audit and finance committee february 14, 2020

AUDIT AND FINANCE COMMITTEE

FEBRUARY 14, 2020

AUDIT AND FINANCE COMMITTEE ROSTER SOUTHERN CALIFORNIA REGIONAL RAIL AUTHORITY

COUNTY MEMBER Los Angeles: Paul Krekorian (Chair) 1 vote Ara Najarian

Pam O’Connor Roxana Martinez

Orange: Andrew Do (Vice-Chair) 1 vote Mark A. Murphy

Riverside: Andrew Kotyuk 1 vote Brian Berkson

San Bernardino: Larry McCallon 1 vote Javier John Dutrey

Ventura: Brian Humphrey 1 vote

*1 vote per Member Agency. Names are listed in voting order unless BoardSecretary advised otherwise.

AUDIT AND FINANCE COMMITTEE MEETING FRIDAY, FEBRUARY 14, 2020 – 10:30 A.M. LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY (METRO)

BOARD ROOM ONE GATEWAY PLAZA, 3RD FLOOR LOS ANGELES, CALIFORNIA 90012

AGENDA DESCRIPTIONS The agenda descriptions are intended to give notice to members of the public of a brief general description of items of business to be transacted or discussed. The posting of the recommended actions does not indicate what action will be taken. The Authority may take any action that it deems to be appropriate on the agenda item and is not limited in any way by the notice of the recommended action. The Chair reserves the right to discuss the items listed on the agenda in any order.

A person with a disability may contact the Board Secretary’s office at (213) 452-0255 or via email [email protected] at least 72-hours before the scheduled meeting to request receipt of an agenda in an alternative format or to request disability-related accommodations, including auxiliary aids or services, in order to participate in the public meeting. Later requests will be accommodated to the extent feasible.

SUPPORTING DOCUMENTATION The agenda, staff reports and supporting documentation are available from the Board Secretary, located at 900 Wilshire Blvd., Suite 1500, Los Angeles, CA 90017, and on the Metrolink website at www.metrolinktrains.com under the Meetings & Agendas link.

PUBLIC COMMENTS ON AGENDA ITEMS AND ITEMS NOT ON THE AGENDA Members of the public wishing to address the Board of Directors regarding any item appearing on the agenda or any item not on the agenda, but within the subject matter jurisdiction of the Board, may do so by completing a Speaker’s Form and submitting it to the Board Secretary. All speakers will be recognized by the Chairman and will be considered under Item 5 (Public Comment). When addressing the Board, please state your name for the record. Please address the Board as a whole through the Chair. Please note comments to individual Board members or staff are not permitted when addressing the Board. A speaker’s comments shall be limited to three (3) minutes.

mailto:[email protected]

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Audit and Finance Committee Meeting Agenda Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

1. Call to Order

2. Safety Briefing

3. Pledge of Allegiance

4. Roll Call

5. Public Comment

6. Approval of Meeting Minutes – January 10, 2020 Audit and Finance Committee

It is recommended that the Committee approve the Minutes of the January 10, 2020Audit and Finance Committee Meeting.

Page 1

7. Internal Audit Department Quarterly Update

Internal Audit Department (Internal Audit) is providing quarterly updates on internalaudits, external audits, and other activities.

The Board may receive and file this report.

8. Corrective Action Status Update – Quarter Ended December 31, 2019

The Internal Audit Department (Internal Audit) reports the Corrective Action statusof the prior audits on a quarterly basis.

The Board may receive and file this report.Page 9

9. FY2019-20 Quarterly Investment Report – Quarter Ended December 31, 2019

The Authority’s Annual Investment Policy requires the Treasurer to make a quarterlyinvestment report to the Board of Directors. Section 53646 of the CaliforniaGovernment Code encourages local agencies to file this report. This report is forthe quarter ended December 31, 2019.


Audit and Finance Committee Meeting Agenda Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 3

10. FY2019-20 Quarterly Accounts Receivable Status Report – Quarter EndedDecember 31, 2019

This report presents a status update on the Authority’s Accounts Receivable for thequarter ended December 31, 2019.


11. FY2019-20 Quarterly Fuel Hedging Program Update – Quarter EndedDecember 31, 2019

Staff is providing an update on the Authority’s Fuel Hedging program. This report isas of December 31, 2019.


12. Chief Executive Officer’s Report

13. Committee Members’ Comments

14. Chair’s Comments

15. ADJOURNMENT

NEXT COMMITTEE MEETING: MARCH 13, 2020

MINUTES OF THE AUDIT AND FINANCE COMMITTEE MEETING January 10, 2020

ITEM 6

COUNTY MEMBERS PRESENT Los Angeles: Paul Krekorian (Chair) 1 vote Ara Najarian

Pam O’Connor Roxana Martinez1

Orange: Andrew Do (Vice-Chair) 1 vote

Riverside: Brian Berkson 1 vote

San Bernardino: Larry McCallon 1 vote

Ventura: -- 1 vote

1 Director Martinez arrived at the end of the discussion of Item No. 6.

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Audit and Finance Committee Meeting Minutes – January 10, 2020 Transmittal Date: February 7, 2020 Page 2

STAFF/PRESENTERS:

ROGER ALFARO, Partner, Eide Bailly ALEX BARBER, Senior Manager, General Accounting RONNIE CAMPBELL, Chief Financial Officer DON O. DEL RIO, General Counsel DON FILIPPI, Chief, System Safety, Security and Compliance Officer GEOFFREY FORGIONE, Associate General Counsel ISABELLA KANG, Business Analyst II ELISABETH LAZUARDI, Senior Manager, Audit NOELIA RODRIGUEZ, Chief of Staff COLLETTE LANGSTON, Board Secretary

Meeting minutes are prepared in a format that corresponds with the Board Meeting Agenda, which is incorporated by reference with these minutes. Board Agendas are available online at www.metrolinktrains.com under the Meetings and Agendas link or from the Board Secretary at (213) 452-0255.

1. Call to Order

The January 10, 2020 Audit and Finance Committee Meeting was called to order byChair Krekorian who presided over the meeting at 10:33 a.m. at the at the MetroBoard Room, One Gateway Plaza, 3rd Floor, Los Angeles, CA 90012.

2. Safety Briefing

Don Filippi, Chief, Safety, Security and Compliance Officer conducted the safetybriefing.

3. Pledge of Allegiance

Director Do led the group in the pledge of allegiance.

4. Roll Call

The Board Secretary called roll and confirmed that a quorum of the Board waspresent.

5. Public Comment

The Secretary confirmed no requests were received. The Public Comment periodwas closed.

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6. Adoption of Board Investment Policy

Ronnie Campbell, Chief Financial Officer provided a brief background on this itemas detailed in the staff report and requested approval of staff’s recommendation.

Director Do submitted a revised policy that included the following language changes:1. Compliance (Proposal):If SCRRA utilizes a portfolio manager, the Treasurer will provide a copy of itsInvestment Policy as part of any portfolio manager contract and will expect itsportfolio managers to invest each portfolio, managed for SCRRA, in accordance withthe provisions of the Investment Policy. The SCRRA Treasurer is responsible forverifying each portfolio manager’s compliance as well as SCRRA’s entire portfolio’scompliance with the provisions of the Investment Policy.

If the SCRRA Treasurer determines a portfolio manager has made an investment that does not comply with the provisions of the Investment Policy, the Treasurer shall immediately notify the portfolio manager and the Audit and Finance Committee Chair of the compliance violation. At that point, the portfolio manager is on probation for a period of one year. The second time a violation occurs while the portfolio manager is on probation, the Treasurer shall request the portfolio manager responsible for the compliance violation to meet with the Chief Executive Officer, and the Treasurer as soon as practicable, at which time it will be decided whether the Board of Directors will be notified of the violation. The Audit and Finance Committee shall be notified of the second compliance violation, and the Audit and Finance Committee Chair may request a presentation by the portfolio manager.

Director Najarian asked how large the portfolio is that being managed to which Thelma Bloes responded that it is a total of $107M with $47M in Local Agency Investment Funds. The Authority’s annual return is less than 2.5%.

THE AUDIT AND FINANCE COMMITTEE RECOMMENDED AS AMENDED (4-0) that the Board approve the Authority’s Investment Policy (FIN-3.1) with the designation of the Chief Financial Officer as Treasurer for one additional year (Attachment B of the staff report).

7. Performance Audit: Central Maintenance Facility Operations (#2020-03-IA)

Elisabeth Lazuardi, Senior Manager, Audit provided a brief background on this itemas detailed in the staff report and requested approval of staff’s recommendation.

Director McCallon commended staff on the thoroughness of the report and statedthat it was important to present it to the community although there are some findingsthat management will be working to mitigate.

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Chair Krekorian also commended staff on the thorough report. He does not expect the community’s response will be warm and fuzzy and expects to have deep discussions in the future.

THE AUDIT AND FINANCE COMMITTEE RECOMMENDED (4-0) the Board:

A) Receive and file the Performance Audit: CMF Operations report (Attachment A),and

B) Direct Internal Audit to present the findings at the February 22, 2020 CMFCommunity Meeting.

8. FY2018-19 Comprehensive Annual Financial Report and Single Audit Report

Alex Barber, Senior Manager, General Accounting introduced Roger Alfaro, EideBailly Partner, who presented a brief presentation on this item as detailed in the staffreport and requested approval of staff’s recommendation.

Director McCallon asked for clarification as to where the findings were located andwhat management’s response was. Alex Barber clarified that both items could befound on the last 3 pages of the report.

