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HomeMy WebLinkAboutGlen Burdette Proposal City of San Luis Obispo Proposal for Auditing Services For the Years Ending June 30, 2019, 2020, 2021, 2022 and 2023 With the Option to Extend for Three Additional Years For the Years Ending June 30, 2024, 2025 and 2026 Glenn Burdette Attest Corporation Certified Public Accountants 1150 Palm Street San Luis Obispo, California 93401 (805) 544-1441 Contact: Allen E. Eschenbach, CPA Principal Al.Eschenbach@glennburdette.com April 11, 2019 2 City of San Luis Obispo Proposal for Auditing Services For the Years Ending June 30, 2019, 2020, 2021, 2022 and 2023 With the Option to Extend for Three Additional Years For the Years Ending June 30, 2024, 2025 and 2026 Table of Contents Page Transmittal Letter 3-4 Submittal Forms Proposal Submittal Summary 5 Schedule of Professional Fees and Expenses 6 Certificate of Insurance 7 References 8 Qualifications Firm Background and Experience 9 Peer Review 9 Firm Staffing 9 Licensing 9 Partner, Supervisory and Staff Resumes 10-13 Standard Hourly Billing Rates 13 Statement of Past Contract Disqualifications 14 Work Program Audit Approach 15-17 Tentative Schedule 18 Estimated Hours 18-19 Services or Data to be Provided by the City 19 Other Information 19 Compensation 19 Peer Review Report 20-21 6 Schedule of Professional Fees and Expenses Standard Fixed Estimated Rates Standard Fee Hours 2018-19 Fees Discount 2018-19 Principal 54 350$ 18,900$ Manager 104 265 27,560 Senior Professional Associate 88 175 15,400 Senior Professional Associate 100 175 17,500 Professional Associate 84 120 10,080 Administrative Assistant 7 95 665 436 90,105$ (16,805)$ 73,300$ Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2019-20 2020-21 2021-22 2022-23 Fixed Fee 74,950$ 77,100$ 79,050$ 81,050$ 8 References Number of years engaged in providing the services included within the scope of the specification under the present name: 42 years Describe fully the last three contracts performed by your firm that demonstrate your ability to provide the services included with the scope of the specifications. Attach additional pages if required. The City reserves the right to contact each of the references listed for additional information regarding your firm's qualifications. Reference No. 1 Agency Name City of San Luis Obispo, California Contact Name Derek Johnson, City Manager Telephone & Email (805) 781-7125 belke@slocity.org Street Address 990 Palm Street City, State, Zip Code San Luis Obispo, CA 93401 Description of services provided including contract amount, when provided and project outcome Audit, CAFR Preparation, A-133 Single Audit; contract amount of $70,450. Reference No. 2 Agency Name City of Lompoc, California Contact Name Dean Albro, Management Services Director Telephone & Email (805) 875-8283 d_albro@ci.lompoc.ca.us Street Address 100 Civic Center Plaza City, State, Zip Code Lompoc, CA 93436 Description of services provided including contract amount, when provided and project outcome Audit, A-133 Single Audit, does not include preparation of CAFR; contract amount of $41,515. Reference No. 3 Agency Name University Corporation at Monterey Bay Contact Name Sherry Baggett, Controller Telephone & Email (831) 582-3395 sbaggett@csumb.edu Street Address 100 Campus Center City, State, Zip Code Seaside, CA 93955 Description of services provided including contract amount, when provided and project outcome Audit, A-133 Single Audit, does not include preparation of financial statements; contract amount of $69,500. 9 Qualifications Firm Background and Experience Glenn Burdette, Certified Public Accountants, is a professional corporation with offices in San Luis Obispo, Paso Robles, and Santa Maria. All of the work on this engagement will be performed from the San Luis Obispo office. We perform audit, accounting, tax services and management consulting services from our San Luis Obispo office. We have been performing financial and compliance nonprofit and governmental audits for over 40 years, and single audits for over 30 years. This Firm has 35 CPAs and 40 other employees (22 professional and 18 support staff). This includes two audit principals, two audit managers, and one audit senior who are Certified Public Accountants, plus one senior and one professional staff who perform governmental audit services. This makes us the area’s largest audit practice. Biographies of the associates expected to perform significant services under this contract are contained under “Partner, Supervisory and Staff Resumes.” Every federal and state desk review of our audits has indicated that the reports generally meet the requirements of Single Audits and the Uniform Guidance. The Firm and any of its employees have never had a record of sub-standard work, or unsatisfactory performance pending with the State Board of Accountancy. There has been no disciplinary action taken or pending against the Firm with state regulatory bodies or professional organizations. We have previously co-hosted