March 27, 2008

 

REPORT OF THE FINANCE-AUDITING COMMITTEE

 

Honorable Board of Directors
Golden Gate Bridge, Highway
  and Transportation District

Honorable Members:

A meeting of the Finance-Auditing Committee was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Thursday, March 27, 2008, at 11:15 a.m., Acting Chair Pahre presiding.

Committee Members Present (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)

Committee Members Absent (2): Chair Stroeh; Director Middlebrook

Other Directors Present (1): Director Newhouse Segal

Staff Present: Acting General Manager and District Engineer Denis Mulligan; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney David J. Miller; Deputy General Manager/Bridge Division Kary H. Witt; Deputy General Manager/Ferry Division James P. Swindler; Deputy General Manager/Administration and Development Teri W. Mantony; Public Affairs Director Mary C. Currie; Director of Risk Management and Safety William R. Stafford; Acting Deputy General Manager/Bus Division and Maintenance Manager G. Gene Walker; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: Gregory Wessel and Frederick Robinson, Marsh Risk and Insurance Services

     
1.

Ratify Actions by the Auditor-Controller

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.

Nancy Jones was not present at the meeting. A copy of her written report is included in the staff report.

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

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors authorize the following actions by the Auditor-Controller:

     
  a.

Ratify commitments and/or expenditures for the period for the period February 1, 2008, through February 29, 2008, totaling $93,194.00;

     
  b. Ratify investments made by the Auditor-Controller during the period February 11, 2008, through March 17, 2008, as follows;
     
Security

Purchase

Date

Maturity

Date

Original

Cost

Percent

Yield

JP Morgan Chase Bank Acceptance
02/14/08
05/13/08
332,625.22
2.92
JP Morgan Chase Bank Acceptance
02/14/08
06/12/08
1,311,414.64
2.93
FHLB Disc Note
02/27/08
03/26/08
5,049,643.68
2.89
CBA (DE) Finance Commercial Paper
03/03/08
05/30/08
6,226,392.29
2.93
Deutsche Bank NY Certificate of Deposit
03/03/08
06/04/08
5,050,000.00
2.92
HSBC Bank USA Global Bank Notes
03/04/08
09/15/09
2,001,044.50
3.50
Credit Suisse FB USA, Inc. Certificate of Deposit
03/13/08
06/05/08
6,130,803.34
2.75
       
  c.
Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between March 18, 2008, and April 14, 2008, as well as the investment of all other funds not required to cover expenditures that may become available; and,
       
  d.

Accept the Investment Report for February 2008 prepared by Public Financial Management.

Action by the Board - Resolution
CONSENT CALENDAR

       
 
AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook
       
2.

Authorize a Budget Increase in the FY 07/08 Bus Transit Division Capital Budget for the Purchase of a Filter Cleaning Station at the San Rafael Bus Facility

In a memorandum to Committee, Maintenance Manager Gene Walker, Deputy General Manager/Bus Division Susan C. Chiaroni and General Manager Celia Kupersmith reported on staff’s recommendation to authorize a budget adjustment in the FY 07/08 Bus Transit Division Capital Budget for the purchase of a filter cleaning station at the San Rafael Bus Facility.

The report stated that the District’s adopted FY 07/08 Ten-Year Capital Plan includes funds for the purchase of a filter cleaning station at the San Rafael Bus Facility, as part of the Particulate Matter (PM) Traps project, which is 80 percent federally funded and 20 percent District funded. Funds for this procurement were originally programmed for FY 08/09 in the Ten-Year Capital Plan. However, the Bus Transit Division is requesting to move this procurement up to this current fiscal year. The cost of this procurement is $56,831.25. An increase in the FY 07/08 Bus Transit Division Capital Budget is required in the amount of $45,465.00, with $45,465.00 FTA grant funds. The remaining balance in the amount of $11,366.25 will be funded through savings from FY 07/08 capital equipment purchases. The report also stated that the filter cleaning station is being purchased through a sole source procurement which is consistent with District policy and has been approved by the Attorney for the District.

