HomeMy WebLinkAboutItem O •
/ AGENDA RE
DATE: August 13, 2001
TO: Honorable Mayor and City Council
THRU: John B. Bahorski, City Manager
FROM: Pamela Arends-King, Director of Administrative Services/Treasurer
SUBJECT: Award Independent Auditors Professional Services Contract
For Fiscal Years June 30, 2002 through June 30, 2004
SUMMARY OF REQUEST:
Staff requests City Council award the Independent Auditors Professional Services
Contract for Fiscal Years June 30, 2002 through June 30, 2004 to Lance, So11 and
Lunghard LLP and authorize City Manager to execute agreement.
BACKGROUND:
At the May 14, 2001, Council meeting, City Council directed staff to send out Requests
for Proposals (RFP) for auditing services. Staff sent out RFP's to several respected
auditing firms and received two responses. Lance So11 & Lunghard LLP and Conrad and
Associates were the two firms that responded to the RFP. Both firms are very
experienced and highly respected within the auditing community however; staff believes
Lance So 11 and Lunghard LLP would best suit the City's needs. The City's finance
department is experiencing several major changes that Lance So 11 and Lunghard LLP is
very knowledgeable with the major changes such as the accounting software conversion,
utility billing conversion and the implementation of GASB 34. The Firm has provided
invaluable constructive guidance on the City's need to improve internal control
procedures in the area of accounts payable, automation of the collection of beach parking
revenues, liability risk management and accounting software to insure the protection of
City's funds.
Don Parker, the partner who will be in charge of the audit, chairs the Redevelopment
Agency Subcommittee of the Governmental Accounting and Auditing Committee of the
California Society of CPAs, provided invaluable information to the City's
Redevelopment Agency in regards to it's Low/Moderate housing set-aside. He and his
staff played a major role in determining whether funds from the Low/Moderate housing
set-aside could be used for the financing of the Seal Beach Trailer Park purchase. They
also helped determine whether the Agency's Low/Moderate housing set aside was in
Agenda Item 0
August 13,2001
Independent Audit Professional Service Contract
excess of State requirements which helped determine whether the Agency could
refinance Tax Allocation Bonds. The refinancing of the Tax Allocation Bonds raised
around $3.5 million in funds that will be used to replace the West End Pump Station and
rebuild storm drains in the project area. The Redevelopment Agency is once again facing
the problem of surplus Low/Moderate housing set aside funds that will be addressed in
the audit. Due to Don Parker and his staff's expertise this issue will be addressed
according to State requirements.
The auditing and accounting services provided by Lance Soll and Lunghard over the past
three years resulted in the City receiving the Government Finance Officer's and
California Society of Municipal Finance financial reporting awards.
The firm also met State Controller Office Requirements including the preparation of the
State Controllers Report for both the City and Agency along with the requirements of the
Single Audit Act of 1984.
FISCAL IMPACT:
The total proposed fees for auditing services for Fiscal Years June 30, 2002 through June
20, 2004 is $94,020. This figure is $4,606 less than the proposed fees from Conrad and
Associates. This fee includes the annual audit for the City and the Redevelopment
Agency, implementation of GASB 34, and the preparation of the Annual State
Controllers Reports for the City and the Redevelopment Agency. Should the City or
Agency require additional services above and beyond the scope of the auditing services
the standard hourly rates would be utilized for the term of any new agreement. The
standard hourly rates are $190/hour for Partner, $95/hour for Field Supervisor, $80/hour
for Senior Accountants and $70/hour Staff Accountants.
RECOMMENDATION:
Staff recommends Council award the Independent Auditing Professional Services
Contract for Fiscal Years June 30, 2002 through June 20, 2004 with Lance Soil &
Lunghard and authorizes the City Manager to execute the agreement.
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August 13,2001
Independent Audit Professional Service Contract
dt..vt,
Pamela Arends-King
Director of Administrative Services/Treasurer
401 6 ///
Jo . Bahorski
Manager
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CITY OF SEAL BEACH
AUDITING SERVICES - REQUEST FOR PROPOSAL
INVITATION
The City of Seal Beach is requesting proposals for auditing services from
qualified firms. The term for the services will be three consecutive years,
beginning with the fiscal year ending June 30, 2002.
NATURE OF SERVICES REQUIRED
A. General
The City is selecting auditors to perform an examination of the
financial statements of all fund types and account groups of the City
for the year ending June 30, 2002 and for the two succeeding years.
B. Auditing Standards to be Followed
Each examination is to be performed in accordance with generally
accepted auditing standards as adopted by the American Institute of
Certified Public Accountants (AICPA). In addition, the minimum
auditing standards set forth in the Single Audit Act and OMB Circular
A-133 must be met.
C. Reports to be Issued
Audit reports are required for the general-purpose financial
statements of the City, a Single Audit report and a report on your
review of the City's Gann Limit computation will be required. The City
also requires a management letter containing comments and
recommendations regarding the auditor's review and evaluation of
the systems of internal control and accounting procedures.
D. Special Considerations
The City desires assistance in preparation of the Comprehensive
Annual Financial Report (CAFR) to ensure compliance with the
reporting requirements for a Certificate of Achievement for Excellence
in Financial Reporting issued by the Government Finance Officers
Association (GFOA).
It is expected that the auditor selected will be available throughout the
year for general consultation regarding matters of accounting.
E. The external auditor will meet with staff and two Council Members to
review the Management Letter and Audit. Attendance at one Council
meeting maybe required.
F. The auditor is required to perform an annual review of the City's
Investment Policy to determine compliance with applicable State and
Federal laws. A report is to be provided to the City on such
compliance and, if applicable, recommendations for changes in the
Investment Policy document.
G. Working Paper Retention and Access to Working Papers
Working papers are to be retained for a period of five years and are
to be made available (upon reasonable notice) to City staff as well as
any third parties authorized by the City.
II. DESCRIPTION OF THE GOVERNMENT
The City of Seal Beach is a Charter City in the State of California located in
northern Orange County. The City was incorporated on October 25, 1915, and
operates under a Council-Manager form of government. The City is a coastal
community consisting of approximately 18.2 square miles with an estimated
population of 24,006. The City is bordered by Garden Grove, Long Beach, Los
Alamitos, Huntington Beach, and Westminster.
Seal Beach operates as a "full service city", primarily utilizing contracts with other
governmental entities, private firms and individuals to provide the supplemental
municipal services to the community. City services include police, water, sewer,
road maintenance, and planning, building and engineering services. Fire protection
is provided by the Orange County Fire Authority.
The City's principal revenue sources are utility user tax, sales and uses taxes,
property taxes, and motor vehicle in-lieu fees.
The City employs 93 full-time and 55 regular part-time staff. During summer
months additional part-time staff are employed by the City's recreation and lifeguard
departments.
The City's offices are located at 211 Eighth Street, Seal Beach, California, 90740.
The contact person for further information or questions regarding this request for
proposal is Pam King, Director of Administrative Services, at (562) 431-2527.
A. Background Financial Information
The following summarizes key budgetary information from the
adopted fiscal year 2000 budget:
General Fund:
Revenues $14,235,284
Expenditures:
General Government 1,577,124
Public Safety 7,817,776
Community Development 696,806
Health 54,221
Maintenance 1,435,318
Capital Outlay 174,809
Debt Service 125,603
Transfer Out 1,593,756
Total General Fund Expenditures $13,475,413
B. Fund Structure
The City currently utilizes the following funds and account groups:
1. General Fund - general operations of the City.
2. Gasoline Tax Fund - state subventions for gasoline taxes.
3. Capital Improvement Project Fund - major construction
projects.
4. Measure M Fund - proceeds of Measure M taxes.
5. AB2766 Fund - proceeds of AB2766 (for air quality
improvements).
6. Local Law Enforcement Block Grant Fund - public safety
7. Supplemental Law Enforcement Services Fund - proceeds of
State's Citizens Options for Public Safety program.
8. Agency Funds -funds held by the City in a trustee capacity.
9. General Fixed Asset Account Group - accounts for City's
general fixed assets.
10. General Long-term Debt Account Group - accounts for the
City's general long-term debt.
C. Budgetary Basis of Accounting
Budgets are adopted annually by the City Council by minute action
and are prepared for each fund in accordance with its basis of
accounting (generally modified accrual). The City Manager is
responsible for preparing the budget and for its implementation after
adoption. All unencumbered appropriations lapse at year end. The
City Council has the authority to amend the budget during the year.
The City maintains budgetary controls to ensure compliance with
legal provisions embodied in the appropriated budget approved by
the City Council. The level of budgetary control is established by
function and activity within each fund.
D. Federal, State and Local Assistance
The City receives financial assistance in the form of Community
Development Block Grants (administered by the County of Orange)
and other state and federal programs which vary from year-to-year.
Accordingly, compliance with the Single Audit Act of 1984 and
implementing regulations issued by the United States Office of
Management and Budget (OMB) Circular A-133 will be required.
E. Pension Plan
The City is a member of the California Public Employees Retirement
System (PERS), an agent multiple-employer public employee
retirement system that acts as a common investment and
administrative agent for cities and school districts in California.
