MANAGER’S REPORT
02/14/2018
This month’s report includes a great deal of discussion on financial management subjects. It is pretty dry stuff, but we needed to get this information into the record.
I can do a “show and tell”, which may be easier to follow, and answer any questions at the meeting.
WSP:
Our response letter has been submitted to DOH on January 20th. I expect that DOH will take their full 90 days to review.
Treasurers Report:
I apologize for the lengthy discussion on financial management, once again, but we have been in a period of transition from a system largely kept by hand and not BARS compliant, to one that is more automated, more integrated and is BARS compliant.
I thought we had arrived once before, but was mistaken. I am reasonably confident we are now in a stable pattern. As commissioners you need to be up to speed, in a general sense, on how the District’s financial management system works. I will be copying this discussion into the Policies & Procedures Manual.
You will notice that I am switching the order for the Treasurer’s Report and the Revenue/Expense Report. Actually, the Revenue Expense Report will be titled the Reconciled Budget Position. But more on that later.
The Treasurer’s Report is finally, finally, a thing of beauty. It is now the most useful report in terms of summarizing the financial condition of the District.
But first, a brief tutorial on how the finances, and the reporting, is organized.
How we manage our finances is dictated by the Washington State “Budget, Accounting, Reporting, System” (BARS) manual. In years past the District has been somewhat casual in how it conforms to the BARS manual because the State Auditor made the assumption that the County Treasurer handled all of our budgeting and reporting.
That assumption has only been partially correct, and becomes less so as the County delegates more of the budgeting and accounting responsibility to the District. The big water shed happened for our District when the County decided we were directly responsible for the annual reports to the state auditor. We had previously relied on the County to generate our annual reports. With that no longer being the case, the reports we generate in house must conform to the BARS manual.
Even when the County handled all of the accounting and reporting, they did not do so in a detailed enough fashion to manage the operations of the District. In the past we have depended on what amounted to a second set of books that, hopefully, could be reconciled to the County records, in order to have sufficient detail. What we have now is a system that is essentially an expansion of the County records.
The BARS manual requires the District to manage our finances using an approach called Fund Accounting on a Cash Basis. All of our financial activities are divided up into funds. The District has six funds. Each fund has both a number and a name.
FUNDS:
401 Regular Maintenance Fund: This is the fund in which most of our activity occurs. The revenue from rate payers ends up in the fund, and we pay the majority of our bills from this fund.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water Dist #2 Maint” Fund.
402 Revenue Bond Reserve (USDA): This is the fund into which we have collected the reserve required by the USDA. This is our only “reserved” fund. Reserved funds can only be used for the purposes for which they have been reserved.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water #2 Bond Rsv” Fund.
410 General Facilities Fund: Though this is not technically a “reserved” fund, the District has chosen to identify these funds to be used to make general system expansions to accommodate growth. From a legal standpoint we can use the funds for anything we want because we have not officially designated this a reserved fund.
As identified by the District, these funds would be used for general upsizing projects, such as installing higher capacity well pumps, acquiring additional water rights, or expanding our control capabilities.
Actual system expansion, in keeping with District policy, is paid for by the benefited properties.
This Fund coincides with, and is reconciled to, the County Treasurer’s “Water Dist #2 Fac Reserve” Fund.
600 Refundable Deposits: These are funds that do not actually belong to the District. They are funds that have been deposited into our keeping for specific purposes. Refundable deposits include the Rent Deposit, Developer Extension Deposit, and Meter Deposit.
When charges are taken out of these funds, the cost of installing a meter for instance, the money is transferred into one of the other funds. Typically the 401 Regular Maintenance Fund. Any money remaining is refunded to the customer.
These funds do not coincide with any County fund designations.
601 Clearing Fund: Not to be confused with the Clearing Account (we will get into “accounts” in a bit). This is the fund into which we deposit receipts prior to transferring them to the County Treasurer.
