HomeMy WebLinkAbout04-20-22 F&A Committee Packet1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
WEDNESDAY
April 20, 2022
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1.ROLL CALL
2.PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE COMMITTEE ON ANY SUBJECT MATTER WITHIN THE COMMIT-
TEE'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA
DISCUSSION ITEMS
3.RECEIVE THE DISTRICT’S POLICY NO. 27, INVESTMENT POLICY, OF THE
DISTRICT’S CODE OF ORDINANCES FOR REVIEW AND RE-DELEGATE
AUTHORITY FOR ALL INVESTMENT RELATED ACTIVITIES TO THE CHIEF
FINANCIAL OFFICER, IN ACCORDANCE WITH GOVERNMENT CODE SECTION
53607 (FAKHOURI) [5 minutes]
4.APPROVE AN AMENDMENT TO THE DISTRICT’S PURCHASING MANUAL,
SECTION 1.2 “ETHICS STATEMENT,” TO INCORPERATE THE DISTRICT’S CODE
OF ORDINANCES POLICY 41 (EMPLOYEE COMPLIANCE WITH DISTRICT’S
CONFLICT OF INTEREST CODE) AND POLICY 50 (ANTIFRAUD POLICY) TO ADD
DEFINITION TO “HIGH STANDARDS OF ETHICAL BEHAVIOR” IN
PROCUREMENT; AND APPROVE AN AMENDMENT TO SECTION 2.2.5
“PURCHASING AND FACILITIES MANAGER” TO CLARIFY AND REAFFIRM THE
DISTRICT’S COMMITMENT TO BEST VALUE PROCUREMENT. (PAYNE) [5
minutes]
5.ADJOURNMENT
2
BOARD MEMBERS ATTENDING:
Mark Robak, Chair
Jose Lopez
All items appearing on this agenda, whether or not expressly listed for action, may be delib-
erated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
Agenda and all attachments are also available through the District Secretary by contacting
her at (619) 670-2280.
If you have any disability which would require accommodation in order to enable you to par-
ticipate in this meeting, please call the District Secretary at 670-2280 at least 24 hours prior
to the meeting.
Certification of Posting
I certify that on April 15, 2022 I posted a copy of the foregoing agenda near the regular
meeting place of the Board of Directors of Otay Water District, said time being at least 24
hours in advance of the meeting of the Board of Directors (Government Code Section
§54954.2).
Executed at Spring Valley, California on April 15, 2022.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: May 11, 2022
SUBMITTED BY: Eid Fakhouri,
Finance Manager
PROJECT: DIV. NO.All
APPROVED BY: Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT:
Annual Review of the Investment Policy (Policy No. 27) of the
District’s Code of Ordinances and the Re-delegation of
Authority for All Investment Related Activities to the Chief
Financial Officer
GENERAL MANAGER’S RECOMMENDATION:
That the Board receives the District’s Investment Policy (Policy No.
27) of the District’s Code of Ordinances for review and re-delegate
authority for all investment related activities to the Chief
Financial Officer, in accordance with Government Code Section 53607.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
Government Code Section 53646 recommends that the District’s
Investment Policy be tendered to the Board on an annual basis for
review. In addition, Government Code Section 53607 requires that for
the Board’s delegation of investment responsibilities to the Chief
Financial Officer to remain effective, the governing board must re-
delegate authority over investment activities on an annual basis.
ANALYSIS:
The primary goals of the Investment Policy are to assure compliance
with the California Government Code, Sections 53600 et seq. The
primary objectives, in priority order, of investment activities are:
AGENDA ITEM 3
1. Protect the principal of the funds.
2. Remain sufficiently liquid to enable the District to meet
all operating requirements which might be reasonably
anticipated.
3. The District’s return is a market rate of return that is
commensurate with the conservative investments approach to
meet the first two objectives of safety and liquidity.
The code provides a conservative range of investment options for
local agencies, including Federal Treasuries, Federal Agencies,
Callable Federal Agencies, the State Pool, the County Pool, high-
grade corporate debt, and others.
Each year, staff reviews the California Debt and Investment Advisory
Commission (CDIAC) Investment Guidelines to ensure our Investment
Policy reflects the most recent and relevant updates approved by the
California State Legislature. During this year’s policy review,
there were no relevant legislative changes that affect our Investment
Policy.
On an annual basis, staff submits the Investment Policy to our list
of Broker/Dealers for their professional review and to ensure they
acknowledge and understand the District’s Investment Policy. This
year, District Brokers/Dealers did not recommend any changes be made
to our Investment Policy.
Because of the District’s adherence to a conservative range of
authorized investments, we have been able to maintain a healthy and
diversified portfolio that meets our overall investment objectives
and supports our long-term financial plans. The current policy is
consistent with the current law and the overall objectives of the
policy are being met;therefore, there are no recommended changes to
the District’s Investment Policy at this time.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
Demonstrate financial health through formalized policies, prudent
investing, and efficient operations.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Policy No. 27
C) Presentation Slides
ATTACHMENT A
SUBJECT/PROJECT:
Annual Review of the Investment Policy (Policy No. 27) of
the District’s Code of Ordinances and the Re-delegation of
Authority for All Investment Related Activities to the
Chief Financial Officer
COMMITTEE ACTION:
The Finance and Administration Committee recommend that the
Board review the Investment Policy (Policy No. 27) of the
District’s Code of Ordinances and re-delegate authority for all
investment related activities to the Chief Financial Officer.
NOTE:
The “Committee Action” is written in anticipation of the
Committee moving the item forward for board approval. This
report will be sent to the Board as a committee approved item,
or modified to reflect any discussion or changes as directed
from the committee prior to presentation to the full board.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 1 of 17
1.0 POLICY
It is the policy of the Otay Water District to invest public funds in
a manner which will provide maximum security with the best interest
return, while meeting the daily cash flow demands of the entity and
conforming to all state statues governing the investment of public
funds.
2.0 SCOPE
This investment policy applies to all financial assets of the Otay
Water District. The District pools all cash for investment purposes.
These funds are accounted for in the District’s audited Comprehensive
Annual Financial Report (CAFR) and include:
2.1) General Fund
2.2) Capital Project Funds
2.2.1) Designated Expansion Fund
2.2.2) Restricted Expansion Fund
2.2.3) Designated Betterment Fund
2.2.4) Restricted Betterment Fund
2.2.5) Designated Replacement Fund
2.2.6) Restricted New Water Supply Fund
2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt
proceeds, debt reserves and deferred compensation funds. Funds
received from the sale of general obligation bonds, certificates of
participation or other tax-exempt financing vehicles are segregated
from pooled investments and the investment of such funds are guided by
the legal documents that govern the terms of such debt issuances.
3.0 PRUDENCE
Investments should be made with judgment and care, under current
prevailing circumstances, which persons of prudence, discretion and
intelligence, exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of
their capital as well as the probable income to be derived.
Attachment B
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 2 of 17
The standard of prudence to be used by investment officials shall be
the “Prudent Person” and/or "Prudent Investor" standard (California
Government Code 53600.3) and shall be applied in the context of
managing an overall portfolio. Investment officers acting in
accordance with written procedures and the investment policy and
exercising due diligence shall be relieved of personal responsibility
for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion
and appropriate action is taken to control adverse developments.
4.0 OBJECTIVE
As specified in the California Government Code 53600.5, when
investing, reinvesting, purchasing, acquiring, exchanging, selling and
managing public funds, the primary objectives, in priority order, of
the investment activities shall be:
4.1)Safety: Safety of principal is the foremost objective of
the investment program. Investments of the Otay Water
District shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio.
To attain this objective, the District will diversify its
investments by investing funds among a variety of securities
offering independent returns and financial institutions.
4.2)Liquidity: The Otay Water District’s investment portfolio
will remain sufficiently liquid to enable the District to
meet all operating requirements which might be reasonably
anticipated.
4.3)Return on Investment: The Otay Water District’s investment
portfolio shall be designed with the objective of attaining
a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the District’s investment risk
constraints and the cash flow characteristics of the
portfolio.
5.0 DELEGATION OF AUTHORITY
Authority to manage the Otay Water District’s investment program is
derived from the California Government Code, Sections 53600 through
53692. Management responsibility for the investment program is hereby
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 3 of 17
delegated to the Chief Financial Officer (CFO), who shall be
responsible for all transactions undertaken and shall establish a
system of controls to regulate the activities of subordinate officials
and their procedures in the absence of the CFO.
The CFO shall establish written investment policy procedures for the
operation of the investment program consistent with this policy. Such
procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an
investment transaction except as provided under the terms of this
policy and the procedures established by the CFO.
6.0 ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall
refrain from personal business activity that could conflict with the
proper execution and management of the investment program, or that
could impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the General
Manager any material financial interests in financial institutions
with which they conduct business. They shall further disclose any
personal financial/investment positions that could be related to the
performance of the investment portfolio. Employees and officers shall
refrain from undertaking personal investment transactions with the
same individual with whom business is conducted on behalf of the
District.
7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of District selected
financial institutions and security broker/dealers authorized and
approved to provide investment services in the State of California.
Investment services include the buying or selling of permissible
investments such as treasuries, government agencies, etc. for delivery
to the custodian bank. These may include “primary” dealers or regional
dealers that qualify under Securities & Exchange Commission Rule 15C3-
1 (Uniform Net Capital Rule). No public deposit shall be made except
in a qualified public depository as established by state laws. All
financial institutions and broker/dealers who desire to become
qualified bidders for investment transactions must supply the District
with the following, as appropriate:
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 4 of 17
Audited Financial Statements.
Proof of Financial Industry Regulatory Authority (FINRA)
certification.
Proof of state registration.
Completed broker/dealer questionnaire.
Certification of having read the District’s Investment
Policy.
Evidence of adequate insurance coverage.
An annual review of the financial condition and registrations of
qualified bidders will be conducted by the CFO. A current audited
financial statement is required to be on file for each financial
institution and broker/dealer through which the District invests.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
From the governing body perspective, special care must be taken to
ensure that the list of instruments includes only those allowed by law
and those that local investment managers are trained and competent to
handle. The District is governed by the California Government Code,
Sections 53600 through 53692, to invest in the following types of
securities, as further limited herein:
8.01)United States Treasury Bills, Bonds, Notes or those
instruments for which the full faith and credit of the United
States are pledged for payment of principal and interest. There
is no percentage limitation of the portfolio which can be
invested in this category, although a five-year maturity
limitation is applicable.
