Report 2015-102 All Recommendation Responses

Report 2015-102: Central Basin Municipal Water District: Its Board of Directors Has Failed to Provide the Leadership Necessary for It to Effectively Fulfill Its Responsibilities (Release Date: December 2015)

Recommendation #1 To: Central Basin Municipal Water District

To ensure the stability of the district's operations, by June 2016 the district's board should establish a formal policy for hiring for the general manager position. Because the current general manager is on a contract set to expire in May 2017, the board should initiate the hiring process for a new general manager or begin the process of renegotiating the contract with the current general manager in the fall of 2016.

1-Year Agency Response

On February 26, 2016, the Board formally adopted a hiring and compensation policy for the General Manager. The policy includes: 1) the minimum qualifications required for the General Manager; 2) the creation of an Ad Hoc that includes two Board members and external water industry professionals; and 3) an outline of the appropriate steps for a competitive and equitable process. The policy ensures that a competitive and fair process be undertaken to attract and recruit qualified applicants to the position.

The review period for the current General Manager's contract was initially agendized for the May 23, 2016 Regular Board Meeting. Due to scheduling conflicts, the evaluation was conducted at the July 25, 2016 Regular Board Meeting where the Board agreed to revise the General Manager's employment contract and include a one-year extension. An amendment was approved pursuant to the Brown Act at the August 22, 2016 Regular Board Meeting which extends the employment contract through May 10, 2018.

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

6-Month Agency Response

On February 26, 2016, the Board formally adopted a hiring and compensation policy for the General Manager. The policy includes: 1) the minimum qualifications required for the General Manager; 2) the creation of an Ad Hoc that includes two Board members and external water industry professionals; and 3) an outline of the appropriate steps for a competitive and equitable process. The policy ensures that a competitive and fair process be undertaken to attract and recruit qualified applicants to the position.

The review period for the current General Manager's contract was agendized for the May 23, 2016 Regular Board Meeting and rescheduled to the June 1, 2016 Special Board Meeting. Due to scheduling conflicts, the General Manager's review will be rescheduled to the June 27, 2016 Regular Board meeting during which time new terms will be considered.

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

As the district notes, the board adopted a new policy describing a process for hiring the general manager. Further, the district indicated it will begin a review of the current general manager's contract in June 2016 and will consider new terms. Until the district initiates that process, we consider this recommendation partially implemented.

60-Day Agency Response

A hiring policy for the General Manager will be presented to the Board of Directors in February 2016. The review period for the current General Manager's contract will begin in May 2016 and new terms will be addressed and considered at that time.

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

Recommendation #2 To: Central Basin Municipal Water District

To better address potential ethical violations, the district should implement by June 2016 a means for investigating board members' and staff's potential violations of the district's code of conduct and conflict-of-interest code that would insulate those investigations from undue influence from either the board or the general manager.

60-Day Agency Response

On January 25, 2016, the Board of Directors adopted revisions to the Administration & Ethics Committee Policy (Administrative Code Part 3, Chapter 9, Article 1, Section 1.4) which addresses a process for handling potential ethical violations of the District's code of conduct and conflict of interest code. The revisions consist of the following: 1) Language to provide clarity on the roles of the Committee members, staff and General Counsel; 2) Explanation of the two part system and process to be put in place; 3) Language to provide clarity on how alleged ethics violations on the part of the General Manager, General Counsel or the Administration and Ethics Committee will be reported; and 4) Language to provide clarity on possible penalties if a violation is determined.

The two part system includes an independent and confidential ethics hotline service provider and an independent review of potential ethics violations by a third party investigating law firm.

In December 2015, the Board was informed by staff that an informal solicitation process was conducted and that the District would be entering into a contract under the General Manager's authority with Lighthouse to serve as the independent ethics hotline provider. Additionally, after solicitation of Statement of Qualifications from four investigating law firms by the District's General Counsel (Nossaman) and interviews conducted by the Board on January 15, 2016, the Board has selected Nixon Peabody as the independent investigative law firm (selection was approved on January 25, 2016).

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

Recommendation #3 To: Central Basin Municipal Water District

To evaluate its progress toward its goals and objectives, the district should use its recently adopted strategic plan and issue an annual report that describes the steps it has taken toward achieving the goals and objectives in the strategic plan.

1-Year Agency Response

The District continues to implement its adopted strategic plan and has provided quarterly reports to the Board of Directors. The 3rd quarter update was provided on April 21, 2016 as part of the FY 2017 Budget workshop. The annual report for the first year of the Plan was published at the July 25, 2016 Regular Board Meeting.

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

6-Month Agency Response

The District is currently using the adopted strategic plan and has been providing quarterly reports to the Board of Directors. The 3rd quarter update was provided on April 21, 2016 as part of the FY 2017 Budget workshop.

