HomeMy WebLinkAbout10-14-2009 Administration Committee Agenda
AGENDA
REGULAR MEETING OF THE
ADMINISTRATION COMMITTEE
ORANGE COUNTY SANITATION DISTRICT
WEDNESDAY, OCTOBER 14, 2009, AT 5:00 P.M.
ADMINISTRATIVE OFFICE
10844 Ellis Avenue
Fountain Valley, California 92708
www.ocsd.com
PLEDGE OF ALLEGIANCE
DECLARATION OF QUORUM
PUBLIC COMMENTS
REPORT OF COMMITTEE CHAIR
REPORT OF GENERAL MANAGER
REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES
CONSENT CALENDAR ITEMS (1)
1. Approve minutes of the September 9, 2009, meeting of the Administration Committee.
ACTION ITEMS (2 - 3)
2. Recommend to the Board of Directors to: a) Authorize the General Manager to enroll the
Orange County Sanitation District in the Proposition 1A Securitization Program, managed
by the California Statewide Communities Development Authority, for the immediate collection of the 8 Percent State Budget Reduction of Local Property Tax Revenues
estimated to be $5 million, in a form approved by General Counsel; and,
b) Adopt Resolution No. OCSD No. 09-XX, Approving the Form of and Authorizing the
Execution and Delivery of a Purchase and Sale Agreement and related documents with respect to the sale of the Seller’s Proposition 1A Receivable from the State; and, Directing
and Authorizing certain actions in connection therewith.
October 14, 2009 Page 2
3. Recommend to the Board of Directors to: a) Adopt Resolution No. OCSD 09-XX,
Authorizing the Execution and Delivery by the District of an Installment Purchase
Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District
Revenue Refunding Certificate Anticipation Notes, Series 2009B, such Notes
Evidencing Principal in an Aggregate Amount of Not to Exceed $181,000,000, Approving an Official Statement in Connection with the Offering and Sale of
such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions; and,
b) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Refunding Certificate Anticipation
Notes, Series 2009B in an amount not to exceed $181,000,000.
INFORMATIONAL ITEMS (4 - 5)
4. Safety and Health Strategic Plan
5. Internal Audit Reports – Review of Accounting Policies and Procedures, and Chemical Purchases
CLOSED SESSION
During the course of conducting the business set forth on this agenda as a regular meeting of the Committee, the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations,
pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted.
Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employee actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Committee during a permitted closed session
and are not available for public inspection. At such time as final actions are taken by the Committee on any of these subjects, the minutes will reflect all required disclosures of information.
Convene in closed session.
Reconvene in regular session.
Consideration of action, if any, on matters considered in closed session.
Other business and communications or supplemental agenda items, if any.
Adjournment: The next regular Administration Committee meeting is scheduled for Thursday,
November 12, 2009, at 5 p.m.
October 14, 2009 Page 3
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Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda
has been posted in the main lobby of the District’s Administrative offices 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 all, of the members of District’s Board, are available for public inspection in the office of the Clerk of the Board, located at 10844 Ellis Avenue, Fountain Valley, California.
Items Not Posted: In the event any matter not listed on this agenda is proposed to be submitted to the Committee for
discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or because there is a need to take immediate action, which need came to the attention of the Committee subsequent to the
posting of agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date.
Public Comments: Any member of the public may address the Administration Committee on specific agenda items or
matters of general interest. As determined by the Chair, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes.
Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by
the Committee except as authorized by Section 54954.2(b).
Consent Calendar: All matters placed on the consent calendar are considered as not requiring discussion or further explanation, and unless a particular item is requested to be removed from the consent calendar by a Director of staff
member, there will be no separate discussion of these items. All items on the consent calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar.
All items removed from the consent calendar shall be considered in the regular order of business.
The Committee Chair will determine if any items are to be deleted from the consent calendar.
Items Continued: Items may be continued from this meeting without further notice to a Committee meeting held within five (5) days of this meeting per Government Code Section 54954.2(b)(3).
Meeting Adjournment: This meeting may be adjourned to a later time and items of business from this agenda may be
considered at the later meeting by Order of Adjournment and Notice in accordance with Government Code Section 54955 (posted within 24 hours).
Accommodations for the Disabled: The Board of Directors Meeting Room is 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) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature
of the disability and the type of accommodation requested. Notice to Committee Members: For any questions on the agenda or to place any items on the agenda, Committee members should contact the Committee Chair
or Clerk of the Board ten days in advance of the Committee meeting.
Committee Chair: Mark Waldman (714) 827-1969 Committee Secretary: Lilia Kovac (714) 593-7124 lkovac@ocsd.com General Manager: Jim Ruth (714) 593-7110 jruth@ocsd.com
Assistant General Manager Bob Ghirelli (714) 593-7400 rghirelli@ocsd.com Director of Finance and Lorenzo Tyner (714) 593-7550 ltyner@ocsd.com Administrative Services
Human Resources and Employee Jeff Reed (714) 593-7144 jreed@ocsd.com Relations Manager
Page 1
ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir. 10/28/09
AGENDA REPORT Item Number 2 Item Number
Orange County Sanitation District FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: PROPOSITION 1A SECURITIZATION PROGRAM
GENERAL MANAGER'S RECOMMENDATION
1) Authorize the General Manager to Enroll the Orange County Sanitation District in the
Proposition 1A Securitization Program, managed by the California Statewide
Communities Development Authority, for the immediate collection of the 8 Percent State Budget Reduction of Local Property Tax Revenues estimated to be $5 million, in a form
approved by General Counsel; and,
2) Adopt Resolution No. OCSD No. 09-XX, Approving the Form of and Authorizing the
Execution and Delivery of a Purchase and Sale Agreement and related documents with respect to the sale of the Seller’s Proposition 1A Receivable from the State; and,
Directing and Authorizing certain actions in connection therewith.
SUMMARY
Proposition 1A Securitization Program, managed through the California Statewide
Communities Development Authority (CSCDA), provides all local government program
participants 100 percent of its reduced property tax allocations, as a result of the
passage of the FY 2009-2010 State budget that reduced local government property tax
revenues by 8 percent. The funding of these reduced property tax revenues will come to the local government participants in two equal installments in January and May of
2010. The source of the funding is through the issuance of tax-exempt bonds by the
CSCDA. Once the bonds are sold, local participating agencies have no ongoing
obligations with repayment of the bonds. The State’s obligation to repay the 8 percent
property tax borrowing is the only security pledge for the repayment of the bonds.
The alternative to the Sanitation District is to forgo eight percent of property tax
revenues in FY 2009-10, estimated at $5 million, until June 2013, at which time the
estimated $5 million will be paid, including interest at 2 percent.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
Page 2
ADDITIONAL INFORMATION
The CSCDA was created in 1988 to enable local governments and eligible private
entities access to low-cost, tax-exempt, financing. It has completed over 1,200 financings totaling more than $42 billion since 1988, and has consistently ranked in the top 10 of the more than 3,000 tax-exempt issuers nationwide.
There would be no cost to the Sanitation District by participating in the program as all
interest and issuance costs will be paid by the State. Participating local agencies will have no obligation on the bonds and no credit exposure to the State.
The commitment process includes the following signed documents by November 6,
2009:
· Adopted Sale Resolution with Clerk’s Certificate
· Executed Purchase and Sale Agreement
· Certificate of Local Agency
· Opinion of Local Agency Counsel
· Bill of Sale and Bringdown Certificate
· Bringdown Opinion of Local Agency Counsel
· Escrow Instruction Letter
· Irrevocable instructions to the State Controller
These documents will be made available at the October 28, 2009, Board meeting.
Following is a chart listing the timeline events of the Proposition 1A Securitization
Program:
Friday, November 6, 2006
Ø Signed Participant documents due to Bond Counsel and is the Final Commitment date for
Participating Local Agencies
Tuesday, November 10, 2009 Ø Bond Pricing
Thursday, November 19, 2009 Ø Closing
Friday, January 15, 2010,
and Monday, May 3, 2010 Ø Local Agencies Receive Property Tax Withholdings
MW:lc
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ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir. 10/28/09
AGENDA REPORT Item Number 3 Item Number
Orange County Sanitation District FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES
2009B
GENERAL MANAGER’S RECOMMENDATION
1) Adopt Resolution No. OCSD 09-XX, Authorizing the Execution and Delivery
by the District of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and
delivery of Orange County Sanitation District Revenue Refunding Certificate
Anticipation Notes, Series 2009B, such Notes Evidencing Principal in an
Aggregate Amount of Not to Exceed $181,000,000, Approving an Official
Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related
Actions; and,
2) That the Orange County Sanitation District Financing Corporation approve the
documents supporting and authorizing the Revenue Refunding Certificate Anticipation Notes, Series 2009B in an amount not to exceed $181,000,000.
