CC 2014-04-22_08.c. Agreement for Audit ServicesMEMORANDUM
TO: CITY COUNCIL
FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES ·r
SUBJECT: CONSIDERATION OF AGREEMENT FOR CONSUL TANT SERVICES
FOR AUDIT SERVICES
DATE: APRIL 22, 2014
RECOMMENDATION:
It is recommended the City Council award an agreement for consultant services to Moss,
Levy & Hartzheim LLP, Certified Public Accountants (MLH) for a period of three years,
with an option to extend for two additional one-year periods, and authorize the Mayor to
execute all documents.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Audit services for the fiscal year are performed in the following fiscal year, when the
City's financial results for the year are completed. Therefore costs for the fiscal year
ending June 30, 2014 are paid from the FY 2014-15 Budget. The current budget
includes approximately $21,400 for this service. The proposed contract amount is not to
exceed $19,200 in the first year; therefore no additional budget appropriation will be
required.
Minimal staff time is required to award the auditing services contract.
BACKGROUND:
Municipalities are required to hire auditors to produce annual financial statements and
to conduct evaluations of the entity's internal controls. The auditor is responsible for
determining that the financial statements do not include material misstatements and do
not misrepresent the City's financial condition. In the evaluation of internal control, the
auditor appraises procedures that could allow collusion, theft, or fraud.
The City has contracted with MLH for auditing services since 2001, and has been
satisfied with their performance, responsiveness and audit procedures. However, the
contract has expired and based on industry best practices, on January 31, 2014, staff
issued a Request for Proposals (RFP) for auditing services for Fiscal Years 2013-14,
2014-15 and 2015-16. The RFP included an option for providing ·auditing services to
the Five Cities Fire Authority; however, consideration and approval of that contract will
be awarded separately by the Authority and is not the subject of this report.
Item 8.c. - Page 1
CITY COUNCIL
AWARD OF AUDIT SERVICES CONTRACT
APRIL 22, 2014
PAGE2
ANALYSIS OF ISSUES:
The City received seven responsive proposals and one proposal after the due date of
March 14, 2014. The seven proposals were as follows:
Firm FY 2013-14 FY 2014-15 FY 2015-16
Badawi & Associates $18,955 $19,524 $20,109
Moss, Levy & Hartzheim $19,200 $19,885 $20,615
Pressley & Associates $19,800 $18,900 $19,400
Patel & Associates $20,707 $20,707 $20,707
Van Lant & Fankhanel $27,100 $27,100 $27,100
Glenn Burdette Attest Company $33,550 $34,250 $34,950
R.J. Ricciardi $35,500 $35,500 $35,500
Proposals were evaluated 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 process, it was not the most
important factor in evaluating the proposals.
Based on an evaluation of the proposals, staff recommends awarding the contract to
MLH. The firm conducts annual audits for over 30 cities, including Atascadero, Grover
Beach, Paso Robles and Santa Maria and demonstrated extensive experience with
cities of similar nature, size and complexity. The firm has a history of technical expertise
and professionals that specialize in governmental accounting, and total audit fees are
competitive.
Engaging a new auditor could provide a fresh or different perspective and occasionally
having new eyes looking at the City's operations can provide value. Continuing the
City's long-standing relationship with MLH does not offer this advantage. However,
there are significant advantages to the auditor having a thorough and complete
understanding of the City's operations. Staff has discussed this with MLH and believes
that potential disadvantages can be overcome during the contract period with additional
auditing processes and procedures that will help ensure that neither party has become
"too comfortable" with each other.
ALTERNATIVES:
The following alternatives are provided for City Council consideration:
1. Approve staff recommendation;
2. Do not approve staff recommendation; or
3. Provide direction to staff.
Item 8.c. - Page 2
CITY COUNCIL
AWARD OF AUDIT SERVICES CONTRACT
APRIL 22, 2014
PAGE3
ADVANTAGES:
Awarding the agreement to MLH will provide the City with a qualified firm to perform the City's
required audits within the approved budget. It also provides advantages of operational familiarity
and efficiencies for both City staff and the auditor.
DISADVANTAGES:
The disadvantage of the recommendation is that other qualified audit firms will not be
selected. The City may not benefit from different auditor perspectives or interpretations.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, April 17, 2014. The Agenda
and report were posted on the City's website on Friday, April 18, 2014. No public
comments were received.
ATTACHMENTS:
Agreement for Consultant Services
Item 8.c. - Page 3
AGREEMENT FOR CONSULTANT SERVICES
This AGREEMENT FOR CONSULTANT SERVICES ("Agreement"), is made and
effective as of April 22, 2014, 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 April 22, 2014 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
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least 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.
9. LAWS TO BE OBSERVED. Consultant shall:
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Item 8.c. - Page 5
(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,
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Item 8.c. - Page 6
transferring, and 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 Liabilitv. 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 Liabilitv. 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.
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Item 8.c. - Page 7
13. INDEPENDENT CONSUL TANT
(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. UNDUEINFLUENCE
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
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Item 8.c. - Page 8
depositions, 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:
To Consultant:
18. ASSIGNMENT
City of Arroyo Grande
Director of Administrative Services
300 E. Branch Street
Arroyo Grande, CA 93420
Moss, Levy & Hartzheim, LLP
Ron A. Levy, Partner
2400 Professional Pkwy, Ste 205
Santa Maria, CA 93455
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
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Item 8.c. - Page 9
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
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
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Item 8.c. - Page 10
behalf of the Consultant and has the authority to bind Consultant to the perfonnance of
its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CITY OF ARROYO GRANDE
By: __________ _
Tony Ferrara, Mayor
Attest:
Kelly Wetmore, City Clerk
Approved As To Fann:
Timothy J. Cannel, City Attorney
Page 8
CONSULTANT
By: ___________ _
Its: ------------(Title)
Item 8.c. - Page 11
EXHIBIT A
CITY'S REQUEST FOR PROPOSAL
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Item 8.c. - Page 12
.{i~CITV OF
f/Mf"~:..· --~.~-=-
REQUEST FOR PROPOSAL
FOR
PROFESSIONAL AUDITING SERVICES
DUE DATE: Friday, March 14, 2014 at 3:00 p.m.
Exhibit A
Item 8.c. - Page 13
City of Arroyo Grande
RFP for Professional Auditing Services
CITY OF ARROYO GRANDE
REQUEST FOR PROPOSAL FOR
PROFESSIONAL AUDITING SERVICES
I. PROPOSAL INTENT
Exhibit A
Page I
The City of Arroyo Grande is soliciting the services of qualified CPA firms to audit all funds of the
City of Arroyo Grande forthe Fiscal Years 2013-14, 2014-15, and 2015-16. 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 Proposal 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 February 11, 2014 at
2:00 pm to allow all interested CPA firms to ask questions for the mutual benefit of all involved. All
questions and correspondence should be directed to Debbie Malicoat, Director of Administrative
Services at dmalicoat@arroyogrande.org. The question and answer will then be forwarded to all
firms that provide an email address, and posted on the City's website. All questions must be
submitted no later than February 7, 2014. Responses will be provided by February 12, 2014.
