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HomeMy WebLinkAboutAgenda Report - February 18, 1987 (47)TO THE CITY COUNCIL FROM THE CITY MANAGER'S OFFICE DATE February I8, s987 SUBJECT Approval of Request for Proposals for Auditing Services RECOMMENDED ACTION: 1. That the City Council approve the Request for Proposals for Auditinq Services. 2. That the City Council appoint an audit committee of five (5) persons to review the proposals submitted. 3. That this City Council authorize the Finance Director to advertise the Request for Auditing Services and solicit proposals. BACKGROUND INFORMATION: At the March 19, 1986, Council meeting, it was decided that the City solicit bids for the performance of the next audit (fiscal year 1986-87). The attached Request for Proposals for Auditing Services will accomplish this. -�7 Robert H. Holm Finance Director/Treasurer _ RHH/ss Attachment AUDITSR2/TXTF.06S NO CITY COUNCI EREC M RFID. Mavor EVELYN M OLSON Mayor Pro Tempore DAVID M HINCHMAN JAMES W. PINKERTON. Jr. JOHN R. (Randyi SNIDER CITY OF LODI CITY HAIL. 221 'NEST PINE STREET CALL BOX 3006 LODI, CALIFORNIA 95241-1910 (209)334-5634 INVITATION TO SUBMIT PROPOSALS FOR AUDITING SERVICES NOTICE OF PROPOSAL A. Invitation THOMAS A. PETERSON City Manager ALICE M. REIMCHE City Clerk RONALD Ni. STEIN City Attorney The City of Lodi invites proposals for the furnishing of auditing services. The accounting period to be covered will be the fiscal year ending June 30, 1987. It is the intent of the City Council to reappoint the successful firm for four additional years unless terminated for cause. B. Procedural and Information Questions Any questions regarding this proposal or additional information required by the respondents should be directed to either: Robert H. Holm, Finance Director or James W. Pruss, Assistant Finance Director 221 W. Pine Street, Call Box 3006 Lodi, CA. 95241-1910 (209) 333-6761 C. Due Date and A:>rard OUte Written proposals are dueprior to 5:00 p.m. Monday, March 30, 1987. Proposals postmarked or hand delivered after Monday, March 30, 1987, will not be accepted. The award of the contract by the City Council is expected to be made at the April 15, or May 6, 1987, regular meeting of the City Council. D. Number of Copies/Method of Delivery The proposer shall submit five (5) copies of the proposal to: Robert H. Holm, Finance Director City of Lodi 221 W. Pine Street, Call Box 3006 Lodi, CA 95241-1910 All proposals must be sealed. An all-inclusive fee must be sealed in a separate envelope, and the fee shall not be shown elsewhere it, the proposal. The following information must be shown on the outside of the envelope or packaging; Auditor's Name & Address "Audit Services Proposal" Fred M. Rei Mayor, City of Lodi FMR/ss CITY OF LODI REQUEST FOR PROPOSAL AUDIT SERVICES TABLE OF CONTENTS Paoe SECTION I - INTRODUCTORY INFORMATION .............................. A. Proposers' Fre-Submission Conference ................ B. Ownership of City -Related Documents................3 C. Proposal Costs.....................................3 D. Insurance/Indemnification ..........................4 E. Acceptance of Proposal Contents....................4 F. Acceptance or Rejection of Proposals...............4 SECTION Ii - GENERAL INFORMATION AND RECORDS TO BE AUDI ED ........ 5 A. General Information................................5 B. Other Information..................................5 C. Computer Information...............................8 D. Volumes of Transactions and Value of Inyfentories... 9 E. Listing of Federal and State Grants...............10 F. Assistance Available to Proposers.................11 -I- Table of Contents (continued) SECTION III - NATURE OF SERVICES REQUIRED .........................14 A. Scope of the Audit................................14 B. Requirements of the Auditor ....................... 15 C, Reports Required by City .......................... 16 D. Time Requirements.................................17 SECCION IV- FORMAT OF RESPONSE ..... .............................17 A. Title Page........................................IS B. Table of Contents.................................18 C. Letter of Transmittal .............................18 D. Profile of Independent Auditor....................19 E. Summary of Proposer's Qualifications..............20 F. Approach to the Examination .......................21 G. Report Requirements ............................. .21 N. Time Requirements.................................21 I. Additional Data .......................... ........21 SECTION V - EVALUATION OF PROPOSALS..............................21 A. Mandatory Criteria................................2.2 B. Technical Criteria................................22 C. Cost Criteria.....................................24 D. Interviews with Proposers .........................24 AUDITSR2/TXTF.O6S -2- I. INTRODUCTORY INFORMATION A. Proposers' Pre -Submission Conference A proposers' conference prior to proposal submission will be held at 10:00 a.m., March 3, 1987, in the City Council Chambers, second floor, City Hall, 221 West Pine Street, Lodi, CA, to discuss this request for proposal (RFP). S. Ownership of City -Related Documents All property rights, including publication •fights of all reports produced