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HomeMy WebLinkAbout11/19/2014 - STAFF REPORTS - 2.N. O�?ALM$A iy a Y N bn»o C411FOAM" CITY COUNCIL STAFF REPORT DATE: November 19, 2014 Consent Calendar SUBJECT: APPROVE AGREEMENT EXTENSION WITH LANCE, SOLL & LUNGHARD, LLP FOR AUDITING SERVICES FROM: David H. Ready, City Manager BY: Department of Finance and Treasury SUMMARY The City and the Successor Agency to the Palm Springs Redevelopment Agency are required by law and the Government Accounting Standards Board (GASB) to issue Comprehensive Annual Financial Reports that are audited by an outside audit firm. The City is in the final year of a five (5) year agreement and desires to renew the current agreement with Lance, Sol[ and Lunghard LLP, for five (5) years. RECOMMENDATION: 1. APPROVE AN EXTENSION TO THE AGREEMENT FOR PROFESSIONAL FINANCIAL AUDITING SERVICES IN A FORM APPROVED BY THE CITY ATTORNEY WITH LANCE, SOLL AND LUNGHARD, LLP, FOR A FIVE (5) YEAR TERM WITH ANNUAL CPI INCREASES. 2. Authorize the City Manager to sign and execute the appropriate documents. STAFF ANALYSIS: The City, the Successor Agency to the Palm Springs Redevelopment Agency and other component units are required by law and by standards set up by the Government Accounting Standards Board (GASB) to issue a Comprehensive Annual Financial Report that has been audited by an outside auditing firm according to standards and procedures prescribed by GASB. The independent auditor plays an important and reassuring role in testing and evaluating the City's system of internal controls and overall financial management for signs of strength and weakness and reporting the results. They can also serve as a valuable resource as government financial reporting continues to evolve and government financial management becomes more complex and legally constrained. ITEM NO. City Council Staff Report November 19, 2014 — page 2 Approval of Audit Services Agreement Extension with Lance, Soll and Lunghard, LLP The current five-year contract with Lance, Soll and Lunghard, LLP, (LSL) expires this year. However, LSL has offered a new five-year contract proposal with fees that are at the same level as the fifth year of the current agreement plus annual CPI increases. Based upon the last 12-months of CPI information available, the first CPI increase would be 2%. GFOA best practices indicate that Governmental entities should enter into multiyear agreements of at least five years in duration when obtaining the services of independent auditors. Such multiyear agreements can take a variety of different forms (e.g., a series of single-year contracts), consistent with applicable legal requirements. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit. Multiyear agreements can also help to reduce audit costs by allowing auditors to recover certain "startup" costs over several years, rather than over a single year. Auditor rotation is another factor to consider with the amendment of this agreement. Though there is no legal requirement to change audit partners every five years as there is in the private corporate sector under the Sarbanes-Oxley Act of 2002, the periodic rotation of audit partners and staff has also become a best practice in the public sector. LSL already rotated their audit partner after the first two years of the current agreement, and has plans to rotate in a third partner in the next couple of years. Further, each year the audit team and lead is usually different, so there is always a `fresh set of eyes' on our books each fiscal year. FISCAL IMPACT: The annual cost of the current agreement for audit services of the City's Financial Statements is $72,963 which includes an annual cost-of-living-adjustment as determined by the CPI-U for LA-Riverside-Orange Co as published by the Bureau of Labor Statistics, U.S. Department of Labor. Services and the base costs under the new agreement would be the same as the current agreement, and the annual CPI increases will continue to be applied. Listed below is the breakdown of the different services and the costs for the final year of the current agreement and the estimated costs for the first year of the amended agreement. 