Loading...
HomeMy WebLinkAboutFinance MINUTES 09-17-24110ENTRAL SAN REGULAR MEETING OF THE BOARD OF DIRECTORS: MARIAHN LAURITZEN CENTRAL CONTRA COSTA President SANITARY DISTRICT MICHAEL R. MCGILL President Pro Tent FINANCE COMMITTEE BARBARA D. HOCKETT TAD J PILECKI FLORENCE T WEDINGTON MINUTES PHONE: (925) 228-9500 FAX.- (925) 372-0192 Tuesday, September 17, 2024 www.centralsan.org 2:30 p.m. Committee: Chair Mariah Lauritzen Member Tad Pilecki Staff. - Roger S. Bailey, General Manager (joined during Item 3.b.) Katie Young, Secretary of the District Philip Leiber, Deputy GM — Administration Danea Gemmell, Planning and Development Services Division Manager (left during Item 3.b.) Edgar Lopez, Capital Projects Division Manager (arrived during Item 3.b.) Emily Barnett, Communications and Government Relations Manager (left during Item 3.b.) Kevin Mizuno, Finance Manager Brennan Rogers, Accounting Supervisor Shari Deutsch, Risk Management Administrator Eileen Hansen, Deputy Secretary of the District Karen DeLong, Administrative Services Assistant 1. Call Meetina to Order Chair Lauritzen called the meeting to order at 2:30 p.m. 2. Public Comments None. 3. Items for Committee Recommendation to the Board Finance Committee Minutes September 17, 2024 Page 2 a. Review and recommend approval of expenditures incurred, August 16, 2024 through September 5, 2024 Staff responded to questions posed in advance of the meeting by Member Pilecki. All staff responses were to his satisfaction. Check #313429, Air Systems Inc. in the amount of $8, 777.05 Mr. Mizuno explained that this expenditure pertained to water heater repairs in the laboratory's industrial hot water system. Additional issues surfaced during the investigation and work was required beyond what was originally anticipated, including the replacement of two pumps. Check #313521, KP Doors and Access LLC, in the amount of $32,967.77 • Mr. Mizuno explained that the emergency fire rated rolling doors needed replacement at Household Hazardous Waste (HHW) as parts were not available for the prior doors, which are very old. Additional charges were also incurred for the work to be performed after HHW's normal business hours so as to not impact customers. Check #203192, BE Workplace Design in the amount of $41, 785.68 Mr. Mizuno explained that this expenditure was for the full replacement of three aged and ergonomically outdated cubicles, along with replacement of the old desks, lighting and furniture in the Procurement workgroup area. He emphasized this was the last workstation area of the third floor in the headquarters office building (HOB) to be replaced. The amount included labor, tax and materials, as well as conversions to sit -stand desks for improved employee ergonomics. Member Pilecki expressed concern over the spending on furniture at the district in general and inquired about whether there are furniture items stored the warehouse that could be used. Mr. Leiber stated that Central San tries to get the balance right between controlling costs and providing a reasonable standard of furniture. It was noted that the furniture could possibly have been used longer but concurred that it was dated and not up to the standard seen elsewhere in the building. Chair Lauritzen added that recently manufactured furniture may not last as long, needing to be replaced more frequently. Member Pilecki emphasized his position that any spending on furniture should be closely monitored. COMMITTEE ACTION: Recommended Board approval. Finance Committee Minutes September 17, 2024 Page 3 b. Receive Budget -to -Actual Expenditure overview through the month of August 2024 Mr. Mizuno provided an overview of the Budget -to -Actual Expenditures for the Operations and Maintenance (O&M) and Sewer Construction Fund (SCF) through August 31, 2024. O&M: The total expenditures through August 2024 were $14.9 million, lower than the annual Budget of $17.6 million. It was noted that the O&M Fund is reporting a favorable budget variance of approximately $2.7 million or 15.3 percent. He then provided additional context comparing this year's spending trend through August to that of the prior year, indicating this high variance is normal at the onset of the fiscal year which is expected to tighten by the close of the first quarter. SCF: The total expenditures through August 2024 were $1.4 million, significantly below the target of $19.1 million. Mr. Mizuno emphasized that the interim budget allocations of the annual adopted budget have not yet been allocated to months using project -specific projections, and thus it reflects a "straight line" spending expectation which is too high for this time of year. The report is expected to reflect a more realistic "s-curve" of project spending by the close of the first quarter and will be updated at the next meeting. Member Pilecki noted that there are capital work paid in the first months of the new year charged to the prior Fiscal Year (FY), resulting in an under- achieving of the target. Mr. Mizuno explained that applying charges for capital projects to the month when costs were incurred is a requirement for both O&M and SCF. Chair Lauritzen requested clarification of the budget to actual graph. Mr. Leiber explained that the first month of the FY is transitional, adding that the projections in these months should be lower in future years. Mr. Lopez stated that most contractors were delayed in their July billing, and most accruals were for work done in the last FY. A discussion of several concepts followed including