Fiscal Year 2024-2025 Quarter 1 Audit and Performance Review Report — CleanPowerSF Sfpuc Commission, December 10, 2024

Quarterly Audit and Performance
Review Report
FY 2024-25, Q1
December 10, 2024
Irella Blackwood, Audit Bureau Director
1 FY 2024-25 Audit Plan Status
Audits and Assessments To Date
Status Count
Completed 7
In Progress 10
Upcoming 13
Total 30
2 Completed In Progress Upcoming

Q1 Audits Completed and Reports Issued
Audit / Assessment Oversight Body Report Date
CY 2023 Post Audit Controller 7/17/2024
FY 2023-24 Cybersecurity Maturity
Assessment CSA, Controller 9/4/2024
FY 2023-24 Warehouse Inventory Counts
(5 Audits) SFPUC, Finance 9/16/2024
3 4
Spotlight: Revenue Bond Oversight Committee (RBOC)
Sunset and Future of Oversight
RBOC: created in November of 2002 to promote the health and welfare of the SFPUC’s customers and to be “… committed to a persistent, vigorous and independent review of the expenditure of revenue bond funds for the PUC’s capital improvement program over the next decade.” (Admin Code
§ 5A.30(f))
Oversight to ensure:

1. Proceeds from revenue bonds authorized by the Board and/or the voters of the City are expended in accordance with the
authorizing bond resolution and applicable law;

2. Bond proceeds are expended solely for uses, purposes and projects authorized in the bond resolution; and

3. Revenue bond funds are appropriately expended for authorized capital improvements so that an uninterrupted supply of water and power continues to flow to the City and to the PUC's customers. 5 Spotlight: Revenue Bond Oversight Committee (RBOC)
Sunset and Future of Oversight (Cont.)
Immediate next steps include…

1. SFPUC Audit Bureau will partner with CSA to complete RBOC’s Phase III Audit.
• Document management responses for audit findings/recommendations, and update to final report prior to issuance
• Present final audit report to the Commission
• Follow-up on recommendations every 6 months until closed

2. Audit Bureau will assume immediate responsibility of RBOC’s legacy and will oversite revenue bond proceeds (incl., capital expenditures) • Long-standing good working relationship with CSA
• Provide value to ratepayers through cost and time-efficient audits that will be formalized into the SFPUC Annual Audit Plan
• Audit will be performed by independent auditors and/or CSA The RBOC will sunset January 2025
CSA Audit Recommendations
6 # Audit Title
Report
Issued
Date
Open
Rec
Total
Rec
Months
Open
%
Complete
Close
Date
(or Target)
Revenue Lease Audit: Crystal Springs Golf Partners, LP
1 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 0 8 18 100% 7/10/2024
Revenue Bond Oversight Audit, Phase II
2 The San Francisco Public Utilities Commission Spent Revenue Bond Funds for Allowable Purposes but Should Strengthen Its Compliance and Monitoring Controls
9/5/2023 0 3 12 100% 7/10/2024
Public Integrity Assessment: Procurement
3 Criminal Conduct by Former San Francisco Public Utilities Commission General Manager Harlan Kelly Undermined the
Integrity of City Procurements Despite Existing Rules
Governing Gifts, Disclosures, and Sole Source Waivers
3/27/2024 3 3 6 0% 7/31/2025
Total 3 14 79%
7 FY 2024-25, Q2 Outlook
Completing
• Chapter 6 Delegated Authority Audit
• BOS Budget & Legislative Analyst, Conflicts of Interest Audit • BOS Budget & Legislative Analyst, Work Orders Audit
• EPA Cyber Security Guidance Self-Assessment
• Wholesale Revenue Requirement: Statement of Changes in Balancing Account, FY 2022-23
• Franchise Fee Audits for Energy Center SF and Pacific Gas & Electric 8 FY 2024-25, Q2 Outlook (Cont.)
Upcoming
• SFPUC Audited Financial Statements, FY 2023-24
• SFPUC Annual Comprehensive Financial Report, FY 2023-24 • SFPUC Popular Annual Financial Report, FY 2023-24
• Customer Assistance Program, Post-Enrollment Verification • Citywide Payroll Audit
• CleanPowerSF Independent Privacy Audit

THANK YOU
Feedback & Questions?
9 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: December 10, 2024
To: Commissioner Kate H. Stacy, President
Commissioner Joshua Arce, Vice President
Commissioner Avni Jamdar
Commissioner Steve Leveroni
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services
Subject: FY 202 4-25 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 2024-25, ending September 30, 2024.

I. Completed Audits

There were six completed audits during the first quarter of FY 2024-25:

1. 2023
Post Audit | July 17, 2024
Report Link: https://tinyurl.com/5h48hexd

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 process and procedure documentation, prompt clearing of unidentified receipts, manual carryforward survey and transactions, and budget entry documentation. Areas for improvement were identified in purchasing and payables processing, employee recognition documentation, processing of expense reports, community-based organizations, general ledger entry timeliness. 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 2023-24 Cybersecurity Maturity Assessment | September 4, 2024 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 “3.3” 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.

3-7. FY 2023-24 Warehouse Inventory Counts | September 16, 2024 Report Link: https://tinyurl.com/4w9s65nn

Report Summary: The SFPUC engaged third-party auditor Crowe, LLP (Crowe) to perform FY 2023-24 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). Some observed variances were attributed to:

• Issues with the automated fuel tracking system
• Miscounts, double counts, or other errors in data entry • Issuances made after Maximo report run
• Failure to submit issue tags

Management concurred with the recommendations and provided additional detail regarding mitigating actions.

II. Audit Recommendation Status

As of 9/30/24, 3 audit recommendations were open for the Procurements Public Integrity Assessment.

If you have questions, please contact me at [email protected] or Irella
Blackwood, Audit Director, at [email protected].

cc: Irella Blackwood, Audit Director

att: FY 2024-25 QAPR Audit Plan, By Status

# Quarter
Status Audit Type Enterprise /
Bureau Audit Name Oversight
Body

1-5
[Updated] Financial Water
A
nnual Physical Inventory Count, FY 2023-24 SFPUC,
Finance

Completed
[Updated] Financial Wastewater

Completed
[Updated] Financial Hetch Hetchy
W
ater & Power

Completed
6 [Updated] Financial Business Services,
F
inance Post Audit, CY 2023 Controller

Completed
7 In Progress Financial Business Services,
F
inance
Wholesale Revenue Requirement: Statement of
Changes in Balancing Account, FY 2022-23 BAWSCA

8 In Progress Financial Power F ranchise Fee Audit: Energy Center SF LLC Controller

9 In Progress Financial Power F ranchise Fee Audit: Pacific Gas & Electric Company Controller

10 In Progress Financial Business Services,
F
inance Single Audit, FY 2023-24 OMB

11 Upcoming Financial Water
A
udited Financial Statements, FY 2023-24 Controller

12 Upcoming Financial Wastewater

13 Upcoming Financial
Hetch Hetchy
W
ater & Power
& CleanPowerSF

14 Upcoming Financial Business Services,
F
inance Annual Comprehensive Financial Report, FY 2023-24 SFPUC

15 Upcoming Financial Business Services,
F
inance Popular Annual Financial Report, FY 2023-24 SFPUC

16 [Updated] Financial Business Services,
F
inance Post Audit, CY 2024 Controller

Upcoming
17 [Updated]
Financial Business Services,
F
inance
Wholesale Revenue Requirement: Statement of
Changes in Balancing Account, FY 2023-24 BAWSCA

Upcoming
18 [Updated] Financial Water
I
nterim Financial Statements, FY 2024-25 Controller

Upcoming
19 [Updated]
Financial Wastewater

Upcoming
20 [Updated]
Financial
Hetch Hetchy
W
ater & Power
& CleanPowerSF

Upcoming

Quarterly Audit & Performance Review Report
FY 2024-25 Audit Plan, By Status
As of September 30, 2024

Status

Completed: 7
In Progress: 10
Upcoming: 13
Total: 30

# Quarter
Status Audit Type Enterprise /
Bureau Audit Name Oversight
Body

21 [Updated]
Performance Hetch Hetchy
Water & Power Cybersecurity Maturity Assessment, FY 2023-24 SFPUC

Completed
22 In Progress Performance All SFPUC SFPUC Chapter 6 Delegated Authority Audit BOS

23 In Progress Performance All SFPUC BLA Conflicts of Interest Audit BOS

24 In Progress Performance All SFPUC BLA Work Orders Audit BOS

25 In Progress Performance Hetch Hetchy
Water & Power EPA Cybersecurity Guidelines Self-Assessment SFPUC

26 Upcoming Performance Customer Services
Bureau
Customer Assistance Program Post-Enrollment
Verification SFPUC

27 [Updated]
Performance Human Resources
Services Citywide Payroll Audit CSA,
Controller

Upcoming
28 [Updated]
Performance CleanPowerSF CleanPowerSF Independent Privacy Audit SFPUC

Upcoming
29 [Updated] Concessions,
Lease
Revenue
Real Estate
Services Revenue Lease Audit: Mission Valley Rock CSA,
Controller

In Progress
30 In Progress
Revenue Bond
Oversight
Committee
RBOC SFPUC Revenue Bond Programs Audit: Phase III RBOC

OFFICE OF THE CONTROLLER

CITY AND COUNTY OF SAN FRANCISCO
Greg Wagner
Controller
ChiaYu Ma
Deputy Controller

415-554-7500 City Hall • 1 Dr. Carlton B. Goodlett Place •Room 316• San Francisco CA 94102-4694 FAX 415-554-7466

DATE: July 17, 2024

TO: Dennis Herrera, General Manager, Public Utilities Commission

FROM: Greg Wagner, Controller

SUBJECT: Results of CY2023 Post Audit & Continuous Monitoring Program

Thank you for your staff’s support of the Controller’s continuous monitoring and post audit program. This letter summarizes the audit work completed and explains observations that may have been found during that work. We recognize the extra work and resources required to collect the subject documentation, especially under these extraordinary circumstances, and we truly appreciate your department’s effort and assistance.

Department Financial Activity Highlights:

Program Overview
The continuous monitoring and post audit program are designed to help assess each department’s accounting and internal control practices and compliance with City laws, regulations, and policies. The monthly monitoring reports that we send you or your staff provide regular feedback about processing in your department. They can help identify areas that are working well and highlight those that may need immediate attention for change and improvement.

Post-Audit Approach
The post audit examines the effectiveness of the design and implementation of each department’s internal control. This year, a risk-based approach was used to determine the transaction cycles selected for testing. Each department was assigned a departmental risk level for each transaction cycle based on the materiality of the department’s operations to the City’s financial reporting objectives. This was done primarily on the magnitude, volume, and complexity of the department’s transactions, and adjusted for factors such as separate reporting funds and new systems, personnel, or management. Departments with more transactions, higher dollar amounts, more complex

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transactions, and separate financial statements were assigned a higher risk. The assessment of inherent risk is used to design audit procedures and is not a reflection on your department’s management or performance.

Financial transactions were selected for analysis and testing on a risk basis. Documentation provided by your department as well as preliminary inquiries of key personnel were used to evaluate the adequacy of the design of the controls on selected cycles. Subsequent testing was used to evaluate the adequacy of the implementation of the controls. In all cases, the existence of citywide controls and potential compensating controls are considered in the evaluation.

Procedures
Our audit team:
• Reviewed your response to our internal control questionnaire • Reviewed your continuous monitoring results
• Reviewed your responses to our manual carryforward survey • Reviewed your P-Card transactions in both US Bank Access Online and in PeopleSoft • Reviewed your prior year’s post audit results and your response • Examined your written policies and procedures pertaining to the audit areas • Interviewed key staff members to understand the design of controls

Strengths
The following areas are highlighted as your strengths. Your cooperation in timely preparation and organization of backup documentation contributed to an efficient post audit. The Controller’s Office thanks you for your prompt response to our inquiries throughout the duration of the post audit.

1. Documentation. Your department provided processes and procedures for all requested cycles for this post audit. This demonstrates commitment by management to implement an effective system of internal controls.

2. Promptly Clearing Unidentified Receipts. Your department has maintained performance with no exception in this area.

3. Manual Carryforward Survey & Transactions. Your department has maintained performance with no findings in this area.

4. Budget Entry Documents. Your department has maintained performance with no findings in this area.

Areas for Improvement
Based on the test work performed, there were certain areas that were found to need improvement or requested documentation was not received. Specific areas include:

1. Purchasing & Payables Processing. Three invoices we reviewed were paid more than 30 days after the invoice receipt date. The department should ensure that invoices are processed following City’s prompt payment rule of 30 days. See Appendix A, Transaction Documentation for details.

