mprwa agenda packet 01-08-15

8/10/2019 MPRWA Agenda Packet 01-08-15

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AgendaMonterey Peninsula Regional Water Author ity (MPRWA)

Regular Meeting

7:00 PM, Thursday, January 8, 2015

Council Chamber580 Pacific Street

Monterey, California

ROLL CALL

PLEDGE OF ALLEGIANCE

REPORTS FROM BOARD DIRECTORS AND STAFF

PUBLIC COMMENTSPUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on anysubject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any personor group desiring to bring an item to the attention of the Authority may do so by addressing the

Authority during Public Comments or by addressing a letter of explanation to: MPRWA, Attn:Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriate staff person will contactthe sender concerning the details.

CONSENT AGENDA

1. Approval of Minutes from the December 11, 2014 Regular Meeting - Milton

2. Approve and File Checks Through January 8, 2015 - Milton

AGENDA ITEMS

3. Receive Annual Financial Report and a Full Opinion Audit for FY 2013-14 and 2012 fromMcGilloway, Ray, Brown and Kaufman (Kaufman) CPA - Cullem

4. Receive Report, Discuss, And Provide Staff Direction On The Updated MPWSP CriticalPath (CPM) Permits & Approvals Schedule (Summary Version) To Include The Status ofthe Test Slant Well, GWR, Pacific Grove Small Projects, And Aquifer Storage (ASR); AndDiscuss Future Permits And Approvals Required Of Marina - Crooks

5. Update And Provide Direction On Efforts To Request A Modification To The Cease andDesist Order - Burnett

6. Receive Report, Discuss, And Provide Staff Direction On Updated CPUC Schedule -

Cullem

7. Establish Water Authority Meeting Schedule For Calendar Year 2015 - Milton

ADJOURNMENT
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The City of Monterey is committed to including the disabled in all of its services, programs andactivities. In compliance with the Americans with Disabilities Act, if you need special assistance

to participate in this meeting, please contact the City Clerks Office at (831) 646-3935.Notification 30 hours prior to the meeting will enable the City to make reasonable arrangementsto ensure accessibility to this meeting [28 CFR 35.102-35.104 ADA Title II]. Later requests willbe accommodated to the extent feasible. For communication-related assistance, dial 711 to usethe California Relay Service (CRS) to speak to City offices. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week. If you require a hearingamplification device to attend a meeting, dial 711 to use CRS to talk to the City Clerk's Office at(831) 646-3935 to coordinate use of a device.

Agenda related writings or documents provided to the MPRWA are available for publicinspection during the meeting or may be requested from the Monterey City Clerks Office at 580Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with CaliforniaGovernment Code Section 54954.2(a) or Section 54956.


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AgendaMonterey Peninsula Regional Water Authority (MPRWA)

Regular Meeting

7:00 PM, Thursday, January 8, 2015

Council Chamber580 Pacific Street


ROLL CALL



PUBLIC COMMENTSPUBLIC COMMENTS allows you, the public, to speak for a maximum of three minutes on anysubject which is within the jurisdiction of the MPRWA and which is not on the agenda. Any personor group desiring to bring an item to the attention of the Authority may do so by addressing theAuthority during Public Comments or by addressing a letter of explanation to: MPRWA, Attn:Monterey City Clerk, 580 Pacific St, Monterey, CA 93940. The appropriate staff person will contactthe sender concerning the details.

CONSENT AGENDA

1. Approval of Minutes from the December 11, 2014 Regular Meeting - Milton

2. Approve and File Checks Through January 8, 2015 - Milton

AGENDA ITEMS

3. Receive Annual Financial Report and a Full Opinion Audit for FY 2013-14 and 2012 fromMcGilloway, Ray, Brown and Kaufman (Kaufman) CPA - Cullem

4. Receive Report, Discuss, And Provide Staff Direction On The Updated MPWSP CriticalPath (CPM) Permits & Approvals Schedule (Summary Version) To Include The Status ofthe Test Slant Well, GWR, Pacific Grove Small Projects, And Aquifer Storage (ASR); AndDiscuss Future Permits And Approvals Required Of Marina - Crooks

5. Update And Provide Direction On Efforts To Request A Modification To The Cease andDesist Order - Burnett

6. Receive Report, Discuss, And Provide Staff Direction On Updated CPUC Schedule -Cullem

7. Establish Water Authority Meeting Schedule For Calendar Year 2015 - Milton

ADJOURNMENT


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Thursday, January 8, 2015

2

The City of Monterey is committed to including the disabled in all of its services, programs andactivities. In compliance with the Americans with Disabilities Act, if you need special assistanceto participate in this meeting, please contact the City Clerks Office at (831) 646-3935.Notification 30 hours prior to the meeting will enable the City to make reasonable arrangementsto ensure accessibility to this meeting [28 CFR 35.102-35.104 ADA Title II]. Later requests willbe accommodated to the extent feasible. For communication-related assistance, dial 711 to usethe California Relay Service (CRS) to speak to City offices. CRS offers free text-to-speech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week. If you require a hearingamplification device to attend a meeting, dial 711 to use CRS to talk to the City Clerk's Office at(831) 646-3935 to coordinate use of a device.

Agenda related writings or documents provided to the MPRWA are available for publicinspection during the meeting or may be requested from the Monterey City Clerks Office at 580Pacific St, Room 6, Monterey, CA 93940. This agenda is posted in compliance with CaliforniaGovernment Code Section 54954.2(a) or Section 54956.


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MINUTES

MONTEREY PENINSULA REGIONAL WATER AUTHORITY (MPRWA)Regular Meeting

7:00 PM, Thursday, December 11, 2014COUNCIL CHAMBER580 PACIFIC STREET

MONTEREY, CALIFORNIA

Directors Present: Edelen, Kampe, Pendergrass, Rubio

Directors Absent: Burnett, Roberson

Staff Present: Executive Director, Authority Clerk

ROLL CALL

Vice President Kampe called the meeting to order at 7:00 PM.



Executive Director Cullem reported regarding the 2015 meeting schedule and regarding theTAC visit to the two desal projects sites in Moss Landing on November 17, 2014.

PUBLIC COMMENTS

Vice President Kampe invited public comment for items not on the agenda.

Nelson Vega encouraged continuing to focus on the lowest cost water project, then

questioned the authority and method that Deep Water Desal Project has to withdrawwater from the bay.

Tom Rowley spoke to a recent trip to Hawaii where he learned of similar potential todamage and pollute their aquifer.

George Riley spoke to the Monterey Peninsula Water Supply Project (MPWSP)anticipated schedule expressing concern that it is a faith based project and not a factbased project.

Mr. Cullem and Vice President Kampe responded to public comment.

CONSENT AGENDA

On a motion by Director Edelen, seconded by Director Rubio and carried by the following vote,the Monterey Peninsula Regional Water Authority approved the Consent Agenda as presented:

AYES: 4 DIRECTORS:Edelen, Kampe, Pendergrass, Roberson, Rubio

NOES: 0 DIRECTORS: None


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MPRWA Minutes Thursday, December 11, 2014

Monterey Peninsula Regional Water Authority

Regular Meeting Minutes - Thursday, December 11, 20142

ABSENT: 2 DIRECTORS: Burnett, RobersonABSTAIN: 0 DIRECTORS: NoneRECUSED: 0 DIRECTORS: None

1. Approve A One-Year Contract Extension With Environmental Resources, Inc. For PublicInformation Services At A Total Price Not-To-Exceed $10,000 And Authorize The ExecutiveDirector To Negotiate The Terms Of The Extension And To Award The Contract.Action: Approved

2. Approve Minutes from November 13, 2014 Regular Meeting

Action: Approved

3. Approve and File Checks Through December 11, 2014

Action: Approved

AGENDA ITEMS

4. Receive Report On The Status Of The Pure Water Monterey (PWM)/GroundwaterReplenishment (GWR) Project And Status Of The Bi-Lateral Agreements On The GWR SourceWater Definitive Agreement.

Keith Israel, General Manager from the Monterey Peninsula Water Pollution Control Agency(MRWPCA) presented an update regarding the definitive legal agreements. He spoke to theschedule of meetings and negotiations to get the agreements finalized. There are 5 areas offocus:

1. Legal Agreements2. Financial Availability3. Water Rights4. CEQA5. Water Availability and Quality

Mr. Israel discussed impacts to the CPUC schedule and reported that the Supplemental Noticeof Preparation (NOP) was published on December 10, 2014, noting that it does not change thedraft EIR completion date. Mr. Israel answered questions of the Board.

