Quarterly Audit and Performance
Review Report
FY 2021-22, Q2
February 22, 2022
Nancy L. Hom, Deputy Chief Financial Officer
Financial Services | Audit Bureau
1 2
Annual Summary
• Audits and Assessments (Total YTD, 28)
Upcoming
43%
Completed
28%
In Progress
29%
Audits Completed and Reports Issued
Audit / Assessment Oversight
Body Report Date
2020 Green-e Energy Audit
Center for
Resource
Solutions
10/28/21
Social Impact Partnership Program Audit CSA, Controller 12/9/21 FY 2020-21 Annual Physical Inventory
Count
• Water
• Wastewater
• Hetch Hetchy Water & Power
SFPUC, Finance 12/31/21
3 Audit Highlight:
Annual Warehouse Inventory Counts
FY 2020-21 Inventory Count compared to Maximo
Findings:
• User error – items incorrectly processed in/out of Maximo (inventory management software)
• Non-stock items – unclear whether to include in inventory • Challenges between Maximo and EJ Ward (fuel management system), primarily due to user error
Management concurred with the recommendations.
4 Report Variance in
Unit Count
Variance in
Percentages
(Units)
Total Inventory
Count in Units
Variance in
Dollars
Variance in
Percentage
(Dollars)
Total Inventory
Count in Value
Moccasin 45 1.9% 2,353 496$ 0.1% 430,758$ City Distribution Division (CDD) &
Auxiliary Water Supply System (AWSS) 413 26.8% 1,542 161,134$ 3.3% 4,915,399$ Millbrae & Sunol Yard 17 1.5% 1,121 460$ 0.1% 544,895$ Hetchy In-City Power 534 39.2% 1,363 139,041$ 9.7% 1,431,814$ Wastewater Southeast 93 2.4% 3,913 33,513$ 1.3% 2,677,961$ Open City Services Audits and
Recommendations
5 Total Open Closed % Complete
Audits 20 1 19 95%
Recommendations 256 7 249 97%
6 FY 2021-22, Q3 Outlook
Completing
• SFPUC Bond Expenditure Audit
• FY 2020-21 Audited Financial Statements
• FY 2020-21 Annual Comprehensive Financial Report
• FY 2020-21 Popular Annual Financial Report
Upcoming
• FY 2020-21 Wholesale Revenue Requirement Audit
• CleanPowerSF Privacy Audit
• FY 2020-21 Single Audit (OMB Circular A-133)
Public Integrity Assessment Updates
Completed
• Community Benefit / Social Impact Partnership Program Audit; completed in FY 2021-22 Q2
In Progress
• SFPUC Public Integrity Assessment; data collection, staff interviews underway; estimated completion FY 2021-22 Q3 • SSIP Program Management Contract Audit; data collection, staff interviews underway; estimated completion FY 2021-22 Q4 7 THANK YOU
Feedback & Questions?
8 OUR MISSION: To provide our customers with high-quality, efficient and reliable water, power and sewer services in a manner that values environmental and community interests and sustains the resources entrusted to our care.
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: February 22, 2022
To: Commissioner Anson Moran, President
Commissioner Newsha Ajami, Vice President
Commissioner Sophie Maxwell
Commissioner Tim Paulson
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Deputy Chief Financial Officer
Subject: FY 2021-22 Second Quarter Audit and Performance Review Report through December 31, 2021
This memorandum provides the San Francisco Public Utilities Commission ( SFPUC) Quarterly Audit and Performance Review (QAPR) report, as of FY 2021-22 second quarter, ending December 31, 2021. In addition, this memo provides an update regarding the ongoing Public Integrity Assessment.
I. REPORTS SUMMARY
There were five completed audits since the last quarterly report:
1. 2020 Green-e Energy Audit, October 28, 2021
Report Summary: Third-party auditor Larkin & Associates, PLLC performed the audit procedures agreed upon by CleanPowerSF and the Center for Resource Resolutions (CRS) to verify compliance with annual reporting requirements of the CRS’s Green-e Energy program.
