Board Members present: Sandra Bishop, Dorothy Anderson, Peter Bartel, Susie Smith, and Patrick Lanning.
Others present: Randy Berggren, JoAnn Andersen, Terry Bequette, Tom Buckhouse, Ken Beeson, Cathy Bloom, Ed Case, Marty Douglass, Cathy Hamilton, Dick Helgeson, Garry Kunkel, Roseanna McArthur, Jim Origliosso, Debra Wright, and Krista Hince of the EWEB staff; members of the public; and Kim Kunkel, Minutes Recorder.
President Bishop called the Work Session of the Eugene Water & Electric Board (EWEB) to order.
STATUS OF PUBLIC AGENCY NETWORK
Referring to a memorandum entitled Status of Public Agency Network Activity, copies of which were included in the meeting agenda packet, Information Services Manager Terry Bequette said this discussion of the Public Agency Network would include the following:
In terms of background, Mr. Bequette explained that EWEB staff has been participating in an ad hoc effort to define and develop a Public Agency Network. He said that since May 4, a committee comprised of fourteen different Eugene-Springfield agencies has met and has reached a consensus on a network concept, including how it should be organized and operated.
Noting that it has not yet been reviewed by the full committee, Mr. Bequette presented an overview of the following draft recommendations issued by the Ad Hoc Public Agency Network Committee:
With regard to next steps, Mr. Bequette said the committee decided that it should document its current consensus thinking in the form of these recommendations so as to determine the level of support from the agencies they represent. He said EWEB's support for the conceptual model is also important at this stage. He said the recommendations document, when finalized, will be used by committee members to communicate with their respective decision makers. Mr. Bequette said no commitment to funding will be sought in this communications process, but the committee wants confirmation that the next steps in the development of the network should proceed. He said the proposed next steps are:
Mr. Bequette reviewed the issues of concern to EWEB, as follows:
Mr. Bequette presented a brief overview of the list of participating agencies.
The Board asked a number of clarifying questions.
1999/2000 BUDGET CONTROLS STATUS/AUDIT FINDINGS
Referring to a memorandum entitled Review of Budget Monitoring Controls, copies of which were included in the meeting agenda packet, Treasurer Jim Origliosso recalled that in June 1999, staff agreed that a procedure would be implemented to communicate performance against the approved Board budget in a more formal way. He noted that the principle change was that when year-end budget position is projected to meet certain criteria, staff would propose an amendment to the budget during the year. He said this process has been in place for one year and has resulted in several budget amendments. Mr. Origliosso stated that staff recently conducted an evaluation of the process and developed findings and recommendations intended to improve the effectiveness and efficiency of the process.
Following a review of the budget monitoring control criteria for triggering a budget amendment proposal, Mr. Origliosso presented an overview of the following five findings, and associated recommendations, of the evaluation:
-- Intra-year budget projections are directed toward cash management and are currently not an effective way of predicting utility financial and operating performance.
Recommendation: The budget is an estimate and understandably does not match up exactly to the events that happen a year later. Improvements need to be made to the way in which rates are charged for benefits, labor, and stores to adequately account for the budget variances that occurred at the end of 1999.
Additionally, all corporate costs, such as EDI, should be budgeted at the section level and be charged to the appropriate section level. A new section for financial transactions should be developed for the 2001 budget to record journal entries for accruals and assign the new section to Finance to monitor. Utility revenue would remain in section 955 to eliminate a mass change to Banner account coding.
Directors should emphasize collection of information from sections relating to commitment and contingencies (un-invoiced items). These should be recorded earlier on the budget monitoring report instead of at year-end.
-- Spending projections are being reported net of additional revenues and reimbursements which is not consistent with the policy view that the budget represents the maximum appropriation currently authorized.
Recommendation: Need a materiality standard $10,000. A new criterion for budget monitoring needs to be added for revenues and reimbursements that could have a material effect on budget position. Revenues and expenses should be reported separately by section and supervisors.
-- There are many ways to define capital work and the budget system, and hence the Board's criteria for reporting capital project variances are inconsistently applied.
Recommendation: Clear reporting rules for each level of the program, project, and job schema should be developed and communicated before beginning the 2001 budget. All capital activity that is subject tot he monitoring criteria should be specifically identified by project number, job number, or other identifying characteristics when the budget is approved. New reports should be written to accommodate capital budget monitoring at the umbrella and independent job level.
-- Forms, procedures, and roles supporting the budget amendment process are not clear and consequently the controls are not uniformly applied throughout the organization.
Recommendation: Contract amendments should be processed by the GM Division's staff and budget amendment processed by General Accounting's staff on two different forms. After the section supervisor discusses the budget amendment with their director, the budget amendment needs to be given to General Accounting's staff to deliver to the EMT for group discussion and signature by General Manager at the EMT meeting. The signed budget amendment needs to be given back to General Accounting so that it can be included in the Board run.
-- The budget monitoring process is not performed by all Divisions monthly, as it is time consuming and needs to be streamlined.
Recommendation: All Directors need to drive the importance of budget monitoring on a regular basis to the section supervisors.
Mr. Origliosso addressed a number of clarifying questions.
President Bishop requested that Finding 2 be re-written to provide more clarity.
SECOND QUARTER FINANCIAL STATEMENTS
Referring to a memorandum entitled Second Quarter Financial Results and Impacts, copies of which were included in the meeting agenda packet, Assistant Treasurer Cathy Bloom presented an overview of the Electric and Water Utility and Steam System financial statements for the period ending June 30, 2000.
In summary, Ms. Bloom stated that the Electric Utility results from the first half of the year were slightly better than budgeted. She said retail sales were on track with budget and wholesale activity continued to be much higher than expected. She noted that the spot market prices are continuing to spike, contributing to the higher wholesale sale activity and corresponding higher purchased power costs in comparison to the budget. Ms. Bloom said the overall budget for revenues and power costs resulted in a surplus of $785,000 with a projected year end surplus of $586,000.
With regard to the Water Utility results from the first half of the year, Ms. Bloom reported a net operating revenue of $37,000. She said this was higher than last year due to higher sales and lower operating costs. Ms. Bloom stated that because this is the beginning of the peak summer months, operating results will be clearer at the end of the quarter.
Commissioner Smith inquired as to the projected trend in terms of power trading costs. Mr. Berggren responded that from a risk management perspective, EWEB is in a relatively good position; however, the future is difficult to predict. Mr. Varner said EWEB is monitoring its position closely.
Addressing a separate matter, President Bishop inquired as to the purpose for including contracts on the Consent Calendar. Roseanna McArthur, Director of Corporate Services, responded that contracts in excess of a certain dollar amount are included on the Consent Calendar as the result of a "dollar amount trigger," as requested by the Board. In addition, she said the Board is to act as the Contract Review Board by determining, for example, whether the contract award process was followed appropriately. Mr. Origliosso added that contracts do not go into effect until they are approved by the Board.
President Bishop stated that in reviewing contract law, it seems that the Board has little ability to affect a contract once a letter of intent to award has been issued. Mr. Origliosso said the letter of intent to award stipulates that award of the contract is contingent upon Board approval. President Bishop requested that staff draft a statement of explanation of the Consent Calendar process in relation to contract review and approval.
The meeting adjourned at 7:28 p.m.
_____________________________________ ______________________________________
Assistant Secretary President