COMMITTEE AGENDA MEMORANDUM
Board Audit Committee
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: title
Receive a Status Update on the Implementation of Audit Recommendations; Authorize Staff to Close Completed Board-Directed Audits or Refer Them to the Chief Audit Executive (CAE) for Follow-up Review; and Discuss Timing of Next Update.
End
RECOMMENDATION: Recommendation
A. Receive a status update on the implementation of audit recommendations;
B. Authorize staff to close completed Board-directed audits or refer them to the CAE for follow-up review, and
C. Discuss timing of the next update.
Body
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.
The last status report to the BAC was in February 2026. As of this report, there are four (4) Board-directed audits, and one (1) Program-required audit that are open (see Attachment 1). Currently, there are fourteen (14) active audit recommendations that are not fully resolved and are marked as “Pending/Underway.” Since the February report, nine (9) audit recommendations have been marked as “Completed/Implemented” (see Attachment 2).
A brief high-level summary about the efforts made by staff to address pending recommendations for a given audit based on the detailed updates provided by recommendation owners in Attachment 2 are provided below.
• 2021 PERMITTING BEST PRACTICES AUDIT
On October 13, 2020, TAP International Inc. was requested to conduct the Permitting Best Practices Audit that resulted in fourteen (14) recommendations to enhance communication and processing speed, introduce best practices where appropriate, and improve customer experience. Presentation of the Permitting Best Practices Audit final report was approved and recommended by the Board Audit Committee on May 26, 2021, and presented to the full Board at the July 13, 2021, Board meeting. Since July 2021, eight (8) of the fourteen (14) recommendations have been implemented. Key improvements include reducing processing time for low-risk, repetitive permit applications, establishing dedicated environmental planner support and streamlined California Environmental Quality Act (CEQA) review, identifying workflows and IT system requirements, and completing a procurement process for permit database upgrades. In addition, a Billing Process and Policy was created to address financial controls, and permit forms and webpages were updated. Finally, a revised Water Resources Protection Ordinance and updated fee rate schedule were developed and adopted by the Board. To date, six (6) out of the fourteen (14) audit recommendations remain “Pending/Underway,” none of which are identified as “High” priority. The majority of the pending recommendations pertain to the permit database upgrade, which is well underway. In addition, the Water Resources Protection Manual is being updated by staff to provide clear requirements for use of Valley Water lands. Staff will continue to provide updates via the annual audit status report to the BAC until all recommendations have been addressed.
• 2023 CAPITAL IMPROVEMENT PROGRAM (CIP) PERFORMANCE AUDIT
On May 24, 2022, the Board approved the initiation of the CIP Performance Audit, which resulted in eight (8) problem statements, each with a recommendation (some with sub-recommendations) for a total of fifteen (15) individual recommendations intending to improve the CIP planning processes, enhance the CIP 5-year plan, and improve transparency and consistency of the information reported in the CIP. Presentation of the CIP Performance Audit final report was approved by the BAC on August 16, 2023, and presented to the full Board at the October 24, 2023, Board meeting. Since October 2023, staff has initiated the implementation of the recommendations. Implementation of the recommendations should ensure projects are selected and prioritized using defined criteria, that key goals and milestones in the CIP plan are achievable given agency resources, continue ongoing efforts to implement leading practices as identified in the audit final report, enhance quality assurance procedures, and ensure compliance with Change Management procedures. As of this report, thirteen (13) recommendations have been implemented. Currently, two (2) recommendations are still pending, of which one (1) is identified as high priority, and one (1) as medium. Staff estimates the recommendations will be fully implemented by Q4 of fiscal year (FY) 2027. Staff continues to work on implementing the remaining recommendations and will return to provide a status report at the December 16, 2026, BAC meeting in order to include the CIP Benchmarking Study findings.
• 2024 HUMAN RESOURCES PERFORMANCE AUDIT
On March 26, 2024, the Board approved the initiation of the Human Resources (HR) Performance Audit. The audit was conducted between August and November 2024, which resulted in ten (10) recommendations. The presentation of the HR Performance final report was approved and recommended by the Board Audit Committee on March 19, 2025, and subsequently presented to the full Board at the April 8, 2025, Board meeting. Since April 2025, nine (9) of the ten (10) recommendations have been implemented, and one (1) audit recommendation is identified as "Pending/Underway," of which one (1) is identified as High priority. Key improvements include conducting monthly all HR employee team meetings, providing change management and communication training to HR leadership, continuing to prioritize required training for all new supervisors, enhancing the effectiveness of the supervisory training program, and incorporating additional topics. An HR Operations Plan outlining key initiatives was developed, reviewed, and approved by HR Leadership in Q4 2025. Several updates within the Equal Employee Opportunity Program have been implemented, including increased visibility of forms, processes, and staffing for employees, and regular in-person supervisory and employee Sexual Harassment Prevention Training by the EEO team. A new confidentiality survey and evaluation process has been implemented. Lastly, Human Resources, in partnership with other key players, selected a new Human Capital Management (HCM) system and are working with Information Technology (IT) on the first phase of implementation. Two (2) audit recommendations were recently completed in May 2026. HR participated in the new ERP System selection and HR completed the employee classification review related to confidentiality. Next steps involve ensuring that a representative from HR with a strong understanding of HR system needs is involved in implementing the selected HCM system capabilities against HR's system needs. HR leadership and representatives are on the implementation team to ensure a careful process for successful system adoption is applied. Human Resources will continue to work on implementing the remaining recommendations and return to provide a status report at the March 2027 BAC meeting.
