HomeMy WebLinkAbout25D - AGMT - FINANCIAL AUDIT SRVSREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
APRIL 16, 2012
TITLE:
AWARD CONTRACT TO MACIAS GINI &
O'CONNELL, LLP FOR COMPREHENSIVE
FINANCIAL AUDIT SERVICES
CITY MANAGER
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
APPROVED
? As Recommended
? As Amended
? Ordinance on 151 Reading
? Ordinance on 2°d Reading
? Implementing Resolution
? Set Public Hearing For_
CONTINUED TO
FILE NUMBER
Authorize the City Manager and Clerk of the Council to execute the attached agreement with
Macias Gini & O'Connell, LLP, subject to non-substantive changes approved by the City Manager
and City Attorney, for three years and the option to renew annually for two succeeding years in
an annual amount not to exceed $208,000.
DISCUSSION
Annually, the City of Santa Ana retains the services of an independent certified public accounting
firm to conduct the annual audit of the City's financial statements as well as federal and state
grant audits known as the single audit. The audits are conducted in accordance with auditing
standards recognized and accepted in the United States and applicable under the Government
Auditing Standards issued by the Comptroller General of the United States. The standard annual
audits include but are not limited to the examination of processes, internal controls, segregation
of duties, compliance of legal requirements, application of General Accounting Standards Board
(GASB) requirements, and validation that financials are presented in conformity with Generally
Accepted Accounting Principles (GAAP).
The City seeks new proposals every seven years. As such, On February 9, 2012, the City
conducted a formal Request for Proposal (RFP) to select a certified public accounting firm. The
audit firm will conduct the standard financial statement preparation and audit, the City State
Controller report, and the on-line attestation for Section 8 Housing. However, as a result of the
passage of AB1 x26 (redevelopment dissolution), staff has focused on selecting an audit firm with
a high level of experience in Redevelopment and demonstrated knowledge of AB1 x26. The firm
will provide guidance regarding compliance with Successor City Agency, Successor Housing
Agency and federal grants.
As a result of the recent scrutiny placed on public accounting firms, the City is seeking an audit
firm that is willing to add an analytical function that is higher than the basic standards accepted
25D-1
Agreement with Macias Gini & O'Connell LLP
For Financial Audit Services
April 16, 2012
Page 2
by Generally Accepted Accounting Standards (GAAS). Staff will partner with the audit firm in
identifying and analyzing additional components of the City's financial structure which include
operational audits, disclosure requirements, financial trends and fiscal health analysis.
Proposals were sent to seven established accounting firms including the City's current audit
provider Macias, Gini & O'Connell. Four of the seven accounting firms responded. The
remaining three firms did not respond to the RFP indicating a lack of adequate staff to conduct
the audit given the complexity and size of the City.
A five-member selection committee evaluated the four proposals submitted. The evaluation was
base on several factors, including the firms' technical qualifications, thoroughness of auditors
proposed scope of work, experience with similarly sized governmental agencies, strength of
redevelopment experience and knowledge, and willingness to add additional analytical capacity.
Proposal
Firms Score
Macias Gini & O'Connell, LLP 88.0
Mayer Hoffman McCann P.C. 84.6
Vavrinek, Trine, Day & Company, LLP 68.0
Vasquez & Company, LLP 63.2
Macias Gini & O'Connell, LLP (MGO) was selected as the best firm to conduct the City's annual
financial audit. They demonstrated adequate staffing and technical knowledge for a city the size
of Santa Ana. MGO has demonstrated a high level of knowledge regarding redevelopment as
well as a heightened knowledge regarding successor agencies, Enforceable Obligation Payment
Schedule (EOPS), and Recognized Obligation Schedule (ROPS). Recently, MGO was retained
by the County of Orange to perform the Agreed Upon Procedures (AUP) related to the dissolution
of Redevelopment Agencies, as required by Health & Safety Code Section 34182, for more than
half of the Orange County cities.
Additionally, MGO's strength in redevelopment will be critical as the City closes its
Redevelopment Agency and develops the appropriate accounting mechanisms for the new
successor agency.
25D-2
Agreement with Macias Gini & O'Connell LLP
For Financial Audit Services
April 16, 2012
Page 3
FISCAL IMPACT
Funds for these services will be included in the proposed fiscal year 2012-13 budget within the
Accounting Division Contract Services-Professional account (account no. 01110110-62300) to
cover the audit cost related to the City's General Fund, with additional funds in the Successor
Redevelopment Agency, CDBG, Housing Authority, the Workforce Investment programs and
various grants funds for their respective costs. Additional funds will be budgeted to cover the
audit fee in the subsequent fiscal year.
IMML'ar."A )k
Francisco Gutierrez
Executive Director
Finance and Management Services Agency
2501-3
25D-4
AGREEMENT FOR PROVISION OF
FINANCIAL AUDIT SERVICES
THIS AGREEMENT, made and entered into this 16th day of April, 2012 by and between Macias,
Gini & O'Connell, Inc., a California corporation (hereinafter "AUDITOR"), and the City of Santa Ana, a
charter city and municipal corporation organized and existing under the Constitution and laws of the State
of California (hereinafter "CITY").
RECITALS
A. The CITY issued a Request for Proposals, dated February 6, 2012, for an independent audit
of its financial statements and records.
B. Pursuant to said invitation, AUDITOR submitted a proposal which is hereby accepted by
CITY for provision of said professional service.
C. AUDITOR is recognized as a competent and qualified certified public accountant, duly
authorized to practice and licensed as such by the California State Board of Accountancy.
D. In undertaking the performance of this Agreement, AUDITOR represents that it is
knowledgeable in its field and that any services performed by AUDITOR under this Agreement
will be performed in compliance with such standards as may reasonably be expected from a
professional consulting firm in the field.
NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms
and conditions hereinafter set forth, the parties agree as follows:
1. SCOPE OF SERVICES
AUDITOR shall provide financial auditing services for CITY's 2012-2014 fiscal years, as set
forth in CITY's Request for Proposals, attached hereto as Exhibit A, and incorporated by this reference.
Said services shall be performed in accordance with the process set forth in AUDITOR'S Proposal,
attached hereto as Exhibit B. All exhibits referenced herein and attached hereto shall be incorporated by
reference as though attached in their entirety.
2. REPRESENTATIVES
For purposes of implementing this Agreement, the representative of CITY shall be the Executive
Director of the Finance and Management Services Agency, or his designated representative, and the
representative of the AUDITOR shall be Jean Horimoto, Director. Except as may be otherwise stated
herein, such representatives shall have the authority to act on behalf of their respective parties in carrying
out the terms of this Agreement.