2. Employee Recognition. Three vouchers we reviewed were related to Employee Recognition.

The department drafted an Employee Recognition Policy; however, it was not finalized and N:\ACCNTING\Post Audit 2024\Audit Letters\PUC - Post Audit Letter CY2023 Final.docx Page 3 of 12

approved by Controller’s Office. Also, the vouchers should be recorded in account code 523050, employee recognition, instead of the food account code of 546990. We recommend the department finalize the Employee Recognition Policy and obtain Controller’s Office approval before incurring expenses related to employee recognition. See Appendix A, Transaction Documentation for details.

3. Expense Reports Processing. One employee reimbursement for food exceeded Controller’s threshold of $200 per single vendor and should have gone through the procurement process. We recommend the department remind employees of the Controller’s guidelines to ensure reimbursements fall within the policy. Six employee reimbursements were for employee recognition and should have been recorded in account code 523050, employee recognition, instead of the food account code of 546990. See Appendix A, Transaction Documentation for details.

4. Community Based Organizations. One voucher for a nonprofit organization was submitted late.

The nonprofit did not follow the disbursement schedule. We recommend the department work with the nonprofit to send disbursement funding request according to the contract’s requirements/schedule. Three vouchers for two separate nonprofits were paid more than 30 days after the invoices were received. We recommend the department review and update their payment procedures to ensure that invoices are paid within the City’s prompt payment rule of 30 days. See Appendix B, Community Based Organizations for details.

5. General Ledger Entry Submitted After Year-End Deadline. We recognize your department’s fiscal staff’s effort in meeting the year-end schedule, but improvements could be utilized in meeting the year-end deadlines as department requested exceptions to post accounting transactions after the year-end deadline. Your department’s request has grown from one journal entry to three journal entries over the last three fiscal years. One journal entry was processed for CleanPowerSF FY23 expense accruals related to FY24 vouchers. One journal entry was processed for PUC Bureau FY23 Q4 overhead and recovery from Water, Hetchy Water, Power, Clean Power and Wastewater. The last journal entry was processed for PUC Bureau to abate FY23 Q1 to Q3 City Attorney infrastructure charges to various PUC Peoplesoft chartfields. We encourage the department to reconcile the accounting transactions in a timely manner to ensure a smooth fiscal year-end closing.

Summaries of all higher risk findings are presented in Appendix A: Fieldwork Test Results on page 5, Appendix B: Community Based Organizations on page 8, and Appendix C: P Card on page

10. N:\ACCNTING\Post Audit 2024\Audit Letters\PUC - Post Audit Letter CY2023 Final.docx Page 4 of 12

Year-End Close
An ongoing goal of the Controller’s office is to have a well-managed process for CCSF’s Year-End Close. To accomplish this goal, departments must meet the year-end schedule, respond promptly to Controller’s request for information and required actions. This ensures that the processes for the issuance of our Annual Comprehensive Financial Report (ACFR) provides financial data integrity, accuracy, and timeliness. Below is your department’s last three year’s statistics on budget and journal entries submitted after the month 13 deadline and deleted vouchers that were not fully approved by the year-end deadline.

Follow-up
A detailed audit matrix that reflects test work for each area of the Post Audit was provided to your Deputy Chief Financial Officer and discussed at the exit conference. We have not removed findings which we believe are valid although your staff may disagree. In those cases, we have communicated our reasons for retaining the finding to your staff and included any comments in the appendices.

By September 13, 2024, please provide us with a response for the observations that were reported above. If you have any questions about the audit or this report, please call Jocelyn Quintos at 415-554-6609 or Lilly Ting at 415-554-7567.

Cc: Nancy Hom, Chief Financial Officer and Assistant General Manager, Business Services Laura Busch, Deputy Chief Financial Officer, Public Utilities Commission Vivian Chen, Deputy Chief Financial Officer, Public Utilities Commission Sailaja Kurella, Director, Office of Contract Administration Jocelyn Quintos, Director of Accounting Operations and Supplier, Controller’s Office

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Appendix A: Fieldwork Test Results
Overview
Communication, documentation, and monitoring of compliance are critical elements of every sound financial system, and policies and procedures are an essential part of establishing internal controls.

For this year’s post audit, departments were asked to respond to an internal control questionnaire and submit copies of their policies and procedures for the basic accounting cycles, submit selected transaction documentation for review and to conduct walkthroughs on accounting cycle procedures.

Internal Control
While it was not within the scope of this audit to perform an extensive internal control review, the status of procedure documentation your department has submitted on requested cycles is below.

Cycle Status
Cash Handling Received
Revenue and
Receivables
Received
Purchasing & Payables Received
Payroll Received
Grants Not received. Department follows the Controller’s Policies.

Journal Entries &
Financial Closing
Received
Budget Changes Not received. Department follows the Controller’s Policies.

Debt Received
Fixed Assets Received
Inventory Received
Trustee Accounts Received
Claims N/A

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Transaction Documentation
The following documents were selected for review, document numbers in bold indicate issues found. Please find our observations below.

Employee Recognition Findings and Recommendation
Vouchers:

Hetch Hetchy
02664107
02681984
02764959
02609797
02621773

Water
02762011
02762000
02826955
02825392
02726161

Wastewater
02569422
02662173
02786292

Expense Report:

Hetchy Hetchy
0000106691

CleanPower
02532896
02831878

PUB
02655613
02654248
02542516
02780633
02815892

PUB
0000106085
0000108938
0000110580
0000110576
0000110714

Our review found thirteen higher risk items in this
category.

Three vouchers we reviewed were paid more than
30 days after the invoices were received. We
recommend the department review and update
their payment procedures to ensure that invoices
are paid within the City’s prompt payment rule of 30
days.

Three vouchers and six expense reports we reviewed
were food purchases related to Employee
Recognition. The department drafted an Employee
Recognition Policy; however, it was not finalized and
approved by the Controller’s Office. However, the
department incurred employee recognition
expenses prior to final policy approval. In addition,
these three vouchers and six expense reports should
be recorded in account code 523050, employee
recognition, instead of account code 546990, food.

We recommend the department finalize the
Employee Recognition Policy, obtain Controller’s
Office approval and comply with Controller’s
reimbursement guidelines.

One expense report we reviewed was for food
purchases related to Employee Recognition event.

The food purchases were over $200 per single
supplier. We recommend the department follow
Controller’s reimbursement guidelines to process
expense reports.

Other observations have been noted in the
Fieldwork Summary which was presented to your
finance staff.

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Manual Appropriation Carryforward
of Annual Funds
Findings and Recommendation
Hetch Hetchy
KK23MCF014_19
KK23MCF014_24
KK23MCF014_36
KK23MCF014_42
KK23MCF014_48

Water
KK23MCF015_8
KK23MCF015_11
KK23MCF015_24
KK23MCF015_69

CleanPower
KK23MCF013_8

PUB
KK23MCF012_6
KK23MCF012_18
KK23MCF012_25
KK23MCF012_30

Wastewater
KK23MCF016_9
KK23MCF016_10
KK23MCF016_19
KK23MCF016_49
KK23MCF016_57

After reviewing your Manual Appropriation
Carryforward Survey, our process consisted of
sampling nineteen of your Manual Appropriation
Carryforward requests. Twelve financial and
procurement transactions were selected for analysis
and tested for compliance with your FY23 Manual
Appropriation Carryforward Request.

Purchase Orders Tested
0000762103
0000752666
0000813628
0000813188
0000738919
0000744938
0000720194

Requisition Tested
0000292843
0000292477
0000292124
0000293816
0000282396

Our review did not result in any findings for the
documents.

Other observations have been noted in the
Fieldwork Findings Summary which was presented to
your finance staff.

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Appendix B: Community Based Organizations
The following Community Based Organizations were selected for review, below are our observations.

Community Based
Organizations
Findings and Recommendation

BAY AREA VIDEO

COALITION
Contract# 1000025334 -
$105,000
PO# 0000712460 -$35,000
Voucher# 02790699 -
$28,907.64
Voucher# 02803896 -
$6,092.36

Our review found no higher risk items in this category.

Other observations have been noted in the Fieldwork Findings Summary which was presented to your finance staff.

SAN FRANCISCO

CONSERVATION CORPS
Contract # 1000026697 -
$5,853,016
PO# 0000654718 -
$1,056,309.92
Voucher# 02546184 -
$89,108.43
Voucher# 02650089 -
$211,136.33

Our review found one higher risk item in this category.

Our review found that one voucher was submitted late. The nonprofit submitted the March invoice on 5/03/23 when the disbursement was due on 4/30/23 per Appendix B of the grant agreement which states “SFCC must submit monthly financial invoice within 15 business days, and no more than 30 calendar days of the last day of the month, in which services were provided”. We recommend the department work with the
nonprofit to send disbursement funding request according to the contract’s requirements/schedule.

Other observations have been noted in the Fieldwork Findings Summary which was presented to your finance staff.

SUNSET YOUTH SERVICES
Contract # 1000025347 -
$105,000
PO# 0000622332 -
$33,950
Voucher# 02528470 -
$13,961
Voucher# 02643872 -
$19,541

Our review found no higher risk items in this category.

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Community Based
Organizations
Findings and Recommendation

EARTH LAND INSTITUTE
Contract # 1000026639 -
$480,000
PO# 0000655598 -
$160,000
Voucher# 02448049 -
$20,000
Voucher# 02555072 -
$20,000
Our review found one higher risk item in this category.

One of the vouchers we reviewed was paid more than 30 days after the invoices were received. Invoice was received on 5/5/23 and paid on 6/5/23. We recommend the department
review and update their payment procedures to ensure that invoices are paid within the City’s prompt payment rule of 30 days.

Other observations have been noted in the Fieldwork Findings Summary which was presented to your finance staff.

OLD SKOOL CAFE
Contract # 1000025384 -
$105,000
PO# 0000625082 -
$33,950
Voucher# 02529963 -
$33,950

Our review found no higher risk items in this category.

Other observations have been noted in the Fieldwork Findings Summary which was presented to your finance staff.

YOUTH LEADERSHIP

INSTITUTE
Contract # 1000025349 -
$75,000
PO# 0000622339 -
$24,250
Voucher# 02498534 -
$13,683.3
Voucher# 02560784 -
$9,855.58

Our review found two higher risk items in this category.

Two vouchers we reviewed were paid more than 30 days after the invoices were received. One invoice was received on 3/1/23 and paid on 4/19/23 and the other invoice was received on 4/28/23 and paid on 6/7/23. We recommend the
department review and update their payment procedures to ensure that invoices are paid within the City’s prompt payment rule of 30 days.

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Appendix C: Procurement Card (P-Card)
Overview
The City Procurement Card (P-Card) program enables designated City employees to make authorized purchases during declared emergencies and for certain employee reimbursement items. All transactions should comply with both the citywide P-Card policy and your pre- approved departmental policy. P-Card purchases are monitored monthly and quarterly using reports available from SF Financials & Procurement and US Bank. Departments must respond to all inquiries from the P-Card team and/or fund accountant to ensure that transactions are compliant and that any potential violations are reviewed and granted an exception.

Transaction Documentation
The following documents were selected for review. Document numbers in bold indicate exceptions found. Please find our observations below.

Voucher# Observations Recommendations
02401427
02632357
02632769
02802758
Missing supporting documentation with
justification related to Lomo Libre delivery
fee.

Supporting documentation for purchases must
be accessible to multiple individuals.

Table A: Audit Criteria
The following table summarizes the criteria considered for the audit.

