CSRMA California Sanitation Risk Management Authority

Transcription

1 CSRMA California Sanitation Risk Management Authority c/o ALLIANT INSURANCE SERVICES License No.: 0C Pine Street, 11th Floor, San Francisco, CA Fax: OFFICERS: PAST PRESIDENTS: Russ Baggerly, President Robert Reid Paul Bushee, Vice President Kevin Hardy FINANCE COMMITTEE MEETING AGENDA Date/Time: Monday, April 8, 2013 LOCATION: Alliant Offices 10:00 AM 100 Pine Street, 11th Floor San Francisco, CA A = Action A. CALL TO ORDER I = Information V = Verbal B. PUBLIC COMMENTS S = Separate H = Handout C. CONSENT CALENDAR 1. Meeting Minutes: November 5, 2012 A p. 3 D. GENERAL ADMINISTRATION 1. Investment Update and Cash Flow Analysis I/H p CAMP - Notice of Solicititation of Written Consent of Participants I p Policy & Procedure for Analyzing and Selecting Discount Rates used in A p. 15 Establishing Claims Liabilities 4. Estimated Actual 12/13 Budget & Proposed 13/14 Budget - DRAFT A/S p. 17 E. STAFF/COMMITTEE REPORTS None F. INFORMATION ITEMS 1. Investment Custody Account Bank Change I p Letter - Amendment to Bylaws and JPA Agreement - JPA Auditor Position I p Committee Member Comments V 4. CSRMA 2013 Meeting Calendar I p CSRMA Organizational Chart I p CSRMA Service Team Chart I p. 54 G. ADJOURNMENT The next meeting is scheduled for November 4, 2013 Per Government Code section , persons requesting disability-related modifications or accommodations, including auxiliary aids or services in order to participate in the meeting, are requested to contact Alliant at (415) twenty-four hours in advance of the meeting. Entrance to the meeting location requires routine provision of identification to building security. However, CSRMA does not require any member of the public to register his or her name, or to provide other information, as a condition to attendance at any public meeting and will not inquire of building security concerning information so provided. See Government Code section agendas.xls 1 4/1/2013

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3 CALIFORNIA SANITATION RISK MANAGEMENT AUTHORITY FINANCE COMMITTEE MEETING NOVEMBER 5, 2012 SAN FRANCISCO, CALIFORNIA MEMBERS PRESENT Mr. Kenneth Spray, Chair, Vallejo Sanitation & Flood Control District Mr. Roland Williams, Castro Valley Sanitary District Ms. Brenda Krout, Ojai Valley Sanitary District MEMBERS/GUESTS ABSENT Mr. Ed Oyama, West Valley Sanitary District GUESTS AND CONSULTANTS Mr. Dennis Mulqueeney, Alliant Insurance Services, Inc. Mr. Seth Cole, Alliant Insurance Services, Inc. Mr. Myron Leavell, Alliant Insurance Services, Inc. Mr. P.J. Skarlanic, Alliant Insurance Services, Inc. Ms. Paulina Woo, The PFM Group Mr. David Becker, James Marta & Company A. CALL TO ORDER The meeting was called to order by Chair Ken Spray at 10:09 a.m. B. PUBLIC COMMENTS None. C. CONSENT CALENDAR C.1. Meeting Minutes: April 9, 2012 The minutes of the meeting on April 9, 2012 were reviewed. A motion was made to approve the meeting minutes as presented. MOTION: Ken Spray SECOND: Roland Williams MOTION CARRIED C.2. Proposed 2013 Meeting Calendar The Committee reviewed the proposed meeting calendar. G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \C.1 - Minutes of the FC November FINAL.doc 3

4 A motion was made to approve the 2013 meeting calendar as proposed. MOTION: Ken Spray SECOND: Brenda Krout MOTION CARRIED D. GENERAL ADMINISTRATION D.1. CSRMA Investment Performance Review Paulina Woo of PFM presented a review of CSRMA s current investments and provided a market outlook to the Committee. Paulina explained that CSRMA revised its investment strategy in September of 2008, whereby a longer term approach was taken. In this approach the average duration for the portfolio has been between 2.25 and 2.68 years. This restructuring has allowed CSRMA to benefit from the higher yields available on l ongerterm investments and to take advantage of rising interest rates in the future. This strategy has achieved CSRMA s portfolio a return of 3.91% since its adoption in The return on investment last year for CSRMA was approximately 2.52%, a return 1.23% higher than the Merrill-Lynch 1-5 Year U. S. Treasury Index, which was established as the benchmark. D Fiscal Year DRAFT Financial Audit Ken Spray reported that a draft of the financial audit is complete and ready for the Committee s review. Ken announced that David Becker of James Marta & Company was present to review the financial audit with the Committee. Once again this year, CSRMA has prepared a Comprehensive Annual Financial Report (CAFR). As a result of its efforts last year, CSRMA earned the GFOA Certificate of Achievement in Financial Reporting Award, which requires a CAFR. David directed the Committee s attention to the financial audit packet. David reported that the financial statements are in compliance with the accounting principles generally accepted in the United States. He reviewed a letter addressed to the Finance Committee reporting no significant issues with CSRMA s finances and reviewed the financial section of the draft financials with the Committee. David directed the Committee s attention to page 22 of the audit packet and discussed the significance of the discount rate used in establishing the claims liabilities that are recorded in the financial statements. Last year, it was recommended that the Board develop a policy for selecting a discount rate given the current economic environmental and market forecast; the draft of which will be reviewed in the next agenda item. A motion was made to submit the draft financial audit to the Executive Board and Board of Directors at their January meetings for their review and acceptance. G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \C.1 - Minutes of the FC November FINAL.doc 4