3. DELIVERY OF WORK PRODUCT - OWNERSHIP
AUDITOR warrants and represents that it has the absolute right to enter into and perform this
Agreement and will perform its obligations hereunder in accordance with standards and practices
prevailing in the industry. AUDITOR's contribution to the Project, including works to be produced by
AUDITOR hereunder, will not infringe or misappropriate the proprietary or personal rights of any third
25d-5
person or party. AUDITOR shall deliver to CITY any work product which results from the services
provided. Said work product shall be submitted in hard copy and produced in a form compatible with
CITY's information systems, as agreed between the Project Manager and AUDITOR.
In regard to all material produced as a deliverable under this Agreement, including but not limited
to records, papers, drawings, specifications, programs, systems and other materials prepared by
AUDITOR, AUDITOR agrees, for itself and its affected officers, employees, agents, contractors, and
volunteer workers, that (a) other such material shall be the property of the CITY, and may not be
copyrighted without prior review from the CITY, and (b) the authors of all such material, whether
copyrighted or not, award to the CITY, and to its officers, agents and employees acting within the scope
of their official duties, as a condition of payment to the AUDITOR, a royalty-free, nonexclusive,
irrevocable license throughout the world for governmental purposes to disclose, publish, translate,
reproduce, and use such materials.
4. COMPENSATION
a. CITY agrees to pay, and AUDITOR agrees to accept as total payment for its services, the rates
and charges identified in AUDITOR's Cost Proposal, attached hereto as Exhibit C. The total sum to be
expended under this Agreement shall not exceed $208,000 per fiscal year, during the term of this
Agreement.
b. Payments to AUDITOR shall be made within thirty (30) days after receipt by CITY of
invoices from AUDITOR, which shall be rendered not more often than monthly. Special examinations,
surveys, or detailed reports of any nature outside the scope of this Agreement shall be billed separately by
AUDITOR and must be specifically authorized in writing by CITY in advance of such additional services
proposed to be provided. Payment need not be made for work which fails to meet the standards of
performance set forth in the Recitals which may reasonably be expected by CITY.
5. TERM
The term of this Agreement shall be for a period of three (3) consecutive years, beginning with
the fiscal year ending June 30, 2012. CITY shall retain an option in its sole discretion to extend auditing
services for one additional one-year period.
6. INDEPENDENT CONTRACTOR
AUDITOR shall, during the entire term of this Agreement, be construed to be an independent
contractor and not an employee of the CITY. This Agreement is not intended nor shall it be construed to
create an employer-employee relationship, a joint venture relationship, or to allow the CITY to exercise
discretion or control over the professional manner in which AUDITOR performs the services which are
the subject matter of this Agreement; however, the services to be provided by AUDITOR shall be
provided in a manner consistent with all applicable standards and regulations governing such services.
AUDITOR shall pay all salaries and wages, employer's social security taxes, unemployment insurance and
similar taxes relating to employees and shall be responsible for all applicable withholding taxes.
7. INSURANCE
Prior to undertaking performance of work under this Agreement, AUDITOR shall maintain and
shall require its subcontractors, if any, to obtain and maintain insurance as described below:
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a. Commercial General Liability Insurance. AUDITOR shall maintain commercial general
liability insurance which shall include, but not be limited to protection against claims arising from bodily
and personal injury, including death resulting therefrom and damage to property, resulting from any act or
occurrence arising out of AUDITOR's operations in the performance of this Agreement, including,
without limitation, acts involving vehicles. The amounts of insurance shall be not less than the following:
single limit coverage applying to bodily and personal injury, including death resulting therefrom, and
property damage, in the total amount of $1,000,000 per occurrence, $2,000,000 in the aggregate. Such
insurance shall (a) name the CITY, its officers, employees, agents, volunteers and representatives as
additional insured(s); (b) be primary with respect to insurance or self-insurance programs maintained by
the CITY; and (c) contain standard separation of insureds provisions.
b. Business automobile liability insurance, or equivalent form, with a combined single limit of
not less than $2,000,000 combined single limit. Such insurance shall include coverage for owned, hired
and non-owned automobiles.
c. Worker's Compensation Insurance. In accordance with the provisions of Section 3300 of the
Labor Code, AUDITOR, if AUDITOR has any employees, is required to be insured against liability for
worker's compensation or to undertake self-insurance. Prior to commencing the performance of the work
under this Agreement, AUDITOR agrees to obtain and maintain any employer's liability insurance with
limits not less than $1,000,000 per accident.
d. Professional liability (errors and omissions) insurance, with a combined single limit of not
less than $1,000,000 per claim, and $2,000,000 in the aggregate.
e. The following requirements apply to the insurance to be provided by AUDITOR pursuant to
this section:
(i) AUDITOR shall maintain all insurance required above in full force and effect for
the entire period covered by this Agreement.
(ii) Certificates of insurance shall be furnished to the CITY upon execution of this
Agreement and shall be approved in form by the City Attorney.
(iii) Certificates and policies shall state that the policies shall not be canceled or
reduced in coverage or changed in any other material aspect without thirty (30)
days prior written notice to the CITY.
f. If AUDITOR fails or refuses to produce or maintain the insurance required by this section or
fails or refuses to furnish the CITY with required proof that insurance has been procured and is in force
and paid for, the CITY shall have the right, at the CITY's election, to forthwith terminate this Agreement.
Such termination shall not effect AUDITOR's right to be paid for its time and materials expended prior to
notification of termination. AUDITOR waives the right to receive compensation and agrees to indemnify
the CITY for any work performed prior to approval of insurance by the CITY.
8. INDEMNIFICATION
AUDITOR agrees to and shall indemnify and hold harmless the CITY, its officers, agents,
employees, consultants, special counsel, and representatives from liability: (1) for personal injury,
damages, just compensation, restitution, judicial or equitable relief arising out of claims for personal
injury, including death, and claims for property damage, which may arise from the negligence,
recklessness or willful misconduct of the AUDITOR or its contractors, subcontractors, agents, employees,
or other persons acting on their behalf which relates to the services described in section 1 of this
Agreement; and (2) from any claim that personal injury, damages, just compensation, restitution, judicial
25D-7
or equitable relief is due by reason of the negligence, recklessness or willful misconduct of AUDITOR
arising from this Agreement. The AUDITOR further agrees to indemnify, hold harmless, and pay all costs
for the defense of the CITY, including fees and costs for special counsel to be selected by the CITY,
regarding any action by a third party asserting that personal injury, damages, just compensation,
restitution, judicial or equitable relief due to personal or property rights arises by reason of the terms of,
or effects arising from this Agreement. CITY may make all reasonable decisions with respect to its
representation in any legal proceeding.
