November 18, 2011

 

REPORT OF THE FINANCE-AUDITING COMMITTEE/

COMMITTEE OF THE WHOLE

 

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

Honorable Members:

A meeting of the Finance-Auditing Committee/Committee of the Whole (Committee) of the Golden Gate Bridge, Highway and Transportation District (District) was held in the Board Room, Administration Building, Toll Plaza, San Francisco, CA, on Friday, November 18, 2011, at 9:35 a.m., Chair Stroeh presiding.

Committee Members Present (8): Chair Stroeh; Directors Boro, Cochran, Elsbernd, Grosboll and Moylan; Vice Chair Pahre; President Reilly (Ex Officio)
Committee Members Absent (1): Director Sobel
Other Directors Present (3): Directors Eddie, Renée and Theriault

Committee of the Whole Members Present (11): Directors Boro, Cochran, Elsbernd, Moylan, Pahre, Renée, Stroeh and Theriault; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
Committee of the Whole Members Absent (7): Directors Arnold, Campos, Chu, Mar, Rabbitt, Snyder and Sobel

[Note: On this date, there was one vacancy on the Board of Directors.]

Staff Present: General Manager Denis Mulligan; Acting Auditor-Controller Jennifer Mennucci; District Engineer Ewa Bauer; District Secretary Janet Tarantino; Attorney David Miller; Deputy General Manager/Bridge Division Kary Witt; Acting Deputy General Manager/Ferry Transit Division Christian Stark; Deputy General Manager/Administration and Development Kellee Hopper; Assistant Clerk of the Board Lona Franklin

Visitors Present: Nancy Jones, PFM Asset Management, LLC

1. Ratification of Previous Actions by the Auditor-Controller

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan outlined commitments, disbursements and investments made on behalf of the District. The report also included a copy of the District’s Investment Report from PFM Asset Management, LLC (PFM). 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, Nancy Jones, of PFM, reported that little change has taken place regarding the District’s investments since her last report on October 27, 2011.

She reported that consumer confidence remains low. Retail sales have not shown a concomitant decline, however. As a result, the investment community displays uncertainty regarding whether consumer confidence may increase, and whether retail sales may decline. Current expectations for Christmas sales continue to be positive, although fewer sale prices are anticipated.

She also reported that the District’s portfolio remains well diversified between United States (U.S.) Treasuries, federal agencies and high-quality corporate issuers. She added that PFM is no longer purchasing any securities backed by European banks. However, they recently purchased Governor’s Energy Office (GEO) bonds issued by the City and County of San Francisco, with a rate over 1% for a one-year bond and 1.34% for a five-year bond. She indicated that the GEO bond rates are better than the current U.S. Treasury rate. She explained that such bonds commonly trade at the same rate as bonds issued by the U.S. Treasury. She concluded by stating that, if the GEO bond rates fall, PFM will sell those bonds on behalf of the District at a profit. Finally, she distributed copies of a graphic downloaded from www.NYTimes.com entitled, “Europe’s Sovereign Debt Crisis Has Global Impacts.” A copy of this document is available from the Office of the District Secretary and on the District’s web site.

Discussion ensued, including the following comment:

     
 
  • Director Renée commented that some counties and cities are reluctant to purchase bank securities. In response, Ms. Jones stated that purchase decisions by PFM are made based upon credit worthiness. Unless specifically instructed by their client to do so, PFM is not currently purchasing European bank notes because of the financial exposure. She added that JPMorgan Chase is presently a secure investment.
     
  Staff recommended and the Committee concurred by motion made and seconded by Directors COCHRAN/EDDIE to forward the following recommendation to the Board of Directors for its consideration:
     
 
RECOMMENDATION

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

  a.