8.02)Local Agency Investment Fund (LAIF), which is a State
of California managed investment pool, may be used up to the
maximum permitted by State Law (currently $75 million). The
District may also invest bond proceeds in LAIF with the same but
independent maximum limitation.
8.03)Bonds, debentures, notes and other evidence of
indebtedness issued by any of the following government agency
issuers:
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 5 of 17
Federal Home Loan Bank (FHLB)
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mac")
Federal National Mortgage Association (FNMA or "Fannie Mae")
Government National Mortgage Association (GNMA or “Ginnie
Mae”)
Federal Farm Credit Bank (FFCB)
Federal Agricultural Mortgage Corporation (FAMCA or “Farmer
Mac”)
There is no percentage limitation of the portfolio which can be
invested in this category, although a five-year maturity from the
settlement date limitation is applicable. Government agencies
whose implied guarantee has been reduced or eliminated shall
require an “A” rating or higher by a nationally recognized
statistical rating organization.
8.04)Interest-bearing demand deposit accounts must be made
only in Federal Deposit Insurance Corporation (FDIC) insured
accounts. For deposits in excess of the insured maximum of
$250,000, approved collateral shall be required in accordance
with California Government Code, Section 53652. Certificates of
Deposit (CD) will be made only to the FDIC-insured limit of
$250,000. Investments in CD’s are limited to 15 percent of the
District’s portfolio.
8.05) Commercial paper, which is short-term, unsecured
promissory notes of corporate and public entities. Purchases of
eligible commercial paper may not exceed 2 percent of the
outstanding paper of an issuing corporation, and maximum
investment maturity will be restricted to 270 days. Investment is
further limited as described in California Government Code,
Section 53601(h). Purchases of commercial paper may not exceed 10
percent of the District’s portfolio.
8.06)Medium-term notes defined as all corporate debt
securities with a maximum remaining maturity of five years from
the settlement date or less, and that meet the further
requirements of California Government Code, Section 53601(k).
Investments in medium-term notes are limited to 10 percent of the
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 6 of 17
District’s portfolio and no more than 2 percent of the
outstanding medium-term notes of any single issuer.
8.07)Money market mutual funds that invest only in Treasury
securities and repurchase agreements collateralized with Treasury
securities, and that meet the further requirements of California
Government Code, Section 53601(l). Investments in money market
mutual funds are limited to 10 percent of the District's
portfolio.
8.08)The San Diego County Treasurer’s Pooled Money Fund,
which is a County managed investment pool, may be used by the
Otay Water District to invest excess funds. There is no
percentage limitation of the portfolio which can be invested in
this category.
8.09)Under the provisions of California Government Code
53601.6, the Otay Water District shall not invest any funds
covered by this Investment Policy in inverse floaters, range
notes, interest-only strips derived from mortgage pools, or any
investment that may result in a zero-interest accrual if held to
maturity. Also, the borrowing of funds for investment purposes,
known as leveraging, is prohibited.
9.0 INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to
investing, and on a continual basis. There shall be a questionnaire
developed which will answer the following general questions:
A description of eligible investment securities, and a
written statement of investment policy and objectives.
A description of interest calculations and how it is
distributed, and how gains and losses are treated.
A description of how the securities are safeguarded
(including the settlement processes), and how often the
securities are priced and the program audited.
A description of who may invest in the program, how often,
and what size deposits and withdrawals are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc., utilized by the
pool/fund?
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 7 of 17
A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it
accept such proceeds?
10.0 COLLATERALIZATION
Collateralization will be required on certificates of deposit
exceeding the $250,000 FDIC insured maximum. In order to anticipate
market changes and provide a level of security for all funds, the
collateralization level will be 102% of market value of principal and
accrued interest. Collateral will always be held by an independent
third party with whom the entity has a current custodial agreement. A
clearly marked evidence of ownership (safekeeping receipt) must be
supplied to the entity and retained. The right of collateral
substitution is granted.
11.0 SAFEKEEPING AND CUSTODY
All security transactions entered into by the Otay Water District
shall be conducted on a delivery-versus-payment (DVP) basis.
Securities will be held by a third-party custodian designated by the
District and evidenced by safekeeping receipts.
12.0 DIVERSIFICATION
The Otay Water District will diversify its investments by security
type and institution, with limitations on the total amounts invested
in each security type as detailed in Paragraph 8.0, above, so as to
reduce overall portfolio risks while attaining benchmark average rate
of return. With the exception of U.S. Treasury securities, government
agencies, and authorized pools, no more than 50% of the District’s
total investment portfolio will be invested with a single financial
institution.
13.0 MAXIMUM MATURITIES
To the extent possible, the Otay Water District will attempt to match
its investments with anticipated cash flow requirements. Unless
matched to a specific cash flow, the District will not directly invest
in securities maturing more than five years from the settlement date
of the purchase. However, for time deposits with banks or savings and
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 8 of 17
loan associations, investment maturities will not exceed two years.
Investments in commercial paper will be restricted to 270 days.
14.0 INTERNAL CONTROL
The Chief Financial Officer shall establish an annual process of
independent review by an external auditor. This review will provide
internal control by assuring compliance with policies and procedures.
15.0 PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of
obtaining a rate of return throughout budgetary and economic cycles,
commensurate with the investment risk constraints and the cash flow
needs.
The Otay Water District’s investment strategy is passive. Given this
strategy, the basis used by the CFO to determine whether market yields
are being achieved shall be the State of California Local Agency
Investment Fund (LAIF) as a comparable benchmark.
16.0 REPORTING
The Chief Financial Officer shall provide the Board of Directors
monthly investment reports which provide a clear picture of the status
of the current investment portfolio. The management report should
include comments on the fixed income markets and economic conditions,
discussions regarding restrictions on percentage of investment by
categories, possible changes in the portfolio structure going forward
and thoughts on investment strategies. Schedules in the quarterly
report should include the following:
A listing of individual securities held at the end of the
reporting period by authorized investment category.
Average life and final maturity of all investments listed.
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment
category.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 9 of 17
17.0 INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by
resolution of the District’s Board of Directors. The policy shall be
reviewed annually by the Board and any modifications made thereto must
be approved by the Board.
18.0 GLOSSARY
See Appendix A.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 10 of 17
APPENDIX A: GLOSSARY
ACTIVE INVESTING: Active investors will purchase investments and
continuously monitor their activity, often looking at the price
movements of their stocks many times a day, in order to exploit
profitable conditions. Typically, active investors are seeking short
term profits.
AGENCIES: Federal agency securities and/or Government-sponsored
enterprises.
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a
bank or trust company. The accepting institution guarantees payment
of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk
tolerance of the investment portfolio. A benchmark should represent a
close correlation to the level of risk and the average duration of the
portfolio’s investments.
BROKER/DEALER: Any individual or firm in the business of buying and
selling securities for itself and others. Broker/dealers must register
with the SEC. When acting as a broker, a broker/dealer executes
orders on behalf of his/her client. When acting as a dealer, a
broker/dealer executes trades for his/her firm's own account.
Securities bought for the firm's own account may be sold to clients or
other firms, or become a part of the firm's holdings.
CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing,
FDIC insured debt instrument offered by banks and savings and loans.
Money removed before maturity is subject to a penalty. CDs are a low
risk, low return investment, and are also known as “time deposits”,
because the account holder has agreed to keep the money in the account
for a specified amount of time, anywhere from a few months to several
years.
COLLATERAL: Securities, evidence of deposit or other property, which a
borrower pledges to secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: An unsecured short-term promissory note, issued by
corporations, with maturities ranging from 2 to 270 days.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 11 of 17
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
report for the Otay Water District. It includes detailed financial
information prepared in conformity with generally accepted accounting
principles (GAAP). It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual
provisions, extensive introductory material, and a detailed
statistical section.
COUPON: (a) The annual rate of interest that a bond’s issuer promises
to pay the bondholder on the bond’s face value. (b) A certificate
attached to a bond evidencing interest due on a set date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all
transactions, buying and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of
securities: delivery versus payment and delivery versus receipt.
Delivery versus payment is delivery of securities with an exchange of
money for the securities. Delivery versus receipt is delivery of
securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked
to, or derived from, the movement of one or more underlying index or
security, and may include a leveraging factor, or (2) financial
contracts based upon notional amounts whose value is derived from an
underlying index or security (interest rates, foreign exchange rates,
equities or commodities).
DISCOUNT: The difference between the cost price of a security and its
maturity when quoted at lower than face value. A security selling
below original offering price shortly after sale also is considered to
be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments
that are issued at a discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of
securities offering independent returns.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 12 of 17
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to
supply credit to various classes of institutions and individuals,
e.g., S&L’s, small business firms, students, farmers, farm
cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures deposits in member banks and thrifts.
FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system
supports agricultural loans and issues securities and bonds in
financial markets backed by these loans. It has consolidated the
financing programs of several related farm credit agencies and
corporations.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are
traded. This rate is currently pegged by the Federal Reserve through
open-market operations.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION (FAMC or Farmer Mac): A
stockholder owned, publicly-traded corporation that was established
under the Agricultural Credit Act of 1987, which added a new Title
VIII to the Farm Credit Act of 1971. Farmer Mac is a government
sponsored enterprise, whose mission is to provide a secondary market
for agricultural real estate mortgage loans, rural housing mortgage
loans, and rural utility cooperative loans. The corporation is
authorized to purchase and guarantee securities. Farmer Mac
guarantees that all security holders will receive timely payments of
principal and interest.
FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks
(currently 12 regional banks), which lend funds and provide
correspondent banking services to member commercial banks, thrift
institutions, credit unions and insurance companies.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A
stockholder owned, publicly traded company chartered by the United
States federal government in 1970 to purchase mortgages and related
securities, and then issue securities and bonds in financial markets
backed by those mortgages in secondary markets. Freddie Mac, like its
competitor Fannie Mae, is regulated by the United States Department of
Housing and Urban Development (HUD).
