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HomeMy WebLinkAbout04-21-2022 Whale Rock Commission Agenda PacketWHALE ROCK COMMISSION MEETING AGENDA Thursday, April 21, 2022 1:30 PM Regular Meeting 990 PALM STREET CITY COUNCIL HEARING ROOM The City of San Luis Obispo, who administers the Whale Rock Commission meetings, has returned to in-person meetings. Zoom participation will not be supported for the Whale Rock Commission meeting. The meeting will be held at 990 Palm Street in the Council Hearing room of the City of San Luis Obispo City Hall Building. Seating will be limited capacity and masks are strongly recommended. Instructions for Public Comment Public Comment prior to the meeting (must be received 3 hours in advance of the meeting) Mail - Delivered by the U.S. Postal Service. Address letters to the City Clerk's Office at 990 Palm Street, San Luis Obispo, California, 93401. Email - Submit public comments via email to cityclerk@slocity.org. In the body of your email, please include the name of the meeting (Whale Rock Commission meeting), the date of the meeting (April 21, 2022), and the agenda item number (if applicable) relating to your comment. Voicemail - Call (805) 781-7164 and leave a voicemail. Please state and spell your name, mention that your message is in regard to the Whale Rock Commission meeting, state the agenda item number you are calling about, and leave your comment. Verbal comments must be received by 10:00 AM on the morning of the noticed meeting and will be limited to 3 minutes. All voicemails will be forwarded to the Commissioners and saved as Agenda Correspondence. All comments submitted will be placed into the administrative record of the meeting. Public Comment during the meeting: Meetings have returned to an in-person format. To provide public comment during the meeting, you must be present in the Council Hearing Room. Zoom participation will not be supported. The Council Hearing Room is located in City Hall, 990 Palm Street, San Luis Obispo. If you have questions, please contact the City Clerk’s Office at cityclerk@slocity.org or (805) 781-7100. Whale Rock Commission Meeting Agenda, April 21, 2022 1:30 PM REGULAR MEETING 990 PALM STREET CITY COUNCIL HEARING ROOM CALL TO ORDER: (City Staff) ROLL CALL: Chair Jason Steck, Vice Chair Brigitte Elke, Commissioner Dennis Elliot, Commissioner Derek Johnson, Commissioner Erica A. Stewart, Commissioner Dane Mathis. PUBLIC COMMENT: At this time, the public may address the commission about items not on the agenda, within the Commission’s jurisdiction. Persons wishing to speak should follow the aforementioned procedures related to public commen t. Comments are limited to three minutes per person. Items raised at this time are generally referred to staff and if action by the Commission is necessary, it may be scheduled for a future meeting. AGENDA 1. MINUTES REVIEW – DRAFT 2021 WHALE ROCK COMMISSION MEETING MINUTES Recommendation: Approve the April 29, 2021 Whale Rock Commission Meeting Draft Minutes. 2. ELECTION OF OFFICERS – ANNUAL ELECTION OF THE WHALE ROCK COMMISSION CHAIR, VICE CHAIR, AND SECRETARY Historically, the chair position rotates among the commission partners. At the pleasure of the Commissioners, the next rotation would be Brigitte Elke, Chair; Dennis Elliot, Vice-Chair; Erica A. Stewart, Commission Secretary. After the election of officers, the new Chair presides over the meeting. Recommendation: Appoint Brigitte Elke as Commission Chair, Dennis Elliot as Commission Vice-Chair, and Erica A. Stewart as Commission Secretary. PRESENTATIONS 3. 2021-22 ACCOMPLISHMENTS Receive a presentation of staff’s 2021-22 accomplishments. Whale Rock Commission Meeting Agenda, April 21, 2022 BUSINESS ITEMS 4. FY 2020-21 FINANCIAL STATEMENTS Receive a presentation of the 2020-21 Whale Rock Financial Statements. Recommendation: Receive and File Fiscal Year 2020-21 Financial Statements. 5. 2021-22 WHALE ROCK RESERVOIR BUDGET AMENDMENT Receive a presentation requesting funding from Whale Rock Unreserved Working Capital to supplement 2021-22 budget needs. Recommendations: 1. Authorize the use of $30,000 of Whale Rock Unreserved Working Capital to supplement existing design budget for the Whale Rock Pipeline Replacement Project; and 2. Authorize the use of $60,000 of Whale Rock Unreserved Working Capital to purchase pipe and fittings to replenish Whale Rock’s inventory for use on emergency pipeline repairs. 6. 2022-23 WHALE ROCK RESERVOIR BUDGET Receive the 2022-23 Budget presentation for the Whale Rock Reservoir including capital projects (CIP) and Commission member contributions and consider budget adoption. Recommendation: Adopt the 2022-23 Whale Rock Reservoir Budget. 7. ADVERTISEMENT OF TRANSMISSION PIPELINE REPAIR PROJECT, SPECIFICATION NO. 91617 Receive a presentation on the Transmission Pipeline Repair Project. Recommendations: 1. Authorize staff to advertise for bids for the Transmission Pipeline Repair Project construction upon completion of design plans; and 2. Authorize City of San Luis Obispo City Manager to award the Transmission Pipeline Repair construction project if the lowest responsible bid is within the Engineer’s estimate of $510,000. Whale Rock Commission Meeting Agenda, April 21, 2022 COMMISSION REPORTS & COMMUNICATION Commissioners may make announcements, report on activities, refer to staff issues for study and report back to the Commission at a subsequent meeting. ADJOURN Commissioners: Erica A. Stewart, City of San Luis Obispo Derek Johnson, City of San Luis Obispo Jason Steck, California Men’s Colony, Chair Dennis Elliot, Cal Poly University Dane Mathis, State Department of Water Resources Brigitte Elke, City of San Luis Obispo, Vice Chair Whale Rock Commission Meeting – April 21, 2022 Agenda Item 1 – Draft 2021 Whale Rock Commission Meeting Minutes Whale Rock Commission Report CALL TO ORDER A regular meeting of the Whale Rock Commission was called to order on Thursday, April 29, 2021, at 2:06 pm via teleconference, by City Staff. ROLL CALL Commission Members Present: Commission Members Dennis Elliot, Jason Steck, Derek Johnson, Dane Mathis, and Brigitte Elke Absent: Commissioner Heidi Harmon Staff Present: Noah Evans, Whale Rock Supervisor; Aaron Floyd, Director of Utilities; Mychal Boerman, Deputy Director-Water; Jennifer Thompson, Utilities Business Manager; Debbie Malicoat, Accounting Manager/Controller; Teresa Purrington, City Clerk; Michelle Bulow, Recording Secretary PUBLIC COMMENT None. CONSIDERATION OF MINUTES 1.WHALE ROCK COMMISSION MINUTES OF APRIL 30, 2020 ACTION: MOTION BY COMMISSIONER JOHNSON, SECOND BY SECRETARY ELKE, CARRIED 4-0 (Chair Mathis is not a voting member) to approve Consent Agenda Item C1. ELECTIONS 2.ELECTION OF OFFICERS – ANNUAL ELECTION OF THE WHALE ROCK COMMISSION CHAIR, VICE CHAIR AND SECRETARY ACTION: MOTION BY COMMISSIONER JOHNSON, SECOND BY COMMISSIONER ELLIOT, CARRIED 4-0, that Jason Steck is appointed as Chair, Brigitte Elke is appointed as Vice-Chair and Dennis Elliot as Secretary. Meeting turned over to new Chair Steck. PRESENTATIONS 3.2020 Accomplishments Item 1 Packet Page 1 Received a presentation of staff’s 2020 accomplishments. Whale Rock Supervisor Noah Evans shared a presentation of 2020-21 accomplishments •Replacement of toilet facility in public access area. (1 of 7) •Rebuilding of three picnic tables in public access area •Clearing of the Whale Rock pipeline easement 4.Capital Improvement Plan Update Receive a presentation of ongoing CIP activity and present CIP to be considered in the 2021-22 budget. Whale Rock Supervisor Noah Evans provided a presentation of current CIP projects. •Completion of boat house •Completion of spillway underdrain plans and specifications •Draft emergency action plan circulated to local agencies for input •Generator and Motor Control Study •Ongoing – fencing around reservoir Whale Rock Supervisor Noah Evans presented upcoming CIP for Commission consideration •Stilling Basin Inspection •Cityworks Implementation Study • PUBLIC COMMENT None. BUSINESS ITEMS 5.2019-20 FINANCIAL STATEMENTS Receive a presentation on the 2019-20 Whale Rock Financial Statements. City Staff Tavy Garcia presented audited 2019-20 Financial Statements: statement of activities, summary of net position, budget to actual comparison, ownership allocation, revenue and expense breakdown. Reminder given about prior period restatement. PUBLIC COMMENT None. ACTION: MOTION BY COMMISSIONER JOHNSON, SECOND BY SECRETARY ELLIOT, CARRIED 4-0 to receive and file as presented. 6.2021-22 WHALE ROCK RESERVOIR BUDGET Receive the 2021-22 budget presentation for the Whale Rock Reservoir including capital projects and Commission member contributions and consider adoption. Item 1 Packet Page 2 City Staff Jennifer Thompson presented the Whale Rock Budget, focusing on changes from previous years. PUBLIC COMMENT None. ACTION: MOTION BY COMMISSIONER JOHNSON, SECOND BY COMMISSIONER ELLIOT, CARRIED 4-0 to adopt the 2021-22 Whale Rock Reservoir Budget 7.ADVERTISEMENT OF SPILLWAY UNDERDRAIN REPAIR PROJECT, SPECIFICATION NO 91335 Receive a presentation on the Spillway Underdrain Repairs Project, authorize staff to advertise for construction bids, and authorize the City of San Luis Obispo City Manager to award the project if lowest responsible bid is within the engineer’s estimate of $765,000. ACTION: MOTION (AS AMENDED BY COMMISSIONER ELKE) BY COMMISSIONER JOHNSON, SECOND BY COMMISSIONER ELLIOT, CARRIED 4-0 to authorize staff to advertise for bids, and authorize the City of San Luis Obispo City Manager to award the project if lowest responsible bid is within $1 million dollars. Whale Rock staff to provide Commission with a memorandum advising of award amount. If bids come in above $1 million dollars, will return to the Commission for alternative or further recommendation. 8.COMMISSION REPORTS AND COMMUNICATION Whale Rock Supervisor Noah Evans and Deputy Director Mychal Boerman provided information regarding position of water supply in current drought situation and any related state regulations that are anticipated, as requested by Commissioner Johnson. MEETING ADJOURNED AT 2:46 PM Item 1 Packet Page 3 City of San Luis Obispo, Title, Subtitle Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 2 – Election of Whale Rock Commission Officers FROM: Aaron Floyd, Utilities Director PREPARED BY Mychal Boerman, Utilities Deputy Director - Water SUBJECT: Election of Whale Rock Commission Officers RECOMMENDATION Appoint Brigitte Elke as Commission Chair, Dennis Elliot as Commission Vice-Chair, and Erica Stewart as Commission Secretary. DISCUSSION Historically, the chair position rotates among the commissioners. At the pleasure of the commissioners, the next rotation would be Brigitte Elke, Chair; Dennis Elliot, Vice-Chair; Erica Stewart, Commission Secretary. After the election of officers, the new Chair presides over the meeting. The newly elected Chair, Vice-Chair, and Secretary will maintain their positions on the commission for a single-year term, until new appointments are made during the 2023 Whale Rock Commission meeting. Future Commission Officer Rotation Schedule Year Chair Vice Chair Secretary 2021-22 (Current Year) CMC Representative City of SLO Finance Director Cal Poly Representative 2022-23 City of SLO Finance Director Cal Poly Representative City of SLO Mayor 2023-24 Cal Poly Representative City of SLO Mayor City of SLO City Manager 2024-25 City of SLO Mayor City of SLO City Manager DWR Representative 2025-26 City of SLO City Manager DWR Representative CMC Representative 2026-27 DWR Representative CMC Representative