This fund does not coincide with any County funds except that money in this fund is transferred to the the 401 Fund.
603 Capital Replacement Fund: This fund does not show up in the Treasurer’s Report because it has never had a beginning balance or any activity. This fund was created when we set up Bias because “everyone” has a capital replacement fund. We have options with this fund. We could transfer any excess in the 401 Regular Maintenance Fund into this fund at the end of each year. Or we could budget and transfer money into this fund. Or we could let it sit with no balance and no activity until such time as we think of something to do with it.
ACCOUNTS:
Since this is Fund Accounting on the Cash Basis, there have to be cash accounts. Unlike business accounting, “accounts” refer specifically to cash accounts. Typically, they can be thought of as checking accounts, which some of them actually are. What are thought of as “accounts” in business, such as “Office Supplies” or “Electricity” are styled “Line Items” in BARS.
While the Funds each have a three digit number, Cash Accounts are simply number sequentially.
1 General Maintenance: This is the checking account into which we deposit receipts from rate payers for water bills, various fees associated with water service, and General Facilities Funds. This is a clearing account from which we write the monthly check to the County Treasurer.
The The 1 General Maintenance cash account is attached to the 401 Regular Maintenance Fund. It is reconciled with the Bank of the Pacific.
2 County Treasurer: We can think of the money transferred to the Treasurer as a checking account. The money in this account comes from the 1 General Maintenance Account through the monthly check. It is attached to the 401 Regular Maintenance Fund.
This account is reconciled with the County Treasurer reports.
3 Rent Deposit: We receive a deposit equaling two base rate billing cycles from tenants when the property owner requests that the water bill be sent to the tenant.
The tenant is refunded any money left in the account after all water bills have been brought current at the time the tenant vacates the property.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
4 Developer Extension: This accounts receives deposits required by our Developer Extension Agreement (currently $5,000). The money is used to cover the expenses of reviewing and monitoring developer projects that are to be deeded over to the District.
Any money left in the account after completion of the project is refunded to the developer.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
5 Meter Deposit: We receive a deposit at the time a service meter is requested (or when a meter is to be moved at the customer’s request). The money is used to cover the District’s costs of installing a meter.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled to the Bank of the Pacific.
Any money left over following installation of the meter that is not transferred (by check) to the 1 General Maintenance cash account is refunded to the customer.
Petty Cash; We keep a petty cash account from which we make change and for small purchases.
This account is attached to the 600 Refundable Deposits Fund. It has no connection to the County Treasurer and is reconciled (when we remember) on a monthly basis.
ON TO THE ACTUAL TREASURER’S REPORT
Page 1 of the report summarizes the condition and activity of the Funds. It is pretty self-explanatory. The fund that is of most interest is the 401 Regular Maintenance Fund. For the month of January (for accounting purposes. When the expenses actually occurred is a bit more complex) the Beginning Balance was $328,195.84. Revenue was $50,561.62. Expenditures were $34,462.041. Leaving an Ending Balance of $344,295.45. Which is an increase of $16,099.61.
The 402 Revenue Bond Reserve (USDA) will not change from now on unless I can get those funds into the investment program. Perhaps Scott can assist me in that endeaver.
The 410 General Facilities Fund had a substantial increase, $20,025.84, as a result of several people wanting to get their Water Availability Letters prior to the big January 1st increase.
The 600 Refundable Deposits Fund is of little actual interest, beyond the fact that we are responsible for the care of those funds, because it is not the District’s money.
The 601 Revenue Clearing Fund is an in and out fund. Customer payments are entered in the fund and then transferred to the 401 Regular Maintenance Fund or 410 General Facilities Fund. Expenditures exceeded revenues this month because January’s receipts were more than December’s.
The “Claims Clearing”, “Payroll Clearing” and “Outstanding Deposits” columns should always be zero. There is a problem if they are anything BUT zero. Balances in these columns indicate that the fund was not reconciled.