the annual governmental GGAP update provided by the GFOA. In addition, we communicate learning opportunities to our clients on an as-needed and as-available basis. Our Firm has never been removed from a project or disqualified from proposing on a project as presented in “Statement of Past Contract Disqualifications.” Peer Review Our Firm had its quality control system reviewed in May 2017 as required by the American Institute of Certified Public Accountants. The quality control review included a review of specific governmental engagements including single audits. The firm passed the review and a copy of the report is at the end of the proposal. License to Practice The Firm and all assigned key professional staff are properly licensed to practice as certified public accountants in California. The CPA license numbers for the persons who will be performing the audit services are indicated under “Partner, Supervisory and Staff Qualifications and Experience.” Also, the Firm has a valid City of San Luis Obispo business tax license and certificate. 10 Partner, Supervisory and Staff Resumes We anticipate that the principal, manager and professional staff identified would remain the same throughout the term of the contract. However, if those personnel leave the Firm, are promoted or assigned to another office, we would be able to provide replacement staff who have substantially the same qualifications and experience. If those personnel are changed for other reasons, we would obtain the City’s express prior written approval. We acknowledge that the City retains the right to approve or reject replacements. Likewise, we could provide replacement staff for other personnel as required during the term of the contract, with substantially the same qualifications and experience. It is our expectation that within 2 years, Glenn Burdette and the City would exercise partner rotation and transition from Mr. Eschenbach to Mrs. Nagle. To assure the quality of all staff over the term of the contract, all our CPA's and professional staff conducting audits subject to Government Auditing Standards are required to take at least 80 hours of continuing professional education (CPE) classes every two years with at least 24 hours in CPE directly related to the government environment and government auditing. Professional staff assigned to the engagement would continue to obtain relevant continuing professional education and all new staff will be subject to our hiring standards. We are members of the American Institute of Certified Public Accountants, the California Society of Certified Public Accountants, the California Society of Municipal Finance Officers, and the Government Finance Officers Association. We subscribe to all current pronouncements of the Financial Accounting Standards Board and the Governmental Accounting Standards Board. As such, we have access to the AICPA technical hotline, CalCPA technical hotline, GFOA technical services staff, and GASB and FASB technical staff when questions arise related to accounting or disclosure during the course of the audit. Allen E. Eschenbach (Certified Public Accountant License # 73290) - Audit Principal Mr. Eschenbach graduated from California Polytechnic State University, San Luis Obispo in June 1991 with a Bachelor of Science degree in Business Administration, with an accounting concentration. He was employed as a supervising senior at Ernst & Young LLP in San Francisco for three and a half years where he audited various public and nonpublic companies in the capital markets and financial services industries, as well as a number of large retailers and nonprofits. Mr. Eschenbach joined the Firm in January 1995, became a principal in June 2000, and served as the Firm’s managing principal from 2003 through 2005. Since becoming a principal he has overseen the Santa Maria office and since 2001 has been responsible for the education and quality control of the audit department. He has extensive experience providing attestation and consulting services to clients of all industries on the Central Coast, including municipal and educational governmental entities, private agriculture, high technology, and construction enterprises. He has also assisted companies with fraud audits and Sarbanes-Oxley section 404 internal control implementation. Mr. Eschenbach is a member of the American Institute of Certified Public Accountants and the Government Finance Officers Association. He is also a member of the California Society of Certified Public Accountants, and currently serves on the CalCPA state accounting principles and auditing standards committee. He is a graduate of Leadership San Luis Obispo Class VI and has served on the board of a number of local community organizations. 