SUMMARY
In September 2009, the Administration Committee and the Board of Directors
authorized the execution and delivery of up to $181 million of Refunding Certificates of
Participation.
The current global financial crisis has negatively impacted the financial strength and ratings of many financial institutions that provide bank liquidity facilities securing
variable rate bonds issued by municipal entities. Variable rate issues secured by
banks with the least favorable investor perception have experienced higher than
expected interest rate resets as investors are less willing to hold bonds secured by
these weakening banks. In many cases, investors have tendered the bonds to the banks (Bank Bonds) to preempt any possibility of the liquidity bank not being able to
provide funds in the future.
Page 2
In addressing the global financial crisis and uncertainty in the market place, the
District refinanced its exposure to higher reset rates and Bank Bonds existing with its
outstanding Certificates of Participation (COP), Series 2006 variable rate debt by
refunding it with the COP Series 2008C Certificate Anticipation Notes (CANs). The market yields on short-term securities issued in anticipation of permanent
financing CANs have significantly lowered in cost to issuers. The District’s 2006
COPs debt was issued in 2006 as daily variable rate debt and had averaged 3.25
percent. However, the Bank Bond characteristics had increased the costs to over 4.00 percent in calendar year 2008. The yield on the COP Series 2008C CAN’s was 0.98 percent over a one-year period. Thus, the issuance of CANs allowed the
District to redeem the Bank Bonds at a cost of less than 2.0 percent while waiting for
the markets to stabilize.
Staff has again recommended refunding the 2008C CANs with a new one-year CAN that will again enable the District to lock-in a low rate for approximately one year
without encumbering its cash reserves. Given the large single maturity, CANs can
be sold on a competitive basis in order to obtain the lowest interest rate possible.
PRIOR COMMITTEE/BOARD ACTIONS
September 23, 2009: Directed staff to pursue up to $181 million in one-year fixed-rate
Certificates of Participation (COP) notes to replace the one-year $176 million outstanding certificates of participation notes maturing in December 2009
ADDITIONAL INFORMATION The Board of Directors and the Financing Corporation will each be required to adopt
separate Resolutions to complete this refinancing. Drafts of these two Resolutions
are attached for review. A Financing Corporation is required by the structure of the
COPs and was formed in April 2000, to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the District and the Corporation meets after an adjournment of the OCSD Board.
The OCSD Resolution authorizes the execution and delivery of certain legal
documents and the execution and delivery of Revenue Refunding Certificate Anticipation Notes, Series 2009B, evidencing principal in an aggregate amount of not to exceed $181,000,000 all as spelled out in the title as follows:
Page 3
“A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY
THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST
AGREEMENT, AND A CONTINUING DISCLOSURE AGREEMENT IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B, SUCH NOTES EVIDENCING PRINCIPAL IN AN
AGGREGATE AMOUNT OF NOT TO EXCEED $181,000,000, APPROVING AN
OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF
SUCH NOTES, AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS.”
The Resolution of the Corporation is somewhat shorter and simpler. It authorizes
three actions that are similarly enumerated in the title as follows:
“A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE
EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT
PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH
THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B; AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH
NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT-TO-
EXCEED $181,000,000 AND; AUTHORIZING THE EXECUTION OF NECESSARY
DOCUMENTS AND NOTES AND RELATED ACTIONS.” Following is a chart listing the remaining steps to be completed for the issuance of
the Certificate Anticipation Notes Series 2009B debt issuance:
October
Ø Board approval of legal and disclosure
documents
Ø Receive Ratings from Bond Rating Agencies November Ø Competitive Bids
December Ø Closing
Ø Payment on 2008C CANs
ATTACHMENTS
1. Resolution No. OCSD 09-XX
JDR:LT:MW:lc
85241633.4
RESOLUTION NO. OCSD 09-XX
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE
COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION
AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY
SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE
ANTICIPATION NOTES, SERIES 2009B, SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $181,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF A NOTICE INVITING BIDS
AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE
OFFERING AND SALE OF SUCH NOTES AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS
WHEREAS, to finance the acquisition, construction and installation of certain
improvements to its wastewater system (the “Prior Project”) the District caused the execution
and delivery of $176,115,000 in aggregate principal amount of Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), of
which $176,115,000 in principal amount is currently outstanding (the “Prior Certificates”);
WHEREAS, the District desires to pay at maturity all of the Prior Certificates by paying
all of the remaining principal components of the installment payment relating to the Prior
Certificates (the “Prior Installment Payment”), and the interest components thereof to the date of maturity;
WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be
so paid, the District and the Orange County Sanitation District Financing Corporation (the
“Corporation”) desire that the Corporation purchase the Prior Project from the District and the
District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the
installment payment (the “Installment Payment”) to be made by the District, pursuant to a new
installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation
and the District have agreed to finance such payment by causing the execution and delivery of up
to $181,000,000 in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) to be repaid from the sale
proceeds of future certificates of participation, other notes or obligations or lawfully available
funds of the District;
WHEREAS, the Corporation intends to assign without recourse certain of its rights
under and pursuant to the Installment Purchase Agreement to Union Bank, N.A., as trustee (the “Trustee”), pursuant to a Trust Agreement by and among the Trustee, the Corporation and the
District (such Trust Agreement, in the form presented at this meeting, with such changes,
85241633.4 2
insertions and omissions as are made pursuant to this Resolution, being referred to herein as the
“Trust Agreement”);
WHEREAS, in consideration of such assignment and the execution and delivery of the
Trust Agreement, the Trustee intends to execute and deliver the Notes, evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon;
WHEREAS, the District desires to provide for the public sale of the Notes in one or
more discrete sale transactions;
WHEREAS, a form of the Notice of Intention to Sell to be published in connection with
the public offering and sale of the Notes has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Notice of Intention to Sell”);
WHEREAS, a form of the Official Notice Inviting Bids to be distributed in connection
with the public offering and sale of the Notes has been prepared (such Official Notice Inviting
Bids, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Notice Inviting Bids”);
WHEREAS, a form of the Preliminary Official Statement to be distributed in connection
with the public offering of the Notes has been prepared (such Preliminary Official Statement in
the form presented to this meeting, with such changes, insertions and omissions as are made
pursuant to this Resolution, being referred to herein as the “Preliminary Official Statement”);
WHEREAS, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), requires that the
underwriter thereof must have reasonably determined that the District has undertaken in a written
agreement or contract for the benefit of the holders of the Notes to provide disclosure of certain
material events;
WHEREAS, to cause such requirement to be satisfied, the District desires to enter into a Continuing Disclosure Agreement with a dissemination agent to be named therein and the
Trustee (such Continuing Disclosure Agreement in the form presented to this meeting, with such
changes, insertions and omissions as are made pursuant to this Resolution, being referred to
herein as the “Continuing Disclosure Agreement”);
WHEREAS, there have been prepared and submitted to this meeting forms of:
(1) the Installment Purchase Agreement;
(2) the Trust Agreement;
(3) the Notice of Intention to Sell;
(4) the Notice Inviting Bids;
(5) the Preliminary Official Statement; and
85241633.4 3
(6) the Continuing Disclosure Agreement.
WHEREAS, all acts, conditions and things required by the Constitution and laws of the
State of California to exist, to have happened and to have been performed precedent to and in
connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law,
to consummate such financing for the purpose, in the manner and upon the terms herein
provided;
NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE DISTRICT DOES HEREBY RESOLVE, DETERMINE AND ORDER:
Section 1. All of the recitals herein contained are true and correct and the Board of
Directors of the District (the “Board”) so finds.
Section 2. The Installment Purchase Agreement, in substantially the form submitted
to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board, and such other member of the Board as the Chair may designate, the General Manager of the District, the Director of Finance and Administrative
Services of the District, and such other officers of the District as the Director of Finance and
Administrative Services may designate (the “Authorized Officers”) are, and each of them is,
hereby authorized and directed, for and in the name of the District, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve,
such requirement or approval to be conclusively evidenced by the execution of the Installment
Purchase Agreement by such Authorized Officer; provided, however, that such changes,
insertions and omissions shall not result in an aggregate principal amount of the Installment Payment in excess of $181,000,000, shall not result in a true interest cost for the Installment Payment in excess of 3.0% per annum and shall not result in an Installment Payment later than
December 15, 2010.
