HomeMy WebLinkAbout03.f. Review draft PP to adopt proposed resolution establishing independent treasury function separation frmo CCC treasury, and adopt BP 051 banking and cash managementPage 1 of 17
Item 31
BOARD OF DIRECTORS
POSITION PAPER
MEETING DATE: APRIL 16, 2024
SUBJECT: REVIEW DRAFT POSITION PAPER TO ADOPT PROPOSED RESOLUTION
2024-XXX ESTABLISHING CENTRAL SAN'S INDEPENDENT TREASURY
FUNCTION AND SEPARATION FROM THE CONTRA COSTA COUNTY
TREASURY POOL AND ADOPT BP 051 BANKI NG AND CASH
MANAGEMENT
SUBMITTED BY: INITIATING DEPARTMENT:
KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION -FINANCE
REVIEWED BY: PHILIP LEIBER, DEPUTYGENERAL MANAGER -ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
ISSUE
Central San's Board previously directed staff to pursue an in-house treasury function to improve the
efficiency of operations, be better positioned to nimbly respond to unforeseen operational and
environmental events and be more aligned with the treasury structure of similarly sized agencies.
Following the selection of US Bank to provide banking, custodial safekeeping, and merchant card services
on March 21, 2024, the next step towards the implementation of an in-house treasury structure is the
approval of a Resolution to withdrawal from the County Pool and the adoption of policies and procedures
appointing a District Treasurer amongst other matters.
BACKGROUND
Central San is a voluntary participant in the Contra Costa County (the County) Treasury Pool and has the
option to depart and implement an in-house treasury function with proper Board authorization. California
Government Code section 61053 outlines the process in which an independent special district such as
Central San can separate from the respective county and "establish an alternative depository." The
attached Resolution (Attachment 1) addresses the various requirements spelled out in California
Government Code section to withdrawal from the County Pool and implement an in-house treasury
function. Once approved by Central San's Board of Directors (the Board), the Resolution must be
presented to the County Board of Supervisors allowing Central San to move forward with implementing
full banking services with US Bank, the bank selected by Central San following a formal request for
proposal solicitation process. As a requirement of the County, the Resolution specifies a "not to
exceed" implementation timeframe of fifteen (15) months from the approval date of the Resolution, even
though it is the goal of staff to implement an in-house treasury structure in September 2024.
With the support of a third -party consultant (Eide Bailly), staff developed a draft Banking & Cash
Management board policy (BP 051) establishing key policies over the prudent management of its treasury
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 130 of 150
Page 2 of 17
function, including the appointment of the Deputy General Manager of Administration as the District's
Treasurer (Attachment 2). 1 n conjunction with the approval of the attached Resolution, the Board is also
being asked to adopt BP 051 at this time. To supplement to this a thorough process -level Banking & Cash
Management Administrative Procedures (AP 051) document was also developed to serve as a General
Manager directive to staff regarding key treasury processes (Attachment 3). While it is Central San's
policy that Administrative Procedures are within the authority of the General Manager and do not require
Board authorization, AP 051 is being presented to the Board to enhance the transparency of forthcoming
internal treasury protocols once an in-house treasury structure is implemented. A major objective of AP
051 is to establish clear roles, responsibilities, expectations as well as limitations for key staff involved in
the treasury management function.
Following the Board's approval of the attached Resolution as well as BP 051, staff will coordinate with
County officials to obtain the necessary authorization by the County Board of Supervisors to proceed with
the County Treasury Pool withdrawal process. While the attached draft resolution currently anticipates
presentation to the Board for approval on May 2, 2024, it is reasonably possible this date will be
postponed until staff receives confirmation from Contra Costa County Legal Counsel that the language is
acceptable for presentation to their Board of Supervisors. If delays do occur, staff is optimistic the final
resolution can still be presented to the Board for approval no later than July 2024. Regardless, it is
prudent to continue with Finance Committee review at this time in consideration of several upcoming in-
house treasury implementation project milestones with final implementation still scheduled for September
2024. Any changes to the attached resolution will be highlighted out in the forthcoming Board position
paper. Concurrently, staff will also be working to complete solicitation for investment advisory/management
services and make a contract recommendation to the Board sometime in July or August 2024. Staff will
also commence efforts with its enterprise resource planning (ERP) consultant and US Bank to implement
banking system integration functionalities (i.e., bank reconciliations, payments, deposits, etc.) and
appropriate system -based internal controls and security.
ALTERNATIVES/CONSIDERATIONS
The Board may direct amendments to the attached Resolution or Banking & Cash Management Board
Policy (BP 051), which can either be directed at this meeting or effectuated by requesting staff to return
with revisions to either of the documents for consideration at a later date. Staff does not recommend
deferring the adoption of the Resolution or BP 051 as it could adversely impact the in-house treasury
implementation target of September 2024 and other contemporaneous project efforts (i.e., ERP
modifications, solicitation and selection of and investment advisor/manager, etc.).
