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HomeMy WebLinkAbout1997-03-11 - AGENDA REPORTS - AWARD CONTR AUDIT SRVS (2)AGENDAREPO City Manager Approv Item to be presented 002 Steve Stark CONSENT CALENDAR DATE: March 11, 1997 SUBJECT: AWARD CONTRACT FOR AUDIT SERVICES DEPARTMENT: Administrative Services BACKGROUND The Finance Division has completed the Request for Proposal process for the selection of an accounting firm to perform the City's audit services for a period of three fiscal years, ending June 30, 1999, with an option to extend two additional fiscal years. On December 26, 1996, "Request for Proposal" notices were mailed to 44 local accounting firms who advertise in the local yellow pages and 23 accounting firms who are members of California Society of Municipal Finance Officers and who have offices in the surrounding area of the Santa Clarita Valley. Concurrently, the City Clerk published the "Notice Inviting RFP's" in the local newspaper. A preparer's conference was held on January 15, 1997, in which interested accounting firms were allowed an opportunity to learn more about the City's auditing needs. A total of nine accounting firms submitted proposal packets for this service; the proposal packets were opened on February 3, 1997, after the deadline. The Finance Division evaluated all nine proposals based on their technical qualifications, approach, and price quotes. Based on those rankings, the top five proposals were as follows: FIRM LOCATION HPMG Peat Marwick Los Angeles Diehl, Evans & Company Irvine Moreland & Associates Newport Beach McGladrey & Pullen Pasadena Macias, Gini & Company Los Angeles On February 19, 1997, the audit committee, consisting of Ken Pulskamp, Assistant City Manager; Steve Stark, Director of Administrative Services; Barbara Boswell, Acting Accounting Manager; Jeff Lambert, Planning Manager; and Michele Hansen, Accountant, held interviews with the top five candidates who made an oral presentation to the group. The audit committee proceeded to select the audit firm of Moreland & Associates, based on the firrn�s understanding of the City's needs and expertise in the field of governmental auditing. Request for Proposal packets are on file with the Director of Administrative Services. APPROOVED M A -renda Item: 7 AWARD CONTRACT FOR AUDIT SERVICES March 11, 1997 - Page 2 1. City Council award contract for audit services to Moreland& Associates for a period of three years ending June 30, 1999. The amount of this contract will not exceed $45,700 for FY'96297; $47,528 for FY'97298; and $49,430 for FY'98299. 2. City Council authorize City Manager to sign all documents. ATTACHMENT Moreland & Associates Proposal available in reading file in the City Clerles office. SS:MDH:hds wumitNaWimm.dh RECEIVED JAN 3 0 1997 ADMINISHATIVE SHVICES CEPARTMENT CITY OF SANTA (LARITA PROPOSAL OF AUDIT SERVICES CITY OF SANTA CLARITA JANUARY 31,1997 TITLE PAGE RFP SUBJECT: AUDIT PROPOSAL CITY OF SANTA CLARITA NAME OF FIRM: MORELAND & ASSOCIATES LOCAL ADDRESS: 1201 DOVE STREET SUITE 680 NEWPORT BEACH, CA 92660 TELEPHONE NUMBER: (714) 221-0025 NAME OF CONTACT PERSON: MICHAEL C. MORELAND DATE: JANUARY 31,1997 I I I Ll I I [I I I I H I I P I I I I TABLE OF CONTENTS SECTION PAGE Letter of Transmittal Profile of the Proposer: Our Firm Size, Location and Range of Services 4 Data Processing Auditing and Consulting 4 Use of EDP Software 5 Other Consulting Services 5 Governmental Accounting Services Department 6 Quality Control Review 6 Summary of Proposer's Qualifications: Our Audit Team 7 Resume of Michael Moreland, Engagement Partner 8 Resume of Charles Acocello, Engagement Manager 10 Resume of Kathryn Empson, Senior Accountant 11 Resume of Patricia Rives, Quality Control Reviewer 11 Other Staff 13 Educational Programs 13 Current Governmental Clients and Directly Related Experience 14 Knowledge of Redevelopment Agencies 16 Review of the Annual Calculation of the Appropriations Limit 16 Management Letters 17 Assistance in Receiving Awards 17 Federal and State Grants and the Single Audit 17 Knowledge of NCGA and GASB Statements and Interpretation 18 Assistance in Governmental Bond Offerings 19 Auditing Joint Powers Authorities and Special Districts 19 Franchise Audits 20 Availability 20 References 21 Our Approach to Your Objectives 22 Audit Approach - Planning and Interim Audit Work 23 Audit Approach - Final Audit Work 24 Approach to the Single Audit 25 Reports to be.Issued - Single Audit 25 Knowledge of Applicable Laws and Regulations 25 Key Dates for Completion of the June 30, 1997 Audit 26 Assistance by City Staff 26 Scope Section Your Objectives 28 Fees For Our Services 30 APPENDIX A - Latest External Quality Control Review Report APPENDIX B - Sample Management Letter I I I I I I I I I I I I I I 1201 DOVE STREET, SUITE 680 NEWPORT BEACH. CALIFORNIA 92660 Moreland &,djjocia,&s, (714) 22"025 CERTIFIED PUBLIC A=UNTANTS 570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (619) 752-3390 January 31, 1997 Mr. Steve Stark Director of Administrative Services City of Santa Clarita 23920 W. Valencia Blvd., Suite 300 Santa Clarita, CA 91351 Dear Mr. Stark: We are pleased to present this proposal of audit services to the City of Santa Clarita. We have addressed each of the specifications included in your Request for Proposal. We have also provided significant information about our service approach to auditing. We currently audit the financial statements of forty-one California cities, thirty-one redevelopment agencies and many other governmental entities. Our success in providing professional services to your specialized industry is in part due to our dedication to the development and implementation of the accounting and auditing issues relating to governmental accounting. Our knowledge of your industry is best demonstrated by the fact that for the past ten years, over ten percent of the "outstanding" awards in financial reporting issued by the California Society of Municipal Finance Officers were issued to our clients. Additionally, approximately ten percent of the Certificates of Achievement for Excellence in Financial Reporting issued by the Government Finance Officers Association to California cities during the past ten years were issued to our clients. We are very proud of our part in these achievements. We have also achieved success because we understand that we provide a service to our clients. We provide an audit approach which satisfies all of the technical requirements without forgetting that we provide a service. We encourage you to verify our level of service as well as the availability of myself and Mr. Acocello, the audit manager, with the references provided in our proposal. We think you will be pleasantly surprised at how highly our clients praise the. quality of service we provide. You will have easy access to each of the audit team members. I will personally supervise all phases of audit planning, detailed audit testing and report preparation. Throughout the year you should feel comfortable in calling us for advice. We are never too busy to meet the needs of our clients. Our clients rely on us to help keep them up-to-date on new developments affecting their industry, because they recognize our commitment to serving the needs of local government. I I I 11 I I I I F I I I I I I I Mr. Steve Stark Director of Administrative Services City of Santa Clarita January 31, 1997 Page 2 Briefly stated, the scope of services includes the following for each of the three years ending June 30, 1999, Nvith an option for the City to renew for two years: - A financial audit of the City's comprehensive annual financial report. - An expansion of the City's financial audit to meet the requirements of the Single Audit Act of 1984. - A financial audit of the Santa Clarita Public Financing Authority. A financial and compliance audit of the Santa Clarita Redevelopment Agency. - A management letter containing our comments and recommendations for improving the accounting procedures and the systems of internal control for the City. The letter will also contain any nonmaterial instances of noncompliance with laws and regulations noted during our audit and any nonreportable internal control structure conditions. - A review of the annual calculation of the appropriations limit as required by Section 1.5 of Article XIIIB of the California Constitution. - A letter to the City Council (in lieu of an audit committee) containing required communications about the audit process. - A financial and compliance audit of the AB 2766 funds. - A semi-annual review of the City's investment reports to determine compliance with California Government Code Section 53601. We have the experience and the resources to complete the above scope of services within the time periods described in your Request for, Proposal. As you read through our proposal, we hope that you will recognize the philosophy we follow regarding our relationship with clients. We believe this is what sets us apart from our competition. Our philosophy can be summarized in the following concepts: We recognize that our product is a service. We are careful to consider the comfort level of our client's staff while maintaining professional skepticism. We recognize that our work is accomplished by working with City staff, yet our client is the City Council. Thank you for providing us the opportunity to present this proposal, as we would very much like to become auditors for the City of Santa Clarita. We sincerely look forward to working with you and other City staff. We would be pleased to provide any additional information or answer any questions you may have regarding our proposal. 