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 August 2025. At that time, there were four (4) Board-directed audits, and two (2) Program-required audits that were still open. As of this report, one (1) Board-directed audit, and one (1) program-required audit are now fully implemented. The other audits are still open, along with an additional Board-directed audit that has been added since the August 2025 report (see Attachment 1). Currently, there are twenty-three (23) active audit recommendations that are not fully resolved and are marked as “Pending/Underway.” Since the August report, five (5) 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.
• 2020 SAFE, CLEAN WATER PROGRAM GRANT MANAGEMENT AUDIT (completed):
On September 2, 2020, TAP International, Inc., along with subconsultants Greta McDonald and Drummond Kahn, initiated the Grants Management Performance Audit to: (1) determine the extent to which Valley Water’s grants management and administration program is operating effectively, and (2) determine if opportunities exist to better align Valley Water’s grant management and administration program and processes with best practices for grants management internal controls. Presentation of the Safe, Clean Water Program Grant Management Audit final report was approved by the Board Audit Committee on January 13, 2021, and was presented to the full Board at the March 23, 2021, Board meeting. The audit identified 11 recommendations to enhance operating effectiveness and identify opportunities to incorporate best practices. As of this report, all eleven (11) recommendations have been achieved. The key accomplishment achieved since the last report in February 2025 was the completion of the Board-approved Grants Redesign Project that implemented updates and improvements to the administration of the Safe, Clean Water Grants and Partnerships Program. This included updates for all grant types, the Mini-Grant Program, and the Standard Grant Program that addresses the audit recommendations. Staff worked with consultants and internal subject matter experts to implement the approved Grants Redesign Project recommendations. The redesigned Mini-Grant Program was launched in Fall 2024 and accepts applications year-round. The redesigned Standard Grant Program includes a streamlined application, simplified match funding requirements, expanded eligible project costs, and a project readiness criterion to evaluate due diligence and financial viability. It includes a streamlined budget template, reduced invoicing and reporting requirements, and insurance costs as eligible cost for both grant opportunities. The Office of Civic Engagement presented the final update to the BAC in December 2025.
• 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 the 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, an updated fee rate schedule 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 contract staff to provide clear requirements for use of Valley Water lands. Staff will return to provide a status report at the May 20, 2026, BAC meeting.
• 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, twelve (12) recommendations have been implemented. Currently, three (3) recommendations are still pending, of which two (2) are identified as high priority, and one (1) as medium. Staff estimates the recommendations will be fully implemented by Q4 of FY26. Staff continues to work on implementing the remaining recommendations and will return to provide a status report at the September 16, 2026, BAC meeting.
• 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, seven (7) of the ten (10) recommendations have been implemented, and three (3) audit recommendations are identified as "Pending/Underway," of which two (2) are identified as High priority, and one (1) as medium. Key improvements include conducting monthly all-employee team meetings, providing change management and communication training to HR leadership, continuing to prioritize required training for all new supervisors, and enhancing the effectiveness of the supervisory training program and incorporating additional topics. An HR Operations Plan outlining key initiatives was developed and reviewed and approved by HR Leadership in Q4 2025. Next steps involve ensuring that a representative from HR with a strong understanding of system needs is highly involved in evaluating the Enterprise Resource solution system capabilities against HR's system needs. Other steps include implementing a careful process for successful system adoption, taking steps to prevent harassment by offering regular Equal Employment Opportunity (EEO) training. Staff will continue to work on implementing the remaining recommendations and return to provide a status report at the March 18, 2026 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 with management’s responses to the BAC at its January 21st, 2026, BAC meeting and is expected to present the information to the full Board on February 24th, 2026. The result of the audit produced five (5) recommendations, two (2) of which staff have already implemented. As of this report, three (3) of the five (5) recommendations remain open.
• 2023 CLOSE-OUT AUDIT OF THE 2012 SAFE, CLEAN WATER PROGRAM (a Program-required audit) (completed):
On April 27, 2023, Valley Water engaged Moss Adams LLP (Auditor) to conduct the performance close-out audit of the voter-approved 2012 Program (Measure B), which ended in June 2021. The result of the audit produced five (5) recommendations intended to develop a conflict of interest policy that applies to the Independent Monitoring Committee, continue implementing the remaining recommendations of the grants management and administration performance audit, examine project key performance indicators (KPIs) in future iterations of the program and make revisions as needed to better reflect KPIs that are within Valley Water’s control and focus on outcome-based KPIs, implement strategies to promote project continuity for projects heavily reliant on external agency cooperation, and conduct robust training and establish annual refresher training for staff involved in contracting processes. Staff presented the audit report with management’s responses to the BAC at its March 20th, 2024, BAC meeting, and subsequently to the full Board at its April 23rd, 2024, Board meeting. Since the last update to the BAC in August 2025, the last two (2) outstanding recommendations have been completed. The Board adopted a new IMC resolution with conflict-of-interest provisions in September 2025, and the independent performance audit of the renewed Safe, Clean Water Program was completed, with the Board receiving the final report and management response in November 2025. As of this report, all five (5) recommendations have been implemented.
• 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 the Valley Water Board of Directors to conduct independent professional audits of the SCW Program 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 five (5) years. Valley Water engaged PMA Consultants to conduct this independent performance audit, which was approved. The primary objective of this independent performance audit was to assess the implementation of the renewed SCW Program for the period from July 1, 2021, through June 30, 2024. The audit focused on key aspects, including governance, transparency, compliance, and performance. The audit was conducted between August and November 2024 and resulted in nine (9) recommendations. The presentation of 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. Key improvements include strengthening governance and partnership management, as well as enhancements to reporting processes for greater transparency. This includes documenting compliance with Measure S, improving clarity in Board resolutions, refining funding reconciliation and change control practices, and enhancing public reporting of project schedules and key performance indicators (KPIs). Additional improvements focus on implementing stronger oversight tools, improving data accuracy, and better aligning KPIs with controllable contributions, financial sustainability, and current project activities to support informed Board engagement.
The final audit report, including management responses, was presented in October 2025. As a result, there are no significant implementation updates at this time; however, since the completion of the audit, one (1) recommendation has been completed. Staff will return to the Board Audit Committee at the October 21, 2026 with future status updates as recommendations progress.
Additionally, at its February 15th, 2023, BAC meeting the committee referred four (4) completed implementations to the CAE for a follow-up review to confirm that the actions implemented by staff met the intent of the recommendations. The CAE concluded that three could be closed, but the 2020 Real Estate Services Unit (RESU) audit should remain open until the four (4) recommendations that are partially implemented are completed. As of this report, the outstanding recommendations include measuring the efficiency of property acquisition efforts, including identifying external factors which delay issuance of the first written offer or lengthen the negotiation period; tracking and reporting all costs associated with leasing or licensing Valley Water property, and ensuring applicable fees are at market rate. RESU has completed development of the required metrics and analyses and anticipates final closing of the audit soon.
Staff intends to return to provide the next general update at the August 19th, 2026, BAC meeting.
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