9. CONFIDENTIALITY
All information gained by AUDITOR in performance of this Agreement shall be considered
confidential and shall not be released by AUDITOR without CITY'S prior written authorization excepting
that information which is a public record and subject to disclosure pursuant to the CaliforniaPublic
Records Act, government Code Section 6250 et seq. AUDITOR, its officers, employees, agents, or
subcontractors, shall not voluntarily provide declarations, letters of support, testimony at depositions,
response to interrogatories or other information concerning the project or cooperate in any way with a
party who may be adverse to CITY or whom AUDITOR reasonably should know may be adverse in any
subsequent litigation. AUDITOR shall incur no liability under this Agreement for materials submitted by
it which are later released by CITY, its officers, employees, or agents. AUDITOR shall also incur no
liability for statements made by it at any public meeting, or for any document released by it for which
prior written CITY authorization was obtained.
If AUDITOR or any of its officers, employees, consultants, or subcontractors does voluntarily
provide information in violation of this Agreement, CITY has the right to reimbursement and indemnity
from AUDITOR for any damages caused by AUDITOR'S conduct--including attorney's fees.
AUDITOR shall promptly notify CITY should AUDITOR, its officers, employees, agents or
subcontractors be served with any Summons, Complaint, Subpoena, Notice of Deposition, Request for
Documents, Interrogatories, Request for Admissions or other discovery requests from any party regarding
this agreement and the work performed hereunder. CITY retains the right, but not the obligation, to
represent AUDITOR and/or to be present at any deposition, hearing, or similar proceeding. AUDITOR
agrees to cooperate fully with CITY and to provide CITY with the opportunity to review any response to
discovery requests provided by AUDITOR. However, CITY'S right to review any such response does not
imply or mean the right by CITY to control, direct, or rewrite said response.
CITY warrants that AUDITOR will have fully met the requirements of this provision by obtaining
CITY'S written approval prior to providing documents, testimony, or declarations; Consulting with CITY
before responding to a Subpoena or court order; in the case of depositions upon providing Notice to CITY
of same; or providing CITY opportunity to review discovery responses prior submission. For purposes of
this section, a written authorization from CITY shall include a "faxed" letter.
10. CONFLICT OF INTEREST CLAUSE
AUDITOR covenants that neither it nor any officer or principal of their firm have any interests,
nor shall they acquire any interest, directly or indirectly which will conflict in any manner or degree with
the performance of their services hereunder. AUDITOR further covenants that in the performance of this
Agreement, no person having such interest shall be employed by them as an officer, employee, agent, or
subcontractor.
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25D-8
11. NOTICE
Any notice, tender, demand, delivery, or other communication pursuant to this Agreement shall
be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or
certified mail, postage prepaid, or sent by facsimile or other telegraphic communication in the manner
provided in this Section, to the following persons:
To CITY: Clerk of the City Council
City of Santa Ana
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, CA 92702-1988
facsimile (714) 647-6956
With courtesy copies to:
Executive Director of the Finance and Management Services Agency
City of Santa Ana
20 Civic Center Plaza (M-17)
P.O. Box 1988
Santa Ana, California 92702
facsimile (714) 647-5414
and
City Attorney
City of Santa Ana
20 Civic Center Plaza (M-29)
P.O. Box 1988
Santa Ana, California 92702
facsimile (714) 647-6515
To AUDITOR: Macias, Gini & O'Connell
Katherine V. Lai
4675 MacArthur Court, Ste 680
Newport Beach, California 92660
Facsimile (949) 221-0035
A party may change its address by giving notice in writing to the other party. Thereafter, any
communication shall be addressed and transmitted to the new address. If sent by mail, communication
shall be effective or deemed to have been given three (3) days after it has been deposited in the United
States mail, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent by
facsimile, communication shall be effective or deemed to have been given twenty-four (24) hours after
the time set forth on the transmission report issued by the transmitting facsimile machine, addressed as set
forth above. For purposes of calculating these time frames, weekends, federal, state, County or City
holidays shall be excluded.
12. EXCLUSIVITY AND AMENDMENT
This Agreement represents the complete and exclusive statement between the CITY and
AUDITOR, and supersedes any and all other agreements, oral or written, between the parties. In the
event of a conflict between the terms of this Agreement and any attachments hereto, the terms of this
Agreement shall prevail. This Agreement may not be modified except by written instrument signed by
the CITY and by an authorized representative of AUDITOR. The parties agree that any terms or
conditions of any purchase order or other instrument that are inconsistent with, or in addition to, the terms
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25D-9
and conditions hereof, shall not bind or obligate AUDITOR nor the CITY. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not embodied herein.
13. ASSIGNMENT
Inasmuch as this Agreement is intended to secure the specialized services of AUDITOR,
AUDITOR may not assign, transfer, delegate, or subcontract any interest herein without the prior written
consent of the CITY and any such assignment, transfer, delegation or subcontract without the CITY's
prior written consent shall be considered null and void. Nothing in this Agreement shall be construed to
limit the CITY's ability to have any of the services which are the subject to this Agreement performed by
CITY personnel or by other consultants retained by CITY.
14. TERMINATION
If, at any time during the term of this Agreement, CITY determines that AUDITOR is not
faithfully abiding by any term or condition contained herein, CITY may notify AUDITOR in writing of
such defect or failure to perform; which notice must give AUDITOR a ten (10)-day notice of time
thereafter in which to perform said work or cure the deficiency. If AUDITOR has not performed the
work or cured the deficiency within the ten (10) days specified in the notice, such shall constitute a breach
of this Agreement and CITY may terminate this Agreement immediately by written notice to the
AUDITOR to said effect. Thereafter, neither party shall have any further duties, obligations,
responsibilities or rights under this Agreement except, however, any and all obligations of AUDITOR'S
surety shall remain in full force and effect, and shall not be extinguished, reduced, or in any manner
waived by the termination hereof. In said event, AUDITOR shall be entitled to the reasonable value of its
services performed from the beginning of the period in which the breach occurs up to the day it received
CITY'S Notice of Termination, less any offset from such payment representing the CITY'S damages from
such breach. CITY reserves the right to delay any such payment until completion or confirmed
abandonment of the project, as may be determined in the CITY'S sole discretion, so as to permit a full and
complete accounting of costs. In no event, however, shall AUDITOR be entitled to receive in excess of
the compensation quoted in its bid
15. ATTORNEYS FEES
In the event an action is commenced by either party to enforce any rights under this Agreement,
the prevailing party shall be entitled to recover reasonable attorney's fees and court costs, in addition to
any other relief granted by the Court.
16. DISCRIMINATION
AUDITOR shall not discriminate because of race, color, creed, religion, sex, marital status,
sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited by applicable
law, in the recruitment, selection, training, utilization, promotion, termination or other employment
related activities. AUDITOR affirms that it is an equal opportunity employer and shall comply with all
applicable federal, state and local laws and regulations.
