CC 2020-07-14_08b Agreement for Auditing ServicesMEMORANDUM
TO: CITY COUNCIL
BY: MICHAEL STEVENS, ADMINISTRATIVE SERVICES DIRECTOR
SUBJECT: CONSIDERATION OF AGREEMENT FOR AUDITING SERVICES
DATE: JULY 14, 2020
SUMMARY OF ACTION:
Approve an agreement for consulting services with Moss, Levi & Hartzheim LLP to
provide auditing services.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
The FY 2020-21 Budget included $34,000 for auditing services to perform the City’s FY
2019-20 annual financial audit and statutory reporting. Moss, Levi & Hartzheim’s
maximum cost to perform the FY 2019-20 audit in the current fiscal year is $28,080. Audit
services for Five City Fire Authority (FCFA) are also included in this agreement; however,
the cost for these services are solely the responsibility of the FCFA.
RECOMMENDATION:
It is recommended the City Council approve an agreement for auditing services with
Moss, Levi & Hartzheim LLP, Certified Public Accountants, for a period of three years
with an option to extend for two additional one-year periods, and authorize the Mayor to
execute the Agreement.
BACKGROUND:
Municipalities are required to hire external auditors to audit their financial statements
annually and to conduct evaluations of the entity’s internal controls. The auditor is
responsible for determining that the City’s financial statements do not include material
misstatements and do not misrepresent its financial condition. In addition, auditors
evaluate the City’s internal controls and procedures to reduce the risk of collusion, theft,
or fraud.
On March 5, 2020, the Administrative Services Department issued a Request for
Proposals (RFP) for auditing services to Certified Public Accounting (CPA) firms. Five
proposals were received by the RFP closing date of April 16, 2020. The selection process
was performed by the City’s audit selection team and was based on a set of scoring
criteria. The results of that scoring recommend awarding the City’s auditing services to
Moss, Levi & Hartzheim LLP (MLH).
Item 8.b. - Page 1
CITY COUNCIL
CONSIDERATION OF AGREEMENT FOR AUDITING SERVICES
JULY 14, 2020
PAGE 2
The City’s previous agreement for audit services, which happens to be with MLH, expired
on June 30, 2020. In the past, the City has been satisfied with MLH’s performance,
responsiveness and audit procedures.
ANALYSIS OF ISSUES:
As discussed, the City audit selection team is recommending approval of a three-year
audit service agreement with MLH, with an additional two one-year extensions based on
satisfactory performance. The City audit selection team evaluated the various CPA firm
proposals based on several criteria including: understanding of the work to be performed;
the auditor’s experience in conducting audits of cities of similar nature, size and
complexity; technical experience and professional qualifications of the audit team; the
firms’ commitment to keeping the same team assigned to the job for each successive
year; the ability of the proposed approach to meet the needs of the City and price. While
price was a component of the evaluation criteria, it was not the most important factor in
evaluating the proposals. The table below reflects the vendor’s pricing proposals.
Firm FY 2019-20 FY 2020-21 FY 2021-22
Glenn Burdette Attest Company $40,100 $41,080 $42,180
Moss, Levi & Hartzheim $28,080 $28,080 $28,935
JJAPC $39,500 $39,500 $39,500
Rogers, Anderson, Malody & Scott $41,795 $41,795 $41,795
Vasquez & Company $27,000 $27,800 $28,600
One other factor influencing the decision to recommend MLH is that they are a local firm
based out of Santa Maria. In addition, they have more than 42 years of experience
performing nonprofit and governmental audits. They demonstrate extensive experience
with cities of similar nature, size and complexity and currently provide audit services to
the cities of Atascadero, Grover Beach, Buellton, Goleta and Santa Maria. The firm has
a history of technical experience and CPA professionals that specialize in governmental
accounting and at a cost that is competitive.
Based on Government Code section 12410.6.(b), which requires that the audit partner
with primary responsibility for the audit should be rotated after six consecutive years of
leading the audit, the City will request that a new MLH audit partner is assigned to lead
the City’s audit work in order to meet Government Code, to get a different perspective,
and to ensure objectivity.
ALTERNATIVES:
1. Approve the agreement with MLH;
2. Do not approve the agreement with MLH and contract with one of the other CPA
firms; or
3. Provide direction to staff.
Item 8.b. - Page 2
CITY COUNCIL
CONSIDERATION OF AGREEMENT FOR AUDITING SERVICES
JULY 14, 2020
PAGE 2
ADVANTAGES:
Awarding the agreement to MLH will provide the City with a qualified accounting firm to
perform the City’s required audit and reporting requirements and within the approved
budget. Contracting with MLH also provides advantages of operational familiarity and
efficiencies for both City and MLH staff.
DISADVANTAGES:
The disadvantage of the recommendation is that other qualified audit firms will not be
selected. The City may not benefit from a different audit firm’s perspective, interpretations
and audit process.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Item 8.b. - Page 3
Page 1
AGREEMENT FOR CONSULTANT SERVICES
This AGREEMENT FOR CONSULTANT SERVICES (“Agreement”), is made and
effective as of July 14, 2020, between Moss, Levy & Hartzheim LLP (“Consultant”), and
the CITY OF ARROYO GRANDE, a Municipal Corporation (“City”). In consideration of
the mutual covenants and conditions set forth herein, the parties agree as follows:
1. TERM
This Agreement shall commence on July 1, 2020 and shall remain and continue in
effect for a period of three years (the “Initial Term”), or until completion of services as set
forth herein, unless sooner terminated pursuant to the provisions of this Agreement. This
Agreement may be extended for two additional one-year periods after the Initial Term
upon written agreement by City and Consultant. All terms and conditions of this
Agreement shall apply to any additional one year terms.