Section 3. The Trust Agreement, in substantially the form submitted to this meeting
and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Trust Agreement in the form presented to this
meeting, with such changes, insertions and omissions as the Authorized Officer executing the
same may require or approve, such requirement or approval to be conclusively evidenced by the
execution of the Trust Agreement by such Authorized Officer.
Section 4. The execution and delivery of Notes evidencing principal in an aggregate amount not to exceed $181,000,000, payable in the years and in the amounts, and evidencing
principal of and interest on the Installment Payment as specified in the Trust Agreement as
finally executed, are hereby authorized and approved.
85241633.4 4
Section 5. The payment of the remaining principal components of the Prior
Installment Payment at maturity, and the interest components thereof, and the Prior Certificates
evidencing interests therein, is hereby authorized and approved.
Section 6. The form of Notice of Intention to Sell, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby
approved, and the use of the applicable Notice of Intention to Sell in connection with the offering
and sale of a series of the Notes is hereby approved. The Authorized Officers are each hereby
authorized and directed, for and in the name and on behalf of the District, to cause one or more Notices of Intention to Sell to be published in The Bond Buyer (or in such other financial publication generally circulated throughout the State of California or reasonably expected to be
disseminated among prospective bidders for the Notes as an Authorized Officer shall approve as
being in the best interests of the District) at least five days prior to the date set for the opening of
bids under the applicable Notice Inviting Bids, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by the publishing of such Notice of Intention to Sell.
Section 7. The Notice Inviting Bids, in substantially the form submitted to this
meeting and made a part hereof as though set forth herein, with such changes, insertions and
omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of one or more Notices Inviting Bids in connection with the offering and sale of the Notes is hereby authorized and approved. The terms and conditions of the offering
and sale of the Notes shall be as specified in the applicable Notice Inviting Bids. Bids for the
purchase of the Notes shall be received at the time and place set forth in the applicable Notice
Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the bid for the Notes with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the applicable Notice Inviting
Bids.
Section 8. The Preliminary Official Statement, in substantially the form presented to
this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and
sale of the Notes is hereby authorized and approved. The Authorized Officers are each hereby
authorized to certify on behalf of the District that the Preliminary Official Statement is deemed
final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-12 to be omitted). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Notes
a reasonable number of copies of the Preliminary Official Statement.
Section 9. The preparation and delivery of a final Official Statement (the “Official
Statement”), and its use in connection with the offering and sale of the Notes, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved
by an Authorized Officer, such approval to be conclusively evidenced by the execution and
delivery thereof. The Authorized Officers are, and each of them is, hereby authorized and
85241633.4 5
directed to execute the final Official Statement and any amendment or supplement thereto, for
and in the name of the District.
Section 10. The Continuing Disclosure Agreement, in substantially the form submitted
to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Continuing Disclosure Agreement in
the form submitted to this meeting, with such changes, insertions and omissions as the
Authorized Officer executing the same may require or approve, such requirement or approval to
be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer.
Section 11. The Authorized Officers are, and each of them hereby is, authorized and
directed to execute and deliver any and all documents and instruments and to do and cause to be
done any and all acts and things necessary or proper for carrying out the execution and delivery
of the Notes and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. The Authorized Officers are further authorized and directed to execute and deliver such additional notes as may be necessary or desirable to pay the Notes at
maturity; provided, however, that the documents executed and delivered in connection with any
such notes shall be in the form approved pursuant to this Resolution in connection with the
Notes.
Section 12. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Notes, or in connection with or related to
any of the agreements or documents referenced in this Resolution, are hereby approved,
confirmed and ratified.
Section 13. This Resolution shall take effect immediately upon its adoption.
85241633.4 6
PASSED AND ADOPTED at a regular meeting held on October 28, 2009.
Chair
ATTEST:
Clerk of the Board
APPROVED AS TO FORM:
________________________
General Counsel, Orange County
Sanitation District
85241633.4
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
I, Penny M. Kyle, Clerk of the Board of Directors of the Orange County Sanitation
District, do hereby certify that the foregoing Resolution No. OCSD 09-__ was passed and
adopted at a regular meeting of said Board on the 28th day of October, 2009, by the following vote, to wit:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of
Orange County Sanitation District this 28th day of October, 2009.
Clerk of the Board of Directors
Orange County Sanitation District
Page 1
ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir.
AGENDA REPORT Item Number 4 Item Number
Orange County Sanitation District FROM: James D. Ruth, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: SAFETY AND HEALTH STRATEGIC PLAN
GENERAL MANAGER'S RECOMMENDATION
Informational item.
SUMMARY
Under the guidance of the General Manager and the Executive Management Team
(EMT), the Safety & Health Division developed a strategic plan in conjunction with the
OCSD strategic plan published in November 2008. The work had limited support from
BHI Consulting, which was the firm that assisted OCSD in the development of its overarching strategic plan.
The Safety & Health strategic plan is predicated on a three-year timeframe. It will be
reviewed and revised annually as the Sanitation District’s needs and priorities change.
The Safety & Health Strategic Plan is based on the requirements to achieve Cal/OSHA Voluntary Protection Program (VPP) eligibility. The fundamental task description was
to:
Develop and implement Safety and Health Strategic Plan for all Sanitation
District activities.
The Safety & Health Strategic Plan provides for a mission, vision, and set of objectives.
The mission commits Safety to providing support to achieve VPP eligibility in three
years. The vision is a collection of statements that characterize workplace safety at the
end of the three years. And finally, the objectives put forth targeted actions that will effectively identify, define, and measure the organization performance toward making a
safer, healthier, more secure workplace.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
Page 2
ADDITIONAL INFORMATION
Development of the Safety & Health Strategic Plan began with the following actions:
· Achieve California OSHA Voluntary Protection Program (VPP) eligibility within
3 years.
· Establish a mature safety culture where employees are accountable for their
safety as well as the safety of others by 2012.
· Train all employees and develop a training management system to keep all
employees within compliance of training needs.
· Monitor OCSD processes to ensure a healthy work environment is maintained.
· Assure that all employees are prepared for emergency events by 2010.
· Meet the Water Environmental Federation (WEF) security guidelines by 2012.
To fix the direction for Safety & Health programs and topics that are important to
Sanitation District staff, focus group meetings, comprised of a broad cross-section of
employees, were held with the external consultant. These focus groups provided
feedback which served to align the Safety & Health mission, vision, and values with organizational direction.
Specific objectives were defined, which will allow the Safety & Health Division to realize
the vision of OCSD. The Strategic Plan will be updated annually following the EMT
feedback to revise elements of the Plan with durations exceeding one year.
ATTACHMENTS
1. Safety & Health Strategic Plan
JDR:LT:JR:WB
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
Mission:
The mission of the Safety & Health Division is to create a safe, healthy, and secure environment
for District staff, contractors, and visitors. We will accomplish this by providing practical and
effective advice, support, and guidance.
Vision:
· Achieve California OSHA Voluntary Protection Program (VPP) eligibility within 3 years.
· Establish a mature safety culture where employees are accountable for their safety as well
as the safety of others by 2012.
· Train all employees and develop a training management system to keep all employees
within compliance of training needs.
· Monitor OCSD processes to ensure a healthy work environment is maintained.
· Assure that all employees prepared for emergency events by 2010.
· Meet the Water Environmental Federation (WEF) security guidelines by 2012.
Introduction:
The intention of this strategic plan is to guide the Orange County Sanitation District’s Health,
Safety, Security, and Emergency Preparedness efforts toward higher standards. The Strategic
Plan will identify, define, and measure items that have been deemed necessary to ensure that the
Vision statements are achieved by their target dates. This strategic plan finds much of its basis in
safety regulations and the needs of the District. It proposes strategies in the adoption of the
Voluntary Protection Program (VPP), which includes comprehensive and deliberate strategies and
actions to achieve certification in the program. The Safety and Health Division will be the primary
responsible division for driving the implementation of this Strategic Plan’s programs, but partnering
with each Department will be critical to gain support for the proposed programs with resources of
time and personnel to ensure targets are met. The Strategic Plan will be a flexible living document
that will be reviewed on a periodic basis to ensure milestones and target dates are being met and
the Sanitation District’s needs by being reviewed annually to update the visions.
Strategic Objectives:
1.0 Training
2.0 Management Leadership & Employee Involvement
3.0 Worksite Analysis
4.0 OSHA Statistics
5.0 Health
6.0 Emergency Preparedness
7.0 Security Guidelines
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
1.0 Training
Objective: Develop strategies to ensure 100% compliance training is completed each fiscal
year.