Vice President Kampe invited public comment on the item.

Tom Rowley spoke to the pending lawsuit between the Monterey Tax PayersAssociation and the Monterey Peninsula Water Management District regarding thelegislative rules to spend money on projects after they are approved by the voters. Hereported the court date has been delayed until March 2015.

5. Review, Discuss, And Provide Direction On The Mission Of The Water Authority AndAccomplishments In 2014.


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Excutive Director Cullem spoke to the purpose of the Authority and the need to brief DirectorRoberson on the history and mission of the JPA. He spoke to the accomplishments listed in thestaff report which were tied to the work plan, and the approved objectives. Mr. Cullem outlinedthe subcommittee that has been established to meet with the County of Monterey regardingfunding and participation.

Vice President Kampe invited public input on the item.

George Riley requested clarification of the purpose of a two year or a four yearextension of the CDO.

This item was for information and discussion only.

6. Receive Report, Discuss, And Provide Staff Direction On The Status Of The Slant Test WellConstruction and Of The Litigation Related to The Marina Coast Water District Appeal of theCoastal Development Permit (CDP)

Ian Crooks from Cal Am reported regarding the Marina Coast Water District appeal indicatingthe presiding Judge ruled that the appeal should have been filed in Monterey as the initialapplication, so that filing is being transferred and at this time there is no impact on the Cal Amproject. He reported on the status of the test well drilling and informed the Board that since theproject was originally scheduled to start in October, the contractors are working diligently tocomplete all drilling by February and should be acknowledged for their efforts.

Vice President Kampe invited public comments.

Nelson Vega requested clarification regarding the construction technology of the wells. George Riley requested an update regarding the status of the State Lands Commission

permit.

Ian Crooks responded to Mr. Vegas comment indicating the technology is not the hinderingissue but that the geology that will make the well successful or unsuccessful.

7. Receive Report, Discuss, And Provide Staff Direction On Updated CPUC Schedule.

Mr. Cullem spoke to the purpose of the item and benefit of discussing this in full detail with theentire Board. Vice President Kampe spoke to the benefit to have the slant well in process, thatit is a milestone for this project.

Vice President Kampe invited public comments on the item.

Tom Rowley spoke to the Coastal Commission hearing, and encouraged the Authorityto continue to contact and provide updates to the Coastal Commission and thank themfor their support.

Nelson Vega questioned the lawsuit between the MCWD, Cal Am and Monterey County,questioning what the impacts are to the MPWSP if the contract is found to be valid.

8. Receive Status Report On The FY 2013-2014 Audit, Discuss, And Provide Staff Direction.


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Executive Director Cullem reported that the Financial Auditors have requested more time tofinalize the Year End 2013-14 finances and meet with the Finance Subcommittee prior toreleasing the final report. He noted that the year-end credit approved at the previous meetingwas issued and credited to the member cities, who have been invoiced for their 2014 membercontributions.

Vice President Kampe invited public comments and had no requests to speak.

9. Receive Report, Discuss, And Provide Staff Direction On The Updated MPWSP Critical Path(CPM) Permits & Approvals Schedule (Summary Version) To Include The Impact Of GWR, AndDiscuss Future Permits And Approvals Required Of Marina.

Ian Crooks presented two versions of the critical path summary, one which outlined thepermitting schedule and the other was a more detailed schedule that is discussed by the TAC.Mr. Crooks noted how the Ground Water Replenishment project schedule is now more inalignment with the MPWSP. He informed the Directors that permits for the production wells willbe required from the City of Marina; therefore discussions need to begin to lay the groundworkto ensure there are no delays and that many elements of the schedule are contingent upon therelease of the draft EIR.

Vice President Kame Invited public comment on the item.

Nelson Vega requested clarification regarding how to determine where the salt watermay be coming from if there is salt water intrusion found during the modeling.

Tom Rowley expressed concern that the draft EIR would be released prior to knowing ifthere are positive results for the test slant well.

George Riley said that he thinks the lack of comprehensive data is a weakness in theproject and invites litigation.

Director Edelen requested the addition of the Aquifer Storage and Recovery (ASR) and thePacific Grove Water Projects to the chart to show all current efforts and projects we are workingtoward.

10. Receive Report, Discuss, And Provide Staff Direction On Current Efforts To Seek An ExtensionOf The CDO Deadline Of December 31, 2016.

Executive Director Cullem spoke to the item and the efforts to negotiate and discuss a possibleextension with State Water Resources Control Board (SWRCB) staff for an extension of a theCease and Desist Order (CDO). The initial outreach will begin in the spring.

Vice President Kampe invited comments from the public.

George Riley indicated that Public Water Now has filed three separate protests to theCPUC to reject any penalty for violations of the CDO.

Mr. Rolwey spoke in support of rate payers not being require to pay penalties.

ADJOURNMENT


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Having no more business to conduct, the meeting was adjourned at 8:29 PM.

ATTEST:

Lesley E. Milton-Rerig, Authority Clerk Bill Kampe, Vice President


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Monterey Peninsula Regional Water AuthorityAgenda Report

Date: December 11, 2014

Item No: 2

FROM: Authority Clerk Milton

SUBJECT: Approval and File Authority Checks Through January 8, 2015.

RECOMMENDATION:

It is recommended that the Authority approve and file the accounts payable paymentsmade during the period December 11, 2014 through January 8, 2015 with totalpayments for the above referenced period of $14,969.23from the general fund accountand authorize the Directors to sign for such checks.

DISCUSSION:

At its meeting on September 12, 2013, the Authority Board approved a staffrecommendation to provide the Directors a listing of general checks issued since the lastreport so that it can inspect and confirm these checks. Each invoiced expense has beenreviewed and approved by the Executive Director and Finance personnel prior to paymentto insure that it conforms to the approved budget.

The following checks are hereby submitted to the Authority for inspection andconfirmation.

$ 5,000.00 to Perry and Freeman for contracted Legal Counsel services

$ 562.50 to Access Monterey Peninsula for televising meetings

$ 9,406.73 to Brownstein Hyatt Farber and Schreck for Special Legal CounselServices.

The bank balance as of January 8, 2015 is sufficient cover the above check therefore,staff is recommending approval.

ATTACHMENTS:

Budget to Actual Report through January 5, 2015


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11:37 AM

01/05/15

Accrual Basis


Profit & Loss Budget vs. ActualJuly 1, 2014 through January 5, 2015

Budget Jul 1, '14 - Jan 5, 15 Balance

Ordinary Income/Expense

Income

47200 Program Income

47230 Membership Dues 458,680.00 334,196.00 124,484.00

47240 Program Service Fees 0.00 0.00 0.00

47250 Reimbursement SPI Contract 0.00 18,562.14 -18,562.14

47260 Reimburesment VE Contract 0.00 0.00 0.00

47200 Program Income - Other 0.00 0.00 0.00

Total 47200 Program Income 458,680.00 352,758.14 105,921.86

49900 Uncategorized Income 0.00 0.00 0.00

Total Income 458,680.00 352,758.14 105,921.86

Expense

60900 Administration and Clerical

60901 Clerk of the Board 24,000.00 24,000.00 0.0060902 Executive Director 94,680.00 17,603.81 77,076.19

60903 Principal Offc of the Authority 5,000.00 0.00 5,000.00

60904 Financial Services 6,000.00 6,000.00 0.00

60905 Misc Admin Expenses 500.00 0.00 500.00

60900 Administration and Clerical - Other 0.00 0.00 0.00

Total 60900 Administration and Clerical 130,180.00 47,603.81 82,576.19

62100 Legal Fees

62110 Board Counsel 63,000.00 15,000.00 48,000.00

62140 Special Counsel 152,000.00 12,493.65 139,506.35

62100 Legal Fees - Other 0.00 0.00 0.00

Total 62100 Legal Fees 215,000.00 27,493.65 187,506.35

62800 Contract Services

60801 Public Outreach 35,000.00 2,408.33 32,591.67

62802 Audit Services 6,000.00 4,425.00 1,575.00

62803 Televised Meeting 10,000.00 1,975.00 8,025.00

62804 Contract Services & Studies 30,000.00 0.00 30,000.00

62805 Contract SPI 0.00 0.00 0.00

62800 Contract Services - Other 0.00 0.00 0.00

Total 62800 Contract Services 81,000.00 8,808.33 72,191.67

65000 Insurance 7,500.00 6,673.44 826.56

65100 Travel Expenses 5,000.00 325.00 4,675.00

66000 Payroll Expenses 0.00 0.00 0.00

68300 Contingency 20,000.00 0.00 20,000.00

Total Expense 458,680.00 90,904.23 367,775.77

Net Ordinary Income 0.00 261,853.91

Page 1 of 2


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11:37 AM

01/05/15

Accrual Basis


Profit & Loss Budget vs. ActualJuly 1, 2014 through January 5, 2015

Budget Jul 1, '14 - Jan 5, 15 Balance

Other Income

47220 Interest Earned 0.00 1.65 -1.65

Total net Income 0.00 261,855.56

Page 2 of 2


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Monterey Peninsula Regional Water AuthorityAgenda Report

Date: January 08, 2015

Item No: 3.

