[1. Call General Session to Order]
[00:00:07]
UH, I'M BILL FLORES, COMMITTEE, CHAIR OF THE FINANCE AND AUDIT COMMITTEE MEETING.
AND WELCOME TO THE DECEMBER 2ND, 2024 FINANCE AND AUDIT COMMITTEE MEETING.
I HEREBY CALL THIS, UH, MEETING TO OF THE FINANCE AND AUDIT COMMITTEE.
THE MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON NARCOS WEBSITE.
I HAVE CONFIRMED THAT A QUORUM IS PRESENT IN PERSON.
BEFORE WE BEGIN, LET'S SKIP THAT.
UH, BEFORE MOVING ON TO TODAY'S BUSINESS, I'LL HIGHLIGHT TO THE COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION AND SECURITY MAP ARE INCLUDED WITH A POSTED MEETING MATERIALS.
THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO.
NOTICE OF PUBLIC COMMENT, IF ANY.
TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON NOVEMBER, UH, 21ST, 2024, AND PROVIDED INSTRUCTIONS FOR THE PUBLIC FOR COMMENTING IN PERSON.
HAS ANYONE EXPRESSED INTEREST IN PARTICIPATING? CHAD, WE, WE'VE RECEIVED NO COMMENTS.
WE'VE RECEIVED NO COMMENTS, CHAIR.
[3. October 9, 2024 General Session Meeting Minutes]
SO THE NEXT ITEM IS AGENDA ITEM THREE, THE OCTOBER 9TH GENERAL SESSION MEETING MINUTES.THERE'S A DRAFT IN MEETING MATERIALS.
DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? I MOVE TO APPROVE.
SINCE, UH, PEGGY AND I ARE THE ONLY TWO MEMBERS, I'M GONNA HAVE TO SECOND AT THAT.
[4. Annual Committee Self-Evaluation Survey Results]
UH, THE NEXT IS AGENDA ITEM FOUR, THE ANNUAL COMMITTEE SELF-EVALUATION SURVEY RESULTS.FOLLOWING THE OCTOBER MEETING BOARD MEMBERS WHO SERVED ON THE F AND A COMMITTEE DURING 2024 WERE ASKED TO COMMITTEE TO COMPLETE A COMMITTEE.
SELF-EVALUATION SURVEY RESULTS HAVE BEEN COMPILED OR INCLUDING THE MEETING, MEETING MATERIALS TO FACILITATE THIS TODAY'S DISCUSSION.
WOULD ANYONE LIKE TO COMMENT ON THE SURVEY RESULTS? WELL, GOOD JOB CHAIR.
UH, THE, UH, RESULTS WERE OUTSTANDING.
WELL, I WANT TO, UH, COMPLIMENT ALL OF THE ERCOT TEAM, PARTICULARLY THE FINANCE TEAM FOR THE WORK THAT THEY DID TO MAKE THE FINANCE AND AUDIT COMMITTEE, UH, UH, JOB, UH, WORK OUT WELL FOR US.
AND I ALSO WANT TO THANK THE COMMITTEE MEMBERS, UH, ONE OF WHICH WAS, UH, BOB, WHO IS NOT WITH US ANYMORE, BUT, UH, WE'RE GONNA MISS BOB.
UH, BUT, UH, PEGGY AND BOB BOTH WERE EXCEPTIONAL MEMBERS OF THE COMMITTEE.
WITH THAT, WE'LL MOVE ON TO AGENDA ITEM.
DOES ANYBODY FROM MANAGEMENT HAVE ANYTHING THEY'D LIKE TO ADD, OR ARE WE GOOD ON THAT? OKAY.
UH, THE NEXT ITEM IS AGENDA ITEM FIVE, THE 2024 SYSTEM AND OPERATIONS CONTROL AUDIT, OR AS WE REFER TO IT, UH, MORE FREQUENTLY, SOC INCLUDES THREE SUB ITEMS AND AGENDA ITEM 5.1.
BETTY DAY WILL PRESENT A REVIEW OF REQUIREMENTS FOR THE ANNUAL SOC AUDIT AND AGENDA ITEM 5.2, WEAVER AND TIDWELL WILL PRESENT THE RESULTS AND EXAMINATION AND INDEPENDENCE REPORT FROM THE SYSTEM CONTROL AUDITOR.
AND IN AGENDA ITEM 5.3, BETTY WILL RETURN TO THE PODIUM TO PRESENT STAFF'S RECOMMENDATIONS REGARDING ACCEPTANCE OF THE 2024 SOC AUDIT REPORT.
THE COMMITTEE PLANS TO REVIEW THE CONFIDENTIAL REPORT LATER THIS MORNING IN THE EXECUTIVE SESSION, AND THEN RETURN TO GENERAL SESSION FOR A VOTE ON THE RECOMMENDATION AND AGENDA ITEM 9.1.
[5.1 Review of Requirements for Annual System and Organization Control Audit]
SO BETTY, THE FLOOR IS YOURS.UM, WE'LL START RIGHT IN HERE WITH THE, UH, PURPOSE OF THE, THE SOC AUDIT.
