Loading...
HomeMy WebLinkAbout2006-11-08MINtJTES OF THE REGULAR JOINT MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE & STEERING COMMITTEE Orange County Sanitation District Wednesday, November 8, 2006, 5:00 p.m. A joint meeting of the Finance, Administration and Human Resources Committee and the Steering Committee of the Orange County Sanitation District was held on November 8, 2006, at 5:00 p.m., in the Sanitation District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: FAHR COMMITTEE MEMBERS: DIRECTORS PRESENT: Darryl Miller, Chair Mike Duvall, Vice Chair Bill Dalton Rich Freschi · Phil Luebben Joy Neugebauer Mark Waldman Doug Davert, Board Vice Chair DIRECTORS ABSENT: James W. Silva Jim Ferryman, Board Chair STAFF PRESENT: Jim Ruth, Interim General Manager Bob Ghirelli, Acting Assistant General Manager Lorenzo Tyner, Director of Finance and Administrative Services Jeff Reed, Human Resources Manager Mike White, Controller Lilia Kovac, Committee Secretary Denise Martinez, Sr. Human Resources Analyst Rich Spencer, Human Resources Supervisor Paul Loehr, Human Resources Supervisor Norbert Gaia Bob Geggie Juanita Skillman OTHERS PRESENT: Brad Hogin, General Counsel Jennifer Christian, Mayer Hoffman Mccann P.C. Ken Al-Imam, Mayer Hoffman Mccann P.C. (2) .APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no public comments. IN TH FILED ORANGEE g:,~!'?_: ~~ .'.~ SECRETARY ,-,"•' l"JISTAICT NOV 15 2006 (4) REPORT OF THE COMMITTEE CHAIR Chair Miller did not give a report. BY f . .;::, ---.1.-_:___::...:..__~=--.o (5) REPORT OF THE GENERAL MANAGER Jim Ruth, Interim General Manager, did not give a report. 'Minutes of the Regular Joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee Meeting November 8, 2006 Page 2 (6) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES Lorenzo Tyner, Director of Finance, reported further research of APIA insurance may offer a viable alternative for insurance, and will present options to the FAHR committee in December. (7) REPORT OF GENERAL COUNSEL Brad Hogin, General Counsel, reported that he will be responding to a letter from Bob Lockhart, president of Revenue Enhancement Group. Mr. Lockhart alleges in the letter that the Sanitation District's fee ordinance does not comply with Proposition 218. General Counsel also reported that he will be reporting to the FAHR Committee in December on 2006 legal fees. (8) CONSENT CALENDAR ITEMS Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: a. Approve minutes of the October 11, 2006 joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee meeting. b. FAHR06-76 Receive and file Employment Status Report as of October 13, 2006. c. FAHR06-77 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. d. FAHR06-78 Recommend to the Board of Directors to receive and file the FY 2006-07 First Quarter Financial Report for the period ended September 30, 2006. e. Item pulled for discussion. Motion: It was moved, seconded, and duly carried to approve the recommended action for the items specified as 8(a) through 8(d). END OF CONSENT CALENDAR f. FAHR06-79 Recommend to the Board of Directors to approve Amendment No. 1 to Motion: the Real Property Lease Agreement, Specification No. L-018, with Village Nurseries Wholesale, LLC, providing for a lease extension effective December 1, 2006 through November 30, 2011, with option to renew for three additional 5-year periods. It was moved, seconded, and duly carried to approve the recommended action. (9) ACTION ITEMS 'Minutes of the Regular Joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee Meeting November 8, 2006 Page 3 a. FAHR06--80 Recommend to the Board of Directors to receive and file the Motion: Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2006, prepared by staff and audited by Mayer Hoffman Mccann P.C., Certified Public Accountants. It was moved, seconded, and duly carried to approve the recommended action. b. FAHR06-81 Recommend to the Board of Directors to approve the reclassification of four OCSD positions affecting incumbents Motion: It was moved, seconded, and duly carried to approve the recommended action. (10) INFORMATIONAL ITEMS a. FAHR06-82 Information on industry, county and state trends related to OCSD's Succession Management Program Jeff Reed, Human Resources Manager, presented the current status of the Succession Management Program, as well as statistics that indicate the future shortage of qualified staffing resources due to competition for skilled personnel. (11) CLOSED SESSION The Committee convened in Closed Session at 6:05 p.m. pursuant to Government Code Section 54957(b)(1) to: (1) Confer with designated representatives, Jeff Reed, Human Resources Manager; Richard Spencer, Human Resources Supervisor; and Paul Loehr, Human Resources Supervisor, re Meet and Confer Update re contract negotiations for employees represented by 1 ). Orange County Employees Association; 2). International Union of Operating Engineers, Local 501, and 3). Supervisors, Professional Management Team (part of Peace Officers Council of California), Government Code Section 54957.6. Confidential Minutes of the Closed Session held by the Finance, Administration and Human Resources Committee have been prepared in accordance with California Government Code Section 54957.2, and are maintained by the Clerk of the Board in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. (12) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. ,, Minutes of the Regular Joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee Meeting November 8, 2006 Page4 (13) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. (14) FUTURE MEETING DATES The next regular FAHR Committee meeting is scheduled for December 13, 2006, at 5 p.m. (15) ADJOURNMENT The Chair declared the meeting adjourned at 7:15 p.m. Submitted by: 6,A~ Lilia Kovac Committee Secretary H:\dept\agenda\FAHR\FAHR2006\1106\110806 draft FAHR Minutes.doc ROLL CALL JOINT FINANCE, ADMINISTRATION AND HUMAN RESOURCES AND STEERING COMMITTEES Meeting Date: November 8, 2006 COMMITTEE MEMBERS Time: 5:00 p.m. Adjourn: Darryl Miller (Chair) Mike Duvall (Vice Chair) Bill Dalton Richard Freschi Phil Luebben Joy Neugebauer James W. Silva Mark Waldman Jim Ferryman (Board Chair) Doug Davert (Board Vice Chair) OTHERS I Brad Hogin, General Counsel STAFF Jim Ruth, Interim General Manager Bob Ghirelli, Acting Assistant General Manager Lorenzo Tyner, Director of Finance and --Administrative Services David Ludwin, Director of Engineering Jim Herberg, Director of Operations & Mgmt. Patrick Miles, Director of Information Technology Nick Arhontes, Director of Regional Assets --and Services Ed Torres, Acting Director of Technical Services Bret Colson, Public Information Manager Jeff Reed, Human Resources Manager Mike White, Controller Lilia Kovac, Committee Secretary c: Lenora Crane AGENDA REGULAR JOINT MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE & STEERING COMMITTEE ORANGE COUNTY SANITATION DISTRICT WEDNESDAY, NOVEMBER 8, 2006, AT 5:00 P.M . (1) ROLL CALL ADMINISTRATIVE OFFICE 10844 Ellis Avenue Fountain Valley, California 92708 www.ocsd.com (2) APPOINTMENT OF CHAIR PRO.TEM , IF NECESSARY (3) PUBLIC COMMENTS (4) REPORT OF COMMITTEE CHAIR (5) REPORT OF GENERAL MANAGER (6) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES (7) REPORT OF GENERAL COUNSEL (8) CONSENT CALENDAR ITEMS Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: a. Approve minutes of the October 11, 2006 Joint Meeting of the Finance, Administration and Human Resources Committee and Steering Committee. b. FAHR06-76 Receive and file Employment Status Report as of October 13, 2006. Book Page 10 c. FAHR06-77 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Co$ts Report. Book Page 16 Book Page 1 November 8, 2006 Page2 d. FAHR06-78 Recommend to the Board of Directors to receive and file the FY 2006-07 First Quarter Financial Report for the period ended September 30, 2006. Book Page 19 e. FAHR06-79 Recommend to the Board of Directors to approve Amendment No. 1 to the Real Property Lease Agreement, Specification No. L-018, with Village Nurseries Wholesale, LLC, providing for a lease extension effective December 1, 2006 through November 30, 2011, with option to renew for three additional 5-year periods. Book Page 21 END OF CONSENT CALENDAR f. Consideration of items deleted from Consent Calendar, if any. (9) ACTION ITEMS a. FAHR06-80 Recommend to the Board of Directors to receive and file the Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2006, prepared by staff and audited by Mayer Hoffman Mccann P.C., Certified Public Accountants. Book Page 23 Mike White -30 Minutes b. FAHR06-81 Recommend to the Board of Directors to approve the reclassification of four OCSD positions affecting incumbents Book Page 30 Lorenzo Tyner - 5 Minutes (10) INFORMATIONAL ITEMS a. FAHR06-82 Information on industry, county and state trends related to OCSD's Succession Management Program Book Page 35 Jeff Reed - 5 Minutes (11) CLOSED SESSION j During the course of conducting the business set forth~ on this age~da as a regular meeting of the Committee, 1 the Chair may convene the Committee in closed session to consider matters of pending real estate negotiations, l pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, l 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 l 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 . L the~~. subje_c!s, the. minutes, will_ reflect f'III re.quired disclosures of info,rmation .... ·-···--.. · ...................................................................... _! H:\dept\agenda\FAHR\FAHR2006\ 1106\03.110806 FAHR Agenda.doc Book Page 2 November 8, 2006 Page 3 a. Convene in closed session. Conference with designated representatives Lorenzo Tyner, Director of Finance and Administrative Services; Jeff Reed, Human Resources Manager; and Paul Loehr, Human Resources Supervisor, re Meet and Confer Update re contract negotiations for employees represented by 1). Orange County Employees Association; 2). International Union of Operating Engineers, Local 501, and 3). Supervisors, Professional Management Team (part of Peace Officers Council of California) (Government Code Section 54957(b)(1 ). b. Reconvene in regular session. c. Consideration of action, if any, on matters considered in closed session. (12) OTHER BUSINESS. COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS. IF ANY (13) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGEN"DA FOR ACTION AND STAFF REPORT (14) FUTURE MEETING DATES The next regular FAHR Committee meeting is scheduled for December 13, 2006, at 5 p.m. (15) ADJOURNMENT H: \dept\agenda\F AHR\F AH R2006\ 1106\03. 11 0806 FAH R Agenda. doc Book Page 3 November 8, 2006 Page4 Agenda Posting: In accordahce with the requirements of California Government Code Section 54954.2, this agenda has bee11 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 written materials relating to each agenda item are available for public inspection in the office of the Board Secretary. 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 ~genda, 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 Finance, Administration and Human Resources Committee on specific agenda items or matters of general interest. As determined by the Chair, speakers may be deferred uliitil the sp-eclfic 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 pa-rticular 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 th.e consent calendar. All items removed from the consent calendar shall be considered in the regular order of 'busines,s. 