Detroit Water and Sewerage Department

Transcription

1 Detroit Water and Sewerage Department 735 Randolph Street Detroit, Michigan (313) Office Agenda Tuesday, March 3, :30 AM Finance Committee Meeting 5th Floor Board Room, Water Board Building Finance Committee

2 Finance Committee Agenda March 3, CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES 5. PUBLIC PARTICIPATION 6. OLD BUSINESS A. February 11, 2015 Special Meeting B. February 17, 2015 Regular Meeting A. GLWA/DWSD-R Update B. Water and Sewer Rates Update C. Preliminary Budget and CIP Update D. FY Preliminary Five Year Forecast E. Chapter 9 update F. FY 2014 Audit update G. ERP update 7. NEW BUSINESS 8. REPORTS 9. Look Ahead Schedule 10. OTHER MATTERS 11. ADJOURNMENT A. Commercial Operations Report B. CFO Report C. Monthly Information Reports Scheduled Meetings Finance Committee April 2015 Meeting TBD Annual Finance Committee Report to BOWC TBD Detroit Water and Sewerage Department Page 2

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5 Detroit Water and Sewerage Department Meeting Minutes - Draft Finance Committee PAGE Randolph Street Detroit, Michigan (313) Office Tuesday, February 17, :30 AM 5th Floor Board Room, Water Board Building Finance Committee Meeting 1. CALL TO ORDER Chairman Kenoyer called the meeting to order at 7:30 A.M. 2. ROLL CALL Present: 3 - Linda Forte, Bradley Kenoyer and J. Bryan Williams 3. APPROVAL OF AGENDA Chairman Kenoyer requested approval of the agenda. A motion was made by Co-Chairperson Forte, seconded by Co-Chairperson Williams, that the agenda be approved. The motion carried by the following vote: approved Aye: 3 - Co-Chairperson Forte, Co-Chairperson Kenoyer and Co-Chairperson Williams 4. APPROVAL OF MINUTES Chairman Kenoyer requested approval of the minutes of January 12, A motion was made by Co-Chairperson Williams, seconded by Co-Chairperson Forte, that the minutes be approved. The motion carried by the following vote: approved Aye: 3 - Co-Chairperson Forte, Co-Chairperson Kenoyer and Co-Chairperson Williams 5. PUBLIC PARTICIPATION None. Detroit Water and Sewerage Department Page 1

6 PAGE 4 Finance Committee Meeting Minutes - Draft February 17, OLD BUSINESS A. Chapter 9 update (verbal) Nicolette Bateson, Chief Financial Officer reported that the Financial Review Commission approved a resolution to proceed with financing for the Department's sewer system. B. FY 2014 Audit update (verbal) Ms. Bateson reported that the audit is underway. C. ERP update (verbal) Ms. Bateson reported that the City's Oracle Fusion process is underway. The project is nearing key decisions on the chart of account format and moving toward a cloud-base solution to implement best practices. D. State Revolving Fund update (verbal) Ms. Bateson reported that the fund had received approval. 7. NEW BUSINESS A. FY Preliminary Five-Year Forecast Ms. Bateson reported that the five-year forecast is consistent with the official statements issued last year and this is the first public discussion draft. Mr. Bart Foster of The Foster Group reported on the preliminaries of the forecast. B. GLWA/ DWSD-R update Ms. Bateson reported that the Finance Division continues its effort in the stand up of the Great Lakes Water Authority (GLWA) and Detroit Water and Sewerage Department Retail (DWSD-R). The GLWA website, and posted on Michigan Intergovernmental Trade Network (MITN) are several procurements to assist in the GLWA's transition. Finance is working to transition the DWSD-R system and working with the City's administration. Detroit Water and Sewerage Department Page 2