17. JURISDICTION - VENUE
This Agreement has been executed and delivered in the State of California and the validity,
interpretation, performance, and enforcement of any of the clauses of this Agreement shall be determined
and governed by the laws of the State of California. Both parties further agree that Orange County,
25d-10
California, shall be the venue for any action or proceeding that may be brought or arise out of, in
connection with or by reason of this Agreement.
18. PROFESSIONAL LICENSES
AUDITOR shall, throughout the term of this Agreement, maintain all necessary licenses, permits,
approvals, waivers, and exemptions necessary for the provision of the services hereunder and required by
the laws and regulations of the United States, the State of California, the City of Santa Ana and all other
governmental agencies. AUDITOR shall notify the CITY immediately and in writing of its inability to
obtain or maintain such permits, licenses, approvals, waivers, and exemptions. Said inability shall be
cause for termination of this Agreement.
19. MISCELLANEOUS PROVISIONS
a. Each undersigned represents and warrants that its signature hereinbelow has the power, authority
and right to bind their respective parties to each of the terms of this Agreement, and shall indemnify CITY
fully, including reasonable costs and attorney's fees, for any injuries or damages to CITY in the event that
such authority or power is not, in fact, held by the signatory or is withdrawn.
b. Captions and headings in this Agreement, including the title of this Agreement, are for
convenience only and are not to be considered in construing this Agreement.
c. All Exhibits referenced herein and attached hereto shall be incorporated as if fully set forth in the
body of this Agreement.
'
25D-11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year first above
written.
ATTEST:
MARIA D. HUIZAR
Clerk of the Council
APPROVED AS TO FORM:
SONIA R. CARVALHO
City Attorney
By:
Laura Sheedy
Assistant City Attorney
CITY OF SANTA ANA
PAUL M. WALTERS
Interim City Manager
MACIAS, GINI & O'CONNELL, LLP
KEVIN L. O'CONNELL
CEO & Managing Partner
256-12
SECTION 4: SPECIFIC AUDIT APPROACH AND METHODOLOGY.
for Iron, not us.
We will provide an audit
plan that is complete,
dear and descriptive and
realistic, thus forming
thehasishy which audit
progress canhe measured.
Our objective for each of the audit
components as defined in the RFP is to
provide an audit plan that is both realistic
and mutually acceptable, thus forming
the basis by which audit progress can
be measured. Frequent communication
is required for the audit plan to be an
effective management tool. We will
meet with the appropriate. management
personnel on a regular basis to report
the progress of our audits, and any
preliminary findings. We expect the
City to communicate any foreseeable
delays in the delivery of accounting
records, financial statements, and/or
other documents needed to complete our
work.
We propose to address all key accounting
and reporting issues that could potentially
affect our audit opinion up front. Proper
planning, timely communications, and
the prompt resolution of reporting
issues will lead to a smooth transition to
the issuance of our reports and timely
completion of the engagement. This
approach will result in a positive working
relationship between our auditors and the
City.
In the event that circumstances warrant
more extensive and detailed services
beyond those in the contractual
agreement, we shall provide in writing
and in advance the reasons for the
additional services together with our
estimate of costs. No additional work will
be performed without advance approval
by the city.
If selected, MGO will perform the
following auditing services beginning with
the fiscal year ending June 30, 2012.
ScopeotSetrvices
MGO will provide the following auditing
services beginning with the fiscal year
ending June 30, 2012:
Annual Audit of the City's Financial
Statements: We will perform a
review of the City's financial audit in
accordance with auditing standards
generally accepted in the United States
of America (GAAS) as promulgated
by the American Institute of Certified
Public Accountants (AICPA) and the
standards applicable to financial audits
contained In Government Auditing
Standards, issued by the Comptroller
General of the United States for the
purpose of expressing opinions on ,
the fair presentation of the City's basic
financial statements, in conformity
with accounting principles generally
accepted in the United States of
America (GAAP). GAAP provides
for certain required supplementary
information (RSI), such as
management's discussion and analysis
(MD&A), to accompany the City's basic
financial statements.
As part of our engagement, we will
apply certain limited procedures to the
City's RSI. These limited procedures
will consist principally of Inquiries of
management regarding methods of
measurement and presentation. The
following RSI is required (allowed) by
GAAP and will be subjected to certain
limited procedures, but will not be
audited:
• Management's Discussion and
Analysis
• Schedule of Funding Progress for
Pension Benefits
Budgetary Comparison Schedules
Supplementary information other than
RSI, also accompanies the City's basic
financial statements. We will subject
certain supplementary information to
auditing procedures applied In our audit,
which we will provide an opinion on the
basic financial statements.
We understand that the City we will be
responsible for preparing the CAFR,
including related note disclosures, RSI
and supplemental information. As
your auditors, we will review the CAFR
in its entirety to ensure that the CAFR
continues to satisfy the requirements
for submission to the Government
Finance Officers Association (GFOA)
for consideration for the Certificate of
Achievement for Excellence in Financial
Reporting.
_: P MdT D91t9ri=AccoW=W 2 014 UT B 23
f i
SECTION 4: SPECIFIC AUDIT APPROACH AND METHODOLOGY.
• Single Audit; We will perform a Single
Audit in accordance with the federal
Single Audit Act Amendments of 1996;
U.S. Office of Management and Budget
(OMB) Circular A-133, Audits of States,
Local Governments and Non-Profit
Organizations and the OMB Circular
A-133 Compliance Supplement. The
schedule of expenditures of federal
awards with accompanying notes,
schedule of findings and questioned
costs and the following reports will be
issued separate from the City's basic
financial statements.
• Report on Compliance with
Requirements Applicable to Each
Major Program, Internal Control
Over Compliance and Schedule of
Expenditures of Federal Awards in
Accordance with OMB CircularA-133
• Report in Internal Control Over
Financial Reporting and on Compliance
and Other Matters Based on an Audit
of Financial Statements in Accordance
with Government Auditing Standards.
We understand that the City will
provide MGO with the schedule of
expenditures of federal awards while
we will take responsibility over the with
accompanying notes and schedule of
findings and questioned costs.
Additionally, MGO will also complete
and submit the online Data Collection
Form and electronic submission to the
Federal Audit Clearinghouse. MGO will
provide the City with a final print and
electronic copy of the Data Collection
Form that was electronically submitted.
• Management Letters: We issue
management letters every year in
connection with nearly all of our
governmental clients. Unless there
are unusual circumstances, the
management letters are issued at the
conclusion of the audit concurrent with
the issuance of the audited financial
statements.
Our management letters contain
observations and recommendations
that 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.
Annual Audit of the Successor
Community Redevelopment
Agency of the City of Santa Ana
Financial Statements: There are
many uncertainties surrounding the
financial reporting requirements
of the dissolved Redevelopment
Agencies. However; we stand ready
to perform an audit of the Successor
Community Redevelopment Agency
and Housing Successor Agency at the
City's request, in accordance with all
applicable auditing standards and
with the objective of expressing an
opinion on the financial statements.
