HomeMy WebLinkAboutItem 1e - Agreement for Auditing ServiceAupusc i, IYU3
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DATE:
TO:
FROM
STAFF REPORT
Administrative Services Department
April 21, 2015
Honorable Mayor and City Council
Hue Quach, Administrative Services Director
Shannon Huang, Financial Services Manager /Treasurer
SUBJECT: PROFESSIONAL SERVICES AGREEMENT WITH MOSS, LEVY &
HARTZHEIM, LLP FOR THE CITY'S FINANCIAL AUDITING SERVICE
Recommendation: Approve
SUMMARY
Staff solicited proposals from qualified certified public accounting firms to audit the
City's financial statements. After an extensive review of proposals from 10 auditing
firms, it is recommended that the City enter into an agreement with Moss, Levy &
Hartzheim, LLP, for the City's Financial Auditing Services for three years, with the
option to enter into two one -year extensions. The firm was selected based on their
auditing experience with government entities, staff qualifications, and proposed pricing.
The total cost for the three year period is $102,615. Should City Council grant the
renewal of the two one -year contracts at its time of consideration, the annual cost for
each of those years would be $35,306 and $35,857, respectively. In total, the five -year
period would cost $173,778.
DISCUSSION
The Financial Service Division issues Request for Proposals for auditing services every
five years to ensure audit independence and competitive pricing. The rotation of the
audit firm eliminates the potential impact on the audit firm's independence due to
developing a longstanding relationship with the City staff. In addition, it is advisable to
have a fresh set of eyes inspect the financial records to avoid complacency. While all
firms will follow generally accepted auditing standards, each firm has a slightly different
focus, which also helps to ensure that the audit remains effective.
A Request for proposals ( "RFP ") was sent to qualified audit firms, and posted with
California Society of Municipal Financial Officer and on the City's website in February
2015. The scope of the City's auditing services includes:
Agreement for Financial Auditing Services
April 21, 2015
Page 2 of 4
• A financial audit of the basic financial statements of all funds of the City of
Arcadia in accordance with auditing standards generally accepted in the United
States of America and Government Auditing Standards, issued by the
Comptroller of the United States.
• A financial audit of the Successor Agency to Arcadia Redevelopment Agency.
• A single audit on the expenditures of federal grants in accordance with U.S.
Office of Management and Budget (OMB) Circular A -133.
• Assist in the preparation of the City's annual financial statements including the
City's Comprehensive Annual Financial Report (CAFR), Successor Agency's
Audited Financial Statement, Audited Financial Report for the Arcadia Transit,
and the City's Financial Transactions Reports for the State Controller.
• Agreed -upon auditing procedures pertaining to the City's GANN Limit
(Appropriations Limit).
• A report in writing to the City Council for any control deficiencies found during the
audit that are considered significant deficiencies and /or material weaknesses
based on the standards and guideline established by Statement on Auditing
Standards (SAS) No. 115, Communicating Internal Control Related Matters
Identified in an Audit.
• Communicate to the City Council matters related to the financial statement audit,
in the auditor's professional judgment, significant and relevant to the governing
body, according to the standards and guideline established by Statement on
Auditing Standard (SAS) No. 114, The Auditor's Communication With Those
Charged With Governance
• The audit firm may be consulted throughout the year as an information resource
and may be asked to provide guidance on implementing Federal and State
regulations as they may affect local government accounting.
There were 10 auditing firms that responded to the RFP. Staff reviewed and evaluated
each firm's proposal based on technical qualifications individually using the following
criteria:
Agreement for Financial Auditing Services
April 21, 2015
Page 3 of 4
Table I: Selection Criteria
SELECTION CRITERIA I WEIGHT
1 Capability of handling all aspects of the engagement, provide ongoing 35%
support, technical assistance, and continuity of staff throughout the year.
2 Professional qualifications of the key members of the engagement team 30%
and the firm.
3 Knowledge, experience and approach on Government Audits and Laws. 15%
4 Clearly defined schedule of the audit engagement plan and completion 15%
dates for key parts of the audit
5 Thoroughness of the auditor's proposed scope of services 5%
TOTAL 1 100% I
Staff reviewed the costs proposed by the firms and listed the five -year total in the table
below. For comparison purpose, the following proposal costs included two major
programs for Single Audit as some of the firms charge extra for additional federal grant
programs.
Table II: Criteria Score and Total Auditing Costs
AUDITING FIRMS
Five -Year Cost
Score
1 Chavan & Associates, LLP
$167,500
83%
2 Moss Levy & Hartzheim, LLP
$173,778
100%
3 Lance Soll & Lunghard, LLP
$193,712
100%
4 Van Lant & Frankhanel, LLP
$195,600
81%
5 White Nelson Diehl Evans, LLP
$198,085
100%
6 Simpson & Simpson, CPAs
$207,250
91%
7 The Pun Group
$223,265
100%
8 Mayer Hoffman McCann P.C.
$246,780
90%
9 Rogers Anderson Malody & Scott, LLP
$262,400
90%
10 Vasquez & Company, LLP
$307,915
94%
Agreement for Financial Auditing Services
April 21, 2015
Page 4 of 4
All 10 auditing firms have the professional qualifications to satisfy the City's
requirements, although their experience with municipalities varies. It is recommended
that the City Council select the second lowest bidder, Moss, Levy & Hartzheim, LLP, for
the City's auditing services based on its broader experience in public agency auditing,
and strong municipality client base, as well as pricing.