Director Do requested that future reports are made available earlier.

THE AUDIT AND FINANCE COMMITTEE received and filed the ComprehensiveAnnual Financial Report (CAFR) and Single Audit Report.

9. Overview of Fiscal Year 2020-21 Budget Development and Process

Ronnie Campbell, Chief Financial Officer, provided a brief background on this itemas detailed in the staff report and requested approval of staff’s recommendation.

Director Najarian verified that staff will be meeting with the MAAC members andRonnie Campbell confirmed that both MAAC and the regional CEOs will havepresentations prior to the Audit and Finance Committee. Director Najarian followedup regarding the budget workshop and Mr. Campbell again confirmed that the intentof monthly updates was to keep the committee informed so that a standalone budgetworkshop was not necessary. Director Najarian asked for detail on the capitalprogram items to which Mr. Campbell responded that the Authority is trying to workthrough a backlog on the capital program of projects that have been identified andare now included in the budget.

Chair Krekorian stated that his concern is about MAAC participation and havingthese conversations monthly at Committee allows for a more focused conversation.

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THE AUDIT AND FINANCE COMMITTEE received and filed the Overview of FY2020-21 Budget Development and Process.

10. Chief Executive Officer’s Report

There was no Chief Executive Officer’s Report.

11. ADJOURNMENT

There being no further business for consideration by the Board, the meeting wasadjourned at 11:07 a.m.

Prepared by,

Collette Langston Board Secretary

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TRANSMITTAL DATE: February 7, 2020

MEETING DATE: February 14, 2020 ITEM 7

TO: Audit and Finance Committee

FROM: Internal Audit Department

SUBJECT: Internal Audit Department Quarterly Update

Issue

Internal Audit Department (Internal Audit) is providing quarterly updates on internal audits, external audits, and other activities.

Recommendation


Strategic Goal Alignment

This report aligns with the strategic goal to improve organizational efficiency by communicating updates on the progress of the FY2020 Audit Annual Plan, the status of external audits and other audit activities.

Background

The Internal Audit Department was established in July 2013. The Internal Audit Charter was adopted by the Board in May 2014.

Discussion

I. Internal Audits

A. The Internal Audit Charter requires the presentation of a quarterly progress reportof the Annual Audit Plan to the CEO and Board of Directors. Detailed progressstatus for internal audits for the FY2020 Annual Audit Plan Second Quarter Updateis attached (Attachment A). A recently completed audit is:

i. Performance Audit: Central Maintenance Facility (CMF) Operations (#2020-03-IA). Report was issued on December 30, 2019 and presented at the January10, 2020 Audit and Finance Committee meeting. As approved by the Board,

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Internal Audit Department Quarterly Update Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

audit results will be presented at the February 22, 2020 CMF Community Meeting.

II. External Audits

i. FY2019 CAFR Audit and Single Audit completed. Audit report was issued onDecember 31, 2019 and presented at the January 10, 2020 Audit and FinanceCommittee meeting. Internal Audit is tracking the status of the CorrectiveActions.

ii. California Public Employees' Retirement System (CalPERS) Review oftemporary upgrade pay. The Authority was one of 60 selected employers for thereview. Final report is anticipated to be issued in March 2020.

iii. FY2019 Federal Transit Administration (FTA) Triennial Review. The report wasissued on October 24, 2019. Internal Audit is tracking the status of theCorrective Actions for the review are included in Item Corrective Actions.

iv. FY2019 Compliance Audit under Memorandum of Understanding (MOU) withthe Los Angeles County Metropolitan Transportation Authority (Metro). Theaudit fieldwork has been completed and a report is currently being drafted.

III. Other Activities

A. External Quality Control Review (External Peer Review) – As required by theAuditing Standards, an external quality control review is scheduled to beperformed for the Internal Audit. The on-site review will be conducted onFebruary 24, 2020 through February 28, 2020. The external peer review resultwill be presented to the Audit and Finance Committee in Spring 2020.

Prepared by: Elisabeth Lazuardi, Senior Manager, Audit

Elisabeth Lazuardi, Senior Manager, Audit

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SCRRA - Internal Audit DepartmentFY 2019-20 Annual Audit Plan Update

(As of 09/30/2019)

ATTACHMENT A

{A} {B} {C}={A}-{B}

# Audit Activity Auditable Unit DescriptionPlanned

StaffHours

StaffHours to

2Q

Under (Over)

Status

Total Hours - External Audits 1 Central Maintenance Facility (CMF) Operations

Equipment;Facilities & Fleet Maintenance

Evaluate compliance with procedures established at the CMF to control and monitor pollution levels produced by operating activities at CMF. (Special Request Audit)

400 527 (127) Completed

2 System safety oversight managementSafety, Security & Compliance

Evaluate process to ensure inspections, violations, corrective actions are properly tracked (Special Request Audit)

400 69 332 In-Process - Planning

3 Employee exit processHuman Resources

Evaluate effectiveness of employee exit process (Special Request Audit)* Outsourced

150 - 150 Not Initiated

4 IT - Application Controls Information Technology Evaluate Business Application Controls of Assetworks Program 400 - 400 Not Initiated 5 Penetration Testing - SCRRA networks

Information Technology; PTC Train Control; Fare Collections (PCI-DSS)

Penetration testing of SCRRA networks - this audit is performed to address a finding in the Cybersecurity Assessment of PTC network audit (2019-10-IA)*Outsourced

130 289 (159) In Process - Fieldwork

6 Contract Task Orders (CTO) - vendor selection processPurchasing, Contracts & Material Management; Program Delivery & Operations

Evaluate controls in place for vendor selection process for issued Contract Task Orders (Special Request Audit)* Outsourced/Co-sourced


7 Contract amendments Purchasing, Contracts & Material Management; Operations

Evaluate process for amending contracts*Outsourced/Co-sourced

200 177 23 In Process - Report Writing

8 Project management - Tunnel work AV line Operations Project Management processes over Tunnel work on the Antelope Valley line *Outsourced/Co-sourced


9 Contract Audits - C3124-15 (Vincent Grade/Acton Station Second Platform & Vincent Siding Extension)

Program Delivery Evaluate contract management/ administration process 200 - 200 Not Initiated

10 Materials Inventory ManagementMaterials Management & Warehousing

Evaluate management processes over inventory ordering and receiving and review of general supply chain management/inventory monitoring

400 428 (28) Completed

11 Operating Receivable and Third Party DepositFinance

Processes over tracking and collecting operating receivables and third party deposits.


12 Construction Contract Change Order ProcessOperations; Program Delivery

Determine whether internal controls and processes used in the Change Order function are adequate

200 304 (104) Completed

13 Cybersecurity Assessment of PTC Network Control Operations and Train Control System PTC Train Control

Identify weaknesses of existing critical infrastructure and evaluate current controls if they are consistent with best practices

175 242 (67) In Process - Report Drafted

14 Labor Cost Analysis Various architectural & engineering contracts and request for proposals

Agreed upon procedures as requested by Purchasing, Contracts & Material Management

100 100 Ongoing

Total Hours 3,405 2,035 1,370

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FROM: Internal Audit Department

SUBJECT: Corrective Action Status Update – Quarter Ended December 31, 2019

Issue

The Internal Audit Department (Internal Audit) reports the Corrective Action status of the prior audits on a quarterly basis.

Recommendation



This report aligns with the strategic goal to maintain fiscal sustainability and improve organizational efficiency by tracking the completion of the audits’ corrective actions.

Background

At the July 28, 2017 Board Meeting, the Board directed Internal Audit to provide quarterly updates to the Board of corrective actions on internal and external audits.

Discussion

For the quarter ended December 31, 2019, there were 58 items implemented, verified, or closed, 5 audit recommendations implemented pending verification, 14 items past due, and 19 items not yet due.

The reporting of the corrective actions contains two attachments:

• Attachment A – Corrective action items that were not yet due, past due, orimplemented pending verification as of December 31, 2019. Corrective actions relatedto external audit findings will remain on Attachment A until the external auditors clearthose findings.

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Corrective Action Status Update – Quarter Ended December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

• Attachment B – Corrective action items that were implemented, verified, or closed.Audit recommendations were closed, although not implemented, when there werealternative solutions addressing the audit findings and the risks of not implementingthe audit recommendations were considered low.

The chart below summarizes the activities from Attachments A and B for the Second Quarter of FY 2020 (October 1 through December 31, 2019).

Report Name Implemented

Verified or Closed

Implemented Pending

Verification Past Due Not Yet

Due

Audit Reports Issued During 2nd Quarter 2020-03-IA – Central Maintenance Facilities Operations

15 0 1 5

2019-01-EA – FTA Triennial Review 2019

0 0 0 2

2019-06-IA – Materials Inventory Audit.

