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Home My WebLink About06/07/2011, C11 - AWARD OF AUDIT SERVICES CONTRACT Council. M fi.,D"p June 7,2011 j agenda Report 1�" ba ui CITY OF SAN LUIS O B I S P O FROM: Mary Bradley, Interim Director of Finance& Information Technology Prepared By: Debbie Malicoat, Finance Manager SUBJECT: AWARD OF AUDIT SERVICES CONTRACT RECOMMENDATION Award the contract for auditing services to Glenn, Burdette, Phillips & Bryson, Certified Public Accountants (GBPB), for a term of three years with an option to renew for another two years. DISCUSSION Background On April 5, 2011, the Council authorized issuing a request for proposals (RFP) for auditing services. The RFP was posted on the City's website and forwarded directly to nine California firms with experience in local government auditing. Six firms participated in a pre-proposal teleconference on Wednesday, April 20, 2011 to discuss the RFP. The City received five proposals as summarized below. Firm Name Location Total Proposed Com enation 2010-11 Christy White San Diego $45,210 Maze &Associates Pleasant Hill $50,108 Glenn, Burdette, Phillips &Bryson San Luis Obispo $53,000 Moss, Levy& Hartzheim LLP Santa Maria $53,020 GALLINA LLP Roseville $58,690 Proposal Evaluation An interdepartmental review team comprised of the Interim Director of Finance & Information Technology, Finance Manager, Accounting Supervisor, Senior Administrative Analyst from the Utilities Department, and the Transportation Assistant from Public Works Transit, evaluated the proposals and rated the firms on experience, approach to completing the work, understanding of the work scope and proposed compensation. While the City has been satisfied with the services received from the current auditors, GBPB, the prior auditing services contract was awarded in 2005 and therefore it was timely to evaluate all available options. The review team was very mindful of the need to periodically evaluate auditing services to ensure not only that the City's needs are being met, but also to ensure that staff is acting as good stewards of the public funds and receiving competitive pricing. During the course of evaluating the proposals the team also considered whether the five-year term that was originally discussed in the RFP was in the best interest of the City. The RFP was written based on C11-i Award of Auditing Services Contract Page 2 the Government Finance Officers Association (GFOA) best practice, which recommends that Cities issue RFP's every five years, but recognizes that there is value in continuity and minimizing start up costs for both the City and the auditor, so it does not necessarily recommend changing auditors every five years. After further discussion there was concern about the term of the contract in light of the other changes currently happening in the Finance & Information Technology (IT) Department. The review team discussed the value of engaging a new audit firm that could bring a "fresh set of eyes" to the City with the value of a firm that is familiar with its policies and practices, which may be helpful in providing perspective to the new Director of Finance & IT. Changing audit firms will be a significant work effort for staff, not just in the Finance & IT Department, but in all departments, particularly Public Works and Utilities who interface with the auditors a great deal in preparing the TDA and Whale Rock reports. The Finance & IT Department is currently engaged in several software upgrades (timecard program, Utility Billing system, and Energov) and will be undertaking a rigorous work program associated with the Major City Goal related to Essential Services and Fiscal Health. Successful completion of these work programs will be facilitated by continuity and stability in the auditing services contract. It was the consensus of the group that while maintaining stability has added value, it should be balanced against staffs professional responsibility as stewards of the public trust. In addition, GBPB pricing was initially higher than the other firms ($61,750) and while the team valued continuity, there was concern about cost, particularly in light of the City's fiscal circumstances. However, staff was able to negotiate a reduced cost with GBPB as reflected in the attached contract. Given all the considerations, the review team's recommendation is to enter into a three-year contract with GBPB, which will allow time for a new Director to come onboard and become familiar with City operations without the added complication of a new auditing firm. It will do so without committimg the City to a longer term contract and it will allow staff to provide the necessary focus to other critical work programs in the department over the next few years. Upon mutual agreement, the contract could be extended for an additional two years. CONCURRENCES The review team concurs with the recommendation. FISCAL IMPACT The fees for the three-year contract proposed by GBPB are as follows: 2010-11 2011-12 2012-13 City's basic financial statements and Gann.limit compliance letter 37,200 37,944 38,703 Transportation Development Act financial and compliance report 4,800 4,896 4,994 Single Audit Act report 6,800 6,936 7,075 Whale Rock Commission financial report 4,200 4,284_ 4,370 Total $539000 $54,060 $55,142 T:\Council Agenda Reports\Finance&IT CAR\Finance\201 I\Auditing Services RFP,2011\Council Agenda Report,Auditing Services Award.doc C11-2 Award of Auditing Services Contract Page 3 The Preliminary 2011-13 Financial Plan includes adequate resources to fund audit services at this level. The Transportation Development Act report is paid by the Transit Fund. The Whale Rock Commission report is paid by the Whale Rock Fund. ALTERNATIVES The Council could choose to change audit firms. Given the record of service by GBPB in the past, their competitive fees and the increased staff workload in changing auditors, this alternative is not recommended at this time. ATTACHMENT Auditor Agreement AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE Proposal for auditing services from Glenn, Burdette, Phillips & Bryson T:\Council Agenda Reports\Finance&IT CAR\Finance\2011\Auditing Services RFP,2011\Council Agenda Report,Auditing Services Award.doc C11-3 AUDITOR AGREEMENT Aftachm®n$ THIS AGREEMENT is made and entered into in the City of San Luis Obispo on June 7, 2011 by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and Glenn, Burdette, Phillips & Bryson, Certified Public Accountants, a Professional Corporation, hereinafter referred to as Auditor. WITNESSETH: WHEREAS,on April 5,2011,City requested proposals for auditing services per Specification No.91067. WHEREAS, pursuant to said request, Auditor submitted a proposal that was accepted by City for said auditing services. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained,the parties hereto agree as follows: 1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered, as first written above,until acceptance or completion of said audit services for a period of three years with an option to renew for an additional two years,upon mutual agreement. 2. INCORPORATION BY REFERENCE. City Specification No. 91067 and Auditor's proposal dated April 27,2011,are hereby incorporated in and made a part of this Agreement. 3. CITY'S OBLIGATIONS. For providing auditing services as specified in this Agreement, City will pay and Auditors shall therefore compensation as stated in Auditor's proposal. 4. AUDITORS' OBLIGATIONS. For and in consideration of the payments and agreements hereinbefore mentioned to be made and performed by City, Auditor agrees with City to do everything required by this Agreement and the said specifications 5. AMENDMENTS. Any amendment, modification or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Administrative Officer of the City. 6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding or representation be binding upon the parties hereto. C11-4 A MA Anachment 7. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City City Clerk City of San Luis Obispo 990 Palm Street San Luis Obispo,CA 93401 Auditor Glenn,Burdette,Phillips&Bryson Certified Public Accountants A Professional Corporation 1150 Palm Street San Luis Obispo,CA 93401 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Auditor do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: CITY OF SAN LUIS OBISPO By City Clerk Mayor APP VED S TO FORM: AUDITOR I By City Attorney C11-5