The total at the bottom of the “Ending Balance” column should equal the total at the bottom of the “Adjusted Ending Balance”. If they don’t, there is a problem. I will fix any of those problems before you see the report.
Page 2 summarizes the activity in the cash accounts. I have already discussed these accounts in detail above.
The important thing to notice on Page 2 is that the Ending Balance and the Adj. Balance should balance, the Outstanding columns should be zero, and the total at the bottom of the Adj Balance column should equal Adjusted Ending Balance on Page 1. The Funds and Accounts must balance.
Page 3: The General Manager prepared the report, so it is appropriate for him to sign it, and it is the Treasurer’s Report so it is appropriate for the Treasurer to sign it.
Why does everything have to have a number? In dealing with all of this on a daily basis, much clearer communications occur if the funds and accounts are referred to by number.
Fun, hunh?
Revenue/Expense Report:
It is not outside the realm of possibilities that the County will one day cut us loose and require that we manage all of our finances with no assistance from them. As it is, all they really do is write the checks to our vendors and handle some of payroll (we have to handle anything related to benefits). So their assistance is minimal.
As we are now configured, should that transition ever take place, and there are forces at work that are making that closer to a reality, all we will need to do is order some checks and activate the payroll module in the Bias software. A few months ago it would have been a pretty significant fire drill. As an aside, the regulations regarding the handling of special district accounting recently changed. In years past special districts whose revenues and/or number of customers fell below a certain threshold had to have their finances managed by the county treasurer. Special districts above the threshold were (and still are) expected to handle their own finances. Just last year that changed. Now special districts that fall below the threshold, which this district does, can handle their own finances if they request and receive a letter from the county treasurer. An unanswered question is, can a county treasurer issue such a letter unilaterally without a request from the special district. The rule is ambiguous on that point.
All of which somewhat explains why the “Revenue/Expense Report” is changing to the “Budget Position” report. BARS does not really recognize a “Revenue/Expense” report. Public agencies are not concerned with profits, so revenue and expense are not as important as tracking expenses against the budget. In fact, in preparing a public agency budget, it is expected that the budget will show expenses equaling revenues, a “balanced” budget. Therefore, “Budget Position” report.
I will continue to label the report “Reconciled” if it is, indeed, reconciled or not if not. Though reconciliations are much, much easier now that our internal records track more closely with the County records. Reconciliations can now be completed within a few hours of receiving the reports as opposed to the few days previously required. The added benefit is that we can now have a much higher expectation that our records and the County records are in complete agreement.
In order to conform to the BARS methods some changes had to be made. The first change, and a major one, is that the receipts from customers’ payments were previously recorded in the Regular Maintenance Fund as they were received. Since we use a clearing cash account that approach would not work. There would be no way to reconcile our records with the County records since the balance in the clearing account is a moving target changing on a daily basis and does not appear in the County records. Thus, the establishment of the 601 Revenue Clearing Fund and associating the 1 General Maintenance cash account with that fund.
When we write the check to the Treasurer the cash transaction transfers the money from the 1 General Maintenance cash account to the 2 County Treasurer cash account. The transaction is tracked by an interfund transfer from the 601 Revenue Clearing fund to the 401 Regular Maintenance Fund.
Therefore, the revenue for the month shows up as an interfund transfer instead of directly as revenue. The revenue BARS line items are retained in the event that money is deposited directly to the 2 County Treasurer cash account. Though they will usually have zero balances except for the exceptions. For instance, investment income, which does not pass through the clearing fund and account but is deposited directly into the Regular Maintenance fund by the Treasurer.
Clear as mud, right?
I can cover this in the meeting while we are all looking at the reports.
The 401 Regular Maintenance Fund is detailed from Page 1 to Page 3 of the Reconciled Budget Position report.