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 13 of 17
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA, like
GNMA was chartered under the Federal National Mortgage Association Act
in 1938. FNMA is a federal corporation working under the auspices of
the Department of Housing and Urban Development (HUD). It is the
largest single provider of residential mortgage funds in the United
States. Fannie Mae is a private stockholder-owned corporation. The
corporation’s purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages. FNMA’s securities
are also highly liquid and are widely accepted. FNMA assumes and
guarantees that all security holders will receive timely payment of
principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created
by Congress and consisting of a seven-member Board of Governors in
Washington, D.C., 12 regional banks and about 5,700 commercial banks
that are members of the system.
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (FINRA): An independent,
not-for-profit organization authorized by Congress to protect
America’s investors by making sure the securities industry operates
fairly and honestly. It is dedicated to investor protection and
market integrity through effective and efficient regulation of the
securities industry. FINRA is the successor to the National
Association of Securities Dealers, Inc. (NASD).
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): A
government owned agency which buys mortgages from lending
institutions, securitizes them, and then sells them to investors.
Because the payments to investors are guaranteed by the full faith and
credit of the U.S. Government, they return slightly less interest than
other mortgage-backed securities.
INTEREST-ONLY STRIPS: A mortgage-backed instrument where the investor
receives only the interest, no principal, from a pool of mortgages.
Issues are highly interest rate sensitive, and cash flows vary between
interest periods. Also, the maturity date may occur earlier than that
stated if all loans within the pool are pre-paid. High prepayments on
underlying mortgages can return less to the holder than the dollar
amount invested.
INVERSE FLOATER: A bond or note that does not earn a fixed rate of
interest. Rather, the interest rate is tied to a specific interest
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 14 of 17
rate index identified in the bond/note structure. The interest rate
earned by the bond/note will move in the opposite direction of the
index. An inverse floater increases the market rate risk and modified
duration of the investment.
LEVERAGE: Investing with borrowed money with the expectation that the
interest earned on the investment will exceed the interest paid on the
borrowed money.
LIQUIDITY: A liquid asset is one that can be converted easily and
rapidly into cash without a substantial loss of value. In the money
market, a security is said to be liquid if the spread between bid and
asked prices is narrow and reasonable size can be done at those
quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from
political subdivisions that are placed in the custody of the State
Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could
presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase/reverse repurchase
agreements that establish each party’s rights in the transactions. A
master agreement will often specify, among other things, the right of
the buyer-lender to liquidate the underlying securities in the event
of default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an
investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills,
commercial paper, bankers’ acceptances, etc.) are issued and traded.
MUTUAL FUNDS: An open-ended fund operated by an investment company
which raises money from shareholders and invests in a group of assets,
in accordance with a stated set of objectives. Mutual funds raise
money by selling shares of the fund to the public. Mutual funds then
take the money they receive from the sale of their shares (along with
any money made from previous investments) and use it to purchase
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 15 of 17
various investment vehicles, such as stocks, bonds, and money market
instruments.
MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only
in money markets. These funds invest in short term (one day to one
year) debt obligations such as Treasury bills, certificates of
deposit, and commercial paper.
PASSIVE INVESTING: An investment strategy involving limited ongoing
buying and selling actions. Passive investors will purchase
investments with the intention of long-term appreciation and limited
maintenance, and typically don’t actively attempt to profit from short
term price fluctuations. Also known as a buy-and-hold strategy.
PRIMARY DEALER: A designation given by the Federal Reserve System to
commercial banks or broker/dealers who meet specific criteria,
including capital requirements and participation in Treasury auctions.
These dealers submit daily reports of market activity and positions
and monthly financial statements to the Federal Reserve Bank of New
York and are subject to its informal oversight. Primary dealers
include Securities and Exchange Commission registered securities
broker/dealers, banks, and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law
requires that a fiduciary, such as a trustee, may invest money only in
a list of securities selected by the custody state—the so-called legal
list. In other states the trustee may invest in a security if it is
one which would be bought by a prudent person of discretion and
intelligence who is seeking a reasonable income and preservation of
capital.
PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers,
brokers, and bankers who underwrite and trade securities offerings.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not
claim exemption from the payment of any sales or compensating use or
ad valorem taxes under the laws of this state, which has segregated
for the benefit of the commission eligible collateral having a value
of not less than its maximum liability and which has been approved by
the Public Deposit Protection Commission to hold public deposits.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 16 of 17
RANGE NOTE: An investment whose coupon payment varies and is dependent
on whether the current benchmark falls within a pre-determined range.
RATE OF RETURN: The yield obtainable on a security based on its
purchase price or its current market price. This may be the amortized
yield to maturity on a bond the current income return.
REGIONAL DEALER: A securities broker/dealer, registered with the
Securities & Exchange Commission (SEC), who meets all of the licensing
requirements for buying and selling securities.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a
fixed price on a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the
agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception: When the Fed is
said to be doing RP, it is lending money that is increasing bank
reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee
whereby securities and valuables of all types and descriptions are
held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of
outstanding securities issues following their initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to
protect investors in securities transactions by administering
securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises
(FHLB, FNMA, FAMCA, etc.), and Corporations, which have imbedded
options (e.g., call features, step-up coupons, floating rate coupons,
derivative-based returns) into their debt structure. Their market
performance is impacted by the fluctuation of interest rates, the
volatility of the imbedded options and shifts in the shape of the
yield curve.
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
INVESTMENT POLICY 27 09/15/93 05/05/21
Page 17 of 17
TREASURY BILLS: A non-interest bearing discount security issued by the
U.S. Treasury to finance the national debt. Most bills are issued to
mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities
issued as direct obligations of the U.S. Government and having initial
maturities of more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities
issued as direct obligations of the U.S. Government and having initial
maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission
requirement that member firms as well as nonmember broker-dealers in
securities maintain a maximum ratio of indebtedness to liquid capital
of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm, including margin loans
and commitments to purchase securities, one reason new public issues
are spread among members of underwriting syndicates. Liquid capital
includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as
a percentage. (a) INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the security. (b) NET
YIELD or YIELD TO MATURITY is the current income yield minus any
premium above par or plus any discount from par in purchase price,
with the adjustment spread over the period from the date of purchase
to the date of maturity of the bond.
INVESTMENT POLICY No. 27
APRIL 20,
2022
Attachment C
Eid Fakhouri, CPA Finance Manager
POLICY REVIEW
Purpose:
➢Annual Investment Policy Review
California Government Code Section 53646
➢Delegation of Investment Authority
Chief Financial Officer
California Government Code Section 53607
INVESTMENT OBJECTIVE
To safeguard principal, maintain liquidity,
and to achieve a market investment
return.
➢Fund Objectives (in order of priority)
Safety
Liquidity
Yield
POLICY CHANGES
➢CDIAC –Annual Legislative Review
No Recommended Changes
➢California State Treasurer
No Changes in LAIF Limit,
currently set at $75M.
DELEGATION OF INVESTMENT AUTHORITY
Re-delegate authority for all investment related
activities to the Chief Financial Officer in
accordance with Government Code Section
53607.
BOARD ACTION
➢The action we are requesting today is to
review and receive the 2022 Investment
Policy 27 and to request the Re-
delegation of authority for all investment
activities to the District’s Chief Financial
Officer.
QUESTIONS?
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: May 11, 2022
PROJECT: Various DIV. NO.ALL
SUBMITTED BY: Kent Payne
Purchasing and Facilities Manager
APPROVED BY: Adolfo Segura, Chief, Administrative Services
Jose Martinez, General Manager
SUBJECT: AMEND THE DISTRICT'S PURCHASING MANUAL TO INCORPORATE BY
REFERENCE THE DISTRICT’S CONFLICT OF INTEREST CODE AND ANTIFRAUD
POLICIES AND TO REAFFIRM THE DISTRICT’S COMMITMENT TO BEST VALUE
PROCUREMENT
GENERAL MANAGER’S RECOMMENDATION:
That the Board approve an amendment to the District’s Purchasing Manual
Section 1.2, “Ethics Statement”, to incorporate by reference the
District’s Code of Ordinances Policy 41 - Employee Compliance With
District’s Conflict Of Interest Code and Policy 50 - Antifraud Policy
so as to add definition to “high standards of ethical behavior” in
procurement; and, approve an amendment to Section 2.2.5, “Purchasing
and Facilities Manager”, to clarify and reaffirm the District’s
commitment to best value procurement.
COMMITTEE ACTION:
See “Attachment A”.
PURPOSE:
To request that the Board amend the District’s Purchasing Manual as
presented in “Attachment B” to incorporate the District’s Conflict of
Interest Code and Antifraud Policies and to clarify the District’s
commitment to Best Value Procurement.
AGENDA ITEM 4
2
ANALYSIS:
The Board of Directors establishes the operational guidelines and
procedures with respect to purchasing materials, equipment, and
services necessary to conduct the District’s business. These procedures
are defined and published in the District’s Purchasing Manual.
As a normal course of business, the manual is reviewed periodically,
and changes are recommended that are intended to improve the operation
of the District including emphasizing and reaffirming the Districts
commitment to high ethical standards in procurement, and to seek the
best value in all procurement.
Section 1.2 - Ethics Statement
The Purchasing Manual’s Section 1.2 states that District staff engaged
in any aspect of procurement are to be held to a high standard of
ethical behavior for which the Purchasing Manual has been designed to
ensure. The District, through its Code of Ordinances, has established
Conflict of Interest and Antifraud policies which, in part, instruct on
procurement activities and add definition to the Manual’s ethical
behavior declaration. Therefore, staff is recommending that Policy 41
- Employee Compliance With District’s Conflict Of Interest Code and
Policy 50 - Antifraud Policy be incorporated into the Purchasing Manual
by reference as presented in “Attachment B”.
2.2.5 - Purchasing and Facilities Manager
The National Institute for Public Procurement (NIGP), and the
procurement community as a whole, promote Best Value Procurement (BVP)*
as an industry standard which dictates the consideration of all factors
that go into procurement decisions for goods and services including,
but not limited to, price, availability, quality, training,
maintenance, and all other associated costs. Likewise, the Purchasing
Manual promotes the concept of BVP through terms such as “maximize the
value”, “with the greatest value”, “best meets the District’s needs”,
and “best meets the District’s requirements”, but does not clearly call
out the standard itself.