Audit Findings Summary: The confidential report found no exceptions regarding the compliance of the Green-e Energy verification reporting requirements.
2. Social Impact Partnership Program Audit, December 9, 2021
Report Summary: The Controller’s City Services Auditor (CSA) engaged Sjoberg Evashenk Consulting, Inc. (SEC), to assess the appropriateness and effectiveness of SFPUC’s governance and oversight of the Social Impact Partnership (SIP) Program.
Report link: SIP Audit Report
Audit Findings Summary: The audit found the SIP Program lacks the infrastructure and policies for program sustainability. The three findings were:
1. Inconsistencies in the design of the SIP Program create inherent risks that SFPUC could award contracts to contractors that would not, in the end, provide the greatest value to the City and its residents.
2. Internal control weaknesses contribute to confusion in the solicitation and award process, resulting in unreliable and inconsistent recordkeeping, which impedes program monitoring and transparency.
2 3. The program lacks a sustainable framework (including policies and procedures, systems, and resources) to ensure long term success.
Management concurred with the seven recommendations addressing the audit findings and is committed to implementing the recommendations to strengthen the SIP Program and its operation and administration processes. The General Manager presented the audit report to this Commission on January 11, 2022.
3.- 5. FY 2020-21 Annual Physical Inventory Count, December 31, 2021
Report Summary: The SFPUC engaged third-party auditor Crowe, LLP (Crowe) to perform physical inventory counts for the three enterprise funds for FY 2020-21. The five reports cover results from Crowe’s physical counts in warehouses located in Moccasin, City Distribution Division (CDD), Auxiliary Water Supply System (AWSS), Millbrae, Sunol Yard, Hetchy Power In-City, and Wastewater Southeast. Report link:
FY 2020-21 Inventory Report
Audit Findings Summary: The audits found variances between the physical count and the amounts reported in the inventory system (Maximo). The three main findings were attributed to:
1. User error – items being processed in/out of Maximo incorrectly.
2. Non-stock items – whether to include or not; develop method to separate from inventory-stock items.
3. Ongoing user error and other challenges between Maximo and EJ Ward (fuel management system).
Management concurred with the recommendations and provided additional detail regarding mitigating actions.
II. Audit Recommendation Status
Seven new audit recommendations are open for the Social Impact Partnership Program Audit. SFPUC is committed to incorporating these recommendations by the end of the calendar year 2022.
III. Public Integrity Assessment Updates
Over the past several months, the Controller’s City Services Auditor (CSA) and external auditors have conducted a series of audits and assessments related to public integrity.
The status of these efforts is outlined below.
• Community Benefit / Social Impact Partnership Program Audit – commenced Q4, FY 2020-21. Completed second quarter of FY 2021-22.
• SFPUC Public Integrity Assessment – commenced Q1, FY 2021-22. CSA began its assessment of SFPUC’s procurement and contracting processes. The target date for completion is Q3, FY 2021-22.
• Sewer System Improvement Program (SSIP) Program Management Contract Audit – commenced Q2, FY 2021-22. The target date for completion is Q4, FY 2021-22.
If you have questions, please contact me at [email protected] .