by proposer in connection v th services performed under this agreement shall be veste, in the City of Lodi. The proposer shall not publish or release any of the results of its examinations without the expressed written permission of the City. C. Proposal Costs The City is not liable for any cost incurred by a proposer responding to this RFP. -3- g, 1w;urance/Indemnification The auditor shall defend, indemnify and cave harmi.ess the City of Lodi, its officers and employees, from and against any and all claims, demands, losses, defenses, costs or liability of any kind or nature which the City of Lodi, its officers and/or employees, may sustain or incur, or which may be imposed upon them for injury to or death of persons, or damage to property arising out of auditor's actively or passively negligent performance or attempted negligent performance of this agreement, excepting only liability arising out of the willful misconduct or negligence of the City of Lodi, its officers or employees. E. Acceptance of Proposal Contents After the auditing firm is selected by the City, the contents of the submitted proposal will become a contractual obligation. Failure of the auditor to agree to include the proposal as part of the contractual agreement may result in cancellation of the award. The City reserves the right to reject those parts that do not meet with the approval of the City. F. Acceptance or Rejection of Proposals The City reserves the right to accept or reject any or all proposals submitted and to request additional information from any or all proposers. Any contract awarded will be made to the independent auditor who, based on evaluation of all responses, applying all criteria and interviews, if necessary, determined to be the best qualified to perform the audit. -4- II. GENERAL INFORMATION AND RECORDS to BE -AUDITED A. General Inform2tion Che City of Lodi is a general law City incorporated under the laws of the State of California on December 6, 1906. The City encompasses an area of 9.3 square miles and has a certified population of 43,293 as of January, 1986. The governing body is an elected at -large five -member City Council that selects a Mayor annually. A City Manager, City Attoriey, City Clerk are appointed by and report to the City Council. Organizational units of the City government are under the direction of the City Manager with Lhe exception of the Librarian who reports to the Library Board of Trustees who are appointed by the City Council. The City has a permanent full-time work force of 335 employees and is a full service City. The City Council adopted a 1986-87 general operating budget of $37,925,545 which includes electric, water and sewer enterprise funds. B. Other Information 1. The Finance Department (see Organization Chart --Exhibit A) is headed by the Finance Director/Treasurer who is responsible for planning, organizing and directing all systems and procedures regarding the City's centralized accounting system and financial reporting. The Finance Director', who is appointed City Treasurer by the City Council, is responsible for a pooled cash investment. portfolio in excess of $22,000,000. -5- 2. For financial reporting purposes, the City includes all funds, account groups, agencies, boards, ;:omMis"sions and authorities that are controlled by the City Council. The financial transactions are recorded in individual funds and account groups. The City uses the following fund categories, fund types and account groups: General Fund (I): To account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds (34): To account for the proceeds of specific revenue sources, other than special assessments, expendable trusts, or capital projects, that are legally restricted to expenditure for specific purpos`s. Debt Service Fund (I): To account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Special Assessment Funds (2): To account for the financing of public improvements deemed to benefit the properties against which special assessments are levied. Enterprise Funds (3): To account for operations that are financed and operated in a manner similar to private business enterprises. In these funds, it is the intent of the governing body that costs (expenses, including depreciation) of providing services to the general public on a continuing basis be financed or recovered primarily through user charges. M internal Panic ill. Tn tho Finan. inn or services provided by one department to other departments cf the governmental unit on a cost - reimbursement basis. Trust and Agency Fund (7.): To account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. These include expendable trust funds and nonexpendable :rust funds. General Long -Term Debt Account Groups (-): To account for unmatured general long -tern liabilities of the City. 3. Governmental, expendable trust and agency funds are accounted for on the modified accrual basis of accounting. Governmental and expendable trust fund revenues are recognizeri when received in cash except those accruable, which are recorded as receivables when measurable and available to pay current period liabilities. Expenditures are recognized on the accrual basis, except for principal and interest of special assessment long-term debt, which is recognized when financial