The report provided background regarding the District’s commitment to comply with California Air Resources Board regulations relative to nitrous oxide (NOx) and PM, noting that the Bus Maintenance Department has purchased and installed 46 high efficiency diesel particulate filters on Golden Gate Transit MCI buses. The filters have reduced NOx by 25 to 30 percent and PM by 85 percent. The report noted that one of the key components to the efficient, long-lasting operation of the filters is proper maintenance, and annual cleaning of the filters is required to keep them in good working order. Currently, the filter cleaning process is outsourced and has proven to be costly, as well as time prohibitive, due to long lead times by the contractor. Procurement of a filter cleaning station, with the resulting in-house cleaning capability, will result in an annual cost savings of $30,000. 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 COCHRAN/REILLY 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 07/08 Bus Transit Division Capital Budget in the amount of $45,465, for the sole source purchase of a filter cleaning station at the San Rafael Bus Facility at a cost of $56,831.25, to be funded with $45,465.00 Federal Transit Administration grant funds programmed in the Ten-Year Plan and with $11,366.25 through savings from FY 07/08 capital equipment purchases.

Action by the Board at its meeting of March 28, 2008 – Resolution
NON-CONSENT CALENDAR


AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook

       
3.

Authorize a Budget Increase in the FY 07/08 Bridge Division Capital Budget Relative to the Award of Contract No. 2006-B-1, Golden Gate Bridge Seismic Retrofit Phase IIIA, North Anchorage Housing/North Pylon, to Shimmick Construction Company, Inc./Obayashi Corporation, Joint Venture

In a report to Committee, Deputy District Engineer Ewa Bauer, District Engineer Denis Mulligan and General Manager Celia Kupersmith provided staff’s recommendation for the Committee’s concurrence with a budget increase relative to the award of Contract No. 2006-B-1, Golden Gate Bridge Seismic Retrofit Phase IIIA, North Anchorage Housing/North Pylon, to Shimmick Construction Company, Inc./Obayashi Corporation, Joint Venture. The report stated that this project is included in the FY 07/08 Bridge Division Capital Budget at a total cost of $50,000,000 and is 100% federally funded. A capital budget increase in the amount of $69,231,219, to be funded with $62,447,958 federal funds and $6,783,261 District funds, is required to fully fund this project for the total proposed budget of $119,231,219. 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 COCHRAN/REILLY 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 07/08 Bridge Division Capital Budget in the amount of $69,231,219, to be funded with $62,447,958 federal funds and $6,783,261 District funds, for a total Phase IIIA Project budget of $119,231,219, contingent upon receiving confirmation from the Federal Highway Administration and the State of California, Department of Transportation, that the $112,447,958 in federal funding previously approved for the Phase IIIA Project remains unchanged.

Action by the Board
Refer to the Building and Operating Committee Meeting of March 27, 2008

AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook

       
4.

Authorize Budget Increases in the FY 07/08 Ferry Transit Division Operating and Capital Budgets Relative to the Award of Contract No. 2008-FT-4, Installation of the Four New Main Engines for Re-Powering of the M.V. Mendocino, and Dry-Docking for Routine U.S. Coast Guard Inspection, Hull Maintenance and Repairs, to Bay Ship & Yacht Co.

In a report to Committee, Deputy General Manager/Ferry Division James Swindler and General Manager Celia Kupersmith provided staff’s recommendation for the Committee’s concurrence with budget increases relative to the award of Contract No. 2008-FT-4, Installation of the Four New Main Engines for Re-Powering of the M.V. Mendocino, and Dry-Docking for Routine U.S. Coast Guard Inspection, Hull Maintenance and Repairs, to Bay Ship & Yacht Co. The report stated that the engine installation component of Contract No. 2008-FT-4 is part of the M.V. Mendocino Repower Project, which is included in the FY07/08 Ferry Transit Division Capital Budget in the amount of $2,300,000 and is 100 percent grant funded. Approximately $1,306,625 of the total project budget has already been expended on the procurement of the engines and other materials, as well as on the necessary engineering services and staff time associated with the M.V. Mendocino Repower Project. The report stated that a budget increase in the FY07/08 Ferry Transit Division Capital Budget in the amount of $777,000 is required to fully fund the engine installation component of Contract No. 2008-FT-4. This recommended capital budget increase will be funded by federal grant funds that have been secured for the M.V. Mendocino Repower Project.