5 MOTION: Ken Spray SECOND: Roland Williams MOTION CARRIED D.3. Policy & Procedure for Analyzing and Selecting Discount Rates used in Establishing Claims Liabilities Seth Cole reviewed the draft policy & procedure with the Committee. As a result of discussion at the 2012 Long Range Planning Session, the Executive Board directed the Program Administrators to draft a Board policy for selecting the discount rate used in establishing the claims liabilities that will be recorded in the financial statements. Seth directed the Committee s attention to the attachment on page 11 of the agenda packet. There was discussion on the frequency for reviewing and determining the discount rate and whether a longer term strategy may be more advantageous. The consensus was that a review at least every 3 years would be sufficient. No action was taken at this time. The Finance Committee directed the Program Administrators to revise the draft policy & procedure to reflect a review at least every 3 years and bring it back for review and approval by the Committee at their April 2013 meeting. D.4. Reconciling the Program Director Fees for the Fiscal Year Ended June 30, 2012 Seth Cole reported that at the end of each fiscal year, the Program Administrators reconcile the Program Director Fees paid to the current contract amount to ensure that payment to Alliant was billed correctly and in accordance with the contract. Seth directed the Committee s attention to the attachment on page 13 of the agenda packet and reviewed the fee reconciliation for each program. Seth pointed out that the Primary Insurance Program shows a difference of $63.10 in Program Director Fees received versus the Contracted Amount. The difference is due to the addition and deletion of member agency vehicles throughout the coverage term. There was also a $ difference in Program Director Fees received versus the Contracted Amount for the Pooled Liability Program due to rounding on the Program renewal calculations. The Committee felt that the variances were acceptable. The Committee also reviewed Alliant s Public Entity Disclosure Letter included in the agenda packet. D.5. Budget to Date Report as of September 30, 2012 Ken Spray reviewed the Budget to Date Report with the Committee, and reported that there are currently no major concerns about CSRMA s finances at this time. E. STAFF/COMMITTEE REPORTS None. G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \C.1 - Minutes of the FC November FINAL.doc 5

6 F. INFORMATION ITEMS F.1. Article How to Prevent Against Identity Theft in College The Committee reviewed the article. F.2. Article Is Your Desk the New Hot Spot for Lunch? The Committee reviewed the article. F.3. Committee Member Comments There were no Committee member comments. F.4. CSRMA 2012 Meeting Calendar The Committee reviewed the 2012 meeting calendar. F.5. CSRMA Organizational Chart The Committee reviewed the CSRMA Organizational Chart. F.6. CSRMA Service Team Chart The Committee reviewed the CSRMA Service Team Chart. G. ADJOURNMENT The meeting was adjourned at 12:07 p.m. The next meeting is scheduled for April 8, G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \C.1 - Minutes of the FC November FINAL.doc 6

7 Agenda Item No. D1 Finance Committee Meeting Meeting Date: April 8, 2013 Investment Update and Cash Flow Analysis ISSUE: Ms. Sarah Meacham of PFM will present a review of CSRMA s current investments and provide a market outlook. Additionally, the Program Administrators were directed to work with PFM to perform a cash flow analysis for CSRMA to determine if it should invest in longer-term vehicles for greater yield. Ms. Meacham will review the results of the cash flow analysis with the Committee. RECOMMENDATION: None at this time. FISCAL IMPACT: Unknown. BACKGROUND: CSRMA joined CAMP in 2004 and has invested $15,000,000 in shortterm notes in separately-managed portfolios. PFM Asset Management LLC is the Program Administrator. Remaining funds are invested in LAIF. ATTACHMENTS: Investment Performance Review (handout) G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \D.1 - Investment Update and Cash Flow Analysis_April 2013.doc 7

8 Agenda Item No. D.2 Finance Committee Meeting Meeting Date: April 8, 2013 California Asset Management Trust ISSUE: CSRMA has received CAMP s Annual Notice of Solicitation of Written Consent of Participants requesting a response. As a member of CAMP, CSRMA is entitled to one participant vote in the annual election of the trustees. RECOMMENDATION: The Program Administrators recommend that the Finance Committee review the Proxy Statement and provide direction in its execution. FISCAL IMPACT: None. BACKGROUND: In 2004, CSRMA joined the California Asset Management Program (CAMP), which is a California JPA established in 1989 by the treasurers and finance directors of several California local agencies to provide professional investment services to California public agencies at a reasonable cost. CAMP offers participants both the CAMP money market portfolio (the "Trust") rated AAAm by Standard & Poor's and individually managed portfolios, which are not a part of the Trust, but are available under a separate agreement with the Program's investment advisor. CAMP is directed by a Board of Trustees, which is made up of experienced local government finance directors and treasurers. ATTACHMENTS: California Asset Management Trust Notice of Solicitation of Written Consent of Participants. 8 G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \D.2 - CAMP - Proxy Statement.doc