Purpose: To make certain all employees receive required training so that they perform their job
safely.
Strategies:
· Compliance Training - develop strategies to ensure that the appropriate number of classes
is offered to ensure that all OCSD employees are conforming to compliance training
requirements. This will also ensure that OCSD meets its strategic plan goal of 100% trained
employees.
· Management Training – develop better management training regarding safety topics to
ensure that Management knows their requirements and expectations for their employees’
safety.
· VPP Training – provide VPP training to all OCSD employees to ensure their support and
buy in of the programs.
· Performance Measurements – develop leading indicators for use in performance
measurements. Leading indicators predict the likelihood of an event before it occurs and
support productivity. An example of a leading indicator would be the percentage of training
completed versus the amount scheduled.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
2.0 Management Leadership & Employee Involvement
Objective: Develop a strategy that shows Management commitment to Safety and increase
employee involvement in the safety process.
Purpose: To gain Management and Employees involvement and commitment in the safety
programs at OCSD.
Strategies:
· Policy Development – develop a leadership and employee involvement policy that will put
expectations in place for all employees so OCSD can better prepare for the VPP audit.
· Define Safety Management System – adopt VPP as the safety management system that
OCSD will follow.
· Management of Change Program – develop a Management of Change Program to ensure
that safety is a critical review aspect of any major changes made to OCSD facilities and
processes.
· Communication System – integrate and utilize the different communications systems (i.e.,
Pipeline, Safetyline, SAFE Bulletins, etc.) that are available at OCSD to better communicate
safety messages to all employees.
· Monthly Compliance Audits – get leadership and employees involved in audits of OCSD as
required by the Injury and Illness Prevention Program.
· Formalize Employee Involvement – develop a process that will quantify employee
involvement that includes management and employee.
· Safety Coordinator Positions– develop a Safety Coordinator positions for each Department
so they are the focal point for safety and to help lead the safety process in the Department.
· In-house Focus Groups (done by Safety) – conduct annual focus groups to measure
employees satisfaction with the safety program and gather ideas for improvement. This will
be accomplished with an annual perception survey to measure all OCSD employees’
satisfaction with the safety program.
· Performance measurements – develop leading indicators so management can use them as
performance measurements.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
3.0 Worksite Analysis
Objective: Develop strategies for a comprehensive analysis of worksites to identify and mitigate
hazards at all OCSD locations.
Purpose: To ensure that safety hazards are identified so employees are protected from injury
and/or illness.
Strategies:
· Third Party Audits & Inspections – initiate three annual third party audits and inspections of
OCSD facilities to ensure compliance with OSHA regulations. If, at the end of the third year
of audits, there are still a significant number of findings we would continue the audits until
there are de minimis findings and then transition to every other year for audits. The Safety
Division will track the completion of any corrective actions generated by the audit so it can
be reported to Management when needed.
· Develop Job Safety Analysis (JSA) – JSA is a step by step review of a task that looks at the
hazards and provides recommendations on how to protect employees from the identified
hazards. Based upon past injury data develop JSAs then apply the JSA to other high risk
activities. Each Department would be responsible for the development of their JSAs with
the Safety Division as support.
· Monthly Inspection Program – Update the inspection policy and get Management approval
to ensure managers and supervisors conduct safety inspections of their work areas and
correct deficiencies.
· Performance Measurements – develop leading indicators for performance measurement.
· Management of Change Program – ensure that there is a process in place that allows the
Safety & Health Division to review changes to OCSD processes and structures before they
occur so safety can be addressed as early as possible to help reduce potential hazards and
risk to people. This should be a formal process with a check list so the same things are
looked at on all projects.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
4.0 OSHA Statistics
Objective: Develop strategies to ensure OCSD has three years of at or below industry averages
for Total Recordable Incident Rates (TRIR) and Days Away, Restricted, or
Transferred (DART).
Purpose: To compare OCSD safety program effectiveness against similar industries by using
standardized formulas.
Strategies:
· Root Cause Analysis – conduct training for Supervisors and Managers on how to determine
root cause. Becoming proficient at root cause analysis will result in the problem being
corrected rather than a symptom being addressed. An accident can be caused by multiple
issues but unless the root cause of the accident is identified it will continue to reoccur and
cause more accidents. To ensure that we prevent the accident from reoccurring we need to
provide root cause analysis training. This will ensure that the accident’s root cause does not
come back and contribute to another injury.
· Response System – need to update the Safety policy to ensure that someone from
Management responds to incidents/accidents. Management response will ensure that an
investigation is conducted as soon as possible and that corrective measures are put in
place to prevent a reoccurrence. Management’s response will also show employees the
importance of accident prevention.
· Accident/Incident Reporting – need to shorten the length of time that a Supervisor and
Manager have to report an injury to the Safety Division to 24 hours or less. Need to also
expect that all employees must report to their Management any injury as soon as they
become aware of the injury. This will help ensure that the proper causes of accidents and
incidents are identified and workers’ compensation paperwork is filed.
· Accident Reporting form (electronic) – new electronic form will allow for faster submittal and
review of accident and incident reports by management, as well as tracking corrective
actions.
· Performance Objectives for Management – need to continue with the indicators so
Management can use these to measure their performance on this objective.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
5.0 Health
Objective: Develop policies, strategies, and controls to ensure OCSD processes do not cause
unhealthy exposures to OCSD employees and the public from an OSHA perspective.
Purpose: To ensure OCSD employees have a healthy work environment and OCSD follows
health exposure requirements.
Strategies:
· Industrial Hygiene Sampling – conduct chemical exposure sampling of the workplace to
ensure that OCSD employees do not have an adverse chemical exposure per Cal/OSHA
requirements.
· Noise Exposure Monitoring – conduct noise monitoring and employee testing to ensure that
OCSD employees are not being overexposed to high noise levels from OCSD processes.
· Health Concerns – promptly, within 72 hours, start addressing employee health concerns
that are brought to the Safety and Health Division. The Safety and Health Division will
communicate in a prompt fashion any results to the person or group that brought up the
health concern.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
6.0 Emergency Preparedness
Objective: Develop policies, strategies, and controls to ensure OCSD preparedness is at a level
to ensure employees know what to do during an emergency.
Purpose: To prepare OCSD and its employees for different possible emergencies so that when
they do occur the agency will know what to do and how to respond.
Strategies:
· Emergency Drills – conduct at least two emergency drills annually per facility to ensure
employees know their roles during an emergency.
· Tabletop Exercises – conduct tabletop exercise drills with employees to develop their
responses to emergency situations.
· Integrated Emergency Response Plan (IERP) Review – conduct a review and update of the
IERP to ensure it is current and has the appropriate plans for emergencies.
· Inter-agency Coordination – work with other agencies to ensure that OCSD builds a
relationship with other agencies so we know who to contact during an emergency.
· Mutual Aid Relationships – continue to participate in the mutual aid agreements and foster
relationships with other agencies so both agencies understand each other’s needs during
an emergency and benefit from each others’ resources.
· Preparedness Staging – stage supplies for an emergency to ensure that core jobs can be
completed and that employees have the emergency supplies to complete the task.
· NIMS Training – ensure that Incident Commanders and support staff are appropriately
trained for their roles.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
7.0 Security Guidelines
Objective: Develop policies, strategies, and controls to ensure OCSD security is at a level that is
commensurate with what is needed to protect OCSD employees and property.
Purpose: To ensure OCSD has security measures in place to protect its employees and
property.
Strategies:
· Vulnerability Assessment – conduct a vulnerability assessment of critical assets to be
protected such as pump stations and remote facilities.
· Security Enhancement – enhance security with lighting, CCTV surveillance, and perimeter
fencing at all facilities to include pump stations.
· Policy - develop a Written Workplace Security Program and train employees on the
requirements to ensure they follow them.
· GWRS Security Assessment – work with OCWD to determine the vulnerability of the GWRS
and what steps need to be taken to protect the facility.
· Joint Campus Security – work with OCWD to ensure both facilities operate at an equivalent
level of security and we support each other’s security needs.