FINANCIAL IMPACTS
The recommended action to approve the attached Resolution and Banking & Cash Management Board
Policy by itself will not have any immediate or direct financial impacts. As required by the County and/or
state law, California Sanitary Districts that maintain their own treasury function are required to obtain and
maintain both crime & fidelity Insurance as well as a surety bond, which must be deposited annually prior to
October 1 st of each year at an amount determined by the Board. While Central San already possesses
crime & fidelity Insurance, the coverage and amount will be re -assessed during insurance renewal
process. It is also unclear what size of a surety bond will be appropriate, which is being assessed
currently by Risk Management and Finance Division staff, as well as project implementation consultants,
Eide Bailly. The additional cost for expanded insurance coverage and meeting the surety bond
requirements is not expected to be significant and is expected to be covered by the FY 2024-25 Self
Insurance fund budget. Any costs in excess of Board approved Self -Insurance fund budget will be
brought back to the Board for approval as required by policy.
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 131 of 150
Page 3 of 17
COMMITTEE RECOMMENDATION
The Finance Committee reviewed this matter at its meeting on April 16, 2024 and recommended
RECOMMENDED BOARD ACTION
Approve the proposed Resolution 2024-xxx establishing Central San's own treasury function and
separation from the Contra Costa County Treasury Pool and adopt a Banking & Cash Management Board
Policy (BP 051) appointing the Deputy General Manager - Administration as the District's Treasurer.
Strategic Plan re -In
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 3 - Maintain financial stability and sustainability
GOAL SEVEN: Innovation and Agility
Strategy 2 - Implement organization -wide optimization
ATTACHMENTS:
1. Proposed Resolution
2. Banking & Cash Management Board Policy (BP 051)
3. Banking & Cash Management Administrative Procedures (AP 051)
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 132 of 150
Page 4 of 17
Attachment 1
RESOLUTION NO. 2024-XXX
A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT
AUTHORIZING TRANSFER OF TREASURER AUTHORITY FROM CONTRA COSTA
COUNTY TO THE BOARD OF DIRECTORS OF THE CENTRAL CONTRA COSTA
SANITARY DISTRICT APPOINTING A DISTRICT TREASURER AND AUTHORIZING
THE DEPOSIT OF DISTRICT FUNDS WITH U.S. BANK
WHEREAS, the Central Contra Costa Sanitary District (Central San) is a special district
and a public entity established under the Sanitary District Act of 1923 and operating
pursuant to California Health and Safety Code section 6400 et seq;
WHEREAS, Health and Safety Code sections 6405 and 6801 provide that the Contra
Costa County Treasurer shall be Central San's Treasurer and depository, and maintain
custody of all Central San funds, unless Central San establishes an alternative District
Treasurer and depository pursuant to Health and Safety Code section 6801;
WHEREAS, Central San intends to withdraw its money from the County treasury and
appoint a District Treasurer;
WHEREAS, Central San has a system to record its financial transactions under
generally accepted accounting principles that is available upon request to reflect Central
San's financial position as well provide sufficient records to be audited by an
independent auditor;
WHEREAS, Central San undergoes an annual financial statement audit as engaged by
an independent auditor and the audit is conducted under generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General of
the United States;
WHEREAS, Central San has a system of internal controls over its various transaction
cycles and business operations, including having developed procedures for drawing and
signing checks, for preventing fraud and ensuring accountability, and ensuring that bond
principal and salaries shall be paid when due;
WHEREAS, it is the policy of Central San to pay claims and demands before they are
approved by the Board of Directors if the Treasurer determines that the claims and
demands conform to Central San's approved budget;
WHEREAS, to establish an alternative depository for Central San funds, Health and
Safety Code section 6801 requires Central San's Board of Directors to fix the amount of
the surety bond for Central San's District Treasurer;
WHEREAS, Central San's Board of Directors approved the establishment of a bank
account with US Bank as a depository for Central San's funds;
WHEREAS, it is the desire of Central San's Board to appoint a District Treasurer and
establish an alternative depository to the County Treasurer, pursuant to Health and
Safety Code section 6801.
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 133 of 150
Page 5 of 17
Central Contra Costa Sanitary District
Resolution No. 2024-XXX
Page 2 of 3
NOW, THEREFORE, BE IT RESOLVED that:
Section 1. The Recitals set forth above are true and correct and are incorporated into
this Resolution by this reference.
Section 2. Central San's Board hereby appoints the Deputy General Manager -
Administration as its District Treasurer who will serve in the place of the County
Treasurer.
Section 3. Central San's Board wishes to withdraw its money from the County Treasury
and hereby states its intention to withdraw its money from the County Treasury and
have all revenues collected by the County on behalf of Central San sent to US Bank.
Section 4. Central San's Board hereby states that Central San will establish its own
relationship with the Local Agency Investment Fund ("LAIF").