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15 Agenda Item No. D.3 Finance Committee Meeting Meeting Date: April 8, 2013 Policy & Procedure for Analyzing and Selecting Discount Rates in Establishing Claims Liabilities ISSUE: A revised draft Policy & Procedure is attached to this item for the Finance Committee s review and consideration. This draft contains the suggested edits, in RLSO, made by the Finance Committee at the November 5, 2012 meeting. RECOMMENDATION: The Program Administrators are recommending that the Finance Committee recommend that the Executive Board recommend to the Board of Directors adoption of the Policy & Procedure. FISCAL IMPACT: Unknown. BACKGROUND: As a result of discussion at the 2012 Long Range Planning Session, the Executive Board directed the Program Administrators to draft a Board policy for selecting the discount rate used in establishing the claims liabilities that will be recorded in the financial statements. Historically the Program Administrators have used a conservative view of past earnings to project future earnings to determine the appropriate discount rate used in establishing claims liabilities recorded on the financial statements. G iven the current economic environment and market forecast, past performance may not be an accurate indicator for predicting future performance. In light of this, CSRMA s financial auditor has recommended that the Board develop a policy for selecting the discount rate used in establishing the claims liabilities that will be recorded in the financial statements. Through consultation with the Authority s financial advisor and actuary, the development of a model discount factor would provide a basis that is in concert with current and projected achievable market realities. ATTACHMENTS: Draft Policy & Procedure for Analyzing and Selecting Discount Rates in Establishing Claims Liabilities. G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \D.3 - Policy and Procedure for Selecting Discount Rates - ITEM.doc 15

16 CSRMA California Sanitation Risk Management Authority JPA Manual CSRMA POLICY AND PROCEDURE MEMORANDUM #TBD6-JPA EFFECT'IVE: January 1, 2013April 26, 2013 SUBJECT: Analyzing and Selecting Discount Rates used in Establishing Claims Liabilities Policy Statement Given that CSRMA s financial condition relies substantially on estimates of the future value of current liabilities, it is incumbent upon the Authority to calculate these estimates as accurately as possible. T hese estimates involve discounting the liabilities to account for the time value of money, including both inflationary and investment income assumptions. CSRMA engages qualified financial professionals to assist in these calculations including, actuaries, investment advisors, financial auditors and insurance professionals, however estimates developed are ultimately the responsibility of CSRMA. A key factor in developing the estimates is the discount rate used in calculations. T his policy is intended to assist the Authority in selecting the discount rate used in establishing claim liabilities that ultimately are recorded in the Authority s financial statements. Procedure At least every three (3) years annually at times relevant to the making of financial decisions for the Authority: 1. Review and determine the current rate of return on the Authority s investment portfolio. 2. Work with the Authority s investment advisor to determine a reasonable expected rate of return based on the current portfolio and expected future earnings. 3. Work with Authority s actuary in setting a reasonable rate based on payout patterns for the respective programs. 4. Discuss with the Authority s financial auditor the rationale for the discount rate being utilized. 5. Discuss with the various CSRMA Committees the discount rate assumptions being utilized, its rationale and gain formal approval for the factors then in use from at least the Executive Board. 6. Err on the side of conservatism. JPA Program Manual 16

17 Agenda Item No. D4 Finance Committee Meeting Meeting Date: April 8, 2013 Estimated Actual 12/13 Budget & Proposed 13/14 Budget - DRAFT ISSUE: Review and discuss the budget for Fiscal Year 2013/2014. RECOMMENDATION: The Program Administrators recommend that the Finance Committee discuss the draft budget and ultimately recommend to the Executive Board adoption of a budget. FISCAL IMPACT: As depicted in the draft budget document. BACKGROUND: The proposed budget is the result of a number of assumptions and the analysis of many disparate factors. E ach Program of the JPA is analyzed individually with general expenses of the JPA allocated to each program on a percentage basis. The majority of expenses however, are program specific. The two group purchase programs (Property, PIP) are designed to break even each year as there is no risk sharing involved and monies generally do not need to be accrued beyond a single fiscal year. The revenue and expenses of the two pooling programs (liability & workers comp.) however are driven heavily by actuarial projections and the underwriting results of prior Program Years as reflected through the retrospective rating and dividend calculations. For these reasons there is not necessarily a balance between revenue and expenses in any one year. The Program Administrators have identified some items that the Finance Committee may want to focus on, or review. These are described as follows: 1. Allocation percentages are used in the budget to calculate: JPA expenses, Interest Income, Program Directors Fees, and Safety Expenses for each Program, as follows: A. JPA Expenses are allocated back to each program based on the total expenses for the JPA, unless an expense item is program specific. The percentages used are 10% PIP, 10% Property, 45% Liability, and 35% Workers Compensation. The percentages are based on an estimate of how much time each Program takes as a percentage of overall JPA administration time. B. Interest Income is calculated according to each program s cash balance in LAIF and the short term investments in CAMP as reflected in the audited financials, and are adjusted each year. C. Program Directors Fee is program specific and is based on the annual hours worked on e ach program in accordance to the contract agreement between G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \D.4 - CSRMA Budget - FC.doc 17