7 PAGE 5 Finance Committee Meeting Minutes - Draft February 17, REPORTS A. Customer Service Report Darryl A. Latimer, Chief Customer Service Officer/Deputy Director reported that the Department had ceased its aggressive water shut-offs due to the weather but will resume its collection efforts in March. Our focus have been on illegal usage and re-checks. The Department is moving forward with the assistance program and the Detroit Water Fund is available to help customers in shut off status. The Department also partnered with Department of Human Services (DHS), The Heat and Warmth Fund (THAW), Wayne Metro, and Water Assistance Volunteer Effort (WAVE) that provide assistance. Mr. Latimer reported that the Department continues its effort of the stormwater drainage concerns and would submit options to the administration to forward for the Mayor's direction. Mr. Latimer reported that there has been some delay between receiving payments and posting for the wholesale customers but the Department is working to correct the matter. The Department continue its effort in collections from larger entities that have outstanding balances. In addition, the Department is expanding its commercial collection capability which would entail providing accurate data and reporting. B. CFO Report Ms. Bateson reported that GLWA held its first Audit Committee meeting on February 6, Mr. Brian Baker was elected chairman of the committee. The other members are Joseph Nardone and Robert Daddow. Brian Baker will also serve as the liaison between the Board of Water Commissioner's Finance Committee and Audit Committee. She also noted in attendance was Gary Brown, Vice Chairman of the GLWA Board of Directors and Carol O'Cleireacain Deputy Mayor of Economic Policy and Planning and Strategy who are assisting in the standup of the DWSD-R. C. Monthly Information Reports Ms. Bateson reported that General Council provided an update on the status of water and sewer contracts negotiations. 9. LOOK AHEAD SCHEDULE Scheduled Meetings Finance Committee March 3, 2015, 7:30am Meeting Annual Finance Committee Report to BOWC- TBD 10. OTHER MATTERS Director McCormick reported that the Department received a $10 million SAW grant to assist in the asset management implementation. We also received a $10 million SAW loan award to assist with the design of the Rouge River Outfall (RRO 2). The Michigan Department of Environmental Quality (MDEQ) approved the alternative to the RRO2,for us to make permit modification for the implications of the alternative to be written into the National Pollutant and Discharge Elimination System (NPDES) permit. Detroit Water and Sewerage Department Page 3

8 PAGE 6 Finance Committee Meeting Minutes - Draft February 17, ADJOURNMENT There being no further business, the meeting adjourned at 8:50 A.M. A motion was made by Co-Chairperson Williams, seconded by Co-Chairperson Forte, that the adjounrment be approved.. The motion carried by the following vote: approved Aye: 3 - Co-Chairperson Forte, Co-Chairperson Kenoyer and Co-Chairperson Williams Detroit Water and Sewerage Department Page 4

9 PAGE 7 City of Detroit Water & Sewerage Department Finance Division DT: TO: CC: FM: RE: February 28, 2015 Nicolette Bateson, Chief Financial Officer Debra Sommers, Finance Manager Bart Foster, President, The Foster Group Kathy Smith-Roy, DWSDD Advisor to CFO Executive Summary Draft Financial Reports FY The purpose of this memorandum m is to provide a summary of the Draft FY financial reporting as of February 27, Open year-end items which may generate adjusting entries include the following. a) Change in compensated absences liability (citywide) b) Change in final pension costs (citywide) c) Other post-employment benefits costs (OPEB) (citywide) (The OPEB costs for FY and FY were $30.9 and $26.4 million, respectively.) d) Final adjustments for cost center allocations between Water and Sewer Funds pending resolution of the above items. The City absences Finance Department anticipates the change in liability for pension and compensated to be negligible. Reporting Highlights The fiscal year June 30, 2014 includes the implementation off a new accounting standard Government Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities, as follows: o Debt Issuance Costs other than prepaid insurance costs are required to be expensed. The financial impact (no cash impact) in FY includes a prior period adjustmentt and restatement, reduction of the beginning net position for a total amount of $43.92 million; $24.19 and $19.73 forr the Sewer Fund and Water Fund, respectively. The prepaid insurance costs will continue to be reported as an asset and amortized over the life of the debt issue. 03/01/15, 1

