Professional Documents
Culture Documents
1: We recommend the Board provide in their annual orientation training for new and returning Board members a clear understanding of MSDs organizational structure and operations, their responsibilities as Board members, as well as their legal and fiduciary roles, and the purpose of the board on which they serve. In addition, the orientation should address ethical requirements of Board members and staff and any significant policy changes adopted by MSD during the previous year. 2: We also recommend that the orientation be facilitated by a knowledgeable independent party, who can participate in and oversee the orientation training. 3: We recommend that the Budget Committee perform a regular review of budget to actual expenditures to monitor costs in each account and report to the Board. 4: The name and number of budget categories should provide transparency and sufficient detail to allow Committee members to accurately identify the types of expenses attributed to each category. 5: This review should be documented in the Board and Budget Committee meeting minutes. 6: Periodically, the Budget Committee should receive and review a listing of expenditures with sufficient detail to question transactions as necessary. 7: We recommend the Board develop a whistleblower reporting policy by creating and documenting an independent process whereby employees and/or volunteers have the option to directly make the Board aware of concerns involving matters that specifically need Board oversight. 8: We recommend the Board establish methods that allow for concerns to be reported directly to their attention by all staff, including anonymous concerns, and any complaints against executive staff. 9: The Board should further develop a process by which concerns are brought to the attention of the Board and ensure a process exists to analyze, investigate and resolve issues brought to its attention. The internal audit function could be used to ensure that concerns brought to the Board are independently investigated and findings reported directly to the Board.
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Staff is preparing a comprehensive, annual Board member orientation for new and returning Board members that will cover MSDs organizational structure and operations, Board member responsibilities, their legal and fiduciary roles, the purpose of the Board, ethical requirements of Board members and staff, and significant policy changes adopted by MSD during the previous year. Board orientation training will be scheduled for all members of the MSD Board once vacant positions have been filled. MSD is working with an independent party (Center for Non Profit Excellence) that can facilitate MSD Board orientation training. Orientation will be conducted when vacant Board positions are filled. Mid-year financial reports (12-31-11 unaudited) were reviewed by the Budget Committee on January 30, 2012. Finance Department is in the process of developing standard financial reports that will be provided to the Board on a monthly basis. The reports will include a Year-to-Date Summary of expenses by category and comparison to budget. MSD expects to launch the "OpenMSD" transparency website by March 15 which will include a sortable database on all expenditure transactions. The transactions will be updated on a regular basis. The Board reviewed a demonstration of this transparency website on February 13, 2012. Review of the financial reports by the Budget Committee and Board will be documented in meeting minutes.
Staff is currently negotiating a service agreement with an ethics hotline provider (Ethics Point) which is expected to be finalized by March 1, 2012. The provider will then proceed with implementing the hotline which is expected to be on-line for employees by April 15, 2012. Staff is also currently drafting a Whistleblower Reporting Policy, which will include procedures for use of the ethics hotline to report concerns/complaints. This Policy will be presented to MSD Policy Committee for approval or the recently adopted Ethics Policy for the Board and Senior Management will be amended to include the Whistleblower Reporting Policy. The Whistleblower Reporting Policy will also be included in the Ethics Policy being drafted for all MSD employees. In addition to the whistleblower reporting policy, internal procedures are also currently being drafted to govern the receipt, analysis, investigation, and resolution of concerns and/or complaints reported through the ethics hotline and are expected to be completed within the next 30 days.
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45: In establishing a financial disclosure policy, we recommend the MSD Board members, as well as all executive team members, annually file with an appropriate committee of the Board, and by a specified date, a statement detailing financial interests held. Required information should be prescribed by an appropriate committee of the Board.