18 Alliant Insurance Services and CSRMA. This amount has been increased by 5% solely for the sake of argument at this juncture. The Program Administrators are directed to negotiate their contract renewal with the Officers Committee for subsequent action by the Executive Board. Last year the Board approved a 10% reallocation of the Program Directors Fees between the PIP and Property Programs in the FY Budget. The Program Administrators reported to the Finance Committee last year that they believed the allocation of Program Directors Fees between the PIP and Property Program was out of alignment by as much as 20% - 25%, given the number of members participating in each Program and the associated Net Insurance Premium. The growth in the Property Program has outpaced the growth in the PIP Program. Therefore, the Program Administrators recommended that a portion of the Program Directors Fee for the PIP be allocated to the Property Program and recommended that the reallocation be phased in over 2-3 years. The Program Administrators are recommending another 10% reallocation of the Program Directors Fees between the PIP and Property Program to bring them in balance. This is reflected in the proposed FY Budget. D. Safety Expenses allocation percentages are 10% PIP, 10% Property, 35% Liability, and 45% Workers Compensation unless an expense item is program specific. These percentages are based on the Risk Control Advisor s time and resources applied to each program. E. Other Revenue and Risk Control Online Expense are new line items to account for revenue realized for selling access to Risk Control Online to nonmembers and the associated expense. The allocation percentages are 5% PIP, 5% Property, 40% Liability, and 50% Workers Compensation. ATTACHMENTS: Estimated Actual 12/13 Budget & Proposed 13/14 Budget (Separate) G:\Share\CLIENT\jpa\CSRMA\Agenda\_Finance\2013\ \D.4 - CSRMA Budget - FC.doc 18

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21 California Government Code: (a) The agreement shall provide for strict accountability of all funds and report of all receipts and disbursements. (b) In addition, and provided a separate agency or entity is created, the public officer performing the functions of auditor or controller as determined pursuant to Section , shall either make or contract with a certified public accountant or public accountant to make an annual audit of the accounts and records of every agency or entity, except that the officer need not make or contract for the audit in any case where an annual audit of the accounts and records of the agency or entity by a certified public accountant or public accountant is otherwise made by any agency of the state or the United States only as to those accounts and records which are directly subject to such a federal or state audit. In each case the minimum requirements of the audit shall be those prescribed by the Controller for special districts under Section and shall conform to generally accepted auditing standards. (c) When an audit of an account and records is made by a certified public accountant or public accountant, a report thereof shall be filed as public records with each of the contracting parties to the agreement and also with the county auditor of the county where the home office of the joint powers authority is located and shall be sent to any public agency or person in California that submits a written request to the joint powers authority. The report shall be filed within 12 months of the end of the fiscal year or years under examination. (d) When a nonprofit corporation is designated by the agreement to administer or execute the agreement and no public officer is required to perform the functions of auditor or controller as determined pursuant to Section , an audit of the accounts and records of the agreement shall be made at least once each year by a certified public accountant or public accountant, and a report thereof shall be filed as a public record with each of the contracting parties to the agreement and with the county auditor of the county where the home office of the joint powers authority is located, and shall be sent to any public agency or person in California that submits a written request to the joint powers authority. These reports shall be filed within 12 months after the end of the fiscal year or years under examination. (e) Any costs of the audit, including contracts with, or employment of certified public accountants or public accountants, in making an audit pursuant to this section shall be borne by the agency or entity and shall be a charge against any unencumbered funds of the agency or entity available for the purpose. (f) All agencies or entities may, by unanimous request of the governing body thereof, replace the annual special audit with an audit covering a two-year period. (g) Notwithstanding the foregoing provisions of this section to the contrary, agencies or entities shall be exempt from the requirement of an annual audit if the financial statements are audited by the Controller to satisfy federal audit requirements The contracting parties to an agreement made pursuant to this chapter shall designate the public office or officers or person or persons who have charge of, handle, or have access to any property of the agency or entity and shall require such public officer or officers or person or persons to file an official bond in an amount to be fixed by the contracting parties. 21 Page 1 of 2