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
Table 1 – Safety Strategic Plan at-a-glance
STRATEGIC OBJECTIVES Strategies Start Date Completion
Date
1.0 SAFETY & HEALTH
TRAINING
1.1 Compliance Training In Progress
1.2 Management Training Near Term
1.3 VPP Training Future
1.4 Performance Measurements Near Term
2.0 MANAGEMENT
LEADERSHIP/EMPLOYEE
INVOLVEMENT
2.1 Policy Development In Progress
2.2 Define Safety Management system In Progress
2.3 Management of Change Program In Progress
2.4 Communications System In Progress
2.5 Monthly Compliance Audits Near Term
2.6 Formalized Employee Involvement Near Term
2.7 In-house Focus Groups In Progress
2.8 Safety Coordinator Positions Near Term
2.9 Performance Measurements Near Term
3.0 WORKSITE
ANALYSIS
3.1 Third Party Audits and Inspections Near Term
3.2 Develop JSAs Future
3.3 Monthly Inspection Program Near Term
3.4 Performance Measurements Near Term
3.5 Management of Change Program In Progress
4.0 OSHA STATISTICS 4.1 Root cause analysis Near Term
4.2 Response system Near Term
4.3 Accident/Incident Reporting Near Term
4.4 Reporting Form Near Term
4.5 Performance Objectives for Management Near Term
5.0 HEALTH 5.1 Industrial Hygiene Sampling In Progress
5.2 Noise Exposure Monitoring In Progress
5.3 Health Concerns In Progress
Orange County Sanitation District
Safety & Health Strategic Plan
September 28, 2009
STRATEGIC OBJECTIVES Strategies Start Date Completion
Date
6.0 EMERGENCY
PREPAREDNESS
6.1 Emergency Drills In Progress
6.2 Tabletop Exercise In Progress
6.3 IERP Review In Progress
6.4 Inter-agency Coordination In Progress
6.5 Mutual Aid Relationship In Progress
6.6 Preparedness Staging In Progress
6.7 NIMS Training In Progress
7.0 SECURITY
GUIDELINES
7.1 Vulnerability Assessment In Progress
7.2 Security Enhancement In Progress
7.3 Policy Near Term
7.4 GWRS Security Assessment Future
7.5 Joint Campus Security Future
Form No. DW-102.3 Revised: 03/01/07 Page 1
ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir. 10/28/09
AGENDA REPORT Item Number
5
Item Number
Orange County Sanitation District
FROM: James D. Ruth, General Manager
Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: INTERNAL AUDIT REPORTS – REVIEW OF ACCOUNTING POLICIES AND PROCEDURES AND CHEMICAL PURCHASES
GENERAL MANAGER'S RECOMMENDATION
Informational item.
SUMMARY
At the direction of the Administration Committee’s Audit Oversight Subcommittee,
Lance, Soll & Lunghard, LLP (LSL), Certified Public Accounts was engaged to apply
agreed-upon procedures on the Financial Management Division’s accounting policies
and procedures and on chemical purchase procedures.
Attached are the Accountant Reports from LSL, the District’s contracted internal
auditors, on these two engagements. Also attached are separate reports on staff’s
responses to the auditor’s findings and recommendations contained within their reports.
In summary, LSL concluded that the District has adequate accounting policies and procedures in place and they are functioning as designed; that chemical purchases are
reasonable and the policies and procedures over chemicals are adequate.
PRIOR COMMITTEE/BOARD ACTIONS
At the February 11, 2009 Administration Committee Meeting, the Committee members
approved the selection of LSL, to perform internal auditing services as directed by the
Committee for the period of March 1, 2009 through February 28, 2010, in an amount not
to exceed $58,670. The Committee also at this time established an audit oversight subcommittee consisting of Directors Waldman, Luebben, and Dalton assigned to meet
with auditors and staff, to give direction on the scope of audit areas, and to report back
to the Administration Committee on the results of audits undertaken.
Form No. DW-102.3 Revised: 03/01/07 Page 2
ADDITIONAL INFORMATION
N/A ATTACHMENT
1. Accountants’ Report on Agreed-Upon Procedures for Accounting Policies and
Procedures. 2. Accountant’s Report on Agreed-Upon Procedures for Chemical Purchases.
3. Staff’s Responses to Internal Audit Report on Accounting Policies and
Procedures.
4. Staff’s Responses to Procedures Performed on the Review of Chemical
Purchases.
JDR:LT:MW
ORANGE COUNTY SANITATION DISTRICT
Independent Accountants’ Report on Agreed-Upon Procedures for Accounting Policies and Procedures
August 6, 2009
Administration Committee
Orange County Sanitation District Fountain Valley, California
INDEPENDENT ACCOUNTANTS’ REPORT
ON APPLYING AGREED-UPON PROCEDURES
We have performed the procedures enumerated below which were agreed to by the management of the Orange County Sanitation District, Fountain Valley, California (Sanitation District), solely to assist the
Sanitation District in evaluating certain accounting policies and procedures. This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the
American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the management of the Sanitation District. Consequently, we make no representation
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 obtained from the performance thereof were as follows:
Capital Assets
1. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of capital assets. We performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as designed.
Findings: The Sanitation District does not currently have a control in place to ensure that capital
assets recorded on the detail listing are currently in use. We recommend that departments periodically receive the listing to verify assets are still in use and a periodic observation is
performed.
2. Procedure Performed: We selected a sample of capital asset additions, deletions and transfers which covered the fiscal years ended June 30, 2008 and June 30, 2009, and tested for the
following attributes: adequate documentation, approvals, capital project charter (for additions only), property disposal request (for deletions only) and project completion form (for transfers
only).
Findings: No findings were noted as a result of the procedures performed.
Lance, Soll & Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL: 714.672.0022 Fax: 714.672.0331 www.lslcpas.com
41185 Golden Gate Circle Suite 103 Murrieta, CA 92562 TEL: 951.304.2728 Fax: 951.304.3940
Brandon W. Burrows, C.P.A
Donald L. Parker, C.P.A
Michael K. Chu, C.P.A
David E. Hale, C.P.A, C.F.P.
A Professional Corporation
Donald G. Slater, C.P.A
Richard K. Kikuchi, C.P.A
Susan F. Matz, C.P.A.
Administration Committee Orange County Sanitation District
Fountain Valley, California
Cash Disbursements
3. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of cash disbursements. We performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as
designed.
Findings: No findings were noted as a result of the procedures performed.
4. Procedure Performed: We selected a sample of cash disbursements which covered the fiscal years ended June 30, 2007 and June 30, 2008, and tested for the following attributes: propriety of
warrant, warrant support, approvals, and correct general ledger coding and posting.
Findings: We noted one disbursement that was not properly coded to the correct account. The nature of the disbursement related to the annual employee picnic and it was improperly coded to
a repairs and maintenance expense account. The amount of the disbursement was less than $100. Because of the error, we expanded our sample selection. There were no additional errors
discovered.
Cash Receipts
5. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of cash receipts. We performed a transaction walkthrough
test for each procedure to determine the proper procedures were being followed as designed.
Findings: We noted the following items:
• We observed that the Accounting Assistant II posts cash receipts to the general ledger
and also prepares the daily bank deposit. These duties should ideally be segregated in order to mitigate the risk of fraud. The Sanitation District has a compensating control in
that the Accounting Supervisor reviews the batches prior to them getting posted to the general ledger.
• During our walkthrough, we inspected an invoice request for a credit memo and noted
that the request was prepared and approved by the Accounting Supervisor. We recommend invoice requests that are prepared by the Accounting Supervisor be
reviewed by a member of management.
6. Procedure Performed: We selected a sample of cash receipts during the fiscal years ended June 30, 2008 and June 30, 2009, and tested for the following attributes: computation,
classification, and proper approval.
Findings: No findings were noted as a result of the procedures performed.
Administration Committee Orange County Sanitation District
Fountain Valley, California
Financial Reporting
7. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of financial reporting. We performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as
designed.
Findings: No findings were noted as a result of the procedures performed.
8. Procedure Performed: We selected a sample of journal entries during the fiscal years ended June 30, 2008 and June 30, 2009, and verified there was proper segregation of duties and
adequate support for each entry.
Findings: No findings were noted as a result of the procedures performed.
Inventories
9. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of inventories. We performed a transaction walkthrough test
for each procedure to determine the proper procedures were being followed as designed.
Findings: Finance Department Policy and Procedure, Policy Number 401-2-10, Hazardous Materials, Section 6.5 states “the MSDS (Material Safety Data Sheet) will be attached to the
Receiving Department paperwork until the material is received. Warehouse personnel will compare the material container with the MSDS, the packing slip, and the purchase order, and if
they match, the division will be notified of the availability of the material.” Section 6.7 states “no materials will be released from the Receiving Department without proper paperwork and MSDS
being present.” This policy was implemented on January 1, 2005. Based on our walkthrough, we determined this is no longer the procedure. The current procedure is that the Safety Department
verifies the MSDS is on file rather than the Receiving Department, as the policy states. We recommend either the policy be updated to conform to the new practice or the practice be
changed to conform to the existing policy.
