Report 2014-122 All Recommendation Responses

Report 2014-122: Ross Valley Sanitary District: The Board and Management Have Only Recently Begun to Address Significant Weaknesses in the District's Financial and Administrative Functions (Release Date: April 2015)

Recommendation #1 To: Ross Valley Sanitary District

The board should ensure that management continues to develop and strengthen its controls over the district's financial and administrative functions. For example, district management should fully implement all of the external auditor's remaining recommendations by June 30, 2015. Management should also ensure that its staff follow these policies and should create and implement a plan for monitoring its system of controls. The board should also consider periodically contracting with qualified professionals to conduct a review of the effectiveness of the district's system of internal controls.

Annual Follow-Up Agency Response From April 2017

Complete. A complete set of Finance Policies has been developed and endorsed by the Board. A set of Accounting and Payroll Procedures has been developed and is used by staff. These policies and procedures address all of the 13 findings from the external auditor.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed these policies and procedures and found them to fully address our recommendation.

1-Year Agency Response

Of the 13 findings from the external auditor, 11 are implemented and 2 are nearing completion.

For inventory controls; physical counts are now a set part of each fiscal year close out, and spot checks of listed assets in inventory are done by the independent financial auditor. The implementation of the inventory tracking tools is in progress, with standard inventory data (part #'s, descriptions, location) being set up for the two information systems which have to share inventory tracking data; QuickBooks Enterprise and Innovyze CMMS. The remaining inventory tracking tool implementation is expected to be complete in FY 2016-17.

A complete set of ten (10) Finance Policy topics was endorsed by the RVSD Board. Four of these have been adopted by the Board, and drafts of two more are pending Board action. The remaining four topic areas will be submitted for Board adoption during FY 16/17.

The scope of work for the independent annual financial audit includes review of the district's internal controls.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Of the 13 findings from the external auditor, 11 are implemented and 2 are in progress.

One finding in progress is finalizing the new inventory controls, which have included 2 years of physical counts and standard processes rolled out for the annual inventory process. The remaining step is for implementing a standard electronic record keeping system for the annual inventory controls.

The one finding still pending is for the adoption of written accounting policies. These will be codified in a new Financial Practices and Controls Policy (Accounting Policy), which will be developed and approved within FY 2015-16. Future financial audit scopes will include steps to monitor compliance with the new FPC Policy.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

Of the 15 findings from the external auditor, 13 are implemented, 1 is in progress, and 1 is pending. The recommendation for timesheets being done by all employees is now fully implemented, with all staff using a new electronic time charging system (Time Control commercial software), and updating their time on a weekly basis. Payroll uses the Time Control software input, via QuickBooks, eliminating use of old paper time sheets and manual input to QuickBooks.

The one finding in progress is finalizing the new inventory controls, which have included 2 years of physical counts and standard processes rolled out for the annual inventory process. The remaining step is for implementing a standard electronic record keeping system for the annual inventory controls.

The one finding still pending is for the adoption of written accounting policies. These will be codified in a new Financial Practices and Controls Policy (Accounting Policy), which will be developed and approved within Q1 of the new FY 2015-16. Future financial audit scopes will include steps to monitor compliance with the new FPC Policy.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #2 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to make it clear that the activities of approving invoices, recording invoices, preparing checks, and reconciling bank statements to the district's records should be performed by separate individuals.

Annual Follow-Up Agency Response From April 2017

Complete. Codified in Accounting and Payroll Procedure, "Accounts Payable Processing"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's policy and agree that the new procedures address our recommendation.

1-Year Agency Response

Standard procedure now. Draft Revenue/Cash Balance Management Policy is pending Board consideration.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

This is Standard practice currently. New Financial Practices and Controls Policy will codify the practice. This new Policy should be adopted by July 2016.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

This is Standard practice currently. New Financial Practices and Controls Policy will codify the practice. This new Policy should be adopted by September 2015.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #3 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to make it clear who is responsible for reviewing and approving monthly bank reconciliations.

