BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☐
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Consider March 18, 2026, Board Audit Committee Recommendation to Approve Proposed Amendments to the Board Audit Committee Audit Charter and Proposed Amendments to the Board of Directors Code of Conduct and Ethics; and Provide Further Direction as Needed.
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RECOMMENDATION: Recommendation
Consider recommendations resulting from the March 18, 2026, Board Audit Committee meeting to:
A. Consider and approve proposed amendments to the Board Audit Committee Audit Charter;
B. Consider and approve proposed amendments to the Board of Directors Code of Conduct and Ethics; and
C. 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 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.
At its regular March 18, 2026, meeting, the BAC considered proposed amendments to the BAC Audit Charter and voted to recommend them to the full Board for approval suggesting the Board of Directors Code of Conduct and Ethics (Code) be reconciled simultaneously to avoid conflicting guidance. These proposed amendments are set forth below.
A. Recommended Changes to the BAC Audit Charter
(1) Modification: Article III, §7.4
During the BAC meeting on March 18, 2026, the Committee recommended updating Article III, section 7.4 to simplify the language from “tri-annually” to the actual, intended, review period of “every three years.” This recommendation is reflected below:
Risk Assessment - The Committee shall endeavor to complete a Valley Water- wide risk assessment, at a minimum, every three (3) years tri-annually and to annually update Valley Water-wide audit risk assessment to include objectively recommended audits ranked based upon the potential level of risk to Valley Water. The results of this Valley Water-wide audit risk assessment should be relied upon to develop the proposed Annual Audit Plan.
(2) 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 auditors after the issuance of a request for goods or services has been released.
The Independent Auditor reports directly to the BAC. Assigning a member of the BAC 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 BAC member sitting on the selection panel for a role that they directly supervise, limits any communication solely to their role as a panelist to avoid an actual or perceived violation of the Code.
The following language is recommended to be added to the Charter:
“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 potential auditor(s) 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.”
(3) Modify: Article VII, §4
Additional language to Article VII, §4 is recommended to clarify when Valley Water management shall provide a report to the BAC 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 language addition below removes any ambiguity:
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.
B. Recommended Changes to the SCVWD BOD Code of Ethics and Conduct
In order to effectively reconcile the BAC Audit Charter and the BOD Code, the Code also needs to be updated. The following recommendation will reconcile the two documents to ensure that the BAC representative to the selection panel is in adherence of both governing documents. At a broader level, the suggested modifications below apply to the full Board.
(1) Modify: A - Ethics; Section 11:
Representation of Private Interests.
No Director shall contact staff on behalf of a party who is bidding or intends to bid on a Valley Water contract or who has or intends to submit a response to a request for proposals or request for qualifications, nor shall a Director inquire about the identity of bidders or proposers prior to the time that staff has made a recommendation for selection of a contractor, vendor, or consultant. Directors are not prohibited from making general inquiries about the status of a particular procurement, or from providing a member of the public with information about the appropriate staff contact concerning procurement of goods and services by Valley Water. Directors are not prohibited from sitting on selection panels where the solicitation is for services that directly report to the Board or Committee they are on so long as no more than one Board member or Committee member participate in the selection panel, no Board member or Committee member interacts with the potential vendor outside of the selection panel interview, and no individual Board member or Committee member participates in the same selection panel more than two (2) consecutive procurement periods.
After issuance of a request for goods or services, Directors are prohibited from communicating with any current or potential vendor, supplier, contractor, or consultant, except as described in this paragraphsection, until after issuance by the Chief Executive Officer or his/her designee of a decision on any protest relating to the request for goods or services or resultant contract award. Any communications during this period shall be limited to matters unrelated to the request for goods or services or the contract award. Whenever the Director has communicated during the aforementioned period with any current or potential vendor, supplier, contractor, or consultant in violation of these restrictions, the name of the party, the date, and the content of the communications shall be disclosed at the next board meeting after the communication and noted in the minutes.
These recommended changes are also set forth in the attachments. Approval to amend the attachments as hereby presented is requested.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice impacts associated with adopting the proposed BAC Audit Charter amendments. This action is unlikely to or will not result in adverse impacts and is not associated with an equity opportunity.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
*Attachment 1: Board Audit Committee Charter, Red-lined
*Attachment 2: Directors Code of Conduct and Ethics, Red-lined
*Attachment 3: PowerPoint
UNCLASSIFIED MANAGER: Manager
Darin Taylor, 408-630-3068