The Board of Directors has no commitments and/or expenditures to ratify for the period October 1, 2011, through October 31, 2011;

  b. Ratify investments made by the Auditor-Controller during the period October 18, 2011, through November 7, 2011, as follows:
   
Security
Purchase Date
Maturity Date
Original Cost
Percent Yield
Bank of Nova Scotia Certificate of
Deposit
10/18/11
10/15/12
9,005,319.00
0.68
FHLMC (Callable) Notes
10/18/11
10/18/13
5,568,840.00
0.60
FNMA (Callable) Notes
10/26/11
10/26/16
5,000,000.00
1.75
JP Morgan Chase & CO Notes
10/31/11
11/15/14
6,452,314.40
2.66
  c. Authorize the Auditor-Controller to re-invest, within the established policy of the Board, investments maturing between November 8, 2011, and December 5, 2011, as well as the investment of all other funds not required to cover expenditures that may become available; and,
  d. Accept the Investment Reports for October 2011, as prepared by PFM.
     
   
Action by the Board at its meeting of December 16, 2011 – Resolution
CONSENT CALENDAR

AYES (10): Directors Boro, Cochran, Elsbernd, Moylan, Pahre, Renée, Stroeh and Theriault; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

[Second Vice President Grosboll arrived at this time.]

     
2. Authorize Budget Adjustment(s) and/or Transfer(s)
  a. Budget Increase and Budget Transfer Relative to Contract No. 2010-BT-1, San Rafael Body Shop Roof Replacement and Solar Panels Installation
    In a memorandum to Committee, Auditor-Controller Joseph Wire, District Engineer Ewa Bauer and General Manager Denis Mulligan reported on staff’s recommendation to approve a budget increase in the amount of $98,700.00, for Contract No. 2010-BT-1, San Rafael Body Shop Roof Replacement and Solar Panels Installation, to be funded with $42,500.00, from interest earned on the State I-Bond Grant Program funds and a budget transfer from the FY 11/12 District Division Operating Budget to the FY 11/12 Bus Transit Division Capital Budget in the amount of $56,200.00, for a total Project Budget of $870,700.00. The Board of Directors, by Resolution No. 2009-063 at its meeting of July 24, 2009, authorized the award of Contract No. 2010-BT-1, San Rafael Body Shop Roof Replacement and Solar Panels Installation, to Angotti & Reilly, Inc., San Francisco, CA, in the amount of $493,000.00, including a Contingency Fund in the amount of $49,300.00, and established a total Project Budget of $772,000.00.

The staff report stated that additional engineering staff costs were incurred during review and approval of the contractor’s submittals related to the fabrication and installation of the solar panel system and due to coordination of the construction work that was staged around the ongoing operations at the San Rafael Body Shop Building.

A copy of the staff report is available from 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/ELSBERND to forward the following recommendation to the Board of Directors for its consideration:
     
 
RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors approve actions relative to Contract No. 2010-BT-1, San Rafael Body Shop Roof Replacement and Solar Panels Installation, with Angotti & Reilly, Inc., as follows:

  a. Establish an increased total Project Budget in the amount of $870,000.00, for additional engineering staff costs incurred during review and approval of the contractor’s submittals related to the fabrication and installation of the solar panel system and due to coordination of the construction work that was staged around the ongoing operations at the San Rafael Body Shop Building, to be funded with $456,519.00 State I-Bond grant funds (52%) and $414,181.00 District funds (48%);
  b. Authorize a budget transfer from the FY 11/12 District Division Operating Budget to the FY 11/12 Bus Transit Division Capital Budget in the amount of $56,200.00; and,
  c. Authorize a budget increase in the FY 11/12 Bus Transit Division Capital Budget in the amount of $98,700.00, to be funded with $42,500.00 interest earned on the State I-Bond Grant Program and with the above referenced $56,200.00 budget transfer.
 
Action by the Board at its meeting of November 18, 2011
Resolution

AYES (11): Directors Boro, Cochran, Elsbernd, Moylan, Pahre, Renée, Stroeh and Theriault; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
3. Authorize Actions Related to Grant Programs
  a. Approve Actions Relative to the Filing of a Sub-Grantee Agreement with the Marine Exchange of the San Francisco Bay Region Relative to the Automatic Identification System Navigation Equipment Project

In a memorandum to Committee, Deputy General Manager/Ferry Transit Division James Swindler, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on staff’s recommendation to add the Automatic Identification System Navigation Equipment Project (AIS Project) to the FY 11/12 Ferry Division Capital Budget; increase the FY 11/12 Ferry Transit Division Capital Budget in the amount $209,367.00, for the purchase and installation of upgraded AIS navigation equipment for five ferryboats; and, authorize the General Manager or his designee to execute for and on behalf of the District the Sub-Grantee Agreement for the AIS Project with the Marine Exchange of the San Francisco Bay Region (Fiduciary Agent and Direct Grantee for Port Security Grant Program (PSGP) funds).