IT, UH, THE PURPOSE OF THIS REPORT IS TO REVIEW THE 2024, UM, SOC AUDIT REQUIREMENTS.
WE HAVE WEAVER REPRESENTATIVES FROM WEAVER HERE TODAY TO GO OVER THIS.
IT'S REQUIRED BY PROTOCOL SECTION ONE.
THIS JUST PROVIDES SOME BACKGROUND.
I WON'T READ THROUGH ALL OF THIS, BUT, UH, BASICALLY WE HAVE AN INDEPENDENT AUDITOR COME IN AND ASSESS OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING DUE TO THE FINANCIAL TRANSACTIONS THAT WE PERFORM ON BEHALF OF THE MARKET.
SO WHAT THEY DO IS, UH, FOCUS ON OUR SETTLEMENTS AND BILLING PROCESSES, AS WELL AS SOME IT CONTROLS.
AND THE RESULT IS A REPORT WHICH IS BEING PRESENTED TO YOU TODAY BY WEAVER AND, AND TIDWELL.
AND, UH, UH, WE'LL BE ASKING FOR ACCEPTANCE OF THAT REPORT, A RECOMMENDATION FOR ACCEPTANCE FROM, UM, FNA TO MAKE TO THE BOARD TOMORROW TO VOTE TO ACCEPT THIS REPORT.
MARKET PARTICIPANTS RELY ON THIS REPORT, UM, FOR THEIR OWN FINANCIAL REPORTING.
SO WE HAVE, UM, A SCOPE THAT HAS 22 CONTROL OBJECTIVES AND 117 CONTROLS.
WEAVER WILL STEP THROUGH THESE.
THEY BASICALLY FOCUS ON OUR TRANSAC TRANSACTION PROCESSING CONTROLS, AND THEN SOME GENERAL IT ACCESS CONTROLS.
[5.2 Results of Examination and Independence Report from the System and Organization Control Auditor]
WITH THAT, I WILL TURN IT OVER TO BRITTANY AND MELANIE FROM, FROM WEAVER.[00:05:01]
WE CAN DRIVE DOWN.MY NAME IS BRITTANY GEORGE, I'M A PARTNER WITH WEAVER OUT OF OUR DALLAS OFFICE, AND I HAVE WITH ME MELANIE TOLL, WHO IS A SENIOR MANAGER OUT OF OUR DALLAS OFFICE, AND SHE OVERSEES, SHE'S THE ENGAGEMENT MANAGER FOR THE OR CO SOC.
SO THIS IS WHAT WE'LL GO OVER TODAY, JUST THE, UH, THE OVERVIEW OF THIS ENGAGEMENT, THE APPROACH THAT WE TAKE, AND SOME ADDITIONAL INFORMATION AROUND AUDITOR INDEPENDENCE.
SO THE GOVERNING STANDARD UNDER WHICH WE PERFORM THE SOC ENGAGEMENT IS THE A I, CPA'S, SSAE NUMBER 21.
AND, AND THIS, LIKE BETTY SAID, IS RELEVANT TO CONTROLS AT SERVICE ORGANIZATIONS FOR, UM, INTERNAL CONTROL OVER FINANCIAL REPORTING.
AS BETTY MENTIONED AS WELL, THE SCOPE FOR THIS IS, UH, THE SETTLEMENT SETTLEMENTS AND BILLINGS OPERATIONS, AND ALL OF THE UNDERLYING SUPPORTING APPLICATIONS AND SYSTEMS. THE, THERE IS A SCOPING EXERCISE THAT WE GO THROUGH EACH YEAR BEFORE WE BEGIN THIS ENGAGEMENT TO ENSURE THAT WE HAVE ALL OF THE CORRECT APPLICATIONS SUPPORTING INFRASTRUCTURE, IF THERE ARE ANY NEW APPLICATIONS IN SCOPE, WHICH OCCURRED THIS YEAR.
UM, FOR THE PERIOD UNDER REVIEW.
THE, THE ONGOING PERIOD THAT WE HAVE CURRENTLY IS OCTOBER 1ST THROUGH SEPTEMBER 30TH.
AND WE JUST COMPLETED THAT, UM, THAT REPORT RECENTLY, THERE WERE FOUR NEW CONTROLS THAT WERE ADDED TO ROUND OUT THAT 117 CONTROL COUNT.
AND THAT WAS DUE TO THE NEW SYSTEM, BLACK LINE BEING INTRODUCED.
THAT'S THE TREASURY MANAGEMENT SYSTEM.
THE PHASES THAT WE GO THROUGH, UH, IN ORDER TO PERFORM AND COMPLETE THE SOC ONE ENGAGEMENT IS FIRST WE COLLECTED DOCUMENTATION.
UH, AND WE DID THAT THIS SUMMER IN THE, THE JUNE JULY TIMEFRAME.
