Great Lakes Water Authority Audit Committee Thursday, April 7, 2016 at 8:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan 48226 GLWater.org AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES A. March 24, 2016 (Page 1) 5. PUBLIC PARTICIPATION 6. OLD BUSINESS A. FY 2017 and 2018 Financial Planning Update – Including: - Review of GLWA Operations & Maintenance Budget - Coordination of lease and shared services agreements Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action: None. B. FY 2015 Detroit Water & Sewerage Audit Update (Page 5) Presenter: Nicolette Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action: None. 7. NEW BUSINESS A. Proposed FY 2017 Non-Contract Wholesale Water Customer Charges (Page 7) and Public Hearing Presenter: Jon Wheatley, Public Finance Manager Proposed Action: The Audit Committee recommends that the Great Lakes Water Authority Board hold a public hearing on the proposed non-contract wholesale water customer service charges as presented herein. Subject to public comment, it is further recommended that the Great Lakes Water Authority adopt the proposed charges for Genesee County Drain Commission and the City of Highland Park. B. Update: FY 2017 Wholesale Sewer Customer Charges-Bad Debt True-Up (Page 13) Presenter: Jon Wheatley, Public Finance Manager Proposed Action: None. 8. REPORTS A. Wholesale Accounts Receivable Aging Report as of March 31, 2016 (Page 15) – Presenter: Jon Wheatley, Public Finance Manager B. Wholesale Water Revenue Report- Variance Analysis (Page 28) – Presenter: Jon Wheatley, Public Finance Manager C. City of Detroit Retail Receivable (Page 29) - Marcus Hudson, CFO, DWSD 9. INFORMATION A. City of Highland Park Billings and Collections (Jon Wheatley, Public (Page 36) Finance Manager) B. Flint Prepayment Reconciliation (Jon Wheatley, Public Finance Manager)(Page 37) C. Cash Transfers to DWSD (Nicolette N. Bateson, CFO) (Page 38) 10. LOOK AHEAD Next Audit Committee Meeting: Friday, May 6, 2016 at 8 am 11. OTHER MATTERS 12. ADJOURNMENT AGENDA ITEM #4A Great Lakes Water Authority Special Audit Committee Meeting MINUTES Thursday, March 24, 2016 at 8:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan 48226 GLWater.org 1. CALL TO ORDER Chairman Baker called the meeting to order at 8:05 am 2. ROLL CALL Chairman Brian Baker, Director Robert Daddow, and Director Joseph Nardone 3. APPROVAL OF AGENDA Chairman Baker requested approval of the Agenda. MOTION BY: JOSEPH NARDONE SUPPORT BY: ROBERT DADDOW ACTION: APPROVED 4. APPROVAL OF MINUTES Chairman Baker requested approval of the Minutes of March 4, 2016. MOTION BY: ROBERT DADDOW SUPPORT BY: JOSEPH NARDONE ACTION: APPROVED 5. PUBLIC PARTICIPATION None Page 1 Item 7B was moved up on the Agenda. B. Rating Agency Criteria and Benchmarking Presenter: Jonathan Wheatley, Public Finance Manager, and Kari Blanchett (via telephone), PFM Proposed Action: Receive and file report. Kari Blanchett noted pages 20 and 23 of the presentation need to be corrected and will provide revised copies. MOTION BY: ROBERT DADDOW SUPPORT BY: JOSEPH NARDONE ACTION: APPROVED 6. OLD BUSINESS A. FY 2017 and 2018 Financial Planning Update ‐ DWSD‐R Budget Update, Marcus Hudson, DWSD Chief Financial Officer ‐ FY 2017‐2021 Capital Improvement Plan, Monica Daniels, Capital Manager ‐ GLWA Next Steps, Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer, and Bart Foster, The Foster Group, LLC Proposed Action: None B. FY 2015 City of Detroit Audit (including DWSD) Update (verbal report) Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer o The City of Detroit requested an extension for the completion of the Audit through March 31st. Request letter went from the Mayor to State Treasurer, two days ago asking for an extension. There was internal discussion about 30 days vs 60 days. She will forward to the Board the extension letter. o We have seen a significant increase in the scope of testing on the Audit. Nicolette Bateson stated she met with Kathy Smith Roy, and they found a category of revenue they had not looked at before. The annual has about $5 Million in it, and they want to design a whole new Audit testing program for that amount. o This is KPMG’s last year under contract. o The draft of the financial statements is in process. Not sure if the draft will be ready by next Friday’s meeting. It may be necessary to ask for a Special Meeting in April in order to review a draft of the financial statement when it is in good condition, while we are working through the budget. Page 2 7. NEW BUSINESS A. DWSD Financial Performance Report through November 30, 2015 Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer, and Bart Foster, The Foster Group, LLC Proposed Action: Receive and file report. MOTION BY: ROBERT DADDOW SUPPORT BY: JOSEPH NARDONE