Section 2.2.5 details the responsibilities of the Purchasing and
Facilities Manager and includes item “e” with the requirement to “Make
purchases for the District in such a manner so as to maximize the value
3
received….” Staff recommends that “Best Value Procurement” be inserted
into item “e” so that it reads: “Make purchases based on Best Value
Procurement for the District in such a manner so as to maximize the
value received for monies expended” thereby, clarifying and affirming
the District’s commitment to the BVP standard (see “Attachment B”).
*Best Value in Government Procurement, Concepts and Practices,
Published by NIGP: The Institute for Public Procurement, Copyright 2013
NIGP, Inc.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
None.
STRATEGIC GOAL:
This action supports the District’s goal to ensure financial health
through formalized policies, prudent investing, and efficient
operations.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – Committee Action Report
Attachment B – Proposed Updates to Purchasing Manual Sections 1.2 and
2.5.5
Attachment C – Purchasing Manual Updates
ATTACHMENT A
SUBJECT/PROJECT:
AMEND THE DISTRICT'S PURCHASING MANUAL TO INCORPORATE BY
REFERENCE THE DISTRICT’S CONFLICT OF INTEREST CODE AND
ANTIFRAUD POLICIES AND TO REAFFIRM THE DISTRICT’S COMMITMENT
TO BEST VALUE PROCUREMENT
COMMITTEE ACTION:
The Finance, Administration, and Communications Committee reviewed
this item at a meeting held on April 20, 2022. The Committee
supports presentation to the full Board for their consideration.
NOTE:
The “Committee Action” is written in anticipation of the Committee
moving the item forward for Board approval. This report will be
sent to the Board as a Committee approved item or modified to
reflect any discussion or changes as directed from the Committee
prior to presentation to the full Board.
ATTACHMENT B
SUBJECT/PROJECT:
AMEND THE DISTRICT'S PURCHASING MANUAL TO INCORPORATE BY
REFERENCE THE DISTRICT’S CONFLICT OF INTEREST CODE AND
ANTIFRAUD POLICIES AND TO REAFFIRM THE DISTRICT’S COMMITMENT
TO BEST VALUE PROCUREMENT
Proposed Updates:
__________________________________
Page 1 of 32
OTAY WATER DISTRICT
PURCHASING MANUAL
Revised June 3, 2020
Page 2 of 32
Table of Contents
Section Page
1 – Mission and Ethics Statement . . . . . . . . . . . . . . . . . . . 4
2 – Organization . . . . . . . . . . . . . . . . . . . . . 5
Purpose
Statement
Responsibilities
3 - Purchasing Policy . . . . . . . . . . . . . . . . . . . 7
Purpose
General
Policies
4 - Purchasing Guidelines . . . . . . . . . . . . . . . . . 9
Purpose
General
Guidelines and Protocols
Vendor Involvement
Guidelines and Protocols
5 - Legal Considerations Regarding Purchasing . . . . . . . 11
Purpose
General
6 - Types of Purchases . . . . . . . . . . . . . . . . . . 12
Purpose
General
Procedures
Construction Services (Public Works)
Professional Consulting
Cooperative/Joint Purchases
Emergency Purchases 13
Materials, Goods, Services, and General Consulting
Petty Cash
Sole Source Purchases
Blanket Purchase Orders:
Guidelines for Issuing Blanket Purchase Orders 14
Guidelines for the Use of Blanket Purchase Orders
7 - Pricing/Bidding Requirements . . . . . . . . . . . . . . 15
Purpose
General
Requirements
Formal Advertising
Quotations
Public Works – Construction
Request for Proposals 16
Two Step Bidding
Purchases Exempt from Competitive Pricing
Emergency Purchases 17
Page 3 of 32
Board Authorized Purchases Exceeding the General Manager’s Authority
8 - Change Orders . . . . . . . . . . . . . . . . . . . . . 18
Purpose
General
9 - Authorization to Purchase – Signatory Authority . . . . 19
Purpose
General
10 - Documentation of Purchases . . . . . . . . . . . . . . 20
Purpose
General
Procedure
Purchases Exempt from Purchase Order Requirement
11 - Special Considerations . . . . . . . . . . . . . . . . 22
Exceptions to Purchasing Procedures
Bonding
Encouraging Emerging Business Enterprise
Insurance
Invoicing
Receiving, Inspection and Acceptance 23
Specifications
Inventory
12 - Disposal of Surplus Property . . . . . . . . . . . . . 24
Purpose
General
Procedure
Auction Sale
Sale to Federal, State, and Local Municipalities and Government Agencies 25
Sale to Republic of Mexico Municipalities and U.S. Government Agencies 26
Donation of District Surplus Property to Municipalities, Government Agencies, and
Charitable Organizations 27
Exchange or Trade-In 28
Disposal as Scrap
13 – Cal Card Credit Cards . . . . . . . . . . . . . . . . . 29
Purpose
Guidelines
Definitions
Procedure 30
Authorized Purchases
Responsibilities
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Revisions . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Page 4 of 32
Section 1 – Mission and Ethics Statement
1.0 PURPOSE:
To provide an understanding of the basic goal of the purchasing function within the Otay Water District.
1.1 MISSION STATEMENT:
To provide for the procurement, storage and distribution of all supplies, equipment and services for the
District using progressive purchasing techniques, methods and stringent controls while seeking the
highest cost savings for the customers of the District.
1.2 ETHICS STATEMENT:
The Otay Water District, its governing Board, employees, and agents who are involved at any point in
the process to select suppliers, award and administer contracts and approve payments must adhere to
high standards of ethical behavior. To this end, the policies and guidelines established in this Purchasing
Manual, the Otay Water District’s Code of Ordinances Policy 41 - Employee Compliance With
District’s Conflict Of Interest Code and Policy 50 - Antifraud Policy are intended to ensure that
purchasing and purchasing related decisions are in accordance with adherence to the high ethical
standards of the purchasing community and of the Otay Water District.
Page 5 of 32
Section 2 – Organization
(Rev 2017-05-03) (Rev 2017-08-02)
2.0 PURPOSE:
To provide an understanding of the Purchasing Division’s organization and its relationship within the
Otay Water District.
2.1 STATEMENT:
The Purchasing and Facilities Manager directs the Purchasing and Facilities Division. The Purchasing
and Facilities Manager reports to the Chief of Administrative Services, who in turn reports to the General
Manager. The General Manager reports to the Board of Directors.
Board of Directors
|
General Manager
|
Chief of Administrative Services
|
Purchasing and Facilities Manager
2.2 RESPONSIBILITIES:
2.2.1 Board of Directors – Ultimate authority regarding the purchasing policies, practices and guidelines
of the District rests with the Board of Directors. It is the Board’s responsibility to establish policy and
direction regarding purchasing functions in accordance with the District’s Code of Ordinances.
2.2.2 General Manager – The General Manager is responsible, in accordance with the District’s Code of
Ordinances, for ensuring that the District complies with Board direction regarding the purchasing
function.
2.2.3 (Deleted)
2.2.4 Chief of Administrative Services – It is the Chief’s responsibility to administer the District’s
Purchasing and Facilities Division as directed by the General Manager.
2.2.5 Purchasing and Facilities Manager – It is the Manager’s responsibility to manage the Purchasing
and Facilities Division as directed by the Chief of Administrative Services and to:
a. Develop objectives, policies, programs and procedures for the negotiation and the
acquisition of materials, supplies, equipment and services for the District.
Page 6 of 32
b. Coordinate purchasing policies throughout the District.
c. Disseminate to other departments purchasing information designed to promote efficient
operations.
d. Negotiate and approve assigned purchase orders in the best interest of the District.
e. Make purchases based on Best Value Procurement for the District in such a manner so as
to maximize the value received for monies expended.
f. Arrange for the sale or disposal of materials and supplies declared surplus by the Board of
Directors.
g. Maintain inventory levels at a satisfactory operating level.
h. Work with District departments to promote vendor/seller relations.
i. Work with District Departments and Committees establishing standardization of
workmanship, materials and supplies used throughout the District.
j. Protect the District’s interest in matters concerning charges related to the purchasing of
materials, supplies and services.
Page 7 of 32
Section 3 – Purchasing Policy
3.0 PURPOSE:
To provide an understanding of the purchasing function and to establish and present the
purchasing policies within the Otay Water District.
3.1 GENERAL:
Purchasing is fundamental to the operation of the District. It means the acquisition of goods and
services in exchange for an acceptable price or consideration. A purchase may be in the simplest
form or it may involve the development of lengthy written agreements. Every purchase involving
the transfer of goods or services is a contract. As a contract, there are considerations as to the
nature of the purchase, its value, timing, method of payment, delivery, and other conditions that
must be addressed. For this reason, it is the District’s policy to rest the responsibility and authority
to purchase within the Purchasing and Facilities Division (Purchasing Department).
3.2 POLICIES:
a. General Policy: All purchases and requests for pricing or repair services shall be made in
accordance with applicable laws and the District’s Purchasing Manual, policies, and
procedures.
b. Open Door Policy: The Purchasing Department shall maintain an “Open Door” policy
with all salespeople desiring to sell goods or services to the District.
c. Interviews with Salespeople: If it is necessary for staff, other than Purchasing Department
personnel, to interview salespeople regarding details of their products, requests for such
visits should be made through the Purchasing Department. In interviews with salespeople,
no one except the Purchasing Department may comment on the preference for any product,
or give any information regarding performance or price.
d. Correspondence with Suppliers: All correspondence with suppliers must be processed
through the Purchasing Department unless it is technical in nature and makes no references
towards purchasing.
e. Negotiated Changes: Unless authorized by the General Manager, the Purchasing
Department will negotiate all changes to purchases.
f. Authority to Question: In order to serve the best interest of the District, the
Purchasing Department shall have the authority to question all requests for purchases
regarding quantity, quality, timing, and specifications.
g. Approval of Gratis Materials and Samples: The Purchasing Department must approve all
gratis materials, supplies or services submitted to the District as samples or tests prior to
their acceptance.
h. Conflict of Interest: Employees are required to disclose to the Purchasing Department
any conflict of interest in the selection or recommendation for selection of District
vendors, suppliers, or consultants. All contracts shall contain language, as approved
by the District’s legal counsel, requiring Vendors, Suppliers, and Consultants to disclose
any actual and potential conflicts of interest that exist between the Vendor, Supplier, or
Consultant and the District, its representatives, agents, Board of Directors, and employees.