2 Mr. Steve Stark Director of Administrative Services City of Santa Clarita January 31, 1997 Page 3 The undersigned is authorized to represent Moreland & Associates at the Newport Beach address and telephone number shown on the letterhead. Also authorized to make representations for the firm are Ms. Patricia Rives, Partner, and Mr. Charles Acocello, Manager. Very truly yours, MORELAND & ASSOCIATES Michael C. Moreland, Partner MCM:shn 3 I I PROFILE OF THE PROPOSER OUR FIRM SIZE, LOCATION AND RANGE OF SERVICES Moreland & Associates is a large regional firm of certified public accountants providing auditing, accounting, consulting and income tax services to numerous governmental clients. Our services are provided from our offices in Newport Beach, San Marcos and San Francisco by forty-five professionals and four support staff. Services to the City of Santa Clarita will be provided by our Newport Beach office, which has a staff of two partners, four managers, fifteen senior accountants and fifteen other professional staff. Our firm and all of our employees are strongly committed to governmental accounting. All of our forty-five professional staff have municipal government auditing experience. Over ninety-five percent of our work involves services to local government clients. Mr. Moreland has held leadership positions and is currently very active in all professional organizations in California which dealAith municipal finance. Much of his involvement is included in his resume, which is included in the next section of our proposal. All of the staff identified in this proposal are quite active in their commitment to governmental accounting, as indicated in their resumes. Our firm and each staff member meet the independence requirement of the General Accounting Office. DATA PROCESSING, AUDITING AND CONSULTING As you know, nearly all governmental entities today utilize some form of electronic data processing equipment. Therefore, our staff has extensive experience in auditing within an electronic data processing environment. During our evaluation of the internal controls over your major accounting operations such as cash receipts, cash disbursements, payroll, and fixed assets, we will determine the controls you have established over data processed by the computer. Subsequently, we will develop audit tests to verify that the controls you have established are functioning as intended. We utilize Lotus 1-2-3, a word processing program and several other useful software programs on portable computers as an audit tool on all audit engagements. The audit manager, the senior accountant and an assistant accountant to be assigned to the engagement will have extensive experience in efficiently and effectively utilizing these computers on a variety of auditing and consulting engagements. Several years ago, we completed an evaluation of the computerized utility billing system of the City of Pomona. The study included an evaluation of activities in the Finance Department, Data Processing Department, Water Department and the Treasury Office. We have evaluated alternative computerized accounting software for several Cities. We assisted the Cities of Calabasas, La Canada Flintridge, Laguna Hills, Laguna Niguel, Lake Forest, Malibu, and Twentynine Palms in their implementation of new hardware and accounting software, which included training staff and developing policies and procedures for manual and computer processes. I I I I I I I I I I I I I I I I I I I USE OF EDP SOFTWARE We have established a process, utilizing Lotus 1-2-3, for the preparation of financial statements whereby trial balance data is transferred into pro forma financial statement spreadsheets, either by direct input or through downloading from the client's accounting system. This process significantly reduces the time involved in the preparation of financial statements, particularly after the first year of the engagement, requiring only updates thereafter. In addition, this process readily lends itself to analytical review procedures and to the development of audit lead schedules. We have reviewed packaged financial statement preparation programs, and we have found our internally developed system best meets our specific needs and those of our clients. OTHER CONSULTING SERVICES Our general capability to provide consulting services is best demonstrated by our many years of successfully serving the governmental industry as described in our resumes. We have completed management audits for the County of San Bernardino, the South Coast Air Quality Management District, and the Cities of Modesto and Long Beach. We provide a wide variety of consulting services to our government clients. Ilose services which are related to accounting or auditing or which involve finance department type activities are performed entirely by our professional staff. Examples of these types of services are as follows: Review of business licenses, transient occupancy taxes, admission taxes, franchise fees, contract compliance, etc., 0 Review and analysis of property taxes allocated by the County, 0 Review or documentation of accounting policies and procedures, 0 Special accounting projects, 0 Internal audit department type services, and 0 Loaned accountants. We performed a study to determine if the internal control procedures were adequate and functioning properly within the Parks and Recreation Department of a large city. The major systems reviewed were cash receipts/revenues, purchasinglaccounts payable/contracting, and payroll for contract employees. We also performed, on. behalf of a governmental entity, a study of the administrative systems, procedures and controls of one of the largest temporary shelters for the homeless in California. The project involved the assessment of new and/or improved systems and the identification of the administrative positions responsible for monitoring the new systems. I I I I I I I I I I I I I I I GOVERNMENTAL ACCOUNTING SERVICES DEPARTMENT Our Governmental Accounting Services Department is, in effect, an employment agency that provides temporary, full-time or part-time personnel who are experienced in governmental accounting. Our staff are available on a recurring basis each month to replace an absent employee on a full-time basis, or to complete a specific task or series of tasks. While we can imagine a variety of recurring and nonrecurring projects which we can perform for you, there are many more of which only you are aware. Some of the projects we have performed for other governmental entities are: 0 Preparation of an accounting policies and procedures manual. 0 Preparation of the State Controller's Report and the Street ReporL Preparation of monthly bank reconciliations, investment reports and financial reports. 0 Assistance in the preparation of the budget. Assistance in the year end closing. 0 Assistance in recording bond issues or monthly fiscal agent activity. 0 Grant accounting and analysis. 0 On-call staff from the Accountant to the Finance Director level. These services are offered throughout the year at the same reduced rates regardless of the constraints of a "busy season". In today's jargon, we are providing you an opportunity to privatize certain functions within your Finance Department or to fill temporarily vacant positions. QUALITY CONTROL REVIEW Our firm has enrolled in the Quality Review Program offered by the American Institute of Certified Public Accountants. Our most recent quality review was completed in May of 1994 and included specific government engagements. We received an unqualified opinion. A copy of the report stemming from this review is included in Appendix A. There is not now nor has there ever been any regulatory action taken against Moreland & Associates. 