Item 4.1 - Agreement for Auditing Servicesti City of Poway
COUNCIL AGENDA REPORT
H�
DATE:
TO:
FROM:
INITIATED BY:
SUBJECT:
Summary:
September 16, 2014
APPROVED
APPROVED AS AMENDED O
(SEE MINUTES)
DENIED O
REMOVED O
CONTINUED
RESOLUTION NO.
Honorable Mayor and Members of the City Council
Daniel Singer, City Manager",100
Scott Edwards, Director of Administrative Services
Andrew White, Finance Manager a4l
Approval of Agreement for Auditing Services
Based upon a recent Request for Proposals (RFP) process, staff is seeking approval to
enter into an agreement with Rogers, Anderson, Malody & Scott, LLP to provide
auditing services to the City of Poway.
Recommended Action:
It is recommended that the City Council: 1) Approve a Standard Agreement for Contract
Services with Rogers, Anderson, Malody & Scott, LLP (Attachment A); and 2) Authorize
the City Manager to execute the agreement.
Background:
The City of Poway's (City) current contract with Pun & McGeady, LLP for auditing
services has expired. In July 2014, the City conducted an RFP process, soliciting
proposals from auditing firms to provide annual independent auditing services to the
City. The requested services include audits of the City of Poway, the Poway Housing
Authority, and the Public Financing Authority. Additionally, services include preparation
of the Financial Statements in the Comprehensive Annual Financial Report (CAFR),
Agreed -upon Procedures Applied to the Appropriations Limit Schedule (Gann Limit),
and the Single Audit, if required.
The RFP was posted on the California Society of Municipal Officer's web site, as well as
the City's on -line a -bid board. Eight firms submitted proposals. Based upon review of
each firm's pricing, qualifications, and responsiveness to the RFP requirements, staff
conducted interviews with the three highest rated firms. Following the interviews, staff
conducted reference checks on the top two finalists.
1 of 44 September 16, 2014 Item # 4.1
Auditing Services
September 16, 2014
Page 2
Findings:
After a thorough evaluation of submitted proposals, Rogers, Anderson, Malody & Scott,
LLP was selected as the firm best suited to meet the City's current and future needs.
Rogers, Anderson, Malody & Scott, LLP has extensive experience working with the
public sector, including the audit of other local cities such as El Cajon, La Mesa and
San Marcos.
Staff recommends that the City enter into an agreement with Rogers, Anderson, Malody
& Scott, LLP for a period of three years, with the possibility of two, one -year extensions.
A draft agreement is attached, with the final agreement -to be approved by the City
Attorney and signed by the City Manager. Under the terms of the new agreement, the
following fees are proposed for each fiscal year to be audited:
2013/14
2014/15
2015/16
2016/17
2017/18
Total
$45,500
$46,500
$47,500
$48,500
$49,500
$237,500
Fiscal Impact:
There is currently $51,200 available for these services in the fiscal year 2014 -15
Adopted Budget. These funds are split between the Administrative Services Director
Division's operating budget ($43,700; 0100 -1704) and the Development Services
Housing Authority Division's operating budget ($7,500; 0309 - 1704).
Environmental Review:
This action is not subject to review under the 2014 California Environmental Quality Act
(CEQA) Guidelines.
Public Notification:
A copy of this report was provided to Rogers, Anderson, Malody & Scott, LLP.
Attachment:
A. Draft Standard Agreement for Contract Services with Rogers, Anderson, Malody
& Scott, LLP
2 of 44 September 16, 2014 Item # 4.1
City of Poway
STANDARD AGREEMENT FOR SERVICES
This Agreement, entered into this 16th day of September, 2014, by and
between the CITY OF POWAY (hereinafter referred to as "City ") and Rogers,
Anderson, Malody & Scott, LLP (hereinafter referred to as "Consultant ").
RECITALS
WHEREAS, City desires to obtain the services of a private consultant to perform
professional auditing services; and
WHEREAS, Consultant is licensed to practice public accounting in the State of
California and has represented that Consultant possesses the necessary qualifications
to provide such services; and
WHEREAS, City has authorized the preparation of an agreement to retain the
services of Consultant as hereinafter set forth.
