Quarterly Audit and Performance
Review Report
FY 2023-24, Q1
November 28, 2023
Irella Blackwood, Audit Bureau Director
1 FY 2023-24 Audit Plan Status
Audits and Assessments To Date
Status Count
Completed 10
In Progress 10
Upcoming 10
Total 30
2 Upcoming
33%
Completed
33%In Progress
33%
Completed In Progress Upcoming
Q1 Audits Completed and Reports Issued
Audit / Assessment Oversight Body Report Date
Post Audit, CY 2022 Controller 7/13/2023
FY 2022-23 Cybersecurity Maturity
Assessment CSA, Controller 7/13/2023
Chapter 14B Local Business Enterprise
Compliance Audit CSA, Controller 8/8/2023
SFPUC Revenue Bond Programs Audit:
Phase II RBOC 8/30/2023
Wholesale Revenue Requirement:
Statement of Changes in Balancing Account,
FY 2020-21
BAWSCA 9/13/2023
FY 2022-23 Warehouse Inventory Counts SFPUC, Finance 9/15/2023 3 4
Audit Spotlight:
Annual Inventory Warehouse Counts
Auditor: Crowe LLP
Scope: Fiscal Year 2022-23, 100% Count
Objective: Ensure accurate count and valuation of inventory maintained and managed by various SFPUC
warehouses.
Findings
• Continued software and hardware issues with automated fuel tracking system
• Continued erroneous counts performed by staff and data entry errors
• Lack of timely entry of inventory transactions to Maximo. • Mislabeled inventory items, lack of organized inventory storage.
5 Audit Spotlight:
Annual Inventory Counts (cont’d)
• Though slightly improved, there are areas that can benefit fr
om further improvements.
• Next Steps:
Audit Bureau will follow up with internal stakeholders to improve controls over inventory management.
Inventory Warehouse Total
Inventory ($)
Inventory
Variance ($) Variance (%)
Water, Water Supply Treatment $642,514 $6,839 1.06%
Water, City Distribution Division $7,271,844 $153,390 2.11% Hetchy Water, Moccasin $470,945 $220 0.05%
Power, In-City $1,372,997 $75,192 5.48%
Wastewater $3,356,658 $2,048 0.06%
Total, overall SFPUC $13,114,958 $237,689 1.81%
Open CSA Audits and Recommendations
6 # Audit Title
Report
Issued
Date
Open
Rec
Total
Rec
Months
Open
%
Complete
Target
Close
Date
SSIP CS-165 Program Management Contract Audit
1 Although Its Sewer System Improvement Program Management Consultant Complied With Contract Terms, the San Francisco Public Utilities Commission Should Improve Its Contract Management
2/16/2023 15 15 8 0% 3/31/2024
Revenue Lease Audit: Crystal Springs Golf Partners, LP
2 Crystal Springs Golf Partners, L.P., Paid Rent Owed for 2019 Through 2021, but a Few Improvements Can Strengthen
SFPUC’s Lease Administration
3/9/2023 8 8 10 0% 12/31/2023
Total 23 23 0%
7 FY 2023-24, Q2 Outlook
Completing
• Audited Financial Statements, FY 2022-23
• Interconnection Security Agreement, FY 2022-23
• Chapter 6 Delegated Authority Audit
• Public Integrity Assessment: SOLIS Procurement
8 FY 2023-24, Q2 Outlook (Cont.)
Upcoming
• SFPUC Revenue Bond Programs Audit: Phase III
• Annual Comprehensive Financial Report, FY 2022-23
• Popular Annual Financial Report, FY 2022-23
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, 13th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: November 28, 2023
To: Commissioner Tim Paulson, President
Commissioner Anthony Rivera, Vice President
Commissioner Newsha K. Ajami
Commissioner Sophie Maxwell
Commissioner Kate H. Stacy
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services
Subject: FY 2023
-24 Q1 Audit and Performance Review Report
This memorandum summarizes the San Francisco Public Utilities Commission (SFPUC) Quarterly Audit and Performance Review (QAPR) report for the first quarter of FY 2023-24, ending September 30th, 2023.
I. Completed Audits
There were ten completed audits during the first quarter of FY 2023-24:
1. 2022 Po st Audit | July 13, 2023
Report Link: https://tinyurl.com/2bv2uwnf
Report Summary: The Controller’s Office performs the Post Audit to examine the effectiveness of the design and implementation of each department’s accounting and internal control practices and compliance with City laws, regulations, and policies.
Audit Findings Summary: The post audit highlighted SFPUC’s strengths in clearing unidentified receipts and in documentation related to budget entries, journal entries, and processes and procedures. Areas for improvement were identified in the processing of expense reports and purchases and payables. In response to the audit, SFPUC staff will continue to evaluate opportunities to promote and improve compliance with particular focus on areas highlighted in the findings.