WE GO THROUGH OUR TESTING SHORTLY THEREAFTER IN JUNE, OR SORRY, EXCUSE ME, JULY AND AUGUST, AND OUR REPORTING HAPPENS, WHICH INCLUDES, UM, QUALITY REVIEW FROM SEPTEMBER THROUGH NOVEMBER.
THE REPORT, UM, RECEIVED AN UNMODIFIED OPINION AGAIN THIS YEAR, AND THERE WERE NO REPORTABLE EXCEPTIONS FOR THIS REPORTING PERIOD.
I'M GONNA LET MELANIE GO THROUGH SOME OF THE AUDIT APPROACH.
SO JUST STEPPING YOU GUYS THROUGH WHAT OUR PROCESS IS.
SO FIRST, WE HAVE A TEAM THAT'S COMPILED OF OUR ENGAGEMENT, QUALITY RISK PARTNER, UM, OUR NORMAL PARTNER, OUR SENIOR MANAGER, AND THEN SUPERVISORS ALL THE WAY TO ASSOCIATES THAT ARE HELPING US WITH THE ENGAGEMENT.
WE TAKE A RISK-BASED APPROACH WHEN WE'RE KIND OF GOING THROUGH THE EXAMINATION, THE AUDIT PROCESS.
AND THESE ARE ALL AROUND AN EMPHASIS AND FOCUS OF RISKS TO USER ENTITIES.
FINANCIAL REPORTING, UM, KEY CONTROLS ARE DEFINED BY ERCOT, AND THOSE ARE DIRECTLY TIED TO THOSE RISKS, INCLUDING, UH, THE MAPPING OF ADDED AND EXISTING CONTROL POINTS TO THE COMPLEMENTARY USER ENTITY CONTROLS SPECIFIED BY BLACKLINE.
SO JUST KIND OF GONNA TALK Y'ALL THROUGH THAT A LITTLE BIT, UM, WITH THAT NEW AD.
SO FIRST, WHAT ERCOT DID WAS THEY TOOK THE COMPLIMENTARY USER ENTITY CONTROLS, UH, SPECIFIED BY BLACKLINE.
THESE ARE THE CONTROLS THAT THEY HAVE SPECIFIED NEED TO BE IN PLACE BY ORGANIZATIONS THAT USE THAT TREASURY MANAGEMENT SYSTEM.
FROM THERE, UM, ERCOT ASSESSED, OKAY, UM, WHICH OF THESE ARE RELEVANT TO INTERNAL CONTROLS OR FINANCIAL REPORTING, AND THEREFORE WE NEED TO SEEK COVERAGE WITHIN YOUR EXISTING CONTROL SET.
SO YOU KIND OF SEE THAT, UM, REFERENCED IN THAT RIGHT HAND COLUMN, THE, THE ASSESSMENT PERFORMED BY ERCOT.
SO THESE, AGAIN, JUST MORE COMPLIMENTARY USER CONTROLS SPECIFIED BY BLACKLINE, AND THAT ALL EQUATED TO THESE ADDITIONAL CONTROL POINTS THAT WERE SPECIFIED BY ERCOT TO ADDRESS THOSE CONTROLS THAT BLACKLINE OUTLINED.
UM, AND SO YOU CAN KIND OF SEE WHAT THOSE LOOK LIKE ALL THE WAY FROM ENCRYPTION PROTOCOLS, CONTROLS, UM, BANK RECONCILIATION CONTROLS, AND THEN ACCESS CONTROLS.
SO CONTINUING ALONG WITH THE AUDIT APPROACH.
SO LIKE BRITTANY SAID, WE HAVE AN APPLICATION AND SYSTEM SCOPING EXERCISE WHERE WE ASSESS ALL THE APPLICATIONS AND UNDERLYING INFRASTRUCTURE THAT SUPPORTS THOSE APPLICATIONS FROM THE OPERATING SYSTEMS ALL THE WAY DOWN TO THE DATABASES.
AND THEN REALLY MAKING SURE THAT THOSE DIRECTLY IMPACT THE INTERNAL CONTROLS OR FINANCIAL
[00:10:01]
REPORTING AS IT RELATES TO THE USER ENTITIES.SO THAT WOULD BE THE MARKET PARTICIPANTS.
UM, FROM THERE WE'RE OBVIOUSLY THEN GONNA GO INTO CONTROL TESTING, WHICH INCLU INCLUDES DESIGNED WALKTHROUGHS, UM, WITH THE PROCESS OWNERS, AND THEN OUR OPERATING EFFECTIVENESS TESTING, WHICH IS INQUIRY OBSERVATION, INSPECTIONS OF DOCUMENTS AND RECORDS AND CONFIGURATIONS, AND THEN REPERFORMANCE OF ANY TRANSACTIONAL CONTROLS.
AND THEN OUR SAMPLING IS IN ACCORDANCE WITH THE AICPA'S A UC SECTION FIVE 30, UM, WHICH THE APPENDIX A IN THE BACK SPECIFIES WHAT THOSE POPULATIONS AND SAMPLING REQUIREMENTS ARE.