2. SERVICES
Consultant shall perform the tasks described and comply with all terms and
provisions set forth in the City’s Request For Proposals, Exhibit “A,” attached hereto and
incorporated herein by this reference.
3. PERFORMANCE
Consultant shall at all times faithfully, competently and to the best of his/her ability,
experience and talent, perform all tasks described herein. Consultant shall employ, at a
minimum generally accepted standards and practices utilized by persons engaged in
providing similar services as are required of Consultant hereunder in meeting its
obligations under this Agreement.
4. AGREEMENT ADMINISTRATION
City’s Director of Administrative Services shall represent City in all matters
pertaining to the administration of this Agreement. Ron A. Levy, CPA shall represent
Consultant in all matters pertaining to the administration of this Agreement.
5. PAYMENT
The City agrees to pay the Consultant in accordance with the payment rates and
terms set forth in Consultant’s Proposal, Exhibit “B,” attached hereto and incorporated
herein by this reference.
6. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE
(a) The City may at any time, for any reason, with or without cause, suspend or
terminate this Agreement, or any portion hereof, by serving upon the Consultant at least
Item 8.b. - Page 4
Page 2
ten (10) days prior written notice. Upon receipt of said notice, the Consultant shall
immediately cease all work under this Agreement, unless the notice provides otherwise.
If the City suspends or terminates a portion of this Agreement such suspension or
termination shall not make void or invalidate the remainder of this Agreement.
(b) In the event this Agreement is terminated pursuant to this Section, the City
shall pay to Consultant the actual value of the work performed up to the time of
termination, provided that the work performed is of value to the City. Upon termination of
the Agreement pursuant to this Section, the Consultant will submit an invoice to the City
pursuant to Section 5.
7. TERMINATION ON OCCURRENCE OF STATED EVENTS
This Agreement shall terminate automatically on the occurrence of any of the
following events:
(a) Bankruptcy or insolvency of any party;
(b) Sale of Consultant’s business; or
(c) Assignment of this Agreement by Consultant without the consent of City.
(d) End of the Agreement Initial Term specified in Section 1, unless otherwise
extended.
8. DEFAULT OF CONSULTANT
(a) The Consultant’s failure to comply with the provisions of this Agreement
shall constitute a default. In the event that Consultant is in default for cause under the
terms of this Agreement, City shall have no obligation or duty to continue compensating
Consultant for any work performed after the date of default and can terminate this
Agreement immediately by written notice to the Consultant. If such failure by the
Consultant to make progress in the performance of work hereunder arises out of causes
beyond the Consultant’s control, and without fault or negligence of the Consultant, it shall
not be considered a default.
(b) If the City Manager or his/her delegate determines that the Consultant is in
default in the performance of any of the terms or conditions of this Agreement, he/she
shall cause to be served upon the Consultant a written notice of the default. The
Consultant shall have ten (10) days after service upon it of said notice in which to cure
the default by rendering a satisfactory performance. In the event that the Consultant fails
to cure its default within such period of time, the City shall have the right, notwithstanding
any other provision of this Agreement to terminate this Agreement without further notice
and without prejudice to any other remedy to which it may be entitled at law, in equity or
under this Agreement.
Item 8.b. - Page 5
Page 3
9. LAWS TO BE OBSERVED. Consultant shall:
(a) Procure all permits and licenses, pay all charges and fees, and give all
notices which may be necessary and incidental to the due and lawful prosecution of the
services to be performed by Consultant under this Agreement;
(b) Keep itself fully informed of all existing and proposed federal, state and local
laws, ordinances, regulations, orders, and decrees which may affect those engaged or
employed under this Agreement, any materials used in Consultant’s performance under
this Agreement, or the conduct of the services under this Agreement;
(c) At all times observe and comply with, and cause all of its employees to
observe and comply with all of said laws, ordinances, regulations, orders, and decrees
mentioned above;
(d) Immediately report to the City’s Contract Manager in writing any
discrepancy or inconsistency it discovers in said laws, ordinances, regulations, orders,
and decrees mentioned above in relation to any plans, drawings, specifications, or
provisions of this Agreement.
(e) The City, and its officers, agents and employees, shall not be liable at law
or in equity occasioned by failure of the Consultant to comply with this Section.
10. OWNERSHIP OF DOCUMENTS
(a) Consultant shall maintain complete and accurate records with respect to sales,
costs, expenses, receipts, and other such information required by City that relate to the
performance of services under this Agreement. Consultant shall maintain adequate
records of services provided in sufficient detail to permit an evaluation of services. All
such records shall be maintained in accordance with generally accepted accounting
principles and shall be clearly identified and readily accessible. Consultant shall provide
free access to the representatives of City or its designees at reasonable times to such
books and records; shall give City the right to examine and audit said books and records;
shall permit City to make transcripts therefrom as necessary; and shall allow inspection
of all work, data, documents, proceedings, and activities related to this Agreement. Such
records, together with supporting documents, shall be maintained for a period of five (5)
years after receipt of final payment.
(b) Upon completion of, or in the event of termination or suspension of this
Agreement, all original documents, designs, drawings, maps, models, computer files,
surveys, notes, and other documents prepared in the course of providing the services to
be performed pursuant to this Agreement shall become the sole property of the City and
may be used, reused, or otherwise disposed of by the City without the permission of the
Consultant. With respect to computer files, Consultant shall make available to the City, at
the Consultant’s office and upon reasonable written request by the City, the necessary
computer software and hardware for purposes of accessing, compiling, transferring, and
Item 8.b. - Page 6
Page 4
printing computer files. Upon request by City, Consultant shall make available all work
papers and reports to any successor auditor in a timely manner.