2. FY 2022-23 Cybersecurity Maturity Assessment | July 13, 2023 Report is confidential.
Report Summary: The City Services Auditor (CSA) assessed SFPUC’s cybersecurity maturity level based on the National Institute of Standards and Technology (NIST) cybersecurity framework. The assessment is mandated by the Committee on Information Technology (COIT) cybersecurity policy.
Audit Findings Summary: SFPUC scored a “3.1” out of a possible “4.0” where a higher score indicates higher maturity. SFPUC continues to improve its cybersecurity program and bolster its cyber infrastructure.
3. Chapter 14B Local Business Enterprise Compliance Audit | August 8, 2023 Report Link: https://tinyurl.com/4u8w5hpn
Report Summary: The Controller’s Office engaged Sjoberg Evashenk Consulting, Inc. to assess whether three randomly selected contractors and two joint ventures disclosed all subcontractors, met their LBE participation commitments, submitted all required CMD forms, and whether contracts were adequately monitored for LBE compliance.
Audit Findings Summary: There were no findings related to the administration of SFPUC contracts, and SFPUC’s SOLIS system was recognized as a safeguard against Form 7 and Form 9 noncompliance.
4. SFPUC Revenue Bond Programs Audit: Phase II | August 30, 2023 Report Link: https://tinyurl.com/3fpbv7uy
Report Summary: The SFPUC Revenue Bond Oversight Committee (RBOC) engaged HKA Global, Inc. and Yano Accountancy Corporation through the Controller’s Office City Services Auditor to audit six bond series subject to their oversight. The objective of the audit was to determine whether revenue bond funds were spent appropriately.
Audit Findings Summary: The two findings involved non-completion of impartiality and confidentiality statements by individuals associated with procurements, and lack of quantification and reporting on overhead rates charged for SFPW sewer engineering activities. Of the three recommendations, SFPUC partially concurred with one and did not concur with the remaining two.
5. W
holesale Revenue Requirement: Statement of Changes in Balancing Account, FY 2020-21 | September 13, 2023
Report Link: https://tinyurl.com/49djfuwf
Report Summary: Third-party auditors KPMG LLP and Yano Accountancy Corporation performed the annual audit, as required by the Water Supply Agreement with Wholesale Water Customers, to review the allocation of operating and capital costs among retail and wholesale water customers.
A
udit Findings Summary: The report contains four observations related to misclassified expenditures; the SFPUC concurred and recorded audit adjustments and changed related disclosures.
• The wholesale share of capital cost contribution – new regional assets – debt-funded was not summarized correctly, resulting in a $26,387,000 misstatement in the Balancing Account as of June 30, 2021. SFPUC recorded an audit adjustment to the Balancing Account of $26,387,000 in favor of the Retail Customers.
• The wholesale share of actual revenue-funded capital expenditures was misstated by $1,152,000. SFPUC recorded an audit adjustment of $1,152,000 in favor of the Wholesale Customers.
• The overall wholesale revenue requirement was misstated by $235,000 because SFPUC did not calculate the Proportional Annual Use (PAU) and Adjusted Proportional Annual Use (APAU) percentages correctly.
SFPUC and the Wholesale Customers jointly investigated the discrepancy and agreed on adjusted higher PAU and APAU
percentages. SFPUC recorded an audit adjustment to the Balancing Account of $235,000 in favor of the Retail Customers.
• The paid time off adjustment was not calculated correctly, resulting in a $34,000 misstatement in the Balancing Account as of June 30, 2021.
SFPUC recorded an audit adjustment to the Balancing Account of $34,000 in favor of the Wholesale Customers.
Total audit adjustments recorded by SFPUC were $25,436,000 in favor of the Retail Customers.
The cause of the first, third, and fourth observations was determined to be inadequate controls over spreadsheet calculations to ensure their accuracy, while the cause of the second observation was determined to be inadequate review of the general ledger to determine which amounts should be recorded as revenue-funded capital expenditures.
6-10. FY 2022-23 Warehouse Inventory Counts | September 15, 2023 Report Link: https://tinyurl.com/5t44nzcn
Report Summary: The SFPUC engaged third-party auditor Crowe, LLP (Crowe) to perform FY 2022-23 physical inventory counts at locations in Millbrae, Sunol Yard, Hetchy Power In-City, Moccasin, Wastewater Southeast, City Distribution Division (CDD), and Auxiliary Water Supply System (AWSS).