Audit Criteria Fulfilled Exceptions
Found
Authorization and Pre-
Authorization
• All requests for business travel/lodging require
approval in advance by the Department Head or an
Authorized Travel Signatory.
• Purchases must be made after P-Card Request
Authorization form was signed
None
Supporting Documents
• Supporting documents such as receipts and
registration must be retained and match pre-approvals.
•Travel expense form must be completed to be used
for travel, training, or other employee
reimbursement items
02401427

Items That Should be Procured
through Purchase Orders
Recurring purchases that should be obtained through a
purchase order or requisition are strictly prohibited
None

Purchases Made by Non-
Cardholder Employees
Purchases must be authorized by the person whose
name is on the card. P-Cards must be properly stored
and handled
None
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Audit Criteria Fulfilled Exceptions
Found
Sales Tax Accrual The department must accrue sales tax when shopping online where sales tax is not charged
None
Employee Recognition
Department must have an approved employee
recognition policy before making program-related
purchases
None
Food Policy Department must have a food policy before purchasing food for employees, guests, and/or clients
None

Prohibited Items
Prohibited purchases include, but are not limited to:
• Personal purchases of any kind (personal purchases
are defined as purchases of goods or services intended
for non-work-related use or use other than for official business)
• Donations or gifts to a charity, a gift to an entity, or a political contribution
• Fuel for personal cars since the personal vehicle
expenses will be compensated through mileage
reimbursement
• Refer to the P-Card Policies & Procedures for
additional prohibited items

None
IT Related Items
Departments should utilize the Technology
Marketplace and not use P-Cards to circumvent City
procurement policies
None
Payments for Recurring
Subscriptions
Purchases of recurring subscriptions must be pre-
approved and documented in the Departmental policy
None
>$200 Non-Travel Purchases should follow non-travel expense reimbursement guidelines when applicable
None
Payment of Existing Invoices
for After-the-fact Purchases
P-Card should not be used to pay for after-the-fact
purchases
None
Segregation of Duties An employee cannot be both the Authorized Cardholder and the Purchase Approver
None
Timely Payment Payment (Scheduled Due Date) must be made within fourteen (14) days of the statement date
None
Voucher amount matches US
Bank transactions
Voucher should match transaction receipts and
cardholder/managing statements
None
Payment made using assigned
department Supplier ID
To ensure that payments are applied to the correct
managing account, Departments should use the correct
None
N:\ACCNTING\Post Audit 2024\Audit Letters\PUC - Post Audit Letter CY2023 Final.docx Page 12 of 12

Audit Criteria Fulfilled Exceptions
Found
Supplier ID Number when processing payment in
PeopleSoft.

Table B: Strengths and Improvements Needed
Strengths
Clear separation of duties amongst department P-Card staff.

Detailed tracking of emails and receipts for supporting documentation.

Payments are made within fourteen days of the statement date.

Needs Improvement
Supporting documents should be readily available to other P-card supporting staff.

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.

Business Services | Financial Services Bureau
525 Golden Gate Avenue, 4th Floor
San Francisco, CA 94102
T 415.554.3155
F 415.554.3161
TTY 415.554.3488

Date: September 20, 2024

To: Greg Wagner, Controller

Through: Dennis J. Herrera, General Manager

From: Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services

Subject: Management Response to CY 2023 Post Audit Findings

Thank you for your Post Audit Report dated July 17, 2024, which outlines the findings from the Calendar Year 2023 Post Audit & Continuous Monitoring Program.

The Controller’s Office monitoring and review program is invaluable in supporting SFPUC's commitment to adhering to citywide policies and procedures. We appreciate your recognition of our department's strengths, as well as the insightful observations included in the report. SFPUC staff will continue to seek opportunities to enhance compliance in the monitored areas, with a particular focus on the issues highlighted by recent findings.

Below are SFPUC’s detailed responses and action plans:

A. Purchasing & Payable Processing

Findings Response/Action Plan
Three vouchers we reviewed were
paid more than 30 days after the
invoices were received. We
recommend the department review
and update their payment
procedures to ensure that invoices
are paid within the City’s prompt
payment rule of 30 days.

SFPUC Accounting will conduct ongoing
training sessions for divisional purchasing
and accounts payable staff on the City’s
Prompt Payment policy, emphasizing the
importance of prioritizing payment
processing for invoices with discounts.

SFPUC’s Payment Processing Checklist
offers clear guidelines and procedures for
staff at every stage of payment processing,
ensuring all staff understands and adheres
to the relevant policies and procedures.

SFPUC’s Accounts Payable GoPaperless
(APGP) system includes automated
tracking to flag invoices for expedited
processing. Divisional staff are instructed to
use the 'Expedited' checkbox to ensure
timely handling of discounted invoices. A

system enhancement adds the label field
labeled "Eligible for Discount," which will
remind accounts payable staff to take
advantage of discounts, when possible.

B. Employee Recognition

Findings Response/Action Plan
Three vouchers we reviewed were
food purchases related to
Employee Recognition. The
department drafted an Employee
Recognition Policy; however, it was
not finalized and approved by the
Controller’s Office. However, the
department incurred employee
recognition expenses prior to final
policy approval. In addition, these
three vouchers should be recorded
in account code 523050, employee
recognition, instead of account
code 546990, food.

We recommend the department
finalize the Employee Recognition
Policy, obtain Controller’s Office
approval and comply with
Controller’s reimbursement
guidelines.

The SFPUC Employee Recognition Policy
was not fully approved in calendar year
2023 and is currently being finalized. Once
approved by the Controller’s Office, SFPUC
Accounting and Human Resource Services
will conduct comprehensive training to
ensure all employees are well-informed
about the purchasing policy.

Accounting staff are trained to ensure the
proper account codes are used for these
transactions.

C. Expense Reports Processing

Findings Response/Action Plan
Six expense reports we reviewed
were food purchases related to
Employee Recognition. The
department drafted an Employee
Recognition Policy; however, it was
not finalized and approved by the
Controller’s Office. However, the
department incurred employee
recognition expenses prior to final
policy approval. In addition, these
six expense reports should be
recorded in account code 523050,
employee recognition, instead of
account code 546990, food.

The SFPUC Employee Recognition Policy
was not fully approved in calendar year
2023 and is currently in the finalization
stage. Once approved by the Controller’s
Office, SFPUC Accounting and the Human
Services Department will conduct
comprehensive training to ensure all
employees are well-informed about the
policy details.

Accounting staff receive training to ensure
the proper account codes are used for
these transactions.

We recommend the department
finalize the Employee Recognition
Policy, obtain Controller’s Office
approval and comply with
Controller’s reimbursement
guidelines.

One expense report we reviewed
was for food purchases related to
Employee Recognition event. The
food purchases were over $200 per
single supplier.

We recommend the department
follow Controller’s reimbursement
guidelines to process expense
reports.

Employees and managers have been
instructed to follow the appropriate
purchasing guidelines for future employee
recognition-related expenses.

All policy violations are documented and
reviewed/approved by the Division
Manager, Assistant General Manager, and
Deputy Chief Financial Officer.

D. Community Based Organization

Findings Response/Action Plan

1. One voucher for a nonprofit
organization was submitted
late. The nonprofit did not
follow the disbursement
schedule.

We recommend the department
work with the nonprofit to send
disbursement funding request
according to the contract’s
requirements/schedule.

SF Conservation Corps -
$89,108.43
This finding relates to the joint contribution
to the San Francisco Sheriff's Department,
which is responsible for processing the
payment.

The nonprofit submitted the invoice in
SOLIS, but the voucher was processed by
Sheriff’s Department, as they issued the
contract and purchase order.

The invoice correction was the main cause
of the delay, as the original invoice was
submitted timely.

SFPUC Accounting has informed the
Sheriff's Department to ensure that
grantee/nonprofit organizations submit their
disbursement funding requests according to
the grantor's specified requirements and
schedule.

2. Three vouchers for two
separate nonprofits were paid
more than 30 days after the
invoices were received.

We recommend the department
review and update their
payment procedures to ensure
that invoices are paid within the
City’s prompt payment rule of
30 days. See Appendix B,
Community Based
Organizations for details.

a. Earth Land Institute -
$20,000.00
b. Youth Leadership -
$13,683.30 and $9,855.58

2.a. SFPUC strictly follows the City’s
Prompt Payment policy. This invoice was
paid one day late due to a delay during the
Infrastructure Review stage. We have
informed the Review team about the
importance of timely payments to
contractors.

2.b. The two late payments were due to
staffing changes resulting in the absence of
the AP Receiver. To prevent similar issues
in the future, a backup AP Receiver has
been assigned and trained within the
Capital Projects & Grants team to ensure
timely payments.

E. General Ledger Entry Submitted After Year-End Deadline

Findings Response/Action Plan
We recognize your department’s
fiscal staff’s effort in meeting the
year-end schedule, but
improvements could be utilized in
meeting the year-end deadlines as
department requested exceptions
to post accounting transactions
after the year-end deadline.

Your department’s request has
grown from one journal entry to
three journal entries over the last
three fiscal years. One journal
entry was processed for
CleanPowerSF FY23 expense
accruals related to FY24 vouchers.

One journal entry was processed
for PUC Bureau FY23 Q4
overhead and recovery from Water,
Hetchy Water, Power, Clean Power
and Wastewater. The last journal
entry was processed for PUC
Bureau to abate FY23 Q1 to Q3
City Attorney infrastructure charges
to various PUC Peoplesoft
SFPUC makes every effort to submit fiscal
year end entries on time.

However, occasional unique circumstances
exist beyond our control that affect
timeliness of entries. These include:

• Third-party invoices received in mid-
Q1/2025 from CleanPowerSF vendors
requiring necessary extensive
reconciliation by staff.
• City Attorney’s Office work order billings
submitted after the year-end closing
deadline, delaying our necessary
internal management review and
reconciliation, abatement, and recovery
entries.

SFPUC will continue to work and
collaborate closely with City departments
and vendors to ensure timely submission of
transactions.

chartfields.

We encourage the department to
reconcile accounting transactions
in a timely manner to ensure a
smooth fiscal year-end closing.

We appreciate the Controller’s Office staff’s time dedicated to this audit and will ensure that SFPUC management and staff carefully review and consider all observations and recommendations made in this report. Thank you.

cc: Jocelyn Quintos, Director of Accounting Operations and Systems, Controller’s Office
Sailaja Kurella, Director of Office of Contract Administration Ronald P. Flynn, Deputy General Manager
Vivian Aiyi Chen, Deputy Chief Financial Officer
Irella C. Blackwood, Audit Director

Crowe LLP
Independent Member Crowe Global
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowe.com

DRAFT

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102

September 16, 2024

To: Steven Ritchie, Assistant General Manager, Water Enterprise Ellen Levin, Deputy Assistant General Manager, Water
Angela Cheung, Water Supply & Treatment Manager
Annette Devincenzi, Warehouse Manager

Cc: Ronald P. Flynn, Deputy General Manager
Nancy L. Hom, Assistant General Manager, Business Services and Chief Financial Officer Vivian Chen, Deputy Chief Financial Officer
Laura Busch, Deputy Chief Financial Officer
Irella Blackwood, Audit Director
Jennifer Hopkins, Information Technology Services Director

Subject: Fiscal Year End 2023-2024
Inventory Count – Water Enterprise, Millbrae Warehouse and Sunol Yard Fuel Station

Dear Mr. Ritchie, Ms. Levin, Ms. Cheung, and Ms. Devincenzi:

The San Francisco Public Utilities Commission (SFPUC) engaged Crowe LLP (Crowe) to perform full inventory count services for three enterprise funds including the Wastewater Enterprise, Water Enterprise, and Hetch Hetchy Enterprise.
1 This report represents results of Crowe’s full count of the Water Enterprise’s Millbrae warehouse and fuel inventory at the Millbrae and Sunol Yards.

A. Scope of Inventory Work

The SFPUC requested Crowe perform full inventory count services of these enterprise activities to test whether significant variances exist between the physical count and the records in the SFPUC’s Maximo Inventory Tracking System (Maximo), to determine the cause of variances, and to determine amounts that need to be adjusted in Maximo. The SFPUC requested reporting of the analysis, findings, and recommendations consistent with the format requested by SFPUC’s Financial Services Bureau.

B. Warehouse Locations

The locations for the Water Enterprise full inventory count were:

Millbrae Warehouse
1000 El Camino Real
Millbrae, CA 94030

Sunol Yard
505 Paloma Way
Sunol, CA 94586

1 Note that some of the enterprises have multiple warehouse locations.

Page 2 ends

On June 18, 2024, Crowe visited the locations above and conducted the FY 2023-2024 full inventory count that is the subject of this report. The last full inventory count of the locations was performed by Crowe for FY 2022-2023 on June 27, 2023. In Table 1 below, we provide key data2,3 from both full inventory counts.