Page 8 of 32
Section 4 – Purchasing Guidelines
4.0 PURPOSE:
To provide guidelines and protocol for the standardized application of purchasing activities within
the Otay Water District.
4.1 GENERAL:
To a large extent, the Purchasing and Facilities Division’s (Purchasing Department) performance
will be measured by how well it satisfies the needs of various departments within the District. It is
essential that there be mutual cooperation between District departments to ensure that a condition
of confidence exists. For this reason the following standardized guidelines and protocols have been
established.
4.1.1 Guidelines and Protocol:
a. Departments will keep the Purchasing Department informed of their current and anticipated
activities.
b. Overlapping duties regarding purchases will be clearly defined in the best interest of
the District.
c. If the material or equipment requested is not readily available or its price is such that
significant savings can be realized through alternatives, the alternative that is in the best
interest of the District shall be selected.
d. Policies and procedures of the District’s Purchasing Manual will be followed.
e. The Purchasing Department will notify interested departments on matters related to
shortages, new products, discontinued products or anything else that directly affects the
performance of the interested department, the Purchasing Department, or the District.
4.2 VENDOR INVOLVEMENT
Through the Purchasing Department’s contact with vendors, it is in a position to develop or
diminish the District’s reputation and/or vendor/District relationships. The District promotes a
fair and aggressive purchasing manner that results in positive vendor relationships. To
accomplish this, the District has established the following standardized guidelines and
protocols.
4.2.1 Guidelines and Protocol:
a. All competition between suppliers is to be kept open and fair.
b. Advantages through vendor errors shall be declined.
c. Revision of bids after submission shall not be accepted.
d. Materials not strictly up to specification that may be usable without sacrifice shall be
reviewed.
e. Bids shall only be solicited from those vendors with whom the District intends to do
business.
Page 9 of 32
f. The District shall not be obligated to any particular vendor.
g. Vendor locations may be visited to promote product and vendor knowledge.
h. Transactions and communications with vendors shall be truthful yet shall not divulge
sensitive or confidential information related to competition.
i. Vendor questions, calls or correspondence shall be answered promptly and in a manner that
maintains fair competition.
Page 10 of 32
Section 5 – Legal Considerations Regarding Purchasing
5.0 PURPOSE:
To provide understanding and direction related to legal considerations within the purchasing function of
the Otay Water District.
5.1 GENERAL:
The District has designated that the Purchasing and Facilities Manager has the authority to act fiducially
as its agent with regard to the purchase of materials, supplies, and services. This designation is referred
to as Law of Agency. As such, the Purchasing and Facilities Manager binds the District to whatever
buying decision is made and makes the District responsible for any purchase order issued under his/her
limits of authority. In addition to acting in the best interest of the District, the Purchasing and Facilities
Manager must ensure that various Federal and State statutes governing purchasing and interstate
commerce are complied with. For these reasons, consultation with the District’s legal counselor shall
be made whenever there is a question concerning anti-trust implications, warranty, risk of loss and
rights and remedies of the District.
Page 11 of 32
Section 6 – Types of Purchases
6.0 PURPOSE:
To provide standardized procedures for the purchase of consulting, construction, materials, goods, and
services within the Otay Water District.
6.1 GENERAL:
The District recognizes the varying levels of complexity within the purchasing function and the need to
establish standardized procedures to administer the various types of purchases made within the District.
6.2 PROCEDURES:
6.2.1 Construction Services (Public Works):
The General Manager, or his/her designee, may award purchase orders/contracts for construction services
that are within the authorization limit of the General Manager as set by the Board of Directors.
Competitive pricing of construction purchases must be in accordance with the bidding and pricing
procedures of the District as outlined in Section 7.2.3 (Pricing/Bidding Requirements) of this manual.
Award shall be made to the responsive and responsible bidder who has submitted the lowest bid
meeting the requirements and criteria set forth in the invitation to bid. For construction contracts
exceeding staff’s limit of authorization, a summary of bids together with staff’s recommendation for
award or possible rejection of bids must be presented to the Board of Directors of the District at a board
meeting. Should an award be made, the Board of Directors will authorize staff to execute a contract on
behalf of the District. After approval as to form and legality by the District’s legal counsel, the successful
bidder and the District’s representative will sign the contract. A copy of the executed contract
shall be promptly provided to the Finance Department for proper accounting review. If after
notification, the successful bidder fails to execute the contract within ten (10) days, the bid deposit,
made in cash, cashier’s check, certified check, or bid bond will be forfeited.
6.2.2 Professional Consulting:
The General Manager, or his/her designee, may award purchase orders/contracts for professional
consulting services that are within the authorization limits as set by the Board of Directors. Professional
Consulting Services are defined as architectural, Engineering, Environmental and any other service as
identified within the California Government Code § 4525-4529. Competitive pricing of consulting
services must be in accordance with the bidding and pricing procedures of the District as outlined in
Section 7.2.4a (Pricing/Bidding Requirements) of this manual. Award shall be made to the consultant
whose response to a request for proposal best meets the District’s needs. At the discretion of the Board
of Directors or the General Manager, the review of submitted proposals may be made by a Committee
established by the Board or the General Manager. For professional consulting contracts exceeding the
General Manager’s limit of authorization, a summary of bids together with staff’s recommendation for
award must be presented to the Board of Directors of the District at a board meeting. Should an award be
made, the Board of Directors will authorize staff to execute a contract on behalf of the District. After
approval as to form and legality by the District’s legal counsel, the successful bidder and the District’s
representative will sign the contract. A copy of the executed contract shall be promptly provided to the
Finance Department for proper accounting review.
6.2.3 Cooperative/ Joint Purchases:
The Purchasing and Facilities Manager may utilize cooperative/"piggyback" contracts, multiple
award schedules and joint power agreements awarded by Federal agencies, any state, municipality
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or public agency to purchase goods and services, up to the General Manager’s authorized approval
limit or subject to Board of Directors’ approval when the General Manager’s authority i s
exceeded. These purchases are exempt from the District’s competitive solicitation requirements
so long as the contracts, schedules and agreements are solicited in a manner substantially
consistent with District purchasing policies. (Rev 2017-05-03)
6.2.4 Emergency Purchases:
In the event of a catastrophic emergency, the guidelines and requirements as set forth in California state
statute and in the District’s Code of Ordinance shall prevail over those stated herein.
6.2.5 Materials, Goods, Services, and General Consulting:
Purchases of materials, goods and services, the value of which are within the limits authorized by the
Board of Directors, may be made by the District’s General Manager or his/her designee. Competitive
pricing for materials, goods and services must be in accordance with the bidding and pricing procedures
of the District as outlined in Section 7.2.2, 7.2.4, 7.2.5, and 7.2.6 (Pricing/Bidding Requirements) of
this manual as applicable. Purchases shall be made from the bidder whose bid best meets the District’s
requirements and needs as set forth in the invitation to bid or request for quotation. The Board of Directors
of the District must authorize purchases exceeding the General Manager’s authorized approval limit.
At a meeting of the Board of Directors, a summary of bids together with staff’s recommendation for the
award of a contract/purchase order or the rejection of bids shall be presented. Should an award be made,
the Board of Directors of the District will authorize staff to execute a purchase order/contract on behalf
of the District.
6.2.6 Petty Cash:
The primary purpose of petty cash funds is to reduce costs associated with purchases and expenses in
accordance with the District’s financial policies.
6.2.7 Sole Source Purchases:
Other than contracts for construction, alteration or repair of District facilities, a contract may be
awarded for materials, goods, services, or general consulting without competition when the District’s
General Manager or the Board of Directors determines that either the product is designated to match others
in use on a particular public improvement, is a unique or novel product application required to be used in
the public interest, or where only one brand or trade name is known. Sole source purchases may be
made by the District’s General Manager provided the value of the purchase is within the limits authorized
for the General Manager by the Board of Directors of the District and the reason for the sole source
authorization is documented by the General Manager and retained in accordance with District’s record’s
retention policy. The Board of Directors of the District must authorize sole source purchases exceeding
the General Manager’s authorized limit. At a meeting of the Board of Directors, staff will present the
bid submitted together with a recommendation requesting an award of purchase order/contract to the
vendor identified as the sole source. Should an award be made, the Board will authorize staff to
execute a purchase order/contract on behalf of the District.
6.2.8 Blanket Purchase Orders:
Blanket purchase orders are issued to reduce administrative and operational costs, inventories and
paperwork and may be issued for regularly purchased materials, supplies and services. Should a
blanket purchase order be issued, the order shall include a description of each material, supply and/or
service requested, a unit price for each, the period of time the order shall be in effect, and a statement
obligating the vendor to deliver all or a specified part of the District’s usage requirement upon receipt
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of an authorized release from the District. Not included on the blanket purchase order are specific
quantities. Instead of specific quantities, the blanket purchase order shall list an estimate of the quantity
of each item that will be used for the period to which the blanket purchase order refers. Blanket
purchase orders may not be issued for a period of time exceeding one year unless authorized by the
General Manager.
6.2.8.1 Guidelines for Issuing Blanket Purchase Orders:
a. Blanket purchase orders may only be issued, changed, or revoked by the Purchasing and
Facilities Manager or the General Manager.
b. Competitive pricing and vendor selection for blanket purchase orders shall be in accordance
with the policies and guidelines as set forth in this manual.
c. The Board of Directors must authorize blanket purchase orders exceeding the General
Manager’s authorization limit. At a formal meeting of the Board of Directors, a summary of
the requested blanket purchase order(s) shall be presented. The summary shall include a
description of the materials, supplies, and services required, and total order pricing. Should
the Board approve the blanket order(s), they will authorize staff to issue a blanket purchase
order on behalf of the District.
