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HomeMy WebLinkAbout10-11-2017 Administration Committee Agenda Orange County Sanitation District Wednesday, October 11, 2017 Regular Meeting of fhe 5:00 P.M. ADMINISTRATION Administration Building COMMITTEE Board Room 10844 Ellis Avenue Fountain Valle CA 714 593-7433 AGENDA CALL TO ORDER: PLEDGE OF ALLEGIANCE: DECLARATION OF QUORUM: (Clerk of the Board) PUBLIC COMMENTS: If you wish to address the Committee on any item, please complete a Speaker's Form (located at the table outside of the Board Room) and submit it to the Clerk of the Board or notify the Clerk of the Board the item number on which you want to speak. Speakers will be recognized by the Chairman and are requested to limit comments to three minutes. REPORTS: The Committee Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Committee Members. These reports are for information only and require no action by the Committee. DEPARTMENT HEAD REPORTS: CONSENT CALENDAR: The Consent Calendar Items are considered to be routine and will be enacted, by the Committee, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 1. APPROVAL OF MINUTES (Clerk of the Board) RECOMMENDATION: Approve Minutes of the September 13, 2017 Administration Committee Meeting. 10/11/2017 Administration Committee Agenda Page 1 of 3 NON-CONSENT: 2. CONTRACTED INTERNAL AUDITS IN SEARCH OF FICTITIOUS EMPLOYEES AND SEARCH OF FICTITIOUS VENDORS (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Receive and file the August 24, 2017, White Nelson Diehl Evans (WNDE) audit report in Search of Fictitious Employees and Search of Fictitious Vendors. 3. DOIG DRIVE PROPERTY DISPOSAL - BROKER (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Authorize the General Manager to conduct a Request for Proposal process and subsequently award for real estate broker services to facilitate the sale of the Orange County Sanitation District's real property at 7311 Doig Drive, Garden Grove, CA. INFORMATION ITEMS: 4. STRATEGIC PLAN UPDATE (Bob Ghirelli) 5. ORANGE COUNTY SANITATION DISTRICT PROCUREMENT PROCESS (Lorenzo Tyner) CLOSED SESSION: None. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday, November 8, 2017 at 5:00 p.m. 1 011 112 01 7 Administration Committee Agenda Page 2 of 3 Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's office at (714)593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Agenda Postina: In accordance with the requirements of California Government Code Section 54954.2,this agenda has been posted outside the main gate of the Sanitation District's Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item,including any public records distributed less than 72 hours prior to the meeting to all,or a majority of the Board of Directors,are available for public inspection in the office of the Clerk of the Board. Agenda Description: The agenda provides a brief general description of each item of business to be considered or discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take any action which is deemed appropriate. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Kelly A.Lore Clerk of the Board (714)593-7433 klore/alocsd.com For any questions on the agenda, Committee members may contact staff at: General Manager James Herberg (714)593-7300 iherberofdocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rohirellildocsd.00m Director of Finance and Lorenzo Tyner (714)593-7550 Itvnerfdoasd.com Administrative Services Director of Human Resources Celia Chandler 714 593-7202 cchandler ocsd.com 10/11/2017 Administration Committee Agenda Page 3 of 3 ITEM NO. 1 MINUTES OF THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, September 13, 2017 at 5:00 P.M. A regular meeting of the Administration Committee of the Orange County Sanitation District was called to order by Board Chair Sebourn on September 13, 2017 at 5:02 p.m. in the Administration Building of the Orange County Sanitation District. Director Kim led the Flag Salute. A quorum was declared present at 5:10 p.m., as follows: COMMITTEE MEMBERS PRESENT: STAFF PRESENT: Donald P. Wagner, Vice-Chair Jim Herberg, General Manager Jim Ferryman Bob Ghirelli, Assistant General Manager Peter Kim Celia Chandler, Director of Human Resources Mark Murphy (Alternate) Rob Thompson, Director of Engineering Steve Nagel Lorenzo Tyner, Director of Finance & Scott Peotter Administrative Services Erik Peterson (Alternate) Roya Sohanaki, Engineering Manager Greg Seboum, Board Chair Tina Knapp, Deputy Clerk of the Board David Shawver, Board Vice-Chair Janine Aguilar Jennifer Cabral COMMITTEE MEMBERS ABSENT: Al Garcia Chad Wanks, Chair Mark Kawamoto Al Krippner Randall Kleinman Glenn Parker Laurie Klinger Sal Tinajero Laura Maravilla Kathy Millea Jeff Mohr Andrew Nau Man Nguyen Ddaze Phuong Merrill Seiler Richard Spencer John Swindler OTHERS PRESENT: Brad Hogin, General Counsel Karen Delaney, Alliant Laurinda Newell, Alliant PUBLIC COMMENTS: None. 0 9/1 312 01 7 Administration Committee Minutes Page 1 &5 REPORT OF COMMITTEE CHAIR: Board Chair Sebourn did not provide a report. REPORT OF GENERAL MANAGER: General Manager Jim Herberg provided information regarding a letter received from the City of Anaheim's Successor Agency to the Anaheim Redevelopment Agency. He stated that a request for a new appointment be made to the Anaheim Oversight Board to fill the vacancy of Gail Eastman who represents the Orange County Sanitation District. A copy of the letter and a current list of the 13 Redevelopment Agency Oversight Boards were distributed to the Committee Members and made available to the public. Mr. Herberg stated that at the September 271h Board of Directors meeting, an item will be presented to appoint the new member to the Anaheim board, and to reaffirm the currently listed appointments to the remaining 12 boards unless any Director provides an alternative recommendation. REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES: Director of Finance and Administrative Services Lorenzo Tyner did not provide a report. Due to a lack of quorum, Board Chair Sebourn reordered the agenda to begin with Information Item No. 6. INFORMATION ITEMS: 6. URBAN RUNOFF PROGRAM (Jim Colston) Mark Kawamoto, Engineering Supervisor, introduced Merrill Seiler, Principal Environmental Specialist, who manages the urban runoff program. Mr. Kawamoto provided an informative PowerPoint presentation that included an overview of how the OCSD Urban Runoff Diversion Program works and background of Program, OCSD's partners, diversion locations, dry weather urban runoff quality, and impact of urban runoff. Mr. Kawamoto and Mr. Seiler answered questions from the Committee. Director Nagel arrived at 5:10 p.m., thereby establishing quorum. Vice-Chair Wagner arrived at 5:17 p.m. CONSENT CALENDAR: 1. APPROVAL OF MINUTES (Clerk of the Board) MOVED, SECONDED, AND DULY CARRIED TO: Approve Minutes of the July 12, 2017 Administration Committee Meeting. 09/13/2017 Administration Committee Minutes Page 2 of 5 AYES: Ferryman, Kim, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver, and Wagner NOES: None ABSTENTIONS: None ABSENT: Krippner, M. Murphy (Alternate), Parker, Tinajero, and Wanke 2. REIMBURSEMENTS TO BOARD MEMBERS AND STAFF (Lorenzo Tyner) MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Receive and file report of reimbursements to Board Members and Staff per Government Code Section 53065.5 for the period of July 1, 2016 through June 30, 2017. AYES: Ferryman, Kim, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver, and Wagner NOES: None ABSTENTIONS: None ABSENT: Krippner, M. Murphy (Alternate), Parker, Tinajero, and Wanke 3. CONTINUITY OF OPERATIONS PLAN CONSULTING AND SOFTWARE (Celia Chandler) MOVED, SECONDED, AND DULY CARRIED TO: A. Approve a Professional Services Agreement with BOLDplanning Inc. for consulting services and Continuity of Operations Management Software under GSA Contract GS35FO301Y or its successor, for an amount not to exceed $118,000; and B. Approve a contingency amount of$11,800 (10%). AYES: Ferryman, Kim, Nagel, Peotter, Peterson (Alternate), Sebourn, Shawver, and Wagner NOES: None ABSTENTIONS: None ABSENT: Krippner, M. Murphy (Alternate), Parker, Tinajero, and Wanks NON-CONSENT: 4. CINTAS FIRE PROTECTION (SAFETY TRAINING) (Celia Chandler) Director of Human Resources Celia Chandler introduced Human Resources Manager Richard Spencer who provided an overview of this item. Mr. Herberg and Mr. Spencer responded to questions from the Committee pertaining to the training offered and an explanation as to why this is an unanticipated expense. Director Mark Murphy arrived at 5:20 p.m. 09/13/2017 Administration Committee Minutes Page 3 of 5 MOVED. SECONDED, AND DULY CARRIED TO: A. Ratify a change order to P.O. 105830-013, U.S. Communities contract number 12-JLH-011C, issued to Cintas Fire Protection, for safety training for an additional $30,000 for a contract amount not to exceed $129,000 for the period from October 1, 2016 to June 30, 2017; and B. Add funding to P.O. 105963-013, U.S. Communities contract number 12-JLH-011C, issued to Cintas Fire Protection, for safety training for an additional $30,000 for a contract amount not to exceed $129,000 for the period from July 1, 2017 to June 30, 2018. AYES: Ferryman, Kim, M. Murphy (Alternate), Nagel, Peotter, Peterson (Alternate), Seboum, Shawver, and Wagner NOES: None ABSTENTIONS: None ABSENT: Krippner, Parker, Tinajero, and Wanke INFORMATION ITEMS: 5. BENEFITS PROGRAM UPDATE (Celia Chandler) Director of Human Resources Celia Chandler provided an informative PowerPoint presentation that included an overview of the cost of employee benefits, compliance requirements, organizational sustainability components of offering benefits, language in the labor agreements regarding employee benefits and cost sharing, an overview of benefit plans offered, and a comparison of average benefits costs. Ms. Chandler introduced Karen Delaney and Laurinda Newell, both with Alliant, who continued the presentation with information pertaining to benefit plan pricing, renewals and timing, current benefit trends, and the importance of investing in talent at OCSD. Ms. Chandler indicated that proof of the eligibility of dependents is required annually or when changes are made. Ms. Chandler confirmed the monthly cost of employee benefits. The Committee inquired as to benchmarking between public agencies and the private sector and asked that this information be provided in the future. Ms. Delaney responded to a question regarding health savings accounts. 7. SPACE UTILIZATION NEEDS (Rob Thompson) Director of Engineering Rob Thompson provided a PowerPoint presentation pertaining to this item, which included information regarding OCSD's need for space for future processing needs. Mr. Thompson's presentation included an overview of current and recently completed construction projects, future construction needs, immediate space challenges, and long-term space issues. The Committee indicated that phasing by square footage would be helpful in reviewing this subject in the future. Mr. Thompson indicated that OCSD believes capacity needs are projected to be met through 2040. 09/13/2017 Administration Committee Minutes Page 4 of 5 CLOSED SESSION: CONVENED IN CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTIONS 54956.8: The Committee convened in closed session at 6:09 p.m. to discuss two items. Confidential minutes of the Closed Session have been prepared in accordance with the above Government Code Section and are maintained by the Clerk of the Board in the Official Book of Confidential Minutes of Board and Committee Closed Session Meetings. Director Nagel recused himself at 6:09 p.m. and left the meeting during discussion on Closed Session Item No. 1. Director Nagel returned to the meeting at 6:12 p.m. for the discussion on Closed Session Item No. 2. RECONVENED IN REGULAR SESSION: The Board reconvened in regular session at 6:15 p.m. CONSIDERATION OF ACTION, IF ANY, ON MATTERS CONSIDERED IN CLOSED SESSION: General Counsel Brad Hogin stated there was nothing to report. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: Board Vice-Chair Shawver indicated that he recently attended the California Association of Sanitation Agencies annual conference (focus on Proposition 218 notification, biosolids, and public-private partnerships) and would be happy to share his conference materials with anyone interested. ADJOURNMENT: Committee Vice-Chair Wagner declared the meeting adjourned at 6:17 p.m. to the next regularly scheduled meeting of Wednesday, October 11, 2017 at 5:00 p.m. Submitted by: Tina Knapp, CMC Deputy Clerk of the Board 09/13/2017 Administration Committee Minutes Page 5 of 5 ADMINISTRATION COMMITTEE Meeting Date Told dDir. to/u/v to/zs/v AGENDA REPORT Item Number Iem Number z Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: CONTRACTED INTERNAL AUDITS IN SEARCH OF FICTITIOUS EMPLOYEES AND SEARCH OF FICTITIOUS VENDORS GENERAL MANAGER'S RECOMMENDATION Receive and file the August 24, 2017, White Nelson Diehl Evans (WNDE) audit report in Search of Fictitious Employees and Search of Fictitious Vendors. BACKGROUND At the direction of the Administration Committee's Audit Oversight Subcommittee, White Nelson Diehl Evans (WNDE), Certified Public Accountants and the Orange County Sanitation District's (Sanitation District) contracted internal auditors, were engaged to apply agreed-upon procedures in Search of Fictitious Employees and Search of Fictitious Vendors. Attached are the Accountant Reports from WNDE on these two agreed-upon procedure reviews. Also attached are staff's responses to the auditors findings and recommendations pertaining to this review. In summary on the Search for Fictitious Employees, of the 15 procedures performed by WNDE, there were no exceptions noted on 13 of these procedures. Of the remaining two procedures, WNDE noted two separate findings. Upon review of these findings with the Audit Oversight Committee, it was concluded by the Committee that: • Maintaining copies of identifying documents to support the Employment Eligibility Verification Form (Form 1-9) is not federally mandated, but a procedure that was adopted by the Sanitation District a few years back for new employees going forward. Personnel employed prior to the implementation of this procedure would not have these identifying documents in their personnel file; and • The one exception where a retired employee's personnel file did not contain a signed Form 1-9 was because the employee's initial hire on date was in 1985, one year prior to the Employee Eligibility Verification mandate. In summary on the Search for Fictitious Vendors, of the 14 procedures performed by WNDE, there were no exceptions noted on 11 of these procedures. Of the remaining three procedures, WNDE noted three separate findings. Upon review of these findings with the Audit Oversight Committee, it was concluded by the Committee that: Page 1 of 2 • There were legitimate reasons why some vendors were included in the Vendor Master File (VMF) multiple times (legally filed address vs. mailing address, different parcel numbers receiving sewer rebates with the same address, etc.), but that the 60 duplicate VMF uncovered by the auditors during their test work should be reviewed by staff to determine if any of these duplicates can be deactivated; • The Sanitation District should review all VFM to ensure that a Request for Taxpayer Identification Number (Form W-9) is on file as a result of the 18 instances where WNDE discovered that the Form W-9 was not on file. The W-9 was not a formally documented procedure by the Sanitation District until around 2012, and no effort was made to secure this form for existing vendors; and • That staff implement procedures to secure the approval authorization for all disbursements as one out of 34 cash disbursements tested did not have the required Controller approval. Overall, the Committee concluded that no fictitious employees or vendors had been uncovered by agreed-upon procedures performed by WNDE. RELEVANT STANDARDS • Internal Auditing —Approx. 3 per year ATTACHMENT The following attachment(s)are included in hard copy and may also be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: • Staff Report to Ad Hoc Audit Committee, 'Responses to Agreed-Upon Procedures Report to Search for Fictitious Employees' • "Agreed Upon Procedures Review — Fictitious Employee Analysis" report from WNDE • Staff Report to Ad Hoc Audit Committee, "Responses to Agreed-Upon Procedures Report to Search for Fictitious Vendors" • "Agreed Upon Procedures Review—Fictitious Vendor Analysis"report from WNDE Page 2 of 2 C� p C1 August 24, 2017 STAFF REPORT TO: Ad Hoc Audit Committee FROM: Michael D. White, Controller SUBJECT: Responses to Agreed-Upon Procedures Report to Search for Fictitious Employees On August 24, 2017, White Nelson Diehl Evans (WNDE) issued their report on procedures they performed in their search for fictitious employees. Below is a listing of the auditors' findings contained within their report along with staff responses. Internal Controls 1. Procedure Performed: The District provided narratives and/or interviews regarding how the Employee Master File (EMF) is maintained. Results: Only the Human Resources Department can enter new employees, remove employees, and make employee information changes, including the pay rate. The Payroll Department is responsible for processing payroll and cannot change employee information in the EMF. The functions of making changes to the EMF and processing payroll are segregated. No exceptions were noted as a result of the procedures performed. Staff Response: N/A 2. Procedure Performed: The auditors received the EMF file as of March 13, 2017, and tested it against the District's policies and procedures. Results: No exceptions were noted as a result of this testing. Staff Response: N/A OCSD ♦ P.0.Box8127 ♦ Fountain Valley,CA 92728-8127 ♦ (714)%2-2411 Response to Contracted Internal Auditors Report on Search for Fictitious Employees August 24, 2017 Page 2 of 6 3. Procedure Performed: The IT Manager responsible for providing the EMF in procedure #2 above signed a representation that in the compilation or transmission of the EMF, all electronic data provided is as originally recorded in the District's system and was not altered for purposes of this agreed-upon procedure. Results: The representation letter was signed by the Principal Information Technology Analyst who provided the EMF. No exceptions were noted as a result of this testing. Staff Response: N/A Analysis of EMF 1. Procedure Performed: The auditors reviewed the EMF for any duplicate employee names and/or addresses. Results: The auditors performed this procedure and utilized the results to select the samples for procedure #3 below within this "Analysis of EMF" section. Staff Response: N/A 2. Procedure Performed: The auditors reviewed the EMF for any partial duplication of employee names and/or addresses (such as variations of employee names included in the EMF and the same street name, but different house/apartment number). Results: The auditors performed this procedure and utilized the results to select the samples for procedure #3 below within this "Analysis of EMF" section. Staff Response: N/A 3. Procedure Performed: Since there should be no duplicates within the EMF itself, the auditors selected all exact or partial matches identified in procedures #1 and #2 above for testing. The auditors reviewed the personnel files to verify a W-4 (IRS form for determining the correct federal income tax withholding), 1-9 (Employment Eligibility Verification), and other identifying documents (driver's license, etc.) and to note the pay rate in effect over the 21-month period. They then reviewed the history of payments made over the 21-month period for reasonableness in relation to the pay rate. Response to Contracted Internal Auditors Report on Search for Fictitious Employees August 24, 2017 Page 3 of 6 Results: The auditors identified 39 partial matches when comparing the information within the EMF mostly due to similar addresses and selected them for testing. The majority of the matches occurred due to living on the same street and same city; however, there was a different street address or apartment number. For 38 out of the total 39 employees tested, the auditors inspected the signed 1-9 that was signed by the human resources personnel who indicated that they inspected the proper identifying documents. However, they were unable to inspect other identifying documents, such as a driver's license, on 13 of these personnel files since copies were not retained. For 1 employee out of the total 39 employees tested, the auditors were unable to inspect the signed form 1-9 or other identifying documents, such as a driver's license, since the employee had retired in October 2016 and the documents were not available. Staff Response: OCSD is required to verify federally accepted documentation establishing identify and employment authorization and have an Human Resource representative annotate the valid document, sign, and date. However, there is no federal mandate that copies of the verifying documentation be maintained. Several years back, Human Resources began the practice of including copies of the documentation along with the 1-9 in the personnel file. The auditor's sample of the entire workforce included personnel files prior to when the District's internal practice required copies of the documentation. In response to the 1 employee who had retired in October 2016, this employee was originally hired in 1985, one year prior to the mandate of Employment Eligibility Verification and the required completion and filing of Form 1-9. 4. Procedure Performed: The District provided a list of new employees hired during the 21-month period. Results: The auditors received this listing and utilized the information to select the sample as noted in procedure #6 below and tested in procedure#7 below within this "New Employee" section. Staff Response: N/A 5. Procedure Performed: The Human Resources Department is responsible for entering new employees, making employee changes, including pay rates, and removing employees. The Payroll Department is responsible for processing payroll and cannot change employee information. The list of new employees was Response to Contracted Internal Auditors Report on Search for Fictitious Employees August 24, 2017 Page 4 of 6 provided to both the Human Resources and Payroll Departments to verify the existence of the employees. The employee in charge of each department signed a representation that the new employee listing contained actual employees and/or noted any discrepancies. Results: The auditors received signed representation letters from both the Human Resources Assistant and the Finance Director. No discrepancies were noted. Staff Response: N/A 6. Procedure Performed: A sample of 25 employees was randomly selected from the listing obtained in procedure#4 above. Results: The auditors selected the sample and tested the items in procedure #7 below within this "New Employee' section. Staff Response: N/A 7. Procedure Performed: The auditors reviewed the following for the employees selected in procedure #6 above: the personnel files to verify a W-4 and other identifying documents (driver's license, etc.) were retained. Results: No exceptions were noted as a result of this testing. Staff Response: N/A 8. Procedure Performed: The District provided a list of employees with pay rate changes during the 21-month period. Results: The auditors received this listing and utilized the information to select the sample as noted in procedure#10 below and tested in procedure#11 below within the "Change in Pay Rates" section. Staff Response: N/A 9. Procedure Performed: The District provided the payroll policy surrounding required