10 PAGE 8 o Certain accounts relating to refundings of debt referred to as Deferred Charges have been reclassified from assets/liabilities to deferred inflows and deferred outflows of resources. This is a reporting change only, no financial or cash flow impact. During fiscal year, 16 Accounting Funds and 230 General Ledger Accounts were closed, with minimal financial impact included in the Miscellaneous Non-Operating Expense. This supports the efforts to streamline the accounting records. Looking ahead to FY , GASB 68, Accounting and Reporting for Pensions, will be implemented resulting in a significant increase in liability for financial reporting purposes. Financial Highlights The comparative summary of Statement of Revenue, Expenses and Changes in Net Position (excluding Final Water/Sewer Cost Allocations, final adjustments for Compensated Absences, final adjustments for Pension Costs and OPEB Costs) is included following this memorandum. Improvements can be found in most reporting and financial categories as compared to the prior year. Highlights of the Draft report are as follows: During fiscal year, funds unrestricted, for extraordinary repair and replacement and improvement and extension increased by $108 million from the prior year. It should be noted that Management s recommendation is to designate unrestricted funds as of June 30, 2014 for unique FY 2015 expenses: a) a portion of the biosolids dryer project (nontax exempt costs), b) estimate of DWSD s share of the City of Detroit s bankruptcy fees, and c) settlement of litigation costs with the bond insurers related to the City of Detroit s Chapter 9. 03/01/15, 2

11 PAGE 9 DWSD FY (DRAFT as of ) & Comparison Cash & Investments Sewer Unrestricted, Extraordinary Repair & Replacement and Improvement and Extension Funds FY FY Change $ 102,132,211 $ 53,246,775 $ 48,885,437 Reserves & Debt Funds $ 248,924,338 $ 264,523,335 $ (15,598,997) Unspent Bond Proceeds $ 44,123,304 $ 138,394,235 $ (94,270,931) $ 395,179,854 $ 456,164,345 $ (60,984,491) Water Unrestricted, Extraordinary Repair & Replacement and Improvement and Extension Funds $ 102,518,190 $ 43,634,650 $ 58,883,540 Reserves & Debt Funds $ 195,438,472 $ 183,405,324 $ 12,033,148 Unspent Bond Proceeds $ 120,420,900 $ 149,946,495 $ (29,525,595) $ 418,377,563 $ 376,986,470 $ 41,391,093 Unrestricted, Extraordinary Repair & Replacement and Improvement and Extension Funds* $ 204,650,402 $ 96,881,425 $ 107,768,977 Reserves & Debt Funds $ 444,362,810 $ 447,928,659 $ (3,565,849) Unspent Bond Proceeds $ 164,544,205 $ 288,340,730 $ (123,796,526) Total $ 813,557,417 $ 833,150,815 $ (19,593,398) * In FY certain funds are necessary for the following: Biosolids Dryer project reimbursement; DWSD's share of the City of Detroit bankruptcy fees; settlement of litigation costs with the bond insurers related to the City of Detroit's Chapter 9; etc. Net Revenue increased by 3.6%, despite an increase in bad debt expense over the prior year of $4.8 million. Bad debt expense (see Attachment for additional detail) increased from $55.4 million in FY13 to $60.2 million in FY 14 as a result of the following: o Accounts receivable unrecorded reconciling adjustments for prior years of approximately $16 million. o Delinquent accounts of $12.2 million not eligible per the County for 2013 property tax lien. The County estimates the number of parcels deemed inactive (not eligible for lien) is anticipated to double for the 2014 property tax year. DWSD did not submit delinquent accounts for the 2014 property tax year, and the County s estimates have been included in the accounts receivable and revolving fund loan balances for fiscal year June 30, For fiscal year June 30, 2015 Cash flow may be negatively impacted since repayment of the County advance will come due June 30, 2015, with no offset for added receivables to advance. The payment is estimated to be $12-$15 million. Total operating expenses before depreciation and other items decreased $3.8 million. Wages and benefits were down $10.7 million or 8.9%. 03/01/15, 3