Section 5. Central San's Board and the County Board of Supervisors shall determine a
mutually acceptable date for the withdrawal of the district's money from the County
Treasury to take place but no later than 15 months from the date of this Resolution.
Section 6. Central San's Board hereby designates US Bank as the depository of Central
San's money.
Section 7. Central San's District Treasurer and all Central San employees responsible
for handling Central San's finances shall be covered in the amount set forth in Central
San's Employee Dishonesty (Crime & Fidelity) Insurance Policy with National Union Fire
Insurance Company of Pittsburgh, PA.
Section 8. Central San's District Treasurer shall make quarterly or more frequent written
reports to Central San's Board, as the Central San Board shall determine, regarding the
receipts and disbursements and balances in the accounts controlled by Central San's
District Treasurer.
Section 9. Central San's Board shall determine the amount of a surety bond that will be
deposited by the District Treasurer annually prior to October 1 of each year.
Section 10. Central San's management has developed a system of internal controls,
policies, and procedures regarding Central San's system of accounting, the drawing of
checks, the timing of payments such as bond principal, salaries, and other demands
and claims.
Section 11. The Board Secretary shall certify the adoption of this Resolution.
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 134 of 150
Page 6 of 17
Central Contra Costa Sanitary District
Resolution No. 2024-XXX
Page 3 of 3
PASSED AND ADOPTED this 2nd day of May 2024, by the Board of Directors of the
Central Contra Costa Sanitary District by the following vote.
AYES: Members:
NOES: Members:
ABSENT: Members:
Mariah N. Lauritzen
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
COUNTERSIGNED:
Katie Young, CPMC, CIVIC
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
Approved as to form:
J. Leah Castella, Esq.
Counsel for the District
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 135 of 150
Attachment 2Page 7 of 17
Number: BP 051
Central Contra Costa
Sanitary District
Authority: Board of Directors
Effective: XX/XX/2024
Revised: Not applicable
Reviewed: Not applicable
Initiating Dept./Div.: Administration/Finance
BOARD POLICY
BANKING & CASH MANAGEMENT
PIJRPnSF
To set forth policy direction for banking and cash management at Central San.
POLICY
1. The Board recognizes the strategic value of maintaining an in-house treasury function
as it relates to improved operational control, process efficiencies, and responsiveness
to change (i.e., emergencies, disasters, laws/regulations, programs, etc.).
2. Management shall establish and enforce suitable internal controls over the banking
and cash management function to safeguard Central San's liquid assets. A wide
range of internal controls should be considered including those that are preventative,
detective, as well as corrective.
3. The Deputy General Manager of Administration shall serve as Central San's Treasurer
with specific authorities set forth in internal administrative procedures.
4. Banking and custodial safekeeping services must be authorized by the Board.
AUTHORITY
The General Manager has the authority to execute all banking and custodial safekeeping
service agreements once the necessary Board authority to proceed is obtained. The
General Manager shall establish, implement, and enforce administrative procedures to
support this policy.
PERIODIC REVIEW
This policy shall be reviewed at least biennially to ensure alignment with current strategic
priorities set by the Board. Any changes must be approved by the Board following initial
review by the Administration Committee.
[Original Retained by the Secretary of the District]
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 136 of 150
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Attachment 3
Number: AP 051
Related Board Policy: N/A
Authority: General Manager
Effective:
Revised:
Reviewed:
Initiating Dept/Div: Administration/Finance
Date Signed:
Philip Leiber, Deputy General Manager, Administration
Roger S. Bailey, General Manager
ADMINISTRATIVE PROCEDURE
BANKING & CASH MANAGEMENT
1. PURPOSE
To set forth administrative procedures over Central San's banking and cash management
functions establishing requirements for opening, closing, updating, and managing bank
accounts and cash balances. Beyond ensuring the security of Central San's monetary assets,
this policy shall also outline protocols to ensure Central San maintains adequate liquidity for
covering operations while minimizing idle cash for utilization in the investment portfolio.
2. SCOPE
The policies in this document shall apply to all employees involved in the banking and cash
management function. Excluded from the scope of this administrative procedure are many
policy requirements associated with Central San's investments, accounts payable, payroll,
and cash receipts processes as those are covered in separate related policies listed hereafter.
3. RELATED POLICIES
This policy focuses on the administrative procedures associated with banking protocols.
Other administrative procedures covering protocols associated with cash management
include the following:
a. Investments (BP 005)
b. Petty Cash Reimbursements (AP 103)
c. Cash Receipts Handling (AP 105)
d. Bi-weekly Payroll Funding (AP 107)
e. Accounts Payable (AP 108)
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 137 of 150
Number: AP 051
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Attachment 3
BANKING & CASH MANAGEMENT
Page 2 of 10
C!