06/12

FROM: Executive Director Cullem

SUBJECT: Receive Annual Financial Report and a Full Opinion Audit for FY 2013-2014from McGilloway, Ray, Brown and Kaufman (Kaufman) CPA; Approve aModification to the Kaufman Contract to Complete the FY 2014- 2015 Audit witha Completion Date of December 1, 2015 at an additional fee not-to-exceed$7000; and Provide Direction to Staff.

RECOMMENDATION:

It is recommended that the MPRWA receive the written audit for Fiscal Year 2013-2014 as well

as a verbal presentation by Kaufman. It is further recommended that the Authority approve anamendment to the Kaufman contract to include completion of the audit for Fiscal Year 2014-2015 by December 1, 2015 at a fee not-to-exceed $7000, inclusive of the MD&A and providestaff direction.

DISCUSSION:

At its meeting on June 13, 2013, the Water Authority Board approved a staff recommendation toallow completion of the Financial Annual Report and a Full Opinion Audit for FY 2013-2014 tobe completed concurrently with that of the Member City conducting the Authority audit.However, staff subsequently determined it would create less of a potential conflict of interest toselect a firm not currently auditing member cities. This decision resulted in an initial delay in

selecting an audit firm.

Following an informal solicitation for proposals, the Executive Director selected McGilloway,Ray, Brown and Kaufman for the audit. The Water Authority was advised of the selection at itsmeeting of October 10th. The contract was executed on October 31, 2013.

At its meeting of February 13, 2014, the Water Authority approved a modification to the contractfor the completion of the Fy 2013-2014 audit at a not-to-exceed price of $6000. The audit wascompleted in December 2014. The audit and management letter were presented and briefed tothe Ad Hoc Financial Committee on January 10, 2015.

With the completion of this audit, the Authority now needs to select a firm for FY 2014-2015.

Kaufman had offered to complete audits for fiscal years 2012 to 2015 in its initial proposal, but itwas decided to authorize only one year at a time. Kaufman has now offered to complete the FY2014-2015 for a price not to exceed $7000.00 which would include completion of an additionalitem, the Management Discussion and Analysis (MD&A) which staff has had to have completedby change order the last two audits. In the opinion of the Executive Director, $7000.00 would bea fair and reasonable fee. In addition, since it now has extensive experience with the Authoritysfinancial system, an amendment to Kaufmans contract for the additional work would be in thebest interest of the public.


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ATTACHMENTS:

Fiscal Year 2013-2014 Audit and Letters

McGilloway, Ray, Brown and Kaufman contract dated October 31, 2013, amendedFebruary, 2014.


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MONTEREY PENINSULA REGIONAL

WATER AUTHORITY

BASIC FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2014

MCGILLOWAY, RAY, BROWN & KAUFMAN

ACCOUNTANTS & CONSULTANTS


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TABLE OF CONTENTS

Page

Independent Auditors Report 1

Managements Discussion and Analysis 3(Required Supplementary Information)

Basic Financial statements

Statement of Net Position 7Statement of Revenues, Expenses and Changes in Net Position 8

Statement of Cash Flows 9

Notes to Financial Statements 10


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Daniel M. McGilloway, Jr., CPA, CVA, Gerald C. Ray, CPA, Clyde W. Brown, CPA, Patricia M. Kaufman, CPA,

Larry W. Rollins, CPA, Helen Grace H. Rodriguez, CPA, CFE

Sarita C. Shannon, CPA, Whitney Ernest, CPA, Devvyn MacBeth, CPA,

Jesus Montemayor, CPA, Smriti Shrestha, CPA

McGILLOWAY, RAY, BROWN&KAUFMANAccountants & Consultants

2511 Garden Road, Suite A180 379 West Market Street

Monterey, CA 93940-5301 Salinas, CA 93901

831-373-3337 Fax 831-373-3437 831-424-2737Toll Free 866-373-2511 Fax 831-424-7936

INDEPENDENT AUDITOR'S REPORT

The Board of Directorsof Monterey Peninsula Regional Water Authority


We have audited the accompanying basic financial statements of the Monterey Peninsula RegionalWater Authority (the Authority), as of and for the year ended June 30, 2014, as listed in the table

of contents, and the related notes to the financial statements.Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with accounting principles generally accepted in the United States of America; thisincludes the design, implementation, and maintenance of internal control relevant to the

preparation and fair presentation of financial statements that are free from material misstatement,

whether due to fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the United

States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entitys preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the entitys internal control.

Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of significant accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.


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2

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of the Monterey Peninsula Regional Water Authority as of June 30, 2014

and the changes in financial position and its cash flows for the year then ended, in accordance

with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that themanagements discussion and analysis onpages 3 through 6 be presented to supplement the basic

financial statements. Such information, although not a part of the basic financial statements, is

required by the Governmental Accounting Standards Board, who considers it to be an essentialpart of financial reporting for placing the basic financial statements in an appropriate operational,

economic, or historical context. We have applied certain limited procedures to the required

supplementary information in accordance with auditing standards generally accepted in the

United States of America, which consisted of inquiries of management about the methods ofpreparing the information and comparing the information for consistency with managements

responses to our inquiries, the basic financial statements, and other knowledge we obtainedduring our audit of the basic financial statements. We do not express an opinion or provide anyassurance on the information because the limited procedures do not provide us with sufficient

evidence to express an opinion or provide any assurance.

Salinas, CaliforniaDecember 31, 2014


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MONTEREY PENINSULA REGIONAL WATER AUTHORITYMANAGEMENTSDISCUSSION AND ANALYSIS

JUNE 30, 2014

3

The management of Monterey Regional Water Authority (the Authority) is providing thismanagementsdiscussion and analysis of the financial activities for the fiscal year ended June 30,2014. This information presented should be considered in conjunction with the Authoritys basicfinancial statements.

Financial Highlights

The Authoritys total net position as of June 30, 2014, was $130,649, and as of June 30,2013, was $7,268.

The change in net position for the fiscal year ended June 30, 2014, was an increase of$123,381.

The Authority has operating revenues in excess of operating expenses in the amount of$123,381.

Overview of Financial Statements

This discussion and analysis is intended to serve as an introduction to the Authoritys basic financial

statements. The Authoritys audit report iscomprised of the financial statements and notes.Measurement Focus and Basic F inancial StatementsThe basic financial statements consist of the Authoritys Statement of Net Position, Statement ofRevenues, Expenses and Changes in Net Position, Statement of Cash Flows, andNotes to the BasicFinancial Statements.

Measurement focus is a term used to describe which transactions are recorded within the variousfinancial statements. Basis of accounting refers to when transactions are recorded regardless ofthe measurement focus applied. The accompanying financial statements are reported using theeconomic resources measurement focus, and the accrual basis of accounting. Under the economicmeasurement focus all assets and liabilities (whether current or noncurrent) associated with these

activities are included on the Statement of Net Position. The Statement of Revenues, Expenses andChanges in Net Position present increases (revenues) and decreases (expenses) in total net position.Under the accrual basis of accounting, revenues are recorded when earned and expenses arerecorded when a liability is incurred, regardless of the timing of related cash flows.

The Statement of Net Positionpresents information on all of the Authoritys assets, deferredoutflows of resources, and liabilities, deferred inflows of resources, with the difference between thefour reported as net position. Over time, increases and decreases in net position may serve as auseful indicator of whether the financial position of the Authority is improving or deteriorating.

The Statement of Revenues, Expenses and Changes in Net Positionpresents information showinghow the Authoritys net position changed during the most recent fiscal year. All changes in net

position are reported as soon as the underlying event giving rise to the change occurs, regardless ofthe timing of related cash flows. Thus, revenues and expenses are reported in this statement forsome items that will only result in cash flows in future fiscal periods.