Annual Follow-Up Agency Response From April 2017

Complete. Codified in Accounting and Payroll Procedure, "Accounts Payable Processing"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's policy and agree that the new procedures address our recommendation.

1-Year Agency Response

Standard practice now. This responsibility will be specified in the Draft Revenue/Cash Balance Management Policy by FY 16/17.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Will include this information in new Financial Practices and Controls Policy (Accounting Policy).

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Will include this information in new Financial Practices and Controls Policy (Accounting Policy).

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #4 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to limit California lodging costs to the rate set by the State for its employees, and limit any out-of-state lodging costs to rates set by the federal government for its employees. In addition, the district should remove from its travel policy the reimbursement for exercise equipment use.

Annual Follow-Up Agency Response From April 2017

Complete. The District adopted Federal rates, which is standard practice for establishing travel and expense reimbursement.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's new policy and agree that it addresses our recommendation.

1-Year Agency Response

Board adopted a new Travel and Expense Reimbursement Policy in January 2015. The policy includes the required use of government lodging rates when available, and sets a $15 per day limit exercise facility access. A pending update will incorporate consistent use of either state or federal rates and remove the per-day exercise facility allowance.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Will update recently adopted reimbursement policy to clarify the lodging limits and to remove reimbursement for exercise equipment use.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Will update recently adopted reimbursement policy to clarify the lodging limits and to remove reimbursement for exercise equipment use.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #5 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to require periodic reporting of financial information to the board.

1-Year Agency Response

Complete. The Board considered and adopted a policy in February 2016 that requires reporting of financial information to the Board.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

It has been the District's standard practice for last 2 years to provide monthly, quarterly, and annual financial reports to the Board. Will codify this practice in the new FPC Policy.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

District's standard practice for last 2 years has been to provide monthly, quarterly, and annual financial reports to the Board. Will codify this practice in the new FPC Policy.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #6 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to require a periodic review to ensure that only appropriate personnel are included as authorized signers on financial accounts.

1-Year Agency Response

Complete. Standard practice includes reviewing and updating as needed for any personnel or Board changes, and seperate annual review is completed as part of the financial audit. In February 2016, the Board adopted Resolution 16-1500, identifying the correct and authorized staff and Board members designated as check signers.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

Will include in new FP&C Policy.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Will include in new FP&C Policy.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #7 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to establish an appropriate system for tracking and valuing inventory.

Annual Follow-Up Agency Response From April 2017

Complete. A revised Inventory Management and Valuation Policy was adopted by the Board in March 2017 and the District's procedure codified in the Accounting and Payroll Procedure entitled "Inventory Tracking Procedure"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's new inventory tracking procedure and found that it addresses our recommendation.

1-Year Agency Response

In progress. The remaining QuickBooks Enterprise and Innovyze CMMS tracking tool implementation is expected to be complete in FY 2016-17.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

In progress. Expect to have recommended inventory controls by end of FY 2015-16.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

In progress. Expect to have recommended inventory controls by end of FY 2015-16.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #8 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to require employees to obtain their supervisor's approval before working paid overtime.

Annual Follow-Up Agency Response From April 2017

Complete. Codified in Accounting and Payroll Procedure, "Payroll Processing"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's new payroll processing procedure and found that it addresses our recommendation.

1-Year Agency Response

This is current practice, and will be adopted in policy by FY16-17

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Practice implemented per verbal and written direction to supervisors. Will adopt by formal HR policy by end of FY 2015-16.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Practice implemented per verbal and written direction to supervisors. Will adopt by formal HR policy in FY 2015-16.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #9 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to do the following: Require all employees, including managers, to complete timesheets to track time worked and any compensated time off.

60-Day Agency Response

RVSD has implemented the use of a commercial software program, Time Control, for use by all employees up to and including the GM, for use in weekly time reporting. Time Control data is reviewed by the appropriate payroll person and directly input to QuickBooks. Time Control provides for review and approval by responsible supervisors before releasing to payroll.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #10 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to develop and document a process for reviewing and monitoring designated employees' and board members' filing of Form 700.