11. INDEMNIFICATION
(a) Indemnification for Professional Liability. When the law establishes a
professional standard of care for Consultant’s Services, to the fullest extent permitted by
law, Consultant shall indemnify, protect, defend and hold harmless City and any and all
of its officials, employees and agents (“Indemnified Parties”) from and against any and all
losses, liabilities, damages, costs and expenses, including attorney’s fees and costs to
the extent same are caused in whole or in part by any negligent or wrongful act, error or
omission of Consultant, its officers, agents, employees or subcontractors or any entity or
individual that Consultant shall bear the legal liability thereof) in the performance of
professional services under this agreement.
(b) Indemnification for Other Than Professional Liability. Other than in the
performance of professional services and to the full extent permitted by law, Consultant
shall indemnify, defend and hold harmless City, and any and all of its employees, officials
and agents from and against any liability (including liability for claims, suits, actions,
arbitration proceedings, administrative proceedings, regulatory proceedings, losses,
expenses or costs of any kind, whether actual, alleged or threatened, including attorneys’
fees and costs, court costs, interest, defense costs, and expert witness fees), where the
same arise out of, are a consequence of, or are in any way attributable to, in whole or in
part, the performance of this Agreement by Consultant or by any individual or entity for
which Consultant is legally liable, including but not limited to officers, agents, employees
or subcontractors of Consultant.
(c) General Indemnification Provisions. Consultant agrees to obtain executed
indemnity agreements with provisions identical to those set forth here in this section from
each and every subcontractor or any other person or entity involved by, for, with or on
behalf of Consultant in the performance of this agreement. In the event Consultant fails
to obtain such indemnity obligations from others as required here, Consultant agrees to
be fully responsible according to the terms of this section. Failure of City to monitor
compliance with these requirements imposes no additional obligations on City and will in
no way act as a waiver of any rights hereunder. This obligation to indemnify and defend
City as set forth here is binding on the successors, assigns or heirs of Consultant and
shall survive the termination of this agreement or this section.
12. INSURANCE
Consultant shall maintain prior to the beginning of and for the duration of this
Agreement insurance coverage as specified in Exhibit “C,” attached hereto and
incorporated herein as though set forth in full.
Item 8.b. - Page 7
Page 5
13. INDEPENDENT CONSULTANT
(a) Consultant is and shall at all times remain as to the City a wholly independent
Consultant. The personnel performing the services under this Agreement on behalf of
Consultant shall at all times be under Consultant’s exclusive direction and control. Neither
City nor any of its officers, employees, or agents shall have control over the conduct of
Consultant or any of Consultant’s officers, employees, or agents, except as set forth in
this Agreement. Consultant shall not at any time or in any manner represent that it or any
of its officers, employees, or agents are in any manner officers, employees, or agents of
the City. Consultant shall not incur or have the power to incur any debt, obligation, or
liability whatever against City, or bind City in any manner.
(b) No employee benefits shall be available to Consultant in connection with
performance of this Agreement. Except for the fees paid to Consultant as provided in the
Agreement, City shall not pay salaries, wages, or other compensation to Consultant for
performing services hereunder for City. City shall not be liable for compensation or
indemnification to Consultant for injury or sickness arising out of performing services
hereunder.
14. UNDUE INFLUENCE
Consultant declares and warrants that no undue influence or pressure was or is
used against or in concert with any officer or employee of the City of Arroyo Grande in
connection with the award, terms or implementation of this Agreement, including any
method of coercion, confidential financial arrangement, or financial inducement. No officer
or employee of the City of Arroyo Grande will receive compensation, directly or indirectly,
from Consultant, or from any officer, employee or agent of Consultant, in connection with
the award of this Agreement or any work to be conducted as a result of this Agreement.
Violation of this Section shall be a material breach of this Agreement entitling the City to
any and all remedies at law or in equity.
15. NO BENEFIT TO ARISE TO LOCAL EMPLOYEES
No member, officer, or employee of City, or their designees or agents, and no
public official who exercises authority over or responsibilities with respect to the project
during his/her tenure or for one year thereafter, shall have any interest, direct or indirect,
in any agreement or sub-agreement, or the proceeds thereof, for work to be performed in
connection with the project performed under this Agreement.
16. RELEASE OF INFORMATION/CONFLICTS OF INTEREST
(a) All information gained by Consultant in performance of this Agreement shall be
considered confidential and shall not be released by Consultant without City’s prior written
authorization. Consultant, its officers, employees, agents, or subcontractors, shall not
without written authorization from the City Manager or unless requested by the City
Attorney, voluntarily provide declarations, letters of support, testimony at depositions,
Item 8.b. - Page 8
Page 6
response to interrogatories, or other information concerning the work performed under
this Agreement or relating to any project or property located within the City. Response to
a subpoena or court order shall not be considered “voluntary” provided Consultant gives
City notice of such court order or subpoena.
(b) Consultant shall promptly notify City should Consultant, 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 request, court order, or subpoena from any person or party regarding this
Agreement and the work performed thereunder or with respect to any project or property
located within the City. City retains the right, but has no obligation, to represent Consultant
and/or be present at any deposition, hearing, or similar proceeding. Consultant agrees to
cooperate fully with City and to provide the opportunity to review any response to
discovery requests provided by Consultant. 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.