signatures/approvals on personnel action forms for pay rate changes. Results: Pay rate changes due to promotions or a change in position require a personnel action form (PAF). The payroll system automatically routes the PAF to the appropriate employee for approval, which will be a supervisor, manager, or department head of the employee's division. Cost of living increases are included in salary schedules containing the position title, step, and hourly rate, which are Response to Contracted Internal Auditors Report on Search for Fictitious Employees August 24, 2017 Page 5 of 6 approved by the Board of Directors. Cost of living increases do not require a PAF and are entered into the system by the Human Resources Department based on the approved salary schedules. Staff Response: N/A 10.Procedure Performed: A sample of 25 employees was randomly selected from the listing obtained in procedure #8 above, with 15 specifically selected as the largest pay rate changes and 10 randomly selected. Results: The auditors selected the sample and tested the items in procedure #11 below within this "Change in Pay Rates" section. Staff Response: N/A 11.Procedure Performed: The auditors performed the following for the employees selected in procedure #10 above: a. reviewed the personnel files to verify a W-4 and other identifying documents (driver's license, etc.) were retained. b. compared the new pay rate from procedure #8 above with the PAF in the employee's personnel file to verify the propriety of the rate change. c. verified the PAF was approved by the appropriate supervisor in accordance with District policy noted in procedure #9 above. Results: For all 25 employees tested, the auditors inspected the employment eligibility verification form, 1-9, that was signed by the human resources personnel indicating that they inspected the proper identifying documents. However, for 3 of these employees, they were unable to inspect other identifying documents, such as a driver's license, since copies were not retained in the personnel files. Staff Response: Same result and staff response to "Analysis of EMF— Procedure Performed No. 3" above. 12.Procedure Performed: The District provided a listing of employees and the number of paychecks issued for July 1, 2015 through June 30, 2016. Normally, an employee should have only 26 paychecks for one full fiscal year; however, annual rate adjustments occur through a separate check; therefore, the existence of 27 paychecks for one fiscal year would be reasonable. The auditors reviewed the number of paychecks issued per employee and investigated employees who have received in excess of 27 paychecks. Results: The auditors originally noted 105 employees with more than 27 paychecks; however, the District requested the population be sampled. The Response to Contracted Internal Auditors Report on Search for Fictitious Employees August 24, 2017 Page 6 of 6 auditors selected 25 employees for testing and found the reason for paychecks in excess of 27 were as follows: • Additional payouts for compensated absences, such as vacation, sick, bereavement, and comp time • Retroactive pay for rate changes • Tuition reimbursements Staff Response: It is staff's opinion that the above three circumstances are legitimate reasons for issuing checks in excess of 27 to any one employee during the year and were appropriately authorized by Human Resources and Financial Management. Staff Overall Response: No fictitious employees were uncovered in this agreed- upon engagement. ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW FICTITIOUS EMPLOYEE ANALYSIS FOR THE 21-MONTH PERIOD OF JULY 1,2015 TO MARCH 31, 2017 INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES Board of Directors Orange County Sanitation District Fountain Valley, California We have performed the procedures set forth in this report, which were agreed to by the management of the Orange County Sanitation District, Fountain Valley, California (the District), for the 21-month period of July 1, 2015 to March 31, 2017. The District's management is responsible for establishing and maintaining internal controls over payroll to ensure there are no fictitious employees. The sufficiency of these procedures is solely the responsibility of the management of the District. Consequently,we make no representations regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and the results of those procedures are as follows: Interual Controls 1. The District provided narratives and/or interviews regarding how the Employee Master File (EMF) is maintained. The narrative and/or interviews included: a. What data fields are maintained for each employee. b. What procedures are used to set up a new employee. c. What personnel are authorized to set up a new employee. d. Identified employees who have access to the EMF and also have authority to input data for purposes of issuing payroll checks. e. Identified the Information Technology (IT) employees that have access to the EMF and/or have the ability to make additions,deletions or changes to the EMF. f. Determined if any high-level officials obtain a periodic report of new employees added to the EMF. Results: a. The EMF included the following data fields: • Employee ID • Preferred and legal first name, middle name/initial, and last name • Benefit group • Bargaining group • Department • Division number and name • Pay status,whether active or retired,and pay frequency • Title(classification) • Current mailing address - 1 - 2875 Michelle Drive,Suite 300,Irvine,CA 92606 •Tel: 714.978.1300• Fax:714.978.7893 Offices located in Orange and San Diego Counties Internal Controls (Continued) 1. (Continued) Results (Continued): b. Only the Human Resources Department can enter new employees, remove employees, and make employee information changes, including the pay rate. The Human Resources Department requests the necessary information from the new employee including a signed employment eligibility verification form, I-9. c. Only the Human Resources Department can set up a new employee. d. The Payroll Department has access to the EMF and can input data for issuing payroll checks. However, the Payroll Department cannot make changes to the EMF; therefore, this does not cause an issue for segregation of duties. e. The IT Department has access to the EMF,but cannot make changes. I. High-level officials do not obtain a periodic report of new employees added to the EMF; however, given the District's other controls, we do not see a need to add this procedure. Overall.: Only the Human Resources Department can enter new employees, remove employees, and make employee information changes, including the pay rate. The Payroll Department is responsible for processing payroll and cannot change employee information in the EMF. The functions of making changes to the EMF and processing payroll are segregated. 2. The District provided the EMF as of March 13,2017. Results: We received the EMF file. No exceptions were noted as a result of this testing. 3. The IT Manager responsible for providing the EMF in procedure #2 above signed a representation that in the compilation or transmission of the EMF, all electronic data provided is as originally recorded in the District's system and was not altered for purposes of this agreed-upon procedure. Results: The representation letter was signed by the Principal Information Technology Analyst who provided the EMF. No exceptions were noted as a result of this testing. Analysis of EMF 1. We reviewed the EMF for any duplicate employee names and/or addresses. Results: We performed this procedure and utilized the results to select the samples for procedure #3 below within this "Analysis of EMF"section. -2 - Analysis of EMF (Continued) 2. We reviewed the EMF for any partial duplication of employee names and/or addresses (such as variations of employee names included in the EMF and the same street time, but different house/apartment number). Results: We performed this procedure and utilized the results to select the samples for procedure #3 below within this "Analysis of EMF"section. 3. Since there should be no duplicates within the EMF itself, we selected all exact or partial matches identified in procedures#1 and#2 above for testing. a. We reviewed the personnel files to verify a W-4 (IRS form for determining the correct federal income tax withholding), I-9 (Employment Eligibility Verification), and other identifying documents(driver's license, etc.)were retained and to note the pay rate in effect for the 21-month period. b. We reviewed the history of payments made over the 21-month period for reasonableness in relation to the pay rate noted in procedure#3a above. Results: We identified 39 partial matches when comparing the information within the EMF mostly due to similar addresses and selected them for testing. The majority of the matches occurred due to living on the same street and same city; however, there was a different street address or apartment number. For 38 out of the total 39 employees tested, we inspected the signed I-9 that was signed by the human resources personnel who indicated that they inspected the proper identifying documents. However, we were unable to inspect other identifying documents, such as a driver's license, on 13 of these personnel files since copies were not retained. For 1 employee out of the total 39 employees tested, we were unable to inspect the signed form I-9 or other identifying documents, such as a driver's license, since the employee had retired in October 2016 and the documents were not available. There were no other issues noted during this testing. New Employees 4. The District provided a list of new employees hired during the 21-month period. Results: We received this listing and utilized the information to select the sample as noted in procedure #6 below and tested in procedure #7 below within this "New Employee" section. 5. The Human Resources Department is responsible for entering new employees, making employee changes, including pay rates, and removing employees. The Payroll Department is responsible for processing payroll and cannot change employee information. The list of new employees was provided to both the Human Resources and Payroll Departments to verify the existence of the employees. The employee in charge of each department signed a representation that the new employee listing contained actual employees and/or noted any discrepancies. Results: We received signed representation letters from both the Human Resources Assistant and the Finance Director.No discrepancies were noted. -3 - New Emulovees (Continued) 6. A sample of 25 employees was randomly selected from the listing obtained in procedure#4 above. Results: We selected the sample and tested the items in procedure #7 below within this "New Employee"section. 7. We reviewed the following for the employees selected in procedure 46 above: a. We reviewed the personnel files to verify a W4 and other identifying documents (driver's license, etc.)were retained. Results: No exceptions were noted as a result of this testing. Chan¢e in Pay Rates 8. The District provided a list of employees with pay rate changes during the 21-month period. Results: We received this listing and utilized the information to select the sample as noted in procedure #10 below and tested in procedure #11 below within this "Change in Pay Rates" section. 9. The District provided the payroll policy surrounding required signatures/approvals on personnel action forms for pay rate changes. Results: Pay rate changes due to promotions or a change in position require a Personnel Action Form (PAF). The payroll system automatically routes the PAF to the appropriate employee for approval, which will be a supervisor, manager, or department head of the employee's division. Cost of living increases are included in salary schedules containing the position title, step, and hourly rate, which we approved by the Board of Directors. Cost of living increases do not require a PAF and are entered into the system by the Human Resources Department based on the approved salary schedules. 