1 6 E I 0 I I I I I I I I I I I I I I I I SUMMARY OF PROPOSER'S QUALIFICATIONS OUR AUDIT TEAM As shown in Figure I below, our audit team will be organized under the direction of Mr. Michael Moreland. Our audit team members have extensive direct experience in auditing governmental entities in California. We believe our individual qualifications will assure you of receiving the type of service we describe in this proposal. We encourage you to contact the references provided below. We are confident that all of our clients are satisfied with the level of service we provide. Michael Moreland will assume overall responsibility for services provided to the City. He will be supported by Chuck Acocello, who will manage the staff working in the field. Kathryn Empson will be the senior accountant in charge of the field work. Patricia Rives will be the quality control reviewer. Their resumes are presented below. It is our practice to provide continuity of staff during the entire term of the agreement at the partner, manager and senior accountant level. Except for unusual circumstances, all three of these positions will be filled by staff who served the City during the prior year. City of Santa Clarita Director of Admin. Services Steve Stark Engagement Partner M. Moreland Engagement Manager C Fu—cFA—co—ceTr&­— Senior Accountant Kathryn Empson Professional Staff of Moreland & Associates Figure 1 7 Quality Control Reviewer Patricia Rives I 11 I I I I I 11 I n I 11 I I H I I I I RESUME OF MICHAEL MORELAND ENGAGEMENT PARTNER Michael Moreland will assume overall responsibility for services provided to the City. Mr. Moreland has over twenty years of experience in performing financial and compliance audits for government. Some of the clients served include: Cities of Bell Gardens, Beverly Hills, Big Bear Lake, Bradbury, Brawley, Brea, Calabasas, Canyon Lake, Chino, Chino Hills, Commerce, Covina, Culver City, Cypress, Dana Point, Delano, Del Mar, Dinuba, Escondido, Fountain Valley, Fullerton, Garden Grove, Glendale, Glendora, Grand Terrace, Hawthorne, Irvine,La Canada Flintridge, La Mirada, La Palma, Laguna Beach, Laguna Hills, Laguna Niguel, Lake Forest, Los Alamitos, Los Angeles, Lynwood, Mammoth Lakes, Manhattan Beach, Mission Viejo, Monrovia, Montebello, Monterey Park, Newport Beach, Oceanside, Orange, Pasadena, Perris, Pico Rivera, Pomona, Poway, Rialto, San Fernando, San Juan Capistrano, San Marcos, Santa Clara, Santa Fe Springs, Solana Beach, South Lake Tahoe, South Pasadena, Stanton, Sunnyvale, Tehachapi, Temecula, Torrance, Tulare, Tustin, Twentynine Palms, Villa Park, West Covina and Yorba Linda, California. Community Redevelopment Agencies of the Cities of Bell Gardens, Big Bear Lake, Brawley, Brea, Commerce, Compton, Covina, Culver City, Cypress, Dana Point, Escondido, Fountain Valley, Fullerton, Glendora, Grand Terrace, Hawthorne, La Canada Flintridge, La Mirada, La Palma, Los Angeles, Lynwood, Mission Viejo, Montebello, Monrovia, Oceanside, Orange, Perris, Pico Rivera, Pomona, Poway, Rialto, San Buenaventura, Calabasas, San Juan Capistrano, San Marcos, Santa Fe Springs, Solana Beach, South Pasadena, Stanton, Temecula, Tulare, Tustin, West Covina and Yorba Linda. - Los Angeles Unified School District. - City of Los Angeles, Department of Airports. - Cities of Los Angeles and Pasadena, Fire and Police Pension Systems. Office of the Los Angeles County Superintendent of Schools. - South East Regional Reclamation Authority. - Orange County Cities Risk Management Authority (OCCRMA). - Rossmoor Community Services District. - Triunfo Sanitation District - County Sanitation Districts of Orange County. - Santa Margarita -San Luis Rey Watershed Planning Agency. 91 I Mr. Moreland is very active in organizations which relate to the public sector industry. His involvement includes: California Avocado Commission. - Chairman of the State Governmental Accounting and Auditing Committee. West San Gabriel Valley Consortium. Central Orange County Fixed Guideway Agency Orange County Council - Boy Scouts of America. California Inland Empire Council - Boy Scouts of America. Santa Fe Springs Public Improvements Corporation. Mr. Moreland is very active in organizations which relate to the public sector industry. His involvement includes: 9 California Society of Certified Public Accountants - Chairman of the State Governmental Accounting and Auditing Committee. - Member of State Controller's Advisory Committee for Redevelopment Compliance Guidelines. - Editorial consultant and author for seven years of a regular column on governmental accounting and auditing in Outlook Magazine, a publication of the California Society of Certified Public Accountants. California Society of Municipal Finance Officers (CSMFO) - Associate member; regularly attends monthly section meetings and annual conferences. - Frequent speaker at section meetings and annual conference. Regular instructor at weekend training seminars. - Participates in the preparation and instruction of the Career Development Program "How to Prepare an Award Winning CAFR". - Participates in the review of annual financial reports and member of three- person final review committee under the California Award Program. Government Finance Officers Association Associate member and frequent instructor of Professional Development Programs. 9 Member of National Council on Governmental Accounting Grant Accounting Task Force which developed the exposure draft that became NCGA Statement 2, Grant Entitlement, and Shared—Revenue Accounting and Reporting By State and Local Governments. Other Organizations and Activities - Chairman of California Committee on Municipal Accounting. - American Institute of Certified Public Accountants. - Member GASB Task Force on the Financial Reporting Model. - Member GASB Small Governments Task Force. Mr. Moreland received a Bachelor of Business Administration degree in Accounting from Loyola Marymount University and holds CPA certificates from the State of California and several other states. He has been a California CPA since 1968. Much of Mr. Moreland's continuing professional education requirement is fulfilled through writing articles and making presentations on various governmental accounting subjects for GFOA, CSMFO and the League of California Cities. He also attends numerous CSMFO chapter and section meetings, as well as the annual conference. RESUME OF CHARLES ACOCELLO ENGAGEMENT MANAGER Charles Acocello will supervise theday-to-day services provided to the City. He currently manages the financial and/or compliance audits of many of our government clients, including the Cities of Agoura Hills, Montebello, Monterey Park and San Buenaventura. Prior to joining our firm, Mr. Acocello was the Financial Audit Manager of the State of Arizona, Office of the Auditor General. The Office of the Auditor General is the independent auditor for the State of Arizona, and reports directly to the State Legislature. The Auditor General is also responsible for conducting audits of all county governments including special districts under control of the county, universities and community colleges and school districts. His duties as an audit manager include: - Establish priorities and time and performance standards and prepare budgets. - Monitor -the overall progress of financial and compliance audits and the staff utilized on the audits. - Prepare or review written reports of findings and participate in the oral presentations to management of the audited entities. - Research and resolve technical problems and sensitive reporting issues. 1 10 11 I I I I I I I I I I I I I I I I I I Review completed audits for: - compliance with generally accepted auditing standards, - compliance with generally accepted accounting principles, - soundness of reasoning and judgment, and - reasonableness of recommendations to client management. Promote consistency in procedures and reporting. Prepare or conduct in-house training programs in governmental accounting and auditing. Actively participate in those professional organizations which have an impact on governmental accounting and auditing. Mr. Acocello received a Bachelor of Science degree in Accounting from Arizona State University and is a Certified Public Accountant in both California and Arizona. He is a member of the California Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the California Society of Municipal Finance Officers (CSMFO). Mr. Acocello has attended numerous CSMFO chapter and section meetings as well as all annual conferences. Additionally, he receives continuing education through special programs developed by the California Society of Certified Public Accountants for members of their Governmental Accounting and Auditing Committee and has conducted and attended in-house training programs on numerous governmental accounting topics. RESUME OF KATHRYN EMPSON SENIOR ACCOUNTANT Ms. Empson has been responsible for the audits of the financial statements of the Cities of Agoura Hills, Calabasas, Camarillo, and Lake Forest. She has performed financial and compliance audits of several redevelopment agencies and single audits of several cities. Additionally, she has experience in preparing award-winning CAFR's. Ms. Empson received a Bachelor of Business Administration degree in Accounting from Eastern Michigan University. She is working towards becoming a CPA in the State of California. Each year Ms. Empson receives approximately forty hours of continuing education designed to meet the GAO requirements for continuing education. RESUME OF PATRICIA RIVES QUALITY CONTROL REVIEWER Patricia Rives will perform the quality control review of all reports issued to the City. She has worked in public accounting for over ten years, serving governmental clients almost exclusively. Prior to joining our firm, she worked for another CPA firm which worked extensively in the field of governmental accounting and auditing. Some of the clients served include: 11 Cities of Agoura Hills, Baldwin Park, Banning, Brawley, Brea, Camarillo, Chino, Chula Vista, Colton, Cypress, Dana Point, Del Mar, Seal Beach, Fullerton, Huntington Beach, Laguna Niguel, Manhattan Beach, Mission Viejo, Monterey Park, Palos Verdes Estates, Poway, Rolling Hills Estates, San Buenaventura, San Juan Capistrano, San