City of SLO Finance Director Item 2 Packet Page 4 City of San Luis Obispo, Title, Subtitle Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 3 – 2021-22 Accomplishments FROM: Aaron Floyd, Utilities Director PREPARED BY: Mychal Boerman, Utilities Deputy Director – Water Noah Evans, Whale Rock Supervisor SUBJECT: 2021-22 Accomplishments RECOMMENDATIONS Receive a presentation of 2021-22 Whale Rock accomplishments. DISCUSSION Whale Rock staff are responsible for maintenance, repair, and upkeep of all Whale Rock facilities and infrastructure, including the dam, spillway, intake structure, transmission pipeline, public access areas, and all other associated infrastructure. Major accomplishments for 2021-22 include the replacement of approximately 60 feet of Whale Rock transmission pipeline as the result of a transmission pipeline leak, the replacement of fencing around the reservoir to ensure protection of the reservoir’s watershed area, and completion of the Emergency Action Plan (EAP) that documents response procedures that Whale Rock staff will follow in case of an emergency at the dam. A full presentation of the 2021-22 Whale Rock accomplishments will be provided during the commission meeting. Figure 1 - Auto Control Valve Replacement Item 3 Packet Page 5 City of San Luis Obispo, Title, Subtitle Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 4 – FY 2020-21 Financial Statements FROM: Aaron Floyd, Utilities Director PREPARED BY: Mychal Boerman, Utilities Deputy Director - Water SUBJECT: FY 2020-21 Financial Statements RECOMMENDATIONS Receive and File Fiscal Year 2020-21 Financial Statements. DISCUSSION Each year the City receives an independent audit of the Whale Rock Commission’s financial statements. This audit provides an opinion as to whether the financial statements are prepared, in all material respects, in accordance with accounting principles generally accepted in the United States of America. For the 2020-21 fiscal year, the auditors have issued a “clean” opinion, meaning that the financial statements are presented fairly in all material respects. The Management’s Discussion and Analysis section includes financial and operational highlights for the fiscal year and summary information on the Commission’s financial position at year end. As in prior years, the auditors have also provided a report on the internal controls over financial reporting and, consistent with the findings for the City’s Annual Comprehensive Financial Report, identified four areas of improvement. These findings, along with the City’s responses are incorporated into the last section of the financial statements. The Whale Rock Commission 2020-21 Financial Statements, as well as the auditor’s reports, are provided in Attachment 1 – FY 2020-21 Audited Financial Statements. ATTACHMENTS 1. FY 2020-21 Audited Financial Statements Item 4 Packet Page 6 Whale Rock Commission Financial Statements For the Fiscal Years ended June 30, 2021 and 2020 Item 4 - Attachment 1 Packet Page 7 Item 4 - Attachment 1 Packet Page 8 Whale Rock Commission Fiscal Years Ended June 30, 2021 and 2020 Table of Contents Independent Auditors' Report 1-2 Management’s Discussion and Analysis 3-8 Basic Financial Statements Government-wide Financial Statements: Statements of Net Position - June 30, 2021 and 2020 13 Statements of Activities - Fiscal Years Ended June 30, 2021 and 2020 14 Fund Financial Statements Balance Sheets - June 30, 2021 and 2020 17 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position - June 30, 2021 18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position - June 30, 2020 19 Statements of Revenues, Expenditures, and Changes in Fund Balance - Fiscal Years Ended June 30, 2021 and 2020 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities - June 30, 2021 21 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities - June 30, 2020 22 Notes to the Financial Statements 23-27 Required Supplementary Information Budgetary Comparison Schedule - Fiscal Year Ended June 30, 2021 31 Notes to Required Supplementary Information 32 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 33-34 Schedule of Findings and Responses 35-39 Status of Prior Year Findings - 2019/2020 40-44 Item 4 - Attachment 1 Packet Page 9 This page intentionally left blank. Item 4 - Attachment 1 Packet Page 10 1 INDEPENDENT AUDITOR’S REPORT To the Members of the Whale Rock Commission San Luis Obispo, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and general fund of the Whale Rock Commission (Commission), as of and for the years ended June 30, 2021 and June 30, 2020, and the related notes to the financial statements, which collectively comprise the Commission’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Item 4 - Attachment 1 Packet Page 11 To the Members of the Whale Rock Commission San Luis Obispo, California Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and general fund of the Commission as of June 30, 2021 and June 30, 2020, and the respective changes in financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 3-8 and 31-32 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 21, 2022, on our consideration of the Commission’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Commission’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission’s internal control over financial reporting and compliance. Badawi & Associates, CPAs Berkeley, California March 21, 2022 2 Item 4 - Attachment 1 Packet Page 12 Management’s Discussion & Analysis This section provides a narrative overview and analysis of the financial activities of the Whale Rock Commission for the fiscal years ended June 30, 2021 and 2020. It should be read in conjunction with the accompanying basic financial statements. Overview of the Financial Statements The financial statements are presented in accordance with Governmental Accounting Standards Board Statement No. 34. The basic financial statements are comprosed of three components: 1. Government-wide financial statements 2. Fund financial statements and 3. Notes to the financial statements. Government-Wide Financial Statements This set of statements is designed to provide readers with a broad overview of the Commission’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all the Commission’s assets and liabilities, with the differnce reported as net position. Over time, increases or decreases in net position may serve as an indicator of whether the finacial position of the Commission is improving or declining. The Statement of Activities presents information showing how the Commission’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activites or objectives. The Commission, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the activities of the Commission are accounted for in one fund. 3 Item 4 - Attachment 1 Packet Page 13 Management’s Discussion & Analysis Whale Rock Commision The Whale Rock Fiduciary (Custodial) fund is used to account for the Commission’s ongoing operating activities. Ownership in the Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State University; and 11.24%, California Men’s Colony. The City’s share of the Commission’s expenses is recorded as expenses of the Water Fund. All receipts and disbursement of the Commission are included in the fiduciary fund. Financial Highlights The following outlines financial highlights for the year: x The assets of the Commission exceeded its liabilities at June 30, 2021 by $4.1 million (net position). The Commission’s unrestricted net position increased by $853,000, compared with 2019-20. x Total assets increased by $971,000 or 30% to $4.2 million. This reflects an increase primarily in cash and capital assets net of depreciation, offset by smaller decreases in prepaid expenses and accounts recceivable. Total liabilities also increased by $20,000 or 14% to $164,100. The changes are reflected in vendors payable, accrued salaries and other accrued liabilities. x Total Revenue, comprised of charges for services, other revenues, and use of money and property amounted to $2.2 million for FY 2020-21 which represents an increase of $293,000 or 16% from the prior year. The total charges for services increase by $58,000 or 5% from the prior year. Other revenues which include capital contributions increased to $897,000 which represents an increase of $305,000 or 51% from the prior year. This increase in capital contributions was primarily driven by Cal Poly which increased by $205,000 based on their share of currrently budgeted capital projects. In contrast, use of money and property, which reflects the funds allocation of investment earnings, saw a decrease of $71,000 for the fiscal year due to fair market value adjustments. x Water distribution revenues increased from the prior year by $19,000, from $229,000 in FY 2019-20 to nearly $249,000 in the current year. This increase was primarily due to increases in water distribution charges for Cal Poly, which saw an increase of $16,000, with smaller increases in pumping charges for the other members. x Total expenses of $1.21 million were lower in FY 2020-21 from the prior year by $382,000, which represents a decrease of 24%. This decrease was primarily caused by a reclassification of non capitalizable costs in the prior year. In FY 2020-21, operational costs were $73,000 greater than FY 2019-20, while general government costs were $23,000 greater than in FY 2019-20. Depreciation remained consistent with the prior year. 4 Item 4 - Attachment 1 Packet Page 14 Management’s Discussion & Analysis Operational Highlights The following are the operational highlights for the fiscal year: x The Spillway Underdrain repair project continues to progress. The California Division of Safety of Dams (DSOD) has reviewed and provided comments on the repair construction plans and specifications. HDR Engineering, the hired consultant, is addressing this. The plans will be re-submitted to the DSOD for acceptance. Once the plans are approved by the DSOD the project will be put out to bid. Staff hopes to construct this project in 2022-23. x Staff worked with HDR Engineering to identify a project plan and required funds to update the Whale Rock Reservoir Emergency Action Plan. This project is State mandated and will help first responders react to an emergency situation at Whale Rock Dam with a planned and documented course of action. The Emergency Action Plan (EAP) has been reviewed and commented on by the Office of Emergency Services (OES). OES comments have been addressed and the EAP has been re-submitted for final review. Once accepted by OES, staff will schedule tabletop exercises to gain familiarity working with the EAP. x Staff installed new pressure relief valves at Pump Station B, replacing the existing 60-year-old valves. The new pressure relief valves will help to maintain water delivery by protecting the pipeline from high water pressure events that can damage the pipeline. x Staff worked to improve the public access area at Whale Rock Reservoir by installing six new bathrooms and trash receptacles, as well as two picnic tables and one bench. Whale Rock staff planted 30 new trees in the public access area. There are oaks, redwoods, and shrubs that will mature and improve the user experience at Whale Rock. x Staff has contracted with an environmental firm to help acquire biological permits so that the stilling basin can be drained, cleaned, and inspected. This inspection is a regulatory requirement. The Notes to the Financial Statements provide additional information that is essential to the reader for a full understanding of the data provided in the Commission’s financial statements. 