NOW, THEREFORE, IT IS MUTUALLY AGREED THAT CITY DOES HEREBY
RETAIN CONSULTANT ON THE FOLLOWING TERMS AND CONDITIONS:
1. Scope of Services.
Consultant shall provide services as described in Exhibit "A" entitled
"Special Provisions" attached hereto and made a part hereof.
2. Compensation and Reimbursement.
City shall compensate and reimburse Consultant as provided in Exhibit "A"
entitled "Special Provisions" attached hereto and made a part hereof.
3. Term of Agreement.
The term of this Agreement shall be as described on Exhibit "A" entitled
"Special Provisions" attached hereto and made a part hereof.
4. Termination.
This Agreement may be terminated with or without cause by City.
Termination without cause shall be effective only upon 60 -day written notice to
Consultant. During said 60 -day period Consultant shall perform all consulting services
in accordance with this Agreement. This Agreement may be terminated by City for
cause in the event of a material breach of this Agreement, misrepresentation by
Consultant in connection with the formation of this Agreement or the performance of
3 of 44 Attachment A September 16, 2014 Item # 4.1
services, or the failure to perform services as directed by City. Termination for cause
shall be effected by delivery of written notice of termination to Consultant. Such
termination shall be effective upon delivery of said notice.
5. Confidential Relationship.
City may from time to time communicate to Consultant certain information
to enable Consultant to effectively perform the services. Consultant shall treat all such
information as confidential, whether or not so identified, and shall not disclose any part
thereof without the prior written consent of the City. Consultant shall limit the use and
circulation of such information, even within its own organization, to the extent necessary
to perform the services. The foregoing obligation of this Paragraph 5, however, shall
not apply to any part of the information that (i) has been disclosed in publicly available
sources of information; (ii) is, through no fault of Consultant, hereafter disclosed in
publicly available sources of information; (iii) is now in the possession of Consultant
without any obligation of confidentiality; or (iv) has been or is hereafter rightfully
disclosed to Consultant by a third party, but only to the extent that the use or disclosure
thereof has been or is rightfully authorized by that third party.
Consultant shall not disclose any reports, recommendations, conclusions
or other results of the services or the existence of the subject matter of this contract
without the prior written consent of the City. In its performance hereunder, Consultant
shall comply with all legal obligations it may now or hereafter have respecting the
information or other property of any other person, firm or corporation.
6. Office Space and Clerical Support.
Consultant shall provide its own office space and clerical support at its
sole cost and expense.
7. Covenant Against Contingent Fees.
Consultant declares that it has not employed or retained any company or
person, other than a bona fide employee working for Consultant, to solicit or secure this
Agreement, that it has not paid or agreed to pay any company or person, other than a
bona fide employee, any fee, commission, percentage, brokerage fee, gift or any other
consideration, contingent upon or resulting from the award or making of the Agreement.
For breach of violation of this warranty, City shall have the right to annul this Agreement
without liability, or, at its sole discretion, to deduct from the Agreement price or
consideration, or otherwise recover the full amount of such fee, commission,
percentage, brokerage fee, gift or contingent fee.
4 of 44 Attachment A September 16, 2014 Item # 4.1
8. Ownership of Documents.
All memoranda, reports, plans, specifications, maps and other documents
prepared or obtained under the terms of this Agreement shall be the property of City
and shall be delivered to City by Consultant upon demand.
9. Conflict of Interest and Political Reform Act Obligations.
During the term of this Agreement Consultant shall not act as consultant
or perform services of any kind for any person or entity whose interests conflict in any
way with those of the City of Poway. Consultant shall at all times comply with the terms
of the Political Reform Act and the local conflict of interest ordinance. Consultant shall
immediately disqualify itself and shall not use its official position to influence in any way
any matter coming before the City in which the Consultant has a financial interest as
defined in Government Code Section 87103. Consultant represents that it has no
knowledge of any financial interests which would require it to disqualify itself from any
matter on which it might perform services for the City.
