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Home My WebLink About05-13-2026 Audit Ad Hoc Committee Meeting Complete Agenda PacketNOTICE OF REGULAR MEETING AGENDA PUBLIC PARTICIPATION NOTICE ORANGE COUNTY SANITATION DISTRICT AUDIT AD HOC COMMITTEE MAY 13, 2026 - 4:00 PM ACCESSIBILITY FOR THE GENERAL PUBLIC Your participation is always welcome. OC San offers several ways in which to interact during this meeting. MEETING PARTICIPATION INSTRUCTIONS www.ocsan.gov IN-PERSON MEETING ATTENDANCE OC San Headquarters: 18480 Bandilier Circle, Fountain Valley, CA 92708 ONLINE MEETING PARTICIPATION Join the meeting now PARTICIPATE BY TELEPHONE Dial: (213) 279-1455 Phone Conference ID: 856 772 565# WATCH THE MEETING ONLINE The meeting will be available for online viewing at: SUBMIT A COMMENT Online at: https://ocsd.legistar.com/Calendar.aspx or by emailing: OCSanClerk@ocsan.gov ROLL CALL AUDIT AD HOC COMMITTEE Meeting Date: May 13, 2026 Time: 4:00 p.m. COMMITTEE MEMBERS (4) OTHERS STAFF AUDIT AD HOC COMMITTEE Regular Meeting Agenda Wednesday, May 13, 2026 - 4:00 PM Headquarters - Fountain Valley Room 18480 Bandilier Circle Fountain Valley, CA 92708 (714) 593-7433 View Current Board of Directors ACCOMMODATIONS FOR THE DISABLED: If you require any special disability related accommodations, please contact the Orange County Sanitation District (OC San) Clerk of the Board’s office at (714) 593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. AGENDA DESCRIPTION: The agenda provides a brief general description of each item of business to be considered or discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take any action which is deemed appropriate. MEETING RECORDING: A recording of this meeting is available within 24 hours after adjournment of the meeting at https://ocsd.legistar.com/Calendar.aspx or by contacting the Clerk of the Board. SUBMIT A COMMENT: You may submit your comments and questions in writing in advance of, or during the meeting by using the eComment feature available online at: https://ocsd.legistar.com/Calendar.aspx or by sending them to OCSanClerk@ocsan.gov with the subject line "PUBLIC COMMENT ITEM # [insert relevant item number]" or "PUBLIC COMMENT NON-AGENDA ITEM". All written public comments will be provided to the legislative body and may be read into the record or compiled as part of the record. NOTICE TO DIRECTORS: To place items on the agenda for a Committee or Board Meeting, the item must be submitted to the Clerk of the Board: Kelly A. Lore, MMC, (714) 593-7433 / klore@ocsan.gov at least 14 days before the meeting. For any questions on the agenda, Board members may contact staff at: General Manager: Rob Thompson, rthompson@ocsan.gov / (714) 593-7110 Asst. General Manager: Lorenzo Tyner, ltyner@ocsan.gov / (714) 593-7550 Director of Communications: Jennifer Cabral, jcabral@ocsan.gov / (714) 593-7581 Director of Engineering: Mike Dorman, mdorman@ocsan.gov / (714) 593-7014 Director of Environmental Services: Lan Wiborg, lwiborg@ocsan.gov / (714) 593-7450 Director of Finance: Wally Ritchie, writchie@ocsan.gov / (714) 593-7570 Director of Human Resources: Laura Maravilla, lmaravilla@ocsan.gov / (714) 593-7007 Director of Operations & Maintenance: Riaz Moinuddin, rmoinuddin@ocsan.gov / (714) 593-7269 Upcoming Meeting Dates AUDIT AD HOC COMMITTEE Regular Meeting Agenda Wednesday, May 13, 2026 CALL TO ORDER ROLL CALL: Clerk of the Board PUBLIC COMMENTS: Your participation is always welcome. Specific information as to how to participate in a meeting is detailed in the Special Notice attached to this agenda. In general, OC San offers several ways in which to interact during meetings: you may participate in person, join the meeting live via Teams on your computer or similar device or web browser, join the meeting live via telephone, view the meeting online, and/or submit comments for consideration before or during the meeting. INFORMATION ITEMS: 1.2026-4890INTERNAL AUDIT UPDATE RECOMMENDATION: Information Item. Originator:Wally Ritchie Attachments: OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: Adjourn the Audit Ad Hoc Committee meeting. AFFIDAVIT OF POSTING: I hereby certify under penalty of perjury and as required by the State of California, Government Code § 54954.2(a), that the foregoing Agenda was posted online at www.ocsan.gov, in the lobby, and outside the main door of Orange County Sanitation District Headquarters at 18480 Bandilier Cir. Fountain Valley, CA 92708 not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including those distributed less than 72 hours prior to the meeting to a majority of the Board of Directors, are available for public inspection with the Clerk of the Board. /s/ Kelly A. Lore, MMC Clerk of the Board May 4, 2026 Page 2 of 2 AUDIT AD HOC COMMITTEE Agenda Report Headquarters 18480 Bandilier Circle Fountain Valley, CA 92708 (714) 593-7433 File #:2026-4890 Agenda Date:5/13/2026 Agenda Item No:1. FROM:Robert Thompson, General Manager Originator: Wally Ritchie, Director of Finance SUBJECT: INTERNAL AUDIT UPDATE GENERAL MANAGER'S RECOMMENDATION RECOMMENDATION: Information Item. BACKGROUND Orange County Sanitation District (OC San)selected the audit firm of Macias Gini &O'Connell LLP (MGO)to provide audits of various OC San programs and processes as selected by the Audit Ad Hoc Committee.Most recently,the Audit Ad Hoc Committee selected the areas of Succession Planning and Supply Chain and Vendor Management. The auditors will provide an update on those efforts. RELEVANT STANDARDS ·Conduct audits to determine if OC San operations are being conducted in an economical and efficient manner ·Conduct audits to establish whether specific government programs are effective in meeting their stated goals and objectives ·Conduct audits to determine if OC San is following policies and procedures in conducting operations ATTACHMENT The following attachment(s)may be viewed on-line at the OC San website (www.ocsan.gov)with the complete agenda package: ·Succession Planning Audit Report ·Supply Chain and Vendor Management Audit Report ·Presentation Orange County Sanitation District Printed on 5/4/2026Page 1 of 1 powered by Legistar™ April 29, 2026 Orange County Sanitation District Succession Planning Engagement TABLE OF CONTENTS © Macias Gini & O’Connell LLP | 2 Table of Contents Table of Contents ............................................................................................................................................................................................................... 2 Executive Summary ........................................................................................................................................................................................................... 3 Objective ............................................................................................................................................................................................................................. 5 Scope & Methodology ........................................................................................................................................................................................................ 5 Current State ...................................................................................................................................................................................................................... 7 Observations and Recommendations ............................................................................................................................................................................... 9 Additional Considerations ............................................................................................................................................................................................... 12 Conclusion ........................................................................................................................................................................................................................ 14 Appendix A – Succession Planning Framework .............................................................................................................................................................. 15 Appendix B – MGO Ratings Definitions ............................................................................................................................................................................ 19 EXECUTIVE SUMMARY © Macias Gini & O’Connell LLP | 3 Executive Summary Background Between February 2025 and April 2026, Macias Gini & O’Connell (MGO) evaluated the Orange County Sanitation District’s (OC San) human capital management and workforce succession planning practices. This review was conducted in alignment with the 2025 Enterprise Risk Assessment where talent acquisition, talent retention and succession planning were 3 of 16 identified risks. To conduct the assessment, MGO met with the general manager, Human Resources leadership and staff, internal customers, reviewed the prior two fiscal years’ operating metrics, and current partnership and training programs. We reviewed succession planning through the following criteria: • Governance: Establishing workforce succession planning as an organizational priority, supported by appropriate budget and time resources. This responsibility rests with the Board, General Manager, and Executive Management Team (EMT). • Framework: Aligning HR resources with succession planning priorities, and continuously gather feedback to improve execution and adapt to strategic needs. This is primarily the responsibility of the Human Resources Department. • Implementation: Executing the succession plan through collaborative recruitment efforts, employee coaching, documentation, cross- training, and fostering a culture of growth and continuous improvement. Direct supervisors are primarily responsible for implementation. OC San’s Governance, Framework and Guidance are strong and well established. While a formal succession plan is not documented, there is an established data-informed framework to forecast and plan for potential workforce transitions. Additionally, OC San has prioritized training and education funds to invest in employee development. The Human Resources Department has developed strong relationships with local higher education institutions for a strong internship program and leadership academy. They also manage the performance management, goal setting, and individual development plan requirements. While governance and framework elements are well established, implementation of workforce succession planning is inconsistent at the department level. While, the operations and maintenance department has well established goal setting criteria, position guides, and ongoing training, other departments are not as advanced in their implementation. Our recommendations for OC San focus on minor improvements at the governance and framework levels, with more consistent application of workforce planning at the implementation level to realize the goals of the workforce planning strategy. EXECUTIVE SUMMARY © Macias Gini & O’Connell LLP | 4 Observations and Recommendations The initial observations and recommendations outlined below are based on the data reviewed and discussions with HR Department leadership, functional subject matter experts, and department hiring managers. These observations represent current practices and opportunities. Observation risk levels are categorized as high (red), medium (orange) and low (yellow) in the table below with corresponding recommendations. Detailed guidance and analysis are provided in the report appendices. # Categories Observations Recommendations 1 Succession Plan Development Absence of a modern, documented succession framework – High Inconsistent internal pipelines – Medium Document OC San’s succession plan to communicate strategy internally and externally. 