We will perform an audit of the Citys
Redevelopment Agency's basic
financial statements and each major
fund in accordance with all applicable
auditing standards with the objective
of expressing an opinion on the
financial statements. If requested, we
will provide the City with a complete
draft of the Successor Community
Redevelopment Agency and Housing
Successor Agency Financial Statements,
including footnotes and any required
supplementary schedules by November
1 of each year,
• Santa Ana Housing Authority: We will
perform the financial and compliance
audit for the Housing authority and
prepare and submit HUD an electronic
REAC submission for the City's Section
8 Program.
At the City's request, we will conduct
fieldwork for the Successor Community
Redevelopment Agency, Housing
Successor Agency and Housing
Authority during the same time
• GANN: We will perform agreed-upon
procedures in connection with the
annual calculation of the appropriations
limit as required by Section 1.5
of Article XIIIB of the California
Constitution. MGO will provide the
City with a draft of the GANN limit
letter no later than November 1,
annually.
• Annual Review of the City's
Investment Policy: We will perform
various procedures agreed to by the
City Council and the City Management
solely to assist the City in determining
whether the City's investment activities
are in compliance with the City's
investment policy and the California
Government Code. Agreed-upon
procedures will be performed in
accordance with attestation standards
established by the American Institute
of Certified Public Accountants. We
understand that we will provide the City
a separate report on such compliance
and, if applicable, recommend changes
in the Investment Policy document
relating to cash and investments for
many governmental entities in order
to verify compliance with established
policies and procedures and to
enhance internal controls In conformity
with the City's required scope of
work, MGO will issue the necessary
annual audit report for the purpose
of determining compliance with
applicable State and Federal Laws.
• Required Communication:
We will present matters or topics which
may be of interest to the accounting
and financial reporting personnel
of the City related to government
auditing and accounting. Topics that
may be covered include updates
on generally accepted accounting
principles (GAAP), generally accepted
auditing standards (GAAS), OMB
Circular revisions, recent GASB
pronouncements, changes in business
trends relating to the City and other
authoritative procedures. We will also
provide information encompassing
GAAP and GAAS related topics.
Professional standards require us
to communicate any instances of
irregularities and illegal acts or
24 25Q-14
indications of illegal acts to the
City's staff and City Council. Also,
professional standards require that
we communicate other information
specifically related to the audit
engagement. We will ensure that our
communications to the City Council
meet these requirements.
We are proud of our record of being
well-informed with regard to the
government sector and the changes
in auditing standards that may occur
throughout the course of providing
audit services to our clients. MGO's
professionals continue to have a
presence in both State and federal
levels of government, as well as at the
regional level. We will acquire prompt
and pertinent responses to inquiries
that may arise from a technical or
procedural standpoint, over the
development of our engagement with
the City. Our liaison relationship with
GASB, the AICPA, GFOA and ASB will
allow us to obtain precise, relevant
information necessary to provide
exceptional communication and audit
services to you.
• State Controller Reports: We
will prepare and submit the State
Controller's Report for the City and,
if required by the State Controller's
Office, for the former RDA for fiscal
year June 30, 2012 by the annual
required submission date of the State
Controller's Office. If required, MGO
is prepared to also prepared to submit
State Controller Reports of the former
RDA for the three succeeding years.
• Property Based Improvement
District/Orange County Fire
Authority. Upon request by the
City, we will review operations of
the Property Based Improvement
District (PBID) and Orange County Fire
Authority, according to the agreement
between the City and and each of the
entities specified in the agreements.
• Bond Disclosures Attestation: We
will prepare and shall review and attest
to the bonds continuing disclosure
requirements. We will perform various
procedures agreed to by the City
Council and the City Management
solely to assist the City in determining
whether the City is in compliance with
the required continuing disclosures.
The agreed-upon procedures will
be performed in accordance with
attestation standards established by
the American Institute of Certified
Public Accountants.
• City's Operational Audits: We
understand the constraints of available
City resources and the need to
maintain segregation of key duties and
responsibilities. We will work closely
with Finance and Management Services
Department, in addition to the regular
annual audit, to determine procedures
in testing internal controls over the
following areas as outlined in the
Request for Proposal:
• Accounts payables (including Public
• Work construction progress
payments and relocation
disbursements)
• Payroll
• Treasury investments
• Utility billing and accounting
functions
• Purchasing
• Workers compensation claims
• Attendance at City Council
and Other Meetings: MGO's
representatives shall attend meetings
of City Council, or its committees,
primarily meetings of the Audit and
Ethics Committee, whenever requested
by City.
• 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 City staff 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 MGO with the references
provided below. Our staff is, of course,
available to provide accounting,
auditing or consulting services
throughout the year.
Workpapers: All workpapers will be
retained by MGO for at least seven
(7) years from the date the audits
are finalized and such workpapers
will be made available for review
during normal business hours to
representatives of the City, and
applicable Federal and State agencies.
• Additional Assistance: We will also
perform the following tasks:
• Provide up to 20 additional
consulting hours on accounting
and technical matters throughout
the years including in-house
training on newly adopted GASB
pronouncements.
• Provide assistance to the City
in continuing to meet the
requirements of the GFOA of
the United States and Canada
Certificate of Achievement for
Excellence in Financial Reporting
program.
• Keep the City advised of new and
national developments affecting
municipal finance, reporting and
trends.
• Be available year-round to advise
the City on various financial issues.
• Invite representatives of the City
to MGO's annual client technical
updates and trainings.
• If the City requests, we are
available to perform a "consent
review" and issue a "consent
and citation of expertise". We
have provided such services for
numerous other clients, including
the Alameda County Water District,
Contra Costa Water District, and
County of Orange County.
eroaaso$sortnme,?ac 25
25D-15
IN erecognizetheim1?ortanceof
tIntelyc omple tion o? aucl?it tasks and
deHv6rables.
Audit approach planning and
interim audit work
During May of each year, management
of our audit team will have an entrance
conference with the Director of Finance
and Management Services and other
appropriate staff. The purpose of this
meeting will be to ensure a good working
relationship and to discuss the scope
and timing of the annual audit, the
documents needed for our permanent
files, the detailed audit plan, and the
list of schedules that City staff normally
prepares in connection with the year-end
closing. Perhaps the most important
objective of the pre-audit conference is
to establish a relationship in which we
all feel comfortable in asking questions
and expressing our views, 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 each year.
During ourfrst year serving the City,
we prepared 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, capital assets, grant
compliance, and investment activities.
This information was 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 was be used to
tailored to your specific systems. During
the interim work in subsequent years, we
have noted changes in the system, if any,
a practice, we will continue.
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 employed during the final audit
work to decide on the extent of testing of
year-end account balances. The review
of these documents will also assist us in
identifying changes from the prior year in
the operations of the City.