Table 1
San Francisco Public Utilities Commission
Water – Millbrae Warehouse and Sunol Yard Inventory Count Comparison with Prior Full Inventory Counts
(As of June 18, 2024)

Results

As indicated in Table 1, variances were identified between Crowe’s full inventory count and the count reported in the Maximo system. The following finding explains the variances in counts. Crowe’s recommendation related to this finding is also included.

Finding #1 – Physical Inventory Counts Differed from Maximo Report Counts

Condition:

Of the 1,241 items we counted, 21, or 1.7%, had a variance between their physical count and their count in Maximo.
4 Based on the physical count, and using the average cost in Maximo, we determined that the total value of the combined variances in the Millbrae Warehouse and Sunol Yard inventories was ($3,741), or (0.6%) of the total inventory value of $616,535 in Maximo.5

We found 6 positive variances (where the physical count was greater than the Maximo inventory count) which totaled $29. We found 15 negative variances (where the physical count was less than the Maximo inventory count) which totaled ($3,769). In Table 2 below we provide a summary of variances which shows that most of the variance dollar amount is fuel related.

Warehouse staff provided documentation of this on the day of Crowe’s inventory count. The total value of the variance associated with these 5 items was ($98). If these items are excluded, total inventory variance as a percentage of total inventory falls from

1.7% to 1.3%.
5 The ($3,741) variance is the difference between $27,358, which is the total value of the 21 items with variances using Crowe’s physical count for each item, and $31,098, which is the total value of the 21 items with variances using the Maximo count for each item. The difference of ($1) between the ($3,741) variance in Table 1 and the ($3,740) implied by the dollar amounts in this footnote (i.e., $27,358 minus $31,098 equals ($3,740)) is due to intermediate rounding.

It ems Value It ems Value
Total Inventory
(per Maximo) 1,241 616,535$ 1,132 642,514$ Total Inventory Variance
(per Crowe's Count) 21 (3,741)$ 15 (6,839)$ Total Inventory Variance
(as a percentage of Total Inventory) 1.7% (0.6%) 1.3% (1.1%) Description FY 2023-2024 FY 2022-2023

Page 3 ends

Table 2
San Francisco Public Utilities Commission
Water – Millbrae Warehouse and Sunol Yard Inventory Count Summary of Variances

As shown in Table 3 below, based on the fuel dip procedures Crowe performed for this physical count, we found the actual quantities of fuel contained in the four tanks varied from those in the Maximo system. We believe that the quantities we observed during our physical count using a manual dip process and a conversion formula were reasonably accurate as they closely matched quantities registered by an electronic measurement system contained in the fuel tanks that the Water Enterprise generated that day (referred to as the System Status Report). Table 4 provides the other non-fuel count variances.

Table 3
San Francisco Public Utilities Commission
Water – Millbrae Warehouse and Sunol Yard Fuel Inventory Summary of Fuel Gallon and Cost Variances
6 6 The Maximo count and valuation data used in this report is as of the end of the business day prior to Crowe’s count. Due to the Maximo inventory system synchronizing with the EJ Ward fuel management system during the night, the fuel tank level data in Maximo is as of the end of the business day that was two business days prior to Crowe’s count. Therefore, some of the fuel variance may be due to regular fuel transactions that occurred on the business day prior to Crowe’s count.

Description Item Count Amount
Positive - -$
Negative 4 (3,480)
Total Fuel Variance 4 (3,480)
Positive 6 29
Negative 11 (289)
Total Other Variances 17 (260)
Rounding Adjustment (1)
Total Variance 21 (3,741)$
Fuel Variances
Other Variances
Item
Number Description Item Code Unit
Maximo

6.17.24 Crowe

6.18.24 Variance Average Cost Cost of Variance
1 GASOLINE, AUTO, UNLEADED, MILLBRAE 091-30-3255 GAL 2,618.6 2,134.5 (484.1) 3.2069$ (1,552)$ 2 GASOLINE, DIESEL FUEL, MILLBRAE 091-40-3146 GAL 1,675.0 1,607.5 (67.5) 4.4931 (303) 3 GASOLINE, AUTO, UNLEADED, SUNOL 091-30-3260 GAL 1,009.1 814.0 (195.1) 5.2714 (1,028) 4 GASOLINE, DIESEL, SUNOL 091-40-3147 GAL 1,006.6 870.0 (136.6) 4.3621 (596) Rounding Adjustment (1)
Total (3,480)$

Page 4 ends

Table 4
San Francisco Public Utilities Commission
Water – Millbrae Warehouse and Sunol Yard Fuel Inventory Summary of Non-Fuel Count Variances7

Criteria:

Chapter 6 of the City and County of San Francisco Office of the Controller’s Accounting Policies and Procedures identifies that Departments shall conduct a physical inventory at least annually and ensure that the inventory management system records accurately reflect inventory on hand. Additionally, Section 6.1 (Policy Guidelines) indicates that inventory system records must be promptly adjusted for any variances identified in the physical counts; Departments must periodically review the inventory records for reasonableness and appropriateness of any changes to inventory unit cost, inventory valuation, and unit of measure, and Departments must periodically review the inventory for obsolescence and reasonableness of inventory classification. The Policy Guidelines also indicate that Departments should investigate significant variances between the physical count, the inventory system records, and the accounting records; document the reasons for variance; and take corrective actions to reduce future variances.

Cause:

Millbrae and Sunol Warehouse staff identified the reasons for the differences in this physical count compared to the count in Maximo. The reasons included minor miscounts during periodic cycle counts, occasional system posting manual errors by the individual entering the quantity or unit of measure, and several items issued by warehouse staff after the Maximo system inventory report was generated. 8 Regarding the fuel variances observed, we determined that the Water Enterprise uses the automated fuel tracking information system, E.J. Ward, to capture fuel usage and the SFPUC Information Technology Services Bureau has developed an interface designed to periodically upload the E.J. Ward fuel usage data to the Maximo system. However, based on problems with the system interface between the E.J. Ward system and the Maximo system, actual Water Enterprise fuel usage data was not consistently and accurately uploaded into Maximo causing the variances.

7 The total of ($261) from Table 4 is the sum of two items from Table 2: Total Other Variances of ($260) and Rounding Adjustment of ($1).
8 This was the case for five items which warehouse staff issued on an emergency basis. The total dollar value of the variance due to these five items was ($98).

Item
Number Description Item Code Unit
Maximo

6.17.24 Crowe

6.18.24 Variance
Average
Cost
Cost of
Variance
1 BOLT, HEX, STEEL, N.C., 5/8"X 4-1/2" 053-06-4467 EA 214 223 9 0.99$ 9$ 2 EAR PLUG, YELLOW, FOAM, UNCORDED, 200 PR/BX. (4T147) 042-40-0500 PR 180 200 20 0.31 6 3 REDUCER, PIPE, M.I., GALV, 1 X 1/2" (1MPN6) 047-33-5842 EA 28 29 1 5.23 5 4 GASKET MATERIAL, RUBBER 047-31-9031 SF 167 168 1 3.33 3 5 CHAIN, WELDED, PROOF COIL, 3/16" 040-10-1650 FT 75 77 2 1.63 3 6 BOLT, CARRIAGE, STEEL, H.T., 1/2" X 5" 053-06-1539 EA 90 92 2 0.99 2 7 NUT, HEX, STL, HVY, N.C. 3/4", ZINC PLTD 053-10-2087 EA 252 244 (8) 0.75 (6) 8 NUT, HEX, STL., HVY., 1" ZINC PLTD. 053-10-2099 EA 130 125 (5) 1.40 (7) 9 GLOVE, G-TEK, MEDIUM 084-15-6015 PR 60 59 (1) 7.88 (8) 10 BOLT, HEX, STEEL, NC, 5/8 X 2-1/2" 053-06-4460 EA 90 79 (11) 1.12 (12) 11 BOLT, HEX,STL, GR-5, NC, 3/8" X 1", PLAIN 053-00-3545 EA 100 54 (46) 0.31 (14) 12 BOLT, HEX,STL, GR-5, NC, 3/4" X 3-1/2", ZINC PLT 053-00-3918 EA 132 124 (8) 2.38 (19) 13 GASKET, RUBBER, FULL FACE, C.I., 1/8" THICK, 8" DIA, NSF-61 047-31-9014 EA 40 39 (1) 26.58 (27) 14 CEMENT, PORTLAND, #105, LOW TYPE I-II ALKALI 056-10-1400 SJ 16 13 (3) 10.85 (33) 15 ELBOW, PIPE, STEEL, WELDING, 6", 90 DEG, SHORT RADIUS 047-31-5025 EA 5 4 (1) 32.67 (33) 16 CARTRIDGE, FILTER, RESPIRATOR - COMBINATION - NORTH
75SCP100 042-40-1560 EA 21 20 (1) 38.50 (39)
17 NUT, PLN, NC, THRD, 1/4" 053-10-2089 HUN 170 150 (20) 4.62 (92) Rounding Adjustment 1
Total (261)$

Page 5 ends

Effect:

The combined Millbrae and Sunol inventory value in the Maximo system is overstated by $3,741.

Regarding the fuel usage variances, absent periodic monitoring of the fuel levels, the Millbrae Warehouse and Sunol Yard will have difficultly reconciling future inventories and identifying variances that are the result of missing fuel (e.g., theft), delivery errors, data entry errors, tank leaks, or shrinkage.

Recommendation:

The Millbrae Warehouse staff should update the asset inventory counts in Maximo after management approval. The SFPUC’s Financial Services Bureau should adjust the General Ledger to reflect the actual cost of inventory on hand. If the E.J. Ward system cannot be made to work consistently it should be replaced or upgraded.

Management Response:

Millbrae Warehouse’s asset inventory counts were updated in Maximo following the audit. All inventory items are updated on a regular basis.

The E. J. Ward fuel management system is managed by SFPUC Fleet. There is another cause for fuel variances between E. J. Ward and Maximo. Leased vehicles are included in the E.J. Ward system so the vehicles could obtain fuel from Millbrae and Sunol Yards. However, the short-term leased vehicles are not added to Maximo. If these vehicles are added to Maximo, the fuel variances should be lower between the two systems. The E. J. Ward system is in need of an upgrade. The current system is used by all SFPUC worksites and is at the end of its service life. Repairs had to be made to the system in Millbrae in the past year to make it functional again.

Other Matters

This full inventory count did not constitute an audit, examination, review, or compilation of the historical and prospective financial information conducted in accordance with generally accepted auditing standards or with other standards established by the American Institute of Certified Public Accountants (AICPA) .

Accordingly, Crowe is unable to express an opinion or any other form of assurance with respect to any of the historical or prospective financial information. Crowe did not perform any procedures to verify the Management Response and Crowe does not provide any assurance regarding the accuracy or completeness of the response. Any and all amounts referred to in this letter are preliminary and could change should additional procedures be performed. Additionally, issues that are not mentioned here could develop subsequent to the date of this letter that may have impacted Crowe’s analysis or that Crowe may cite should additional procedures be performed.

The inventory services did not contemplate obtaining the understanding of internal controls or assessing control risk, tests of accounting records and responses to inquiries by obtaining corroborating evidential matter, and certain other procedures ordinarily performed during an audit or examination. Thus, this engagement did not provide assurance that we became aware of significant matters that would be disclosed in an audit or examination.

As part of this inventory, the SFPUC agreed to be responsible to: make all management decisions and perform all management functions; designate an individual who possesses suitable skill, knowledge, and/or experience, preferably within senior management to oversee our services; evaluate the adequacy and results of the services performed; accept responsibility for the results of the services; and establish and maintain internal controls, including monitoring ongoing activities. The SFPUC has ultimate authority for making changes to inventory reported in its Maximo system and on its financial statements .

Crowe’s fees are not dependent upon the outcome of this report and Crowe is independent with respect to any other economic interests.

Page 6 ends

We appreciate the contribution of SFPUC management and your input and direction on this project. We also thank Millbrae Warehouse and Sunol Yard management and staff for providing access to the inventory and for timely responses to our requests.