"Consultant" means an individual who, pursuant to a contract with a state
or local agency:
(A) Makes a governmental decision whether to:
1. Approve a rate, rule or regulation;
2. Adopt or enforce a law;
3. Issue, deny, suspend, or revoke any permit, license,
application, certificate, approval, order, or similar
authorization or entitlement;
4. Authorize the City to enter into, modify, or renew a contract
provided it is the type of contract that requires City approval;
5. Grant City approval to a contract that requires City approval
and to which the City is a party, or to the specifications for
such a contract;
6. Grant City approval to a plan, design, report, study, or similar
item;
7. Adopt, or grant City approval of, policies, standards, or
guidelines for the City, or for any subdivision thereof; or
(B) Serves in a staff capacity with the City and in that capacity participates in
making a governmental decision as defined in Regulation 18702.2 or
performs the same or substantially all the same duties for the City that
would otherwise be performed by an individual holding a position specified
in the City's Conflict of Interest Code.
5 of 44 Attachment A September 16, 2014 Item # 4.1
DISCLOSURE DETERMINATION:
❑ 1. Consultant/Contractor will not be "making a government decision"
or "serving in a staff capacity" as defined in Sections A and B
above.
No disclosure required.
❑ 2. Consultant/Contractor will be "making a government decision" or
"serving in a staff capacity" as defined in Sections A and B above.
As a result, Consultant/Contractor shall be required to file a
Statement of Economic Interest with the City Clerk of the City of
Poway in a timely manner as required by law.
DEPARTMENT DIRECTOR
10. No Assignments.
Neither any part nor all of this Agreement may be assigned or
subcontracted, except as otherwise specifically provided herein, or to which City, in its
sole discretion, consents to in advance thereof in writing. . Any assignment or
subcontracting in violation of this provision shall be void.
11. Maintenance of Records.
Consultant shall maintain all books, documents, papers, employee time
sheets, accounting records, and other evidence pertaining to costs incurred and shall
make such materials available at its office at all reasonable times during the contract
period and for three (3) years from the date of final payment under this Agreement, for
inspection by City and copies thereof shall be furnished, if requested.
12. Independent Contractor.
At all times during the term of this Agreement, Consultant shall be an
independent contractor and shall not be an employee of the City of Poway. City shall
have the right to control Consultant only insofar as the results of Consultant's services
rendered pursuant to this Agreement; however, City shall not have the right to control
the means by which Consultant accomplishes such services.
13. Licenses, Permits, Etc.
Consultant represents and declares to City that it has all licenses, permits,
qualifications, and approvals of whatever nature that are legally required to practice its
profession. Consultant represents and warrants to City that Consultant shall, at its sole
cost and expense, keep in effect at all times during the term of this Agreement, any
6 of 44 Attachment A September 16, 2014 Item # 4.1
license, permit, or approval which is legally required for Consultant to practice its
profession.
14. Consultant's Insurance.
Consultant shall provide insurance as set forth in Exhibit "A" entitled
"Special Provisions" attached hereto and made a part hereof.
15. Indemnification.
(a) For Claims (as defined herein) other than those alleged to arise from
Consultant's negligent performance of professional services, City and its respective
elected and appointed boards, officials, officers, agents, employees and volunteers
(individually and collectively, "Indemnitees ") shall have no liability to Consultant or any
other person for, and Consultant shall indemnify, protect and hold harmless
Indemnitees from and against, any and all liabilities, claims, actions, causes of action,
proceedings, suits, damages, judgments, liens, levies, costs and expenses, including
reasonable attorneys' fees and disbursements (collectively "Claims "), which
Indemnitees may suffer or incur or to which Indemnitees may become subject by reason
of or arising out of any injury to or death of any person(s), damage to property, loss of
use of property, economic loss or otherwise occurring as a result of Consultant's
negligent performance under this Agreement, or by the negligent or willful acts or
omissions of Consultant, its agents, officers, directors, sub - consultants or employees.