6.2.8.2 Guidelines for the Use of Blanket Purchase Orders:
a. The supervisor of the employee receiving materials, services, and/or goods released against
a blanket purchase order will write the account code/work order information, sign (attesting
that the release is authorized and that all goods/materials/services were received and accepted)
and forward the receiving (packing slips) document to the Finance Department. Processed
shipping documents (coded and signed) must be submitted to the Finance Department no later
than the end of next workday from the date items were received.
b. In the event that invoiced unit pricing exceeds the unit price indicated on the blanket
purchase order, Purchasing will contact the vendor requesting that a corrected invoice be
sent to the District and notify them that payment will be withheld pending the receipt of the
corrected invoice.
c. Should the ordering individual wish the warehouse to take delivery of items released under a
blanket purchase order, notification must be given to warehouse staff. Said notification
should be made by written memorandum or through e-mail or other electronic form and
must include information on the purchase order number assigned to the purchase, what and
when goods are to be delivered, and who will ultimately receive the goods.
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Section 7 – Pricing/Bidding Requirements
7.0 PURPOSE:
To provide requirements, policies, and guidelines for the pricing/bidding of purchases within the Otay
Water District.
7.1 GENERAL:
It is the District’s policy to request competitive pricing from responsible vendors for all purchases
exceeding $10,000. Pricing, although important, is not the only factor in determining the overall cost
and value of a product. Quality, service and delivery are factors that must also be considered when
comparing quotations. It is by weighing these factors that an intelligent decision can be made to purchase
the product with the greatest value for the least overall price. (Rev 2017-05-03)
7.2 REQUIREMENTS:
7.2.1 Formal Advertising:
Public works purchases, as defined in the State of California’s government and contract code, shall follow
the procedure outlined under the California Uniform Public Construction Cost Accounting Act
(CUPCCAA) (Sect 22000 et seq. of the California Contract Code and as set by the California Uniform
Construction Cost Accounting Commission (CUCCAC). Solicitations must contain a brief description of
the goods or services required, state where prospective bidders may obtain plans and specifications and
make any required deposits, state the time and place of the bid opening, and state that the District reserves
the right to reject one or all bids. (Rev 2016-09-07) (Rev 2016-09-07)
7.2.2 Quotations:
For purchases greater than $10,000, excluding public works subject to CUPCCAA or formal bidding, a
minimum of three competitive quotations must be obtained. Quotations received may be in written or oral
form. Should oral quotations be received, written documentation must be made identifying the bidder’s
name, contact name, telephone number, the date of the quotation and the pride bid. Should three quotations
not be obtainable, documentation in the form of a notation of memorandum must be provided and attached
to the purchase requisition. Where only one price is obtainable, the actions taken to obtain competitive
pricing shall be documented and attached to the purchase requisition and the purchase may be made and
the requirements of this section shall be satisfied. (Rev 2016-09-07) (Rev 2017-05-03)
7.2.3 Public Works - Construction
Public work purchases equal to or exceeding what is authorized under the California Uniform Public
Construction Cost Accounting Act (CUPCCAA) (Sect 22000 et seq. of the California Code and as set by
the California Uniform Construction Cost Accounting Commission (CUCCAC) must be formally
advertised and sealed bids received. (Rev 2017-09-07)
The Purchasing and Facilities Manager or the General Manager’s designee, in conjunction with the project
manager, and where appropriate, the District’s legal counsel, shall publicly open all sealed bids and
tabulate the results. The bid tabulation, along with a recommendation for award contract or
possible rejection of bids, shall be forwarded to the District’s General Manager.
In the event that the value of the purchase exceeds the General Manager’s signatory authority, a summary
of bids shall be presented together with staff’s recommendation for an award of contract or possible
rejection of bids to the Board of Directors of the District during a formal board meeting. The Board of
Directors will then authorize the execution of the contract on behalf of the District.
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Award shall be made to the responsive and responsible bidder who has submitted the lowest bid
meeting the requirements and criteria set forth in the invitation to bid. After approval as to form and
legality of the contract documents by legal counsel, the successful bidder and the appropriate District
representative(s) shall execute the contract. A copy of the executed contract shall be promptly provided
to the Finance Department for proper accounting review.
7.2.4 Request for Proposals:
a. For the Solicitation of Professional Consulting (Engineering): (Rev 2016-09-07)
The General Manager, or his/her designee, will establish a review panel to evaluate and rank submittals
(proposals) using criteria published in the Request for Proposals package. Documents, invitations, and
evaluation of submittals for professional consulting services shall be made in compliance with
Government Code Section 4526-4529 and District Policy #21 – Policy for Selection of Professional
Consultants.
b. For the Solicitation of General Consulting and Services:
The General Manager, or his/her designee, shall determine the method for soliciting and evaluating
proposals for general consulting and services. The request for proposal must be in written form and must
provide sufficient information to clearly identify the work required and provide respondents with a
clear understanding of the District’s needs, work specifications, expectations and the criteria that will
be used to evaluate submittals.
7.2.5 Two Step Bidding:
Where it is considered impractical to initially prepare a purchase description to support an award on price,
a request for proposals may be issued requesting the submission of not priced technical proposals. This
will be followed by an invitation for bids limited to those bidders whose technical proposals meet the
requirements set forth in the first invitation.
7.2.6 Purchases Exempt from Competitive Pricing:
The following contract/purchases are exempt from competitive pricing:
1. With Federal, State or Local Agencies,
2. Temporary labor services to fill time-limited employment needs,
3. For the sole purpose of obtaining expert witness for litigation, and
4. That are for legal defense, legal advice, or legal services.
7.2.7 Emergency Purchases:
During times when the General Manager has declared an emergency, where the immediate acquisition
of materials, goods, and services is required, the purchase of needed materials, goods, and services shall
be made in accordance with California state statutes and per the District’s Code of Ordinances.
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7.2.8 Board Authorized Purchases Exceeding the General Manager’s Authority: (Rev 2017-05-03) (Rev 2017-08-02)
a. The General Manager or his/her Designee is authorized to exceed his/her delegated purchasing
authority under Section 2 of the Code of Ordinance and purchase the following goods and services
without Board approval so long as the overall Board Approved District Budget for Labor and
Benefits, Materials and Maintenance and Administrative expenses is not exceeded:
1. Temporary labor services
2. Fuel, gasoline and diesel
3. Sewage Transportation and Processing
4. Water Meters
5. Service and maintenance of the District’s Board adopted sole source Enterprise Resource
Planning (ERP) System, Tyler Eden
6. Service and maintenance of the District’s Board adopted sole source Geographic Information
System, Environmental Systems Research Institute (ESRI)/GIS
7. Health Benefits, Property, Liability Insurance, Workers’ Compensation and other products and
services as provided by Special District Risk Management Authority (SDRMA), Association
of California Water Agencies – Joint Powers Insurance Authority (ACWA-JPIA) or any other
Board approved provider. (Rev 2020-06-03)
8. Regulatory Fees
9. Service and maintenance of the District’s Board adopted sole source Cityworks® work and
asset management system.
10. Service and maintenance of other Board adopted sole and single source enterprise systems,
infrastructure and services.
11. Mount Miguel Antenna Site Lease Agreement and Addendums
b. The General Manager or his/her Designee is authorized to exceed his/her delegated purchasing
authority under Section 2 of the Code of Ordinances and purchase the following goods and services
without Board approval so long as the amounts are commensurate with the District’s water
revenues for the same time period:
1. Water
2. Gas and electric utility for the operation of the District
3. Chemicals and gasses for the treatment of potable and recycled water.
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Section 8 – Change Orders
8.0 PURPOSE:
To provide guidelines for the initiation and approval of contract change orders within the Otay Water
District.
8.1 GENERAL:
Change orders may be initiated by the contractor/vendor or by the District. The District’s General
Manager or his/her designee must approve change orders as defined in the District’s Code of
Ordinances, Section 2.01e. The Board must approve change orders exceeding the General Manager’s
authorized limit. Only written change orders are allowed.
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Section 9 – Authorization to Purchase – Signatory Authority
9.0 PURPOSE:
To provide guidelines and protocol for establishing signatory authority for the approval of purchases
within the Otay Water District.
9.1 GENERAL:
The Board of Directors of the District has sole signatory (ability to sign contracts and approve purchases)
authority within the Otay Water District. The Board may, at a regularly scheduled board meeting,
establish signatory authorization limit(s) for the General Manager as defined in the District’s Code of
Ordinances, Section 2.01c-e. The General Manager at his/her discretion may delegate his/her signatory
authority, as he/she deems necessary. Other than as identified in Section 7.2.8 of this Manual, “Board
Authorized Purchases Exceeding the General Managers Authority”, delegated authorization limits may
not exceed those established by the Board for the General Manager. Delegated authorization
must be documented in the form of a memorandum, signed by the General Manager. Included in the
memorandum must be a listing of individuals and/or job classification to whom signatory and
purchase approval authority has been delegated and the maximum dollar value(s) of said authority.
Copies of the memorandum shall be provided to the District’s senior management team and to the
Purchasing and Facilities Manager. The General Manager at his/her discretion may allow the
Department Chiefs to delegate their signatory authority, as they deem necessary within their departments.
(Rev 2017-08-02)
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Section 10 – Documentation of Purchases
10.0 PURPOSE:
To provide standardized guidelines and procedures for documenting the authorization, pricing
and award of contracts within the Otay Water District. All purchases exceeding petty cash limit,
excluding purchases identified as exempt from this requirement under “Purchases Exempt from
Purchase Order Requirement”, shall be required to be documented as prescribed herein.
10.1 GENERAL:
As a public agency, the fundamental practice of documenting purchases must be followed. The
documentation must provide a record of vendor name, address, contact and telephone number, pricing,
authorized purchase approval(s), terms and conditions, consideration, placement of order, receipt of
order and authorization of payment. Documentation will be made on a “purchase requisition” form
(printed or electronic) together with a purchase order/contract (printed or electronic).
10.2 PROCEDURE:
a. A “Purchase Requisition” (requisition) form is an internal control document. It shall be used
to record vendor name, address, contact and telephone number, authorized purchase
approval(s), pricing, quantities and special terms and conditions. Documentation of competitive
pricing may be in the form of a memorandum or note attached to the requisition. For purchases
requiring the use of formal bidding/advertising, the bids received will be retained in accordance
with the District’s record retention policy. The requisition may be in written or electronic form
provided that it is standardized, and immutable.
b. When complete, the requisition will be used to produce a purchase order/contract. A copy
of the completed purchase requisition will be retained in accordance with the District’s record
retention policy.
c. The purchase order/contract represents a written agreement between the District and the Vendor.