5
BACKGROUND
Central San's Banking & Cash Management Administrative Procedures were developed in
preparation for its transition from being a voluntary pooled participant with the Contra Costa
County Treasurer Tax Collector's Office to taking the treasury function (i.e., banking and cash
management) in-house. Following several months of deliberation and planning involving peer
agency benchmarking, risk assessment analysis, best practice research, independent
professional consultations, and public discussions with the Board, it was concluded that a
transition to an in-house treasury function was in the strategic best interest of Central San.
As a prerequisite to this move, the Board took action to appoint a Treasurer and adopt these
Banking & Cash Management Administrative Procedures, with the purpose of establishing
clear policy and process guidelines, roles, and responsibilities for staff, as well as establishing
a framework for developing internal controls to protect those monetary assets.
DEFINITIONS
a. ACH Credit — Equivalent to a digital check "written" by the payer that instructs the
ACH network to transfer funds from their account to a payee's account. An ACH credit
transaction is completely electronic, eliminating the need for a written paper check and
visit to the bank. The most common type of ACH credit transactions are payroll direct
deposits. Often referred to as "push" transactions, ACH credits typically take 1-2
business days to process.
b. ACH Debit — Initiated by the payment receiver, an ACH debit is the most common
type of ACH transfer. Also known as a "pull" transaction, the receiver is "pulling" funds
from the payer. Per National Automated Clearing House (NACHA) rules, ACH debits
must be completed within one business day.
c. Automated Clearing House (ACH) — The primary system that agencies use for
electronic funds transfers. With ACH, funds are electronically deposited in financial
institutions, and payments are made online.
d. Bank Account— Any and all bank and investment accounts with financial institutions
including but not limited to checking, savings, money market, certificates of deposits
(CDs), mutual funds, and investment accounts.
e. Cash — coins and currency and all negotiable instruments with monetary value
(including but not limited to checks, money orders, ACH transactions, etc.), that can
be deposited into a bank account.
f. Check - A written, dated, and signed instrument that directs a bank to pay a specific
sum of money to the bearer. The person or entity writing the check is known as the
payor or drawer, while the person to whom the check is written is the payee.
g. Collateralization of Deposits — Process by which a bank or financial institution
pledges securities, or other deposits for the purpose of securing the repayment of
deposited funds.
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Number: AP 051
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Attachment 3
BANKING & CASH MANAGEMENT
Page 3 of 10
h. Custodial Agreement — An arrangement wherein one holds an asset or property on
behalf of the actual owner (beneficiary). This may include cash, stock certificates,
bonds, and other financial instruments. The custodian is responsible for safeguarding
these types of assets, usually held at one of the custodian's premises, a sub -custodian
facility, or an outside depository.
Electronic Funds Transfer (EFT) - This encompasses Automated Clearing
House (ACH) debits, ACH credits (e.g., direct deposit) and wire transfers.
j. Positive Pay - A common automated cash service that helps banks detect fraud by
matching a company's issued check with the check presented for payment. The dollar
amount, check number and account number must all match, or the check is flagged
and sent back to the issuer for review.
k. Wire Transfer— An electronic transfer of funds via a network that is administered by
banks and transfer service agencies around the world. Wire transfers involve a
sending and receiving institution and require information from the party initiating the
transfer, such as the receiver's name and account number.
6. SEGREGATION OF DUTIES
As an underlying principle, cash management processes should be developed such that no
individual is able to complete a transaction from start to finish. This entails segregating the
core transactional duties of recordkeeping (i.e., ability to record the transaction in the
accounting system), custody (i.e., having access to blank check stock or ability to initiate an
ACH credit or wire transfer), and authorization (i.e., signing a check or releasing a wire
transfer) between different individuals (or work groups) when practical. Alternatively,
compensating internal controls should be implemented where full segregation of duties is not
feasible. Generally, the cost of implementing an internal control (i.e., number of employees,
staff time, technology, etc.) should not exceed its benefit.
Individuals with the authority to instruct a bank to make positive pay exceptions cannot have
any responsibility for preparing the bank reconciliation of that bank account. Individuals
assigned by the Finance Manager to reconcile the account shall not be the same individuals
who are authorized to sign checks or approve EFTs on the account.
7. ROLES AND RESPONSIBILITIES
The following are the core parties involved in the cash management and banking function and
associated roles and responsibilities:
a. Board of Directors
Central San's elected Board of Directors (Board) are the governing body of Central
San. While administrative matters are delegated to the General Manager, policy -level
decisions and responsibilities are retained by the Board. Key banking and cash
management responsibilities of the Board include the following:
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Number: AP 051
BANKING & CASH MANAGEMENT
Page 4 of 10
Attachment 3
i. Authorize master banking and investment services agreements.
ii. Adopt and periodically review banking and cash management policies.
iii. Appoint the position to serve as Central San's Treasurer, currently the Deputy
General Manager of Administration.
b. General Manager
Central San's General Manager serves as the chief executive officer of Central San
overseeing all operating departments through two Deputy General Managers, among
other members of the executive team. Key banking and cash management
responsibilities of the General Manager include the following:
i. Execute banking and investment services agreements, following Board
approval.