(b) For Claims alleged to arise from Consultant's negligent performance of
professional services, Indemnitees shall have no liability to Consultant or any other
person for, and Consultant shall indemnify and hold harmless Indemnitees from and
against, any and all Claims that Indemnitees may suffer or incur or to which
Indemnitees may become subject by reason of or arising out of any injury to or death of
any person(s), damage to property, loss of use of property, economic loss or otherwise
to the extent occurring as a result of Consultant's negligent performance of any
professional services under this Agreement, or by the negligent or willful acts or
omissions of Consultant, its agents, officers, directors, sub - consultants or employees,
committed in performing any of professional services under this Agreement. For Claims
alleged to arise from Consultant's professional services, Consultant's defense obligation
to Indemnitees shall include only the reimbursement of reasonable defense costs and
attorneys' fees to the extent caused by Consultant's negligence.
(c) The foregoing obligations of Consultant shall not apply to the extent that
the Claims arise from the sole negligence or willful misconduct of City or its elected and
appointed boards, officials, officers, agents, employees and volunteers.
(d) In any and all Claims against City by any employees of the Consultant,
anyone directly or indirectly employed by it or anyone for whose acts it may be liable,
the indemnification obligation under this Section 15 shall not be limited in any way by
any limitation on the amount or type of damages, compensation or benefits payable by
or for the Consultant under worker's compensation acts, disability benefit acts or other
employee benefit acts.
7 of 44 Attachment A September 16, 2014 Item # 4.1
16. Consultant Not an Agent.
Except as City may specify in writing, Consultant shall have no authority,
expressed or implied, to act on behalf of City in any capacity whatsoever as an agent.
Consultant shall have no authority, expressed or implied, pursuant to this Agreement to
bind City to any obligation whatsoever.
17. Personnel.
Consultant shall assign qualified and certified personnel to perform
requested services. The City shall have the right to review and disapprove personnel
for assignment to Poway projects.
City shall have the unrestricted right to order the removal of any person(s)
assigned by Consultant by giving oral or written notice to Consultant to such effect.
Consultant's personnel shall at all times comply with City's drug and
alcohol policies then in effect.
18. Notices.
Notices shall be given as described on Exhibit "A" entitled "Special
Provisions" attached hereto and made a part hereof.
19. Dispute Resolution.
In the event of a dispute between City and Consultant concerning the
terms of this Agreement or its performance, the parties agree to initially submit such
dispute to voluntary mediation before a mutually acceptable mediator prior to arbitration
or litigation. In the event that the subject of such action is compensation claimed by
Consultant in the event of termination, Consultant's damages shall be limited to
compensation for the 60 -day period for which Consultant would have been entitled to
receive compensation if terminated without cause. In the event of arbitration, each
party shall bear its own attorneys' fees and costs incurred. Any action to enforce or
interpret the terms or conditions of this Agreement shall be brought in the Superior
Court in San Diego County, Central Division. Consultant hereby waives any right to
remove any such action from San Diego County as is otherwise permitted by California
Code of Civil Procedure section 394.
20. Gender.
Whether referred to in the masculine, feminine, or as "it," "Consultant"
shall mean the individual or corporate consultant and any and all employees of
consultant providing services hereunder.
8 of 44 Attachment A September 16, 2014 Item # 4.1
21. Counterparts.
This Agreement (and any amendments) may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which, together, shall
constitute one and the same instrument. Documents delivered by telephonic facsimile
transmission shall be valid and binding.
22. Entire Agreement.
This Agreement shall constitute the entire understanding between
Consultant and City relating to the terms and conditions of the services to be performed
by Consultant. No agreements, representations or promises made by either party,
whether oral or in writing, shall be of any force or effect unless it is in writing and
executed by the party to be bound thereby.