ACTION: APPROVED 8. REPORTS A. ERP and HRIS/Payroll Implementation Budget and Implementation Update - Mike Huber, Finance Director; Denis DesRosiers, ERP Program Director; and Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Mike Huber o Update to Financial Statement and BS & A implementation. We did the analytics and the update for the budget so the great news is we are under budget and ahead of schedule. Denis DesRosiers o Nicolette Bateson commented that our strong point of connect with the city is the launch of their Oracle Cloud System. She asked, is Oracle Cloud/WAM integration going to cause us delays? Denis replied, per the HP Team, all of the work was on the city side. So, the interfaces for DWSD and DRMS, from an HP perspective, are exactly the same as the interface for Oracle Fusion. There should not be any impact, but we will follow up to make sure. However, there might be something with the GL strings if they have to revert back to seven segments from eight. B. Transition Services Budget and Project Update - Mike Huber, Finance Director Right now we have about $3 Million that we have not spent of the budget. We are assessing other needs we may have in the standup. Audit Readiness Services – we have our evaluation for asset, evaluation for fixed asset inventory, as well as other needs we are identifying. Nicolette Bateson asked, when will we be selecting a new firm? o Mike Huber replied that an RFP was sent out, and we have four bidders. Oral interviews will be held next week, and we hope to make a selection after that process. o The RFP was divided up into two sections. Phase one was requirement for lease to get acquisition valued for necessary legal documents and balance sheet. Phase two was for fixed asset inventory. We eventually need to do this, but it is not pressing. Page 3 o Nicolette Bateson stated that the thought was to find a firm that had the capacity to do both. It is preferred to do an asset inventory, especially at this point as we are standing up the entities because there are spill over impacts of being able to improve the data in our asset management system. 9. INFORMATION None 10. LOOK AHEAD Next Audit Committee Meeting will be held on Friday, April 1, 2016 at 8:00 am. 11. OTHER MATTERS Next week’s meeting will consist of the CIP, Budget Update, and Budget Draft. We hope to be able to schedule a date to take the Budget, Schedule of Charges and the CIP to the full Board. 12. ADJOURNMENT Chairman Baker requested a motion to adjourn. MOTION BY: ROBERT DADDOW SUPPORT BY: JOSEPH NARDONE ACTION: APPROVED There being no further business, the meeting adjourned at 9:50 am. Page 4 AGENDA ITEM #6B City of Detroit Notice of failure to provide Audited Financial Statements and Notice of failure to provide Operating Data for: Great Lakes Water Authority Water Supply System Revenue Bonds and Great Lakes Water Authority Sewage Disposal System Revenue Bonds The City of Detroit expects to fail to file its audited financial statements for the fiscal year ended June 30, 2015 by the date required for the continuing disclosure undertakings for the above described bond issues. While the City of Detroit’s administration and auditors are working diligently to complete the reports, the City has not received all necessary audited financial statements which are required elements of the City’s Comprehensive Annual Financial report. As a result, the City of Detroit’s Water and Sewerage Department (“DWSD”) expects to fail to file the annual operating data for the above described bond issues for the fiscal year ended June 30, 2015 by the date required by the continuing disclosure undertakings for such bond issues. The City anticipates that it will be able to file its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015 (including DWSD’s audited financial statements) by May 31, 2016, and DWSD anticipates that it will be able to file the operating data by May 31, 2016. This notice is in reference to DWSD Water Supply System Revenue Bonds and Sewage Disposal System Revenue Bonds that were assumed by the Great Lakes Water Authority as of January 1, 2016. Page 5 Page 6 AGENDA ITEM #7A Great Lakes Water Authority Financial Services Group Audit Committee Communication Date: April 7, 2016 To: Great Lake Water Authority Audit Committee From: Jon Wheatley, Public Finance Manager Re: Proposed FY 2017 Non- Contract Wholesale Water Customer Charges and Public Hearing Background: On March 2, 2016 the GLWA Board of Directors held a public hearing for the proposed wholesale water and sewage service charges for FY 2017. Absent in that schedule of charges were the charges for the two non-contract customers: Genesee County Drain Commission (“GCDC”) and the City of Highland Park.
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