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HomeMy WebLinkAboutFinance MINUTES 04-25-23 (Special)Page 2 of 7 LCENTRAL SAN SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FINANCE COMMITTEE MINUTES Tuesday, April 25, 2023 10:00 a.m. Committee: Chair Barbara Hockett Member Mike McGill (alternate for Member Lauritzen) Guest: Doug Pryor, Foster & Foster (left after Item 4.a.) BOARD OF DIRECTORS: BARBARA D. HOCKETT President Staff. Katie Young, Secretary of the District Philip Leiber, Deputy General Manager Edgar Lopez, Provisional Director of Engineering and Technical Services Benjamin Johnson, Internal Auditor Kevin Mizuno, Finance Manager Chris Thomas, Accounting Supervisor Shari Deutsch, Risk Management Administrator (left after Item 5.c.) Amelia Berumen, Assistant to the Secretary of the District 1. Call Meetina to Order Chair Hockett called the meeting to order at 10:01 a.m. 2. Public Comments None MARIAHN. LAURITZEN President Pro Tem MICHAEL R. MCGILL TAD J. PILECKI DIVISION 3-VACANT PHONE: (925) 228-9500 FAX.- (925) 372-0192 www.centralsan.org Mr. Mizuno requested Item 4. a. be heard as the first item of business. The Committee agreed to the request. Page 1 May 4, 2023 Regular Board Meeting Agenda Packet - Page 213 of 218 Page 3 of 7 Finance Committee Minutes April 25, 2023 3. Items for Committee Recommendation to the Board The items under this agenda category were heard at the conclusion of Item 5. c. in the remaining agenda order. a. Review and recommend approval of expenditures incurred March 10, 2023 through April 13, 2023 The Committee had no questions. COMMITTEE ACTION: Recommended Board approval. b. Receive Budget -to -Actual Expenditure overview through the month of March 2023 Mr. Mizuno reviewed the overview graphs provided in the agenda in detail. O;}erations and Maintenance (O&M) — No red flags were noted. Mr. Mizuno stated the draft budget for the next fiscal year will be provided to the Board for review next week. The budget will assume, for purposes of projecting reserve levels and based on estimates by managers, that expenditures will be close to the budgeted level this year. However, he emphasized Finance considers these divisional estimates to be conservative and that the year would close with a higher favorable variance than projected in the draft budget. This will provide the Board with the opportunity to dispose of the variance in the fall and apply the funds towards various potential beneficial uses. Mr. Leiber spoke about interpretation of the O&M variance, including the topics of price variance versus quantity variance, with the latter including work that may not have been completed. A price variance example is high inflation, as seen in chemical prices during the year. However, as it pertained to quantity variance, the strategic plan metrics show that, overall, the District's output measures are tracking well which is indicative of important work getting done. Capital — The draft FY 2023-24 budget currently anticipates this year closing at $71 million versus the approved $158 million that contains carry forward from prior years. It is projected $71 million (rounded) will be included in the next fiscal year draft budget for capital improvements. This figure is substantially lower than last year's estimates for FY 2023-24 and demonstrates the efforts of the Capital Division to reassess the Capital Improvement Budget, reprioritize projects, and close some unexpended budgetary carry -forward to reserves. May 4, 2023 Regular Board Meeting Agenda Packet - Page 214 of 218 Page 4 of 7 Finance Committee Minutes April 25, 2023 Mr. Lopez provided additional information on the lower than expected expenditures to date. The Filter Plant and Clearwell Improvements Project, a large construction endeavor, is behind in billing due to a cyber-attack experienced by the contractor. Staff has been working with the contractor and anticipates receiving significant billing soon. Other invoicing challenges have been attributed to delivery issues and other construction challenges. Mr. Leiber stated another important point to reflect upon is that the District uses a cash -based accounting for interim reporting rather than accrual - based accounting. Therefore, if vendors are slow in submitting invoices, it will cause expenditures to be lower than planned, even if work is getting done as scheduled. Accrual -based accounting is only utilized at year-end. The Committee had no further questions. COMMITTEE ACTION: Recommended Board receipt. C. Review draft Position Paper to authorize the General Manager to execute a contract in an amount not to exceed $171,600 with Maze & Associates, Certified Professional Accountants to perform financial audit services for Fiscal Years 2022-23 through 2024-25 with the option to extend for two additional years Mr. Mizuno reviewed the details provided in the draft Position Paper. The Committee had no questions. COMMITTEE ACTION: Recommended Board approval. The agenda moved to Item 5 after a brief recess. 