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 (p0sted within 24 hours). Accomm0aati0ns 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 Board Secretary's office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the dis_ability and the type of accommodation requested. Notice to Committee Members: For any questions oh the agenda or to place any items on the agenda, Committee members should contact the Committee Chair or Secretary ter;i days in advance of the Committee meeting. Committee Chair: Committee Secretary: Interim General Manager: Acting Assistant General Manager Director of Finance and Administrative Services Acting Human Resources and Employee Relations Manager Darryl Miller Lilia Kovac Jim Ruth Bob Ghirelli Lorenzo Tyner Jeff Reed (949) 453-5300 (714) 593-7124 (714) 593-7110 (714) 593-7400 (714) 593-7550 (714) 593-7144 H:\dept\agenda\FAHR\FAHR2006\1106\03.110806 FAHR Agenda.doc Book Page 4 lk0vac@ocsd.com jruth@ocsd.com bqhirelli@oesd.c0m ltyner@ocsd.com jreed@ocsd.com MINUTES OF THE REGULAR JOINT MEETING OF THE FINANCE, ADMINISTRATION AND HUMAN RESOURCES COMMITTEE & STEERING COMMITTEE Orange County Sanitation District Wednesday, October 11, 2006, 5:00 p.m. A joint meeting of the Finance, Administration and Human Resources Committee and the Steering Committee of the Orange County Sanitation District was held on October 11, 2006, at 5:00 p.m., in the Sanitation District's Administrative Office. (1) The roll was called and a quorum declared present, as follows: FAHR COMMITTEE MEMBERS: DIRECTORS PRESENT: Darryl Miller, Chair Mike Duvall, Vice Chair Bill Dalton Rich Freschi Phil Luebben Joy Neugebauer Mark Waldman Doug Davert, Board Vice Chair DIRECTORS ABSENT: James W. Silva Jim Ferryman, Board Chair STAFF PRESENT: Jim Ruth, Interim General Manager Bob Ghirelli, Acting Assistant General Manager Lorenzo Tyner, Director of Finance and Administrative Services David Ludwin, Director of Engineering Jeff Reed, Human Resources Manager Mike White, Controller Lilia Kovac, Committee Secretary Norbert Gaia Juanita Skillman OTHERS PRESENT: Brad Hagin, General Counsel Brian Gruber, Lance, Soll & Lunghard Richard Kikuchi, Lance, Soll & Lunghard Shirish Patel, Lance, Soll & Lunghard Ed Soong, Public Resources Advisory Group Lori Koh (2) APPOINTMENT OF CHAIR PRO TEM No appointment was necessary. (3) PUBLIC COMMENTS There were no public comments. (4) REPORT OF THE COMMITTEE CHAIR Chair Miller did not give a report. (5) REPORT OF THE GENERAL MANAGER Jim Ruth, Interim General Manager, did not give a report. Book Page 6 Minutes of the Regular Joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee Meeting October 11, 2006 Page2 (6) REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES Lorenzo Tyner, Director of Finance, did not give a report. (7) REPORT OF GENERAL COUNSEL Brad Hagin, General Counsel, informed the Committee members that he would be conducting Ethics training in-house, as required by Assembly Bill AB1234. He also asked those directors that have already completed their Ethics training submit a copy of the certificate of completion to the Board Secretary's office of the Sanitation District for the files. (8) CONSENT CALENDAR ITEMS Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: a. Approve minutes of the September 13, 2006 joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee meeting. b. FAHR06-67 Receive and file Employment Status Report as of September 18, 2006. c FAHR06-68 Receive and file OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. d. FAHR06-69 Recommend to the Board of Directors to Approve Amendment No. 1 to Motion: the agreement with the State of California, Department of Parks and Recreation, providing for a change to the billing methodology for sewer services for Balsa Chica State Beach. It was moved, seconded, and duly carried to approve the recommended action for the item specified as 8(a) through 8(d). Director Freschi abstained from voting on Item B(a). END OF CONSENT CALENDAR e. Consideration of items deleted from Consent Calendar, if any. (9) ACTION ITEMS a. FAHR06-70 Recommend to the Board of Directors to authorize extension of a service contract with Public Resources Advisory Group (PRAG) for financial advisory services for an additional five-year period effective November 2006. Motion: It was moved, seconded, and duly carried to approve the recommended action. Book Page 7 Minutes of the Regular Joint meeting of the Finance, Administration and Human Resources Committee and Steering Committee Meeting October 11, 2006 Page3 (10) INFORMATIONAL ITEMS a. FAHR06-71 Independent Accountant Report on the Capital Improvement Program's Procurement Procedures and Internal Controls Lorenzo Tyner introduced Richard Kikuchi of Lance, Soll and Lunghard who presented their independent report and findings of the District's Capital Improvement Program's Procurement Procedures and Internal Controls. Director of Engineering, David Ludwin, presented a response to the recommendations made on the auditors report. b. FAHR06-72 Retirement and benefits program review Lorenzo Tyner presented a verbal report on Bartel Associates, LLC's Benefits Review. A follow up meeting was scheduled for Thursday, October 26, 2006. c. FAHR06-73 Succession Management Program Update Jeff Reed presented the major components of the Succession Management program, and will be periodically reporting progress to the committee. d. FAHR06-74 Management of Property and Liability Insurance Programs Mike White briefly presented facts on the different joint insurance programs available to the Sanitation District for the various needs of the agency this size. Staff will prepare a comparative analysis of joint powers insurance authority and report back to the committee in November with options. (11) CLOSED SESSION There was no closed session. (12) OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. (13) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. Book Page 8 FAHR COMMITTEE Meeting Date To Bel. of Dir. 11/08/06 AGENDA REPORT Item Number Item Number FAHR06-76 Orange County Sanitation District FROM: Lorenzo Tyner, Director of Finance & Administrative Services Originator: Jeff Reed, Acting Human Resources & Employee Relations Manager SUBJECT: EMPLOYMENT STATUS REPORT AS OF OCTOBER 13, 2006 GENERAL MANAGER'S RECOMMENDATION Receive and file the Employment Status Report. SUMMARY The number of full-time equivalent (FTE) employees at OCSD is 594; actual headcount is 601. PRIOR COMMITTEE/BOARD ACTIONS N/A PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. 1:8'.1 Not applicable (information item) ADDITIONAL INFORMATION NEW HIRES: 3 Total Job Title Division Business Need Associate Engineer Ill Mechanical Maintenance & Power 2 -Important Production Maintenance Worker Collection Facilities O & M 2 -Important Intern Environmental Sciences Lab 3-Normal H:ldept\agenda\FAHRIFAHR2006\1106\08.06-76.Employment Status Report.doc Page 1 Book Page 10 SEPARATIONS: 2 Total Job Title Division Reason Safety & Health Specialist Safety & Health Resignation Information Tech Analyst Ill Electrical & Instrumentation Maintenance & Retirement Process Controls PROMOTIONS: 2 Total Current Pay Former Job Pay Name Division Job Title Grade Title Grade Laboratory 69 Laboratory 57 McMullin, Ryan Environmental Sciences Analyst Assistant Lab Accountant 70 Accounting 58 Stanford, Cristina Accounting Assistant 11 RECRUITMENT STATUS: All current recruitments have been reviewed and approved by the General Manager through the Position Analysis process. RECRUITMENTS GREATER THAN 90 DAYS: 2 Total Job Title Engineer -Mechanical ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS 1. Employment Status Report 2. FY 2006/07 Staffing Report 3. Recruitments in Process Date Days Posted Open 2/6/2006 252 H:ldept\agenda\F AHRIFAHR2006\1106108.06--76. Employment Status Report~doc Book Page 11 Division Status O&M Process Reposted to attract Engineering additional applicants Page 2 to 0 0 :,,;-- 'i:I ~ (C -N EMPLOYMENT STATUS REPORT DIVISION/DEPARTMENT AUTHORIZED FTE ACTUAL FTE VACANCIES 110 General Management Administration 2.50 2.50 - 150 Assistant General Manager Administration 3.50 2.50 1.00 151 Board Services 7.50 5.00 2.50 152 Public Information Office 7.00 7.00 . - 153 Safety & Health 8.00 8.00 - General Management Totals 28.50 25.00 3.50 210 Finance Administration 2.00 2.00 - 220 Accounting 19.00 17.00 2.00 230 Contracts, Purchasing & Materials Management 29.50 27.50 2.00 240 Human Resources 19.00 16.00 3.00 Administrative Services Totals 69.50 62.50 7.00 410 Regional Assets & Services Administration 8.00 8.00 - 420 Collection Facilities O&M 24.00 20.00 4.00 430 Facilities Maintenance Services 19.00 17.00 2.00 Regional Assets & Services Totals 51.00 45.00 6.00 610 Technical Services Administration 2.00 2.00 - 620 Environmental Assessment 16.00 15.00 1.00 630 Environmental Sciences Laboratory 38.00 37.50 0.50 640 Source Control 39.00 38.00 1.00 660 Environmental Compliance Services 21.50 19.50 2.00 Technical Services Totals 116.50 112.00 4.50 710 Engineering Administration 3.00 2.00 1.00 740 Planning 16.00 16.00 - 750 Project Management Office 15.75 14.75 1.00 760 Engineering & Construction 63.50 59.50 4.00 Engineering Totals 9!f.25" 92.25 6.00 810 O&M Administration 4.00 4.00 - 820 O&M Process Engineering 14.50 10.50 4.00 830 Operations, Plant No. 1 42.25 40.25 2.00 840 Operations, Plant No. 2 47.50 44.50 3.00 850 Mech Main! & Power Production 73.00 69.00 4.00 860 Electrical & Instrumentation Maintenance 68.00 61.00 7.00 Operations & Maintenance Totals 249.2"5 229.25 20.00 910 IT Administration 2.00 2.00 - 920 IT Customer Support 9.00 8.00 1.00 930 IT Network Support 8.00 8.00 - 940 IT Programming & Database Systems 12.00 10.00 2.00 Information Technology Totals 31.00 28.00 3.00 GRAND TOTAL FTEs AUTHORIZED FTE ACTUAL F1E VACANCIES 644.00 594.00 50.00 # ofVa~ncies Nt:it In Recruitment RECRUITMENTS - - 1.00 - - 1.00 - 1.00 2.00 - 3.00 - 4.00 - 4.00 - 1.00 - - - 1.00 - - - 1.00 1.00 - 3.00 2.00 2.00 4.00 5.00 16.00 - - 1.00 1.00 2.00 lnJfecruilment 28.00 22.00 o:i 0 0 :;,;- "'ti ~ ..... w 700.00 680.00 660.00 - 640.00 -• 620.00 - 600.00 • 580.00 560.00 - 540.00 - 520.00 - 500.00 DEC Authorized FTE* 644.00 Actual FTE** 598.50 Difference*** 45.50 In Recruitment 36.50 Vacancies 9.00 *Authorized FTE as of August *' Actual FTE as of August * .. Difference= Recruitments+ Vacancies • • FEB 644.00 601.00 43.00 16.50 26.50 STAFFING REPORT • • • • • • • • • • • • • • • • ' MAR APR MAY JUN JUL SEP OCT NOV 644.00 644.00 644.00 644.00 644.00 644.00 644.00 644.00 598.50 596.50 591.50 593.50 590.50 591.50 593.00 594.00 45.50 47.50 52.50 50.50 53.50 52.50 51.00 50.00 24.00 21.00 22.00 17.50 18.00 28.00 30.00 28.00 21.50 26.50 30.50 33.00 35.50 24.50 21.00 22.00 . I-+--Authorized FTE* ---Actual FTE** j IJj 0 0 ;,;- 'tj cffl (1) -~ DIV 151 220 230 420 420 420 620 620 760 820 820 820 830 840 850 860 860 860 860 HC FTE 1 1.00 1 1.00 2 2.00 2 2.00 1 1.00 1 1.00 1 0.50 1 0.50 1 1.00 1 1.00 1 1.00 1 1.00 2 2.00 2 2.00 4 4.00 1 1.00 1 1.00 1 1.00 1 1.00 POSITION DIVISION Clerk of the Board Board Services Principal Financial Analyst Accounting Contracts Administrator Purchasing Regional Assets & Services Maintenance Worker Admin Regional Assets & Services Engineering Manager Admin Regional Assets & Services Lead Mechanic Admin Environmental Assessment Intern -Biosolids Division Environmental Assessment Intern -Ocean Monitoring Division Engineering & Construction Planner/Scheduler Management Engineer -Mechanical O & M Process Support Associate Engineer 11/111 O & M Process Support Engineer 0 & M Process Support OIT/Plant Operator Plant 1 Operations OIT/Plant Operator Plant 2 Operations Mechanic/Sr. Mechanic Mechanical Maintenance Instrumentation & Electrical Instrumentation Tech II Maintenance Instrumentation & Electrical Maintenance Supervisor Maintenance Instrumentation & Electrical Electrical Tech II Maintenance Instrumentation & Electrical IT Analyst 111 Maintenance 1.UILO/LUUO RECRUITMENTS IN PROCESS NEW/ CLOSING INTERNAL/ JOB REPLACEMENT STATUS DATE EXTERNAL NUMBER POSTING DATE New Scheduling interviews. Closed Internal 398 9/13/2006 New Offer in process. Closed External 409 7/31/2006 Interviews scheduled 10/23 & New 10/24 Closed External 411 8/16/2006 Position reposed to attract Open Until Replacement additional applicants. Filled External 412 8/24/2006 New Posted internal 10/12. 10/26/2006 Internal 418 10/12/2006 Replacement Posted internal 10/6. 10/20/2006 Internal 422 10/6/2006 Replacement Offer in process. Closed External 414 8/23/2006 Open Until Replacement Interviews scheduled 10/18. Filled External 417 9/8/2006 Open Until New Posted external 9/6. Filled External 408 8/17/2006 Position reposed to attract Open Until Replacement additional applicants. Filled External 355 2/6/2006 Replacement Offer in process. Closed External 404 7/19/2006 Replacement Posted external 10/6. 10/20/2006 External 420 9/21/2006 Agustin Nieto, Jr. will start 10/23. Bruce Thompson will Replacement start 10/30. Closed External 397 7/6/2006 Kwen Tjen will start 10/23. Offer in process on the Replacement remaining candidate. Closed Internal 401 7/31/2006 New Posted internal 10/5. 10/19/2006 Internal 407 10/5/2006 Reviewing applications for Open Until Replacement external position. Filled Internal/External 406 8/17/2006 Replacement Posted internal 10/9. 10/23/2006 Internal 421 10/9/2006 Replacement Reviewing applications. Closed External 419 9/13/2006 Replacement Posting in development. Internal 423 Post Pending t:c 0 0 ;,;-- '"C Jil (1) ...... V, DIV HC 860 1 930 1 940 1 RECRUITMENTS IN PROCESS NEW/ FTE POSITION DIVISION REPLACEMENT STATUS Instrumentation & Electrical 1.00 Engineer Maintenance Repl.acemenl Posted internal 10111 . Applications forwarded to 1.00 IT Analyst I Customer & Network Support Replacement Patrick Miles for review. 1.00 Principal IT Analyst Programming & Databases New Posted external 10/5. 28.00 FTE's 29.00 Actual Recruitments (Headcount) 1..;•~--~..!'