12 2 1 4

Audit Reports Issued Prior to 2nd Quarter 2019-14-CA: Parsons Transportation Group, Inc. Contract Closeout Process

8 0 0 2

2019-09-CA: LASD Law Enforcement Services Contract

2 1 3 0

2019-08-IA: Sole-Source & Non-Competitive Contract Process

4 0 2 3

2019-05-IA: Fuel Management 10 2 2 0 2018-02-CA: Mass Electric Contract No MS222-09R

0 0 1 0

2017-13-IA: Fare Revenue Data Integrity

1 0 1 0

2017-07-IA: Information Technology General Controls

0 0 1 0

2019-18-EA: LACMTA MOU Compliance Examination

0 0 2 1

2020-02-EA: CAFR/Single Audit 0 0 0 2 2017-18: AUP NTD 5 0 0 0 2016-17: AUP NTD 1 0 0 0 Totals 4th Quarter 58 5 14 19

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Corrective Action Status Update – Quarter Ended December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 3

Prepared by: Elisabeth Lazuardi, Senior Manager, Audit

Elisabeth Lazuardi, Senior Manager, Audit

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Quarterly Corrective Action - Outstanding Items as of 12/31/2019ATTACHMENT A

Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2020-03-IA Central Maintenance Facility

OperationsRec #3 The Facilities Maintenance Department should ensure

that the order of missing Ground Power Stations parts is provided to Bombardier as soon as it is received.

c.) Material Inventory will ensure that there is a 10% reserve inventory maintained on Ground Power station cables according to inventory needed provided by the Contractor.

Maintenance of Equipment

Materials Management

c. 3/31/2020 - c.)Not Yet Due

2020-03-IA Central Maintenance Facility Operations

Rec #7 Ensure all trash containers have lids as required under Good Neighbors Standards and Practices or update the Good Neighbors Standards and Practices to clarify that only large trash containers are required to be covered.

a.) Large trash container with damaged covers are being replaced.b.)Smaller containers are emptied daily and do not fall under the requirement to be covered that is outlined in the Good Neighbor Standards and Practices.c.) Good Neighbor Standards and Practices update will be drafted to state that only large containers and containers not emptied daily will be required to be covered.

Facilities & Fleet

Maintenance

11/30/2019 Past Due

Note: Completed in January 2020


Rec #9 The Chief Operations Officer should attend the Monthly Maintenance Meetings with the Contractor as required under the Maintenance of Equipment Service Requirements 30-003, or the SOP should be updated to assign a designee who can attend in place of the COO. In addition, all monthly meetings should be supported by sign in sheets as a best practice.

Update verbiage of Maintenance of Equipment Service Requirements 30-003 so that Chief Operating Officer (COO) attendance is optional to the monthly Bombardier Transit Corporation meeting but given monthly report. Monthly report will also contain sign in sheet of attendees of meeting.


1/31/2020 Not Yet Due


Rec #10 The Maintenance of Equipment Service Requirements 30-003 should be reviewed and updated for accuracy and to add the appropriate title for the responsible staff based on the new organizational structure.

Update verbiage of Maintenance of Equipment Service Requirements 30-003 to correct titles and responsibilities regarding Compliance Officers.




Rec #12 The Fuel Conservation Program (along with all SOPs) should be regularly reviewed to ensure consistency and that the practices are still applicable. The review dates, along with managers signatures, should be reflected on the document.

Fuel Conservation Program will be updated to reflect current SCRRA fleet and target conservation policies.




Rec #13 The CMF diagram on the website should be updated to accurately reflect the load testing areas and to ensure the community is aware of the change.

Equipment department will provide the Community Relations Group updated locations and verbiage for CMF map for load testing areas so that the Community diagram can be updated.



2019-06-IA Performance Audit: Materials Inventory Management

Rec #1 The Procedures Manual should be revised to reflect actual practices in place, where appropriate. The Manual should also be reviewed at least on an annual basis for changes.

The Materials Management and Warehousing Department (MM&W) will complete a Procedures Manual revision to reflect current practices.

MM&W 1/31/2020 Not Yet Due


Rec #2 Once the Procedures Manual is updated, there should be an acknowledgment for employees to follow it. In addition, the updated Manual should be distributed and acknowledged by affected contractors.

The Materials Management and Warehousing Department will disseminate the updated Procedures Manual to impacted parties and secure signatory acknowledgment. This includes providing the Human Resources Department with the updated Procedures Manual to facilitate its distribution and acknowledgement during the new employee on-boarding process.


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Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2019-06-IA Performance Audit: Materials

Inventory ManagementRec #3 Inventory processes for ordering, receiving and making

inventory adjustments in the system should be segregated to the fullest extent possible.

Materials Management and Warehousing will:b.) Reflect the segregation of duties in the Procedures Manual revision.

MM&W 3b.)1/31/2020

3b.) Not Yet Due


Rec #4 Procedures should be updated to provide instructions on how to execute all key processes based on inventory type including but not limited to:a.) Ordering materials for ongoing maintenance;b.) How to process and track internal transfers of inventory between locations;c.) How to produce and utilize key inventory reports generated out of the AssetWorks System.

Materials Management and Warehousing will revise the Procedures Manual to include the key processes.



Rec #6 Standardization of inventory forms and/or logs utilized for things such as orders, requisitions and tracking discrepancies should be required to allow for more consistent practices.

Materials Management and Warehousing will consolidate the requisition form and material log to simplify and standardize material processes for all contractor personnel.

MM&W 12/31/2019 Past Due


Rec #9 Changes in processes or documents required from key contractors should be reflected through an amendment to the contract

The Equipment Department will amend the OP137-17 contract in order to align with current agency and material procurement policies. This includes removing mechanical contractor’s responsibility to dictate/finalize the vendor date, min/max levels, lead time, buyer’s contact information, delivery due date and economic order quantity since this is responsibility of material departments responsibility; as well as including verbiage of MIP frequency to be on a quarterly basis until fleet size has been stabilized as dictated by agency at which point frequency will return to one year.

Update: Amendment 4 sent to Bombardier for signature.

Equipment 9/30/2019 Implemented (Pending Verification)


Rec #10 Amended contract terms for contracts OP137-17 should be summarized in a checklist format. The checklist should be distributed to material handlers and used by the Contract Manager as a tool to help monitor compliance over materials request to the Materials Department.

In connection with recommendation #10, the Equipment department OP137-17 contract terms pertaining to material necessities will be summarized in a checklist format and distributed to material inventory department

Update: Amendment 4 sent to Bombardier for signature.

Equipment 9/30/2019 Implemented (Pending Verification)

2019-14-CA Contract Audit: Parsons Transportation Group, Inc. Contract No. H1636-10 Closeout Process

Rec #2 Contracts and PMO should train staff as to the updated closeout requirements.

Training on procurement and contract management will be provided to Contracts staff, Project Managers, Business Administrators and other internal stakeholders. The training will cover, among other topics, contract closeout procedures. Other closeout documents will reference the new procedures.

Contracts & PMO (PMO's participation

will be determined

once the revised contract P&P is finalized)

3/31/20196/30/2019

Training curriculum: 3/31/2020

Training:4/30/2020

Not Yet Due

12-31-19 Open 2/8 2/7/2020 1:21 PM13


Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2019-14-CA Contract Audit: Parsons

Transportation Group, Inc. Contract No. H1636-10 Closeout Process

Rec #9 Contracts should conduct training on the performance evaluation requirements.

Following development of new or modified procedures, training on procurement and contract management will be provided to CONTRACTS staff, Project Managers, Business Administrators, and other internal stakeholders. The training will cover, among other topics, preparing a Contractor Performance Evaluation. Other closeout procedures will reference the new procedures.

Contracts 3/31/20196/30/2019


Training:4/30/2020

Not Yet Due

2019-09-CA Contract Audit: Los Angeles County Sheriff's Department Law Enforcement Services Contract No SP466-16

Rec #1 1. Safety, Security & Compliance to work with Contract Administration to amend Contract No. SP466-16 to:a.) Provide daily performance and compliance measures requirements for purchased services of all classesb.) Address performance measurement gaps between the various supporting documentsc.) Establish daily deployment target compliance for the service units

The Safety, Security & Compliance Department will meet with the Los Angeles County Sheriff’s Department Contract Law Enforcement Bureau executives to revise and amend the current contract to address the performance and compliance measures to all purchased positions, address performance measure gaps between supporting documents, and establish daily deployment target compliance for all service units.

Security 7/1/2019 Past Due

Need Forms RAPS 500A & E with info addressing audit recommendations.


Rec #4 Safety, Security & Compliance to work with Contract Administration to amend Contract No. SP466-16 to include additional KPI measures for process, officer conduct, and outcomes.

The Safety, Security & Compliance Department will meet with the Los Angeles County Sheriff’s Department Contract Law Enforcement Bureau to revise and amend the current contract to add KPI measures for process, officer conduct, and outcomes



Rec #6 Safety, Security & Compliance to work with Contract Administration to amend the contract to include additional requirements related to:a.) Requirements to identify and track mobile assets in real timeb.) Requirements to provide Geographic Information System (GIS) data and servicesc.) Requirements ensuring that SCRRA equipment provided to LASD is returned upon contract completion

The Safety, Security & Compliance Department will meet with the Los Angeles County Sheriff’s Department Contract Law Enforcement Bureau executives to revise and amend the current contract to identify and track mobile assets in realtime, provide Geographic Information System (GIS) data and services, and language to ensure SCRAA equipment is returned upon completion of contract.


Forms submitted, process discussed, waiting for written procedures


Rec #7 Safety, Security & Compliance should enforce the requirement that LASD training for outside law enforcement agencies be POST certified.

The Safety, Security & Compliance Department will work with the Los Angeles County Sheriff’s Department to coordinate with the California Commission on Peace Officers Standards of Training (POST) to ensure that outside training for law enforcement meets the standards of, and is certified by, the POST Commission.

Security 7/1/2019 Implemented. Pending verification

POST certified training is performed in house. Contract will be negotiated and amended to reflect the reduced service.