The report also stated that the dry-docking maintenance and repairs component of Contract No. 2008-FT-4 is included in the FY 07/08 Ferry Transit Division Operating Budget in the amount of $400,000 and is 100 District funded. Approximately $141,557 of these funds has already been expended on the dry-docking maintenance and repairs of the M.V. Del Norte. The report further stated that an additional budget increase in the FY 07/08 Ferry Transit Division Operating Budget in the amount of $70,000 is required to fully fund the dry-docking maintenance and repairs component of Contract No. 2008 FT-4. This recommended operating budget increase will be funded from District reserves. 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 COCHRAN/REILLY to forward the following recommendation to the Board of Directors for its consideration:

RECOMMENDATION

The Finance-Auditing Committee recommends the Board of Directors authorize budget increases in the FY 07/08 Ferry Transit Division Capital Budget in the amount of $777,000, to be funded with federal funds that have been secured for the M.V. Mendocino Repower Project, and in the FY 07/08 Ferry Transit Division Operating Budget in the amount of $70,000, to be funded from District reserves.

Action by the Board
Refer to the Building and Operating Committee Meeting of March 27, 2008

 

AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook

       
5.

Approve Renewal of the Property Insurance Program

In a memorandum to Committee, Director of Risk Management and Safety William Stafford, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual renewal of the Property Insurance Program, which renews on April 8, 2008. The report stated that the Property Insurance Program is comprised of the District Buildings and Facilities policy, Boiler & Machinery policy and the newly established Bridge Self-Insurance Loss Reserve.

The report described the current District Building and Facilities Insurance policy, which provides $45 million in coverage for all risks of physical loss or damage coverage, excluding earthquake and flood, with $20 million in coverage for earthquake or flood loss. The total cost for the 2008 renewal of this policy is $536,237, which is $136,554 lower than the expiring premium of $672,791, representing a significant 22 percent decrease. It is recommended that the Building and Facilities Insurance policy be renewed at the same limits as described above, with deductibles for all three coverage categories remaining at $250,000 each loss, including 5% of value for flood or earthquake, at a premium of $536,237. The report noted that an estimated 70 percent of the Building and Facilities Insurance policy is based on covering the risk of a catastrophic earthquake; therefore, the District may elect to increase earthquake coverage from the current $20 million to a higher amount for the 2009 renewal of this policy.

The report described the current Boiler & Machinery policy, which covers losses from explosion of boilers and steam pressure vehicles, as well as accidental breakdown of boilers and other mechanical or electrical equipment. The recommended renewal mirrors the existing coverage limits of $1 million per accident and a deductible of $1,000 per accident, for a premium of $2,556, representing a 4 percent decrease over the expiring premium of $2,663.

The report further described the District’s Bridge Self-Insurance Loss Reserve (Reserve), which Reserve was established on April 8, 2006. The District has requested Marsh to continue to obtain quotes for this coverage, to determine whether the District should continue funding the Reserve or consider transferring these risks to an insurance carrier. From Marsh’s research, it was determined that although premiums for this coverage have decreased, terms and limits have become less favorable. Therefore, staff recommends that the District continue funding the Reserve, with an allocation of $1.3 million for FY 07/08. The report noted that the continued funding of a Restricted Bridge Self-Insurance Loss Reserve, to be used in case of catastrophic damage to the Bridge, continues to be a viable way to develop the capital over time to replace this coverage. 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, William Stafford summarized the staff report, and Gregory Wessel and Frederick Robinson, Marsh Insurance Advisors, joined Mr. Stafford at the Board table to be available to the Committee to answer any questions.

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

RECOMMENDATION

The Finance-Auditing Committee recommends that the Board of Directors approve the following actions relative to the renewal of the Property Insurance Program:

  a.