10. A sample of 25 employees was randomly selected from the listing obtained in procedure #8 above, with 15 specifically selected as the largest pay rate changes and 10 randomly selected. Results: We selected the sample and tested the items in procedure #11 below within this "Change in Pay Rates" section. 11. We reviewed the following for the employees selected in procedure 410 above: a. We reviewed the personnel files to verify a W4 and other identifying documents (driver's license, etc.)were retained. b. We compared the new pay rate from procedure #8 above with the PAF in the employee's personnel file to verify the propriety of the rate change. c. We verified the PAF was approved by the appropriate supervisor in accordance with District policy noted in procedure#9 above. -4- Chance in Pay Rates(Continued) 11. (Continued) Results: For all 25 employees tested, we inspected the employment eligibility verification form, 1-9, that was signed by the human resources personnel indicating that they inspected the proper identifying documents. However, for 3 of these employees, we were unable to inspect other identifying documents, such as a driver's license, since copies were not retained in the personnel files. There were no other issues noted during this testing. Excess Paychecks 12. The District provided a listing of employees and the number of paychecks issued for July 1, 2015 through June 30, 2016. Normally, an employee should have only 26 paychecks for one full fiscal year; however, annual rate adjustments occur through a separate check; therefore, the existence of 27 paychecks for one fiscal yew would be reasonable. We reviewed the number of paychecks issued per employee and investigated employees who have received in excess of 27 paychecks. Results: We originally noted 105 employees with more than 27 paychecks; however, the District requested the population be sampled. We selected 25 employees for testing and found the reason for paychecks in excess of 27 were as follows: • Additional payouts for compensated absences, such as vacation, sick, bereavement, and comp time • Retroactive pay for rate changes • Tuition reimbursements Disclaimer This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion,respectively, on the existence of fictitious employees. Accordingly,we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. However, no fictitious employees were uncovered in this agreed-upon procedures engagement. Restriction on the Use of This Report This report is intended solely for the information and use of the Orange County Sanitation District Board of Directors and management of the District, and is not intended to be, and should not be, used by anyone other than those specified parties. 4�� ,/QLI&eaoXaJ !LP Irvine, California August 24, 2017 - 5 - C� p C1 August 24, 2017 STAFF REPORT TO: Ad Hoc Audit Committee FROM: Michael D. White, Controller SUBJECT: Responses to Agreed-Upon Procedures Report to Search for Fictitious Vendors On August 24, 2017, White Nelson Diehl Evans (WNDE) issued their report on procedures they performed in their search for fictitious vendors. Below is a listing of the auditors' findings contained within their report along with staff responses. Internal Controls 1. Procedure Performed: The District provided narratives and/or interviews regarding how the Vendor Master File (VMF) is maintained. Results: Only the Purchasing Department can make changes to the VMF and add new vendors. The Accounts Payable Department and non-purchasing department employees (such as the General Manager, Purchasing Manager, Department Directors, Division Managers, Supervisors, and other District staff)are responsible for approving purchases. The functions of making changes to the VMF and approving purchases are segregated. Staff Response: N/A 2. Procedure Performed: The District provided the VMF and a listing of District employees, including employee addresses, the Employee Master File (EMF), as of March 13, 2017. Results: No exceptions were noted as a result of this testing. Staff Response: N/A OCSD ♦ P.O.Box8127 ♦ Fountain Valley,CA 92728-8127 ♦ (714)%2-2411 Response to Contracted Internal Auditors Report on Search for Fictitious Vendors August 24, 2017 Page 2 of 6 3. Procedure Performed: The IT Manager responsible for providing the VMF and EMF in procedure#2 above signed a representation that in the compilation or transmission of the VMF and EMF, all electronic data provided was as originally recorded in the District's system and was not altered for purposes of this agreed- upon procedure. Results: The representation letter was signed by the Principal Information Technology Analyst who provided the VMF and EMF. No exceptions were noted as a result of this testing. Staff Response: N/A Test for Possible Matches between Vendors and Emolovees 1. Procedure Performed: The auditors compared the names and addresses of the vendors in the VMF with the names and addresses of employees in the EMF. Results: The auditors performed this procedure and utilized the results to select the samples for the procedures under "Exact Matches" section and "Partial Matches" section below. Staff Response: N/A Exact Matches 2. Procedure Performed: Exact matches between the VMF and EMF can be due to travel or other reimbursement requests by employees that are paid outside of the payroll system. The auditors provided the listing of exact matches to the District and requested a history of payments made (outside of payroll) for the 21-month period. They utilized the payment history to identify 15 employees with the largest aggregates payments made outside of payroll. From the remainder of the exact matches identified, a random sample of 10 was selected. Results: The auditors provided the matches noted from procedure #1 ("Test for Possible Matches between Vendors and Employees" section) above and received the history of payments for the 21-month period from the District. They utilized the history of payments to make the sample selection for procedures #3 and #4 below within this "Exact Matches" section. Response to Contracted Internal Auditors Report on Search for Fictitious Vendors August 24, 2017 Page 3 of 6 In addition, during their review of the VMF, the auditors noted some vendors that are listed multiple times. The vendors had the same address and, in some cases, the same tax identification number. The auditors recommend the District review the VMF and remove the vendors that are listed more than once without different addresses. The vendors noted are included in `Attachment A". Staff Response: In some instances, vendors are legitimately listed multiple times due to the need for the separation of a supplier's legally filed address with the Internal Revenue Service (as identified on their W-9 and used for Form 1099 reporting) and the mailing address used for payments. There are also instances where payments are for rebates to sewer customers where the same customer has various accounts that are tied to specific parcels or permit numbers. The parcel numbers are different but the mailing address may be the same. In other circumstances, it may appear that vendors are listed multiple times when actually all but one of the duplicates have been deactivated within the financial information system because of obsolescence. Deleting obsolete files is not a viable option due to the possible loss of transaction history. District staff will review the vendor listed in Attachment A to determine if any of the vendor duplicates can be deactivated. 3. Procedure Performed: For those 25 employees selected in procedure #2 above, the auditors selected a sample from the payment history to test to verify the propriety of the payment. In selecting the sample of individual transactions, they followed the American Institute of Certified Public Accountants (AICPA) sample size guidance with a maximum sample size per employee of 25 transactions. Results: The auditors selected the sample and tested the items selected in procedure #4 below within this "Exact Matches" section. Staff Response: N/A 4. Procedure Performed: To verify the propriety of the payments selected in procedure #3 above, the auditors performed the following: a. The District provided procurement policies and procedures indicating the type and amount of approvals required. b. The auditors ensured the reimbursement request or invoice was approved in accordance with District policy noted in procedure #4a above. c. The auditors determined the payment was for goods and/or services that are reasonable given the District's business. d. In the case of vendors selected that are not employees, the auditors verified the District has a W-9 on file. Response to Contracted Internal Auditors Report on Search for Fictitious Vendors August 24, 2017 Page 4 of 6 Results: The rash disbursements selected for testing were approved in accordance with the District's policies, were reasonable given the District's business, and had a W-9 on file, if applicable. No exceptions were noted as a result of this testing. Staff Response: N/A Partial Matches 5. Procedure Performed: The auditors determined the number of employees and vendor names and/or addresses that have partial matches, provided the listing of partial matches to the District, and requested a history of payments made (outside of payroll)for the 21-month period. They then selected a sample based on the AICPA sample size guidance with a maximum sample size of 25. The sample selection was split with 60% of the sample selection focusing on the largest aggregate payments by vendor and 40% of the sample randomly selected. Results: The auditors provided the matches noted from procedure#1 ("Test for Possible Matches between Vendors and Employees" section) above and received the history of payments for the 21-month period from the District. They utilized the history of payments to make the sample selection for procedures #6 and #7 below within this "Partial Matches" section. Staff Response: N/A 6. Procedure Performed: For those matches selected in procedure #5 above, the auditors selected a sample from the payment history to test to verify the propriety of the payment. In selecting the sample of individual transactions, they followed the AICPA sample size guidance with a maximum sample size per employee of 25 transactions. Results: The auditors selected the sample and tested the items selected in procedure #7 below within this "Partial Matches" section. Staff Response: N/A 7. Procedure Performed: To verify the propriety of the payments selected in procedure #6 above, the auditors performed the following: a. The District provided procurement policies and procedures indicating the type and amount of approvals required. b. The auditors ensured the reimbursement request or invoice was approved in accordance with District policy noted in procedure #6a above. Response to Contracted Internal Auditors Report on Search for Fictitious Vendors August 24, 2017 Page 5 of 6 c. The auditors determined the payment was for goods and/or services that are reasonable given the District's business. d. In the case of vendors selected that are not employees, the auditors verified the District had a W-9 on file. Results: The cash disbursements selected for testing were approved in accordance with the District's policies and were reasonable given the District's business with the exception of one transaction noted in the second paragraph below. Out of the 11 vendors selected for testing, 5 did not have a W-9 on file. The District did not have a W-9 on file because the vendor was set up a long time ago in the system. The W-9 was not a formally documented or consistently followed procedural step by Purchasing to obtain and append a W-9 for newly created Vendor files until the estimated timeframe of 2012. We recommend the District ensures that all vendors in the VMF have a W-9 on file. Out of 34 cash disbursements selected for testing, one did not have the required approval. This disbursement was a rebate to a District customer in the net amount of$17,226.25. This customer paid fees based on estimated usage and, at year-end, the District calculated the customer fees based on actual usage. In this case, the customer was owed a rebate. The District's policy is that all credits or rebates to customers should be reviewed and approved by the Controller. We did not note the Controller's initials on the customer refund. We recommend the District ensure the required approvals are obtained prior to paying customer refunds. Staff Response: The District agrees with the recommendation to ensure that all vendors in the VMF have a W-9 on file. Information Technology (IT) will (1) deactivate any VMFs that have not had any transactional activity over the last two fiscal years and (2) generate a report identifying all remaining active VMFs that do not have W-9's attached. From this report generated by IT, Purchasing will obtain the missing W-9 documents and scan them into the active VMFs. The goal is to complete this recommendation by March 31, 2018. In reference to the lack of approval on a customer refund by the Controller, the District will include a line on the Batch Control Sheet, the approval document for the payment of rebates, requiring the Controller's signature approval. 