17. NOTICES
Any notice which either party may desire to give to the other party under this
Agreement must be in writing and may be given either by (i) personal service, (ii) delivery
by a reputable document delivery service, such as but not limited to, Federal Express,
which provides a receipt showing date and time of delivery, or (iii) mailing in the United
States Mail, certified mail, postage prepaid, return receipt requested, addressed to the
address of the party as set forth below or at any other address as that party may later
designate by notice:
To City: City of Arroyo Grande
Director of Administrative Services
300 E. Branch Street
Arroyo Grande, CA 93420
To Consultant: Moss, Levy & Hartzheim, LLP
Ron A. Levy, Partner
2400 Professional Pkwy, Ste 205
Santa Maria, CA 93455
18. ASSIGNMENT
The Consultant shall not assign the performance of this Agreement, nor any part
thereof, without the prior written consent of the City.
19. GOVERNING LAW
The City and Consultant understand and agree that the laws of the State of
California shall govern the rights, obligations, duties, and liabilities of the parties to this
Item 8.b. - Page 9
Page 7
Agreement and also govern the interpretation of this Agreement. Any litigation concerning
this Agreement shall take place in the superior or federal district court with jurisdiction
over the City of Arroyo Grande.
20. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to
the obligations of the parties described in this Agreement. All prior or contemporaneous
agreements, understandings, representations, and statements, or written, are merged
into this Agreement and shall be of no further force or effect. Each party is entering into
this Agreement based solely upon the representations set forth herein and upon each
party’s own independent investigation of any and all facts such party deems material.
21. TIME
City and Consultant agree that time is of the essence in this Agreement.
22. CONTENTS OF REQUEST FOR PROPOSAL AND PROPOSAL
Consultant is bound by the contents of the City’s Request for Proposal, Exhibit “A”,
attached hereto and incorporated herein by this reference, and the contents of the
proposal submitted by the Consultant. In the event of conflict, the requirements of City’s
Request for Proposals and this Agreement shall take precedence over those contained
in the Consultant’s proposals.
23. CONSTRUCTION
The parties agree that each has had an opportunity to have their counsel review
this Agreement and that any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not apply in the interpretation of this Agreement
or any amendments or exhibits thereto. The captions of the sections are for convenience
and reference only, and are not intended to be construed to define or limit the provisions
to which they relate.
24. AMENDMENTS
Amendments to this Agreement shall be in writing and shall be made only with the
mutual written consent of all of the parties to this Agreement.
25. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of Consultant warrants
and represents that he/she has the authority to execute this Agreement on behalf of the
Consultant and has the authority to bind Consultant to the performance of its obligations
hereunder.
Item 8.b. - Page 10
Page 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the day and year first above written.
CITY OF ARROYO GRANDE CONSULTANT
By:__________________________ By:____________________________
Caren Ray Russom, Mayor
Its:____________________________
Attest: (Title)
____________________________
Kelly Wetmore, City Clerk
Approved As To Form:
_____________________________
Timothy J. Carmel, City Attorney
Item 8.b. - Page 11
Page 9
EXHIBIT A
CITY’S REQUEST FOR PROPOSAL
REQUEST FOR PROPOSALS
FOR
PROFESSIONAL AUDITING SERVICES
DUE DATE: Thursday, April 16, 2020 at 3:00 p.m
Item 8.b. - Page 12
Page 10
CITY OF ARROYO GRANDE
REQUEST FOR PROPOSALS FOR
PROFESSIONAL AUDITING SERVICES
I. PROPOSAL INTENT
The City of Arroyo Grande is soliciting the services of qualified CPA firms to audit all funds
of the City of Arroyo Grande for a period of three years, with an option to extend for two
additional one-year periods. These audits are to be performed in accordance with
generally accepted auditing standards, the standards set forth for financial audits in the
U.S. Government Accountability Office’s (GAO) Government Auditing Standards (GAS),
the provisions of the Federal Single Audit Act and the U.S. Office of Management and
Budget (OMB) Circular A-133, and Governmental Accounting Standards Board (GASB)
Pronouncements.
We have made every effort to include sufficient information within this Request for
Proposals for an auditor to prepare a responsive, comprehensive proposal. In order to
achieve an equitable dissemination of information, a pre-proposal teleconference will be
held on March 26, 2020 at 2:00 pm to allow all interested CPA firms to ask questions for
the mutual benefit of all involved. All questions and correspondence must be directed to
Nicole Valentine, Accounting Manager at nvalentine@arroyogrande.org no later than
March 19, 2020. The questions and answers will then be forwarded to all firms that provide
an email address, and posted on the City’s website, no later than March 31, 2020.
The City’s Comprehensive Annual Financial Report (CAFR) from prior fiscal years are
located on the City’s website at:
www.arroyogrande.org/departments/administrative-services/annual-financial-reports/.
BACKGROUND
The City of Arroyo Grande:
The City of Arroyo Grande (the City) is a full-service city, which currently comprises 5.45
square miles and serves approximately 17,900 residents. It is located on the Central Coast
of California, halfway between Los Angeles and San Francisco.
The City provides full range of services including: police protection, the transmission and
distribution of water and wastewater, recreation and cultural events, the construction and
maintenance of parks, facilities, streets and highways, as well as other general
government activities.
The City provides fire service to its citizens through the Five Cities Fire Authority (FCFA),
a Joint Powers Authority between the Cities of Arroyo Grande, Grover Beach and the
Oceano Community Services District. The City provides financial services to FCFA.
The City is the Successor Agency of the Dissolved Arroyo Grande Redevelopment Agency
(the Agency). The Agency is included in the City’s financial statements as part of the
Private Purpose Trust Fund.
Item 8.b. - Page 13
Page 11
The Finance Staff:
The Administrative Services department administers the City’s operating activities for
Treasury, Utility Billing, Business Licenses and Purchasing. The department also
administers the financial activities for the General Ledger, Accounts Payable, and Payroll.