Crowe LLP

Crowe LLP
Independent Member Crowe Global
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowe.com

DRAFT

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102

September 16, 2024

To: Steve Ritchie, Assistant General Manager, Water Enterprise Margaret Hannaford, Division Manager, Hetch Hetchy Water/Moccasin Cheryl Sperry, Business Services Manager
Alan Thoburn, Asset Management Services Manager
Ray Emerald, Assistant Materials Coordinator

Subject: Fiscal Year End 2023-2024
Inventory Count – Hetch Hetchy Enterprise, Moccasin Warehouse

Dear Mr. Ritchie, Ms. Hannaford, Ms. Sperry, Mr. Thoburn, and Mr. Emerald:

The San Francisco Public Utilities Commission (SFPUC) engaged Crowe LLP (Crowe) to perform full inventory count services for three enterprise funds including the Wastewater Enterprise, Water Enterprise, and Hetch Hetchy Enterprise.
1 This report represents results of Crowe’s full count of the Hetch Hetchy Enterprise – Moccasin Warehouse inventory.

A. Scope of Inventory Work

B. Warehouse Location

The location for the Hetch Hetchy Enterprise full inventory count was:

Moccasin Warehouse
10390 Moccasin Switchback Road
Moccasin, CA 95347

On June 20, 2024, Crowe visited the location above and conducted the FY 2023-2024 full inventory count that is the subject of this report. The last full inventory count of the location above was performed by

1 Note that some of the enterprises have multiple warehouse locations.

Page 2 ends

Crowe for FY 2022-2023 on June 22, 2023. In Table 1 below, we provide key data2,3 from both full inventory counts.

Table 1
San Francisco Public Utilities Commission
Hetch Hetchy Moccasin Warehouse Inventory Count
Comparison with Prior Full Inventory Counts
(As of June 20, 2024)

Results
As indicated in Table 1, variances were identified between Crowe’s full inventory count and the count reported in the Maximo system. The following finding explains the variances in counts. Crowe’s recommendation related to this finding is also included.

Finding #1 – Physical Inventory Counts Differed from Maximo Report Counts

Condition:

Of the 2,349 items we counted, 36 items, or 1.5%, had a variance between their physical count and their count in Maximo. Based on the physical count, and using the average cost in Maximo, we determined that the total value of the variances in the Moccasin Warehouse inventory was ($977), or (0.2%) of the total inventory value of $465,934 in Maximo.
4 We found 17 positive variances (where the physical count was greater than the Maximo inventory count) which totaled $3,392.
5 We found 19 negative variances (where the physical count was less than the Maximo inventory count) which totaled ($4,369). In Table 2 below we provide a summary of variances.

2 In this report, percentages are rounded to one decimal place unless they would round to 0.0%, in which case they are rounded to two decimal places. Monetary values are rounded to the nearest whole dollar unless doing so would obscure the data, in which case they are presented without rounding.
3 Crowe did not perform any procedures related to the assigned value in the Maximo system. 4 The ($977) variance is the difference between $36,785, which is the total value of the 36 items with variances using Crowe’s physical count for each item, and $37,762, which is the total value of the 36 items with variances using the Maximo count for each item.
5 While it appears that the total positive variance in Table 2 is $3,393, this is because the $3,300 of positive variance and the $93 of positive fuel variance in Table 2 are intermediate rounded figures. If the unrounded amounts are added and then rounded to the nearest dollar, the total is $3,392.

It ems Value It ems Value
Total Inventory
(per Maximo) 2,349 465,934$ 2,339 470,945$ Total Inventory Variance
(per Crowe's Count) 36 (977)$ 34 (220)$ Total Inventory Variance
(as a percentage of Total Inventory) 1.5% (0.2%) 1.5% (0.05%) Description FY 2023-2024 FY 2022-2023

Page 3 ends

Table 2
San Francisco Public Utilities Commission
Hetch Hetchy Moccasin Warehouse Inventory Count
Summary of Variances

As shown in Table 3 below, based on the fuel dip procedures Crowe performed for this physical count, we found the actual quantities of fuel contained in the nine tanks varied slightly, or by ($4,249), from those in the Maximo system. Table 4 provides the other $3,273 in non-fuel count variances.

Table 3
San Francisco Public Utilities Commission
Hetch Hetchy Moccasin Warehouse Inventory Count
Summary of Fuel Count Variances6

6 The Maximo count and valuation data used in this report is as of the end of the business day prior to Crowe’s count. Due to the Maximo inventory system synchronizing with the EJ Ward fuel management system during the night, the fuel tank level data in Maximo is as of the end of the business day that was two business days prior to Crowe’s count. Therefore, some of the fuel variance may be due to regular fuel transactions that occurred on the business day prior to Crowe’s count.

Description Item Count Amount
Positive 2 93$
Negative 7 (4,342)
Total Fuel Variance 9 (4,249)
Positive 15 3,300
Negative 12 (27)
Total Other Variances 27 3,273
Rounding Adjustment (1)
Total Variance 36 (977)$
Fuel Variances
Other Variances
Item
Number Description Item Code Unit
Maximo

6.18.24 Crowe

6.20.24 Variance Average Cost Cost of Variance
1 GASOLINE, UNLEADED,CHERRY VLY.,#11. 091-30-3185 GAL 324.0 314.0 (10.0) 4.87$ (49)$ 2 GASOLINE,unlead,EARLY INTAKE,#05 091-30-3212 GAL 2,813.0 2,835.0 22.0 4.20 93 3 FUEL,RENEWABLE DIESEL,EARLY INTAKE
(CHANGED FROM #2 DIESEL 4/12/16) 091-40-3149 GAL 1,182.0 775.0 (407.0) 4.67 (1,899) 4 FUEL, RENEWABLE DIESEL, LOCATION:

MOCC,#03 091-40-3148 GAL 1,225.0 1,247.0 22.0 - - 5 GASOLINE, MOCCASIN , # 4-5 tanks 091-30-3271 GAL 3,020.0 2,922.0 (98.0) - - 6 GASOLINE,UNLEAD,SOUTH FORK,#09. 091-30-3240 GAL 154.4 86.2 (68.2) 3.12 (213) 7 FUEL, RENEWABLE DIESEL,SOUTH
FORK,#10 (CHANGED FROM #2 DIESEL 091-40-3150 GAL 159.7 157.9 (1.8) 4.47 (8) 8 GASOLINE, UNLEADED, OAKDALE,#7. 091-30-3195 GAL 1,784.0 1,330.0 (454.0) 4.73 (2,147) 9 FUEL, RENEWABLE DIESEL OAKDALE
(renamed from BIO DIESEL 3/3/16) 091-40-3170 GAL 876.5 870.4 (6.1) 4.37 (27) 1 Total (4,249)$
Rounding Adjustment

Page 4 ends

Table 4
San Francisco Public Utilities Commission
Hetch Hetchy Moccasin Warehouse Inventory Count
Summary of Non-Fuel Count Variances

Criteria:

Cause:

Moccasin Warehouse staff identified the reasons for the differences in this physical count compared to the count in Maximo. The reasons included miscounting, data entry errors, and small variances due to weighing nuts and bolts with a scale instead of individually counting them. Regarding the fuel variances observed, we determined that the Moccasin Warehouse uses the automated fuel tracking information system, E.J. Ward, to capture fuel usage and the SFPUC Information Technology Services Bureau has developed an interface designed to periodically upload the E.J. Ward fuel usage data to the Maximo system. There may be delays in updating data because of poor network communication systems. The small variances from the quantities we observed during our physical count and those current in Maximo were caused by rounding errors as a result of using a manual dip process and a conversion formula to determine fuel quantities.

Item
Number Description Item Code Unit
Maximo

6.18.24 Crowe

6.20.24 Variance
Average
Cost
Cost of
Variance
1 PIPE, 2" STAINLESS STEEL, ROLLED GROOVE, S-10, 20' LENGTH 047-10-SS20 EA 10 17 7 425.14$ 2,976$ 2 TONER CARTRIDGE, CF413X, MAGENTA, HP 010-10-CF413A EA 1 2 1 217.22 217 3 WIRE NUT CONNECTOR, GREY, IDEAL#30-342 (6YH57) 059-40-4971 EA 150 250 100 0.28 28 4 NAPA# 3536 FUEL FILTER, EQUIP. 712 023-81-3536 EA 0 1 1 25.99 26 5 BOWERS# 4SW SPL 4" METAL BOX 059-77-6800 EA 4 19 15 1.24 19 6 4" NO HUB CLAMP 048-32-0400 EA 2 4 2 5.91 12
7 BOLT, GALV.,SQ. HD., 5/8" X 10", KORTICK ,25/BX. 053-01-5810M EA 48 50 2 3.67 7 8 NIPPLE, GALV. STEEL, 3/4 X 6,(6P814) 047-32-4685 EA 6 8 2 3.06 6 9 TBD -- SPLICE, SPLIT BOLT, 12 Str-10 Str, CONDUCTOR 059-40-5009 EA 51 56 5 0.81 4 10 1/2" 1 HOLE GRC STRAP 059-76-1521 EA 88 90 2 1.13 2 11 T&B #C33 NON INS RING TERM 12-10 059-40-6548 EA 500 512 12 0.11 1 12 T&B, #A18-10F, NON INS FORK TERM, 22-16, 100/PKG. 059-40-6602 EA 250 252 2 0.36 1 13 ROMEX STAPLE, #125P5, (500 bx.) 059-40-1251 EA 500 512 12 0.03 - 14 10-32 X 2", RND. HD. MACH SCREW 053-01-1020 EA 385 386 1 0.09 - 15 GLOVES, NITRILE, DISPOSABLE, SMALL 084-15-6364B BX 0 3 3 - - 16 REDUCING WASHER, 1" X 1/2" 059-75-0112 EA 54 50 (4) - - 17 REDUCING WASHER, 1" X 3/4' 059-75-0134 EA 59 50 (9) - - 18 REDUCING WASHER, 3/4" X 1/2" 059-75-3412 EA 110 99 (11) - - 19 10-32 X 1", RND. HD. MACH SCREW, 100/PKG. (2EE25) 053-01-1010 EA 318 316 (2) 0.06 - 20 3/4" EMT 2 HOLE STRAP 059-76-1602 EA 103 101 (2) 0.08 - 21 WIRENUT, TAN, IDEAL# 30-341 100/BX. 059-40-4970 EA 100 97 (3) 0.22 (1) 22 COUPLING, 1-1/2" PVC PIPE, SCH 40, S X S 047-30-9033 EA 24 22 (2) 0.63 (1) 23 BOLT, CAP, HEX, NC, 1/2-13 x 4, 5/PKG. (23KZ79) 053-01-2127 EA 15 13 (2) 0.90 (2) 24 T&B #C10-8F NON INS FORK TERM 12-10 059-40-6801 EA 150 144 (6) 0.51 (3) 25 T&B #B14-6F NON INS FORK TERM 18-14 059-40-6700 EA 200 180 (20) 0.32 (6) 26 REPAIR NIPPLE, 1/2" SLIP 048-22-12RN EA 13 11 (2) 3.25 (6) 27 REDUCING WASHER, 1 1/2-1 059-75-0151 EA 56 50 (6) 1.15 (7) Total 3,273$

Page 5 ends

Effect:

The Moccasin Warehouse inventory value in the Maximo system is overstated by $977.

Recommendation:

The Moccasin warehouse staff should update the asset inventory counts in Maximo after management approval. The SFPUC Financial Services Bureau should adjust the General Ledger to reflect the actual cost of inventory on hand. If the E.J. Ward system cannot be made to work consistently it should be replaced or upgraded.

Management Response:

Hetch Hetchy Water concurs with the recommendations and has made the corresponding adjustments in Maximo. Improvement in Hetch Hetchy Water’s fuel inventory management is a critical need. The EJ Ward fuel system continues to be an ongoing challenge with connectivity (telemetry issues) that negatively impacts inventory accuracy, reordering, and preventative maintenance scheduling for vehicles. This has led to manually tracking fuel inventory to mitigate system shortfalls. Correcting E.J. Ward fuel system problems will require network connectivity and communication system upgrades, as well as fuel system hardware and software upgrades. Hetch Hetchy Water is investigating options for next steps.

Page 6 ends

Other Matters

As part of this inventory, the SFPUC agreed to be responsible to make all management decisions and perform all management functions; designate an individual who possesses suitable skill, knowledge, and/or experience, preferably within senior management to oversee our services; evaluate the adequacy and results of the services performed; accept responsibility for the results of the services; and establish and maintain internal controls, including monitoring ongoing activities. The SFPUC has ultimate authority for making changes to inventory reported in its Maximo system and on its financial statements .

Crowe’s fees are not dependent upon the outcome of this report and Crowe is independent with respect to any other economic interests.

