MEETING OF THE WQA ADMINISTRATIVE/FINANCE COMMITTEE

TO BE HELD ON WEDNESDAY, AUGUST 15, 2012 AT 12:00 P.M. AT 1720 W. CAMERON AVE., SUITE 100, WEST COVINA, CA 91790

AGENDA WQA Committee Members: Louie Aguiñaga, Mike Whitehead and Jim Byerrum Watermaster Liaison Member: Dave Michalko

I. Discussion Regarding Biennial Review of Conflict of Interest Code [enc]

II. Discussion Regarding SAS 114 Planning Letter for the Audit of the Fiscal Year 2011/2012 [enc]

III. Discussion Regarding Increase in Annual Liability Insurance Premium and Administrative Budget Line Item Transfer Request [enc] IV. Discussion Regarding Task Orders Related to the Discharge Permit Process V. Executive Director’s Report

AGENDA SUBMITTAL

To: Administrative/Finance Committee

From: Kenneth R. Manning, Executive Director

Date: August 15, 2012

Subject: Biennial Review of Conflict of Interest Code

Background and Discussion The Los Angeles County Board of Supervisors is the code reviewing body of the WQA’s Conflict of Interest Code. State law directs all agencies that have adopted a Conflict of Interest Code to review their code and make any changes necessitated by changed circumstances. All agencies are required to submit to the Board a Biennial Review Certification Form filled out by the agency head no later than October 1, 2012. If an amendment is made the amended code is not effective until it has been approved by the Board of Supervisors of Los Angeles County. Recommendation / Proposed Action Staff recommends to change the position of “Consultant” to “Public Affairs Consultant” and to take it to the full Board for approval. Attachment: Letter from County Board of Supervisors

AGENDA SUBMITTAL

To: Administrative/Finance Committee

From: Kenneth R. Manning, Executive Director

Date: August 15, 2012

Subject: SAS 114 Planning Letter for the Audit of the Fiscal Year 11/12

Background and Discussion Statement on Auditing Standards (SAS) 114 requires certain communication between auditors and those charged with oversight of the organization being audited. At the planning phase of the audit, the communication includes information regarding the scope and timing of the audit as well as a request to be informed of any information relevant to the audit. SAS 114 communications have been required since the fiscal year 07/08. Certain audit firms provide the planning communication in the form of a SAS 114 Planning letter. Other audit firms communicate the planning information verbally to those in governance at committee meetings, formal board meetings or council meetings, while other audit firms communicate the information either at the entrance conference or in some other informal manner. In August 2011, WQA staff surveyed local agencies to determine how common it was to present the SAS 114 planning communication in the form of a letter to the Board of Directors. Staff received 25 responses from local agencies and cities – of these, 12 were provided with a SAS 114 planning letter and 13 were not. Staff also received 5 responses from audit firms – of these, 4 typically provide a SAS 114 letter at the start of the audit, and 1 firm communicates the information verbally at the entrance conference. The policy of the WQA’s auditors, Mayer Hoffman McCann (MHM), is to communicate the information in the form of a SAS 114 Planning Letter. Accordingly, attached is a copy of the SAS 114 Planning Letter for the fiscal year 11/12. Jennifer Farr, the audit partner, has requested that this letter be disseminated to the entire Board of Directors as an informational item at the next board meeting. Recommendation / Proposed Action Provide a copy of the SAS 114 Planning Letter to the Board of Directors as an information item at the August 22, 2012 board meeting. Attachment: SAS 114 Planning Letter

August 2, 2012 Board of Directors San Gabriel Basin Water Quality Authority West Covina, California We are in the process of planning the audit of the San Gabriel Basin Water Quality Authority (the “Authority”) for the year ending June 30, 2012. Professional auditing standards require that, as a part of our audit, we “communicate clearly with those charged with governance the responsibilities of the auditor in relation to the financial statement audit, and an overview of the scope and timing of the audit.” Additionally, the purpose of this communication is to “obtain from those charged with governance information relevant to the audit”.

Timing of Audit

We plan to begin the final audit examination in September 2012. We plan to present the draft audit reports to the Board at the completion of the audit.

Planned Scope of Audit In addition to our standard audit approach, we have identified the following fraud and error risk areas for the Authority and plan to modify our audit approach as follows:

• Risk of errors associated with recording capital asset additions and deletions: We will review significant capital asset transactions to ensure proper capitalization of new assets and accounting for the deletion of disposed assets. We will inquire about the status of significant construction in progress to ensure that completed projects have been properly removed from this account.

• Risk of improper cutoffs for revenues and expenditures: We plan to select a sample of revenues and

expenditures subsequent to year end to determine if they should be recorded in fiscal year ending June 30, 2012.