It also leads the City’s budget preparation process and is responsible for the preparation
of the Comprehensive Annual Financial Report and special reports as required by law.
The City of Arroyo Grande uses Eden Inforum Gold software for general ledger, budget,
accounts payable, and payroll accounting.
Number of Individual Funds by Type:
Governmental Funds:
General Fund 1
Special Revenue Funds 24
Capital Projects Fund 1
Debt Service Funds 2
Total Governmental Funds 28
Proprietary Funds:
Enterprise Funds 3
Total Proprietary Funds 3
Fiduciary Funds:
Private-Purpose Trust Fund 1
Agency Funds 2
Total Fiduciary Funds 3
Total Funds 34
III. SCOPE OF WORK
The selected audit firm will perform a financial and compliance audit to determine whether
the combined financial statements of the City fairly present the financial position and the
results of financial operations in accordance with generally accepted accounting principles,
and whether the City has complied with laws and regulations that may have a material
effect upon the financial statements.
The auditors will examine the City’s internal accounting controls and accounting
procedures and render written reports of their findings and recommendations to the
Director of Administrative Services and/or the City Manager. The examination shall be
made and reports rendered in accordance with generally accepted government auditing
standards.
In the required reports on internal controls, the auditor shall communicate any reportable
conditions found during the audit. A reportable condition shall be defined as a significant
deficiency in the design or operation of the internal control structure, which could adversely
Item 8.b. - Page 14
Page 12
affect the organization’s ability to record, process, summarize, and report financial data
consistent with the assertions of management in the financial statements.
Reportable conditions that are also material weaknesses shall be identified as such in the
report. Non-reportable conditions discovered by auditors shall be reported in a separate
letter to management, which shall be referred to in the reports on internal controls.
The auditors shall be required to make an immediate, written report of all irregularities and
illegal acts or indications of illegal acts of which they become aware to the following parties:
City Manager; City Attorney; and the Director of Administrative Services.
The Director of Administrative Services or designee will be responsible for coordinating
the audit process internally. The auditors will meet with the Director of Administrative
Services or designee at the end of the fieldwork process to discuss preliminary audit
findings and management recommendations.
The Auditor will prepare a DRAFT CAFR (including schedules, notes and statistics) from
the financial system as of June 30th of each fiscal year under contract.
Prior to issuing their final reports, the auditors will meet with the Director of Administrative
Services and/or designee. All audit reports will be addressed to the City Council.
The auditors may be consulted occasionally throughout the year as an information
resource. The auditors may be asked to provide guidance on implementation of GASB
requirements and specifics of federal and state regulations as they may affect local
government accounting. They may also be asked to assist with the implementation of new
pronouncements.
Additional Stand Alone Reports:
The City generally does not have federal expenditures that exceed $750,000 and therefore
is not subject to the single audit requirements. However, in years where the City’s federal
expenditures exceeded $750,000, there has usually been one major program. If required,
the auditors will perform a single audit on the expenditures of federal grants in accordance
with OMB Circular A-133 and render the appropriate audit reports on Internal Controls over
Financial Reporting based up on the audit of the City’s financial statements in accordance
with Government Auditing Standards and the appropriate reports on compliance with
Requirements Applicable to each Major Program, Internal Control over Compliance and
on the Schedule of Expenditures of Federal Awards in Accordance with OMB Circular A-
133. The single audit report will include appropriate schedule of expenditures of federal
awards, footnotes, findings and questioned costs, including reportable conditions and
material weaknesses, and follow up on prior audit findings where required. In addition, the
auditor will be required to submit the report to the federal clearing house.
The City receives funding under the Transportation Development Act (TDA) through the
San Luis Obispo Council of Governments (SLOCOG). SLOCOG requires a financial and
compliance audit of funds received and expended from Section 99400, 99234, and 99260
of the Public Utilities code. The auditors will be required to perform this audit and prepare
the required report.
Item 8.b. - Page 15
Page 13
As mentioned earlier, the City provides financial services to FCFA. As part of this proposal,
the auditors will perform audit services, as well as, provide an opinion on FCFA’s basic
financial statements.
The auditor, subject to an amendment, will prepare any other special purpose audits that
may be required during the term of the agreement.
City Responsibilities:
The City responsibilities will be to prepare the final closing of the books. The City will
provide balance sheets for all funds and groups, statement of revenues and expenditures
for all funds as well as detailed subsidiary ledgers.
The City will produce the confirmation letters that are mailed by the auditors.
The City staff will be available to assist the auditors in locating records or preparing audit
schedules.
The City will provide the auditor with reasonable workspace, desks, and chairs. The
auditors will also be furnished access to telephones, facsimile machines, and
photocopying machines.
IV. PROPOSAL REQUIREMENTS
Independence
The firm should provide an affirmative statement that it is independent of the City of Arroyo
Grande as defined by generally accepted auditing standards. Moreover, the firm must have
no conflict of interest with regard to any other work performed for the entity being audited.
It is understood that the services performed by the auditors are in the capacity of
independent contractors and not as an officer, agent, or employee of the City.
License to Practice in California
An affirmative statement should be included indicating that the firm and all assigned key
professional staff are properly licensed to practice in California.
Firm Qualifications and Experience
The proposal should state the size of the firm, the location of the office from which the work
on this engagement is to be performed, and the number of the staff that will be assigned
to the audit. Indicate the scope of work, date, engagement partners, total hours, and the
name and telephone number of the principal client contact.
The firm shall provide information on the results of any federal or state desk reviews or
field reviews of its audits during the past three (3) years. In addition, the firm shall provide
information on the circumstances and status of any disciplinary action taken or pending
against the firm during the past three (3) years with state regulatory bodies or professional
organizations.