5 Item 4 - Attachment 1 Packet Page 15 Management’s Discussion & Analysis Financial Analyisis Net position may serve, over time, as an indicator of a government’s financial position. As noted above, assets exceeded liabilities by $4.1 million at June 30, 2021. At the end of the current fiscal year, the Commission continues to report a positive net position. Information about changes in net position resulting from operations is summarized below: 6 Item 4 - Attachment 1 Packet Page 16 Management’s Discussion & Analysis Commission Contributions Members contribute for both operating and maintenance activities as well as capital improvement projects (CIP) which may also include contributions toward the CIP reserve. Total contributions by member are show below. Budgetary Highlights A budgetary comparison schedule for the year ended June 30, 2021 is presented as part of the required supplementary information. The following summarizes the original and final budget compared with actual results for 2020-21. The variance column reflects the differences between the actual amounts realized and the final budget amounts. 7 Item 4 - Attachment 1 Packet Page 17 Management’s Discussion & Analysis Capital Assets Capital assets, including infrastructure, are those assets that are used in the performance of the Commission’s functions and reservoir. As of June 30, 2021, the Commission’s capital assets increasesd by $98,000 from $757,000 in the prior year to $855,000 (net of accumulated depreciation). This increase was due to the completion of several projects inclduing Whale Rock Reservoir majoir maintenance and newly installed pressure relief valves at Pump Station B offset by annual depreciation of approximately $61,000. More information on the Commission’s capital assets can be found in Note 3 of these financial statements. Request for Additional Information This finacial report is designed to provide a general overview of the Commision’s finances for all those with an interest in the finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of San Luis Obispo, Department of Finance, 990 Palm Street, San Luis Obispo, California, 93401. 8 Item 4 - Attachment 1 Packet Page 18 BASIC FINANCIAL STATEMENTS 9 Item 4 - Attachment 1 Packet Page 19 This page intentionally left blank. 10 Item 4 - Attachment 1 Packet Page 20 GOVERNMENT-WIDE FINANCIAL STATEMENTS 11 Item 4 - Attachment 1 Packet Page 21 This page intentionally left blank. 12 Item 4 - Attachment 1 Packet Page 22 2021 2020 ASSETS Cash and investments 3,317,658$ 2,432,815$ Accrued interest receivable 7,825 8,900 Accounts receivables 14,528 15,875 Prepaid expense 49,971 59,091 Nondepreciable capital assets 1,577 - Capital assets, net of accummlated depreciation 853,097 756,582 Total assets 4,244,656 3,273,263 LIABILITIES Accounts payable 82,493 73,528 Accrued salaries 26,011 21,703 Other liabilities 55,627 48,748 Total liabilities 164,131 143,979 Net Position Net investment in capital assets 854,674 756,582 Unrestricted 3,225,851 2,372,702 Total Net Position 4,080,525$ 3,129,284$ Whale Rock Commission Statements of Net Position June 30, 2021 and 2020 The accompanying notes are an integral part of these financial statements. 13 Item 4 - Attachment 1 Packet Page 23 2021 2020 Expenses Reservoir operations 959,595$ 886,612$ General government 184,494 160,747 Capital projects 9,593 485,529 Depreciation 60,809 63,523 Total expenses 1,214,491 1,596,411 Program Revenues Charges for services: Basic operating charges 1,015,607 976,317 Water distribution 248,469 229,018 Total program revenues 1,264,076 1,205,335 Net expense and program revenues 49,585 (391,076) General Revenues and Transfers Use of money and property 820 71,545 Other revenues 896,600 591,934 Total general revenues and transfers 897,420 663,479 Increase in Net Position 947,005 272,403 Net Position - beginning of year 3,129,284 2,856,881 Prior year restatement 4,236 - Net position,beginning of year, as restated 3,133,520 2,856,881 Net Position - end of year 4,080,525$ 3,129,284$ Whale Rock Commission Statements of Activities June 30, 2021 and 2020 The accompanying notes are an integral part of these financial statements.14 Item 4 - Attachment 1 Packet Page 24 FUND FINANCIAL STATEMENTS 15 Item 4 - Attachment 1 Packet Page 25 This page intentionally left blank. 16 Item 4 - Attachment 1 Packet Page 26 803--807--809 2021 Assets Cash and investments 3,317,658$2,432,815$ Accrued interest receivable 7,825 8,900 Accounts receivables 14,528 15,875 Prepaid items 49,971 59,091 Total assets 3,389,982 2,516,681 Liabilities and Fund Balance Liabilities Accounts payable 82,493 73,528 Accrued salaries 26,011 21,703 Other liabilities 55,627 48,748 Total liabilities 164,131 143,979 Fund Balance Assigned for reservoir operations 228,818 210,040 Assigned for CIP 1,587,581 892,922 Unassigned 1,409,452 1,269,740 Total fund balance 3,225,851 2,372,702 Total Liabilities and Fund balance 3,389,982$2,516,681$ 2020 Whale Rock Commission Balance Sheets June 30, 2021 and 2020 The accompanying notes are an integral part of these financial statements. 17 Item 4 - Attachment 1 Packet Page 27 2021 Total Fund Balances - governmental funds 3,225,851$ Capital assets at estimated historical cost 1,877,840 Accumulated depreciation (1,023,166) 854,674 Total net position - governmental activities 4,080,525$ Capital assets used in governmental activities are not financial resources and therefore are not reported in the fund. Whale Rock Commission Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position For the years ended June 30, 2021 The accompanying notes are an integral part of these financial statements. 18 Item 4 - Attachment 1 Packet Page 28 2020 Total Fund Balances - governmental funds 2,372,702$ Capital assets at estimated historical cost 1,718,940 Accumulated depreciation (962,358) 756,582 Total net position - governmental activities 3,129,284$ Capital assets used in governmental activities are not financial resources and therefore are not reported in the fund. Whale Rock Commission Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position For the years ended June 30, 2020 The accompanying notes are an integral part of these financial statements. 19 Item 4 - Attachment 1 Packet Page 29 2021 REVENUES: Use of money and property 820$ 71,545$ Other revenue 896,600 591,934 Services: Basic operating charges 1,015,607 976,317 Water distribution 248,469 229,018 Total services 1,264,076 1,205,335 Total revenues 2,161,496 1,868,814 EXPENDITURES: Current: Reservoir operations 959,595 886,612 General government 184,494 160,747 Capital projects 168,494 84,590 Total curent expenditures 1,312,583 1,131,949 Total expenditures 1,312,583 1,131,949 Excess of revenues over expenditures 848,913 736,865 FUND BALANCES: Beginning of year, as restated 2,376,938 1,635,837 End of year 3,225,851$ 2,372,702$ 2020 Whale Rock Commission Statements of Revenues, Expenditures and Changes in Fund Balances For the years ended June 30, 2021 and 2020 803--807--809 The accompanying notes are an integral part of these financial statements. 20 Item 4 - Attachment 1 Packet Page 30 2021 Total excess of revenues over expenditures - governmental funds 848,913$ Expenditure for capital outlay 157,324 Construction in progress deletion 1,577 Depreciation expense (60,809) 98,092 Total increase in net position - governmental activities 947,005$ Capital outlay net of depreciation expenses and disposal Whale Rock Commission Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the years ended June 30, 2021 The accompanying notes are an integral part of these financial statements. 21 Item 4 - Attachment 1 Packet Page 31 2020 Total excess of revenues over expenditures - governmental funds 736,865$ Expenditure for capital outlay - Construction in progress deletion (400,939) Depreciation expense (63,523) (464,462) Total increase in net position - governmental activities 272,403$ Capital outlay net of depreciation expenses and disposal Whale Rock Commission Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the years ended June 30, 2020 The accompanying notes are an integral part of these financial statements. 22 Item 4 - Attachment 1 Packet Page 32 Whale Rock Commission Notes to Financial Statements June 30, 2021 and 2020   Note 1: Summary of Significant Accounting Policies Description of the Reporting Entity The Whale Rock Commission (Commission) was established as a joint venture on December 12, 1960 to oversee, in a fiduciary capacity, the operations and routine maintenance of the Whale Rock Reservoir (Reservoir). The Commission is composed of six voting members and two non-voting members. Three voting members are appointed by the City of San Luis Obispo (City); one by the California Polytechnic State University; one by the California Men's Colony; and one by the Director of Finance, State of California. The two non-voting members are position appointments: the Director of Water Resources, State of California; and the Water Superintendent, City of San Luis Obispo. The Commission is authorized to establish policies for the operation of the Reservoir, to contract for the sale of excess water, and to approve its annual budget. The City, in accordance with established policies of the Commission, operates and maintains the Reservoir; prepares and recommends the annual budget; and maintains the fiscal records and moneys of the Commission. Ownership in the Reservoir is as follows: 55.05%, City of San Luis Obispo; 33.71%, California Polytechnic State University; and 11.24%, California Men's Colony. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the Commission. The statement of activities demonstrates the degree to which the direct expenses are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Separate fund financial statements are also provided. Measurement Focus, Basis of Accounting and Basis of Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Commission considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. The Commission considers interest earned but not received and billings to participating agencies earned but not received as susceptible to accrual. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. The focus of financial measurement is upon available resources rather than net income determination. 23 Item 4 - Attachment 1 Packet Page 33 Whale Rock Commission Notes to Financial Statements June 30, 2021 and 2020   Note 1: Summary of Significant Accounting Policies (Continued) The accounting policies of the Commission conform to generally accepted accounting principles. The accounts of the Commission are presented in the fund financial statements as a Governmental Fund. As the City maintains the accounting records and moneys of the Commission in a fiduciary capacity, the Commission's operating activities are accounted for in a separate fiduciary fund type (Custodial Fund) in the City's Annual Comprehensive Financial Report (ACFR). The operations of the fund are accounted for with a set of self-balancing accounts that comprise the Commission's assets, liabilities, fund equity, revenues, and expenditures. Commission resources are allocated to, and accounted for, as assets of the fund and equity to the participating agencies. Budgets and Budgetary Accounting As provided under the Whale Rock Agreement, the Commission has the sole responsibility for the adoption of the budget and may amend or supplement the budget at any time after its adoption. The budget is legally adopted prior to the commencement of the fiscal year and is prepared in accordance with generally accepted accounting principles. The Director of Finance of the City has the authority to make or approve administrative adjustments to the budget as long as those changes will not have a significant policy impact nor affect budgeted year- end fund balances. Appropriations lapse at year-end unless such amounts are encumbered and reappropriated in the next fiscal year. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets are reported as part of the Commission. Capital assets are defined by the Commission as assets with an initial, individual cost of more than $25,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of assets or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. The Commission does not have any intangible assets. Detailed information on the Commission’s capital assets can be found in Note 3. City of San Luis Obispo Services Because the City accounts for the activities of the Commission, other services such as workforce and risk management are also provided by the City. The City’s ACFR fully discusses pooled and self-insurance and how the City manages the risk of the Commission. New Pronouncements In 2021, the Commission adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements:  GASB Statement No. 84, Fiduciary Activities – The objective of this statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The requirements of this statement did not apply to the Commission for the current fiscal year. 24 Item 4 - Attachment 1 Packet Page 34 Whale Rock Commission Notes to Financial Statements June 30, 2021 and 2020 Note 1: Summary of Significant Accounting Policies (Continued) New Pronouncements (Continued) ¾GASB Statement No. 90, Majority Equity Interests – The primary objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The requirements of this statement did not apply to the Commission for the current fiscal year. ¾GASB Statement No. 93, Interbank offered rates (except LIBOR removal and lease modifications) – The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an interbank offered rate. The requirements of this statement did not apply to the Commission for the current fiscal year. ¾GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans—an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32 – The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this statement did not apply to the Commission for the current fiscal year. ¾GASB Statement No. 98, The Annual Comprehensive Financial Report – The objective of this Statement is to address references in authoritative literature to the term comprehensive annual financial report. The requirements of this statement did not apply to the Commission for the current fiscal year. Note 2:Cash and Investments The Commission's cash and investments are pooled with those of the City. As provided for by the California Government Code, the cash balances of substantially all funds held by the City are pooled and invested by the City Treasurer for the purpose of increasing interest earnings through investment activities. The Commission's share of the aggregate pooled cash and investments are recorded at fair value and included in the accompanying balance sheet under the financial statement caption cash and investments. Interest earned on pooled investments is allocated quarterly to the Commission based upon the Commission's average cash balance during the allocation period. Refer to Note 2 of the Notes to the Financial Statements of the City of San Luis Obispo as contained in the City's ACFR for further discussion of the nature of the City's pooled cash and investments and all related fair value disclosures. Note 3:Capital Assets Governmental Accounting Standards Board (GASB) standards require that the Commission report in the government- wide statements the value of all capital assets net of accumulated depreciation, including infrastructure assets, in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Infrastructure assets are defined as long- lived capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. 25 Item 4 - Attachment 1 Packet Page 35 Whale Rock Commission Notes to Financial Statements June 30, 2021 and 2020   Note 3: Capital Assets (Continued) The minimum requirement for compliance with GASB standards is to provide infrastructure valuations for all assets constructed, acquired, or placed into service on or after July 1, 1980. Relevant assets for the Commission were valued at one of two dates: 1) the original date of construction, if available, or 2) the incorporation date of the Commission. Each asset was reviewed to determine the adequacy of the data to value to asset prior to July 1, 1980 using historical cost or estimated historical cost. Capital assets activity for the fiscal year ended June 30, 2021 was as follows: Balance Balance June 30, 2020 Increases Decreases June 30, 2021 Capital assets not being depreciated: Construction in progress -$ 158,901$ (157,324)$ 1,577$ Total capital assets not being depreciated - 158,901 (157,324) 1,577 Capital assets being depreciated: Infrastructure 430,782 127,396 - 558,178 Buildings and improvements 1,092,285 - - 1,092,285 Equipment 195,873 29,928 - 225,801 Accum. Depreciation (962,358) (60,809) - (1,023,167) Total capital assets being depreciated, net 756,582 96,515 - 853,097 Capital assets, net 756,582$ 255,416$ (157,324)$ 854,674$ 26 Item 4 - Attachment 1 Packet Page 36 Whale Rock Commission Notes to Financial Statements June 30, 2021 and 2020   Note 3: Capital Assets (Continued) Capital assets activity for the fiscal year ended June 30, 2020 was as follows: Note 4: COVID-19 Pandemic During December 2019, the Novel Corona Virus Disease (COVID-19) was discovered and subsequently declared a world-wide pandemic by the World Health Organization on March 11, 2020. On March 4, 2020, California Governor Gavin Newsom proclaimed a State of Emergency as a result of the threat of the COVID-19 in the State of California, leading to the San Luis Obispo County Health Officer issuing a shelter-at-home order on March 18, 2020, and the City Council declaring a health emergency on March 17, 2020. This halted all business within San Luis Obispo County, outside of essential activities, and largely stifled economic activity in the last quarter of the 2019-20 fiscal year, which resulted in slight impact to the Whale Rock reservoir operations. The COVID-19 pandemic continued to impact the communities served by the Whale Rock reservoir during the 2020-21 fiscal year. In order to keep employees safe, and to continue providing essential services, the management and staff of the reservoir continue to comply with all federal, state, and local health best practices and recommendations. Note 5: Prior Period Adjustment During 2021, prior period adjustments were made to correct payroll errors. Balance Balance June 30, 2019 Increases Decreases June 30, 2020 Capital assets not being depreciated: Construction in progress 400,939$ -$ (400,939)$ -$ Total capital assets not being depreciated 400,939 - (400,939) - Capital assets being depreciated: Infrastructure 430,782 - - 430,782 Buildings and improvements 1,092,285 - - 1,092,285 Equipment 229,518 - (33,645) 195,873 Accum. Depreciation (932,480) (63,523) 33,645 (962,358) Total capital assets being depreciated, net 820,105 (63,523) - 756,582 Capital assets, net 1,221,044$ (63,523)$ (400,939)$ 756,582$ Government-wide Statements Fund Statements Net Position/Fund Balance as previously reported at June 30, 2020 3,129,284$ 2,372,702$ Prior Period Adjustments: Cash (311) (311) Accrued payroll 4,547 4,547 Net Position/Fund Balance as restated at June 30, 2020 3,133,520$ 2,376,938$ 27 Item 4 - Attachment 1 Packet Page 37 This page intentionally left blank. 28 Item 4 - Attachment 1 Packet Page 38 REQUIRED SUPPLEMENTARY INFORMATION 29 Item 4 - Attachment 1 Packet Page 39 This page intentionally left blank. 30 Item 4 - Attachment 1 Packet Page 40 Variance Positive Original Budget Final Budget Actual (Negative) Revenues Use of money and property 1,000$ 1,000$ 820$ (180)$ Other revenues 423,660 423,660 896,600 472,940 Services: Basic operating charges 954,600 1,089,993 1,015,607 (74,386) Water distribution 335,300 285,200 248,469 (36,731) Total services 1,289,900 1,375,193 1,264,076 (111,117) Total Revenues 1,714,560 1,799,853 2,161,496 361,643 Expenditures Current: Reservoir operations 1,173,597 1,168,190 959,595 208,595 General government 183,978 183,978 184,494 (516) Capital projects 338,716 997,630 168,494 829,136 Total Expenditures 1,696,291 2,349,798 1,312,583 1,037,215 Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses 18,269 (549,945) 848,913 1,398,858 Commission Equity - beginning of year 2,376,938 2,376,938 2,376,938 - Commission Equity - end of year 2,395,207$ 1,826,993$ 3,225,851$ 1,398,858$ Whale Rock Commission Budgetary Comparison Schedule Fiscal Year Ended June 30, 2021 31 Item 4 - Attachment 1 Packet Page 41 Budgetary Comparison Schedule Whale Rock Commission Notes to Required Supplementary Information June 30, 2021 1.The budget is prepared using the modified accrual basis of accounting consistent with U.S. generally accepted accounting principles. 2.Outstanding encumbrances from the prior fiscal year are not reflected in the original budget column but are included in the final budget amounts. 32 Item 4 - Attachment 1 Packet Page 42 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR’S REPORT To Members of the Whale Rock Commission San Luis Obispo, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and general fund information of the Whale Rock Commission (Commission), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the Commission’s basic financial statements and have issued our report thereon dated March 21, 2022. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Commission’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission’s internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and responses, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and responses as items 2021-001, 2021-002 and 2021-003 to be material weaknesses. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings and responses as items 2021- 004 to be significant deficiency. Item 4 - Attachment 1 Packet Page 43 To the Members of the Whale Rock Commission San Luis Obispo, California Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Whale Rock Commission’s Response to Findings The Commission’s response to the findings identified in our audit is described in the accompanying schedule of findings. Commission’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Badawi & Associates Certified Public Accountants Berkeley, California March 21, 2022 34 Item 4 - Attachment 1 Packet Page 44 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section I – Current Year Findings A. Financial Statement Audit Finding 2021-001 Year-End Close and Balance Sheet Account Reconciliations (Material Weakness) Criteria: The City is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, an effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations. Condition: During the performance of the audit, we noted that the City had to record a large number of adjusting entries after the closing process was complete to record transactions not previously recorded or to correct transactions or balances previously recorded in error. Those adjusting entries should have been part of the closing process and the timing of recording those adjusting entries have caused some delays and added complexity in the audit. Cause: The City’s closing process was not comprehensive enough to identify timely all the journal entries and adjustments needed to ensure the accuracy of the various account balances. Additionally, multiple employees were granted access to post journal entries after the City closed the book without enough monitoring from the management. Effect: The City’s accounting records needed significant adjustments after the closing of the books and during the audit which caused delays in the audit and added more complexity in dealing with the large volume of adjustments. Recommendation: We recommend that the City update its closing process to ensure all transactions and adjustments are accounted for timely before the audit starts. Additionally, we recommend that the City restrict the employees access to post adjustments after the close of the book. The City should furthermore develop formal written policies over significant accounts that include the timely reconciling of accounts to activity reported in related subsidiary ledgers. Also, the City should restrict journal entries posting after the closing process. Management’s response: This is the third year-end close utilizing the new Oracle Cloud financial system. The City has been working with Oracle Consulting to make improvements to the system to assist with many of the control functions. This resulted in significantly fewer post-closing adjustments than the prior fiscal years and significantly fewer delays in finalizing the audit. Management continues to refine processes and procedures and address deficiencies in the ERP system, including improving the year-end close process. A year-end close checklist has been development and will continue to be utilized and refined. In addition, City staff are performing monthly closing procedures, which will improve the timeliness of year-end closing. Integrated into the month-end procedures will be the review and reconciliation of the City’s balance sheet accounts. This will help to identify issues prior to closing the books and the start of the audit. 35 Item 4 - Attachment 1 Packet Page 45 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section I – Current Year Findings, continued A. Financial Statement Audit Finding, continued 2021-002 Journal Entries Posting and Numbering (Material Weakness) Criteria: Journal entries should be independently prepared, reviewed, and posted to the general ledger with unique identification number. In addition, journal entries should be adequately documented to support its accuracy and purpose. Condition: During the performance of the audit, we noted the following regarding the City’s journal entry process:  For 9 out of 60 testing samples, the City was unable to provide us with documentation or documentation was insufficient for journal entries selected for review.  For 8 out of 60 testing samples, the journal entries were not appropriately approved.  For 3 out of 60 testing samples, the journal entries were not properly recorded or calculated though they were still approved.  The City uses various numbering schemes (a date and time format, a subsidiary ledger-month format, other) that makes it difficult to determine the number of journal entries recorded and the sequence of entries.  Journal entries can be prepared and posted without system restriction, and no controls in place to ensure the journal entries are approved before posted. Cause: The City didn’t consistently and effectively execute the review procedures across the fiscal year and no formal written policy regarding the journal entries posting and numbering. Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved or unsupported. Recommendation: We recommend that the City implement formal written procedures and policies over journal entries to ensure only accurately prepared and supported journal entries are recorded to the general ledger. 36 Item 4 - Attachment 1 Packet Page 46 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section I – Current Year Findings, continued A. Financial Statement Audit Finding, continued 2021-002 Journal Entries Posting and Numbering (Material Weakness), continued Management’s Response: Staff acknowledges that, of the 60 testing samples selected, 8 were indeed not properly approved and were insufficiently documented. This was the result of a system clean-up for project related expenditures that were not correctly reported. Unfortunately, the usual control flow was not adhered to for this process. This issue should not occur going forward. One journal entry was properly approved, however insufficiently documented and three had variances from the documentation. Management has developed written policies over journal entries to ensure that all journal entries have adequate and complete documentation when they are posted to the general ledger. In addition, management has worked with Oracle Consulting to automate the journal entry approval flow in the system and apply a numbering system. This project was finalized on December 14, 2021 and is now fully functional. These issues should therefore no longer occur going forward. However, staff would like to point out that even under manual conditions, the majority of journal entries followed the process implemented which was to have a separate person prepare the journal entry and then have another person post the journal entry. This process can be audited by running a report to show the “prepared by” and “posted by” fields for each journal entry transaction. Before the improvements to the system, journal entries were recorded with a system generated unique identification number; however, it was not a sequential number, which made it challenging to identify the sequence of entries. 37 Item 4 - Attachment 1 Packet Page 47 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section I – Current Year Findings, continued A. Financial Statement Audit Finding, continued 2021-003 Bank Reconciliation (Material Weakness) Criteria: An effective internal control system over cash and investments includes frequent and timely reconciling of account balances to information provided by the bank and custodians. Condition: During the performance of the audit, we noted that the City was behind in performing the monthly bank reconciliation, and the June 2021 bank reconciliation process were not appropriately performed until the start of the engagement in October 2021. Also, the final June 2021 bank reconciliation was not balanced and had an unreconciled variance of around $40,000, which was still under investigation by the City. Cause: The City was not able to perform the bank reconciliations timely as there was not sufficient procedures in place to ensure completion of the process. Effect: Errors and fraud can go undetected without frequent and timely bank reconciliation. Recommendation: We recommend the City develop formal written policies over cash and investments that include the timely reconciling of accounts and include cash and investment accounts reported in each fund. Management’s Response: Management agrees that timely bank reconciliations are an important part of the effective internal controls over cash and investments. The Oracle financial system has functionality that assists with the reconciliation of the City’s books and the bank statement, however that functionality was not configured during the implementation, making bank reconciliation a complicated and time-consuming manual process. Management had been working with Oracle Consulting and staff to configure and implement this functionality which finally went live in June 2021. Staff can also report that the remaining imbalance was caused by a timing issue related to recording revenue of $39,697, leaving approximately $2,500 unreconciled at June 30, 2021. Additionally, management has implemented additional oversight and review of the monthly reconciliation to make sure it is working properly and timely in coordination with month-end closing. 38 Item 4 - Attachment 1 Packet Page 48 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section I – Current Year Findings, continued A. Financial Statement Audit Finding, continued 2021-004 Payroll Module Implementation (Significant Deficiency) Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal control system over payroll requires timely and accurate payroll processing. Condition: During the performance of the audit, we noted that –  The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually track the payroll in a spreadsheet and correct the error as it occurs since the implementation.  The configuration of payroll journal entries posting was implemented incorrectly which caused the variance between the bank record and the City’s general ledger. Cause: The Oracle payroll module has not been implemented correctly. Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed. Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of payroll module. Management’s Response: Management is in full agreement with this finding and is currently working with Oracle Consulting to correct payroll configurations, as recommended. During the fiscal year the payroll team performed an internal audit of the payroll processing to identify and address issues with the system configuration. As stated, the payroll team is currently manually tracking the overtime results of each payroll and manually correcting any calculation errors that result. Additionally, the payroll team has corrected the costing errors that produced incorrect journal entries which also hugely complicated the aforementioned bank reconciliation efforts. 39 Item 4 - Attachment 1 Packet Page 49 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section II – Prior Year Findings A. Financial Statement Audit Finding 2020-001 Year-End Close and Balance Sheet Account Reconciliations (Material Weakness) Criteria: The Commission is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, an effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations. Condition: The City of San Luis Obispo performs all accounting functions for the Commission. During the performance of the audit, we noted that the City had to record a large number of adjusting entries after the closing process was complete to record transactions not previously recorded or to correct transactions or balances previously recorded in error. Those adjusting entries should have been part of the closing process and the timing of recording those adjusting entries have caused some delays and added complexity in the audit. Cause: The City’s closing process was not comprehensive enough to identify timely all the journal entries and adjustments needed to ensure the accuracy of the various account balances. Additionally, the City implemented a new financial software, however formally written accounting policies and procedures related to the system were not developed. Effect: The City’s accounting records needed significant adjustments after the closing of the books and the start of the audit which caused delays in the audit and added more complexity in dealing with the large volume of adjustments. It was noted that one of these adjustment is material to the Whale Rock Fund. Recommendation: We recommend that the City update its closing process to ensure all transactions and adjustments are accounted for timely before the audit starts. The City should furthermore develop formal written policies over significant accounts that include the timely reconciling of accounts to activity reported in related subsidiary ledgers. Also, the City should develop a checklist for year-end closing procedures. Status: See current year finding 2021-001. 