F. Long-term Debt
The City's long-term debt consists of vested amounts due to
employees pursuant to the City's comprehensive annual leave
program, and a long-term capital lease obligation relating to the City's
community center.
G. Risk Management
The City is a member of the Orange County Cities Risk Management
Authority ("OCCRMA"), a public entity risk pool. In addition, the City
has designated $900,000 of reserved general funds for use in
payment of any material claims not covered through the OCCRMA
program.
H. Treasury/Investment of Funds
The Director of Administrative serves as the City Treasurer.
Investment of funds is administered through the Finance Department
pursuant to the Charter. As of December 31, 2000, the City's
portfolio consisted of$616,220 in the State of California Local Agency
Investment Fund (LAIF) and $12,846,730 in all other bank accounts
and securities. The City directly manages its investment portfolio.
Department of Finance and Administration Operations
The Department of Finance and Administration encompasses the
general accounting, treasury, utility billing, general administration and
purchasing functions. It consists of a staff of 3.5 personnel including
the Director of Administrative Services, Assistant Finance Director,
Accounting Technician, and Account Clerk.
Typical transaction volume is as follows:
Number of bank accounts five (5).
Number of cash disbursements per month 350.
Number of purchase orders issued per month 100.
Number of cash receipt batches per month 30.
Number of payroll checks per month 300.
J. Computer System
The City utilizes a Local Area Network (LAN) for all its data
processing. It consists of approximately 75 workstations operating
under various Microsoft Windows applications.
For accounting, the City uses Spring Brook financial software. This
includes general ledger, accounts receivable, accounts payable,
utility billings and cash receipting.
K. Internal Audit Function
Due to its small size, the City does not have an internal audit function.
Within the constraints of available staffing, the City attempts to
maintain segregation of key duties and responsibilities. The City has
received unqualified audit opinions in all years since incorporation.
L. Availability of Prior Reports and Working Papers
The audits of the City for the three fiscal years were performed by
Lance, Soil & Lunghard LLC. It is anticipated that their work papers
will be available for review.
III. TIME REQUIREMENTS
It is anticipated that the audit work will be performed in two phases:
A. Interim Audit Work
Interim work should take place in late May or early June and would
consist of planning and interim audit procedures (such as gaining an
understanding of relevant systems, procedures and internal controls,
selected compliance and transaction testing, etc.)
B. Year-End Audit Work
The second phase would involve updating and completing the
examination of the General Purpose Financial Statements, and
preparing opinion letters and other relevant financial reports. The
year-end audit field work is to begin no earlier than September 15,
and is to be completed no later than October 15. This schedule may
be altered only by mutual agreement between the City and the
auditor. Any proposed audit adjustments must be identified no later
than the conclusion of audit field work.
C. Draft Reports
The Auditor shall provide the City with a complete draft of the General
Purpose Financial Statements, including footnotes and
supplementary schedules by October 15. Drafts of the Single Audit
and Gann Limit Reports are due no later than November 1. A draft of
the management letter is due no later than November 15. The City
will review and provide comments or responses to the auditors within
10 calendar days of receipt of each of the draft reports.
IV. ASSISTANCE TO BE PROVIDED TO THE AUDITOR
A. Finance Department and Clerical Assistance
City Staff members will be made available to assist in the audit. We
will prepare any necessary schedules, provide documents (invoices,
checks, council minutes, etc.) and prepare (type) all confirmations. In
addition, we will be available to respond to any questions which may
arise during the audit.
B. Report Preparation
The Auditor is responsible for preparation of the Independent
Auditor's Report, General Purpose Financial Statements (including
footnotes) and applicable Supplementary Schedules. The
Introductory and Statistical sections of the CAFR are prepared by City
Staff. These reports, together with the Single Audit Report, Gann
Review Report and Management Letter are to be completed and
delivered to the City as described in Section III.C. In addition to
delivery in printed form, the footnote section of the financial report
shall also be provided to the City on magnetic media (floppy diskette)
in a format compatible with Microsoft Word.
C. Other
The City will provide the auditors with suitable workspace, telephone,
access to FAX machine and photocopier.
V. PROPOSAL REQUIREMENTS
A. Sealed Proposals
Proposals must be submitted in a sealed envelope or package
bearing the title "City of Seal Beach Audit Proposal" and the
proposer's name and address. The proposer shall submit four (4)
copies of the completed proposal and other pertinent information to
the Director of Administrative Services no later than 2:00 p.m., on
Thursday, July 12, 2001, 211 Eighth Street, Seal Beach, California
90740. It is the responsibility of the proposer to ensure that the
proposal is delivered on time. Any proposal received after the
deadline will be disqualified.
B. Public Information
All submitted proposals, and information included therein and
attached thereto, shall become public record upon receipt by the City
Council for consideration of selection of auditor.
VI. MINIMUM QUALIFICATIONS
Firms bidding shall meet the following minimum qualifications:
A. Firm shall have successfully completed audits of a minimum of 10
cities in the preceding twelve months.
B. Staff assigned to the engagement shall have a minimum of one-year
of experience in the audit of municipalities. Managers or supervisors
assigned to the engagement shall have a minimum of five years of
experience in the audit of municipalities. Partners assigned to the
engagement shall have a minimum of ten years of experience in the
audit of cities.
C. Firm shall have prepared and issued a minimum of five Single Audit
reports and five management letters in the preceding twelve months.
VII. SELECTION PROCESS AND CRITERIA
A. Selection Committee
All proposals will be reviewed by a selection committee designated by
the City Manager. The selection process will involve the review of the
proposal for compliance with the requirements of the RFP,
qualifications of the firm and references.
Based upon the selection committee's review of the proposals,
interviews may be scheduled at the City of Seal Beach City Hall with
the most qualified proposers. Finalists will be notified of specific
times and will be allowed a total of thirty minutes for their presentation
and to answer questions from the selection committee.
The auditors will be ranked by the selection committee and Staff will
recommend the top ranked auditing firm to the City Council for award
of contract.
B. Contents of Proposal
Proposals shall contain the following information:
1. A general summary of the audit engagement plan including
nature of interim/year-end testing procedures and the extent of
support which will be required from City Staff (i.e. pulling
invoices, checks, schedule preparation, etc.)
2. A discussion of your firms qualifications and relevant
experience including recent experience in compliance auditing
under the Single Audit Act.
3. A discussion of educational background and relevant
experience of the Partner, Supervisor(s) and Staff which will
be assigned to this engagement.
4. A summary of recent audit engagements of other similarly
sized governmental agencies, including individuals from three
recent engagements whom we may contact for reference.
5. A preliminary schedule including tentative dates for completion
of interim and year-end field work, preparation of financial
statements, footnotes, opinion letters and the management
letter.
6. A proposed budget including estimated hours for each
member of the engagement team, hourly billing rates, out-of-
pocket expenses and a total proposed cost for each of the
three years. The budget must include an all-inclusive
maximum price (including out-of-pocket expenses) for all
services outlined in section I. of this Request for Proposal.
7. A listing of billing rates, by staffing level, which would apply to
any supplemental services which may be requested by the
City during the term of this contract.
C. Criteria for Selection
Selection of the auditor shall be based upon the following criteria:
1. Technical qualifications and experience of key members of the
engagement team and the firm.
2. Experience with similarly sized governmental agencies in
providing the types of services outlined in this Request for
Proposal.
3. Capability of handling all aspects of the engagement and
providing ongoing support and technical assistance throughout
the year.
4. Ability to provide continuity of staff from year-to -year.
5. Thoroughness of auditors proposed scope of work.
6. Clearly defined schedule of work to be performed and ability to
meet required completion dates for key parts of the audit.
7. Reasonableness and competitiveness of cost budget.
The award of the contract will not be based on the lowest fee
proposed, but on a combination of all of the above factors.
VIII. TIME SCHEDULE
The City anticipates using the following time schedule, which should result in
the selection of an auditor by August 14, 2001:
June 11, 2001 Authorization of RFP release by City Council
June 12, 2001 Mail RFP's to bidders
July 12, 2001 Written proposals due by 2:00 p.m.
July 16, July 31, 2001 Review of proposals
August 13, 2001 Recommendation to City Council
August 14, 2001 Notification of bidders
Attachments:
Comprehensive Annual Financial Report— Fiscal Year Ended June 30, 2000
Contract for Auditing Services
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CITY HALL • 211 EIGHTH STREET
SEAL BEACH,CALIFORNIA 90740-6379
(562)431-2527
August 29, 2001
Mr. Donald L. Parker
Lance, Soll & Lunghard, LLP
Certified Public Accountants
203 North Brea Boulevard
Brea, California 92821-4056
Dear Mr. Parker,
Forwarded are two (2 ) copies of the Agreement for Auditing
Services between Lance, Soll & Lunghard and the City of Seal
Beach for auditing services for fiscal years ending June
30th, 2002 , 2003 and 2004 .
Please execute the Agreement on behalf of your firm and
return one ( 1) copy to the City to my attention for its
records. Thank you.
Very truly yours,
Joanne M. Yeo, City Clerk
City of Seal Beach
Encl .