11 Mr. Eschenbach has served in a supervisory capacity on the following relevant governmental, nonprofit and single audits: • Cities of San Luis Obispo, Lompoc and Pismo Beach • California Polytechnic State University Corporation • California Polytechnic State University Foundation • University Corporation at Monterey Bay • Foundation of CSU, Monterey Bay • Santa Barbara and Allan Hancock Community College Districts • Lompoc Unified, Paso Robles Joint Unified, Santa Maria-Bonita and Guadalupe Union School Districts Erin M. Nagle, Certified Public Accountant (License #75111) - Audit Principal Ms. Nagle graduated from the University of California at Santa Barbara in June 1995. She was employed as an auditor at BDO Seidman LLP in San Francisco for three years where she worked on public and private companies in retail and manufacturing as well as large non-profits. Ms. Nagle joined our firm in June 1998 and has worked extensively with attest clients in the governmental and nonprofit industries, as well as those in the winery and construction fields. Ms. Nagle is responsible for the education and quality control of the audit department and is a graduate of the Emerging Leaders Academy for CPA’s. She is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Ms. Nagle has served in a supervisory capacity in the following relevant governmental, nonprofit and single audits: • Cities of San Luis Obispo, Lompoc and Guadalupe • University Corporation at Monterey Bay • Foundation of CSU, Monterey Bay • California Polytechnic State University Foundation • Santa Barbara and Allan Hancock Community College Districts • Guadalupe Union, San Luis Coastal Unified, and Paso Robles Joint Unified School Districts Sarah K. Riis-Vestergaard – Certified Public Accountant (License #124755) – Audit Manager Ms. Riis-Vestergaard graduated from California Polytechnic State University, San Luis Obispo in March of 2010. She was employed as an intern by Glenn Burdette before joining the firm full time as an audit professional associate in May of 2018. Ms. Riis-Vestergaard completed her graduate degree from Keller Graduate School of Management in October 2018 as a Master of Financial Management and Accounting with a CPA Emphasis. Ms. Riis-Vestergaard is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Since joining the firm, Ms. Riis-Vestergaard has served on the following relevant governmental, nonprofit and single audits: • Cities of San Luis Obispo, Lompoc and Pismo Beach • California Polytechnic State University Corporation • California Polytechnic State University Foundation 12 • CSU Monterey Bay Corporation • Foundation of CSU, Monterey Bay • Santa Barbara and Allan Hancock Community College Districts • Integrated Waste Management Authority • Family Care Network, Inc. • Women’s Shelter Program of San Luis Obispo County dba Stand Strong • Transitions Mental Health Association, Inc. Katie Olson – Certified Public Accountant (License #130484) – Senior Audit Associate Ms. Olson graduated from California Polytechnic State University, San Luis Obispo in June 2014 with a Bachelor of Science degree in Business Administration. She was employed as an intern at Glenn Burdette during her senior year. After graduation she joined a boutique public accounting firm in San Francisco, where she worked as a tax and audit professional associate before returning to Glenn Burdette as an audit professional in July 2016. Ms. Olson is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Since joining the firm, Ms. Olson has served on the following relevant governmental, nonprofit and single audits: • Cities of San Luis Obispo, Lompoc and Pismo Beach • California Polytechnic State University Corporation • CSU Monterey Bay Corporation • Foundation of CSU, Monterey Bay • Land Conservancy of San Luis Obispo County • Bay Foundation of Morro Bay • City of Morro Bay and Cayucos Sanitary District • Transitions Mental Health Association, Inc. Kristine Lemon – Senior Audit Associate Ms. Lemon graduated from California Polytechnic State University, San Luis Obispo in June 2014 with a Master of Science degree in Financial Accounting. She was employed as an intern by Glenn Burdette before joining the firm full time as an audit professional associate in June of 2014. Ms. Lemon is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Since joining the firm, Ms. Lemon has served on the following relevant governmental, nonprofit and single audits: • Cities of San Luis Obispo, Lompoc, Pismo Beach and Guadalupe • City of Morro Bay and Cayucos Sanitary District • CSU Monterey Bay Corporation • Foundation of CSU Monterey Bay • Mission Hills Community Services District • Integrated Waste Management Authority • California Polytechnic State University Corporation 13     California Polytechnic State University Foundation   Santa Barbara and Allan Hancock Community College Districts   Family Care Network, Inc.   Women’s Shelter Program of San Luis Obispo County dba Stand Strong     Mackenzie Zelenski – Audit Professional Associate     Ms. Zelenski graduated from California Polytechnic State University, San Luis Obispo in March of 2019.  She was  employed as an intern by Glenn Burdette before joining the firm full time as an audit professional associate in  March of 2019.  Ms. Zelenski is currently working on obtaining her CPA license with expected completion in  January 2020.  