Of the availability of contractors to do work now, the issue we heard about from the previous bond report, is affecting them, too. And what they, m. T. A. , are doing is trying to space out their bids, putting their contracts out to bid, so as to not be affected so adversely by the lack of available contractors. One of the problems of this nature manifested itself in the contract for the geary road improvements pardon me, the geary pedestrian improvements, and they got three bids, all of which were over the engineers estimate. They regarde regarded that contract as being so important to pedestrian safety, theyre going to go ahead and award it nonetheless. As a person who lives on geary and is of a certain age, im glad to hear theyre going to do anyway. There were several contracts that i wanted to ask questions about that i didnt get into the detail on until after i had read the report. But generally speaking, we heard that there be no pending major contractor claims on any of the work that theyre doing. Thats good. Some of the things that i read about in the detailed report here, the report that is in your package. Looked like they could be potential claims, but if they resolve the issues by the aforementioned by Jerry Dratler changeover process, then it isnt a claim. If you settle with a change order, its not a claim, and thats the best way to do it. In my previous question about the s. F. G. H. Bond, there was a lawsuit, and there was a lot of legal talent involved in that and by g something with a change ord, all of that is resolved. In this case, the city of San Francisco gets their project late, and the only benefit they get for paying for having it delivered late is a chance to look at a bunch of guys standing around leaning on shovels on the citys dime. Thats, to me, what is important to avoid, and thats what i follow up on most specifically, most ardently. It doesnt seem as though there are any bad ones coming up, though if the staffers were here, i would ask them a little more about a couple of contracts. Contract 64, in particular, where there is a rightofway issue at merapose and pennsylvania. At king street, substation work was suspended due to pg e issues. This kind of thing is on the citys lot. The city will be responsible for paying for those delays. It may have been caused by pg e in this instance, but the contractor wont know a thing about pg e. All the contractor knows is what the contract is with the city. So, again, i would like to find out what is going on there. Again, they, muni, are experiencing the same difficulties in getting bidders to respond to their request for bids and also getting reasonablypriced bids. There were fires up in sonoma county, and it was in all of the papers last year, and a lot of contractor work in particular is going up there. So getting contractors to work, and for those contractors to show up for work down here when they get more money up there is a continuing issue. One of the contracts in the report said this is on the 22 filmore east two mission bay expansion, and they need added funding to finish the contract, or ultimately will need to complete the contract. Thats a question on which i would like to follow up with them. Let me just check my notes that i had coming in here. I think thats it. Chairwoman questions . There are two different bond Program Managers, and im not sure if any of the ones you have questions about are the subject of the m. T. A. Bond, but i know mr. Lee from the m. T. A. Program is here. Sorry, public works. So let me back up a step and say, congratulations, mr. Lurkin, youre the first deliverer of a liason report in the format we talked about for this fiscal year. There has been a little bit of confusion about how to deliver this content, but i think our conversation, when we were developing the work plan with you for the current fiscal year, was that each bond program would appear before you twice in a year. Once you would have a formal report from the bond Program Managers of the type that was just given on the Public Health bond. In the opposite six month point and the calendar, you would have a liason report, like mr. Lurkin gave, and the advantage would be the forcing function of having the liason have an opportunity to anticipate that item, set up a meeting with bond Program Managers, ask any questions they had, so that the content could be focused on things that are of most of interest to goback. And there was a concern you would get detailed reports and pretty pictures, but not much of a chance to focus on issues that are of concern for you. The liason focus was a test. I should have also reminded the m. T. A. Program manager that having that Program Manager appear during the agenda item would be an expectation so that any questions could be answered. So sorry if that was my miss. But thats sort of my expectation for how it would go. Oh, sorry. I was going to say there is a familiarlooking guy over there. Chairwoman i dont know all of the personnel, so sorry about that. And before you go on, i was going to say, yeah, this is a misunderstanding, then, on my part that the new format was going to not include as much a presentation as we had had before. Ill say a misunderstanding to make it sound better than i just forgot. Chairwoman again, you can change it, it is certainly your purview. Our hope was we would have the opportunity for the liason to ask questions that are at the level of interest of the community. Sorry for my not knowing all of the folks here, but the bond Program Manager can and should be here for you. The thing i would have done differently is followed up with the staff before we came into this meeting. We did have this liason meeting, but that was some three weeks ago. I could have got these questions answered by going to the staff out of the venue that were having here. So what ill do then, if we cant get things answered if we cant get them answered today, is follow up later and at the next meeting, ill just give a report on that and it wouldnt take more than just a few minutes. We can put it under new business or whatever. Before youre there to answer some of the questions that were raised, i was also at the