Attachment: FY 2021-22 Audit Plan, By Status as of December 31, 2021 Appendix I: City Services Auditor Recommendations, Aging Report
3 # Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body 1 [Updated]
Completed Financial Water
Annual Physical Inventory Count, FY 2020-21 SFPUC, Finance 2 [Updated] Completed Financial Wastewater
3 [Updated]
Completed Financial Hetch Hetchy Water & Power
4 [Updated]
Completed Financial Power Green-e Verification Audit, 2020 Center for Resource Solutions
5 In Progress Financial Water
Audited Financial Statements, FY 2020-21 Controller 6 In Progress Financial Wastewater 7 In Progress Financial Hetch Hetchy Water & Power
& CleanPowerSF
8 Completed Financial Business Services, Finance Wholesale Revenue Requirement: Statement of Changes in Balancing Account, FY 2019-20 BAWSCA
9 Upcoming Financial All SFPUC Political Activity Fund Compliance Assessment, FY 2017-18 CSA, Controller
10 Completed Financial Business Services, Finance Post Audit 2020 Controller 11 Completed Financial Business Services, Finance Sales and Use Tax Audit, 2018-20 CA Department of Tax & Fee Administration
12 In Progress
Revenue
Bond
Oversight
Committee
RBOC SFPUC Bond Expenditure Audit RBOC
13 [Updated]
Completed Performance External Affairs Community Benefit / Social Impact Partnership Program Audit CSA, Controller
14 [Updated]
In Progress Performance All SFPUC SFPUC Public Integrity Assessment CSA, Controller 15 Upcoming Performance All SFPUC Citywide Audit and Assessment of Emergency Contracting and No Bid Sole Source Contracts CSA, Controller 16 Upcoming Financial Business Services, Finance Wholesale Revenue Requirement: Statement of Changes in Balancing Account, FY 2020-21 BAWSCA
17 [Updated]
In Progress Financial Business Services, Finance Annual Comprehensive Financial Report, FY 2020-21 SFPUC
18 [Updated]
In Progress Financial Business Services, Finance Popular Annual Financial Report, FY 2020-21 SFPUC 19 [Updated]
In Progress Performance Infrastructure SSIP Program Management Contract Audit CSA, Controller 20 Upcoming Performance Infrastructure SFPUC Project Controls Audit CSA, Controller 21 Upcoming
Concessions,
Lease
Revenue
Real Estate Services Revenue Lease Audit CSA, Controller 22 Upcoming Performance Business Services, ITS IT Penetration Test & Vulnerability Assessment CSA, Controller
23 Upcoming Performance Business Services, ITS CleanPowerSF Privacy Audit CPUC Quarterly Audit & Performance Review Report
FY 2021-22 Audit Plan, By Status
As of December 31, 2021
By status, as of Dec 31, 2021
Completed: 8
In Progress: 8
Canceled 0
Upcoming: 12
Total: 28
4 # Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body 24 Upcoming Financial Power Green-e Verification Audit, 2021 Center for Resource Solutions
25 [Updated]
Upcoming Financial Water
Annual Physical Inventory Count, FY 2021-22 SFPUC, Finance 26 [Updated] Upcoming Financial Wastewater
27 [Updated]
Upcoming Financial Hetch Hetchy Water & Power
28 [Updated]
Upcoming Financial Business Services, Finance Single Audit (OMB Circular A-133), FY 2020- 21 OMB
5 Audit Program Summary
Total Open Closed % Complete
Audits 20 1 19 95%
Recommendations 256 7 249 97%
Open Audits
Audit Title Report
Issued Date
Open
Rec
Total
Rec
Months
Open
%
Complete
Target
Close
Date**
External Affairs
1 Significant Changes Are Needed to the Design,
Monitoring, and Control of the San Francisco Public
Utilities Commission’s Social Impact Partnership
Program
12/9/2021 7 7 2 0% 12/31/2022
Total* 7 7 0 0%
* As of July 1, 2015 in AuditShare.
** Date when most complex recommendation of audit will close.
Quarterly Audit and Performance Review Report
Appendix I: City Services Auditor Recommendations,
Aging Report
6 Open Recommendations
Recommendation Explanation
Target
Close
Date
Social Impact Partnership Program Audit
1 Take steps to enforce contract requirements related
to the SIP Program, including consideration of the
following:
a. Institute procedures to proactively contact
contractors that do not meet reporting requirements
and notify contractors that have not demonstrated
adequate progress in fulfilling their commitments.
b. Post on the program website information related
to contractor performance for all contractors
participating in the program, including commitments
fulfilled and unfulfilled, nonprofit organization
beneficiaries, and compliance with program
requirements.
c. Incorporate contractors’ past performance in
fulfilling commitments into future solicitation criteria for participation in the program.