12 PAGE 10 The nonrecurring capital asset adjustment for write-off of prior years balances was $49.7 million, compared to $55.7 million in FY13 (see attached for additional detail). Total net operating income (excluding FY13 OPEB) increased 22.6%, or $39.6 million. Total non-operating expenses decreased by $11.5 million. Total net position decreased by $74.6 million, compared with $105.5 million (excluding OPEB) for FY13. Looking ahead to FY , the significant items will include the debt issuance in September 2014, certain insurance costs related to the bankruptcy paid from operating/unrestricted funds and the implementation of the Plan of Adjustment. The FY 2014 Preliminary Total Operations and Maintenance budget has a negative variance which is largely due to items in the capital improvement program which are expensed for accounting purposes (see attached capital spend analysis with $10,545,907 in sewer and $1,197,937 in water). System FY 2014 Adopted Budget Water 149,813,331 FY 2014 Updated FY 2014 Forecast Preliminary $ 154,446,038 Forecast versus Preliminary $ $ 140,500,000 $ (13,946,038) Sewer 217,493, ,370, ,817,715 3,552,285 Total $ 367,306,919 $ 346,870,000 $ 357,263,753 $ (10,393,753) 03/01/15, 4

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15 SEWERAGE SYSTEM Summary of Expensed portion of Capital Projects Costs June 30, 2014 PAGE 13 Summary of Report Classification FY Interest Nonrecurring Expense Capital Asset Adjustment DRMS Final Final Total Costs FY Adjustment for Prior PROJECT PROJECT CONTRACT Project FY FY Expensed in Operating Expense for Prior Capitalized NUMBER TYPE NUMBER Vendor Description Costs Costs FY Reason for Expense Expense Years' Costs Interest Total STUDY CS 1272 EES/TYJT DBA Econ & Eng. STUDY & EVALUATE DWSD ELEC UTILITY RATES & COST $ $ 6,214 $ 6,214 Labor cost to project that has been moved from capital to O & M $ 6,214 $ 6, CONSTRUCT PC 739 Walsh Construction CONNER CREEK PILOT FACILITY $ $ 87,513 $ 87,513 Legal contract and treasurey module charges to closed project $ 87,513 $ 87, CONSTRUCT DWS 807 Lakeshore ASBESTOS ABATEMENT DWSD FACILITIES $ 15,148,536 $ $ 15,148,536 GASB 49 Policy on Asbestos clean up costs $ 13,468,791 $ 1,679,745 $ 15,148, CONSTRUCT PC 748 Walbridge Aldinger Co BABY CREEK CSO PILOT CONTROL FACILITY $ $ 20,018 $ 20,018 Labor trailing charges to completed project $ 20,018 $ 20, DESIGN CS 1340 Arcadis G&M of MichiganAS NEEDED ENGINEERING SERVICES $ 1,862,556 $ $ 1,583,001 Design tasks that did not result in construction $ 1,583,001 $ 