ii. Authorize and ensure the enforcement of policies and administrative
procedures. Adopt policy revisions as needed.
iii. Check signer (backup to Treasurer and Secretary of the District)
iv. Wire transfer approver (see Exhibit A for limits)
v. Authorize investment actions in line with BP 005 (see Exhibit A for limits)
vi. Authorize intra-banking transfers (backup to Treasurer)
c. Deputy General Manager of Administration (Treasurer)
Central San's Deputy General Manager of Administration oversees Central San's
Administration Department and shall also serve as Treasurer. The Treasurer, not
being involved in any recording or reconciliation function, shall serve as the primary
signatory with the bank. Key banking and cash management responsibilities of the
Treasurer include the following:
i. Oversee compliance with banking custodial services agreement. Ensure
timely renewals of master contract and solicitation for new banking services as
needed.
ii. Implement and enforce policies and administrative procedures as authorized
by the General Manager. Recommend policy revisions for consideration of
approval by the General Manager as needed.
iii. Authorize banking services ancillary to master custodial agreement (i.e.,
lockbox, credit card acceptance, remote deposit, etc.).
iv. Authorize creation or closure of operational accounts under master custodial
bank agreement.
v. Add/remove online banking users and specify authorization limits (secondary).
vi. Check signer (in addition to the General Manager and Secretary of the District)
vii. Wire transfer approver (see Exhibit A for limits)
viii. ACH Filters/Blocks administration (secondary)
ix. Approve positive pay file exceptions (secondary)
x. Authorize investment actions in line with BP 005 (see Exhibit A for limits)
xi. Authorize intra-banking transfers (secondary, see Exhibit A for limits)
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Number: AP 051 Attachment 3
BANKING & CASH MANAGEMENT
Page 5 of 10
d. Finance Manager (Deputy Treasurer)
Central San's Finance Manager oversees the Finance Division, within the
Administration Department, and shall also serve as Deputy Treasurer. The Deputy
Treasurer, not being directly involved in any recording or reconciliation functions, shall
serve as a secondary signatory with the bank. Key banking and cash management
responsibilities of the Deputy Treasurer include the following:
i. Oversee Finance Division, including assigning banking and cash management
responsibilities and tasks to staff as deemed appropriate.
ii. Primary point of contact with bank on day-to-day administrative matters.
iii. Assist with the implementation and enforcement of policies and administrative
procedures. Recommend policy revisions as needed.
iv. Serve as Treasurer in prolonged absence of Treasurer.
v. Add/remove online banking users and specify authorization limits (primary).
vi. Review and approve (but not prepare) bank reconciliations.
vii. Prepare and deliver quarterly investment portfolios.
viii. Wire transfer approver (see Exhibit A for limits).
ix. Edits ACH Filters/Blocks (primary).
x. Approve positive pay file exceptions (primary).
A. Authorize investment actions in line with BP 005 (see Exhibit A for limits).
xii. Authorize intra-banking transfers (primary, see Exhibit A for limits).
xiii. Delegate submission/upload of ACH credit and positive pay files to bank to
appropriate Finance Division staff.
8. AUTHORIZATION / SIGNATURIES
There should be three or more signatories for each bank account. An authorized signatory
who is separated from Central San, or otherwise has a change in employment or job
responsibilities, must be removed from the list immediately and the bank notified in writing.
Central San staff should monitor the list of signatories with the bank and at least annually
verify and update as needed the bank's record of authorized signatories. No custodian or
individual who reconciles the accounts can be a signatory.
9. BANKING STRUCTURE AND CONTROLS
a. Check Signing
Checks must be signed manually by an authorized signatory or by an authorized
representative of the signatory using the appropriate mechanism (e.g., magnetic ink,
printers, check signatory plates). Such mechanisms must be always secured.
Additional procedures and internal control requirements over payments (and the
underlying invoices/claims) are covered separately in AP 108.
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Attachment 3
Number: AP 051
BANKING & CASH MANAGEMENT
Page 6 of 10
b. Operational Accounts
i. General Account
This account is considered the master bank account and is designated for non-
credit card deposits. As a control, disbursements should not be issued from
this account, but from other operational clearing accounts described below
funded by authorized bank transfers from the General Account.
ii. Disbursement Clearing Account
All disbursements are generated through the accounting system via check,
except for petty cash, ACH, and wire transfer payments which are generally
initiated outside the system. To enhance security and assist in the tracking and
reporting of general disbursements, all non -payroll related checks and ACH
payments shall be made from a disbursement clearing account. This account
shall be treated as a zero -balancing account, only being transferred funds from
the General Account sufficient to meet known obligations.