The Statement of Cash Flowsprovides information regarding the Authoritys cash receipts and cashdisbursements during the fiscal year.

TheNotes to the Basic Financial Statementsare included to provide more detailed data and explainsome of the information in the statements.


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MONTEREY PENINSULA REGIONAL WATER AUTHORITYMANAGEMENTSDISCUSSION AND ANALYSIS

JUNE 30, 2014

5

Statement of Revenues, Expenses and Changes in Net Position

The following table represents a summary of the Statement of Revenues, Expenses and Changes inNet Position.

Table 2

2014 2013 Amount Percent

443,124$ 417,445$ 25,679$ 6.2%

Operating expenses 319,743 422,183 (102,440) -24.3%

Change in net position 123,381$ (4,738)$ 128,119$ -2704.1%

CONDENSED STATEMENT OF REVENUES, EXPENSES AND

CHANGES IN NET POSITION

Operating revenues

Year ended June 30, Change

BudgetThe Authoritys governing body adopted a budget as an operating plan. Budgetary basis financial

statements are not presented because there is no legal requirement to do so.

On April 23, 2013, the Authority adopted a budget of $423,680 for the fiscal year ended June 30,2014, with fair-share contributions requested from each member city as well as from MontereyCounty. The budget was subsequently increased on January 9, 2014 to $650,380. Of that increase,$200,000 was for the Desal Plant Value Engineering Study contracted by the Water Authority butpaid for from California American Water Companys (Cal-Am) funds deposited in a separateaccount. The remaining increase to the budget, $26,700, was to cover additional Special Counselsupport in addressing Marina's deliberations on the Cal-Am Test Slant Well Coastal DevelopmentPermit (CDP) and seeking an extension from the State Water Resources Control Board for Ceaseand Desist Order (CDO) 2009-60. These negotiations were related to the Cal-Ams application fora Monterey Peninsula Water Supply Project (MPWSP).

Factors Bearing on the AuthoritysFuture

During fiscal year ended June 30, 2014, the focus of the Authority was to keep the Communityunited in seeking water supply projects that could come as close as possible to the CDO deadline ofJanuary 1, 2017. In particular, the Authority focused on efforts to pass Desal Funding Securitizationlegislation in Sacramento, to obtain regulatory approvals and permits for Cal Am's MPWSP, and thePollution Control Agency Ground Water Replenishment (GWR) project. The Authority continuedto provide transparency in its deliberations, insuring accountable elected officials retain oversight ofnew water supply projects for the Peninsula, maximizing public participation, and retaining a policy

position that best served the needs of Peninsula residents.

The Position Statement also defined basic conditions that any project must satisfy to receiveAuthority support. After intense analysis and public discussion of the Desal options available, theAuthority voted to support Cal-AmsMPWSP.

The future of the Water Authority depends upon how successful it can be in keeping the sixPeninsula Cities and Monterey County working together, focused on those components of theportfolio water solution which comply with the basic conditions of its Position Statement.


24/58

MONTEREY PENINSULA REGIONAL WATER AUTHORITY

MANAGEMENTSDISCUSSION AND ANALYSISJUNE 30, 2014

6

To that end, the Authority again approved the following work plan for the upcoming fiscal year:

Completion of post-settlement activities and follow-up with settling parties regardingCal-Ams CPUC application for the MPWSP

Assist passage of legislation to implement securitization and work collaborativelywith MPWSP and Cal-Am to obtain Water Rate Relief Bonding and other public

funding to minimize costs to the ratepayer

Work collaboratively with Monterey Peninsula Water Management District

(MPWMD) and Monterey Regional Water Pollution Control Agency to move theGWR project forward

Work with the MPWMD to develop a plan for engaging with the State Water

Resources Control Board regarding potential appropriate modifications to the Cease

and Desist Order

When appropriate, support Cal-Am in its effort to secure permits related to theproposed source wells

Actively pursue public outreach and education efforts through our Water Authorityconsultant in cooperation with MPWMD and its Public Outreach Committee

Pursue opportunities to increase the use of storm water in future water supply projects

Request for Information

This financial report is designed to provide citizens and taxpayers with a general overview of the

Authoritys finances and to demonstrate the Authoritys accountability for money it receives. If you

have any questions about this report or need any additional information, please contact the

Authoritys Executive Director, James Cullem, via telephone at 831-241-8503, or email [email protected]


25/58

The accompanying notes are an integral part of these financial statements.

7

ASSETS

Cash and cash equivalents 133,765$

Accounts receivable 9,281

Total assets 143,046

LIABILITIES

Accounts payable 11,276

Unearned revenue 1,121

Total liabilities 12,397

NET POSITIONUnrestricted 130,649

Total net position 130,649$


STATEMENT OF NET POSITION

JUNE 30, 2014


26/58


8

Membership fees 424,562$Project evaluation reimbursement 18,562

Total operating revenue 443,124

OPERATING EXPENSES

Administration and clerical services 94,141

Legal services 169,185

Contract services 48,152

Insurance 6,702

Advertising and promotion 829

Travel expenses 734Total operating expenses 319,743

Operating income/change in net position 123,381

Total net position, beginning of year 7,268

Total net position, end of year 130,649$

OPERATING REVENUES


FOR THE YEAR ENDED JUNE 30, 2014

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION


27/58


9

Cash Flows from Operating Activities

Cash received from membership fees 437,459$

Cash payments to consultants and suppliers of goods and services (424,533)

12,926

12,926

Cash and Cash Equivalents, Beginning of Year 120,839

Cash and Cash Equivalents, End of Year 133,765$

Operating income 123,381$

provided (used) by operating activities

(Increase) decrease in accounts receivables (5,665)

Increase (decrease) in accounts payable (105,911)

Increase (decrease) in deferred revenue 1,121

Net cash provided by operating activities 12,926$

FOR THE YEAR ENDED JUNE 30, 2014

Adjustments to reconcile operating income to net cash

Net increase in cash and cash equivalents

Net cash provided by operating activities

Reconciliation of operating income to net cash provided by operating

activities


STATEMENT OF CASH FLOWS


28/58


NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2014

10

1. Organization and Summary of Significant Accounting Polices

Organization

The Monterey Peninsula Regional Water Authority (the Authority) was formed on February 25,

2012, pursuant to the Joint Exercise of Powers Act, set forth in Chapter 5 of Division 7 of Title 1 of

the Government Code, sections 6500, et seq. The Authority operates as a jointly governedorganization. The participants of the Authority are the City of Carmel-by-the-Sea, the City of Del

Rey Oaks, the City of Monterey, the City of Pacific Grove, the City of Sand City, and the City ofSeaside. The Authority operates under a governing body of six directors, one director from each

participant.

The purpose of the Authority is to jointly ensure the timely development, financing, construction,

operation, repair, and maintenance of one or more water projects and ensure that the governance ofsuch water projects includes representation that is directly accountable to the participants wateruses.

Basis of Accounti ng, F inancial Presentation, and M easur ement F ocus

The Authoritysbasic financial statements have been prepared using the accrual basis of accounting.As such, revenue is recognized when earned, and expenses are recognized when they are incurred.

The Authority reports its activities as a single enterprise fund, which is used to account foroperations that are financed and operated in a manner similar to a private business enterprise.

An enterprise fund distinguishes operating revenues and expenses from non-operating items.

Operating revenues and expenses generally result from providing services and producing and

delivering goods in connection with the proprietarys fund principal ongoing operations. Theprinciple operating revenue for the Authority is membership fees from the Authoritys six member

agencies. Operating expenses for the Authority include the cost of services, and administrative

expenses. All revenues and expenses not meeting this definition are reported as non-operating

revenues and expenses.

The basic financial statements are prepared using an economic resources measurement focus. This

means all assets and liabilities associated with the Authoritys activities are included on the

Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position

presents increases (revenues) and decreases (expenses) to total net position.

Accounting Changes

The Authority applies all applicable GASB pronouncements for certain accounting and financial

reporting guidance.

Budget

The Authority annually adopts an operating budget for the ensuing fiscal year effective July 1 with a

mid-year review as a financial plan for the year. The governing body adopts said budget as anoperating plan. Budgetary basis financial statements are not presented because the Authority is not

legally required to do so.

Cash Equivalents

The Authority presents its cash flow statements using the direct method. For purposes of cash flow

presentation, the Authority considers demand deposits with financial institutions to be cash

equivalents.