resources are prcvided. General obligation bond expenditures are on a cash basis. Proprietary and nonexpendable trust funds are accounted for on the accrual basis of accounting. Their revenues are recognized in the period earned and expenses are recognized in the period incurred. -7- An operatinc budcet is adoptee each fiscal year for the general and special revenue funds on the same modified accrual basis used to reflect actual revenues and expenditures. Budgetary control is exercised at the department level. The City Manger is authorized to transfer budget amounts between departments within, any fund; howeve-, any supplemental appropriations that amend the Lutal expenditures of any fund require City Council resolution. Reported budget amounts are as originally adopted or as amended by City Council resolution. !unencumbered appropriations lapse at year end. 4. The financial statements of the City have been audited annually by independent certified public accounting firms. The accounting firm that audited the previous year's financial records has performed the external audit for the past eleven years and will be invited to submit a proposal for consideration. The last year's audit was conducted under the 1984 Single Audit Act guidelines (OMB Circular A-128). C. Computer Information The City's current computerized accounting system is run on on an ISM System 36 Mainframe. W v. VVIUIIICJ Ut iT'(2W>dk..L}oIIJ attu lathe of Ifive ntorIe-S Approximate annual volume eased upon transactions through June 30, 1986: Number of Receipts (Other than Utility Bills) - 5,860 Number of Checks -- Accounts Payable - 8,523 Payroll - 11,866 Number of Journal Entries - 1,305 Number of Utility Bills Mailed - 232,196 Inventories at June 30, 1986 - Office Supplies $ 9,173 Gas and Diesel Fuel 12,383 Vehicle Parts 32,167 Electric Utility 1,030,361 Sewer 9,553 Water 172,793 Number of Items in Utilities Inventory 3,000 Number of Bank Checking Accounts - 4* *Accounts Payable Payroll Workers' Compensation (Administration) Public Liability and Property damage Claims (Administration) W E. Listing of Federal and State Grants STAILMLNT OF GR'yNT ACTiVI'Y CITY OF LODI Major Federal Assistance Programs Agency/Program Title Year Ended ,lune 30, 1986 Assistance Amount of ID Number Expenditures Department of Transportation Passed through State Department of Transportation: Highway Research, Planning and Construction 20.205 c 514,098 Department of the Treasury Revenue Sharing 21.300 327,453 Total Major Federal Assistance 841,551 Nonmajor Federal Assistance Programs Department of Housing and Urban Development Community Development Block Grant 14.219 71,177 Community Development Block Grant 14.219 68,298 Department of the Interior Passed through State Depar[ ent t of Parks and Recreation: Land and Water Conservation Fund/State Assistance Program 15.916 37,204 TOTAL FEDERAL ASSISTANCE $1 018 230 f f For the period January 1, 1985 to June 30, 1986 State Office of Criminal Justice Punning Career Criminal Apprehension Program CA -49185 $105,556 TOTAL OFFICE OF CRIMINAL JUSTICE PLANNING ASSISTANCE $105,556 -10- 1. The cognizant Federal Agency for the City's federal grants is: U. S. Department of Housing and Urban Development San Francisco Regional Office, Region IX Office of Inspector General 1375 Sutter St., Suite 320 San Francisco, CA 94109-3448 F. Assistance Available to Proposers 1. Recent Audit The most recent audit (and those of the past eleven years) was conducted by Ernst & Whinney. The most recent audit and previous audits were qualified because historical records of fixed assets are not maintained. The City has not corrected this condition because the cost of appraisal of all fixed assets and setting up the requirements for detailed record keeping would require a substantial investment of City funds. The work papers of the previous audits are the property of the previous auditor and can be reviewed by the successful proposer. -1I- The following reports were prepared for the f.i'scal year ending June 30, 1986, and are available. Please contact the City's Finance Director for copies: a. Audited Financial Statements and Other Financial Information b. Report on Internal Accounting and Administrative Controls, Grant Activity and Compliance for Single Audits c. Report on Review of City's Investment Policy d. Management Letter 2. Staff Assistance All members of the Finance Department staff and other City staff members are available to the successful proposer for assistance by providing information and explanations. The Accounting Division of the Finance Department (see organization chart - Exhibit A), the Accountant II and the Assistant Finance Director are the liaison persons. They are available for preparing schedules and computer listings for the client's package preparation, provided the package is submitted in sufficient time to capture that data needed prior to June 30, and in advance of the audit team's arrival. -12- The Accounting Division staff will be available for photocopying and limited document pulling ...... Generally, the proposer's auditing staff will be required to pull accounts payable, receipts, journal vouchers, etc. While the Accounting Division staff is available for assistance, it must be remembered, that these employees still must perform their ongoing tasks such as meeting payroll and accounts payable deadlines and month end closings. 