HomeMy WebLinkAboutStaff Report 137-06C ty Manager’s Repert
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT:UTILITIES
DATE:
SUBJECT:
NL’.kRCH 13, 2006 CMR: 137:06
CITY MANAGER ACTION FOR THE CITY AS A SUBURBAN
REPRESENTATIVE IN ITS WATER CONTRACT WITH SAN
FtL, kNCISCO
This report is for the Council’s information only. No 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 he si~ed a Memorandum of
Understanding (MOU) regarding the am~ual audit for the calculation of the Suburban Revenue
Requirement for FY 2004-05. The Suburban Revenue Requirement is the amount the Contract
allows San Francisco to collect from the Suburban Purchasers, the ~’oup of agencies that
purchase water wholesale from the San Francisco regional water system.
The Contract requires that a "compliance audit" be performed on San Francisco’s calculation of
the Suburban Revenue Requirement for each fiscal year. The Contract also sets out procedures
under which the audit must be performed. Beginning with the compliance audit for FY 1995-96,
the Suburban Representatives and San Francisco a~eed to modify certain audit procedures in the
contract. Prior to conducting the FY 2004-05 compliance audit, the Suburban Representatives
and San Francisco again wished to modify certain audit procedures in the Contract as described
in the attached MOU.
POLICY IMPLICATIONS
Sig-ning the attached MOU was consistent xvith Council authority delegated to the City Manager.
CMR:137:06 Page 1 of 2
ATTACHMENT
Memorandma3 of Understanding Fiscal year 2004-05 Revenue Requirement Compliance Audit
PREPARED BY:
DEPARTMENT HEAD:
~~Ratchye, Senior Resource Planner
CA’R~L YEATS C t
Director of Adm’inistrative
CITY MANAGER APPROVAL: ~~ UO._z_*~
EMIL’N HARRISON
Assistant City Manager
CMR: 137:06 Page_," of 2
MEMORANDUM OF UNDERSTANDING
FISCAL YEAR 2004-05 REVENUE REQUIREMENT
COI%~PLIANCE AUDIT
THIS MEMORANDUM OF UNDERSTANDING is made as of tl~is __ day of
9006, by and between the SAN FRANCISCO PUBMC UTILITIES
COMMISSION ("SFPUC") and the SUBURBAN REPRESENTATIVES.
RECITALS
The City and County of San Francisco, through the SFPUC, entered into a
Settlement Agreement and Master Water Sales Contract ("Contract") with 30
Suburban Purchasers in 1984.
2.Section 6.04 of the Contract requi-es a "comphance audit" be conducted of the
SFPUC’s calcu]affon 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 MOU"I and continued such modified audit procedures for FY 1996-97
through FY 2003-04.
4.The SFPUC and Suburban Representatives now desire to make certain revisions to
the First MOU, effective for the compliance audit of FY 2004-05.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
For the compliance audit of the Suburban Revenue Requirement for FY 2004-05,
the SFPUC and Suburban Representatives agree that .+abe level of precision and
audit procedures set forth in section 6.04(c) of the contract are modred 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 t~he 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 nor_-labor
transactions.
For purposes of the compliance audit, an error exists ff tony one of the following
conditions is met and the result of the specific error, when projected to the
population, exceeds an adjustment of $ !,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 except !) a transaction that occurred in FY
2003-04 but was recorded in FY 2004-05 or 2) a transaction was recorded in FY
2004-05 for an exper_se that will occur, in whole or in part, in FY 2005-06, but the
expense rod11 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 pot.Lion that occurs after twelve calendar months
shall be considered an error.
3. The auditor will apprise SFPUC staff and BAWSCA if the 2% precision m’~d 95%
confider~ce levels ca_nnot be achieved and the reasons for such inability. The auditor
~11 quantify the actual precision and confidence levels achieved in the audit and
include that information in its report,
4.The SFPUC ar_d 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-Tab!es" initialed by a representative of SFWD a~nd 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 xvater consumption data and percentages contained in the J-Tables for FY 2004-
05 ff and when such Tables are initialed by the SFPUC General Manager or his/her
designee m-~d by BAWSCA’s General Manager.
5.The SFPUC ~-ill deliver a copy of this MOU to the auditor rand notify the auditor
that the procedures to be used durk~g tt~e FY 2004-05 audit shall conform to the
contents of this MOU.
6.Nothing in this MOU is intended to diminish the auditor’s responsibility to
employ the procedures it would oi~herwise use to satisfactorily complete the
compkia_-~ce audit, includ_ing additional sampling; nor preclude the auditor from
performing additional analyses for purposes of determining whether certain expenses
have been fairly allocated per tb.,e provisions of the Contract; and to perform the
compliance audit and report its findings and conclusions; exercising the same
professionai care it would use in conducting an audit.
SAN F~IR~~U]BLIC UTILITIES COMMISSI
BY:
~~
Date
BY: O~ ~Date
CITY OF HAYWARD ¯
BY:
CITY OF REDWOOD CITY
Date
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