29/58


NOTES TO BASIC FINANCIAL STATEMENTSJUNE 30, 2014

11

Accounts Receivable

The primary source of accounts receivable is from membership fees paid annually by the sixmember agencies. No allowance is established for membership fees as management considers themfully collectible.

Deferred Outfl ows/I nf lows of ResourcesIn addition to assets, the statement of financial position will sometimes report a separate section fordeferred outflows of resources. This separate financial statement element, deferred outflows ofresources, represents a consumption of net position that applies to a future period(s) and so will notbe recognized as an outflow of resources (expenses) until then. For this reporting period, theAuthority has no items that qualify for reporting in this category.

In addition to liabilities, the statement of net position will sometimes report a separate section fordeferred inflows of resources. This separate financial statement element, deferred inflows ofresources, represents an acquisition of net position that applies to a future period(s) and so will notbe recognized as an inflow of resources (revenue) until that time. For this reporting period, theAuthority has no items that qualify for reporting in this category.

Net Position

The statement of net position reports all financial and capital resources. The difference betweenassets and liabilities is net position. The Authoritys net position is classified asfollows:

Invested in Capital Assets Net of Related Debt This represents the total investment in capitalassets, net of outstanding debt obligations related to those capital assets. Currently, the Authoritydoes not have any capital assets or outstanding debt.

Restricted Net PositionThis represents amounts that are subject to restrictions that are imposed byexternal groups such as creditors, contributors or laws and regulations of other Governments or lawthrough constitutional provisions or enabling legislation. Currently, the Authority does not have arestricted net position.

Unrestricted Net PositionUnrestricted net position includes resources derived from membershipfees.

Revenue Recognit ion

Revenues are recognized when earned. Revenues for the Authority are recognized when billed toeach of the six member agencies.

Use of Estimates

Management uses estimates and assumptions in preparing financial statements in accordance withgenerally accepted accounting principles. Those estimates and assumptions affect the reportedamounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenues and expenses during the reporting period.Accordingly, actual results may differ from these estimates.

2. Cash Held with Financial Institutions

The Authority maintains cash balances at Wells Fargo Bank, N.A, a commercial bank with branchesin Carmel-by-the-Sea, CA with federal depository insurance coverage of $250,000. The bankbalance at June 30, 2014 was $124,484; the book balance was $133,765.


30/58


NOTES TO BASIC FINANCIAL STATEMENTSJUNE 30, 2014

12

3. Related Parties

The Authority currently contracts out for administrative and clerical services and executive directorservices. These two contracts are between the Authority and the City of Monterey (one of sixmember agencies). The administrative and clerical services contract states that the Authority is

contractually obligated to pay the City of Monterey for administrative and clerical services with anannual payment rendered at the beginning of each fiscal year. For the fiscal year ended June 30,2014, a fee of $35,000 was paid to the City of Monterey for administrative and clerical services.

The executive director services contract states the Authority is liable for all services rendered to theAuthority by the Executive Director and fees are to be paid on a monthly basis. For the fiscal yearended June 30, 2014, $59,141 was paid to the City of Monterey for executive director services.

These contracts are in place to provide the Authority with all necessary services that wouldotherwise be handled by an operational staff. As such, the Authority does not retain a staff to fulfillthese duties and does not have payroll or any other related liabilities.

4. Risk Management

The Authority is exposed to various risks of loss related to torts, theft of, damage to, or destructionof assets; errors and omissions; injuries to employees; employee health claims; unemploymentcompensation claims and environmental damage for which the Authority purchases commercialinsurance. There has been no reduction in insurance coverage from the prior year. Insurancesettlements for claims resulting from the risks covered by commercial insurance have not exceededthe insurance coverage in the past year. The Authority has obtained coverage from commercialinsurance companies.

5. Commitments and Contingencies

Value Engineering Study contr act with Value Management Strategies, Inc.

On June 12, 2014, the Authority entered into an agreement with Value Management Strategies, Inc.(VMS) to facilitate a value engineering study for the Monterey Peninsula Water Supply Project -Desalination Infrastructure. The value engineering study is centered on a technical view of the 30%design of Desalination Plant completed by CDM Smith with a purpose of identifying areas ofsavings and value improvements.

This contract was budgeted for $200,000, however, through negotiation the contract was signed fora not-to-exceed amount of $109,036. This amount is to be funded by the Authority and reimbursedby California American Water.

Subsequent Events

Management has performed an analysis of the activities and transactions subsequent to June 30,

2014, to determine the need for any adjustments to and/or disclosures within the audited financialstatements for the year ended June 30, 2014. Management has performed their analysis throughDecember 31, 2014, the date the financial statements were available to be issued. No subsequentevents as defined by the standard were found.

Subsequent events were evaluated through December 31, 2014, which is the date the financialstatements were available to be issued.


31/58

MONTEREY PENINSUL REGION L W TER UTHORITY

October 15, 2013

Ms. Patricia M. Kaufman CPA

McG illoway, Ray, Brown, Kaufman

2511 Garden Road, Suite A180

Monterey, CA 93940-3437

Subject: Selection of Audit Services

Directors

Chuck Della Sala, Presiden

Jason Burnett, Vice Presiden

Ralph Rubio, Secretar

Jerry Edelen, Treasure

Bill Kampe, Directo

David Pendergrass, D irecto

Executive D irector

James M. Cullom, PE

D ear Ms. Kaufman:

Congratulations The W ater Authority has accepted your proposal to provide Audit Services for The M onterey

Peninsula Regional Water Authority.

The Authority received three proposals, yours included. However, we believe your firm is best positioned to

supp ort to com plete its first audit in a timely m anner and at a reason able cost.

Although the current deadline for a CPA prepared certified annual report and a Full Op inion A udit for FY 2013

i s December l

, I am hop eful of getting that deadline extended un til January 1 s t

. Accordingly, I have adjusted

the contract completion date to D ec 6

t

so we have time to review the documents at the staff level and to

prepare a staff report for the W ater Authority Board meeting later in D ecember.

A draft copy of the contract is enclosed herewith. Please review and return with your engagement letter. Please

identify any issues between the two that we need to resolve before executing the contract. If possible, I would

like to sign off by Oct 18,

Should you have any questions, please do no t hesitate to contact me at

culletn@ monterey.org

or contact me on

my cell phone 831-241-8503.

Sincerely,

Cullem P.E.

xecutive D irector

M P R W A

Ertel: Contract

580 PACIFIC S 'F, ROOM 6 MO NTEREY CALIFORNIA - 03940 ,

www.rnprwa.erg.


32/58


33/58

7 Staffing Plan Consultant shall provide Authority with the names of the key

professional personnel assigned to perform the services under this Agreement as well as a

general description of the services they will be assigned to perform.

8

Subconsultant Plan

N/A

9

Meet and Con fer

Consultant agrees to meet and confer with Authority or its

agents or employees with regard to services as set forth herein as may be required by Authority

to insure timely and adequate performance of this Agreement

10

indemnification

Consultant hereby agrees to the following indemnification

clause:

To the fullest extent permitted by law (including, without limitation, California Civil Code

Sections 2782 and 2782.6), Consultant shall defend (with legal counsel reasonably

acceptable to the Authority), indemnify and hold harmless the Authority and its officers,

designated agents, departments, officials, representatives and employees (collectively

Indemnitees ) from and against claims, loss, cost, damage, injury expense and liability

(including incidental and consequential damages, court costs, reasonable attorneys' fees,

litigation expenses and fees of expert consultants or

xp rt

witnesses incurred in connection

therewith and costs of investigation) to the extent they arise out of, pertain to, or relate to, the

negligence, recklessness, or willful misconduct of Consultant, any Subconsultant, anyone

directly or indirectly employed by them, or anyone that they control (collectively Liabilities ).

Such obligations to defend, hold harmless and indemnify any lndemnitee shall not apply to the

extent that such Liabilities are caused in part by the negligence, or willful misconduct of such

Indemnitee.

Notwithstanding the provisions of the above paragraph, Consultant agrees to indemnify

and hold harmless the Authority from and against any and all claims, demands, defense costs,

liability, expense, or damages arising out of or in connection with damage to or loss of any

property belonging to Consultant or Consultants employees, contractors, representatives,

patrons, guests or invitees.