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46: The Board should consider including the following disclosures on the prescribed form: Name, business and home addresses, telephone number and e-mail address of the filer; Title of position or office whereby filing is required; Any other occupation of the filer or filers spouse; Businesses in which the filer or filers spouse hold a specified percentage of interest. The policy should numerically state the percentage of business ownership required to be reported; Sources of income to the filer, filers spouse, or filers immediate family members exceeding a specific amount (dollar 40-41 amount should be specified in the policy); Real property owned by the filer, the filers spouse, or the filers immediate family, and its location; Creditors of the filer, the filers spouse, or the filers immediate family who are owed more than a specified amount. The policy should specify the dollar amount required to be reported; and, Sources of gifts over a specified amount, which should be stated in the policy, to the filer, the filers spouse, or the filers immediate family, except for gifts from family members. 47: The policy should further require an affirmative statement by the filer that he or she has no interest that would cause a conflict with his or her 41 official duties. 48: Sanction for noncompliance with the filing requirements also should 41 be detailed in the policy. 49: To ensure compliance with the code of ethics adopted, MSD should develop and implement policies, procedures, and responsibilities regarding reporting, investigation, and resolution of allegations of ethical 41 misconduct as detailed in the recommendations of Finding 1 regarding a whistleblower policy.
90% These recommendations have been incorporated into the Board and Senior Management Ethics Policy adopted January 23, 2012. Refer to the response provided in Finding 4, Recommendation 40.
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80% These recommendations have been incorporated into the Board and Senior Management Ethics Policy adopted January 23, 2012. Refer to the response provided in Finding 4, Recommendation 40.
51: Board members, appointed executive staff, and other employees who abstain from involvement in discussions and decisions as recommended above should not be present during such discussions, and such abstention should be documented in writing and placed in the employees personnel file or recorded in the minutes of a Board meeting.
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68: Requests for changes to management should be made during Board meetings or meetings of Board committees and have the support of a majority of the members.
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Concurrent with the issuance of a RFQ for legal services, as explained in greater detail in response to recommendations under Finding 6, staff is also drafting a new template contract for use with all legal services providers pursuant to which all legal services, except for services provided by Special Board Counsel, will be provided under the direct supervision of the MSD Legal Director/Legal Counsel who will also have responsibility for monitoring and overseeing all legal services, to include defining, among other things, settlement procedures, and provisions to prevent conflict of interest situations. Staff will present and recommend to the Board proposed legal services contracts for approval following the procurement teams review and evaluation of statement of qualifications from and preliminary selection of qualified attorneys/firms.
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MSD staff is preparing an RFQ for legal services that will include services for Bond Counsel (see Response to Finding 6, Recommendations 53-58). An RFQ for Financial Advisor is being developed and will be issued by June 15, 2012. MSD has amended the contract with its existing Financial Advisor for services on a month-by-month basis until a new Financial Advisor is selected. MSD Board will be kept up-to-date on responses and selections for these professional services. Any use of Co-Bond Counsel will be justified and approved by the Board and the Board will approve the Bond Counsel.
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79: We recommend the Louisville Green Board amend its bylaws to remove specific names of individuals. The Louisville Green bylaws should be free of any redundant or unnecessary terms that may complicate the governance of this corporation.
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80: Further, we recommend the Louisville Green Board select a legal counsel through a transparent, competitive process as similarly recommended in Finding 6.
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The bylaws of the Louisville Green Corporation stipulate that the bylaws may be amended at any regular or special meeting of the Board by an affirmative vote of six (6) members; however, the Corporations Board currently has only five (5) members. As soon as the Boards membership is increased to six (6) members, the bylaws will be amended to remove the names of the President and special legal counsel. Also, effective January 9, 2012, MSDs primary legal services contract was designated by the MSD Board as a professional services contract that should be periodically advertised and competitively negotiated, and staff was authorized to and has begun drafting a RFQ to procure legal services. The RFQ separates legal services into multiple practice areas for purposes of procuring qualified attorneys under separate contracts for each area, (including the areas of special board counsel and bond counsel), is being reviewed by a procurement evaluation team and is expected to be advertised within 30 days. The team will also participate in the evaluation of statements of qualifications and further recommendations concerning the procurement.
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88: The contract should require the financial advisor to be free of conflicts with any investment firm doing business with MSD. 89: All fees for an investment consultant and advisement contract should be a single fee based upon the amount of funds to be invested and the type of investments that are expected by MSD.
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40% 40% A fee structure for Investment Management Services will be included in the annual contracts referenced in response to Finding 13, Recommendation 84.