22 If a separate agency or entity is created by the agreement, the agreement shall designate the treasurer of one of the contracting parties, or in lieu thereof, the county treasurer of a county in which one of the contracting parties is situated, or a certified public accountant to be the depositary and have custody of all the money of the agency or entity, from whatever source. The treasurer or certified public accountant so designated shall do all of the following: (a) Receive and receipt for all money of the agency or entity and place it in the treasury of the treasurer so designated to the credit of the agency or entity. (b) Be responsible, upon his or her official bond, for the safekeeping and disbursement of all agency or entity money so held by him or her. (c) Pay, when due, out of money of the agency or entity held by him or her, all sums payable on outstanding bonds and coupons of the agency or entity. (d) Pay any other sums due from the agency or entity from agency or entity money, or any portion thereof, only upon warrants of the public officer performing the functions of auditor or controller who has been designated by the agreement. (e) Verify and report in writing on the first day of July, October, January, and April of each year to the agency or entity and to the contracting parties to the agreement the amount of money he or she holds for the agency or entity, the amount of receipts since his or her last report, and the amount paid out since his or her last report. The officer performing the functions of auditor or controller shall be of the same public agency as the treasurer designated as depositary pursuant to this section. However, where a certified public accountant has been designated as treasurer of the entity, the auditor of one of the contracting parties or of a county in which one of the contracting parties is located shall be designated as auditor of the entity. The auditor shall draw warrants to pay demands against the agency or entity when the demands have been approved by any person authorized to so approve in the agreement creating the agency or entity. The governing body of the same public entity as the treasurer and auditor specified pursuant to this section shall determine charges to be made against the agency or entity for the services of the treasurer and auditor. However, where a certified public accountant has been designated as treasurer, the governing body of the same public entity as the auditor specified pursuant to this section shall determine charges to be made against the agency or entity for the services of the auditor In lieu of the designation of a treasurer and auditor as set forth in Section , the agency or entity may appoint one of its officers or employees to either or both of such positions. Such offices may be held by separate officers or employees or combined and held by one officer or employee. Such person or persons shall comply with the duties and responsibilities of the office or offices as set forth in subdivisions (a) to (d), inclusive, of Section In the event the agency or entity designates its officers or employees to fill the functions of treasurer or auditor, or both, pursuant to this section, such officers or employees shall cause an independent audit to be made by a certified public accountant, or public accountant, in compliance with Section Page 2 of 2

23 CSRMA V. JOINT EXERCISE OF POWERS AGREEMENT AMENDED AS OF JANUARY 14, 2011April 26, 2013 G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc1 23

24 JOINT EXERCISE OF POWERS AGREEMENT FOR THE CALIFORNIA SANITATION RISK MANAGEMENT AUTHORITY THIS RESTATED AGREEMENT is made and entered by and between the local government entities who are presently parties to that certain "Joint Exercise of Powers Agreement For The California Sanitation Risk Management Authority," or who subsequently become signatories to this instrument (the "Agreement"). Recitals A. On April 2, 1986, t he California Sanitation Risk Management Authority was formed by a group of California local public entities who executed a certain "Joint Exercise of Powers Agreement For the California Sanitation Risk Management Authority" (the "JEPA"). The JEPA has been amended on t hree occasions since then. O ther local public entities have subsequently become signatories to the JEPA and members of California Sanitation Risk Management Authority ("CSRMA"), and at the present time there are sixty members of CSRMA who are parties to the JEPA. B. In the interval since CSRMA was founded, CSRMA has developed and is presently operating risk management and loss prevention programs related to public liability, environmental impairment, auto liability, public officials errors and omissions, property losses and workers' compensation risks in which CSRMA's local government entity members may and do participate. C. With the increase in membership in CSRMA and the development and operation of multiple programs, the conduct of CSRMA's business has become significantly more complex, resulting in the need for a restructuring of certain elements of the CSRMA organization. D. In order to implement the required restructuring, make other needed amendments to the provisions of the JEPA and incorporate all changes in a single instrument, the parties desire to restate the JEPA in the form of this Agreement. E. In order to make the agreement easier to read and understand, all previous endorsements and adjustments have been incorporated into a single instrument. Terms and Conditions In consideration of the foregoing Recitals and the mutual promises of the parties as set forth in the following Terms and Conditions, it is mutually agreed by all of the parties to this Agreement as follows: SECTION 1: Definitions The following definitions shall apply to the provisions of this Agreement: 1 G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 24