d. Apply liquidated damages or other penalties to
contractors that fail to meet their commitments
SFPUC concurs with this recommendation, and will
complete the following by the end of 2022:
1a: The audit report notes that, “SFPUC acted to improve its oversight and outreach in 2021,” and that, “we noted increased outreach by SFPUC in April 2021.” As stated in the report, in April 2021, SFPUC contacted all contractors with SIP commitments, “requesting that they provide
support for contributions made through April 2021 and
submit required reports.” In 2021, SFPUC began
developing procedures to contact firms that are not
demonstrating compliance. In August 2021, SFPUC sent
a standardized letter notifying all non-compliant
contractors of any and all outstanding documentation
and/or compliance issues. As a result of those efforts, SFPUC received some additional reports from contactors
documenting their progress in fulfilling their SIP
commitments. SFPUC staff will continue to proactively
contact contractors that do not meet reporting
requirements and notify contractors that have not
demonstrated adequate progress in fulfilling their
commitments.
1b: As noted in the audit report, “In 2021, SFPUC
developed an internal performance dashboard to track
and report contractors’ fulfillment of SIP commitments and has implemented processes to more proactively contact
contractors that are not meeting SIP Program
requirements.” Additionally, the audit report notes, “SIP staff maintain and use a dashboard to track and report
SIP commitments and contractors’ progress in fulfilling those commitments.” Finally, the audit report states,
“SFPUC plans to share the information on its website.”
SFPUC will post this dashboard on SFPUC’s website,
which will provide information related to contractor
performance for all contractors participating in the
program, including commitments fulfilled and unfulfilled, nonprofit organization beneficiaries, and compliance with program requirements.
1c: SFPUC staff will work with the City Attorney’s Office to develop procedures that incorporate contractors’ past
performance in fulfilling commitments into future
solicitation criteria for participation in the program.
1d: SFPUC staff will work with the City Attorney’s Office to develop the procedures to apply liquidated damages or
other penalties to contractors that fail to meet their
commitments.
12/31/2022
2 Move forward with plans to obtain Board of
Supervisors approval of a SIP Program policy that
includes requirements to standardize processes and
practices and provide clear, consistent guidance for
the program’s contractors.
As stated in the audit report, “in May 2019, it (SFPUC) began working with the City Attorney and Board of
Supervisors to draft an ordinance formally legislating the SIP Program. However, in August 2019, SFPUC
management decided to pause these efforts until this
audit of the SIP Program was completed to ensure that
any findings from the audit could be incorporated into the legislation.” Now that the audit is complete, SFPUC will 12/31/2022
7 Recommendation Explanation
Target
Close
Date
seek Board of Supervisors approval of the SIP Program
policy by the end of 2022.
3 Develop formal, written SIP Program policies and
procedures on:
a. The oversight and management of the program
and guidance provided to external parties.
b. Roles and responsibilities of staff and
management assigned to the program.
c. Standardized contract provisions and protocols for
monitoring and reporting on contractor compliance.
d. Access and usage of information systems used for
program management.
SFPUC concurs with this recommendation, and will
complete the following by the end of 2022:
3a. The audit report states, “SFPUC had developed a
general framework, a business process, that started with the solicitation of SIP-eligible projects and ended with contract close-out.” The report states, “in 2018, SFPUC developed a ‘SFPUC Community Benefits Program Social
Impact Partnerships’ document that provides the
Community Benefits and Environmental Justice policies;
examples and samples of pre-submittal conference
agendas, selection of SIP panelist, scoring, SIP contract language, and panelist conflict-of interest statements; general overview of the solicitation process; and SIP
reporting requirements.” In 2021, SFPUC updated this
framework and business process document regarding the
oversight and management of the SIP Program. SFPUC
will review and develop this framework and business
process document into formal, written SIP Program
policies and procedures on the oversight and
management of the program and guidance provided to
external parties based on the recommendations of this
audit.
3b. In 2021, SFPUC clarified the roles and responsibilities of staff and management assigned to the program.
SFPUC will develop formal, written SIP Program policies and procedures documenting the roles and
responsibilities of program staff and management
consistent with the recommendations of this audit.