Moss, Levy & Hartzheim, LLP is a regional, full service public accounting firm with
offices in Culver City, Beverly Hills, and Santa Maria, and they have clients throughout
the State of California as well as 31 other states. The firm has been in public accounting
for 58 years, with 38 years performing local governmental and non - profit audits.
Additionally, the firm has extensive experience auditing financial books of cities similar
to Arcadia.
FISCAL IMPACT
The total cost for the entire five -year contract is $173,778. The first year's rate will be
$33,654, which is less than the present contract cost of $38,400. The annual auditing
service cost will be budgeted accordingly in the City's annual operating budgets.
RECOMMENDATION
It is recommended that the City Council authorize and direct the City Manager to
execute a professional services agreement with Moss, Levy & Hartzheim, LLP for the
City's Financial Auditing Service for three years, with the option to enter into two
additional one -year extensions totaling $173,778 over the entire 5 -year period.
Approved:
Dominic Lazzar
City Manager
Attachment: Draft Professional Services Agreement
CITY OF ARCADIA
PROFESSIONAL SERVICES AGREEMENT REGARDING
FINANCIAL AUDITING SERVICES
1. PARTIES AND DATE.
This Agreement is made and entered into this day of
20_ by and between the City of Arcadia, a charter city organized under the
Constitution and laws of the State of California with its principal place of business at 240
West Huntington Drive, Arcadia, California 91007 ( "City ") and Moss, Levy, & Hartzheim,
LLP, a Limited Liability Partnership with its principal place of business at 5800 Hannum
Ave., Suite E, Culver City, CA 90230 ( "Consultant "). City and Consultant are
sometimes individually referred to as "Party" and collectively as "Parties."
3. ERMS.
3.1 Scope of Services and Term.
3.1.1 General Scope of Services. Consultant promises and agrees to
furnish to the City all labor, materials, tools, equipment, services, and incidental and
customary work necessary to fully and adequately supply the professional financial
auditing services necessary for the Project ( "Services "). The Services are more
particularly described in Exhibit "A" attached hereto and incorporated herein by
reference. All Services shall be subject to, and performed in accordance with, this
Agreement, the exhibits attached hereto and incorporated herein by reference, and all
applicable local, state and federal laws, rules and regulations.
3.1.2 Term. The term of this Agreement shall be for financial auditing
services for the fiscal years ending June 30, 2015 through June 30, 2017, with the
option to enter into two one -year extensions, unless earlier terminated as provided
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herein. Consultant shall complete the Services within the term of this Agreement, and
shall meet any other established schedules and deadlines.
3.2 Responsibilities of Consultant.
3.2.1 Control and Payment of Subordinates; Independent Contractor.
The Services shall be performed by Consultant or under its supervision. Consultant will
determine the means, methods and details of performing the Services subject to the
requirements of this Agreement. City retains Consultant on an independent contractor
basis and not as an employee. Consultant retains the right to perform similar or
different services for others during the term of this Agreement. Any additional personnel
performing the Services under this Agreement on behalf of Consultant shall also not be
employees of City and shall at all times be under Consultant's exclusive direction and
control. Consultant shall pay all wages, salaries, and other amounts due such
personnel in connection with their performance of Services under this Agreement and
as required by law. Consultant shall be responsible for all reports and obligations
respecting such additional personnel, including, but not limited to: social security taxes,
income tax withholding, unemployment insurance, disability insurance, and workers'
compensation insurance.
3.2.2 Schedule of Services. Consultant shall perform the Services
expeditiously, within the term of this Agreement, and in accordance with the Schedule of
Services set forth in Exhibit "B" attached hereto and incorporated herein by reference.
Consultant represents that it has the professional and technical personnel required to
perform the Services in conformance with such conditions. In order to facilitate
Consultant's conformance with the Schedule, City shall respond to Consultant's
submittals in a timely manner. Upon request of City, Consultant shall provide a more
detailed schedule of anticipated performance to meet the Schedule of Services.
3.2.3 Conformance to Applicable Requirements. All work prepared by
Consultant shall be subject to the prior written approval of City.
3.2.4 Substitution of Key Personnel. Consultant has represented to City
that certain key personnel will perform and coordinate the Services under this
Agreement. Should one or more of such personnel become unavailable, Consultant
may substitute other personnel of at least equal competence upon prior written approval
of City. In the event that City and Consultant cannot agree as to the substitution of key
personnel, City shall be entitled to terminate this Agreement for cause. As discussed
below, any personnel who fail or refuse to perform the Services in a manner acceptable
to the City, or who are determined by the City to be uncooperative, incompetent, a
threat to the adequate or timely completion of the Project or a threat to the safety of
persons or property, shall be promptly removed from the Project by the Consultant at
the request of the City. The key personnel for performance of this Agreement are as
follows: Hadley Y. Hui, Partner.
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3.2.5 City's Representative. The City hereby designates Hue C. Quach,
Director of Administrative Services, or his or her designee, to act as its representative
for the performance of this Agreement ( "City's Representative "). City's Representative
shall have the power to act on behalf of the City for all purposes under this Contract.
Consultant shall not accept direction or orders from any person other than the City's
Representative or his or her designee.
3.2.6 Consultant's Representative. Consultant hereby designates Hadley
Y. Hui, Partner, or his or her designee, to act as its representative for the performance
of this Agreement ( "Consultant's Representative "). Consultant's Representative shall
have full authority to represent and act on behalf of the Consultant for all purposes
under this Agreement. The Consultant's Representative shall supervise and direct the
Services, using his best skill and attention, and shall be responsible for all means,
methods, techniques, sequences and procedures and for the satisfactory coordination
of all portions of the Services under this Agreement.