25 (a) "Agreement" shall mean this restated Joint Exercise of Powers Agreement. (b) "Authority" shall mean the California Sanitation Risk Management Authority (sometimes also referred to in this Agreement as the "CSRMA") created by and existing under this Agreement. (c) "Board of Directors" shall mean the principal governing body of the Authority. (d) "Bylaws" shall mean the adopted Bylaws of the Authority as amended and/or restated in their latest approved form. (e) "Executive Board" shall mean the Executive Board of the Authority's Board of Directors. (f) "Insurance" shall mean any program of the Authority providing coverage against losses to Member Agencies who are participants in the program whether the coverage is based upon purchased insurance, self-insurance, pooled funding or any other similar mechanism, instrument or facility. (g) "Member Agency" shall mean an entity of local government, which is a party to this Agreement. (h) "Program Director" shall mean the individual or firm retained by the Board of Directors to administer the Authority. SECTION 2: Legal Authority For Agreement (a) This Agreement is entered into pursuant to the provisions of Article 1, C hapter 5, Division 7, T itle 1 of the California Government Code (beginning with Section 6500) which authorizes two or more local public entities, such as the Member Agencies who are parties to this Agreement, to exercise any power which is common to each of them. (b) This Agreement is also based upon applicable provisions of law which empower local public entities, such as the Member Agencies who are parties to this Agreement, to engage in risk management and loss prevention activities. T hose provisions of law include Chapter 3, P art 6, D ivision 3.6, T itle 1 of the California Government Code (beginning with Section 989) having to do with insurance and self-insurance coverage for local public entities. SECTION 3: Purposes The purposes of this Agreement are to: (a) Provide for the continuation and effective governance of the Authority. (b) Continue effective operation of cooperative programs of risk management and loss prevention so as to reduce or eliminate losses and loss exposures, decrease the expenses G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 2 25

26 of claims and claims administration and improve procedures to manage risks commonly experienced by the parties to this Agreement. (c) Continue effective operation of existing Insurance programs in the areas of public liability, environmental impairment, auto liability, public officials errors and omissions, workers compensation and property losses. (d) Implement new Insurance and other programs related to the foregoing purposes which the Authority deems necessary, advisable and beneficial to the parties to this Agreement. (e) Pool the self-insurance claims of two or more local public entities as referred to in California Government Code SECTION 4: Parties to the Agreement (a) Only local public entities of California government which are empowered by law and actually engaged in activities pertaining to the disposal of wastewaters and water borne sanitary wastes may be considered for membership in the Authority. (b) The parties to this Agreement are all local public entities which are, as of the effective date of this Agreement, Member Agencies of the Authority or which are subsequently admitted as Member Agencies in accordance with Section 21 of this Agreement. SECTION 5: Term of Agreement Subject to the power to terminate any Member Agency's membership in the Authority, as provided for in this Agreement, this Agreement shall continue indefinitely, and it shall not be terminated so long as two or more Member Agencies agree that the Agreement, and the Authority, be continued. SECTION 6: Existence of Authority As Separate Public Entity With Sole Responsibility For Its Obligations Pursuant to California Government Code Sections 6500 et seq., a public entity of the State of California known as the California Sanitation Risk Management Authority has been created and does now exist. The Authority exists separately and apart from the Member Agencies. Pursuant to California Government Code Section t he debts, liabilities and obligations of the Authority shall be solely its own and they shall not constitute debts, liabilities or obligations of its officers, directors, employees, agents, Board of Directors, Executive Board, Program Director or of any Member Agency. SECTION 7: Powers of Authority (a) The Authority shall have all of the powers common to the parties to this Agreement and all additional powers afforded under California law to public entities such as Authority, formed for the purpose of jointly exercising powers common to their members. T he Authority is also authorized by this Agreement to do all acts necessary for the exercise of its powers. The Authority's powers include, but are not limited to, the following: 3 G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 26

27 i. To make and enter into contracts. ii. To incur debts, liabilities, and obligations. iii. To acquire, hold, or dispose of property, contributions and donations of property, funds, services, and other forms of assistance from persons, firms, corporations, and government entities. iv. To sue and be sued in its own name, and to settle any claim against it. v. To receive and use contributions and advances from member Districts as provided in California Government Code Section 6505, i ncluding contributions or advances of personnel, equipment or property. vi. To invest any money in its treasury that is not required for its immediate necessities, pursuant to Government Code Section vii. To carry out all provisions of this Agreement. (b) Pursuant to California Government Code Section 6509 t he Authority's powers shall be exercised in the manner and according to Procedures provided in the laws applicable to a California county sanitation district, as set forth in the County Sanitation District Act (California Health and Safety Code Sections 4700 et seq.). SECTION 8: Board of Directors The Authority shall be governed by a Board of Directors which shall be composed of representatives of those Member Agencies who have exercised their right to participate on the Board of Directors. E ach Member Agency shall be entitled at any given time to appoint one member and one or more alternate member(s) of the Board of Directors, each of whom shall be an officer, director or employee of the appointing Member Agency. Appointments shall be made as specified in the Bylaws. At any meeting of the Board of Directors, each duly appointed member, or in the member's absence, one of the alternate members as determined by the Member Agency, shall have one vote on behalf of his or her Member Agency. SECTION 9: Powers of the Board of Directors (a) The Member Agencies, acting through the Board of Directors, shall retain overall responsibility for governance of the Authority, including the right to exercise all powers of the Authority not delegated to other persons or bodies of the Authority. (b) The Board of Directors shall have the following express powers, duties and responsibilities: G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 4 27