iii. Payroll Clearing Account
To enhance security and assist in the tracking and reporting of general
disbursements, all payroll related checks and ACH payments shall be made
from a payroll clearing account. This account shall be treated as a zero -
balancing account, only being transferred funds from the General Account
sufficient to meet known payroll obligations (i.e., payroll direct deposits, payroll
checks, payroll taxes and other payroll -related transactions). Refer to AP 107
for additional details on how this account shall be monitored and funded.
iv. Other
From time -to -time various accounts may be required by grantees or state
statute. Accounts may also be established if Central San is the fiscal agent for
another organization.
c. Physical Security of Checks and Printer
All check stock, manual or blank, and the check printer device must be kept in a
secure location with limited and restricted and controlled access to select personnel
only. Refer to AP 108 for additional details on payment processing security.
d. ACH Controls
To achieve more efficient processing, cost savings as well provide a more secure
transaction as compared to utilizing paper transfers (i.e. checks), agencies are
strongly encouraged to receive and send funds electronically via ACH (Automated
Clearing House) whenever possible. Because ACH transfers are conducted by the
bank using batch processing, ACH transfers are far less expensive than wire transfers.
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Attachment 3
BANKING & CASH MANAGEMENT
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Central San staff shall employ common ACH bank controls, coupled with controls
outlined in AP 108, to safely utilize this efficient payment methodology:
i. ACH Filters —This control is ideal for routine, recurring bank debit transactions,
allowing an institution to establish a maximum dollar amount on ACH
transactions with specific approved organizations.
ii. ACH Blocks - A debit block prevents ACH debits received for processing at a
bank from posting to the designated bank account. Unauthorized debits are
automatically returned to the originating (sending) company.
e. Use of Positive Pay
Positive Pay is a service whereby an institution provides its bank with a file of all checks
issued that day. If a check does not exactly match the issued item, the bank is required
to notify the account holder. Unless the account holder instructs the bank to pay the
item noted as not matching, the bank will return the check unpaid. Central San shall
institute, whenever feasible and appropriate, the Positive Pay service provided by its
bank to protect itself from check fraud.
10. POOLED CASH
Consistent with common practices for other large and medium-sized multi -fund public
agencies, Central San's unrestricted cash is accounted for in a pooled cash fund to allow for
efficient cash flow analysis, reconciliation, and maximize investment returns. The allocation of
cash to individual funds is accounted for through a pooled cash account, which shall balance
with the pooled cash fund in the aggregate. Investment earnings (i.e., interest income, realized
gains, etc.) of the pool shall be proportionately divided among the funds on a quarterly basis
based on their weighted average balances.
11. BANK RECONCILATIONS
a. Purpose
Bank reconciliations are an essential internal control tool and are necessary in
detecting fraud and correcting accounting errors. Bank reconciliations ensure that all
transactions that have been processed by a bank have been reviewed and checked,
thus reducing the probability of errors in the data used to record book balances. Bank
reconciliations also assist in ensuring that all payments and receipts have been applied
to a bank account and have also been recorded in the accounting records. Any
differences shall be identified, explained, and rectified.
b. Segregation of Duties
The reconciliation function requires segregation of duties. In that regard, the person
who performs the bank reconciliations shall also not have access to the independent
recording of transactions in the accounting system or the processing of cash
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Attachment 3
BANKING & CASH MANAGEMENT
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disbursements or receipts. Any differences identified between the accounting records
and the bank statements shall be adjusted by a person other than the one performing
the reconciliation.
The bank reconciliation must be reviewed and approved by someone other than the
preparer. Central San must maintain supporting documentation with all reconciliations
in accordance with the record retention policies.
c. Timeliness
A comprehensive reconciliation of all bank accounts held by Central San must be
performed, at a minimum, monthly, by the end of the subsequent month or sooner as
practicable. Central San is encouraged to obtain bank statements electronically.
d. Stale Checks
Through the bank reconciliation process, staff may identify outstanding checks
requiring action. Assigned staff shall contact suppliers for all checks that have been
outstanding for six months that have been identified as "stale". At that point, checks
shall either be cancelled or cancelled and reissued.
i. Stop Payments - A designated staff member of the Finance Division shall be
delegated the responsibility for approval of all orders to stop a check after it
has been issued. If positive pay is utilized, stop payments are not necessary
since designated Central San staff can remove the check in question from the
positive pay record.
Voided Checks - A voided check is a check written or partially written but then
canceled or deleted by Central San prior to issuance. of "void" is used because
checks are pre -numbered for control purposes and every check needs to be
accounted for. Voided checks may require some adjustments when
reconciling the bank statement.
iii. Cancelled Checks - A canceled check is a check that has cleared the
depositor's bank account and has been marked as "canceled" by the bank.
Both voided and canceled checks must be retained in accordance with Central
San's record retention policy.