THEN WE HAVE A QUALITY ASSURANCE PROCESS.
SO ONCE WE'VE DONE ALL THE TESTING, ALL THE CONTROL, UM, EVALUATION, THEN WE GO THROUGH MULTIPLE REVIEW LEVELS TO ENSURE THE QUALITY OF THE WORK THAT'S BEEN PERFORMED AND THE CONCLUSIONS THAT WE'VE REACHED.
THAT INCLUDES, YOU KNOW, A SENIOR ASSOCIATE SUPERVISOR REVIEW, THEN A SENIOR MANAGER REVIEW, THEN A PARTNER REVIEW, AND THEN A QUALITY RISK ENGAGEMENT PARTNER REVIEW.
SO MULTIPLE REVIEW LAYERS TO ENSURE THAT WE'VE REACHED THE PROPER CONCLUSIONS.
I'M GONNA PASS IT TO BRITTANY TO TALK ABOUT AUDITOR INDEPENDENCE.
AUDITOR IN INDEPENDENCE IS SOMETHING THAT THE FIRM TAKES VERY SERIOUSLY.
WITHIN THE A-I-C-P-A, THERE IS A CODE OF PROFESSIONAL CONDUCT, UM, AS IT REL AS IT RELATES TO THE INDEPENDENCE RULE, WHICH SAYS THAT A MEMBER IN PUBLIC PRACTICE SHALL BE INDEPENDENT IN THE PERFORMANCE OF PROFESSIONAL SERVICES AS REQUIRED BY STANDARDS, PROMULGATED BY BODIES DESIGNATED BY COUNSEL.
SO THE THINGS THAT WE DO WITHIN THE FIRM IS WE HAVE POLICIES AND PROCEDURES THAT WE HAVE IMPLEMENTED THAT ARE DIRECTLY RELATED TO INDEPENDENCE.
UM, WE HAVE TRAINING THAT WE ARE REQUIRED TO PERFORM EVERY THREE YEARS, AND THEN UPON HIRE, UM, ALL PERSONNEL ARE REQUIRED TO COMPLETE AN ANNUAL, UH, INDEPENDENCE CONFIRMATION FORM.
UM, AND WE ALSO, UM, THERE, THERE'S ANOTHER, UH, COMPONENT TO THIS THAT, UM, WE ENSURE THAT THE ADEQUACY OF OUR INTERNAL QUALITY SYSTEM FOR OUR PRACTICE, UM, AND OUR COMPLIANCE WITH THAT SYSTEM ARE INDEPENDENTLY EVALUATED EVERY THREE YEARS THROUGH A PEER REVIEW THAT OCCURS.
SO WE HAVE AN OUTSIDE FIRM COME IN THAT DOES THEIR OWN INDEPENDENT EVALUATION OF OUR SELECTED ENGAGEMENTS THAT, UH, PEER REVIEW IS PUBLICLY AVAILABLE AND TO DATE, WE HAVE, UM, HAD NO ISSUES FROM THAT.
UH, IF ANYONE HAS ANY QUESTIONS, WE'RE HAPPY TO TAKE THOSE NOW.
SO HOW DO YOU AS A FIRM EVALUATE AND COORDINATE AMONG WHAT ALL THE INFORMATION YOU'RE GATHERING FROM CLIENTS IS, IS MAY, UH, EMERGING CONTROL RISK? I MEAN, DO YOU FOCUS ON THAT TO LIKE ISSUES THAT MAY BE COMING UP ELSEWHERE THAT COULD HAVE APPLICABILITY IN IN OTHER COMPANIES? ABSOLUTELY.
SO WE DO THAT IN A, A COUPLE OF DIFFERENT WAYS.
SO WE ARE PART OF A GLOBAL GROUP OF, UH, ACCOUNTING FIRMS. AND SO WE, WE DO THAT AT THE ACCOUNTING FIRM LAYER KIND OF WORLDWIDE.
UM, AND THEN WITHIN OUR OWN AREA.
AND THEN AT THE INDUSTRY LEVEL, WE DO THAT AS WELL, UM, WHERE WE LOOK AT PUBLIC COMPANIES, FINANCIAL SERVICES, TECHNOLOGY ORGANIZATIONS AND DO A, A KIND OF RISK BASED VIEW.
AND THAT KIND OF GETS PUSHED DOWN, UH, TO THE, THE VARIOUS SERVICE OFFERINGS IN SERVICE LINES WITHIN THE FIRM.
AND COULD YOU GIVE ME AN IDEA OF ROUGHLY HOW MANY HOURS OF FIRM TIME DOES IT TAKE TO, UH, TO DO THE SOCK ON IT? FOR ERCOT SPECIFICALLY? YES, MA'AM.
IS THAT LIKE, WHERE ARE WE AT? DO YOU KNOW THE EXACT NUMBER? 600 HOURS? IS IT 600? IT'S 600.
SO IT'S, AND THAT, THAT IS GOING TO VARY FROM YEAR TO YEAR.