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Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2019-08-IA Performance Audit: Sole Source and

Non-Competitive Contract ProcessRec #3 Training on newly developed procedures should be

provided to all Contracts staff (and extended to Project Managers when determined appropriate).

Following the development of the procedures, training on procurement and contract management, including non-competitive procurements will be provided to Contracts staff, Project Managers, Business Administrators, and other internal stakeholders. The training will cover, among other topics, preparing a Record of Negotiation (RON) and cost/price analysis.

Contracts 3/31/20196/30/2019


Training:4/30/2020

Not Yet Due

2019-08-IA Performance Audit: Sole Source and Non-Competitive Contract Process

Rec #5 A standardized procurement file checklist should be employed to ensure file completeness and facilitate a supervisory review of the file.

Contracts will address recommendation above as part of the development of revised procurement and contracting procedures.

Contracts 3/31/20196/30/2019

Past Due


Rec #6 Require supervisory or secondary review of procurement files to ensure file completeness and accuracy; the review should be documented.


Contracts 3/31/20196/30/2019

Past Due


Rec #7 Coordinate with Project Managers to review and update practices and provide training on justification form completion to ensure: a. Justification is completed, dated, and submitted at the beginning of procurement process and; b. The appropriate Justification Form is used.

b.) Following adoption of the revised procurement and contracting policies, training on procurement and contract management, including preparing a non-competitive justification, will be provided to Contracts staff, Project Managers, Business Administrators, and other internal stakeholders.

Contracts 3/31/20196/30/2019


Training:4/30/2020

Not Yet Due


Rec #9 Contracts to draft a formal procedure and to provide training on how to process Single-Bid Procurements.

Contracts will address these recommendations as part of the development of procurement and contracting procedures. Following the development of the procedures, training on procurement and contract management, including how to process single-0bid procurements, will be provide to Contracts staff, Project Managers, Business Administrators, and other internal stakeholders.

Contracts 3/31/20196/30/2019


Training:4/30/2020

Not Yet Due

2019-05-IA Performance Audit: Fuel Management

Rec #1 Update and implement the current EMF SOP and CMF SOP to improve the monitoring of the fuel receiving procedure. The revised SOPs should require SCRRA staff to observe the fuel delivery process, measure the delivered fuel quantity (e.g. using a dipstick), and maintain required documents.

MM&W will improve the fuel receiving SOP as follows:d.) Implement a new diesel fuel system to authenticate fuel deliveries and quantities.

Material Management

d. 12/31/2019 d. Past Due (Installation and training in process)


Rec #8 MM&W management should upgrade the Fuel Management Systems and integrate them into one system. Ensure the databases are updated to provide fuel data integrity.

MM&W will upgrade and integrate CMF and EMF diesel fuel systems into a single fueling system via the following process:

d.) Complete system installation.

Material Management

d. 12/31/2019 Past Due

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Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2019-05-IA Performance Audit: Fuel

ManagementRec #10 MM&W management should revise the SCRRA MM&W

Standard OperatingProcedures (SOPs) and include control procedures of the segregation ofduties for the fuel purchase process to the extent feasible.

MM&W will address segregation of duties in the fuel purchase program as follows:

b.) Formalized Finance ownership of fuel futures contracts within the fuel hedging program.c.) Transition to Finance full fuel hedging program ownership or determine an appropriate segregation of duties between Finance and MM&W.

Material Management b.) 4/16/2019

c.) 9/30/2019

b. Implemented (Pending Verification)Temporary solution is inplace -shared oversight responsibility between Finance & MM&W.c. Implemented (Pending Verification)Policy should be updated for the new process.

2018-02-CA Contract Audit: Mass Electric Construction Company Contract No. MS222-09R

Rec #2 Contract Administration require that important negotiated terms and conditions be reconciled back to the contract document, modify the contract accordingly, and document the task as completed.

Contracts will include an “Exceptions Form” as part of the solicitation process, which allows proposers to list proposed changes to the draft contract that is included as part of the solicitation package. Once a vendor is selected, Contracts can more easily incorporate changes identified and agreed upon.

Contracts 7/31/2018, 12/31/2018

3/1/20196/30/2019

Past Due

2017-13-IA Performance Audit: Fare Revenue Data Integrity (Phase 4)

Rec #4 FCS to ensure that Contractors are compliant with PCI-DSS requirement and the SOC 2 examination report requirement should be included in the future service agreement.

(2) Conduent - In the interim, FCS has requested Conduent to provide aquote and timeline to address any PCI-DSS compliance issues [for the period from this reporting date to June 30, 2020]. Upon receipt of a quoteand timeline from Conduent, fare collection will discuss with executive management the best course of action.

FCSConduent:

3/31/19

Past Due

New target date: 1/31/2020

2017-07-IA Performance Audit: Information Technology General Controls

Rec #7 IT Department should ensure that resource owners (data file or application program owners) periodically review access authorization for continuous appropriateness.

Access to the network infrastructure, servers, network shares and applications will be reviewed every six months for their appropriateness and adjusted where necessary. The date the access was reviewed will be documented and reviewed then. (Implemented - Verified)IT policies will also be updated to include this new requirement.

IT Department 9/30/1812/31/184/1/2019

Past Due - Safety & Security to complete review of users under the Premisys application by 7/31/19. New target date is 8/15/19. Revised target date is 11/8/19.

12-31-19 Open 5/8 2/7/2020 1:21 PM16


Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status

2019-18-EA External Audit: LACMTA Memorandum of Understanding (MOU) Compliance Examination

2018-01 Communicate the requirements of the MOU to all key personnel responsible for each of the compliance areas. It is also recommended that a regularly scheduled meeting be held for all responsible personnel to discuss and review the requirements and meeting schedules in their respective areas for better flow of information.

Safety, Security & Compliance team will read through the MOU to ensure they understand the requirements of the MOU. There are regularly scheduled “Right of Way Task Force Meetings” which LACMTA participates. SCRRA will work with LACMTA to see if these meetings will be sufficient to cover the MOU recommendation.

Safety Security & Compliance

6/30/2019 Past Due

Starting January 2020, Finance will ensure quarterly meeting will be set up timely.


2018-02 SCRRA establish regular meeting dates on or before the beginning of the fiscal year to ensure compliance with the requirements of the MOU. Information presented should be timely and current to enable management to monitor status and provide relevant oversight of projects. Minutes should be promptly prepared and retained for all meetings.

SCRRA intends to hold four quarterly meetings for rehabilitation and renovation. LACMTA and SCRRA staff agreed that the reporting would be due 60 days after the end of each quarter. SCRRA agrees that minutes will be taken at each quarterly meeting.

PMO N/A Past Due

Partially Implemented

Missing 4Q meeting as informed by external auditor and LACMTA.

Starting January 2020, Finance will ensure quarterly meeting will be set up timely.


2018-03 Appropriate schedules of deferred revenue account should be maintained in accordance with the LACMTA requirements. The schedule of unearned revenue should reflect the nature and source of the unearned revenue account balance (i.e. MOU numbers, type of subsidy or grant, grant year, purpose, restriction as to use, etc.)

SCRRA’s external auditors (Moss Adams) completed a reconciliation of all deferred revenue accounts for 2002 through 2016. SCRRA is reviewing the work done by the auditors and adding some additional information as requested by LACMTA. SCRRA will be incorporating this information into the deferred reconciliation for 2017 and future years.

Finance 12/31/2020 Not Yet DueDeferred revenue reconciliation was rolled forward to FY2019. As of 12/2/19, SCRRA has only two projects listed in the capital deferred revenue detail to reconcile .

EXTERNAl AUDITS

12-31-19 Open 6/8 2/7/2020 1:21 PM17


Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2020-02-EA EXTERNAL AUDIT: COMPREHENSIVE

ANNUAL FINANCIAL REPORT (CAFR)/SINGLE AUDIT

2019-01 Financial ReportingFinancial matters related to:- Allowance for doubtful accounts- Advanced deposits (repeat issue from prior year audit)- Capitalization of PTC Assets (repeat issue from prior year audit)- Contingency evaluation- Fuel hedge adjustment (repeat issue from prior year audit)- Pension Footnote Disclosure

Auditor recommended:We recommended that SCCRA update its accounting policies and procedures related to year-end reporting. Further, we recommend that the formal review of the financial statements include the preparation/completion of a disclosure checklist to ensure that all relevant disclosures are included in accordance with GAAP.

SCCRA Management will work with external auditors in FY20 to enhance year-end procedures to include a more detailed checklist for financial statement review and all relevant disclosures in accordance with GAAP and industry best practice.

Finance 6/30/2020 Not Yet Due

2020-02-EA EXTERNAL AUDIT: COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)/SINGLE AUDIT

2019-02 Federal Awards & Questioned costs:SCRRA’s listing of all equipment acquired with federal funds only included federal equipment acquired in recent fiscal years and did not include any equipment acquired with federal grants in prior years.

Auditor recommended:We recommended that SCRRA update its accounting policies and procedures related to federally funded equipment to track and include all the required information in accordance with applicable award regulations.

To address the FY18 Audit finding, staff began working in January of 2019 by first completing a review of Finance Policy 4.1, which provides guidance for the tracking of federal funded equipment. During the last six months of FY19, staff then worked to create a “Grantor Report” that tracks fixed assets by “Funding Source Award Number” and “Award Type.” In addition to tracking the federal participation percentage, the report would also track: description, serial number, federal award information number, acquisition date, acquisition cost, location, useful life, use and condition. This meets the basic requirement for FTA-funded equipment.