..JO CLOSING INTERNAL/ JOB DATE EXTERNAL NUMBER POSTING DATE 10/25/2006 Internal 424 10/11/2006 Closed External 382 9/13/2006 10119/2006 External 415 8/29/2006 FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Bob Ghirelli, Acting Assistant General Manager Originator: James Matte, Safety & Health Supervisor Meeting Date To Bel. of Dir. 11/08/06 Item Number Item Number FAHR06-77 SUBJECT: OSHA INCIDENCE RATES AND WORKERS' COMPENSATION CLAIMS AND COSTS REPORT GENERAL MANAGER'S RECOMMENDATION Receive and file the OSHA Incidence Rates and Workers' Compensation Claims and Costs Report. SUMMARY The Safety and Health Division tracks OSHA Incidence Rates for DART<1> Cases (DART Incidence Rate) and Total Accidents (Total Injury Frequency Rate) and the District's Workers' Compensation Claims and Costs. The data for January-September 2006 are shown in the table below: OCSD DART Cases OCSD DART Rate\LJ OSHA Recordable Accidents District OCSD Total Injury Frequency Ratel"' NOTES: (1) Days Away, Restricted or Transfer (2) Industry Average for DART is 2.80 (3) Industry Average for TIFR is 6.00 Revised: 06/04/03 January- Sept 2006 8 1.84 14 3.23 Book Page 16 September Change 2006 (August to Data September) 2 1 4.17 2.09 2 1 4.17 2.09 Page 1 Injuries The two recordable injuries for this reporting period are as follows: • On September 18, a Plant Operator tripped and fell back on hand resulting in a sprained wrist. She was on restricted duty for two days. This injury is classified as a DART case. • On September 22, an OIT felt pain in his shoulder after opening a valve. He sustained a right shoulder strain. He is currently working with restrictions. This injury is classified as a DART case. Claims and Costs The Division also tracks the District's Workers' Compensation Claims and Costs. Information regarding OCSD workers' compensation claims is presented below. January-September Change September 2006 Data (August to 2006 September) OCSD Workers' Compensation Claim Count (report period) 7 2 0 OCSD Workers' Compensation Claim Cost (report period) $39,784 $6,000 $2,000 Total Open Claims 28 Total OCSD Workers' $1,783,207 Compensation Claim Cost Closed Cases The four closed cases for this reporting period are as follows: • A claim involving a Senior Environmental Specialist who sustained a wrist and forearm strain from repetitive computer work on April 1 closed with a total incurred cost of $1,578. • A claim involving an Environmental Technician who sustained a low back strain after moving equipment on truck on August 1 closed with a total incurred cost of $912. • A claim involving a Source Control Inspector II who sustained a low back strain after removing sampler from manhole on June 1 closed with a total incurred cost of $1,069. • A claim involving a Plant Operator who sustained a sprained wrist after tripping on September 18 closed with a total incurred cost of $170.00. PRIOR COMMITTEE/BOARD ACTIONS N/A PROJECT/CONTRACT COST SUMMARY N/A Revised: 06/04/03 Book Page 17 Page2 BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [Zl Not applicable (information item) ADDITIONAL INFORMATION The reporting period ends September 30. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS N/A Revised: 06/04/03 Book Page 18 Page 3 FAHR COMMITTEE AGENDA REPORT Orange County Sanitation District FROM: Mike White, Controller SUBJECT: FIRST QUARTER FINANCIAL REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2006 GENERAL MANAGER'S RECOMMENDATION Meeting Date To Bd. of Dir. 11/08/06 11/15/06 Item Number Item Number FAHR06-78 Receive and file the FY 2006-07 First Quarter Financial Report for the period ended September 30, 2006. SUMMARY Attached in a separately bound document is the First Quarter Financial Report for the period ended September 30, 2006 that includes the quarterly operating and capital budget-to-actual report, the quarterly investment report, the quarterly swap (interest rate exchange agreement) report, and the quarterly certificates of participation report. PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. IZI Not applicable (information item) ADDITIONAL INFORMATION None. ALTERNATIVES N/A H:\deptlagenda\FAHRIFAHR2006\1106108.06-78.1 st Qtr Fin Rpt.doc Revised: 8/20/98 Book Page 19 Page 1 CEQA FINDINGS N/A ATTACHMENTS Attached in a separately bound document is the First Quarter Financial Report for the period ended September 30, 2006 H:\depllagenda\FAHRIFAHR200611106108.06-78.1 st Qtr Fin Rpt.doc Revited: 8120198 Book Page 20 Page2 FAHR COMMITTEE Meeting Date To Bet of Dir. 11/08/06 11/15/06 AGENDA REPORT Item Number Item Number FAHR06-79 Orange County Sanitation District FROM: Mike White, Controller Originator: Angela Brandt, Accounting Supervisor SUBJECT: EXTENSION OF COMMERCIAL LEASE WITH VILLAGE NURSERIES GENERAL MANAGER'S RECOMMENDATION Approve Amendment No. 1 to the Real Property Lease Agreement, Specification No. L-018, with Village Nurseries Wholesale, LLC, providing for a lease extension effective December 1, 2006 through November 30, 2011, with option to renew for three additional 5-year periods. SUMMARY The Sanitation District entered into a 10-year lease agreement with Village Nurseries effective December 1, 1996 in connection with real property located across Garfield Street from Plant No. 1 that will expire on November 30, 2006. This property is being held by the Sanitation District for potential expansion of Plant No. 1 should new governmental treatment regulations be adopted that would require the Sanitation District to build additional facilities. The terms of the lease provides for lease extensions in four, five-year, mutually negotiable increments, or up to 20 additional years. This proposed Amendment No. 1 would be for the first five-year lease extension with Village Nurseries that would run through November 30, 2011. A Provision is contained within the original lease that would allow the Sanitation District to terminate the lease upon six months written notice should an event occur that would require the use of the premises. At the request of Village Nurseries, a provision that would allow them to terminate the lease upon six months written notice has been . included within the proposed Amendment No. 'l. This request was made by Village Nurseries due to the possibility that Southern California Edison may, at some point, terminate their lease on an adjacent property. PRIOR COMMITTEE/BOARD ACTIONS On December 18, 1996, the Board approved a 10-year lease agreement with Village Nurseries in connection with real property, including buildings and other improvements located thereon. Form No. ow-102-4 Dept. 320 Page 1 Book Page 21 Agenda Report -FAHR Revised: 11/1/2006 PROJECT/CONTRACT COST SUMMARY The proposed Amendment No. 1 specify annual lease payments that increase approximately five percent per year over the life of this amendment and will generate lease income in the amount of $32,550 over the five year period at no additional out-of- pocket cost to the Sanitation District. BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. IZI Not applicable (information item) ATTACHMENTS None Form No. DW-102-4 Dept. 320 Page2 Book Page 22 Agenda Report -FAHR Revised: 11/1/2006 FAHR COMMITTEE Meeting Date To Bel. of Dir. 11/08/06 11/15/06 AGENDA REPORT Item Number Item Number FAHR06-80 Orange County Sanitation District FROM: Mike White, Controller SUBJECT: ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR ENDED JUNE 30, 2006 GENERAL MANAGER'S RECOMMENDATION Receive and file the Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2006, prepared by staff and audited by Mayer Hoffman Mccann P.C., Certified Public Accountants. SUMMARY The Sanitation District's independent auditors, Mayer Hoffman Mccann P.C. (MHM), have completed their examination of the Sanitation District's financial statements for the year ended June 30, 2006 and have issued an unqualified opinion. Each year, the FAHR Committee reviews the results of the audit and the corresponding Auditor's report to the Committee. During the audit performed by MHM, no matters involving the internal control over financial reporting and its operations that the auditors consider to be material weakness were noted. Ken Al- Imam, Partner, will attend the meeting to respond to any questions of Directors. This year, staff has again prepared the Comprehensive Annual Financial Report that includes the audited financial statements. For the last twelve years, the Sanitation District has earned the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA). This year's report will again be submitted to GFOA for their review in anticipation of another award. The Comprehensive Annual Financial Report, including the Auditor's opinion letter, the Auditor's Report to the Committee, the Auditor's Report on Compliance and Internal Control Over Financial Reporting, the Auditor's Appropriations Limit Report, and the Auditor's Single Audit Report are attached. PROJECT/CONTRACT COST SUMMARY NIA BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. [ZI Not applicable (information item) H:\dept\agenda\FAHRIFAHR2006\1106I09.06-80. CAFR 06 ,doc Revised: B/20/98 Book Page 23 Page 1 ATTACHMENTS 1. Comprehensive Annual Financial Report for the year ended June 30, 2006. (Separately bound document). 2. Single Audit Report on Federal Awards (Separately bound document). 3. Report on Compliance and Internal Control Over Financial Reporting. 4. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. 5. Independent Accountant's Report on Applying Agreed-Upon Procedures H:\dept\egende\FAHRIFAHR200611106109.06-80.CAFR 06.doc Revised: 8/20/98 Book Page 24 Page2 Mr. Dean Gallagher QF Resources Southern California Edison Company August 31, 2006 Page2 Mr. Lorenzo Tyner Director of Finance and Administrative Services Orange County Sanitation District We were not engaged to, and did not, perform an examination, the objective of which would be the expression of an opinion on the specified 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 you. This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties. Irvine, California August 31, 2006 m,,,_.-1;6~ /nieu n,,, Ac. Book Page 29 FAHR COMMITTEE Meeting Date 11/08/06 AGENDA REPORT Item Number FAHR06-81 Orange County Sanitation District FROM: Lorenzo Tyner, Director of Finance & Administrative Services Originator: Jeff Reed, Acting Human Resources & Employee Relations Manager SUBJECT: MID-YEAR STAFFING MODIFICATIONS: RECLASSIFICATION ADJUSTMENTS GENERAL MANAGER'S RECOMMENDATION Approve the reclassification of four OCSD position affecting incumbents SUMMARY To Bel. of Dir. 11/15/06 Item Number In an effort to support OCSD's staffing plan, it is necessary to review and modify job titles and pay grades to address changes in work. This occurs in situations where staffing requirements result in the need for higher levels of skill and knowledge. Furthermore, the need for the higher skill and knowledge levels must be indefinite and ongoing. Board of Directors Policy C10.10, as well as bargaining unit Memorandums of Understanding, address this process. Both state that requests are considered twice per year, once during the annual budgeting process and again in November. During the current period, thirteen requests were submitted for consideration. The Human Resources Division reviewed each request in detail and discussions ensued with the appropriate supervisor, manager, or department head. Consequently, the Human Resources Division recommends that four of the requests be approved (Attachment 1 ). The four requests will result in classification changes to positions with incumbents, effective immediately following Board approval. These four employees have met the criteria outlined in the Reclassification Guidelines, which are summarized below: 1. The incumbent has been in the position being considered for reclassification and performing the higher level duties for at least 6 months. 2. The incumbent meets the qualifications for the position being considered for reclassification. 3. The incumbent's classification is not being reclassified from a non-supervisory to a supervisory classification. Detailed information regarding each of the requests is documented in the additional information section. H:ldept\agenda\FAHRIFAHR2006\1106109.06-61.Reclass AR -Nov 06.doc Revised: 06/04/03 Book Page 30 Page 1 PRIOR COMMITTEE/BOARD ACTIONS N/A PROJECT/CONTRACT COST SUMMARY The cost for the salary increases as a result of the reclassifications for the remainder of FY 06/07 (November to June) is $7,455. Annualized cost of the salary increases as a result of the reclassifications is $12,780 with sufficient funds existing from already budgeted labor costs. BUDGET IMPACT D This item has been budgeted. D This item has been budgeted, but there are insufficient funds. IZI . This item has not been budgeted. (sufficient funds exist from budgeted labor costs). D Not applicable (information item). ADDITIONAL INFORMATION 240 -Human Res0urces Division Reclassify the Human Resources Manager position at PG 94 ($8,764 -$10,955) to Human Resources and Employee Relations Manager at PG 96 ($9,207 -$11,509) based ,on the elimination of the Director of Human Resources position, and in support of organization-wide human resources, employee relations and labor relations programs. Under direction of the Board of Directors, organizational changes are being implemented to increase District effectiveness and efficiency. With the elimination of the Director of Human Resources position, additional responsibilities for the human resources, employee relations, and labor relations program were transferred to the Human Resources Manager position. This increase in scope and complexity supports a recommendation for reclassification and placement to PG 96. This workload is indefinite and ongoing. 640 -Source Control Division Reclassify a Source Control Inspector I position at PG 69 ($4,729 -$5,911) to Source Control Inspector II at PG 73 ($5,217 -$6,523) based on performing the full scope of the job functions in support of the District's source control program. When initially assigned to the Source Control Inspector I level, the incumbent worked under close supervision , and received detailed instructions on tasks assigned. Over the past year, the incumbent has performed his job responsibilities at the higher classification of Source Control Inspector II requiring limited supervision, and complete understanding of the operating procedures and policies of the source control department. This is demonstrated by the incumbent handling the more difficult assigned industries including SIU metal finishers, a significant increase in the more problem-solving inspections, and managing complex projects such as tomato waste investigation and sampling. H:\deptlagenda\FAHRIFAHR2006\1106\09.06-81.Reclass AR -Nov 06.doc Revised: 06104/03 Book Page 31 Page2 The distinct differences between the Source Control Inspector I and the Source Control Inspector II are the level of supervision received, the type of instruction on the task at hand, and the job knowledge necessary to complete the tasks. At the Source Control Inspector I level there is close supervision with detailed instructions given for new or special assignments. There is an understanding of the general aspects of the job and limited understanding of the technical phases of the job. While at the Source Control Inspector II level or journey level, supervision is limited with no instructions needed on routine work. General instructions are given on new or special assignments, and there is complete understanding of the general aspects and technical phases of the job and their practical applications to problems and situations. This workload is indefinite and ongoing. 