SO WHEN WE HAVE A NEW APPLICATION LIKE WE DID THIS YEAR, THE ADDITIONAL TIME IT TAKES TO SCOPE THAT IN, HAVE THE, THE WALKTHROUGHS, THAT'S GOING TO ADD A COUPLE OF HOURS ANYWHERE FROM 40 UP TO 60 OR SO.
UM, AND, AND THEN ONCE, ONCE BLACKLINE FOR EXAMPLE, KIND OF WE GO INTO ANOTHER YEAR OF TESTING, THOSE HOURS START TO COME BACK DOWN AND, AND WE, WE GAIN EFFICIENCIES YEAR OVER YEAR.
BUT AT, AT THE BASELINE LEVEL, YOU'RE PROBABLY LOOKING AT FIVE TO 600 HOURS.
WELL, I WAS PLEASED WHEN I WAS GOING THROUGH THE MEETING MATERIALS LAST WEEK, I WAS PLEASED TO SEE THAT Y'ALL DID GET A CHANCE TO GET YOUR ARMS AROUND THE NEW TREASURY FUNCTIONS.
UH, 'CAUSE IT'S, IT'S BEEN ONE OF THE THINGS WE AS A COMMITTEE HAVE BEEN WATCHING PRETTY CLOSELY AND WE'RE PLEASED TO SEE THAT, THAT IT'S MEETING THE, THE THRESHOLDS THAT WE WERE HOPING IT WOULD.
[00:15:01]
GOOD.ALRIGHT, ANY OTHER QUESTIONS FOR OUR WEAVER REPRESENTATIVES? OKAY, THANK YOU BRITTANY.
OR IS THERE A QUESTION WE SHOULD HAVE ASKED THAT WE DIDN'T ASK? I DON'T THINK SO.
DO YOU WANT US TO SELF ADMIT THAT
[5.3 Recommendation regarding Acceptance of 2024 System and Organization Control Audit Report]
SO AT THIS POINT, UM, HAVING HEARD THE INFORMATION FROM WEAVER THAT THE NEXT STEP FOR US IS TO HAVE THE F AND A COMMITTEE CONSIDER, UH, RECOMMENDING TO THE BOARD ACCEPTANCE OF THIS AUDIT.ONCE IT, UH, HAS RECEIVED BOARD APPROVAL, THEN WE WILL PROVIDE THIS REPORT TO MARKET PARTICIPANTS IN A CONFIDENTIAL MANNER.
THE REPORT REMAINS CONFIDENTIAL, BUT IS AVAILABLE TO MARKET PARTICIPANTS.
BUT WE'RE LOOKING TO DO THIS OUT OF EXECUTIVE SESSIONS, SO, OKAY.
ALRIGHT, WITH THAT, NEXT UP ARE COMMITTEE BRIEFS.
UH, RICHARD IS GOING TO PRESENT THE FIRST COMMITTEE BRIEF, A AGENDA ITEM 6.1 REVIEW OF THE 2024 FINANCIAL SUMMARY.
AND THEN AFTER THAT, LESLIE SWANSON WILL PRESENT A AGENDA ITEM 6.2 AND 6.3 RESPECTIVELY, WHICH ARE THE PERIODIC REPORT ON INVESTMENTS AND A PERIODIC REPORT ON DEBT COMPLIANCE.
[6.1 Review 2024 Financial Summary]
RICHARD AND LESLIE, YOU ALL HAVE THE FLOOR.SO I'LL BE PRESENTING ITEM 6.1.
UM, SO TODAY'S PRESENTATION IS RELATIVELY UNCHANGED FROM THE LAST MEETING MATERIAL YOU HAVE AT THE HEADLINE LEVEL.
SO WHAT WE HAVE IS A CHANGE FROM THE NET AVAILABLE, UH, YEAR END FORECAST TO BUDGET FROM 94.8 TO 93.9.
OUR REVENUES CHANGE FROM 75.1 TO 73.2, MAINLY DRIVEN BY A DECREASE AND SYSTEM ADMINISTRATION FEE REVENUE FROM 2.2 TO 1.5, PRIMARILY DRIVEN BY WEATHER.
UM, WE HAVE DEPARTMENTAL REVENUES DECREASED SLIGHTLY AND INTEREST INCOME IS RELATIVELY UNCHANGED FROM 71.9 TO 70.3.
THE PRIMARY DRIVER THERE, WHICH WE'LL GET TO IN A COUPLE OF PAGES IS THE FAIR MARKET VALUE ADJUSTMENT, WHICH IS UNREALIZED, BUT PRESENTED IN RESULTS.
ON THE EXPENDITURE SIDE, WE PRESENTED 19.7 MILLION FAVORABLE VARIANCE TO BUDGET.
AT THE LAST BOARD MEETING WE'RE AT 20.7.
THE DEVIL'S IN THE DETAILS HERE.
WE HAVE A CHANGE OF TO, FROM A FAVORABLE 1.6 TO UNFAVORABLE 1.3 IN OUR PROJECT EXPENDITURES.
