HomeMy WebLinkAbout16.c. Receive update on the in-house treasury function assessment directed by the Board of Directors on September 15, 2022Item 16.c.
May 4, 2023
T O: HO NO R A B L E B O A R D O F D I R E C TO R S
F RO M :K E V I N MI Z UNO, F I NA NC E MA NA G E R
RE V IE WE D B Y:P HI L I P L E I B E R , D E P UT Y G E NE R A L MA NA G E R
R O G E R S. B A I L E Y, G E NE R A L MA NA G E R
S UB J E C T: R E C E I V E UP D AT E O N T HE I N-HO US E T R E A S URY F UNC T I O N
A S S E S S ME NT D I R E C T E D B Y T HE B O A R D O F D I R E C TO R S O N
S E P T E MB E R 15, 2022
W ith the f ormation of a new F inance C ommittee, staf f has received questions regarding drivers f or long-
standing finance-related policies and processes, and on the possibility of modernizing certain activities.
W hile 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 (F Y 2022-23).
At the S eptember 15, 2022 B oard meeting, the F inance Manager gave a presentation to the B oard
providing an assessment of Central S an's treasury function. T his assessment provided a background and
a pros-cons analysis of Central S an's longtime arrangement as a "voluntary pooled participant" of the
C ontra C osta C ounty Treasurer-Tax C ollector's Office. T he 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;
Simplif ication of atypical and unnecessarily dif f icult bank reconciliations;
Ability to more swif tly implement change and respond to emergency scenarios;
Optimization of modern banking and Enterprise Resource Planning (E R P ) technology, and;
Transition to a more common structure f or medium sized public agencies like C entral San that are
both self -suf f icient and autonomous.
F urthermore, the assessment emphasized that Central S an's current staff, comprised of three active
C ertif ied Public A ccounts (C PA s), and a C ertif ied Treasury P rofessional (C T P ) in addition to other
tenured municipal accountants, have the experience necessary to administer an in-house treasury
function. Given the skill set of existing f inance division staff and in consideration of treasury procedures
already handled in-house (i.e., cash f lows, 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 C entral San's internal control environment.
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F ollowing the presentation and discussion, C entral San's B oard voted unanimously directing staf f to
pursue the matter further. Specifically, the B oard directed staf f to conduct the following:
1. Assess banking and investment management alternatives and return to the Board with a proposed
alternative treasury structure;
2. D evelop and present an internal controls risk assessment over the proposed "to be" treasury
structure;
3. D evelop and propose a draf t banking/treasury policy, and;
4. D evelop an implementation plan (including R F P development/issuance/assessments and E R P
implementation/modif ications).
At the meeting, staff emphasized the value of retaining a qualif ied and independent consultant to assist
with each of the deliverables outlined previously, which the B oard was supportive of. Over the past few
months f ollowing 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 S an to assist
with this endeavor. Organizations contacted include the Government F inance Officers A ssociation
(G F O A ), Regional Government Services A uthority (R G S ), and a C PA f irm. T he G F O A was unresponsive
to the requests of staff, however quotes were obtained f rom R G S and E ide Bailly, a national C PA f irm with
a strong California municipal audit and consulting practice. After consideration of the informal proposals
and the project needs, staff ultimately selected Eide B ailly f or the project with the f ollowing primary drivers:
1. T he proposed implementation team included active C PA s, which would be particularly valuable
considering the need to develop internal controls in a "to be" environment;
2. T he C PA firm is independent from and not associated with Central S an's current external auditors to
ensure ongoing independence;
3. Staf f resumes on the project proposal had experience with implementing and administering Oracle at
a California public agency, and;
4. T he f irm had experience providing similar consulting services to other public agencies (i.e.,
banking/investment R F Ps, E R P implementations, policy development, internal control risk
assessments, etc.)
C entral San staff and E ide Bailly are currently working towards finalizing the consulting engagement
contract, with work expected to commence no later than early April. Staf f anticipates the four initial project
deliverables outlined previously to be completed and presented to the F inance Committee by J une 2023.
Once approved by the B oard, staff would commence communications with the County Treasury's Of f ice,
development of banking and investment services R F P s, and coordinating with C entral San's E R P
implementation consultant (E mtec) on making modif ications to the E R P system necessary to
accommodate an in-house treasury function. I n consideration of the project's current status and f uture
milestones, it is anticipated that a f ull transition away f rom the C ounty Treasury would most realistically be
achievable by the start of F Y 2023-24 (J uly 1, 2024). T his new timeline, slightly extended from initial
expectations communicated to the B oard, would allow sufficient time for the prudent planning f or and
execution of key project steps.
A related initiative of revising the B oard review process f or expenditures is related to this treasury initiative
and will be managed within this overall project. T he timeline for making that change will also depend on the
status of the pending legislation (A B 759) that would enable the B oard to establish alternative procedures
related to disbursements.
May 4, 2023 Regular Board Meeting Agenda Packet - Page 168 of 218
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Strategic Plan Tie-I n
G O A L FO U R : G overnance and Fiscal R esponsibility
Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility
G O A L S E V E N : I nnovation and Agility
Strategy 2 - I mplement organization-wide optimization, Strategy 3 - Be adaptable, resilient, and responsive
AT TAC HM E NT S :
D escription
1. P resentation
May 4, 2023 Regular Board Meeting Agenda Packet - Page 169 of 218
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1
Update on
In-House Treasury
Assessment Project
Board Presentation
T. Kevin Mizuno
Finance Manager
May 4, 2023
Philip Leiber
Director of Finance & Administration
Table of Contents
1.Background
2.Project Update
3.Next Steps
4.Questions & Discussion
1
2
ATTACHMENT 1
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2
Background
•September 15, 2022 - Board directed staff to
explore in-house treasury arrangement and
return with recommendation and action plan
•Action plan included a risk assessment over the
“to-be” structure, draft treasury policy, and
project implementation plan
•Discussed the operational and strategic
benefits of moving to an in-house treasury
function exceed the drawbacks
•Outlined Central San possesses internal
expertise and staffing size for in-house treasury
transition and maintain segregation of duties
Update on Progress
•In September Board meeting staff emphasized the value of retaining and independent qualified consultant to assist with this engagement
•Reached out to several consultants outlining engagement and discussing their expertise.
•Consultant (Eide Bailly) selected to help with project in consideration of their qualifications, experience, and proposed project plan
•Consultant contract executed April 10th
•Project kickoff meeting held April 19th
Internal Audit
Finding
Project
Discovery
Peer Agency
Benchmarking
Board Briefing &
Direction
Retain a
Consultant Next Steps
3
4
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3
Next Steps
•Risk assessment needed to outline how risks are mitigated in “to be” environment.
•Project timeline outlining key milestones and transition date
•Board Resolution to be drafted opting out of current arrangement with County Treasury and specifying a separation date.
•Treasurer appointed by Board with powers granted.
•ERP system updates and implementation of Cash Management module
•Banking and investment management services selected through formal RFP process.
Risk Assessment Project Timeline Policy
Development Board Action ERP Changes Treasury
Services RFPs
Questions, Feedback
& Discussion
5
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