In terms of January’s report, Revenues were $49,336.17, though those revenues are actually the check written to the County Treasurer in January so are really December’s revenues, the timing anomaly I have ranted on before and from now forward will refrain. Expenses were $34,462.01. Final comment on the timing, these expenses are from the Claims Request approved in January, so are actually December’s expenses.
As a point of reference, we have budgeted $49,150 per month for 401 Regular Maintenance Fund expenses.
As noted in the Treasurer’s Report, revenues exceeded expenses by $16,099.61
Pages 4 through 9 detail the activity in the other funds. Of some interest is Page 9, which is the Budget Position report for the 601 Revenue Clearing fund. It is here that the actual, direct revenue for the month is reported. These are the actual receipts for that month (as opposed to being the receipts for the previous month) and are divided up into their respective categories. The January report shows revenues exceeding expenses because the “expenses” from this account are the monies transferred from the clearing fund to the County Treasurer. In this case, December’s revenues exceed January’s.
The report is specifically designed to track the budget. The column that includes percentage figures indicates the percentage of the budget used to date. Since this report is for January line items that are below 8.3% are below budget, and, obviously, any items above that number are over budget.
Revenues are at 7.4%, so they are slightly below projections, which is typical for this time of year.
Overall expenses are at 6.4%, so expenditures are significantly under budget. Which is also typical for this time of year.
Even though it is early in the year, there are some areas of concern, and some that appear to be of concern but are not.
Payroll taxes are at 13.0% of their budget. This is a time of year when staff utilization should be low, and the Salaries and Wages are under budget, so this line item bears watching. Not that we can do much about it.
Software Support appears to be completely used up. But that is because we have paid the annual fees to most of our software vendors. Membership Dues and Fees are in a similar situation. We belong to WASWD and ERWOW and both of those dues have been paid for the year.
Note that all the reports for all the funds and cash accounts balance with each other. There are no miscellaneous amounts of money wandering around out there for which there is no accounting.
Purchase Orders
The current policy is to generate purchase orders for every purchase. Because that is more than slightly cumbersome, I would like a new policy that states that purchases of $100 or less do not require a purchase order.
That limit would apply to the total purchase. So no making multiple runs to the Dennis Company just to avoid filling out a purchase order.
I am of the opinion that we need to have this policy blessed by a resolution.
2018 Audit
No results yet. We received a good deal of positive response from the auditor, so I am looking forward to a good report.
There was some confusion, and lack of documentation, for vacation and sick leave for Charli. There was a hand shake agreement with a previous commission regarding those items.
We need to clear that policy up with a resolution. Charli gets two weeks of vacation per year. Her sick leave will now be calculated according to the new regulations.
Breakin
The only items we have recovered are the cutoff saw and few small tools.
We discovered that the thieves made off with our supply of pressure reducing valves, as well.
Water Usage
Water usage indicates that we are pumping considerably more water this year than during the same period last year.
It also appears that we pumped considerably more water in 2017 than in 2016. I will be conducting the annual water audit sometime in the next few weeks. It will be interesting to see where we stand. We got down to 3% water loss in 2016. I would be disappointed to see an increase in that number for 2017.
Maintenance Activity:
Usual daily/weekly/monthly maintenance activity. See attached report.
Compensation Policy
We do not have a District specific compensation policy because we do not have an employee manual.
We have been following the County’s general compensation policy and holiday schedule. They have a general policy and specific policies for each union contract.
I would propose that we codify and adopt a compensation policy. The County’s general policy is as good as any.
Specifically:
Over 40 hours per week: time-and-a-half
Most holidays: double time
1/1, 7/4 and 12/25 double time-and-a-half
We have been following the County’s holiday schedule since it tracks with the payroll calendar, to which we are tied since the County processes our payroll.
Contractor Repairs
OLYMPIC HIGHWAY
Fire Hydrant on Highway 12 close to North Bank Road. The hydrant was hit by a car. Examination indicated that the hydrant was not damaged.
Due to the proximity of other utilities, and the need to stage outside the highway fog line, it was advisable to excavate by vac-truck.
