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HomeMy WebLinkAboutItem 11g - Annual Financial Auditing Services STAFF REPORT ADMINISTRATIVE SERVICES DEPARTMENT DATE: July 21, 2026 TO: Honorable Mayor and City Council FROM: Henry Chen, Administrative Services Director SUBJECT: PROFESSIONAL SERVICES AGREEMENT WITH MOSS, LEVY & HARTZHEIM, LLP FOR FINANCIAL AUDITING SERVICES CEQA: Not a Project Recommendation: Approve SUMMARY Under state law, California cities are required to conduct an independent financial audit each year, which must be submitted to the State Controller’s Office. To continue meeting this legal mandate, proposals were solicited from certified public accounting firms to provide independent auditing services for the City's annual financial statements for the Fiscal Years ending June 30, 2026, through June 30, 2030. The requested services included the performance of the annual financial audit, issuance of the Independent Auditor's Report, and completion of all audits and reports required under applicable Government Auditing Standards and other regulatory requirements. Three proposals were received and evaluated through a comprehensive review process. The evaluation included consideration of each firm's governmental auditing experience, technical qualifications, proposed audit approach, references, and proposed fees. Following completion of the evaluation process, Moss, Levy & Hartzheim, LLP was determined to be the firm best qualified to provide the required services. The firm's extensive experience in auditing California local governments, competitive fee proposal, and technical expertise were identified as significant strengths. Accordingly, it is recommended that a Professional Services Agreement be awarded to Moss, Levy & Hartzheim, LLP for an initial three-year term, with the option to Annual Financial Audit Services July 21, 2026 Page 2 of 5 extend the agreement for two additional one-year terms. The total compensation for the full five-year term will be $198,000. It is further recommended that the City Council delegate the authority to approve such optional renewals to the City Manager, without returning to the City Council for further approval, provided that any annual cost adjustments remain within recognized inflationary levels. DISCUSSION A Request for Proposals (“RFP”) for independent auditing services is issued every five years to ensure that the City continues to receive high-quality professional services, at competitive rates. The current RFP was distributed to qualified and certified public accounting firms and was posted on both the California Society of Municipal Finance Officers' website and the City's website on May 11, 2026. The requested scope of services included the following: • An audit of the City's basic financial statements for all funds in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. • A Single Audit of federal awards, when required, in accordance with applicable federal requirements. • Preparation of, or assistance with the preparation of, the City's Annual Comprehensive Financial Report (“ACFR”), the Audited Financial Report for Arcadia Transit, and the City's Financial Transactions Report for submission to the State Controller. • Agreed-upon procedures related to the City's GANN Appropriations Limit. • A written report to the City Council identifying any significant deficiencies or material weaknesses in internal controls identified during the audit, in accordance with applicable auditing standards. • Communication to the City Council regarding matters related to the financial statement audit that are considered significant and relevant to those charged with governance, in accordance with applicable auditing standards. • Consultation throughout the year, as requested, regarding accounting matters and the implementation of federal and state regulations affecting local government financial reporting. Annual Financial Audit Services July 21, 2026 Page 3 of 5 Three proposals were received in response to the RFP. Each proposal was reviewed and evaluated based on the firm’s technical qualifications, experience, staffing, understanding of the City's needs, and proposed cost of services. The scoring of each proposal and the total five-year costs are summarized in the table below. Table 1 Scoring Name of Firm Scoring Moss, Levy & Hartzheim, LLP 99.0 Badawi & Associates 92.0 Vasquez & Company LLP 91.0 Table 2 (Total Costs - 5 Years) Name of Firm Cost Moss, Levy & Hartzheim, LLP 197,115$ Vasquez & Company LLP 262,803 Badawi & Associates 264,316 For purposes of evaluating the cost proposals, certain adjustments were made to ensure an equitable comparison among the firms. Vasquez & Company's proposal included the audit of two major programs for the Single Audit, while Moss, Levy & Hartzheim, LLP's proposal included only one major program. Accordingly, the cost of an additional major program was added to Moss, Levy & Hartzheim, LLP's proposal to provide a comparable basis for evaluation. Badawi & Associates did not identify any cost adjustments based on the number of major programs included in the Single Audit; therefore, no adjustments were made to its cost proposal. It is recommended that the City Council select Moss, Levy & Hartzheim LLP, for the City’s auditing services based on its broad experience in public agency auditing, strong municipal client base, and competitive pricing. Moss, Levy & Hartzheim have provided independent auditing services to the City for the past 11 years. Throughout this period, the firm has consistently delivered timely and professional audit services and has developed a thorough understanding of the City's financial operations. Annual Financial Audit Services July 21, 2026 Page 4 of 5 To promote audit objectivity and provide a fresh perspective on the City's financial reporting, the engagement partner assigned to the audit will be rotated. Although partner rotation is not required under Government Auditing Standards for this engagement, it is required by the California Government Code. Partner rotation is recognized as a sound professional practice that enhances auditor independence and objectivity while preserving continuity of the audit process and maintaining institutional knowledge of the City's operations and financial reporting environment. Moss, Levy & Hartzheim, LLP are a regional certified public accounting firm with offices in Culver City, Beverly Hills, and Santa Maria. The firm has provided public accounting services for more than 65 years and has extensive experience performing audits for California cities, special districts, school districts, and other governmental and nonprofit organizations. 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 proposed Professional Services Agreement is for a total of $198,000 over the five-year term, consisting of an initial three-year term with two optional one-year extensions. Funding for the first year of the agreement is included in the Fiscal Year 2026–27 Operating Budget. Funding for the remaining years of the agreement will be requested as part of the City's annual budget development process. RECOMMENDATION It is recommended that City Council determine this action is not a project under the California Environmental Quality Act (“CEQA”); and authorize the City Manager to execute a Professional Services Agreement with Moss, Levy & Hartzheim, LLP for the financial auditing services for an initial three-year term, with the option to extend the agreement for two additional one-year terms, for a total of $198,000 over the full five-year period. It is further recommended that the City Council delegate the authority to approve such optional renewals to the City Manager, without returning Annual Financial Audit Services July 21, 2026 Page 5 of 5 to the City Council for further approval, provided that any annual cost adjustments remain within recognized inflationary levels.