Renew the following policies:

  1. Building and Facilities Insurance policy with Lexington, Arch Specialty, Essex, Integon and Homeland insurance companies, providing “all risk” coverage for all District facilities, except the Bridge itself, with $45 million of coverage, including $20 million for earthquake and fire, subject to deductibles and 5% of value for flood and earthquake, at a premium of $536,237, for a one-year term, effective April 8, 2008 through April 7, 2009; and,
  2. Boiler and Machinery policy with Hartford Steam Boiler Company, with a limit of liability of $1 million per accident and a deductible of $1,000 per accident, at a premium of $2,556, for a one-year term, effective April 8, 2008, through April 7, 2009; with the understanding that requisite funds for these policies are available in the FY 07/08 Bridge, Bus, Ferry and District Division Operating Budgets and that requisite funds will be budgeted in the appropriate division operating budgets for FY 08/09; and,
  b. Allocate monies to the Restricted Bridge Self-Insurance Loss Reserve in the amount of $1,300,000 for FY 08/09, with the understanding that this Reserve is to be used in the event of catastrophic damage to the Golden Gate Bridge or the sustained loss of toll revenue; with the further understanding that requisite funds are available in the FY 08/09 Bridge Division Operating Budget.

Action by the Board at its meeting of March 28, 2008 – Resolution
NON-CONSENT CALENDAR

       
 
AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook
       
6.

Receive the Independent Auditor’s Reports for the Year Ending June 30, 2007, as Submitted by Macias Gini & O’Connell LLP for the Following:
a.  The Financial Statements of the Supplemental Retirement Plan and Trust; and,
b.  The Single Audit Reports

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation to receive the Independent Auditor’s Reports, as submitted by Macias Gini & O’Connell LLP (Macias) for both the Financial Statements of the Supplemental Retirement Plan and Trust, and the Single Audit Reports, for the year ending June 30, 2007. The report stated that the Independent Auditor’s Reports, which were attached to the report, include the following:

  • Audited Financial Statements of the Golden Gate Bridge, Highway and Transportation District Supplemental Retirement Plan and Trust; and,
  • Single Audit Reports for Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards and the Transportation Development Act.

The report also stated that the Independent Auditor reported no findings in conjunction with either of the above-described Independent Auditor’s Reports. The report also noted that usually audit reports are presented to the Board of Directors in November of each year. In the future, the presentation of these reports will comply with that time schedule. A copy of the staff report, with attachments, is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Joseph Wire summarized the staff report, noting that the Independent Auditor issued “clean” opinions for each of the two submitted Independent Auditor’s Reports.

Discussion ensued, including the following:

  • Director Boro made the following comments and inquiries:
    • He inquired regarding the District’s efforts with respect to monitoring internal controls. In response, Mr. Wire stated that District staff includes a Financial Management and Business Process Manager, who is responsible for such monitoring. Mr. Wire further provided examples of audits that have or will be undertaken by the District: (1) medical provider audits; (2) pharmacy audits; (3) procurement system audits; (4) information technology integrity audits; and, (5) inventory audits.
    • He requested that staff provide a report to the Committee on the above-described audits. In response, Mr. Wire stated that staff would prepare such reports for future meetings of the Finance-Auditing Committee.

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

RECOMMENDATION

The Finance-Auditing Committee recommends the Board of Directors receive the Independent Auditor’s Reports for the year ending June 30, 2007, as submitted by Macias Gini & O’Connell LLP for the following:

       
  a.

The Audited Financial Statements of the Golden Gate Bridge, Highway and Transportation District Supplemental Retirement Plan and Trust; and,

  b.

The Single Audit Reports.

Action by the Board - Resolution
NON-CONSENT CALENDAR

       
  AYES (7): Acting Chair Pahre; Directors Boro, Cochran, Eddie, Grosboll and Reilly; President Moylan (Ex Officio)
NOES (0): None
ABSENT (2): Chair Stroeh; Director Middlebrook
       
7.

Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares for Eight Months Ending February 29, 2008

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a schedule comparing categories of Bridge traffic for eight months ending February 29, 2008. 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

       
8. Review of Financial Statements for Eight Months Ending February 29, 2008
       
  a.

Statement of Revenue and Expenses

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 Eight Months Ending February 29, 2008. 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

       
  b.

Statement of Capital Programs and Expenditures

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided a financial statement entitled, Statement of Capital Programs and Expenditures for Eight Months Ending February 29, 2008. 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

       
9.

Public Comment

There was no public comment.

       
10.

Adjournment

All business having been concluded, the meeting was adjourned at 11:25 a.m.

       

 

Respectfully submitted,

/s/ Barbara L. Pahre, Acting Chair
Finance-Auditing Committee