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 along
with our recommendations in our annual
management letter. During the interim
audit work we will also arrange for typing
of confirmations, 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.
During August each year we will contact
you to determine that the year-end
closing is well planned. We will also
discuss any matters that may impact
our audit procedures or your financial
reporting.
Audit approach-final audit
work .
The final audit work will begin each
year in October with an entrance
conference with the Director of Finance
and Management Services and other
appropriate staff. Fieldwork will begin
with an analytical review of revenues
and expenditures/expenses. This review
will include a comparison of prior year
financial statements and current year
budget to the year-end 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 will appear in the
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 year-end
adjustments and to ensure that sufficient
test work has been completed. The
fieldwork will be completed by late
October. Our management review will be
completed in the field during the same
time period so that at the conclusion of
the fieldwork we have agreement on both
the format and the content of the various
financial reports. An exit conference
will be held at the end of fieldwork to
summarize the results of the fieldwork
and to review significant findings.
We suggest meeting with appropriate
City staff on a regular basis. This will
avoid being disrupted by questions, one
at a time. We find that our workday is
far more productive when we can plan
ahead, and we are sure that well planned
days are your most productive also.
26
25D-1 6
SECTION 4; SPECIFIC AUDIT APPROACH AND METHODOLOGY, _
As part of the annual 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 wilt be discussed at
an exit conference with relevant City
personnel and, if appropriate, presented
in writing at the completion of our audit.
We are available each year to attend
relevant meetings of the City Council.
Approach to the Single Audit
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 that City staff 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 will prepare flow charts and/or other
documentation of these accounting
cycles and identify the internal control
procedures that the City has 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 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 that we are discussing
the other financial reports.
Assistance by City Staff
We understand that the City has limited
staff. As your continuing auditors we will
require less assistance from your staff
than other auditors as we are already
familiar with the controls you have
established to monitor compliance with
federal programs. Additionally, we will
not require the same level of technical
assistance in.famillarizing our staff with
the flow of information through major
and minor accounting cycles such as cash
receipts, cash disbursements, payrolls,
accounting grants, etc. We understand
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. By continuing to allow
MGO to serve the City the assistance
required by City staff will be limited. We
will provide a listing of documents and
schedules to be prepared by City staff at
our entrance conference.
Pxnud To19eBottn? Aocomatanl+?
25D-17
?ECTION 4; SPECIFIC AUDIT APPROACH AND METHODOLOGY,
M9 YOU
a e db-na o of your operations and ensnare timely del-Ivory ®faaffi
aae o s y required deadlines.
561ected by"the City Council - ? April 1.7,20 2
Entrance conference May 29, 2012
Interim audit, Including fieldwork -for F'BID,'OGFA and City operationat audits, and:management I
review as described aE?ove, , May 28 -Juno 8, i
Interim Exit Conference June 8, 2012_
Deliver draft reports for PSiD, OCFA and City operational audits to management, June 22, 2012
Issue reports for PBID, OCFA and City operational audits. J
Deliver, to the;City end submit to the State the City's Annual State Controller's Report 6 (s Zp IZ 5
Year-end audit fieldwork as described above,
Exit Conference..
Deliver draft copies of the Successor Agency and Sucessor Housing Agency Financial Statements, CAFR
opinion, GANN Llmlt Reports and review of the City's Investment Policy.
Deliver draft of management letter and bond disclosure attegtakon•to the City
Issue Successor Agency and Sucessor Housing Agency Financial Statements, CAFR, GANN Limit
Reports, management ietter, bond disclosure attestation and review of the City's Investment Policy.
Deliver the required nurnber of Final copies of, all financial and compliance reports and letters prepared by
the auditors. ;
/ 2, 2012
3tei?lber-2&?°I2 ' i?!
Ober 1 - 31, 2012
Ober 31, 2012
November 1, 2012
November 16, 2012 f
December 3, 2012
December 14, 2012
Deliver to the City and submit to the former Agency's Annual State Controller's Report, If required, December 29, 2012 I
Single Audit Entrance Conference with Department's managing major programs and Finance January, 7, 2013
Single Audit Fieldwork January 7, 2013 - March 1, 20131
Sip le Audit Exit Conferences with,Departments managing major programs and Finance Week of MaCCh 4, 2013,
I I
Deliver the Final Single Audit Report and Housing Authority attestation reports, including on-line
filing with HUD-REAL. March , 2013
28
25D-18 ' d??,?
SECTION 4: SPECIFIC AUDIT APPROACH AND METHODOLOGY.
our.proven
(continuecU
s1 ? F i r
? r I r
E T,
T
F
u??`d?a???ac?e 4j cur lt7t?rna? cvntr,?s 4(?t,t?3{ (1?
y II? ?
1?16?${ln ?iw d ekc{ ?atrn{;` 7 test F?lin ,?{.
naiure< <rm[n9 any eVeM or testnlg I app} I ?t{ 1
wlth?tF?e?rlsk?of con't+i?l rnlliiro d?tcrmm4c?.)ti Sing?ej
r?ttre?; _ i
rTasks ?.
• DeveJb test plat} anctest(ng'strafegJA for key
contr??, mludt?g natUr?r?rrstngd ex?nt ;t:"i
• e testing ?r?d surt7riz? res?(ts
± ?V'a'Ia?e ?Yho{hit ?otrtrolsr??e o?Q.raf(ng?
K* Investa?at?:rnotGa se?s? af-?40tmv eil rigs cs` °(
* Design,suk?stat?trve}estsbasat?ori'?contr?l i
?e?t?ti? ?eSUI?8 S l?-+ 4 x..
1r? a
2 ? T?# Z J ,i
1? ?t 4
3
Dex eables 1
'NO fJ j?? c)fi1171? nC?'ltlotl ln?i.,`{ {{e ! 3 ?''{}
k .? ,?? ?CFO - i
n _ s? -came
r 1 ? t.ds?'
33
25D-19
SECTION 4: SPECIFIC AUDIT APPROACHAND METHODOLOGY,
Laws and Regi<itlations
Approach
When planning and performing audit
procedures and in evaluating and
reporting the results thereof, we need
to recognize that an illegal act may
materially affect the financial statements.
Laws and regulations vary considerably in
their relation to the financial statements:
Direct and material effect on financial
statements
• We consider laws and regulations that
generally have a direct and material
effect on the determination of financial
statement amounts. For example,
escheat or unclaimed property laws,
may affect recorded liabilities and
revenues and applicable laws and
regulations may affect the amount of
revenue accrued under government
contracts. However, we consider
such laws or regulations from the
perspective of their known relation to
audit objectives derived from financial
statement assertions rather than from a
legal perspective.