5th Year of 1st Year of Current Contract Estimated New Contract Nature of Services to be Provided FY 13-14 Audit CPI Factor FY 14-15 Audit City Audit $43,632 2% $44,505 RDA Sucessor Agency Audit 8,674 2% 8,847 Single Audit 4,989 2% 5,089 Financing Authority Audit 4,159 2% 4,242 City State Controller's Report 3,090 2% 3,152 Optionan Audit and Report Services 6,731 2% 6,866 Streets Report to State 1,688 2% 1,722 Total Cost of Services $72,963 2% $74,423 02 City Council Staff Report November 19, 2014 — page 3 Approval of Audit Services Agreement Extension with Lance, Soll and Lunghard, LLP Optional audit and report services costs will only be incurred to the extent they are requested by the City and performed by the auditors during the audit cycle. The City will budget for the audit services in various accounts in the FY 15-16 budget. I Geoffrey Kiehl, Director of Finance and ames Thompson, Treasurer Chief of Staff/City Clerk David H. Ready, City Man Attachments: 1. Proposal for Audit Services from Lance, Soil & Lunghard 2. Professional Services Agreement Amendment with Lance, Sol] & Lunghard 03 •i 111116 •David E.Hale,CPA,CFP •Deborah A.Harper,PA LS Donald G. A. CPA •••! •Bch d K Kikuchi,PA •MMi haelCD..Mangold,PA * •Susan F.Matz,CPA •David S.Myers,CPA CERTIFIED PUBLIC ACCOUNTANTS •Bryan S.Gruber,CPA so w oM•m•m—,— viLmure,peeler&,boucher October 9, 2014 Mr. Geoffrey S. Kiehl City of Palm Springs 3200 E.Tahquitz Canyon Way Palm Springs,CA 92263 As you are aware, our contract with the City of Palm Springs for auditing services expires with the fiscal year ending June 30, 2014. Over the past several years, we have provided the City with auditing and accounting services which included: • Performed a financial audit of the basic financial statements of the City of Palm Springs. These financial statements were included within a Comprehensive Annual Financial Report (CAFR) and met all the requirements necessary to receive the Government Finance Officers Association Award for Excellence in Financial Reporting. • Performed annual single audit of the City's federal grants in accordance with OMB A-133. • Performed financial audit for the Financing Authority. • Prepared annual street report for the City • Prepared annual state controller report for the City and component unit. • Performed annual compliance audits for passenger facility charge and Measure J. • Performed a review and made recommendations on the internal control structure, which consists of the Control Environment, Accounting System, and Control Procedures. We have also provided assistance and information to City staff when required including helpful recommendations to management. We have made it an absolute priority to provide the City of Palm Springs with the best service available and we would like to continue to provide this level of service to the City. Since we are familiar with your accounting system, we will be able to perform an efficient and effective audit under current audit standards, which will benefit the City with continuity of firm personnel and minimal disruption to City staff during the audit. Lance,Soil&Lunghard,LLP 203 North Brea Boulevard • Suite 203 - Brea,CA 92821 TEL 714.672.0022 - Fax 714.672.0331 www.lslcpas.com Orange Counly Temecula Valley Silicon Valley 04 The terms of our existing Professional Services Agreement for Financial Auditing Services entered into March 18, 2010 describe the method of calculating fee changes in option years under Exhibit C — Price Adjustment: "The contract price will be adjusted annually on the anniversary date in option year 4 and option year 5. The adjustment will be adjusted upward or downward by the same percentage increase or decrease, occurring during the previous twelve months, in the consumer price index for all urban consumers (CPI-U) for the LA/Riverside: Orange County (published by the Bureau of Labor Statistics, U.S. Department of Labor), or applying a similar index if the CPI-U is not published or available. " We would like to propose a new five year contract under the terms of our existing agreement by applying the annual consumer price index (noted above) on January of each year to the prior year contract price. We believe this will provide continuous and undisrupted auditing services to the City. As a part of our services, LSL CPAs will continue to provide extensive Governmental Accounting Standards Board (GASB)assistance to the City throughout the year. Please see the attached Appendix A for the 2014 fiscal year fees. The services to be performed, fee structure and billing methods would remain unchanged from our original agreement. Very truly yours, 04, .*� Q Signature Date 05 City of Palm Springs LSL CPAs—Summary of Fees for Audit Services 5th Year of 1st Year of Current Contract Estimated New Contract Nature of Services to be Provided FY 13-14 Audit CPI Factor FY 14-15 Audit City Audit $43,632 +2% $44,505 RDA Sucessor Agency Audit 8,674 +2% 8,847 Single Audit 4,989 +2% 5,089 Financing Authority Audit 4,159 +2% 4,242 City State Controller's report 3,090 +2% 3,152 Optional Audit and Report Services 6,731 +2% 6,866 Streets Report to State 1,688 +2% 1,722 Total Cost of Services $72,963 +2% $74,423 06 AMENDMENT NO. 2 TO FINANCIAL AUDITING SERVICES AGREEMENT (Agreement No. 5960) THIS SECOND AMENDMENT to the Contract Services Agreement No. 5960 for Financial Auditing Services