An annual report will be provided at the 4th quarter reporting session in July 2016.

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

60-Day Agency Response

The District is currently using the adopted strategic plan and has been providing quarterly reports to the Board of Directors. An annual report will be provided at the 4th quarter reporting session in July 2016.. Additionally, staff will be developing a budget process policy which will include language to require a strategic plan annual report.

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

Recommendation #4 To: Central Basin Municipal Water District

To ensure its long-term financial sustainability, the board should complete a long-term financial plan no later than December 2016.

6-Month Agency Response

On June 1, 2016, the Board of Directors received a presentation from Raftelis Financial Consultants on the financial model. The model software was transitioned to the possession of District staff on June 1st, and the contract scope of work with Raftelis was satisfied in full.

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

60-Day Agency Response

The District entered into a contract with Raftelis in October 2015. Work immediately began in November 2015 to gather information. The report is at 65% of completion. Next steps are to present the information to the District's purveyors to seek input. The plan will be presented to the Board of Directors in March 2016.

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

Recommendation #5 To: Central Basin Municipal Water District

To ensure its water rate structure is appropriate to provide the revenue necessary to cover its legitimate costs, the district should complete its planned water rate study no later than the spring of 2017.

1-Year Agency Response

A consultant-led water rate study was completed in August 2016. On August 22, 2016, the District's Board of Directors approved rate increases for FY 2017 and FY 2018 sufficient to improve the District's debt coverage ratio above requirements for a five-year period. The resulting five-year financial projection is now being used by the District's financial advisors to accomplish re-financing of the District's 2010 Certificates of Participation in October 2016.

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

6-Month Agency Response

The FY 2017 Operating Budget was adopted by the Board of Directors on May 23, 2016. The Budget includes funding sufficient for a water rate study contract. Also on May 23rd, the Board of Directors authorized the release of a Request for Proposals for consultant assistance to create the rate study. The District plans on presenting a comprehensive rate adjustment plan to the Board of Directors for approval on September 26, 2016.

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

60-Day Agency Response

Staff will commence work on the water rate study as soon as the long-term financial plan is completed. Staff anticipates seeking the services of a consultant to assist in the rate study. A Request for Proposals will be drafted in May 2016. Funds for this service will be included in the fiscal year 2016-2017 budget.

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

Recommendation #6 To: Central Basin Municipal Water District

To strengthen its financial stability against present and future uncertainties, the district should follow its recently adopted reserve policy.

60-Day Agency Response

The District adopted a reserves policy in April 2015 and has been fully implemented as of May 2015.

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

Recommendation #7 To: Central Basin Municipal Water District

To ensure that it continues to take steps to improve its financial condition and avoids additional costs due to downgrades of its debt credit ratings, the district should immediately create a formal debt management policy. This policy should clearly define its credit objectives and provide guidelines for suitable debt agreements. This policy should also require the district to periodically monitor its specific financial ratios, such as its debt coverage ratio, that are relevant to its credit rating.

60-Day Agency Response

Staff presented to the Board of Directors a debt management policy on December 21, 2015 and it was formally adopted. The policy has been fully implemented as of January 2016.

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

Recommendation #8 To: Central Basin Municipal Water District

To help it maintain its current insurance coverage and better position it to negotiate for more cost-effective and appropriate coverage in the future, the board should immediately adopt a policy requiring a four-fifths majority to terminate the district's general manager. Further, the board should review the district's insurance coverage annually and renegotiate costs and coverage amounts as necessary, particularly as the district resolves outstanding legal claims against it.

6-Month Agency Response

The four-fifths majority vote for the General Manager's termination policy was presented to the Board for consideration on January 25, 2016. The Board approved a four-fifths majority vote to terminate the current General Manager. This item was presented to the Board on March 15, 2016 for incorporation into the Administrative Code and Resolution No. 3-16-890 was adopted.

Regarding review of insurance coverages, the District sought coverage from three sources: ACWA/JPIA, Special Districts Risk Management Authority (SDRMA) and from the private insurance market through Keenan & Associates. As part of the renewal process, the Board discussed insurance coverages at the April 25, 2016 Board Meeting. At this same meeting, the Board authorized the General Manager to secure comprehensive coverages at appropriate price levels for FY2017. At the May 2, 2016 ACWA/JPIA Board Meeting, the ACWA/JPIA Board voted to postpone discussion of District's reinstatement until to December 2016. SDRMA approved the District's participation in the SDRMA Worker's Compensation pool and denied coverage for property and general liability coverages. The District secured all appropriate coverages for FY2017 with the private market through Keenan & Associates. To ensure that this recommendation occurs annually, staff will include insurance coverage review as part of the Budget process.