Indirect effect on financial statements
• The City may be affected by many
other laws or regulations, including
those related to occupational safety
and health, equal employment, and
other violations. Generally, these laws
and regulations relate more to an
organization's operating aspects than
to its financial and accounting aspects,
and their financial statement effect
is indirect. We ordinarily do not have
sufficient basis for recognizing possible
violations of such laws and regulations.
Their indirect effect is normally
the result of the need to disclose a
contingent liability because of the
allegation or determination of illegality.
Normally, our audit does not include
procedures specifically designed to
detect illegal acts that indirectly affect
the financial statements. However, the
procedures listed below, which may be
performed for the purpose of forming
an opinion on the financial statements,
may bring possible illegal acts to our
attention:
• Familiarization with the particular legal
operational framework applicable to
the client and its operations.
• Inquiring of management and the
client's attorneys regarding the
accounting for and disclosure of loss
contingencies.
• Inquiring of management as to the laws
and regulations that may be expected
to have a fundamental impact on the
operations of the City.
• Discussing with management
policies and procedures adopted for
identifying, evaluating, and accounting
for litigation claims and assessments.
• inspecting relevant documentation and
correspondence with relevant licensing
or regulatory authorities.
• Obtaining written confirmation from
management that they have disclosed
all events of which they are aware
which involve possible illegal acts,
together with any actual or contingent
consequences which may arise.
We also remain cognizant for any
instances of non-compliance with laws
or regulations at all times during the
course of our audit that may come to our
attention through:
• The performance of other substantive
procedures;
• Review of the minutes of the governing
bodies of the City; and
• Inquiry of the City and its lawyers
regarding litigation, claims, and
assessments, and others.
Sampling I%- roach
Audit sampling is the application of an
audit procedure to less than 100% of
the items within an account balance or
class of transactions for the purpose
of evaluating the value of the balance
or class. Substantive test ("variables")
sampling provides a technique for
estimating the extent of monetary
misstatement in a class of transactions
or balances. It can also be used for
estimating the amount of a population.
It answers the question, "How much?"
rather than "How many?" as In sampling
for attributes (such as the operation
of a control), and is normally used to
help decide if a balance is materially
misstated. Sampling can be very useful
in performing substantive tests on,
for example, inventory or accounts
receivable. Sampling is sometimes also
used for determining sample sizes for
substantive tests of recorded transactions
(e.g., vouching of sales, purchases).
There are situations when the more
formal approach to sample size
determination is often not practical.
These situations include:
• Test counting during inventory
observations.
• Examining canceled checks when
reviewing a bank reconciliation.
• Checking depreciation calculations.
• Requesting vendor statements.
• Testing accruals.
• Interviewing client personnel in
conjunction with observation and
inquiry procedures.
• Applying analytical procedures.
This does not mean that we would
never use sampling for the above types
of procedures. For example, sampling
might be used when determining the
extent of testing for:
• Examining canceled checks when the
client's outstanding check list consists
of an unusually large number of items
which are similar in amount, such as a
payroll account for a very large client.
+ Selecting invoices for verifying an
accounts payable listing consisting of
an unusually large number of items
similar in amount.
• Testing an accrual comprised of a large
number of small items.
The application of sampling requires
significant auditor judgment in areas such
as:
34 25D-20 =d??
L SECTION 4i SPECIFIC AUDIT APPROACH AND METHODOLOGY.,
i Considering audit approaches other
than using audit sampling (e.g,, use of
computer-assisted audit techniques
(CAATs)).
• Defining the population and defining
the sampling item.
• Assessing the overall risk level for
related control, analytical procedures
and risk assessment activities.
• Determining materiality as a base for
calculating the tolerable misstatement
(error).
• Selecting items for 100% examination.
• Determining the sample size,
considering factors such as:
• Expected misstatement (errors) to
be found.
• The effect of other tests on the
account being tested.
MGO encourages the use of statistical
sampling whenever practical especially
for substantive tests. We use two
primary substantive statistical sampling
techniques - PPS ('Probability
Proportional to Size") sampling and
SRS ('Stratified Random Sampling").
We generally first remove all individual
items in excess of 90% of the tolerable
misstatement from the population for
100% examination prior to selecting a
sample, for both PPS and SRS samples.
In summary our sampling procedures
include the following:
• Define the Objective
• Define the Population and the Sampling
Unit
• Define Tolerable Misstatement
• Remove Items for 100% Examination
• Specify the Desired Level of Sampling
Assurance and the Acceptable Risk of
Overauditing
• Estimate the Expected (Anticipated)
Misstatement
• Select the Sampling Technique (e.g.,
non-statistical, PPS, SRS)
• Determine the Sample Size
• Select the Sample
• Examine the Sample Items and Evaluate
the Sample Results
ea?e•a« 35
25D-21
SECTION 4: SPECIFIC AUDIT APPROACH AND METHODOLOGY,
D EDP A i our consults twill r 'd th A+. t th ' I- ' d I
ur
a JIBS
Approach n p ow e e au r eam o in rma on an too s necessary
to evaluate the strengths and weaknesses of the City's electronic data
MGO's engagement team processing (EDP) controls. This information is used by the assurance team to
includes an EDP consultant that develop its audit plans and determines h ow the team executes its financial
will examine the integrity and statement audits. Our review of the EDP general controls encompasses the
reliability of financial systems from following areas
different angles. Our approach _
uses a comprehensive assessment Qxgaa?I?Zoe ion'.
$ardlWaX@ and _
of the various aspects of the atti O iie>?a d4 a6
lss Qft1N?r?
IT environment that affect the Ideflfificat o_n ald ?aluatron±oe ; t7et@r?nfiiarion arryvheherr
accuracy and completeness of opefauonal structure to determine . ' liard?45ro controls prgwded by tho''
financial data. We conduct our w)tether there rs adequate segregattorr eyutpmeat vendor aro usecto the
assessments using custom tailored of rduties and functrons In addrtronpp[apr ate Pxtent aril whether
tools that take Into consideration ourtools wJfl ass?stip detern mEpg °syster,?_$oftwarea s bi0cted to
the complexity and unique nature , bather pesonneE=q0lrficatons_and_ the sarria`contrbl'proc$lures
of our client's operations. Our controls ensure rfffeetrve func#ioning those applied to changing; testing;
;
evaluation and assessment is of the City!s_mfnrmatrontechnology _ -
and rrnplntentrng?applicatons
based on physical observation rPSOUrces" .1 hrs would inciuae the
and testing, qualitative and revtow 0f backup prUedures'for all ; - `
quantitative assessments, reviews cntieaJ files.`'
of documentation and actual -
-
f * _
practices, and other IT performance 1
data. Our recommendations are Sys #e
?0Mt1?AA1L
based on industry best practices D6,001opmen D`etermJnattop arid=evaluation of ttie
and use our industry knowledge of _r
Ma?i>enance
corr3mulaicatrons hardti?areisoft?vare;
similar entities to produce practical
a>{dl ?ocl><utexratia'It> aril related controls to ensure all
solutions that affect positive
change.