2 Talent Acquisition & Marketing Some recruitment timelines remain lengthy – High Inconsistent competitiveness for specialized and trade roles – High Reconsider including private-sector benchmarks in the classification and compensation study to better compete for hard-to-fill critical positions. 3 Performance Evaluation & Coaching Inconsistent manager check‑ins and coaching practices – High Goal‑setting discipline varies across departments – Low Incorporate coaching requirements as core competencies in performance reviews for position levels, supervisors and above, to reinforce the cultural expectation of a continually growing and training workforce. Require departments to set position goals that align with department goals, appropriate to the position level, within the Cornerstone HRIS system. Acknowledgements We would like to thank OC San, and in particular the Human Resources and Finance Departments, for their ongoing collaboration throughout this project. Focus group participants and individual interviewees provided well thought-out and candid feedback. OBJECTIVE © Macias Gini & O’Connell LLP | 5 Objective The primary objective of this assessment was to conduct a comprehensive review of OC San’s current succession planning and human capital practices to evaluate OC San’s readiness to sustain leadership continuity and meet future workforce demands. Scope & Methodology This assessment focused on evaluating key components of OC San’s succession planning and broader human capital practices to identify strengths, risks, and opportunities to enhance workforce continuity. The scope included: • Reviewing OC San workforce planning documents including policies, organizational charts, compensation data, exit interview summaries, and HRIS reports to assess the current state of talent pipelines, role criticality, and workforce demographics. • Assessing succession planning practices by evaluating identification of skill‑gap trends, knowledge‑transfer processes, and alignment of current practices with future organizational needs. • Conducting interviews and focus groups with HR leadership, department managers and selected staff to understand workforce risks, development expectations, operational pain points, and succession‑readiness perceptions across the organization. • Evaluating workforce development programs including leadership development offerings, supervisory training, technical rotations, internships, and continuing education to determine the effectiveness of internal mobility pathways and alignment with long‑term talent planning. • Analyzing recruitment and talent acquisition processes to understand sourcing effectiveness, hiring cycle trends, and the integration of succession considerations into staffing decisions. The assessment was conducted in three phases: information gathering, analysis, and reporting. Information Gathering During this phase, the MGO team: • Initiated with an entrance meeting in January 2026. • Requested and reviewed supporting documents including internal forms, procedural documents, and example process documentation. • Interviewed staff from Collections Facilities O&M, Construction Management, Environmental Services, Financial Management, General Manager’s Office, Human Resources, Information Technology, Plant Operations, and Public Affairs to validate and corroborate observations. SCOPE & METHODOLOGY © Macias Gini & O’Connell LLP | 6 Analysis During this phase, the MGO team: • Reviewed key policy and procedure documents, including: o Human resources performance indicators and retirement eligibility forecasts o Bargaining unit contracts and compensation philosophy and structure o Employee retirement system eligibility rules and current workforce succession planning tools o Performance management, onboarding/offboarding, and leadership and staff development materials • Documented interview results and identified themes Reporting During this phase, the MGO team: • Conducted meetings with the project sponsor summarizing observations • Delivered a draft report • Conducted an exit meeting • Reviewed and documented any corrective actions taken in response to observations CURRENT STATE © Macias Gini & O’Connell LLP | 7 Current State While OC San’s most recent succession plan document is from 2006, they execute strong supporting operations. OC San has already implemented several major components of effective succession planning, many of which exceed what is typically observed in comparable public sector agencies. These efforts reflect a consistent commitment to long‑term talent sustainability, leadership preparedness, and strategic workforce management. Overall, OC San executes well the major component parts of a strong workforce planning infrastructure. Below is a summary of the most notable strengths. Element Strengths Succession Plan Development • Leaders openly discuss long term workforce continuity needs, creating a strong foundation for a formalized succession planning model. • Retirement trends and development needs are incorporated into annual planning, supporting intentional staffing decisions. • Departments use tools such as standard operating procedures (SOPs) and role matrices to reinforce Talent Acquisition & Marketing • Department leaders are proactively building organizational redundancy by developing talent for critical roles; including executive level and division-specific positions to ensure operational continuity under all staffing scenarios. • HR maintains strong partnerships with local education and vocational institutions to align talent pipelines with OC San needs. Employee applications nearly doubled between FY 2024–25 (15 applications) and FY 2025– 26 (28 applications). Since FY 2019–20, 24 employees have submitted multiple applications in competition for six program positions, resulting in the selection of 13 participants over time. • Structured rotational and internship programs effectively support skill development and internal hiring for the • approach. • Process improvements have strengthened hiring timelines and reduced onboarding delays. • Recruitment materials effectively communicate OC San’s culture and public service value proposition. Performance Evaluation & Coaching • OC San maintains a structured evaluation cycle paired with goal setting and required individual development plans (IDPs). • HR provides consistent guidance to supervisors, supporting clarity and accountability in performance CURRENT STATE © Macias Gini & O’Connell LLP | 8 Training & Development • Leadership, supervisory, and soft skill programs are well received and promote internal career mobility. • Employees have access to meaningful development resources, including coaching and certifications. • Teams complete extensive, role-based operations and maintenance training that is tracked quarterly, including web-based training for supervisors and operators, safety and emergency response tabletops, permit Compensation & Benefits • • Benefits offerings, including tuition reimbursement, contribute to ongoing employee development. Overall, OC San’s workforce programs, including leadership development, technical rotations, internships, clerical pathways, and education reimbursement form a comprehensive development ecosystem that supports internal mobility and strengthens pipeline reliability. Combined with a competitive 75th‑percentile compensation target and stable union partnerships, these elements position OC San well for future succession planning maturity and workforce continuity. The observations and conclusions summarized above were developed through a review of available documentation, workforce data provided by OC San, and structured interviews with executive leadership, department leaders, and Human Resources staff. This work was not intended to function as a formal audit or detailed attribute level testing of each workforce program area. Rather, conclusions reflect consistent themes identified across interviews, corroborated by policy documents, program descriptions, and operational practices shared during the review. Taken together, these sources provide reasonable support for the conclusions regarding OC San’s current succession planning and workforce management strengths. OBSERVATIONS AND RECOMMENDATIONS © Macias Gini & O’Connell LLP | 9 Observations and Recommendations OC San’s current state reflects an organization with strong foundational building blocks, with opportunities to further enhance structure, documentation, and formalized strategy. Key opportunities for improvement include establishing a documented succession plan strategy to guide future resource allocation and ensuring more consistent adoption of training and development practices across departments. Addressing these gaps will be essential to sustaining service continuity, strengthening internal mobility, and ensuring organizational resilience in the years ahead. The following observations and recommendations outline targeted actions OC San can take to build a more robust, proactive, and sustainable succession planning approach. Together, these recommendations are designed to help the organization develop a clear roadmap, reinforce leadership development, and support strategic talent decisions that ensure long‑term organizational strength. Additional supporting sample templates, analysis and guidance are provided in the appendices. Succession Planning Development OC San’s succession plan is from 2006 and has not been updated, leaving the organization without a documented philosophy, governance structure, or standardized process to assess readiness or build candidate pools. While the core components of a succession plan are executed, this creates vulnerabilities strategy. Include the key HR functions that comprise workforce succession planning. This can be completed through updating the 2006 document or identifying succession planning components in board presentations to note workforce succession planning components when providing HR updates. An outline of workforce succession planning component elements with metric measurement options is provided in Appendix A. Inconsistent internal pipelines. responsibility matrices, the organization lacks a unified method for developing candidate pools or tracking readiness for critical roles. Newly introduced IDPs in June of 2025 are required but not widely accepted across employees. However, for FY 2025-26, 94.6% or 610 of 645 IDPs have been entered in Cornerstone. Talent Acquisition & Despite improvements in background checks and a variety of flexible recruitment approaches to benchmarks in the classification and OBSERVATIONS AND RECOMMENDATIONS © Macias Gini & O’Connell LLP | 10 Succession Planning operator certification training, acting pay and