We appreciate the contribution of SFPUC management and your input and direction on this project. We also thank Moccasin Warehouse management and staff for providing access to the inventory and for timely responses to our requests.

Crowe LLP

Crowe LLP
Independent Member Crowe Global
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowe.com

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102

September 16, 2024

To: Barbara Hale, Assistant General Manager, Power
Richard Stephens, Utility Services Manager
David Carter, Materials Coordinator
Bart Murphy, Materials Coordinator

Subject: Fiscal Year End 2023-2024
Inventory Count – Hetch Hetchy Enterprise, Hetchy Power In-City Warehouse

Dear Ms. Hale, Mr. Stephens, Mr. Carter, and Mr. Murphy:

The San Francisco Public Utilities Commission (SFPUC) engaged Crowe LLP (Crowe) to perform full inventory count services for three enterprise funds including the Wastewater Enterprise, Water Enterprise, and Hetch Hetchy Enterprise.
1 This report represents results of Crowe’s full count of the Hetch Hetchy Enterprise – Hetchy Power In-City Warehouse inventory.

A. Scope of Inventory Work

B. Warehouse Locations

The locations for the Hetchy Power In-City full inventory count were:

Hetchy Power In-City Warehouse
Pier 23
San Francisco, California 94111
Treasure Island
Lot 69 (End of Avenue M)
San Francisco, California 94130
On June 26, 2024, Crowe visited the locations above and conducted the FY 2023-2024 full inventory count that is the subject of this report. The last full inventory count of the locations above was performed

1 Note that some of the enterprises have multiple warehouse locations.

Page 2 ends

by Crowe for FY 2022-2023 on June 21, 2023. In Table 1 below, we provide key data2,3 from both full inventory counts.

Table 1
San Francisco Public Utilities Commission
Hetchy Power In-City Warehouse Inventory Count
Comparison with Prior Full Inventory Counts
(As of June 26, 2024)

Results

Finding #1 – Physical Inventory Counts Differed from Maximo Report Counts

Condition:

Of the 970 items we counted, 183 items, or 18.9%, had a variance between their physical count and their count in Maximo. This is a repeat finding. Based on the physical count, and using the average cost in Maximo, we determined that the total value of the variances in the Hetchy Power In-City inventory was ($32,523), or (2.2%) of the total inventory value of $1,455,929 in Maximo. 4 We found 72 positive variances (where the physical count was greater than the Maximo inventory count) which totaled $11,085. We found 111 negative variances (where the physical count was less than the Maximo inventory count) which totaled ($43,609). In Table 2 below we list items with variances that are either above $500 or below ($500).5 The sum of the absolute values of the variances is $54,694, or 3.8% of the total inventory value of $1,455,929 in Maximo.

2 In this report, percentages are rounded to one decimal place. Monetary values are rounded to the nearest whole dollar unless doing so would obscure the data, in which case they are presented without rounding. 3 Crowe did not perform any procedures related to the assigned value in the Maximo system. 4 The ($32,540) variance is the difference between $273,462, which is the total value of the 183 items with variances using Crowe’s physical count for each item, and $306,003, which is the total value of the 183 items with variances using the Maximo count for each item.
5 Of the 183 items with a difference between the physical count and the count in Maximo, 26 are items from the Streetlight1 and Streetlight2 storerooms which warehouse staff should have removed from Maximo as they can no longer be used due to a Board of Supervisors mandate that older City lighting, e.g., halogen and mercury vapor light bulbs, be replaced with LED light bulbs. Of these items, 4 have positive variances totaling $1,282 and 22 have negative variances totaling ($17,505), for a combined variance of ($16,223). If the total variance in the number of items counted is adjusted to exclude these Streetlight items, it falls from 18.9% (183 items divided by 970 items) to 16.6% (157 items divided by 944 items). If the total dollar variance is adjusted to exclude these Streetlight items, it changes from (2.2%) (($32,523) divided by $1,455,929) to (1.1%) (($16,300) divided by $1,455,929).

It ems Value It ems Value
Total Inventory
(per Maximo) 970 1,455,929$ 1,318 1,372,997$ Total Inventory Variance
(per Crowe's Count) 183 (32,523)$ 475 (75,192)$ Total Inventory Variance
(as a percentage of Total Inventory) 18.9% (2.2%) 36.0% (5.5%) Description FY 2023-2024 FY 2022-2023

Page 3 ends

Table 2
San Francisco Public Utilities Commission
Hetchy Power In-City Warehouse Inventory Count
Summary of Items with Variances
(As of June 26, 2024)6

Criteria:

Chapter 6 of the City and County of San Francisco Office of the Controller’s Accounting Policies and Procedures identifies that Departments shall conduct a physical inventory at least annually and ensure that the inventory management system records accurately reflect inventory on hand. Additionally, Section 6.1 (Policy Guidelines) indicates that inventory system records must be promptly adjusted for any variances identified in the physical counts; Departments must periodically review the inventory records for reasonableness and appropriateness of any changes to inventory unit cost, inventory valuation, and unit of measure, and Departments must periodically review the inventory for obsolescence and reasonableness of inventory classification. The Policy Guidelines also indicate that Departments should investigate significant variances between the physical count, the inventory system records, and the accounting records; document the reasons for variances; and take corrective actions to reduce future variances.

6 The Maximo count and valuation data used in this report is as of the end of the business day prior to Crowe’s count.

It em Description Shop It em Code Unit
Maximo

6.25.24 Crowe

6.26.24 Variance
Average
Cost
Cost of
Variance
1 Automatic Deadend Clevis Bail 6 SOL CU PG&E 184097 PE-MAIN PE-10-0848 EA 24 92 68 17.3743$ 1,181$ 2 WIRE,#10 THW BLACK COPPER WIRE,(SOLID) .045 JACKET (500 FOOT SPOOL) PE-MAIN PE-10-0339 FT 500 2,500 2,000 0.4422 884 3 ABB PT/CT TXF 500A PE-MAIN 5950-7525G055 EA 12 16 4 207.4500 830 4 Ground Rod Clamp - 3/4 rod for 4/0-250 PE-MAIN PE-10-1026 EA 130 178 48 16.9141 812 5 N36 STREET LIGHTING CHRISTY BOX LID NEW PE-MAIN PE-10-0354 EA 14 25 11 65.5564 721 6 2" RIGID 90 DEGREE ELBOW PE-MAIN PE-10-0266 EA 15 36 21 29.5042 620 7 Ashphalt, black top cold patch, QUIKRETE #1701 PE-MAIN PE-10-1614 EA 193 255 62 9.5444 592 8 4M /66R BULB, PHILIPS, PS40 LAMP PE-STREETLIGHT2 PE-10-1876 EA (46) - 46 12.0000 552 9 LED,Luminaire Cobra Head, 145W, ROAD FOCUSLuminaire RFL- 145W64LED3K-G2-R3M-UNV-DMG-[API-226]-API2011-RCD7-GY3, PE-MAIN PE-10-1554 EA 38 39 1 526.9066 527 Subtotal: Variances Above $500 (9 Items) 6,719$
Subtotal: Variances Between $0 and $500 (63 Items) 4,366$ Category Subtotal: A ll Positive Variances (72 Items) 11,085$ 10 WIRE, UNDERGROUND, TRI-PLEX 4/0 SERVICE WIRE, 600 VOLT XLP INSULATED CABLE, 3 CONDUCTOR PE-MAIN PE-10-1657 FT 9,173 4,673 (4,500) 1.9860$ (8,937)$ 11 MVR 175/V/BU/PA LAMP PE-STREETLIGHT2 PE-10-0639 EA 99 68 (31) 250.0000 (7,750) 12 Bayonet Fuse 100A High Amp CPS 4038-361-C04 PE-MAIN PE-5920-330007 EA 30 15 (15) 151.9000 (2,279) 13 200W INSTANT RESTRIKE LAMP PE-STREETLIGHT2 PE-10-0623 EA 58 - (58) 39.1771 (2,272) 14 HANDHOLE COVER STEEL, GALVANIZED, AMERON P/N 43338G PE-MAIN PE-10-1650 EA 57 - (57) 36.3258 (2,071) 15 1" ALL THREAD PE-STREETLIGHT1 PE-10-0311 EA 21 - (21) 69.9978 (1,470) 16 Echo Lighting Retrofit Kit 100W Mission Bay LED PE-MAIN -6210-100W19 LOT 24 23 (1) 1,374.1063 (1,374) 17 LU100SBY XL ECO 100W LAMP PE-MAIN PE-10-0621 EA 25 - (25) 47.9579 (1,199) 18 MVR400/U LAMP E37 PE-STREETLIGHT2 PE-10-0607 EA 6 - (6) 196.1500 (1,177) 19 ABB PT/CT TXF 1000A PE-MAIN 950-7525G2310 EA 10 6 (4) 214.9300 (860) 20 ABB PT/CT TXF 800A PE-MAIN 5950-7525G098 EA 6 2 (4) 214.9300 (860) 21 ABB PT/CT TXF 400A PE-MAIN 5950-7525G034 EA 10 6 (4) 207.4500 (830) 22 250W INSTANT RESTRIKE LAMP PE-STREETLIGHT2 PE-10-0625 EA 26 - (26) 28.0000 (728) 23 MVR250/VBU/PA LAMP PE-STREETLIGHT2 PE-10-0638 EA 30 - (30) 23.0489 (691) 24 LU100/ECD LUMALUX LAMP PE-STREETLIGHT2 PE-10-0596 EA 32 - (32) 20.0000 (640) 25 4M /66R BULB, PHILIPS, PS40 LAMP PE-STREETLIGHT2 PE-10-1876 EA 46 - (46) 12.0000 (552) 26 1 1/2" RIGID THREADED GROUNDING BUSHING PE-MAIN PE-10-0229 EA 426 371 (55) 10.0266 (551) 27 CONCRETE MIX, FAST-SETTING NON-SHRINK GROUT PE-MAIN PE-10-0320 EA 72 51 (21) 25.9694 (545) 28 LU100SBY XL ECO 100W LAMP PE-STREETLIGHT2 PE-10-0621 EA 11 - (11) 52.8228 (581) 29 N36 HIGH VOLTAGE CHRISTY BOX LID OLD PE-MAIN PE-10-0355 EA 29 17 (12) 41.7500 (501) Subtotal: Variances Below ($500) (20 Items) (35,868)$
Subtotal: Variances Between $0 and ($500) (91 Items) (7,741)$ Category Subtotal: A ll Negative Variances (111 Items) (43,609)$ Rounding Adjustment 1$
Total (32,523)$

Page 4 ends

Cause:

Hetchy Power In-City Warehouse staff identified the following reasons for the differences in this physical count compared to the count in Maximo:

• Some items have a current balance in Maximo when they should either have a balance of zero or be removed from the system entirely (e.g., halogen and mercury vapor light bulbs; see footnote 6). • Some items were miscounted during periodic cycle counts. • Some items were used on projects but not issued in Maximo.

Effect:

The Hetchy Power In-City inventory value in the Maximo system is overstated by $32,523.

Recommendation:

Hetchy Power In-City warehouse staff should update the asset inventory counts in Maximo after management approval. The SFPUC Financial Services Bureau should adjust the General Ledger to reflect the actual cost of inventory on hand. Hetchy Power In-City should investigate the significant variances between the physical counts noted in Tables 1 and 2, the Maximo system records, and the accounting records; document the reasons for variances; and implement corrective actions to reduce future variances. Warehouse staff should periodically review the inventory records to remove duplicate and obsolete items and to ensure the reasonableness and appropriateness of inventory unit cost, unit of measure, and bin location. Finally, warehouse staff should continue to conduct regular physical inventory cycle counts and compare results with those in Maximo to ensure Maximo data is up- to-date and accurate.

Management Response:

Hetchy Power In-City Management staff and Warehouse staff agree with the assessment.

We also note the improvement over year-to-year measurements; this last count is half the dollar variance we had the previous year.

Warehouse action plan for fiscal year 2024-2025 will focus on:

1. All Stock inventory will be removed from Storerooms Streetlight 1 and Streetlight 2 by moving existing stock to PE-MAIN with Bin Locations.

2. The number of Cycle counts has been increased from previous years.

3. Consideration of Backflushing: record remaining inventory at end of period instead of recording inventory at issuance. For high-volume items (e.g., Elbows, Bushings, Wire, and Connectors), they are recorded daily to increase accuracy of Maximo.