Consultant further agrees to indemnify Authority for damage to or loss of Authority

property to the proportionate extent they arise out of Consultant's negligent performance of

the work associated with this agreement or to the proportionate extent they arise out of any

negligent act or omission of Consultant or any of Consultant's employees, agents, contractors,

representatives, patrons, guests or invitees; excepting such damage or loss arising out of the

negligence of the Authority

11

Insurance

Consultant shall submit and maintain in full force all insurance as

described herein, Without altering or limiting Consultant's duty to indemnify, Consultant shall

maintain in effect throughout the term of this Agreement a policy or policies of insurance with

the following minimum limits of liability:

Commercial e

iabiyj.nsurance including but not limited to premises, personal

injuries, bodily injuries, products, and completed operations, with a combined single limit

of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate.

Professional Liabil ity insurance

Consultant shall maintain in effect throughout the term

of this Agreement professional liability insurance with limits of not less than $1,000,000


34/58

per

claim

and

$2,00

0,000

in the

aggre

gate.

Cons

ultant

will e

ither

maint

ain or

cause

tobe

main

tained

profe

ssiona

l liab

ility co

verag

e in f

ull for

ceor

obtain

exten

ded re

portin

g(tai

l)

cove

rage (

with t

he sam

e liab

ility

limits)

for a

tleast

three

years

follow

ing C

ity's

acce

ptanc

e of t

hewo

rk.

C

omme

rcial a

utom

obile l

iabilit

y insu

rance

cover

ing al

l auto

mobil

es, inc

ludin

gown

ed,

lease

d, no

n-own

ed, a

ndhir

edaut

omob

iles, u

sed in

prov

iding

servi

ces un

der th

is

Agre

emen

t, with

a com

bine

d sing

le lim

it of n

ot les

s than

$1,0

00,00

0 per

occurr

ence.

Wo

rkers'

Com

pensa

tion In

suran

ce. If

Cons

ultant

empl

oys o

thers i

nthe

perfo

rmanc

e of

thisA

greem

ent, C

onsu

ltant s

hall m

ainta

in wo

rkers'

comp

ensat

ion in

suranc

e in

acco

rdance

with

Calif

ornia

Labor

Code

sectio

n 370

0 and

with

a min

imum

of $1

00,00

0

per o

ccurre

nce fo

r emp

loyer

's liab

ility.

Othe

rInsll

rance

Regu

ireme

nts

A

ll

insur

ance r

equire

dund

er thi

s Agr

eemen

t mus

t be w

ritten

by a

n insu

rance

comp

any ei

ther:

a

dmitte

d to d

o bus

iness

in Cal

iforni

a with

a cur

rent A

.M. B

est ra

ting o

f no

les

s than

A:V

;

or

an

insura

nce c

ompa

ny wi

th a cu

rrent

A.M.

Best

rating

of no

less

than A

:

V

II

E

xcep

tion m

ay b

e mad

efor

the S

tate C

ompe

nsati

onIns

uranc

eFun

dwh

en

not

specif

ically

rated.

B

Eac

h insu

rance

polic

y requ

ired b

ythi

s agre

ement

shall

be en

dorse

d to s

tate

that Cityof Monterey shall begivennotice in writingatleast thirty days in

a

dvanc

e of a

ny can

cella

tionth

ereof

, exce

pt 10-

dayn

otice

for no

npaym

ent o

f

th

e pre

mium

.

C

T

he ge

neral

liabili

ty and

auto

polici

es sha

ll:

Prov

ide an

endo

rseme

nt nam

ing t

he Au

thority

, its o

fficer

s, offi

cials,

and

empl

oyees

as ad

dition

alins

ureds

under

an IS

OCG

20 1

0 07 0

4or I

SO 2

0 37

07 04

or th

eir eq

uivale

nt.

Provid

e tha

t such

insur

ance i

s prim

arya

nd no

n-con

tributi

ng ins

uranc

e toa

ny

ins

uranc

e or s

elf-ins

uranc

e mai

ntaine

d byt

he Au

thorit

y.

Containa'Separation

ofIn

sureds

pro

vision

subst

antial

ly equ

ivale

nt

to tha

t used

in th

e ISO

form

CG0

0 01 1

0 01

or the

ir equ

ivalen

t.

Pro

vide

for a w

aiver

of an

ysubr

ogatio

n righ

ts aga

inst t

he Au

thority

via a

n

ISO C

G 24

01 10

93 or

its eq

uivale

nt.

rio

rto th

estar

tof w

ork un

der th

is Ag

reeme

nt, Co

nsulta

nt sha

ll file

c

ertific

ates o

f insu

rance

and e

ndors

emen

tsevi

dencin

gthe

cove

rage r

equire

d

3


35/58

by this agreement with the Authority. Consultant shall f i le a new or amended

certif icate of insurance promptly after any change is made in any insurance

policy which wo uld alter the information on the ce rtif icate then on file.

E.

Neither the insurance requirements hereunder, nor acceptance or approval of

Consultant s insurance, nor whether any claims are covered under any

insurance, shall in any way modify or change Consultant s obligations under

the indem nification clause in this Agreem ent, which shall continue in full force

and e ffect Notwithstanding the insurance requirements contained herein,

Consultant is financially liable for its indemnity obligations unde r this

Agreement.

F.

Any deductibles or self-insured retentions must be declared to and approved

by the Authority. At the option of the Authority either: the insured shall

reduce or eliminate such deductibles or self- insured retentions as respe cts

the Authority, its officers, officials, employees and volunteers; or Consultant

shall provide a f inancial guarantee sa tisfactory to the Authority guaranteeing

payment of losses and related investigations claim administration and

defense expenses.

12

Ownership of Work and Copyrights

Upon completion of the work under this

Agreem ent, ownership, t i tle and copyrights to al l materials and deliverables produced as pa rt of

this Agreem ent wil l automatically be vested in the Authority and no further agreeme nt wil l be

necessary to transfer ownership to Authority.

13

licensing Standard of Care

Consultant represents as follows: that it is

experienced in the professional services and a specialist in the work performed under this

Agreem ent; is duly organized, existing and in goo d standing un der applicable state law; and is

properly l icensed and/or cert if ied to perform the w ork specif ied un der this Agreem ent, including

but not limited to possession of a current City of Monterey business license and will only

employ persons and subconsultants with all required licenses and certif ications.

14

Substitution of Consultant Personnel

The key personn el of Con sultant or any

subconsultants listed in Consultant s proposal and assigned to perform the work under this

Agreeme nt may not be substi tuted w ith or replaced by other personnel or subconsultants

without the advance written consent of Authority.

15

Termination

Authority may terminate this Agreement upon ten days writ ten

notice. The am ount of damages, i f any, as a result of such termination may be decided by

negotiations between the parties or before a c ourt of com petent jurisdiction.

16 Agency

In performing the services specif ied under this Ag reement, Co nsultant

is hereby deemed to be an independent Con sultant and not an age nt or employee of Authority.

17

Entire Agreement

This Agreeme nt const itutes the entire Agreem ent between the

parties hereto and supersedes any and all prior agreements, whether oral or written, relating to

the subject m atter thereof. Any m odification of this A,greem ent will be effective only if it is in

writing signed by both parties hereto.

4


36/58

Cul

lem, E

xecut

iveD

irecto

r

18

Vali

dity If

any p

rovisi

on in

this A

greem

ent is

held

by a c

ourt o

f com

peten

t

ju

risdic

tionto

bein

valid,

void o

r une

nforce

able,

there

mainin

g pro

vision

s will

conti

nuein

full

f

orce w

ithou

t bein

g impa

ired o

rinva

lidate

din a

ny wa

y.

19

Ass

ignme

nt of I

ntere

st

The d

uties u

nder

this A

greem

ent s

hall n

ot be

assign

able,

del

egabl

e, or t

ransfe

rable

witho

ut the

prior

writte

n con

sent o

f Auth

ority.

Any

such p

urpor

ted

assignment, delegation, or transfershallconstitute amaterial breach of thisAgreement upon

wh

ich A

uthor

ity ma

y term

inate

this

Agree

ment

and b

e entit

led to

dama

ges.

20

Co

nflict

of Inte

rest

C

onsul

tant h

ereby

certif

ies tha

t it do

es no

t now

have

, nor

sha

ll it ac

quire

any f

inanci

al or b

usine

ss inte

rest t

hat wo

uld c

onflic

t with

the p

erform

ance

of

se

rvices

unde

r this

Agree

ment

.

21

Cou

nterp

arts

This A

gree

ment

may b

e exe

cuted

in mu

ltiple

origin

als, e

acho

f

whi

ch is

deeme

d to b

e an

origin

al, an

d may

besi

gned

in cou

nterpa

rts.