is made and entered into to be effective on the 5th day of April, 2015 by and between the City of Palm Springs, a California charter city and municipal corporation (hereinafter referred to as the"City'), and Lance, Soll and Lunghard, LLP Certified Public Accountants, (hereinafter referred to as the "Consultant") collectively, the "Parties". RECITALS A. City and Consultant previously entered into a contract services agreement for Financial Auditing Services, which was made and entered into on April 5, 2010 (the "Agreement') in the amount of $207,145 for the first 3 years. Two additional one year optional renewals with CPI increases were exercised for auditing services through April 3, 2015 to complete auditing of FY 13-14. Amendment#1 was executed November 20, 2012 in the amount of $25,000 to perform AB 1484 Due Diligence Review as required by the State of California. B. Section 3.4, "Term"allows for the agreement to be extended by mutual written agreement of the Parties. C. City and Consultant desire to amend the Agreement(Amendment#2)to extend the term of the contract for five (5) years terminating on April 4, 2020 to complete auditing of FY 18-19 at the annual base rate of$72,963 plus a CPI adjustment each year as determined by the Bureau of Labor Statistics, U.S. Department of Labor for LA-Riverside-Orange Counties. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein,the Parties agree as follows. AGREEMENT 1. Section 3.4 "Term" of the Agreement is hereby amended as follows: "The term of the agreement is extended five(5)years terminating on April 4, 2020, but may be extended at the mutual written consent of the Consultant and the City". Section 2.1 "Compensation of CONSULTANT" of the Agreement is hereby amended as follows: "The total amount of Compensation for the 5 years of auditing services commencing April 5, 2015 through April 4, 2020 for Fiscal Year 14-15 thru Fiscal Year 18-19 auditing services shall be$72,963 base rate plus a CPI adjustment each year as determined by the Bureau of Labor Statistics, U.S. Department of Labor for LA-Riverside-Orange Counties." 2. Full Force and Effect. This modifying Amendment is supplemental to the Agreement and is by reference made part of said Agreement. All of the terms, conditions, and provisions, thereof, unless specifically modified herein, shall continue in full force and effect. In the event of any conflict or inconsistency between the provisions of this Amendment and any provisions of the Agreement, the provisions of this Amendment shall in all respects govern and control. 3. Corporate Authority. The persons executing this Amendment on behalf of the Parties hereto warrant 1 07 that (1) such party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Amendment on behalf of said party, (iii) by so executing this Amendment, such party is formally bound to the provisions of this Amendment, and (iv)the entering into this Amendment does not violate any provision of any other agreement to which said party is bound. [SIGNATURES ON NEXT PAGE] 2 08 IN WITNESS WHEREOF, the parties have executed this Amendment as of the dates stated below. ATTEST: "CITY" CITY OF PALM SPRINGS, CA. By By James Thompson, City Clerk David H. Ready, City Manager Date: Date: APPROVED AS TO FORM: By City Attorney Date: "CONSULTANT" Lance, Soil & Lunghard, LLP Date: By: Date: 3 0a CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California } County of JIS On oar before me, nne Wert Ne AMTaeuimeoMw personalty appeared ramrnl m spnwtrl who proved to me on the basis of satisfactory evidence to be the person(a) whose name(s) Wars subscrbed to the within instrument and acknowledged to me that hafshalthey executed the same in hisfierAheir authorized capadty(ies),and that by hiaftierflheir sigrjlure(s) on the instrument the person(s), or the emfty upon beholf of which the person(s)acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Pleea aenry SW Plox a0,1um d nnery fthk OPTIONAL Though the mformaaon babw is no mqu#e by taw,M may prat.Akrabfo to po a M04V on Ire document and cculdpment ftadhrent remover and reafechmeM or 00s tam to anodrw abcurnenf. Description of Attached Document TRIe or Type of Dooumenf: Document Date: Number of Pages. Slgrrer(a)Osier Than Nened Above: Cspeclty(les)Claimed by Signers) Signer's Name: Signer's Name: ❑ Individual ❑Individual ❑ Corporate Officer—Tde(s): ❑Corporate Officer—Tide(s): © Partner—El Umiled ❑General ❑Partner—El Limited ❑General • Attomey in Fad ❑Attorney In Fad ❑ Trustee by d thu"Mre ❑Trustee Top of them note ❑ Guardian or Conservator ❑Guardian or Conservator ❑ Other. ❑Other: Signer is Representing: Signer is Representing: eaw lMawlranry aeoeabr•ossoa�opM.f`A.eua2eho•tleinarh.G,atS1901oE•wwxMuvarJo4ry.up roen.mor raader:tel/14(ieet a74976ahrt 4 10