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

60-Day Agency Response

The four-fifths majority vote for the General Manager's termination policy was presented to the Board on January 25 for consideration. An additional recommendation was added to include a four-fifths vote for hiring a new General Manager, with the proviso of reverting back to a majority vote upon the termination of the new General Manager. This item was approved at the January 25, 2016 Board meeting.

On the matter of review of the District's insurance coverage annually, staff has begun the annual renewal process with Keenan & Associates, the District's broker. Keenan will be reviewing all proposals received from the insurance markets and that information will be presented to the Board of Directors for discussion in April 2016. Additionally, the District is scheduled to make a presentation on March 30, 2016 to ACWA/JPIA for them to consider the District's reinstatement into their insurance program. Lastly, this step will be added to the Budget Policy process currently in development.

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

Recommendation #9 To: Central Basin Municipal Water District

To ensure it holds itself accountable to the public, the district should follow the law and operate in an open and transparent manner by, among other things, disclosing to the public the true nature and purpose of all of its expenditures. To ensure its board makes informed decisions on when it is proper to hold discussions and take votes in closed-session meetings, the district should require its board members to attend training—as soon as possible and biennially thereafter—specifically focused on the Brown Act and its closed-meeting requirements.

60-Day Agency Response

To ensure the District holds itself accountable to the public, the demands list (commonly known as the Warrant Run) is presented to the Board of Directors on a monthly basis. This list includes details on the nature of expense and amount.

On January 25, 2016, the Administrative Code Part 3, Chapter 9, Article 1, Section 1.5 was revised to include Brown Act and Parliamentary procedure Training biennially. Furthermore, a Brown Act and Robert's Rules of Order Workshop for the Board of Directors took place on January 29, 2016. District staff also attended the workshop.

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

Recommendation #10 To: Central Basin Municipal Water District

To make better use of the funds it spends on services, the district should amend its administrative code by June 2016 to limit its sole-source contracts to emergency circumstances and circumstances in which only one vendor can meet the district's needs. Further, before executing any sole-source contracts, the district should require written justification demonstrating the reasons for not competitively bidding the services. The justification should include the background of the purchase, a description of the vendor's uniqueness, an explanation of the consequences of not purchasing from the vendor, market research to substantiate a lack of competition, and an analysis of pricing and alternatives.

6-Month Agency Response

A justification memo template outlining the requirements per the State Audit has been created and implemented as of December 1, 2015.

Administrative Code Part 5: Procurement Policy was revised to include the State Audit recommendations and was approved and adopted by the Board of Directors on March 28, 2016.

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

60-Day Agency Response

A justification memo template outlining the requirements per the State Audit has been created and implemented as of December 1, 2015. Administrative Code Part 5: Procurement Policy is currently being revised to include State Audit recommendations and will be presented to the Board of Directors in March 2016 for adoption.

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

As the district notes, it developed a memo template for justifying sole source contracts that includes the background of the purchase, a description of the vendor's uniqueness, a discussion of the consequences of not making the sole source procurement, and an analysis of pricing and alternatives. However, the district has not yet modified its policies but stated it anticipates doing so in March 2016. For this reason, the recommendation is partially implemented.

Recommendation #11 To: Central Basin Municipal Water District

To ensure that it does not unnecessarily use amendments that limit competitive bidding for its contracts, the district should amend its administrative code by June 2016 to require that it rebid contracts if it significantly changes those contracts' scopes of work, specifically the nature of the services or work products.

6-Month Agency Response

Administrative Code Part 5: Procurement Policy was revised to include the State Audit recommendations and was approved and adopted by the Board of Directors on March 28, 2016.

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

60-Day Agency Response

Administrative Code Part 5: Procurement Policy is currently being revised to include State Audit recommendations and will be presented to the Board of Directors in March 2016 for adoption.

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

Recommendation #12 To: Central Basin Municipal Water District

To ensure its contract amendments reflect the authorization of the board, the district should revise its administrative code to require the general manager to submit a quarterly report to the district's board detailing all its contracts, contract amendments, and contract and amendment dollar amounts.

6-Month Agency Response

A new report format which includes all District contracts was presented to the Finance & Audit Committee and the Board of Directors in January 2016. Language to document the submittal of quarterly reports was included in the Administrative Code Part 5: Procurement Policy which was approved and adopted by the Board of Directors on March 28, 2016.

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

60-Day Agency Response

A new report format which includes all District contracts was presented to the Finance & Audit Committee and the Board of Directors in January 2016. Language to document the submittal of quarterly reports will be included in the Administrative Code Part 5: Procurement Policy and will come before the Board in March 2016 for adoption.

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

Recommendation #13 To: Central Basin Municipal Water District

To ensure it receives the best value from its contracts, the district should adopt and implement a policy by June 2016 requiring that it include in all its contracts' scopes of work specific, well-defined deliverables, measurable results, timelines or progress reports, and evaluations of the contractors once they complete the work.