2

2. Laws.

Cons

ultant

agree

s that

inthe

perfo

rmanc

eof t

his Ag

reeme

nt it w

ill

rea

sonab

ly com

ply w

itha

ll app

licabl

e State

, Fed

eral a

nd loc

al law

s and

regu

lation

s. Thi

s

A

gree

ment

shall b

e gov

erned

bya

nd con

strue

d ina

ccord

ance w

ithth

e laws of the State of

C

aliforn

ia and

theC

ity of

Mont

erey.

IN

WITN

ESS

WHE

REOF

, this

Agre

ement

is en

tered i

nto by

the p

arties

heret

o on t

he

d

ay an

dyea

r first

above

writt

enin M

onte

rey, C

alifor

nia.

CON

SUL

TANT

tideK

aufrr

ian,

McG

illow

ay R

ay Br

own K

aufm

an


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McGILLOWAY, RAY, BROWN KAUFMAN

Accountants Consultants

2511 Garden Road, Suite A.180 79 West Market Street

Monterey, CA 93.940,5301 alinas, CA 93901

831 373 3337 Fax 831 373 3437

31 424 2737

hil

Free 866-373-2511 ax 831-424-7936

EXHIBIT A

October 21, 2013

Mo nterey Peninsula Regional Water Authority

James M . Cullem, P.E., Executive Director

580 Pacific Street, Room 6

Monterey, California 93940

We are pleased to confirm our understanding of the services we are to provide Monterey

Peninsula Regional Water A uthority for the years ending June 3 0, 2013, 2014, and 2015.

W e will audit the basic financial statements of M onterey Peninsula Regional W ater Authority as

of and for the years ending June 30, 2013, 2014, and 2015. Accounting standards generally

accepted in the United States of America provide for certain required supplementary information

(RSI), such as management's discussion and analysis (MD A), to supplement Monterey

Peninsula Regional Water Authority's basic financial statements. Such information, although

not a part of the basic financial statements, is required by the Governmental Accounting

Standards Board who considers it to be an essential part of financial reporting for placing the

basic financial statements in an appropriate operational, economic, or historical context. As p art

of our engagement, we will apply certain limited procedures to Monterey Peninsula Regional

Water Authority s RSI in accordance with auditing standards generally accepted in the United

States of Am erica. These limited procedures w ill consist of inquiries of manage men t regarding

the methods of preparing the information and comparing the information for consistency with

manag emen t s responses to our inquiries, the basic financial statements, and other know ledge we

obtained during our audit of the basic financial statements. We will not express an opinion or

provide any assurance on the information because the limited procedures do not provide us w ith

sufficient evidence to express an opinion or provide any assurance. The following RS1 is

required by generally accepted accounting principles and will be subjected to certain limited

procedure s, but will not be audited:

1) Management s Discussion and Analysis

Daniel M. 114cGillowav, Jr., CPA, CVA , Gerald C. Ray, CPA, Clyde W. Brown, CP A, Patricia M. Kaufman, CPA,

Larry W Rollins, CPA, Helen Grace 11: Rodr4atez, CPA, GEE

Santa C. Shannon, CPA, Deann a Lozono, CPA, Whitney Ernest, CPA, Devvyn MaeBeth, CPA,

Nancy H Ritnberg, CPA, Jesus Montemayor. CPA, told Shrestha, CPA


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M onterey Peninsula Regional Water Authori ty

October 21, 2013

Page 2

udit O bjective

The o bjec t ive of our audi t is the express ion of opin ions as to whether yo ur ba s ic f inanc ial

statemen ts are fairly presented, in all material respects, in conform ity with generally accepted

accounting principles and to report on the fairness of the supplementary information referred to

in the second paragraph when con sidered in relat ion to the f inancial s tatements as a whole. Ou r

audit will be conducted in ac cordance with au diting standards general ly accepted in the U nited

States of A m erica and wil l include tests of the accou nting records and other procedures we

consider necessary to enable us to express such opinions. W e canno t provide assurance that

unm odified opinions wil l be expressed. Circum stances may arise in which i t is necessary for us

to mo dify our opinion s or add emphasis-of-matter or other-m atter paragraphs. If our opinions o n

the f inancia l s ta temen ts a re o ther than u nm odified , we wi l l di scuss the reasons w i th y ou in

advance. If, for any reason, we are unable to co mplete the audit or are unable to form o r have

not form ed opinions, we m ay decline to express opinions or to issue a report as a result of this

engagement.

M anagem ent Responsibil it ies

Management is responsible for the basic financial statements and all accompanying information

as wel l a s a ll r epresen ta t ions conta ined the re in . You agree to as sum e a l l manag em ent

responsibil i t ies for any n onattes t services we provide; oversee the services by designa ting an

individual, preferably from senior m anagem ent, with suitable skill, knowledge, or experience;

evaluate the adequac y and results of the services; and accept responsibility for them .

M anagem ent is responsible for establishing and m aintaining effective internal controls, including

mon itoring ongo ing activities; for the selection an d application of acc ounting principles; and for

the preparat ion and fai r presen tat ion o f the f inanc ial s ta tem ents in con formi ty wi th U .S.

generally acc epted accounting principles.

M anag em ent i s a l so responsib le for ma king al l f inanc ial records and re la ted informat ion

avai lable to us and for the accurac y and com ple teness of tha t inform at ion. You are a lso

responsible for providing us with 1) access to a ll information of which yo u are aware that is

relevant to the preparat ion and fair presen tat ion of the finan cial statem ents, 2) additional

inform at ion tha t we m ay requ es t for the purpose of

the audit , and 3) unrestric ted access to

persons within the government from wh om we determine it necessary to obtain audit evidence.

Your responsibilities include adjusting the financial statements to correc t material misstatemen ts

and c onf i rm ing to us in the wr i t ten representa t ion le t te r tha t the ef fec t s of any unco r rec ted

misstatements aggregated by us during the current engage ment an d pertaining to the latest period

presented are imm aterial, both individually and in the ag gregate, to the financial statements taken

as a whole.


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M onterey Peninsula Regional Water Authori ty

October 21, 2013

Page 3

You are responsible for the design and implem entat ion of programs and con trols to prevent and

detect fraud, and for informing us abou t al l know n or suspected fraud affect ing the governm ent

involving

1)

managem ent, 2) employees who have significant roles in internal control , and 3)

others where the fraud could have a material effect on the financial statements Your

responsibilities include informing us of your knowledge of any allegations of fraud or suspected

fraud affecting the governm ent received in comm unications from employees, former em ployees,

regulators, or others. In addit ion, you are responsible for identifying and ensuring that the e nti ty

com plies with applicable laws and regu lations.

You a re respons ib le fo r the prepara t ion of the supplementa ry in format ion in conformity w i th

U.S. genera l ly accep ted acc oun t ing p r inc ip les. You agree to inc lude ou r r epor t on the

supplementary information in any documen t that contains and indicates that we have reported on

t he supplem en ta ry in fo rm a t ion . Y ou a l so ag ree to inc lude the audi t ed f inanc ia l w i th any

presentation of the supplementary information that includes our report thereon Your

respon s ibi l it ies inc lude ackn ow ledging to us in the representa t ion le t te r tha t 1) you are

responsible for presentation of the supplemen tary information in accordan ce with GAA P; 2) that

you believe the supplementary information, including its form and content, is fairly presented in

accordance with GA AP ; 3) that the methods of measu rement or presentat ion have not changed

from those used in the prior period or , if they have changed, the reasons for such changes); and

4) you have d isc losed to us any s ign i f ican t assump t ions or in terpreta tions under ly ing the

measurement or presentation of the supplementary information,

udit Procedures

eneral

An audit includes exam ining, on a test basis , evidence support ing the amo unts and disclosures in

t he f inanc ia l s t a tem en ts ; the re fo re , ou r aud i t w i ll i nvo lve judgm ent abou t the n um ber o f

transactions to be exam ined and the areas to be tes ted. A n audit a lso include s evaluating the

appropria teness of accounting policies used and the reasonableness of s ignif icant accounting

estimates m ade by managem ent, as well as evaluating the ov erall presentation of the f inancial

s ta temen ts . W e wi l l p lan

nd perform the audit to

obta in

reasonable ra ther than absolute

assurance abo ut whether the financial statements are free of material misstatem ent, whether from

1) errors, 2) fraudulent financial reporting, 3) m isapprop riation of assets, or 4) violations of

laws or gov ernmen tal regulations that are at tr ibutable to the enti ty or to acts by man agem ent or

em ployees acting on be half of the entity.