meeting with brian larkin, and i just wanted to supplement part of what we discussed. And my concerns going into the meeting, every time i meet with the m. T. A. , tends to be more on the Macro Financial level. So i just wanted to share what i discussed with staff, is that since i was keying in on the two presentations, the two tables, they have on page 13 and 14, which actually shows the projects and the funds under the first issuance. And on the page next to it, the second bond issuance. And my purpose, also, is to really probe staff. Im fairly comfortable to have them comment on the spend of the first issuance. It is pretty all gone. There is less than 2 million there. According to their plans, there is a timeline to spend it down. In the second issuance, they are almost half way there. And we had some discussion on their expectation and how happy they are proceeding with the spenddown because they are kind of really looking forward to a third issuance early next year. So that was the type of discussion i had, and i walked away very comfortable that they have a pretty good handle on how they control their spend because prior to the second issuance, there is some discussion and concerns as to the pace of the spend after the first issuance. So i think theyve addressed that, and i feel comfortable on the financial overall management. They seem to be on top of things. I just want to supplement them. Chairwoman thank you. Were not looking for a presentation today. In the interest of time, i would like to take brian up on his offer to address this between now and the next meeting. But thank you, guys, for doing this and for getting into the weeds on this one. Do any other members have any questions or comments . So the next liason report, are you expecting to have the bond manager have a presentation . Chairman yeah, its in the march timeframe. All right. But, again, you would have two different types of events for each bond program. One would be a formal presentation of the type that you saw for Public Health. Uhhuh. And one would be a lie yeas son report, with content of the type that came from mr. Larkin and ms. Mcnullty. You can have the bond Program Manager attend the meeting so they could answer any questions that came up or comment on your meeting, but not a formal presentation. So that formal presentation in is march, and it includes the second bond, the 2011road repaving. And if you look at this long sheet in our package, there is only 10 million unspent out of 250 million. Could i just have it on record, because the item actually calls for a liason report on that repaving bond. On a housekeeping issue, that there is currently no liason on that bond. Yes. Thats why there is no liason report. But i think that chair chu has indicated very clearly that this is essentially spent, and i think that its safe to forego a liason report really pending a closeout procedure for this bond. Chairman thats what i was getting at. Thank you. Good. Chairman any other comments . Just a question for peg. The format will allow us then, after my followup, to clear up or close out the items that i brought up at our next meeting . Chairman sure, we can add it to the next Committee Agenda meeting. It shen shouldnt take more than 10 minutes. Chairman thank you. Public comment . Good morning, my name is Jerry Dratler. I think the new presentation format is a very good idea. I suggest the second presentation format be more formalized with specific required content, like change order report, current budget versus original budget, expected variance from original budget, and a statement by the liason. I ask for your level of comfort whether the project will remain on budget. Thank you. Chairman thank you. Just so we have an agenda item that might be appropriate for mr. Dratlers comments later on. So this would be appropriate. Call the next item. Item seven, presentation from the city Service Auditor regarding the 2015 Affordable Housing bond expenditure audit report and possible action in response to such presentation. Good morning, chair, vice chair, Committee Members. Mark delarosa. Today we will give you a very quick overview of the results of our audit of the 2015 Affordable Housing bond. We specifically looked at the expenditures ensuring that the bond funds are actually expended per the bond measure. Im joined today by simon wattsworth from construction management, which sa firm that has been helping us in completing all of these expenditure audits. Very quickly, ill give you a background. We started this Audit Program back in 2015. In 2016 was the first time we actually completed one of the audits that we have before you. So far we have completed eight. The affordable bond one is the last one we issued back in july. As you know, this is a very focused audit. It is really a compliance audit to ensure that the bond funds that we reviewed were actually in compliance with the bond measure, and that there were no administrative or overhead costs that were expended that are prohibited by the bond measure. Ill actually turn it over to simon, who will give you a very brief overview of this, since this is the first time many of you are probably hearing from us, as well as the results for audit. Good morning. Im sim mo simon wattsworth. As mark mentioned, we have completed eight audits. Similar bonds, weve completed bond audits for the l. A. Community college district, unified school district, as well as numerous construction orders for private owners and developers. Well quickly move on. So the audit scope, we looked at expenditures for the program through june 30th, 2018. The expenditures for bonds totalled 54. 4 million, and the total expenditure was 7. 5 million, for a total of 61. 9million that was expended against the bond. We tested approximately 75 of that value, which was 46. 3. 4. 3 million for bond sale. Which was 57 particulars. 557 . We wanted to make sure that the first test covered there was no operating or government or overhead expenditures billed against the bond, and that they were under the legal setting of the bond. We collected various documents to review, such as change orders, construction contracts, reimbursement requests, and also below market rate, review and analysis rate, which looks at loans given and down payment assistance. In review of all of the expenditures we got, 99 of it tested as approved and were in accordance with the bond measure. We did find unauthorized expenditures of 269. 