6-Month Agency Response

Administrative Code Part 5: Procurement Policy was revised to include the State Audit recommendations and was approved and adopted by the Board of Directors on March 28, 2016.

Furthermore, the RFP template was revised to specifically list the State Auditor's recommendation criteria and require responders to specifically address these items. Additionally, the "Contracts Close Out" report was modified to require project managers to attest to the full payment for services provided and conduct an evaluation of the contractor performance.

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

60-Day Agency Response

Administrative Code Part 5: Procurement Policy is currently being revised to include State Audit recommendations and will be presented to the Board of Directors in March 2016 for adoption.

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

Recommendation #14 To: Central Basin Municipal Water District

To ensure it receives the best value from its contracts, the district should ensure project managers verify services were rendered before approving invoices for payment by June 2016.

60-Day Agency Response

The District's process is for the project manager to review, verify that the services rendered and listed on the invoice are accurate and approve before submitting to the Finance department for final review and approval to issue payment. This has been District policy and staff has been practicing.

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

Recommendation #15 To: Central Basin Municipal Water District

To ensure it receives the best value from its contracts, the district should create processes by June 2016 for project managers to organize and retain contract files that include important documents such as vendor performance and deliverable verification and acceptance.

1-Year Agency Response

The district's vendor provided project management training to all employees as well as development of a project management tool kit. In addition, the District has implemented formal project management administration policies for its larger projects. The tool kit was designed to help guide users to ensure that all files are organized and retained properly. In addition, the District has implemented formal project management guidelines and assigned a project management officer to help monitor projects and ensure all project managers are monitoring vendor performance, providing deliverable verification and acceptance.

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

6-Month Agency Response

The District released an RFP in January 13, 2016. After reviewing the proposals, staff identified that greater detail was required in the "Scope of Work" and deliverables to provide more relevant proposal results. A second RFP was released on March 23, 2016 and remained open until April 15, 2016. As part of the RFP process staff reached out to the Project Management Institute to solicit companies that specifically specialized in project management training. The board approved contract with vendor on May 23, 2016 and will commence work in June 2016 with anticipated completion by August 2016.

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

60-Day Agency Response

A Request for Proposals (RFP) was issued on January 13, 2016 to seek Project Management Training and Consulting Services. Proposals were due January 27, 2016. Proposals received significantly exceeded the anticipated budget. Staff is currently analyzing how to proceed. Development of processes to organize and retain contract files will begin in May 2016. The records management system, financial management system and existing contract management processes will be used for a unified approach.

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

Recommendation #16 To: Central Basin Municipal Water District

To ensure its employees are able to properly administer contracts, by September 2016 the district should follow through with its plan to require that staff responsible for project management attend training by a reputable trainer on contract management.

1-Year Agency Response

Project management training was provided to all employees at the District and advanced training to all project managers. In addition to the training all large projects will now be managed through the Districts project management administration process. Additionally, large projects will be monitored and managed through the District's new project management toolkit. These items combined will help the District manage and administer its projects and contracts properly and efficiently.

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

6-Month Agency Response

The District released an RFP in January 13, 2016. After reviewing the proposals, staff identified that greater detail was required in the "Scope of Work" and deliverables to provide more relevant proposal results. A second RFP was released on March 23, 2016 and remained open until April 15, 2016. As part of the RFP process staff reached out to the Project Management Institute to solicit companies that specifically specialized in project management training. The board approved contract with vendor on May 23, 2016 and will commence work in June 2016 with anticipated completion by August 2016.

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

60-Day Agency Response

A Request for Proposals (RFP) was issued on January 13, 2016 to seek Project Management Training and Consulting Services. Proposals were due January 27, 2016. Proposals received significantly exceeded the anticipated budget. Staff is currently analyzing how to proceed. Additional in-depth training will be provided to specific staff with larger project management needs. Training will start in May 2016 and will continue through October 2016.

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

Recommendation #17 To: Central Basin Municipal Water District

To minimize its risk when contracting with vendors, the district should adhere to its administrative code and execute all contracts only after approval by its general counsel. Further, the district should amend its administrative code to prohibit engaging in a verbal contract. Finally, the district should continue to report to its finance committee all sole-source contracts and contracts entered under the general manager's authority.

6-Month Agency Response

Administrative Code Part 5: Procurement Policy was revised to include language that all contracts will be executed after approval by general counsel. Additionally, language was included to clearly state the prohibition of verbal contracts. The Board of Directors approved and adopted revisions to Administrative Code Part 5: Procurement Policy on March 28, 2016.

A new report format which includes all District contracts was presented to the Finance & Audit Committee and the Board of Directors in January 2016. Sole source reporting continues to be specified in the Procurement Policy, in addition to new specification for all contracts in force reporting. In practice, quarterly contracts report includes all contracts.