The staff report stated that, in November 2010, the Ferry Transit Division applied for FY10 federal PSGP funds for the AIS Project, at 100%, which application was not selected for funding. Thereafter, the Ferry Transit Division submitted an application for FY08 PSGP funds, following notification by the Marine Exchange of the San Francisco Bay Region (Marine Exchange) that funding had become available for the AIS Project at 75%, with a required 25% local match. The Marine Exchange awarded the grant to the District in July 2011.

The staff report also stated that the AIS Project is designed to upgrade the federally required AIS navigation equipment installed on five District ferryboats in 2003 to the same standards as those of the M.V. Golden Gate and M.V. Napa. The upgraded AIS Project navigation equipment will provide vastly improved and user friendly hardware and software to replace the existing first generation of basic equipment that was installed on the ferryboats.

The staff report indicated that the existing equipment is becoming less reliable, providing only minimal security and navigational data to the pilot house crews; and, the core component of the system, the AIS transceiver, has been out of production for several years, is not factory supported and, if incapacitated for a prolonged period, could prompt the United States Coast Guard to disallow use of the affected ferryboats. Standardization of all pilot house electronic aids to navigation throughout the fleet has been a longstanding goal at the Ferry Transit Division.

A copy of the staff report is available from 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/EDDIE to forward the following recommendation to the Board of Directors for its consideration:
     
 
RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors approve actions relative to the filing of a Sub-Grantee Agreement with the Marine Exchange of the San Francisco Bay Region, as follows:

  a. Authorize addition of the Automatic Identification System Navigation Equipment Project (AIS Project) to the FY 11/12 Ferry Division Capital Budget, thereby increasing the FY 11/12 Ferry Transit Division Capital Budget in the amount $209,367.00, for the purchase and installation of upgraded AIS navigation equipment for five ferryboats, to be funded with federal Port Security Grant Program (PSGP) funds in the amount of $157,033.00 (75%), and with PSGP-required local match funds from District Reserves in the amount of $52,344.00 (25%); and,
  b. Authorize the General Manager or his designee to execute for and on behalf of the District the Sub-Grantee Agreement for the AIS Project with the Marine Exchange of the San Francisco Bay Region (Fiduciary Agent and Direct Grantee for PSGP funds).
 
Action by the Board at its meeting of November 18, 2011
Resolution

AYES (11): Directors Boro, Cochran, Elsbernd, Moylan, Pahre, Renée, Stroeh and Theriault; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
4. Receive the Independent Auditors’ Reports for the Year Ending June 30, 2011, as Submitted by Vavrinek, Trine, Day & Co., LLP, including the following:
  a. The Comprehensive Annual Financial Report, including the Single Audit Report;
  b. The Financial Statements of the Supplemental Retirement Plan and Trust;
  c. The Agreed-Upon Procedures Pertaining to the Proceeds of the Public
Transportation Modernization, Improvement and Service Enhancement Account Grant Program; and,
  d. The Independent Auditor’s Communication Letter
     
   

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan reported on the annual audit of the District for the year ending June 30, 2010, as prepared by Vavrinek, Trine, Day & Co., LLP (VTD), and reported on staff’s recommendation that the Board receive the Independent Auditors’ Reports for the year ending June 30, 2011.

The Committee reviewed the staff report, which included the following reports that had been provided by the Auditor-Controller regarding the District’s Financial Statements:

   
  • Introductory Section;
  • Independent Auditor’s Report;
  • Management’s Discussion and Analysis;
  • Financial Statements;
  • Required and Other Supplementary Information;
  • Statistical Section; and,
  • Single Audit Section.
    In addition, the Committee reviewed the following reports that had been provided by the Auditor-Controller regarding the Financial Statements of the Supplemental Retirement Plan and Trust:
   
  • Independent Auditor’s Report;
  • Management’s Discussion and Analysis;
  • Financial Statements; and,
  • Required Supplementary Information.
     