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CITY OF SEAL BEACH
PROPOSAL TO PROVIDE
AUDIT SERVICES
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Prepared by:
Lance, Soil & Lunghard, LLP
Certified Public Accountants
203 N. Brea Blvd., Suite 203
Brea, California 92821-4056
(714) 672-0022 FAX (714) 672-0331
July 6, 2001
Contact Person:
Donald L. Parker, CPA, Partner
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LCITY OF SEAL BEACH
LPROPOSAL TO PROVIDE AUDIT SERVICES
TABLE OF CONTENTS
EItem Page No.
ILetter of Transmittal 1
1. Audit Engagement Plan
Ia. Support from City 3
b. Analytical Procedures 3
1 c. Internal Control Structure 3
d. Laws and Regulations 4
e. Resolution of GFOA and CSMFO Comments 4
2. Firm Qualifications and Relevant Experience
Ca. Local Accounting Firm and Independence 4
b. Location of Firm and Number of Personnel 5
c. License to Practice in the State of California 5
d. Range of Activities 5
e. References of Governmental Clients 6
f. Firm Qualifications and Experience 6
I CSMFO and GFOA Award Program 6
Federal Single Audit - OMB Circular A-133 6
Redevelopment Agencies 7
I Municipal Water Utilities 7
Joint Power Authorities 8
Public Financing Authorities 8
g Special Districts 8
GASB 34 8
g. Peer Review 9
Ih. Disciplinary Action 9
3. Summary of Personnel Qualifications and Experience
Ia. Personnel Assigned to the Audit
Donald L. Parker, CPA, Partner 11
I Richard K. Kikuchi, CPA, Partner 13
Kimberly A. Manning, CPA, Audit Manager 15
Bully J. Bullis, CPA, Senior 16
I b. Staff Auditors 17
c. Continuing Education 17
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CITY OF SEAL BEACH
PROPOSAL TO PROVIDE AUDIT SERVICES
TABLE OF CONTENTS
Item Page No.
4. Summary of Recent Engagements of Similar Size
Similar Engagements 17
5. Preliminary Schedule
a. Agreed upon deadlines 18
b. Timely communications 18
c. Required timetable 18
6. Proposed Budget
Estimated hours 19
7. Billing Rates 20
8. Other Information 20
Identification of Anticipated Potential Audit Problems 20
Insurance Requirements 21
Appendix A - Listing of Governmental Audit Clients 22
Appendix B - Peer Review Report 23
Proposed Auditing Fees 24
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Lance \ Brea, A 92821-4056 1� I 1 L'1 \�
Lunghard (714) 672-0022 ��,
Fax (714) 672-0331
CERTIFIED PUBLIC ACCOUNTANTS www.Islcpas.com 1►M9 Y
Brandon W.Burrows
Donald L.Parker
Michael K.Chu
David E.Hale
A Professional Corporation
Donald G.Slater
Richard K.Kikuchi
Retired
Robert C.Lance
1914-1994
Richard C.Soli
July 6, 2001 Fred J.Lunghard,Jr.
1928-1999
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Ms. Pam King, Director of Administrative Services.
City of Seal Beach
211 Eight Street
Seal Beach, CA 90740
Dear Ms. King:
We are pleased to respond to your request for proposal for auditing services. As a
leader in the field of governmental accounting and auditing,we appreciate the opportunity given us to
present our professional qualifications.
The annual services that would be provided for the City of Seal Beach,for fiscal year
2001-2002 and the subsequent two fiscal years, would be as follows:
' 1. Perform a financial audit of the General Purpose Financial Statements of the City of
Seal Beach that would include the following oversight and component units:
City of Seal Beach
Seal Beach Redevelopment Agency
We understand that we will be responsible for preparing this report. These financial
statements will be included within a Comprehensive Annual Financial Report(CAFR)
' which will be submitted under the National and California award programs.Our audit
would express an opinion as to whether the financial statements and associated notes
conform to generally accepted accounting principles.
2. Perform a Single Audit of all federal grants of the City utilizing Generally Accepted
Governmental Auditing Standards. This audit would be performed according to the
requirements of OMB Circular A-133,Government Auditing Standards issued by the
GAO and the AICPA Industry Audit Guide.
MEMBER
CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
Lance
L Sol s
Lunt ghard
LLP
CERTIFIED PUBLIC ACCOUNTANTS
Ms. Pam King,
Director of Administrative Services
City of Seal Beach
Seal Beach, CA 90740
Page 2
3. Perform a financial audit of the Component Unit Financial Statements of the Seal
Beach Redevelopment Agency. Again, we understand that we will prepare these
financial statements and our opinion would indicate adherence to generally accepted
accounting principles. A separate compliance audit would be performed and an
opinion issued as required by Section 33080.1 of the Health and Safety Code. This
audit would be done in accordance with Guidelines for Compliance Audits of
California Redevelopment Agencies of the State Controller's Office.
4. Review and issue a report on the calculation of the City's Appropriations Limit(Gann
Limitation), as required by Article XIIIB Section 1.5 of the California Constitution.
' 5. Perform a review and make recommendations on the internal control structure,which
consists of the Control Environment, Accounting System and Control Procedures.
We will issue a separate management letter as a result of our review. Also,we shall
make an immediate and written report of any irregularities and illegal acts or
indication of illegal acts coming to our attention.
6. Prepare the State Controller's Report for the City of Seal Beach and the Seal Beach
Redevelopment Agency.
The sections that follow describe the benefits your organization would receive from
Lance, Soll & Lunghard, LLP. We are committed to provide the services discussed above in
accordance with the timetable specified in your request for proposal.This proposal is a firm and
irrevocable offer for fiscal years discussed above. For purposes of this proposal,Donald L. Parker,
Partner is authorized to make representations for our firm. I can be reached at the address above or
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by phone at(714) 672-0022.
VeryAuly yours,
DONALD L. PARKER, CPA
PARTNER
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CERTIFIED PUBLIC ACCOUNTANTS
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1. AUDIT ENGAGEMENT PLAN
a. Support From City
We expect minimal assistance from City staff; however, we do require that all accounting
functions be performed prior to our commencement of year-end procedures. This means that
reconciliations of cash and investments to the general ledger,balancing of Due To and From,
balancing of Transfers in and out,establishment of accruals and reserves(accounts payable,
receivables, encumbrances, etc.)must have been performed. We expect the City to provide
us with general ledger summaries, trial balances, statements of revenues and expenditures
with actual and budgeted amounts.We should have access to an approved budget,as well as
all supplemental appropriations. We will need general ledger posting details, which can be
hard copies,or access to City computer terminals to allow our auditors to look up transaction
details in the accounting system. Overall,we probably require the least assistance of all the
firms involved in this field. We will even prepare all of the bank and investment
confirmations.
b. Analytical procedures-We use analytical procedures as an overall review of the financial
information in the preliminary and final stage of the audit.These procedures are designed to
assist us in planning our audit and in assessing the propriety of the conclusions reached and
in the evaluation of the overall financial statement presentation.The procedures to be utilized
consist of determining percentage increases and decreases between significant revenue,
expenditure and balance sheet accounts, reading the financial statements and related notes,
and we focus on overall relationships within the financial statements.Once determined,these
are reviewed to determine if the changes appear reasonable or require further analysis. For
all significant differences, explanations are obtained as to why the situation occurred and
additional substantive procedures may be applied and related evidence gathered to resolve
concerns and questions.
c. Internal Control Structure - To gain an understanding of the City's internal control
structure,we complete forms taken from the Local Government Publication of Practitioners
Publishing Company. These forms meet the technical standards of the AICPA and allow us
to document the purpose of funds,the structure of the City and to quantify materiality. The
forms themselves are over 30 pages in length. Also, with regard to the verification of
internal controls,we utilize an internal control questionnaire where we solicit responses from
staff as to duties performed to determine if proper segregation is present. While most firms
perform this step by giving the questionnaire to the City staff to complete, we arrange
personal interviews with City staff where we will complete the questionnaire based on the
interviews. Also, our sample tests are designed to integrate this questionnaire with the
compliance tests,so that responses to the questions can be verified.We will review and make
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Soil &
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CERTIFIED PUBLIC ACCOUNTANTS
lrr recommendations on the internal control structure,which consists of Control Environment,
Accounting System and Control Procedures. We will review internal controls in the area of
cash; investments; revenues and receivables; expenditures and accounts payable; payroll;
is inventories; property and equipment, debt and debt service; insurance and claims. In
addition, during the performance of the Single Audit, we will review areas of internal
controls over federal grants, including general requirements; specific requirements; claims
it for advances and reimbursements and amounts claimed or used for matching. Based on the
results of our review, we will issue a formal internal control report that will identify any
material weaknesses and reportable conditions. This report is required by the Government
is Auditing Standards issued by the Comptroller General of the United States, as well as the
Single Audit Act.In addition,we will also issue a separate management letter directly to the
City Council.This letter would communicate any minor deficiencies in the internal control
system and other matters that we feel should be communicated to the City Council. All
internal control issues will initially also be discussed with management of the City.