8. Procedure Performed: The District provided a list of all new vendors added during the 21- month period. Results: The District provided the listing of all new vendors added during the 21- month period. Staff Response: N/A Response to Contracted Internal Auditors Report on Search for Fictitious Vendors August 24, 2017 Page 6 of 6 9. Procedure Performed: The District distributed the list of new vendors to the appropriate personnel who reviewed the list and confirmed that new vendors added to the list were valid. Results: The listing was provided to the Contracts/Purchasing Assistant and the Purchasing Supervisor who signed a representation letter that, to the best of their knowledge, the new vendors consisted of valid vendors utilized by the District for appropriate District daily operations. Staff Response: N/A Review of P.O. Boxes 10.Procedure Performed: The auditors identified vendors in the VMF with P.O. Boxes as addresses and selected a sample of 25. Results: The auditors identified the vendors in the VMF that had P.O. Boxes as addresses and selected a sample for the procedure #11 below within this "Review of P.O. Boxes" section. Staff Response: N/A 11.Procedure Performed: The auditors verified the authenticity of the vendor by performing the following procedures: a. Reviewed the form W-9 the District has on file. b. Accessed the vendor websites and/or called the vendor to verify existence. Results: The auditors were able to verify the existence of all vendors with online websites. For 13 of the 25 vendors selected, they were not able to inspect the W- 9. The District did not have a W-9 on file because the vendor was set up a long time ago in the system. The W-9 was not a formally documented or consistently followed procedural step by Purchasing to obtain and append a W-9 for newly created Vendor files until the estimated timeframe of 2012. The auditors recommend the District ensures that all vendors in the VMF have a W-9 on file. Staff Response: This is the same recommendation as stated in "Partial Matches — Procedure Performed No. 7" and OCSD's response is the same. Staff Overall Response: No fictitious vendors were uncovered in this agreed- upon engagement. ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW FICTITIOUS VENDOR ANALYSIS FOR THE 21-MONTH PERIOD OF JULY 1,2015 TO MARCH 31, 2017 INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING AGREED-UPON PROCEDURES Board of Directors Orange County Sanitation District Fountain Valley, California We have performed the procedures set forth in this report, which were agreed to by the management of the Orange County Sanitation District, Fountain Valley, California (the District), for the 21-month period of July 1, 2015 to March 31, 2017. The District's management is responsible for establishing and maintaining internal controls over cash disbursements to ensure there are no fictitious vendors. The sufficiency of these procedures is solely the responsibility of the management of the District. Consequently, we make no representations regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and the results of those procedures are as follows: Intemal Controls 1. The District provided narratives and/or interviews regarding how the Vendor Master File (VMF) is maintained. The narrative and/or interviews included: a. What data fields are maintained for each vendor. b. What procedures are used to set up a new vendor. c. What personnel are authorized to set up a new vendor. d. Identified employees who have access to the VMF and also have authority to approve invoices,purchase orders, or receiving documents. e. Identified the Information Technology (IT) employees that have access to the VMF and/or have the ability to make additions,deletions, or changes to the VMF. f. Determined if any high-level officials obtain a periodic report of new vendors added to the VMF. g. If the District makes "manual" or "emergency" payments to vendors that do not go through the regular approval and review procedures, identified personnel responsible for verifying that the vendor has been approved and added to the VMF. Results: a. The VMF included the following data fields: • Vendor name • Type of vendor(vendor versus employee) • Address, city, state, and zip code • Tax Identification Number • Type of company: C (corporation),N (any other type), P (individual/sole proprietor), and E (exempt) • Business phone(can add fax number,but is not mandatory) • Email (not mandatory) - 1 - 2875 Michelle Drive,Suite 300,Irvine,CA 92606 •Tel: 714.978.1300• Fax:714.978.7893 Offinr located in Orange and San Diego Counties Internal Controls (Continued) 1. (Continued) Results (Continued): b. New vendors are entered into the system by the Purchasing Department. A W-9 must be scanned into the system as support for the existence of the new vendor. Also the tax identification number (TIN) must be entered into the system. By entering in the TIN number, the District can verify that the vendor does not already exist in the system to avoid duplicate entries. c. Only the Purchasing Department can make changes to the VMF and add new vendors. d. The Accounts Payable Department has access to the VMF and can approve invoices. However, the Accounts Payable Department cannot make changes to the VMF; therefore, this does not cause an issue for segregation of duties. e. The IT Department has access to the VMF,but cannot make changes. f. High-level officials do not obtain a periodic report of new vendors added to the VMF; however, given the District's other controls, we do not see a need to add this procedure. Per our discussion with the finance department, the District does not believe a benefit exists for this control as they could not think of any new vendor being added that would raise a red flag. g. If a "manual" or "emergency" payment to a vendor requires setup in the VMF then the only difference from the procedure noted in "b" above is that a W-9 is not required. The W-9 will be obtained at a later date due to the emergency situation. Overall.: Only the Purchasing Department can make changes to the VMF and add new vendors. The Accounts Payable Department and non-purchasing department employees (such as the General Manager, Purchasing Manager, Department Directors, Division Managers, Supervisors, and other District staff) are responsible for approving purchases. The functions of making changes to the VMF and approving purchases are segregated. 2. The District provided the VMF and a listing of District employees, including employee addresses, the Employee Master File(EMF),as of March 13, 2017. Results: We received the VMF and EMF files.No exceptions were noted as a result of this testing. 3. The IT Manager responsible for providing the VMF and EMF in procedure #2 above signed a representation that in the compilation or transmission of the VMF and EMF, all electronic data provided was as originally recorded in the District's system and was not altered for purposes of this agreed-upon procedure. Results: The representation letter was signed by the Principal Information Technology Analyst who provided the VMF and EMF.No exceptions were noted as a result of this testing. -2 - Test for Possible Matches between Vendors and Employees 1. We compared the names and addresses of the vendors in the VMF with the names and addresses of employees in the EMF. a. We searched for exact matches of names and addresses. b. We searched for partial matches (such as variations of employee names included in the VMF and the same street name,but different house/apartment number). Results: We performed this procedure and utilized the results to select the samples for the procedures under"Exact Matches" section and`Partial Matches"section below. Exact Matches 2. Exact matches between the VMF and EMF can be due to travel or other reimbursement requests by employees that are paid outside of the payroll system. We provided the listing of exact matches to the District and requested a history of payments made (outside of payroll) for the 21-month period. We utilized the payment history to identify 15 employees with the largest aggregates payments made outside of payroll. From the remainder of the exact matches identified, a random sample of 10 was selected. Results: We provided the matches noted from procedure #1 ("Test for Possible Matches between Vendors and Employees" section) above and received the history of payments for the 21-month period from the District. We utilized the history of payments to make the sample selection for procedures#3 and#4 below within this "Exact Matches"section. In addition, during our review of the VMF,we noted some vendors that are listed multiple times. The vendors had the same address and, in some cases, the same tax identification number. We recommend the District review the VMF and remove the vendors that are listed more than once without different addresses. The vendors noted are included in "Attachment A". 3. For those 25 employees selected in procedure 42 above, we selected a sample from the payment history to test to verify the propriety of the payment. In selecting the sample of individual transactions, we followed the American Institute of Certified Public Accountants (AICPA) sample size guidance with a maximum sample size per employee of 25 transactions. Results: We selected the sample and tested the items selected in procedure #4 below within this "Exact Matches" section. 4. To verify the propriety of the payments selected in procedure #3 above, the following was performed: a. The District provided procurement policies and procedures indicating the type and amount of approvals required. b. We ensured the reimbursement request or invoice was approved in accordance with District policy noted in procedure#4a above. c. We determined the payment was for goods and/or services that are reasonable given the District's business. d. In the case of vendors selected that are not employees, we verified the District has a W-9 on file. -3 - Exact Matches (Continued) 4. (Continued) Results: The cash disbursements selected for testing were approved in accordance with the District's policies,were reasonable given the District's business, and had a W-9 on file, if applicable. No exceptions were noted as a result of this testing. Partial Matches 5. We determined the number of employees and vendor names and/or addresses that have partial matches. We provided the listing of partial matches to the District and requested a history of payments made (outside of payroll) for the 21-month period. We selected a sample based on the AICPA sample size guidance with a maximum sample size of 25. The sample selection was split with 60% of the sample selection focusing on the largest aggregate payments by vendor and 40% of the sample randomly selected. Results: We provided the matches noted from procedure #1 (`Test for Possible Matches between Vendors and Employees" section) above and received the history of payments for the 21-month period from the District. We utilized the history of payments to make the sample selection for procedures#6 and 47 below within this `Partial Matches" section. 