Quarterly Audit and Performance
Review Report
FY 2025-26, Q2
February 24, 2026
Nancy L. Hom
Chief Financial Officer and AGM, Business Services
1 FY 2025-26 Audit Plan Status
Audits and Assessments to Date
Status Count
Completed 14
In Progress 9
Upcoming 5
Total 28
2 Completed In Progress Upcoming
Audits Completed and Reports Issued
Audit / Assessment Oversight Body Report Date
FY 2024-25 Audited Financial Statements
(Water, Wastewater, and Hetch Hetchy Water
and Power & CleanPowerSF)
Controller 11/5/2025
14B LBE Compliance Audit Controller’s Office,
City Services Auditor 11/18/2025
FY 2024-25 Annual Comprehensive Financial
Report SFPUC 12/10/2025
FY 2024-25 Popular Annual Financial Report SFPUC 12/10/2025 Mission Valley Rock Revenue Lease Audit Controller’s Office, City Services Auditor 12/18/2025
3 4
Spotlight: Mission Valley Rock Revenue Lease Audit
Controller’s Office Policy
• SF Admin Code, Section 10.6-2, authorizes and directs Controller to periodically audit city-owned property leases where revenues are $500,000 or more, annually. • Auditor: Sjoberg Evashenk Consulti ng (through City Services Auditor) Background
• Mission Valley Rock (MVR) is a sand and gravel operation in Sunol, CA, that leases property from the SFPUC, paying a base monthly base rent and royalties from quarry aggregate.
• Revenues: $4.6 million (3 fiscal years, 2021-2024), primarily from royalties.
Results
9 MVR generally complied with key requirements of the leases and SFPUC effectively management the lease agreements for the audit period.
5 Spotlight: Mission Valley Rock Revenue Lease, (Cont.) Key Findings
• MVR did not timely pay base rent escalations and property tax by due date • MVR underpaid royalties due to lack of adjustments for city-purchases of aggregate ($18.6K) • MVR did not properly retain documents during ownership transition (pre-May 2022). • SFPUC did not properly record payment receip t dates, limiting possible late payment fees Key Recommendations
Eight (8) recommendations were made, focused on assessment and collection of underpaid royalties / late fees; timely payment processing and documentation; more frequent independent reviews of lease revenue for MVR; and validate MVR’s price lists to ensure lowest pricing.
Progress to Date
9 After draft report (11/2025), SFPUC implemented (and CSA closed) 4 of the 8 recommendations prior to final report issuance on 12/18/25. 9 SFPUC implemented the remaining 4 recommendations prior to the end of Q2. Now awaiting notification from CSA regarding closure audit and recommendations.
Tracking Summary: Audit Recommendations
6 # Audit Title
Report
Issued
Date
Open
Rec
Total
Rec
Months
Open
%
Complete
Close
Date
(or Target)
Public Integrity Assessment: Procurement
1 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 2 2 21 0% 3/31/2026
Mission Valley Rock Revenue Lease Audit
2 Mission Valley Rock Co., LLC, Generally Complied With Financial Contract Provisions but Underpaid at Least
$18,628 in Rent for Fiscal Years 2021-22 Through 2023-
24, and SFPUC Needs to Bolster Its Financial Practices
12/18/2025 4 8 0 50% 6/30/2026
Total 61 0 4 0 %
7 FY 2025-26, Q3 Outlook
Completing
• Revenue Bond Audit, Phase 3
• FY 2024-25 Single Audit
• Citywide Payroll Audit
• COVID-19 Emergency Procurement Audit
• FY 2024-25 Construction Close-Out A udit: Sunol Long Term Improvements - Corporation Yard
• Cybersecurity Network Penetration and Vulnerability Assessment 8 FY 2025-26, Q3 Outlook (Cont.)
Upcoming
• Pacific Gas & Electric, Franchise Fee Audit
• Energy Center San Francisco LLC, Franchise Fee Audit
• FY 2024-25 Wholesale Revenue Requirement: Statement of Changes in Balancing Account
• CY 2025 Post 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.
BUSINESS SERVICES BUREAU
525 Golden Gate Avenue, 13th Floor
San Francisco, CA 94102
T 415.934.5707
F 415.554.1877
Date: February 24, 2026
To: Commissioner Joshua Arce, President
Commissioner Stephen E. Leveroni, Vice President
Commissioner Avni Jamdar
Commissioner Kate H. Stacy
Commissioner Meghan Thurlow
Through: Dennis J. Herrera, General Manager
From: Nancy L. Hom, Chief Financial Officer and Assistant General Manager, Business Services
Subject: FY 2025-26 Q2 Audit and Performance Review Report This memorandum summarizes the San Francisco Public Utilities Commission (SFPUC) Quarterly Audit and Performance Review (QAPR) report for the second quarter of FY 2025-26, ending December 31, 2025.
I. Completed Audits
There are seven completed audits to report since the last QAPR:
1-3. FY 2024- 25 Audited Financial Statements | November 5, 2025 Report Links: https://tinyurl.com/5vu8y3je, https://tinyurl.com/3s2p75th, https://tinyurl.com/4y2rkdy5
Report Summary: Third-party auditor Macias Gini & O’Connell LLP issued clean, or unqualified opinions, of the financial statements of all three enterprises. It was the auditor’s independent opinion that the financial statements are accurate and free from material misstatements and additionally noted no internal control weaknesses.
4. 14B LBE Compliance Audit | N
ovember 18, 2024
Report Link: https://tinyurl.com/yvz8hcxy
Report Summary: As required by the San Francisco Administrative Code, Chapter 14B, Local Business Enterprise (LBE) and Non- Discrimination in Contracting Ordinance, the Office of the Controller’s City Services Auditor assessed whether the five selected contractors disclosed all subcontractors, met their LBE participation goals, and submitted all required Contract Monitoring Division (CMD) forms, and whether contracts were adequately monitored for LBE compliance.