All of the fixed assets from FY17 – FY19 (and going forward) are being tracked by funding allocations or federal participation percentage. During the same six-month period of FY19, SCCRA’s fixed asset accountant was able to identify the funding allocations on 85% of the total 1,076_QTY assets to be accounted for. General Accounting staff has remaining 410 assets which require additional research to complete the project. This work is anticipated to be completed by June 30, 2020.

Finance 6/30/2020 Not Yet Due

12-31-19 Open 7/8 2/7/2020 1:21 PM18


Project # Project Name Rec # Recommendation Corrective Action Plan Department Due Date Status2019-01-EA FTA Triennial Review 2019 Finding 1 Metrolink Lacking excess real property inventory and

utilization plan as required by the FTASCRRA must submit to the FTA Region IX Los Angeles Metropolitan Office a written excess real property utilization plan, which includes all of the required elements. The plan must include a proposed timeline for property disposition.

Finance1/30/2020

Not Yet Due

Plan submitted to FTA

2019-01-EA FTA Triennial Review 2019 Finding 2 Facility and facility equipment was not being maintained and documented in accordance with the Facility/Equipment Maintenance Plan

SCRRA must submit to the FTA Region IX Los Angeles Metropolitan Office procedures for completing preventive maintenance inspections on time.

Facilities1/30/2020

Not Yet Due

Plan submitted to FTA

12-31-19 Open 8/8 2/7/2020 1:21 PM19

Corrective Action - Implemented Verified or Closed During Second Quarter FY 2020ATTACHMENT B

Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2020-03-IA Central Maintenance Facility

OperationsRec #1 Management should obtain a receipt acknowledgement

from the contractors (i.e. Bombardier and Amtrak) that they have and understand the most current Good Neighbor Standards and Practices and the SCRRA Fuel Conservation Program. The contractors should be reminded of these requirements regularly and held contractually accountable.

Management will provide to Contractors most current Good Neighbor Standards and Practices and SCRRA Fuel Conservation Program with their acknowledgement of receipt.


12/31/2019 Implemented.

contractors received most current SOP's


Rec #2 Procedures should be implemented to effectively monitor and document contractor compliance with the requirements under the Good Neighbor Standards and Practices and the Fuel Conservation Program. An example of a procedure would be to conduct and document periodic spot checks of train activity (i.e. idling engines, HEP usage, load testing). Non-compliance with the requirements should be immediately communicated to the contractor.

• The Operations contractor manager will establish compliance checks with trains crews at LAUS• The rolling stock contractor will document HEP status for all applicable train sets where HEP should be off when equipment arrives to the CMF and dropped off by the Operations contractor.• The rolling stock contractor will log emergency load testing to be performed outside of the loco shop area. Once permanent sound monitors are installed at the CMF, the system will be configured to sound out automatic alerts after certain decibels are reached to be notified of excessive noise and investigate appropriately. • Management will establish compliance checks on rolling stock contractor for load testing on special trains based on their schedule as well as random compliance checks on equipment idling in the yard and ground power station usage.



Verified thattracking sheets and process established for HEP and load testing - tracking sheets to be included in morning packets to management.


Rec #3 The Facilities Maintenance Department should ensure that the order of missing Ground Power Stations parts is provided to Bombardier as soon as it is received.

a.) The required equipment is on order and will be provided to Bombardier upon receipt.b.) The Good Neighbor Standard and Practices update will be drafted to further clarify the equipment needed to be connected to ground power, when equipment should be shut off and turned on prior to service to match current practices.c.) Material Inventory will ensure that there is a 10% reserve inventory maintained on Ground Power station cables according to inventory needed provided by the Contractor.


Materials Management


Verified through observation of delivered packing slips and acknowledgment of receipt from contractor


Rec #4 Management reviewing completed work orders should ensure that all documented evidence is included in the Net Facilities System. Employees not following procedure should be coached on the required procedures.

The recommendations outlined have been implemented. Inspections are completed weekly. An email notification is provided to Management following completion of each inspection.

Facilities & Fleet

Maintenance


Verified through subsequent review of completed work orders

12-31-19 Closed 1/8 2/7/2020 1:29 PM20


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2020-03-IA Central Maintenance Facility

OperationsRec #5 Management should ensure that Sand Silo Inspections

are conducted timely.The recommendations outlined have been implemented. Inspections are completed weekly. An email notification is provided to Management following completion of each inspection.

Facilities & Fleet

Maintenance


Verified through subsequent review of completed work orders


Rec #6 Update the current SOP to establish guidelines as to the inspection procedures to be followed when the Sand Silo access hatch is opened. Ensure that SCRRA personnel are trained with the new guidelines.

SOP for Sand delivery was revised on September 30, 2019 to address the use of Access Hatch. Maintenance staff were trained on the procedures including inspection of the seal following the opening of the access hatch if the hatch is opened.

Facilities & Fleet

Maintenance


Verified updated SOP and personnel acknowledgment of new procedures


Rec #8 Facility Management should conduct regular spot checks throughout the facility to ensure compliance with all requirements under the Good Neighbors Standards and Practices and the Storm Water Pollution Prevention Plan. Non-compliance should result in holding the contractor contractually accountable and performing necessary training.

• Housekeeping practices for each section of the facility have beendeveloped by the contractor to address the trash, gloves, bottles and other material on the ground. • Monthly walks with the area supervisor for each section have been established to observe and address housekeeping issues directly with thesupervisor responsible. Inspections will be documented and recorded. • Rolling stock equipment contractor will be issued Project letter to redtag and remove from service area any broken or damaged hoses.o Contractor staff were instructed to inspect hoses in the Service & Inspection Area prior to use, red tag defective equipment and removefrom area and only use equipment that is intact.

Facilities & Fleet

Maintenance

11/7/19 - Locomotive Shop inspection

11/14/19 - Car Shop Inspection

11/21/19 - Service Area Inspection

12/5/19 - Storage Track Area

ImplementedVerified:•Monthly checks established and completed to address compliancewith SOPs.•Rolling Stock Contractor instructed and acknowledged requirement to inspect and disposeof defective hoses.


Rec #11 Sand delivery times should be clarified to reflect the time frame (from beginning to end) as to when a sand delivery can begin and the latest it could end. Once updated, communication on delivery times should be clarified with the Community Relations Group.

Update Sand delivery times on the SOP Facilities & Fleet

Maintenance

1/31/2020 Implemented. Verified SOP updated and provided to Community Relations Group

12-31-19 Closed 2/8 2/7/2020 1:29 PM21


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2019-06-IA Performance Audit: Materials

Inventory ManagementRec #3 Inventory processes for ordering, receiving and making

inventory adjustments in the system should be segregated to the fullest extent possible.

Materials Management and Warehousing will:a.) Determine and implement an appropriate level of segregation of duties for Materials Management and Warehousing personnel.

MM&W 10/31/2019 Implemented.

Verified to revised task hierarchy within AssetWorks. Revised hierarchy segregates duties between Users, Operators and Supervisors.


Rec #5 A formal cycle counting methodology should be established. Key elements of the process should include guidance for the frequency of counts and benchmarks should be established for the expected accuracy of counts. An effective cycle counting process may eliminate the need for annual physical inventory.

Materials Management and Warehousing will establish a formal cycle count program within or outside of AssetWorks using an ABC Stratification analysis.

MM&W 12/31/2019 Implemented.

Verified thatCycle counting process established


Rec #7 Inventory deliveries should be verified immediately upon receipt

As of September 20, 2019, Materials Management have implemented the action of verifying inventory deliveries immediately upon receipt.

MM&W 9/20/2019 Implemented. Verified though observation.


Rec #8 The Purchasing, Contracts and Contract Compliance Department should work with IT to automate the preparation, approval and submission of the Purchase Order process in Oracle

Contracts and Procurement to work with IT to turn on the capability in Oracle for POs to be sent by Oracle to the suppliers once approved. Oracle (R12) supports this function and needs to be turned on by IT. Email templates to be developed for consistency in communication when sent directly from the system. Going forward, Contracts and procurement will ensure that information is up-to-date and the automation is implemented.

Contracts & Procurement

10/31/2019 Implemented.Verified the functionality of the new process with Contracts & Procurement Department.


Rec #11 Materials Management should collaborate with the Equipment Department to determine the best workable solution for providing needed parts to contractors after business hours while controlling access to the warehouse.

MM&W will:a.) Work with the Facilities and Security teams to rekey the CMF Material Control warehouse to prevent unauthorized access. b.) Work with Equipment and Bombardier to develop a list of authorized contractor personnel who can access the warehouse after hours;c.) Secure commitments from authorized contractor personnel to complete the material control log upon after hours entry.d.) Ensure that only authorized employees have card reader access to the CMF Material Control warehouse.

MM&W 11a.)9/30/19

11b.) 10/15/19

11c.) 10/31/19

11d.)10/31/19

Implemented. Verified:a.)door was disabledb.)listing of authorized personnelc.) acknowledgment from Contractord.)only authorized employees have access to warehouse

12-31-19 Closed 3/8 2/7/2020 1:29 PM22


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2019-06-IA Performance Audit: Materials

Inventory ManagementRec #12 Materials Management should collaborate with the IT

Department, Operations and Human Resources to establish procedures that will ensure that access to AssetWorks is immediately removed for employees/contractors ending employment with the Authority. In addition, periodic reviews of access rights in AssetWorks should be performed to ensure only authorized individuals have access, and that such access is appropriate

a.) Setup a meeting with IT, Operations, and Human Resources to establish procedures to revoke Assetworks access upon employment termination. b.) Assetworks access has been revoked for all terminated employees and contractors. Internal Audit has verified that Management has addressed this Corrective Action as of September 30, 2019;

MM&W 12a.)10/31/2019

12b.) 9/30/2019

12a.) Implemented - attended the meeting to establish new procedure.

