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HomeMy WebLinkAboutItem 11h - Financial Auditing Services PSA Extension DATE: June 3,2025 TO: Honorable Mayor and City Council FROM: Henry Chen, Administrative Services Director SUBJECT: EXTENSION TO THE PROFESSIONAL SERVICES AGREEMENT WITH MOSS, LEVY & HARTZHEIM LLP FOR FINANCIAL AUDITING SERVICES IN AN AMOUNT NOT TO EXCEED $33,000 CEQA: Not a Project Recommendation: Approve SUMMARY The City’s contract with Moss, Levy & Hartzheim LLP (“Moss”) for the annual audit of Arcadia’s financial statements expires upon the audit of Fiscal Year 2023-24. The current fiscal year is the first year-end close under the City’s new financial Enterprise Resource Planning (“ERP”) system. To minimize disruptions to City operations, it is recommended that the existing audit contract be extended for one additional year. The proposed extension will allow the fiscal year-end closeout process to be completed without the added complexity of transitioning to new auditors. A one-year extension of the current contract has been proposed, with a minimal cost increase of $1,000, or 3.1%. It is recommended that the City Council authorize the City Manager to execute a one-year extension to the Professional Services Agreement with Moss for professional audit services, in an amount not to exceed $33,000. BACKGROUND In 2020, Arcadia entered a five-year contract with Moss for the annual audit of the City’s financial statements and the Single Audit. While new audit proposals are typically solicited by the City at the conclusion of each contract, the first year of any new audit engagement is more challenging and time-consuming. During the first year with a new audit firm, additional work is required for the new firm to become familiar with the City and its internal controls, including extensive interviews with staff from various departments. Once the City’s processes are documented, testing of those controls is usually performed through the selection and review of sample transactions. Copies of contracts, agreements, bond documents, and other administrative records and reports are gathered and reviewed by the new audit firm. Professional Services Agreement Extension Moss, Levy & Hartzheim LLP June 3, 2025 Page 2 of 2 DISCUSSION This fiscal year is the first year-end close under the City’s new ERP system. Customary with the implementation of any new enterprise system, there is a steep learning curve as staff becomes familiar with the new program. The year-end closeout process under the new ERP differs significantly from that of the previous system. New schedules must be created, and revised processes and reports must be created for the necessary account reconciliations for the auditors. Completing the first close process in a timely and efficient manner will be more challenging this year. Allowing employees to concentrate on these tasks in the new ERP system, instead of preparing for a transition to a new audit firm, will create capacity for staff to better understand the new process and implement improvements that could enhance future year-end closings. For the last five years, the service provided by Moss has been well received by staff, and their work has been regarded as thorough and professional. An extension of the contract for one additional year would allow staff additional time to become accustomed to the new process and to facilitate a smoother year-end close. A new contract will be solicited for FY 2025-26 and beyond. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. FISCAL IMPACT The contract cost of $33,000 includes a 3.1%, or $1,000 increase from the prior year. Sufficient budget to perform the annual audit has been included in the Administrative Services Department’s Operating Budget. RECOMMENDATION It is recommended that the City Council determine that this action is not a project under the California Environmental Quality Act (“CEQA”); and authorize the City Manager to execute a one-year extension to the Professional Services Agreement with Moss, Levy & Hartzheim LLP for financial auditing services in an amount not to exceed $33,000.