920 -Information Technology Customer Support Division Reclassify the Information Technology Analyst I position at PG 71 ($4,966 -$6,207) to Information Technology Analyst II at PG 75 ($5,483 -$6,854) based on performing the full scope of the job functions in support of the District's information technology systems. When initially assigned to the Information Technology Analyst I level, the incumbent worked under close supervision, and received detailed instructions on tasks assigned. Over the past year, the incumbent has performed the full range of duties assigned, working independently, applying well developed information technology knowledge, and exercising judgment and initiative. This is demonstrated by the incumbent taking on the lead role in supporting the maintenance and upgrade of the Magic server-based applications, as well as upgrade of the Laboratory Atlas application server and client upgrades. Work is only reviewed on completion and for overall results. The distinct differences between the Information Technology Analyst I and the Information Technology Analyst II are the level of supervision received, the type of instruction on the task at hand, and the job knowledge necessary to complete the tasks. At the Technology Analyst I level there is close supervision with detailed instructions given for new or special assignments. There is an understanding of the general aspects of the job and limited understanding of the technical phases of the job. In contrast, at the Information Technology Analyst II level or journey level, supervision is limited with no instructions needed on routine work. General instructions are given on new or special assignments, and there is complete understanding of the general aspects and technical phases of the job and their practical applications to problems and situations. This workload is indefinite and ongoing. 940 -Programming & Database Support Division Reclassify the Senior Information Technology Analyst position at PG 83 ($6,680 - $8,349) to Principal Information Technology Analyst at PG 87 ($7,372 -$9,216) based on performing the highest level of professional computer and related systems support in administering the District's Geographic Information System (GIS). H:ldeptlagenda\FAHRIFAHR2006\1106I09.06-81.Reclass AR -Nov OS.doc Revised: 06/04/03 Book Page 32 Page 3 ATTACHMENT 1 SUMMARY RECLASSIFICATIONS POSITION UPGRADES NOVEMBER 2006 RECLASSIFICATION REQUESTS Current Proposed Div Classification Title i Reclassification Title I 240 i Human Resources j Manager I I Human Resources & Employee Relations Manager --·---·----.J-_---------------~----------------------- 640 I Source Control lnspec I Source Control lnspec II I I ------1----------------------------. . - 920 : IT Analyst I I IT Analyst II ______ J.. ___________________ _ 940 ! Senior IT Analyst Principal IT Analyst I I H:\dept\agenda\FAHR\FAHR2006\1106\09.06-81.Reclass AR -Nov 06-Att 1 Book Page 34 FA ... R COMMITTEE Meeting Date To Bd. of Dir. 11/08/06 AGENDA REPORT Item Number Item Number FAHR06-82 Orange County Sanitation District FROM: Lorenzo Tyner, Director of Finance and Administrative Services Originator: Jeff Reed, Acting Human Resources and Employee Relations Manager SUBJECT: INFORMATION ON INDUSTRY, COUNTY AND STATE TRENDS RELATED TO OCSD'S SUCCESSION MANAGEMENT PROGRAM GENERAL MANAGER'S RECOMMENDATION For Information only SUMMARY By the year 2010, the Department of Labor predicts the United States will have 10 million more jobs than skilled workers to fill them. In the federal government, about 80 percent of senior and middle managers are eligible for retirement now. The percentage of those eligible for retirement in the more than 80,000 state and local governments across the nation is unknown, but it is expected to be alarmingly high. In fact, 46.3 percent of government workers are aged 45 or older. Compared with the private sector, where just 31.2 percent are 45 years old or older, this fact indicates that the government sector is at the forefront of this trend. In California state government more than half of all employees will be eligible to retire within the decade, including 3,397 executives and managers. This "brain-drain" projection demonstrates the urgency with which local governments must begin to systematically replace talent, as a means to sustaining and improving organizational performance into the future. The most popular and effective approach to getting this done is succession planning. Unfortunately, less than 22% of organizations have a succession plan. As reported, OCSD is in the process of putting a succession management program in place. An initial status up~a~e on OCSD's Succession Management Program was delivered at the FAHR Committee's meeting of October 11th. At that time, the committee raised questions about any related meet and confer items, as well as trend information. Information on the meet and confer items will be presented in future meetings. The intent of this report is to provide information on trends, which can be found in the Additional Information section of this report. PRIOR COMMITTEE/BOARD ACTIONS N/A Book Page 35 PROJECT/CONTRACT COST SUMMARY N/A BUDGET IMPACT D This item has been budgeted. (Line item: ) D This item has been budgeted, but there are insufficient funds. D This item has not been budgeted. IZI Not applicable (information item) ADDITIONAL INFORMATION Trends -The following trends have been identified: • The U.S. Bureau of Labor Statistics projects a shortfall of 10 million workers by 2010. -,ndustry: • Looking at all levels of government as of 2001, the public sector workforce is older than its private sector counterpart. It also has proportionately fewer young workers, a fact that increases the seriousness of future workforce challenges. ~ A significant percentage of employees at all levels of government are approaching retirement eligibility. • Multiple factors have made government one of the first sectors to bear the brunt of an aging national workforce: o Past employment patterns (periods of growth and downsizing, hiring freezes, early retirement incentives or buy-outs) o The declining appeal of public service o Competition with the private sector for talent o Lower retirement-eligibility criteria than most sectors offer o Regulations that hamper jurisdictions from retaining older workers or rehiring retirees o Budget cutbacks in training that h·ave depleted the talent pipeline • Some local governments enhanced the retirement benefit formula, with the early retirement option after age 50 with reduced benefits. It is anticipated that this will lower the age c!t which employees consider retirement. Currently OCSD's average is 61 with 24 years of service. Orange County: • Overall, Orange County employment is expected to increase by 21.9% by 2012. State and local government are expected to be one of the top ten growth industries during that period. • By 2025 employment in the government sector is expected to increase by 28.9%, and employment in the utilities sector is expected to increase by 35%. Page2 Book Page 36 • At least 33% of future jobs will need skills in Science, Technology, Engineering, or Mathematics. Currently only 20% of undergraduate and graduate degrees conferred are in Science, Technology, Engineering, or Mathematics. California: • No data available. Most likely similar to county trends. Outliers -The following outliers have been identified: Industry: • Some structures require different approaches, such as can an employer ask employees when they anticipate they will retire. Direct information is more reliable than statistical forecasts; however, organizations need to safeguard the information and to exercise discretion in its use to avoid potential liability. Orange County: • No data available. Most likely similar to industry. California: • No data available. Most likely similar to industry/county. Talent Pool -The following issues have been identified: • To close the gap between workforce supply and demand, organizations need a coordinated action plan that includes all phases of an employee's lifecycle, including: o Recruitment and selection o Performance management o Compensation and benefits o Training and development o Leadership development (including succession management, coaching, and mentoring) o Career management o Retention o Retirement • The percentage of the workforce with a college degree is expected to decline nationally. According to the National Center for Public Policy and Higher Education, by 2020 the share of the workforce with less than a high school diploma is projected to increase, while the share with an associate's or a bachelor's degree is projected to decrease. Page 3 Book Page 37 Industry: • Securing accurate organizational data is the essential first step in addressing the challenges of an aging and retirement-eligible workforce. The information assists with: o Planning effectively o Identifying areas needing immediate attention o Informing policy-makers and executive management on issues o Mobilizing individual stakeholders to action • Proactive recruiting is already becoming increasingly beneficial. Traditionally, government agencies have relied heavily on job postings to attract candidates. With the projected shrinking of the labor pool, however, it will become necessary to actively source candidates through other avenues, such as internet sourcing, direct sourcing from other public agencies or firms, campus networking and recruiting, networking through user groups and professional organizations, tradeshows and conferences, and job fairs. • Currently many candidates come from other agencies. • Other agencies have identified some of the same recruiting trends that OCSD is experiencing. To address the difficulty of finding environmental engineers, the Sanitation Districts of Los Angeles County partners with several public agencies and private engineering firms in a funding program for students in master's of science in environmental engineering programs, funding up to $20,000 for related expenses. Repayment is not required if the graduate then completes a three-year employment commitment with one of the member agencies. Orange County: • Orange County's unemployment rate is low (4.8% in September). The county enjoys a diverse economy that is not reliant on just one or two segments. Orange County's unemployment rate is lower than the state's. • High housing costs are driving young professionals to other counties (e.g. Inland Empire) and even out of California. Families making the median family income for Orange County are not able to afford median priced single-family homes in the county. When compared to peer regions, median single-family home prices in the San Francisco Bay Area are the only ones higher than in Orange County. The median single family home price in Austin, Texas, for 2005 (seasonally adjusted) was more than $500,000 less than in Orange County. This suggests that employers in Orange County may have a more difficult time retaining or attracting high quality workers than in similar communities. California: • The high housing costs in California deter out-of-state candidates from relocating to California. • California's educational system is not performing well. California is near the bottom on the list of states' National Assessment of Educational Progress tests and per-student spending in recent years. Page4 Book Page 38 Higher Standards -The following issues have been identified: • Competencies define factors (knowledge, skills and abilities, or KSA's) related to successful job performance. • Developing one's own competencies increases one's ability to be successful at a job. • Leadership development of staff will be necessary. • There will be an expectation of more from more educated staff. • High standards enable OCSD to be viewed as an employer of choice. • OCSD can exceed compliance requirements of local, state, and federal mandates by having higher standards. Industry: • Stricter wastewater operating permits (CWEA, WDR, NPDES, tertiary treatment) Orange County: • A shortfall of skilled workers in Orange County is expected. If 43% of current O.C. 1ih graders continue to obtain advanced educational degrees, there will be just 14,972 new graduates each year with these degrees in the workforce. Such a rate would lead to an annual shortfall of more than 3,000 skilled workers, given that 18,000 jobs will be created annually that require advanced degrees. California: • 90% of future jobs will need some kind of advanced educational degree (A.A or above). • At least one third of future jobs will demand skills in the STEM disciplines (science, technology, engineering, and mathematics), according to the U.S. Department of Labor. Later Retirement-The following issues have been identified: • Accurate