I have requested a copy of the accident report from the State Patrol, and have paid for it, so that I can get the name and address of the owner of the vehicle. But I have not yet received it. I have attempted to email the state, but so far have not received a response. The reports are supposed to be sent out within five business days of payment receipt. We are several weeks beyond that period now.
CENTRAL PARK DRIVE
There is a connection on Central Park Drive, just east of Hill Road that has been repaired three times. The problem has always been that the water main is on the north side of the road and the service connection is on the south side. The service lateral under the road was not sleeved at the time it was installed and is of an inferior quality material.
After three repairs we determined that the service lateral needed to be replaced. This involved contractor assistance.
We had hoped we could accomplish a “haul and replace” in which a pig is attached to the far end of the old line, the new line is attached to the pig, and a pull line is passed through the old line and attached to the pig. By pulling on the line the pig pushes the old line out while hauling the new line through the old lines soft soil.
That did not work in this case. The low quality PE pipe simply buckled under the pressure.
So we attempted to use a “torpedo”, which is a pneumatic device that can push through soil hauling a sleeve with it. The new line could then be passed through the sleeve. However, the torpedo depends on being able to push the soil aside. The soils in this area are too compacted to do that. The torpedo would only travel a few feet before no further forward progress was possible.
The final solution was to bring in a horizontal drilling rig to drill through the soils in order to install the new sleeve and service lateral.
117 Reyvaan Drive
This connection has been repaired multiple times. The problem is that the service lateral may be connected to the old water main that used to run up the hill along the power line easement, even though the residence is located immediately adjacent to the reservoir site. Or it may not.
We will need to pot hole along the service lateral to determine how it is routed. In any event, it appears to be too lightly constructed to withstand the pressures to which it is subjected.
If we find that the line is connected to the old line running up the hill, we will need to find the connection point at the top of the hill and cap that line off.
Either way, the line will be replaced with HDPE as opposed to the thin wall PE in current use.
Hill Road Water Main
Joe has suggested that we explore the possibility of doing part of this project. One approach would be to replace the line from south of Central Park Drive to the north side of the River Road intersection. This part of the project would avoid the two road crossings, which are expensive, and cut the length of the project approximately in half.
I think there is some merit in that approach. I haven’t had an opportunity to explore possibilities with contractors, but will do that in the near future if that is the board’s wish.
No action on this item in January.
Highway 12 Meters
I have done some research into this project, and will need to do some more before I am ready to solicit estimates.
Currently I have information from two companies that would fill our need. I would like to have more.
In view of the Hill Road problem we may need to postpone this project.
Training/Certifications.
No training activity in January.
I intend to sit for the WDM4 exam sometime this year. Just acquiring the qualifications to sit for the exam is an accomplishment. The District would have the distinction of being the smallest district in the state managed by a WDM4.
There are fairly stringent requirements to be eligible to take the exam. I have discussed those requirements and my qualifications and have been assured there will be no problem with my eligibility.
Safety
We have a mini safety meeting every morning. This time of year we focus on exposure issues and driving safety.
Vehicles
Service Truck: No issues.
F-150: Needed a new battery.
S-10: No issues.
Pickup Truck: No Issues
New Connections
No new connections in January.
Old Shop Building Gutters & Downspouts
No action in January.
Shop Site South Fence
On indefinite hold.
Alder Glen & Etc.
No news in January.
Carl Way/Ridgeview: Not an issue
Hemlock Park
Lois Lane Not an issue
Waverly Court Not an issue
Garden Road: Not an issue
Walthom Lane: Not an issue
Greenbriar Court
Reynvaan Court
Madow Court
Reed Lane Not an issue
Blaine Road (End) Not an issue
Larson Lane Not an issue
Fremont Drive
Silkey Court
Lake Road
Hemlock Park
Fairway Park
River Road: Replaced
Alder Glen: Will need replacement.
Fairway Terrace: Will need replacement.