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d. Laws and regulations that will be subject to audit test work are determined from the
municipal code of the City (we would ask for access to a volume of the Code during our
fieldwork),applicable sections of Governmental Code for the State of California(we have a
complete library of California Codes in book form and on CD ROM) and our extensive
experience with governmental entities.
e. Resolution of GFOA and CSMFO Comments is a service that Lance, Soll & Lunghard,
LLP provides to our clients submitting CAFRs to the awards programs. As you know, it is
not uncommon to receive suggestions and or comments as a result of issuing the CAFR to
the GFOA and CSMFO. Lance, Soll&Lunghard,LLP's usual procedure is to address any or
all comments received and forwarding these responses to the city's finance director for their
it approval. These comments will then be incorporated with the next year's submission.
2. FIRM QUALIFICATIONS AND RELEVANT EXPERIENCE
PROFILE OF LANCE, SOLL & LUNGHARD, LLP
a. Local Accounting Firm and Independence
Lance,Soll&Lunghard,LLP is a local public accounting firm that has met the individual
auditing needs of business and governmental subdivisions for over 70 years. This experience
has led to the development of efficient procedures that provide numerous client benefits. Our
is clients have grown to understand that an audit from us provides them with a wealth of
knowledge, confidence and a source of management improvements. We are organized as a
partnership and currently we provide auditing and accounting services to the City of Seal
r Beach and all of its component units. We meet the independence requirements as defined
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Lby the U.S. General Accounting Office's Standards for Audit of Governmental
Organizations, Programs, Activities and Functions (1988).
sr b. Location of Firm and Number of Personnel
We have one office located in Brea,California and presently have six partners. Professional
la staff consists of four managers,seven seniors,eighteen staff auditors and two bookkeepers.
Governmental staff consists of three partners, two managers, four seniors and seven staff
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c. License to Practice in the State of California
"o We are a public accounting firm licensed by the State of California, Department of
Consumer Affairs, as a Public Accounting Partnership. All of our partners are Certified
I Public Accountants licensed by the State of California. We are members of the American
Institute of Certified Public Accountants and the California Society of Certified Public
Accountants. All key staff to be assigned to this engagement(Partner-in-Charge,Concurring
CPartner,Manager and Senior)are licensed by the State of California to practice as Certified
Public Accountants. Additionally, we comply will all local laws relating to the conduct of
L our audits.Therefore,we would obtain a business license prior to conducting business within
your City.
Ld. Range of Activities
Our activities overall cover auditing,compilation and review services,management services
and income tax preparation. Approximately 60% of our practice deals with governmental
Iauditing and related services. Generally,our services break down into the following major
classifications:
IFinancial Auditing: Income Tax Preparation:
Governmental entities (See Appendix A Individual
I for additional breakdown) Corporate
Automotive Dealerships Partnerships
Compilation and Review Services: Estates and Trusts
I Automotive Dealerships
Manufacturing and Service Companies
Management Services:
L Design and Installation of Fund Accounting Systems
Redevelopment Agency Financial/Debt Planning
Compliance Audits (Franchise Fee, TOT, Lease Agreements, Etc.)
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e. References of Governmental Clients
A complete listing of current city audit clients along with phone numbers of contact
personnel and references as to services provided is contained in Appendix A to this
proposal. We welcome your contacting any or all of these to get their opinion on the services
is we provide.
r f. Firm Qualifications and Experience
CSMFO and GFOA Award Program
We prepare the financial statements and footnote disclosures for most of our cities that have
received the CSMFO award and/or the GFOA award. All of our governmental partners,
r managers and seniors have been closely involved in the preparation of these reports;
however, we do not distinguish between cities which are applying for the award and those
that are not.Thus, all of our clients receive award quality financial reports. This makes the
f conversion to award financial statements easier should a city so desire to do so in the future.
Cities which are presently receiving these awards are as follows:
Brea Chino Hills
El Monte El Segundo
Fontana Hawthorne
Lancaster Murrieta
Ontario Rancho Cucamonga
Seal Beach Walnut
West Hollywood Yorba Linda
IMI Federal Single Audit-OMB Circular A-133
We perform single audit services for all of our cities that have federal grants and meet the
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requirements as stipulated under OMB Circular A-133. These engagements fully comply
with OMB Circular A-133 and include preparing the Schedule of Federal Expenditures along
with all required opinions. Our procedures in this area were reviewed by the State
Controller's Office acting in their capacity as cognizant agency and we were given high
marks for our approach and documentation.
Presently, we perform Federal Single Audits for the following cities:
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ill Azusa Brea
El Monte Fontana
Hawthorne Huntington Park
L Lancaster Maywood
Montclair Ontario
IRancho Cucamonga San Dimas
Upland Walnut
IWest Hollywood Yorba Linda
Redevelopment Agencies
iWe perform financial and compliance audits for all redevelopment agencies connected
with our cities. These audits include financial statement preparation as well as
I conducting compliance audits required by Section 33080.1 of the Health and Safety
Code. These compliance audits are performed in accordance with the State Controller's
Guidelines for Compliance Audits of California Redevelopment Agencies. Some of our
I agencies are very simple(one project area and no bonding)while others are very complex
(eight project areas and significant bonding)with multiple pass-through agreements and
owner participation agreements. For some of our agencies,we also prepare the statement
I of indebtedness form that is filed with the County in which they are located. Presently,
we audit the following redevelopment agencies:
Artesia Hidden Hills Ontario
Azusa Huntington Park Rancho Cucamonga
Big Bear Lake Irwindale San Dimas
I Brea Lancaster Seal Beach
California City Loma Linda Upland
El Monte Maywood Walnut
IFontana Montclair West Hollywood
Hawthorne Murrieta Yorba Linda
Municipal Water Utilities
We have extensive experience performing financial audits of cities with Water Utilities.
Presently, we audit the following cities with Water Utilities:
L Azusa Big Bear Lake
Brea Chino Hills
El Monte El Segundo
L Huntington Park Loma Linda
Montclair Ontario
Seal Beach Upland
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Joint Power Authorities
We perform financial and bond compliance audits on several joint powers authorities
affiliated with our municipal clients. Typically,these are building authorities which have a
bond issue present and a lease agreement with the City for the facility. When we perform
these audits, we also review the trustee's compliance with the provisions of the trust
indenture on the bond issue, a step which most auditors do not perform. Additionally, for
these entities we prepare the Special District State Controller's Report.
Public Financing Authorities
We are familiar with and have assisted our clients in reporting the following types of bond
issues whether issued directly or through a financing authority:
• Tax Allocation Bonds (Original and Refunding Issues)
• Revenue Bonds(Water, Sewer, Parking Authority, Etc.)
• Crossover Refunding Bond Issues
• Certificates of Participation (Original and Refunding Issues)
L • Mortgage Revenue Bonds (Original and Refunding Issues)
• Industrial Development and Developer Bonds
In assisting our clients with these types of bonds,we have prepared separate financial audits
of these issues, participated on bond financing teams (on behalf of a city and/or
redevelopment agency), performed computations under GASB Statement Number 7 (to
determine economic gain or loss as the result of refunding) and perform annual or five year
�I arbitrage computations. We have routinely been requested to issue comfort letters and or a
"consent and citation of expertise" in regards to new bond issues of our clients.
Special Districts
We perform financial audits of the following special districts:
East Kern Airport District
Rancho Cucamonga Fire District(Subsidiary District)
Murrieta Fire District (Subsidiary District)
GASB 34
We have offered GASB 34 implementation seminars to our clients and other cities within the
Southern California area. We are versed in this issue and plan to early implement some of
our clients in the year ending June 30, 2001.
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g. Peer Review
iis We are members of the American Institute of Certified Public Accountant's Private
Companies Practice Section. This organization has the requirement for peer review along
with Generally Accepted Government Auditing Standards. We have participated in the peer
review program since its inception and have undergone four peer reviews.The first review
was conducted by Arthur Young & Company (now Ernst & Young, a National Public
Accounting Firm), the following two by Harabedian, Hall&Company and the most recent
by Kelly and Company. Overall, they confirmed what we already knew, that our approach
and procedures comply with technical and professional pronouncements. All of these peer
reviews covered governmental engagements. Our most recent peer review, conducted by
Kelly&Company, is included in Appendix B to this proposal.
jr h. Disciplinary Action
There have been no disciplinary actions against our organization since its inception. All of
our Single Audit reports are desk reviewed by either a Federal cognizant agency or the State
Controller's Office acting as the Oversight Agency. We have never had a report rejected by
any of these agencies. In fact,we are highly regarded and recognized by the staff of the State
In Controller's Office as a firm that always submits top quality reports.
3. SUMMARY OF PERSONNEL QUALIFICATIONS AND EXPERIENCE
a. Personnel Assigned to the Audit
Audit Team-The most critical component in the successful completion of an audit is the
personnel assigned to carry out the responsibilities. We have assembled a Lance,Soli&
Lunghard, LLP team composed of individuals with the optimum mix of talents. The
individuals assigned have experience in performing the tasks for which they are
responsible, as well as familiarity with all municipal accounting operations. In addition,
each has developed extensive skills in a variety of other complementary subjects through
their work with clients in other industries. Thus, the experience gained on previous
assignments can be applied and tailored to the unique needs of your organization.