De#ermmation and evaluation on
- -_ .. - data are authPrize d; accurately
transmitted andrreviewed and
t?ho ner there are rocedure? to si fficient{y pt4tecfed
ensure that the developmen_of.
new
system$ and=maJnerance,and changes
-
to exWlrig
systems,are appropTiately
auth'gnzed tested •atd implemented: -
(,?Iso a dPtern-nnatron on,wliether -
opriatc documentation exists for
.
app)
the applications,
,i?cce§s DAtc and _
Determinatiorton w )etheracce?s to ' Pi6Ce a?
data fEfes softvyare, hardware -and
" Detenrnnati_on on ?Uhother there - _
ctQCUrnentatign is
reincted to properly are cgnirols to ensu"re prom-pt
authonzed personnel -'.This includes a= -and accurate processing,of data - <.
rEyielro ot physical and logical access _ Tiiis mcluc(es the review of data -_
procedures. The review of logical caliture, data 4alidatign artd,edi'l-
accessWould=-rnclude,theevaluattonv _ ..
transaciign_loggmg=audJhfrails,
?.vlt IJ, Pllu GIIVI_IIgIjyllyu allu
confi lentialify of data corlection; In addition, a reyfew of:
- the'retention 'for a Lc
' Elles"Will be'eQn uc[ed -
36 25D-22d?.,
.,;<- PrncdtoAeBaia?Acoviml+mktC
37
25D-23
(Determining Major Programs
Audit Process & Approach
LSECTION 7: COST PROPOSAL:
Pocket-ftotec.
tors
We innovate to'cut costs,
but NEVER at the expense of quality.
Value fox Fees,
Our fee philosophy is to foster long-term client relationships by offering fair and competitive pricing. Over the years, we
have gained an in-depth understanding of the resources required to perform the City's audit. Based on this experience,
we have developed a pricing model which will allow us to provide the requisite experience, commitment and quality for
your engagement.
The City requires a high level of expertise and specialized skills that cross multiple disciplines. Our professionals have a proven
reputation for demonstrating an uncompromising dedication to responsive, value-added service. We believe our proposed fees
reflect the MGO Team's experience along with our sensitivity to the budgetary concerns you are facing. Below is a summary of
assumptions utilized in our fee analysis based on the information noted in the Request for Proposal. Should any of the assumptions
noted change based on the City's request or the uncertainty surrounding the financial reporting requirements of the former
redevelopment agency, we will work closely with City Management to determine the impact on our fee analysis.
Our proposed all-inclusive fees summarized below for completion of audit services assume the following:
1. The Orange County Fire Authority agreed upon procedures begins FY 2013 and is assumed to be performed
annually thereafter for the remainder of the contract period.
2. Internal Audit Operational Audits only occur FY 2012, 2013 and 2014. No Internal Audit Operational Audits will
occur in FY 2015.
3. The Single Audit includes 8 major programs. Any additional major programs will be billed at the discounted hourly
rates commensurate with level of effort, not to exceed $5,000 for each additional major program identified.
4. The State Controller Reports for the former Agency will be performed for the entire duration of the contract.
5. Stand-alone audits of the Successor Agency and Successor Housing Agency will be required for the entire duration
of the contract. The cost assigned to these audits represent the level of effort to compile stand alone financial
reports. The cost and level of effort related to performing test of controls, compliance and substantive testwork of
the Successor Agencies is part of the City Audit fees as the Successor Agencies will be reported in the City's CAFR.
The former Agency represents more than 40% of the City's governmental fund assets in the FY 2011 CAFR .
6. All out-of-pocket expenses, including parking, telephone, fee, copying and reproduction are included in the all-
inclusive maximum price. You will not be biiied separately for these costs.
EXHIBIT C
r,''? ?road4'oBrs?a?AROO?mi+aotK
43
25D-24
O '•!•• +
SeiviCe! 261;1j12 201?Jj3` X131,14. ;2o1a1{
City Audit $ 84,748 $ 87,290 $ 89,909 $ 92,606
Single Audit (includes 8 major programs) 60,685 62,506 64,381 66,312
GANN 943 971 1,000 1,030
City's Investment Polity Compliance Review 2,547 2,623 2,702 2,783
State Controller Reports - City 7,743 7,975 8,215 8,461
State Controller Reports - RDA 1,661 1,711 1,762 1,815
Independent Financial report for RDA Successor Agency and the Housing
Successor Agency of the Redevelopment Agency and ABXI 26 compliance 13,906 14,323 14)53 15,195
City's Operational Audit 7,044 7,255 7,473 - I
Housing Authority annual on-line attestation of the Financial Data Schedule 1,573 1,620 1,669 1,719
Bond disclosures attestation 1,706 1,757 1,809 1,864
PBID operational audits 4,250 4,378 4,509 4,644
Orange County Fire Authority Agreed Upon Procedures Audit - 4,058 4,179 4,305
Other Financial Reviews 5,123 5,277 5,435 5,598
Total fQt Fiscal Year (nat,fo-exceed)" $ 191;929` $ 201;944 207,746: $ 206
level 2011/12 2012113' ;:.' 201/14 2014115
Partner 134 136 136 130
Director 15 15 15 15
Manager 274 279 279 271
Senior Accountant 1,012 1,028 1,028 996
Associate 691 715 715 683
Clerical 13 13 13 11
Total 2,139 2,186 2,186 2,106
44
Level 2011,%12, 2012/13" 2013/IA 20?AIi5
Partner $ 28,006 $ 29,277 $ 30,155 $ 29,689
Director 2,145 2,209 2,276 2,344
Manager 34,524 36,209 37,295 37,312
Senior Accountant 80,960 84,707 87,248 87,068
Associate 45,606 48,606 50,064 49,258
Clerical 688 736 759 661
Total $ 191,929 $ 201,744 $ 207,796 $ 206,333
25D-25
• f LEVELFOR,'SUPPLEMENTAL SERVICES.
Rates for Addftional
Professional Services.
The following are discounted hourly rates for any supplemental services the City may request during the term of this contract, The
discounted hourly rates are consistent with the billable hourly rates utilized in compiling the all-inclusive maximum price noted in
Section 7.
nt eiiL
LeveE..' 2011/42 > 2012
J_ 13
2Qj3/14,
20f4/15.. _-`
Partner $ 209 $ 215 $ 222 $ 228
Director 143 147 152 156
Manager 126 130 134 138
Senior Accountant 80 82 85 87
Associate 66 68 70 72
Clerical 55 57 58 60
_?: t?road'lHBeaalufA?ocoaat?
45
25D-26