28 i. Election of certain Authority officers and the members of its Executive Board, except that vacancies occurring in those offices during their term shall be filled pursuant to Section 11(f) and 12(d) ii. Approval of the annual budget of the Authority. iii. Approval of amendments to this Agreement and the Bylaws. iv. Approval of new Insurance programs of the Authority. v. The exercise of powers of the Authority, including promulgation of policies, procedures and rules, with respect to all matters reserved to the Board of Directors by this Agreement, the Bylaws or otherwise. SECTION 10: Meetings of the Board of Directors (a) The Bylaws of the Authority shall make provision for calling and holding meetings of the Board of Directors which shall include, in any event, at least one regular meeting annually. (b) Meetings of the Board of Directors shall be conducted in accordance with this Section, the Bylaws and applicable provisions of law governing the meetings of legislative bodies and governing boards of local public entities of the State of California including the provisions of the Ralph M. Brown Act (California Government Code Section et seq.). (c) The presence in person (or by telephone in the case of a noticed telephonic meeting) of a majority of the then duly appointed members (including one alternate in the case of absence of the member) of the Board of Directors shall constitute a quorum for the conduct of business of the Board except as otherwise provided by this Agreement, the Bylaws or other applicable provisions of law. SECTION 11: Officers of the Authority (a) The officers of the Authority shall be a President, Vice- President, Secretary and TreasurerTreasurer-Auditor whose duties shall be as set forth in this Agreement, the Bylaws or as prescribed by applicable provisions of law. (b) The President and Vice President shall be elected by the Board of Directors and shall serve two-year terms. Neither officer shall serve for more than two complete consecutive terms in his or her respective office. The terms of each office will ordinarily commence immediately following the first Board of Directors meeting of each odd-numbered calendar year except that if an election has not been conducted by that date, the terms shall commence as soon as the election has been held. (c) Unless the Board of Directors determines otherwise, the Secretary shall be an individual who is the senior representative of the Program Director. The Secretary shall serve at the pleasure of the Executive Board. If the senior representative of the Program Director is G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 5 28

29 unable to serve for any reason, including his or her removal from office by the Executive Board, the Executive Board shall appoint a replacement who may be another senior member of the Program Director, a senior staff member of the Authority, a member of the Executive Board, a member of the Board of Directors or an officer, director or employee of a Member Agency. (d) Unless the Board of Directors determines otherwise, the TreasurerTreasurer-Auditor shall be appointed by the Executive Board and shall serve at the Executive Board's pleasure. The TreasurerTreasurer-Auditor shall be an officer, director or employee of a M ember Agency. (e) The Authority may have such other officers as provided in the Bylaws. (f) If a vacancy occurs mid-term in the office of the President, the Vice President shall automatically succeed to the office of President to serve out the balance of the term of his/her predecessor. I f a v acancy occurs mid-term in the office of Vice President, a successor shall be appointed by the Executive Board to serve out the balance of the term. SECTION 12: Executive Board (a) The day-to-day business of the Authority will be conducted, directed and supervised by an Executive Board consisting of eight members of the Board of Directors, seven of whom shall be regular members and one of whom shall be an alternate member. T he alternate shall attend and participate in all meetings of the Executive Board but shall not be entitled to vote except in the absence of a regular member. (b) The Executive Board shall have the powers, duties and obligations granted to it by this Agreement, the Bylaws and as delegated by the Board of Directors. (c) The President and Vice President of the Authority shall serve as members of the Executive Board. The other five members and the alternate shall be elected by the Board of Directors and shall serve terms of office as provided in the Bylaws. (d) If a vacancy occurs mid-term in the office of a regular member of the Executive Board, the Alternate member, if there is one, shall automatically succeed to the vacant office for the balance of the term of his/her predecessor. If there is no Alternate member, or if the vacancy occurs mid-term in the office of the Alternate member, the Executive Board shall fill the vacant office by appointment and the appointee shall serve out the balance of his/her predecessor's term. SECTION 13: Committees The Authority shall have standing and other committees as may be provided for in the Bylaws or which are created by the Board of Directors, the Executive Board or the President. Committees of the Authority shall have powers, duties and responsibilities as provided in the Bylaws or as delegated and directed by the appointing person. G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 6 29

30 SECTION 14: Program Director and Other Staff (a) The Board of Directors shall appoint a Program Director who shall be responsible for the general administration of the business and activities of the Authority as directed by the Executive Board. (b) The Board of Directors shall appoint an attorney at law who shall serve as general Legal Counsel to the Authority. (c) Subject to the direction of the Board of Directors, the Executive Board shall provide for the appointment of such other staff of the Authority as may be necessary for the administration of the Authority. (d) As determined by the Executive Board, staff functions may be performed by employees of the Authority, by officers, directors and employees of Member Agencies and by agents, advisors and consultants retained under contract by Authority. (e) The Program Director and other staff of the Authority shall have such powers, duties and obligations as are established by this Agreement, the Bylaws, the policies, procedures and rules promulgated by the Authority and any contractual arrangements which may exist between the Authority and the respective person. (f) Subject to any applicable contractual arrangements which may take precedence, the Program Director and Legal Counsel shall serve at the will and pleasure of the Board of Directors and all other staff shall serve at the will and pleasure of the Executive Board. SECTION 15: Insurance Coverage The Authority shall maintain insurance coverage on its activities as determined by the Executive Board to be necessary and adequate. SECTION 16: Accounts and Records (a) Annual Budget. The Authority shall adopt an annual budget, which shall include a separate budget for each separate Insurance program under development or adopted and implemented by the Authority. T he Executive Board shall cause to be prepared, shall review and approve and shall recommend a proposed annual budget to the Board of Directors for its consideration. T he recommended budget shall be submitted to the members of the Board of Directors not later than fifteen (15) days prior to the Board of Directors' regular spring meeting. (b) Funds and Accounts. A s directed by the Executive Board, the TreasurerTreasurer- Auditor of the Authority shall establish and maintain such funds and accounts as may be required by law and good accounting practices. Separate accounts shall be established and maintained for each insurance program under development or adopted and implemented by the Authority. Books and records of the Authority in the hands of the G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 7 30