4. Closer monitoring of Field crews and contractor usage to ensure proper procedures are followed.

5. Tighten pre-audit procedures with field crews and conduct more counts before the audit.

Page 5 ends

Other Matters

Crowe’s fees are not dependent upon the outcome of this report and Crowe is independent with respect to any other economic interests.

We appreciate the contribution of SFPUC management and your input and direction on this project. We also thank Hetchy Power In-City management and staff for providing access to the inventory and for timely responses to our requests.

Crowe LLP

Crowe LLP
Independent Member Crowe Global
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowe.com

DRAFT

San Francisco Public Utilities Commission
525 Golden Gate Ave, 13
th Floor
San Francisco, CA 94102

September 16, 2024

To: Joel Prather, Assistant General Manager, Wastewater Enterprise Mike Maraviglia, Acting Maintenance Manager
Christian Losno, Materials Coordinator
Jorge Gonzalez, Assistant Supervisor of Stores & Equipment

Cc: Ronald P. Flynn, Deputy General Manager
Nancy L. Hom, Assistant General Manager, Business Services/Chief Financial Officer Vivian Chen, Deputy Chief Financial Officer
Laura Busch, Deputy Chief Financial Officer
Irella Blackwood, Audit Director
Jennifer Hopkins, Information Technology Services Director

Subject: Fiscal Year End 2023-2024
Inventory Count – Wastewater Enterprise Warehouse

Dear Mr. Prather, Jones, Losno, and Gonzalez:

A. Scope of Inventory Work

B. Warehouse Location

The location for the Wastewater Enterprise full inventory count was:
2725 Oakdale Avenue
San Francisco, California 94124

On June 5, 2024, Crowe visited the location above and conducted the FY 2023-2024 full inventory count that is the subject of this report. The last full inventory count of the location above was performed by

1 Note that some of the enterprises have multiple warehouse locations.

Page 2 ends

Crowe for FY 2022-2023 on June 28 and June 29, 2023. In Table 1 below, we provide key data2,3 from both full inventory counts.

Table 1
San Francisco Public Utilities Commission
Wastewater Warehouse Inventory Count
Comparison with Prior Full Inventory Counts
(As of June 5, 2024)

Finding #1 – Physical Inventory Counts Differed from Maximo Report Counts

Condition:

Of the 3,760 items we counted, 7 items, or 0.2%, had a variance between their physical count and their count in Maximo. Based on the physical count, and using the average cost in Maximo, we determined that the total value of the variances in the Wastewater Enterprise inventory was ($1,711), or (0.05%) of the total inventory value of $3,712,176 in Maximo.
4 We found 3 positive variances (where the physical count was greater than the Maximo inventory count) which totaled $363. We found 4 negative variances (where the physical count was less than the Maximo inventory count) which totaled ($2,074).5 In Table 2 below we list the 7 items with variances from the Maximo count.

2 Crowe did not perform any procedures related to the assigned value in the Maximo system. 3 In this report, percentages are rounded to one decimal place unless they would round to 0.0%, in which case they are rounded to two decimal places. Monetary values are rounded to the nearest whole dollar unless doing so would obscure the data, in which case they are presented without rounding.
4 The ($1,711) variance is the difference between $6,557, which is the total value of the 7 items with variances using Crowe’s physical count for each item, and $8,268, which is the total value of the 7 items with variances using the Maximo count for each item.
5 Most of the negative variance is caused by a single item, GBRNG-0026. Warehouse staff were unable to locate this item and suggested that it should not have been included in the inventory count based on Maximo data indicating that it has not been issued since 2012.

It ems Value It ems Value
Total Inventory
(per Maximo) 3,760 3,712,176$ 3,757 3,356,658$ Total Inventory Variance
(per Crowe's Count) 7 (1,711)$ 13 (2,048)$ Total Inventory Variance
(as a percentage of Total Inventory) 0.2% (0.05%) 0.3% (0.1%) Description FY 2023-2024 FY 2022-2023

Page 3 ends

Table 2
San Francisco Public Utilities Commission
Wastewater Inventory Count
List of All Items with Variances6

Criteria:

Cause:

Wastewater Warehouse staff identified the reasons for the differences in this physical count compared to the count in Maximo. The reasons included minor miscounts during periodic cycle counts and one item which may have been misclassified as an inventory item in Maximo.

Effect:

The Wastewater Enterprise inventory value in the Maximo system is overstated by $1,711.

Recommendation:

The Wastewater warehouse staff should update the asset inventory counts in Maximo system after management approval. The SFPUC Financial Services Bureau should adjust the General Ledger to reflect the actual cost of inventory on hand. The Wastewater Enterprise should investigate the variances between the physical counts noted in Tables 1 and 2, the Maximo system records, and the accounting records; document the reasons for variances; and implement corrective actions to reduce future variances.

6 The Maximo count and valuation data used in this report is as of the end of the business day prior to Crowe’s count.

It em
Numbe r Description It em Code Unit
Maximo

6.4.24 Crowe

6.5.24 Variance Average Cost Cost of Variance
1 BEARING, LINK BELT, 23091-150-113 GBRNG-0026 EA 4 0 (4) $ 488.59 $ (1,954) 2 WIPES, HIGH GLOSS, UNITED LABS, 640 GYHGW-0640 EA 20 19 (1) 62.41 (62) 3 GASKET, ROPE, KEWANEE, 7L-284-X, 1-032-
9-031-24-01, 1/8 IN X 3/8 IN X 3/4 IN GGSKT-0367 FT 60 58 (2) 26.78 (54) 4 PIN, SHEAR GPINS-0112 EA 385 383 (2) 2.00 (4) 5 GASKET, ROPE, KEWANEE, 7L-284-X, 0-032-
9-011-48-02, 3/4 IN X 3/4 IN GGSKT-0366 FT 12 13 1 0.40 - 6 Grunge Grippers Heavy Duty Degreasing
Wipes, UNITED LABS, 629V GYHDW-0629 EA 19 20 1 62.25 62 7 CHAIN, ROLLER ARCHN-0201 BOX 5 6 1 300.27 300 Rounding Adjustment 1
(1,711)$

Page 4 ends

Management Response:

WWE concurs with the findings presented in this report and is pleased to see a marked improvement from last year. We will continue to improve our cycle count process, to include investigation of variances between the reports and physical counts. We feel that we succeeded here and look forward to continuing our improvements across all WWE warehouse functions.

Other Matters

Crowe’s fees are not dependent upon the outcome of this report and Crowe is independent with respect to any other economic interests.

We appreciate the contribution of SFPUC management and your input and direction on this project. We also thank Wastewater Enterprise management and staff for providing access to the inventory and for timely responses to our requests.

Crowe LLP

Crowe LLP
Independent Member Crowe Global
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowe.com

San Francisco Public Utilities Commission
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102

September 16, 2024

To: Steve Ritchie, Assistant General Manager, Water Enterprise Ellen Levin, Deputy Assistant General Manager, Water Enterprise William Teahan, CDD Division Manager
William Toman, CDD Materials Coordinator
Andy O’Brien, CDD Materials Coordinator

Subject: Fiscal Year End 2023-2024
Inventory Count – Water Enterprise, CDD Main Warehouse, AWSS Warehouse, and 6 Satellite Warehouses (Auto, Carpentry, Electrical, Ground, LMPS, and Machine Shops)

Dear Mr. Ritchie, Ms. Levin, Mr. Teahan, Mr. Toman and Mr. O’Brien:

The San Francisco Public Utilities Commission (SFPUC) engaged Crowe LLP (Crowe) to perform full inventory count services for three enterprise funds including the Wastewater Enterprise, Water Enterprise, and Hetch Hetchy Enterprise.1 This report represents results of Crowe’s full count of the Water Enterprise inventory at the CDD Main and AWSS Warehouses and 6 Satellite Warehouses but excluding the Millbrae Warehouse and Sunol Yard, which are addressed in a separate report.

A. Scope of Inventory Work

B. Warehouse Locations

The locations for the Water Enterprise full inventory count were:

CDD Main (and 5 Satellites)
1990 Newcomb Ave
San Francisco, California 94124

1 Note that some of the enterprises have multiple warehouse locations.

Page 2 ends

AWSS
1980 Oakdale Ave
Twin Peaks Reservoir
San Francisco, California 94124
LPMS Satellite
991 Lake Merced Blvd.

San Francisco, California 94132
From June 10 through June 12, 2024, Crowe visited the locations above and conducted the FY 2023- 2024 full inventory count that is the subject of this report. The last full inventory count of the locations above was performed by Crowe for FY 2022-2023 from June 12 through June 14, 2023. In Table 1 below, we provide key data2,3 from both full inventory counts.

Table 1
San Francisco Public Utilities Commission
Water CDD (MAIN, AWSS, and 6 Satellite Shops) Warehouse Inventory Count Comparison with Prior Full Inventory Counts
(As of June 12, 2024)

Results

Finding #1 – Physical Inventory Counts Differed from Maximo Report Counts

Condition:

Of the 1,735 items we counted, 79 items, or 4.6%, had a variance between their physical count and their count in Maximo. This is a repeat finding. Based on the physical count, and using the average cost in Maximo, we determined that the total value of the variances in the Water Enterprise inventory locations specified above was $2,387, or 0.04% of the total inventory value of $6,781,049 in Maximo. 4 We found 38 positive variances (where the physical count was greater than the Maximo inventory count) which totaled $36,172. We found 41 negative variances (where the physical count was less than the Maximo inventory count) which totaled ($33,785). In Table 2 below we list 18 items with variances that are either above $1,000 or below ($1,000) and provide a summary of all variances, both fuel and non-fuel. The

2 In this report, percentages are rounded to one decimal place, unless they would round to 0.0%, in which case they are rounded to two decimal places. Monetary values are rounded to the nearest whole dollar unless doing so would obscure the data, in which case they are presented without rounding.
3 Crowe did not perform any procedures related to the assigned value in the Maximo system. 4 The $2,387 variance is the difference between $579,808, which is the total value of the 79 items with variances using Crowe’s physical count for each item, and $577,421, which is the total value of the 79 items with variances using the Maximo count for each item.

It ems Value It ems Value
Total Inventory
(per Maximo) 1,735 6,781,049$ 1,648 7,271,844$ Total Inventory Variance
(per Crowe's Count) 79 2,387$ 253 (153,390)$ Total Inventory Variance
(as a percentage of Total Inventory) 4.6% 0.04% 15.4% (2.1%) Description FY 2023-2024 FY 2022-2023

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relatively low total inventory variance of $2,387 is due to the offsetting effect of negative and positive variances which are balancing each other out. The sum of the absolute values of the variances is $69,957, or 1.0% of the total inventory value of $6,781,049 in Maximo.

Table 2
San Francisco Public Utilities Commission
Water (CDD and AWSS and 6 Satellite Shops) Warehouse Inventory Count Summary of Items with Variances
(As of June 12, 2024)
5 As shown in Table 3 below, based on the fuel dip procedures Crowe performed for this physical count, we found the actual quantities of fuel contained in the two tanks varied from those in the Maximo system. We believe that the quantities we observed during our physical count using a manual dip process and a conversion formula were reasonably accurate as they closely matched quantities registered by an electronic measurement system contained in the fuel tanks that the Water Enterprise generated that day (referred to as the System Status Report).

5 The Maximo count and valuation data used in this report is as of the end of the business day prior to Crowe’s count. Due to the Maximo inventory system synchronizing with the EJ Ward fuel management system during the night, the fuel tank level data in Maximo is as of the end of the business day that was two business days prior to Crowe’s count. Therefore, some of the fuel variance may be due to regular fuel transactions that occurred on the business day prior to Crowe’s count.

