Update on State Audit and Operations of MSD

Transcription

1 Update on State Audit and Operations of MSD presented by Greg C. Heitzman Interim Executive Director Louisville MSD May 8, 2012

2 Presentation Outline 1. The State Audit and Corrective Action Plan 2. Executive Director s Observations on MSD Operations 3. Executive Director s Recommendations for Task Force Consideration 2

3 2011 State Audit Mayor Greg Fischer requested State Auditor, Crit Luallen, to investigate MSD in May 2011 Audit complete and released December 17, findings and recommendations 3

4 2011 State Audit Major areas of concern: Governance and Senior Management (leadership) Management Reporting and Communications to Board Ethical Standards and Conflicts of Interest Adequacy of Controls and Separation of Duties Procurement of Legal and Financial Services Financial Policies and Investment Practices Discretionary Expenditures (travel, contributions, events) Gaps in Policies and Procedures 4

5 Progress to Date on State Audit 60-Day Audit Response was submitted on February 14, 2012 Through April 15, 2012: 70% of Audit Response work is complete 40 of the 150 Audit recommendations (27%) are fully implemented Expect 100% complete by December 15, 2012 Monthly reports provided to the MSD Board and Public 5

6 Percent Work Complete 100% 90% 80% 70% 60% 50% 40% 30% 52% 60 Day State Audit Response % 70% State Audit Recommendations Actual & Projected Work Complete April 15, % 82% 85% 90% 93% 96% 98% 100% 20% 10% 0% 2/14/12 3/15/12 4/15/12 5/15/12 6/15/12 7/15/12 8/15/12 9/15/12 10/15/12 11/15/12 12/15/ Timeline

7 Number Recommendtions Complete Day State Audit Response State Audit Recommendations Actual & Projected Recommendations Complete April 15, /14/12 3/15/12 4/15/12 5/15/12 6/15/12 7/15/12 8/15/12 9/15/12 10/15/12 11/15/12 12/15/ Timeline

8 Interim Executive Director Observations January to May

9 90 Day (plus) Action Plan Senior Management Team Review discretionary spending and reimbursements, suspend where appropriate Suspend charitable contributions Review each vacancy, suspend where appropriate Review contracts identified in Audit, take corrective action Review employee conflicts, take corrective action Review 2011 employee performance and compensation 9

10 90 Day (plus) Action Plan Board Governance and Committees Fill Vacant Board seats (7 filled, 1 remaining) Conduct Board Training (Ethics, Conflicts of Interest, Roles, Regulations) June 2012 Review and Update By-Laws July 2012 Review Committees and Membership (revise if needed) Review role and authority of Board General Counsel (external or internal) 10

11 90 Day (plus) Action Plan New Policies and Procedures Board and Senior Management Ethics/Conflicts of Interest Employee Ethics/Conflicts of Interest Policy/Code of Conduct Employee Education Assistance Program Travel Policy Charitable Contributions Policy Procurement and P-Card Policies Property and Inventory Control Policy Investment Policy 11

12 90 Day (plus) Action Plan Legal and Regulatory Review Review existing outside legal service contracts and adjust where appropriate Determine role of MSD General Counsel and In-House Legal Director Develop RFP for Legal Services (May 2012) Assess internal legal resources and fill vacancies and expertise where needed: Engineering & Construction Contracts Employment Environmental Regulations Real Property and Easements 12

13 90 Day (plus) Action Plan Financial Review Begin Routine Financial Reporting to Board Conduct Inventory and Assessment of Investments Review MSD Annual Audit, Internal Audits, Annual Report Review role of current Financial Advisor (monthly contract extension) Review 5 Year Proforma and Balance Sheet (FY ) Hire Financial Director (May 2012) Develop RFP for Financial Services (May 2012) Develop New Financial Reporting to Board (Fall 2012) 13

14 90 Day (plus) Action Plan Internal Audit Review Establish Independent Reporting of Internal Auditor to Board Adopt Audit Committee Charter Adopt Internal Audit Charter Establish Whistleblower Procedure within Ethics Policy Open MSD Transparency Website Employee Ethics Hotline (May 2012) Develop Annual Audit Plan (July 2012) Conduct routine audits (resume after State Audit complete) 14

15 90 Day (plus) Action Plan Human Resources Hire Human Resource Director Review Compensation of Management Develop RFP for Human Resources Management and Compensation Consultant Develop RFP for Organizational Development/Training Resources Negotiate Union Contract (expired February 2012) Review Hiring Practices (full-time, part-time, temporary) 15

16 90 Day (plus) Action Plan Operations and Service Delivery Engineering and Construction (++) EPA Consent Decree considered model program (++++) Central Maintenance, Drain and Sewer (++) Flood Protection (++) Emergency Response (+++) Information Technology and Customer Service (++) 16