23. Pension Reform Act of 2013
At all times during the term of the Agreement with the City, no officer,
director, shareholder, member, partner, employee, or contractor, providing services to
the City, will be a "retired annuitant," under the City's retirement system, ineligible for
temporary employment under section 7522.56 of the California Government Code,
which was added as a part of the Pension Reform Act of 2013. For the purposes of this
statement a "retired annuitant" is a person retired from the California Public Employees'
Retirement System ( "CalPERS "). Any retired annuitant proposed to provide work on
behalf of the City must be eligible for appointment under the Pension Reform Act of
2013, and any other applicable laws, without any adverse financial impact to the City.
(Remainder of page intentionally left blank)
9 of 44 Attachment A September 16, 2014 Item # 4.1
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first above written.
CITY OF POWAY
0
Daniel Singer, City Manager
Dated:
ATTEST:
Sheila R. Cobian, CMC, City Clerk
APPROVED AS TO FORM:
By:
Morgan L. Foley, City Attorney
CONSULTANT
Dated:
Name, Title
10 of 44 Attachment A September 16, 2014 Item # 4.1
"SPECIAL PROVISIONS"
EXHIBIT "A"
A. Scope of Services.
Consultant agrees to perform consulting services as required by City.
Consultant shall provide the necessary qualified personnel to perform the services. In
performance of the services Consultant shall provide professional audit services as
detailed in the Scope of Services submitted with the proposals dated August 8, 2014,
which are included in this document as Attachment 1.
B. Compensation and Reimbursement.
City shall pay Consultant a fee in accordance with the Fee Proposals
submitted with the proposals dated August 8, 2014, which are included in this document
as Attachment 2. Total fee is not to exceed $237,500. Consultant's fee shall include and
Consultant shall be responsible for the payment of all federal, state, and local taxes of
any kind which are attributable to the compensation received.
In addition to said consulting fee, Consultant shall be reimbursed for all
reasonable expenses, including lodging, telephone, and travel (air, auto, rail)
necessarily incurred in performance of the services. Consultant shall bill City for such
expenses as incurred, referencing this Agreement. All expenses shall be itemized and
supported by receipts for amounts in excess of Twenty -Five Dollars ($25.00).
Statements for reimbursement of expenses shall be paid within ten (10) days of
approval by City. All air travel shall be billed at coach or special fare rates. Only
lodging outside San Diego County shall be reimbursable. Consultant shall receive prior
authorization for air travel and lodging expenses. All other expenses shall be
reimbursed in accordance with City's cash disbursement policies in effect at the time
incurred.
C. Term of Agreement.
This Agreement shall be effective from the period commencing September
16, 2014, through the completion of the Fiscal Year 2015 -16 audit, with options for the
Fiscal Year 2016 -17 and Fiscal Year 2017 -18 audits, unless sooner terminated by City
as provided in the section of this Agreement entitled "Termination." Upon expiration or
termination of this Agreement, Consultant shall return to City any and all equipment,
documents or materials' and all copies made thereof which Consultant received from
City or produced for City for the purposes of this Agreement.
11 of 44 Attachment A September 16, 2014 Item # 4.1
D. Consultant's Insurance.
1. Coverages:
Consultant shall obtain and maintain during the life of this
Agreement all of the following insurance coverages:
(a) Comprehensive General Liability, including premises -
operations, products /completed, broad form property damage, and blanket contractual
liability with the following coverages: General Liability $1,000,000 Bodily Injury and
Property Damage combined each occurrence and .$2,000,000 aggregate.
(b) Automobile Liability, including owned, hired, and non -owned
vehicles: $1,000,000 combined single limit.
(c) Consultant shall obtain and maintain, during the life of the
Agreement, a policy of Professional Errors and Omissions Liability Insurance with policy
limits of not less than $1,000,000 combined single limits, per claim and annual
aggregate.
(d) Workers' Compensation insurance in statutory amount. All
of the endorsements which are required above shall be obtained for the policy of
Workers' Compensation insurance.
2. Endorsements:
Endorsements shall be obtained so that each policy contains the
following three provisions:
(a) Additional Insured. (Not required for Professional Errors and
Omissions Liability Insurance or Workers' Compensation.)
"City of Poway and its elected and appointed boards, officers,
agents, and employees are additional insureds with respect to this subject project and
contract with City."
(b) Notice.