The City's CAFRs from prior fiscal years are located on the City's website at
www.arroyogrande.org/departments/administrative-services/annual-financial-reports/.
II. BACKGROUND
The Citv 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 17,400 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 citizen through the Five Cities Fire Authority (FCF A), a joint
powers authority between the Cities of Arroyo Grande, Grover Beach and the Oceana Community
Services District. The City provides financial services to FCF A.
The City is the Successor Agency of the Fonner 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.c. - Page 14
City of Arroyo Grande
RFP for Professional Auditing Services
The Finance Staff:
Exhibit A
Page2
The Finance 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 lnforum Gold software for general ledger, budget, accounts
payable, and payroll accounting.
Number of Individual Funds by Type:
Governmental Funds:
General Fund I
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 ======
ill. 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 affect the organization's
ability to record, process, summarize, and report financial data consistent with the assertions of
management in the financial statements.
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Item 8.c. - Page 15
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Page 3
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.
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 $500,000 and therefore is not
subject to the single audit requirements. However, in years where the City's federal expenditures
exceeded $500,000, 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 ofFederal 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 (TOA) 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.
As mentioned earlier, the City provides financial services to FCF A. As part of this proposal, the
auditors will perform audit services, as well as, provide an opinion on FCF A'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.
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Item 8.c. - Page 16
City of Arroyo Grande
RFP for Professional Auditing Services
City Responsibilities:
Exhibit A
Page4
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 ofrevenues and expenditures for all funds as well
as detailed subsidiary ledgers. The City will prepare a DRAFT CAFR (including schedules, notes
and statistics) from the financial system as of June 30th of each fiscal year under contract. (Please
note Auditor assistance may be required with certain note disclosures or schedules.)
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
A. Independence
The finn should provide an affirmative statement that it is independent of the City of Arroyo Grande
as defined by generally accepted auditing standards. Moreover, the finn 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.
B. License to Practice in California
An affirmative statement should be included indicating that the finn and all assigned key
professional staff are properly licensed to practice in California.
C. Finn 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 finn shall provide information
on the circumstances and status of any disciplinary action taken or pending against the finn during
the past three (3) years with state regulatory bodies or professional organizations.
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.
D. Partner. Supervisory and Staff Qualifications and Experience
The firm shall identify the principal supervisory and management staff, including engagement
4
Item 8.c. - Page 17
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Page 5
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 staffs 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.
E. 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.
F. 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.
G. 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.
H. 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 I.
I. Acceptance or Rejection and Negotiation of Proposals
The City reserves the right to reject any or all proposals, to waive non-material irregularities or
5
Item 8.c. - Page 18
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Page6
information in the request for proposal, and to accept or reject any item or combination ofitems. 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
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.
6
Item 8.c. - Page 19
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Page7
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 firms' 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.
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 ...................................................................... January 31, 2014
Pre-Proposal Teleconference ............................................. February 11, 2014
Proposals Due .................................................................... March 14, 2014
Interviews (if requested) .................................................... March 17 -21, 2014
Select Consultant ............................................................... March 24, 2014
Finalize Contract.. .............................................................. April 1, 2014
City Council Consideration ............................................... April 22, 2014
VIII. SUBMITTAL
A. Submit a total of2 copies to:
Debbie Malicoat
Director of Financial Services
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, March 14, 2014 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 Debbie Malicoat at dmalicoat@arroyogrande.org.
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Item 8.c. - Page 20
City of Arroyo Grande
RFP for Professional Auditing Services
AGREEMENT FOR CONSUL TANT SERVICES
Exhibit A
Attachment l
This AGREEMENT FOR CONSULTANT SERVICES ("Agreement"), is made and
effective as of 2014, between
("Consultanf), 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 , 2014 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 "B", 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. 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 "8", attached hereto and incorporated
herein by this reference.
6. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE
Page 1-1
Item 8.c. - Page 21
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment 1
(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 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.
9. LAWS TO BE OBSERVED. Consultant shall:
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Item 8.c. - Page 22
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment 1
(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,
Page 1-3
Item 8.c. - Page 23
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment 1
transferring, and 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 Liabilitv. 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.
Page 1-4
Item 8.c. - Page 24
City of Arroyo Grande
RFP for Professional Auditing Services
13. INDEPENDENT CONSUL TANT
Exhibit A
Attachment I
(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. UNDUEINFLUENCE
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
Page 1-5
Item 8.c. - Page 25
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment 1
depositions, 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:
To Consultant:
18. ASSIGNMENT
City of Arroyo Grande
Director of Administrative Services
300 E. Branch Street
Arroyo Grande, CA 93420
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
Page 1-6
Item 8.c. - Page 26
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment 1
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
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
Page 1-7
Item 8.c. - Page 27
City of Arroyo Grande
RFP for Professional Auditing Services
Exhibit A
Attachment I
behalf of the Consultant and has the authority to bind Consultant to the performance of
its obligations hereunder. ·
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
CITY OF ARROYO GRANDE
By: ___________ _
Tony Ferrara, Mayor
Attest:
Kelly Wetmore, City Clerk
Approved As To Form:
Timothy J. Carmel, City Attorney
CONSULTANT
By: ____________ _
Its: -------------(Title)
Page 1-8
Item 8.c. - Page 28
EXHIBIT 8
CONSULTANT'S PROPOSAL
Page 10
.--.;
· ....... :
.... • •! .... ,. A •: ,·..._-_;. ,J.a.,~1... • V· j·· '-"~ --··"·
Item 8.c. - Page 29
CITY OF ARROYO GRANDE
PROPOSAL FOR PROFESSIONAL
AUDITING SERVICES
For Fiscal Years 2013-14, 2014-15, and 2015-2016
Submitted By:
Moss, Levy & Hartzheim LLP
2400 Professional Parkway, Suite 205
Santa Maria, CA 93455
Phone: 805.925.2579
Fax: 805.925.2147
Email: mlhsm@mlhcpas.com
Submitted On:
March XX, 2014
Contact Person:
Ron A. Levy, CPA
Exhibit B
Item 8.c. - Page 30
CITY OF ARROYO GRANDE
AUDIT PROPOSAL
TABLE OF CONTENTS
Introduction:
Exhibit B
Letter of Transmittal ............................................................................................. : ..................... 1
Technical Proposal:
Qualifications
Experience ................................................................... ~ ............................................................. 4
Peer Review ............................................................................................................................... 5
Firm Profile ............................................................. : ................................................................... 5
License to Practice in California ................................................................................................ 6
Standard Hourly Rates ............................................................................................................... 7
Statement of Past Contract Disqualifications ............................................................................ 7
Work Program
Tentative Schedule .................................................................................................................... 8
Specific Audit Approach ............................................................................................................. 8
Services or Data to be Provided by the City .............................................................................. 11
Appendices:
Appendix A -References ........................................................................................................... 12
Appendix B -Peer Review Report ............... : ............................................................................. 13
Appendix C -Resumes .............................................................................................................. 14
Item 8.c. - Page 31
PARTNERS
RONALD A LEVY, CPA
CRAIG A HARTZHEIM, CPA
HADLEY Y HUI, CPA
Debbie Malicoat
Director of Fiscal Services
City of Arroyo Grande
300 East Branch Street
Arroyo Grande, CA 93420
Exhibit B
MOSS, LEVY & HARTZHEIM LLP
CERTIFIED PUBLIC ACCOUNTANTS
2400 PROFESSIONAL PKWY, STE 205
SANTA MARIA, CA 93455
TEL: 805.925.2579
FAX: 805.925.2147
www.mlhcpas.com
We are pleased to respond to the City of Arroyo Grande's Request for Proposal for independent
auditing services. We have prepared our proposal to address each specification included in the City
of Arroyo Grande's Request for Proposal.