17 90 Day (plus) Action Plan Other Support Areas Procurement (Purchasing and Construction) (++) Review MBE/WBE Program (++++) Billing and Revenue Enhancement (++) Employee, Contractor and Community Safety /Security (++) Risk Management Methodology(+) Building, Facility and Property Management (++) MSD Brand, Community Education and Outreach (+) Business Culture and Quality Management System (+) 17

18 Interim Executive Director Recommendations Beyond the State Audit and Partnerships Three Year Plan July 2012 to June

19 Recommendations Board and Senior Management Fill remaining Board positions, Appoint Chair, Vice Chair, & Committee Assignments Conduct Board Orientation Workshop Consider Executive Committee and Customer Committee Fill key vacancies (Executive Director) Appoint Officers (Executive Director, Chief Engineer, Secretary, Treasurer) Develop Strategic Business Plan Conduct management assessment and change to support Strategic Business Plan 19

20 Recommendations Audit, Controls, and Risk Management Adequately resource Internal Audit to achieve annual Audit Plan approved by Board Adopt Management Control System (COSO Model/ SOX principles/ ISO 9000/14000) Adopt standard Policy/Procedure/Work Instruction Model Conduct assessment of strategic and operating risks Develop risk management model and mitigation plans 20

21 Recommendations Human Capital Investment Negotiate expired Union Contract, NAGE Local 189 & 191 Conduct review of employee compensation and benefits (market based pay, equity, job descriptions) Improve Taleo Performance Management System to include key strategic and operating metrics and EE accountability Implement Quality Management System (ISO 9000/14000, TQM) Develop comprehensive employee training program (leadership, teamwork, skill, technology, safety) Develop succession and talent resource plans Adopt performance and knowledge based business culture Build culture of health, safety, quality work life and community 21

22 Recommendations Infrastructure Investment Develop Comprehensive 20 Year Facility Plan EPA Consent Decree Requirements ($840M) Future Storm Water and Stream Regulations (MS4) Aging Infrastructure (facilities not in Consent Decree) Louisville Flood Protection System Un-Sewered Areas of Jefferson County Development and Growth (Floyds Fork Corridor) Regional Waste Water Opportunities Explore alternative project delivery methods to accelerate implementation and reduce costs of capital improvements Enhance procurement of Engineering Services Combine Infrastructure and Purchasing procurement functions 22

23 Recommendations Financial Investment Select new Financial Advisor through RFP process Conduct comprehensive review of debt and investment portfolio Pursue options to refinance existing debt (advance refund, refinance, call bonds, etc.) Review short term debt portfolio and associated long term risks Determine optimal timing and type of next borrowing ($80 to $120M in FY2014) Review existing SWAP program and develop proactive strategy to unwind, if appropriate Update Investment Policy and determine if Investment Manager is needed 23

24 Recommendations Rate Model, Billing and Revenue Enhancement Conduct comprehensive cost of service rate study using industry standards and best practices Rate Classes (Industrial, Commercial, Residential) Rate Blocks Capacity and Other Fees Complete billing agreement and cost sharing with LWC Conduct audit of customer accounts, billing accuracy and reliability (Revenue Enhancement Program) Enhance Customer Assistance Program Evaluate Developer Recapture Agreements and Lateral Extension methods in light of slow economy 24

25 Recommendations Customer Care and Community Outreach Partner with LWC to implement enhanced Customer Care Program (internet access, e-billing, payment plans, etc.) Conduct customer focus groups and customer survey input Create Customer Advisory Counsel for citizen input Build MSD Brand Leverage Green Infrastructure Investment Develop Community Partnerships in Environment, Health and Education 25

26 Next Steps 1. Complete State Audit Action Plan by December Stabilize Operations (fill remaining leadership vacancies) 3. Re-engineer MSD systems and process where appropriate 4. Integrate Task Force Recommendations where appropriate Pursue Partnerships among MSD, LWC and DPW (ILA) Evaluate merger of water and sewer long term (5 years) 26

27 Challenges 1. MSD Leadership a. Focus on Consent Decree and Operations (prior business model) b. Focus on State Audit and Corrective Actions (current business model) c. Focus on new Strategic Business Plan and Partnerships (future business model) 2. Resources a. Human Knowledge and Culture to Lead Change b. Funding Resources for Plans and Transition 3. Management Structure a. Choose interim, transition, long term management structure 4. Business Constraints a. Federal Consent Decree ($840M) b. Rate Capacity (>7% requires Metro Council approval) c. Debt Capacity ($1.6B) 27

28 Questions 28