"Said policy shall not terminate, nor shall it be canceled, until thirty
(30) days after written notice is given to City."
(c) Primary Coverage.
"The policy provides primary coverage to City and its elected and
appointed boards, officers, agents, and employees. It is not secondary or in any way
subordinate to any other insurance or coverage maintained by City."
12 of 44 Attachment A September 16, 2014 Item # 4.1
3. Insurance Certificates:
Consultant shall provide City certificates of insurance showing the
insurance coverages described in the paragraphs above, in a form and content
approved by City, prior to beginning work under this Agreement.
E. Notices.
All notices, billings and payments hereunder shall be in writing and sent to
the following addresses:
To City: City of Poway
13325 Civic Center Drive
P.O. Box 789
Poway, CA 92074
To Consultant: Rogers, Anderson, Malody & Scott, LLP
735 E. Carnegie Drive, Suite 100
San Bernadino, CA 92408
13 of 44 Attachment A September 16, 2014 Item # 4.1
Proposal for Professional
Auditing Services to
CITY OF POWAY
For the fiscal years ending June 30, 2014, 2015 & 2016
(With the option of two subsequent years)
Submitted by:
ROGERS, ANDERSON, MALODY & SCOTT, LLP
CERTIFIED PUBLIC ACCOUNTANTS
735 E. CARNEGIE DRIVE, SUITE 100
SAN BERNARDINO, CALIFORNIA 92408
PHONE: (909) 889 -0871
FAX: (909) 889 -5361
August 8, 2014
CONTACT PERSON: TERRY SHEA, PARTNER
tshea @ramscpa.net
ALTERNATE CONTACT: SCOTT MANNO, PARTNER
smanno @ramscpa.net
ROGERS, ANDERSON, MALODY & SCOTT, LLP
CEPTIFIf -D PUBLIC AC.C;:O4.. \1'r NTS, SINCE 9e'8
14 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Table of Contents
Paqe
Transmittal Letter i
Technical Proposal
Independence and License to practice in California
Firm qualifications and experience 2
About our firm
Single audit experience
Housing Authority and Successor Agency experience
Tax department
CAFR preparation
Other services
Quality control
External quality control examinations
Partner, supervisory and staff qualifications and experience 5
Partner and supervisory staff involvement
Continuing professional education
Assigned personnel
Similar engagements with other governmental entities
Specific audit strategy (audit approach) 9
Specific audit strategy
Understanding of internal control
Sample sizes
Approach in drawing samples for compliance testing
Computer technology in the audit
EDP software
Analytical procedures
Approach in determining applicable laws and regulations
Evaluation of intemal controls and management letter comments
Identification of anticipated potential audit problems 17
Resumes of key engagement personnel 18
Attachment A: Quality Control Review Report 22
Attachment B: Current Clients 23
Attachment C: Addendum No. 1 25
15 of 44 Attachment A September 16, 2014 Item # 4.1
735 'c. Car negiu Dr, Suite 100
San Bernardino, CA 92408
909 889 0871 T
909 889 5361 F
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16 of 44
ROGERS, ANDERSON, MALODY & SCOTT, LLP .
CER"I "IFIED PUBLIC ACCOUNTANTS, SINCE 1948
August 8, 2014
City of Poway
Attention: Andrew White, Finance Manager
13325 Civic Center Drive
Poway, CA 92064
Rogers, Anderson, Malody & Scott, LLP is pleased to respond to your
request for proposal for independent professional auditing services for the
City of Poway (the City).
For 65 years, Rogers, Anderson, Malody & Scott, LLP (RAMS) has been
providing honest, accurate, objective results to all of our clients, including
not - for - profit organizations such as yours. Our experience has helped us
understand the complex requirements and issues encountered in such
organizations. We also understand the desire for the timely delivery of
accurate reports and for a quality audit performed in a competent and
efficient manner.
We are aware that the City has other proposals to consider. We believe
that RAMS would be the appropriate choice for the audit engagement for
the following reasons, which are provided in more detail in our proposal:
RAMS has an established reputation in the governmental and not -
for- profit accounting and auditing community for providing excellent,
timely service and high quality reporting to our clients.