12b.) Implemented - verified terminated employee access revoked.


Rec #13 The Manager of the Materials Management and Warehousing should have delegated authority to approve access to the Inventory Management Module within the AssetWorks Inventory Management System

a.) Formalize an IT request that access to the Assetworks Inventory Management Module be governed by the SRF process and require Materials Management and Warehousing approval.b.) Revoke Assetworks Inventory Management Module access for select personnel following an internal review.

MM&W 13a.) 10/31/2019

13b.) 10/31/2019

13a.) Implemented.

reviewed updated SRF

13b.) Implemented.Verified that only selected personnel had Access


Rec #1 Contracts in collaboration with the Program Management Office (PMO), should consolidate the various procedures into a comprehensive set of closeout procedures and forms. Procedures and forms should be cross-referenced between Contracts and PMO.

Contracts will address these recommendations as part of the development of procurement and contracting procedures


will be determined


3/31/20196/30/2019

Implemented.

Procedures Manual submitted and reviewed


Rec #3 Contracts to update the current CON 23 addressing checklists, terminations and certification requirements.

Contracts will address these recommendations as part of the development of procurement and contracting procedures. The procedures will address closeout checklists, termination, and certification requirements.

Contracts 3/31/20196/30/2019

Implemented.

Form is developed under the new procedures


Rec #4 Contracts and other relevant departments jointly determine, based on contract value and complexity, the requirement for Legal and Insurance Specialist review.

Contracts, with support from other relevant departments, will consider establishing different legal and insurance requirements for contracts based on various parameters.

Contracts 3/31/20196/30/2019

Implemented.


12-31-19 Closed 4/8 2/7/2020 1:29 PM23


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2019-14-CA Contract Audit: Parsons

Transportation Group, Inc. Contract No. H1636-10 Closeout Process

Rec #5 Contracts to develop procedures by which a Warranty and Guaranty Register is prepared for each completed contract.

Contracts will address this recommendation as part of the development of procurement and contracting procedures.

Contracts 3/31/20196/30/2019

Implemented.



Rec #6 Contracts should develop time limits for the prompt closeout and de-obligation of unused funds.

Contracts will collaborate with the Finance and Grants Departments, and other relevant Departments, to develop appropriate time limits for contract closeouts and de-obligation of unused funds.

Contracts 5/31/20196/30/2019

Implemented.



Rec #7 Contracts and PMO develop procedures to ensure compliance with the Buy America requirement together with the appropriate documentation.

Contracts will address this recommendation as part of the development of procurement and contracting procedures. Other closeout procedures will reference the new procedure.


will be determined


3/31/20196/30/2019

Implemented.



Rec #8 Contracts and PMO should work together to develop the elements of a Contractor Performance Evaluation and include them in the procedures.

Contracts will work with departments to address these recommendations.


will be determined


3/31/20196/30/2019

Implemented.



Rec #10 PTC Contract Management Team should perform and evaluation of the contractor for this contract.

The performance evaluation will be submitted. PTC submitted the performance evaluation to Contracts and is awaiting Contracts' review. CEO extended the targert date

PTC (Completed) &

Contracts

3/31/20196/30/2019

Implemented.



Rec #2 Safety, Security & Compliance should promptly develop written procedures to manage Contract No. SP466-16 effectively. Internal controls for mitigating performance risks associated with deployment should also be implementedimmediately, i.e. requiring staff to perform site visits to validate the daily performance of LASD personnel performing their base contract duties.

The Safety, Security & Compliance Department will establish internal policies and procedures to effectively manage the LASD’s contract.

Security 7/1/2019 Implemented.

Written procedures submitted & reviewed.


Rec #5 Safety, Security & Compliance to complete the Community Policing Plan

The Safety, Security & Compliance Department will work with the Los Angeles County Sheriff’s Department to write a Community Policing Plan.

Security 7/1/2019 Closed

Alternative solution was implemented

12-31-19 Closed 5/8 2/7/2020 1:29 PM24


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status


Rec #1 Establish detailed procedures to document Sole-Source procurement files. Include standardized templates.

The Purchasing, Contracts & Materials Management Department (Contracts) will address the recommendation above as part of the development of revised procurement and contracting procedures.

Contracts 3/31/20196/30/19

Implemented. Verified updated procedures update.


Rec #2 Procedures to require that a Summary Record of Negotiation (SRN) is included in each file. The SRN TO include: (1) purpose of the procurement; (2) history of negotiations describing the most important aspects of the procurement; (3) names and positions of each person who participated in the negotiations; (4) explanation of how the final price was negotiated and; (5) a description of important contract terms and conditions.


Contracts 3/31/20196/30/2019

Implemented.

Sole source/Noncompetitive negotiated procurement justification form submitted


Rec #4 Designate electronic copies of procurement documentation as the “official” records for these files; the electronic filing format should be standardized.


Contracts 3/31/20196/30/2019

Implemented.



Rec #7 Coordinate with Project Managers to review and update practices and provide training on justification form completion to ensure: a. Justification is completed, dated, and submitted at the beginning of procurement process and; b. The appropriate Justification Form is used.

a.) Contracts will work with the IT Department to evaluate the feasibility of developing a web based non-competitive procurement justification form to facilitate better collection and tracking of justification data.

Contracts 3/31/20196/30/2019

Closed

Alternative solution was implemented


Rec #1 Update and implement the current EMF SOP and CMF SOP to improve the monitoring of the fuel receiving procedure. The revised SOPs should require SCRRA staff to observe the fuel delivery process, measure the delivered fuel quantity (e.g. using a dipstick), and maintain required documents.

MM&W will improve the fuel receiving SOP as follows:b.) Implement periodic MM&W monitoring to authenticate fuel deliveries and quantities.c.) Revise the SOP to reflect 1a and 1b.

e.) Revise the SOP to reflect 1d.

Material Management

b. 6/30/2019 c. 6/30/2019

e. 12/31/2019

Implemented.

SOPs were updated


Rec #2 Evaluate the appropriateness of the Security Guard Services and the Maintenance Contractor’s employee’s participation in the locomotive dieselfuel receiving process at EMF and CMF.

MM&W will address the ongoing contractor involvement in the CMF and EMF fuel receiving processes as follows:b.) Revise the SOP to reflect 2a.c.) Evaluate appropriate levels of contractor involvement in the fuel receiving process and implement conforming processes.d.) Revise the SOP to reflect 2c.

Material Management

b. 6/30/2019 c. 6/30/2019

d. 12/31/2019

Implemented. SOPs were updated to address monitoring of fuel delivery

12-31-19 Closed 6/8 2/7/2020 1:29 PM25


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2019-05-IA Performance Audit: Fuel

ManagementRec #4 Establish a reconciliation process between the fuel

received, fuel invoiced, and the data in the Fuel Management Systems (Fuel Master Plus and Phoenix for Windows). SCRRA Material Management & Warehousing Policies andProcedures Manual – Central Maintenance Facility - COO-MM6 needs to be updated with clear guidance for the reconciliation process.

MM&W will address reconciliation via corrective actions 1a - 1e. MM&W will not institute reconciliation processes using legacy systems as its focus will be on new system implementation per corrective actions 8a - 8c.

Material Management


SOPs were updated


Rec #8 MM&W management should upgrade the Fuel Management Systems and integrate them into one system. Ensure the databases are updated to provide fuel data integrity.

MM&W will upgrade and integrate CMF and EMF diesel fuel systems into a single fueling system via the following process:c.) Finalize the scope of work and submit a request for proposal via Contracts and Procurement.

Material Management

c. 9/30/2019 Implemented. The process to procure a new fuel management system is completed


Rec #10 MM&W management should revise the SCRRA MM&W Standard OperatingProcedures (SOPs) and include control procedures of the segregation ofduties for the fuel purchase process to the extent feasible.

MM&W will address segregation of duties in the fuel purchase program as follows:

d.) Revise the SOP to reflect corrective action 1a and segregation of duties during the fuel receiving process. MM&W will also note in the SOP revision that the fuel receiving process does not result in Fuel Manager invoice approvals.e.) Revise the SOP to reflect corrective actions 8a-c and new fuel systems. The SOP revision will detail that new fuel systems will independently and accurately record transactions without MM&W involvement to guard against potential fraud or error concealments.

Material Management

d. 6/30/2019e. 12/31/2019

Implemented.

SOPs were updated

2017-13-IA Performance Audit: Fare Revenue Data Integrity (Phase 4)

Rec #4 FCS to ensure that Contractors are compliant with PCI-DSS requirement and the SOC 2 examination report requirement should be included in the future service agreement.

FCS has requested a letter from INIT addressing PCI-DSS compliance. FCS INIT: 12/31/19 Implemented.An assurance letter received from INIT

2017-18 National Transit Database - AUP Finding 1 We noted no evidence of documented review of monthly data, which is reported to NTD. While annual reports are certified by the CEO, it does not appear that there is through process in place to review the summary data worksheets for accuracy and completeness before these reports are provided to NTD

Monthly data, which is one part of the NTD effort, is compiled and reviewed by the Business Analyst (BA). Upon completion of the review, the BA send the final numbers, along with a link to the documentation, to the Senior Manager, Business Operation. The Manager review the monthly data, (the final numbers, AND the source document), then responds with confirmation. Although this process was in place for report year 2018, it has been made more robust for report year 2019, and evidence of the review is being saved on a monthly basis in anticipation of future audits.