forecasts of when employees will actually retire are more difficult to make, since those decisions are affecte~ by environmental, organizational, and individual factors. • Another factor affecting the accuracy of retirement forecasts is the quality of the data available and the analysts' tools and skills, which studies find vary significantly across jurisdictions. • Life expectancy continues to increase due to health care and individual wellness. • Retirement systems/pensions and Social Security will experience shortfalls. • Increasing housing cost require people to work longer to pay them off • Retiree medical will keep many in the workforce. • College tuition for children creates the need for full income. • Shortage of Generation X and Generation Y workforce leaves job openings. • Companies are beginning to offer flexible work programs that support older workers. Page 5 Book Page 39 Industry: • The average age of a utility retiree is 56 with 24 years of service, according to a 2005 study by the American Water Works Association (AWV\/A). AWV\/A concluded that [water utility] employees generally retire shortly after they become eligible for retirement, especially if they have worked most of their eligible years for one organization. • AARP reports that 65 percent of those over 45 cited health insurance and coverage for prescription drugs as key reasons for remaining employed. Orange County: • Older Orange County workers will be in demand. Less than 1 % long-term annual growth in workforce size likely means more older workers will delay retirement to fill jobs that a forecasted under-sized, under-educated, and under-skilled workforce is unable to do. Their technical, experience, and employability skills will be in demand. • Baby Boomers at the peak of their earning potential and continuing to maintain youthful vigor will result in an older working population as they seek to be active, engaged, and productive. • Pension and/ or Social Security shortfalls may force workers to continue to work in order to maintain their current lifestyle. California: • 69% of people over age 45 expect to work beyond the current "normal" retirement age of 65. Along with the need to restore their diminished savings, however, AARP reports that 65 percent of those over 45 cited health insurance and coverage for prescription drugs as key reasons for remaining employed. Eligibility/ Hiring Requirements -The following issues have been identified: Industry: • At least 33% of future jobs need skills in Science, Technology, Engineering, or Mathematics. Currently only 20% of undergraduate and graduate degrees given in Science, Technology, Engineering, or Mathematics. • 90% of jobs will require some advanced degree by 2025. • All OCSD employees will be eligible for the Succession Management Program. • Volunteer participation in the program to receive personalized career-tailored training and development. • Skills inventories can be used to understand one's own skill. • Competencies will show required KSA's. • Pre-assessments can gauge gaps between competencies and current KSA's. • Use of skill assessments (testing) during the staffing process can ensure that internal applicants possess the needed KSA's. Page6 Book Page 40 • Key competencies (KSA's) are necessary to perform the job successfully. • Public sector hiring process is lengthy, which may affect the industry's ability to recruit due to the time required to hire new staff. • Public sector systems impose strict and complex rules governing compensation, job classifications, and work descriptions. Orange County: • No data available. Most likely similar to industry. California: • No data available. Most likely similar to industry/county. ALTERNATIVES N/A CEQA FINDINGS N/A ATTACHMENTS N/A Page? Book Page 41 ORANGE COUNTY SANITATION DISTRICT (714) 962-2411 www.ocsd.com Mailing Address: P.O. Box 8127 Fountain Valley, California 92728-8127 Street Address: 10844 Ellis Avenue Fountain Valley, California 92708-7018 -. 1 ~ A company of Allianz@ Global Investors Investment Management Program Orange County Sanitation District Strategy Review for the Period June 30, 2006 -September 30, 2006 Biographical Information John M. Miller, CFA Mr. Miller is an Executive Vice President and an account manager, with a focus on institutional client servicing, and he is co-head of the public pension plan team. In addition to those responsibilities, he has management responsibilities for new investment professionals in the account management servicing group. He joined PIMCO in 1999. Prior to that, he was an officer in the U.S. Army, achieving the rank of Captain. Mr. Miller holds a bachelor's degree in economics from the United States Military Academy, West Point and an MBA from the Harvard Business School. Christine Telish, CFA Ms. Telish is a Vice President and account manager, with a focus on institutional client servicing. She is also a member of PIMCO's municipal team, providing specialized servicing for tax-sensitive accounts. She joined PIMCO in 1994, and has nineteen years of finance, accounting, and investment experience. Ms. Telish holds a bachelor's degree in finance, real estate and law from California State Polytechnic University and an MBA from the University of California, Irvine. Agenda I. Performance & Market Review 11. Economic Outlook & Strategy Ill. Organizational Update Portfolio Strategy: Diversified Set of Price Return Strategies During a Period of Unattractive Yields Price Return Strategies Yield Strategies • Anticipate continued slowing of U.S. economy and steeper yield curve -Focus on short and intermediate maturities • Corporates: Underweight as credit spreads remain tight • Mortgages: Overweight and emphasize coupon selection • TIPS: Retain modest exposure as an inflation hedge 12 PIM C 0 • ., Assets Under Management by Strategy PIMCO continues to build on fixed income expertise to provide effective solutions to meet investor needs Alternative Investments: Equities: Fixed Income: Absolute Return Strategies Commodities Real Estate Real Return Tactical Allocation Di\ersified Income CBO/CLO Broad U.S. Market Large Cap U.S. Small Cap U.S. International: Japan, Europe Global, International Long Duration Intermediate** Cash Management** Credit Mortgages Global Emerging Markets Municipals Other LIBOR based vehicles: enhanced cash or pure alpha Commodity-linked exposures enhanced with active bond portfolios Real Estate-linked exposure backed by inflation index bonds TIPS and other inflation-hedging strategies Tactical allocation among PIMCO funds, All Asset, All Asset All Authority* Global credit combining corporate and emerging markets debt Collateralized bonds/loan obligations Stocks PLUS®, StocksPLUS®Total Return, Stocks PLUS® PARS: Combines passive equity index exposure with active bond management Focus on long-term bonds; asset liability management Total Return, Moderate Duration Low Duration, Enhanced Cash, Money Market Investment Grade Corporates, High Yield Emphasis on management of mortgage pass-th roughs Non-U.S. and global multiple currency formats Focus on solid credits with improving economic fundamentals Tax-efficienttotal return management $13,089 12,674 169 38,381 13,391 6,549 6,628 32,742 32,222 292,377 50,692 32,404 17,322 64,867 16,248 9,241 2,690 Total Assets Under Management: $641,693 M Assets as of September 30, 2006. PIMCO now includes the assets that it manages for third-party clients of its German affiliate, Allianz Dresdner Global Investors Germany. Potential differences in asset totals are due to rounding. * All Asset strategies are invested in PIMCO Funds; these assets are not included in the individual strategies. ** Stable Value assets have not been netted from US Total Return, US Moderate Duration and US Low Duration assets. As of September 30, 2006, total Stable Value assets equal $18,904MM. 15 PIM C 0 l L L L L L L L L Callan Associates Inc. Investment Measurement Service Quarterly Review Orange County Sanitation District September 30, 2006 The following report was prepared by Callan Associates Inc. ("CAI") using information from sources that include the following: fund trustee(s); fund custodian(s); investment manager(s); CAI computer software; CAI investment manager and fund sponsor database; third party data vendors; and other outside sources as directed by the client. CAI assumes no responsibility for the accuracy or completeness of the information provided, or methodologies employed, by any information providers external to CAI. Reasonable care has been taken to assure the accuracy of the CAI database and computer software. In preparing the following report, CAI has not reviewed the risks of individual security holdings or the compliance/non-compliance of individual security holdings with investment policies and guidelines of a fund sponsor, nor has it assumed any responsibility to do so. Copyright 2006 by Callan Associates Inc. r • r l r r L L L L L L L L Ill • Ht\ t I I 11 ·,r11101.1, CHI< 1(,0 Ile .I l'l\ October 31, 2006 Mr. Michael D. White Controller Orange County Sanitation Districts 10844 Ellis A venue Fountain Valley, California 92728 RE: September 30, 2006 Quarterly Performance Report Dear Mike, The September 30, 2006 Quarterly Performance Report for the District's investment portfolio is attached. This letter provides a qualitative summary of the most important points covered in the report. Market Overview The long-awaited Fed pause finally came in August -and coupled with a sharp decline in oil prices -ignited a rally in U.S. equities that continued through the end of the quarter. Prior to the third quarter, the Fed had increased short-term interest rates at 17 consecutive meetings, dating back to June 2004. All major equity indices posted strong returns for the third quarter. The Dow closed the quarter 44 points shy of its all-time high set in 2000. The S&P 500 is still about 12% below its peak. The tech-laden NASDAQ is more than 55% off its high, reached in March of 2000, when the bubble burst. The fixed income market, as measured by the Lehman Aggregate Bond Index, ended the quarter positively (+3.8%), the first time this year and its best quarterly showing in four years. A string of reports showing the economy is slowing boosted Treasurys, which experienced their biggest quarterly gain in four years. For the three-month period, corporates (+4.5%) led all sectors of the bond market due to a tight supply, strength in equities and expectations that the Federal Reserve is near the end of its tightening cycle. The federal funds rate began and ended the quarter at 5.25%. After the second consecutive meeting in which rates were left unchanged, the Federal Open Market Committee left the door open by saying "some inflation risks remain." In the shorter maturity portion of the yield curve in which the District invests, returns were modestly positive. The Merrill 1-5 Year Gov/Credit index posted a return of 0.52%, which is less than the quarterly coupon. L L L L L L L r L Mr. Michael White October 3 I, 2006 Page2 Manager Results The two underlying portfolios totaled $279 million as of September 30, 2006. Both are managed by PIMCO. The Liquid Operating portfolio is approximately 20% of the assets, while the Long Term Operating portfolio is 80%. The Liquid Operating Money account produced a 1.34% return for the quarter, slightly better than the return on the 90-day Treasury bill (1.33%), and higher than the prior quarter. For the trailing twelve months, the portfolio gained 4.67%, which is, again, above the 90-day Treasury bill return (4.50%), and higher than the return on the Long Term fund .. Over longer time periods, the portfolio ranks in the top decile of Callan's Money Market Mutual Funds Database, on an after-fee basis. As of September 30, the portfolio's yield is over 5%, up from 4.75% in the prior quarter. Over 60% of the Liquid Operating fund is invested in commercial paper. When combined with the second portfolio, the exposure to commercial paper is only 15% of the operating assets. The Long Term Operating Fund produced a 2.58% return for the quarter, out performing the Merrill 1-5 Year Gov/Corp index at 2.48%. The portfolio is very high quality, and is somewhat defensively positioned. A small position in TIPS (Treasury Inflation Protected Securities) is held. When comparing the returns to the Defensive Fixed Income peer group, the ranking suffers during periods of rising interest rates due to the longer duration of both the portfolio and its benchmark, relative to the majority of its peers,. For the most recent quarter, the longer duration was advantageous, and the ranking is in the top decile. Over the longer term, the Districts have been rewarded for taking on this duration risk. As for sector guidelines, the Fund has less than 30% invested in corporate notes, and the combination of asset backed securities and mortgages remains below 20%. All securities are rated investment grade. Please do not hesitate to call me if you have any questions. Yours truly, Ruthann C. Moomy, Ph.D., CFA Senior Vice President U.S. FIXED INCOME Style Median and Index Returns* for Periods ended September 30, 2006 Last Last 3 Last Last3 Last 5 Last 10 Quarter Quarters Year Years Years Years Core Bond Style 3.81 3.21 3.90 3.67 5.12 6.66 Core Bond Plus Style 3.89 3.47 4.20 4.43 5.60 6.90 LB Aggregate 3.81 3.06 3.67 3.38 HI 6.42 LB Govt/Credit 3.91 2.71 3.33 3.08 4.96 6.47 LB Govt 3.54 2.61 3.30 2.76 4.34 6.23 LB Credit 4.51 2.88 3.39 3.52 5.80 6.78 Citi Broad Investment Grade 3.85 3.04 3.71 3.48 4.85 6.45 Extended Maturity Style 6.60 2.05 2.82 5.44 7.31 8.27 r LB Gov/Credit Long 6.82 1.65 2.60 5.04 7.14 8.10 LB Gov Long 6.48 1.48 2.51 4.91 6.59 8.15 LB Credit Long 7.23 1.85 2.70 5.24 7.95 7.86 Intermediate Style 3.14 3.27 3.87 2.90 4.47 6.14 LB Intermediate Aggregate 3.41 3.27 3.84 3.15 4.45 6.11 LB Gov/Credit Intermediate 3.20 3.02 3.55 2.56 4.34 5.95 LB Gov lnlermediate 2.92 2.93 3.54 2.25 3.70 5.63 LB Credit Intermediate 3.67 3.18 3.58 3.02 5.18 6.43 Defensive Style 2.07 3.44 4.18 2.58 3.34 5.19 Acti1•e Cash Style 1.51 3.59 4.59 2.84 2.91 4.62 Money Market Funds ( net of fees) 1.19 3.26 4.15 2.28 1.83 3.46 ML Treasury 1-3 Year 1.97 3.04 3.74 1.91 2.79 4.79 90-Day Treasury Bills 1.33 3.55 4.50 2.73 2.30 3.81 High Yield Style 3.60 6.22 7.53 8.95 10.15 7.30 LB High Yield 4.07 7.34 8.07 9.08 10.51 6.52 ML High Yield Master 4.05 7.20 7.90 8.92 10.13 6.83 Mortgages Style 3.65 3.72 4.39 4.14 4.94 6.67 LBMBS 3.63 3.57 4.19 3.95 4.53 6.30 LB ABS 2.85 3.56 4.16 2.99 4.22 6.10 LBCMBS 4.11 3.55 4.06 3.17 5.66 LB Muni 3.41 3.69 4.45 4.37 5.17 5.90 LB Muni 1-I0Year 2.76 2.99 3.48 2.74 3.99 5.01 LB Muni 3 Year 1.93 2.40 2.69 1.63 2.92 4.14 U.S. Fixed Income Index Characteristics as of September 30, 2006 Yield Modified Adj. Average %of %of Lehman Brothers Indices toWorst Duration Maturity LBG/C LB Aggregate LB Aggregate 5.32 4.61 7.07 100.00% 100.00'k· LB Govt/Credit 5.10 5.11 7.70 100.00?r 59.18% Intermediate 5.02 3.63 4.43 79.70% 47.17% Long-Term 5.44 10.91 20.57 20.30% 12.01% L LB Govt 4.81 4.59 6.46 60.93% 36.06% LB Credi! 