In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith outlined commitments, disbursements and investments made on behalf of the District. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Nancy Jones described the latest economic news and current interest rates for the District’s portfolio. She distributed a handout to the Committee entitled, “Market Update,” which included the following graphs: 1) Interest Rates for the Past Ten Years; 2) Recent Interest Rates; 3) Historical Pattern – Inverted Yield Curve; and, 4) Historical Yield Trends. Ms. Jones highlighted information contained in the first two graphs, noting that although yields for two-year U.S. Treasury Notes have risen and fallen over the past ten years, the average yield for the past ten years has been 4.20%. She also stated that in January 2006, the two-year U.S. Treasury Note rate was at 4.30%, then peaked at 5.28% in June/July 2006, and has now fallen to 4.81%.

Ms. Jones further described the information contained in the third and fourth graphs, which depicted the historical pattern of yields for U.S. Treasury Notes. She pointed out the difference in short-term and long-term rates, noting that although there is some concern in the market that interest rates may fall off significantly, the District’s portfolio is in excellent shape due to strategic investing. She stated that when rates were rising, the portfolio was mostly invested in short-term securities; now that rates appear to have reached their peak and are falling, the portfolio is being invested in longer-term securities. She stated that based on the historical trends of interest rates, the District’s Portfolio Manager has been investing the District’s portfolio in three-year, four-year and five-year securities at higher yields ranging between 4.25% and 5.25%.

Discussion ensued, including the following:

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/BORO to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

PURCHASE

DATE

MATURITY

DATE

ORIGINAL

COST

PERCENT

YIELD

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to authorize a budget increase in the FY 06/07 Bridge Ferry Division Capital Budget relative to Contract No. 2007-B-2, Merchant Road Improvements and Realignment (Merchant Road Project).

The report stated that the Merchant Road Project consists of improvements to Merchant Road that benefit both the District and the Presidio Trust. The District and the Presidio Trust negotiated a Cooperative Agreement to allocate the respective costs associated with the project. On June 23, 2006, the Board of Directors awarded Contract No. 2007-B-2 to Granite Rock Company, dba Pavex Construction Division, in the amount of $1,318,861 and authorized a project budget in the amount of $1,075,448 to cover the District’s share of the project. The project budget amount did not include the Presidio Trust’s share of the project in the amount of $622,723; therefore, did not reflect the total project cost of $1,698,171.

The report further stated that it is recommended that the FY 06/07 Bridge Division Capital Budget be increased by $622,723 to include the Presidio Trust’s share of the total project budget for Contract No. 2007-B-2. A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors MIDDLEBROOK/EDDIE to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends the Board of Directors authorize a budget increase in the FY 06/07 Bridge Division Capital Budget, in the amount of $622,723, to be funded by the Presidio Trust, relative to Contract No. 2007-B-2, Merchant Road Improvements and Realignment.

Action by the Board - Resolution
NON-CONSENT CALENDAR

In a memorandum to Committee, Capital and Grant Programs Manager Gayle S. Prior, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on staff’s recommendation to approve actions relative to the filing of an application for the Fiscal Year 2005 Transit Security Grant Program administered by the U.S. Department of Homeland Security (DHS).  The report stated that in May 2005, the District filed an application with the DHS for FY 04/05 Transit Security Grant Program (TSGP) funds in the amount of $442,000 to support implementation of two new ferry security capital projects, including the Larkspur Ferry Terminal Supplies Storage and Inspection Station and the Communications and Surveillance Equipment projects.

The report also stated that the Governor’s Office of Homeland Security (OHS) has been designated as the State’s administrative agency and is responsible for administering the TSGP funds for the State of California on behalf of the DHS.  As a part of the June 2006 California Supplement to the FY 04/05 TSGP Federal Program Guidelines and Application Kit issued by OHS, project applicants are required to adopt a resolution appointing individuals or positions to act on behalf of the applicant and its governing body and to provide related certifications and assurances for TSGP grant applications.  The report further stated that staff recommends approving the actions necessary to secure TSGP funds to support the ferry security capital projects.  A copy of the staff report is available in the Office of the District Secretary and on the District’s web site.

RECOMMENDATION

The Finance-Auditing Committee recommends the Board of Directors authorize the General Manager or her designee to execute any necessary actions, including related certifications and assurances, relative to the filing of a grant application with the U.S. Department of Homeland Security, for FY 04/05 Transit Security Grant Program funds, in the amount of $442,000, to support ferry transit security capital projects.