Marcos, Santa Barbara, Santa Fe Springs, Solana Beach, Stanton, Tustin, Twentynine Palms and Villa Park, California. Community Redevelopment Agencies of the Cities of Agoura Hills, Baldwin Park, Brawley, Brea, Chino, Colton, Cypress, Dana Point, Fullerton, Huntington Beach, Monterey Park, Poway, San Buenaventura, San Juan Capistrano, San Marcos, Santa Barbara, Santa Fe Springs, Solana Beach and Stanton. Capistrano Valley Water District. San Diego Pooled Insurance Program Authority. San Diego County Cities Risk Management Authority. Southeast Area Social Services Funding Authority. San Elijo Joint Powers Authority. Orange County Cities Risk Management Authority (OCCRMA). Chino Valley Independent Fire District. Orange County Fire Authority. Santiago Library System. Santa Fe Springs Public Improvements Corporation. Ms. Rives is very active in organizations which relate to the public sector industry. Her involvement includes: - Chairperson Orange County/Long Beach Chapter of the California Society of Certified Public Accountants Governmental Accounting and Auditing Committee. - Associate member of the California Society of Municipal Finance Officers (CSMFO); regularly attends monthly section meetings and annual conferences. - Participates in the review of CAFRs for the CSMFO Certificate of Award for Outstanding Financial Reporting Program. - Participates in the review of annual budget documents under the CSMFO Budget Award Program. 12 I I I I I I I I 11 I I H 11 I I 11 I I I Member, Government Finance Officers Association (GFOA) Special Review Committee for the Certificate of Achievement for Excellence in Financial Reporting. Each year attends the Annual Conference of the Government Finance Officers Association (GFOA).of the United States and Canada. Ms. Rives received a Bachelor of Science degree in Business Administration with a major in Accounting from California State University at Long Beach and has been a Certified Public Accountant in the State of California since 1984. She is a member of the California Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the California Society of Municipal Finance Officers (CSMFO). Ms. Rives has attended numerous CSMFO chapter and section meetings as well as all annual conferences, and all GFOA Annual Conferences. In addition to the continuing education received at these meetings and conferences, she attended an AICPA Conference covering revisions to the GAO's Government Auditing Standards, and an AICPA conference covering an update of generally accepted accounting principles. She has completed the Governmental Accounting and Auditing Certificate of Educational Achievement program offered by the AICPA. Ms. Rives has also conducted in-house training programs on numerous governmental accounting and auditing topics OTHER STAFF We -will assign sufficient staff to theengagement to ensure the work is completed in a timely manner. All of the staff assigned will have considerable experience in governmental accounting and auditing. Many of our professional staff have worked in government, so they have a good understanding of the level of service you expect from your auditors. There will be on-site supervision by Ms. Empson of all staff assigned to the engagement. EDUCATTONAL PROGRAMS Our staff is continually expanding their knowledge of the governmental industry through formal in-house training programs, programs offered by the California Society of Certified Public Accountants and other professional organizations, and through on-the-job training. We believe this mixture of training techniques will provide you.with a well rained staff to satisfy your auditing needs throughout the term of the agreement. We have also offered one-on-one training in governmental accounting to selected client personnel. You will note from the resumes of Mr. Moreland, Mr. Acocello and Ms. Rives that they are extremely well qualified to conduct in-house training programs for our staff. In addition, Mr. Moreland recently updated both of the major governmental accounting and auditing courses offered by the California Society of Certified Public Accountants, Audits of California Governmental Units and Governmental Accountinji and Auditing Update. 13 11 I I I I I I I I I I I I I I I I I CURRENT GOVERNMENTAL CLIENTS AND DIRECTLY RELATED Wp have completed, or are in the process of completing, financial audits for the following governmental clients for the year ended June 30, 1996: - Cities of Agoura Hills, Baldwin Park, Bell Gardens, Calabasas, Camarillo, Chino Hills, Chula Vista, Colton, Covina, Culver City, Fountain Valley, Fullerton, Glendora, Hawthome, La Canada Flintridgt, La Mirada, La Palma, Laguna Hills, Lake Forest, Mission Viejo, Monrovia, Montebello, Monterey Park, Palos Verdes Estates, Perris, Pico Rivera, Poway, Rolling Hills Estates, San Buenaventura, San Marcos, Santa Barbara, Santa Fe Springs, Solana Beach, Stanton, Temecula, Tulare, Tustin, Twentynine Palms, Villa Park, West Covina and Yorba Linda, California. Twenty of these cities have been clients for over five years and the remaining twenty-one cities have selected us as their auditors for a three or more year period. Community Redevelopment Agencies of the Cities of Agoura Hills, Baldwin Park, Bell Gardens, Colton, Covina, Culver City, Fountain Valley, Fullerton, Glendora, Hawthorne, La Canada Flintridge, La Mirada, La Palma, Mission Viejo, Montebello, Monrovia, Monterey Park, Perris, Pico Rivera, Poway, San Buenaventura, San Marcos, Santa Barbara, Santa Fe Springs, Solana Beach, Stanton, Temecula, Tulare, Tustin, West Covina, and Yorba Linda. - Las Virgenes Municipal Water District. - Triunfo Sanitation District. - County Sanitation Districts of Orange County. - Santa Margarita -San Luis Rey Watershed Planning Agency. - Santa Fe Springs Public Improvements Corporation. - Central Orange County Fixed Guideway Agency. - Orange County Council - Boy Scouts of America. - California Inland Empire Council - Boy Scouts of America. - California Avocado Commission. - West San Gabriel Valley Consortium. - Orange County Cities Risk Management Authority (OCCRMA). - San Diego Cities Risk Management Authority. 14 H I I I I I I I I I I I I I I I I I I San Diego Pooled Insurance Program Authority. Palos Verdes Peninsula Transit Authority. Orange County Fire Authority. Fountain Valley Improvement Authority. Glendora Library Authority. Fullerton Library Building Authority. Fullerton Parking Authority. In addition to the financial audits listed above, we have recently completed the following: - City of Brea - Senior Citizen compliance audit. Special review of purchasing procedures. Review of a fixed asset appraisal. - City of Del Mar - Performed limited reviews of admissions taxes paid to the City relating to the annual Del Mar Grand Prix auto race. - City of El Segundo - Reviewed records supporting business licenses at selected businesses within the City. - City of Fullerton - Reviewed golf course revenues in order to determine compliance with the City's golf course management agreement. - City of Laguna Beach - Special review of City Treasurer's activities, and a Transportation Development Act compliance audit. - City of La Mirada - Transportation Development Act compliance audit, and a special five-year review of certain Redevelopment Agency transactions. - City of Manhattan Beach - Served as City internal audit staff performing reviews of various internal accounting activities such as cashiering, business license issuance and related cash receipts and fire department permit issuance. Also, annually reviewed admission taxes paid to the City in connection with a Virginia Slims tennis tournament. - City of Montebello - Various cash flow projections in connection with proposed bond issues, and a review of the accounts payable system. - City of Oceanside - Community Development Block Grant audit, Section 8 Housing Assistance Payment Program - Grant audit, a long-term loaned accountant, a special review of the golf course operations, a special review of cash cut-off, and the annual review of card room revenues. 