6. For those matches selected in procedure #5 above, we selected a sample from the payment history to test to verify the propriety of the payment. In selecting the sample of individual transactions, we followed the AICPA sample size guidance with a maximum sample size per employee of 25 transactions. Results: We selected the sample and tested the items selected in procedure #7 below within this "Partial Matches"section. 7. To verify the propriety of the payments selected in procedure #6 above, the following was performed: a. The District provided procurement policies and procedures indicating the type and amount of approvals required. b. We ensured the reimbursement request or invoice was approved in accordance with District policy noted in procedure#6a above. c. We determined the payment was for goods and/or services that are reasonable given the District's business. d. In the case of vendors selected that are not employees, we verified the District had a W-9 on file. Results: The cash disbursements selected for testing were approved in accordance with the District's policies and were reasonable given the District's business with the exception of one transaction noted in the second paragraph below. Out of the 11 vendors selected for testing, 5 did not have a W-9 on file. The District did not have a W-9 on file because the vendor was set up a long time ago in the system. The W-9 was not a formally documented or consistently followed procedural step by Purchasing to obtain and append a W-9 for newly created Vendor files until the estimated timeframe of 2012. We recommend the District ensures that all vendors in the VMF have a W-9 on file. -4- Partial Matches(Continued) 7. (Continued) Out of 34 cash disbursements selected for testing, one did not have the required approval. This disbursement was a rebate to a District customer in the net amount of$17,226.25. This customer paid fees based on estimated usage and, at year-end, the District calculated the customer fees based on actual usage. In this case, the customer was owed a rebate. The District's policy is that all credits or rebates to customers should be reviewed and approved by the Controller. We did not note the Controller's initials on the customer refund. We recommend the District ensure the required approvals we obtained prior to paying customer refunds. Analvzine New Vendors 8. The District provided a list of all new vendors added during the 21-month period. Results: The District provided the listing of all new vendors added during the 21-month period. 9. The District distributed the list of new vendors to the appropriate personnel who reviewed the list and confirmed that new vendors added to the list were valid. Results: The listing was provided to the Contracts/Purchasing Assistant and the Purchasing Supervisor who signed a representation letter that, to the best of their knowledge, the new vendors consisted of valid vendors utilized by the District for appropriate District daily operations. Review of P.O. Boxes 10. We identified vendors in the VMF with P.O. Boxes as addresses and selected a sample of 25. Results: We identified the vendors in the VMF that had P.O. Boxes as addresses and selected a sample for the procedure#11 below within this "Review of P.O. Boxes"section. 11. We verified the authenticity of the vendor by performing the following procedures: a. Reviewed the form W-9 the District has on file. b. Accessed the vendor websites and/or called the vendor to verify existence. Results: We were able to verify the existence of all vendors with online websites. For 13 of the 25 vendors selected,we were not able to inspect the W-9. The District did not have a W-9 on file because the vendor was set up a long time ago in the system. The W-9 was not a formally documented or consistently followed procedural step by Purchasing to obtain and append a W-9 for newly created Vendor files until the estimated timeframe of 2012. We recommend the District ensures that all vendors in the VMF have a W-9 on file. - 5 - Disclaimer This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion,respectively, on the existence of fictitious vendors.Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. However, no fictitious vendors were uncovered in this agreed-upon procedures engagement. Restriction on the Use of This Report This report is intended solely for the information and use of the Orange County Sanitation District Board of Directors and management of the District, and is not intended to be, and should not be, used by anyone other than those specified parties. A)A" i Aw-z" /1P Irvine, California August 24, 2017 -6 - ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW FICTITIOUS VENDOR ANALYSIS FOR THE 21-MONTH PERIOD OF JULY 1, 2015 TO MARCH 31,2017 ATTACHMENT A SECTION: EXACT MATCHES PROCEDURE#2 The following vendors were listed multiple times within the VMF: The Bank of New York Mellon Arms,International Inc City of Fullerton East Orange County Water District Biorem Environmental Inc Aecom Technical Services Inc Alfa Laval Ashbrook Simon-Hartley Inc American Chemical Society American General Life Insurance Company Associated Vacuum Services AT&T Teleconference Services Battery Systems Inc Benshaw,Inc (Regal) Calcoast(California Coastal Commission) Carollo Engineers Corporate Office City of Buena Park City of Los Alamitos City of Stanton City of Tustin City of Westminster Cortech Engineering City of Brea City of Yorba Linda Dancing Coyote Environmental Dartco Transmission Sales & Service Employment Development Dept-Cashier Eppendorf North America Inc First American Title Company Institute of Business Publications ORANGE COUNTY SANITATION DISTRICT AGREED-UPON PROCEDURES REVIEW FICTITIOUS VENDOR ANALYSIS FOR THE 21-MONTH PERIOD OF JULY 1, 2015 TO MARCH 31,2017 ATTACHMENT A(CONTINUED) SECTION: EXACT MATCHES PROCEDURE#2 JP Morgan Chase Bank,NA Lehigh Outfitters,LLC Liberty Pipeline Services Linde Electronics Specialty Gases MSC Industrial Supply Co OFS Brands Holdings Inc Opfiv Security Inc Orange County Vector Control District Parkson Corporation Pine Environmental Services LLC Powercom Quincy Compressor R.F. Macdonald Co Red Wing Shoe Store SCPLRC - Souther California Public Southland Claims Svc Inc T and D Communications Inc TCH Associates/Princeton Case West USAA United Services Automobile Assoc Vaughan's Industrial Repair Wastewater Solids Management Co Willdan Umpqua Bank Bonerts Inc South Coast Circuits Wateruse Association Gallade Chemical Inc Stratus Environmental Inc National Water Research Institute International Paper GRM Information Management Services ADMINISTRATION COMMITTEE Meeting Date TOBd.Of Dir. io/up1 io/zs/v AGENDA REPORT emNumber Item Number 3 Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: DOIG DRIVE PROPERTY DISPOSAL— BROKER GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to conduct a Request for Proposal process and subsequently award for real estate broker services to facilitate the sale of the Orange County Sanitation District's real property at 7311 Doig Drive, Garden Grove, CA. BACKGROUND In 2005, the Orange County Sanitation District (Sanitation District) purchased the building located at 7311 Doig Drive in Garden Grove to be used as a Collections Department field office and corporate yard. However, as a result of local sewer transfers primarily in Tustin and unincorporated areas of Orange County, it was later determined that the new facility was no longer necessary and the building was declared surplus property. A decision was made to lease the building out. The building is currently under a lease with a manufacturing firm that guarantees extensions until 2022. The building was constructed in 1978 per seismic codes less stringent than currently required. A Seismic Risk Assessment was performed and structural reinforcements were recommended to meet current seismic standards. The Board determined that the associated expenses related to repair of the building were cost prohibitive and directed staff to dispose of the property. RELEVANT STANDARDS Ensure the public's money is wisely spent PROBLEM The Sanitation District does not engage in many real estate transactions. As such, it does not maintain in-house real estate resources or expertise. PROPOSED SOLUTION Dispose of this asset through sale through engagement with a real estate broker for this transaction. Page 1 of 2 TIMING CONCERNS The ownership and management of this property is not necessary and represents a distraction from Sanitation District core business. RAMIFICATIONS OF NOT TAKING ACTION N/A PRIOR COMMITTEE/BOARD ACTIONS March 2017 - Board of Directors approved disposition of property at 7311 Doig Drive be referred to the Administration Committee. November 2016 -Approved the Second Amendment to the Doig Property Lease to enter into an eight-month lease extension of the Sanitation District's real property at 7311 Doig Drive, in a form approved by General Counsel. July 2016 - Board of Directors approved First Amendment to extend the lease by three months at 7311 Doig Drive. December 2011 - Board of Directors authorized the lease at 7311 Doig Drive. November 2010 - Board of Directors declared the property at 7311 Doig Drive as surplus property. ADDITIONAL INFORMATION At its March 22, 2017 meeting, the Board approved the designation of Sanitation District property at 7311 Doig Drive as surplus and referred the item to the Administration Committee for disposition. Staff recommends engaging a broker to facilitate the sale of the property. FINANCIAL CONSIDERATIONS The proceeds of this asset disposal may be used to offset other property acquisitions by the Sanitation District. ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.corn with the complete agenda package: N/A Page 2 d 2 ADMINISTRATION COMMITTEE Meeting Date To ad.of Dir. io nw - AGENDA REPORT IWm Number Item Number a - Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Robert P. Ghirelli, Assistant General Manager SUBJECT: STRATEGIC PLAN UPDATE GENERAL MANAGER'S RECOMMENDATION Information Only. BACKGROUND In November 2013, the Orange County Sanitation District (Sanitation District) Board of Directors adopted the 2014-2019 Five-Year Strategic Plan. Each year, staff undertakes a review and update of the Strategic Plan to make any necessary changes. In April, staff began the 2017 update process. In April, the firm of BHI Management Consulting (consultant) was retained to conduct a series of one-on-one confidential interviews with interested board members. In July, the consultant led a Strategic Planning Workshop for employees and participated in the Executive Management Team's annual planning meeting in August. Information gathered during these meetings was used to prepare this Strategic Plan Update. RELEVANT STANDARDS Strategic Plan PRIOR COMMITTEE/BOARD ACTIONS November 2013 - Adopted the 2014-2019 Five-Year Strategic Plan. ADDITIONAL INFORMATION Based on the outcome of the Strategic Plan Update Interviews and Employee Workshop, several minor modifications were made to the Levels of Service and seven of the eight strategic goals are deemed complete: Completed Strategic Goals: • Disinfection of Ocean Discharge—develop an implementation plan associated with cessation of disinfection of the ocean discharge. • Legislative Advocacy and Public Outreach—Develop a unified legislative advocacy and public outreach program. Page 1 of 2 • Odor Control — Completion of the Odor Control Master Plan. • Future Biosolids Management Options — Study biosolids management options, including third-party contracts and onsite capital facilities. • Energy Efficiency — Research new energy efficiency and energy conversion technologies. • Local Sewer Transfers—Complete the transfer of 174 miles of local sewers serving parts of Tustin and unincorporated areas north of Tustin and local sewer transfers in the City of Santa Ana. • Future Water Recycling—Determine partnerships, needs, strategies, benefits, and costs associated with recycling of Plant No. 2 effluent water. The eighth goal, Workforce Planning and Workforce Development, is continuing into the final year of the 5-year strategic plan. As part of our comprehensive workforce planning and development efforts, the General Manager's 2017-2018 work plan calls for a staffing study that identifies required staffing levels and opportunities to improve organizational efficiency and effectiveness. Staff is proposing to make changes to some of the Levels of Service contained in the Strategic Plan. These changes are highlighted in the attached red-line version of the strategic plan. The changes are intended to clarify the meaning of a service level, delete outdated service levels, and eliminate irrelevant service levels. CEQA N/A FINANCIAL CONSIDERATIONS N/A ATTACHMENT The following attachment(s)are included in hard copy and may also be viewed on-line at the OCSD website (www.ocsd.coml with the complete agenda package: Redline Version of Draft Strategic Plan Document (provided in hard copy as separate document) Page 2 of 2 UPDATEDRAFr December 2017 �-7� .*N r y ti M. e t; d 5 f: year strategic klan ORANGE COUNTY SANITATION DISTRICT ORANGE COUNTY SANITATION DISTRICT five-year strategic plan DECEMBER 2017 ANI A �i g 2 a ' N THE tl Q a 4� • 1 I i� `v table of contents ■ OCSD Board of Directors...........................................................................................ii Message from the General Manager..........................................................................iu ExecutiveSummary.......................................................................................................1 tegic Planning Framework.............................................................................2 Statement.........................................................................................................3 Is�on tatement............................................................................................................4 CoreValues.....................................................................................................................5 RiskRegister....................................................................................................................6 Strategic Goals and Levels of Service.........................................................................7 ORANGE COUNTY SANITATION DISTRICT-S YEAR STRATEGIC PLAN(DECEMBER 2017) board of directors The strategic planning effort starts with the Board of Directors setting overall policy and priorities for the Sanitation District.Based on that policy direction,staff develops the annual operational plan and budget. Anaheim La Palma Denise Barnes Peter Kim Brea Los Alamitos Glenn Parker Richard Murphy Buena Park Member of the Board of Supervisors Fred Smith Michelle Steel Costa Mesa Sanitary District Midway City Sanitary District James M. Ferryman Al Kfippner Cypress Newport Beach Mariellen Yatc Scott Peotter Fountain Valley Orange Steve Nagel Teresa Smith Fullerton Placentia Greg Seboum Chad Wanke (Board Chair) Santa Ana Garden Grove Sal Tinajem Steve Jones Seal Beach Huntington Beach Ellery Deaton Barbara Delgleize Stanton Irvine David Shawver Donald P.Wagner Tustin Allan Bernstein Irvine Ranch Water District John Withers Villa Park La Habra Robert Collacott Tun Shaw Yorba Linda Water District Phil Hawkins ORANGECOUNTY SANITATION DISTRICT-5Y 45iRAiE11110P (DECEMBER 20171 message from the general manager tmd ember 2013 the Orange County Sanitation District(OCSD) d a 5-Year Strategic Plan that envisioned an organizational that adheres to our core values and makes efficient and e use of all available resources.The Strategic Plan centered forts on customer service, fiscal responsibility, protecting health and the environment, communication, partnering thers and creating the best possible workforce. We tied to the execution of that plan and implementation of the als necessary to achieve success. Protecting publironment are critical to our mission, and I am pleased to report that our ocean monitoring program reflects that our ocean is healthy around OCSD's ocean outfall.We also continue to be fiscally strong.This year OCSD received AAA bond ratings and we have reduced our long term pension liabilities,which in rum enabled us to reduce planned rate increases by 35 percent over the next three years. Four years into the five year Strategic Plan, I am pleased to report that we have completed seven of the original strategic goals and made strides towards accomplishing the final goal.In this update year,we held Board member interviews,an employee workshop,and updated our Risk Register. We remain committed to sustaining and improving our performance and meeting all of the established strategic goals. Under the direction of the Board of Directors,I am honored to be leading this effort and I look forward to working together to accomplish our goals in the years ahead and contin our successes. Ir The accomplishments laid out in this Strategic Plan update would not be possible without the collective dedication and effort of our workforce and the commitment a�d support of our Board of Directors and The public we serve. Respectfully submitted, 12 & James D. Herberg,General Manager ORANGECOUNTY SANITATION DISTRICT—SPEAR STRATEGIC PLAN(DECEMBER 2017) executive summary The 2014—2019 5 year Strategic Plan is a guiding document that provides a framework that directs our work. Each year,the Strategic Plan will be reassessed,updated, and submitted for approval by the Board of Directors. This year's Strategic Plan Update began with consultant retained by OCSD conducting confidential Board Interviews with interested Board members to identify issues of concerns. Next, the consultant led a Strategic Planning Workshop for employees and attended the Executive Management Team's annual retreat to provide feedback from the Board members and employees. will. e Update concluded with t five Strategic Goals being identified as completed, no new goals being adopted, and a few minor modifications being made to OCSD's levels of service. Comp/eted Strategic Goa/a Disinfection of Ocean Discharge—Develop an implementation plan including the technical,financial, and societal factors associated with cessation of disinfection of the ocean disc Legislative Advocacy and Public Outreach—Develop a unified legislative adv7includmig outreach program. Odor Control—Completion of the Odor Control Master Plan. Future Biosolids Management Options—Study biosolids management optionspartycontracts and onsite capital facilities. Energy Efficiency—Continue to research new energy efficiency and energy conversonecnologies. Local Sewer Transfers — Complete the transfer of 174 miles of local sewers serving parts of Tustin and unincorporated areas north of Tustin and local sewer transfers in the City of Santa Ana. Future Water Recycling — Determine partnerships, needs, strategies, benefits, and costs associated with recycling of Plant No.2 effluent water. $hategiC Goals is Progress. 1. Workforce Planning and Workforce Development—This initiative is ongoing and part of a comprehensive workforce planning and development effort to ensure we have the right people with the right skills and abilities,in the right place,at the right time. ORANGE CWNTY SANITATION DISTRICT-SYSM SYMTMIC PLAN(DECEMBER 2017) strategic planning framework The planning framework illustrated below shows how OCSD staff and the Board of Directors play a critical role in strategic planning and resource allocation. Monitoring Strategic New or Altered and Evaluation Planning evels of Board strategic (:9) Approval of Budget planning process Budget ,o Goals and Operational \objectives Planning _3 L ORANGECOUNTY SANITATION DISTRICT-SPEAR STRATEGIC PLAN(DECEMBER 2017) our mission The Nlission Statement is the basic fo,andation that defines wlay we exist. "To protect pub/ic hea/th and the environment by providing effective wastewater co/%ction, treatment, and recyc/ing" 1 1.. p3 vision statement The Vision Statement supports the Mission Statement by expressing a broad philosophy of what the Orange County Sanitation District strives to achieve in the delivery of services tour customers,vendors, other agencies,the general public,and each other. ORANGE COUNTY SANITATION DISTRICT WILL BE A LEADER IN: • Providing reliable, responsive, and affordable services in line with customer needs and expectations. • Protecting public health and the environment utilizing all practical and effective means for wastewater, energy and solids resource recovery. • Continually seeking efficiencies to ensure that the public's money is wisely spent. • Communicating our mission and strategies with those we serve and all other stakeholders. • Partnering with others to benefit our customers, this region, and our industry. • Creating the best possible workforce in terms of safety, productivity, customer service, and training. ORANGECOUNTY SANITATION DISTRICT-6 YEAR STRATEGIC PLAN IDECEMBER 20171 philosophycore values The Core Values support the NEssion and Vision Statements by expressing die values,beliefs,and that guide our daily actions.7bey help form the framework of our organization and reinforce our professional work ethic. We aspire to the highest degree of integrity,honesty,trust, and respect in our interaction with each other,our suppliers, our customers,and our community. We strive to reach OCSD goals through cooperative efforts and collaboration with each other and our cons6tuenues. We work to solve problems in a aeadve,cost-effective and safe manner,and we acknowledge team and individual efforts. We lead by example,acknowledging the value of our resources and using them wisely and safely to achieve our objectives and goals.We axe committed to act in the best interest of our employees,our organi>ation, and our community. We continuously develop ourselves,enhancing our talents, skills,and abilities,knowing that only through personal growth and development will we continue to progress as an agency and as individuals. We seek to recognize,acknowledge,and xewazd contributions to OCSD by our many talented employees. p5 risk register 2017 The Risk Register is a periodic compilation of the various risks facing the Orange County Sanitation District, as seen and determined by our management team. As the world dealt with a variety of critical events last year (a number of terrorist incidents in Europe,high rainfalls in Southern California,a massive sewage leak offshore from Los eles, an extensive natural gas leak north of Los Angeles), OCSD management identified risks directly r to our infrastructure and ongoing services.Management agreed that our biggest risks Are cyber terrorist er attacks,earthquakes with their associated impacts,and threats to maintenance of assets. The 201 Isk Register Update Identified these as the top risks: • Earthquake and liquefaction impact facilities and operations—Southern California is prone to earthquakes, and some areas of Orange County may include areas subject to liquefaction. • Poor maintenance of assets leads to safety and reliability issues—Concerns about sufficient staffing of Maintenance personnel might lead to threats with regards to the assets. • Cyber or hacker attack on OCSD—Cyber-attacks can potentially prevent servers and regular work from continuing normally—OCSD operations now depend on continued computer and server function,which could be at risk from cyber-attacks. The major continuity challenges Include: • Lack of business continuity exercises leads to unpreparedness—OCSD conducts emergency preparedness exercises, but alight need to do more in regard to business continuity. Engineering staff are putting new engineering measures into effect to reduce the chance of damage to buildings from earthquakes, while Risk Management has purchased earthquake insurance on additional key structures. The Operations department is adding staff to the Maintenance function. Regarding cyber-attacks, OCSD's Information Technology a'l) Division has added personnel who specialize in IT security. Risk Management will be asking the Board to approve a contract with a business continuity consultant to move forward an integrated business continuity effort for all OCSD divisions including IT. ORANGE COJNTV SANITATION DGTRICT—SVEMWUMIeIC PLAN(DECEMBER 2017) strategic goals and levels of service OCSD has six outstanding strategic goals to support the vision of the Board of Directors and Executive Management Team. The levels of service are key performance indicators in achieving the overall vision. ProvldingExoeptlonal Customer SeMae • Providing reliable,responsive,and affordable services in line with customer needs and expectations. 