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Oct 17th Audit Budget Finance Committee Minutes

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AUDIT, BUDGET AND FINANCE COMMITTEE MEETING October 17, 2002 MINUTES OF THE MEETING ATTENDEES: Commissioners: Patricia Scates, Chair John Protopappas (excused) Frank Kiang Staff: John Betterton Patti Heilbron Doug Waring Oliviér Flewellen Ray King Joe Wong John Glover Fred Rickert Tay Yoshitani Visitors: Lance Bateman Gene Yanno, Yanno and Associates Ian Fleming, Price Waterhouse Coppers Agenda: 1. Finance Division Briefing ISO 9000 Implementation Finance Staffing 2. Review June 30, 2002 Financial Statements and Management Letter 3. Board Letters for Committee’s Review MIS Software Purchasing Open Account Agreements Contract for Finance Services 4. Review Series N Refunding Revenue Bonds The meeting was called to order at 12:17 p.m. Finance Division Briefing ISO 9000 Implementation Fred Rickert, CFO, reported that significant progress has been made in producing the procedures required for ISO 9000 certification for the Finance Division. He also reported that it became necessary to divert the consultant initially hired for Finance to assist the Maritime Division, which is falling behind in procedure writing. As a result, compensation approved for the consultant, D Squared, is being consumed at a much greater rate than anticipated and a supplement to the firm’s contract will likely be required to complete the assignment. The Committee ...
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AUDIT, BUDGET AND FINANCE COMMITTEE MEETING
October 17, 2002
MINUTES OF THE MEETING
ATTENDEES:
Commissioners:
Patricia Scates, Chair
John Protopappas (excused)
Frank Kiang
Staff:
John Betterton
Oliviér Flewellen
John Glover
Patti Heilbron
Ray King
Fred Rickert
Doug Waring
Joe Wong
Tay Yoshitani
Visitors:
Lance Bateman
Gene Yanno, Yanno and Associates
Ian Fleming, Price Waterhouse Coppers
Agenda:
1. Finance Division Briefing
ISO 9000 Implementation
Finance Staffing
2.
Review June 30, 2002 Financial Statements and Management Letter
3.
Board Letters for Committee’s Review
MIS Software
Purchasing Open Account Agreements
Contract for Finance Services
4.
Review Series N Refunding Revenue Bonds
The meeting was called to order at 12:17 p.m.
Finance Division Briefing
ISO 9000 Implementation
Fred Rickert, CFO, reported that significant progress has been made in producing the
procedures required for ISO 9000 certification for the Finance Division.
He also
reported that it became necessary to divert the consultant initially hired for Finance to
assist the Maritime Division, which is falling behind in procedure writing.
As a result,
compensation approved for the consultant, D Squared, is being consumed at a much
greater rate than anticipated and a supplement to the firm’s contract will likely be
required to complete the assignment.
The Committee inquired about plans for
updating the procedures and the need for accountability, and then recommended that
the procedures be reviewed cyclically.
Rickert indicated that ISO required
independent semi-annual audits in order to maintain certification.
The Committee
requested regular updates on the progress of the certification program.
It also
commented that while it is commendable of Rickert to take the initiative to get ISO
certification, there is no required deadline for it and every effort should be made to
correct deficiencies already known before requesting any additional resources.
Audit, Budget and Finance Committee Meeting
Page 2
October 17, 2002
Finance Staffing
Rickert reported that he would like to recommend retaining Becky Taylor of Taylor and
Associates, a former Port Commissioner, to perform an executive search for the open
position of Financial Planning Manager.
This position supervises the preparation of the
annual operating and capital budgets, cash management, and debt administration.
Rickert anticipates that the search will take 6 to 9 months.
The Committee
commented that considering Becky Taylor for this assignment was permitted under
the code of ethics since it has been more than one year since she held the office of
Commissioner.
Rickert stated that he would submit an agenda item for this at the
November 19, 2002 Board meeting.
Review June 30, 2002 Financial Statements and Management Letter
Price Waterhouse Coopers, the Port’s external auditors, presented the final Audited
Financial Statements for the Year ended June 30, 2002 to the Committee.
Ian
Fleming, Engagement Manager for Price Waterhouse Coopers, commented that the
new format required by Government Accounting Standards Board Statement number
34 had been implemented.
The management letter is still in draft form and was not
presented.