Ms. Zelenski  is a member of the American Institute of Certified Public Accountants and the  California Society of Certified Public Accountants.     Standard Hourly Billing Rates    Any work performed during the audit and any additional services required or requested will be billed at our  standard hourly rates.  The standard hourly rates are currently as follows:    Principals     $ 350/hour Entry Level Professionals‐ 1st Yr  $ 120/hour    Senior Managers    290/hour Administrative Associates   95/hour    Managers    265/hour  Support Associates    85/hour  Supervisors    200/hour  Human Resources Consulting    265/hour  Senior Professional Associates     175/hour  Credit & Collection Services    265/hour  Professional Associates    140/hour  Litigation Testimony/Support   450/400/hour    * Standard rates may vary on a staff by staff or principal by principal basis.    The highest rates for principals and managers are for specialized services such as litigation support, expert witness  testimony, estates and trusts, or mergers and acquisitions and would not necessarily relate to services provided to  you.    15 Work Program Audit Approach We will perform the audits in accordance with U.S. generally accepted auditing standards (GAAS) as set forth by the American Institute of Certified Public Accountants (AICPA), the standards for financial audits set forth in the U.S. General Accounting Office's Government Auditing Standards, issued by the Comptroller General of the United States, the provisions of the Uniform Guidance Single Audit Act, the provisions of U.S. Office of Management and Budget (OMB) Single Audits, Audits of State and Local Governments and Non-Profit Organizations and the latest versions thereof, and the applicable laws, rules and regulations of the Transportation Development Act (TDA). We acknowledge our commitment to the proposed schedule for the 2018-19 audit and to the deadlines detailed in the RFP. In the required reports on internal controls, we will communicate any matters considered to be significant deficiencies under standards established by the AICPA. Significant deficiencies that are also material weaknesses will be identified as such in the report. Other matters involving the internal control that are not significant deficiencies nor material weaknesses will be reported in a separate letter to management which will be referred to in the required reports on internal controls. Reports on compliance will include all material instances of noncompliance. All nonmaterial instances of noncompliance will be reported in a separate letter to management which will be referred to in the required reports on compliance. We acknowledge our responsibility to make immediate, written report of all irregularities and illegal acts or indications of which we become aware to the City Council, City Administrator and the Finance Director. We understand that your expectation is that the auditors will prepare the Comprehensive Annual Financial Report and the footnotes to the financial statements. Proposed Segmentation for the Engagement It is our practice to divide an audit into (1) interim field work - to be performed in June and July 2019, and (2) year- end field work - to be performed in October and November 2019. We will work with the City to establish fieldwork dates that are mutually agreeable each year. Our audit approach will be designed to provide for the most effective and efficient use of resources. During our interim field work, we will review the basic accounting systems of the City and will use questionnaires and checklists to document our understanding of the internal control system including the control environment, risk assessment, control activities, information and communication, and monitoring. This will be supplemented by narratives of our understanding of the flow of information through the accounting system. We will need to interview various City staff, including the Finance Manager, finance staff, and information technology staff, in order to gain an understanding of the internal control system and complete these forms and narratives. We will also reference the City’s organizational charts, policy manuals and procedure guides to aid in our understanding. We anticipate documenting our understanding of the following internal controls process during interim field work: purchasing/cash disbursements, personnel/ payroll, revenue/cash receipts, bid process and budget amendments. Based on the controls present within the respective processes and our preliminary evaluation of such controls, a 16 determination will be made as to the extent of controls testing procedures to be performed. In addition, we anticipate performing detail testing of fixed asset additions and disposals and testing purchasing/cash disbursements and revenue/cash receipts for TDA during interim field work. During interim field work, we will also perform a preliminary determination of major programs for the Uniform Guidance