1. Control-Completion of the Odor Control Master Plan to make sure the Districes investment is current and,if needed,future process systems to produce the benefits intended. Targetfor completion in FY 15-16. Providing Exceptional Customer Service Odor complaint call response: Treatment plants within 1 hour. 100% Odor complaint call response: Collection system within 1 working day. 100% Number of odor complaints events: (Under normal operating conditions) 0 • Reclamation Plant No. 1 0 • Treatment Plant No. 2 12 • Collection System Respond to public complaints or inquiries regarding construction projects within 1 100% day. guh RnJ Respond to all biosolids contractor violations within a week of violation notice. 100% PrOt6ah7gPahllC Health and the Environment • Protecting public health and the environment utilizing all practical and effective means for wastewater, energy,and solids resource recovery. 2. Future Biosolids Management Options - Study biosolids management opt s including third-patty contracts and onsite capital facilities for mid-term and long-term approaches 2016-2017. Tagetfor romble#on in FY 15-16. 3. Energy Efficiency-The District will research new energy efficiency and energy conversion technologies to maximize energy of 6ency,reduce operating costs,mmunize environmental impact, and replace assets that are at the end of their useful lives. Targetfor completion in FY 17-18. ocsD owns antl operates$6.24illlon in Infiasbueture a55e[5.Through these assets OCSD wliWs,veers,andeinrer reuses orsafoy discharges 210 mll0onga11onspardayofwa m.ter. ORANGECOUNTY SANITATION DISTRICT—STEAR 1111IIATEa1C PLAN IDECEMBER 2017) strategic goals and levels of service Protecting Public Health& The Environme Level of Service Target Accept dry weather runoff diversion flows without imposing fees. Up to 10 mgd Air emissions health risk to community and employees, per one million people < SO (for each plant). Notices of violation (NOV) with air, land, and water permits. 0 Respond to collection system spills within 1 hour. 100% Sanitary sewer spills per 100 miles. <2.1 Contain sanitary sewer spills within 5 hours. 100% BOO Meet secondary treatment standards. TSS 25 mg/L SS 30 mg/L Thirty-day geometric mean of coliform bacteria in effluent after initial dilution of <1000 250:1 (MPN). Frequency of unplanned use of emergency one-mile outfall (per year during dry 0 weather). Compliance with Core Industrial pretreatment requirements. 100% Msnsgfng&ndProtectfngthe Public's Funds • Continually seeking efficiencies to ensure that the public's money is wisely spent. 4. Local Sewer Transfers-Complete transfer of 174 miles of local sewers serving parts of Tustin and unincorporated areas north of Tustin and local sewer transfers in the City of Santa Ana to be concluded by December 31,2013.Following those,no further local sewers to be transferred at the initiation of CCSD.If a local jurisdiction is interested in CICSD transferring sewers,each request will be considered on an individual basis assuming the sewers meet the requirements identified. Tmget/orsomplehon in FY 13-14. Managing and Protecting Public Funds evel of Service Target Annual user fees sufficient to cover all O&M requirements. 100% Actual collection,treatment, and disposal costs per million gallons. <within 30%of budget Maintain AAA Bond Rating. Maintain ORANGE CGJNTV SANITATION DGTRICT-SVEM 57MTnIC PWI(DECEMBER 2017) strategic goals and levels of service Stakeholder UndeimWad/ngand Sappoit • Communicating our mission and strategies with those we serve and all other stakeholders. • Parmering with others to benefit our customers,this region,and our industry. 5. Future Water Recycling Options-Determine partnerships,needs,strategies,benefits,and costs associated with recycling of Plant No. 2 effluent water. Target forcornpk6on in FY 18-19. Stakeholder Understanding and Support Level of Service Target Meet GWRS specification requirements for Plant No. 1 secondary effluent. 5 NTU Provide specification effluent available to the Groundwater Replenishment 100% System to maximize production of purified water. 0rgan1Z9WW01Ef VdVenesa • Creating the best possible workforce in terms of safety,productivity,customer service,and training. 6. Workforce Planning and Workforce Development-This initiative is ongoing and pan of a comprehensive workforce planning and development effort to ensure we have the tight people with the right skills and abilities,in the right place,at the right time. Target for completion, ongoing. Organizational Effectiveness Employee injury incident rate—per 100 employees. Industry Average Meet mandatory OSHA training requirements. >95% Achieve annual agency target of days away from work, days of restricted work <2 5 activity, or job transferred as a result of a work-related injury or illness. Training hours per employee. 45 per year ORANGECOUNTY SANITATION DISTRICT-5Y RSTRATEGIC PUN DECEMBER 2017) .a y Reclamation Plant No.1 (Administration Offices) 10844 Ellis Avenue • Fountain Valley,California 92708 714.962.2411 Treatment Plant No.2 22212 Brookhurst Street • Huntington Beach,California 92646 w .ocsewers.wm a, N mxwwo„ ADMINISTRATION COMMITTEE Meeting Date To ad.of Dir. ,0,117 AGENDA REPORT Itern Number tern Number s Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ORANGE COUNTY SANITATION DISTRICT PROCUREMENT PROCESS GENERAL MANAGER'S RECOMMENDATION Information Only. BACKGROUND Each month, staff provides an informational presentation on topics of interest to the Board of Directors. This month's topic: Orange County Sanitation District's Procurement Process, Bids vs. RFPs, Sole Source Contracts vs. Competitive Contracts, and other related topics. RELEVANT STANDARDS • Maintain a proactive asset management program • Protection of Orange County Sanitation District assets • Ensure the public's money is wisely spent • Consider life-cycle costs in all decisions ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.com) with the complete agenda package: N/A Page 1 of 1 ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARS California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CIP Capital Improvement Program CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA US Environmental Protection Agency FOG Fats, Oils, and Grease gpd gallons per day GWRS Groundwater Replenishment System ICS Incident Command System IERP Integrated Emergency Response Plan LOS Level Of Service MGD Million Gallons Per Day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O & M Operations & Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District OOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration PCSA Professional Consultant/Construction Services Agreement PDSA Professional Design Services Agreement POTW Publicly Owned Treatment Works ppm parts per million PSA Professional Services Agreement RFP Request For Proposal RWQCB Regional Water Quality Control Board Glossary of Terms and Abbreviations SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Interceptor SARWQCB Santa Ana Regional Water Quality Control Board SAW PA Santa Ana Watershed Project Authority SCADA Supervisory Control And Data Acquisition SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SRF Clean Water State Revolving Fund SSMP Sewer System Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation W ERF Water Environment & Reuse Foundation WIFIA Water Infrastructure Finance and Innovation Act WIIN Water Infrastructure Improvements for the Nation Act W RDA Water Resources Development Act Activated sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen and consume dissolved nutrients in the wastewater. Benthos —The community of organisms, such as sea stars, worms, and shrimp, which live on, in, or near the seabed, also known as the benthic zone. Biochemical Oxygen Demand (BOD) — The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biogas—A gas that is produced by the action of anaerobic bacteria on organic waste matter in a digester tank that can be used as a fuel. Biosolids—Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farmland or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Glossary of Terms and Abbreviations Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere, used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system— In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP)—A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) — Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (DIT) — The dilution at which the majority of people detect the odor becomes the D/T for that air sample. Greenhouse Gases (GHG) — In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming ("greenhouse effect'). Groundwater Replenishment System (GWRS) — A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons per day of drinking quality water to replenish the local groundwater supply. Levels Of Service (LOS) — Goals to support environmental and public expectations for performance. N-Nitrosodimethylamine (NDMA) — A N-nitrosamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP)—An alliance of the National Association of Clean Water Agencies and Water Environment Federation, with advisory support from the US Environmental Protection Agency. NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Plume — A visible or measurable concentration of discharge from a stationary source or fixed facility. Glossary of Terms and Abbreviations Publicly Owned Treatment Works (POTW) —A municipal wastewater treatment plant. Santa Ana River Interceptor(SARI) Line —A regional brine line designed to convey 30 million gallons per day of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer—Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban runoff. South Coast Air Quality Management District (SCAQMD) — Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment — Biological wastewater treatment, particularly the activated sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge—Untreated solid material created by the treatment of wastewater. Total Suspended Solids (TSS)—The amount of solids floating and in suspension in wastewater. Trickling filter — A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff—Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed—A land area from which water drains to a particular water body. The Orange County Sanitation District's service area is in the Santa Ana River Watershed.