Item 8.b. - Page 16
Page 14
For the firm’s office that will be assigned responsibility for the audit, list the most significant
engagements (maximum 5) performed in the last five years that are similar to the
engagement described in this request for proposals.
Partner, Supervisory and Staff Qualifications and Experience
The firm shall identify the principal supervisory and management staff, including
engagement partners, managers, other supervisors and specialists, who would be
assigned to the engagement and indicate whether each such person is licensed to practice
as a certified public accountant in the State of California. The firm should also provide
information on the staff’s governmental auditing experience.
The firm should provide as much information as possible, regarding the number,
qualifications, experience and training of the specific staff to be assigned to this
engagement.
The firm should also provide information regarding the processes or procedures it uses to
ensure compliance with AB 1345.
Total All-Inclusive Maximum Price
The proposal should contain all pricing information relative to performing the audit
engagement as described in this request for proposals. The total all-inclusive maximum
price to be proposed is to contain all direct and indirect costs.
The proposal should include a schedule of professional fees and expenses, which support
the total of the all-inclusive maximum price.
The proposal should itemize the maximum price option for: 1) performing auditing services
and financial statement assistance for the City of Arroyo Grande for all funds; 2) performing
auditing services and financial statement assistance for the Five Cities Fire Authority; 3)
performing compliance audit for Single Audit requirements, if applicable; and 4) performing
compliance audit for the Transportation Development Act, in accordance with the
requirements of San Luis Obispo Council of Governments.
Ownership of City Related Documents
All property rights, including publication rights of all reports produced by the selected firm
in connection with services performed under this agreement shall be vested in the City of
Arroyo Grande. The selected firm shall not publish or release any of the results of its
examinations without express written permission from the City.
Working Paper Retention and Access to Work Papers
All work papers must be retained, at the auditor’s expense, for a minimum of five (5) years,
unless the auditor is notified in writing by the City of the need to reduce this retention
period. The auditors will be required to make working papers available to the City and any
other third parties authorized by the City. At the completion of this contract, the auditor will
make available all work papers and reports to the successor auditor in a timely manner.
Item 8.b. - Page 17
Page 15
Acceptance of Proposal Contents
After auditors are selected by the City, the contents of the submitted proposal will become
a contractual obligation. The successful firm will be required to execute a standard
consultant agreement with the City, an example of which is included as Attachment 1.
Acceptance or Rejection and Negotiation of Proposals
The City reserves the right to reject any or all proposals, to waive non-material irregularities
or information in the request for proposal, and to accept or reject any item or combination
of items. By requesting proposals, the City is in no way obligated to award a contract or to
pay expenses of the proposing firms in connection with the preparation or submission of a
proposal. Furthermore, the City reserves the right to reject any and all proposals prior to
the execution of the contract(s), with no penalty to the City of Arroyo Grande.
V. PROPOSAL FORMAT AND CONTENT
Firms desiring to respond shall make their proposals brief and concise, yet with sufficient
detail to allow for a thorough evaluation. The purpose is to demonstrate the qualification,
competence and capacity of the firms seeking to undertake the independent audit of the
City. As such, the substance of the proposals will carry more weight than their form or
manner of presentation. Each proposal shall include as a minimum the following
information in this format:
A. Introduction
Present an introduction to the proposal describing the firm’s understanding of the desired
work. Include a detailed description of the methods by which the consultant intends to
perform the work set forth in the Scope of Services.
B. Qualifications
Include a brief description of the firm’s background, experience with similar projects, and
resumes of key personnel proposed to work on the project.
C. Work Plan
Provide a tentative schedule by phase, key task, and proposed compensation for completing
the work. This schedule, as modified to be acceptable to the City, will be used as an Exhibit
to the Agreement between the City and the successful consultant.
D. Costs
Item 8.b. - Page 18
Page 16
Submit a cost proposal, which includes a performance and cost schedule for all services
necessary to complete this project. The proposal should include a separate all-inclusive cost
for each of the three years of the contract. The proposal should specify the major
components, the cost breakdown by major component or phase, and the expected time of
completion for each component based on the scope of services outlined in the proposal.
The proposal should include, a total proposed, “not to exceed” costs of the services,
including a fee and rate schedule describing all charges and hourly rates for services. Cost
will not be the deciding factor in making the selection.
E. References
List former clients for whom similar or comparable services have been performed. Include
the name, mailing address, and telephone number of the appropriate contact person.
VI. SELECTION PROCESS
The proposals for the City’s audit will be evaluated by the Director of Administrative Services
and staff. Evaluation considerations will include the following:
A. Responsiveness of the proposal in clearly stating the understanding of the work to
be performed and in demonstrating the intention and ability to perform the work.
B. Cost. Although a significant factor, other factors will be considered.
C. Auditors’ experience in conducting audits of cities of similar nature, size, and
complexity, and the auditors’ commitment to maintaining technical expertise in the
municipal financial environment.
D. Technical experience and professional qualifications of the audit team.
E. The firm’s commitment to keeping the same team assigned to this job for each
successive year the auditor is awarded the contract.
F. Ability of proposed approach to meet the needs of the City.
Item 8.b. - Page 19
Page 17
VII. TENTATIVE SCHEDULE
The timing of the proposal process is subject to change, depending on the needs of the City, but
is anticipated as follows:
............................................................................................. RFP released March 5, 2020
............................................................................................. Pre-Proposal Teleconference March
26, 2020
............................................................................................. Proposals Due April 16, 2020
Interviews (if requested) ............................................ April 20 – 23, 2020
Select Consultant ...................................................... April 27, 2020
Finalize Agreement ................................................... May 7, 2020
City Council Consideration ........................................ May 12, 2020
VIII. SUBMITTAL
A. Submit a total of 2 hard copies and one electronic copy to:
Nicole Valentine
Accounting Manager
300 E. Branch Street
Arroyo Grande, CA 93420
B. Show the following information on the outside of the package:
Firm’s name and address
Audit Services Proposal
C. The proposal must be received at the above address by the closing date and time.
Firms mailing or shipping their proposals must allow sufficient delivery time to ensure
timely receipt of their proposals by the time specified. Late proposals will not be
accepted.