Audit Findings Summary: Based on a sample of five contracts, the audit found:
• No findings relating to any sampled SFPUC contracts
• CMD, Recreation and Park Department (Rec and Park), and San Francisco Public Works (Public Works) could not provide the Form 7 or Form 9 payment information submitted for a Rec and Park construction contract
• T he LBE participation of Build Group, Inc., under a Rec and Park construction contract could not be fully validated due to incomplete records
5. FY 2024-25 Annual Comprehensive Financial Report | December 10, 2025
Report Link: https://tinyurl.com/jma8m33b
Report Summary: The Annual Comprehensive Financial Report holistically details the financial activities, condition, and services for all Water, Wastewater, and Hetch Hetchy Water & Power & CleanPowerSF results. It also provides financial and statistical data, inclusive of 10 years of financial and operating metrics, with social and economic data.
6. FY 2024-25 Popular Annual Financial Report | December 10, 2025 Report Link: https://tinyurl.com/ycycmr5e
Report Summary: The Popular Annual Financial Report (PAFR) is a high-level summary of information from the Annual Financial Report specifically designed to be readily accessible and easily understandable to the general public and other interested parties. This year’s PAFR highlights affordability, responsible management, and investments in the environment, local community, and an effective workforce.
7. Mission Valley Rock Revenue Lease Audit | December 18, 2025 Report Link: https://tinyurl.com/yevuaa57
Report Summary: The City Services Auditor (CSA) engaged Sjoberg Evashenk Consulting, Inc. to determine whether Mission Valley Rock (MVR) complied with key requirements of the leases and whether SFPUC effectively management the lease agreements provided appropriate management and oversight of the services provided under the Agreement. Audit period: July 1, 2021, through June 30, 2024.
Audit Findings Summary: 4 findings were noted, related to:
• Additional royalty payments owed by MVR to SFPUC
• Late payments by MVR
• Deficient documentation by MVR early in ownership transition • Dating of payment receipts by SFPUC and lack of stringent late fee assessment
II. Audit Recommendation Status
As of 12/31/25, 2 audit recommendations were open for the Procurements Public Integrity Assessment, and 4 for the Mission Valley Rock Revenue Lease Audit.
If you have questions, please contact me at [email protected] or Christopher
Crane, Acting Audit Director, at [email protected].
cc: Christopher Crane, Acting Audit Director
att: FY 2025-26 QAPR Audit Plan as of Q2, By Status
# Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body
1-5
Completed Financial Water
Annual Physical Inventory Count, FY 2024-25 SFPUC,
Finance
Completed Financial Wastewater
Completed Financial Hetch Hetchy Water & Power
6 Completed Financial Business Services, Finance Post Audit, CY 2024 Controller
7 [Updated] Financial Water
Audited Financial Statements, FY 2024-25 Controller
Completed
8 [Updated]
Financial Wastewater
Completed
9 [Updated]
Financial Hetch Hetchy Water & Power
& CleanPowerSF
Completed
10 [Updated]
Financial Business Services, Finance Annual Comprehensive Financial Report, FY 2024-25 SFPUC
Completed
11 [Updated]
Financial Business Services, Finance Popular Annual Financial Report, FY 2024-25 SFPUC
Completed
12 In Progress Financial Business Services, Finance TIDA Costs Reconciliation SFPUC
13 In Progress Financial Business Services, Finance Single Audit, FY 2024-25 Controller
14 Upcoming Financial Business Services, Finance Wholesale Revenue Requirement: Statement of Changes in Balancing Account, FY 2024-25 BAWSCA
15 [Updated]
Financial Power Franchise Fee Audit: Energy Center SF LLC Controller
Upcoming
16 [Updated]
Financial Power Franchise Fee Audit: Pacific Gas & Electric Company Controller
Upcoming
17 [Updated] Financial Business Services, Finance Post Audit, CY 2025 Controller
Upcoming
18 Completed Performance Hetch Hetchy Water & Power Cybersecurity Maturity Assessment, FY 2024-25 SFPUC
19 [Updated]
Performance Contracts Administration
Bureau 14B LBE Compliance Audit CSA,
Controller
Completed
20 In Progress Performance Human Resources Services Citywide Payroll Audit CSA, Controller
21 In Progress Performance Human Resources Services COVID-19 Emergency Procurement Audit CSA, Controller
Quarterly Audit & Performance Review Report
FY 2025-26 Audit Plan, By Status
As of December 31, 2025
Status
Completed: 14
In Progress: 9
Upcoming: 5
Total: 28
# Quarter
Status Audit Type Enterprise / Bureau Audit Name Oversight Body
22 In Progress Performance Infrastructure FY 2024-25 Construction Close-Out Audit: Sunol Long Term Improvements - Corporation Yard
CSA,
Controller
23 In Progress Performance Customer Services Bureau Customer Assistance Program Post-Enrollment Verification SFPUC
24 In Progress Performance Hetch Hetchy Water & Power Critical Infrastructure Protection and Operations and Planning Reliability Standards Audit
WECC /
NERC
25 In Progress Performance All SFPUC Network Penetration and Vulnerability Assessment SFPUC
26 Upcoming Performance All SFPUC Digital Accessibility and Inclusion Standard Assessment
CSA,
Controller
27 [Updated] Concessions,
Real Estate Services Revenue Lease Audit: Mission Valley Rock CSA, Controller
Completed Lease
Revenue
28 In Progress
Revenue
Bond Business Services, Finance SFPUC Revenue Bond Programs Audit: Phase III CSA, Controller
Oversight