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100: We recommend the MSD Audit Committee develop and approve procedures for the internal audit function. 101: The adopted procedures should state the process for the Internal Auditor to follow in initiating an audit, including the process for the Audit Committee to be informed of and approve or authorize any audit requests not already on the annual audit plan made by management or other parties. 102: The adopted procedures should also state the acceptable time period for the Internal Auditor to allow management to respond to a draft audit report. 103: The adopted procedures should specify that the Auditor is to inform the Audit Committee if management fails to respond to the draft report within the specified time period and the process to follow to release an audit report when management fails to respond. 104: The procedures should require the Internal Auditor to inform the Committee when a draft audit is completed for the Audit Committee to review and approve the draft report prior to forwarding the report to management for response. 105: Finally, procedures should require the Audit Committee, after reviewing and approving internal audit reports, to ensure internal audit reports are presented to the full MSD Board for ratification.
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Updates to the Audit Committee and Internal Audit Charters were adopted by the MSD Board on February 13, 2012. These updates include procedures for initiating internal audits, approval of audit requests by the Audit Committee, responses to audit findings by management, and approval of internal audit reports by the MSD Board. Also included were statements of responsibility for the Audit Committee to assist in performing the annual evaluation of the Internal Auditor, approve and recommend to the MSD Board an annual budget for the Internal Auditor, review and approval of the annual work plan for internal audit, and to hold at least four meetings annually, on a quarterly basis, to receive routine status updates from the Internal Auditor. The adopted Internal Audit Charter states that the Internal Auditor reports functionally to the Audit Committee and administratively to the Executive Director. The MSD organizational chart was immediately revised to reflect the reporting structure of the Internal Auditor. MSD is currently seeking further guidance from the State Auditor's Office, the Institute of Internal Auditors and other agency practices regarding the procedures for communicating preliminary draft audit reports to the Board Audit Committee prior to management review. This recommendation has been incorporated into the Audit Committee and Internal Audit Charters adopted by the MSD Board on February 13, 2012. Refer to the response provided in Finding 17, Recommendation 100.
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108: The Internal Auditor should request directly to the Audit Committee the amount of funds estimated as necessary to conduct those audits. 109: Once approved by the Audit Committee, the annual budget for the Internal Auditor should be ratified by the full Board to be included in the MSD budget by the Finance Director. 110: We also recommend the MSD Board revise the Audit Committee Charter to include within the Committees responsibilities the performance of the annual evaluation of the Internal Auditor and the budgeting for the expenses of the Internal Auditor. 111: We recommend the MSD Board revise the organizational chart of MSD to include a direct reporting line from the Internal Auditor to the Audit Committee of the Board. 112: We recommend the MSD Audit Committee consistently approve the annual MSD internal audit work plan as required under the Internal Audit Charter. 113: Further, the Board should revise the Audit Committee Charter language to agree with the language in the Internal Audit Charter as the current Committee Charter only states the Committee is responsible for reviewing the work plan. 114: Additionally, we recommend the MSD Internal Auditor provide routine status updates on audits to the Audit Committee. This will foster continued communication between the Internal Auditor and Audit Committee members. It will allow the Internal Auditor to discuss any problems that may be encountering on an audit with the Committee in a more timely manner and will allow the Committee an opportunity to discuss any concerns they may have with the thoroughness of a particular audit or regarding other areas of the organization that they may wish to ask her to investigate.
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These recommendations have been incorporated into the Audit Committee and Internal Audit Charters adopted by the MSD Board on February 13, 2012. Refer to the response provided in Finding 17, Recommendation 100.
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115: Finally, we recommend the MSD Audit Committee consider holding quarterly meetings to ensure continued direct communication with the Internal Auditor.
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This recommendation has been incorporated into the Audit Committee and Internal Audit Charters adopted by the MSD Board on February 13, 2012. Refer to the response provided in Finding 17, Recommendation 100.
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118: In addition, the policy providing six-month and annual salary increases and bonuses to new employees should be reconsidered because this policy could provide an excessive increase in compensation to an employee that has not been with MSD a complete year. 119: Furthermore, all forms of compensation, including performance salary increases and bonuses, should be considered if MSD wants to control or freeze its payroll budget.
