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APPROVE A MOTION AUTHORIZING AN AMENDMENT TO AN AGREEMENT WITH BAKER TILLY US, LLP TO PROVIDE SUPPLEMENTAL ACCOUNTING SUPPORT AND SERVICES
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RECOMMENDATION
It is recommended that the City Council approve a motion to:
1. Approve findings pursuant to Stockton Municipal Code Section 3.68.070 in support of an exception to the competitive bidding process.
2. Authorize the City Manager to execute a ninth contract amendment with Baker Tilly US, LLP in the amount of up to $150,000, to provide supplemental accounting support and services, for a new contract amount of $1,655,600.
It is also recommended that the City Manager be authorized to take necessary and appropriate actions to carry out the purpose and intent of the motion.
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Summary
The Administrative Services Department (ASD) currently has 5 vacancies in the Accounting Division including the Accounting Manager position, while the accounting needs for City operations continue to increase. Expedient and compliant accounting and reporting is required to maintain continuity of business. To address this increased workload, ASD requires staff augmentation and support services.
DISCUSSION
Background
On July 24, 2012, the City Council approved a motion authorizing a $600,000 contract with Management Partners to provide project management and technical assistance for the Chapter 9 bankruptcy process. The City did not have the staffing resources and expertise necessary to manage the bankruptcy process while simultaneously managing day-to-day operations.
An administrative change order for $150,000 was executed in February 2013 and on July 11, 2013, change orders numbers 2 and 3 totaling $450,000 were approved by City Council resolution #13-0349, bringing the total contract cost to $1,200,000. Change order number 4 increased the contract by $100,000. Change order number 5 added $5,600 for interim staffing assistance in the Community Services Department, and change order number 6 in August 2014 added $200,000, bringing the total contract amount to $1,505,600.
Following the City’s exit out of bankruptcy, Management Partners continued to provide services to support updating the Long-Range Financial Plan (L-RFP) and advising on post-bankruptcy matters. Approximately $90,000 was expended from 2016 to 2020. Since 2021, services have been on an as needed basis for the L-RFP updates, averaging about $11,000 per year.
In October 2022, Management Partners merged with Baker Tilly US, LLP (“Baker Tilly”) who assumed the City’s contract. Amendment number 8 was executed on July 7, 2023 adding a termination date of June 30, 2025 and updating compensation amounts for work associated with L-RFP updates without an increase in the total contract amount. The current contract balance is $20,641 which is projected to be enough to fund L-RFP updates through June 30, 2025.
Present Situation
Between January and March 2024, the Accounting division lost three key employees: Accounting Manager, Senior Accountant, and the Accountant responsible for bank reconciliations. The division already had two vacant Accountant positions actively being recruited. Two Accountant positions will be filled in April, but the other three positions will take longer to recruit and secure qualified applicants. There is an immediate need for staff augmentation services that can provide the necessary technical skills during the upcoming federal grants audit and the start of the external audit for FY 2023-24. The City cannot afford to continue operations without additional qualified and experienced resources supporting the Accounting function. To fill this need, Staff recommend entering into an agreement with Baker Tilly for a not-to-exceed amount of $150,000 over the proposed contract term (April 2024 through June 2025) (Attachment A).
Under the terms of the agreement, Baker Tilly will provide operational support to the Accounting division via a team of dedicated certified public accountants with substantial local government experience, including experience with the Tyler Munis financial management system, the City’s current system of record for all financial transactions.
Findings
Pursuant to SMC section 3.68.070, Council may approve findings which support an exception to the competitive bidding process. These findings include:
1. The City does not have sufficient expertise or staff resources to support the compliance and expedience required for the federal grant audit and other City accounting activities.
2. The City has struggled to recruit and retain qualified Accounting staff on a permanent basis since the start of the pandemic. The most recent Accountant I eligibility list only included ten names. All were interviewed and only two were hired for three vacancies.
3. In determining the most qualified firm, the most important considerations are a firm’s ability to meet the full scope of work, their experience with similar scopes of work, and the ability to work in conjunction with City staff.
4. Absent staff augmentation services, there is a significant risk to the City of accounting errors, misreported financials, additional audit findings and further delays in audit reports, resulting in delays in providing services that benefit the residents and potential noncompliance with local, state and federal regulations.
FINANCIAL SUMMARY
The $150,000 contract will be paid using salary savings from the vacant Accounting Manager, Supervising Accountant, Senior Accountant and Accountant positions which are allocated from 64% to 86% respectively to the General Fund 2040-006-xxx with the remainder charged to multiple other City funds. Any additional funding needed for renewals in future fiscal years will be included in the annual budget development process as needed for continued staff augmentation.
Attachment A - Agreement with Baker Tilly