After 61 years in public accounting and more than 37 years of performing local governmental audits,
it is extremely gratifying to witness the continued growth of Moss, Levy & Hartzheim LLP. The Firm
has evolved from a one-person operation to a regional public accounting firm with offices in Beverly
Hills, Culver City, and Santa Maria, with clients throughout the State of California, as well as 31
other states. We and the entire staff are pleased with not only the continuing development of the
firm, but also the progress and economic health of our clients. We understand that governmental
accounting is a specialized industry with its own accounting standards and requirements and that is
why we strive to constantly improve the quality of our professional services. This degree of
dedication coupled with our ability to inform our clients of any new accounting and auditing issues is
paramount to our success.
We feel that our size is such that we are large enough to provide a broad spectrum of services and
experience backed by an in-house training program, professional development courses, and an
extensive professional library, yet not so large as to become impersonal and rigid. Our informal
style allows us to be flexible enough to complete our audits in a timely manner that is the most
convenient for each client. Also, this style allows us to be more accessible to our clients when our
clients have questions or concerns.
It is our understanding that we will be responsible for expressing opinions on the City of Arroyo
Grande's basic financial statements in conformity with accounting principles generally accepted in
the United States of America. In addition to those procedures deemed necessary to express our
opinions on the basic financial statements, we understand that we will also be responsible for
performing certain limited procedures involving supplementary information required by the
Governmental Accounting Standards Board (Managemenf s Discussion and Analysis, Statistical
Section, and Supplementary Information).
Our audit would be made in accordance with auditing standards generally accepted in the United
States of America; Government Auditing Standards, issued by the Comptroller General of the United
States; Office of Management and Budget (OMB) Circular A-133, Audits of State, Local
Governments, and Nonprofit Organizations; and Guidelines for Compliance Audits of California
Redevelopment Agencies issued by the State Controller, Division of Local Government Fiscal
OFFICES: BEVERLY HILLS· CULVER CITY· SANTA MARIA
MEMBER AMERICAN INSTITUTE OF CPAs · CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS · CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS
OFFICIALS
Item 8.c. - Page 32
Exhibit B
Affairs. As part of performing our audits in accordance with these standards, we understand that we
will be required to audit the Schedule of Ex_penditures of Federal Awards.
It is also our understanding that we will be responsible for issuing the following:
1. Reports on the fair presentation of the financial statements in accordance with auditing
standards generally accepted in the United States of America as listed below:
a) Basic Financial Statements for the City of Arroyo Grande
b) Audit Report for the City of Arroyo Grande in accordance with the Single Audit Act (if
applicable)
c) Basic Financial Statements for the Five Cities Fire Authority (FCFA)
2. Financial and compliance audit of the Transportation Development Act funds
3. A report based on the auditor's understanding of the internal control structure and assessment
of control risk. In this report, we will communicate any reportable conditions found during the
audit and indicate whether they are also material weaknesses.
4. A separate report on our analysis of the internal control structure used in the administration of
federal financial assistance programs.
5. Test compliance with Proposition 111, Article Xlll.B -Review of Appropriation Limit
Calculations
6. A report on the City's compliance with laws and regulations, related to "major" federal awards
including an opinion on compliance with specific requirements applicable to "major" federal
awards programs. This report on compliance will include all instances of non-compliance (if
applicable).
7. A Management Letter addressed to the City Council of the City of Arroyo Grande setting forth
recommendations for improvements in the City's accounting systems.
8. We will communicate in a letter to the Mayor, Treasurer, City Manager, and Finance Manager
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 affect the City's ability to record, process, summarize, and report financial data
consistent with the assertions of management in the financial statements. "Nonreportable
conditions" discovered by us will also be communicated in the "Management Letter".
9. We will make immediate, written notification to the City Manager, Finance Manager, and the
City Attorney of all irregularities and illegal acts or indications of illegal acts of which we become
aware.
We will make all communications to the City as required by the audit standards under which the
engagement is performed. Those communications include, but are not limited to:
1. The Auditor's responsibility under auditing standards generally accepted in the United
States of America.
2. Significant accounting policies.
3. Management's judgment and accounting estimates.
4. Significant audit adjustments.
2
Item 8.c. - Page 33
5. Other information in documents containing audited financial statements.
6. Disagreements with management.
7. Management consultation with other accountants.
8. Major issues discussed with management prior to retention.
9. Difficulties encountered in performing the audit.
10. Errors, irregularities, and illegal acts.
We will be available to present our audit plan prior to beginning field work.
Exhibit B
All work papers and reports will be retained, at our expense, for a minimum of seven years (or the
retention timeframe established by the professional standards, whichever is longer) unless the Firm
is notified in writing by the City of the need to extend the retention period. The work papers are
subject to review by federal and state agencies and other individuals designated by the City.
Accordingly, the work papers will be made available upon request.
In addition, we will respond to the reasonable inquiries of successor auditors and allow successor
auditors to review work papers.
All adjusting journal entries made by us will be discussed and explained to the designated Finance
Department personnel prior to recording. They will be in a format that shows the lowest level of
posting detail needed for data entry in the general ledger systems.
