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 you. Chairman this is our audit, so if there is any thing you what like to see, now is the time. Call the next item. Item number eight, opportunity for Community Members to comment or take action on any matters within the committees jurisdiction. One is 2019to 2020 seago initiative. Two, other committee business, seago fiscal year 2018 to 2019 report. B, 2019 to 2020 draft port plan. I and your staff person will speak on these yalls, but beforitems,but befor chu, do you want to speak on these items or should i just go ahead . Chairman i have some comments on the second two at the bottom. So the standardized templates, i think weve agreed that were going to this is something weve been thinking about working on for a long time, and we havent. And peg is now going to staff someone on this from her department. Im happy to take that on, if anybody else has any interest, please let me know. And certainly we need to get the public included in that. Thats where were at with that one. And then the expenditures audit, we have the calendar that is in your work plan that reflects when the Audit Department expects to issue the construction expenditure audit, the work that cummings is doing. Well have them on your agenda as soon as they become available. Public finance, upcoming bond issues, anna vendegna is here, who is the head of our office of public finance. She provides a memo, which is something youve had with your forward debt calendar, and tells you what upcoming bond issues are. Ill ask her to comment or see if you had any questions on that item. Chairman thank you. Peg. So we are currently working on a few general Obligation Bond issues. The next two that we see coming in the coming months here or the 2019 sea bonds for clean and safe Neighborhood Parks in the amount of 2. 1 million, and about 93million worth of bonds for Affordable Housing. After that, additional influences that are planned are for the sea wall and Public Health and potentially transportation, as well, following that. Id be happy to answer any questions on our schedule. Chairman so what, generally, is spring 2020 . What month . Its the exact schedule is still t. B. D. , but could be around march. Chairman my only concern with that is that were not in our march meeting hearing about transportation bonds, and theoretically in march, that theyre going out for 150, so im not sure how to solve that. Do you think it will happen . It says t. B. D. It is t. B. D. , and mr. Letty is here and could probably add additional on the schedule, but we can certainly wait until after the march meeting are you running out of money . Chairman good question. So our the only thing that we can really do if a bond is going off the rails is to stop a bond issuance. I dont know if you can say that better than i can, but thats what i would like to know before something is issued, is if we feel comfortable where it is . Ive got no concerns, actually. Im just trying to line it up so that we actually get as much information before it goes out. And 150 million, as you can see with the other ones, there must be something upcoming that you need 150 million in one issuance. Yeah. We work with the project managers to see what their expenditure needs are that they forecast. And before we finally size and prepare the issuance of the bond, we have to make sure that they have a reasonable plan of expenditure for those funds within three years. Thats our standard practice. So we also attempt to try to group the bond sales together with multiple programs issuing. For example, the upcoming sale that director vandegna mentioned was for Affordable Housing and clean and safe Neighborhood Parks and the goal is to group them toge