40 Item 4 - Attachment 1 Packet Page 50 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section II – Prior Year Findings, continued A. Financial Statement Audit Finding, continued 2020-002 Journal Entries Posting and Numbering (Material Weakness) Criteria: Journal entries should be independently prepared, reviewed, and posted to the general ledger with unique identification number. In addition, journal entries should be adequately documented to support its accuracy and purpose. Condition: The City of San Luis Obispo performs all accounting functions for the Commission. During the performance of the audit, we noted the following regarding the City’s journal entry process:  The City was unable to provide us with documentation or documentation was insufficient for journal entries selected for review.  The City uses various numbering schemes (a date and time format, a subsidiary ledger-month format, other) that makes it difficult to determine the number of journal entries recorded and the sequence of entries.  The City does not maintain a log of manual journal entries to document the accountability of all journal entries, the preparer, the approver, and the purpose of why the entry was recorded.  Journal entries can be prepared and posted without system restriction, and no controls in place to ensure the journal entries are approved before posted. The City implemented review procedures towards the end of the fiscal year, so significant number of journal entries we tested before the implementation have the conditions above. Cause: The City didn’t fully implement the review procedures across the fiscal year. Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved or unsupported. Recommendation: We recommend that the City implement formal written procedures and policies over journal entries to ensure only accurately prepared and supported journal entries are recorded to the general ledger. Status: See current year finding 2021-002. 41 Item 4 - Attachment 1 Packet Page 51 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section II – Prior Year Findings, continued A. Financial Statement Audit Finding, continued 2020-003 Bank Reconciliation (Material Weakness) Criteria: An effective internal control system over cash and investments includes frequent and timely reconciling of account balances to information provided by the bank and custodians. Condition: The City of San Luis Obispo performs all accounting functions for the Commission. During the performance of the audit, we noted that bank reconciliations were not performed until the start of the engagement. Also, the June 2020 bank reconciliation was not balanced and had an unreconciled variance of around $600,000, which was still under investigation by the City. Cause: The City was not able to perform the bank reconciliations timely as there was not sufficient policy and procedures in place to ensure completion of the process. Effect: Errors and fraud can go undetected without frequent and timely bank reconciliation. Recommendation: We recommend the City develop formal written policies over cash and investments that include the timely reconciling of accounts and include cash and investment accounts reported in each fund. Status: See current year finding 2021-003. 42 Item 4 - Attachment 1 Packet Page 52 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section II – Prior Year Findings, continued A. Financial Statement Audit Finding, continued 2020-004 Segregation of Duties in Cash Disbursement (Significant Deficiency) Criteria: An effective internal control system over cash disbursement requires the segregation of incompatible duties. An effective internal control system over cash disbursement provides reasonable assurance for the safeguarding of assets. Condition: The City of San Luis Obispo performs all accounting functions for the Commission. During the performance of the audit, we noted Accounts Payable Analyst was granted edit access to the vendor master file, who also has the access to check printing and invoices data entry. Additionally, the financial system doesn’t prevent unauthorized invoices to be processed and the Accounting Manager doesn’t review the check register against invoices when doing the review process. Cause: The City does not have sufficient internal controls over cash disbursement processes. Effect: Unauthorized payments or incorrect payment can occur undetected. Recommendation: We recommend the City to implement internal controls to prevent unauthorized or inaccurate cash disbursement, for example, to generate a change report of vendor master file and have management reviewed regularly. Status: Implemented. 43 Item 4 - Attachment 1 Packet Page 53 Whale Rock Commission Schedule of Findings and Responses For the year ended June 30, 2021 Section II – Prior Year Findings, continued A. Financial Statement Audit Finding, continued 2020-005 Payroll Module Implementation (Significant Deficiency) Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal control system over payroll requires timely and accurate payroll processing. Condition: The City of San Luis Obispo performs all accounting functions for the Commission. During the performance of the audit, we noted that – • The City has not implemented Goals and Performance module in Oracle for all employees, evaluation tracking and reporting has transitioned to a completely manual process. During the interview of payroll employees, we learned that a significant number of employee reviews were performed late, causing manual retroactive payroll payments to be made. • The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually track the payroll in a spreadsheet and correct the error as it occurs since the implementation. Cause: The Oracle payroll module has not been implemented correctly. Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed. Recommendation: We recommend the City to work with third-party vendor to correct the implementation of payroll module. Status: See current year finding 2021-004. 44 Item 4 - Attachment 1 Packet Page 54 Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 5 – 2021-22 Whale Rock Reservoir Budget Amendment FROM: Aaron Floyd, Utilities Director PREPARED BY: Mychal Boerman, Utilities Deputy Director - Water SUBJECT: 2021-22 Whale Rock Reservoir Budget Amendment RECOMMENDATIONS 1.Authorize the use of $30,000 of Whale Rock Unreserved Working Capital to supplement existing design budget for the Whale Rock Pipeline Replacement Project; and 2.Authorize the use of $60,000 of Whale Rock Unreserved Working Capital to purchase pipe and fittings to replenish Whale Rock’s inventory for use on emergency pipeline repairs. DISCUSSION The Whale Rock Commission (Commission) considers the operating and capital budget for Whale Rock Reservoir on an annual basis and approves the budget during its annual commission meeting. Opportunity for current fiscal year budget modifications may also take place during this designated meeting. Whale Rock Pipeline Replacement Project The Whale Rock Transmission Pipeline Replacement Project (Project) includes replacement of 225 linear feet of 30-inch concrete cylinder pipe within the Dairy Creek Golf Course along Highway 1, across from the Cuesta College campus. This pipeline replacement project was previously approved by the commission following an inspection of the pipeline in 2017 that indicated that this section of pipeline was experiencing abnormal wear or corrosion and had an increased likelihood of failure. Following adoption of the 2021-22 Whale Rock budget on April 29, 2021, which approved the allocation of $60,000 for design of this pipeline replacement project, Whale Rock staff engaged one of the City’s on-call engineering consultants to request a quote for design services for the Project. Due to price increases in the engineering sector, previously approved funding is insufficient to support design of the project. An additional $30,000 of supplemental funding is needed from Whale Rock Unreserved Working Capital for the Project to stay on schedule for replacement in FY 2022-23. Pipe Repair Inventory In November 2021, Whale Rock staff discovered a small leak on the Whale Rock pipeline. Upon excavation it was discovered that the approximately 60 feet of pipeline needed replacement. Upon completion of the repair work, the majority of Whale Rock’s inventory of on-hand replacement pipe had been exhausted. Whale Rock staff are requesting that the 2021- 22 budget be supplemented with an additional $60,000 from Whale Rock Unreserved Working Capital to replenish inventory so that it is available for future pipeline repair needs. Item 5 Packet Page 55 With persistent supply chain shortages and delays, staff are estimating six to 12 weeks of procurement time before the pipe materials would be delivered to Whale Rock. Given this delay, staff are requesting amendment to this year’s budget so that pipe may be ordered immediately. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15278. FISCAL IMPACT Budgeted: No Budget Year: 2021-22 Funding Identified: Yes Design for the Whale Rock Transmission Pipeline Replacement Project was originally budgeted at $60,000 for 2021-22. Staff is requesting this budget be supplemented with an additional $30,000 from Unreserved Working Capital for the Project’s design. Price increases are the result of inflationary factors and a competitive engineering market. Staff is requesting approval of $60,000 from Unreserved Working Capital to purchase pipe and fittings to replenish Whale Rock’s inventory for use on emergency pipeline repairs. In full, staff is requesting the use of $90,000 of Whale Rock Unreserved Working Capital for these two projects. Available Unreserved Working Capital balances currently equal $1,441,404. If this budget request is approved, Unreserved Working Capital balances will equal $1,351,404. ALTERNATIVES 1. Commission members may elect not to approve the proposed budget amendments related to the Whale Rock Pipeline Replacement Project. Staff does not recommend this alternative as it will prevent staff from replacing structurally deficient pipe and updating pipeline integrity models with up-to-date information that will help minimize future Whale Rock pipeline rehabilitation and replacement costs. 2. Commission members may elect not to approve the proposed budget amendments necessary to purchase pipe and fittings to replenish Whale Rock’s inventory for use on emergency pipeline repairs. Staff does not recommend this option as these pipe materials are not available locally and procurement time is lengthy due to supply chain interruptions. 