1,583, DESIGN CS 1346 Smith Group Inc AS NEEDED ENGINEERING SERVICES BY CONSULTANT $ 8,914,331 $ $ 215,613 Design tasks that did not result in construction $ 215,613 $ 215, STUDY/DESIGN CS 1372 Nth Consultants Ltd GEOTECH ENGINEER SVCS AS NEEDED REQUESTED BY DWSD $ 1,130,635 $ 3,341,514 $ 3,794,186 Design tasks that did not result in construction $ 3,794,186 $ 3,794, CONSTRUCT CS 1343 Abe Associates Metco Ser AS NEEDED AERIAL PHOTO AERIAL GROUND SURVEYS $ 4,945,610 $ $ 921,690 Tasks did not result in construction $ 921,690 $ 921, Des/Construct CS 1333 Abe Associates Inc FACILITIES AS BUILT DOCUMENTATION & MAINTENANCE $ 3,427,897 $ $ 2,628,895 Design did not result in construction $ 2,012,823 $ 616,072 $ 2,628, STDY/DES/CA CS 1442/PC 774 Tooles Contracting COMPLEX I & II INCINER & CONVEY SYS IMPROVEMENTS $ 22,004,203 $ 6,933,763 $ 170,827 Nature of costs repairs $ 170,827 $ 170, STUDY/DESIGN PC 756 Weiss Construction REPLACE TROUGHS / PRIM CLAR $ 8,511,027 $ 4,456,402 $ 291,490 Repair cost $ 291,490 $ 291, STDY/DES/CA CS 1432A Tucker Young Jackson Tul AS NEEDED GENERAL ENGINEERING SERV $ 4,819,826 $ 820,959 $ 588,626 Design tasks that did not result in construction $ 588,626 $ 588, DESIGN/BUILD DWS 876 Inland Waters REHAB CIRC & NON CIRC SEW EAST $ 39,579,168 $ 3,474,492 $ 4,024,567 Emergency repairs $ 4,024,567 $ 4,024, DESIGN/BUILD DWS 877 Inland Waters REHAB CIRC & NON CIRC SEW WEST $ 38,585,317 $ 5,353,291 $ 4,746,327 Emergency repairs $ 4,746,327 $ 4,746, IT DWS 882 Detroit Radio Team SCADA RADIO NETWORK UPGRADE $ 144,184 $ 1,738,035 $ 4,523 Spare parts $ 4,523 $ 4, DESIGN/BUILD PC 786 Walsh Construction ROUGE RVR OUTFALL 2 WWTP MODIF $ 8,229,109 $ 2,972,829 $ 4,609 Photos/video $ 4,609 $ 4, DESIGN/BUILD PC 787 Weiss Construction REPL BLT FLTR PR COMP I & II $ 12,439,524 $ 6,258,526 $ 235,698 Hazardous Mat'ls Removal / Repair cost $ 235,698 $ 235, CONSTRUCT PC 789 Weiss Construction PUMP STAT 1 RACK IMP $ 258,894 $ 1,765,193 $ 11,227 Scum removal $ 11,227 $ 11, CONSTRUCT PC 788 J. F. Cavanaugh Co HUBBELL SOUTHFIELD IMPRO $ 342 $ 10,432,535 $ 185,848 Repair cost $ 185,848 $ 185, DESIGN/BUILD PC 791 Walsh Construction SEWAGE INCINERATOR IMPROV $ 2,402,916 $ 4,194,464 $ 134,837 Hazardous Mat'ls Removal $ 134,837 $ 134, DESIGN/BUILD PC 792 New England Fertilizer INSTALL & TEST BIOSOLIDS DRYER $ 1,911,141 $ 26,092,098 $ 33,583 GASB 49 FSG 002 Policy for Environmental Clean Up Costs $ 33,583 $ 33,583 $ 34,837,826 Total Costs to be Expensed $ 10,545,907 $ 21,996,103 $ 2,295,817 $ 34,837,826 03/01/15, 7