THIS IS PRI PRIMARILY DRIVEN BY HARDWARE PURCHASES FOR TEST DATA MANAGEMENT.
AND THE SECOND EYE TEST ENVIRONMENT, IT'S GONNA ALLOW AN ADDITIONAL TEST AND DEV ENVIRONMENT.
UM, AND THERE'S HARDWARE INVOLVED THERE.
SO WHILE WE'RE FORECASTING THIS, UM, CHANGE, UH, AS ALWAYS WITH THESE YEAR END PURCHASES, SOMETHING COULD SHIFT FROM YEAR TO YEAR.
SO JUST MAKING YOU ALL AWARE OF THAT.
WE HAVE THE STAFFING MANAGEMENT CHANGE FROM 11.9 TO 13.5 MILLION.
UM, PART OF THAT WAS OF COURSE THE ONGOING HEALTHCARE SAVINGS.
SO WE'RE SEEING LOWER HEALTHCARE COST IN 2024 THAN EXPECTED AND ALSO DRIVEN BY OUR OTHER EXPENDITURES CATEGORY, WHICH SHIFTED FROM 6.6 TO 8.5 FAVORABLE, PRIMARILY DRIVEN BY LEGAL SERVICES.
OF COURSE, WE HAD THE FAVORABLE LEGAL RULINGS AND NOW WE'RE EXPERIENCING FEWER OUTSIDE SERVICES FOR LEGAL RELATED TO, UH, LITIGATION.
THERE'S A POSSIBILITY OF ANOTHER HALF MILLION SHIFT IN THAT CATEGORY BEFORE YEAR END DEPENDING ON, ON MATTERS.
RICHARD, HOW, HOW ARE WE OFF ON HEALTHCARE SAVINGS? UH, WE DON'T, DON'T WE KNOW WHAT THOSE COSTS ARE GONNA BE GOING INTO THE BUDGETING CYCLE? NO, WE DON'T KNOW BECAUSE WE'RE, WE'RE PARTIALLY SELF-INSURED.
SO WE HAVE, WE HAVE THESE, THESE FLUCTUATIONS.
AND EVIDENTLY WE'RE ALL VERY HEALTHY THIS YEAR, SO RIGHT BONUS THERE.
BUT THAT, THAT IS AN AREA WE'RE GONNA LOOK AT FOR NEXT YEAR.
UM, WE USED TO PERFORM A THREE YEAR ROLLING AVERAGE AND THAT PRACTICE ENDED, UH, SEVERAL YEARS BACK.
BUT WE'LL CONTINUE PICKING THAT UP JUST TO SANITY CHECK THE FORECASTS OF OUR OUTSIDE VENDOR.
AND AS A REMINDER, YOU'RE, UH, YOU HAVE A SELF-INSURED PROGRAM, SOME SORT OF A STOP-LOSS, RIGHT? THAT'S CORRECT.
SEPTEMBER CAME IN LOWER THAN EXPECTED, WHICH SHIFTED OUR YEAR END
[00:20:01]
FORECAST, UH, 'CAUSE OF MILDER WEATHER.IF THE MILDER WEATHER CONTINUES, WE MAY SEE ADDITIONAL SHIFTS IN THE SYSTEM ADMINISTRATION FEE REVENUES.
THEN LOOKING AT THE STATEMENTS OF FINANCIAL POSITION, UM, THIS IS FINALLY NORMALIZED.
WE'VE HAD THE OUTSTANDING DIFFERENCE, UH, YEAR TO YEAR BETWEEN 24 AND 23 BECAUSE OF THE BOND PORTFOLIO.
YOU'LL SEE THAT THIS, THIS, UH, PRESENTATION THAT'S FINALLY EQUALIZED BECAUSE WE HAVE MADE THAT BOND PORTFOLIO PURCHASED IN SEPTEMBER OF 2023.
SO NOW YOU'LL SEE THAT THE YEAR OVER YEAR, YEAR OVER YEAR UNRESTRICTED CASH AND BOND INVESTMENTS ARE RELATIVELY LEVEL.
THERE'S NOTHING TOO EXCITING TO CALL OUT ON THIS PAGE.
LOOKING AT THE STATEMENTS OF ACTIVITIES AND NET ASSETS.
UM, THESE ARE ALL THE USUAL SUSPECTS AND OUR KEY TAKEAWAYS, UH, I WILL AGAIN POINT OUT THOUGH, UM, THAT SECOND DASH FROM THE BOTTOM 6.4 MILLION INCREASE IN US TREASURY OBLIGATIONS, FAIR VALUE ADJUSTMENT LOSS THAT SHIFTED FROM A 0.8 MILLION TO A 4.1 MILLION AS WE CONTINUE TO WATCH, UH, INTEREST RATE VOLATILITY ON THE CRR FUNDS.
YOU KNOW, WE'VE, WE'VE BEEN IN A FAIRLY STABLE HOLDING PATTERN FROM MARCH OF 2023 TO PRESENT WHERE WE'RE BETWEEN 2,000,000,002, 2 1 50 ON THIS.
