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HomeMy WebLinkAbout04.a. Receive Update on the In-House Treasury Function Assessment Directed by the Board of Directors on September 15, 2022Page 1 of 3 Item 4.a. F__1_448�411C_S0 March 21, 2023 TO: FINANCE COMMITTEE FROM: KEVIN MIZUNO, FINANCE MANAGER REVIEWED BY: PHILIPLEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER SUBJECT: RECEIVE UPDATE ON THE IN-HOUSE TREASURY FUNCTION ASSESSMENT DIRECTED BY THE BOARD OF DIRECTORS ON SEPTEMBER 15, 2022 With the formation of a new Finance Committee, staff has received questions regarding drivers for long- standing finance -related policies and processes, and on the possibility of modernizing certain activities. While questions were initially targeted towards the expenditures and contract review, approval, and reporting protocols, these issues are directly related to and can ultimately be managed within a separate initiative staff has embarked upon early this fiscal year (FY 2022-23). At the September 15, 2022 Board meeting, the Finance Manager gave a presentation to the Board providing an assessment of Central San's treasury function. This assessment provided a background and a pros -cons analysis of Central San's longtime arrangement as a "voluntary pooled participant" of the Contra Costa County Treasurer -Tax Collector's Office. The assessment outlined that the advantages to implementing an in-house treasury function appear to outweigh the disadvantages in several areas, including the following: • Elimination of inefficiencies and redundancies in administrative processes; • Simplification of atypical and unnecessarily difficult bank reconciliations; • Ability to more swiftly implement change and respond to emergency scenarios; • Optimization of modern banking and Enterprise Resource Planning (ERP) technology, and; • Transition to a more common structure for medium sized public agencies like Central San that are both self-sufficient and autonomous. Furthermore, the assessment emphasized that Central San's current staff, comprised of three active CPAs (and a Certified Treasury Professional, or "CTP") in addition to other tenured municipal accountants, have the experience necessary to administer an in-house treasury function. Given the skill set of existing finance division staff and in consideration of treasury procedures already handled in-house (i.e., cash flows, bank reconciliations, liquidity management, etc.), it is projected that there would be minimal impacts to the workload or composition of existing staff (i.e., no increase in headcount), with no adverse impacts to Central San's internal control environment. Following the presentation and discussion, Central San's Board voted unanimously directing staff to pursue the matter further. Specifically, the Board directed staff to conduct the following: March 21, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 136 of 142 Page 2 of 3 1. Assess banking and investment management alternatives and return to the Board with a proposed alternative treasury structure; 2. Develop and present an internal controls risk assessment over the proposed "to be" treasury structure; 3. Develop and propose a draft banking/treasury policy, and; 4. Develop an implementation plan (including RFP development/issuance/assessments and ERP implementation/modifications). At the meeting staff emphasized the value of retaining a qualified and independent consultant to assist with each of the deliverables outlined previously, which the Board was supportive of. Over the past few months following Board direction, staff has reached out to several consultants and organizations to ascertain whether they have the skills, experience, and willingness to contract with Central San to assist with this endeavor. Organizations contacted include the Government Finance Officers Association (GFOA), Regional Government Services Authority (RGS), and a CPA firm. The GFOA was unresponsive to the requests of staff, however quotes were obtained from RGS and Eide Bailly, a national CPA firm with a strong California municipal audit and consulting portfolio. After consideration of the informal proposals and the project needs, staff ultimately selected Eide Bailly for the project with the following primary drivers: 1. The proposed implementation team included active CPAs, which would be particularly valuable considering the need to develop internal controls in a "to be" environment; 2. The CPA firm is independent from and not associated with Central San's current external auditors to ensure ongoing independence; 3. Staff resumes on the project proposal had experience with implementing and administering Oracle at a California public agency, and; 4. The firm had experience providing similar consulting services to other public agencies (i.e., banking/investment RFPs, ERP implementations, policy development, internal control risk assessments, etc.) Central San staff and Eide Bailly are currently working towards finalizing the consulting engagement contract, with work expected to commence no later than early April. Staff anticipates the four initial project deliverables outlined previously to be completed and presented to the Finance Committee by June 2023. Once approved by the Board, staff would commence communications with the County Treasury's Office, development of banking and investment services RFPs, and coordinating with Central San's ERP implementation consultant (Emtec) on making modifications to the ERP system necessary to accommodate an in-house treasury function. Inconsideration of the project's current status and future milestones, it is anticipated that a full transition away from the County Treasury would most realistically be achievable by the start of FY 2023-24 (July 1, 2024). This new timeline, slightly extended from initial expectations communicated to the Board, would allow sufficient time for the prudent planning for and execution of key project steps. The related initiative of revising the Board review process for expenditures is related to this treasury initiative and will be managed within this overall project. The timeline for making that change will also depend on the status of the pending legislation that would enable the Board to establish alternative procedures related to the review of expenditures, which is presently provided for in the State Code provisions for municipal water districts. March 21, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 137 of 142 Page 3 of 3 Strategic Plan Tie -In GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 3 - Maintain financial stability and sustainability GOAL SEVEN: Innovation and Agility Strategy 2 - Implement organization -wide optimization, Strategy 3 - Be adaptable, resilient, and responsive March 21, 2023 Regular FINANCE Committee Meeting Agenda Packet - Page 138 of 142