16 PAGE 14 Water SYSTEM Summary of Expensed portion of Capital Projects Costs June 30, 2014 Summary of Report Classification FY Nonrecurring Capital Asset Interest Expense DRMS Final Final Total Costs FY Adjustment Adjustment for PROJECT PROJECT CONTRACT Project FY FY Expensed in Operating Expense for Prior Prior Capitalized NUMBER TYPE NUMBER Vendor Description Costs Costs FY Reason for Expense Expense Years' Cos ts Interest Total STUDY DWS 807 Lakeshore ASBESTOS ABATEMENT DWSD FACILITIES $ 2,451,692 $ $ 2,451,692 GASB 49 Policy on Asbestos clean up costs $ 2,125,767 $ 325,925 $ 2,451, CONSTRUCT CS 1240 CONSULTING ENGINEERINGGENERAL ENGINEERING SERVICES AS NEEDED $ 4,295,154 $ $ 144,749 Design tasks that did not result in construction $ 144,749 $ 144, CONSTRUCT DWS 812 L D'Agostini & Sons Inc. IMLAY STATION IMPROVEMENTS $ $ 29,193 $ 29,193 Labor trailing charges to completed project $ 29,193 $ 29, CONSTRUCT CS 1291 MALCOLM PIRNIE AS NEEDED ENGINEERING SERVICES FOR WATER SYS $ 256,927 $ $ 13,249 Design tasks that did not result in construction $ 13,249 $ 13, DESIGN CS 1340 ARCADIS G&M OF MICHIGAAS NEEDED ENGINEERING SERVICES $ 3,157,676 $ $ 3,025,223 Design tasks that did not result in construction $ 1,396,823 $ 1,628,400 $ 3,025, DESIGN CS 1345 GREELEY & HANSEN LLC AS NEEDED ENGINEERING SERVICES BY CONSULTANT $ 1,286,695 $ 263,843 $ 1,902,268 Design tasks that did not result in construction $ 1,902,268 $ 1,902, STUDY/DESIGN CS 1346 SMITH GROUP INC AS NEEDED ENGINEERING SERVICES BY CONSULTANT $ 11,145,860 $ $ 1,056,852 Design tasks that did not result in construction $ 1,056,852 $ 1,056, CONSTRUCT SW 548 Colas anti Corp Posen Con SW SLUDGE & WASTE WASHWATER TREAT FACILITIES $ 51,618,291 $ 1,413,404 $ 177,817 Cleanings bains and tanks $ 177,817 $ 177, Des/Construct CS 1347 SOMAT ENGINEERING INC ENG SVCS CONCRETE TEST GEOTECH SOIL BORINGS $ 12,602,084 $ $ 1,779,716 Design did not result in construction $ 1,779,716 $ 1,779, STDY/DES/CA CS 1372 NTH CONSULTANTS LTD GEOTECH ENGINEER SVCS AS NEEDED REQUESTED BY DWSD $ 18,237,023 $ $ 4,556,401 Design tasks that did not result in construction $ 4,556,401 $ 4,556, STUDY/DESIGN CS 1343 ABE ASSOCIATES METCO SE AS NEEDED AERIAL PHOTO AERIAL GROUND SURVEYS $ 4,678,290 $ $ 1,997,204 Tasks did not result in construction $ 1,997,204 $ 1,997, STDY/DES/CA CS 1333 ABE ASSOCIATES INC FACILITIES AS BUILT DOCUMENTATION & MAINTENANCE $ 3,933,867 $ $ 3,134,864 Design did not result in construction $ 2,387,239 $ 747,626 $ 3,134, DESIGN/BUILD DWS 853 DCI WOLVERINE JV SCHOOLCRAFT PUMPING STATION REHABILITATION $ $ 277,082 $ 277,082 Trailing charges to completed project $ 277,082 $ 277, DESIGN/BUILD SP 563 Walsh Construction SPRINGWELLS WTR TREAT PLANT 1958 FILTER REHAB $ 8,190,002 $ 16,801,417 $ 534,383 Lead abatement/demolitions $ 534,383 $ 534, IT WATER CAPITAL PURCHDELL COMPUTER CORPORATs/b Water Capital Purchases $ $ 149,797 $ 149,797 1yr software license maintence fees $ 149,797 $ 149, DESIGN/BUILD NE 376 WHITE DCI JV NORTHEAST WTP PUMP FAC IMPRV $ $ 36 $ 36 Labor trailing charges to completed project $ 36 $ DESIGN/BUILD CS 1432A TUCKER YOUNG JACKSON TUAS NEEDED GENERAL ENGINEERING SERV $ 6,784,987 $ 911,818 $ 963,498 Design tasks that did not result in construction $ 963,498 $ 963, CONSTRUCT LH 395 Detroit Electical Service Variable Frequency Drives 3 High Lift Pumps at LHWTP $ $ 36 $ 36 Labor trailing charges to completed project $ 36 $ CONSTRUCT CS 1487 DLZ MICHIGAN INC NORTH OAKLAND TRANS. SYS $ 12,732,833 $ $ 11,146,633 NOTS construction terminated $ 9,356,658 $ 1,789,975 $ 11,146, DESIGN/BUILD DWS 874 DeMaria Building INSPECTION, REHAB, & UPGRADES $ 671,478 $ 1,549,287 $ 21,800 Manuals $ 21,800 $ 21, DESIGN/BUILD WS 680 Willie McCormick Ass. WTR SYS IMPRV VAR STS C.O.D. $ 1,241,963 $ 2,167,982 $ 3,272 Repairs $ 3,272 $ 3, DESIGN/BUILD DWS 882 Detroit Radio Team SCADA RADIO NETWORK UPGRADE $ 109,315 $ 1,737,925 $ 4,523 Spare parts $ 4,523 $ 4,523 $ 33,370,287 Total Costs to be Expensed $ 1,197,937 $ 27,680,424 $ 4,491,926 $ 33,370,287 03/01/15, 8