Bec ause of the inherent limitations of an audit,

combined

with the inheren t limitations of internal

control, and bec ause w e will not perform a detailed exam ination of all transactions, there is a risk

that mater ia l miss ta tem ents ma y ex is t and no t be detec ted by us , even though the audi t i s

properly planned and performed in accordance with

U.S. generally acce pted aud iting standa rds.

In addit ion, an audit is not designed to detect imm aterial misstatements, or violat ions of law s or

gov ernm enta l r egula t ions tha t do no t have a d i r ec t and m ate r ia l e f fec t on the f inanc ia l

s ta tem ents . How ever , we w i ll inform the approp r ia te l eve l of m anagem ent of any m ater ia l

errors , any fraudulent f inancial report ing, or misappropr ia t ion

of assets that come to our

attention. W e wil l also inform the appropriate level of m anagem ent of any violat ions of laws or


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M onterey Peninsula Regional W ater Authority

October 21, 2013

Page 4

governm enta l r egu l a t ions t ha t c om e to our a t ten t i on , un l es s c l ea r ly i nc onsequent i a l. O ur

responsib ility as auditors is limited to the period covered by o ur audit and do es not extend to any

later periods for wh ich w e are not engaged as au ditors.

Ou r procedures w il l include tests of docu mentary evidence support ing the transactions recorded

i n t he ac c ou nt s , and m ay inc lude t e s ts o f t he p hys i c a l ex i s tenc e o f i nven tori e s , and d i r ec t

conf i rmat ion of receivab les and cer ta in other assets and l iab i l it ies by cor responden ce w i th

selec ted individuals , funding sources , c redi tors , and f inanc ia l ins ti tut ions . W e w i ll request

written representations from you r attorneys as part of the engagemen t, and they may bill you for

r e sponding t o t h i s inqui ry . A t t he c onc lus ion o f our au d i t, w e w i ll r equ ir e c e r t a in w r it ten

representations from you ab out the financial statements and related matters.

Audit ProceduresInternal Control

O ur audit will include obtaining an understanding o f the enti ty and i ts environment, including

internal control, sufficient to assess the risks of material misstatement of the financial statements

and to design the n ature, timing, and extent of further audit proced ures. An aud it is not designed

to provide assurance on internal control or to identify def iciencies in internal control . How ever,

dur ing the audi t , w e wi l l commun icate to management and those charged w i th governance

internal control related matters that are

r equi r ed to be com munica ted

under AIC PA professional

standards.

Audit ProceduresCompliance

A s par t of obta in ing reasonable assurance abou t whether the f inancia l s ta tements a re f ree of

material misstatement, we will perform tests of Monterey Peninsula Regional Water Authority's

compl iance w i th the p rovis ions of ap pl icab le laws, regula t ions , con t rac ts , and ag reements .

However, the objective of our audit will not be to provide an opinion on overall compliance and

w e will not express such an opinion.

Engagement Administration Fees and Other

W e understand that your employees w il l prepare al l cash or other confirmations we request and

w ill locate any do cuments selected by us for testing.

Patricia M Kaufman is the engagement partner and is responsible for supervising the

engagemen t and signing the report or authorizing an other individual to sign it .

W e es tim ate our f ees f o r these se rvi c es t o b e 5 ,90 0 f o r t he yea r ended June 3 0 , 2 0 1 3 . A

detai led breakdo wn of our fees for the audit services for the year ended June 30 , 2013 , and two

subsequent years is provided below:


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Mo nterey Peninsula Regional Water Authority

October 21, 2013

Page 5

For the Y ears Ending June 30,

Segments

ours

0 1 3 0 1 4 0 1 5

Planning

Preliminary Fieldw ork

Fieldwork and Workpaper Review

R e p o r t s a n d M a n a g e m e n t L e t te r

R e p o r t P r e s e n t a ti o n a n d E x i t C o n f e r e n c e

8

8

1 2

1 0

2

S u b t o t a l A u d i t

0

,900

,100

, 4 0 0

O u t o f p o c k e t e x p e n s e s

A d d i t io n a l S e r v i c e s - I n it i a l D r a f ti n g o f R e p o r t a n d

Footnotes

T o t a l A u d i t

1 0 0

9 0 0

1 0 5 1 1 0

5,900

,205

, 5 1 0

Currently, our rates range from 85 per hour for clerical to 250 per hour for partners. This fee

estimate is based on anticipated cooperation from your personnel, and the assumption that

unexpected circumstances will not be encountered during the engagement. Our invoices are

submitted monthly and are payable upon receipt by you. Our invoices for these fees will be

rendered each m onth as w ork p rogresses and are payable on presentation.

Accounts past due over 30 days are considered delinquent and will be subject to an annual

finance charge of twelve percent (12%), or a monthly rate of one percent (1%). There will be a

minimum finance charge of 1.00. Payments received on account will first be credited against

any delinquency charges. Further, we will cease performing services on delinquent accounts if

the account becom es 60 days or m ore overdue and w ill not be resum ed until your account is paid

in full. All expenses incurred to collect past due accounts, including collection fees will be

add ed to any am ount due. If w e elect to term inate our services for nonpaym ent, our engagem ent

w ill be d eem ed to have been com p leted up on w ritten notification of term ination, even if w e have

not completed our report. You will be obligated to compensate us for all time expended and to

reim burse us for all out-of-pock et exp end itures through the d ate of term ination.

If any d ispu te arises am ong the p arties, they agree to try first in good faith to settle the disp ute by

mediation administered by the American Arbitration Association (AAA) under its Commercial

Mediation Rules. All unresolved disputes shall then be decided by final and binding arbitration

in accordance with the Commercial Arbitration Rules of the AAA. Fees charged by any

mediators, arbitrators, or the AAA shall be shared equally by all parties. In agreeing to

arbitration, we both acknowledge that in the event of a dispute, each of us is giving up the right

to have the d ispute decid ed in a court of law before a judge or jury and instead w e accept the use

of arbitration for resolution.


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M onterey Peninsula Regional Water Author i ty

October 21, 2013

Page 6

W e appreciate the opportunity to be of service to M onterey Peninsula Regional W ater Authori ty

and b e l ieve th is le t te r accura te ly summ arizes the s igni f icant te rms of our engagem ent . I f you

have an y ques t ions , p lease le t us know. I f you a gree wi th the t e rms of ou r engage me nt as

described in this letter , please sign the enclose d copy , and return i t to us.

Very t ruly yo urs ,

1 4 t ib tOW

_ i o

, 9 T E V A A :

Walk

M cGilloway, Ray, Brown Kaufm an

Accountants Consul tants

RESPO N SE:

Th is le t t e r co r rec t ly se ts fo r th th e u n de r s t an d in g o f M o n te rey Pen in su l a R eg io n a l W ate r

Authority.

M anagement s ignature:

Title:

Date:

Governance s ignature:

Title:

Date:


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March 14, 2014

Ms. Patricia M. Kaufman CPAMcGilloway, Ray, Brown, Kaufman2511 Garden Road, Suite A180Monterey, CA 93940-3437

Subject: Amendment #2 to Contract for Audit Services for FY 2013-2014

Dear Ms. Kaufman:

At its meeting of February 13, 2014, the Monterey Peninsula Regional Water Authority accepted

your proposal for Amendment #2 to your contract to now include FY 2013-2014 audit services.

By amendment #1, the original contract was extended to March 31, 2014 by the MPRWA on

November 14, 2013.

The scope of work will now include Audit Services as described in Kaufman Proposal dated

October 7, 2013, Exhibit A of the original contract, for fiscal year 2013-2014 at an additional

price not-to-exceed $6000.00. Total contract price is not to exceed $11,900.00. The 2013-2014

Audit is to be completed by October 1, 2014 and the amended contract completion date is

December 31, 2014. All other terms of the original contract are to remain the same.

Please sign and return a copy of this letter if this amendment is accepted.

The Authority retains the option of negotiating a future amendment to the contract for FY 2014-

2015 as included in Exhibit A to the original contract.

Should you have any questions, please do not hesitate to contact me at [email protected] or

contact me on my cell phone 831-241-8503.

Sincerely, Accepted:

James M. Cullem P.E. Patricia Kaufman CPAExecutive Director McGalloway, Ray, Brown, KaufmanMPRWA


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mprwa agenda packet 01-08-15

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