1-Year Agency Response

Complete. The Board adopted an Ethics Policy in August 2015; the Board adopted Resoltion 12-1450 in 2012 that addresses Form 700 filing.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The Board adopted an Ethics Policy in August 2015; a policy update will be agendized for the Board's consideration to include direction on process for Form 700 administration in December 2015.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Will include in new Conflict of Interest Policy, by Q1 of FY 2015-16.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #11 To: Ross Valley Sanitary District

The district should strengthen its financial and administrative policies to do the following: Develop and document a policy that requires board members and designated employees to attend ethics training biannually and a process for monitoring attendance.

6-Month Agency Response

In August, 2015, the Board adopted an Ethics Policy which addresses ethics training.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

Will include in new Conflict of Interest Policy, by Q1 of FY 2015-16.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #12 To: Ross Valley Sanitary District

To clarify the roles and responsibilities of board members, the district should create a more comprehensive board member manual that describes all of the board's roles and fiduciary responsibilities. This manual should address the best practices contained in the California Special Districts Association's Special District Board Member/Trustee Handbook. The district should also provide for additional training for board members in the following areas over which they exercise important responsibilities: financial management, contracting, emergency procurement, and human resources.

Annual Follow-Up Agency Response From April 2017

Complete. The Board Member Orientation Binder includes the California Special District Association Handbook. Regular training is provided to the Board regarding their responsibilities, described in the Board of Directors Policy entitled "Board Professional Development, Training, and Education"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's new policy on board member training and found that it addresses our recommendation.

1-Year Agency Response

The Board Member Orientation Binder has been revised to include the California Special District Association (CSDA) Handbook.

Training for the Board is in progress. Regular training is made available through the California Special District Association and other resources. Training on Board roles and responsibilities will be addressed in policy, to be completed by FY 16-17.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

A complete revision to the Board policies and procedures has been initiated. It is estimated to take between 12-18 months for the Board to consider all policies, with an estimated completion at the beginning of 2017. Board member orientation binder will be revised to include the California Special District (CSDA) Handbook.

Board policies are being updated to specify Board Director duties and responsibilities, similar to a job description. Professional development and minimum required training will be added to address Board roles in financial management, public contracting, human resources, and other key areas. Expect completion within 12-18 months.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Board Member Orientation Binder will be revised to include the California Special Districts Association (CSDA) Handbook.

Board policies will be updated to specify Board Director duties and responsibilities, similar to a job description. Professional development and minimum required training will be added to address Board roles in financial management, public contracting, human resources, and other key areas.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #13 To: Ross Valley Sanitary District

The board should reduce the salary ranges for all positions in the district's salary schedules to better align with comparable positions at comparable sanitation agencies. While we are not suggesting that the board cut current salaries of its employees, it is imperative that the board reduce the salary ranges in its salary schedules before more employees reach the top step of their respective salary ranges. The board should also ensure that COLAs are tied to an appropriate cost-of-living index and that any merit raises are based on satisfactory performance that is documented in an appraisal. Further, the board should either justify its need for longevity pay to attract and retain qualified employees or discontinue its practice of offering longevity pay to those employees who are not already receiving this extra pay. In addition, the district should revise its employee retirement contribution policy to require all employees to contribute an appropriate amount to their pensions and should discontinue its practice of reimbursing its represented employees up to $300 annually for gym memberships. The board should make these changes for unrepresented employees immediately and should seek to make these changes for represented employees by negotiating with the American Federation of State, County, and Municipal Employees Local 2167 when the current MOU expires in July 2015.

1-Year Agency Response

The recommendations have been implemented for all unrepresented staff. These same recommendations will all have been met pending the April 20, 2016, Board meeting to consider approving the new AFSCME - RVSD 2015-18 Labor Agreement (AFSCME MOU).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

The board adopted the resolution described in its 6-month response that does not include any COLAs for unrepresented employees and requires merit raises to be based on performance that is documented in an employee's annual performance evaluation. The resolution also eliminated the longevity pay program and required all unrepresented employees to begin making the full employee contribution towards their pension benefits beginning July 1, 2015.