accrual, carry forward, and closing period practices. The Committee expressed a desire for a document that shows the progress of work completed. Member Pilecki asserted that the graph needs to reflect actual work completed. Mr. Mizuno responded that this issue arises as only one month of the fiscal year truly reflects expenditure accruals, and the remaining months of the fiscal year are on a cash basis, which is common for public agencies. He indicated that the other months of the fiscal year could reflect more complete expenditures if the books were held open longer like in June, however that would cause a delay in financial reporting. Finance Committee Minutes September 17, 2024 Page 4 Chair Lauritzen requested staff consider this matter further and strive to provide supplemental information on capital spending and/or commitments next meeting. COMMITTEE ACTION: Provided input to staff and recommended Board receipt. C. Receive Quarterly Financial review for the fourth quarter ended June 30, 2024 of Fiscal Year (FY) 2023-24 ending June 30, 2024 (Unaudited) Mr. Mizuno provided an overview of the report included in the agenda materials. He 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. For the O&M budget, the total expenditures are $85.5 million which is six percent below the budget. The variance was largely attributable to lower than budgeted spending in Salaries & Wages and Other Purchased Services. Member Pilecki inquired about the vacancy factor and emphasized the vacancy factor should be monitored regularly, and staff should consider making modifications prospectively if it is consistently too low. Total revenue for the SCF was $90.4 million, exceeding the budget by 13.6 percent. The three major drivers for this variance were Investment Income, Secured Property Taxes, and capital reimbursements from the City of Concord for its share of eligible capital program spending. Member Pilecki stated that long-term investment return assumptions would be discussed further at the December Financial workshop. In response to Member Pilecki's inquiry about how the variance is communicated to Concord in a way that it is not a surprise, Mr. Mizuno responded that Ms. Gemmell is in communication with Concord periodically who provides a projection of the annual amount due to assist the city with budget planning. Chair Lauritzen opined that the numbers show that Central San needs more conservative planning, as does the City of Concord. Mr. Mizuno shared that in recent years Concord financial staff initiated a conversation with Central San to explore the merits of quarterly instead of annual payments. Member Pilecki requested that a review of the billing options be presented in an upcoming meeting. Finance Committee Minutes September 17, 2024 Page 5 COMMITTEE ACTION: Recommended Board receipt and requested additional information on City of Concord's billing. d. Review draft Position Paper and consider adopting proposed Resolution 2024-XXX which (1) elects to use a master bond in lieu of individual bonds, and (2) authorizes Central San's General Manager to acquire crime insurance in lieu of a master bond with a coverage amount of $5 million as related to the In-house Treasury function Mr. Leiber provided an overview of the draft Position Paper included in the agenda materials, noting that the cost of the recommended $5 million in coverage would be about $10,000 in total compared to the $5,500 for the current $1 million in coverage In response to Member Pilecki's question regarding right to recovery with a bond, Ms. Deutsch explained that pursuing recovery against an individual is a possibility, but with insurance, the provider takes the responsibility for recovery and the process is less complicated for the District as the policy holder. COMMITTEE ACTION: Recommended Board approval. 4. Other Items a. Receive PFM Asset Management (PFMAM) Other Post -Employment Benefits (OPEB) and Pension Prefunding Sub -trust Reports for the second Quarter of calendar year 2024 Mr. Mizuno provided an overview of the reports included in the agenda materials. For the OPEB trust, while the quarterly returns were low at 1.18 percent, the annual return was 11.18 percent, well above the target of 5.75 percent. He also reported that the inception to date return was 6.14 percent. The Pension Prefunding fund posted a quarterly return of 0.77 percent and a one-year return of 8.12 percent, which exceeded the target of 5.14 percent. He also reported that the inception to date return was 4.31 percent. COMMITTEE ACTION: Received the report. b. Review Risk Management Loss Control Report as of September 3, 2024 Ms. Deutsch provided an overview of the report provided in the agenda materials. She discussed prior open claims through September 3, 2024 as well as new claims occurring since the previous report. Finance Committee Minutes September 17, 2024 Page 6 She stated that for Item C, in the handout, the reserve has gone up from $25, 000 to $50, 000, with the expectation that the District will be dismissed from the case for this amount. COMMITTEE ACTION: Received the report. 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 1. Update the Budget to Actual graph in the Quarterly Financial review presentation. 2. A progress report on the City of Concord billing schedule. COMMITTEE ACTION: Received the list and provided input to staff. 7. Future Scheduled Meetings Tuesday, October 29, 2024 at 2:30 p.m. Tuesday, November 19, 2024 at 2:30 p.m. Tuesday, December 17, 2024 at 2:30 p.m. 8. Adjournment — 3:42 p.m.