15 City of Pasadena - Reviewed accounts payable system. City of Pomona - Evaluation of computerized systems and internal controls relating to their on-line utility billing system. City of San Fernando - Business license tax audit. City of Santa Fe Springs - Reviewed tax increments allocated by the County of Los Angeles to each Redevelopment Agency Project Area since inception of the project areas. California Avocado Commission - Assisted staff in the documentation of accounting and budgeting policies and procedures. West San Gabriel Valley Consortium - We performed a management and operations audit of all of the major operating functions of the Consortium. We also developed procurement policies and procedures and a cost allocation plan. We have reviewed franchise payments and/or contract compliance from various cable and disposal companies for the Cities of Brea, Glendora, Laguna Hills, Lake Forest, Mammoth Lakes, Mission Viejo, Newport Beach, Oceanside, Temecula, West Covina and Yorba Linda. We have reviewed Transient Occupancy Tax payments from some or all hotels/motels for the Cities of Barstow, Big Bear Lake, Calistoga, Costa Mesa, Cypress, Escondido, Hawthorne, Laguna Beach, Lake Forest, Long Beach, Manhattan Beach, Mission Viejo, Monterey Park, Newport Beach, Pomona, San Mateo, Santa Fe Springs, Solana Beach, Solvang, Sunnyvale, Temecula, Torrance, I and Tustin. IKNOWLEDGE OF REDEVELOPMENT AGENCIE We have performed financial and compliance audits of numerous redevelopment agencies as listed in our resumes. You will also note in Mr. Moreland's resume that be is a member of the State Controller's Advisory Committee which developed the Redevelopment Compliance Audit Guidelines. Mr. Moreland, as Chairman of the Governmental Accounting and Auditing Committee of the California Society of Certified Public Accountants, advised the State Controller's Office in the development of accounting systems for redevelopment agencies, revisions to the Compliance Audit Guidelines, and revisions to the Annual State Controller's Report. REVIEW OF THE ANNUAL CALCULATION OF THE APPROPRIATIONS LIMIT Mr. Moreland was a member of the League of California Cities Gann Appropriation Limit Task Force. The Task Force developed new guidelines for the computation of the annual appropriations limit as a result of the passage of Proposition 111. Mr. Moreland, on behalf of the California Society of Certified Public Accountants, assisted the Task 16 I Force by developing the appropriate procedures and reporting in connection with the review of the annual calculation of the appropriations limit as part of the annual financial audit process. MANAGEMENT LETTERS I I I I I I I 11 I I I I I I I I We issue management letters every year in connection with all of our governmental clients. Unless there are unusual circumstances, the management letters are issued at the conclusion of the examination concurrent with the issuance of the audited financial statements. Our management letters contain observations and recommendations which are meaningful to our clients. They are intended to be constructive and are in fact viewed in a very positive manner by our clients. Management letters are always reviewed in draft form with appropriate client personnel before they are issued. A sample management letter is included in Appendix B. ASSISTANCE IN RECEIVING AWARDS Each year, four of our staff participate in the review of annual financial reports under the California Award Program. For the past ten years, Mr. Moreland has been a member of the final three-person committee reviewing reports under the California Award Program. During the past several years we have assisted the Cities of Agoura Hills, Baldwin Park, Brea, Camarillo, Chino, Covina, Chino Hills, Culver City, Cypress, Dana Point, Dinuba, Escondido, Fountain Valley, Fullerton, Glendora, Irvine, La Mirada, Laguna Beach, Laguna Hills, Lake Forest, Mission Viejo, Monrovia, Montebello, Monterey Park, Newport Beach, Oceanside, Orange, Palos Verdes Estates, Pico Rivera, Placenta, Poway, Rialto, Rolling Hills Estates, San Buenaventura, San Clemente, San Fernando, San Juan Capistrano, San Marcos, Santa Fe Springs, Solana Beach, Stanton, Temecula, Tulare, Tustin, West Covina and Yorba Linda in receiving. "outstanding" awards under the California Award Program. Most of these cities have also received Certificates.of Achievement from the GFOA. For the year ended June 30, 1995, all twenty-one that applied to the CSMFO received "outstanding" awards in financial reporting. All of the staff identified in our proposal have experience in preparing award- winning CAFR's. In 1990, Mr. Moreland developed a program entitled "How to Prepare an Award Winning CAFR" for the California Society of Municipal Finance Officers. He participated in presenting the program on seven occasions to over two hundred attendees. FEDERAL AND STATE GRANTS AND THE SINGLE AUDIT Today, nearly all governmental entities are receiving significant revenues from Federal and State grants. These revenue sources have become so significant that the National Council on Governmental Accounting (NCGA) selected the subject of "Grant Accounting" to be one of the first areas to be resolved in connection with the restatement of 17 I 11 I I I I I k I I Governmental Accounting, Auditing and Financial Rel2ortin Mr. Moreland was a member of the NCGA Accounting Task Force which developed the exposure draft that became NCGA Statement 2, Grant, Entitlement, and Shared Revenue Accounting and Reporting by State and Local Governments. We have audited countless Federal and State grants in connection with the governmental clients we have served. Some of the grants we have audited include CDEG, CETA, FAA, FAU, FEMA, EDA, JTPA, OCJP, TDA, UMTA, Asset Forfeiture Funds, Revenue Sharing,. Senior Citizens' Nutrition, Child Development and Section 8 Housing Assistance Payment Programs. We have also audited numerous Federal and State grants in connection with school district audits. OMB Circular A-102, Attachment P, was published in the Federal Register on October 22,4979, and became effective immediately. It provided for what is commonly called the "single audit. approach". Because most local governments did not comply with the single audit approach, Congress passed the Single Audit Act of 1984, which became mandatory in California for the year ended June 30, 1986. We performed single audits for the Cities of Montebello, Oceanside and Santa Fe Springs for the year ended June 30, 1985. Single audits were required for nearly all of our municipal audit clients for each of the years ended subsequent to June 30, 1985. All of our single audits were performed in accordance with OMB Circular A-128, Audits of State and Local Governments. Mr. Moreland was a guest speaker on the subject of the Single Audit Concept for the California Society of Municipal Finance Officers Southern Chapter meeting in July, 1982, and again spoke on this subject at the 1986 Annual Seminar in Claremont. In June, 1983, Mr. Moreland published an article on the single audit concept in Outlook Magazine, a publication of the California Society of Certified Public Accountants. Our working papers will be retained for a minimum of three years. They %vill be available to the City, Federal agencies, State agencies and other parties at the direction of the City. KNOWLEDGE OF NCGA AND GASB STATEMENTS AND INTERPRETATIONS Mr. Moreland worked closely with three members of NCGA in connection with various governmental accounting organizations. Also, as Chairman of the California Committee on Municipal Accounting, he made an oral presentation to the Governmental Accounting Standards Board (GASB) an the governmental accounting issues which are most important in California, and has responded to all documents released by the GASB seeking public comment. Mr. Moreland is one of four practicing CPA's in the United States selected by the GASB to review and comment upon potential implementation problems in connection with proposed GASB Statements for smaller governmental units. He is also a member of the GASB Task Force on the Financial Reporting Model. 1 18 ASSISTANCE IN GOVERNMENTAL BOND OFFERINGS Today, because of the changing bond market and the changes in financing vehicles available to local government, governmental entities almost always utilize bond consultants in developing a financing strategy and the appropriate bond documents. When requested, we assist our clients in the review of the official statement in connection with municipal bond issues. We also issue consent letters upon request. Mr. Moreland and others in the firm often have assisted in local government bond issues. The recording of long-term debt can be very complicated and can involve numerous fund types, an account group and several entities. Because these transactions occur infrequently in many cities, we are often called upon to assist in preparing the required journal entries to record these transactions. We would be pleased to assist you should the need arise. AUDITING JOINT POWERS AUTHORITIES AND SPECIAL DISTRICTS We have audited numerous joint powers authorities and special districts, including the following: - Central Orange County Fixed Guideway Agency. - Coachella Valley Joint Powers Insurance Authority. County Sanitation Districts of Orange County. Cypress Civic Center Authority. Fountain Valley Improvement Authority. - Fullerton Library Building Authority. - Fullerton Parking Authority. Glendale Library Authority. Glendora Library Authority. - Las Virgenes Municipal Water District. - Oceanside - San Buenaventura Housing Financing Authority. - Orange County Cities Risk Management Authority (OCCRMA). - Orange County Fire Authority. - Palos Verdes Peninsula Transit Authority. 