3. Records Computerized The following systems are computerized: General Ledgers Appropriation Ledgers Revenue Ledgers Accounts Payable Pay rol l Business Licenses Utility Billing Numerous reports and listings are provided.to users. The data processing staff can run special request listings or reports for proposers provided programming time is minimal. Month end revenue and expenditure reports are generated, and trial balance by funds is prepared. At year end, pre-closing and post -closing trial balance reports are prepared. -13- Auditor's staff will be provided a private office on the main floor to accommodate two auditors. One additional desk in the Accounting Division is also available for auditors. Conference roor; in other parts of City.Hall may also be available. III. NATURE OF SERVICES REQUIRED A. Scope of the Audit The City of Lodi is required to comply with the Single Audit Act of 1984 - OMB Circular A-128. The Single Audit Act provides that: 1. The audit shall be made by an independent auditor. An "independent auditor" means (1) a state or local government auditor who meets the independence standards specified in the generally accepted government auditing standards, or (2) a public accountant who meets such independence standards. 2. The audit shall be made in accordance with generally accepted government audit standards covering financial compliance audits. These standards mean the Standards for Audit of Government Organizations, Programs, Activities and Functions developed by the Comptroller General (General Accounting Office). The current edition, dated February, 1982, should be used as reference. -14- 3. The audit shall cover the entire operations of the state or local aovernrent, or at the ont iur� of that governmien.+; it may cover subordinate units that received, expended or administered federal financial assistance during the fiscal year. NOTE: The City of Lodi does not distribute federal or state grant funds to subrecipients, therefore, audits of subrecipients are not within the scope of this audit. 4. if conditions are discovered which lead tc the belief that material errors, defalcations or other irregularities may exist, or if any other circumstances are encountered that require extended services, the auditor will promptly advise the City Council and Finance Director/Treasurer. The auditor will provide the Citv Council and Finance Director/Treasurer with all readily ascertainable facts relative to such extraordinary circumstances together with an estimate for the additional cost of investigation. No extended services will be performed unless they are authorized by the City Council. B. Requirements of the Auditor OMB Circular A-128 specifies that the auditor shall determine whether: 1. The financial statements of the government, department, agency or establishment present fairly its financial position and results of its financial operations in accordance with generally accepted accounting principles (GAAP). -15- %. The oiQ n:7at?on ha& internal accounting and other control systeris tc. provide reasonable assurance that it is m'�nauing federal financial assistance programs in compliance with applicable lases and regulations, and that: 3. The organization has complied with laws and regulations that may have material effect on its financial statements and on each major federal assistance program. C. Reports Required by City (parenthesis indicate number required) 1. Audited Financial Statements (60) Combined Balance Sheet - All Fund Types and Account Group Combined Statement of Revenues, Expenditures and Changes in Fund Balances - All Governmental Fund Types and Expendable Trust Funds Combined Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General and Speci�i Revenue Funds combined Statement of Revenues, Expenses and Changes in Retained Earnings/Fund Balances - All Proprietary Fund Types and Similar Trust Funds Combined Statement of Changes in Financial Position - All Proprietary Fund Types and Similar Trust Funds. Other Financial Information Combining Balance Sheet - All General Funds Combining Balance Sheet - All Enterprise Funds Combining Statement of Revenues, Expenses and Changes in Retained Earnings - All Enterprise Funds 2. Report on Internal Accounting and Administrative Controls, Grant Activity and Compliance for Single Audits (20) 3. Report on Treasurer's Compliance with City's Investment Policy (10) 4. Management Letter (20) -16- D Timo Cfn .{;v +o � ,ju r t {ttC{..{ L3 Dates audit work can be commenced: I. Preliminary Mork Testing of inventories, mailing of confirmations, reviewing listings of receivables, etc., can and should be commenced as close to June 30, as possible. Other site visits and conferences with staff can be held after July 1, but should be held to a minimum due to closings. 2. Post -Closing Work The post -closing work with the full audit team should not commence until October 1. 3. Completion of Post -Closing Work and Exit Conference October 27-30, 1987. 