D. Closing Date: All proposals must be received by Friday, April 16, 2020 at 3:00 p.m.
G. The City reserves the right to reject any or all proposals for any or no reason.
H. For more information, please contact Nicole Valentine at
nvalentine@arroyogrande.org.
Item 8.b. - Page 20
Page 18
EXHIBIT B
CONSULTANT’S PROPOSAL
The following cost schedule is a total all-inclusive maximum cost per year of the
contract:
Audit Service
Fixed Term
FY 2019‐20
Fixed Term
FY 2020‐21
Fixed Term
FY 2021‐22
Option Year
FY 2022‐23
Option Year
FY 2023‐24
City Audit 20,080$ 20,080$ 20,785$ 21,510$ 22,260$
CAFR prepearation 4,500 4,500 4,650 4,810 4,975
TDA audits 2,000 2,000 2,000 2,000 2,000
Single Audit Act Report (if required) 1,500 1,500 1,500 1,500 1,500
Total City Cost 28,080$ 28,080$ 28,935$ 29,820$ 30,735$
FCFA audit and financial statements 7,125$ 7,125$ 7,375$ 7,635$ 7,900$
Total Maximum All‐Inclusive Price 35,205$ 35,205$ 36,310$ 37,455$ 38,635$
Item 8.b. - Page 21
Page 19
EXHIBIT C
INSURANCE REQUIREMENTS
Prior to the beginning of and throughout the duration of the Work, Consultant will maintain
insurance in conformance with the requirements set forth below. Consultant will use
existing coverage to comply with these requirements. If that existing coverage does not
meet the requirements set forth here, Consultant agrees to amend, supplement or
endorse the existing coverage to do so. Consultant acknowledges that the insurance
coverage and policy limits set forth in this section constitute the minimum amount of
coverage required. Any insurance proceeds available to City in excess of the limits and
coverage required in this agreement and which is applicable to a given loss, will be
available to City.
Consultant shall provide the following types and amounts of insurance:
Commercial General Liability Insurance using Insurance Services Office “Commercial
General Liability” policy from CG 00 01 or the exact equivalent. Defense costs must be
paid in addition to limits. There shall be no cross liability exclusion for claims or suits by
one insured against another. Limits are subject to review but in no event less than
$1,000,000 per occurrence.
Business Auto Coverage on ISO Business Auto Coverage from CA 00 01 including
symbol 1 (Any Auto) or the exact equivalent. Limits are subject to review, but in no event
to be less than $1,000,000 per accident. If Consultant owns no vehicles, this requirement
may be satisfied by a non-owned auto endorsement to the general liability policy
described above. If Consultant or Consultant’s employees will use personal autos in any
way on this project, Consultant shall provide evidence of personal auto liability coverage
for each such person.
Workers Compensation on a state-approved policy form providing statutory benefits as
required by law with employer’s liability limits no less than $1,000,000 per accident or
disease.
Excess or Umbrella Liability Insurance (Over Primary) if used to meet limit requirements,
shall provide coverage at least as broad as specified for the underlying coverages. Any
such coverage provided under an umbrella liability policy shall include a drop down
provision providing primary coverage above a maximum $25,000 self-insured retention
for liability not covered by primary but covered by the umbrella. Coverage shall be
provided on a “pay on behalf” basis, with defense costs payable in addition to policy limits.
Policy shall contain a provision obligating insurer at the time insured’s liability is
determined, not requiring actual payment by the insured first. There shall be no cross
liability exclusion precluding coverage for claims or suits by one insured against another.
Coverage shall be applicable to City for injury to employees of Consultant, subcontractors
or others involved in the Work. The scope of coverage provided is subject to approval of
Item 8.b. - Page 22
Page 20
City following receipt of proof of insurance as required herein. Limits are subject to review
but in no event less than $1,000,000 per occurrence.
Professional Liability or Errors and Omissions Insurance as appropriate shall be written
on a policy form coverage specifically designated to protect against acts, errors or
omissions of the Consultant and “Covered Professional Services” as designated in the
policy must specifically include work performed under this agreement. The policy limit
shall be no less than $1,000,000 per claim and in the aggregate. The policy must “pay on
behalf of” the insured and must include a provision establishing the insurer’s duty to
defend. The policy retroactive date shall be on or before the effective date of this
agreement.
Insurance procured pursuant to these requirements shall be written by insurer that are
admitted carriers in the state California and with an A.M. Bests rating of A- or better and
a minimum financial size VII.
General conditions pertaining to provision of insurance coverage by Consultant.
Consultant and City agree to the following with respect to insurance provided by
Consultant:
1. Consultant agrees to have its insurer endorse the third party general liability
coverage required herein to include as additional insureds City, its officials employees
and agents, using standard ISO endorsement No. CG 2010. Consultant also agrees to
require all Consultants, and subcontractors to do likewise.
2. No liability insurance coverage provided to comply with this Agreement shall
prohibit Consultant, or Consultant’s employees, or agents, from waiving the right of
subrogation prior to a loss. Consultant agrees to waive subrogation rights against City
regardless of the applicability of any insurance proceeds, and to require all Consultants
and subcontractors to do likewise.