Filing System
We are approaching the point where we can call in the shredding truck.
We still haven’t implemented a new filing system. A lot of my time got sucked up with the accounting system this year. It has been a steep learning curve that should be easing down some in 2018.
Renters
No action in January. As a reminder regarding this item…it is my intent to have two forms. One form that is completed by the tenant at the time they apply to have the billing in their name, and a second form that will be sent to the property owner informing them that the tenant is vacating. My thinking on the second form is that it will include a forwarding address for the tenant and will require acknowledgement by the property owner before the tenant’s deposit will be sent to the forwarding address.
While our policy of requiring a deposit for tenants is a service to the property owner, the primary objective is to remove the District from tenant/owner conflict.
Armory
No action in January
LeMay Project
The LeMay project is heating up. It appears that the engineer for the project is being encouraged to “make haste” and the quality of the design work reflects a hasty preparation.
Both myself and JWM&A are reviewing the plans. The presence of some very glaring omissions and errors indicates that we need to approach the review with a fine-tooth comb.
Fire Station
No news in January.
Reynvaan Site Security
Lighting and fencing have not been ordered.
As-Built Drawings
No action in January
Disaster Management Planning
No action on the plan outline in January.
I really need to bear down on this. We are in pretty good shape for typical emergencies, but there are still holes in our ability to respond to a real catastrophe.
WAWARN
On a periodic basis there are new batches of information and new resources. I receive email alerts when new things pop up.
Most are not of immediate interest to us.
I am trying to find the time to study all the resources available to us so that, if need arises, I know what kind of assistance we can expect.
There were no requests for assistance in January.
Red Flag Programs
I am putting this on here as a reminder that I need to start work on this program. Since we now accept credit cards and have District credit cards we need to have an ID protection program, typically referred to as a “Red Flag” program.
New programs are tail end charlies for the next couple of months, at least.
Future Very Small Projects
We have a list of very small projects that need attention during the course of the year:
Clean North Bank Gutters (Needs to be done every year)
Install Well #6 Flush Valve
Repair Well #6 Shut Off Valve
Locate Isolation Valves in “The Swamp” area (MAIN MAY BE DRY)
Paint Hydrant Caps/Install Number Plates (Started Summer 2015)
Landscape Shop/Garage Area (ONGOING)
Install Sampling Stations at North Bank and Reynvaan (Sanitary Survey)
Install Sampling Stations stations to replace followup sites that are currently private addresses.
Isolation Valve Exercise Program (Now an item on the Sanitary Survey) IMPLEMENTED
Clean and organize Shop ONGOING
Future and/or On-Hold Programs
Web Page
Email Bills
Unfunded “Dream” Projects
Include Reynvaan Pump Station in SCADA
Probably will require new controls, which are getting due anyway
Include Hirschbeck Pump Station in SCADA
Convert SCADA Communications to Cellular, or whatever
Repave Office Parking Lot (Over Jim’s dead body) THE WORST SPOT IS PATCHED.
Replace Office Carpet
Long Distance Service Laterals
Any thoughts would be welcome.
We have had our first “incident”. The meter for a resident on Sunset Road is located right next to the driveway for a property on Blaine Road. The meter box is being subjected to some damage due to its proximity to the driveway. We are fixing the problem by moving the meter a few feet away from the driveway and installing a highway meter box.
Future Project
I will start work on the remote read meters for Highway 12 after the first of the year.
Another Thought for Future Planning
With increasing levels of regulation and the workload of maintenance and repairs to an aging system, I am very much thinking that it will not be long before it will make sense to add another full time field technician, probably more like a laborer/meter reader. I will be planning that into future budgets.
I am very sensitive to the problem of budgetary inflation, and the phenomenon that work is like a gas, it always expands to fill the space available. But it seems the list of necessary tasks grows faster than we can get those tasks completed.
Respectfully Submitted:
Reg Hearn
General Manager