19 I I I I I I I I I I I I I I I I I I I Perris Public Financing Authority. Pomona Public Financing Authority. Rossmoor Community Services District. San Diego Pooled Insurance Authority (SANDPIPA). San Diego County Cities Risk Management Authority. Santiago Library District. Santa Margarita -San Luis Rey Watershed Planning Agency. Southeast Area Social Services Funding Authority (SASSFA). Southern California Coastal Water Research Project Authority. Triunfo, Sanitation District. West San Gabriel Valley Consortium. FRANCHISE AUDITS As mentioned above we have reviewed franchise fees based on gross receipts in connection with cable and refuse companies for the Cities of Brea, Glendora, Laguna Hills, Lake Forest, Mammoth Lakes, Mission Viejo, Newport Beach, Oceanside, Temecula, West Covina and Yorba Linda. Additionally, we have performed tests of gross receipts on behalf of numerous cities in connection with various recreational activities or sporting events such as golf, tennis, horseback riding, swimming and auto racing. AVAILABILITY Throughout the year you and your staff should feel comfortable calling us for advice. We should be viewed as another resource available to you in carrying out your financial and administrative duties. We will contact you throughout the year to discuss how current accounting pronouncements may affect your accounting or financial reporting. We believe our ability to quickly respond to your needs and to keep you informed should be a significant consideration in selecting us as your auditors. Please verify our level of service and the availability of Mr. Moreland and Mr. Acocello with the . references provided below. Our staff is, of course, available to provide accounting, auditing or consulting services throughout the year. PTI, I This is a medium-sized city %vith a xuter enterprise operation and an active redevelopment agency, a financing authority and a housing authority. Them are approD&nately 850 annual audit houm The City receives the GFOA and CSMFO awards for financml reporting each �= aty of Montebello 1600 w. Beverly Bhd aty, RDA Single June 30,1986 Mr. Ted NiK Montebello, CA 90640 Audit Asset Seizure Finance Director (213) 887-1412 Funds, TDA, Various Special Projects This is a medium-sized cityAith three enterprise operations, an actim redevelopment aget'LY and several Enancing authoritim There are apprcDdmately 850 annual audit hours. The City receives the GFOA and CSMFO awards for financial reporting each yeu. Gly of Fountain Valley 10200 Slater Aw— CIty, Single Audit, June 30,1997 h1s. Elizabeth Fox Fountain Valley, CDA OCJP Audit Fiscal Sciviccs Manager CA 9Z708 C714) 9654418 This is a medium-si7A city with one enterprim operation and an active redevelopment agency. There are apprc�dmately 700 annual audit hours. The City receives the GFOA and CSMFO awards for financial reporting each year. I 1 21 As indicated above, we currently audit the financial statements of forty-one California cities and thirty-one redevelopment agencies. We selected the following five clients for you to contact because they closely relate to the proposed engagement and because they demonstrate our depth of experience. Mr. Moreland currently serves as engagement partner for all the clients listed below. Address and Audits Performed acnt Name of Fnft TeIpphone For 6-30�% Since FYE aty of Fullerton 303 W. Commomvealth CIty, Single Audit, June 30,1990 Mr Glenn Stembnnk Fullertori, CA 92632 RDA, Library Auth, Accounting Manager (714) 7j8-3169 Parking Auth. Air Quality Impr. OCJP Audit� Golf Course Review, Cost Allocation Plan Funds Asset Seizure This is a large city with one enterprise operation and an active redevelopment agency. There are approDdmately I= annual audit hours. The City receives the GFOA and CSMFO awards for financial reporting each year. aty of Monterey Park 320 W. Ne%mark St. at3� RDA, Single June 30� 1993 Mr. David Dong Monterey Park CA 91754 Audit Cost Allocation Director of Management (818) 307-1355 Plan, TOT Audits services This is a medium-sized city %vith a xuter enterprise operation and an active redevelopment agency, a financing authority and a housing authority. Them are approD&nately 850 annual audit houm The City receives the GFOA and CSMFO awards for financml reporting each �= aty of Montebello 1600 w. Beverly Bhd aty, RDA Single June 30,1986 Mr. Ted NiK Montebello, CA 90640 Audit Asset Seizure Finance Director (213) 887-1412 Funds, TDA, Various Special Projects This is a medium-sized cityAith three enterprise operations, an actim redevelopment aget'LY and several Enancing authoritim There are apprcDdmately 850 annual audit hours. The City receives the GFOA and CSMFO awards for financial reporting each yeu. Gly of Fountain Valley 10200 Slater Aw— CIty, Single Audit, June 30,1997 h1s. Elizabeth Fox Fountain Valley, CDA OCJP Audit Fiscal Sciviccs Manager CA 9Z708 C714) 9654418 This is a medium-si7A city with one enterprim operation and an active redevelopment agency. There are apprc�dmately 700 annual audit hours. The City receives the GFOA and CSMFO awards for financial reporting each year. I 1 21 I Address and Audits Performed Client Nameo[Enfi!y Telguhone For 6-3(�96 Since FYF City of La Mhda 13700 La Mrada BhLL City, RDA, June 30, 1987 W Richard D. Patton La Mirada, CA 90638 Sinoe Audit, TDA Director of Finance (310) 943-0131 This is a medium-sEmd city with two enterprise operations and an active redevelopment agmq. There are appradmately 600 annual audit hours. The City rcc6� the GFOA and CSMFO awards for finaricial reporting each yeu. CDA Community Development Agency OCJP Office of Criminal Justice Planning RDA Redevelopment Agency TDA Transportation Development Act TOT Transient Occupancy Tax OUR APPROACH TO YOUR OBJECTIVES The scope of services is described in the next section of our proposal. Our approach to meeting your objectives is presented in the balance of this section. Our audit approach will emphasize service to the City. Service not only in terms of a qualified staff of auditors efficiently and effectively performing the necessary audit tests, but also service as an attitude maintained by the entire audit team. All of our planning, audit tests and dealings with you and your staff will be performed from an independent objective viewpoint, yet we will never forget that our product is a service. We understand that the annual audit will result in a certain amount of additional work and inconvenience on the part of you and your staff. However, we are confident that our service-oriented audit approach will eliminate many of the common problems experienced in governmental audits, such as: - New staff each year, - Inexperienced staff who do not understand governmental accounting, - Auditors who feel free to interrupt your staff any time, and - Management letter comments made without a thorough understanding of the related costs or even the practicality of the recommendation. We know these common complaints and can avoid them because of four very important facts, namely: Our audit team members maintain their up-to-date knowledge of the governmental industry at the same meetings and seminars which you and your staff attend, I 1 22 I I I I I I I I I I I I I I I Many of our audit staff, including the proposed engagement manager, have worked in government so they better understand your audit needs and what you expect in terms of service, Our audit team members have spent many years. successfully serving the local government industry, and Our service approach to you will be supervised by Michael Moreland who, because of his years of serving government clients, thoroughly understands the duties and responsibilities of you and your staff. AUDIT APPROACH - PLANNING AND INTERIM AUDIT WORK We suggest that an initial planning meeting be held shortly after our, appointment as auditors. Management of our audit team will meet with you,and other appropriate City personnel to establish a good working relationship and to discuss the scope and timing of the annual audit, the detailed audit plan, the documents needed for our permanent files, and the list of schedules that the City's staff normally prepares in connection with the year end closing. Perhaps the most important objective of the pre -audit conference is to establish a r!lationship in which we all feel comfortable asking questions and expressing our views. At our initial meeting we would ask to be included on the mailing list for the City Council minutes. Currently reviewing the minutes will assist us in keeping aware of your activities, and thereby enhance our value to you. We devote a considerable amount of time to planning each year, because we find that well-planned audits are completed in a timely manner. We will schedule approximately two weeks of interim audit work during April, May or June. During the first year, we will prepare 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, fixed assets, grant compliance and investment activities. This information is gained through discussions with appropriate City staff and the review of available documented policies and procedures. Our knowledge of your overall internal control structure and of your major systems will be used to tailor our standard audit programs to your specific systems. During the interim audit work in subsequent years, we will note changes in the system, if any. At this point we will utilize the prior year financial statements, the current year budget, and our knowledge of your systems to determine materiality for audit purposes. This level of materiality will be utilized during the final audit work in deciding on- the extent of testing of account balances. The review of these documents will also assist us in identifying changes from the prior period in the operations of the City. 23 I 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 