3.2.7 Coordination of Services. Consultant agrees to work closely with
City staff in the performance of Services and shall be available to City's staff,
consultants and other staff at all reasonable times.
3.2.8 Standard of Care, Performance of Employees. Consultant shall
perform all Services under this Agreement in a skillful and competent manner,
consistent with the standards generally recognized as being employed by professionals
in the same discipline in the State of California. Consultant represents and maintains
that it is skilled in the professional calling necessary to perform the Services. Finally,
Consultant represents that it, its employees and subcontractors have all licenses,
permits, qualifications and approvals of whatever nature that are legally required to
perform the Services, including a City Business License, and that such licenses and
approvals shall be maintained throughout the term of this Agreement. As provided for in
the indemnification provisions of this Agreement, Consultant shall perform, at its own
cost and expense and without reimbursement from the City, any services necessary to
correct errors or omissions which are caused by the Consultant's failure to comply with
the standard of care provided for herein. Any employee of the Consultant or its sub -
consultants who is determined by the City to be uncooperative, incompetent, a threat to
the adequate or timely completion of the Project, a threat to the safety of persons or
property, or any employee who fails or refuses to perform the Services in a manner
acceptable to the City, shall be promptly removed from the Project by the Consultant
and shall not be re- employed to perform any of the Services or to work on the Project.
3.2.9 Laws and Regulations. Consultant shall keep itself fully informed of
and in compliance with all local, state and federal laws, rules and regulations in any
manner affecting the performance of the Project or the Services, including all Cal /OSHA
requirements, and shall give all notices required by law. Consultant shall be liable for all
violations of such laws and regulations in connection with Services. If the Consultant
performs any work knowing it to be contrary to such laws, rules and regulations and
without giving written notice to the City, Consultant shall be solely responsible for all
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costs arising therefrom. Consultant shall defend, indemnify and hold City, its officials,
directors, officers, and employees free and harmless, pursuant to the indemnification
provisions of this Agreement, from any claim or liability arising out of any failure or
alleged failure to comply with such laws, rules or regulations.
3.2.9.1 Immigration Reform and Control Act. Consultant
acknowledges that Consultant, and all subcontractors hired by Consultant to perform
services under this Agreement, are aware of and understand the Immigration Reform
and Control Act ( "IRCA "). Consultant is and shall remain in compliance with the IRCA
and shall ensure that any subcontractors hired by Consultant to perform services under
this Agreement are in compliance with the IRCA. In addition, Consultant agrees to
indemnify, defend and hold harmless the City, its directors, officials, officers and
employees, from any liability, damages or causes of action arising out of or relating to
any claims that Consultant's employees, or the employees of any subcontractor hired by
Consultant, are not authorized to work in the United States for Consultant or its
subcontractor and /or any other claims based upon alleged IRCA violations committed
by Consultant or Consultant's subcontractor(s).
3.2.10 Insurance.
3.2.10.1 Time for Compliance. Consultant shall not
commence Work under this Agreement until it has provided evidence satisfactory to the
City that it has secured all insurance required under this section. In addition, Consultant
shall not allow any subcontractor to commence work on any subcontract until it has
provided evidence satisfactory to the City that the subcontractor has secured all
insurance required under this section; provided, however, that in lieu thereof, the
Consultant may provide evidence to the City that all subcontractors are additional
insureds under the Consultant's policies of insurance.
3.2.10.2 Minimum Requirements. Consultant shall, at its
expense, procure and maintain for the duration of the Agreement insurance against
claims for injuries to persons or damages to property which may arise from or in
connection with the performance of the Agreement by the Consultant, its agents,
representatives, employees, subcontractors and volunteers. Consultant shall also
name and obtain insurer's consent to naming City, its directors, officials, officers, and
employees as an additional insured with proof of certificate of insurance that they are an
additional insured. Such insurance shall meet at least the following minimum levels of
coverage:
(A) Minimum Scope of Insurance. Coverage shall be
when commercially available (occurrence based) at least as broad as the latest version
of the following: (1) General Liability: Insurance Services Office Commercial General
Liability coverage for premises and operations, contractual liability, personal injury,
bodily injury, independent contractors, broadform property damage, explosion, collapse,
and underground, products and completed operations (2) Automobile Liability:
Insurance Services Office Business Auto coverage for any auto owned, leased, hired,
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and borrowed by Consultant or for which Consultant is responsible; and (3) Workers'
Compensation and Employer's Liability: Workers' Compensation insurance as required
by the State of California and Employer's Liability Insurance.
The City, its directors, officials, officers, and employees shall be listed as additional
insured. Any deductibles or self- insured retentions must be declared to and approved
by City and conform to the requirements provided in Section 3.2.10.6 herein.
(B) Automobile Liability. The automobile liability policy
shall be endorsed to state that: (1) the City, its directors, officials, officers, and
employees shall be covered as additional insureds with respect to the ownership,
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operation, maintenance, use, loading or unloading of any auto owned, leased, hired or
borrowed by the Consultant or for which the Consultant is responsible; and (2) the
insurance coverage shall be primary insurance as respects the City, its directors,
officials, officers, and employees, or if excess, shall stand in an unbroken chain of
coverage excess of the Consultant's scheduled underlying coverage. Any insurance or
self- insurance maintained by the City, its directors, officials, officers, and employees
shall be excess of the Consultant's insurance and shall not be called upon to contribute
with it in any way.
(C) Workers' Compensation and Employers Liability
Coverage. The insurer shall agree to waive all rights of subrogation against the City, its
directors, officials, officers, and employees for losses paid under the terms of the
insurance policy which arise from work performed by the Consultant.