Minimal assistance of the City's staff is required during the course of the audit, however, we do ask
that the City provide the following: cooperation in answering questions, requested confirmations,
bank reconciliations, a general ledger, and other miscellaneous items. Also, with the City's
approval, our audit team can pull and file appropriate supporting documents, which includes
invoices. We feel this approach minimizes the disruption of the City's routine.
This proposal is a firm and irrevocable offer until June 14, 2014.
Thank you for your consideration and please do not hesitate to contact the authorized representative
listed below with any questions, problems, or concerns.
Sincerely,
4.CPA
-"
Ron A. Levy, CPA
Partner
2400 Professional Pkwy, Ste 205
Santa Maria, CA 93455
(805) 925-2579
3
Item 8.c. - Page 34
CITY OF ARROYO GRANDE
Technical Proposal
QUALIFICATIONS
Experience
Exhibit B
Moss, Levy & Hartzheim LLP has an extensive background in auditing cities with over 37 years of
experience in this specialized field. We currently perform over 30 city audits and numerous other
governmental audits. ·
Please see Appendix A -References/Similar Engagements
Recent local auditing experience includes the following:
1. CSMFO and GFOA Award Programs
The Firm currently audits the following seven cities that participate in either or both of
the CSMFO and GFOA Award Programs: (Each city has received the awards it has
participated in).
City of Bellflower
City of Morgan Hill
City of Paso Robles
City of Tracy
2. OMB Circular A-133
City of Santa Maria
City of Watsonville
City of Whittier
We have performed compliance audits in accordance with the Office of Management
and Budget (OMB) Circular A-133, Audits of State, Local Governments and Nonprofit
Organizations, for each of our 30 municipal clients. ·
3. Special Districts
Currently, our Firm audits 62 special districts including recreation districts, utility
districts, cemetery districts, community services districts, sanitary districts, water
districts, fire districts, an ambulance services district, and an airport district.
4. State Controller's Report and Street Report
We have prepared State Controller's reports and street reports for numerous cities,
redevelopment agencies, and special districts. We feel this experience allows us to
help assist our clients in their preparation of the state controller's reports or prepare the
reports as a separate engagement for our clients.
4
Item 8.c. - Page 35
CITY OF ARROYO GRANDE
Technical Proposal
Exhibit B
5. Federal and State Grant Programs and the Single Audit
Each of our municipal clients, the majority of our special district clients, and all of our
school district clients receive federal and state grants which require compliance audits.
Some of our most commonly audited federal programs are as follows:
Municipal Major Programs:
Community Development Block Grant Funds (CDBG)
HOME Program
Airport Improvement Program
Federal Emergency Management Act Funds (FEMA)
Section 8 Housing Assistance Payments
Urban Mass Transportation Act Funds (UMTA)
Highway Planning and Construction
Other Common Municipal Programs:
COPS Fast Grants
COPS More Grants
Asset Seizure funds
Retired Senior Volunteer Program
Enterprise Community Grants
Economic Development Administration
6. Franchise Audits
The Firm has assisted several cities in reviewing franchise financial statements as part
of reviewing franchise requests for rate increases. In addition, the Firm has performed
transient occupancy audits for five cities and has performed various audits of operating
lease charges (such as use of a sewage treatment plant based on percentage of use
by our client and actual expenses as recorded by the treatment plant operator).
Peer Review
Please see Appendix B -Peer Quality Review Report for a copy of our firm's most recent quality
review report, which includes a review of local governmental engagements.
Firm Profile
Moss, Levy & Hartzheim LLP is a minority owned regional firm that performs audits of governmental
entities from the Oregon to the Mexican border. The Firm currently employs 33 professionals and
has annual gross revenues between 4 and 4.5 million dollars. The Firm has three offices in
California: Beverly Hills, Culver City, and Santa Maria.
The audit work will be completed by staff from our Santa Maria office.
The Santa Maria office is currently staffed by seven certified public accountants (two partners, two
managers, and three senior accountants). In addition, the office employs three senior accountants
and five staff accountants.
The City of Arroyo Grande will have one partner and one alternate partner assigned to the audit at
all times. In addition, one manager, one senior accountant, and two or three staff accountants will
be assigned on a full-time basis to the audit from the Santa Maria office. The City of Arroyo Grande
will also have a computer specialist assigned to the audit on a full-time basis. This individual assists
the audit team in documenting the computer system internal control structure.
5
Item 8.c. - Page 36
CITY OF ARROYO GRANDE
Technical Proposal
License to Practice in California
Exhibit B
Moss, Levy & Hartzheim LLP is a properly licensed certified public accounting firm in the State of
California, license # 5863. All certified public accountants engaged in the audit of the City are
licensed to practice in the State of California and have received at least the minimum number of
governmental continuing professional education hours required by the State Board of Accountancy
to perform a governmental audit.
Partner, Supervisory, and Staff Qualifications and Experience
It is the firm's policy to have our partners and audit manager involved in the managing function of
our governmental audits. Having both the partner and audit manager involved in the engagement
allows the City to receive immediate response to questions about accounting and audit topics,
concerns, and findings.
It is expected that Mr. Ron Levy would be the partner in-charge of the City's audit. Mr. Levy would
have primary responsibility for the audit. Mr. Levy would also be responsible for assisting in the
preparation of the City's CAFR. Mr. Levy has assisted numerous cities and has prepared award
winning CAFRs. Mr. Levy will also be responsible for addressing any City's questions or concerns
that arise during the year. It is the firm's policy to have a partner on site for a majority of the field
work. This policy enables the partner to become acquainted with the City's daily operations and key
personnel.
Mr. Craig Hartzheim will be the alternate partner assigned to the audit. As alternate partner, it is his
responsibility to be familiar with the City, its staff, the audit, and any special problem areas of the
City in the event that Mr. Levy is unavailable. Mr. Hartzheim has assisted numerous cities and
prepared award winning CAFRs. Mr. Hartzheim has also assisted cities in preparing the State
Controller's reports.
Mr. Adam Guise will be the manager assigned to the audit. As manager, Mr. Guise will oversee the
day to day operations of the audit and will review all audit areas. Mr. Guise will be at the City for
100% of the fieldwork. He performs in-house training for governmental auditing staff members and
is in charge of keeping the firm updated on aspects of governmental accounting and auditing issues.
I
Mr. Travis Hole will be the senior accountant assigned to the audit. As senior accountant, it will be
Mr. Hole's responsibility to oversee the staff accountants, do preliminary reviews of audit sections,
and to perform more difficult audit sections.