3. Commission members may elect to appropriate the requested funds as part of the 2022-23 Whale Rock Budget. This action is not recommended as it will cause delays in the proposed projects, as budget will not be appropriated and available to be spent until July 1, 2022. Item 5 Packet Page 56 Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 6 – 2022-23 Whale Rock Reservoir Budget FROM: Aaron Floyd, Utilities Director PREPARED BY: Mychal Boerman, Utilities Deputy Director - Water SUBJECT: 2022-23 Whale Rock Reservoir Budget RECOMMENDATION Adopt the 2022-23 Whale Rock Reservoir Budget. DISCUSSION The Whale Rock Commission considers the Operating, Salary and Benefits, Capital, and Electrical Pumping Budgets for Whale Rock Reservoir on an annual basis and approves the budgets during its annual commission meeting. Details regarding budgetary requests for 2022- 23 are discussed below. Staffing and Operating Budget The proposed 2022-23 budget for operation of the Whale Rock Reservoir includes ongoing maintenance and upkeep of Whale Rock facilities and includes costs for maintenance and operation of the dam, spillway, intake structure, transmission pipeline, and pump stations. The budget also includes costs associated with maintenance and upkeep of public access and recreation areas, the dam keeper shop and residence, and tools and equipment required for daily work. General Government expenses found within the Operating Budget fund support services that are provided by the City’s internal support departments such as Human Resources, Finance, City Clerk’s Office, and City Attorney’s Office. The City recently completed a compensation study for all City of San Luis Obispo employees which documented that salaries and benefits need to be increased for Whale Rock to remain competitive when recruiting and retaining employees. Preliminary estimates for compensation increases have been incorporated into the 2022-23 Salary and Benefits budgets. While actual increases will be dependent upon bargaining group negotiations, staff updated the Salaries and Benefits budget to account for this uncertainty. Table 1 and Table 2 below present the Operating and Salaries and Benefits budgets proposed for Whale Rock Reservoir for fiscal year 2022-23. Item 6 Packet Page 57 Table 1 - Operating Budget Budget Category Adopted 2021-22 Budget Proposed 2022-23 Budget Contract Services $120,796 $143,296 Data Processing Services $7,800 $7,800 Maintenance $6,800 $8,200 Legal Services $5,000 $5,000 Office Supplies $2,500 $2,500 Employee and Volunteer Recognition $500 $500 Membership and Certifications $1,504 $1,471 Education and Training $9,080 $8,900 Trips and Meetings $1,500 $1,500 Office and Facility Electricity $7,000 $8,400 Agency Pumping Expenses $299,608 $365,400 Communication Service (Radio, Cell, Fiber) $12,080 $12,080 Solid Waste Service $1,700 $1,900 Construction Materials and Supplies $5,800 $5,800 Equipment Maintenance Supplies $4,100 $4,300 Chemicals $400 $400 Miscellaneous Materials and Supplies $18,800 $18,420 Safety Materials and Supplies $2,304 $2,272 Machinery and Equipment $20,000 $20,000 General Government $187,511 $190,202 Total $714,783 $808,341 Table 2 – Salaries and Benefits Budget Budget Category Adopted 2021-22 Budget Proposed 2022-23 Budget Salaries $400,172 $462,648 Benefits $206,100 $228,335 Total $606,272 $690,983 Capital Projects Capital Improvement Project Funding Request To reduce large fluctuations in CIP budget requests on a year over year basis, Whale Rock participants have opted to contribute to projects over multiple years in advance of project delivery. For instance, the total cost for a project to rehabilitate Pump Station A and Pump Station B is estimated at $1,960,620. Whale Rock Commission member agencies have elected to pay between $180,000 and $221,377 per year over a ten-year period from 2015-16 through 2024-25 to fund this project. This payment is referred to as a payment to “CIP Reserves”. In Item 6 Packet Page 58 some cases, projects are not able to be funded in advance and must be fully funded by Whale Rock Participants in the year they are anticipated to be constructed, these projects are generally the result of emerging regulations or unanticipated equipment failure that requires immediate action. Tables 3-5 below categorize CIP investments into three major categories related to Infrastructure Projects, IT Projects, and Fleet Purchases. Table 6 provides the total CIP contribution being requested in the 2022-23 Whale Rock Budget, including Cal Poly’s annual “Reserves Catch-Up” payment. Table 3 - Infrastructure Projects Project Name Project Delivery Year Total Project Budget 2022-23 Contribution Valve Replacement 2027-28 $400,000 $25,085 Shop Pavement Replacement 2029-30 $50,000 $5,000 Shop and Residence Reroof 2022-23 $35,000 $11,600 Transmission Pipeline Repair (Pre-Calibration)1 2022-23 $510,000 $146,600 Transmission Pipeline Repair Design (Post-Calibration) 2025-26 $60,000 $15,000 Transmission Pipeline Reinspection 2027-28 $550,000 $53,616 Pump Station Rehabilitation 2024-25 $1,926,620 $208,669 Closed Tube Piezometer Replacement 2024-25 $108,923 $11,593 Evaporation and Weather Station Replacement 2025-26 $25,398 $2,898 Stilling Basin Cleaning 2022-23 $150,000 $150,000 Cityworks Integration 2022-23 $10,000 $10,000 Fencing Replacement 2022-23 $20,000 $20,000 Total 2022-23 Infrastructure Projects CIP $660,061 Table 4 - IT Projects Project Name Project Delivery Year Total Project Budget 2022-23 Contribution Wireless System Upgrade (IT) 2022-23 $1,121 $1,121 Total 2022-23 IT Projects CIP $1,121 1 The Transmission Pipeline Repair Project is an ongoing work effort that consists of multiple stages of analysis and repair. Pre-Calibration repair funding will be utilized to remove approximately 200 feet of Whale Rock Pipeline. Removed pipeline will be analyzed and used to update the Whale Rock Pipeline Condition Analysis model. Funding for Post-Calibration design will be utilized to fund designs for any repairs that are necessary if model recalibration results in the need to remove additional pipe. Item 6 Packet Page 59 Table 5 - Fleet Purchases Project Name Project Delivery Year Total Project Budget 2022-23 Contribution F150 4x4 Pickup (Replacement) 2025-26 $34,593 $3,594 4x4 ¾ Ton Truck with Utility Box & Crane (Replacement) 2025-26 $75,000 $6,956 4x4 SUV/Jeep (Replacement 2025-26 $60,000 $15,000 John Deere Tractor (Replacement) 2023-24 $75,000 $12,000 Equipment Trailer (Replacement) 2022-23 $15,000 $15,000 Dump Trailer (New) 2022-23 $20,000 $20,000 Total 2022-23 Fleet Purchases CIP $72,550 Table 6 – Total Proposed CIP Contribution Total 2022-23 Infrastructure Projects Contribution $660,061 Total 2022-23 IT Projects Contribution $1,121 Total 2022-23 Fleet Contribution $72,550 Cal Poly CIP Reserve Catch Up2 $76,579 Total 2022-23 Proposed CIP $810,311 Electrical Pumping Charges Pacific Gas and Electric (PG&E) rates were raised two times during FY 21-22 and are anticipated to be increased again during the second quarter of FY 2022-23. The cumulative impact of these rate increases is approximately 20%. Whale Rock staff have proposed 20% increases to electricity budgets for each participant. Electrical Pumping Charges are passed directly from the City to member agencies, based on proportional water received, as bills are received from PG&E, and are not collected by the City in advance of use. However, member agencies are recommended to allocate funding in their agency budgets to accommodate electrical expenses, as outlined below. Table 7 - 2022-23 Electricity/Pumping Billing Allocations Agency Estimated Electrical Billings City of San Luis Obispo $127,200 Cal Poly $165,600 California Men’s Colony incl. DCGC $72,600 Total $365,400 2 Cal Poly began making contributions to CIP Reserves in 2020 -21 and makes additional contributions annually to “catch up” on projects where Reserve Contributions were not made between 2015 -16 and 2020-21. Item 6 Packet Page 60 Member Agency Contribution Allocations Projected Whale Rock Commission member contributions for the 2022-23 budget are calculated by totaling all projected Whale Rock expenditures and subtracting revenues the Commission anticipates collecting through pumping charges, investment income, day use fees, and other revenue sources. Total expenditure and revenue projections for FY 2022-23 can be seen in Table 8 and Table 9 below. The total budgetary request for all member agencies can be seen in Table 10, with an agency-by-agency break-down provided in Table 11. Table 10 – 2022-23 Whale Rock Budget Request Expenditures (Table 8) $2,309,635 Revenues (Table 9) ($372,400) 2022-23 Contribution Request $1,937,235 Table 8 – 2022-23 Whale Expenditure Projections Expenditure Category Amount Operating (Table 1) $808,341 Salaries and Benefits (Table 2) $690,983 Capital Improvements (Table 6) $810,311 Total $2,309,635 Table 9 – 2022-23 Whale Rock Revenue Projections Revenue Category Amount Whale Rock Pumping Charges $365,400 Investment Income $1,000 Other Revenue $6,000 Total $372,400 Table 11 – Member Agency Allocations 2020-21 2021-22 2022-23 Adopted Budget Adopted Budget Proposed Budget City of San Luis Obispo (55.05%) O&M Allocation $ 559,092 $ 522,494 $ 620,372 CIP Contribution-Actual $ 83,676 $ 460,966 $ 206,064 CIP Contribution-Reserve $ 362,977 $ 268,362 $ 197,856 Total Annual Contribution $ 1,005,745 $ 1,251,822 $1,024,291 Cal Poly State University (33.71%) O&M Allocation $ 342,361 $ 319,950 $ 379,886 CIP Contribution-Actual $ 51,239 $ 282,273 $ 126,184 CIP Contribution-Reserve $ 222,270 $ 164,332 $ 121,157 Additional Catch-Up Reserve $ 76,579 $ 76,579 $ 76,579 Item 6 Packet Page 61 ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15278. ALTERNATIVE The Whale Rock Commission members may elect not to approve the budget as proposed or may elect to modify elements of the proposed budget. This alternative is not recommended as the proposed budget allocates funding for staffing, electrical costs, Capital Improvement Projects, and costs for other essential functions related to the safety of Whale Rock Reservoir and delivery of raw water from the reservoir for basic health and safety needs. ATTACHMENT 1.Whale Rock Fund Analysis Total Annual Contribution $ 692,449 $ 843,135 $ 703,806 California Men's Colony (11.24%) O&M Allocation $ 114,154 $ 106,682 $ 126,666 CIP Contribution-Actual $ 17,085 $ 94,119 $ 42,074 CIP Contribution-Reserve $ 74,112 $ 54,793 $ 40,398 Total Annual Contribution $ 205,351 $255,594 $209,138 Total Member Contribution $ 1,903,545 $ 2,350,551 $ 1,937,235 Item 6 Packet Page 62 CHANGES IN FINANCIAL POSITION ‐ WR 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28 2028‐29 2029‐30 2030‐31 Link to Backup Info Actuals Budget Budget Budget Budget Budget Budget Budget Budget Budget Budget REVENUES BY TYPE Member Agency Contribution 1,015,607$           949,126$              1,126,924$           1,131,908$             1,143,832$           1,158,429$           1,170,234$           1,181,925$           1,193,484$           1,204,892$           1,216,129$            Member Agency CIP (Actual + Reserve)887,938$              1,401,425$           810,311$              604,716$                 597,724$              289,841$              242,401$              149,365$              25,000$                25,000$                20,000$                 Water Distribution Revenue 248,469$              299,608$              365,400$              380,016$                 395,217$              411,025$              427,466$              444,565$              462,348$              480,841$              500,075$               Investment & Property Revenue 818$  58,713$                 #1,000$   #1,000$   #1,000$  1,000$   #1,000$   #1,000$  1,000$  1,000$  1,000$   Other Revenue 8,662$  6,000$  6,000$  6,000$  6,000$  6,000$  6,000$  6,000$  6,000$  6,000$  6,000$   TOTAL 2,161,494$           2,714,871$           2,309,635$           2,123,640$             2,143,772$           1,866,295$           1,847,101$           1,782,855$           1,687,831$           1,717,733$           1,743,204$            EXPENDITURE BY CATEGORY Salaries & Benefits 545,122$               606,272$               690,983$               697,507$                  711,340$               728,236$               742,749$               757,580$               772,733$               788,212$               804,023$               Operating Expenditures 414,989$               519,664$               618,139$               627,411$                  636,822$               646,375$               656,070$               665,911$               675,900$               686,038$               