10. Procedure Performed: We selected a sample of inventory additions during the fiscal years ended June 30, 2008 and June 30, 2009, and tested for the following attributes: adequate
approval, proper supporting documentation and proper recordkeeping.
Findings: No findings were noted as a result of the procedures performed.
Investments
11. Procedure Performed: We reviewed the Sanitation District’s policies and procedures as they relate to investments. We also verified the Sanitation District was properly preparing monthly
investment reconciliations for the fiscal years ended June 30, 2008 and June 30, 2009. We performed a transaction walkthrough test for each procedure to determine the proper procedures
were being followed as designed. We reviewed the Sanitation District’s investments as of the most recent investment reconciliation prepared, which was for the period ended April 30, 2009, to
determine all investments were in compliance with the Sanitation District’s investment policy.
Findings: No findings were noted as a result of the procedures performed.
Administration Committee Orange County Sanitation District
Fountain Valley, California
12. Procedure Performed: We selected a sample of investment transactions during the fiscal year
ended June 30, 2009, to verify the Sanitation District was properly following its Treasury Management Procedures.
Findings: No findings were noted as a result of the procedures performed.
Long-Term Debt
13. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of long-term debt. We performed a transaction walkthrough test for each procedure to determine the proper procedure was being followed as designed.
Findings: Although the Sanitation District has a thorough policy on the parameters for issuing
debt and managing outstanding debt, there was no policy that indicated the process of initiating and authorizing, recording and processing, and reconciling and reporting the long-term debt. We
recommend the Sanitation District implement a policy to address those procedures.
14. Procedure Performed: We selected a sample of long-term debt transactions which covered the fiscal years ended June 30, 2008 and June 30, 2009, and tested for the following attributes:
adequate support and correct coding and posting.
Findings: No findings were noted as a result of the procedures performed.
Payroll
15. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of payroll. We performed a transaction walkthrough test for
each procedure to determine the proper procedure was being followed as designed.
Findings: Financial Management Policy and Procedure, Policy Number 301-3-7, Overtime Pay for Holiday Worked, Mandatory Overtime, and Pass down Overtime, Section 6.2 states “time
worked on holidays as part of the employee’s schedules workweek should be tracked as overtime on timesheets, with the pay code ‘Mand OT/Hol Workd’ and the appropriate sub ledger, project-
phase, or work order number.” This was a new policy that was effective as of March 1, 2009. Based on our review of various timesheets that were approved since then, there were numerous
timesheets noted that were not properly recorded in the proper pay code. We recommend that these timesheets be reviewed by the supervisors prior to submittal to payroll to verify that holiday
pay and other mandatory pay have been appropriately entered on the timesheets before approval, as stated in the policy.
16. Procedure Performed: We selected a sample of Sanitation District employees during the fiscal
years ended June 30, 2007 and June 30, 2008, and tested for the following attributes: proper pay classification, computation of pay, check or direct deposit pay stub was proper, costs were
correctly allocated and all hours were recorded.
Findings: No findings were noted as a result of the procedures performed.
Administration Committee Orange County Sanitation District
Fountain Valley, California
Purchasing
17. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of purchasing. We performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as designed.
Findings: No findings were noted as a result of the procedures performed.
18. Procedure Performed: We selected a sample of purchase orders during the fiscal year ended
June 30, 2009, and tested for the following attributes: adequate approval and proper supporting documentation.
Findings: No findings were noted as a result of the procedures performed.
Self-Insurance
19. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk
procedures as they relate to the area of self-insurance. We performed a transaction walkthrough test for each procedure to determine the proper procedure was being followed as designed.
Findings: No findings were noted as a result of the procedures performed.
20. Procedure Performed: We selected a sample of worker’s compensation, general liability, and
property damage claim files covering the fiscal years ended June 30, 2008 and June 30, 2009, to review that the Sanitation District was retaining the proper documentation including various forms
and approvals.
Findings: Based on our review of the worker’s compensation claim files, there were three files that we selected that were missing the Industrial Medical Service Order (IMSO)/Industrial Medical
Service Order Election of Personal Physician (IMSOEPP), five files were missing the Compensation Leave Form and one file was missing the work status form. We also determined
there was an Employee Claim for Worker's Compensation Benefits (Form DWC-1) that was missing an employer representative signature. We reviewed a sample of general liability and
property damage claims and determined the proper documentation was retained. We recommend the Sanitation District assemble a checklist so that employees are well informed about the
different documents that need to be included with the files.
General
21. Procedure Performed: We reviewed the entity-level controls as they relate to the control environment, risk assessment, information and communication, and monitoring. We also
reviewed the general computer controls.
Findings: No findings were noted as a result of the procedures performed.
Summary of Results
Based on our review of the Sanitation District’s accounting policies and procedures, we that, overall, the Sanitation District has adequate policies and procedures in place and they are functioning as designed.
The review was conducted in order to assess and provide feedback to the Sanitation District regarding certain accounting policies and procedures in place.
Administration Committee Orange County Sanitation District
Fountain Valley, California
As noted in the previous sections, we performed tests on procedures, conducted inquires and reviewed
the procedures that have been established by the Sanitation District. We found certain exceptions and made recommendations which are mentioned above.
Conclusion
We were not engaged to, and did not conduct an audit, the objective of which would be the expression of
an opinion on the specified elements, accounts or items. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have
been reported to the Sanitation District.
This report is intended solely for the use of the specified users listed above and is not intended to be, and should not be, used by anyone other than those specified parties.
ORANGE COUNTY SANITATION DISTRICT
Independent Accountants’ Report on Agreed-Upon Procedures for Chemical Purchases
August 10, 2009
Administration Committee
Orange County Sanitation District Fountain Valley, California
INDEPENDENT ACCOUNTANTS’ REPORT
ON APPLYING AGREED-UPON PROCEDURES
We have performed the procedures enumerated below which were agreed to by the management of the Orange County Sanitation District, Fountain Valley, California (Sanitation District), solely to assist the
Sanitation District in evaluating its chemical purchases. This engagement to apply agreed-upon procedures was performed in accordance with attestation standards established by the American Institute
of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the management of the Sanitation District. Consequently, we make no representation 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 obtained from the performance thereof were as follows:
1. Procedure Performed: We selected a sample of contracts for chemical purchases and verified
compliance with the Sanitation District’s procurement policies and procedures.
Findings: No findings were noted as a result of the procedures we performed.
2. Procedure Performed: We selected certain chemicals used by the Sanitation District and gained an understanding of the processes and controls in place over ordering, receiving, and
placing chemicals into service.
Findings: Although we noted that the Sanitation District has good control procedures in place, there were no written policies and procedures which documented these processes and controls.
We recommend that the Sanitation District develop written documentation for this area.
3. Procedure Performed: We selected a sample of chemical purchases for the fiscal years ended June 30, 2008 and June 30, 2009, and tested them for the following attributes: correctness of
invoice including prices and quantities, mathematical accuracy, approval, sufficient funds on purchase order, and general ledger coding and posting.
Findings: We noted certain exceptions through the procedures we performed which are
described below. Although we noted such exceptions, we consider the items to be insignificant in relation to our sample selected.
Lance, Soll & Lunghard, LLP 203 North Brea Boulevard Suite 203 Brea, CA 92821 TEL: 714.672.0022 Fax: 714.672.0331 www.lslcpas.com
41185 Golden Gate Circle Suite 103 Murrieta, CA 92562 TEL: 951.304.2728 Fax: 951.304.3940
Brandon W. Burrows, C.P.A
Donald L. Parker, C.P.A
Michael K. Chu, C.P.A
David E. Hale, C.P.A, C.F.P.
A Professional Corporation
Donald G. Slater, C.P.A
Richard K. Kikuchi, C.P.A
Susan F. Matz, C.P.A.
Administration Committee Orange County Sanitation District
Fountain Valley, California
Sodium Hypochlorite Solution
a) For invoice #55-38815466, 55-38813400, 55-38831174, 55-38819791 and 55-38815468,
there was no quantity documented on the bill of lading therefore we were unable to verify the amount invoiced agreed to amount received.
b) The following invoices from JCI Jones Chemicals, Inc. charged the Sanitation District $0.5931/gallon. However, the contract amount was for $0.5331/gallon. We noted the
Sanitation District paid the full amount on the invoices, then issued credit memo #404255 for $0.06/gallon. The Sanitation District also issued tax credit memo #407964 for the over
payment made in sales tax from the invoices.