under-filling positions) some recruitment processes can extend 3 months. This contributes to lost positions compete directly with the private sector. Using private-sector benchmarks would enable OC San to strategically set compensation based on market competition at the position level, while still maintaining internal equity. Additional option includes classification adjustments for hard-to-fill positions, referral incentives, and recruitment incentives. Inconsistent competitiveness for specialized and trade roles. Compensation benchmarking against local public agencies does not reflect private‑sector or sanitation‑industry realities, reducing competitiveness for engineering, construction, technical, and trade classifications. Notably, five positions have remained vacant for more than 200 days. MGO’s review of the Recruitment Strategy Forms (RSF) revealed a clear contrast between a streamlined recruitment cycle and a significantly delayed one. The efficient process moved from initial RSF meeting to offer letter in 46 days, supported by a one‑day subject matter expert review, early confirmation of interview dates, and an internal promotion pathway that minimized sourcing time. In contrast, the delayed process spanned 214 days from initial request to offer. Several factors contributed to the extended timeline: posting delays driven by slow responses on job‑posting language that required repeated follow‑ups; the decision to coordinate Electrical and Civil/Mechanical interviews on a single date, which created scheduling bottlenecks; large interview panels (five for Electrical, four for Civil/Mechanical), further constraining availability; and interview dates that had to be shifted to accommodate both panel schedules OBSERVATIONS AND RECOMMENDATIONS © Macias Gini & O’Connell LLP | 11 Succession Planning Evaluation & Coaching ‑ Although policies outline expectations, actual frequency and quality of manager interactions differ across teams, limiting consistent growth and accountability. core competencies in performance reviews for position levels supervisor and above to reinforce the cultural expectation of a continually growing and training workforce. Require employees to set individual goals in Cornerstone HRIS system that directly align with the department goals established by department managers. Implementing this consistently across OC San will strengthen goal‑setting discipline, support clearer alignment of priorities, and create a more uniform coaching and performance environment ‑ Goal‑setting discipline varies across departments. structured tools, but some departments do not fully leverage the platform, resulting in inconsistent goal clarity and misalignment. ADDITIONAL CONSIDERATIONS © Macias Gini & O’Connell LLP | 12 Additional Considerations The table below summarizes information gathered during the project that did not warrant formal observation but is relevant to overall employee support and identifies opportunities for additional HR involvement. Succession Planning Acquisition & Marketing ‑ Some divisions report insufficient entry‑level candidates and greater difficulty filling experienced roles, while Operations notes that adding a small number of true entry‑level roles would cushion vacancy impacts and strengthen long‑term pipelines; OC San’s internship program and automatic progression of Operators in Training to Operators upon achieving required certification and hours already serves as a feeder within the one‑year ‑ entry‑level staffing needs to determine where additional roles would meaningfully support internal pipelines. Establish a consistent framework for identifying which operational functions benefit most from added entry‑level capacity and where underfilling or reclassification strategies remain more effective. Training & Development Training relies on a two‑year budget cycle, but actual training costs (especially vendor‑led programs) fluctuate significantly, making planning difficult and sometimes delaying course delivery. Analysts to review to accompany the existing agenda during the quarterly meetings. Share the checklist with managers as a reminder of the centralized services Soft‑skills training not required for frontline staff. Leadership and soft‑skills programs are well-received but are not consistently promoted by managers across all employee groups, limiting district‑wide culture development. to feed into the leadership training program. Inconsistent tracking of learning engagement. Training hours and transcripts are tracked, but the organization does not yet measure learning program impact or participation Create a centralized list of approved training vendors informed by departmental experience and implement a feedback loop that captures vendor performance to guide Termination Institutional knowledge loss risk for administrative departments. ADDITIONAL CONSIDERATIONS © Macias Gini & O’Connell LLP | 13 Succession Planning departures is resulting in institutional knowledge loss for some departments. While checklists exist, structured knowledge capture processes (e.g., documented transition plans, cross‑training plans) are not consistently used, personnel have implemented this practice. A sample position guidance is provided as a position profile template under separate cover. CONCLUSION © Macias Gini & O’Connell LLP | 14 Conclusion OC San’s workforce succession planning is well executed in relation to other public sector entities, supported by prioritization and strategic direction from the general manager, structured guidance and framework provided by the Human Resources Department, and formal documentation and continual training within the operations and maintenance departments. The observations identified in this review reflect common challenges seen across California public entities such as candidate competition with the private sector and time constraints limiting employee availability for documentation. Implementing these observations will build upon OC San’s strong foundation. Documenting workforce succession planning in a formal plan will serve as both a communication tool for the Board and public and a strategic guide for future EMT members. Incorporating private-sector compensation benchmarks will provide a more complete view of labor market competition, particularly for hard-to-fill positions. Additional options include classification adjustments for hard-to-fill positions and implementing recruitment referral incentives. Lastly, aligning individual goals with departmental objectives enhances employee purpose, documenting job guides reinforces OC San’s collaborative, organization-first culture and both put employee development and growth directly in the hands of supervisors and employees. Implementing the targeted improvements outlined in this report will help OC San build upon its solid foundation, streamline processes, and enhance long‑term employee workforce resilience. Doing so will position OC San to better navigate staffing fluctuations while continuing to reliably support mission‑critical operations and program delivery. APPENDIX A – SUCCESSION PLANNING FRAMEWORK © Macias Gini & O’Connell LLP | 15 Appendix A – Succession Planning Framework 1. Definition of Succession Planning Succession planning is a strategic, systematic process that identifies critical organizational roles, defines the competencies and experiences required for success, and develops internal talent capable of assuming these roles within a 12–36-month time horizon. This process mitigates operational risk, ensures leadership continuity, preserves institutional knowledge, and aligns workforce capabilities with OC San’s long‑term strategic priorities. 2. Succession Planning Philosophy OC San’s succession planning philosophy is centered on long-term sustainability, leadership continuity, and intentional investment in talent. The organization prioritizes the identification and development of successors for critical positions, ensuring that resources for talent acquisition, learning and development, and knowledge transfer are focused where they have the highest impact. Key principles: • Prioritization of Critical Positions: Resource allocation for recruitment, development, and knowledge transfer is driven by the identification of positions that, if left vacant, pose significant operational or strategic risk. • Future-Focused Development: Successors are developed to meet both current and future organizational requirements. • Shared Accountability: o HR designs and maintains the framework. o Managers and supervisors execute development actions and evaluate readiness. o Leadership/GM sets priorities, authorizes investment, and monitors progress. • Transparency and Engagement: Individuals identified as high-potential or successor candidates are informed, engaged, and provided clarity about expectations and development opportunities. 3. Identification of Critical Positions Definition of a Critical Position A critical position is a role essential to OC San’s business continuity, regulatory compliance, operational performance, or institutional knowledge retention. These positions require technical expertise, leadership responsibility, or highly specialized knowledge that is difficult to replace quickly. APPENDIX A – SUCCESSION PLANNING FRAMEWORK © Macias Gini & O’Connell LLP | 16 Criteria for Identifying Critical Positions • Operational impact if left vacant • Strategic importance to OC San’s mission and long-term goals • Difficulty of replacement internally or externally • Specialized knowledge concentration within the role • Recruitment lead time and onboarding complexity • Retirement risk within 1–5 years Department Critical Positions Retirement Eligible Total Employees Percent Eligible Engineering Division Operations Division Financial Management Division Human Resources 4. Methodology: Annual Succession Planning Process This section outlines how succession planning is conducted at OC San, integrating SHRM methodology and OC San’s annual talent processes. Step 1: Identify and Validate Critical Roles (Annual Review) • Review organizational charts, workforce data, and retirement eligibility. • Conduct annual retirement and vacancy risk analysis (current + 5-year outlook). • Leadership/GM finalizes the official list of critical roles for the cycle. Step 2: Develop or Update Role Profiles • HR collaborates with department leadership to define competency-based profiles. • Profiles include current competencies and future-state expectations aligned with OC San’s mission, regulatory environment, technological changes, and strategic plans. Step 3: Bench Strength Analysis & Talent Assessment Managers evaluate employee performance and potential using: • Current-year performance evaluations • Potential and leadership capability ratings • 360-degree feedback (if used) APPENDIX A – SUCCESSION PLANNING FRAMEWORK © Macias Gini & O’Connell LLP | 17 Successor readiness categories: • Ready Now (0–12 months) • Ready Soon (1–2 years) • Ready Later (3–5 years) HR leads a calibration session to ensure consistent evaluation across divisions. Step 4: Identify Successor Candidates & Pipeline Vulnerabilities • Primary and secondary successors identified where possible • Gaps and high-risk roles documented • HR compiles a cross-organizational view of bench strength Step 5: Individual Development Plans (IDPs) For each successor or high-potential employee, IDPs include: • Technical skills training • Leadership development and behavioral competencies • Mentoring, coaching, or job shadowing • Cross-functional rotations • Project-based developmental assignments Step 6: Transparent Engagement and Ongoing Development • Managers hold quarterly development check-ins • Employees participate in goal-setting and self-assessment • HR facilitates career discussions and learning opportunities Step 7: Monitor Progress & Adjust Annually Succession plans are reviewed annually with updated metrics such as: • % of critical roles with identified successors • Successor readiness distribution (Now/Soon/Later) • Internal mobility and promotion rates • Development plan completion rates • Overall organizational bench strength trends HR compiles this information into an Annual Succession Planning Report for executive leadership. 5. RACI Matrix: Roles & Responsibilities R = Responsible | A = Accountable | C = Consulted | I = Informed Activity HR Leadership/GM Managers/Supervisors Employees Identify critical roles APPENDIX A – SUCCESSION PLANNING FRAMEWORK © Macias Gini & O’Connell LLP | 18 Develop competency profiles R A C I Conduct talent assessments C A R I Identify successors C A R I Create IDPs C A R R Quarterly check-ins I C R R Annual reporting R A C I 6. Three-Year Rolling Prioritization Plan OC San will maintain a rolling 3-year focus that evolves annually based on: • Critical roles with immediate vacancy or retirement risk • Roles with limited or no internal successors • Roles that are high-cost or high-difficulty to recruit • Roles undergoing technological, regulatory, or organizational change Three-Year Focus Areas: Year 1: Address immediate vulnerabilities; accelerate development for Ready-Now or Ready-Soon talent. Year 2: Strengthen the pipeline and expand cross-training/rotational development. Year 3: Build leadership capacity aligned with long-term organizational strategy and future skill needs. Progress and priorities will be updated annually based on organizational changes, workforce trends, and leadership directives. APPENDIX B – MGO RATINGS DEFINITIONS © Macias Gini & O’Connell LLP | 19 Appendix B – MGO Ratings Definitions Observation Risk Rating Definitions Report Rating Definitions Rating Definition Rating Explanation Low Process improvements exist but are not an immediate priority for OC San. Taking advantage of these opportunities would be considered best practice for OC San. Low Adequate internal controls are in place and operating effectively. Few, if any, improvements in the internal control structure are required. Observation should be limited to only low risk observations identified or moderate observations which are not pervasive in nature. Medium Process improvement opportunities exist to help OC San meet or improve its goals, meet or improve its internal control structure, and further protect its brand or public perception. This opportunity should be considered in the near term. Medium Certain internal controls are either: • Not in place or are not operating effectively, which in the aggregate, represent a significant lack of control in one or more of the areas within the scope of the Assessment. • Several moderate control weaknesses in one process, or a combination of high and moderate weaknesses which collectively are not pervasive. High Significant process improvement opportunities exist to help OC San meet or improve its goals, meet or improve its internal control structure, and further protect its brand or public perception. This opportunity should be considered as soon as possible. High In consideration of the magnitude of risks to the Program, significant reporting and internal control deficiencies exist, are not in place, or are operating ineffectively in the category area within the scope of this Assessment. Business risks exist which have the potential to create situations that could significantly impact the Authority. • Critical control weaknesses (breakdown) in the overall control environment in part of the business or the process being assessed. • Significant non-compliance with laws and regulations. • Mid to High-risk observations which are pervasive in nature. Not Rated Observation identified is not considered a control or process improvement opportunity but should be considered by management or the Board, as appropriate. Not Rated Adequate internal controls are in place and operating effectively. No reportable observations were identified during the Assessment. APPENDIX B – MGO RATINGS DEFINITIONS © Macias Gini & O’Connell LLP | 20 (1) Risk ratings assigned by the MGO Team are based on professional judgement. Professional judgement is generally defined by the American Institute of Certified Public Accountants (AICPA) as the application of the accumulated knowledge gained through training and experience and by making use of the ethical standards, which results in making informed decisions about the level of risks and the courses of recommended actions that are appropriate in specific circumstances. MGO mgocpa.com Orange County Sanitation District Supply Chain & Vendor Management Practices Engagement April 29, 2026 EXECUTIVE SUMMARY © Macias Gini & O’Connell LLP | 2 Table of Contents Executive Summary ........................................................................................ 3 Objective ......................................................................................................... 3 Scope & Methodology ..................................................................................... 4 Current State ................................................................................................... 5 Strategic Context ............................................................................................ 5 Summary of Observations .............................................................................. 6 Observations Narrative ................................................................................... 7 Recommendations ......................................................................................... 8 Appendix A – Vendor Management Enhancements Recommendations .... 13 Appendix B – MGO Ratings Definitions ........................................................ 14 EXECUTIVE SUMMARY © Macias Gini & O’Connell LLP | 3 Executive Summary OC San operates within a challenging procurement environment in California. Highly specialized wastewater treatment equipment such as pumps, clarifier mechanisms, process‑control components, and custom- fabricated materials are often produced by only one or two manufacturers, many of which can be international. This leads to unavoidable sole‑source procurements and long global lead times that can exceed a year. California’s public‑contracting requirements and policies further limit procurement flexibility, and OC San’s fixed five‑year rate structure limits OC Sans ability to absorb inflationary cost increases and global market volatility. Within this environment, OC San has established and maintained strong procurement governance. OC San’s purchasing ordinance, competitive‑bidding rules, documented SOP framework, and clear approval workflows create a solid foundation of transparency, compliance, and internal control. Staff in Purchasing, Warehouse, Contracts, and Accounts Payable demonstrate high professionalism and adapt effectively to market constraints. OC San’s supply chain and vendor challenges are not the result of internal execution failures. They are the predictable outcome of structural market shifts colliding with rigid organizational guardrails. Vendor consolidation, price escalation, labor scarcity, and declining contractor interest have materially altered the operating environment. OC San is already proactively mitigating external market pressures through early procurement of long‑lead assets, increased inventory buffering, diversification of pump suppliers, and strong cross‑divisional coordination. The recommendations in this report build upon those strengths to advance efficiency, visibility, and long‑term operational reliability. In response, the organization has taken steps to mitigate the impacts of the realizties of the operating environment. These actions are rational and competent, but increasingly defensive and incremental. The cumulative effect is growing reliance on short term operational repairs, deferred capital and maintenance decisions, and erosion of financial maneuverability. The opportunities identified in this assessment do not reflect systemic internal control weaknesses; instead, they represent modernization enhancements that will strengthen and enhance organizational resilience against structural market realities. These include implementing a district‑wide vendor‑performance framework, establishing documentation and system‑of‑record standards, expanding data‑governance expectations, and incorporating inflation‑aware procurement guidance. Objective Between December 2025 and February 2026, Macias Gini & O’Connell (MGO) evaluated the Orange County Sanitation District’s (OC San) procurement, vendor‑management, and supply chain practices. This review was conducted in alignment with the 2025 Enterprise Risk Assessment and focused on OC San’s ability to maintain operational continuity in an increasingly constrained supply chain environment. The primary objective of this assessment was to evaluate supply chain resilience, supplier selection & diversification & vendor performance and monitoring ensuring management against industry best practices. SCOPE & METHODOLOGY © Macias Gini & O’Connell LLP | 4 Scope & Methodology This assessment focused on evaluating key components of OC San’s supply chain and vendor management practices to identify strengths, gaps, and opportunities for improvement. The scope included: • Reviewing procurement policies, procedures, and supplier selection criteria to assess compliance with legal standards, clarity of contracting templates, and effectiveness in managing risk, performance expectations, and accountability. • Assessing supply chain resilience and continuity practices by evaluating procurement processes for critical materials and services, contingency planning for supply disruptions, and the adequacy of continuity and redundancy measures. • Evaluating vendor diversification and sourcing strategies including vendor concentration risks, availability of alternative suppliers, contract redundancy, and alignment with industry standards and peer public utility practices. • Analyzing vendor performance monitoring and lifecycle management practices to determine the effectiveness of performance measurement, post-award oversight, issue escalation, contract close- out procedures, and vendor data management such as insurance, audits, and renewals. • Conducting a preliminary assessment of internal practices to identify areas of strength and opportunities for improvement across project delivery and governance. The assessment was conducted in three phases: information gathering, analysis, and reporting. Information Gathering During this phase, the MGO team: • Initiated with an entrance meeting in November 2025. • Requested and reviewed supporting documents including internal forms, procedural documents, and example process documentation. • Interviewed 27 staff members from Financial