SO WE'VE ENTERED A PERIOD OF STABILITY HERE ON RRS.
THAT'S THE END OF MY PRESENTATION.
ANY QUESTIONS? COMMENTS? NO, THANK YOU.
[6.2 Periodic Report on Investments]
LESLIE.I HAVE THE PERIODIC REPORT ON INVESTMENTS.
WE ARE IN COMPLIANCE WITH THE INVESTMENT CORPORATE STANDARD.
THE ONLY ITEM TO NOTE FOR THIS MEETING THAT I HAVE IS THAT WE CAN SEE THE RATES ARE DECLINING, UM, FROM THE FED RATE CUTS FROM THE LAST MEETING.
AND WITH THAT, I'D TAKE ANY QUESTIONS THAT YOU HAVE.
HAS THERE BEEN, UH, WHEN WE LAST MET THE LAST TWO MEETINGS, I THINK THAT, UH, Y'ALL HAVE DONE A PRETTY GOOD JOB OF LOCKING IN, IF YOU WILL, UH, THE INTEREST INCOME FORECAST FOR 2025.
HAVE YOU, WHAT, HOW DOES THAT LOOK AT THIS POINT? WHEN YOU LOOK AT 20 25, 20 26? YES.
YOU CAN SEE ON, UH, WELL WE HAVE LOCKED IN FOR 2025.
UM, ABOUT 46 MILLION YOU CAN SEE ON THIS PAGE.
AND THEN FOR 2026 WE HAVE 12 MILLION.
THAT'S WHAT I WAS LOOKING FOR.
[6.3 Periodic Report on Debt Compliance]
YOU CAN GO ON TO THE DEBT COMPLIANCE.SO FOR THE DEBT COMPLIANCE, WE ARE ALSO IN COMPLIANCE.
UH, THE ITEM TO NOTE ON THIS IS THAT WE SUBMITTED OUR THIRD QUARTER DEBT COMPLIANCE FOR ERCOT INC.
THE OTHER ITEM I WANTED TO DISCUSS IS ON SLIDE 15 AND WE LOCKED IN OUR RESET RATE WITH THE TRUST COMPANY FOR SUB CHAPTER M AND THAT RESET RATE IS 6.07.
SO THE AMORTIZATION SCHEDULES HAVE BEEN UPDATED IN THIS PRESENT PRESENTATION, SO I WANTED TO MAKE SURE THAT YOU GUYS NOTICED THAT.
SO THIS IS THE LOCKED IN RATE MOVING FORWARD ON M.
ANY QUESTIONS? I DON'T HAVE ANY PEGGY, ANY QUESTIONS? OKAY.
[7. Future Agenda Items]
THAT, WE'RE GONNA MOVE TO AGENDA ITEM SEVEN.UH, FUTURE AGENDA ITEMS. RICHARD IS GOING TO MAKE THIS PRESENTATION.
SO WE HAVE, UM, WE SEE OUR AGENDA TODAY AND THEN FOR THE FEBRUARY COMMITTEE MEETINGS WE HAVE A NUMBER OF ANNUAL REVIEW
[00:25:01]
ITEMS THAT ARE COMING FORWARD.SO WE'LL BE BUSY FROM AN ADMINISTRATIVE PERSPECTIVE AT THE FEDERAL, I MEAN AT THE FEBRUARY BOARD MEETING.
CAN YOU REFRESH MY MEMORY ON THIS? THE BUDGETING PROCESS, TIMING, BUDGET, PROCESS TIMING WILL BE BACK IN APRIL FOR THE FIRST FULL COMMITTEE REVIEW.
WE EXPECT TO HAVE A LIMITED DISCUSSION WITH YOU IN FEBRUARY IN EXECUTIVE SESSION.
AND, UH, GOING INTO THAT PROCESS, ARE YOU LOOKING AT AREAS WHERE WE HAVE, YOU KNOW, HISTORICALLY MISSED BUDGET AND REALLY SCRUTINIZED THOSE AREAS BECAUSE THERE'S CERTAIN AREAS THAT SEEM LIKE WE PRETTY HIGH PERCENTAGE OFF.
WANNA WORK ON GETTING THOSE, YOU KNOW, MORE FINE TUNED? ABSOLUTELY.
WE, WE HAVE A LOT OF LESSONS LEARNED FROM THE LAST BUDGET CYCLE.
WE HAD A HIGH NUMBER OF VERY SKILLED EMPLOYEES WE WERE TRYING TO HIRE OUT OF THAT, THAT HIRING PROCESS.
SO THAT'S SOMETHING WE'LL DEFINITELY INCORPORATE INTO TIMELINES AND CAPABILITIES TO HIRE THEM.
THERE WAS CONCERNS DURING THE LAST BUDGET CYCLE ON WHETHER OR NOT WE COULD ACTUALLY INCORPORATE THE NUMBER OF EMPLOYEES WE WERE HIRING.
THAT HAS GONE VERY SUCCESSFULLY.
