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AWARD A CONTRACT FOR MEASURE A ADDITIONAL AUDIT SERVICES TO EADIE AND PAYNE, LLP
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a motion authorizing the City Manager to award and enter into an agreement for Measure A additional audit services with the firm of Eadie and Payne, LLP, for an amount not to exceed $86,000 for the three (3) fiscal years ended June 30, 2015, 2016 and 2017. The proposed contract includes the option of two one-year contract extensions for audits of the fiscal years ending June 30, 2018 and 2019. The combined five-year contract award is for an amount not to exceed a total of $146,000.
It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the motion.
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Summary
Section 1911 (“Annual Audit”) of the City Charter requires that an annual audit of all City accounts be conducted by certified public accountants selected by the City Council. The City’s independent annual audit includes Measure A financial activities as part of the General Fund.
In addition, City Council took action on October 6, 2015 to direct staff to solicit qualified firm(s) to provide a separate independent review of the use of Measure A funds. These auditing services were to be in addition to the City’s annual audit of the Comprehensive Annual Financial Report (CAFR) and specific to the Measures A and B Supplemental Display on page 182 of the CAFR. The Request for Proposal (RFP) was prepared with input from the Council’s Audit Committee and issued as MEASURE A AUDIT SERVICES (PUR 15-026). The RFP provided that the City desired to have an independent audit of Measures A and B, and required that the audit was to be performed in accordance with Attestation Standards established by the American Institute of Certified Public Accountants, generally accepted accounting principles, and best practices of the Government Finance Officers Association.
In April 2016, staff issued the RFP for Measure A audit services, extended the acceptance period to May 19, 2016, and received qualified responses. A selection panel reviewed the proposals based on evaluation criteria from the RFP including: experience with government agencies, similar types of engagements, experience auditing general transaction and use taxes, qualifications of staff and audit approach. The selection panel unanimously recommends that the City Council award a three-year contract, with up to two one-year extensions, to retain the services of Eadie and Payne, LLP (Attachment A).
DISCUSSION
Background
The City Charter Section 1911 requires the City of Stockton (“City”) to have an annual audit conducted by a firm of Certified Public Accountants. The audit is to be made in accordance with auditing standards generally accepted and Government Auditing Standards for audits of public agencies. The City’s independent annual audit includes Measure A financial activities as part of the General Fund.
Measure A’s enacting ordinance (2013-07-09-1601, Section 20. Audit and Review) states: “The proceeds of the tax imposed by this Ordinance, as well as the expenditure thereof, shall be audited annually by an independent accounting firm. The City Council shall discuss the results of such audit at a meeting of the City Council that is open to the public. The report of such audit shall be posted on the City’s website.” The City’s external audit firm, Pun & McGeady LLP, has completed the independent audit of Fiscal Year (FY) 2014-15 and issued an unmodified audit report which was accepted by Council on January 26, 2016.
At its May 19, 2015 meeting, the Measure A Citizen’s Advisory Committee approved a motion to recommend to Council that the City engage a separate independent auditor to audit the uses of Measure A proceeds. The Advisory Committee members conveyed that they believe that the CAFR does not illustrate the level of detail necessary to fully understand how the Measure A sales tax revenues are used. In addition to the audit recommendation, the Advisory Committee also worked with staff to develop a supplemental display to provide a single reference and greater transparency regarding the use of Measure A proceeds. This display was subsequently added to the City’s Comprehensive Annual Financial Report.
Because the Audit Committee is charged with the responsibility to coordinate and provide oversight of all audits of City funds, staff presented the Advisory Committee recommendation to the Audit Committee for consideration so that the Council would have the benefit of both committees’ input when considering the request for an independent audit of the use of Measure A proceeds. The Audit Committee ultimately recommended to Council that a supplemental display should be included in the CAFR and that a separate independent audit should be completed.
In addition, on October 6, 2015 the City Council directed staff to solicit qualified firm(s) with experience and interest to present their qualifications and capabilities to provide an independent review of Measure A funds. These auditing services were to be in addition to the CAFR audit and specific to the Measures A and B Supplemental Display in the CAFR. This RFP was prepared with input from the Council’s Audit Committee. The RFP provided that the City desired to have an independent audit of Measures A and B as presented in the Supplemental Display in the City’s CAFR, and required that the audit was to be performed in accordance with Attestation Standards established by the American Institute of Certified Public Accountants, generally accepted accounting principles, and best practices of GFOA.
Present Situation
Staff issued a Request for Proposals for Measure A Audit Services (PUR 15-026) with proposals originally due to the City by April 7, 2016. The RFP notice was published on the City’s Bid Flash website, and notice was sent to 11 qualified firms. No bids were received, so the deadline was extended to May 19, 2016. The City subsequently received interest and response to the RFP from two firms: Bowman and Company, LLP and Eadie and Payne, LLP. A selection committee for evaluation of the proposals was formed and consisted of the following members:
• Mark Steranka, Internal Auditor/Moss Adams LLP
• Dan Wright, City Council Audit Committee Vice-Chair
• Edwin Gato, City of Stockton, Accounting Manager
• Florence Low, City of Stockton, Program Manager
The selection committee met on May 31, 2016 and June 14, 2016, and evaluated the proposals submitted by the firms against the required qualifications established in the RFP. The fee proposal was submitted under separate seal and was opened at the completion of the technical evaluation. The selection committee used evaluation criteria outlined in the RFP including: experience with government agencies, similar types of engagements, experience auditing general transaction and use taxes, qualifications of staff and audit approach. The selection committee unanimously ranked Eadie and Payne, LLP highest on these criteria, specifically with regards to government agencies and audit approach. The firm of Eadie and Payne, LLP was determined to be the best qualified to provide additional audit services of agreed upon procedures for the Measure A Supplemental Display portion of the General Fund.
The Council Audit Committee reviewed these materials and the selection committees’ recommendation on June 20, 2016, and accepted their selection of Eadie and Payne, LLP. From these results, it is recommended that the City Council award a contract to Eadie and Payne, LLP and authorize the City Manager to execute an agreement for these additional Measure A audit services as presented in the CAFR Supplemental Display which is consistent with Council direction on October 6, 2016.
FINANCIAL SUMMARY
The following are this contract’s total fixed fees for each fiscal year, including the two one-year options to extend these services:
• June 30, 2015 $28,000
• June 30, 2016 $28,000
• June 30, 2017 $30,000
• June 30, 2018 $30,000
• June 30, 2019 $30,000
The budget to support the June 30, 2015 and June 30, 2016 audit services is already budgeted in the General Fund City Auditor Professional Services account #010-1901-510. The subsequent years’ budget will be established in the Annual Budget development process.
Attachment A - Measure A Audit Services Contract