Board Letters for the Committee’s Review
Purchasing Open Account Agreement
Ray King, Purchasing Manager, presented the annual open account agreements for a
variety of supplies, equipment and services.
It amounts to $3.6 million for the fiscal
year ending June 30, 2003.
The Committee requested that the previous fiscal year’s
2001-2002 costs be provided for comparison.
MIS Software
Rickert reported that the MIS department planned to upgrade all personal computers
to Microsoft Windows XP.
This cost was anticipated in the operating budget for fiscal
year 2003.
An opportunity arose to acquire the necessary licenses at a 50% discount,
a savings of $224,000 if the order was placed by July 31, 2002.
The order was placed
in anticipation of Board approval in August 2002.
The agenda item that included this
transaction was pulled for other reasons.
The Committee inquired if this item was
included in the MIS strategic plan.
John Glover, Deputy Executive Director, replied
that it was.
Both of the items are recommended for approval.
Contract for Finance Services
Rickert reported that he will request Board approval to extend the contract for the
financial consulting services of Lance Bateman.
He anticipates the extension will not
exceed 2 years.
During the last 18 months, Bateman provided consulting services for
the last 3 Bond sales; including managing the proceeds of the 2002 Series K, which
saved $5 million in arbitrage earnings retained by the Port; the successful sale of the
$620 million bond issue, which facilitated the Port’s expansion program; and the
successful Series N Bond issue, which refunded the 1992 Series E Bonds and resulted
in a Net Present Value savings of $24 million. Bateman has acted as interim Financial
Audit, Budget and Finance Committee Meeting
Page 3
October 17, 2002
Contract for Finance Services – (continued)
Planning Manager until a permanent employee can be found.
Extending his contract
will provide a transition period when a new Financial Planning Manager is hired; in
addition to implementing an in-house CIP feasibility analysis system, a Cash Flow
forecasting system, and the design and implementation of controls over bond proceed
spending requested by the Committee.
Rickert stated that he will bring an agenda
item before the Board for approval at the November 19, 2002 meeting.
Executive Directors Report
Tay Yoshitani, Executive Director, reported that he wished to get back to the
Committee on a new automobile policy that was precipitated by their comments as a
result of a recent request to purchase a number of sedans.
While the new policy is
not popular with everyone involved, it is consistent with other local agencies, including
the City of Oakland.
Joe Wong, Director of Engineering, presented an overview of the
new auto policy, which is anticipated to reduce the sedan fleet size, saving
approximately $50,000 per year in operating expenses and $500,000 in capital
spending over the next 2 years.
Many of the assigned vehicles would be replaced with
automobile allowances and mileage reimbursement for use of employees’ personal
automobiles.
The Committee inquired if this would present any liability insurance
problems.
Wong responded that it would not because employees are required to meet
minimum insurance requirements at their own expense before qualifying for
automobile allowance.
Action Items Carried Forward
Request:
Establish ground rules for control over commitment of bond
proceeds
Due:
November 21, 2002
Requestor:
Commissioner Scates
Responsible:
Fred Rickert
Action Items for Future Follow-up
Request: Present Portwide cash flow forecast
Due:
November 21, 2002
Requestor:
Commissioner Scates
Responsible:
Fred Rickert
Request:
Provide FY 2002 costs for open account purchases
Due:
October 18, 2002
Requestor:
Commissioner Scates
Responsible:
Fred Rickert
Request:
Present Board Agenda for new automobile policy
Due:
November 5, 2002
Requestor:
Commissioner Scates
Responsible:
Joe Wong
Audit, Budget and Finance Committee Meeting
Page 4
October 17, 2002
Request:
Present Board Agenda item to award contract to Taylor and
Associates for search for Financial Planning Manager
Due:
November 19, 2002
Requestor:
Commissioner Scates
Responsible:
Fred Rickert
Request:
Present Board Agenda item to extend Lance Bateman’s contract for
Financial Services for 2 years
Due:
November 19, 2002
Requestor:
Commissioner Scates
Responsible:
Fred Rickert
Request:
Schedule cyclical financial procedures review
Due:
November 21, 2002
Requestor:
Commissioner Kiang
Responsible:
Fred Rickert
Meeting went into closed session at 12:19 p.m.
Meeting returned to open session at 1:40 p.m.
Meeting was adjourned at 2:09 p.m.
Next meeting is scheduled for November 21, 2002 at 12:00 noon in the Board Room.
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