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

60-Day Agency Response

Administrative Code Part 5: Procurement Policy is currently being revised and will include language to indicate that all contracts will be executed after approval by general counsel. Additionally, language will be added to clearly state the prohibition of verbal contracts. Revisions to Administrative Code will be presented to the Board of Directors in March 2016 for adoption.

A new report format which includes all District contracts was presented to the Finance & Audit Committee and the Board of Directors in January 2016.

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

Recommendation #18 To: Central Basin Municipal Water District

To ensure its expenditures do not constitute gifts of public funds, the district should immediately eliminate its allocation of funds to individual board members for community outreach.

60-Day Agency Response

The Board of Directors approved eliminating its allocation of funds to individual board members for community outreach at the January 26, 2016 Board meeting.

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

Recommendation #19 To: Central Basin Municipal Water District

To ensure its expenditures do not constitute gifts of public funds, the district should develop policies that specify limitations on the types of activities it will sponsor in the future to ensure that it funds only those organizations whose activities have a direct link to its authorized purposes. For example, it should eliminate its purchase of holiday turkeys.

6-Month Agency Response

Staff presented revisions to Administrative Code Part 3, Chapter 9, Article 1, Sections 1.31 Public Awareness and Outreach and 1.32 Outreach Guidelines to address the type of activities/events the District will sponsor that have a direct link to the District's purpose at the February Administration & Ethics Committee. During the meeting, the Committee requested that staff provide definitions as to what types of events qualify under the policy. The Committee requested that this item be brought back in March for review and consideration.

Staff presented this item to the Administration & Ethics Committee on March 9, 2016. The Committee recommended approval of the policy. This item was presented to the Board of Directors on March 28, 2016 and was approved and adopted.

Lastly, the District has ended the practice of purchasing turkeys for holiday giveaways.

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

60-Day Agency Response

Staff will present revisions to Administrative Code Part 3, Chapter 9, Article 1, Section 1.32 Outreach Guidelines for Directors, to address the type of activities/events it will sponsor that have a direct link to the District's purpose at the February Administration & Ethics Committee and to the Board of Directors in February 2016.

On another note, the District has stopped the practice of purchasing turkeys for holiday giveaways.

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

Recommendation #20 To: Central Basin Municipal Water District

To ensure its expenditures do not constitute gifts of public funds, the district should revise its administrative code by June 2016 to include more specific guidance as to what constitutes a reasonable and necessary use of public funds. The guidance should establish restrictions on the amount spent for board member installation ceremonies. It should also include a process for the district to ensure that expenses are reasonable and necessary before it pays them.

6-Month Agency Response

Staff presented revisions to the Administrative Code in February 2016 to the Board of Directors which establish restrictions on the amount spent for board member installation ceremonies. On February 26, 2016, the board adopted revisions to the Administrative Code setting a limit of $2,500 for board member installation ceremony expense.

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

60-Day Agency Response

Staff will present revisions to Administrative Code at the February Administration & Ethics Committee and the Board in February 2016, to include more specific guidance as to what it constitutes a reasonable and necessary use of public funds and establish restrictions on the amount spent for board member installation ceremonies. It will also include a process for the district to ensure that expenses are reasonable and necessary before it pays them.

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

Recommendation #21 To: Central Basin Municipal Water District

To ensure it considers the most qualified candidates for positions, the district should follow its established hiring policies. Specifically, it should use a competitive hiring process and ensure that its board first formally approves all positions for which the district recruits. Further, the district should consider for employment only individuals who meet the established minimum qualifications for the positions for which they have applied. If the district believes certain qualifications are not necessary for a position, it should indicate in the position description that such qualifications are desirable but not required.

60-Day Agency Response

As noted in the State Audit, the District has this policy. The policy can be found in the Administrative Code, under Part 3, Chapter 5, Article 2 Assignment of Positions. The District will continue to adhere to this policy. As noted in the State Audit, the District currently has qualified staff for its positions.

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

We made this recommendation based on the fact that the district had violated its own policies in the past. Given that we found current senior managers met qualifications and that the policies in place as of July 2015, if followed, will help ensure the district hires the most qualified individuals for its positions, we consider this recommendation fully implemented. However, we expect the district to continue to follow established policies.

Recommendation #22 To: Central Basin Municipal Water District

To ensure that it does not inappropriately grant undeserved raises to its staff, the district should follow its policy to provide annual performance evaluations to all employees.

60-Day Agency Response

This has been District policy as the State Audit notes. This is also in the Administrative Code under Part 3, Chapter 6, Article 7 Performance Evaluations.

All evaluations were completed in 2015 and are on schedule for May 2016.

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

As we note in the report, the district has a policy already in place to conduct annual performance evaluations. Further, we determined that the district completed performance evaluations in 2015 for certain key staff reviewed in the audit report.