Mr. David Ortiz will be the Information Technology Director assigned to the audit. Mr. Ortiz has
extensive knowledge in auditing EDP functions. Mr. Ortiz will also perform the statistical sampling
procedures for the audit. Also, he will document and test the internal control structure of the
computer systems.
Please see Appendix C -Resumes for each individual's resume.
In addition to the supervisory staff listed above, two or three staff accountants will be assigned to the
audit. All staff accountants have degrees from accredited colleges or universities, have received in-
house governmental audit training, and at present have at least one year of governmental auditing
experience. All staff accountants will be directly supervised by the senior accountant and/or
manager assigned to the audit at all times. All partners, managers, and staff members have worked
on numerous governmental engagements together. Consistently working together will provide the
6
Item 8.c. - Page 37
CITY OF ARROYO GRANDE
Technical Proposal
City with a knowledgeable and efficient audit team.
Exhibit B
The Firm will maintain staff continuity on the engagement throughout the term of the contract,
barring any terminations, illnesses, or other unforeseen circumstances. At the request of the City,
any Moss, Levy and Hartzheim LLP employee assigned to the audit can be removed and replaced
by another qualified employee. Moss, Levy & Hartzheim LLP has an advantage in that there is
relatively low turnover in employees as can be seen on individual resumes and therefore, the Firm
will not use the City as a training ground for its employees.
Standard Hourly Rates
Separate fee schedule based on hourly rates in accordance with the following:
Partner $ 130 hour
Manager $ 90 hour
Senior Accountant $ 70 hour
Junior Accountant $ 50 hour
Support $ 45 hour
Statement of Past Desk Reviews and/or Disciplinary Action
The firm has not had any federal or state desk reviews during the past three (3) years. In addition,
there has been no disciplinary action taken or pending against the firm during the past three (3)
years.
7
Item 8.c. - Page 38
CITY OF ARROYO GRANDE
Technical Proposal
WORK PROGRAM
Tentative Schedule
Exhibit B
Please see separate Cost Proposal for proposed compensation.
Phase
Preliminary correspondence
Interim fieldwork
(on site)
Year end fieldwork
(on site)
Fieldwork wrap up
Preparation of financial statements
Audit wrap up
Specific Audit Approach
Activities
-Scope & timing of audit
-Review any accounting issues
-Address the City personnel's
concerns about the impending audit
-Risk assessment
-Communicate with those charged
with gowmance
-Test of controls
-Confirmations mailed
-Risk assessment
-Analytical procedures
-Review confirmations
-Review draft management report
of audit findings
-Finalize any outstanding issues
-Submit any adjusting journal
entries
-Financial statement proofing
process
-Changes to CAFR to City
-Management letter
Timeframe
May5
June2-6
July 15
Staff Assigned
Partner
Manager
Manager
Senior
2-3 Staff Accountants
Support
September 22-26 Manager
September 29-
0ctober 3
October 14-31
Nowmber 1
Senior
2-3 Staff Accountants
Partner
Manager
Senior
Manager
Support
The main extent of our work would be what is required to enable us to express an opinion on the
financial statements in accordance with:
1. A/CPA Industry Audit Guide for State and Local Governmental Units
2. A/CPA Audit Standards
3. National Committee on Governmental Accounting, Auditing and Financial Reporting
(Amended) Publication
4. Laws of the State of California
5. Requirements of Office of Management and Budget Circular A -133, Audits of State,
Local Governments, and Nonprofit Organizations
6. GAO Standards for Audit of Governmental Organizations, Programs, Activities, and
Functions, the Guidelines for Financial and Compliance Audits of Federally Assisted
Programs
7. Our Firm's own additional standards and procedures
The audit will be made in accordance with auditing standards generally accepted in the United
States of America.
8
Item 8.c. - Page 39
CITY OF ARROYO GRANDE
Technical Proposal
Exhibit B
The primary purpose of the audit is to express an opinion on the basic financial statements, and
such an audit is subject to the inherent risk that material errors or fraud may exist and not be
detected by us. If conditions are discovered which lead to the belief that material errors,
defalcations, or fraud may exist or if any other circumstances are encountered that require extended
services, we will promptly advise the City.
Our audit would begin when it is convenient for the City staff. We estimate this to be around June to
perform interim work. During May or June each fiscal year, the partner or manager of the firm will
contact the Finance Department personnel. The purpose of this contact will be to discuss the scope
and timing of the annual audit, to review any accounting issues known at that time, and to address
any City personnel's concerns about the impending audit.
We will schedule approximately one week of interim work each fiscal year. During the first fiscal
year, we will prepare narrative flow charts and other documentation of the internal control structure
and of the major systems, such as revenue and cash receipts, purchasing and cash disbursements,
payroll and personnel, inventory, property and equipment, grant compliance, in~estment activities,
and the budget process. We will gain this information through discussions with appropriate City
staff and the review of available documented policies, organizational charts, manuals, programs,
and procedures. Once we obtain this information, we will evaluate the systems of internal controls
and revise our standard governmental audit programs. During the interim work in subsequent fiscal
years, we will note changes in the system, if any.
For our first fiscal year of engagement, we will utilize the prior fiscal year's financial statements, the
current fiscal year budget and our knowledge of your systems to determine materiality for the
different audit sections. Each fiscal year, we will select a sample of transactions to determine to
what extent the systems are functioning as described to us. The extent of our sample size will
depend upon our assessment of the internal control structure. The selection of transactions for
testing will be made using a combination of random, systematic, and haphazard sampling
techniques. We will identify the strength of the systems upon which we can rely in planning our
substantive tests. Our internal control review will meet all the requirements of the AICPA Statement
on Auditing Standards (SAS) No. 55, Consideration of the Internal Control Structure in a Financial
Statement Audit, as amended by Statement on Auditing Standards No. 78 and SAS 99
Consideration of Fraud in a Financial Statement Audit. We will also perform preliminary analytical
review procedures using prior fiscal years' audited statements and current budget.
We will also review the following documents in order to determine compliance with laws and
regulations:
(a) Minutes of the governing body with special attention to: indications of new revenue
sources, including federal and state grants; expenditure authorizations and related
appropriations, including any special or restrictive provisions; appropriation transfers;
authorization for bank or other debt incurred; awards to successful bidders; authorization
for new leases entered into; changes in licenses, fines or fees; authorization for fund
balances designations or reservations; and authorization for significant new employees
hired
(b) New agreements and amendments to new agreements including but not limited to: grant
agreements; debt and lease agreements; labor agreements; joint venture agreements;
and other miscellaneous agreements
(c) Administrative Code
(d) Investment Policy
9
Item 8.c. - Page 40
CITY OF ARROYO GRANDE
Technical Proposal
Exhibit B
Before April 1 of each fiscal year, we will contact you to provide our detailed audit plan for the fiscal
year end fieldwork. We will also discuss with you any matters that may impact our audit procedures
or your financial reporting. Also, we will discuss with you any assistance the City may need witfl the
fiscal year-end closing.