5.57 5.91 9.64 39.07% 23 .12% LB Mortgage 5.68 3.81 6.30 34.93% LB Asset-Backed 5.24 2.77 3.18 1.18% LB Commercial Mo1tgage 5.30 4.77 5.86 4.71% LB Corp High Yield 8.17 4.52 7.91 ,:, Returns less than one year are not annualized. :_':1pit:ii ".Ltd-·.,,, !{:•,i,>:. • ·,1111,I (J,uru :.'ili;1j INTERNATIONAL EQUITY Style Median and Index Returns* for Periods ended September 30, 2006 Last Last 3 Last Last3 Last5 Last 10 Quarter Quarters Year Years Years Years r- Global Style 4.81 11.04 14.93 16.96 10.63 9.23 Non-U.S. Style 4.10 14.51 20.09 22.63 15.41 9.81 Core Style 4.01 14.64 19.43 22.11 15.33 9.81 MSCI EAFE-Unhedged 3.93 14.49 19.16 22.32 14.26 6.82 MSC! EAFE-Local 5.02 8.80 16.54 20.00 9.20 6.59 MSC! EAFE Growth -Unhedged 2.31 11.82 16.68 19.38 12.38 4.18 r MSC! EAFE Value-Unhedged 5.53 17.15 21.63 25.23 16.12 9.30 C MSCI World-Unhedged 4.47 10.79 14.18 16.72 10.01 7.26 ( MSC! World-Local 4.99 7.99 12.77 15.56 7.76 7.27 MSCI AC World ex-U.S.-Unhedged 3.9S 14.34 19.36 23.92 16.38 7.61 r-MSC! AC World-Unhedged 4.60 11.33 15.14 18.01 11.37 7.70 I Pacific Basin Style 0.79 5.27 15.67 19.06 15.51 3.75 r-Japan Style -1.35 -0.56 12.81 17.80 12.20 5.31 Pacific Rim Style 6.50 15.87 23.77 25.04 23.22 5.22 MSCI Pacific-Unhedged 0.41 3.95 12.89 18.52 13.61 1.66 r.-MSC! Pacific-Local 2.79 3.58 16.66 19.31 11.79 1.95 MSC! Japan-Unhedged -0.72 1.18 13.17 16.83 11.04 0.42 MSC! Japan-Local 2.54 1.21 17.89 19.00 10.84 1.01 Europe Style 5.10 20.00 23.00 24.23 14.89 12.25 MSCI Europe-Unhedged S.63 19.96 22.30 24.07 14.58 10.28 MSC! Europe-Local 6.11 11 .42 16.49 20.34 8.15 9.82 Emerging Markets Style 5.64 13.85 22.75 32.91 31.27 10.83 MSC! Emerging Markets-Unhedged 5.01 12.71 20.82 31.04 28.85 7.58 I MSCI Emerging Markets-Local 5.54 12.40 20.27 27.87 25.47 11.45 L Small Cap Style 2.00 13.45 20.13 28.49 23.39 13.41 L MSC! EAFE Small Cap-Unhedged 0.40 6.81 15.16 26.21 22.79 Return Attribution for EAFE Countries L Third Quarter 2006 Country Total Local Currency Weighting Australia 2.59% 2,14% 0.44% 5.23% I Austria 3.36% 4.34'7o -0.93% 056% Belgium 11.34% 12.39'70 -0.93'70 1.24% l_ Denmark 8.71% 9.?0'lo -0.90% 0 76% Finland 1.20% 2.15% -0.93% 1.43% France 4.87% 5.85% -0.93% 9%% Germany 4.84% 5.82% -093% 7.10% l, Greece 5.10% 6.09% -0.93% 0.63% Hong Kong 6.34% 6.68% -0.32'70 1.69% Ireland 8.70% 9.73% -0.93% 0.83'7o Italy 4.46% 5.44% -0.93'7e 3.85% Japan -0.72% 2.54% -3.18% 23.64% L Netherlands 10.75% 11.79% -0.93% 3.50% New Zealand 8.30% 1.21% 701 % 0.15% Norway -6.20% -1.74% -454% 0,81% L Portugal 7.17% 8.17% -0.93'10 0.34% Singapore 6.86% 7.20% -0.32'70 0.84% Spain 1220% 13.26% -0.93% 4.02% Sweden 6.88% 8.74% -1.71% 2.43% Switzerland 7.44% 9.98% -2.31% 708% UK 4.24% 3.22% 0.99% 13.90% I L I * Returns less than one year are not annualized. Capital Market I~e, iP1\ • Third QuM!L'.1 2()0(i Ll Global Bonds Follow U.S. Rates r The Citigroup Non-U.S. Government Bond Index gained 2.53%, in local terms, during the third quarter, as long-term yields fell in nearly all major international bond markets. Lowered growth expectations, r partially due to the housing exposed U.S. consumer and sharply declining oil prices, fueled the bond market rally. Even after the impressive bond rally in the United Stales, during the ,..--quarter U.S. bonds still offered a yield advantage over most major developed markets. This yield advantage, as well as the surging U.S. stock market, continued to attract foreign investment, supporting the U.S. dollar. The strengthening U.S. dollar eroded the return of the ,-- r·- unhedged Citigroup Non-U.S. Government Bond Index, which returned only 88 bps in the quarter. While many European and Asian markets witnessed an increase in short-term rates and a decrease in long-term rates, the Bank of Canada ended a tightening regime and held overnight rates steady at 4.25%. Canadian l 0-year yields fell 58 bps to 4%, rn unison with r -U.S. long rates. I I L l L Country Australia Austria Belgium Canada Denmark Finland France Germany Greece Ireland Italy Japan Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland UK Return Attribution for Non-U.S. Govt Indices Third Quarter 2006 Total 2.69'7c l.91'7c 1.75% -I 72'7c 1.51% ll?'k 1.91'7c I. 75'7c l.85'7c I 79'7c 2-17'70 -I-Wk, I 73'7o -'l.?5C,'c 3 69'7o I 65'7o l.82'if, I .84'7c 0.29'7o 0.82% 3.86% Local 2 24,./r 2.86% 2.70'7r 5.0S'k 244'7c 2 12ck 2.87'7c 2 70'7o 2 SJ<;, 2 75'7o 34-Vlc I 79'7o 2 69'7< I 88'7c 201'7, 2.60% 2.JS'A 2.80% 2.03'7'c 3_21% 2 84% Currency•• 0,44';!• -0,93'7o -0.93Cfr -0.32¼ -0.9(JC/c -0.93'7c -0.93'k -0.93% -0.9Wr -0.93% -0.9Wc -3.IS'i'c -0.9W -4.54¼ l.65'7c -0.93</o -0.32% -0.93'7c -1.?l'ii -2.31'7c 0.99% Weighting 0.41% l9W 3 33'7o 2 44"« 097% 0.61'if 1032% 11.73°/c 2.41 '7c 0.52'7c 11 23~•;, 35.S3Ck 2.70'7r 0.26'7, 084'7c 1.on 038% 4()5Ck 0.89~0 0 93'7c 715% In the United Kingdom, I 0-year rates fell by 19 bps to 4.52'lo. However, the short end of the curve increased by as much as 40 bps, in response to the Bank of England increasing rates by 25 bps to 4.75%. The two-year to 30-year part of the curve remained inverted by 82 bps, due largely to corporate pension funds' demand for long maturity bonds. The pound gained 1 % against the U.S. dollar. The European Central Bank raised rates by 25 bps to 3¼, as economic orowth forecasts remained mildly positive. The gradual increase in 0 short-term rates is expected to continue through the balance of the year in order to suppress building inflationary pressures. Nevertheless, Iono-tenn rates oenerally fell around the continent. The German O 0 l 0-year bund declined 36 bps to 3.7 I%. The euro fell 0.9% against a strong U.S. dollar. The Bank of Japan ended its zero interest rate policy, increasing overnight rates to 0.25%, but assured investors monetary policy would remain accommodative. Prospects for economic growth became more questionable and JO-year bond yields fell 25 bps to 1.68%. The U.S. dollar gained 3.2% against the yen as the Japan versus U.S. interest rate differential remained significant. Emerging debt markets shook off their second quarter jitters, with the JPMorgan EMBI Plus advancing 6.89¼. Ten percent growth rates in China and India led to tightening in both countries. Brazil cut rates as growth faltered. Rates were increased in South Africa and Turkey, where local cutTency markets continued to show vulnerability. Callan Style Group Returns -Third Quarter 2006 20% LO% 00%L----------'---------~ GJub.iJ Fixed Sl)le 10th Pcrccnt..ile 1.74 25th Perc_cnUJc-1 38 Median 1.28 75th PerccnLilc 1 25 901.h PcrccnHk O 79 Cill World Gov Unhcdµ,cd Denchmark • 1 '14 l'\an-U S Fixed Style 1.28 o.~s O.BG O.GS 0,38 Cm N"nn-U.S. World Gov Unhcdµ,cd 0,88 INTERNATIONAL FIXED INCOME L'._ Style Median and Index Returns* for Periods ended September 30, 2006 Last Last 3 Last Last 3 Last 5 Quarter Quarters Year Years Years "-- Global Style 1.28 4.14 2.20 4.52 7.96 Citi World Govt-Unhedged 1.44 4.23 2.22 4.06 7.32 i Citi World Govt-Local 2.76 0.61 0.94 3.03 3.93 Non-U.S. Style 0.86 4.62 2.03 4.58 8.70 I Citi Non-U.S. World Govt-Unhedged 0.88 4.76 2.02 4.41 8.17 i'... Citi Non-U.S. World Govt-Local 2.53 0.17 0.39 3.10 3.81 Citi Euro Govt Bond-Unhedged 1.95 7.36 4.91 7.21 12.71 Citi Euro Govt Bond-Local 2.91 -0.03 -0.15 4.18 5.48 JPM Emerg Mkts Bond Plus 6.89 6.12 8.35 11.79 14.13 " Returns less than one year are not annualized. ''' Derived from MSC! EAFE data. (;;p,lcil f,b1 kL'I r-;, \ Itel". 0 Tl!i1d (_)u,1; fl'J ::'.(J(J(i Last 10 Years 5.86 5.30 5.27 5.29 4.70 4.92 11 .33 r [ L L L L L L L L L /I Investment Manager Returns The table below details the rates of return for the Sponsor's investment managers over various time periods ended September 30, 2006. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. Returns for Periods Ended September 30, 2006 Last Last Last Last Last 3 5 10 uarter Year Years Years Years Domestic Fixed-Income Long Term Operating Fund 2.58% 4.27% 2.80% 3.92% 5.61% Liquid Operating Monies 1.34% 4.67% 2.82% 2.46% 4.09% Net of Pees 1.30% 4.52% 2.67% 2.31% 3.94% Market Indicators LB 1-5yr Govt/Credit 2.51% 3.77% 2.19% 3.64% 5.40% ML 1-3yr Govt/Corp 2.04% 3.88% 2.14% 3.15% 5.04% ML 1-5yr Govt/Corp 2.48% 3.79% 2.18% 3.57% 5.43% ML 1-5yr G/C excl. BBBs 2.44% 3.77% 2.10% 3.46% 5.37% Treasury Bills 1.33% 4.50% 2.73% 2.30% 3.81% Total Fund 2.35% 4.41% 2.79% 3.74% 5.46% Orange County Sanitation District II Investment Manager Returns The table below details the rates of return for the Sponsor's investment managers over various time periods. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The frrst set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class. 12/2005- 9/2006 2005 2004 2003 2002 Domestic Fixed-Income Long Term Operating Fund 3.40% 2.47% 2.31% 3.26% 8.17% Liquid Operating Monies 3.66% 3.21% 1.35% 1.18% 2.11% Net of Pees 3.55% 3.06% 1.20% 1.03% 1.96% Market Indicators LB 1-5yr Govt/Credit 3.18% 1.44% 1.85% 3.35% 8.12% ML l-3yr Govt/Corp 3.20% 1.74% 1.21% 2.74% 6.10% ML 1-5yr Govt/Corp 3.21% 1.43% 1.76% 3.30% 7.91% ML 1-5yr G/C excl. BBBs 3.16% 1.48% 1.60% 2.69% 8.09% Treasury Bills 3.55% 3.07% 1.33% 1.15% 1.78% Total Fund 3.51% 2.59% 2.08% 3.02% 7.44% Orange County Sanitation District Ill 20 r r r r [ L L L L r L L L LONG TERM OPERATING FUND PORTFOLIO CHARACTERISTICS DETAIL SEPTEMBER 30, 2006 Weighted Average Portfolio Characteristics Total Fund, By Asset Class and By Sector Ending Percent Market of Effective Effective OA OA Sector Total Fund A~ncies C Os Credit Mortgages Treasunes Non-Convertible Bonds Cash Equivalents Name U.S. Treas Nts 00042 United States Treas Nt Fede.ral Home Ln Bks Value $296,536,488 $90,520,445 $4,422,931 $27,548,886 $33,163,032 $128,732,921 $284,388,215 $12,148,273 Unitcd S1ate TrensNts Dtd00132 U.S. Treas Nts 3.5% 12/15/2009 Name Flodda Pwr COIJl l:lcwlett Packard Co ConocoPhillips Bellsouth Corp Sim Corp Medium Term Nts Book Entry Name Portfolio Cou11on Maturity 100.0% 4.26 30.5% 4.25 1.5% 4.14 9.3% 5.49 11.2% 5.08 43.4% 3.71 95.9% 4.22 4.1% 5.22 5 Largest Holdings Ending Market Sector Treasuries Treosurics Agencies Treasuries Treasuries Value $45,963,360 $23,809,687 $18,249,990 $12,921,283 $10,386,656 2.50 2.84 1.26 1.99 5.46 1.86 2.60 0.25 Percent of Portfolio 15.5% 8.0% 6.2% 4.4% 3.5% 5 Lowest Rated Holdings (Quality Rating) Tranche # Tr 0 Sector Credit Credit Credit Credit Credit Ending Market Volue $908.366 $1.4I0,120 $607,620 $706.073 $1 ,82.'i,537 Percent of Portfolio 03% 0.5% 0.2% 0.2% 0.6% 5 Longest Duration Holdings Sector Ending Market Value Percent of Portfolio Federal Home Ln Bks Cons Bd Did 07/02/2003 Fnma Pool # 879906 Agencies Mortgages Treasunes Agencies Treasuries $1,015,732 $341,773 $2,093,490 $2,872,723 $390,565 0.3% 0.1% 0.7% 1.0% 0.1% United States Treas Nts Fed Home Ln Bks Cons Bd 06/19/2003 United States Treas Nts 5 Holdings with Highest Effective Yield Ending Percent orne FnrnaPool # 823358 Fnrn Fhlmc Mbs Passthru #78-6064 Gnrna Pool # 80965 Mpt Gnrna Ii Arm Mbs Passthru #803956.500% 04/20/2030 Gnma Ii Arm Mbs Passthru #80408 6.50% 05/20/2030 Sector Mortgages Mortgages Mortgages Mortgages Mortgages Market of Voloe $2.524.170 $30,9]9 $767.590 $93,670 $812,383 .Portfolio 0.9% 0.0% 0.3% 0.0% 0.3% Yield Duration Convexity Quality 5.02 1.94 (0.19) AGCY 5.03 2.33 (0.41) AGCY 5.43 1.12 (0.11) AGCY 5.52 1.80 0.00 AA- 5.56 3.05 (0.68) AGCY 4.72 1.60 0.04 TRSY 5.01 2.01 (0.19) AGCY 5.22 0.25 0.00 AAA Effective OA OA Yield Duration Convexitv Oualitv 4.65 2.07 0.05 TRSY 5.00 0.64 0.01 TRSY 4.95 3.34 0.13 AGCY 4.73 1.72 0.04 TRSY 4.60 2.96 0.10 TRSY Effective Yield 5.37 5.59 5.47 5.60 5.54 OA OA Duration Convexitv Oualitv 0.11 0.01 888- 0.61 0.01 A-O.SO 0.00 A-1.73 0.00 A 1.67 0.00 A Effective OA OA Yield Duration Convexitv Ouolitv 5.19 4.80 tU?.J AGCY 5.95 3.75 rt.07J AGCY 4.59 3 ,66 0. L6 TRSY 5.08 3,62 (0 54) AGCY 4.58 3,61 0.15 TRSY Effective Yield 6.25 6.13 6.05 6.00 6.00 OA l>uration 2.43 0.31 1.35 1.04 1.04 OA onvexity Quolity (0 51) AGCY 0.00 AGCY (0.67) AGCY (0 96) AGCY (0.96) AGCY * All Statistics shown on the