Action by the Board - Resolution
NON-CONSENT CALENDAR

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual audit of the Golden Gate Bridge, Highway and Transportation District for the year ending June 30, 2006, prepared by Macias, Gini and O’Connell, LLP. The Committee reviewed the following reports that had been provided by the Auditor-Controller:

• Independent Auditor’s Report;
• Management’s Discussion and Analysis;
• Financial Statements;
• Supplemental Schedule of Revenues and Expenses by Division; and,
• Management Letter

The report further stated that staff recommends that the Committee receive the Financial Statements, Independent Auditor’s Reports and Memorandum on Internal Controls for the year ending June 30, 2006. A copy of the staff report, including attached Independent Auditor’s reports, is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Joseph Wire introduced Cynthia Pon, a representative of the independent auditor, Macias, Gini and O’Connell, LLP (Macias). Ms. Pon then addressed the Committee, providing an overview of the Independent Auditor’s report. A written version of Ms. Pon’s presentation was provided to the Board members at the meeting, a copy of which is available in the Office of the District Secretary and on the District’s web site.

Ms. Pon summarized the scope of auditing services provided by Macias, and highlighted the results of the audit. She stated that one item of special significance noted in the auditor’s report was the District’s transfer of Rail Division assets to the Sonoma-Marin Area Rail Transit District in March 2006. She also stated that Macias provided an Unqualified or “Clean” Opinion, the highest level of assurance that the company can provide, and that the auditors had not found any material noncompliance issues.

Ms. Pon acknowledged the District’s progress in complying with the rules adopted in June 2004 by the Government Accounting Standards Board (GASB) regarding post-employment retiree benefits, which require governmental agencies to have actuarial evaluations performed on the agencies’ post-employment healthcare benefit liabilities, and have those liabilities reflected on their financial statements. Ms. Pon commended the District for completing the actuarial study, for setting aside designated funds to help fund retiree benefits and for issuing a Request for Proposals to establish a separate trust to account for these benefits.

Discussion ensued, including the following:

• Director Martini inquired regarding the District’s internal controls. In response, Ms. Pon stated that this year’s audit reviewed the District’s internal controls, and that there was one recommendation with respect to the implementation of the new Financial Management Information System (FMIS). She noted that the auditor’s report recommended that the District revisit its financial reporting process to better utilize the IFAS report writing feature to automate the generation of year-end financial statements, rather than rely on stand-alone spreadsheet files for such reports.

• Director Boro made the following inquiries:
  • He inquired as to whether Macias has the responsibility to audit internal purchasing and payroll procedures. In response, Ms. Pon stated that this audit reviewed such procedures indirectly in the context of the financial statement balances, but did not include a performance audit that would focus on the internal procedures and operational efficiencies of a particular transaction cycle.
  • He inquired as to whether the District has hired a staff person who is responsible for monitoring internal controls. In response, Mr. Wire answered in the affirmative, noting that the District has hired a Business Process Analyst who is responsible for such monitoring. He further noted that in response to the auditor’s recommendation, staff is currently reviewing its financial reporting process with the goal of eliminating errors that occur when data is transferred from the FMIS to manual spreadsheets.
  • He inquired as to the type of internal controls that are in place to prevent any fraudulent transactions. In response, Mr. Wire stated that a series of checks and balances are built into the District’s FMIS procurement system, so that every transaction needs to be approved through the work flow system by a supervisor or manager.
    

Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/MIDDLEBROOK to forward the following recommendation to the Board of Directors for its consideration:

[Note:  The above recommendation was forwarded to the Board of Directors meeting of November 17, 2006, for action.]

Authorize a project budget increase in the FY 06/07 Bus Division Capital Budget in the amount of $70,000, to be funded with $56,000 in existing Federal Transit Administration grant funds and by a budget transfer in the FY 06/07 Bus Division Capital Budget from the Capital Equipment line item to the Contract No. 97-BT-8 Project Budget line item in the amount of $14,000.

Action by the Board - Resolution
NON-CONSENT CALENDAR

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a schedule comparing categories of Bridge traffic for four months ending October 31, 2006. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Revenues and Expenses for Four Months Ending October 31, 2006. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

Attorney David Miller, at the request of Chair Stroeh, stated that the Committee would convene in closed session to discuss two matters of pending workers’ compensation litigation listed on the agenda as Item No. 8.a.1., Darrell Breedlove vs. Golden Gate Bridge, Highway and Transportation District (District), and Item No. 8.a.2., Shirley McGrath vs. District, as well as one matter of pending litigation listed on the agenda as Item No. 8.b.1., Vikki Adams vs. District.

There was no public comment.

All business having been concluded, the meeting was adjourned at 11:20 a.m.