• Risk of noncompliance with federal grants. We will test the Water Reclamation and Reuse Program (San Gabriel Basin Demonstration Project) as the Major Program in accordance with OMB A-133 Single Audit requirements.

If any member of the Board has information relevant to our audit (matters involving amounts that would be significant to the financial statements of the Authority taken as a whole), please contact the undersigned at 949-474-2020 x. 301 or JFarr@cbiz.com. Sincerely, Jennifer Farr, C.P.A. Shareholder

August 14, 2012 Page 2 of 2

AGENDA SUBMITTAL

To: Administrative/Finance Committee

From: Kenneth R. Manning, Executive Director

Date: August 15, 2012

Subject: Increase in Annual Liability Insurance Premium and Administrative Budget Line Item Transfer Request – Property and Liability Insurance

Background and Discussion Increase in Annual Liability Insurance Premium The WQA is a member of ACWA JPIA and as such is part of ACWA's Property and Liability Insurance Programs. The annual cost of the Property and Liability insurance was budgeted at $40,000, with Liability Insurance at $37,500 and Property Insurance at $2,500. The invoice from ACWA JPIA for the Liability Insurance annual premium was received a few days ago - it is for $48,406 instead of the projected amount of $37,500. Based on the increased cost of Liability Insurance, the annual budget for Property and Liability Insurance is now projected at $50,000 for the FY 12/13. The following is a schedule of the JPIA Liability Insurance premiums over the past several years:

Coverage Dates Premium Rebate Claims Oct 07/Sept 08 $28,701 Oct 08/Sept 09 $30,108 $126,100 Oct 09/Sept 10 $30,746 ($4,059) Oct 10/Sept 11 $32,419 ($3,532) Oct 11/Sept 12 $34,200 Oct 12/Sept 13 $48,406

The dramatic increase for Oct 12/Sept 13 is due to the Oct 08/Sept 09 claim. The claim increased our experience modification from .86 to 1.6, resulting in an increase of our annual premium by approximately 50% to 60%. For the period of Oct 11/Sept 12, the calculated premium was reduced from $54,234 to $34,200 because ACWA JPIA was able to use $20,034 from the WQA’s RPA stabilization fund to offset the cost. This left a balance in WQA’s RPA fund of $3,383 – this was used to reduce the premium for Oct 12/Sept 13 from $51,789 to $48,406.

August 14, 2012 Page 2 of 2 Per staff’s discussions with ACWA JPIA Finance, the effect of the claim will drop off the policy next year, and WQA’s experience modification should go down to less than 1. This will lower our annual premium to approximately $33,000 to $34,000 (assuming the WQA has no claims during the next 12 months). Administrative Budget Line Item Transfer Request – Property and Liability Insurance A Budget Line Item Transfer Request to increase the budget for Property & Liability Insurance by $10,000, (from $40,000 to $50,000), is being submitted to accommodate the increased Liability Insurance premium. Recommendation / Proposed Action Staff requests that the Administrative / Finance Committee recommend approval of the budget line item transfer for Property & Liability Insurance. Attachments: Line Item Transfer Form – SGBWQA A-15

LINE ITEM TRANSFER FORMSGBWQA A-15

DATE: August 15, 2012

TO: EXECUTIVE DIRECTOR

FROM: ACCOUNTANT

SUBJECT: ADMINISTRATIVE BUDGET LINE ITEM TRANSFER REQUESTProperty and Liability Insurance

Line Item Line Increase Revised Line Account No. Line Item Description Item Budget (Decrease) Item Budget

TRANSFER TO: 6310-00-000 $40,000 $10,000 $50,000

TRANSFER FROM: Contingency $50,000 ($10,000) $40,000

Explanation:

Approval: Board Approval (for items in excess of $5,000)

Kenneth R. Manning; Executive Director Luis Aguinaga; Board Chairman

In accordance with Administrative Procedure 15, the following budget line item transfers for the Fiscal Year 2012/2013 are hereby requested:

The WQA is a member of ACWA JPIA and as such is part of ACWA's Property and Liability Insurance Programs. The annual cost of the Property and Liability insurance was budgeted at $40,000, with Liability Insurance at $37,500 and Property Insurance at $2,500. The invoice from ACWA JPIA for the Liability Insurance annual premium was received a few days ago - it is for $48,406 instead of the projected amount of $37,500. Based on the increased cost of Liability Insurance, the annual budget for Property and Liability Insurance is now projected at $50,000 for the FY 12/13.

A Budget Line Item Transfer Request is hereby submitted to accommodate the costs related to increase in Property and Liability Insurance with a corresponding decrease in Contingency.

Property and Liability Insurance