4 million. The 269 is broken into two separate findings. Finding werent wha of what we d as overhead expenditures. 60,000 was spend on relocations. They were agreed and reviewed with the city attorney. The second finding, totaling 75,615 was for expenditures that were outside of the bond requirement. The bond was specific that there couldnt be any expenditures before the 60 days. So these were expenditures that were prior to the september 4th cutoff date, 2015. These findings were reviewed with m. R. H. C. D. , and were agreed upon. As a result we came up with two recommendations. One is that they should establish training with approvals, that have notable funding. And they should have established prebond reimbursement guidelines for ap improvement procedures. They have committed to implementing these recommendations by october 31st. Chairman just to quickly note, benjamin mccloski is here to answer any questions that you have. I just wanted to reiterate how much we are grateful and thankful for the department for their collaboration and cooperation in providing us with the information. I know that part of this is really the implementation of the recommendations, and i know they have been working diligently with their staff, as well as with the city attorney, in terms of ensuring they provide the right tools for their project managers and staff moving forward, given that we have other Affordable Housing bonds before us. As simon mentioned, we are completing our 2016 Public Health audit, and hopefully we will have that in the next couple of months, so that it is ready for your january meeting. And were available to answer any questions that you have. Chairman questions . Not really a question. Im a liason, and i just wanted to thank you for the work on this. I didnt have a ton of time to followup on this, but i did read through everything. I think these are sound recommendations, and im happy to see that it doesnt seem like there is a lot of extreme findings, and m. R. I. C. D. Is going to move forward with the recommendations. I think this was a good report, and i just want to thank everybody for their work on that. Thank you, simon, for walking us through that. I started my professional life as a public account tantaccountant, so i may understand some of the audit methodology. But i think it would be helpful if you could just explain a little to my fellow members, in your audit methodology, you tested 75 . So, for example, how did you discuss it a little bit, some of the considerations that you had in your mind before you decided on why 75 or not why 65 . Is it a function of the fact that these have never been audited . Is it a function of the fact of the dollar amountsieamountsize . I think it would be helpful to get an understanding of how you selected those statistics to be audited. The 75 is something we came up from the full download of expenditures that we got. We typically look through every one of those expenditures to see what is to see what those items are and what the descriptions are. Thats how we come up with that. If we see potential red flags in the description, thats our sample. We then review that sample with the Controllers Office which pretty much sets that 75 . It is not a standard thing. Some projects weve done have been 90 , and some have been less than that. It just depends on the expenditures and what we see in the report. Thank you. Chairman yeah. Im thrilled with this information, and particularly at this level. Thank you. It is really helpful. And understanding the process better is actually really helpful. But since youve got a wealth of experience at other institutions, can i ask a couple of questions about that . Yes. Chairman what are common findings that you see in other bond programs in other cities . And what should we be looking for . I think we tailored this more to what youre looking for. I think the overhead is always a key one that gets put through on the bonds. That was the majority of the findings in this one. So thats really kind of what we looked and focused on. It is similar to other bonds. We see similar findings. Chairman can you explain what overhead is . Um. Is there a definition . Sorry. Yes. So we basically used the definition that is in the bond language itself. So basically anything that is thats salaries for regular staff for the department that are overseeing the bond, is part of the overhead. And anything that is general administrativetype of costs that are not necessarily or directly related to the administration of the bond. What we have found in completing eight audits so far is that departments are very diligent in terms of ensuring that the folks that are actually working on those bond funds, that those bond programs are actually dedicated to them, so there is no mixing of the regular daytoday operational stuff that departments are tasked with, on top of the ones that are specific to the bond. So thats generally how we defined it. Chairman any other questions or comments . Thank you. Is there any Public Comment . Hi, im Jerry Dratler. I think it is laudable the progress that seago has made in terms of retaining an outside firm to do audibondexpenditure audits. They have been around since 2002, and were finally getting to it. Thats not very good. I would like to see the report include a summary of total bond costs, broken down into what are called hard costs, and commissioner larkin can explain that in soft costs, which are architects, consultants, and project management. And hard costs should be broken down to include change orders and other meaningful subcategories. As you can see from the bond expenditure audit, soft costs are an area for potential abuse, as confirmed by the firm representative. And city departments benefit when theyre able to shift items out of their operating budget into the capital expenditure. So that requires a little higher level of oversight. Thank