Our fiscal year-end fieldwork would begin after the City has closed its books which we estimate to be
the second week of September. The fiscal year end audit work will begin with an analytical review of
all significant balance sheet and revenues and expenditures/expense accounts for each fund group,
which includes a comparison of prior fiscal year financial statements and current fiscal year budget
to the fiscal year-end trial balance. The primary objective of the fiscal year end audit work is to audit
the final numbers that will appear in the City's CAFR.
The primary objective of the fiscal year end audit work is to audit the final numbers that will appear in
the City's financial statements. Our fieldwork would also consist of procedures required under SAS
No. 99, Consideration of Fraud in a Financial Statement Audit. We will also be maintaining
compliance with SAS Nos. 103-112, during each fiscal year. These procedures significantly
changed the way auditors approach audits and are required for audits with a fiscal year ended
beginning after December 31, 2006. This will entail a risk-based audit approach which will
significantly increase the time spent between the City's staff and the audit staff. Also, this will require
additional meetings with an audit committee or similar governing body representative.
We will also perform procedures such as:
(a) Confirmations by positive and negative circularizations including but not limited to all
cash and investment accounts; selected receivable and revenue balances; all bonds,
loans, notes payable, and capital leases; all notes receivable; all insurance carriers; all
legal firms employed on the City's business; and other miscellaneous confirmations as
deemed necessary
(b) Physical verifications and observations
(c) Analysis and review of evidential materials
(d) Interviews and investigative efforts
(e) Electronic data processing testing for computer and software reliability
(f) Numerous other procedures
During the entire engagement, our audit team will be determining the risk assessment of federal
programs to be audited in compliance with OMB Circular A-133. We will perform tests of: general
requirements; specific requirements; claims for advances and reimbursements; and amounts
claimed or used for matching in compliance with the Single Audit Act. Also we will obtain an
understanding of the internal control structure of each program tested. The compliance audit will be
made in accordance with auditing standards generally accepted in the United States of America and
the GAO Standards for Audits of Governmental Organizations, Programs, Activities, and Functions,
and the GAO Guidelines for Financial and Compliance Audits of Federally Assisted Programs.
The objective in testing transactions for compliance with laws, regulations, the provisions of
contracts, and grant agreements is to express an opinion on whether the governmental unit has
complied in all material respects, with applicable compliance requirements, noncompliance with
which could have a material effect on each major program. In drawing audit samples for purposes
of tests of compliance, we will plan our tests to support a low assessed level of control risk. We will
select transactions from each program or area which requires testing. The selection of transactions
to test would be based on auditor's professional judgment. We use the PPG Guide to Audits of
Local Governments and the PPG Guide to Single Audits for guidance in determining the number of
transactions to test.
JO
Item 8.c. - Page 41
CITY OF ARROYO GRANDE
Technical Proposal
Exhibit B
SAS No. 99, Considerations of Fraud in a Financial Statement Audit impacts both the planning and
the performance of the audit. In planning, the audit team will discuss how and where the financial
statements might be susceptible to material misstatement due to fraud. To determine this we will
inquire of management, consider results of analytical procedures, and consider other fraud risk
factors. We will review the results of our inquiries and identification of potential fraud areas on a
daily basis to achieve a high level of compliance with SAS No. 99.
As part of our audit engagements, we issue our clients management letters if we note certain
observations or recommendations that we feel need to be disclosed. Our Firm's philosophy
regarding the management letter is that the management letter is to help management improve its
internal control and accounting procedures and not to criticize the management in charge. This is
why we present our management letters to management in draft form for open discussion prior to
issuance.
The Firm uses PPC audit programs, checklists, and questionnaires in conjunction with client specific
audit program procedures. In addition to our PPC checklists, the Firm uses GFOA and CSMFO
Award Program Reviewer's Checklists as an additional guide for CAFRs.
The Governmental Accounting, Auditing and Financial Reporting (GAAFR), issued by the
Government Finance Officers Association (the "Blue Book'1 and other GFOA publications are often
used as additional tools when preparing the financial statements of our governmental clients. The
Firm has and uses its extensive library of current AICPA, GFOA, and GASB publications and
pronouncements.
Services or Data to be Provided by the City
Minimal assistance of the City's staff is required during the course of the audit, however, we do ask
that the City provide the following: cooperation in answering questions, requested confirmations,
bank reconciliations, a general ledger, and other miscellaneous items. Also, with the City's
approval, our audit team can pull and file appropriate supporting documents, which includes
invoices. We feel this approach minimizes the disruption of the City's routine.
Respectfully submitted,
MOSS, LEVY & HARTZHEIM LLP
Ro Ale , CPA
Moss, L vy & Hartzheim LLP is an Equal Opportunity Employer
II
Item 8.c. - Page 42
ExhibitB
APPENDICES
Item 8.c. - Page 43
Exhibit B
CITY OF ARROYO GRANDE.
APPENDIX A· REFERENCES/SIMILAR ENGAGEMENTS
Reference No. 1
Customer Name City of Santa Maria
Contact Individual Rene Vise, Director of Administrative Services
Telephone & FAX Number Tel: 805.925.0951 ext. 215 FAX: 805.925.2243
Street Address 110 East Cook Street
City, State, Zip Code Santa Maria, CA 93454
Description of services provided -CAFR, Single Audit, TOA, and Redevelopment
Agency audits.
-Awarded GFOA
Reference No. 2
Customer Name City of El Paso de Robles
Contact Individual Deanne Purcell, Finance Manager
Telephone & FAX Number Tel: 805.227.7276 FAX: 805.237.6565
Street Address 821 Pine Street
City, State, Zip Code City of El Paso de Robles, CA 93446
Description of services provided -CAFR, Single Audit, TOA, and Redevelopment
Agency audits.
-Awarded CSMFO
Reference No. 3
Customer Name City of Atascadero
Contact Individual Jeri Rangel, Director of Administrative Services
Telephone & FAX Number Tel: 805.461.5000 FAX: 805.461.7612
Street Address 6500 Palma Ave
City, State, Zip Code Atascadero, CA 93422
Description of services provided -CAFR, Single Audit, TOA, and Redevelopment
Agency audits.