your internal control structure. The selection of transactions for testing will be made using a combination of random, systematic and haphazard sampling techniques. We will test the strengths of the systems to be sure they are functioning as intended. We will identify weaknesses, if any, so that they can be included with our recommendations in our -annual management letter. During the interim audit work we will also develop the detailed audit plan, arrange for typing of confirTnations, finalize the schedule for the completion of the final audit work, complete the listing of client prepared schedules, and perform those tasks which can be efficiently accomplished prior to the end of the year. IAUDIT APPROACH - FINAL AUDIT WOR I I I I I I I I I I I I During July of each year we will contact you to determine that the year end closing is progressing normally. We will also discuss any matters which have occurred subsequent to the interim audit work which may impact our audit procedures or your financial reporting. The final audit work will begin in mid August each year with an analytical review of revenues and expenditures, which includes a comparison of prior year financial statements and current period budget to the closing trial balance to identify those accounts which will require further audit work based on materiality levels. The primary objective of the final audit work is to audit the final numbers that vdll appear in the various financial statements. Upon completion of fieldwork and posting of any audit adjustments, we will perform a final analytical review of audited balances to determine if our materiality levels have changed as the result of closing adjustments and to ensure that sufficient testwork has been completed. Each year, the fieldwork will be completed by approximately mid September. Our management review will be completed in the field during the same time period so that at the conclusion of the field work we have reached an agreement on both the format and the content of the financial statements. An exit conference will be held at the end of fieldwork to summarize the results of the fieldwork and to review significant findings. We believe you may want to set aside specific blocks of time to meet with us throughout the audit. This will avoid being disrupted by questions, one at a time. We find that our work day is far more productive when we can plan ahead, and we are sure that well-planned days are also your most productive. As part of each audit, we will evaluate the internal control structure in order to determine the nature and extent of our audit procedures. Frequently, this evaluation process leads to worthwhile suggestions for improving the internal control structure as well as the efficiency and effectiveness of accounting operations and procedures. All -of our recommendations will be discussed at an exit conference with appropriate City personnel and, if appropriate, presented in writing at the completion of our audit. We are available each year to present the various financial and compliance reports and the management letter to the City Council or Governing Board. 24 I I I I I I I I I I I I I I I I APPROACH TO THE SINGLE AUDI Our approach to the single audit will begin with the identification of major Federal financial assistance programs from the list of Federal assistance program expenditures which you will provide. We will require a preliminary listing in connection with our interim audit work. At that time, we will identify the major accounting cycles such as cash receipts, purchasing and cash disbursements, payroll procedures, investment procedures, etc. which affect Federal programs. We mill prepare flow charts and/or other documentation of these accounting cycles and identify the internal control procedures which you have established. We will then perform tests of transactions for each of these accounting cycles in order to satisfy ourselves that the internal controls are functioning as intended. We will then work with City's staff to identify the systems you have established to monitor compliance with the requirements of the major Federal financial assistance programs. Next we will select transactions, reports, files etc. to test that the compliance systems are functioning as intended. We will complete the additional audit procedures in connection with the single audit during the financial audit process. Much of this work will be accomplished in connection with the interim audit work. It will be completed during the final audit work so that we can discuss drafts of the various financial and compliance reports at the same time we are discussing the comprehensive annual financial report. REPORTS TO BE ISSUED - SINGLE AUDIT During the final audit work, we will complete any additional testing of major Federal financial assistance programs that may be necessary as a result of reviewing the final schedule of expenditures. We will then prepare drafts of the required reports for your review. After reviewing and discussing drafts of the required reports, you should prepare responses to any findings or questioned costs. 'ne-reports will be revised to include your responses and will be delivered along with the other reports. KNOWLEDGE OF APPLICABLE LAWS AND REGULATIONS We have a copy of the California Government Code and -the Health and Safety Code in our offices for use as needed during the annual audit. We have included references to the more common laws, rules and regulations in our standard audit program for the usual activities of a California city. In addition, we utilize the "Single Audit Information Service" to maintain knowledge of the applicable laws relating to Federal programs. As part of our annual audit process, we will also ask you if there are any unusual laws, rules, or regulations which relate to your City. 1 25 KEY DATES FOR COMPLETION OF THE JUNE 30,1997 AUDIT Presented below are suggested key dates for the completion of the June 30, 1997 audit: March 11, 1997 - Selection of auditors by City Council. April 7, 1997 - Initial planning meeting, including discussion of prior audit concerns and the interim work to be performed. April 7, 1997 to April 18, 1997 - Interim audit work as described above. August 18, 1997 to September 19, 1997 - Final audit work and management review as described above. September 19, 1997 - Exit conference to summarize the results of fieldwork and to review significant findings. October 10, 1997 - Deliver five copies of the draft CAFR to the Director of Administrative Services. October 24, 1997 - Our partner, manager and senior accountant will meet with City staff to discuss the CAFR. I -- - -- QQctober--31-,:1991---' -=DEIiVe-f--tli-e-r—equiFed=ri-umbi�r::�of--c6�*es-of::tlie--�y � gAFR.-::T November 14, 1997 - Deliver 30 copies of the Redevelopment Agency financial and compliance report, November 28, 1997 - Deliver the required number of copies of the Single Audit report, the AB 2766 report, the Financing Authority financial statements, the management letter, the Article XIIIB letter and the letter regarding the conduct of the annual audit. ASSISTANCE BY CITY STAFF We will require assistance in connection with the annual audit by City staff in the following areas: Clerical assistance such as typing of confirmations, pulling of invoice packages and reproduction of agreements and other documentation for our files. 26 I I I I I I I I I I I I I I I I I 11 a Technical assistance in familiarizing our staff with the flow of information through the major and minor accounting cycles such as cash receipts, cash disbursements, payroll, fixed assets, accounting for grants, etc. Also, technical assistance in connection with the overall activities of the Finance. Department such as the preparation and approval of journal entries, the reports generated by your computerized accounting system, and the schedules generated in connection with the year end closing. e Technical assistance in familiarizing our staff with the controls you have established to monitor compliance with Federal program requirements. Since we will be assigning auditors who are experienced with governmental accounting and auditing, we expect the time required by City staff will not be any greater than in the past. 27 I I YOUR OBJECTIVES SCOPE SECTION I I I I I I You are selecting auditors to perform an audit of the financial statements of all fund types and account groups of the City of Santa Clarita for each of the three years ending June 30, 1999, with the option for the City to renew for an additional two years. Ile City as a reporting entity includes the City of Santa Clarita, the Santa Clarita Redevelopment Agency and the Santa Clarita Public Financing Authority. Each'annual audit will be expanded to include the requirements of the Single Audit Act of 1984, including the requirements of OMB Circular A-128. Each annual audit will include a compliance audit of the Redevelopment Agency in accordance with the requirements of the "Guidelines for Compliance Audits of California Redevelopment Agencies", issued by the State Controller's Office. A separate report will be required each year for the Redevelopment Agency and the Financing Authority. Annually, we will perform a