HomeMy WebLinkAboutStaff Report 126-07City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: UTILITIES
DATE:
SUBJECT:
FEBRUARY 5, 2007 CMR:126:07
REPORT OF CITY MANAGER ACTION FOR THE CITY AS A
SUBURBAN REPRESENTATIVE IN ITS WATER CONTRACT
WITH SAN FRANCISCO
This report is for information only. No Council action is required.
DISCUSSION
On December 12, 2005, the Council delegated to the City Manager the authority to execute
certain documents for the City of Palo Alto under the Settlement Agreement and Master Water
Sales Contract (Contract) with San Francisco when the City acts as a Suburban Representative
[CMR:434:05]. The City Manager exercised that authority when his designee signed a
Memorandum of Understanding (MOU) regarding the annual audit for the calculation of the
Suburban Revenue Requirement for FY 2005-06.
The Suburban Revenue Requirement is the amount the contract allows San Francisco to collect
from the suburban purchasers, the group of agencies that purchase water wholesale from the San
Francisco regional water system. These same agencies comprise the membership of the Bay
Area Water Supply and Conservation Agency (BAWSCA).
The Contract requires that a "compliance audit" be performed on San Francisco’s calculation of
the Suburban Revenue Requirement each fiscal year. Each year, the Suburban Representatives
may choose to conduct a "suburban review" of the compliance audit. BAWSCA staff
recommended that the Suburban Representatives initiate a suburban review of the audit for the
FY 2005-06 Suburban Revenue Requirement. This MOU contains the same general provisions
as the one signed by the City Manager last year for the calculation of the Suburban Revenue
Requirement for FY 2004-05. [CMR: 137:0@
POLICY IMPLICATIONS
Signing the attached MOU was consistent with Council authority delegated to the City Manager.
If any issues raised in the calculation of the FY 2005-06 Suburban Revenue Requirement Cannot
be resolved without going to arbitration, the Council will be asked to approve that action.
CMR: 126:07 Page 1 of 2
ATTACHMENT
Memorandum of Understanding Fiscal Year 2005-06 Revenue Requirement Compliance Audit
PREPARED BY:
RAT~
Resource Planner
DEPARTMENT HEAD:
VALE E F G
Director of Utilities
CITY MANAGER APPROVAL:
EMILY
Assistant City Manager
CMR:126:07 Page 2 of 2
MEMORANDUM OF UNDERSTANDING
FISCAL YEAR 2005-06 REVENUE REQUIREMENT
COMPLIANCE AUDIT
~MORANDUM OF UNDERSTANDING is made as of this z’t/’’~ day of
2006,-by and between the SAN FRANCISCO PUBLIC UTILITIES
COMMISSION ("SFPUC") and the SUBURBAN REPRESENTATIVES.
RECITALS
The City and County of San Francisco, through the SFPUO, entered into a Settlement
Agreement and Master Wate~- Sales Contraci ("Contract") with 30 Suburban Purchasers in
1984.
2.section 6.04 of the Contract requires a "compliance. audit" be conducted of the SFPUC’s
calculation of the Suburban Revenue Requirement for each fiscal year.
The SFPUC and Suburban Representatives modified certain audit procedures required in
section 6.04 (c) of the Contract for the FY 1995-96 compliance audit ["First MOLI"] and ’
continued such modified audit procedures for FY 1996-97 through FY 2004-05.
4. The SFPUC and Suburban Representatives now desire to make certain revisions to the First
MOU, effective for the compliance audit of FY 2005-06.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
For the compliance audit of the Suburban Revenue Re.quirement for FY 2005-06, the
SFPUC and Suburban Representa{ives agree that the level of precision and audit
procedures set forth in section 6.04(c) of the contract are modified as follows: the
compliance auditor shall conduct the audit to achieve a two percent [2%] precision level and
a ninety-five percent [95%] confidence level, using probability proportional to size statistical
sampling, with a sample size of 320 items, based on the assumption of one error. For
purposes of testing personnel costs, the auditor shall select a judgmental sample of 30
payroll items. These items shall be tested for errors as defined in Section 2 below. If the
sample error exceeds 2% of the gross sample value, the auditor shall select additional
personnel transactions in accordance with the statistical sampling methodology used to test
non-labor transactions.
For purposes of the compliance audit, an error exists if any one of the following conditions
is met and the result of the specific error, when projected to the population, exceeds an
adjustment of $1,000 or more:
There is a lack of sufficient supporting documentation;
The amount recorded is incorrect, based on supporting documentation;
There was an incorrect classification of expenses~/charges in accordance with the Contract;
or
There was an out-of-period transaction excep! 1) a transaction that occurred in F¥ 2004-05
but was recorded in FY 2005-06 or 2)a transaction was recorded in FY 2005-06 for an
expense that will occur, in whole or in part, in FY 2006-07, but the expense will be fully
realized within twelve calendar months of when it is recorded. If a portion of the expense
would not be realized within twelve calendar months of when it is recorded, only the portion
that occurs after twelve calendar months shall be considered an error.