(D) All Coverages. Each insurance policy required by this
Agreement shall be endorsed to state that: (A) coverage shall not be, reduced or
canceled except after thirty (30) days prior written notice by certified mail, return receipt
requested of cancellation, of intended non - renewal or endorsement reduction in limit or
scope of coverage; provided, however, that in the event of cancellation due solely to
non - payment of premium, ten (10) days notice of cancellation for non - payment of
premium may instead be given to the City.; and (B) any failure to comply with reporting
or other provisions of the policies, including breaches of warranties, shall not affect
coverage provided to the City, its directors, officials, officers, and employees.
3.2.10.5 Separation of Insureds, No Special Limitations. All
insurance required by this Section shall contain standard separation of insureds
provisions. In addition, such insurance shall not contain any special limitations on the
scope of protection afforded to the City, its directors, officials, officers, and employees.
3.2.10.6 Deductibles and Self- Insurance Retentions. Any
deductibles or self- insured retentions must be declared to and approved by the City.
Consultant shall guarantee that, at the option of the City, either: (1) the insurer shall
reduce or eliminate such deductibles or self- insured retentions as respects the City, its
directors, officials, officers, and employees; or (2) the Consultant shall procure a bond
guaranteeing payment of losses and related investigation costs, claims and
administrative and defense expenses.
3.2.10.7 Acceptability of Insurers. Insurance is to be placed
with insurers with a current A.M. Best's rating no less than A:VII, admitted or approved
to do business in California, and satisfactory to the City.
3.2.10.8 Verification of Coverage. Consultant shall furnish City
with complete and accurate copies of current certificates of insurance and
endorsements effecting coverage required by this Agreement on forms satisfactory to
the City. The certificates and endorsements for each insurance policy shall be signed
by a person authorized by that insurer to bind coverage on its behalf, and shall be on
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forms provided by the City if requested. Copies of all certificates and endorsements
must be received and approved by the City before work commences. The City reserves
the right to require complete, certified copies of all required insurance policies, at any
time.
3.3.2 Payment of Compensation. Consultant shall submit to City a
monthly itemized statement which indicates work completed and hours of Services
rendered by Consultant. The statement shall describe the amount of Services and
supplies provided since the initial commencement date, or since the start of the
subsequent billing periods, as appropriate, through the date of the statement. City
shall, within forty -five (45) days of receiving such statement, review the statement and
pay all approved charges thereon.
3.3.3 Reimbursement for Expenses. Consultant shall not be reimbursed
for any expenses unless prior written authorization is obtained from the City.
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3.3.4 Extra Work. At any time during the term of this Agreement, City
may request that Consultant perform Extra Work. As used herein, "Extra Work" means
any work which is determined by City to be necessary for the proper completion of the
Project, but which the parties did not reasonably anticipate would be necessary at the
execution of this Agreement. Consultant shall not perform, nor be compensated for,
Extra Work without prior written authorization from City's Representative.
3.4 Accounting Records.
3.5.1 Termination of Agreement.
3.5.1.1 Grounds for Termination. City may, by written notice
to Consultant, terminate the whole or any part of this Agreement at any time and without
cause by giving written notice to Consultant of such termination, and specifying the
effective date thereof, at least seven (7) days before the effective date of such
termination. Upon termination, Consultant shall be compensated only for those services
which have been adequately rendered to City, and Consultant shall be entitled to no
further compensation. Consultant may not terminate this Agreement except for cause.
A termination without cause by City shall not act as or be deemed a waiver of any
potential known or unknown City claims associated with Consultant's performance prior
to the date of termination.
3.5.1.2 Effect of Termination. If this Agreement is terminated
as provided herein, City may require Consultant to provide all finished or unfinished
Documents and Data and other information of any kind prepared by Consultant in
connection with the performance of Services under this Agreement. Consultant shall be
required to provide such document and other information within fifteen (15) days of the
request.
3.5.1.3 Additional Services. In the event this Agreement is
terminated in whole or in part as provided herein, City may procure, upon such terms
and in such manner as it may determine appropriate, services similar to those
terminated.
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3.5.2 Delivery of Notices. All notices permitted or required under this
Agreement shall be given to the respective parties at the following address, or at such
other address as the respective parties may provide in writing for this purpose:
Consultant:
City:
Moss, Levy & Hartzheim, LLP
5800 Hannum Avenue Suite E
Culver City, CA 90230
Attn: Hadley Y. Hui, Partner
City of Arcadia
240 West Huntington drive
Arcadia, CA 91007
Attn: Hue C. Quach, Director of Administrative Services
Such notice shall be deemed made when personally delivered or when mailed, forty -
eight (48) hours after deposit in the U.S. Mail, first class postage prepaid and
addressed to the party at its applicable address. Actual notice shall be deemed
adequate notice on the date actual notice occurred, regardless of the method of service.
3.5.3 Ownershia of Materials and Confidential
3.5.3.1 Documents & Data; Licensing of Intellectual Property.
This Agreement creates a non - exclusive and perpetual license for City to copy, use,
modify, reuse, or sublicense any and all copyrights, designs, and other intellectual
property embodied in plans, specifications, studies, drawings, estimates, and other
documents or works of authorship fixed in any tangible medium of expression, including
but not limited to, physical drawings or data magnetically or otherwise recorded on
computer diskettes, which are prepared or caused to be prepared by Consultant under
this Agreement ( "Documents & Data "). Consultant shall require all subcontractors to
agree in writing that City is granted a non - exclusive and perpetual license for any
Documents & Data the subcontractor prepares under this Agreement. Consultant
represents and warrants that Consultant has the legal right to license any and all
Documents & Data. Consultant makes no such representation and warranty in regard
to Documents & Data which were prepared by design professionals other than
Consultant or provided to Consultant by the City. City shall not be limited in any way in
its use of the Documents and Data at any time, provided that any such use not within
the purposes intended by this Agreement shall be at City's sole risk.