3c. In 2021, SFPUC staff have been working with the City Attorney’s Office to standardize the solicitation language for contracts that contain the SIP language. As a
component of this effort, SFPUC staff have updated the
language regarding required documentation from
contractors to report their progress in delivering SIP
commitments. These updates are reflected in solicitations and contracts containing SIP language that have been
advertised since August 2021. While the solicitation
language will continue to be updated to reflect changes to contracting laws and requirements, SFPUC will work with the City Attorney’s Office to update standardized contract provisions for monitoring and reporting on contractor
compliance.
3d. The audit report notes that, “In 2017, SFPUC
implemented Salesforce to monitor contractors and track contractor reporting.” In 2021, SFPUC staff updated the reporting system utilized by contractors to submit their reports and supporting documentation to be more user
friendly and accessible. SFPUC also standardized the
fields in the reporting system and Salesforce to make
contractor reporting more consistent and to better ensure that the corresponding data maintained in Salesforce is accurate and reliable. In 2021, SIP Program staff are
working with SFPUC’s Information Technologies staff to
improve and automate systems that assist in contract
compliance. SFPUC will develop formal, written SIP
12/31/2022
8 Recommendation Explanation
Target
Close
Date
Program policies and procedures regarding access and
usage of information systems used for program
management.
4 Formalize the Contract Administration Bureau’s
record retention policy and ensure the bureau retains
all documentation supporting the solicitation and
contract award process, including documentation
relating to the SIP Program. In doing so, SFPUC
should consider developing a formal checklist and
filing system to ensure all documentation is retained
in a central location and files are easy to locate in
the event of staff attrition.
SFPUC’s Contract Administration Bureau (CAB), with
guidance from the City Attorney’s office, will review and formalize the Bureau’s record retention policy. CAB will also develop a formal checklist and filing system to
ensure all documentation is retained in a central location and files are easy to locate even with staff attrition. This will be completed by the end of 2022.
12/31/2022
5 Ensure staff review required SIP reports and
underlying documentation in a timely manner,
ensuring information reported by contractors is
accurate, reliable, and supported. As discrepancies
are identified, SFPUC should proactively and
promptly contact contractors to address the
discrepancies and areas where additional support is
necessary. Documentation supporting SFPUC’s
efforts should be retained in Salesforce or a centrally
located network drive that is available in the event of staff turnover.
a. SFPUC should also conduct periodic supervisory
reviews of a sample of approved contractor
submissions to ensure that SIP Program staff are
following established processes and that information
reported by the contractor is supported by the
underlying documentation required by SFPUC.
As noted in the audit report and cited above, in spring 2021 SFPUC staff reviewed all of the SIP documentation
and reports submitted by firms to date. SFPUC will
proactively contact firms to address any discrepancies
and provide additional support as necessary. In 2022,
SFPUC will retain all such documentation in Salesforce or a centrally located network drive that is available in the event of staff turnover. SFPUC will conduct periodic
supervisory reviews of a sample of approved firm
submissions to ensure SIP Program staff are following
established processes and that information reported by
the contractor is supported by the underlying
documentation required by SFPUC by the end of 2022.
12/31/2022
6 Assess SIP Program staffing levels to ensure
sufficient resources are available to provide
oversight and controls necessary to ensure the
integrity of the program and accuracy of information
reported.
SFPUC will assess SIP Program staffing levels to ensure sufficient resources are available to provide oversight and controls necessary to ensure the integrity of the program and accuracy of information reported by the end of 2022. 12/31/2022
7 Increase transparency into the SIP Program by
implementing a publicly available SIP Performance
Dashboard, and implement internal controls to
ensure the dashboard presents data that is accurate,
reliable, and updated in a timely manner.
As noted in the audit report, “In 2021, SFPUC developed an internal performance dashboard to track and report
contractors’ fulfillment of SIP commitments and has
implemented processes to more proactively contact
contractors that are not meeting SIP Program
requirements.” As also stated in the audit report, “SFPUC plans to share the information on its website.” By the end of 2022, SFPUC will make the SIP Performance
Dashboard publicly available and will implement internal controls to ensure that the dashboard presents data that is accurate, reliable, and updated in a timely manner.
12/31/2022