COMMITTEE AGENDA MEMORANDUM
Board Audit Committee
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: title
Discuss Proposed Updates to the Board Audit Committee Audit Charter and Provide Further Direction as Needed.
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RECOMMENDATION:
Recommendation
A. Discuss Proposed Updates to the Board Audit Committee Audit Charter; and
B. Provide Further Direction as Needed.
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SUMMARY:
The Board Audit Committee (BAC) was established to assist the Board of Directors (Board), consistent with direction from the full Board, to identify potential areas for audit and audit priorities, and to review, update, plan, and coordinate execution of Board audits. On September 26, 2018, the BAC directed that an Audit Committee Charter be developed, and on August 27, 2019, the Board formally approved the BAC Audit Charter. The BAC Audit Charter was last amended by the Board at its regular meeting on April 22, 2025.
A. Recommended Changes
(1) New: Article III, §9
A new provision is recommended to be added to Article III of the Board Audit Committee Audit Charter (Charter) providing direction when selecting an Independent Auditor. Currently, section 11 of the Board of Directors Code of Ethics and Conduct (Code) prevents Directors from communicating with current or potential vendors after the issuance of a request for goods or services has been released.
The Independent Auditor reports directly to the Board. Assigning a member of the Board to sit on the selection panel is a reasonable expectation and has been established as a practice of The Santa Clara Valley Water District (District). Guidance is needed to ensure that a Committee member sitting on the selection panel for the Independent Auditor role the Board supervises limits any communication solely to their role as a panelist to avoid an actual or perceived violation of the Code. Staff anticipates a clarification to the Code ensuring the two documents complement one another. The following recommended addition to the Charter is proposed:
9. Selection of Independent Auditor - The Independent Auditor will be required to adhere to the District’s standard procurement process. Where a selection panel is created to review Independent Auditor submissions and/or engage in interviews, one member of the Committee may sit on the selection panel. The Committee member who participates in the selection panel may not interact directly with the vendors outside of the selection panel interview. Committee members shall rotate who sits on the selection panel so that no individual Committee member participates in the selection panel more than two (2) consecutive procurement periods.
(2) Modify: Article VII, §4
Additional language to Article VII, §4 is recommended to clarify when Valley Water management shall provide a report to the Committee of the scope and nature of all planned Management initiated Audits. The language currently could be perceived as the next meeting after Valley Water Management staff notifies the Committee of any planned Management Initiated Audits or following the Chairs request. The suggested below language removes any ambiguity:
1. Notice to Committee of Management Initiated Audits - Valley Water management shall notify the Committee in writing of any planned Management Initiated Audits before commencing the same. Upon request by the Board Chair, Valley Water management shall provide a report to the Committee of the scope and nature of all planned Management Initiated Audits at the next scheduled Committee meeting following the Board Chairs request. Where circumstances require any Management Initiated Audit to commence before the next regularly scheduled Committee meeting, the Committee Chair shall be advised of this need, and the audit need not be delayed. Where the Management Initiated Audit allows for a response by Valley Water staff before it is finalized, the Committee Chair shall be immediately notified by email or telephone and shall determine whether to have the Committee review and comment on any draft Valley Water response at a regularly scheduled or specially noticed Committee meeting. Where possible, Valley Water management shall provide the Committee with at least fifteen calendar days for such review and comment. Where timely review and comment by the full Committee is not reasonably possible, the Committee Chair may conduct such review and comment himself/herself and shall report upon such review and comment at the next scheduled Committee meeting. The Committee Chair may also delegate this responsibility to the Vice Chair for any particular Management Initiated Audit, where the Committee Chair is unavailable. The Committee shall be provided with copies of any final reports on Management Initiated Audits.
These recommended changes are all set forth in the redlined Charter (Attachment-1), and input is sought from the Committee regarding whether to recommend them to the full Board for adoption in the Charter.
B. BAC Input Regarding Further Charter Changes
Input is also requested from the Committee regarding any additional modifications to propose for the Charter. Once a final set of changes has been approved by the Committee, the proposed updated Charter would be presented to the full Board for approval.
ENVIRONMENTAL JUSTICE IMPACT:
The BAC Charter is not subject to environmental justice analysis. The BAC Charter serves as a guide utilized by the BAC to describe how the BAC will carry out its function as it relates to the Board’s priorities.
ATTACHMENTS:
Attachment 1: Red-lined Board Audit Committee Charter
Attachment 2: PowerPoint
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068