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Home My WebLink About13.c. Committee Minutes-(Special) Finance 11-27-2023Item 13.c. December 7, 2023 TO: HONORABLE BOARD OF DIRECTORS FROM:KATIE YOUNG, SECRETARY OF THE DISTRICT SUBJECT: NOVEMBER 27, 2023 - SPECIAL FINANCE COMMITTEE - PRESIDENT HOCKETT AND MEMBER LAURITZEN Attached are minutes of the above Committee meeting. ATTACHMENTS: Description 1. (Special) Finance Minutes 11-27-23 December 7, 2023 Regular Board Meeting Agenda Packet - Page 94 of 99 Page 1 of 6 SPECIAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FINANCE COMMITTEE M I N U T E S Monday, November 27, 2023 9:30 a.m. Committee: Chair Barbara Hockett Member Mariah Lauritzen Guest: David Alvey, Maze & Associates Staff: Roger S. Bailey, General Manager (arrived during Item 3.d.) Katie Young, Secretary of the District Greg Norby, Deputy General Manager – Operations Philip Leiber, Deputy General Manager – Administration Danea Gemmell, Planning and Development Services Division Manager Edgar Lopez, Capital Projects Division Manager (arrived during Item 3.d.) Benjamin Johnson, Internal Auditor Kevin Mizuno, Finance Manager Christopher Thomas, Accounting Supervisor Diana Diaz, Provisional Accounting Supervisor Shari Deutsch, Risk Management Administrator Geoffrey Michalczyk, Management Analyst (joined durring Item 3.d.) Stacey Durocher, Administrative Services Assistant 1. Call Meeting to Order Chair Hockett called the meeting to order at 9:30 a.m. 2. Public Comments None. BOARD OF DIRECTORS: BARBARA D. HOCKETT President MARIAH N. LAURITZEN President Pro Tem MICHAEL R. MCGILL TAD J. PILECKI FLORENCE T. WEDINGTON PHONE: (925) 228-9500 FAX: (925) 372-0192 www.centralsan.org December 7, 2023 Regular Board Meeting Agenda Packet - Page 95 of 99 Page 2 of 6 Special Finance Committee Minutes November 27, 2023 Page 2 A request was made to hear Item 3.d. as the first order of business, followed by Item 3.a. 3. Items for Committee Recommendation to the Board a. Review and recommend approval of expenditures incurred October 13, 2023 through November 9, 2023 At the conclusion of Item 3.d. on the agenda, the Committee moved to hear Item 3.a. as the next order of business. The Committee had no questions. COMMITTEE ACTION: Recommended Board approval. b. Receive Budget-to-Actual Expenditure overview through the month of October 2023 Mr. Mizuno provided a brief overview of the Budget-to Actual Expenditure Overview included in the agenda materials. Operations & Maintenance Fund (O&M) Expenditures for the O&M fund were $27.9 million and were under the budgeted amount of $31 million. He emphasized this is a higher-than- expected year-to-date variance attributable to timing issues, and that he expects the variance to contract by the close of the year. One specific example he brought up was $1 million in retirement trust contributions that was included in the FY 23-24 budget. While amounts were budgeted in July through October 2023 for this line item, contributions did not commence until Board direction was obtained earlier this month, with the first contribution occurring in late November 2023. Sewer Construction Fund (SCF) The SCF had a total of $18.6 million in expenditures through October and is significantly below the target of $38.28 million, but the pace is expected to pick up throughout the year. Mr. Mizuno also informed the Committee that this was the first month staff was able to display interim budget spreads for the capital improvement budget using project-specific estimates gathered from capital project managers using the newly implemented Oracle EPM capital budgeting tool. The Committee had no questions. COMMITTEE ACTION: Recommended Board receipt. December 7, 2023 Regular Board Meeting Agenda Packet - Page 96 of 99 Page 3 of 6 Special Finance Committee Minutes November 27, 2023 Page 3 c. Receive Quarterly Financial Review for quarter ending September 30, 2023 Mr. Mizuno provided a brief overview of the report included in the agenda materials. It was highlighted that the quarterly financial report includes expenditure results at the line item and organizational unit level detail which is not presented in the monthly overviews. The Committee had no questions. COMMITTEE ACTION: Recommended Board receipt. d. Review draft Position Paper to accept (1) the audited Annual Comprehensive Financial Report (ACFR) for the Fiscal Year ended June 30, 2023 performed by Maze & Associates, and (2) the independent auditors’ memorandum on internal control (MOIC) and required