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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 H:\dept\asd\210\crane\AdminComm\ADMIN2009\Admin Committee_finals\10-14-09\03 101409 Admin Agenda.docx 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 Page 1 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