696,329$               Capital Outlay 168,553$               1,716,683$            761,121$               118,515$                  2,112,436$            285,094$               577,500$               773,000$               20,000$                 70,000$                 20,000$                 Transfers Out 183,978$               187,511$               190,202$               194,006$                  197,886$               201,844$               205,881$               209,998$               214,198$               218,482$               222,852$               TOTAL 1,312,642$            3,030,129$            2,260,445$            1,637,439$              3,658,485$            1,861,548$            2,182,200$            2,406,490$            1,682,831$            1,762,733$            1,743,204$            EXPENDITURE BY FUNCTION General Government 183,978$               187,511$               190,202$               194,006$                  197,886$               201,844$               205,881$               209,998$               214,198$               218,482$               222,852$               Reservoir Operation 1,128,664$            2,101,824$            2,070,243$            1,443,433$              3,460,598$            1,659,704$            1,976,320$            2,196,492$            1,468,633$            1,544,251$            1,520,352$            TOTAL 1,312,642$            2,289,335$            2,260,445$            1,637,439$              3,658,485$            1,861,548$            2,182,200$            2,406,490$            1,682,831$            1,762,733$            1,743,204$            CHANGES IN FINANCIAL POSITION Working Capital ‐ Beginning 2,376,938$            3,225,851$            3,542,159$            3,569,931$              4,034,715$            2,498,586$            2,481,915$            2,125,399$            1,480,347$            1,463,930$            1,397,513$            Revenues over (under) Expenditure 848,852$               425,537$               49,190$                 486,201$                  (1,514,712)$          4,747$  (335,099)$             (623,635)$             5,000$  (45,000)$               ‐$  Working Capital ‐ Year End (before CalPers Down Payment)3,225,790$            3,651,388$            3,591,348$            4,056,132$              2,520,003$            2,503,332$            2,146,816$            1,501,764$            1,485,347$            1,418,930$            1,397,513$            CalPers Down Payment ‐$ 109,229$              21,417$                21,417$  21,417$                21,417$                21,417$                21,417$                21,417$                21,417$                21,417$                 Working Capital ‐ Year End 3,225,790$            3,542,159$            3,569,931$            4,034,715$              2,498,586$            2,481,915$            2,125,399$            1,480,347$            1,463,930$            1,397,513$            1,376,096$            Operating Reserve (20%)228,818$               262,689$               299,865$               303,785$                  309,210$               315,291$               320,940$               326,698$               332,566$               338,547$               344,641$               Capital Outlay Reserve Balance 1,587,581$            1,906,648$            1,955,837$            2,457,038$              956,917$               969,567$               634,468$               95,000$                 100,000$               55,000$                 55,000$                 UFL Trust Fund ‐$ 21,417$                22,620$                37,700$  37,700$                37,700$                37,700$                37,700$                37,700$                37,700$                37,700$                 Unreserved Working Capital ‐ Year End 1,409,391$            1,351,404$            1,291,609$            1,236,192$              1,194,759$            1,159,357$            1,132,291$            1,020,949$            993,663$               966,266$               938,755$               Item 6 - Attachment 1Item 6 Packet Page 63 Whale Rock Commission Report Whale Rock Commission Meeting – April 21, 2022 Agenda Item 7 – Advertisement of Transmission Pipeline Repair Project, Specification No. 91617 FROM: Aaron Floyd, Utilities Director PREPARED BY: Mychal Boerman, Utilities Deputy Director - Water SUBJECT: ADVERTISEMENT OF TRANSMISSION PIPELINE REPAIR PROJECT, SPECIFICATION NO. 91617 RECOMMENDATIONS 1.Authorize staff to advertise for bids for the Transmission Pipeline Repair Project construction upon completion of design plans; and 2.Authorize City of San Luis Obispo City Manager to award the Transmission Pipeline Repair construction project if the lowest responsible bid is within the available project budget of $510,000. DISCUSSION Background The Whale Rock pipeline was installed in 1960 and provides raw water to the California Men’s Colony (CMC)and City of San Luis Obispo (City) water treatment plants for use at CMC, Cal Poly, and the City. The 30- inch diameter concrete cylinder pipe (CCP) spans approximately 18 miles, beginning at Whale Rock Reservoir (Reservoir) and ending at the City’s water treatment plant. The pipeline is pressurized via gravity from the Reservoir until the pressure is required to be boosted at two pump stations, one in the town of Cayucos, and another near the Morro Bay Water Resource Recovery Facility. Whale Rock pipeline failures are uncommon but increasing in frequency as the pipeline surpasses 60 years of service life. In order to identify overall pipeline condition and to pinpoint segments that may be experiencing abnormal wear, the City, on behalf of the Whale Rock Commission (Commission), contracted with Pure Technologies in 2017 to conduct an inspection of the interior of the Whale Rock pipeline. The inspection was designed to use magnetic resonance technology to identify areas of the pipeline with metal loss which increases the likelihood of pipeline failure. Inspection results documented a small number of locations experiencing Figure 1- Pipeline Inspection Device Item 7 Packet Page 64 abnormal pipeline degradation that were recommended for replacement and further analysis. Further analysis requires the identified segments of pipeline to be removed to allow for physical inspection of the interior and exterior of the pipe. When these sections are removed and physically analyzed, results will be utilized to update the pipeline assessment model, which will result in a more accurate assessment of points of potential failure in the pipeline. The Commission approved funding for Fiscal Year 2021-22 for the Transmission Pipeline Repair Project design work necessary for replacement of approximately 225 feet of Whale Rock pipeline within the confines of the Dairy Creek Golf Course. Staff have requested contributions amounting to $146,600 in the Fiscal Year 2022-23 budget for construction and construction management related services. This $146,000 contribution will supplement the $363,400 previously contributed by commission members, amounting to a total of $510,000 for replacement of the identified segment of pipe. Staff are requesting authorization from the Commission to advertise for bids for the project and to authorize City of San Luis Obispo City Manager to award the Transmission Pipeline Repair construction project if the lowest responsible bid is within the available project budget of $510,000. ENVIRONMENTAL REVIEW The Transmission Pipeline Repair Project is categorically exempt from CEQA pursuant to CEQA Guidelines section 15302, Replacement or Reconstruction of existing structures and facilities, Attachment 1. The pipeline being replaced will have the same purpose and capacity when replaced. FISCAL IMPACT Action to approve the advertisement of this project does not directly carry a fiscal impact. The current estimate for project construction and construction management is $510,000. Previous CIP Reserve contributions totaling $363,400 have been made toward the project. The difference between past contributions and the current project cost estimate, $146,600, will be paid from 2022-23 CIP contributions. Funding Category Contribution Source Amount Construction Agency Capital Reserve Contributions $333,400 Construction 2022-23 CIP Contribution $116,600 Construction Management Agency Capital Reserve Contributions $30,000 Construction Management 2022-23 CIP Contribution $30,000 Total Construction Cost $510,000 Item 7 Packet Page 65 ALTERNATIVES Whale Rock Commission members may elect not to approve the Project for advertisement for bids at this time. Staff does not recommend this alternative as it would result in 225 feet of compromised pipe remaining in the system and would prohibit Pure Technologies from updating the Whale Rock Pipeline Inspection Model. Item 7 Packet Page 66 Notice of Exemption To: Office of Planning and Research From: City of San Luis Obispo 1400 Tenth Street, Room 121 Community Development Department Sacramento, CA 95814 919 Palm Street San Luis Obispo, CA 93401-3249 County Clerk County of San Luis Obispo Filing Not Required 1144 Monterey Street, Suite A San Luis Obispo, CA 93408 Project Title: Whale Rock Transmission Pipeline Replacement Project Project Location: Pipeline easement within Dairy Creek Golf Course in an unincorporated area of San Luis Obispo (SLO) County, CA Project Location - City: Unincorporated, SLO County, CA Project Location - County: SLO Description of Project: The Whale Rock pipeline was installed in 1960 and provides raw water to the California Men’s Colony and City of San Luis Obispo Water treatment plants. The 30-inch diameter concrete cylinder pipe spans approximately 18 miles, beginning at Whale Rock Reservoir and ending at the City’s water treatment plant. The Whale Rock Transmission Pipeline Replacement Project includes replacement of approximately 225 feet of the existing pipeline within an existing 20-foot wide easement in the Dairy Creek Golf Course. Name of Public Agency Approving the Project: City of SLO, on behalf of the Whale Rock Commission Name of Person or Agency Carrying Out the Project: City of San Luis Obispo Exempt Status (check one): Ministerial (Section 21080(b)(1); 15268; Declared Emergency (Sec. 21080(b)(3); 15269(a)); Emergency Project (Sec. 21080(b)(4); 15269(b)(c) Categorical Exemption. State type and section number: Class 2: Replacement or Reconstruction Statutory Exemptions. State code number: Reasons why project is exempt: The proposed Whale Rock Transmission Pipeline Replacement Project is exempt because it involves replacement of a portion of the existing Whale Rock pipeline within an existing easement. The pipeline being replaced will have the same purpose and capacity when replaced per Class 2, Part C. Lead Agency Contact Person: Noah Evans Area Code/Telephone/Ext. (805)540-8529 If filed by applicant: 1.Attach certified document of exemption finding. 2.Has a notice of exemption been filed by the public agency approving the project? Yes No Signature:______________________________ Date: ___________________ By: Shawna Scott, Senior Planner (sscott@slocity.org) Signed by Lead Agency Date Received for Filing at OPR: __________ Signed by Applicant February 8, 2022 Item 7 - Attachment 1Item 7 Packet Page 67 Figure 1: Transmission Pipeline Repair Project Whale Rock Commission, 2022 Existing 30” Whale Rock Transmission Pipeline Dairy Creek Golf Course Hi g h w a y 1 NORTH ~13 miles to Whale Rock Reservoir ~5 miles to City of SLO Water Treatment Plant Proposed ~225’ Transmission Pipeline Repair Item 7 - Attachment 1Item 7 Packet Page 68