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HomeMy WebLinkAboutItem 1e - Agreement for Auditing ServiceAupusc i, IYU3 �- 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 Revised 04/13 1 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. Revised 04/13 2 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 Revised 04/13 3 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, Revised 04/13 4 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, Revised 04/13 5 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 Revised 04/13 6 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. Revised 04/13 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. Revised 04/13 8 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 Revised 04/13 9 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. Revised 04/13 10 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. Revised 04/13 11 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. Revised 04/13 12 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