communications for the Fiscal Year ended June 30, 2023. Mr. Alvey from Maze & Associates provided a synopsis of this year’s audit results outlined in the audit opinion letter and the MOIC emphasizing this year’s ACFR would be receiving a clean audit opinion. Mr. Mizuno provided an overview of the presentation included in the a genda materials. He stated the ACFR allows stakeholders to assess the financial condition and performance of the District. He also said a new accounting standard GASB-96 has been implemented to account for Subscription-Based Information Technology Arrangements (SBITA’s) and is requiring the District to report the liability on the balance sheet representing the cost to be paid for these longer-term agreements. In response to Chair Hockett’s question regarding Subscription-Based Information Technology Arrangements, Mr. Mizuno referred to Oracle as an example of a SBITA. He stated the District pays Oracle to access their software which is hosted and maintained by them in the cloud. Mr. Bailey asked what the difference was between cloud-based subscriptions and the annual software agreements that the District has had in the past. Mr. Leiber explained that in the past perpetual licenses were purchased up front, but these agreements typically had an ongoing annual maintenance fee that was accounted for as an O&M expense. Cloud-based subscriptions are longer-term arrangements allowing the consumer access to the product that is being hosted and maintained elsewhere. The accounting profession now views these as obligations that are similar to leases and need to be captured on the balance sheet. December 7, 2023 Regular Board Meeting Agenda Packet - Page 97 of 99 Page 4 of 6 Special Finance Committee Minutes November 27, 2023 Page 4 Mr. Bailey stated that the District has always incurred annual costs that were not required to be disclosed whether they were cloud-based or not but agrees they should be disclosed. In response to Mr. Bailey’s question regarding net unrestricted assets, Mr. Mizuno said that GASB accounting standards significantly limits how much of a government agency’s net position can be reported as “restricted”, and that the most common types of restrictions are related to unspent bond proceeds, unspent legally restricted grant proceeds, or other external restrictions. Mr. Bailey expanded on the topic emphasizing that this is a somewhat contentious topic. He said that the accounting term “unrestricted” is misleading because it doesn’t take into account obligations that the Board may have already approved, nor does it account for some of the money that has been collected for capacity fees. In response to Member Lauritzen’s question regarding depreciation being treated as an expense, Mr. Mizuno stated that depreciation is required to be reported on the ACFR. Member Lauritzen asked who determines the classification of useful life of District equipment. Mr. Mizuno said this is done by Central San staff but is based on a schedule of capital asset useful lives that is disclosed in the footnotes of the ACFR. In closing, Mr. Mizuno reminded the Committee that Central San received the Certificate of Achievement for Excellence in Financial Reporting Award for the Fiscal Year 2021-22 ACFR, and that staff is confident this year’s ACFR for FY 2022-23 would be eligible to receive the award as well. The Committee had no further questions and thanked staff for their fiscal responsibility and transparency. COMMITTEE ACTION: Recommended Board acceptance. 4. Other Items a. Receive Highmark Other Post-Employment Benefits (OPEB) and Pension Prefunding Sub-trust Reports for the Third Quarter of calendar year 2023 Mr. Leiber provided a brief overview of the presentation included in the agenda materials. The Committee had no questions. COMMITTEE ACTION: Received reports and provided input to staff. December 7, 2023 Regular Board Meeting Agenda Packet - Page 98 of 99 Page 5 of 6 Special Finance Committee Minutes November 27, 2023 Page 5 b. Review Risk Management Loss Control Report as of November 9, 2023 Ms. Deutsch reviewed the report included in the agenda materials, and informed the Committee that the Hayden claim has been settled. COMMITTEE ACTION: Reviewed and provided input to staff. 5. Announcements None. 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 and provided input to staff. 7. Future Scheduled Meetings Tuesday, December 19, 2023 at 9:30 a.m. 8. Adjournment – at 10:27 a.m. December 7, 2023 Regular Board Meeting Agenda Packet - Page 99 of 99 Page 6 of 6