4. Other Items a. Receive Other Post Employment Benefit (OPEB) actuarial valuation as of July 1, 2022 This item was heard out of order as the first item of business. Mr. Mizuno stated some favorable news was presented in the two-year funding report that will aid in the upcoming fiscal year draft budget. Mr. Leiber added with downturns in the market, staff was concerned about potential OPEB cost impacts, but the good news in the actuarial valuation countered those concerns. Mr. Pryor reviewed the Valuation Summary (provided as Attachment 3) in detail and responded to questions posed. May 4, 2023 Regular Board Meeting Agenda Packet - Page 215 of 218 Page 5 of 7 Finance Committee Minutes April 25, 2023 He noted the most popular health plans, as reviewed as part of the benefits summary table on page 1, tend to be Kaiser and Health NeVUnited Healthcare. There are now more retirees than active employees in the study. That increase was first shown in year 2020 and has increased further in 2022 to 291 retirees compared to 280 employees. On page 5 of the summary report, the historical trust graph showed a favorable positive return for FY 2020-21 of $15 million. However, in FY 2021-22 the return was a negative 2.3%. Mr. Pryor advised a smoothing mechanism is used to mitigate the impact of such swings and a dramatic improvement over the year was later shown on page 6 of the summary. The red bar shown on page 6 depicts a growth in trust assets on a smoothed market value basis, demonstrating how trust assets have grown over the past 15 years from nothing to nearly matching OPEB plan's actuarially accrued liability in 2022. The large drop in the ADC (Actuarial Determined Contribution) for FY 2019-20 shown on page 8 was attributed to the District's move to Ca1PERS Healthcare. Coinciding with that reduction, estimated pay -go costs have since flipped with the ADC, with pay -go costs not exceeding the annual ADC requirement. There was some discussion on Medicare and how various needs of care and services change over the years, especially with an increase in life expectancy and the various levels of expenses and assistance needs that are and are -not covered by Medicare and health coverage. Questions posed were answered to the satisfaction of the Committee. COMMITTEE ACTION: Received the information. b. Receive annual update of the Strategic Risk Inventory and Enterprise Risk Management (ERM) Program Ms. Deutsch reviewed the presentation provided with the agenda materials. It was noted that the mitigation plans referred to in slide 3 are confidential as they describe in detail how Central San plans to address the various strategic risks identified. Member McGill inquired how mitigation plans could be shared with the Board should a constituent inquire about the content. Ms. Deutsch suggested that some detail could be provided without sacrificing confidentiality and Mr. Leiber reported that staff is evaluating ways to provide such information to the Board for discussion in the future. Member McGill asked about the possibility of strategic risks not currently captured on the register. Ms. Deutsch noted that while the ERM Team May 4, 2023 Regular Board Meeting Agenda Packet - Page 216 of 218 Page 6 of 7 Finance Committee Minutes April 25, 2023 discusses new issues as they arise, so far each have aligned with at least one of the existing strategic risks. This does not preclude adding new strategic risks should they arise. Mr. Leiber added that periodic ERM presentations to the Committee and to the Board provide an opportunity for Board Members to suggest additional topics and issues for the ERM team's consideration. Ms. Deutsch shared that some of the rating changes from prior reviews reflected in slides 6 and 7 reflected the addition of new team members who brought different perspectives to the risk assessment conversations. Member McGill noted that though those changes were minimal. Ms. Deutsch shared that even though there were no significant changes in the scores, any change in final scores is agreed upon by the entire ERM team. Chair Hockett opined that the relative consistency of risk scores over time represents a form of stability. The Committee recommended Board receipt of the report. COMMITTEE ACTION: Received the update and recommended Board receipt. G. Review Risk Management Loss Control Report as of April 11, 2023 Ms. Deutsch reviewed specific matters listed on the Loss Control Report. Of particular note, a landslide claim in Orinda had been recently closed as it is not a claim but rather an expense matter. The situation is in the hands of Capital Projects and Collection System Operations staff to oversee repair work needed. Staff is working with FEMA (Federal Emergency Management Agency) regarding the expenses for bypass pumping and the necessary repairs. Secondly, a new claim attributed to a bicycle accident on Sycamore Valley Road was submitted by an attorney for claims of imperfections of access lids in the roadway. Staff has responded to public records act requests and will continue its internal investigation. COMMITTEE ACTION: Received the report. At this point, the agenda order returned to the original order balance, beginning with Item 3.a. 5. Announcements None May 4, 2023 Regular Board Meeting Agenda Packet - Page 217 of 218 Page 7 of 7 Finance Committee Minutes April 25, 2023 6. 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. 7. Future Scheduled Meeti Tuesday, May 9, 2023 at 9:30 a.m. (Budget Review) Tuesday, May 23, 2023 at 9:30 a.m. Tuesday, June 20, 2023 at 9:30 a.m. 8. Adjournment — at 11:33 a.m. May 4, 2023 Regular Board Meeting Agenda Packet - Page 218 of 218