Business Operations

6/30/2019 Implemented. Issue was not raised by external auditors on 2019 AUP Report

12-31-19 Closed 7/8 2/7/2020 1:29 PM26


Project # Project Name Rec #3 Recommendation Corrective Action Plan Department Due Date Status2017-18 National Transit Database - AUP Finding 2 One of the requirements of the NTD and one of the

SCRRA’s internally established methodologies for calculation of annual Passenger Miles Traveled (PMT) data that is reported to NTD is performance of Conductor Ridership Surveys, which should be conducted based on random sampling methodology throughout the year. We noted that Conductor Ridership Surveys were not performed for the months of June through December of 2017, for six months of the fiscal year 2017/2018. This represents change in established methodology for calculation of PMT, which was approved by FTA for NTD reporting. SCRRA’s documented should be followed or updated based on actual process in place

Since this lapse in random sampling, which took place durning the first half in report year year 2018, a new business analyst was hired with the primary duty of working on the NTD, and completing the PMT task discussed in this finding.

Business Operations


2017-18 National Transit Database - AUP Finding 3 We noted that sampling procedures currently used by SCRRA in calculation of PMT were last reviewed and revised in 2014 based on data obtained in 2011–2013. With organizational and service level changes in the past five years, including change in SCRRA’s ridership and service segments recently added, we suggest that the methodology is reviewed and submitted to FTA for approval once again.

The NTD Desk Manual has been developed. Methodological review will be performed under CTO with a qualified firm during the fiscal year 2018-19. Budget has been established in the FY19 Operating budget to fund this effort.

As of July 1, 2019 - CTO work is complete and new methodology being utilized for report year 2020.

Business Operations


2017-18 National Transit Database - AUP Finding 4 During our testing, we noted that the Delay Reports format for documentation of missed trips that are used in calculation of Vehicle Revenue miles reported to NTD has changed during the year. We recommend that changes to format incorporate essential reporting information, such as the amount of missed miles for that given train segment.

Automated Delay Report were implemented during report year 2018. The Delay Reports provide the essential information that we use to derive the amount of missed miles for a given train segment.

Business Operations


2017-18 External Audit: National Transit Database - AUP

Finding 5 Finding 5:During our testing, we noted that purchased services or providers which is included in the Metrolink NTD reports is not being reviewed. We recommend, that purchased services and Transportation be reviewed.

During FY18, Form B30 was filled out by our Operations Department. This form is comprised mainly of financial data. Both Finance and Operations agree going forward (During FY19 submission) this data should be updated by Finance and reviewed internally to ensure the proper data was being input.

Finance 10/31/2019 Implemented. Issue was not raised by external auditors on 2019 AUP Report

2016-17 National Transit Database - AUP Finding 3 There are no formalized or documented procedures for reporting and maintaining data in accordance with National Transit Database (NTD) Requirements. We also noted that sampling procedures currently used by SCRRA in calculation of Passenger Miles Traveled (PMT) were last reviewed and revised in 2014 based on data obtained in 2011–2013. With organizational and service level changes in the past five years, we suggest that methodology is reviewed and submitted to FTA for approval once again.

The NDT Desk Manual has been developed. Methodological review will be performed under CTO with a qualified firm during the fiscal year 2018-19. Budget has been established in the FY19 Operating budget to fund this effort.

As of July 1, 2019 - CTO work is complete and new methodology being utilized for report year 2020.

Business Operations


12-31-19 Closed 8/8 2/7/2020 1:29 PM27




FROM: Stephanie Wiggins, Chief Executive Officer

SUBJECT: FY2019-20 Quarterly Investment Report – Quarter Ended December 31, 2019

Issue

The Authority’s Annual Investment Policy requires the Treasurer to make a quarterly investment report to the Board of Directors. Section 53646 of the California Government Code encourages local agencies to file this report. This report is for the quarter ended December 31, 2019.

Recommendation



This report aligns with the strategic goal to maintain fiscal sustainability and present an update to the Board on cash & investment portfolio and interest earned.

Background

The objective of the Authority's investment strategy is to ensure that the Authority's temporary idle funds are prudently invested to preserve capital, provide necessary liquidity and achieve a market-average rate of return through economic cycles. The Authority's externally-managed funds are maintained with the State of California's Local Agency Investment Fund (LAIF) and a money market account with Bank of America. These investment vehicles are designed to enhance total return consistent with the objective of safety and liquidity.

Discussion

For the quarter ended December 31, 2019, the Authority managed a portfolio of $114.2 million in cash, cash equivalents and investment funds. Approximately $44.8 million (39%) of the portfolio was comprised of restricted funds while the remaining balance of $69.4 million (61%) was comprised of unrestricted funds.

28

FY2019-20 Quarterly Investment Report – Quarter Ended December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

Restricted Accounts Local Agency Investment Fund (LAIF) 40.9$ Bank of America Money Market Reserves 3.9 44.8$

Unrestricted Accounts Cash on hand 43.6 Cash on hand/cash threshold 25.0 69.4

Total portfolio 114.2$

Cash Portfolio as of December 31, 2019(Dollar amount in millions)

Restricted Funds

Local Agency Investment Fund (LAIF)

LAIF is a pooled fund managed by the State Treasurer in which the Authority is a voluntary participant. It is an investment alternative for California’s local governments and offers local agencies the opportunity to participate in a major portfolio that invests hundreds of millions of dollars, using the investment expertise of the State Treasurer’s office investment staff at no additional cost to the Authority.

The balance in the Authority’s LAIF account is comprised of grants from Proposition 1B (Prop 1B) and accumulated interest earnings already earmarked in prior years for existing Capital and Rehabilitation projects. This balance does not represent a source of available funding. The active 34 Prop 1B-funded projects are listed in Attachment A.

Prop 1B was approved by California voters on November 7, 2006 to authorize $19.9 billion of State General Obligation Bonds for specific transportation programs intended to relieve congestion, facilitate movement of goods, improve air quality, and enhance the safety of the State’s transportation system.

The Authority submits funding applications to the State and receives Prop 1B funds, which are designated for specific purposes such as rehabilitation, replacement and expansion of various assets including tracks, bridges, signals, rolling stock, ticket vending machines, grade crossing improvements, and positive train control systems. Specific projects that may qualify for new Prop 1B grants are identified during the annual budget process. At each fiscal year-end, the balance in LAIF account is shown on the Authority’s Comprehensive Annual Financial Report (CAFR) within the notes to basic financial statements.

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Bank of America (BofA) Money Market Fund

The Authority has established a Bank of America money market reserves account in connection with the use of its lease/leaseback proceeds, which historically have been and continue to be, restricted by the Board. As of December 31, 2019, approximately $3.9 million is invested in BofA, which the Board has earmarked for capital maintenance of rolling stock to ensure it is in good condition to meet and maximize its useful life. Interest earnings on the account may be used for other specific purposes as approved and directed by the Board.

Investment Portfolio Compliance

The composition of the investment portfolio as of December 31, 2019 complies with the provisions of the Authority’s Annual Investment Policy1 where LAIF’s deposit limit is capped at $65 million and money market and mutual funds’ maximum limit at 20% of the portfolio. The current balance in LAIF at $40.9 million is below the $65 million cap and BofA’s money market fund balance at $3.9 million represents only 3% of the portfolio.

Interest Earned

The interest earned on the Authority’s LAIF account for the quarter ended December 31, 2019 is equal to $242,122.39 representing a 2.29% annual interest rate.

Unrestricted Funds

Cash on Hand, Cash Threshold

Approximately $69.4 million in cash was on hand as of December 31, 2019, of which $25.0 million1 is maintained as cash threshold to meet projected operating and capital expenditures within thirty (30) days. If the cash balance is projected to fall below $25.0 million for more than two consecutive months, staff will notify the Board.

Budget Impact

There is no budgetary impact as a result of this report.

Prepared by: Thelma Bloes, Senior Manager, Finance Elizabeth Martinez, Finance Analyst I, Cash Management Jerri Stoyanoff, Senior Accountant, Grants Administration

1 Board-approved Investment Policy as adopted on January 11, 2019 stipulated LAIF deposit limit to a $65 million cap; funds invested in Money Market accounts cannot exceed 20% of total portfolio; and $25 million cash threshold.

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Ronnie Campbell, Chief Financial Officer

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2 The total unallocated is programmed as follows: $0.20M for rehabilitation of track, signals, bridges and related assets, $0.95M for Tier 4 locomotives, and $0.27M unrestricted. Funds are allocated to approved projects as milestone invoices are received and coded.