In addition to identifying the District and Vendor, it is used to document terms and conditions.
d. The purchase order/contract will be in a form as approved by the District’s legal counsel.
e. The purchase order form shall be the used as the District’s primary contract document
for material, service, and supply purchases. Typically, purchases of professional engineering
services, consulting and major construction require contracts in a form other than a purchase
order. In the event a contract in a form other than a purchase order is used, the District’s
counsel shall approve it as to form. A purchase order may be issued for control purposes
to supplement a contract. In this event, the purchase order will reference the contract document
as representing the agreement between the District and vendor.
10.2.1 Purchases Exempt from Purchase Order Requirement:
a. The Board has identified the following purchases as exempt from the requirement of a
written purchase order/contract:
1. Travel and meeting advances and reimbursements
2. Purchases less than the petty cash limit
3. Prepaid travel expenses, i.e., airfare and hotel
4. Utilities
5. Television and satellite service
Page 20 of 32
6. Meal reimbursements
7. Telephone usage charges, including wireless telephones and pagers
8. Postage
9. Classified, legal, and display advertising
10. Petty Cash purchases
11. Mileage reimbursement
12. Memberships and dues
13. Subscriptions and books
14. Permits and fees
15. Customer refunds
16. District credit card reimbursements
17. Employee awards, incentives
18. Employee educational reimbursements
19. Seminars and training
20. Purchases made utilizing Cal Card
21. Contracts or letters of agreement as approved by the General Manager or the Board
of Directors
b. Completed purchase requisitions may be required, as determined by the General Manager
or his/her designee.
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Section 11 – Special Considerations
11.0 Exceptions to Purchasing Procedures:
In specific instances, such as Federal Grants and Assessment Districts, there may be specific requirements
in the contract or ordinance relating to the expenditure of such funds. The conditions of such agreements
and ordinances shall take precedence over the procedures established in this manual.
11.1 Bonding:
a. In addition to any required bid deposit or bond, all construction contracts in excess of $35,000
shall require:
1) A PERFORMANCE BOND in the amount of 100% of the contract price, and
2) A LABOR AND MATERIALS BOND in the amount of not less than 50% of the contract
price.
b. For construction contracts under $35,000, bonding shall be in accordance with District Policy
No. 31, Encouraging Disadvantaged Business Enterprise Firms.
11.2 Encouraging Emerging Business Enterprise:
The District’s purchasing practices shall reflect the requirements set forth in District Policy No. 31,
Encouraging Disadvantaged Business Enterprise Firms.
11.3 Insurance:
a. General, Automobile, and Errors and Omissions:
All contracts shall have a requirement for general, automobile, and errors and omissions insurance
as applicable to the type of service or work contemplated. The amount and type of insurance
required for each type of contract shall be at the discretion of the General Manager in an amount
so as to indemnify the District from loss.
b. Workers’ Compensation:
All public works contracts shall have a requirement for workers’ compensation insurance in an
amount as required by law. Additionally, all non-public works contracts shall require workers’
compensation insurance coverage in an amount sufficient to indemnify the District from loss.
11.4 Invoicing:
Financial obligations of the District are normally settled on a Net 30 day payment basis. All
invoices submitted to the District must include:
1) The vendor’s name, business address and date,
2) The District’s purchase order/contract number and the vendor’s invoice number,
3) The shipment date and/or the date of service,
4) The terms of sale and applicable payment discounts,
5) An itemized description of materials purchased or services performed, including quantities,
unit prices, discounts, extensions, and other charges as specified in the purchase order/contract,
Page 22 of 32
6) Sales and other taxes and freight charges, itemized separately or as specified by the District.
11.5 Receiving, Inspection and Acceptance:
a. All materials, supplies or services furnished shall be exactly as specified, free from all defects and
shall be subject to inspection and testing by the District. The method of inspection to be used
in any particular procurement shall be commensurate with the specific quality and specification
requirements. The Purchasing and Facilities Manager shall be notified immediately if any
materials, supplies or services do not conform to specification. In such cases, the Purchasing
and Facilities Manager shall take appropriate action to protect the interests of the District.
b. Receiving shall be documented on the receiving copy of the purchase order or other electronic
form. When all materials, supplies and/or services have been received, the receiving staff will
forward the vendor’s shipping document(s) to the Finance Department and indicate (in writing or
electronically) that the materials, supplies and/or services have been accepted and that the purchase
order is authorized for payment.
11.6 Specifications:
a. All purchases of materials, supplies and services shall meet the requirements as published by the
District in “Standard Specifications for Water and Sewer Construction”.
b. The requesting person shall define specifications for materials, supplies and services not
addressed by the above referenced publication. The specification shall include information such as
brand or trade names, description of material or method of manufacture, description of performance,
purpose and use, physical and chemical properties, and any other information needed so as to give
the purchasing department enough information to purchase correctly. For purchases requiring a
written specification, it shall be the requisitioning staff’s responsibility to provide a complete
specification document.
c. All specifications shall be drafted so as to assure the maximum practicable competition for the
District’s needs.
11.7 Inventory:
General Manager or his/her designee shall identify District property to be inventoried and shall insure
that periodic inventory reconciliation is performed.
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Section 12 – Disposal of Surplus Property
12.0 PURPOSE:
To provide a standardized method for disposing of materials, supplies and other property, excluding
real property, that is surplus to the needs of the District.
12.1 GENERAL:
a. It is staff’s responsibility to keep the District’s inventories as low as possible and to standardize
materials, supplies and equipment in order to minimize the number of articles carried in stock while
b. Surplus Items - The General Manager shall develop, on an as need basis, an inventory of properties
that are surplus to the District’s needs. The General Manager or his/her designee may declare items
with a residual value less than $10,000.00 as surplus to the needs of the District and authorize their
disposal. Where the residual value of an item exceeds $10,000.00, only the Board of Directors may
declare the property surplus and authorize its disposal.
c. Items of Little or No Value – Items that have no value to the District and little or no value in the
market place except as scrap or for a purpose other than its originally intended use, the General
Manager or his/her designee shall have authority to declare said properties trash or scrap and
12.2 PROCEDURE:
Once property has been declared surplus it shall be the responsibility of the Purchasing and Facilities
Manager, in a manner provided herein and approved by the General Manager, to dispose of the surplus
property. All property shall be disposed of “as is-where is”, with no warranty or guarantee as to
serviceability or usability and where applicable, paid in full in U.S. currency prior to delivery. District
property tags shall be removed from the surplus property prior to its disposal. District employees, as private
individuals, may purchase District surplus property by participating in auction sales as prescribed in
Section 12.2.1 Auction Sale.
12.2.1 Auction Sale:
a. Disposal of surplus property may be accomplished through auction sale.
1) Through consignment of items to a vendor, a private auctioneer, licensed and bonded to do
business in San Diego County, to sell on behalf of the District. Where authorized by the
General Manager, the Purchasing and Facilities Manager shall enter into an agreement with
the vendor that has the potential of generating the most market interest and, therefore, the
highest net proceeds for the District. The consignment vendor shall, at its expense, advertise
the item for sale and shall accept offers for the District, with the District having final
acceptance authority.
2) By advertising for sale in a newspaper of general circulation or in any other manner approved
by the General Manager. Newspaper ads shall be placed at least two (2) weeks prior to the
sale date and shall identify the property for sale. Sealed bids will be solicited unless
otherwise directed by the Purchasing and Facilities Manager and the property will be sold to
the highest bidder.
Bid security shall be provided by requiring that a ten percent (10%) guarantee accompany each
bid or aggregated bid. Such bid security shall be in the form of a certified check, cashier’s
check, or money order payable to the order of the District. Payment of the balance of the total
Page 24 of 32
bid must be made by the successful bidder within twenty-four (24) hours after the award.
In the event the successful bidder fails to pay the balance of his bid, the bid security will be
forfeited and the award will be made to the next highest responsible bidder.
The successful bidder shall be responsible for all required permits, fees and licenses. The
property shall be removed from District premises in a time frame established by the Purchasing
and Facilities Manager.
3) By participation in a joint municipal/public agency public auction. Where authorized by the
General Manager, the District may dispose of surplus property through participation in a
joint municipal/public agency auction.
12.2.2 Sale to Federal, State, and Local Municipalities and Governmental Agencies:
a. Where it is in the best interest of the public, surplus property may be sold by the Purchasing and
Facilities Manager to municipalities and government agencies in accordance with the follow
guidelines. The Purchasing and Facilities Manager shall give preference to local governmental
agencies located within the District’s boundary.
Page 25 of 32
1) If the estimated fair market value, as determined by the Purchasing and Facilities Manager,
does not exceed $10,000, a negotiated sale may be conducted with the governmental agency
and sale of the item concluded at the price determined to be a fair and reasonable market price
for the item.
2) If the estimated fair market value, as determined by the Purchasing and Facilities Manager,
is greater than $10,000 but does not exceed $50,000, the General Manager’s approval shall
be obtained prior to any sale. Information provided to the General Manager shall, at a
minimum, identify the government entity, the rationale behind the sale at the value, and the
manner in which the fair market value was determined.
3) If the estimated fair market value, as determined by the Purchasing and Facilities Manager,
is greater than $50,000, Board approval shall be obtained prior to any sale. Information
provided to the Board shall, at a minimum, identify the government entity, the rationale behind
the sale at that value, and the manner in which the fair market value was determined.
12.2.3 Sale to Republic of Mexico, U.S. Municipalities and Government Agencies:
a. When the District has declared items surplus to its needs and the Purchasing and Facilities
Manager has determined that the item(s) should be sold in accordance with the guidelines
contained herein, such item(s) may be sold to Republic of Mexico, U.S. municipalities and/or
government agencies under the following guidelines:
1) Prior to consummating any sale to a Republic of Mexico, U.S. municipality and/or
governmental agency, the Purchasing and Facilities Manager shall ensure that right of first
refusal for known requirements is offered to local governmental agencies.
2) The Republic of Mexico, U.S. municipality and/or governmental agency shall forward to the
Purchasing and Facilities Manager, a written official request which provides the following
information:
a. Name and address of municipality or governmental agency.
b. Name and telephone number of responsible official who can consummate a resulting sale
agreement and sign appropriate sale documents.
c. Description and quantity of surplus property items desired.
d. Statement as to how the items requested will be used by the requesting municipality or
governmental agency.