    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, Acting Auditor-Controller Jennifer Mennucci introduced Ahmad Gharaibeh, representing the independent auditor, VTD. Mr. Gharaibeh provided an overview of the Independent Auditor’s Reports on both the District’s Financial Statements and the Financial Statements of the Supplemental Retirement Plan and Trust. Mr. Gharaibeh summarized the scope of auditing services provided by VTD, and stated that no problems were discovered, and that there were no significant findings during the course of either audit. He also stated that the auditors had not found any material weaknesses in the Financial Statements, and that VTD provided a “clean opinion.” There was no non-compliance found in connection with the Transportation Development Act, or with federal regulations when receiving federal grants. In addition, he stated that a clean opinion was issued for the retirement fund. He complimented staff, stating that auditor recommendations are quick to be implemented and that the audit had gone smoothly.

Mr. Gharaibeh reported that the District has received a Certificate of Achievement for Excellence in Financial Reporting, for the year 2011, which is an award for which the District applies, along with many other public agencies. He concluded by stating that the award is not easy to earn.

Discussion ensued, including the following inquiry:

   
  • Second Vice President Grosboll inquired as to the process used by the independent auditors to verify the District’s assets. In response, Mr. Gharaibeh stated that the prior year balance is audited, and then changes to Capital Assets are added or subtracted, as appropriate. Selections are sampled, including the physical inventory, to assure that all assets reported are actually present and/or in the District’s inventory. He added that financial statements record the historical costs of the assets, which is the price paid at purchase, and not the fair market value.
     
  Staff recommended and the Committee concurred by motion made and seconded by Directors BORO/MOYLAN to forward the following recommendation to the Board of Directors for its consideration:
     
 
RECOMMENDATION

The Finance-Auditing Committee/Committee of the Whole recommends that the Board of Directors receive the Independent Auditors’ Reports for the year ending June 30, 2011, as submitted by Vavrinek, Trine, Day & Co., LLP, including the following:

  a. The Comprehensive Annual Financial Report, including the Single Audit Report;
  b. The Financial Statements of the Supplemental Retirement Plan and Trust;
  c. The Agreed-Upon Procedures Pertaining to the Proceeds of the Public Transportation Modernization, Improvement and Service Enhancement Account Grant Program; and,
  d. The Independent Auditors’ Communication Letter regarding matters related to the audit.
 
Action by the Board at its meeting of November 18, 2011
Resolution

AYES (11): Directors Boro, Cochran, Elsbernd, Moylan, Pahre, Renée, Stroeh and Theriault; Second Vice President Grosboll; First Vice President Eddie; President Reilly (Ex Officio)
NOES (0): None

     
5. Monthly Review of Golden Gate Bridge Traffic/Tolls and Bus and Ferry Transit Patronage/Fares (for Four Months Ending October 2011)

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided a schedule comparing categories of Golden Gate Bridge (Bridge) traffic, as well as a monthly review of Bridge traffic, tolls, transit patronage and
fares, for four months ending October, 2011. Copies of the reports are available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
6. Monthly Review of Financial Statements (for Four Months Ending October 2011)
  a. Statement of Revenue and Expenses

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided financial statements entitled, Statement of Operating Revenues and Expenses. Copies of the reports are 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, Director of Capital and Grant Programs Gayle Prior, Auditor-Controller Joseph Wire and General Manager Denis Mulligan provided financial statements entitled, Statement of Capital Programs and Expenditures. Copies of the reports are available in the Office of the District Secretary and on the District’s web site.

Action by the Board – None Required

       
7.

Public Comment

There was no public comment.

     
8.

Adjournment

All business having been concluded, the meeting was adjourned at 9:48 a.m.

     

 

Respectfully submitted,

s/ J. Dietrich Stroeh, Chair
Finance-Auditing Committee