Audit Findings Summary: The audits found variances between the physical count and the amounts reported in the inventory system (Maximo). The observed variances were attributed primarily to:
• Issues with the automated fuel tracking system
• M iscounts, double counts, or other errors in data entry • Inventory updates not posted to Maximo in a timely fashion • Items not labeled or organized in a manner conducive to inventory counting
Management concurred with the recommendations and provided additional detail regarding mitigating actions.
II. Audit Recommendation Status
As of 9/30/23, 23 audit recommendations are open for two audits: the SSIP CS-165 Program Management Contract Audit and the Crystal Springs Golf Partners, LP Revenue Lease Audit.
If you have questions, please contact me at [email protected] or Irella Blackwood at [email protected].
Attachment: FY 2023-24 Audit Plan, By Status
CC:
Ronald P. Flynn, Deputy General Manager
Irella Blackwood, Audit Bureau Director
Sheryl Bregman, SFPUC Counsel, Office of the City Attorney
# Quarter Status Audit Type Enterprise /
Bureau Audit Name Oversight
Body
1 [Updated]
Financial
Business
Serv
ices,
Finance
Wholesale Revenue Requirement: Statement of Changes in
Balancing Account, FY 2020-21 BAWSCA
Completed
2 [Updated]
Financial
Business
Serv
ices,
Finance
Post Audit, CY 2022 Controller
Completed
3-7'
[Updated] Financial Water
Annual
Physical Inventory Count, FY 2022-23 SFPUC,
Finance
Completed
[Updated] Financial Wastewater
Completed
[Updated] Financial Hetch Hetchy
Wat
er & Power
Completed
8 [Updated] Financial Water
Audi
ted Financial Statements, FY 2022-23 Controller
In Progress
9 [Updated] Financial Wastewater
In Progress
10 [Updated]
Financial
Hetch Hetchy
Water & Power
&
CleanPowerSF
In Progress
11 [Updated]
Financial Power 2021 CA PP Audit
CA
Community
Services
Division
In Progress
12 In Progress Financial
Business
Serv
ices,
Finance
Wholesale Revenue Requirement: Statement of Changes in
Balancing Account, FY 2021-22 BAWSCA
13 [Updated]
Financial
Business
Serv
ices,
Finance
Wholesale Revenue Requirement: Statement of Changes in
Balancing Account, FY 2022-23 BAWSCA
Upcoming
14 [Updated]
Financial
Business
Serv
ices,
Finance
Annual Comprehensive Financial Report, FY 2022-23 SFPUC
Upcoming
15 [Updated]
Financial
Business
Serv
ices,
Finance
Single Audit (OMB Circular A-133), FY 2022-23 OMB
Upcoming
16 [Updated]
Financial
Business
Serv
ices,
Finance
Popular Annual Financial Report, FY 2022-23 SFPUC
Upcoming
17 [Updated] Financial Water
Int
erim Financial Statements, FY 2023-24 Controller
Upcoming
18 [Updated] Financial Wastewater
Upcoming
19 [Updated]
Financial
Hetch Hetchy
Water & Power
&
CleanPowerSF
Upcoming
Quarterly Audit & Performance Review Report
FY 2023-24 Audit Plan, By Status
As of September 30, 2023
Status
Completed: 10
In Progress: 10
Upcoming: 10
Total: 30
# Quarter Status Audit Type Enterprise /
Bureau Audit Name Oversight
Body
20 [Updated]
Performance
Contracts
A
dministration
Bureau
Chapter 14B LBE Audit CSA,
Controller
Completed
21 [Updated]
Performance Business
Se
rvices, ITS Cybersecurity Maturity Assessment, FY 2022-23 CSA, Controller
Completed
22 [Updated]
Performance Hetch Hetchy
W
ater & Power
Critical Infrastructure Protection and Operations and Planning Reliability Standards Audit
WECC /
NERC
In Progress
23 [Updated]
Performance Business
Se
rvices, ITS Interconnection Security Agreement, FY 2022-23 CSA, Controller
In Progress
24 In Progress Performance Infrastructure P ublic Integrity Assessment: SOLIS Procurement CSA, Controller
25 In Progress Performance All SFPUC S FPUC Chapter 6 Delegated Authority Audit BOS
26 In Progress Performance All SFPUC B LA Conflicts of Interest Audit BOS
27 [Updated]
Performance Customer
Se
rvices Bureau Customer Assistance Program Post-Enrollment Verification BOS
Upcoming
28 Upcoming
Concessions, Real Estate
Se
rvices Revenue Lease Audit: Mission Valley Rock CSA,
Controller
Lease Revenue
29 [Updated] Revenue Bond
RBOC S FPUC Revenue Bond Programs Audit: Phase II RBOC
Completed
Oversight
Committee
30 Upcoming
Revenue Bond
RBOC S FPUC Revenue Bond Programs Audit: Phase III RBOC
Oversight
Committee