402607 402610 402749 402752 403120 403129 403138
402608 402611 402750 402765 403121 403136 403155
402609 402748 402751 402766 403122 403137 403156
c) JCI Jones Chemicals, Inc. charged the Sanitation District for 5,012 gallons on invoice
#396970; however, the amount on the bill of lading stated 5,077 gallons. The Sanitation District caught the error and advised JCI Chemicals, Inc. via email to send a debit memo to
collect the short billed amount.
d) The following invoices from JCI Jones Chemicals, Inc. overcharged the Sanitation District by 20 gallons. The Sanitation District caught the error and took corrective action by issuing
credit memo #386435.
383921 383929 383932
383922 383930 383933
383928 383931 384005
e) The following debit memos issued by JCI Jones Chemicals, Inc. did not mathematically
recalculate. The Sanitation District became aware of the error and took corrective action by issuing credit memo #386435.
385267 385259 383932 385272 385275
385269 385257 383933 385273 385276
385255 383931 385271 38524
f) The Sanitation District was charged for 5,067 gallons with invoice #369603. However, the amount on the bill of lading stated 5,114 gallons being delivered. The variance of 47 gallons
resulted in the Sanitation District being undercharged $25.
g) The Sanitation District was charged for 5,103 gallons with invoice #370155. However, the amount on the bill of lading stated 5,116 gallons being delivered. The variance of 13 gallons
resulted in the Sanitation District being undercharged $7.
h) The Sanitation District was charged for 5,030 gallons with invoice #365437. However, the amount on the bill of lading stated 5,110 gallons being delivered. The variance of 80 gallons
resulted in the Sanitation District being undercharged $43.
Ferric Chloride
a) For invoice #9017032864, the bill of lading was not attached and therefore we were unable to
verify the amount invoiced agreed to amount received.
b) For credit memo #123107 and #47210, in the amount of $1,088 and $28,688, respectively, there was no supporting documentation available to substantiate the item and the recording.
Administration Committee Orange County Sanitation District
Fountain Valley, California
c) For invoice #9017018271, the amount on the invoice was $4,789, however the amount
recorded in the general ledger account was $5,021. This resulted in a difference of $232.
d) Invoice #9017019157 did not mathematically recalculate which resulted in an undercharge of $74
e) Invoice #9017029339 did not mathematically recalculate which resulted in an undercharge of
$30.
PRISC Trucklines
a) For invoice #SLS/27216, US Peroxide LLC transposed the amount charged to the Sanitation District. They charged the Sanitation District for 8,791 gallons instead of 7,891 gallons. This
resulted in an overcharge of $180.
b) Invoice #SLS/27004, SLS/27848, SLS/27849, SLS/32004 and SLS/28441 from US Peroxide, LLC were billed to the Sanitation District for fewer gallons than delivered according to the bill
of lading which resulted in undercharges of $1,721.
c) The following invoices from US Peroxide, LLC did not agree to the bill of lading. US Peroxide, LLC was over billing the Sanitation District for the amount of gallons they delivered.
The Sanitation District noted these errors and short-paid the amount on the invoice to match the gallons they received based on the bill of lading.
SLS/27515 SLS/27656 SLS/28099 SLS/32509 SLS/32451
SLS/27603 SLS/27850 SLS/28362 SLS/35210 SLS/31833
SLS/27607 SLS/28046 SLS/29840 SLS/33687 SLS/34267
d) There was no bill of lading attached to invoice #SLS/31400 and SLS/31561 therefore we
were unable to verify the amount the Sanitation District was being invoiced for agreed to what was received.
Magnesium Hydroxide
a) US Peroxide, LLC billed the Sanitation District with invoice #SLS/33261, SLS/33262, and
SLS/33542 for fewer gallons than delivered. These discrepancies resulted in undercharges to the Sanitation District of $948.
b) Hill Brothers billed the Sanitation District with invoice #01323843 for fewer gallons than they delivered. This discrepancy resulted in an undercharged to the Sanitation District of $382.
Summary of Results
Based on our review of the Sanitation District’s chemical purchases, we feel that overall, the purchases
are reasonable and the policies and procedures are adequate. The review was conducted in order to assess and provide feedback to the Sanitation District regarding chemical purchases. As noted in the
previous sections, we performed tests on transactions, conducted inquires and reviewed the procedures that have been established by the Sanitation District. We found certain exceptions and made
recommendations which are mentioned above.
Administration Committee Orange County Sanitation District
Fountain Valley, California
Conclusion
We were not engaged to, and did not conduct an audit, the objective of which would be the expression of an opinion on chemical purchases. Accordingly, we do not express such an opinion. Had we performed
additional procedures, other matters might have come to our attention that would have been reported to the Sanitation District.
This report is intended solely for the use of the specified users listed above and is not intended to be, and
should not be, used by anyone other than those specified parties.
ORANGE COUNTY SANITATION DISTRICT
Staff Report
DATE: October 14, 2009
TO: Administration Committee
FROM: Michael D. White, Controller
SUBJECT: Response to Internal Audit Report on Accounting Policies and
Procedures Issued on August 6, 2009
On August 6, 2009, Lance, Soll & Lunghard issued their report on procedures they
performed in evaluating certain accounting policies and procedures. Below is a listing
of the auditors findings contained within their August 6, 2009 report along with staff
responses.
Capital Assets
1. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of capital assets. We performed a transaction walkthrough test for each procedure to determine the
proper procedures were being followed as designed.
Finding: The Sanitation District does not currently have a control in place to
ensure that capital assets recorded on the detail listing are currently in use. We recommend that departments periodically receive the listing to verify assets are
still in use and a periodic observation is performed.
Staff Response: Staff is in agreement with the recommendation. The Senior
Accountant over capital asset accounting will annually prepare a listing of capital equipment assets by department and receive confirmation from each department
as to whether all equipment is still in use, and test the accuracy of the final
confirmation listings through random sample selections. In addition, the Senior
Accountant will prepare a master listing of infrastructure capital assets and
annually review with the Computerized Maintenance Management System Supervisor as to whether any capitalized infrastructures have been replaced and
demolished, and to make appropriate deletion recommendations to the
Accounting Manager.
2. Procedure Performed: We selected a sample of capital asset additions, deletions and transfers which covered the fiscal years ended June 30, 2008 and
June 30, 2009, and tested for the following attributes: adequate documentation,
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 2 of 8
approvals, capital project charter (for additions only), property disposal request
(for deletions only) and project completion form (for transfers only). Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Cash Disbursements
3. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of cash
disbursements. We performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as designed.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A 4. Procedure Performed: We selected a sample of cash disbursements which
covered the fiscal years ended June 30, 2007 and June 30, 2008, and tested for
the following attributes: propriety of warrant, warrant support, approvals, and
correct general ledger coding and posting. Findings: We noted one disbursement that was not properly coded to the
correct account. The nature of the disbursement related to the annual employee
picnic and it was improperly coded to a repairs and maintenance expense
account. The amount of the disbursement was less than $100. Because of the error, we expanded our sample selection. There were no additional errors discovered.
Staff Response: N/A
Cash Receipts
5. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of cash receipts. We
performed a transaction walkthrough test for each procedure to determine the proper procedures were being followed as designed.
Findings: We noted the following items:
· We observed that the Accounting Assistant II posts cash receipts to the general ledger and also prepares the daily bank deposit. These duties
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 3 of 8
should ideally be segregated in order to mitigate the risk of fraud. The
Sanitation District has a compensating control in that the Accounting Supervisor reviews the batches prior to them getting posted to the general ledger.
Staff Response: N/A
· During our walkthrough, we inspected an invoice request for a credit
memo and noted that the request was prepared and approved by the
Accounting Supervisor. We recommend invoice requests that are
prepared by the Accounting Supervisor be reviewed by a member of
management.
Staff Response: All future credit memos prepared by the Accounting
Supervisor will be reviewed by the Accounting Manager before being processed.
6. Procedure Performed: We selected a sample of cash receipts during the fiscal years ended June 30, 2008 and June 30, 2009, and tested for the following
attributes: computation, classification, and proper approval.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Financial Reporting
7. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of financial reporting.
We performed a transaction walkthrough test for each procedure to determine
the proper procedures were being followed as designed.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
8. Procedure Performed: We selected a sample of journal entries during the fiscal
years ended June 30, 2008 and June 30, 2009, and verified there was proper segregation of duties and adequate support for each entry.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 4 of 8
Inventories
9. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of inventories. We
performed a transaction walkthrough test for each procedure to determine the
proper procedures were being followed as designed.