3. All insurance coverage and limits provided by Consultant and available or
applicable to this agreement are intended to apply to the full extent of the policies. Nothing
contained in this Agreement or any other agreement relating to the City or its operations
limits the application of such insurance coverage.
4. None of the coverages required herein will be in compliance with these
requirements if they include any limiting endorsement of any kind that has not been first
submitted to City and approved of in writing.
5. No liability policy shall contain any provision or definition that would serve
to eliminate so-called “third party action over” claims, including any exclusion for bodily
injury to an employee of the insured or of any Consultant or subcontractor.
6. All coverage types and limits required are subject to approval, modification
and additional requirements by the City, as the need arises. Consultant shall not make
Item 8.b. - Page 23
Page 21
any reductions in scope of coverage (e.g. elimination of contractual liability or reduction
of discovery period) that may affect City’s protection without City’s prior written consent.
7. Proof of compliance with these insurance requirements, consisting of
certificates of insurance evidencing all of the coverages required and an additional
insured endorsement to Consultant’s general liability policy, shall be delivered to City at
or prior to the execution of this Agreement. In the event such proof of any insurance is
not delivered as required, or in the event such insurance is canceled at any time and no
replacement coverage is provided, City has the right, but not the duty, to obtain any
insurance it deems necessary to protect its interests under this or any other agreement
and to pay the premium. Any premium so paid by City shall be charged to and promptly
paid by Consultant or deducted from sums due Consultant, at City option.
8. The insurer will provide 30 days notice to City of any cancellation of
coverage.
9. It is acknowledged by the parties of this agreement that all insurance
coverage required to be provided by Consultant or any subcontractor, is intended to apply
first and on a primary, noncontributing basis in relation to any other insurance or self
insurance available to City.
10. Consultant agrees to ensure that subcontractors, and any other party
involved with the project who is brought onto or involved in the project by Consultant,
provide the same minimum insurance coverage required of Consultant. Consultant
agrees to monitor and review all such coverage and assumes all responsibility for
ensuring that such coverage is provided in conformity with the requirements of this
section. Consultant agrees that upon request, all agreements with subcontractors and
others engaged in the project will be submitted to City for review.
11. Consultant agrees not to self-insure or to use any self-insured retentions or
deductibles on any portion of the insurance required herein and further agrees that it will
not allow any Consultant, subcontractor, Architect, Engineer or other entity or person in
any way involved in the performance of work on the project contemplated by this
agreement to self-insure its obligations to City. If Consultant’s existing coverage includes
a deductible or self-insured retention, the deductible or self-insured retention must be
declared to the City. At the time the City shall review options with the Consultant, which
may include reduction or elimination of the deductible or self-insured retention,
substitution of other coverage, or other solutions.
12. The City reserves the right at any time during the term of the contract to
change the amounts and types of insurance required by giving the Consultant ninety (90)
days advance written notice of such change. If such change results in substantial
additional cost to the Consultant, the City will negotiate additional compensation
proportional to the increase benefit to City.
Item 8.b. - Page 24
Page 22
13. For purposes of applying insurance coverage only, this Agreement will be
deemed to have been executed immediately upon any party hereto taking any steps that
can be deemed to be in furtherance of or towards performance of this Agreement.
14. Consultant acknowledges and agrees that any actual or alleged failure on
the part of City to inform Consultant of non-compliance with any insurance requirements
in no way imposes any additional obligations on City nor does it waive any rights
hereunder in this or any other regard.
15. Consultant will renew the required coverage annually as long as City, or its
employees or agents face an exposure from operations of any type pursuant to this
agreement. This obligation applies whether or not the agreement is canceled or
terminated for any reason. Termination of this obligation is not effective until City executes
a written statement to that effect.
16. Consultant shall provide proof that policies of insurance required herein
expiring during the term of this Agreement have been renewed or replaced with other
policies providing at least the same coverage. Proof that such coverage has been ordered
shall be submitted prior to expiration. A coverage binder or letter from Consultant’s
insurance agent to this effect is acceptable. A certificate of insurance and/or additional
insured endorsement as required in these specifications applicable to the renewing or
new coverage must be provided to City within five days of the expiration of the coverages.
17. The provisions of any workers’ compensation or similar act will not limit the
obligations of Consultant under this agreement. Consultant expressly agrees not to use
any statutory immunity defenses under such laws with respect to City, its employees,
officials and agents.
18. Requirements of specific coverage features or limits contained in this
section are not intended as limitations on coverage, limits or other requirements nor as a
waiver of any coverage normally provided by any given policy. Specific reference to a
given coverage feature is for purposes of clarification only as it pertains to a given issue,
and is not intended by any party or insured to be limiting or all-inclusive.
19. These insurance requirements are intended to be separate and distinct from
any other provision in this agreement and are intended by the parties here to be
interpreted as such.
20. The requirements in this Section supersede all other sections and
provisions of this Agreement to the extent that any other section or provision conflicts with
or impairs the provisions of this Section.
21. Consultant agrees to be responsible for ensuring that no contract used by
any party involved in any way with the project reserves the right to charge City or
Consultant for the cost of additional insurance coverage required by this agreement. Any
such provisions are to be deleted with reference to City. It is not the intent of City to
Item 8.b. - Page 25
Page 23
reimburse any third party for the cost of complying with these requirements. There shall
be no recourse against City for payment of premiums or other amounts with respect
thereto.
22. Consultant agrees to provide immediate notice to City of any claim or loss
against Consultant arising out of the work performed under this agreement. City assumes
no obligation or liability by such notice, but has the right (but not the duty) to monitor the
handling of any such claim or claims if they are likely to involve City.
Item 8.b. - Page 26