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121: Further, we recommend MSD adopt the provisions in the Model Procurement Code in KRS 45A.740, 45A.745, and 45A.750 pertaining to the procurement of architectural and engineering services.
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MSD has adopted the local public agency provisions of the Kentucky Model Procurement Code (KRS 45A.345 through KRS 45A.460), and staff believes that the foregoing provisions allow for procedures similar to those authorized under KRS 45A.740, KRS 45A.745, and KRS 45A.750 and therefore enable MSD to award a contract for architectural or engineering related services to the best firm qualified to perform the required work on the basis of demonstrated competence and qualification for the type of professional services required and at fair and reasonable prices.
122: We recommend: Procurement Method Determination Forms be completed in a timely manner in accordance with procurement policies and used to document the method by which the agency intends to procure a service. It is a checkpoint to ensure the agency is utilizing the correct procurement method and should not be overlooked or completed after the contract is signed or services are provided; MSD centrally maintain all procurement records; and, MSD only approve payments that have a signed Purchase Order. 123: We recommend that MSDs policy of allowing the Board to waive any or all requirements related to the procurement of professional services be repealed.
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Refer to the response provided in Finding 3, Recommendation 32. In addition will evaluate a central procurement process for engineering, construction and goods and services to improve the controls, documentation, records and payments to contractors and vendors.
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MSD staff is currently reviewing Procurement Regulations to determine the appropriateness of the Board's authority regarding procurement of professional services.
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130: Upon employment, all new employees should be trained on records retention responsibilities to assure proper retainage of records. MSD also may want to consider having employees sign an acknowledgement that they have read and understand the records management policies.
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137: We recommend MSD review the allocation process on a regular basis and ensure that the process is fundamentally sound and complies with the commonly accepted accounting basis for capitalized project cost. 138: We also recommend that MSD review the allocation process annually and document that the process has been reviewed and approved by the appropriate administrative and executive staff.
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MSD's overhead allocation calculation is currently being reviewed for compliance with accounting standards and any necessary adjustments. Going forward, this allocation will be reviewed and approved annually by the appropriate administrative and executive staff. Plan is to complete this review prior to June 15, 2012 in order to implement in FY 2013 budget.
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139: We recommend MSD refrain from spending funds for activities and items that do not provide a clear benefit to its ratepayers or help fulfill MSDs mission. 140: We recommend MSD management carefully evaluate each discretionary expenditure to ensure funds are efficiently and effectively used in keeping with its mission. 141: We recommend MSD consider seeking reimbursement of the amount it contributed to the private tribute from the MSD employee who authorized the payment with obtaining the appropriate approval from the Executive Director. 142: We recommend that the MSD Board closely scrutinize its expenditures for contributions and donations. 143: If a contribution or donation is being considered, it should have a clear and documented connection to MSDs mission or must be needed to meet a requirement of its EPA Consent Decree. 144: Further, we recommend all contributions and donations under consideration by MSD be presented to the full Board for approval to ensure Board awareness and management accountability MSD. 145: We recommend MSD no longer use public funds for Holiday parties and celebrations. 146: We recommend MSD closely scrutinize travel and conferences, particularly of out-of-state travel. 147: We recommend MSD management also closely scrutinize the number of employees allowed to attend a single conference or meeting. Further, the MSD Board should approve out-of-state travel after being provided with estimated travel costs. Subsequent to the travel, the actual travel expenses should be reported to the Board.
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As of January 5, 2012, MSD's Interim Executive Director has applied a freeze to all discretionary spending, including travel; meals and food; dues, fees, licenses, and subscriptions; donations, contributions, and sponsorships; and overtime. All exceptions to this freeze are reviewed on a case-by-case basis by Senior Management. Policies are being drafted to govern contributions and donations, travel, and training. These policies are expected to be finalized by June 15, 2012. Funds will not be budgeted for events such as holiday parties or celebrations. As of November 29, 2011, full reimbursement was received for the amount contributed to the private tribute.
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80% 80% 80% A spending freeze has been applied to all discretionary spending. Refer to the response provided in Finding 25, Recommendation 139.
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