12. LIQUIDITY
The Finance Division monitors Central San's cash position weekly to ensure sufficient liquidity
to meet Central San's weekly payment obligations and other cash flow needs. The weekly
cash flow analysis incorporates anticipated cash receipts and disbursements based on
historical information, projected financial activity and value of investment returns. Additional
cash requirements are identified and drawn down from the Central San's balance in the State
of California Local Agency Investment Fund (LAIF) managed by the State of California
Treasurer's Office or other fund(s) as approved by the Treasurer. Temporary idle cash
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 144 of 150
Number: AP 051
Page 16 of 17
Attachment 3
BANKING & CASH MANAGEMENT
Page 9 of 10
identified in the cash flow analysis shall be invested in a manner consistent with Central San's
Board Policy on Investments (BP 005).
Central San's available cash balance is maintained at a flexible goal of at least $2 million in
its primary cash account. The target cash balance may vary depending upon anticipated
receipts and disbursements identified during the weekly cash flow analysis.
13. COLLATERALIZATION OF DEPOSITS
An inherent risk to maintaining cash at a bank, as disclosed annually in Central San's Annual
Comprehensive Financial Report, is "custodial credit risk." Custodial credit risk for deposits
is the risk that, in the event of the failure of a depository financial institution, the Central San
will not be able to recover deposits or will not be able to recover collateral securities that are
in possession of an outside party. This risk is mitigated in that, of Central San's total bank
balance, $250,000 is insured by the Federal Deposit Insurance Corporation (FDIC). The
remaining balances on deposit must be collateralized with securities held by the pledging
financial institution's agent. Pursuant to California Government Code section 53652, the
depository (bank) is required to maintain a market value of at least 110% of the pledged
collateral. The collateral ization agreement between the banking institution and Central San
shall adhere to state and federal law.
14. EXCEPTIONS AND ALTERNATIVE PROCEDURE
Any exception to this Administrative Procedure shall be approved by the General Manager,
documenting the justification for deviating from standard procedures. All exceptions will be
deemed non -recurring and approved on a case -by -case basis. Repeated requests for
exceptions should trigger management's review of policy for consideration of revisions.
15. PERIODIC REVIEW
This Administrative Procedure shall be reviewed periodically and revised as needed to ensure
protocols and internal controls over banking and cash management are revised, as
necessary, to reflect changes in Central San operations, personnel, and objectives.
Attached Supporting Documents:
Exhibit A — Banking & Cash Management Authorization Limits
[Original retained by the Secretary of the District]
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 145 of 150
Number: AP 051
BANKING & CASH MANAGEMENT
Page 10 of 10
Exhibit A
Banking & Cash Management Authorization Limits
Attachment 3
Employee Position / Title
Transaction
Deputy General
Finance Manager
Type
General Manager
Secretary of the
Manager of
(Deputy
Accounting
District
Administration
Supervisor
(Treasurer)Treasurer)
Intra-Bank
No limit (backup to
None
No limit
(backup to Finance
No limit
No limit
Account Transfers
Treasurer)
Manager)
(secondary)
(primary)
Checks'
No limit
No limit
No limit
None
None
(backup)
(secondary)
(primary)
Investment
Invest set
PurchPositive
>$5 million
None
<_ $5 million
<_ $1.5 million
None
Pay
No limit
None
No limit
No limit
No limit
Exceptions
(backup)
(backup)
(secondary)
(primary)
Wire Transfers3
No limit
No limit
No limit
No limit
None
(backup)
(backup)
(secondary)
(primary)
All manual checks must be signed by two authorized personnel, with the Treasurer being the primary signer. Checks generated through Central San's
accounting system shall be signed via a properly secured signature plate and include both General Manager's and Treasurer's signatures.
2 Ordinarily, barring a short or long-term absence of an approving party, transactions must be approved by all involved parties. For instance, a $6 million
investment purchase should be authorized by the Finance Manager, Treasurer, and General Manager.
3 Execution requires approval by two different authorized personnel.
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 146 of 150
Page 1 of 2
Item 4.a.
F__1_448�411C_S0
April 16, 2024
TO: FINANCE COMMITTEE
FROM: SHARI DEUTSCH, RISK MANAGEMENT ADMINSTRATOR
REVIEWED BY: PHILIP LEIBER, DEPUTYGENERAL MANAGER -ADMINISTRATION
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: REVIEW RISK MANAGEMENT LOSS CONTROL REPORTAS OF APRIL 2,
2024
The attached Loss Control Report shows information on current and prior open claims through April 2,
2024.
This report is typically issued monthly and new claims occurring since the previous report are highlighted in
blue (if any).