3. The auditor will apprise SFPUC staff and BAWSCA if the 2% precision and 95%
confidence levels cannot be achieved and the reasons for such inability. The auditor will
quantify the actual precision and confidence levels achieved in the audit and include that
information in its report..
4.The SFPUC and the Suburban Representatives agree that the past practice of SFWD
and BAWSCA seeking agreement on water consumption data used in calculating each year’s
Suburban Revenue Requirement and memorializing their agreement by having "J-Tables"
initialed by a representative of SFWD and BAWSCA is consistent with Section 6.04(d)(2) of the
Contract and should be continued. To that end, Suburban Representatives and SFPUC agree
that the compliance auditor should use water consumption data and percentages contained in
the J-Tables for FY 2005-06 if and when such Tables are initialed by the SFPUC General
Manager or his/her designee and by BAWSCA’s General Manager.
5. The SFPUC will deliver a copy of this MOU to the auditor and notify the auditor that the
procedures to be used during the FY 2005-06 audit shall conform to the contents of this MOU.
2
6. " Nothing in this MOU is intended to diminish the auditor’s responsibility to employ the
procedures it would otherwise use to satisfactorily complete the compliance audit, including
additional sampling; nor preclude the auditor from performing additional analyses for purposes
of determining whether certain expenses have been fairly allocated per the provisions of the
Contract; and to perform the compliance audit and report its findings and conclusions;
exercising the same professional care it would use in conducting an audit,
CITY OF HAY~tVARD
BY:Date
CALIFORNIA WATER SERVICE COMPANY
BY:
CITY OF PALO ALTO
BY:
CITY OF REDWOOD CITY .
BY:
Date
Date
Date
\ \DELL1600~Users~jummeI\My Documents\Main Files\CONTRACT\MOU705-06.DOC
6..Nothing in this MOU is intended to diminish the auditor’s responsibility to. employ the
procedures it would otherwise use to satisfactorily complete the compliance audit, including
additional sampling; nor preclude the auditor from performing additional analyses for purposes
of determining whether certain expenses have been fairly allocated per the provisions of the
Contract; and to perform the Compliance audit and report its findings and conclusions;
exercising the same professional care it would use in conducting an audit.
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
BY:Date
ALAMEDA COUNTY WATER DISTRICT
BY:Date
CITY OF HAYWARD
BY:,te
CALIFORNIA WATER SERVICE COMPANY
BY:.Date
CITY OF PALO ALTO
BY:Date
CITY OF REDWOOD CITY .
BY:Date
\ \DELL1600\Userskjummei\My Documents\Main Ffles\CONTRACT\MOUT05-06.DOC
3
6.Nothing in this MOU is intended to diminish the auditor’s responsibilit~ to employ the
procedures it would otherwise use to satisfactorily complete the compliance audit, including
additional sampling; nor preclude the auditor from performing additional analyses for purposes
’ of determining whether certain expenses have been fairly allocated per the provisions of the
Contract; and to perform the compliance audit and report its findings and conclusions
exercising the same professional care it would use in conducting an audit.
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
BY:Date
ALAMEDA COUNTY WATER DISTRICT
BY:Date
CITY OF HAYWARD
BY:Date
CALIFORNIA WATER/SERVICE COMPANY.
~~ ¯Date
CITY OF PALO ALTO "
BY:Date
CITY OF REDWOOD CITY
BY:Date
\ \DELL1600\Users~jummel\My Documents\Main Files\CONTRACT.\MOU705-06.DOC
3
6.Nothing in this MOU is intended to diminish the auditor’s responsibility to employ the
procedures it would otherwise use to satisfactorily complete the compliance audit, including
additional sampling; nor preclude the auditor from performing additional analyses for purposes
of determining whether certain expenses have been fairly allocated per the provisions of the
Contract; and to perform the compliance audit and report its findings and conclusions;
exercising the same professional.care it would use in conducting an audit.
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
BY:Date
ALAMEDA COUNTY WATER DISTRICT
BY:
CITY OF HAYWARD
BY:
Date
Date
CALIFORNIA WATER SERVICE COMPANY
BY:Date
CITY OF PALO ALTO
CITY OF REDWOOD CITY .
Date
BY:Date
\ \DELL1600 \Users~jummeI\My Documents\Main Files\CONTRACT\MOU705-O6.DOC
3
6.Nothing in this MOU is intended to diminish the auditor’s responsibility to employ the
procedures it would otherwise use to satisfactorily complete the compliance audit, including
additional sampling; nor preclude the auditor from performing additional analyses for purposes
of determining whether certain expenses have been fairly allocated per the provisions of the
Contract; and to perform the compliance audit and report its findings and conclusions;
exercising the same professional care it would use in conducting, an audit.
SAN FRANCISCO PUBLIC UTILITIES COMMISSION
BY:Date
ALAMEDA COUNTY WATER DISTRICT
BY: ’Date
CITY OF HAYWARD
BY:Date
CALIFORNIA WATER SERVICE CQMPANY
BY:Date
CITY OF PALO ALTO
BY:Date
CITY OF REDWOOD CITY .
\\DELL1.600 \Users~jumrnel\My Documents~ Msin FIIes\CONTRACT\NIOUT05-06.DOC
3