The partners at Lance, Soll& Lunghard, LLP are an integral part of the audit process
and will be overseeing and supervising staff personnel in the field. Managers are
responsible for multiple engagements, however, for"newer" clients, their involvement
will be more extensive in order to gain an understanding of the client and to provide
immediate supervision to the staff. For the City of Seal Beach, the personnel assigned to
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the engagement would be as follows:
Partner-In-Charge Donald L. Parker, CPA
Concurring Partner Richard K. Kikuchi, CPA
Audit Manager Kimberly A. Manning, CPA
Senior Buffy J. Bullis, CPA
Professional Staff 2 to 3
Resumes for these individuals follow.
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Donald L. Parker, CPA, Partner
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Education: Bachelor of Science Degree in Business Administration - California State
University, Los Angeles 1972
a
Governmental Accounting and Auditing Certificate of Education
Achievement Program
License: Certified Public Accountant - California 1978
Continuing
Education: Total hours were 124 in last three years of which 72 were in governmental
accounting and auditing subjects.
Memberships: California Society of Certified Public Accountants
L American Institute of Certified Public Accountants
California Redevelopment Association (Associate Member)
California Society of Municipal Finance Officers (Associate Member)
• Government Finance Officers Association(Associate Member)
Experience: 28 years experience in governmental audits.
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• He is familiar with the operations of Counties having been a senior internal
auditor for the County of Los Angeles, Auditor-Controller, Audit Division.
He specialized in the County Treasurer-Tax Collector, Fire Protection
District, County Waterworks, and Department of Recreation.
• Mr. Parker has extensive experience in preparing City, Redevelopment
Agency and Special District financial reports. Presently he is Partner-In-
Charge of the following engagements (which include all component units):
1 California City El Monte
Fontana Huntington Park
Loma Linda Maywood
Montclair Murrieta
Rancho Cucamonga San Dimas
Seal Beach Upland
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Donald L. Parker, CPA, Partner(Continued)
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Achievements: He is a member of the Governmental Accounting and Auditing
Committee of the California Society of CPAs and he chairs its
Redevelopment Subcommittee. Under his direction,this committee has
achieved the following:
r • Drafted the standard compliance opinion utilized by California
Redevelopment Agencies.
• Edited and revised the California Committee on Municipal Accounting's
white paper on Loans Between Cities and California Redevelopment
Agencies.
• In addition, with regard to redevelopment agencies, Mr. Parker has
developed an approach to recording low and moderate income housing
deficits which has been approved by the State Controller's Office.
Presently,he has developed an approach to calculating excess surplus low
and moderate housing funds which has been accepted by the State
Controller's Office and Department of Housing and Community
Development.
• He has been a speaker at the Community Redevelopment Association's
update conference and has written an article for its newsletter regarding
redevelopment audits.
• He is a redevelopment specialist and a computer specialist. He has
combined these talents to implement fund accounting systems for the
Huntington Park and Rancho Cucamonga Redevelopment Agencies.
Additionally,he has developed Microsoft Excel spreadsheet models for
rl preparation of Redevelopment Agency Statements of Indebtedness and
State Controller's Reports. These spreadsheet models have been
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approved by the State Controller's Office for filing.
• Mr. Parker has also been involved with the State Board of Accountancy,
having served on its Rule 69 Committee,and he was the Vice-Chairman
of the Positive Enforcement Committee.
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Richard K. Kikuchi, CPA, Partner
Education: Bachelor of Arts Degree- California State University, Fullerton 1985
License: Certified Public Accountant - California 1991
Continuing
Education: Total hours were 136 in last three years of which 60 were in governmental
accounting and auditing subjects.
Memberships: California Society of Certified Public Accountants
American Institute of Certified Public Accountants
California Society of Municipal Finance Officers(Associate Member)
Government Finance Officers Association(Associate Member)
Experience: Over eleven years experience in governmental audits. He has been involved
on the following major municipal engagements.
•
Azusa Big Bear Lake
El Monte El Segundo
Hawthorne Huntington Park
Murrieta Ontario
San Marino Upland
• Yorba Linda
it • This work entailed the preparation of the Comprehensive Annual Financial
Report for those entities involved in the award programs of the California
Society of Municipal Finance Officers and the Government Finance Officers
• Association of the United States and Canada.
• • Mr.Kikuchi has the responsibility for accomplishing federal single audits for
these and other clients of our firm. These audits have met the requirements
of the OMB and have been desk reviewed by the State Controller's Office.
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Richard K. Kikuchi, CPA, Partner(Continued)
Achievements: Mr. Kikuchi currently sits on the California State Board of Accountancy's
Qualifications Committee, which is an advisory committee established to
examine and to make recommendations for all applicants for the license of
Certified Public Accountant.
• He is a member of the American Institute of Certified Public Accountants and
the California Society of Certified Public Accountants.
• He currently serves as a technical reviewer for the Government Finance
Officers Association (GFOA) and the California Society of Municipal
Finance Officers(CSMFO).
• Mr. Kikuchi currently sits on the CSMFO Special Districts Technical
Committee and teaches an Introductory Governmental Accounting course
through the CSMFO Career Development Committee.
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Kimberly A. Manning, CPA, Audit Manager
Education: Bachelor of Arts Degree- University of California Los Angeles 1985
License: Certified Public Accountant- California 1990
Continuing
■ Education: Total hours were 132 in last three years of which 68 were in governmental
accounting and auditing subjects.
Memberships: California Society of Certified Public Accountants
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American Institute of Certified Public Accountants
American Society of Women Accountants
California Society of Municipal Finance Officers(Associate Member)
Government Finance Officers Association (Associate Member)
Experience: More than ten years experience in governmental audits. She has been the
audit manager on the following major municipal engagements.
Brea Chino Hills
El Segundo Fontana
Loma Linda Rancho Cucamonga
Seal Beach Walnut
West Hollywood Yorba Linda
• This work entailed the preparation of the Comprehensive Annual Financial
Report for those entities involved in the award programs of the California
Society of Municipal Finance Officers and the Government Finance Officers
Association of the United States and Canada.
• Ms. Manning has been the manager responsible for accomplishing federal
single audits for these and other clients of our firm. These audits have met
the requirements of the OMB and have been desk reviewed by the State
Controller's Office.
' Achievements: Participated in meetings of various sections of California Society of
Municipal Finance Officers and she has been a technical reviewer for the
Government Finance Officers Association's awards program.
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Buffy J. Bullis, CPA, Senior
Education: Bachelor of Science Degree in Business Administration, Option in
Accounting- California State University, Los Angeles California, 1998.
License: Certified Public Accountant - California — pending completion of
administration by the State Board of Accountancy.
Continuing
Education: Total hours were 137 in last three years of which 78 were in governmental
accounting and auditing subjects.
rExperience: Two years experience in governmental audits.Ms.Bullis has progressed in an
outstanding manner. She has demonstrated her outstanding talent in the area
' of municipal accounting and auditing. During her time with the firm, Ms.
Bullis has performed all phases of our municipal audits, including City and
Redevelopment Agency,as well as preparation of State Controller's Reports
' for Cities and Redevelopment Agencies. She has been involved in the
following City engagements:
Azusa Brea
California City El Monte
Fontana Hidden Hills
Huntington Park La Habra Heights
Maywood Ontario
Rancho Cucamonga San Dimas
Upland Walnut
West Hollywood Yorba Linda
She has performed several specialized engagements such as transit district
compliance audits,waste management contract compliance audit and internal
control review engagements.
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b. Staff Auditors
The firm's policy of assigning seniors to an engagement requires that the senior have at least
two years of municipal auditing experience. He or she must have demonstrated a high degree
r of understanding of municipal accounting and auditing,as well as of the firm's overall client
philosophy. Having been assigned to the engagement before is also an important factor in
assigning a senior to an engagement. Due to circumstances beyond our control, we cannot
guarantee the same senior for the engagement every year,but assignment of new seniors will
follow the general firm practice listed above.Any changes in personnel at the senior level or
above will be approved by the City. Lance, Soll & Lunghard, LLP's philosophy is to
provide quality audit services with minimal disruption to City staff. Our focused efforts
to obtain and retain quality staff have further enabled us to provide this to our clients.
c. Continuing Education
As a firm policy and in compliance with the continuing education requirements promulgated
by the AICPA, General Accounting Office and the California Society of CPAs,all our staff
auditors (certified and non-certified) meet the requirement of 40 hours of continuing
education every year, with at least 24 hours in governmental accounting and auditing in a
two year period. For our educational programs, we utilize in-house seminars, California
Society of CPAs attendance courses, AICPA training videotapes, and self-study
AICPAICalifornia Society materials. Our formal education program was reviewed by
independent firms during our peer review process and no exceptions were noted.
4. SUMMARY OF RECENT ENGAGEMENTS OF SIMILAR SIZE
Similar engagements performed are as follows:
City of El Monte- Audit and preparation of a Comprehensive Annual Financial Report
(CAFR),which receives both the National and California awards. Last audit performed was
ilr for June 30, 2000. Total hours were 592. Engagement partner is Mr. Donald L. Parker.
Contact person: Ms. Sharon Welch, Director of Finance (626) 580-2023.
Ci ty of Ontario- Audit and preparation of a Comprehensive Annual Financial Report
(CAFR),which receives both the National and California awards. Last audit performed was
for June 30, 2000. Total hours were 589. Engagement partner is Mr. Donald L. Parker.
Contact person: Ms. Carole Coney, Finance Manager(909) 395-2000.
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City of Azusa—Audit and preparation of a Comprehensive Annual Financial Report. Last
audit performed was for June 30, 2000. Total hours were 466. Engagement partner is Mr.
Richard Kikuchi. Contact person:Ms.Marcie Medina, Director of Finance(626)812-5291.
City of Brea—Audit and preparation of a Comprehensive Annual Financial Report(CAFR),
which receives both the National and California awards. Last audit performed was for June
30, 2000. Total hours were 449. Engagement partners are Mr. Richard Kikuchi and Mr.
Mike Chu. Contact person: Mr. Larry Hurst, Director of Finance(714) 990-7600.
[" City of Montclair—Audit and preparation of a Comprehensive Annual Financial Report
i (CAFR). Last audit performed was for June 30,2000. Total hours were 398. Engagement
partner is Mr. Donald L. Parker. Contact person: Mr. Richard Beltran, Assistant Finance
Director(909) 625-9418.
A complete listing of current city audit clients along with phone numbers of contact
personnel and references as to services provided is contained in Appendix A to this
proposal. We welcome your contacting any or all of these to get their opinion on the
services we provide.
5. PRELIMINARY SCHEDULE
a. Agreed upon deadlines will be of utmost importance and Lance, Soll & Lunghard, LLP
intends on submitting all reports within these agreed upon timeframes. Setting a timeline
which is agreed to by both parties is the foundation for this goal. We plan on holding an
entrance conference with the City of Seal Beach before the commencement of the audit and
establishing the desired milestones and report submittal dates. Open communication and
teamwork is a critical component of a successful audit and Lance, Soll & Lunghard, LLP
plans on accomplishing this with the City of Seal Beach.
b. Timely communication is essential in all facets of the audit and ensuring timely
communication with the City regarding corrections to be made will be a key issue. Lance,
Soll & Lunghard, LLP's approach is to have open communication with designated City
management and officials during the entire course of the audit. Therefore,all issues will be
discussed and all proposed corrections will be communicated during our audit fieldwork.
c. Required timetable
In the Request for proposal, dates were specified for commencement of interim
procedures (May or June), year-end field work (between September 15th and October
15th)and draft reports(between October 15th and November 15`h). We feel that with the
cooperation of the City, we can comply with these reporting dates.
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L6. PROPOSED BUDGET
Estimated hours for the various engagements are as follows:
City of Seal Beach Partner Manager Senior Staff Total
liCash - _ - 32.00 32.00
Receivables 32.00 32.00
Inventory - - - 8.00 8.00
Fixed Assets - - - 16.00 16.00
Accounts Payable
- _ _ 35.00 35.00
Long teen debt 30.00 30.00
Encumbrances - - - 8.00 8.00
L Fund Equity - _ _ 8.00
2 8.00
Grants 25.00 25.00
Disbursements - - - 20.00 20.00
Revenue - - - 20.00 20.00
I Payroll _ _ _ 20.00 20.00
Utility Billing 20.00 20.00
Supervision 8.00 8.00 15.00 - 31.00
Report 8.00 16.00 24.00 - 48.00
Total Hours 16.00 24.00 39.00 274.00 353.00
Redevelopment Agency Partner Manager Senior Staff Total
Report 8.00 5.00 5.00 18.00
Cash 6.00 6.00
Tax Increment - - - 3.00 3.00
I Bonds _ _
- 3.00 3.00
Payables and Receivables 10.00 10.00
Compliance Testwork - - - 8.00 8.00
II Supervision 2.00 5.00 5.00 12.00
Total Hours 10.00 10.00 10.00 30.00 60.00
Single Audit Partner Manager Senior Staff Total
IReport 4.00 4.00 8.00 16.00
Testwork - 4.00 20.00 24.00
Total Hours 4.00 4.00 12.00 20.00 40.00
IGann Limitation Partner Manager Senior Staff Total
Report 1.00 - 2.00 - 3.00
I Testwork - 6.00 - 6.00-
Total Hours 1.00 8.00 9.00
C State Controller's Report Partner Manager _ Senior Staff Total
Report 1.00 2.00 9.00 12.00 24.00
Testwork - - - - -
ITotal Hours 1.00 2.00 9.00 12.00 24.00
Grand Total Hours 32.00 40.00 78.00 336.00 486.00
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Proposed all-inclusive fees and costs associated with these engagements are detailed
later in this proposal.
7. BILLING RATES
Billing rates by staffing levels are contained in the proposed fee section of this
proposal.
8. OTHER INFORMATION
' Identification of Anticipated Potential Audit Problems
We do not anticipate any significant potential audit problems. However,our approach
1 to resolving audit problems, once they have been identified, is to draw upon our
internal resources to get the job done. Most of our clients have us prepare the financial
statements and assist them in handling complicated accounting matters. Therefore,we
have the resources to handle most problems encountered. With regard to City staff
time,we recognize that the City of Seal Beach has limited accounting staff and thus we
would attempt to resolve audit problems without utilizing City staff. As you are aware,
GASB 34 will soon be implemented and Lance, Soll & Lunghard, LLP will do
everything possible to make this a smooth transition for the City of Seal Beach.
Impact of GASB Statement Number 34, Basic Financial Statements—Management's
Discussion and Analysis
This pronouncement established a new reporting model for governmental entities.
Some parts will be similar to what is currently being reported(Management Discussion
and Analysis as compared to letter of transmittal currently done in Comprehensive
Annual Financial Reports)and other requirements will be substantially different(dual
perspective financial statements,accrual basis of accounting in entity-wide perspective,
major fund reporting, reconciliation between perspectives and capitalization of
infrastructure assets). While it is impossible to predict problems associated with
implementation of this pronouncement,we feel that cities should continue to maintain
their accounting records on the modified accrual basis and then identify accrual
adjustments at year-end which would convert them to a full accrual approach. Thus,
we can prepare the fund financial statements on modified accrual basis and use accrual
adjustments to prepare entity-wide perspective on full accrual approach. These would
also be the basis for some of the reconciling items present in the required reconciliation
of the two perspectives. Cities will also have to identify revenues that relate directly to
expenditures since these must be compared to expenditures in the entity-wide financial
statements. This is similar to what is currently done in preparation of the City's State
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Controller's report and probably that would serve as a starting point in this identification
process. Additionally, cities will have to break out their budgets into original and final
amounts for presentation purposes. Finally, infrastructure costs will have to be
capitalized and depreciated. Toward that end, public works consultants may have to
be engaged to determine estimated cost values.
We realize that implementation of this pronouncement will mean substantial changes
in the financial recording and processing of transactions, allocations, etc. We have been
through changes in the past when the National Committee on Municipal Accounting
adopted the current reporting model. Presently we are designing new Microsoft Excel
models to accomplish the GASB 34 reporting model. These will be implemented fully
by fiscal year 2000-2001 when we have some of our clients converting to this
pronouncement.
Insurance Requirements
We currently maintained the following insurance coverage:
General Liability $2,000,000 per occurrence for bodily injury, p ersonal injury
and property.
L, Automobile Liability - $1,000,000 per accident for bodily injury and property
damage.
Errors and Omissions Liability - $1,000,000 per occurrence.
Workers' compensation - $1,000,000.
Further, we will comply with the City's requirement as to the deductible amount and
City named as co-insured where possible under our policies.
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Appendix A
IListing of Governmental Audit Clients
City Person to Contact Service Codes Yrs Telephone
Artesia Ms. J. Menzel, Accountant C,CR 13 562-865-6262
Azusa Ms. M. Medina, Fin. Dir. C,M,R,S,U 4 626-812-5291
Big Bear Lake Mr. J. Cuevas, Fin. Mgr. C,CR,R,U 3 909-866-5831
* Brea Mr. L. Hurst, Fin. Dir. C,M,R,S,U 2 714-990-7600
California City Ms. K. Bailey, Accountant C,R,J,CR,SI,U 33 760-373-8661
Canyon Lake Ms. K. Bennett, City Clerk C 7 909-244-2955
* Chino Hills Mr. S. McCartney, Fin. Dir. C,U 3 909-364-2642
* El Monte Ms. S. Welch, Fin. Dir. C,R,S,U 46 626-580-2019
* El Segundo Mr. B. Plumlee, Fin. Dir. C,CR,S,U 2 310-607-2240
* Fontana Ms. L. Strong, Fin. Mgr. C,R,S,U 9 909-350-6778
* Hawthorne Ms. S. Lin, Fin. Dir. C,R,S,SI,U 5 310-970-7923
Hidden Hills Ms. C. Paglia, City Clerk C,R,CR 13 818-888-9281
L Huntington Park Mr. G. Korduner, City Mgr. C,S,SI,U,M 28 323-582-6161
Irwindale Mr. A. De Dios, Finance Dir. C,R 6 626-430-2200
La Habra Hgts. Ms. S. Lindsey, City Mgr C 6 562-694-6302
* Lancaster Mr. G. Hill, Finance Director C,R,S 10 661-723-6000
Loma Linda Mr. T. Parker, Finance Director C,R,S 10 909-799-2840
L'i Maywood Mr. M. Williams, Treasurer C,R,S,CR,SI 20 323-562-5000
Montclair Mr. R. Beltran, Assist. Fin. Dir. C,R,S,J 25 909-625-9418
* Murrieta Ms. T. Ferro, Finance Director C,S 9 909-698-1040
L * Ontario Ms. C. Coney, Fin. Mgr. C,CR,R,S,U 4 909-395-2000
* Rancho Cucamonga Ms. T. Layne, Finance Officer C,R,S,CR,SI,M 20 909-989-1851
San Dimas Ms. B. Herron, Finance Director C,R,S,J 33 909-394-6200
I Seal Beach Ms. P. King, Dir of Admin Svcs C,R,CR,S,U 4 562-431-2527
San Marino Ms. D. Bell, City Manager C,S 8 626-300-0700
* Upland Mr. R. Turner, Acting Fin Dir C,R,S 7 909-931-4153
L * Walnut Ms. C. Londo, Finance Director C,R,S 26 909-595-7543
* West Hollywood Mr. P. Arevalo, City Manager C,S 9 323-848-6400
* Yorba Linda Ms. S. Hartman, Finance Director C,CR,R,S 2 714-961-7141
Service Codes:
C - Financial Audit of City
L CR - Prepare State Controller's Report for City
J Separate Audits of Joint Powers Authorities
M - Performed Audits of Mortgage Revenue Bond Issues
p R - Financial and Compliance Audit of Redevelopment Agency
S - Single Audit of Federal Grants in accordance with OMB Circular A-133
SI - Prepare Statement of Indebtedness for Redevelopment Agency
U - Water Utility Operated and Included in Audit.
* - City Participates in Award Programs and has received or anticipates receiving outstanding
award.
L22
Kelly & Company
' Certified Public Accountants
Member of American Institute of Certified Public Accountants Since 1974
SEC Practice Section
Private Companies Practice Section
Tax Practice Section
September 10, 1998
To the Partners of
Lance, So11 & Lunghard
We have reviewed the system of quality control for the accounting and auditing practice of
Lance, Soil & Lunghard (the "firm") in effect for the year ended May 31, 1998. Our review
was conducted in conformity with standards established by the Peer Review Board of the
American Institute of Certified Public Accountants ("AICPA"). We tested compliance with the
firm's system of quality control to the extent we considered appropriate. These tests included a
review of selected accounting and auditing engagements.
In performing our review, we have given consideration to the quality control standards for an
accounting and auditing practice issued by the AICPA. Those standards indicate that a firm's
quality control policies and procedures should be appropriately comprehensive and suitably
designed in relation to the firm's size, organizational structure, operating policies, and the
nature of its practice. They state that variance in an individual's performance and
understanding of professional requirements or the firm's quality control policies and procedures
can affect the degree of compliance with a firm's prescribed quality control policies and
procedures and, therefore, the effectiveness of the system.
In our opinion, the system of quality control for the accounting and auditing practice of Lance,
So11, & Lunghard in effect for the year ended May 31, 1998, has been designed in accordance
with the quality control standards for an accounting and auditing practice established by the
AICPA and was being complied with for the year then ended to provide the firm with
reasonable assurance of conforming with professional standards in the conduct of that practice.
;al K. IP Or
Kelly & 41# pang
Newport Beach, California
L
C
C
3931 MacArthur Boulevard • Suite 205 • Newport Beach,CA 92660
(949)474-7440 • (800)526-0869 • FAX (949)474-7554
I
Lance, Soll & Lunghard, LLP
Certified Public Accountants
Proposed Auditing Fees
The auditing fees proposed below are based upon operations of the various entities
comprising the City of Seal Beach as of June 30, 2000. Should operations of the entities change
significantly, from those present at June 30, 2000, then the fees shown herein would be subject to
further negotiation. Additionally,the fees are based upon the assumption that accounting functions
would be performed and minimal adjustments would be required. To the extent that this is not the
case, the fees shown would be subject to further negotiation. We do not charge extra for meeting
with the governing boards of the respective entities or for the preparation of comfort or other letters
to underwriters for the inclusion of our report in official statements.
For purposes of this proposal, Lance, Soll &Lunghard, LLP certifies that the individual
signing below is a general partner in the partnership and empowered to submit this bid.
Additionally, this individual is authorized to execute a contract with the City of Seal Beach for the
services specified in this proposal.
A recap of the maximum all-inclusive fees proposed for the various engagements is as
follows. The amounts shown are based upon the hours budgeted and contain a$1,500 increase for
the City in year 2002-2003 only. This amount is caused by the implementation of GASB Statement
Number 34 which will require additional efforts for statement preparation. Detail computations of
these amounts are contained in the forms which follow.
Year 2001-2002 2002-2003 2003-2004
City of Seal Beach $ 20,700.00 $ 22,820.00 $ 22,000.00
Redevelopment Agency 4,340.00 4,470.00 4,600.00
Single Audit 2,690.00 2,770.00 2,850.00
Gann Limitation 670.00 690.00 710.00
State Controller's Report 1,520.00 1,570.00 1,620.00
Total $ 29,920.00 $ 32,320.00 $ 31,780.00
Hourly Rates For Additional Services
Should the City or Agency require additional services above and beyond the scope of this
proposal, the hourly rates Lance, Soil & Lunghard, LLP utilizes will be those contained on the
following attached pages. The additional cost information requested is also contained in the forms
that follow.
111J
//
DONALD L. PARKER, CPA
PARTNER
1
1 24
C
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2002 FINANCIAL STATEMENTS
Standard Quoted
I Hourly
Rate Hourly
Hours Rate ** Total
Annual Total
IPartners 32.00 150.00 128.00 4,090.00
Managers 40.00 100.00 85.00 3,400.00
ISupervisory staff 78.00 80.00 68.00 5,300.00
Staff 336.00 60.00 51.00 17,130.00
Other(specify):
L
Subtotal 486.00 390.00 332.00 29,920.00
Total for services described in narrative
section of RFP (Detail on subsesquent pages) 29,920.00
IOut-of-pocket expenses:
Meals and lodging Included
Transportation Included
1 Report word processing and printing Included
Other(specify) Included
Total all-inclusive maximum price for 2002 audit 29,920.00
C
1
I
Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
** Amounts in this column have been computed from the total cost for each staff
category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
25
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2002 FINANCIAL STATEMENTS
COMBINING SCHEDULE-ALL SERVICES
DESCRIBED IN RFP
1
1 Nature of Service To Be Provided Total Price Schedule
City of Seal Beach $ 20,700.00 Page 27
IRedevelopment Agency 4,340.00 Page 27
Single Audit 2,690.00 Page 27
IGann Limitation 670.00 Page 28
State Controller's Report 1,520.00 Page 28
$ 29,920.00
1 1
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,,
6.
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2002 FINANCIAL STATEMENTS
Standard Quoted
Hourly Hourly
Hours Rate Rate ** Total
City of Seal Beach:
Partners 16.00 150.00 128.00 2,040.00
Managers 24.00 100.00 85.00 2,040.00
Supervisory staff 39.00 80.00 68.00 2,650.00
Staff 274.00 60.00 .51.00 13,970.00
Subtotal 353.00 390.00 332.00 20,700.00
Meals and lodging Included
Transportation Included
Report word processing and printing Included
Other(specify) Included
Total 20,700.00
LRedevelopment Agency:
Partners 10.00 150.00 128.00 1,280.00
Managers 10.00 100.00 85.00 850.00
ESupervisory staff 10.00 80.00 68.00 680.00
Staff 30.00 60.00 51.00 1,530.00
LSubtotal 60.00 390.00 332.00 4,340.00
Meals and lodging Included
ITransportation Included
Report word processing and printing Included
Other(specify) Included
ITotal 4,340.00
Single Audit:
IPartners 4.00 150.00 128.00 510.00
Managers 4.00 100.00 85.00 340.00
Supervisory staff 12.00 80.00 68.00 820.00
Staff _ 20.00 60.00 51.00 1,020.00
I
Subtotal 40.00 390.00 332.00 2,690.00
IMeals and lodging Included
Transportation Included
Report word processing and printing Included
I Other(specify) Included
Total 2,690.00
I Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
C ** Amounts in this column have been computed from the total cost for each staff
category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
L27
L .
L SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2002 FINANCIAL STATEMENTS
I Standard Quoted
Hourly Hourly
Hours Kate Kate ' l ota!
Gann Limitation:
1 Partners 1.00 150.00 130.00 130.00
Managers 100.00
Supervisory staff 8.00 80.00 68.00 540.00
Staff 60.00
Subtotal 9.00 390.00 198.00 670.00
IMeals and lodging Included
Transportation Included
I Report word processing and printing Included
Other(specify) Included
Total 670.00
IState Controller's Report:
Partners 1.00 150.00 130.00 130.00
IManagers 2.00 100.00 85.00 170.00
Supervisory staff 9.00 80.00 68.00 610.00
Staff 12.00 60.00 51.00 610.00
ISubtotal 24.00 390.00 334.00 1,520.00
IMeals and lodging Included
Transportation Included
Report word processing and printing Included
Other(specify) Included
•
Total 1,520.00
I
I
I
I Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
** Amounts in this column have been computed from the total cost for each staff
I category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
1 28
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is
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
in FOR THE AUDIT OF THE 2003 FINANCIAL STATEMENTS
L Standard Quoted
Hourly Hourly
Hours Rate Rate ** Total
Annual Total
Partners 32.00 150.00 132.00 4,210.00
Managers 40.00 100.00 88.00 3,510.00
Supervisory staff 78.00 80.00 70.00 4
5, 60.00
EStaff 336.00 60.00 53.00 17,650.00
Other(specify): GASB 34 1,500.00
1 Rounding (10.00)
Subtotal 486.00 390.00 343.00 32,320.00
ITotal for o services described in narrative
Isection of RFP(Detail on subsesquent pages) • 32,320.00
Out-of-pocket expenses:
IMeals and lodging Included
Transportation Included
1 Report word processing and printing Included
Other(specify) Included
I
Total all-inclusive maximum price for audit 32,320.00
I
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I
INote: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
C ** Amounts in this column have been computed from the total cost for each staff
category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
I29
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2003 FINANCIAL STATEMENTS
COMBINING SCHEDULE-ALL SERVICES
DESCRIBED IN RFP
1
Nature of Service To Be Provided Total Price Schedule
1 City of Seal Beach $ 22,820.00 Page 31
Redevelopment Agency 4,470.00 Page 31
1 Single Audit 2,770.00 Page 31
Gann Limitation 690.00 Page 32
State Controller's Report 1,570.00 Page 32
$ 32,320.00
•
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C
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
ill FOR THE AUDIT OF THE 2003 FINANCIAL STATEMENTS
Standard Quoted
Hourly Hourly
Hours
Rate Rate " Total
City of Seal Beach:
LPartners 16.00 150.00 131.00 2,100.00
Managers 24.00 100.00 88.00 2,100.00
Supervisory staff 39.00 80.00 70.00 2,730.00
IStaff 274.00 60.00 53.00 14,390.00
GASB 34 Statement Preparation 1,500.00
Subtotal 353.00 390.00 342.00 22,820.00
L Meals and lodging Included
Transportation Included
Report word processing and printing Included
Other(specify) Included
Il Total 22,820.00
▪ Redevelopment Agency:
Partners 10.00 150.00 132.00 1,320.00
Managers 10.00 100.00 88.00 880.00
ISupervisory staff 10.00 80.00 70.00 700.00
Staff 30.00 60.00 53.00 1,580.00
Rounding (10.00)
ISubtotal 60.00 390.00 343.00 4,470.00
Meals and lodging Included
Transportation Included
I Report word processing and printing Included
Other(specify) Included
•
Total 4,470.00
Single Audit:
Partners 4.00 150.00 133.00 530.00
IManagers 4.00 100.00 88.00 350.00
Supervisory staff 12.00 80.00 70.00 840.00
Staff 20.00 60.00 53.00 1,050.00
ISubtotal 40.00 390.00 344.00 2,770.00
IMeals and lodging Included
Transportation Included
Report word processing and printing Included
IOther(specify) Included
Total 2,770.00
I Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
I ** Amounts in this column have been computed from the total cost for each staff
category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
1 31
I
cis SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2003 FINANCIAL STATEMENTS
I Standard Quoted
Hourly Hourly
Hours
Rate Rate ** Total
Gann Limitation:
r Partners 1.00 150.00 130.00 130.00
Managers 100.00
Supervisory staff 8.00 80.00 70.00 560.00
Staff 60.00
Subtotal 9.00 390.00 200.00 690.00
EMeals and lodging Included
Transportation Included
I Report word processing and printing Included
Other(specify) Included
Total
690.00
IState Controller's Report:
Partners 1.00 150.00 130.00 130.00
IManagers 2.00 100.00 90.00 180.00
Supervisory staff 9.00 80.00 70.00 630.00
Staff 12.00 60.00 53.00 630.00
ISubtotal 24.00 390.00 343.00 1,570.00
Meals and lodging Included
ITransportation Included
Report word processing and printing Included
Other(specify) Included
ITotal 1,570.00
I
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I
Note: The rate quoted should not be presented as a general percentage of the
Istandard hourly rate or as a gross deduction from the total all-inclusive maximum
** Amounts in this column have been computed from the total cost for each staff
I category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
1 32
,
I
E SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2004 FINANCIAL STATEMENTS
Standard Quoted
I Hourly Hourly
Hours Rate Rate ** Total
Annual Total
IPartners 32.00 150.00 135.00 4,330.00
Managers 40.00 100.00 - 91.00 3,620.00
ISupervisory staff 78.00 80.00 72.00 5,630.00
CStaff 336.00 60.00 54.00 18,180.00
Other(specify):
IRounding 20.00
Subtotal 486.00 390.00 352.00 31,780.00
ITotal for services described in narrative
section of R1iP(Detail on subsesquent pages) 31,780.00
IOut-of-pocket expenses:
IMeals and lodging Included
Transportation Included
Report word processing and printing Included
Other(specify) Included
I
Total all-inclusive maximum price for audit 31,780.00
I
I
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I
Note: The rate quoted should not be presented as a general percentage of the
Istandard hourly rate or as a gross deduction from the total all-inclusive maximum
** Amounts in this column have been computed from the total cost for each staff
I category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
1 33
L
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 2004 FINANCIAL STATEMENTS
COMBINING SCHEDULE-ALL SERVICES
DESCRIBED IN RFP
Nature of Service To Be Provided Total Price Schedule
ICity of Seal Beach $ 22,000.00 Page 35
Redevelopment Agency 4,600.00 Page 35
Single Audit 2,850.00 Page 35
Gann Limitation 710.00 Page 36
1 State Controller's Report 1,620.00 Page 36
$ 31,780.00
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SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
ill FOR THE AUDIT OF THE 2004 FINANCIAL STATEMENTS
Standard Quoted
I Hourly Hourly
Hours Rate Rate ** Total
City of Seal Beach:
1 Partners 16.00 150.00 135.00 2,160.00
Managers 24.00 100.00 90.00 2,160.00
Supervisory staff 39.00 80.00 72.00 2,810.00
IStaff 274.00 60.00 54.00 14,820.00
Rounding 50.00
Subtotal 353.00 390.00 351.00 22,000.00
II 1 Meals and lodging Included
Transportation Included
Report word processing and printing Included
•
Other(specify) Included
Total 22,000.00
Redevelopment Agency:
IPartners 10.00 150.00 136.00 1,360.00
Managers 10.00 100.00 91.00 910.00
ISupervisory staff 10.00 80.00 72.00 720.00
Staff 30.00 60.00 54.00 1,630.00
Rounding (20.00)
I Subtotal 60.00 390.00 353.00 4,600.00
II Meals and lodging Included
Transportation Included
Report word processing and printing Included
• Other(specify) Included
Total 4,600.00
ISingle Audit:
Partners 4.00 150.00 138.00 550.00
Managers 4.00 100.00 90.00 360.00
Supervisory staff 12.00 80.00 73.00 870.00
Staff 20.00 60.00 54.00 1,080.00
IRounding (10.00)
Subtotal 40.00 390.00 355.00 2,850.00
I Meals and lodging Included
Transportation Included
Report word processing and printing Included
in Other(specify) Included
Total 2,850.00
1 Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
I ** Amounts in this column have been computed from the total cost for each staff
category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
1 35
FOR THE AUDIT OF THE 2004 FINANCIAL STATEMENTS
is Standard Quoted
Hourly Hourly
iiii Hours Rate Rate ** Total
Gann Limitation:
Partners 1.00 150.00 130.00 130.00
Managers 100.00
Supervisory staff 8.00 80.00 73.00 580.00
Staff 60.00
CSubtotal 9.00 390.00 203.00 710.00
Meals and lodging Included
L Transportation Included
Report word processing and printing Included
Other(specify) Included
LTotal 710.00
State Controller's Report:
Partners 1.00 150.00 130.00 130.00
LManagers 2.00 100.00 95.00 190.00
Supervisory staff 9.00 80.00 72.00 650.00
Staff 12.00 60.00 54.00 650.00
ESubtotal 24.00 390.00 351.00 1,620.00
L Meals and lodging Included
Transportation Included
Report word processing and printing Included
Other(specify) Included
LTotal 1,620.00
L
I Note: The rate quoted should not be presented as a general percentage of the
standard hourly rate or as a gross deduction from the total all-inclusive maximum
** Amounts in this column have been computed from the total cost for each staff
I category and rounded to even dollars; therefore, the Total Column will not
compute. Any difference in the total has been shown as rounding.
I
I36