The new labor agreement mentioned above ties COLAs for represented employees to the San Francisco Bay Area Urban Consumer Price Index and district policy requires merit raises for unrepresented employees to be based on satisfactory performance that is documented in an employee's appraisal. The new labor agreement also eliminated the longevity pay program for represented employees and requires all of those employees to contribute the full employee contribution towards their pension benefits beginning July 1, 2017.

Citing the Affordable Care Act's emphasis on promoting employee health, the district ceased its gym membership reimbursement program, and established a wellness allowance that reimburses employees for a wider array of programs related to diabetes management, smoking cessation, weight loss programs, and other preventative programs.

6-Month Agency Response

The Board has directed the General Manager and Human Resources to seek these goals for both AFSCME represented and all non-represented employees. The existing agreement with AFSCME expired at the end of June 2015, and labor negotiations are currently in progress. Many of the recommendations are being addressed at the bargaining table.

In regard to unrepresented staff, the Board adopted the Resolution Regarding Compensation and Conditions of Employment for Professional and Administrative Staff in August 2015. The resolution specifically addresses the recommendations. The District has adopted the public policy identified in the affordable Care Act to recognize employer engagement in promoting employee health; the District has ceased, for its unrepresented employees, its "gym membership reimbursement" program in favor of a wellness allowance that permits employees to be reimbursed for a wider array of programs related to diabetes management, smoking cessation, weight loss programs, and other preventative programs.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

The board resolution described above does not include any COLAs for unrepresented employees and requires merit raises to be based on performance that is documented in an employee's annual performance evaluation. The resolution also eliminates the longevity pay program and requires all unrepresented employees to begin making contributions towards their pension benefits beginning July 1, 2015.

60-Day Agency Response

The Board has directed the General Manager and Human Resources to seek these goals for both AFSCME represented and all non-represented employees. The existing agreement with AFSCME expires at the end of June 2015, and labor negotiations are currently in progress. The Board will be considering updated "Terms and Conditions of Employment" for unrepresented employees, which will consider these same goals, in the July/August 2015 timeline.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #14 To: Ross Valley Sanitary District

To ensure that employee compensation remains appropriate after making the changes described in the previous recommendation, the board should develop robust policies that outline how it will establish future compensation for all district positions. This policy should require the district to conduct a salary survey of comparable sanitation agencies to determine what compensation levels are appropriate for the job duties of district positions and to present the results to the board.

Annual Follow-Up Agency Response From April 2017

Complete. The Board of Directors and the AFSCME Union have agreed to a final draft of the District's "Compensation Policy." A formal vote by the Board to accept the Policy is scheduled for April 19, 2017.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We reviewed the district's new compensation policy and found that it addresses our recommendation.

1-Year Agency Response

The objective of this recommendation has been met through the Board action on the labor agreement and the related terms and conditions of employment for unrepresented staff. Putting the Board direction into policy will now move forward, with drafting of a new Compensation Policy outlining the goals, objectives, and methodology used to establish RVSD compensation levels for all positions. This will be adopted by December FY 2016-17.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The Board will develop and adopt a Compensation Policy, outlining the goals, objectives, and methodology used to establish RVSD compensation levels for all positions. This will be adopted by December FY 2015-16.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The Board will develop and adopt a Compensation Policy, outlining the goals, objectives, and methodology used to establish RVSD compensation levels for all positions. This will be adopted by December FY 2015-16.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #15 To: Ross Valley Sanitary District

To ensure that it follows state law and its policies for emergency procurement, the board should review and reapprove all emergencies at each board meeting subsequent to the initial emergency declaration and should terminate emergency declarations as soon as possible to ensure that it competitively bids any work that is no longer an emergency.