Management, Contracts, Purchasing and Materials Management, Operations and Maintenance (O&M), and Engineering to validate and corroborate observations. Analysis During this phase, the MGO team: • Reviewed key policy and procedure documents, including: o Procurement policies, sole source justification forms, and emergency procurement tools. o Vendor performance tracking reports, satisfaction surveys, and outreach plans and materials. o Accounts payable and capital accounting procedures and record retention schedules. o Asset lifecycle planning documents and training materials for procurement and contracts. Reporting During this phase, the MGO team: • Conducted meetings with the project sponsor summarizing observations. • Delivered a draft report. • Conducted an exit meeting. • Reviewed and documented any corrective actions taken in response to observations. CURRENT STATE © Macias Gini & O’Connell LLP | 5 Current State OC San’s supply chain and vendor management function underpins daily operations across plant maintenance, capital program delivery, and warehouse and inventory management. The function spans the full procure-to-pay lifecycle, including requisition initiation, sourcing and contracting, goods receipt and inventory control, invoice processing, and vendor coordination necessary to sustain operational reliability. Vendor performance management is presently decentralized. Individual departments monitor late deliveries, shipment discrepancies, documentation gaps, and invoice issues independently—typically through email correspondence or locally maintained spreadsheets. Because this information is not consolidated into a centralized, district-wide view, OC San lacks the ability to identify cross-functional performance trends, assess vendor reliability holistically, or systematically incorporate performance data into future procurement planning, reorder strategies, or contract renewals. Procurement activities are executed across multiple systems, including JD Edwards, Maximo, PMWeb, OpenGov, and SharePoint. Each division relies on these platforms for discrete components of the procure-to- pay process. While each system provides necessary functionality within its domain, the absence of a unified system of record results in fragmented data, duplicative documentation, and ongoing manual reconciliation across teams. This environment increases administrative burden and limits real-time visibility into procurement status and vendor activity. OC San’s purchasing ordinance and associated standard operating procedures establish clear requirements for competitive bidding, approval workflows, documentation standards, and contract administration. These policies are comprehensive and well defined. However, day-to-day execution often relies heavily on staff experience and institutional knowledge rather than standardized templates, automated workflows, or shared performance dashboards. This reliance contributes to variability in how requisitions, change orders, sole- source justifications, and supporting documentation are prepared and maintained. Overall, the current operating model reflects a procurement function that continues to perform reliably due to strong interdepartmental coordination and disciplined adherence to required procedures. At the same time, opportunities exist to enhance consistency, centralize performance data, and improve system-level visibility across vendors and transactions. Strengthening these elements would support more informed decision- making and reduce administrative friction as procurement demands continue to evolve. Our detailed observations are presented in Table 1. Definitions of the rating scale are included in Appendix B. Strategic Context OC San operates as a specialized special district delivering critical, non-discretionary services in a market that has fundamentally changed: • Vendor pools have consolidated, reducing competition and increasing supplier leverage. • Input costs have structurally reset upward, not temporarily spiked. • Contractors are selectively bidding, prioritizing clients with flexibility, scale, and risk tolerance. • Supply chains have shifted away from predictability, undermining legacy just-in-time assumptions. SUMMARY OF OBSERVATIONS © Macias Gini & O’Connell LLP | 6 OC San’s internal posture, however, remains anchored to a pre-disruption operating model—one that assumes competitive markets, stable pricing, and the ability to plan linearly within a fixed rate horizon. The mismatch between external volatility and internal rigidity is the core strategic issue. OC San’s operational adjustments (increased outreach, added inventory, selective in-house fabrication, process tweaks, and targeted obsolescence) are rational tactical responses. They buy time and, in some cases, preserve service continuity. But they do not address the core problem: the market has less capacity and more pricing power. Those mitigations convert external volatility into internal exposures. Inventory ties up cash, in-house fixes increase fixed-cost commitments, and project deferrals accumulate escalation risk that is not captured on the balance sheet. Recent market changes have reduced supplier availability and materially increased the cost and schedule risk of essential goods and services. OC San’s current practice of deferring work, expanding inventory, and substituting vendor capacity preserves near-term rate stability but transfers risk into future periods in ways that functionally resemble unrecorded financing. Continuing current practice will likely produce more frequent, more expensive emergency procurements, compressed schedules that inflate contractor premiums, and increased potential for service delivery disruptions that are expensive. Summary of Observations OC San is not facing a procurement problem. It is facing a financial resilience problem driven by irreversible market changes interacting with fixed institutional constraints. The primary risk is not overspending, but the gradual loss of flexibility, optionality, and long-term cost control through deferral and implicit risk absorption. Table 1: Observations # Observation Risk 1 Vendor performance is not tracked systematically, limiting visibility into delivery reliability and quality issues. Medium 2 Documentation inconsistencies can lead to duplicate records and reduced data reliability across the procure-to-pay lifecycle. Medium 3 Rising materials costs combined with a fixed five‑year rate plan constrain financial flexibility. Medium 4 Reliance on institutional knowledge creates variability in process execution. Low 5 System and process gaps affect cross‑functional visibility and decision‑making. Low 6 Barriers to entry & industry constraints limit competition. Low 7 Need for on demand training & succession planning. Low OBSERVATIONS NARRATIVE © Macias Gini & O’Connell LLP | 7 Observations Narrative OC San’s supply chain and vendor challenges are occurring within a materially altered operating environment that is largely outside OC San’s direct control. Over the past several years, vendor consolidation, labor constraints, and sustained cost escalation have reduced competition, limited supplier availability, and increased pricing volatility across core goods and services required for wastewater operations and capital delivery. These conditions are no longer episodic or transitional; they reflect structural changes in the market for specialized public utility vendors. At the same time, OC San operates within organizational guardrails that constrain its ability to respond flexibly to these external pressures. The District’s reliance on a fixed multi-year rate plan and its longstanding policy of avoiding debt issuance limit near-term financial maneuverability and reduce the range of available responses to unanticipated cost increases or supply disruptions. As a result, OC San has limited capacity to absorb volatility through pricing, financing, or accelerated investment. In this context, OC San has implemented a range of pragmatic operational adjustments, including increased vendor outreach, expanded inventory and warehouse capacity, reduced reliance on just-in-time purchasing, process changes, in-house fabrication where feasible, and selective obsolescence of legacy components. These actions are reasonable and consistent with how similarly situated agencies have responded to supply chain instability. However, they are primarily compensatory in nature and do not address the underlying market dynamics driving vendor scarcity and cost escalation. The cumulative effect of these conditions is an increasing reliance on short-term mitigations and project deferrals to maintain rate stability and operational continuity. While these actions may reduce immediate financial pressure, they also introduce longer-term risks by narrowing future options, compressing delivery schedules, and increasing exposure to further escalation. In practice, deferred capital work, extended maintenance cycles, and inventory substitutions function as implicit risk-transfer mechanisms, shifting cost and execution risk into future periods rather than eliminating it. Importantly, the absence of formal vendor management structures or performance frameworks does not appear to be the primary driver of current challenges. Given the limited depth of the vendor market and reduced supplier leverage available to public agencies, OC San’s ability to enforce performance norms or obtain meaningful recourse beyond existing contractual mechanisms is inherently constrained. Enhancements to vendor management processes may improve visibility and documentation but are unlikely, on their own, to materially change market outcomes. Taken together, these factors suggest that the primary risk facing OC San is not procurement noncompliance or operational inefficiency, but a gradual erosion of organizational resilience and financial optionality. As external conditions persist, OC San’s capacity to respond to future disruptions—whether supply-related, financial, or operational—may continue to diminish unless tradeoffs are made more explicit and risks are more directly acknowledged at the organizational level. The following section provides a detailed expansion of our observations, offering targeted recommendations designed to address the specific risk areas and potential mitigants identified during our engagement. RECOMMENDATIONS © Macias Gini & O’Connell LLP | 8 Recommendations Observation 1: Vendor performance is not tracked systematically, limiting visibility into delivery reliability and quality issues. OC San maintains strong procurement governance through its purchasing ordinance and related standard operating procedures (SOPs) covering competitive bidding, requisitioning, sole‑source justification, ProCard use, and long‑term contract procedures. However, none of OC San’s policies require structured, post‑award vendor performance monitoring, and no system‑of‑record exists for tracking supplier reliability or service quality across the organization. Today, vendor performance issues such as late deliveries, missing packing slips, wrong items, extended lead‑time variability, invoice discrepancies, or responsiveness concerns can be captured informally within individual divisions (e.g., Financial Management, Contracts, Purchasing and Materials Management, Operations and