Findings: Finance Department Policy and Procedure, Policy Number 401-2-10, Hazardous Materials, Section 6.5 states “the MSDS (Material Safety Data Sheet)
will be attached to the Receiving Department paperwork until the material is
received. Warehouse personnel will compare the material container with the
MSDS, the packing slip, and the purchase order, and if they match, the division will be notified of the availability of the material.” Section 6.7 states, “no materials will be released from the Receiving Department without proper
paperwork and MSDS being present.” This policy was implemented on January
1, 2005. Based on our walkthrough, we determined this is no longer the
procedure. The current procedure is that the Safety Department verifies the MSDS is on file rather than the Receiving Department, as the policy states. We recommend either the policy be updated to conform to the new practice or the
practice be changed to conform to the existing policy.
Staff Response: Staff will review and update the policy to conform to current
practice.
10. Procedure Performed: We selected a sample of inventory additions during the
fiscal years ended June 30, 2008 and June 30, 2009, and tested for the following
attributes: adequate approval, proper supporting documentation and proper
recordkeeping.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Investments
11. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures as they relate to investments. We also verified the Sanitation District
was properly preparing monthly investment reconciliations for the fiscal years
ended June 30, 2008 and June 30, 2009. We performed a transaction walkthrough test for each procedure to determine the proper procedures were
being followed as designed. We reviewed the Sanitation District’s investments
as of the most recent investment reconciliation prepared, which was for the
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 5 of 8
period ended April 30, 2009, to determine all investments were in compliance
with the Sanitation District’s investment policy. Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
12. Procedure Performed: We selected a sample of investment transactions during
the fiscal year ended June 30, 2009, to verify the Sanitation District was properly
following its Treasury Management Procedures.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Long-Term Debt 13. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of long-term debt.
We performed a transaction walkthrough test for each procedure to determine
the proper procedure was being followed as designed. Findings: Although the Sanitation District has a thorough policy on the
parameters for issuing debt and managing outstanding debt, there was no policy
that indicated the process of initiating and authorizing, recording and processing,
and reconciling and reporting the long-term debt. We recommend the Sanitation District implement a policy to address those procedures.
Staff Response: Staff will update the desk procedures on long-term debt that
indicates the process of initiating and authorizing, recording and processing, and
reconciling and reporting the long-term debt. 14. Procedure Performed: We selected a sample of long-term debt transactions
which covered the fiscal years ended June 30, 2008 and June 30, 2009, and
tested for the following attributes: adequate support and correct coding and
posting. Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 6 of 8
Payroll
15. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of payroll. We
performed a transaction walkthrough test for each procedure to determine the proper procedure was being followed as designed.
Findings: Financial Management Policy and Procedure, Policy
Number 301-3-7, Overtime Pay for Holiday Worked, Mandatory Overtime, and
Pass down Overtime, Section 6.2 states “time worked on holidays as part of the employee’s schedules workweek should be tracked as overtime on timesheets, with the pay code ‘Mand OT/Hol Workd’ and the appropriate sub ledger, project-
phase, or work order number.” This was a new policy that was effective as of
March 1, 2009. Based on our review of various timesheets that were approved
since then, there were numerous timesheets noted that were not properly recorded in the proper pay code. We recommend that these timesheets be reviewed by the supervisors prior to submittal to payroll to verify that holiday pay
and other mandatory pay have been appropriately entered on the timesheets
before approval, as stated in the policy.
Staff Response: The on-line time keeping system requires supervisors to approve timesheets before payroll can be processed. After all time sheets have
been approved by Supervisors, and before payroll is process, the Payroll Section
will review all approved timesheets to ensure that overtime recorded on holidays
is properly recorded. 16. Procedure Performed: We selected a sample of Sanitation District employees
during the fiscal years ended June 30, 2007 and June 30, 2008, and tested for
the following attributes: proper pay classification, computation of pay, check or
direct deposit pay stub was proper, costs were correctly allocated and all hours were recorded.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A Purchasing
17. Procedure Performed: We reviewed the Sanitation District’s policies and
procedures and desk procedures as they relate to the area of purchasing. We
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 7 of 8
performed a transaction walkthrough test for each procedure to determine the
proper procedures were being followed as designed. Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
18. Procedure Performed: We selected a sample of purchase orders during the fiscal year ended June 30, 2009, and tested for the following attributes: adequate
approval and proper supporting documentation.
Findings: No findings were noted as a result of the procedures performed. Staff Response: N/A
Self-Insurance
19. Procedure Performed: We reviewed the Sanitation District’s policies and procedures and desk procedures as they relate to the area of self-insurance. We
performed a transaction walkthrough test for each procedure to determine the
proper procedure was being followed as designed.
Findings: No findings were noted as a result of the procedures performed.
Staff Response: N/A
20. Procedure Performed: We selected a sample of worker’s compensation, general liability, and property damage claim files covering the fiscal years ended June 30, 2008 and June 30, 2009, to review that the Sanitation District was
retaining the proper documentation including various forms and approvals.
Findings: Based on our review of the worker’s compensation claim files, there were three files that we selected that were missing the Industrial Medical Service Order (IMSO)/Industrial Medical Service Order Election of Personal Physician
(IMSOEPP), five files were missing the Compensation Leave Form and one file
was missing the work status form. We also determined there was an Employee
Claim for Worker's Compensation Benefits (Form DWC-1) that was missing an employer representative signature. We reviewed a sample of general liability and property damage claims and determined the proper documentation was
retained. We recommend the Sanitation District assemble a checklist so that
employees are well informed about the different documents that need to be
included with the files.
Response to Internal Audit Report on Accounting Policies and Procedures Issued on
August 6, 2009
October 14, 2009 Page 8 of 8
Staff Response: Staff concurs with the recommendation and will develop a
checklist so that employees are well informed about the different documents that need to be included with the files.
General
21. Procedure Performed: We reviewed the entity-level controls as they relate to the control environment, risk assessment, information and communication, and monitoring. We also reviewed the general computer controls.
Findings: No findings were noted as a result of the procedures performed.
Summary of Results
Based on our review of the Sanitation District’s accounting policies and procedures, we
that, overall, the Sanitation District has adequate policies and procedures in place and
they are functioning as designed. The review was conducted in order to assess and provide feedback to the Sanitation District regarding certain accounting policies and procedures in place.
As noted in the previous sections, we performed tests on procedures, conducted
inquires and reviewed the procedures that have been established by the Sanitation District. We found certain exceptions and made recommendations which are mentioned above.
Conclusion We were not engaged to, and did not conduct an audit, the objective of which would be
the expression of an opinion on the specified elements, accounts or items. Accordingly,
we do not express such an opinion. Had we performed additional procedures, other
matters might have come to our attention that would have been reported to the Sanitation District.
This report is intended solely for the use of the specified users listed above and is not
intended to be, and should not be, used by anyone other than those specified parties.
MW:lc
ORANGE COUNTY SANITATION DISTRICT
Staff Report
DATE: October 14, 2009
TO: Administration Committee
FROM: Michael D. White, Controller
SUBJECT: Responses to Internal Audit Report on Chemical Purchases Issued on August 6, 2009
On August 6, 2009, Lance, Soll & Lunghard issued their report on procedures they performed in evaluating District chemical purchase procedures. Below is a listing of the auditors findings contained within their August 6, 2009, report along with staff
responses.
1. Procedure Performed: We selected a sample of contracts for chemical purchases and verified compliance with the Sanitation District’s procurement policies and procedures.
Findings: No findings were noted as a result of the procedures we performed.
Staff Response: N/A
2. Procedure Performed: We selected certain chemicals used by the Sanitation
District and gained an understanding of the processes and controls in place over
ordering, receiving, and placing chemicals into service. Findings: Although we noted that the Sanitation District has good control
procedures in place, there were no written policies and procedures which
documented these processes and controls. We recommend that the Sanitation
District develop written documentation for this area. Staff Response: Staff concurs with the auditor’s recommendation and is in the
process of developing policies and procedures documenting these processes
and controls.
3. Procedure Performed: We selected a sample of chemical purchases for the fiscal years ended June 30, 2008 and June 30, 2009, and tested them for the
following attributes: correctness of invoice including prices and quantities,
mathematical accuracy, approval, sufficient funds on purchase order, and
general ledger coding and posting.
Response to Internal Audit Report on Purchases Issued on August 6, 2009
October 14, 2009
Page 2 of 2
Findings: We noted certain exceptions through the procedures we performed which are described below. Although we noted such exceptions, we consider the items to be insignificant in relation to our sample selected.
Staff Response: N/A
MDW:lc