3.5.3.2 Confidentiality. Except as otherwise required by
California law, all ideas, memoranda, specifications, plans, procedures, drawings,
descriptions, computer program data, input record data, written information, and other
Documents and Data either created by or provided to Consultant in connection with the
performance of this Agreement shall be held confidential by Consultant. Such materials
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shall not, without the prior written consent of City, be used by Consultant for any
purposes other than the performance of the Services. Nor shall such materials be
disclosed to any person or entity not connected with the performance of the Services or
the Project. Nothing furnished to Consultant which is otherwise known to Consultant or
is generally known, or has become known, to the related industry shall be deemed
confidential. Consultant shall not use City's name or insignia, photographs of the
Project, or any publicity pertaining to the Services or the Project in any magazine, trade
paper, newspaper, television or radio production or other similar medium without the
prior written consent of City.
3.5.4 Cooperation; Further Acts. The Parties shall fully cooperate with
one another, and shall take any additional acts or sign any additional documents as
may be necessary, appropriate or convenient to attain the purposes of this Agreement.
3.5.5 Indemnification.
3.5.5.1 To the fullest extent permitted by law, Consultant shall
defend, indemnify and hold the City, its officials, officers, and employees free and
harmless from any and all claims, demands, causes of action, costs, expenses, liability,
loss, damage or injury, in law or equity, to property or persons, including wrongful death,
in any manner arising out of or incident to any alleged acts, omissions or willful
misconduct of Consultant, its officials, officers, employees, agents, consultants and
contractors arising out of or in connection with the performance of the Services, the
Project or this Agreement, including without limitation the payment of all consequential
damages and attorney's fees and other related costs and expenses. Notwithstanding
the foregoing, to the extent Consultant's Services are subject to Civil Code Section
2782.8, the above indemnity shall be limited, to the extent required by Civil Code
Section 2782.8, to claims that arise out of, pertain to, or relate to the negligence,
recklessness, or willful misconduct of the Consultant. Consultant shall defend with
Legal Counsel of City's choosing, at Consultant's own cost, expense and risk, any and
all such aforesaid suits, actions or other legal proceedings of every kind that may be
brought or instituted against City, its directors, officials, officers, and employees.
Consultant shall pay and satisfy any judgment, award or decree that may be rendered
against City or its directors, officials, officers, and employees, in any such suit, action or
other legal proceeding arising from Consultant's performance of the Services, the
Project or this Agreement, except to the extent that liability is caused by the active
negligence or willful misconduct by the City or its directors, officials, officers, and
employees. Consultant shall reimburse City and its directors, officials, officers, and
employees, for any and all legal expenses and costs incurred by each of them in
connection therewith or in enforcing the indemnity herein provided. Consultant's
obligation to indemnify shall not be restricted to insurance proceeds, if any, received by
the City, its directors, officials, officers, and employees, and shall take effect
immediately upon execution of this Agreement.
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3.5.5.2 The duty to defend and to hold harmless, as set forth
above, shall include the duty to defend as established by Section 2778 of the California
Civil Code, and the duty to defend shall arise upon the making of any claim or demand
against the City, its respective officials, officers, agents, employees and representatives,
notwithstanding that no adjudication of the underlying facts has occurred, and whether
or not Consultant has been named in the claim or lawsuit.
3.5.6 Entire Agreement. This Agreement contains the entire Agreement
of the Parties with respect to the subject matter hereof, and supersedes all prior
negotiations, understandings or agreements. This Agreement may only be modified by
a writing signed by both Parties.
3.5.9 Time of Essence. Time is of the essence for each and every
provision of this Agreement.
3.5.10 City's Right to Employ Other Consultants. City reserves right to
employ other consultants in connection with this Project.
3.5.13 Construction; References; Captions. Since the Parties or their
agents have participated fully in the preparation of this Agreement, the language of this
Agreement shall be construed simply, according to its fair meaning, and not strictly for
or against any Party. Any term referencing time, days or period for performance shall
be deemed calendar days and not work days. All references to Consultant include all
personnel, employees, agents, and subcontractors of Consultant, except as otherwise
specified in this Agreement. All references to City include its elected officials, officers,
and employees except as otherwise specified in this Agreement. The captions of the
various articles and paragraphs are for convenience and ease of reference only, and do
not define, limit, augment, or describe the scope, content, or intent of this Agreement.
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3.5.14 Amendment; Modification. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing and signed by
both Parties.
3.5.15 Waiver. No waiver of any default shall constitute a waiver of any
other default or breach, whether of the same or other covenant or condition. No waiver,
benefit, privilege, or service voluntarily given or performed by a Party shall give the
other Party any contractual rights by custom, estoppel, or otherwise.
3.5.16 No Third Party Beneficiaries. There are no intended third party
beneficiaries of any right or obligation assumed by the Parties.
3.5.17 Invalidity; Severability. If any portion of this Agreement is declared
invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the
remaining provisions shall continue in full force and effect.
3.5.20 Labor Certification. By its signature hereunder, Consultant certifies
that it is aware of the provisions of Section 3700 of the California Labor Code which
require every employer to be insured against liability for Worker's Compensation or to
undertake self- insurance in accordance with the provisions of that Code, and agrees to
comply with such provisions before commencing the performance of the Services.