Maintenance (O&M), and Engineering). These data points are often maintained in Outlook threads, personal notes, or local spreadsheets, and are not consolidated, shared, or incorporated into procurement decisions, strategic sourcing activities, contract monitoring, or renewal evaluations. Additionally, OC San’s multi‑system environment (Maximo, JD Edwards, SharePoint) disperses purchasing, receiving, and invoicing information. Without a unified view, OC San is unable to reliably evaluate historical vendor performance or identify systemic issues that may affect plant operations, maintenance scheduling, or project timelines. While vendor quality dips were not noted by all divisions, these challenges are occurring in the context of industry‑wide supply chain constraints. Due to market consolidation, OC San’s available vendor pool is smaller, and many suppliers are prioritizing private‑sector clients with more flexible scopes or terms. As a result, rigid performance requirements may not always align with available alternatives. OC San has mitigated many risks through proactive purchasing, increased inventory, and operational adjustments; however, the absence of a district‑wide vendor management framework limits the ability to systematically assess trends, prepare for future disruptions, or convert localized mitigation efforts into organizational learning. To strengthen operational reliability and improve long‑term procurement decision‑making, OC San would benefit from implementing a scalable and tiered vendor performance management approach that reflects the realities of the public sector and the limited vendor pool. MGO has added additional information for recommendations 1 – 3 in Appendix A. Recommendation 1: Establish a tiered vendor performance program based on commodity type and market risk. Recommendation 2: Explore creating a district‑wide “vendor event log” to capture issues and reestablish accurate lead times. Recommendation 3: Incorporate vendor performance data into contract renewals, sole‑source justifications, and ongoing vendor management. RECOMMENDATIONS © Macias Gini & O’Connell LLP | 9 Observation 2: Documentation inconsistencies can lead to duplicate records and reduced data reliability across the procure-to-pay lifecycle. OC San’s procurement and Public Works procedures require extensive documentation; however, the SOPs do not establish district‑wide standards for naming conventions, metadata requirements, folder structures, or system of record assignments. As a result, requisitions, justification letters, bid tabulations, evaluation documents, and ProCard backup are stored inconsistently across JD Edwards, SharePoint, PMWeb, and Maximo. While certain areas such as Emergency Purchases and Public Works Change Management demonstrate strong documentation expectations, these processes still rely heavily on manual attachments, disconnected systems, and non‑standardized forms. This contributes to duplicate records, inconsistent labeling, and ongoing issues such as duplicate part creation in Maximo. Interviews further confirmed that naming conventions differ by division and SharePoint/Maximo records lack uniform structure. Although OC San’s Records Retention Schedule provides robust guidance on retention and destruction of official records, it does not define the metadata, naming rules, or taxonomy needed to support consistent documentation practices across departments. These gaps reduce data reliability across the procure‑to‑pay lifecycle and create significant inefficiencies. Staff in Accounts Payable, Warehouse, Capital Accounting, and Contracts frequently perform manual reconciliations due to mismatched or duplicate documentation, and multi‑system workflows introduce version‑control risk for capital project. Without a unified approach to document control, OC San’s ability to maintain accurate, accessible, and audit‑ready records is diminished, increasing operational workload and reducing confidence in procurement and project data. To address these issues, OC San should implement a district‑wide document‑control framework that establishes consistent expectations for all procurement, contracts, maintenance, and capital project files. This should include creating a standardized taxonomy and naming structure; defining required metadata fields such as project number, vendor, commodity code, revision, and fiscal year; and establishing uniform folder structures within SharePoint and other repositories. Integrating these standards into existing SOPs along with the use of controlled templates for justification memos, price evaluations, cost estimates, and change management tools would significantly reduce duplication, strengthen data integrity, and streamline reconciliation and audit processes. Recommendation 4: Establish a district‑wide document standard that defines naming conventions, required metadata and standardized folder structures for all procurement, contracting, maintenance, and capital project documentation. Recommendation 5: Designate and document system of record requirements for each document type across systems, ensuring consistent file storage, retrieval, and version control throughout the agency. Recommendation 6: Continue the work, already underway, assessing the feasibility of migrating toward an interoperable finance system environment. Recommendation 7: Assess potential gaps, duplications, or otherwise tied to multiple system(s) access and segregation of duties. RECOMMENDATIONS © Macias Gini & O’Connell LLP | 10 Observation 3: Rising materials costs combined with a fixed five‑year rate plan constrain financial flexibility. OC San operates under a fixed five‑year rate plan, which could limit its financial flexibility as material costs continue to rise. Although the Emergency Purchases SOP and Purchasing procedures emphasize minimizing emergency buys and achieving cost savings, they do not address pricing strategy, inflation‑sensitive procurement, or the use of escalation clauses and cooperative contracts. The policies also lack guidance on cost caps, pre‑negotiated emergency rates, commodity‑specific sourcing strategies, or long‑term cost modeling tied to rate structures. Despite these gaps, Engineering and Operations have demonstrated strong operational resilience by increasing inventory levels to buffer supply chain volatility, procuring long‑lead assets early, responsibly extending asset life cycles when necessary, and exploring U.S.‑based pump alternatives to reduce European supply chain exposure. These measures help offset volatility, but the absence of formal guidance within procurement SOPs limits OC San’s ability to systematically manage inflation‑impacted purchasing. No SOP requires evaluating cost escalators, forecasting inflation‑sensitive materials, or pursuing consolidation strategies. Without a structured cost‑management framework, rising material costs can exacerbate budget pressure and emergency purchases can further elevate unit costs and freight expenses under OC San’s fixed rate environment. Adding inflation‑aware procurement practices and cost‑management tools to existing SOPs would strengthen long‑term financial resilience and support more predictable budgeting under fixed rate plans. Without changing the rate plan or issuing debt, finance leadership can still act in a variety of ways: 1) Explicitly classify deferral as financial exposure 2) Reframe ‘affordability’ and ‘responsiveness’ internally 3) Prioritize schedule certainty 4) Adjust the perspective on market volatility from temporary to permanent 5) Preserve liquidity and optionality whenever possible Recommendation 8: Explore incorporating long‑term cost‑forecasting and inflation‑risk planning into procurement SOPs, including multi‑year cost modeling tied to rate plans and early budgeting adjustments based on lead‑time trends and cost indices. Recommendation 9: Shift organizational culture to align with new market and labor realities. Observation 4: Reliance on institutional knowledge creates variability in process execution. OC San’s change-order and procurement procedures are detailed, but their execution still depends heavily on professional judgment and institutional knowledge. Change-order processing requires staff to interpret scope, select the appropriate change order method, assess contractor documentation, and prepare technical documents such as independent cost estimations, time impact analyses, pre-negotiation plans, and records of negotiations. Similar reliance on experience is required for sole-source justifications, JD Edwards requisitioning, assembling complete attachment packages, and documenting evaluations. Because SOPs do not include standardized templates, job aids, examples, or documented training expectations, staff often rely on informal knowledge transfer, which varies across divisions. RECOMMENDATIONS © Macias Gini & O’Connell LLP | 11 This is most evident in emergency purchasing, where after-hours vendor selection depends on individual memory rather than pre-approved vendor lists. While some areas such as Contracts’ checklists and Warehouse’s Maximo retraining help reduce variability, OC San lacks a formal mechanism to ensure process consistency when staff onboard, transition roles, or depart. The record retention schedule also does not define requirements for preserving role-specific responsibilities or ensuring continuity when document owners and approvers change. These gaps introduce variability in how change orders, requisitions, and justifications are prepared and documented, reducing consistency and increasing the risk of incomplete or uneven application of procurement and contracting requirements. Strengthening SOPs with standardized tools, training, and role-continuity expectations would reduce reliance on individual experience and improve documentation quality across teams. Recommendation 10: Add role transition and knowledge retention documentation requirements to record retention policy and standard operating procedures. Recommendation 11: Implement job aids and examples for common documentation to reduce reliance on staff interpretation and internally held process knowledge. Observation 5: Multiple systems and process gaps affect cross‑functional visibility and decision‑making. OC San’s procurement, change‑order, and financial workflows operate across multiple systems such as Maximo, JD Edwards, OpenGov, PMWeb, and SharePoint with no defined system of record or cross‑system data governance. Although staff maintain strong service levels through manual checking and collaboration, the underlying processes remain fragmented and require significant reconciliation effort. Change‑order workflows involve multiple roles (Project Manager, Resident Engineers, Contracts, Engineering, Accounting, and the General Manager), yet none of the SOPs define how change‑order data is to flow across JD Edwards, PMWeb, or SharePoint, nor do they specify reconciliation frequency, ownership of cross‑system updates, or requirements for digital workflows or reporting dashboards. Similar gaps exist in procurement, ProCard, blanket PO, and requisition processes, all of which rely heavily on manual routing and uploads. These omissions result in inconsistent visibility. Without formalized data governance and system‑of‑record standards, OC San’s cross‑functional decision‑making remains dependent on manual processes, individual knowledge, and departmental workarounds. Addressing these gaps through a unified data‑governance framework would significantly reduce reconciliation workload, strengthen reporting accuracy, and ensure consistent visibility across procurement, contracting, maintenance, and capital‑project teams. Recommendation 12: Insert a “Cross‑System Data Governance” section into the Purchasing SOP or create a standalone policy that defines: System of record for each data type (vendor, purchase order, invoice, contract, inventory), required reconciliation frequency, and integrated reporting standards. Observation 6: Barriers to entry and industry constraints limit competition. OC San’s policy SOP 401‑1‑07 Sole Source Purchases establish strong expectations for competitive procurement, requiring clear justification for sole‑source awards, defined approval workflows, and Board RECOMMENDATIONS © Macias Gini & O’Connell LLP | 12 thresholds. Multi‑step sealed bids, competitive proposals, and prequalification processes reinforce competitive integrity. OC San also takes proactive steps to expand supplier participation, such as piloting U.S.