single audit. We will assess each major program in accordance with the Uniform Guidance in order to determine the level of testing required. We will determine the way in which funds received from federal grantor agencies flow through the City’s accounting systems. We will perform tests of compliance with the matrix of compliance requirements contained in the Uniform Guidance’s Compliance Supplement for each major program. These are: activities allowed or unallowed; allowable costs/cost principles; cash management; eligibility; equipment/real property management; matching, level of effort, earmarking; period of performance; procurement/suspension and debarment; program income, reporting, subrecipient monitoring; and special tests and provisions. For major programs listed in the Agency Program requirements section of the Uniform Guidance Compliance Supplement, we will also perform these compliance tests. For those major programs which are not listed in the Agency Program Requirements section, we will determine applicable laws and regulations and develop compliance tests for these programs by interviewing City staff, reviewing grant documents, considering the program objectives, procedures and compliance requirements, then determining which compliance requirements could have a direct and material effect on a major program and testing those requirements. During year-end field work, we will perform substantive tests of account balances including vouching to supporting documentation or confirmation with outside parties as determined appropriate. We expect the following to be significant audit areas: investments, capital assets, long-term liabilities, grants revenue and Uniform Guidance single audit, and TDA compliance. We will apply preliminary analytical procedures by comparing account balances for the current year to the prior year amounts and the current year budget in order to identify unusual or unexpected balances or relationships and in order to consider risks when preparing audit work programs. Analytical procedures will also be applied to significant revenues and expenses as a portion of our substantive audit program. We will perform a final determination of major programs for the Uniform Guidance single audit and assess the need to audit additional programs, as well as complete any final controls and compliance testing, during final audit fieldwork. We will also complete TDA compliance testing and the agreed-upon-procedures to the GAAN Appropriations Limit. We will perform tests of the Measure Y funding summary schedule to allow us to express an “in-relation-to” report. We will also apply limited procedures to required supplementary information. Sample Sizes and Sampling Sample sizes will vary depending on our assessment of risk, as well as whether we are performing tests of controls, tests of compliance or substantive tests. For the tests of controls described above, we anticipate sample sizes between 25 and 40. This equates to a tolerable risk of 5% - 12%. For tests of compliance with laws and regulations, we anticipate a sample size of between 25 and 40 for each major federal program. Sample sizes for substantive tests depend on the account balance or transaction class being tested compared to the tolerable misstatement of the financial statements as a whole. 17 We intend to use nonstatistical sampling procedures and worksheets as contained in the Practitioners Publishing Company Guide to Audits of Local Governments. Whenever possible, we will use a random selection method specific to the population (ex. The City’s range of check numbers, receipt numbers, etc.). We will determine the population of transactions related to major federal programs and select our sample from this population in order to test for compliance. Likewise, populations of cash disbursements, payroll disbursements and cash receipts will be identified in order to draw samples for tests of controls. Analytical Procedures We will apply preliminary analytical procedures by comparing account balances for the current year to the prior year amounts and to the current year budget in order to identify unusual or unexpected balances or relationships and in order to consider risks when preparing audit work programs as part of our year-end testing procedures. Analytical procedures will also be applied to significant revenues and expenses/expenditures as a portion of our substantive audit program. 18    Tentative Schedule    This tentative schedule is designed to meet the deadlines detailed in the RFP, however, we can be flexible around  the City’s schedule.      