Recommendation #23 To: Central Basin Municipal Water District

To ensure it is efficiently using its resources, the district should eliminate its board members' automobile or transportation allowances and instead reimburse them based on their business mileage or transit use.

Annual Follow-Up Agency Response From October 2020

The board has taken action to right-size the organization. This action has resulted in a reduction in annual expenses of $1.2M - $1.5M (projected). The allowance is standard for the industry and not considered excessive.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2019

At this time, the District would like to keep the response of "partially implemented" once again, as we will be addressing all benefits, including for Directors, as part of our next budget.

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

Annual Follow-Up Agency Response From October 2018

At this time, the District would like to keep the response of "partially implemented" once again, as we will be addressing all benefits, including for Directors, as part of our next budget.

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

As we noted in our assessment of previous responses to this recommendation, the district chose to take a different approach to that of our recommendation by reducing the auto allowance and instituting a mileage reimbursement for travel outside Los Angeles County. We specifically recommended elimination of the allowance rather than reduction; however, according to the district, it expects to address director benefits as part of its next budget. At this time, we consider this recommendation to be partially implemented.

Annual Follow-Up Agency Response From November 2017

This recommendation is partially implemented. Central Basin expects to address all benefits, including for Directors, as part of its next budget.

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

As we noted in our assessment of the district's 6-month response to this recommendation, the district chose to take a different approach to that of our recommendation by reducing the auto allowance and instituting a mileage reimbursement for travel outside Los Angeles County. We specifically recommended elimination of the allowance rather than reduction; however, according to the district, it expects to address director benefits as part of its next budget. At this time, we consider this recommendation to be partially implemented.

1-Year Agency Response

Central Basin's response has not changed from its 6-month response.

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

As we noted in our assessment of the district's 6-month response to this recommendation, the district chose to take a different approach to that of our recommendation by reducing the auto allowance and instituting a mileage reimbursement for travel outside Los Angeles County. We specifically recommended elimination of the allowance rather than reduction; however, according to the district's general manager, the issue could return for reconsideration in 2017. At this time, we consider this recommendation to be partially implemented.

6-Month Agency Response

At the January 25, 2016 Board meeting, the Board reduced their automobile allowance from $597 to $397 and authorized mileage reimbursement at the current IRS mileage rate for any automobile travel outside of Los Angeles County. Additionally, staff was directed to bring back revisions to the Administration Code under the section for automobile allowance.

In an effort to memorialize the actions taken by the Board in January, the Board approved revisions to the Administrative Code under Part 3, Chapter 9, Article 1, Section 1.18 Authorized Expenses, Subsection (E) Transportation policy at its February 26, 2016 Board meeting.

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

The district has chosen to take a different approach than that of our recommendation. According to information the district provided, it surveyed 11 area water districts and 19 area cities. It found that 11 of 30 entities provided an auto allowance with a median value of $335. At a board meeting in January 2016, district staff recommended three options: elimination of the auto allowance, reducing the allowance to $335, or decreasing it to another amount as determined by the board. In February 2016, the board voted to reduce the auto allowance from $597.68 to $397 and institute a mileage reimbursement, at the IRS approved rate, for travel outside Los Angeles County. We specifically recommended elimination of the allowance rather than reduction; however, according to the general manager, the issue could return for reconsideration in 2017. At this time, we consider this recommendation to be partially implemented.

60-Day Agency Response

At the January 25, 2016 Board meeting, the Board reduced their automobile allowance from $597 to $397 and authorized mileage reimbursement for any travel outside of Los Angeles County. Additionally, staff was directed to bring back revisions to the Administration Code under the section for automobile allowance.

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

Recommendation #24 To: Central Basin Municipal Water District

To ensure it is efficiently using its resources, the district should periodically analyze and, beginning in June 2016, report to the board whether all elements of its board member compensation, including health and related benefits, are appropriate and reflect the common practices of special districts.

6-Month Agency Response

The District began review of Board Members' compensation and benefits on January 25, 2016 when the Board approved revisions to its automobile/transportation allowance and reduced their automobile allowance. At the April 25, 2016 staff presented a compensation survey for Board Members of 21 water agencies including 10 Metropolitan Water District of Southern California Member Agencies, 8 Wholesale Agencies; and 3 Retail Agencies in Southern California. Additionally, staff will include review of Directors compensation and benefits in the annual Budget process to ensure they are appropriate and reflect the common practices of special districts.

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

60-Day Agency Response

Staff will conduct a compensation and benefits survey for Board members. The survey methodology will include review the ACWA/JPIA database, Metropolitan Water District member agencies, and the Water Replenishment District. Staff will present the findings to the Board of Directors in April 2016. Additionally, staff will be developing a budget process policy which will include language to require an annual review of Board member compensation, including health and related benefits, to ensure they are appropriate and reflect the common practices of special districts.