12
Item 8.c. - Page 44
Exhibit B
PowELL & SPAFFORD. LLD
Jessie C. Powell, CPA
Patrick D. Spofford, CPA
CERTIFIED DUBUC ACCClUNlANTS
System Review Report
To the Partners of
Moss, Levy & Hartzheim, LLP
and the Peer Review Committeeofthe California SocietyofCPAs
L;...,....J 1., II.. c:,1.1 ... ;, r..-i ,J ~ ...... b ... ,,
\i.:nJ-rn ~ ..... ,. l ... tL.1.. .I C. .. hl;.J P .. u ... -'\.. .. _,.,,J,
We have reviewed the system of quality control for the accounting and auditing practice of Moss, Levy &
Hartzheim., LLP (the firm) in effect for the year ended December 31, 2011. Our review was conducted in
accordance with standards for Performing and Reporting on Peer Reviews established by the Peer Review
Board of the American Institute of Certified Public Accountants. The firm is responsible for designing a
system of quality control and complying with it to provide the firm with reasonable assurance of
performing and reporting 1n conformity with applicable professional standards in all material respects.
Our responsibility is to express an opinion on the design of the system of quality control and the firm's
compliance therewith based on our review. The nature, objectives, scope, limitations of, and the
procedures perfoIJJled in a System Review are descn"bed in the standards at www.aicpa.org/prsnmmary.
As required by the standards, engagements selected for review included engagements. perfor3led under
Government Auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice·of Moo-s,;;Levy &
Hartzheim, ll.P in effect for the year ended December 31, 2011, has been suitably designed anilicomplied
with to provide the firm with reasonable assurance of performing and reportmg in conformity with
applicable professional standards in all material respects. Firms can receive a rating of pass. pass with
. deficiency (ies) or/ail. Moss, Levy & Hartzheim, LLP has recei~d a peer review r~ting of pass.
July 1-1, 2012
664 W. Bi.Ji Courl • San Bernardino. CA 92410 ° P.O. Be..-.: 8847 • Redlands, CA g43·75 . -
Telephone 909-8"35-ml • fox 909-885-7541
Item 8.c. - Page 45
CITY OF ARROYO GRANDE
APPENDIX C -RESUMES
RON A. LEVY, CPA -PARTNER
Exhibit B
• California licensed CPA with 37 years of audit experience with governmental entities.
• Partner in charge of all governmental audits, currently including 30 municipal audits
(including Redevelopment Agency & Single Audits), 28 school district audits, and 62 special
district audits.
• Has assisted governmental clients with year end closings, key position interviews,
preparation of award winning CAFR's, and preparation of State Controller's Reports.
• Honored as CPA of the year (2006) by the Santa Barbara Chapter of the California Special
Districts Association.
• Has met or exceeded all continuing education requirements, including recent courses in:
2013, 2012, and 2011 Governmental Accounting Conferences
GASB Statement No.34 Training Conference
Compliance Auditing, Audit Sampling and Concluding the Audit
Audits of State and Local Governments
Governmental Accounting Update
The Single Audit Act
2013, 2012, and 2011 School District Conferences
Auditor's Reports on Audits of Local Governments
Planning a Governmental Audit Engagement
• Member of the following:
California Society_ of Municipal Finance Officers
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
California Association of School Business Officials
Kiwanis Club
• A Bachelor of Science degree from Oregon State University conferred in 1977.
• Taught accounting courses at a branch of Laverne College and Chapman College.
• Knowledgeable about all areas of tax law.
14
Item 8.c. - Page 46
CITY OF ARROYO GRANDE
APPENDIX C -RESUMES
CRAIG HARTZHEIM, CPA-PARTNER (ALTERNATE)
Exhibit B
• California licensed CPA with 30 years of audit experience with governmental, non-profit, and
commercial entities.
• Engagement partner for governmental and non-profit audits (Beverly Hills office), currently
including 40 special district audits (including Los Angeles County Flood Control District and the
County Sanitation District of Los Angeles County), 12 school districts and related audits, and 17
municipal audits.
• Has assisted governmental clients with year end closings, key position interviews, preparation of
award winning CAFRs, and preparation of State Controller's Reports.
• Has met or exceeded all continuing education requirements, including recent courses in the
following:
2013, 2012, and 2011 Governmental Accounting Conferences
2013, 2012, and 2011 School District Conferences
Audits of States and Local Gov~mments
Preparing Governmental Financial Statements
GAAS Guide
Other Comprehensive Basis of Accounting (OCBOA) Statements
Audit Standards update
Implementing SAS No. 112
Implementing SAS No. 114
Auditing update
Grants Management
• A Bachelor of Science degree in Accounting from Marquette University conferred in 1982.
• Member of the following:
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
• Knowledgeable about all areas of tax law including non-profit and payroll tax issues.
15
Item 8.c. - Page 47
CITY OF ARROYO GRANDE
APPENDIX C -RESUMES
ADAM GUISE -MANAGER
Exhibit B
• California Licensed CPA with 7 years of audit experience with governmental, non-
profit, and commercial entities.
• A Bachelor of Science degree in Business Administration with a concentration in
public accounting from California Polytechnic State University, San Luis Obispo.
• Managing Auditor for 7 Cities, 3 school district audits, and 9 special districts.
• Has assisted governmental clients with year end closings, preparation of award
winning CAFRs, and preparation of State Controller's Reports.
• Has met or exceeded all continuing education requirements, including recent courses in the
following:
2013, 2012, and 2011 School District Conferences
2013, 2012, and 2011 Governmental Accounting Conferences
Audits of State and Local Governments
Single Audits of Governmental Entities
ln.ternal Control Over Governmental Financial Reporting
California Ethics: Making Ethical Decisions in the Practice of Public Accounting
• Previous work experience included 2 years auditing publically traded corporations with
an international public accounting firm.
TRAVIS HOLE, CPA-SENIOR ACCOUNTANT
• California Licensed CPA with 4 years of audit experience with governmental, non-
profit, and commercial entities.
• A Bachelor of Arts degree in Economics and Business with a concentration in
accounting from Westmont College.
• Auditor for 4 Cities, 12 school district audits, 10 special districts, 3 non-profits, and 1
commercial business.
• Has attended recent courses in the following:
2013, 2012, and 2011 School District Conferences
2013, 2012, and 2011 Governmental Accounting Conferences
Government Auditing Standards: Yellowbook
California Ethics: Ethical Obligations of California CPAs
16
Item 8.c. - Page 48
CITY OF ARROYO GRANDE
APPENDIX C -RESUMES
PABLO TORRES, CPA -SENIOR ACCOUNTANT
• California Licensed CPA
Exhibit B
• A Bachelor of Science degree in Business Administration with a concentration in
public accounting from California Polytechnic State University, San Luis Obispo.
• Auditor for 5 Cities, 10 school district audits, 9 special districts, and 4 non-profits.