Phase/Task Date(s) Interim audit fieldwork 6/10 ‐ 6/14/19 Interim audit open items completed 6/21/2019 Final audit PBC items due to GB  9/25/2019 Final audit fieldwork 9/30 ‐ 10/11/19 Final audit open items completed 10/18/2019 CAFR Excel due from GB, including footnotes 11/1/2019 CAFR Excel comments due to GB 11/6/2019 CAFR Word due from GB, including footnotes  11/8/2019 CAFR Word comments due to GB  11/13/2019 Review final CAFR comments/questions and make final adjustments 11/18 ‐ 11/21/19 Final CAFR to printer (GB release signed auditors' reports) 11/22/2019 Council agenda deadline Nov 2019 Council presentation Dec 2019 GFOA award deadline 12/31/2019 TDA Draft due from GB  11/8/2019 Review final comments/questions and make final adjustments 11/18 ‐ 11/21/19 TDA report to printer (GBP&B release signed auditors' reports) 11/22/2019 SLOCOG submission deadline 12/31/2019 Single Audit SEFA due to GB for final review 9/25/2019 Findings due to City for review 11/1/2019 Review final comments/questions and make final adjustments 11/18 ‐ 11/21/19 Single Audit report issued by GB 11/22/2019 Federal Audit Clearinghouse submission 30 days after issuance but     no later than 3/31/2020 12/31/2019 Whale Rock Draft due from GB 11/8/2019 Review final comments/questions and make final adjustments 11/18 ‐ 11/21/19 Whale Rock report to printer (GB release signed auditors' reports) 11/22/2019 Gann Limit due to GB for final review 9/25/2019 Review final comments/questions and make final adjustments 11/18 ‐ 11/21/19 Gann Limit report issued by GB 11/22/2019   Estimated Hours    The level of staff and number of hours to be assigned to each proposed segment of the audit is anticipated as  follows:    Principal Manager Senior Professional Associate Professional Staff Administrative Assistant City's basic financial statements 42          73          155              74                2                         TDA financial audit and  compliance report 3              4              9                    10                  1                          Single audit act report 3             22          14                ‐               2                         Whale Rock Commission  audit report 4             5            6                  ‐               1                         Gann Limit agreed‐upon‐ procedures report 2              ‐           5                    ‐                 1                          19 The principal and manager will be on-site at the City for significant portions of fieldwork and will be active in the audit process and oversight of audit staff. Services or Data to be Provided by the City In the normal course of performing the audit, certain assistance will be requested from City staff. Most of the items requested are available or prepared by City staff in the normal course of business. We will provide detailed schedule requests in advance of both interim and final fieldwork to include items such as: support for selected account balances and transactions, explanations for fluctuations, updated internal control narratives and preparation of confirmations. During fieldwork, we will request supporting documents for selected transactions including Single Audit, TDA, and Whale Rock. The fixed fee presented in the “Proposal Submittal Summary” is based on maximum audit efficiencies providing for participation and anticipated cooperation from City personnel and the assumption that unexpected circumstances will not be encountered. It includes only our work associated with the audit of the financial statements of the City. Additional fees will be charged if we need to perform additional services due to the incomplete or untimely receipt by us of the information on the schedule requests list, accounts not being fully adjusted the day we commence fieldwork, or timing related inefficiencies. We would discuss fees for additional services with the City if the need arises. Other Information Our Firm uses personal computers extensively in our audit practice. We have portable laptop computers, scanners and printers that we take into the field to assist in preparing working papers and financial statements. Our work papers are prepared and maintained electronically so we attempt to get as many of the City’s documents in electronic form. When possible, we would like to use the City’s data files for testing rather than manually preparing information. We agree to retain all working papers and reports at our expense for a minimum of five years and make them available to the City or its designees. Compensation The total all-inclusive maximum price presented in the “Proposal Submittal Summary” reflects a discount of approximately 19% in recognition of the City’s governmental status. In addition, the total all-inclusive maximum price presented in the “Proposal Submittal Summary” contains all direct and indirect costs, including all estimated out-of-pocket expenses. We understand that the City is not responsible for expenses incurred in preparing and submitting the proposal. Such costs are not included in the proposal. If it should become necessary for the City to request our Firm to render any additional services to either supplement the services requested in the RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only as set forth in an addendum to the contract between the City and our Firm. Any such additional services will be billed at our standard hourly rates in effect at the time the services are performed.