4. Final Reports Due December 1, 1987. IV. FORMAT OF RESPONSE In order to simplify the review process and to obtain the maximum degree of comparability, the proposers are asked to organize proposals in the following manner: -17- A. Title Page Show the RFP subject, name of the audit firm, local address, telephone number, name and title of contact person and date of submission. B. Table of Contents The table of contents of the proposal should include a clear and complete identification of the materials submitted by section and page number. Cross reference to section and page number in RFP would be helpful. C. Letter of Transmittal Introductory in general, but should include the following: 1. A brief understanding of the audit service to be performed. 2. A positive commitment to perform the service within the time period specified on page 17 of RFP section D. Time Requirements. 3. The name(s) of the persons authorized to represent the proposer, their title, address and telephone number. 4. Reference to a sealed envelope that contains the all- inclusive fee. -18- D. Profile of the Independent Auditor For general background information, the following is required: 1. The organization and size of the proposer, whether it is local, regional, national or international in operations. 2. The location of the office from which the work is to be done and the number of professional staff by staff level employed at that office. 3. A description of the range of activities performed by the local office including auditing, tax service and management services. 4. A statement on the proposers staff capability to audit computerized systems, including the number and classifications of personnel skilled in computer sciences who will work on the audit, if required. 5. A positive statement that the following mandatory criteria are satisfied: a. An affirmation that the proposer is properly licensed for practice as a certified public accountant or a public accountant. According to generally accepted governmental auditing standards (GAGAS), public accountants must be licensed on or before December 30, 1970, or working for a GPA firm to be eligible for engagement. -19- b. An affirmaticn that the proposer meets the independence requirements of the St;rndards fer :Audit of Goyernrpntdl Organizations, Programs, activities and Functions 1981 revision, published by the U.S. General Accounting Office. c. An affirmation that the proposer does not have a record of substandard audit work. d. An affirmation that the proposer meets all specific requirements imposed by state or local law or rules and regulations. E. Summary of Proposer's Qualifictions 1. Identify the audit managers, seniors and other staff who will work on the audit, including staff from other than the local office. Resumes including relevant experience and continuing education for partner through senior assigned to the engagement should be included. (The resumes may be included as an appendix.) 2. Describe the recent local and regional office auditing experience similar to the type of audit requested. -20- F. Annrnach to the FvAmin»+ iri � � Submit a work plan to accomplish the scope defined in the RFP section I-;, subsection A, page 14, and subsection B. Requirements of the Auditor, page 15. The work plan should include time estimates for each significant segment of the work and the staff level to be assigned. G. Report ReQuirements Submit information on whether the proposer can submit the r,,:ports required in section III, subsection C. Reports Re uired, page 16. H. Time Requirements Proposers should state how they plan to meet the time requirements specified on page 17 (if not covered in letter of transmittal). I. Additional Data Data not specifically requested should not appear in the foregoing sections, but any additional information considered essential to the proposal may be presented in this section. V. Evaluation of Proposals The proposals will be evaluated by a committee appointed by the City Council. Proposers may be asked to make oral presentations to supplement their proposals. The City will schedule a time -21- PROFESSIONAL QUALIFICATIONS A. Mandatory Criteria Proposals shall not be considered unless they meet all of,, the following mandatory criteria: 1. Must be the submittal of an independent auditor properly licensed for public practice. 2. Must meet the independence standards of the GAO, Standards for Audit of Governmental Organizations, Programs`, Activities and Functions 1981 revistcn Is published by the U.S. General Accounting Office. a- Comprehensiveness of audit work pian. b. Realistic time estimates of each major segment of the work plan and the estimated number of hours for each staff level including consultants. 2. Technical experience of the firm. (a - 20) 3. Qualifications of staff, including consultants to be assigned to the audit. Education, including continuing education courses taken, during the past three years, position in the firm and years and types of 'experience will be considered. This will be considered from the resumes submitted. ,.. .. (0,-26) fi 4. Size and structure of the firm. Total tech nicalpoints (maximum - 75} -23- rt Y iY '. C G.:Crit �- 4 Total cost of the audit.F (0 - 25) Total technical and cost points (maximum - 100) Q. Interviews with Proposers (if necessary) Interview points awarded. (1 - 10) .? p2 IN1 y k �� espy k .(�'- t - H Z r Lt1 0 t- _! Q LL W 00 �- U �--- Z Q U 16 - LL