Financial and Compliance Audit of the AB 2766 funds. Annually, we will review the calculation of the appropriations limit as required by Section 1.5 of Article XIIIB of the California Constitution, and we will provide the City Council with a letter discussing the conduct of the audit. Each audit of the Comprehensive Annual Financial Report (CAFR) of the City will be performed in accordance -with generally accepted auditing standards as adopted by the American Institute of Certified Public Accountants (AICPA), and will conform with the guidelines set forth in the AICPA!s Industry Audit Guide, Audits of State and Local Governmental Units. Also, the audits of the City and the Redevelopment Agency will comply with the standards for financial and compliance audits contained in the Government Auditing Standards, issued by the US. General Accounting Office, and the requirements of OMB Circular A-128, Audits of State and Local Governments. We will assist you in preparing your financial statements in accordance with the most recent applicable pronouncements of the Governmental Accounting Standards Board. We will work with you in preparing a CAFR that continues to meet the reporting requirements for a Certificate of Achievement for Excellence in Financial Reporting issued by the Government Finance Officers Association, and an Outstanding Award in Financial Reporting from the California Society of Municipal Finance Officers. In connection with each annual audit, we will review the internal control structure and accounting procedures in order to develop our audit procedures. As a result of this review, we will provide the City with a management letter containing our comments and recommendations for improving the accounting procedures and the systems of internal control as well as any nonmaterial instances of noncompliance with laws and regulations noted during our audit and any nonreportable internal control structure conditions. We will initiate an exit conference to discuss drafts of our management letter and the various financial and compliance. reports with appropriate City personnel. Following the audit, we will meet to discuss any suggestions which either of us may have for improving the conduct of the annual audit process, or any other matters of interest. Throughout the year, we are available for meetings or discussions in order to meet your needs. 91 I We will follow -the audit approach described in the previous section in order to meet all of your objectives and timing requirements. Working together -we will develop agreed-upon procedures to semi-annually review the City's investment reports for compliance with California Government Code Section 53601. We are currently performing these services for the City of Chino Hills. 11 I I 11 I I 11 I I I I I I I NVe will also meet with you to develop procedures for performing audits of franchise fees paid to the City by utility, cable and refuse companies. We will review with you the audit programs we currently use with other cities. We will also meet with you to identify the projects and the scope of work relating to the internal audit services. We are currently the internal auditors for the City of Burbank, and have performed similar services for the Cities of Manhattan Beach, Pomona, Redondo Beach, San Clemente and others. 1 29 FEES FOR OUR SERVICES Fees for our services are based on the level of work performed and the total number of hours necessary to provide the service. A summary of our fees for the three years ending June 30, 1999 is as follows: Manager 100 90 9,000 1997 1998 1999 Annual Auditing Services: Assistant Accountant 320 55 City $20,000 $20,800 $21,600 Redevelopment Agency 3,000 3,100 3,200 Public Financing Authority 3,000 30100 3,200 Single Audit 6,000 6,250 6,500 Semi -Annual Review of Investments (Twice) 6,000 6,Z50 6,500 AB 2766 3,000 3,100 3,200 Annual Auditing Services (80 hours) 4,700 4,900 5,100 Executive Time (80 hours) 5,30 5,500 5,700 Total Fees The above fees provide for approximately a 4% increase each year to cover increased salary and other costs. A detail of the hours and hourly rates used in computing the 1997 fees is as follows: Hourly Level of Work Performed Hours Rates Amount Annual Auditing Services Partner 40 $110 $ 4,400 Manager 100 90 9,000 Senior Accountant 360 60 21,600 Assistant Accountant 320 55 17,600 Clerical 40 25 1,000 53,600 Out-of-pocket expenses 1,40 55,000 Reduction for new client —42 �O00) Total 41,000 30 Level of Work Performed Internal Auditing Services Partner Manager Senior Accountant Out-of-pocket expenses Reduction for off season work Total Executive Time Hourly Hours Rates 6 110 10 90 64 Amount K M CEO E "T .! To 5,400 300 5,700 (1,000 4,700 Partner 10 110 1,100 Manager 50 90 4,500 Senior Accountant 20 60 1,200 6,800 Reduction for off season work —a �500) Total 5.30 Total Fees for 1997 Hourly rates for 1998 and 1999 will increase 4% each year. Fees for franchise fee audits or other auditing services will be at the hourly rates in effect at the time the services are provided. Total fees for such projects will be determined in advance of commencing the work based.on a discussion of the scope of services. Fees for services provided by our Governmental Accounting Services Department are at substantially reduced rates. Our fees are billed on a monthly basis as the work progress and in a format which is acceptable to the City. 31 I I I I I I I I I I I I 1 -1 I j I I I 1� APPENDIX A LATEST EXTERNAL QUALITY CONTROL REVIEW REPORT I I I I I I I I I I I I 11 I I GILBERT ACCOUNTANCY CORPORATION Catzried Public Accounran rs May 25, 1994 To the Partners Moreland & Associates We have reviewed the system of quality control for the accounting and auditing practice of Moreland & Associates (the firm) in effect for the year ended December 31, 1993. Our review was conducted in conformity with standards for on-site quality reviews established by the American Institute of Certified Public Accountants. We tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests included a review of selected accounting and auditing engagements. In performing our review, we have given consideration to the quality control standards issued by the AICPA. Those standards indicate that a firm's system of quality control should be appropriately,comprehensive and suitably designed in relation to the fi=ls size, organizational structure, operating policies, and the nature of its practice. They state that variance in.individual Performance can affect the degree of compliance with a firm's quality control system and, therefore, recognize that there may not be adherence to all policies and procedures in -every case. In our opinion, the system of quality control for the accounting and auditing practice of Moreland & Associates in effect for the year ended December 31, 1993, met the objectives of quality control standards established by the AICPA and was being complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards in the conduct of that practice. 0 John E. chaquica Gilbert Accountancy Corporation Certified Public Accountant JEC: sck 1760 CREEKSIDE OAKS DRIVE SUITE 19M SACRAMENTO. CA 95833 9 4916) 646-6464 0 FAX (916) 641-2727 I I I I I I I I I I I I I I I I I I I APPENDIX B SAMPLE MANAGEMENT LETTER n I I I I I I I I I I I I H I Sample- Management Letter - no reportable conditions and a single audit is required (Date: Last Day of Fieldwork) Name Title City of Address Dear We have audited the general purpose financial statements of the City of as of and for the year ended June 30, 19_, and have issued our report thereon dated In planning and performing our audit of the general purpose financial statements of the City of for the year ended June 30, 19. we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. We noted no matters involving the internal control structure and its operation that we considered to be material weaknesses under standards established by the American Institute of Certified Public Accountants which was reported to the City Council in a separate letter dated. However we noted items of less significance which are discussed below. (List Findings and Recommendations) We have reviewed the status of the recommendations contained in our letter to the City dated , and found that all of our suggestions have been implemented, except for [list any items outstanding]. This report is intended for the use of management, although we recognize that it may become a public document when issued. to the City. We would like to express our appreciation for the courtesy and assistance extended to us during our audit by all of your staff. We would be pleased to discuss with you at your convenience the matters contained in this letter or any other matters which you would like to discuss. IMORELAND & ASSOCIATES I (Partner name) 11 I I I I I I I I I I I Name Title City of (Date: Last Day of Fieldwork) Page 2 We would like to express our appreciation for the courtesy and assistance extended to us during our audit by all of your staff. We would be pleased to discuss with you at your convenience the matters contained in this letter or any other matters which you would like to discuss. IMORELAND & ASSOCIATES I (Partner name) 11 I I I I I I I I I I I