17 PAGE 15 City of Detroit Water & Sewerage Department Financial Services Group Date: March 3, 2015 To: Board of Water Commissioners (BOWC) Finance Committee From: Nicolette Bateson, CPA, Chief Financial Officer Re: Monthly CFO Report This month s BOWC Finance Committee binder includess highlights of the draft FY 2014 year end financial report. Some of those highlights underscore the progress made, and work that remains, to achieve a financial best practices state through the finance transformation initiative. Below is a brief synopsis of efforts underway to improve financial management of DWSD. Managing the Capital Investment Cycle Over the course of the past six months, we have appointed a lean team to address construction project close out processes. FY 2013 was the first round of identifying the oldest projects that had not closed out timely which resulted in write offs. In closing out FY 2014, the second round of analysis has been completed. This additional layer of analysis has identified additional root causes that will be addressed. Last month, OHM Advisors joined the finance transformationn effort to collapse the siloed engineering, procurement, accounting, and planning functions into a cohesivee capital investment cycle through an engineering lens. This Thursday, Cheryl Porter, Chief Operating Officer, and I will participate in the cross functional team (the Capital Cycle team) kick off of this project. The ERP project has not fully encompassed construction management software to address all stages of development (i. e., planning,, design, procurement, constructionn and operations). OHM Advisors and the Capital Cyclee team will be tasked will evaluating systems to address this need. The Procurement Team has initiated quarterly business reviews (QBR) with vendors and contractors. The QBR team includes staff and advisors from operations, engineering, finance, risk managemen nt and legal to review projects in process. The goal is proactive support to the engineering team, managed risk, and improved financial and operational

18 PAGE 16 project outcomes. In January, a seasoned construction, finance, and accounting professional from Experis joined the team. In addition to participating and facilitating the above projects, she will focus on capitalization policies, procedures, and communications to effectuate lasting change. Her experience complemented the DWSD team in tackling long standing issues for the FY 2014 year end close. Procure to Pay Cycle Resources have recently been reassigned to improve the timeliness and consistency of vendor payments. Again, it is clear that a cross functional team is key to addressing the payment delays as well as vendor communications. Addressing timely paperwork submittals is key to solving this issue. The new ERP and workflow will provide a dramatic process improvement. For now, the primary concern is that interim financial information may be misleading if receiving and invoicing documents are not entered in a timely manner. Financial Planning & Analysis The intensive process to overhaul the internal budget process for the FY 2016 Budget is complete. The next step is to roll out training and materials to the managers. This serves as the foundation for improved budget management going forward. Stand up of the Financial Planning and Analysis (FP&A) unit within the Finance Group is expected to occur within the next 30 to 45 days. The FP&A function pulls together long term planning, trend analysis, and reporting. This approach will strengthen data sharing between the existing budget and accounting functions.