31 TreasurerTreasurer-Auditor shall be open to inspection at all reasonable times by authorized representatives of Member Agencies. A quarterly unaudited financial statement will be produced and distributed to all Member Agencies. The Authority shall adhere to the standard of strict accountability for funds set forth in Government Code Section (c) TreasurerTreasurer-Auditor's Report. The TreasurerTreasurer-Auditor, within one hundred and twenty (120) days after the close of each fiscal year, shall give a complete written report of all financial activities for such fiscal year to the Board and to each member District. (d) Annual Audit. Pursuant to Government Code Section 6505, the Authority shall contract with an independent certified public accountant to make an annual fiscal year audit of all accounts and financial statements of the Authority, conforming in all respects with the requirements of that section. A report of the audit shall be filed as a public record with the County Auditor of each Member Agency within six months of the end of the fiscal year under examination. Costs of the audit shall be considered a general expense of the Authority. SECTION 17: Responsibilities for Funds and Property (a) The TreasurerTreasurer-Auditor shall have custody of and disburse the Authority's funds. He or she may delegate disbursing authority to such persons as may be authorized by the Executive Board to perform that function, subject to the requirements of (b) below. (b) Pursuant to Government Code Section , the TreasurerTreasurer-Auditor shall: i. Receive and acknowledge receipt for all funds of the Authority and place them in the treasury of the TreasurerTreasurer-Auditor to the credit of the Authority. ii. Be responsible upon his or her official bond for the safekeeping and disbursement of all Authority funds so held by him or her. iii. Pay any sums due from the Authority, as approved for payment by the Executive Board or by any body or person to whom the Board has delegated approval authority, making such payments from Authority funds upon w arrants drawn by the TreasurerTreasurer-Auditor. All warrants of the Authority shall be signed by two persons as designated by the Board; provided, however, that the Board may, by resolution, authorize imprest accounts for expenditures of funds in limited amounts for which only one authorized signatory shall be required on the instrument. iv. Verify and report in writing to the Authority and to Member Agencies, as of the first day of each quarter of the fiscal year, the amount of money then held for the Authority, the amount of receipts since the last report, and the amount paid out since the last report. G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 8 31

32 (c) Pursuant to Government Code Section , t he Program Director, the TreasurerTreasurer-Auditor and such other persons as the Board of Directors may designate shall have charge of, handle and have access to the property of the Authority. (d) The Authority shall secure and pay for a fidelity bond or bonds, in an amount or amounts and in form specified by the Board of Directors, covering the TreasurerTreasurer-Auditor and all other officers and staff of the Authority who are authorized to hold or disburse funds of the Authority, and all other officers and staff who are authorized to have charge of, handle, and have access to property of the Authority. SECTION 18: Responsibilities of the Authority The Authority shall perform the following functions in discharging its responsibilities under this Agreement: (a) Assist each Member Agency's designated risk manager with the risk management function; (b) Provide loss prevention and safety services to the Member Agencies; (c) Provide claims adjusting and claims management services as required; (d) Provide statistical reports to the Member Agencies; (e) Recommend standard contract clauses relating to indemnity, hold harmless, insurance and other similar matters affecting Member Agencies; and (f) Provide other services consistent with purposes of the Authority as may be deemed necessary, advisable and beneficial to the Member Agencies. SECTION 19: Responsibilities of the Member Agencies (a) Each Member Agency shall appoint one employee or other representative to be responsible for the Member Agency's risk management functions and to serve as liaison between Member Agency and the Authority as respects risk management. (b) Each Member Agency shall maintain an active safety program through a designated safety officer and/or safety committee. (c) Each Member Agency shall timely pay all premiums, fees, charges and assessments imposed or levied by the Authority. (d) Each Member Agency shall provide the Authority with requested information and assistance in order to fulfill the programs under this Agreement. G:\Share\CLIENT\jpa\CSRMA\Admin\CSRMA JPA Agreement & Bylaws Change Letter - March 2013\2. CSRMA - JEPA - Restated FINAL_Treasurer-Auditor RLSO.doc 9 32