3) If the estimated fair market value, as determined by the Purchasing and Facilities Manager,
does not exceed $50,000, the General Manager’s approval shall be obtained. Information
provided to the General Manager shall, at a minimum, identify the government entity, the
rationale behind the sale at that value, and the manner in which the fair market value was
determined.
4) If the estimated fair market value, as determined by the Purchasing and Facilities Manager,
is greater than $50,000, Board approval shall be obtained. Information provided to the
Board shall, at a minimum, identify the government entity, the rationale behind the sale at that
value, and the manner in which the fair market value was determined.
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12.2.4 Donation of District Surplus Property to Municipalities, Governmental Agencies, and Charitable
Organizations:
a. Where it is in the best interest of the public, surplus District property of no or De Minimus
value, where proceeds of the sale of the property will be less than the cost of the sale of the property,
may be donated under the following guidelines to municipalities, governmental agencies, and
charitable organizations in lieu of discarding such property:
b. The District’s Purchasing and Facilities Manager shall first assess the value of the item and the
cost of disposal and make a determination that the item has no value or De Minimus value.
c. The requesting municipality, public agency, or charitable organization shall forward to the
Purchasing and Facilities Manager a written donation request, approved by its governing board or
chief operating officer, which includes the following minimum information:
1. Name and address of municipality, agency, or charitable organization.
2. Name and telephone number of responsible official who will accept the donation, if
approved, and sign appropriate donation documents.
3. Description and quantity of surplus property items desired.
4. Statement as to how the items requested will be used by the requesting public agency.
5. Proof of charitable status (501 (C)) organizations as applicable.
d. Donation of surplus items requested shall be made to requesting entities giving priority to
entities as follows:
1. Public agencies within the District’s boundary
2. Public agencies outside of the District’s boundary
3. Charitable organizations within the District’s boundary
4. Charitable organizations outside of the District’s boundary
e. Donation of District owned surplus property of no or De Minimus value may be approved by
the Purchasing and Facilities Manager when the estimated total fair market value of the
donation, as determined by the Purchasing and Facilities Manager, does not exceed either $25
per item or $500 per lot.
f. Donation of District owned surplus property of no or De Minimus value may be approved by
the General Manager when the estimated total fair market value, as determined by the
Purchasing and Facilities Manager, does not exceed $10,000.
g. Donation of District owned surplus property of no or De Minimus value, where the total
estimated fair market value of the donation, as determined by the Purchasing and Facilities
Manager, exceeds $10,000 shall be made by the Board.
h. For the purpose of this policy, charitable organizations shall mean a non-profit organization exempt
from taxation under the provisions of the Internal Revenue Code, 26 U.S.C. 501 (C), whose primary
purpose is public service or a Republic of Mexico registered public organization promoting
economic and social well-being in the border region.
i. In consideration for the donation and as a condition of transfer, the recipient of the donated surplus
shall execute a release and indemnification agreement satisfactory to the District’s General Counsel.
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12.2.5 Exchange or Trade-In:
Where deemed by the Purchasing and Facilities Manager to be in the best interest of the District, the
surplus property may be exchanged or traded in on new supplies and equipment. Trade-in values must
be documented and retained in accordance with the District’s records retention policy.
12.2.6 Disposal as Scrap:
In the case of surplus property that has been determined by the General Manager or their designee to be
trash or scrap with no or De Minimus value, and where no governmental or non-profit organization
expresses interest in the item, the Purchasing and Facilities Manager may dispose of the property in any
manner deemed appropriate. Where property is disposed of as scrap, full records of such disposal shall
be kept.
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Section 13 –Credit Cards
13.0 PURPOSE:
To provide procedures and guidelines for the issuing and use of credit cards and for the
administration of the Cal-Card Program within the District.
13.1 GUIDELINES:
a. The General Manager is authorized to be issued and to issue credit cards and to establish
revolving credit accounts with vendors where it is in the best interest of the District, in
accordance with applicable statutes and laws.
b. Where feasible, the issuing of credit cards shall be through the State of California Cal Card
Program.
c. Use of credit cards shall be limited to appropriate purchases as defined herein.
d. Purchases utilizing credit cards shall be made in accordance with this policy and established
purchasing procedures and guidelines as defined in the District’s Purchasing Manual. This
includes, but is not limited to complying with the District’s requirements related to authorization
and pricing/ bidding.
e. The intent of utilizing credit cards, and in particular Cal-Card credit cards, is to:
1. Reduce costs associated with the accounts payable function,
2. Reduce payment time to District suppliers,
3. Provide a means to take advantage of time sensitive price discounts,
4. Enhance District operations and reduce cost,
5. Reduce dependency on petty cash disbursements,
6. Provide for expedient purchases during emergencies.
13.2 DEFINITIONS:
a. Cal-Card Program: A system developed by the State of California (under Governor Wilson’s
Executive Order W-73-94) designed to facilitate public credit card purchases up to $50,000.
b. I.M.P.A.C. Government Services (IMPAC): Credit Card provider contracted with the State
of California, through a Master Service Agreement, to provide Visa Credit Card service;
maintain master file and account for each card holder; send monthly statements to each
cardholder, approving official, and agency or district accounting office.
c. District Representative: The District’s contact person for program and accounting office
functions; determines which District personnel receives cards; establishes card limits
including purchase restrictions; establishes District’s procedures and guidelines for
participation in the Cal-Card Program.
d. Cardholder: Person(s) designated by the District’s Representative as being authorized to
make purchases using credit cards and/or the Cal-Card Program within District procedures
and guidelines.
e. Approving Official: Person(s) designated by the District’s Representative to review,
approve, and/or certify monthly cardholder billing statements and adherence to District
purchasing and budgetary procedures; forwards monthly statements to the District’s
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accounting office.
f. Accounting Office Representative: Person designated within the District to receive and
process credit card statements and documentation.
g. Credit Card Limit: The transaction and spending limit established by the District
Representative for a Cardholder.
13.3 PROCEDURE:
Purchases made utilizing credit cards and/or Cal-Cards shall comply with the District’s
requirements, guidelines and procedures as defined within the District’s Purchasing Manual.
13.4 APPROPRIATE PURCHASES:
a. The General Manager or his/her designee shall determine which goods and services are
appropriate for purchase using credit cards and may, in the best interest of the District,
restrict where, when and how credit cards are utilized. The value of a purchase made using
credit cards is limited to the signatory authority of the General Manager and must be
categorized as one of the following:
1. Exempt from the requirement of a purchase order/contract,
2. Made under the auspices of a blanket purchase order,
3. Documented and approved in a form approved by the General Manager,
4. Made under an emergency declared by authority of the General Manager.
13.5 RESPONSIBILITIES UNDER THE CAL_CARD PROGRAM:
13.5.1 District’s Representative:
a. The General Manager or his/her designee is the District’s Representative relative to the Cal-
Card program.
b. The District’s Representative shall be responsible, for:
1. Completion and processing of State required documentation for participation in the Cal-
Card program,
2. Establishment of credit card limits (Credit card limits shall not exceed the purchasing
authority of the General Manager as granted by the Board of Directors and those limits
established by the General Manager under his/her Signatory Authority Delegation
Schedule),
3. Identification of Cardholders, Approving Officials, and Accounting Office
Representative,
4. Overseeing of the Cal-Card Program within the District,
5. Insuring adherence to the District’s purchasing policies, procedures and practice.
13.5.2 Cardholder:
a. The Cardholder shall be responsible for:
1. Adhering to the procedures and guidelines set herein,
2. Reviewing his/her monthly statements for accuracy,
3. Retaining, reconciling, and attaching sales slips and, when applicable, approved
requisitions to his/her monthly statement,
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4. Providing and documenting account code information on monthly statements by
transaction,
5. Submitting his/her reconciled statement, with attachments, to his/her Approving Official
in a timely manner.
13.5.3 Approving Official:
a. The Approving Official shall be responsible for:
1. Adhering to the procedures and guidelines set herein,
2. Reviewing and approving for payment the monthly statements for those cardholders
under his/her supervision,
3. Insuring that all information required for payment, including account coding, of monthly
statements is provided to the Finance Department,
4. Requesting additional documentation if necessary,
5. Forwarding all statements to the Finance Department in a timely manner.
13.5.4 Finance Department Representative:
1. The Finance Department Representative shall be responsible for:
1. Adhering to the procedures and guidelines set herein,
2. Receiving consolidated monthly statements,
3. Receiving reconciled statements from Approving Officials,
4. Reconciling statements in accordance with District procedures and policies governing
the accounts payable function.
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Appendix
1. Otay Water District Board of Directors Policy No. 21
2. Otay Water District Board of Directors Policy No. 31
3. Otay Water District Memorandum -Signatory Authority Delegation (Revised as necessary by the
General Manager)
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Revisions
1. Codified October 2009
2. October 2014 –Amend Section 12 - Disposal of Surplus Property by Board action,
3. April 2016 – Amend Section 7.2.8 Board Authorized Purchases Exceeding the General Manager’s
Authority by Board action.
4. August 2016 – Correction of minor spelling errors. Board action not required.
5. September 2016 – CUPCCAA adoption. Section 7 – Pricing/Bidding Requirements by Board action.
6. May 3, 2017 - Section 2 – Organization; 6.2.3 Cooperative/ Joint Purchases; Section 7 –
Pricing/Bidding Requirements; 7.2.8 Board Authorized Purchases Exceeding the General Manager’s
Authority; miscellaneous formatting by Board action.
7. June 7, 2017 – Added: Section 7.2.8, a, 8. Regulatory Fees
8. August 2, 2017 – Modified: Section 7.2.8, a, 7 Liability Insurance and other services added; Added:
Section 7.2.8, a, 9. Cityworks, 10. Enterprise Systems, 11. Antenna Lease Agreement; Modified:
Section 2 – Organization: Assistant GM deleted; Modified: Section 9 – Authorization to Purchase –
Signatory Authority: Assistant GM deleted
9. June 3, 2020 – Appended Section 7.2.8, a, 7 to include: Association of California Water Agencies –
Joint Powers Insurance Authority (ACWA-JPIA) or any other Board approved provider.