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3.5.21 Authority to Enter Agreement. Consultant has all requisite power
and authority to conduct its business and to execute, deliver, and perform the
Agreement. Each Party warrants that the individuals who have signed this Agreement
have the legal power, right, and authority to make this Agreement and bind each
respective Party.
3.5.22 Counterparts. This Agreement may be signed in counterparts,
each of which shall constitute an original.
3.5.23 Exhibits and Recitals. All Exhibits and Recitals contained herein
are hereby incorporated into this Agreement by this reference.
3.6 Subcontracting. 40%hh,
[SIGNATURES ON THE NEXT PAGE]
Revised 04/13
13
CITY OF ARCADIA
By
Dominic Lazzaretto
City Manager
Date:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Stephen P. E
City Attorney
Revised 04/13
14
MOSS, LEVY, & HARTZHEIM, LLP
go
Signature
Print Name and Title
Date:
Hue C. Quach,
Director of Administrative Services
EXHIBIT "A"
SCOPE OF SERVICES
A -1
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH
Overview of the MLH Audit Process
• Before Fiscal
Year -End
• Before Fiscal Year -
End
• Before Fiscal
Year - End and
After Fiscal
Year -End
After Fiscal
Year -End
M
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH (CONTINUED)
The chart below shows some of MLH's preliminary audit procedures:
testing
Obtain budget and budget
Ensure budgetary compliance
Analyze budget -to- actual variances. Look at capital
amendments
projects, status of property tax assessments as part of
Obtain Board minutes
Ensure knowledge of government key
the focus; looking at water rates to see how cost
communication
coverage exists.
Obtain grant documents, any service
Ensure grant compliance
Analyze grants
concession agreements
balances
Obtain policies and procedures, as
Evaluate effectiveness of policies, updates
Analyze policies and procedures
indicated in the 6/30/14 M, D & A
and relate to key compliance matters
Obtain client internal control memos
Evaluate internal controls
Analyze internal controls, including computer controls
of client if they exist
Short interviews of accounting and
for audit
Preliminary trial balance
selected operating personnel for
Perform selected testing on balances such as receipts,
documentation of process
disbursements, and payroll
Obtain prior year financials
Determine which items are Important for I
Set preliminary "materiality" limits
testing
Obtain appropriate schedules
Ensure effective procedures
Testing of cash receipts, cash disbursements, and
payroll transactions
Obtain Board minutes
Ensure knowledge of government key
Analyze important events highlighted in Board meetings
communication
Draft confirmations —third party
Independent verification of selected
Client to prepare letters and auditor to send letters
letters for independent verification of
balances
cash, property taxes, attorney, etc. for
client to sign and auditor to mail
Develop document request list for
To clarify client — auditor requests
Meet with client and agree upon document request list
client to review and agree upon
for audit
Preliminary trial balance
Ensure preliminary results make sense
Perform selected testing on balances such as receipts,
disbursements, and payroll
Obtain documentation for any new
Reduce the amount of year -end testing
Compliance and building of documentation for
agreements, land and property
and build a client permanent file for future
existence, title ownership and use, regulatory
purchases, sales, donations,
years
compliance
easements, NEPA compliance, CEQA,
RECRA and CERCLA, FERC, NEPA,
MSHP permits, for applicability, and
compliance as necessary
Obtain updates on retirement plans
Discuss GASB 68 and any changes
Audit selected components of any new reports and
changes for compliance
Request screen view access only for
Minimize client interruptions and view
Scan ledgers and accounts for accounting propriety
computer analysis
transactions
Consider site visitations on areas
Focus on controls where the risk
Site visitations
where there are significant cash, card,
assessment of material misstatement of
deposits and billing controls, internet
cash, card and internet transactions could
site controls
occur
Legal bills, key litigation
Look for commitments, contingencies and
Discuss with client prepare attorney letters for
disclosure
response and read relevant documents
Obtain minutes
Look for major agreements and key
Analyze for audit relevance and test and inquire as
decisions
necessary
Obtain long -term debt agreements
Analyze for disclosure and compliance
Obtain and prepare long term lease schedules
Commitments and Contingencies
Ensure auditing standards are applied for
Send legal letters, talk with client, review disclosures
proper accrual and disclosure
CITY OF ARCADIA
TECHNICAL PROPOSAL
,SPECIFIC AUDIT APPROACH (CONTINUED)
Please see Appendix F— Segmentation and Budgeted Hours by Segment for a schedule of the level of staff
and number of hours to be assigned to each segment of the engagement.
During the first year of the engagement, we will utilize the prior year's financial statements, the current
year's budget, and our knowledge of the City's systems to determine materiality for the different audit
sections. Each 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 and the results of our assessment in accordance with Statement on Auditing
Standards. These standards require auditors to perform test of controls and transactions based on a risk
approach.
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 of the following requirements of
AICPA: Statement on Auditing Standards (SAS) No. 55, Consideration of the Internal Control Structure
in a Financial Statement Audit, as amended by SAS No. 78; SAS No. 99, Consideration of Fraud in a
Financial Statement Audit; SAS No. 106, Audit Evidence; SAS No. 107, Audit Risk and Materiality in
Conducting an Audit; SAS No. 108, Planning and Supervision; SAS No, 109, Understanding the Entity
and Its Environment and Assessing the Risks of Material Misstatement; and SAS No. 1 10, Pefforming
Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained.