page are dependent on the securities in the portfolio being recognized (by their Cusip) and priced. In this case 99% of the securities in the portfolio (by market value) were recognized and priced. Orange County Sanitation District Ill f I l L L l L L L f I L List of Managers We Do Business With as of 9/30/06 Confidential -For Callan Client Use Only The list below represents those investment management organizations that purchased educational and/or consulting services from a division of Callan Associates as of September 30, 2006. Educational services include those provided by the Callan Investments Institute and/or the "Callan College." Consulting services include manager consulting services provided by our Institutional Consulting Group, financial intermediary consulting services provided by our Independent Adviser Group and/or consulting to a manager's retirement plan provided by our Fund Sponsor Consulting Group. Callan created a line of business in 2006, the Trust Advisory Group (TAG), which engages managers to manage assets in a commingled trust that is only available on a private placement basis to qualified large benefit plan investors. When Callan does business with managers through TAG, the Trust compensates the managers (as contrasted with the arrangements above). However, securities laws applicable to private placements prevent us from publicly listing these managers. If you require more information, please contact our Trust Advisory Group. In no way do any of these manager relationships affect the outcome or process by which any of Callan's services are conducted. Because Callan's client list of investment managers changes periodically, the information below may not reflect very recent changes that are not yet updated in our database.You are welcome to request a list of Callan's investment manager clients at any time. Manager Name Aberdeen Asset Manaaement ABN AMRO Asset Manaaement (USA) LLC Acadian Asset Manaaement. Inc. Affiliated Manaaers Grouo. Inc. AIG Global Investment Grouo Alleaiant Asset Manaaement Grouo AllianceBernstein Allianz Investor Services. LLC (fka USAllianz Investor Services. LLC) Allstate Investments LLC ALPS Mutual Funds Services. Inc. Ameriorise Financial American Centurv Investment Manaaement AmSouth/Investment Manaaement Grouo Ariel Caoital Manaaement. Inc. Ark Asset Manaaement Co .. Inc. Atalanta Sosnoff Caoital. LLC Atlanta Caoital Manaaement Co .. L.L.C. Atlantic Asset Manaaement. LLC AQR Caoital Manaaement AXA Rosenbera Investment Manaaement Babson Caoital Manaaement. LLC Baillie Gifford International LLC (fka Baillie Gifford Overseas Ltd.\ Baird Advisors Bank of America Sarina Asset Manaaement Barclavs Global Investors Barrow. Hanlev. Mewhinnev & Strauss. Inc. Battervmarch Financial Manaaement. Inc. Bear Stearns Asset Manaaement Bel Air Investment Advisors BKF Asset Manaaement. Inc. /fka John A. Levin & Co .. Inc.\ BNY Asset Manaaement -Please see Paae 5 of 5 Boston Comoanv Asset Manaaement. LLC (The) Brandes Investment Partners. L.P. Brandvwine Global Investment Manaaement. LLC Brazos Caoital Manaaement. L.P. Brown Advisorv Brown Brothers Harriman & Comoanv Cadence Caoital Manaaement Caoital Guardian Trust Comoanv Carl Domino Inc. CastleArk Manaaement. LLC Causewav Caoital Manaaement Charles Schwab & Co. Chartwell Investment Partners Chicaao Eauitv Partners. LLC CIBC Global Asset Manaaement (USA\ Ltd. (fka TAL Global Advisors Ltd.\ Citiarouo Asset Manaaement Clear Bridae Advisors Columbia Manaaement Advisors. LLC Columbus Circle Investors Cramer Rosenthal McGlvnn. LLC Credit Suisse Asset Manaaement Davis Advisors Davis Hamilton Jackson & Associates Page 1 of 5 Educational Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y Consulting Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y r l List of Managers We Do Business With as of 9/30/06 Confidential -For Callan Client Use Only The list below represents those investment management organizations that purchased educational and/or consulting services from a division of Callan Associates as of September 30, 2006. Educational services include those provided by the Callan Investments Institute and/or the "Callan College." Consulting services include manager consulting services provided by our Institutional Consulting Group, financial intermediary consulting services provided by our Independent Adviser Group and/or consulting to a manager's retirement plan provided by our Fund Sponsor Consulting Group. Callan created a line of business in 2006, the Trust Advisory Group (TAG), which engages managers to manage assets in a commingled trust that is only available on a private placement basis to qualified large benefit plan investors. When Callan does business with managers through TAG, the Trust compensates the managers (as contrasted with the arrangements above). However, securities laws applicable to private placements prevent us from publicly listing these managers. If you require more information, please contact our Trust Advisory Group. In no way do any of these manager relationships affect the outcome or process by which any of Callan's services are conducted. Because Callan's client list of investment managers changes periodically, the information below may not reflect very recent changes that are not yet updated in our database.You are welcome to request a list of Callan's investment manager clients at any time. Manager Name DE Shaw Investment Manaaement. L.L.C. Dean Investment Associates Delaware Investment Advisers Delta Asset Manaaement Denali Advisors LLC DePrince. Race & Zollo. Inc. Deutsche Asset Manaaement/Deutsche Bank Denver Investment Advisors LLC DSM Caoital Partners DuPont Caoital Manaaement Dwioht Asset Manaaement Eaale Asset Manaaement. Inc. Eaale Global Advisors. LLC EARNEST Partners. LLC Eaton Vance Manaaement Edaar Lomax Comoanv (The) Enhanced Inv. Technoloaies. LLC (INTECH) Eauinox Caoital Manaaement. LLC Evercore Partners Everareen Investments Favez Sarofim & Comoanv Federated Investors Ferrell Caoital Manaaement Fidelitv Investments Fiduciarv Asset Manaaement Fiduciarv Manaaement Associates Fifth Third Asset Manaaement. Inc. First Quadrant L.P. Fischer Francis Trees & Watts Fisher Investments Fort Washinaton Investment Advisors Fortis Investments Franklin Portfolio Associates Franklin Temoleton Fred Alaer Manaaement Co .. Inc. Frolev. Revv Investment Comoanv. Inc. FX Conceots GAM USA Inc. Gartmore Riverview GE Asset Manaaement GlobeFlex Caoital. L.P. GM Asset Manaaement GoldenTree Asset Manaaement. LP Goldman Sachs Asset Manaaement Grande-Jean Caoital Manaaement Grantham. Mavo. Van Otterloo & Co .. LLC Gravbeard Caoital. LLC Great Lakes Advisors. Inc. Harris Investment Manaaement. Inc. Hartford Investment Manaaement Co./The Hartford Hartford Life HSBC Investments (USA) Inc. lndeoendence Investments LLC ING Clarion ING Investment Manaaement Page 2 of 5 Educational Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y Consulting Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y ' L L L l L L L L L List of Managers We Do Business With as of 9/30/06 Confidential -For Callan Client Use Only The list below represents those investment management organizations that purchased educational and/or consulting services from a division of Callan Associates as of September 30, 2006. Educational services include those provided by the Callan Investments Institute and/or the "Callan College." Consulting services include manager consulting services provided by our Institutional Consulting Group, financial intermediary consulting services provided by our Independent Adviser Group and/or consulting to a manager's retirement plan provided by our Fund Sponsor Consulting Group. Callan created a line of business in 2006, the Trust Advisory Group (TAG), which engages managers to manage assets in a commingled trust that is only available on a private placement basis to qualified large benefit plan investors. When Callan does business with managers through TAG, the Trust compensates the managers (as contrasted with the arrangements above). However, securities laws applicable to private placements prevent us from publicly listing these managers. If you require more information, please contact our Trust Advisory Group. In no way do any of these manager relationships affect the outcome or process by which any of Callan's services are conducted. Because Callan's client list of investment managers changes periodically, the information below may not reflect very recent changes that are not yet updated in our database.You are welcome to request a list of Callan's investment manager clients at any time. Manager Name INVESCO IXIS Asset Manaaement Janus Caoital Corooration Jensen Investment Manaaement John Hancock Advisers JPMoraan Asset Manaaement JP Moraan Investment Manaaement JP Moraan Retirement Plan Services Julius Baer Investment Manaaement Kalmar Investments Kellv Caoital Manaaement. LLC Kensinaton Investment Grouo Kniahtsbridae Asset Manaaement. LLC Lazard Asset Manaaement Leader Caoital Coro. Lehman Brothers Inc. Loomis. Savles & Comoanv. L.P. Lord Abbett & Comoanv LSV Asset Manaaement MacKav-Shields LLC Manaaers Investment Grouo LLC Marauette Asset Manaaement Marvin & Palmer Associates. Inc. McMoraan & Comoanv LLC Mellon Asset Manaaement. flea Mellon Institutional Asset Manaaement Mellon Private Wealth Manaaement Merrill Lvnch Metrooolitan Life Insurance Comoanv Metrooolitan West Caoital Manaaement. LLC MFS Investment Manaaement Mondrian Investment Partners Limited Montaa & Caldwell. Inc. Montaomerv Street Income Securities Moraan Stanlev Investment Manaaement Moraan Stanlev Real Estate New York Life Investment Manaaement LLC (NYLIMl Nicholas-Aooleaate Caoital Manaaement Nomura Asset Manaaement U.S.A.. Inc. Northern Trust Global Investment Services Northern Trust Value Investors Nuveen Investments Institutional Services NWQ Investment Manaaement Comoanv OFI Institutional Asset Manaaement Old Mutual Asset Manaaement Oooenheimer Caoital Oriental Financial Grouo Pacific Investment Manaaement Comoanv Paradiam Asset Manaaement Co .. LLC Pareto Partners Pavden & Rvael Penn Caoital Manaaement Perearine Caoital Manaaement. Inc. Phoenix Investment Partners. Ltd. Pinnacle West Caoital Corooration Pioneer Investment Manaaement. Inc. Page 3 of 5 Educational Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y Consulting Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y L l L l List of Managers We Do Business With as of 9/30/06 Confidential -For Callan Client Use Only The list below represents those investment management organizations that purchased educational and/or consulting services from a division of Callan Associates as of September 30, 2006. Educational services include those provided by the Callan Investments Institute and/or the "Callan College." Consulting services include manager consulting services provided by our Institutional Consulting Group, financial intermediary consulting services provided by our Independent Adviser Group and/or consulting to a manager's retirement plan provided by our Fund Sponsor Consulting Group. Callan created a line of business in 2006, the Trust Advisory Group (TAG), which engages managers to manage assets in a commingled trust that is only available on a private placement basis to qualified large benefit plan investors. When Callan does business with managers through TAG, the Trust compensates the managers (as contrasted with the arrangements above). However, securities laws applicable to private placements prevent us from publicly listing these managers. If you require more information, please contact our Trust Advisory Group. In no way do any of these manager relationships affect the outcome or process by which any of Callan's services are conducted. Because Callan's client list of investment managers changes periodically, the information below may not reflect very recent changes that are not yet updated in our database.You are welcome to request a list of Callan's investment manager clients at any time. Manager Name Post Advisorv Grouo Princioal Global Investors Prooress Investment Manaaement Comoanv. LLC Provident Investment Counsel Prudential Investment Manaaement Prudential Retirement Putnam Investments Pvramis Global Advisors Ranaer Investments Manaaement. L.P. RCM Record Currencv Manaaement Rice Hall James & Associates. LLC RiverSource Investments. LLC Robeco USA Rorer Asset Manaoement Rosewood Manaaement Coro. Rothschild Asset Manaaement. Inc. RREEF Funds (The\ Russell Investment Groo Schroder Investment Manaaement North America Inc. SEI Investments Selioman (J. & W.