SO GETTING PEOPLE INTO ERCOT, UM, IS THE, IS THE PRIMARY PROBLEM, IS FINDING THAT TALENTED POOL OF INDIVIDUALS.
IT'S VERY LIMITED AND THERE'S HIGH COMPETITION IN THE ERCOT MARKET SPACE.
UM, ONCE WE GET THEM ON BOARD THOUGH, THAT'S, THAT'S GOING VERY SMOOTHLY POST HIRE.
YEAH, BUT THAT'S, THAT'S ONE AREA.
IT'S I THINK OUR PRIMARY DRIVER.
SO I THINK I JUST WANTED TO CALL THAT OUT.
BUT THERE ARE OTHER AREAS AND WE CAN DISCUSS THOSE MORE.
THERE'S A SECOND ITEM IN EXECUTIVE SESSION WHERE I PLAN TO, TO RUN THROUGH MORE OF THOSE, BUT YES, IT'S HIGH ON OUR, ON OUR LIST OF THINGS AS WE'RE GOING THROUGH THE BUDGET DEVELOPMENT PROCESS.
AND RICHARD, ONE OF THE, ONE OF THE THINGS WE'RE DOING DIFFERENTLY NEXT YEAR IS WE'RE, WE'RE TAKING SIX OF SIX MEETING CYCLE AND PUTTING IT INTO FIVE.
AND SO AS WE GO THROUGH THIS NEXT YEAR, IF, IF WE BEGIN TO SEE WHERE WE'RE HAVING SCHEDULE COMPRESSION AND PROBLEMS TAKING CARE OF ALL THE COMMITTEE'S FUNCTIONS, AS WELL AS UM, ERCOT FINANCIAL REPORTING SCHEDULES AND BUDGETING SCHEDULES, KEEP US POSTED SO THAT WE KNOW WHETHER OR NOT WE NEED TO REVERT BACK TO A SIX MEETING SCHEDULE OR IF THE, THE FIVE MEETING SCHEDULE IS WORKING OUT THE WAY WE HOPE IT WILL.
WE'LL, WE'LL KEEP THAT AT TOP OF MIND.
ANY OTHER QUESTIONS ON SCHEDULING FOR NEXT YEAR? ALRIGHT,
[8. Other Business]
UH, AGENDA ITEM MADE BEFORE WE MOVE INTO EXECUTIVE SESSION IS OTHER BUSINESS.IS THERE ANY OTHER BUSINESS THAT ANY COMMITTEE MEMBER WISHES TO RAISE? OKAY, WITH
[Convene Executive Session]
THAT WE'RE GONNA TRANSITION TO EXECUTIVE SESSION.UH, WE'RE GONNA RECESS GENERAL SESSION AND CONVENE AN EXECUTIVE SESSION.
THERE ARE TWO VOTING ITEMS THAT ARE ANTICIPATED THAT WILL COME OUT OF THE EXECUTIVE SESSION.
SO GENERAL SESSION WILL RECONVENE AT THE CONCLUSION OF THE EXECUTIVE SESSION.
GENERAL SESSION IS NOW RECESSED AND THE, UH, WEBCAST WILL BE CONCLUDED.
[Reconvene General Session]
I HEREBY RECONVENE THE MEETING OF THE FINANCE AUDIT COMMITTEE.UH, THIS, UH, MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON OPS WEBSITE.
I HAVE CONFIRMED THAT A QUORUM IS PRESENT IN PERSON.
[9. Vote on Matters from Executive Session]
UH, WE'RE GONNA, WE HAVE, UH, FOUR VOTING ITEMS FROM THE EXECUTIVE SESSION.FIRST, I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD APPROVE THE CONTRACT MATTER DISCUSSED UNDER AGENDA ITEM ES 2.5.
SO MOVED I SECOND IT AND IT'S APPROVED.
NEXT I'LL ENTERTAIN A MOTION TO APPROVE THE RISK MANAGEMENT MATTER DISCUSSED DURING EXECUTIVE SESSION.
UNDER AGENDA ITEM ES 2.7 0.2, I MOVE IT SECOND.
BY THE WAY, THE REASON WE ARE CONSIDERING APPROVED AS THERE'S ONLY TWO MEMBERS ON THE COMMITTEE RIGHT NOW.
UH, NEXT IS THE SOC REPORT DISCUSSED DURING GENERAL SESSION.
AGENDA ITEMS 5.5 TO 5.3 AND REVIEWED AN AGENDA ITEM ES 2.2 0.1.
I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD ADOPT THE 2024 SYSTEM AND ORGANIZATION AUDIT REPORT.
SO MOVE, I'LL SECOND IT, THAT'S APPROVED.
NEXT I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD SELECT THE AUDITOR DISCUSSED IN AGENDA ITEM E ES 2.2 0.2 AS THE 2025 INDEPENDENT SYSTEM AND ORGANIZATION CONTROL AUDITOR.
SO MOVED I SECOND THAT MOTION AS WELL.
THE MEETING OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED.