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HomeMy WebLinkAboutItem LAGENDAREPORT DATE: June 11, 2001 TO: Honorable Mayor and City Council THRU: John B. Bahorski, City Manager FROM: Pamela Arends -King, Director of Administrative Services/Treasurer SUBJECT: Request to send out Proposals for Independent Auditing Firm SUMMARY OF REOUEST: Staff requests authorization from Council to send out Request for Proposals for auditing services for FY 2002/2003. BACKGROUND: At the April 23, 2001 Council Meeting, City Council took action instructing staff to send out a Request for Proposal for independent auditing services. FISCAL 11"ACT: Staff estimates the annual contract for auditing services will range from $31,000 to $40,000 annually. RECOMMENDATION: Staff recommends Council authorize sending out Request for Proposals for auditing services for FY 2002/2003. -Pamela Arends -King Director of Administrative Services/Treasurer j A PPROVE rs1 nger / Agenda Item � ,G. 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 Audi[ 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. The auditor is required to perform an annual review of the Citys 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. H. 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 January 1, 1989 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 27,400. The City is bordered by Long Beach, Westminster, Huntington Beach and Los Alamitos. Seal Beach operates as a "full service city', primarily utilizing contracts with other governmental entities, private firths 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 & 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 Citys recreation and lifeguard departments. The City's offices are located at 211 Eighth Street, Seal Beach, California, 90740- 6379. 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. Ll 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 Fund Structure The City currently utilizes the following funds and account groups: 1. 2. 3. 4. 5. 6. 7. 8. 9. iul General Fund - general operations of the City. Gasoline Tax Fund - state subventions for gasoline taxes. Capital Improvement Project Fund - major construction projects. Measure M Fund - proceeds of Measure M taxes. AB2766 Fund - proceeds of AB2766 (for air quality improvements). Local Law Enforcement Block Grant Fund - public safety Supplemental Law Enforcement Services Fund - proceeds of State's Citizens Options for Public Safety program. Agency Funds - funds held by the City in a trustee capacity. General Fixed Asset Account Group - accounts for City's general fixed assets. General Long -tens Debt Account Group - accounts for the City's general long -tens 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 Ad of 1984 and implementing regulations issued by the United States Office of Management and Budget (OMB) CircularA -133 will be required. E. Pension Plan The City is a member of the Califomia Public Employees Retirement System (PERS), an agent multiple - employer public employee retirement system that ads as a common investment and administrative agent for cities and school districts in California. F. Long -tens Debt The City's long -tens 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 City Manager 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 $ in the State of California Local Agency Investment Fund (LAIF) and $ in all 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 _ Number of cash disbursement per month - _ Number of purchase orders issued per month-- Number of cash receipt batches per month - _ Number of payroll checks per month - _ J. Computer System The City utilizes a Local Area Network (LAN) for all its data processing. It consists of approximately _ 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, Sall & 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 Auditors 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 forth, 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 Wont 97. 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 Dana Point Audit Proposal" and the proposers 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, June 28 2001, 211 Eighth Street, Seal Beach, California 90740 -6379. 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 Finns 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 firth 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 fines 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, Supervisors) 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 tens of this contract. C. Criteria for Selection Selection of the auditor shall be based upon the following criteria: Technical qualifications and experience of key members of the engagement team and the fine. 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 confinuity 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 July 24, 2001: May 22, 2001 Authorization of RFP release by City Council May 23, 2001 Mail RFP's to bidders June 28, 2001 Written proposals due by 2:00 p.m. June 30 -July 14, 2001 Review of proposals July 24, 2001 Recommendation to City Council July 31, 2001 Notification of bidders Attachments: Comprehensive Annual Financial Report — Fiscal Year Ended June 30, 1999 Contract for Auditing Services REQUEST FOR PROPOSALS - AUDIT SERVICES BIDDERS LIST Conrad & Associates Attn: Michael Harrison 1100 Main Street Irvine, CA 92714 (714)474 -2020 Diehl, Evans & Company Attn: N @in Patel 18401 Von Kansan Suite 200 Irvine, CA 92715 (714) 757 -7700 Lance, Soil & Lunghard Attn: David Hall 203 North Brea Boulevard Suite 203 Brea, CA 92821 -4056 Thomas, Bigbie & Smith Attn: Richard Teaman 4201 Brockton Ave., Suite 100 Riverside, CA 92501 (909)682 -4851 Vasquez Farukhi & Company, LLP Attn: Gilbert Vasquez 2860 North Santiago Blvd., Suite 200 Orange, CA 92667 AGREEMENT FOR AUDITING SERVICES THIS AGREEMENT is made and entered into this day of , 2001, by and between the CITY OF SEAL BEACH, a municipal corporation, hereinafter referred to as "CITY" and certified public accountants, hereinafter referred to as "AUDITOR." WITNESSETH: WHEREAS, on May 22, 2001, CITY invited bids for an independent audit of its financial statements and records; and WHEREAS, pursuant to said invitation, AUDITOR submitted a bid which was accepted by CITY for said professional service; and WHEREAS, AUDITOR is recognized as a competent and qualified certified public accountant, duly authorized to practice and licensed as such by the Califomia State Board of Accountancy. NOW THEREFORE, for and in consideration of the mutual promises, obligations, and covenants contained herein, the parties herein agree as follows: 1. TERM. The term of this Agreement shall be for a period of three (3) consecutive years, beginning with the fiscal year ending June 30, 2002. 2. CITYS OBLIGATIONS. For and in consideration of AUDITOR furnishing service(s) specified in this Agreement CITY shall pay and AUDITOR shall receive in full compensation a total sum not to exceed $ $ , and $ for the fiscal years ending June 30, 2002, 2003, and 2004, respectively. Payments to AUDITOR shall be made within thirty (30) days after receipt by CITY of invoices from AUDITOR, which shall be rendered not more often than monthly. Special examinations, surveys, or detailed reports of any nature outside the scope of this Agreement shall be billed separately by AUDITOR and must be specifically authorized in writing by CITY in advance of such additional services proposed to be provided. 3. AUDITOR'S OBLIGATIONS. For and in consideration of payments and agreements hereinafter mentioned to be made and performed by CITY, AUDITOR agrees with CITY to furnish those services as set forth in Attachment 1, Request for Proposal for Auditing Services, attached hereto and incorporated herein by reference, and to perform as required by this Agreement and the said specifications. 4. INSURANCE. AUDITOR shall procure and maintain for the entire tens of this Agreement, valid insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by AUDITOR, or AUDITOR'S agents, representatives, employees, or subcontractors. AUDITOR shall further maintain professional liability insurance in the amount of one - million dollars ($1,000,000.00) to protect CITY for AUDITOR'S negligent acts, errors, and/or omissions of a professional nature. 5. HOLD HARMLESS AND INDEMNIFICATION. AUDITOR, agrees to indemnify, defend, and hold harmless CITY, its officials, officers, employees, representatives, and agents from and against all claims, lawsuits, liabilities, or damages of whatever nature including without limitation all consequential damages arising out of or in connection with, or relating in any manner to work performed by AUDITOR, his agents, employees and subcontractors, and employees thereof pursuant to this Agreement. AUDITOR shall investigate and indemnify CITY and do whatever is necessary to protect CITY, its officials, officers, employees, agents, and representatives as to any such claims, lawsuits, liabilities, or damages. 6. AMENDMENTS. Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon written approval by the CITY'S Director of Financial Management. 7. TERMINATION. If, at any time during the term of this Agreement, CITY determines that AUDITOR is not faithfully abiding by any term or condition contained herein, CITY may notify AUDITOR in writing of such defect or failure to perform; which notice must give AUDITOR a ten (10)-day notice of time thereafter in which to perform said work or cure the deficiency. If AUDITOR has not performed the work or cured the deficiency within the ten (10) days specified in the notice, such shall constitute a breach of this Agreement and CITY may terminate this Agreement immediately by written notice to the AUDITOR to said effect. Thereafter, neither party shall have any further duties, obligations, responsibilities or rights under this Agreement except, however, any and all obligations of AUDITOR'S surety shall remain in full force and effect, and shall not be extinguished, reduced, or in any manner waived by the termination hereof. In said event, AUDITOR shall be entitled to the reasonable value of its services performed from the beginning of the period in which the breach occurs up to the day it received CITY'S Notice of Termination, less any offset from such payment representing the CITY'S damages from such breach. CITY reserves the right to delay any such payment until completion or confirmed abandonment of the project, as may be determined in the CITY'S sole discretion, so as to permit a full and complete accounting of costs. In no event, however, shall AUDITOR be entitled to receive in excess of the compensation quoted in its bid. 8. INCORPORATION BY REFERENCE. The Request for Proposal for Auditing Services, Attachment 1 hereto, and the proposal submitted by , on Attachment 2 hereto, are hereby incorporated by reference and made a part of this Agreement. 9. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the final, complete, and exclusive agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein or executed as an amendment hereto, shall be of any force or effect, nor shall any such oral agreement, understanding, or representation be binding upon the parties hereto. 10. CONTRACT ASSIGNMENT. AUDITOR shall not assign, transfer, convey, or otherwise dispose of this Agreement, or its right, title, or interest, or its power to execute such an Agreement to any individual or business entity of any kind without the prior written consent of CITY. 11. a. AUDITOR is, and at all times hereafter shall be, an independent contractor of CITY during the entire term of this Agreement. AUDITOR specifically recognizes and acknowledges said status as an independent contractor and not as an employee of CITY. All personnel of AUDITOR shall be employees of AUDITOR and not employees of CITY. AUDITOR shall pay all salaries and wages, employer's social security taxes, unemployment insurance and similar taxes relating to employees and shall be responsible for all withholding taxes. b. AUDITOR shall comply with all Federal and State statutes and regulations relating to the employer /employee relationship including, but not limited to, minimum wage, non - discrimination, equal opportunity, workers compensation, hazardous/unsanitary or dangerous surroundings, the Fair Labor Standards Act 29 USCA Section 201 et sec., and the Immigration Reform and Control Act of 1986 ' USCA Section 245(a) at seq. 12. ANTI - DISCRIMINATION. In the performance of the terms of this Agreement, AUDITOR agrees that it will not engage in discrimination in employment of persons because of the age, race, color, sex, national origin or ancestry, or religion of such persons. Violation of this provision may result in the imposition of penalties referred to in Labor Code Section 1735. 13. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: CITY: City of Seal Beach Attn: Director of Administrative Services 211 Eighth Street, Seal Beach, CA 90740 -6379 AUDITOR: Attention: All notices sent pursuant to this Agreement shall be deemed received (1) immediately if served by personal delivery, and (2) on the fifth day after deposited in the custody of the U.S. Postal Service if served by mail. 14. ATTORNEYS FEES. In the event an action is commenced by either party to enforce any rights under this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and court costs, in addition to any other relief granted by the Court. 15. CONFLICT OF INTEREST. a. All information gained by AUDITOR in performance of this Agreement shall be considered confidential and shall not be released by AUDITOR without CITY'S prior written authorization excepting that information which is a public record and subject to disclosure pursuant to the Public Records Act, government Code Section 6250 at seg. AUDITOR, its officers, employees, agents, or subcontractors, shall not voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories or other information conceming the project or cooperate in any way with a party who may be adverse to CITY or whom AUDITOR reasonably should know may be adverse in any subsequent litigation. AUDITOR shall incur no liability under this Agreement for materials submitted by it which are later released by CITY, its officers, employees, or agents. AUDITOR shall also incur no liability for statements made by it at any public meeting, or for any document released by it for which prior written CITY authorization was obtained. If AUDITOR or any of its officers, employees, consultants, or subcontractors does voluntarily provide information in violation of this Agreement, CITY has the right to reimbursement and indemnity from AUDITOR for any damages caused by AUDITOR'S conduct— including attorney's fees. AUDITOR shall promptly notify CITY should AUDITOR, its officers, employees, agents or subcontractors be served with any Summons, Complaint, Subpoena, Notice of Deposition, Request for Documents, Interrogatories, Request for Admissions or other discovery requests from any party regarding this agreement. and the work performed thereunder. CITY retains the right, but not the obligation, to represent AUDITOR and /or to be present at any deposition, hearing, or similar proceeding. AUDITOR agrees to cooperate fully with CITY and to provide CITY with the opportunity to review any response to discovery requests provided by AUDITOR. However, CITY'S right to review any such response does not imply or mean the right by CITY to control, direct, or rewrite said response. CITY warrants that AUDITOR will have fully met the requirements of this provision by obtaining CITY'S written approval prior to providing documents, testimony, or declarations; Consulting with CITY before responding to a Subpoena or court order, in the case of depositions upon providing Notice to CITY of same; or providing CITY opportunity to review discovery responses prior submission. For purposes of this section, a written authorization from CITY shall include a 'faxed" letter. b. AUDITOR covenants that neither they nor any officer or principal of their fine have any interests, nor shall they acquire any interest, directly or indirectly which will conflict in any manner or degree with the performance of their services hereunder. AUDITOR further covenants that in the performance of this Agreement, no person having such interest shall be employed by them as an officer, employee, agent, or subcontractor. AUDITOR further covenants that AUDITOR has not contracted with nor is performing any services directly or indirectly, with the developer(s) and /or property owners) and /or firm(s) and /or partnerships owning property in the CITY or the study area and further covenants and agrees that AUDITOR and /or its subcontractors shall provide no service or enter into any contract with a any developer(s) and /or property owner(s) and /or firm(s), and/or partnership(s) owning property in the CITY and /or study area prior to completion of this Agreement. 16. AUTHORITY TO EXECUTE AGREEMENT. Both CITY and AUDITOR hereby represent and covenant that each individual executing this Agreement on behalf of each party is a person duly authorized and empowered to execute agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. CITY OF SEAL BEACH: AUDITOR: By: By. John B. Bahorski City Mangaer ATTEST: Clerk APPROVED AS TO FORM: Quinn Barrow City Attorney