\ & Comoanv. Inc. Seneca Caoital Manaaement LLC Shenandoah Asset Manaaement Sinooia Asset Manaaement Sit Investment Associates. Inc. Smith Grouo Asset Manaaement Southeastern Asset Manaaement. Inc. Standish Mellon Asset Manaaement Comoanv State Street Global Advisors Sterne Aaee Asset Manaaement Stone Harbor Investment Partners. L.P. Stone Ridae Investment Partners Stratton Manaaement Svstematic Financial Manaaement T. Rowe Price Associates. Inc. Taolin. Canida & Habacht Texas Pacific Grouo Thomoson Sieael & Walmslev Thrivent Financial for Lutherans TIAA-CREF TimesSauare Caoital Manaaement. LLC Todd Investment Advisors. Inc. Trusco Caoital Manaaement. Inc. TCW Asset Manaaement Comoanv UBS Union Bank of California U.S. Trust Asset Manaaement Vanauard Grouo. Inc. (The) Vauahan Nelson Investment Manaaement Victorv Caoital Manaoement Inc. Vontobel Asset Manaoement Waddell & Reed Asset Manaaement Grouo Washinaton Caoital Manaaement WEDGE Caoital Manaaement Page 4 of 5 Educational Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y Consulting Services y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y y r r I r I t r r r [ I L L I l I L L list of Managers We Do Business With as of 9/30/06 Confidential -For Callan Client Use Only The list below represents those investment management organizations that purchased educational and/or consulting services from a division of Callan Associates as of September 30, 2006. Educational services include those provided by the Callan Investments Institute and/or the "Callan College." Consulting services include manager consulting services provided by our Institutional Consulting Group, financial intermediary consulting services provided by our Independent Adviser Group and/or consulting to a manager's retirement plan provided by our Fund Sponsor Consulting Group. Callan created a line of business in 2006, the Trust Advisory Group (TAG), which engages managers to manage assets in a commingled trust that is only available on a private placement basis to qualified large benefit plan investors. When Callan does business with managers through TAG, the Trust compensates the managers (as contrasted with the arrangements above). However, securities laws applicable to private placements prevent us from publicly listing these managers. If you require more information, please contact our Trust Advisory Group. In no way do any of these manager relationships affect the outcome or process by which any of Callan's services are conducted. Because Callan's client list of investment managers changes periodically, the information below may not reflect very recent changes that are not yet updated in our database.You are welcome to request a list of Callan's investment manager clients at any time. Manager Name Wellinaton Manaaement Comoanv. LLP Wells Caoital Manaaement Western Asset Manaaement Comoanv Westwood Manaaement Corooration William Blair & Co .. Inc. William D. Witter. Inc. Educational Services y y y y y Consulting Services y y In addition, under the terms of the Services Agreement, Callan is obligated through 2008 to advise all of its plan sponsor clients through 2008 on an annual basis, and at the outset of a new relationship, of BNY's status as its preferred broker in those instances where the plan sponsor client chooses to pay Callan's fees through commissions paid to BNY for brokerage transactions, and to provide BNY with some of the same client information as was provided to Alpha prior to the sale. Notwithstanding such obligation to so advise its plan sponsor clients, all clients are advised that they are free to conduct brokerage, and to establish directed brokerage arrangements, with any broker of their choice. Callan's fees for any services provided to its plan sponsor cl ients are always expressed and paid in hard dollars and are the same without regard to the brokerage arrangements which may have been made between the plan sponsor client and its broker. As to its investment manager clients, Callan is obligated through 2008 to advise them that if they choose to pay Callan's fees through broker's commissions, BNY is its exclusive broker for that purpose and that the use of a third party brokerage firm for soft dollar arrangements may fall outside of the safe harbor under Section 28(e) of the Securities Exchange Act of 1934. In addition, if payment for Callan services is received from a third party broker, Callan is to advise the investment manager client of the exclusive brokerage arrangement with Callan and inform BNY of the payment. As with its plan sponsor clients, Callan receives the same payment for its services regardless of whether payment comes from BNY, from a third party brokerage firm, or from the investment manager client. In summary, nothing in the Services Agreement affects the options available to a Callan client for payment of Callan's fees, which are always quoted and paid in hard dollars regardless of the method of payment selected by the plan sponsor or investment manager client. Those options are as follows: ( 1) (2) (3) (4) By paying cash via check or wire transfer By electing to direct brokerage transactions to BNY. At the client's request, BNY will pay invoices submitted by Callan for its services to such client. By entering into a contract for services directly with BNY to acquire Callan's services from BNY. BNY will then contract with Callan for such services and will pay invoices submitted to it by Callan for such services. By selecting any brokerage operation of its choice as a means to pay Callan's fees; although the use of a broker other than BNY by an investment manager may not be consistent with the Section 28(e) safe harbor. Page 5 of 5 r r Callan Investments Institute r r r r r r r [ L L L L L L L L The Callan Investments Institute, the educational division of Callan Associates Inc .. has been a leading educational forum for the pensions and investments indust1y since 1980 The Institute offers continuing education on key issues confronting fund sponsors and investment managers Please contact the Callan Investments Institute for more information, or visit our website at www.callan com CAlLAN ASSOCIATES .. knowledge for investors I 01 (',\l !FOi/NI,\ 'i r RESEARCH PRESENTATIONS (WITH TALKING POINTS) This research series offers a page-by-page summary of the key talking points given by Callan experts during their PowerPoint presentations at Institute programs. The module brings a "voice" to the presentation and offers a description of each slide's charts, tables, graphs, and the like. Research presentations are an invaluable tool when reviewing, understanding, and explaining the Institute presentations you've attended, and imparting that knowledge to colleagues. 2006 June Regional Breakfast Workshop Presentation: GTAA, 130/30, and Other Return-Enhancing Strategies 2006 Spring Defined Contribution Workshop Presentation: Finding That Perfect DC Investment Manager 2006 National Conference Workshop Presentations: Fiduciary Responsibilities for an Investment Committee Portable Alpha: Seek the Holy Grail or Run Away? DC Trends Roundtable The Role of Commodities in Institutional Portfolios EVENT SUMMARIES 2006 Regional Breakfast Workshop Summary (June 2006): Global Tactical Asset Allocation, 130/30, and Other Return-Enhancing Strategies 2006 Defined Contribution Workshop Summary (April 2006): Finding That Perfect DC Investment Manager 2006 National Conference Summary (January 2006) UPCOMING EDUCATIONAL PROGRAMS DC Institute Fourth Annual Conference San Francisco, October 23 -25, 2006 Charter Institute October Regional Workshop Chicago, October 23, 2006 San Francisco, October 26, 2006 The Charter Institute Twenty-Seventh National Conference San Francisco, January 29 -31, 2007 • Vicente Fox -President of Mexico • 2007 Capital Markets Panel • Peter Ricchiuti -Assistant Dean at Tulane University's AB Freeman School of Business, and former CIO of the State of Louisiana • Robert Arnott -Chairman, Research Affiliates and Editor, Financial Analysts Journal • Reza Asian -Middle East Commentator for NPR's "Marketplace;" Muslim Affairs Analyst for CBS News; and author of No god but God Further speakers, workshops, and details to be announced soon! Callan InvPslmcnts l nstitutc SUITL 3500 S,\N l'Il,\N( ISCO CAI IHWi~I ·\ a 1111 -11 'i ')71 50G0 i-1\X ·I 15 27-1 ·10 IQ ,-.,rn c,tllan.com 200G C,ll,,n :\"uci.,1c·, In, II CAILAN s Atlanta Consulting Office 300 Galleria Parkway, Suite 950 Atlanta, Georgia 30339 Phone: (770) 618-2140 Chicago Consulting Office 120 North LaSalle Street, Suite 2100 Chicago, Illinois 60602 Phone: (312) 346-3536 Denver Consulting Office 1660 Wynkoop Street, Suite 950 Denver, Colorado 80202 Phone: (303) 861-1900 New Jersey Consulting Office 200 Park Avenue, Suite 230 Florham Park, New Jersey 07932 Phone: (973)593-8050 San Francisco Consulting Office 101 California Street, Suite 3500 San Francisco, California 94111 Phone: (415) 974-5060 l L L ORANGE COUNTY SAN1TATIONDISTRICT Single Audit Report on Federal Awards Year ended June 30, 2006 r r r r r r r r ( L L L L L L L L L ORANGE COUNTY SANITATION DISTRICT Single Audit Report on Federal Awards Year ended June 30, 2006 . TABLE OF CONTENTS Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to Each Major Program, Internal Control over Compliance and on the Schedule of Expenditures of Federal Awards in Accordance with O:MB Circular A-133 Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 1 2 4 5 6 7 r r r r r r r l L L L L L L L Board of Directors Orange County Sanitation District Page Two Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. Schedule of Expenditures of Federal Awards We have audited the basic financial statements of the Orange County Sanitation District, as of and for the year ended June 30, 2006, and have issued our report thereon dated August 31, 2006. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by O:rvtB Circular A-133 and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. This report is intended solely for the information of the Orange County Sanitation District's management, federal and selected state awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ;l'n?-"/;I>~.,,. ~~,pe. ~I': August 31, 2006 3 r [ [ L L L L L L L L L ORANGE COUNTY SANITATION DISTRICT Schedule of Expenditures of Federal Awards Year ended June 30, 2006 Federal Grantor/ Pass-through Grantor Program Title U.S. Department of Agriculture Direct assistance: Natural Resources Conservation Service: Watershed Protection and Flood Prevention Total U.S. Department of Agriculture U.S. Department of Homeland Security Direct assistance: Disaster Grants -Public Assistance Program Identification Number 69-9104-5-263 FEMA-1577-DR-CA Total U.S. Department of Homeland Security Total Federal A wards * Major Program Catalog of Federal Domestic Assistance Number 10.904 97.036 The accompanying notes are an integral part of this schedule. 4 Federal Financial Assistance Expenditures $ 1,538,038 * 1,538,038 705,742 * 705 ,742 $ 2,243,780 r r r [ L L L L L L L L (1) ORANGE COUNTY SANITATION DISTRICT Notes to Schedule of Expenditures of Federal Awards Year ended June 30, 2006 Summary of Significant Accounting Policies Applicable to the Schedule of Expenditures of Federal Awards (a) Scope of Presentation The accompanying schedule presents only the expenditures incurred (and related awards received) by the Orange County Sanitation District ("District") that are reimbursable under federal programs of federal agencies providing financial assistance. For purposes of this schedule, financial assistance includes federal financial assistance received directly from a federal agency or federal funds received indirectly by the District from non-federal entities. Only the portion of program expenditures reimbursable with such federal funds are reported in the accompanying schedule. Program expenditures in excess of the maximum federal reimbursement authorized and the portion of program expenditures that were funded with other state, local or other non-federal funds are excluded from the accompanying schedule. (b) Basis of Accounting The expenditures included in the accompanying schedule were reported on the modified accrual basis of accounting. Under the modified accrual basis of accounting, expenditures are recognized when the District becomes obligated for payment as a result of the receipt of the related goods and services. Expenditures reported include any property or equipment acquisitions incurred under the federal or selected state program, as required by these agencies. 5 f L L L L L L L ORANGE COUNTY SANITATION DISTRICT Schedule of Findings and Questioned Costs Year ended June 30, 2006 (A) Summary of Auditors' Results (B) (C) 1. 2. 3. 4. 5. 6. 7. 8. 9. An unqualified report was issued by the auditors on the financial statements of the auditee. There were no material weaknesses or reportable conditions in internal control over financial reporting based upon our audit of the financial statements of the auditee. The audit disclosed no noncompliance which is material to the financial statements of the auditee. There were no material weaknesses or other reportable conditions in internal control over major programs of the auditee. An unqualified report was issued by the auditors on compliance for major programs. The audit disclosed no audit findings required by the auditors to be reported under paragraph .510(a) of 0MB Circular A-133. The major programs of the auditee were the U.S. Department of Agriculture - Watershed Protection and Flood Prevention, CFDA No. 10.904 and U.S. Department of Homeland Security-Disaster Grants -Public Assistance, CFDA No. 97.036. The dollar threshold used to distinguish Type A and Type B programs was $300,000. The auditee was not considered to be a low risk auditee for the year ended June 30, 2006. Findings Related to the Financial Statements which are Required to be Reported in Accordance with GAGAS There are no findings required to be reported in accordance with GAGAS. Findings and Questioned Costs for Federal Awards as Defined in Paragraph .510(a) at 0MB Circular A-133 There are no findings or questioned costs required to be reported in accordance with paragraph .510(a) of O:MB Circular A-133. 6 r L ORANGE COUNTY SANITATION DISTRICT Summary Schedule of Prior Audit Findings Year ended June 30, 2006 There were no prior audit findings from previous audit reports requiring follow-up during the year ended June 30, 2006. 7