It em Description Shop It em Code Unit
Maximo

6.7.24 Crowe

6.12.24 Variance
Average
Cost
Cost of
Variance
1 GASOLINE, AUTO, UNLEADED, C.D.D. MAIN 091-30-3250 GAL 3,535.9 5,760.0 2,224.1 4.5057$ 10,021$ 2 PIPE, D.I., CLASS 54, BELL & SPIGOT, TYPE 2, 12" PUSH ON, ZINC COATING MAIN 047-10-4569 FT 534.5 594.0 59.5 75.1873 4,474 3 PIPE, D.I., CLASS 54, BELL & SPIGOT, TYPE 2, 4" PUSH ON, ZINC COATING MAIN 047-10-4565 FT 602.0 694.0 92.0 41.5162 3,819 4 DIESEL, RENEWABLE (99%) MAIN 091-40-3151 GAL - 662.0 662.0 4.5947 3,042 5 DIESEL, RENEWABLE (99%) MAIN 091-40-3151 GAL 2,443.8 2,970.0 526.2 4.5947 2,418 6 COLLAR, STOP, 18" AWSS 047-33-9018 EA 10.0 12.0 2.0 904.0000 1,808 7 VALVE, CHECK, SWING, BRONZE, 3" MAIN 048-22-1906 EA 10.0 12.0 2.0 897.5144 1,795 8 TIRE, 295/75/22.5 AUTO 026-10-5510 EA 10.0 13.0 3.0 520.2144 1,561 9 TRANSMITTER, PRESSURE, STAINLESS ELECT 062-40-4400 EA 5.0 7.0 2.0 549.7810 1,100 Rounding Adjustment (1)
Subtotal: Variances Above $1,000 (9 Items) 30,037$
Subtotal: Variances Between $0 and $1,000 (29 Items) 6,135$ Category Subtotal: A ll Positive Variances (38 Items) 36,172$ 10 DUSTPAN, 12"-20" AWSS 048-21-1020 EA 52.0 48.0 (4.0) 260.0000 (1,040) 11 DUSTPAN, COVER, 10" AWSS 048-21-1110 EA 5.0 3.0 (2.0) 739.9380 (1,480) 12 PLYWOOD, DOUGLAS FIR, 4' X 8' X 1 1/8", CDX CARP 055-30-4046 SH 88.0 60.0 (28.0) 60.5529 (1,695) 13 VALVE, CHECK, SWING, BRONZE, 3" MAIN 048-22-1906 EA 14.0 12.0 (2.0) 897.5144 (1,795) 14 PIPE, D.I., CLASS 54, BELL & SPIGOT, TYPE 2, 8" PUSH ON, ZINC COATING MAIN 047-10-4567 FT 983.0 938.0 (45.0) 47.6321 (2,143) 15 COLLAR, BELL, 8" AWSS 047-33-9108 EA 132.0 121.0 (11.0) 263.0000 (2,893) 16 COLLAR, STOP, 20" AWSS 047-33-9020 EA 42.0 38.0 (4.0) 1,032.0000 (4,128) 17 PIPE, 20", NS, KUBOTA AWSS 047-10-4320 EA 12.0 11.0 (1.0) 4,955.0000 (4,955) 18 LAMP, F32T8, GE27621 ELECT 062-40-3200 EA 40.0 - (40.0) 182.1800 (7,287) Rounding Adjustment (1)
Subtotal: Variances Below ($1,000) (9 Items) (27,417)$
Subtotal: Variances Between $0 and ($1,000) (32 Items) (6,368)$ Category Subtotal: A ll Negative Variances (41 Items) (33,785)$ Total 2,387$

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Table 3
San Francisco Public Utilities Commission
Water (CDD and AWSS and 6 Satellite Shops) Warehouse Inventory Count Summary of Fuel Gallon and Cost Variances6
(As of June 12, 2024)

Criteria:

Chapter 6 of the City and County of San Francisco Office of the Controller’s Accounting Policies and Procedures identifies that Departments shall conduct a physical inventory at least annually and ensure that the inventory management system records accurately reflect inventory on hand. Additionally, Section 6.1 (Policy Guidelines) indicates that inventory system records must be promptly adjusted for any variances identified in the physical counts, Departments must periodically review the inventory records for reasonableness and appropriateness of any changes to inventory unit cost, inventory valuation, and unit of measure, and Departments must periodically review the inventory for obsolescence and reasonableness of inventory classification. The Policy Guidelines also indicate that Departments should investigate significant variances between the physical count, the inventory system records, and the accounting records; document the reasons for variance; and take corrective actions to reduce future variances.

Cause:

The Water Enterprise Warehouse staff identified the following reasons for the differences in this physical count compared to the count in Maximo:

• Occasional manual system posting errors by the individual entering the quantity or unit of measure. • Miscounted items from periodic cycle counts, including use of different counting methods and items not being fully separated to make accurate counts.
• For Satellite shop counts (i.e., Carpentry, Electrical, Meter, Machine, Auto, and LMPS), the inventory users had not submitted issue tags to warehouse management when items were used.

Examples of errors identified in our assessment of a sample of recent E.J. Ward fuel transaction data include the following:
• Transactions where a vehicle had the same odometer reading as the previous transaction for the same vehicle and fuel card.
• Duplicate vehicles identified within the system.
• Multiple vehicles with the same make and model sometimes resulted in fuel transactions assigned to the wrong vehicle.
• Vehicles without a specific year, make, or model identified in the system. After comparing system generated E.J. Ward reports showing all CDD vehicles as of June 20, 2023, and June 13, 2024, Crowe determined that no changes had been made to the year, make, or model of any existing CDD vehicles since last year's inventory count.
7 6 For clarity, item 3 in Table 3 above is the sum of the balances for diesel tank 1 (1,339 gallons) and diesel tank 3 (1,631 gallons). 7 The only changes since last year’s inventory count were the addition of 14 new vehicles and, for some existing vehicles, updated odometer readings, hourly use totals, and dates of most recent fuel transactions.

It em
Tank
Numbe r s F uel Type per Maximo F uel Type per CDD Staff It em Code Unit Maximo

6.7.24 Crowe

6.12.24 Variance
Average
Cost
Cost of
Variance
1 2 GASOLINE, AUTO, UNLEADED, C.D.D. Unleaded gas for vehicles and equipment 091-30-3250 GAL 3,535.9 5,760.0 2,224.1 4.5057$ 10,021.13$ 2 6 DIESEL, RENEWABLE (99%) Red-dyed diesel for a generator located in the boiler room 091-40-3151 GAL - 662.0 662.0 4.5947 3,041.69 3 1 & 3 DIESEL, RENEWABLE (99%) Renewable diesel for vehicles and equipment 091-40-3151 GAL 2,443.8 2,970.0 526.2 4.5947 2,417.73 Total 15,480.55$

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• Vehicles with an increase in their odometer reading but not their total hourly use, or vice versa, suggesting that these items are not being recorded accurately. • Vehicle-specific fuel cards which were used without the associated vehicle showing any increase in odometer reading or total hourly use.

The Water Enterprise uses the automated fuel tracking information system, E.J. Ward, to capture fuel usage and the SFPUC Information Technology Services Bureau has developed an interface designed to periodically upload the E.J. Ward fuel usage data to the Maximo system. However, based on problems with the interface between the E.J. Ward system and the Maximo system, actual Water Enterprise fuel usage data is not consistently and accurately uploaded into Maximo. In addition, between Crowe’s FY 2022-23 and FY 2023-24 inventory counts, warehouse staff only conducted one fuel dip (measurement) of unleaded gasoline and two fuel dips of diesel fuel.8 Finally, the variance in item 2 from Table 3 above is due to warehouse management manually entering a balance of zero gallons in Maximo despite fuel system status reports and a prior physical count showing the tank was more than half full.9

Effect:

The Water Enterprise inventory value in the Maximo system is understated by $2,387. Regarding the fuel usage variances, absent periodic monitoring of the fuel levels, the Water Enterprise will have difficulty reconciling future inventories and identifying variances that are the result of missing fuel (e.g., theft), delivery errors, data entry errors, unrecorded transactions, tank leaks, or shrinkage.

Recommendation:

The Water warehouse staff should update the asset inventory counts in Maximo after management approval. The SFPUC Financial Services Bureau should adjust the General Ledger to reflect the actual cost of inventory on hand. The Water Enterprise should investigate the significant variances between the physical counts noted in Tables 1 and 2, the Maximo system records, and the accounting records; document the reasons for variances; and implement corrective actions to reduce future variances.

If the E.J. Ward system cannot be made to work consistently it should be replaced or upgraded. SFPUC staff also should frequently review the vehicle data in the Fuel View / E.J. Ward software to remove duplicate entries and ensure the make, model, and year fields are populated for all vehicles. In addition, SFPUC should investigate the increased use of the manual override process, or site card S-51, as it can lead to data entry errors and fuel transactions associated with incorrect vehicles. 10 Finally, until the system matters are resolved, warehouse staff should begin tracking fuel tank levels and fuel usage for gasoline and diesel using a weekly process similar to the following:

• Process all outstanding fuel invoices in Maximo and determine the week-over-week fuel level change for both fuel types (i.e., fuel level increase from deliveries/inflows).

8 According to Maximo records, between Crowe’s FY 2022-23 and FY 2023-24 inventory counts, warehouse staff made eight fuel balance adjustments in Maximo: three for unleaded gasoline (item 091-30-3250) and five for diesel (item 091-40-3151). However, only one of the adjustments for unleaded gasoline was for a regular cycle count, and only two of the adjustments for diesel fuel were for regular cycle counts. The other adjustments were either prompted by fuel deliveries (both authorized and unauthorized) or were simply adjustments made based on the tank readout (fuel system status report) without a physical fuel dip to verify the reading. 9 While on site at CDD, Crowe observed warehouse staff performing fuel dips for three of the four fuel tanks listed on the fuel system status report. When Crowe inquired about the fourth fuel tank (tank 6, or item 2 in Table 3 above), which had a balance of zero gallons in Maximo but was more than half full according to a system-generated fuel system status report, warehouse management responded that they did not know why the fuel system status report showed that there was fuel in the tank, nor did they have any information about the purpose or location of the fourth fuel tank. After further inquiry, Crowe subsequently determined that the reading of 662 gallons on the fuel system status report was correct. 10 Since the prior inventory count, the number of fuel transactions utilizing site card S-51 has increased from 12% to 15% of total transactions. For the prior inventory count, Crowe reviewed CDD fuel transaction data from June 1, 2022, to June 20, 2023, and found that 1,160, or 12.3%, of the 9,457 total transactions were authorized using site card S-51. For the current inventory count, Crowe reviewed CDD fuel transaction data from June 1, 2023, through June 13, 2024, and found that 1,321, or 14.5%, of the 9,098 total transactions were authorized using site card S-51.

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• Perform a weekly fuel dip for each tank and determine the week-over-week fuel level change for both fuel types (i.e., net change in fuel level). Measurements should be made to the nearest half-inch and CDD staff should not be permitted to refill vehicles or equipment while the fuel dip is taking place.11 • Determine the total amount of fuel dispensed per E.J. Ward system data and paper logs, including cross-referencing the two to remove any duplicate transactions.12 • Compare the fuel level change based on fuel dips with the net fuel level change per Maximo, E.J.

Ward, and paper logs, calculated as Maximo balance change (inflows) minus total fuel dispensed per E.J. Ward and paper logs (outflows).
• Attempt to determine the cause of any variances greater than the margin of error associated with the fuel dip conversion formula.

Management Response:

CDD inventory management team has requested and received the raw data supporting Crowe’s findings.

Supervisors, managers and subject matter experts are in the process of reviewing the data and will attempt to determine the causes for the variances reported. CDD’s Inventory Management Team will offer feedback regarding Crowe’s comments, along with a process improvement plan, before the end of this 2024 calendar year (mid-fiscal year).

11 The fuel dip conversion charts that CDD staff have are accurate to the nearest half-inch, however, CDD staff only measured to the nearest inch during the fuel dip that Crowe observed for this inventory count. In addition, on the first day of the inventory count, Crowe staff observed trucks and heavy equipment refueling, which effectively altered the fuel variance that was measured against the Maximo fuel balance from the prior business day.
12 Crowe cross-referenced E.J. Ward fuel transaction data against 100 recent CDD fuel transactions manually recorded on paper fuel logs from May 9, 2024 to June 13, 2024 and found that 10, or 10%, were also captured in the E.J. Ward fuel system, as they had the same date, odometer reading, and vehicle number as an E.J. Ward entry, in addition to having a dispensed fuel volume that was either identical to the E.J. Ward entry or differed by only 0.1 gallons.

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Other Matters

Crowe’s fees are not dependent upon the outcome of this report and Crowe is independent with respect to any other economic interests.

We appreciate the contribution of SFPUC management and your input and direction on this project. We also thank Water Enterprise management and staff for providing access to the inventory and for timely responses to our requests.

Crowe LLP

CleanPowerSF Sfpuc CommissionDecember 10, 2024

CleanPowerSF Sfpuc Commission
December 10, 2024