Attachment A

List of Prop 1B projects and funds deposited in LAIF 12/31/19 Balance

1 Security data network $ 7,706,826.52 2 LAUS track & signal modernization 6,123,891.32 3 Rail car restoration 4,241,618.71 4 Tier 4 3,613,312.31 5 Station surveillance 3,604,693.12 6 Tamper, stabilizer, regulator 3,162,654.61 7 Tunnel 25 safety & security 3,086,611.92 8 Maintenance facilities hardening 2,272,085.77 9 LCTOP direct mail 1,586,587.56

10 Ventura LA bridge repair 1,093,893.94 11 PTC 1,034,153.69 12 Ticket vending machine replacement 981,858.13 13 Safety improvement Moorpark & Ventura facilities 191,226.78 14 Defibrillators for cab cars 157,215.34 15 CMF end connect 115,196.32 16 Valley tunnel 25 61,097.46 17 SOC enhancements 53,894.20 18 Valley repl ties rated 3&4 48,032.12 19 Valley sub bridge and culvert 39,949.67 20 Rolling stock rehab 38,164.70 21 Tunnel intrusion detection systems 35,715.88 22 Ventura LA-RR curve 130 34,624.59 23 Security augmentation 33,114.70 24 Valley RR rail and curves 32,260.76 25 Ventura (LA) sub row grading 28,286.41 26 Valley bridge replacements 25,653.96 27 Electronic ticketing system 18,391.56 28 MTA-Canoga Trans corridor 15,923.75 29 Ventura (LA) signal rehab 15,851.99 30 San Gabriel signal rehab 15,300.18 31 CP Beech turnout replacements 14,894.12 32 Ventura (VC) track SOGR 6,452.11 33 SystemW -RR EMF fuel system 434.36 34 Rotem 409.04

Sub-Total $39,490,277.60 Unallocated2 1,418,591.94 Total $40,908,869.54

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SUBJECT: FY2019-20 Quarterly Accounts Receivable Status Report – Quarter Ended December 31, 2019

Issue

This report presents a status update on the Authority’s Accounts Receivable for the quarter ended December 31, 2019.

Recommendation



This report aligns with the strategic goal to maintain fiscal sustainability. This report presents outstanding receivables to the Board and provides updates related to collection efforts.

Background

The Authority’s sources of funds include passenger fares, revenues from dispatching and maintenance-of-way, operating and capital subsidies from Member Agencies, and grants through state and federal programs.

The accounts receivables are composed of:

• Capital Contributions Receivable – Due from Member Agencies and other stateand federal grantors such as the Federal Transit Administration for capital andrehabilitation projects (e.g., construction and rehabilitation of rail infrastructuresystem).

• Due from Other Agencies – Due from agencies such as the California Departmentof Transportation (Caltrans) for construction projects.

• Fares Receivable – Due from customers purchasing passenger fares for commuterrail services.

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FY2019-20 Quarterly Accounts Receivable Status Report – Quarter Ended December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

• Operating Subsidies Receivable – Due every quarter from the five MemberAgencies relating to operating subsidies.

• Other Receivables – Cash received pending application to the correct account(functions as a temporary holding account).

• Shared Use Agreement (SUA) Receivable – Due from other rail partners such asAmtrak and Union Pacific Railroad Company for sharing rail lines.

• Third Party Agreement (TPA) Receivable – Due from private and public agenciesfor projects such as special train services, construction of capital projects on behalfof third parties, and flagging services.

Discussion

As of December 31, 2019, the total outstanding accounts receivable (A/R) balance as indicated in the table below, equaled $44.4 million, of which $7.6 million was current and $36.8 million was past due beyond the 30-day measurement point. Approximately $14.3 million (39%) of the total past due amount pertain to multiple shared use agreements which are the subject of ongoing disputes as well as a pending arbitration being handled by the SCRRA Legal Department.

The table and chart below provide an update on older account activities from September 30, 2019 to December 31, 2019:

Total Current1-30Days

31-60Days

61-90Days

91-180Days

Over 180 Days

Capital Contributions Receivable 6.9$ 2.4$ 3.9$ -$ -$ 0.1$ 0.5$ Due From Other Agencies 18.2$ 2.3$ 10.4$ 5.2$ -$ 0.2$ 0.1$ Fares Receivable 1.1$ 0.6$ 0.1$ 0.1$ 0.1$ 0.1$ 0.1$ Operating Subsidies Receivable 0.3$ 0.3$ -$ -$ -$ -$ -$ Other Receivables (0.2)$ -$ -$ -$ -$ -$ (0.2)$ Shared Use Receivable 15.9$ 1.6$ 0.1$ 0.9$ -$ 0.5$ 12.8$ Third Party Receivable 2.2$ 0.4$ -$ 0.2$ 0.1$ 0.2$ 1.3$

Total 44.4$ 7.6$ 14.5$ 6.4$ 0.2$ 1.1$ 14.6$

A/R Aging Report as of December 31, 2019(in millions)

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The Board provided direction in February 2017 for a 1.5% charge on accounts receivable balances not paid within 30 days from the date of invoice, which resulted in a late charge assessment to 23 accounts and assisted with collection efforts.

9/30/2019 Increase Decrease 12/31/2019

Capital Contributions Receivable (1.4)$ 2.0$ (0.1)$ 0.5$ Due From Other Agencies -$ 0.1$ -$ 0.1$ Fares Receivable 0.1$ 0.1$ (0.1)$ 0.1$ Operating Subsidies Receivable -$ -$ -$ -$ Other Receivables (0.2)$ -$ -$ (0.2)$ Shared Use Receivable (SUA) 12.3$ 0.6$ (0.1)$ 12.8$ Third Party Receivable (TPA) 1.4$ (0.1)$ 1.3$

Total 12.2$ 2.8$ (0.4)$ 14.6$

A/R Aging as of December 31, 2019: Over 180 Days(in millions)

Other -$1.5Other $0.4 Other $0.5 Other $0.5TPA $1.4TPA $1.4 TPA $1.4 TPA $1.3

SUA $12.3 SUA $12.3 SUA $12.7 SUA $12.8

$12.2 $14.1$14.6 $14.6

-$2

$0

$2

$4

$6

$8

$10

$12

$14

$16

9/30/2019 10/31/2019 11/30/2019 12/31/2019

A/R Aging as of December 31, 2019: Over 180 Days(in millions)

Other TPA SUA Over 180 Days

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As of December 31, 2019, SCRRA has been awarded three allocations from the State totaling $98.2 million for the SCORE Program. As part of Pre-Award Authority, staff has executed preliminary environmental, design, and early construction work incurring related project-to-date expenditures totaling $7.0 million. This amount has not yet been billed and is therefore not reflected in the December 31, 2019 A/R balance. In discussion with State Officials, we anticipate Program Supplements being executed in February 2020 and reimbursement for expenditures-to-date to follow shortly afterwards.

Budget Impact


Prepared by: Thelma Bloes, Senior Manager, Finance Lillian Tung, Senior Finance Analyst Edison Abrenica, Senior Finance Analyst Alice Oh, Senior Accountant

Ronnie Campbell Chief Financial Officer

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SUBJECT: FY2019-20 Quarterly Fuel Hedging Program Update – Quarter Ending December 31, 2019

Issue

Staff is providing an update on the Authority’s Fuel Hedging program. This report is as of December 31, 2019.

Recommendation



This report aligns with the strategic goal to maintain fiscal sustainability.

Background

The Agency’s FY20 Fuel Budget is approximately 8% of the total Operating Budget. Given the volatility of fuel pricing, the Authority’s actual fuel expense has ranged from $17.3M to $23.4M accounting for 7.4% to 9.7% of the actual Operating Expenditures in the past four years (FY16-FY19).

Finance Policy FIN-11.1, Fuel Management and Hedging, was approved by the Board on January 23, 2015 and provides guidance for the Fuel Management and Hedging Program. This Program was implemented to minimize the budget risk resulting from the purchase of fuel on a spot basis and to seek overall low fuel cost in the long-term while managing budget risk. The Board has requested that staff provide a quarterly update on our Fuel Management and Hedging Program.

On July 1, 2017, a more formalized Fuel Management and Hedging Program was initiated with approved Fuel Hedging Advisor, Linwood Capital, LLC, utilizing the purchase of “futures contracts”. A deposit of $1,500,000 was made to an account established in the name of the Authority, for use in purchasing forward contracts for fuel.

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Fuel Hedging Program Update for Quarter Ending December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 2

Discussion

As of December 31, 2019, the Authority’s hedging account had a value of $3,295,134, an increase of $111,286 from Fiscal Year ending September 30, 2019. The Fuel Hedging program has the primary function of making our fuel costs predictable. On that basis, it is to be expected that the sale of positions may create a gain or loss depending on the movement of fuel prices. Over the life to date of the program, we have realized gains of $1,795,134 added to our original deposit of $1,500,000.

Our fuel hedging program is currently hedged through the end of fiscal 2020, providing more assurance that our budgeted cost will hold, regardless of market conditions.

The Futures Account Report for quarter ended December 31, 2019, provided by Linwood Capital, LLC is included as Attachment A.

Budget Impact


Prepared by: Alex Barber, Senior Manager, Finance

Ronnie Campbell Chief Financial Officer

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Fuel Hedging Program Update for Quarter Ending December 31, 2019 Transmittal Date: February 7, 2020 Meeting Date: February 14, 2020 Page 3

ATTACHMENT A

Cumulative since inception for fiscal year ending

FY Ending June 2019

December 31, 2019

Cumulative Fuel Expense (including brokerage fees) (1,623,322) (1,795,134)

Cumulative net cash from Metrolink to futures account 1,500,000 1,500,000

Contingent future fuel expense (480,551) (376,488) Account Value = cash asset after fuel expense minus contingent fuel expense 3,603,873 3,671,622

Cash asset after fuel expense 3,123,322 3,295,134

Annual Fuel Expense from futures 591,061 (171,812) Annual Cash from Metrolink to futures account - -

Annual Cash from Metrolink to futures account less fuel expense (591,061) 171,812

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audit and finance committee february 14, 2020

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