list to pursue. The existing active projects with carry forward are the prime challenge at this time and, based on the information currently in-hand, staff is doing the best they can to manage project budgets. Member Williams noted this will be a rate setting year for the next two years, and acknowledged that no one can absolutely predict emergency rehabilitation or replacement timing needs. As it pertained to rates, Mr. Bailey offered that staff would present a two-year recommendation rather than a four-year setting at the winter Financial Planning Workshop due to the market uncertainties. Mr. Leiber added that it is still early in the process, but staff expects to present a lower proposed adjustment than previously anticipated, with a favorable balancing of several factors, while still meeting required financial metrics and delivery of required projects in the Ten-Year Capital Improvement Plan (CIP). COMMITTEE ACTION: Recommended Board receipt. C. Receive Financial Overview through the month of October 2022 Mr. Mizuno reviewed the monthly overview graphs which demonstrated favorable FY 2022-23 expenditure variances through October 2022. The Committee was satisfied with the overview and did not have further questions. COMMITTEE ACTION: Recommended Board receipt. December 1, 2022 Regular Board Meeting Agenda Packet- Page 152 of 157 Page 5 of 7 Finance Committee Minutes November 21, 2022 Page 4 d. Receive Payroll Operational Audit Report Mr. Johnson reviewed the presentation provided with the report in detail and responded to questions from the Committee. In response to questions posed on the audit of payroll payments, Mr. Johnson clarified that the audit sample was based on a random draw of employees, typically three individuals in each pay period (regarding slide 5); and as it pertained to the results described on slide 6, the audit was conducted by staff and reconciled prior to his review. However, he included the information to memorialize the finding and reconciliation, and noted that management had already implemented steps to begin automation of the process. Member Hockett inquired about the challenging process to implement the new Oracle Enterprise Resource Planning (ERP) system and asked whether the system had been improved and stabilized over time. Mr. Johnson responded that the error rate has declined and added that the payroll function is highly compliance based, but there remains room for improvement. Lastly, in response to Member Williams'inquiry of whether any egregious findings were revealed, Mr. Johnson responded no. He found staff is paid timely and accurately overall, with the limited number of exceptions being reduced since the project go-live. COMMITTEE ACTION: Recommended Board receipt. 5. Other Items a. Receive Highmark Other Post-Employment Benefits (OPEB) and Pension Prefunding Subtrust Reports for the Third Quarter of calendar year2022 Mr. Mizuno reviewed the quarterly OPEB Report information and reported that while the OPEB Trust has fared better in the past month and a half, the losses over the previous nine months of the calendar year far exceed any recent gains. The past year has been difficult on a global scale, but it was emphasized that a long-term perspective is key and that the inception-to- date returns still exceed the OPEB Trust benchmark. He reported that an additional $1 million dollars had been approved by the Board for deposit into the OPEB Trust made possible from positive budgetary variance results of the prior year. Staff is finalizing a Request for Proposal process for actuarial services, currently served by Bartel & Associates. He announced that Bartel &Associates had been recently acquired by a larger entity, Foster& Foster. Mr. Mizuno stated the first order of business with the December 1, 2022 Regular Board Meeting Agenda Packet- Page 153 of 157 Page 6 of 7 Finance Committee Minutes November 21, 2022 Page 5 selected consultant will be the actuarial report to calculate the contributions needed over the next two years (FYs 2023-24 and 2024-25) that will use July 1, 2022 asset values. COMMITTEE ACTION: Received the reports. b. Receive the FY 2021-22 Risk Management Annual Report Ms. Kolc provided a comprehensive overview of the Risk Management Audit Report and various functions being monitored. She responded to limited questions posed by the Committee. The Committee commended the well-done efforts of the Risk Management team. COMMITTEE ACTION: Received the report. C. Receive Announcement of Central San's Participation in a COVID Wastewater Bill Relief Program Mr. Leiber reviewed the content of the announcement as provided with the agenda materials. In short, the District is participating in a program that may help some eligible low-income customers unable to pay utility bills due to the pandemic. However, due to the manner in which the District is paid via the property tax roll, it is not likely a large number may avail themselves to this program; and, many low income customers may rent rather than own. Staff has issued various means to inform customers of the program for educational purposes. To date, no inquires have been received; but, staff will follow-up with the County agency administering the program and interfacing with the public regarding the level of participation seen thus far. COMMITTEE ACTION: Received the announcement. d. Review Risk Management Loss Control Report as of November 7, 2022 Ms. Kolc reviewed the Loss Control Report and highlighted two new items, one of which had been sent to counsel for review. Recently, there was a small inhouse sewer leak that has been repaired but led to a small property loss. December 1, 2022 Regular Board Meeting Agenda Packet- Page 154 of 157 Page 7 of 7 Finance Committee Minutes November 21, 2022 Page 6 Additionally, since this report was produced, two exterior overflow claims and a minor vehicle liability matter were received that will be reflected in the next Committee report. 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 Monday, December 19, 2022 at 2:00 p.m. (Special) 2023 meeting dates to be determined. 10. Adjournment— at 3:10 p.m. December 1, 2022 Regular Board Meeting Agenda Packet- Page 155 of 157