60-Day Agency Response

The Board and management have take necessary actions to ensure compliance with this state legal requirement, as it has done for all emergency contracting done in the past two fiscal years.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #16 To: Ross Valley Sanitary District

The district should ensure that it hires qualified vendors at a reasonable price by using a competitive process when contracting for professional services. When this is not possible or appropriate given the nature of the services, the district should adequately justify its use of a noncompetitive process (sole-source procurement). In addition, the district should obtain a written description of services to be provided (scope of services) and a cost estimate from legal counsel before engaging in litigation.

6-Month Agency Response

Implemented through the District's Procurement Policy, adopted September 2014 and via subsequent updates.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

The District's recently approved procurement policy will be updated to include clear guidelines for professional services contracting and factors considered in justifying sole source professional services.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #17 To: Ross Valley Sanitary District

The district should ensure that it has access to qualified human resources professionals, whether contracted or in-house, to assist staff when handling human resources issues.

60-Day Agency Response

The District will continue the work it began in late 2013 to make sure that professional human resources management resources are an integral part of the District management team. RVSD recently renewed its contract with an outside HR management firm (RGS) for the new fiscal year (July 2015 through June 2016). RVSD intends to continue to ensure long term access to professional HR resources, using a combination of professional outside services (such as RGS) and properly trained an qualified District staff.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #18 To: Ross Valley Sanitary District

The district should implement the remaining recommendations contained in its human resources consultants' work plan by the targeted dates shown in Table 3 on page 18 of our report, and improve its performance management system to ensure that staff receive required annual performance evaluations.

Annual Follow-Up Agency Response From April 2017

Complete. The District utilizes Regional Government Services (RGS) for outside professional Human Resources services. The District's Strategic Plan sets staff-level objectives for performance comparisons.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

The District continues to utilize RGS for outside professional HR services. The District is continuing work on its performance management system and annual reviews process. The District has adopted a new Strategic Plan, which sets staff level objectives for performance comparisons.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The Table 3 recommendations are continuing to be implemented, with further progress expected in December 2015. Performance management standards and practices are being reviewed and updated.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The Table 3 recommendations are being implemented currently, with further progress and completion expected on the timelines listed in Table 3. Performance management standards and practices are being reviewed and updated.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #19 To: Ross Valley Sanitary District

The district should implement the remaining recommendations contained in its human resources consultants' work plan by the targeted dates shown in Table 3 on page 18 of our report, and develop and document a policy that requires board members and supervisors to attend harassment prevention training biannually and a process for monitoring their attendance.

Annual Follow-Up Agency Response From April 2017

Complete. Codified in the Administrative and Personnel Policy and in the Board of Directors Policy, both entitled "Prevention of Harassment & Discrimination" and adopted by Board vote on January 25, 2017

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

Working with RGS, staff level annual training on harassment prevention is in place. The Board has a draft policy on harassment prevention training pending. A staff level policy is in progress, as part of a full set of new HR/staff policies under development. This specific policy will be complete by December 2016.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

A policy has been drafted and is expected to be presented to the labor union. Expect adoption for the recommended bi-annual harassment prevention training by December 2015.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

A policy will be adopted for the recommended bi-annual harassment prevention training.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #20 To: Ross Valley Sanitary District

To ensure that compensation for the general manager remains reasonable, and to prevent the excesses that existed in the former general manager's contract, the district should develop a policy that establishes the criteria to be used when periodically evaluating the general manager's performance and for determining any merit-based compensation increases.

1-Year Agency Response

Complete. A General Manager Performance Evaluation Policy, which addresses compensation for the GM, was approved by the Board in February 2016.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

A new "General Manager Contracting, Performance Review, and Compensation Policy" is currently being developed to codify the practices used in the last two annual contract and compensation updates, as reviewed by the State audit team. Expect completion in December 2015.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

A new "General Manager Contracting, Performance Review, and Compensation Policy" will be developed to codify the practices used in the last two annual contract and compensation updates, as reviewed by the State audit team.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2014-122

Agency responses received are posted verbatim.