• Has attended recent courses in the following:
2013, 2012, and 2011 School District Conferences
2013, 2012, and 2011 Governmental Accounting Conferences
ALEXANDER HOM, CPA-SENIOR ACCOUNTANT
• California Licensed CPA
• A Bachelor of Science degree in Business Administration with a concentration in
public accounting from California Polytechnic State University, San Luis Obispo.
• Auditor for 4 Cities, 11 school district audits, 8 special districts, and 2 non-profits.
• Has attended recent courses in the following:
2013, 2012, and 2011 School District Conferences
2013, 2012, and 2011 Governmental Accounting Conferences
17
Item 8.c. - Page 49
CITY OF ARROYO GRANDE
DOLLAR COST BID FOR FISCAL YEARS
Submitted By:
Moss, Levy & Hartzheim LLP
2400 Professional Pkwy, Ste 205
Santa Maria, CA 93455
Phone: 805.925.2579
Fax: 805.925.2147
Email: mlhsm@mlhcpas.com
Submitted On:
March XX, 2014
Contact Person:
Ron A. Levy, CPA
Certification:
2013-14, 2014-15 and 2015-16
Exhibit B
Ron A. Levy, CPA, is entitled to represent the firm, is empowered to submit the bid, and is authorized to contract
with the City of Santa Maria.
Item 8.c. - Page 50
CITY OF ARROYO GRANDE
Dollar Cost Bid
Fees Per Fiscal Year
All-Inclusive not to exceed fixed fees
Fiscal Year 2014 Audits:
City Audit
Includes CAFR assistance and
proofing, Gann, and Management
Letter
t:stimatea =ien'""'
Hours Hourly Rate Rate
Partner
12 $ 100 $ 1,200
Manager
101 $ 75 $ 7,575
Senior Staff
65 $ 65 $ 4,225
Professional
Staff 55 s 45 $ 2,475
Administrative
Staff 15 $ 35 $ 525
Expenses
nla
1,;lty
Subtotal: s 16,000
Fiscal Year 2015 Audits:
City Audit
Includes CAFR assistance and
proofing, Gann, and Management
Letter
t:Sllmetea CJ<"'"""" Hours Hourly Rate Rate
Partner
12 $ 100 $ 1,200
Manager
102 $ 75 s 7,650
Senior Staff
70 $ 65 $ 4,550
Professional
Staff 57 $ 45 $ 2,565
Administrative
Staff 17 $ 35 $ 595
Expenses
n/a
l.;ity
Subtotal: $ 16,560
Fiscal Year 2016 Audits:
City Audit
Includes CAFR assistance and
proofing, Gann, and Management
Letter
Estlmetea CJ<1enucu
Hours Hourly Rate Rate
Par!ner
14 $ 100 $ 1,400
Men ager
105 $ 75 $ 7,875
Senior Staff
72 $ 65 $ 4,680
Professional
Staff 58 $ 45 s 2,610
Administrative
Staff 17 $ 35 $ 595
Expenses
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1,;lty
Subtotal: $ 17,160
Single Audit (if applicable)
Includes Management Letter, if
needed
t:Sllmatea Extenaea
Hours Hourly Rate Rate
1 $ 100 $ 100
4 $ 75 $ 300
1 $ 65 $ 65
14 $ 45 s 630
3 s 35 s 105
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Single Audit Subtotal: $ 1,200
Single Audit (if applicable)
Includes Management Letter, if
needed
t:Sllmetea ex<en.,...,
Hours Hourly Rate Rate
1 $ 100 $ 100
4 s 75 $ 300
1 $ 65 $ 65
15 s 45 $ 675
3 $ 35 s 105
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Single Audit Subtotal: s 1,245
Single Audit {if applicable)
Includes Management Letter, if
needed
t:st1metea CJ<1enucu
Hours Hourly Rate Rate
1 $ 100 $ 100
4 $ 75 $ 300
2 $ 65 $ 130
15 $ 45 $ 675
3 $ 35 $ 105
n/a
Single Audit Subtotal: $ 1,310
Exhibit B
TOA Audit FCFAAudlt
Includes Management Letter, if Includes Financial Statement Assistance,
needed and Management Letter
EStimetea ex<enaea e><1enucu
Hours Hourly Rate Rate EStimaled Hours Hourly Rate Rate
2 $ 100 $ 200 4 $ 100 $ 400
8 $ 75 $ 600 22 $ 75 $ 1,650
4 $ 65 $ 260 30 $ 65 $ 1,950
17 $ 45 s 765 39 $ 45 s 1,755
5 s 35 $ 175 7 $ 35 $ 245
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Subtotal: $ 2,000 FCFA Subtotal: $ 6.000
TOA Audit FCFAAudit
Includes Management Letter, if Includes Financial Statement Assistance,
needed and Management Letter
t:Sllmatea t:Xten""" c.>nenQt:a
Hours Hourly Rate Rate Estimated Hours Hourly Rate Rate
2 $ 100 $ 200 4 $ 100 $ 400
8 $ 75 $ 600 22 $ 75 $ 1,650
4 $ 65 $ 260 32 $ 65 $ 2,080
18 s 45 $ 810 41 $ 45 $ 1,845
6 $ 35 $ 210 7 s 35 $ 245
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JU"
Subtotal: s 2,080 FCFA Subtotal: s 6,220
TOA Audit FCFAAudit
Includes Management Letter, if Includes Financial Statement Assistance.
needed and Management Letter
t:Stimatea ex<ended Extenaea
Hours Hourly Rate Rate Estimated Hours Hourly Rate Rate
2 $ 100 s 200 4 s 100 $ 400
8 $ 75 $ 600 23 $ 75 $ 1,725
5 $ 65 $ 325 32 $ 65 s 2,080
18 $ 45 s 810 43 $ 45 s 1,935
6 $ 35 $ 210 8 $ 35 s 280
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Subtotal: $ 2,145 FCFA Subtotal: s 6,420
Item 8.c. - Page 51
CITY OF ARROYO GRANDE Exhibit B
Dollar Cost Bid
Summary of Fees Per Fiscal Year
Fiscal Year CitvAudit Simile Audit TOA FCFA Total
2014 $ 16,000 $ 1,200 $ 2,000 $ 6,000 $ 25,200
2015 $ 16,560 $ 1,245 $ 2,080 $ 6,220 $ 26,105
2016 $ 17,160 $ 1,310 $ 2,145 $ 6.420 $ 27,035
Item 8.c. - Page 52
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
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Item 8.c. - Page 53
provided is subject to approval of 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 or 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.
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Item 8.c. - Page 54
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
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.
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Item 8.c. - Page 55
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
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Item 8.c. - Page 56
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
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.
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Item 8.c. - Page 58