It is estimated that the sampling size for transaction testing for compliance with systems as actually
implemented would be as follows:
I. Minimum of 60 disbursement items, including automatic and manual checks and bank
debits
II. Minimum of 25 payroll checks, including direct deposits
III. Minimum of 60 receipt iterns
We have extensive knowledge in auditing computer systems. We have assisted numerous clients with the
implementation of accounting software and database business systems. This assistance has provided our
firm with a thorough background in computer systems with respect to both the software applications
aspect and also insight into auditing such systems. It is our policy to have a computer specialist as part of
the audit team and to be used on an as- needed basis. This individual assists the audit team in documenting
the computer system internal control structure and highlighting strengths and weaknesses relating to the
computer structure of the City.
In addition, all of our staff is equipped with networked laptop computers. These computers are equipped
with not only word processing and spreadsheet capabilities, but also various functional software, such as
PPC Audit — e- Tools, Creative Solutions Accounting, Adobe Acrobat, random sampling software, Lacerte
Tax Program, and Easy Accounting Software, which contain amortization programs and depreciation
programs, and other applications as well (including the Governmental Accounting Research System
which includes all GASB publications).
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH (CONTINUED)
We will perform preliminary analytical review procedures using the prior fiscal year's audited statements
and the current fiscal year's budget. In the preliminary stage, we will adopt ratio analysis procedures to
compare the relationships between account balances and classes of transactions between prior periods and
against budgets and industry statistics. This may include budgets, trial balances, and /or draft financial
statements to help us identify the source of individual fluctuations. We will then adopt trend analysis to
compare current data with prior periods, which is particularly useful for analyzing revenue and
expenditures. Any unexpected trends or deviations will be discussed with relevant City staff to obtain
explanations.
We will also review the following documents in order to determine compliance with applicable laws and
regulations:
1. Minutes of the governing body with special attention to: indications of new revenue
sources, including federal and state grants; expense 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
balance commitments or assignments; and authorization for significant new employees
hired.
2. New agreements and amendments to agreements including, but not limited to: grant
agreements; debt and lease agreements; labor agreements; joint venture agreements;
disposition and development agreements; and other miscellaneous agreements.
1 Administrative Code
4. Investment Policy
The main extent of our work would be what is required to enable us to express an opinion on the basic
financial statements in accordance with:
1. AICPA Industry Audit Guide for State and Local Governmental Units
2. AICPA 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's (OMB) Circular A -133, Audits of
State, Local Governments and Nonprofit Organizations
6. GAO Standards for Audit of Governmental Organizations, 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 conducted in accordance with auditing standards generally accepted in the United States
of America. The primary purpose of the audit is to express opinions 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 inay
exist, or if any other circumstances are encountered that require extended services, we will promptly
advise the City.
0
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH (CONTINUED)
If convenient for the City's staff, the approximate target dates for the fiscal year 2015 audits would be as
follows:
1. Entrance conference and submission of audit plan — Week of June I"
2. Interim fieldwork — Week of June 15'x'
3. Exit conferences — June 191'
4. Entrance conference and year -end fieldwork — Week of October 5`"
5. Exit conference — October 9 "'
6. Preparation and submission of the City's Annual Financial Transactions Report — By the
required due date, usually October 18"'
7. Draft management letter, financial statements, and other audit reports -- No later than
November 15`x'
8. Final management letter, financial statements, and other audit reports — No later than
November 30 "'
Our audit would begin when it is convenient for the City's staff. We estimate that in the third week of
June we will perform interim work. Each year, the partner or manager of the firm will contact the
Financial Services Manager to set up an entrance conference meeting. The purpose of this meeting will
be to discuss the scope and timing of the annual audit, to review any accounting issues known at that
time, to provide our detailed audit plan, and to address any of the City's personnel concerns about the
impending audit.
We will schedule approximately one week of interim work each year. During the first 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, investment 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.
Before year -end fieldwork, we will discuss with the City any assistance the City may need with the year-
end closing.
lul
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH (CONTINUED)
The chart below shows some ofMLH's final audit procedures:
Obtain updated general ledger
Ensure proper closing of books
Analyze records and update analytical
procedures
Obtain internal control memos, if there
Re- evaluate internal controls
Update understanding of internal controls
are any changes
and document key changes
Compliance with recharge and
Confirm balance with Treasurer /Auditor
Obtain joint venture agreement
reclamation plan
and test as necessary
Obtain prior GFOA CAFR comments
Ensure improvement in financial reporting
Implement significant changes in financial
reporting methods
Obtain and further agree upon audit
To commence audit properly on final
Apply auditing procedures
schedules as agreed upon in the contract
numbers
and RFP
Obtain /prior year GASB 34 conversion
Ensure that all GASB 34 conversion entries
Work on current year GASB 34
entries /prepare GASB 34 Entries
are proper
presentations
Analyze capital asset ledgers
Review or updates from preliminary and
Obtain capital asset documents and
analyze for impairment
update for impairments
Look at GMA agreement
Analyze credit agreements
Test schedules of credit agreements
Service Concession Agreements
Look for proper accruals and revenue
Look at selected billings and revenue
payments
agreements
Risk Management
Determine coverage
Confirm balances and analyze for proper
accruals as necessary
Cost allocations
Internal service allocation propriety
Discuss and analyze internal service cost
allocations
Allocation agreements
Ensure agreement compliance
Analyze allocations as necessary from
client calculations and documents
Obtain OPEB and PERS documents
Review for any needed updates, GASB 68
Read documents and update
Endangered species communication
Analyze for compliance
Endangered species
Bond agreements
Bond compliance
Test bond compliance and obtain bond
ratings
Contributions
Compliance
Analyze significant contributions for
compliance
Receipt of third party letters
Independent verification of accounts
Match to year -end books and records and
reconcile to accounts
None
Ensure proper audit process
Hold timely status meetings with the
client
Adjusting entries, and any possible Obtain client agreement
Post as necessary with client
management points
None Compliance with contract and governance
Attend finance and board meetings
MD &A, prepare financials, reports and Ensure documents match, are consistent
Read MD &A, prepare financials, reports
read supplementary information and appropriately completed
and read supplementary information
Our year -end fieldwork would begin on October 5 "'. The year -end audit work would begin with an
analytical review of all significant balance sheet and revenues and expenditures /expense accounts for
each fund, which includes substantive tests on all balance sheet accounts. Analytical procedures will be
used to supplement the substantive tests, not supplant them. We will perform analytical procedures
during interim and year -end fieldwork on all balance sheet and revenue and expense /expenditure
accounts.