‑based pump alternatives, maintaining multiple on‑call contracts to keep vendor pools competitive, and providing outreach through PlanetBids, newsletters, and the “Doing Business” portal. These practices demonstrate a commitment to minimizing non‑competitive purchasing. However, the procedures do not include mechanisms for periodic market testing, ongoing review of sole‑source categories, monitoring supplier concentration by commodity group, or formal strategies for commodities with limited competition. In addition, guidance documents do not explicitly address pre‑qualification strategies for constrained markets, use of alternative procurement methods to broaden competition, or targeted supplier‑development efforts for small or local firms. Integrating these elements into SOP 401‑1‑07 would help OC San ensure long‑term competition, reduce supplier dependency, and support broader vendor access for complex technical scopes. Recommendation 13: Incorporate periodic market testing and supplier‑concentration monitoring into SOP 401‑1‑07 to ensure ongoing competition and identify areas where sole‑source reliance is increasing. Recommendation 14: Explore expanding vendor‑access strategies by adding commodity‑specific sourcing approaches, pre‑solicitation vendor education, and readiness sessions for small/local firms to the Purchasing Ordinance and vendor‑outreach materials. Observation 7: Need for on demand training and succession planning. In‑person training is highly valued and actively delivered, especially for Maximo, OpenGov, and JD Edwards. Warehouse is leading new Maximo retraining cycles after identifying adoption gaps. Cross-team collaboration naturally supports informal knowledge transfer and succession readiness. Multiple groups want recorded or self‑paced training, but no policy document (SOP, record retention policy, or Purchasing guidance) defines training requirements, frequency, or format. Turnover in Planning, Maintenance, and Purchasing has already created variability in system use and documentation quality. Recommendation 15: Explore training module software to provide employees with self-paced learning opportunities. Recommendation 16: Assess key departmental and positional succession risks and develop succession plans accordingly. Create a standard process and procedure for visiting these succession plans annually and assessing additional risks and plans. APPENDIX A – VENDOR MANAGEMENT ENHANCEMENTS RECOMMENDATIONS © Macias Gini & O’Connell LLP | 13 Appendix A – Vendor Management Enhancements Recommendations Recommendation 1: Establish a Tiered Vendor Performance Program Based on Commodity Type and Market Risk To avoid overburdening specialized or sole‑source vendors while still improving visibility across routine commodities, OC San should adopt a flexible, tiered performance model. It is recommended OC San begin with smaller, widely available items while maintaining flexibility for high‑complexity categories. • Tier 1 – Widely available commodities (e.g., batteries, janitorial supplies, PPE): Apply standard metrics (on‑time delivery, correct quantities, documentation accuracy). • Tier 2 – Common maintenance, repair, and operations support items: Use a simplified scorecard and quarterly review. • Tier 3 – Specialized, sole‑source, or custom‑fabricated items: Track performance consistently, but use results to adjust expectations and planning, not to drive vendor switching. Recommendation 2: Explore Creating a District‑Wide “Vendor Event Log” to Capture Issues and Reestablish Accurate Lead Times OC San should explore implementing a centralized, light-touch vendor event tracking mechanism (e.g., a standardized SharePoint form or Maximo/ JD Edwards add-on field) to capture delivery issues, documentation errors, responsiveness problems, and invoice discrepancies. The goal is not to force vendor changes, but to retime ordering and improve planning based on real-world performance. Consolidating this information will enable: • Recalibration of actual lead times • Improved reorder point planning • Reduction of emergency purchasing and expediting • Better coordination across Warehouse, AP, O&M, and Purchasing • Heightened visibility into chronic vendor issues Recommendation 3: Incorporate Vendor Performance Data Into Contract Renewals, Sole‑Source Justifications, and Ongoing Vendor Management OC San should incorporate vendor performance metrics as supporting evidence for: Long‑term contract renewals, annual vendor reviews, sole- source justification memos, and market checks and sourcing strategies. Performance data should inform, not determine, procurement decisions. For markets with limited vendor choice, the purpose is transparency, expectation setting, and continuous improvement rather than punitive measures. This provides a defensible, data‑backed basis for procurement decisions while respecting market constraints. APPENDIX B – MGO RATINGS DEFINITIONS © Macias Gini & O’Connell LLP | 14 Appendix B – MGO Ratings Definitions Observation Risk Rating Definitions Report Rating Definitions Rating Definition Rating Explanation Low Process improvements exist but are not an immediate priority for OC San. Taking advantage of these opportunities would be considered best practice for OC San. Low Adequate internal controls are in place and operating effectively. Few, if any, improvements in the internal control structure are required. Observation should be limited to only low risk observations identified or moderate observations which are not pervasive in nature. Medium Process improvement opportunities exist to help OC San meet or improve its goals, meet or improve its internal control structure, and further protect its brand or public perception. This opportunity should be considered in the near term. Medium Certain internal controls are either: • Not in place or are not operating effectively, which in the aggregate, represent a significant lack of control in one or more of the areas within the scope of the assessment. • Several moderate control weaknesses in one process, or a combination of high and moderate weaknesses which collectively are not pervasive. (1) Risk ratings assigned by the MGO Team are based on professional judgement. Professional judgement is generally defined by the American Institute of Certified Public Accountants (AICPA) as the application of the accumulated knowledge gained through training and experience and by making use of the ethical standards, which results in making informed decisions about the level of risks and the courses of recommended actions that are appropriate in specific circumstances. MGO mgocpa.com © 2025 MACIAS GINI & O'CONNELL LLP —CONFIDENTIAL1 Orange County Sanitation District Internal Audit: Succession Planning Project Overview Overview In alignment with the findings of OC San’s April 2025 Enterprise Risk Assessment, this engagement focuses on: •Assessing the organization’s succession planning framework to ensure it includes key elements such as identification of critical roles, talent assessment, development plans,and contingency strategies. •Review implementation knowledge transfer strategies, such as adequacy of training,mentorship program,and documentation of best practices,to help preserve critical information MGO worked collaboratively on this internal audit activity with OC San’s Human Resources and affected departments/divisions to assess the management practices. © 2025 MACIAS GINI & O'CONNELL LLP2 © 2025 MACIAS GINI & O'CONNELL LLP 3 Scope Evaluation focused on: •Key components of OC San’s succession planning •Broader human capital practices •Identify strengths, risks, and opportunities to enhance workforce continuity Methodology Approached the assessment with a review of the following criteria: •Governance •Framework •Implementation Scope and Methodology © 2025 MACIAS GINI & O'CONNELL LLP 4 Approach Kick-off meeting HR operating metrics Compensation structure Training and development Document request Interviews with key stakeholders Retirement eligibility forecasts Reporting Information Gathering Analysis Pipeline development © 2025 MACIAS GINI & O'CONNELL LLP Current State Strengths 5 •Annual assessment ofretirement eligibility •Extensive SOPs in operations and maintenance to support continuity Succession Plan Development •Strong education institution pipelines •Established internship program •Flexible, proactive recruitment approach Talent Acquisition and Marketing •Structured evaluationcycle •HR provided guidance Performance Evaluation and Marketing •Established, responsive training programs •Extensive operations and maintenance training Training and Development •75th percentile target •Benefits supporting development Compensation and Benefits © 2025 MACIAS GINI & O'CONNELL LLP 6 Observations Absence of a modern, documented succession framework Inconsistent internal pipelines Recommendations Document OC San’s succession plan to communicate strategy internally and externally. Observations and Recommendations SUCCESSION PLAN DEVELOPMENT © 2025 MACIAS GINI & O'CONNELL LLP 7 Observations Some recruitment timelines remain lengthy Inconsistent competitiveness for specialized and trade roles Recommendations Consider evaluating broader market benchmarks, including private sector data, within ongoing classification and compensation studies. Consider reviewing recruitment and retention tools to ensure alignment with organizational and market needs Observations and Recommendations TALENT ACQUISITION AND MARKETING © 2025 MACIAS GINI & O'CONNELL LLP 8 Observations Inconsistent manager check-ins and coaching practices Goal-setting discipline varies across departments Recommendations Incorporate coaching requirements as core competencies in performance reviews for position levels, supervisors and above, to reinforce the cultural expectation of a continually growing and training workforce. Require departments to set position goals that align with department goals, appropriate to the position level, within the Cornerstone HRIS system. Observations and Recommendations PERFORMANCE EVALUATION AND COACHING ©© 22002255 MMAACCIIAASS GGIINNII & & OO''CCOONNNNEELL LLP LL LLP Acknowledgements 9 ©© 22002255 MMAACCIIAASS GGIINNII & & OO''CCOONNNNEELL LLP LL LLP — Questions? 