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

Recommendation #25 To: Central Basin Municipal Water District

To ensure it is efficiently using its resources, the district should adopt a policy that its general managers will participate in benefits at the same level as district staff and that the board will negotiate the general managers' contracts on the basis of salary and not other benefits, such as retirement.

6-Month Agency Response

On February 26, 2016, the Board formally adopted a hiring and compensation policy for the General Manager. The policy also includes language that ensures that the benefits provided to the General Manager position are consistent with the District's benefits level for staff and that final candidates receive salaries commensurate to their experience and qualifications.

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

60-Day Agency Response

Staff is currently in the process of preparing a policy to address the State Audit recommendation. This policy will be presented to the Board of Directors in February 2016 for consideration and adoption.

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

Recommendation #26 To: Central Basin Municipal Water District

To ensure that its travel expenses are reasonable and necessary, the district should take steps, such as issuing a clarifying memorandum or providing additional training, to ensure all board members and staff, especially those who process reimbursement claims, are aware of what the district considers to be proper expenses incurred while traveling, including only paying for air travel that is coach or an equivalent class.

6-Month Agency Response

Staff issued a clarifying memorandum to Board Members and staff on what the district considers to be proper expenses while traveling, specifically only paying for air travel that is coach or an equivalent class. The memorandum was presented to staff during the monthly staff meeting on April 26, 2016. Staff was briefed and trained on the new changes to the travel and reimbursement policy.

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

60-Day Agency Response

Staff is in the process of preparing a clarifying memorandum to address the State Audit recommendations and will provide additional training to staff. The memorandum will be issued by March 2016.

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

Recommendation #27 To: Central Basin Municipal Water District

To ensure that its travel expenses are reasonable and necessary, the district should take steps, such as issuing a clarifying memorandum or providing additional training, to ensure all board members and staff, especially those who process reimbursement claims, are aware of what the district considers to be proper expenses incurred while traveling, including only paying for meetings and conferences that have a direct connection to water policy or the district's mission. It should update its list of such preapproved meetings accordingly.

6-Month Agency Response

Staff presented revisions to the list of preapproved meetings to the Administration & Ethics Committee on March 9, 2016. The Committee recommended approval of the revised list. This item was presented to the Board of Directors on March 28, 2016 for consideration and approval. At the Board meeting, additional revisions were suggested to the list and therefore, the recommended motion was to approve the preapproved list with the following revisions: to keep the Association of Metropolitan Water Agencies and the Compton Creek Mosquito Abatement District on the list and until such time as it was reviewed to keep the National Association of Latino Elected and Appointed Officials. Additionally, the Board approved adding the West Basin Water Association meetings to the list of approved meetings.

Staff issued a clarifying memorandum to Board Members and staff on what the district considers to be proper expenses while traveling, including only paying for the following meetings and conferences that have a direct connection to water policy or the district's mission. The memorandum was presented to staff during the monthly staff meeting on April 26, 2016. Staff was briefed and trained on the new changes to the travel and reimbursement policy.

Lastly, the District's practice has been that any meetings not listed on the preapproved list are brought before the Board of Directors for approval prior to Board member attendance and/or compensation. The District will continue this practice.

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

60-Day Agency Response

Staff will be bringing the list of preapproved meetings to the Administration & Ethics Committee for review in February 2016. Any updates to the list will be brought to the Board in February 2016 for consideration and adoption.

Additionally, the District's practice has been that any meetings not listed on the preapproved list are brought before the Board of Directors for approval prior to Board member attendance and/or compensation. The District will continue this practice.

Staff is in the process of preparing a clarifying memorandum to address the State Audit recommendations and will provide additional training to staff. The memorandum will be issued by March 2016.

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

Recommendation #28 To: Central Basin Municipal Water District

To ensure that its travel expenses are reasonable and necessary, the district should take steps, such as issuing a clarifying memorandum or providing additional training, to ensure all board members and staff, especially those who process reimbursement claims, are aware of what the district considers to be proper expenses incurred while traveling, including only paying for lodging expenses that reflect group or government rates, unless there is documentation that such rates are unavailable.

6-Month Agency Response

Staff issued a clarifying memorandum to Board Members and staff on what the district considers to be proper expenses while traveling, specifically only paying for lodging expenses that reflect group or government rates, unless there is documentation that such rates are unavailable. The memorandum was presented to staff during the monthly staff meeting on April 26, 2016. Staff was briefed and trained on the new changes to the travel and reimbursement policy.

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

60-Day Agency Response

Staff is in the process of preparing a clarifying memorandum to address the State Audit recommendations and will provide additional training to staff. The memorandum will be issued by March 2016.