• 2025 WATER CONSERVATION PROGRAM PERFORMANCE AUDIT:
On February 12, 2025, Valley Water engaged Baker Tilly (Auditor) to conduct the performance audit of the Water Conservation Program. The audit focused on reviewing Valley Water’s conservation strategies and evaluating Valley Water’s overall approach to conservation and to identify best practices, opportunities to further enhance its strategic approach to promoting or incentivizing conservation, and lessons learned from past practices within Valley Water and other water agencies. Staff presented the audit report, including management’s responses, to the BAC at its January 21, 2026, meeting and subsequently provided a report to the full Board on February 24, 2026. The audit resulted in five (5) recommendations, two (2) of which staff have implemented. As of this report, three (3) recommendations remain open. For Recommendation #1, management reported that the remaining three full-time positions continue to be documented as unfunded needs in the budget process and that program progress will continue to be monitored to guide the addition of staff in a phased approach. For Recommendation #2, an RFP was issued, a consultant was selected, and contract negotiations are expected to be completed in late 2026. Staff will continue to work on the remaining recommendations and return to provide a status report at the January 2027 BAC meeting.
• 2025 WATER USAGE AND DEMAND FORECASTING AUDIT:
On October 8, 2025, Valley Water engaged Baker Tilly (Auditor) to conduct the Water Usage and Demand Forecasting Audit. The audit focused on reviewing Valley Water’s methods and approaches to forecast water usage and demand, including how forecasting models are used to inform the Water Supply Master Plan. The audit covered forecasting practices between January 1, 2020, and December 31, 2024, and included evaluating the reliability of past forecasts. It also included reviewing policies, procedures and other guidelines, evaluating forecasting methodology, and conducting benchmarking research, including how peer water agencies incorporate the potential effects of climate change in their forecasting models. Staff presented the audit report with management’s responses to the BAC at the July 28, 2026, BAC meeting and is expected to present the information to the full Board on September 8, 2026.
• 2024 RENEWED SCW PROGRAM PERFORMANCE AUDIT (a Program-required audit):
On October 2, 2024, a task order was issued to conduct the first audit of the renewed Safe, Clean Water and Natural Flood Protection Program (SCW Program or Program). The renewed SCW Program, effective July 1, 2021, replaced the previous 2012 Safe, Clean Water and Natural Flood Protection Program (2012 Program) in its entirety. To ensure accountability and transparency, the Program requires independent professional audits at least every five years while the Program is in effect. At the request of the Independent Monitoring Committee (IMC) and subsequent Board direction, staff initiated this audit earlier than the required five-year interval. The audit assessed implementation of the renewed SCW Program for the period from July 1, 2021, through June 30, 2024, and focused on governance, transparency, compliance, and performance. Conducted between August and November 2024, the audit resulted in nine (9) recommendations. The Renewed SCW Program Performance Audit final report was approved and recommended by the Board Audit Committee on October 15, 2025, and subsequently presented to the full Board at the November 19, 2025, Board meeting. Since the February 2026 status report, seven (7) of the nine (9) recommendations have been implemented. Key improvements include strengthening governance and partnership management, documenting compliance with Measure S, improving Board resolutions and change control practices, strengthening oversight tools, improving data accuracy, and better aligning key performance indicators (KPIs) with program objectives. Additional improvements include Board approval of KPI adjustments for Projects D1 and F3, implementation of supervisory reviews for Maximo work order data, development of an internal Strategic Decision & Risk Log for the Santa Clara Flood Control Joint Powers Authority (SFCJPA), enhancements to SCW funding reconciliation and public reporting, and validation of the Measure S tax resolution filing process, including documentation of the appropriate County offices for filing and confirmation of use of the certified resolution template for the FY2026-27 Measure S tax resolution. Next steps include automating acreage data from GIS geospatial polygons into Maximo to further improve data accuracy and continuing implementation of the remaining recommendations. Staff will return to the Board Audit Committee on October 21, 2026, with a status update as implementation progresses.
The BAC is requested to receive the information provided today, and provide guidance to staff as necessary, including whether to close the completed board-directed audit (2020 Safe, Clean Water Program Grant Management Audit) or refer it to the CAE for follow-up review.
ENVIRONMENTAL JUSTICE IMPACT:
The proposed recommendations are not subject to environmental justice analysis. Audits are conducted to identify areas that may expose Valley Water to risk, or areas that may need to implement new processes in order to meet the Board’s priorities.
ATTACHMENTS:
Attachment 1: Audit Recommendation Status Table
Attachment 2: Audit Recommendation Status Updates (detailed).
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068