10 © 2025 MACIAS GINI & O'CONNELL LLP —CONFIDENTIAL1 Orange CountySanitation DistrictInternal Audit: Supply Chain and Vendor Management Project Overview Overview In alignment with the findings of OC San’s April 2025 Enterprise Risk Assessment, this engagement focuses on mitigating OC San’s supply chain and vendor management risks, which have been identified as moderate to high priority enterprise risks. MGO worked collaboratively on this internal audit activity with OC San’s Procurement, Finance, and Operations divisions to evaluate current procurement, vendor monitoring, and supply chain management practices. © 2025 MACIAS GINI & O'CONNELL LLP 2 © 2025 MACIAS GINI & O'CONNELL LLP 3 Approach Kick-off meeting Procurement practices A/P and capital accounting procedures Training materials Document request Interviews with key stakeholders Asset lifecycle planning documents Reporting Information Gathering Analysis Vendor performance © 2025 MACIAS GINI & O'CONNELL LLP Current State 4 Operations remain reliable today due to coordination and staff expertise Increasing reliance on workarounds, deferrals, and short-term fixes Limited transparency and scalability as market pressures intensify © 2025 MACIAS GINI & O'CONNELL LLP Looking Forward 5 District-wide vendor performance tracking Clear systems-of-record and documentation standards Stronger data governance and visibility Inflation-and volatility-aware procurement guidance © 2025 MACIAS GINI & O'CONNELL LLP Market Shift Vs. Legacy Operations Model External Market Reality •Vendor consolidation has led to less competition and more supplier leverage •Costs have reset upward •Contractors bid selectively •Supply chains are less predictable Consequences of Current Mitigations •Tactical responses buy time but shift risk forward—tying up cash, increasing fixed costs, and compounding escalation risk. •If unchanged, outcomes may include more emergency procurements, premium pricing, and increased risk of service disruptions. The Core Strategic Issue •OC San’s internal practices remain rooted in a pre-disruption model of stable pricing, competitive markets, and linear planning. 6 © 2025 MACIAS GINI & O'CONNELL LLP Observations and Recommendations 7 #Observations Risk Recommendations 1 Vendor performance is not consistently tracked.Medium •Implement tiered vendor performance by risk. •Create a district-wide vendor event log. •Apply vendor performance data to renewals and management. 2 Documentation inconsistencies drive duplicate records and reduce data reliability. Medium •Establish district-wide document standards for naming, metadata, and folder structure. •Define systems of record for each document type to ensure version control and retrieval. •Continue evaluating migration to an interoperable finance system environment. •Assess access-related gaps, duplications, and segregation-of-duties risks across systems. © 2025 MACIAS GINI & O'CONNELL LLP Observations and Recommendations 8 #Observations Risk Recommendations 3 Rising material costs and fixed five-year rates limit financial flexibility. Medium •Incorporate long-term cost forecasting and inflation risk into procurement SOPs. •Align organizational culture to evolving market and labor conditions. 4 Reliance on institutional knowledge drives process variability. Low •Require role transition and knowledge retention documentation in policy and SOPs. •Deploy standard job aids to reduce reliance on individual process knowledge. 5 System and process exist.Low •Define cross-system data governance, including systems of record, reconciliation cadence, and reporting standards. © 2025 MACIAS GINI & O'CONNELL LLP Observations and Recommendations 9 #Observations Risk Recommendations 6 Barriers to entry & industry constraints limit competition. Low •Add market testing and supplier-concentration monitoring to SOP 401-1-07. •Expand vendor access through commodity-specific sourcing and targeted outreach. 7 Need for on demand training & succession planning. Low •Provide self-paced training through learning module software. •Assess succession risks and implement annually reviewed succession plans. ©© 22002255 MMAACCIIAASS GGIINNII & & OO''CCOONNNNEELL LLP LL LLP Acknowledgements 10 ©© 22002255 MMAACCIIAASS GGIINNII & & OO''CCOONNNNEELL LLP LL LLP Questions? 11 ORANGE COUNTY SANITATION DISTRICT COMMON ACRONYMS ACWA Association of California Water Agencies LOS Level Of Service RFP Request For Proposal APWA American Public Works Association MGD Million Gallons Per Day RWQCB Regional Water Quality Control Board AQMD Air Quality Management District MOU Memorandum of Understanding SARFPA Santa Ana River Flood Protection Agency ASCE American Society of Civil Engineers NACWA National Association of Clean Water Agencies SARI Santa Ana River Interceptor BOD Biochemical Oxygen Demand NEPA National Environmental Policy Act SARWQCB Santa Ana Regional Water Quality Control Board CARB California Air Resources Board NGOs Non-Governmental Organizations SAWPA Santa Ana Watershed Project Authority CASA California Association of Sanitation Agencies NPDES National Pollutant Discharge Elimination System SCADA Supervisory Control And Data Acquisition CCTV Closed Circuit Television NWRI National Water Research Institute SCAP Southern California Alliance of Publicly Owned CEQA California Environmental Quality Act O & M Operations & Maintenance SCAQMD South Coast Air Quality Management District CIP Capital Improvement Program OCCOG Orange County Council of Governments SOCWA South Orange County Wastewater Authority CRWQCB California Regional Water Quality Control Board OCHCA Orange County Health Care Agency SRF Clean Water State Revolving Fund CWA Clean Water Act OCSD Orange County Sanitation District SSMP Sewer System Management Plan CWEA California Water Environment Association OCWD Orange County Water District SSO Sanitary Sewer Overflow EIR Environmental Impact Report OOBS Ocean Outfall Booster Station SWRCB State Water Resources Control Board EMT Executive Management Team OSHA Occupational Safety and Health Administration TDS Total Dissolved Solids EPA US Environmental Protection Agency PCSA Professional Consultant/Construction TMDL Total Maximum Daily Load FOG Fats, Oils, and Grease PDSA Professional Design Services Agreement TSS Total Suspended Solids gpd gallons per day PFAS Per- and Polyfluoroalkyl Substances WDR Waste Discharge Requirements GWRS Groundwater Replenishment System PFOA Perfluorooctanoic Acid WEF Water Environment Federation ICS Incident Command System PFOS Perfluorooctanesulfonic Acid WERF Water Environment & Reuse Foundation IERP Integrated Emergency Response Plan POTW Publicly Owned Treatment Works WIFIA Water Infrastructure Finance and Innovation Act JPA Joint Powers Authority ppm parts per million WIIN Water Infrastructure Improvements for the LAFCO Local Agency Formation Commission PSA Professional Services Agreement WRDA Water Resources Development Act ORANGE COUNTY SANITATION DISTRICT GLOSSARY OF TERMS ACTIVATED SLUDGE PROCESS – A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen and consume dissolved nutrients in the wastewater. BENTHOS – The community of organisms, such as sea stars, worms, and shrimp, which live on, in, or near the seabed, also known as the benthic zone. BIOCHEMICAL OXYGEN DEMAND (BOD) – The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. BIOGAS – A gas that is produced by the action of anaerobic bacteria on organic waste matter in a digester tank that can be used as a fuel. BIOSOLIDS – Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farmland or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. CAPITAL IMPROVEMENT PROGRAM (CIP) – Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. COLIFORM BACTERIA – A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere, used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. COLLECTIONS SYSTEM – In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. CERTIFICATE OF PARTICIPATION (COP) – A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. CONTAMINANTS OF POTENTIAL CONCERN (CPC) – Pharmaceuticals, hormones, and other organic wastewater contaminants. DILUTION TO THRESHOLD (D/T) – The dilution at which the majority of people detect the odor becomes the D/T for that air sample. GREENHOUSE GASES (GHG) – In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming (“greenhouse effect”). GROUNDWATER REPLENISHMENT SYSTEM (GWRS) – A joint water reclamation project that proactively responds to Southern California’s current and future water needs. This joint project between the Orange County Water District and OCSD provides 70 million gallons per day of drinking quality water to replenish the local groundwater supply. LEVEL OF SERVICE (LOS) – Goals to support environmental and public expectations for performance. N-NITROSODIMETHYLAMINE (NDMA) – A N-nitrosamine suspected cancer-causing agent. It has been found in the GWRS process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. NATIONAL BIOSOLIDS PARTNERSHIP (NBP) – An alliance of the NACWA and WEF, with advisory support from the EPA. NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. PER- AND POLYFLUOROALKYL SUBSTANCES (PFAS) – A large group (over 6,000) of human-made compounds that are resistant to heat, water, and oil and used for a variety of applications including firefighting foam, stain and water-resistant clothing, cosmetics, and food packaging. Two PFAS compounds, perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA) have been the focus of increasing regulatory scrutiny in drinking water and may result in adverse health effects including developmental effects to fetuses during pregnancy, cancer, liver damage, immunosuppression, thyroid effects, and other effects. PERFLUOROOCTANOIC ACID (PFOA) – An ingredient for several industrial applications including carpeting, upholstery, apparel, floor wax, textiles, sealants, food packaging, and cookware (Teflon). PERFLUOROOCTANESULFONIC ACID (PFOS) – A key ingredient in Scotchgard, a fabric protector made by 3M, and used in numerous stain repellents. PLUME – A visible or measurable concentration of discharge from a stationary source or fixed facility. PUBLICLY OWNED TREATMENT WORKS (POTW) – A municipal wastewater treatment plant. SANTA ANA RIVER INTERCEPTOR (SARI) LINE – A regional brine line designed to convey 30 million gallons per day of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. SANITARY SEWER – Separate sewer systems specifically for the carrying of domestic and industrial wastewater. SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT (SCAQMD) – Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. SECONDARY TREATMENT – Biological wastewater treatment, particularly the activated sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. SLUDGE – Untreated solid material created by the treatment of wastewater. TOTAL SUSPENDED SOLIDS (TSS) – The amount of solids floating and in suspension in wastewater. ORANGE COUNTY SANITATION DISTRICT GLOSSARY OF TERMS TRICKLING FILTER – A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. URBAN RUNOFF – Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. WASTEWATER – Any water that enters the sanitary sewer. WATERSHED – A land area from which water drains to a particular water body. OCSD’s service area is in the Santa Ana River Watershed.