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

Recommendation #29 To: Central Basin Municipal Water District

To ensure it reimburses only reasonable and necessary meal expenses, the district should take steps, such as issuing a clarifying memorandum or providing additional training, to ensure that all board members and staff, especially those who process reimbursement claims, are familiar with its meal reimbursement limits.

6-Month Agency Response

Staff issued a clarifying memorandum to Board Members and staff to ensure that they are familiar with the Districts meal reimbursement limits. The memorandum was presented to staff during the monthly staff meeting on April 26, 2016. Staff was briefed and trained on the new changes to the meal and reimbursement policy.

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

60-Day Agency Response

Staff is in the process of preparing a clarifying memorandum to address the State Audit recommendations and will provide additional training to staff. The memorandum will be issued by March 2016.

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

Recommendation #30 To: Central Basin Municipal Water District

The district should revise its administrative code by June 2016 to prohibit paying for or reimbursing meals that occur within the local area that involve meetings either between only district representatives or between district representatives and the district's contractors.

6-Month Agency Response

Staff presented this item to the Administration & Ethics Committee in February 2016 for discussion and direction from the Committee. The Committee requested that staff provide examples of what types of meal reimbursements would qualify for reimbursement and which ones would not. The Committee requested that this item be brought back in March for review and consideration. Staff brought this item back in March for consideration by the Administration & Ethics Committee. The Committee approved staff recommendation and recommended approval at the March 28, 2016 Board meeting.

The Board approved and adopted revisions to the Administrative Code on March 28, 2016 to prohibit paying for or reimbursing meals that occur within the local area that involve meetings either between only district representatives, with the following exceptions to this rule: 1) there is a business necessity to conduct the meeting during the breakfast, lunch or dinner hours; 2) when 2 or more district representatives are traveling for a conference and one receipt includes the cost for all District representatives; and 3) meals provided to staff during working hours that require attendance, which may include staff meetings and mandated trainings. The revisions also included to prohibit paying for or reimbursing meals between district representatives and the district's contractors.

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

60-Day Agency Response

Staff will be bringing this item to the Administration & Ethics Committee in February 2016 for discussion and direction. Upon direction, staff will draft language to be included in the Administrative Code and will present to the Board of Directors in March 2016 for consideration and adoption.

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

Recommendation #31 To: Central Basin Municipal Water District

The district should revise its administrative code by June 2016 to prohibit paying for the costs of meals provided to third parties.

6-Month Agency Response

Staff presented this item to the Administration & Ethics Committee in February 2016 for discussion and direction from the Committee. The Committee requested that staff provide a definition for third parties. The Committee requested that this item be brought back in March for review and consideration. Staff brought this item back in March for consideration by the Administration & Ethics Committee. The Committee approved staff recommendation and recommended approval at the March 28, 2016 Board meeting.

The Board approved and adopted revisions to the Administrative Code on March 28, 2016 to prohibit paying for the costs of meals provided to third parties. The District defined third parties as spouses, family, friends, or persons not doing business with the District.

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

60-Day Agency Response

Staff will be bringing this item to the Administration & Ethics Committee in February 2016 for discussion and direction. Upon direction, staff will draft language to be included in the Administrative Code and will present to the Board of Directors in March 2016 for consideration and adoption.

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

Recommendation #32 To: Central Basin Municipal Water District

To ensure it complies with state law and its own administrative code, the district should require board members to report back to the board on meetings and conferences they attend at the district's expense. The district should record these reports in meeting minutes or document them in expense files before it reimburses the board members for their travel expense claims.

60-Day Agency Response

This was previously approved in the Administrative Code and can be found under Part 3, Chapter 1, Article 1, Section 1.5 (e). Additionally, to ensure Board members abide by the policy, a line item has been added to the Board agendas for Directors to report on Meeting and Conference attendance. Expense forms have also been updated to include the date the Board member reported their attendance. Directors will not be reimbursed for conference expense until they make a report at the Board meeting.

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

Recommendation for Legislative Action

To ensure the efficient and effective delivery of imported and recycled water in southeastern Los Angeles County, the Legislature should pass special legislation to preserve the district as an independent entity but modify the district's governance structure. In doing so, the Legislature should consider a governance structure that ensures the district remains accountable to those it serves; for example, the district's board could be changed from one elected by the public at large to one appointed by the district's customers.

Description of Legislative Action

Assembly Bill 1794 (Chapter 401, Statutes of 2016) requires the board of directors of the Central Basin Municipal Water District to be composed of eight directors, until the directors elected at the November 6, 2022, election take office. At that time, the board will be composed of seven directors, three of which shall be appointed by the water purveyors of the district, and the remaining four shall be elected by the voters for each division established by law. This statute requires that each of the four elected directors shall be a resident of the division from which he or she is elected.

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

All Recommendations in 2015-102

Agency responses received are posted verbatim.