Strategic Plan Tie -In
GOAL ONE: Customer and Community
Strategy 1 - Deliver high -quality customer service
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 3 - Maintain financial stability and sustainability
ATTACHMENTS:
1. Loss Control Report
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 147 of 150
CCCSD 2023-24 Loss Control Report
I I New Incident Ongoing Incident Prior FY Litigated
OVERFLOWS
Status
#
ID#
Loss
DOL
Other Party
Address
City
Reserve
Expenses
Claim
Incident Total
Paid to 1 Ck #
Type
Paid *
Paid **
Closed
1
2024002
SSO
9121/23
Ron Coleman
512 Moraga Way
Moraga
$
$
$ 397.00
Claimant/ 100140
Closed
Louis & Susan Meunier 516 Moraga Way
Moraga
$ 4,944.38
$ -
$ 5,341.38
ServiceMaster / 100153
Closed
2
2024003
SSO
9/29/23
Eding Horn
1029 Windsor Dr
Lafayette
$
$ 3,801.69
$ -
$ 3,801.69
ServiceMaster 1100153
Closed
3
2024005
SSO
10/2/23
Roesbery Car Care
3099 N Main
Walnut Creek
$
$ 88,342.44
Business Loss I Various
$ 28,688.29
ServiceMaster / 100151
$ 34,157.56
Claimant/100150
Closed
Pool & Spa Supplies
3099A N Main
Walnut Creek
$
$ 329.18
$ 10,213.75
$ 161,731.22
Claimant / 100152
Closed
4
2024008
SSO
2/19/24
Dana Nadel
164 Lucinda Lane
Pleasant Hill
$ 7,500.00
$ 1,276.00
$ 8,776.00
Claimant/100165
Total - SSO 1 $ 7,500.00 I $ 37,763.54 I $ 134,386.75 1 $ 179,650.29
OTHER LIABILITY CLAIMS
Status
#
ID#
Loss
Type
DOL
Other Party
Address
City
Reserve
Expenses
Paid *
Claim
Paid **
Incident Total
Paid to 1 Ck #
Open
A
2019014
GL
7/26/2018
Jane Kappel
25 Arlene Lane
Walnut Creek
$ 10,000.00
$ 6,000.00
$
$ 16,000.00
Trial Mar 20241100110
Open
B
2021015
GL
12/14/20
A R Johnson (GAL)
M73, 205 Alamo View Walnut Creek
$ 25,000.00
$ -
$
$ 25,000.00
PI: In Discovery
Open
C
2021024
GL
2/1/17
EBMUD
17-29 Chapel Drive
Lafayette
$ 25,000.00
$
$
$ 25,000.00
2017+ slide, served 5125
Open
E
2023002
GL
2/1/22
Weldon's Xcompl
644 Vallecito Ln
Walnut Creek
$ 10,000.00
$
$
$ 10,000.00
Tendered to Contractor
Open
F
2023010
GL
9/30/22
Frederick Hagen
Sycamore My Rd.
Danville
$ 25,000.00
$
$
$ 25,000.00
Bike Injury - Suit Filed
Open
1
2024010
GL
4/1/24
Emily St. John
1527 Cypress Street
Walnut Creek
$ 912.60
$
$
$ 912.60
Business Loss
Total • Liab 1 $ 95,912.60 I $ 6,000.00 1 $ - 1 $ 101,912.60 1
PLUMBING REIMBURSEMENTS
Loss
Status # ID# DOL Other Party Address City
Reserve
Expenses
Claim
Incident Total
Paid to I Ck #
Type
Paid *
Paid'*
Closed 1 2024009 PL 3/15/2024 Shannon Gruber 55 Ocean Pines Ln Alamo
I$
249.00
1 $ 249.00
Total - PL I $ • I $ - I $ 249.00 1 $ 249.00
AUTO INCIDENTS
Status
#
ID#
Loss
Type
DOL
Other Party Location
Veh#
Reserve
Expenses
Paid *
Loss
Paid **
Incident Total
Paid to 1 Ck #
Closed
1
2024001
AL
7/5123
Kemal Gunel 1273 Locust Street, W,
288
$
$
$ 3,222.20
$ 3,222.20
Claimant/ 100132
Closed
2
2024006
APO
12/5/23
Mohamed Radwan Akky 94 Muth Dr.
290
$
$ 4,229.89
$ -
$ 4,229.89
Laf Auto Body / 100160
$ (4,299.89)
$ (4,299.89)
Subro. State Fund
Open
3
2024007
AL
12/20/23
Elodia Urbina Olympic Blvd, WC
314/M232
$
$ 8,075.91
$
$ 8,075.91
Total -Auto 1 $ - I $ 8,005.91 I $ 3,222.20 1 $ 11,228.11
CENTRAL SAN'S PROPERTY LOSSES
Status # ID# Loss DOL Other Party Address City
Reserve
Expenses
Loss Cost
Incident Total
Paid to I Ck #
Type
Paid
Closed 1 2024004 PD 9/26/23 HOB3 Boiler Leak 5019 Imhoff Martinez
Is
$ 28,916.76
$ -
$ 28,916.76
ServiceMaster/ 100153
Total -Prop I $ $ 28,916.76 I $ 1 $ 28,916.761
Notes: rnor year ciosea claims nave peen removea rrom report.
Prior year active claims show a letter in the # column to distinguish them from current year claims. 412124
April 16, 2024 Regular FINANCE Committee Meeting Agenda Packet - Page 148 of 150