The primary objective of the year -end audit work is to audit the final numbers that will appear in the
City's basic financial statements. Our fieldwork would also consist of procedures required under SAS
No. 99, Considet•ation of Fraud in a Financial Statement Audit.
CITY OF ARCADIA
TECHNICAL PROPOSAL
SPECIFIC AUDIT APPROACH (CONTINUED)
We will perform procedures such as:
(a) Confirmations by positive and negative circularization 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 deemed
necessary
(b) Physical verifications and observations
(c) Analysis and review of evidential material
(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 whether an audit in compliance with
OMB Circular A -133 is required through review of the City Council minutes, examination of the general
ledger, and discussion with finance personnel. If a compliance audit is required, we would perform tests
of. specific requirements; claims for advances and reimbursements; and amounts claimed or used for
matching in compliance with the Single Audit Act. The compliance audit will be conducted in
accordance with auditing standards generally accepted in the United States of America, 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 year -end fieldwork should be completed no later than October 9"'.
The Governmental Accounting, Auditing and Financial Reporting (GAAFR), issued by the Government
Finance Officers Association (the `Blue Book ") and other GFOA publications are often used as additional
tools when preparing and reviewing the financial statements of our governmental clients. The firm has
and uses its extensive library of current AICPA, GF'OA, and GASB publications and pronouncements.
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 workpapers for this engagement are the property of Moss, Levy & Hartzheim, LLP and constitute
confidential information. However, we may be requested to make certain workpapers available to any
Cognizant Agency pursuant to authority given to it by law or regulation, any parties designated by the
federal or state governments or by the City as part of an audit quality review process, and other audits of
entities of which the City is a sub - recipient of grant funds or component unit.
We understand that we shall respond to the reasonable inquiries of successor auditors and allow them to
review working papers relating to matters of continuing accounting significance. If requested, access to
such workpapers will be provided under the supervision of Moss, Levy & Hartzheim, LLP personnel.
12
CITY OF ARCADIA
TECHNICAL PROPOSAL
IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS
We do not anticipate any problems with the audit except for items listed in past management letters. In
the event of a problem, the City Council, City Manager, City Attorney, Director of Administrative
Services, and the Financial Services Manager will be immediately notified in writing of any fraud, other
illegal acts, or indications of illegal acts found during the course of our work. All other discrepancies or
weaknesses in the internal control system that we become aware of will be communicated to management
through discussion, the management recommendation letter, and /or if it is a reportable condition, as part
of the single audit report, if necessary.
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.
Under penalties of perjury, I declare that I am an authorized signer and that there are no and have never
been any financial interests between any officials or employees of the City of Arcadia and Moss, Levy &
Hartzheim, LLP.
Respectfully submitted,
Craig A Hartzheim, CPA
Partner
Moss, Levy & Hartzheim, LLP is an Equal Opportunity Employer
13
Exhibit "B"
SCHEDULE OF SERVICES
Consultant shall perform an audit of the City, Successor Agency to the Arcadia
Redevelopment Agency, and the Transportation Development Act and other pertinent
state requirements, financial statements in accordance with auditing standards
generally accepted in the United States of America as set forth by the American Institute
of Certified Public Accounts, with the objective of expressing an opinion on the fair
presentation of the basic financial statements, which will be in full compliance with the
Government Finance Officers Association's (GFOA) Blue Book. Consultant will also
perform single audits on the expenditures of federal grants in accordance with U.S.
Office of Management and Budget (OMB) Circular A -133 and test compliance with the
Single Audit Act as amended in 1996, and applicable laws and regulations, if applicable.
5. Exit conference — October 9th
than November 30th
W
Exhibit "C"
AUDIT WORK COST PROPOSAL
C -1
Optional Years
Service
2014/15
2015/16
2016/17
2017/18
2018/19
City Audit and CAFR
$ 18,740
$ 19,084
$ 19,428
$ 19,772
$ 20,116
GANN Limit Review Report
410
417
424
431
438
Single Audit and Related
3,880
3,950
020
4,090
4,160
Reports, if applicable *
Successor Agency of the
Arcadia Redevelopment Agency
5,51
5,610
5,7
5,810
5,910
Audit and Related Reports
k6k
Transit Report
2,210
:7%,250
2,290
330
2,370
State Controller's Report
W10
3,361
3,412
,463
3,514
Subtotal:
$ 34,060
$ 34,672
$ 35,284
$ 35,896
$ 36,508
Discount (10 %)
(3,406)
(3,467)
(3,528)
(3,590)
(3,651)
Total for Fiscal Year (not -to-
$ 30,654
$ 31,205
$ 31,756
$ 32,306
$ 32,857
exceed):
C -1