RAMS currently provides auditing services to over 40 governmental
entities and not- for - profit organizations, including over 15 cities,
most of which have enterprise activities.
We understand that the audit process, as a whole, can be a taxing
experience for you and your staff; we understand' that you will have
other commitments and your regular workloads during the audit
period. We make every effort to ensure the audit process, from the
interim field work to the preparation of the required financial reports,
will be as trouble -free as possible for you and your staff. We
accomplish this through comprehensive planning of the audit and
utilizing our staff in the most efficient and effective manner.
The RAMS audit team members are personable and easy to work
with. Through open and responsive communication with all parties
involved in the audit process, we work to have the most efficient
audit possible by minimizing operational distractions of your staff,
while maximizing quality of service and products.
STABILITY. ACCURACYAttacbm6rit A September 16, 2014 Item # 4.1
• Our audit team members are proficient in the use of information technology. We utilize a
comprehensive audit software system that allows us to have a paperless audit. This system
yields much efficiency, including the ability to quickly exchange documents with our clients.
• Our firm provides extensive training and continuing education to all of our audit staff
through a combined use of in -house instruction and third -party providers. Our audit team
members are experienced with, and receive regular training in, performing Single Audits in
accordance with Federal OMB Circulars A -21 and A -133.
• We are committed to helping you meet all reporting /auditing deadlines, resolving any
issues encountered during your audit (e.g., accounting or auditing, new pronouncements,
etc.), and providing you with quality audit services.
• We demonstrate our commitment to our client's success by sharing noted opportunities to
improve the efficiency and effectiveness of your operations, including industry best
practices.
• We have an extensive quality control review process to ensure your financial reports meet
the highest standards. In addition to the preparation of financial reports by the engagement
team and review by the engagement manager, each report is also examined by two
partners and two professional proofreaders.
• We have assisted many of our clients with the preparation of their Comprehensive Annual
Financial Reports. Additionally, our clients that have submitted their reports for the
Government Finance Officers City (GFOA) or California Society of Municipal Finance
Officers (CSMFO) awards have received the awards. Our participation as a GFOA reviewer
also indirectly benefits our clients in the quality review process.
• We believe that our fee estimate and arrangement provides a fair and reasonable cost,
commensurate with the experience of the audit team members, to perform the annual audit
for the City.
We understand the scope of the work to be performed, auditing standards to be followed, and the
reports to be issued, as described in the City's Request for Proposal. We also are committed to
performing the required work within agreed upon time frames and delivery of all final reports each
year by November 30th.
Mr. Shea (license #45615) and Mr. Manno (license #80428), Partners, are authorized to act on
behalf of Rogers, Anderson, Malody & Scott, LLP. We can be reached at: 735 E. Carnegie Drive,
Suite 100, San Bernardino, CA 92408, (909)889 -0871, tshea @ramscpa.net or
smanno @ramscpa.net. Please contact us if you have any questions regarding this proposal.
Thank you for the opportunity to present our proposal qualifications and to serve as independent
auditors to the City of Poway. We look forward to having a long and mutually beneficial
relationship with the City.
Respectfully yours,
ROGER�S, ANDERSON, MALODY & SCOTT, LLP
Terry RPShea, CPA
Partner
17 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Independence and License to practice in California
Independence
Rogers, Anderson, Malody & Scott, LLP is independent of the City of Poway, and all of its
component units, as defined by general standard number two of the generally accepted
auditing standards.
We are also independent of the City of Poway, as defined by the second general standard for
government auditing in the U.S. Government Accountability Office's Government Auditing
Standards (2011).
We have had no professional relationship with the City of Poway or its agencies or component
units within the, last five years.
License to practice in California
Rogers, Anderson, Malody & Scott, LLP is licensed to practice in the State of California. The
key professional staff, which includes the partners, managers, and supervisors, are all certified
public accountants licensed to practice in the State of California.
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18 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Firm qualifications and experience
About our firm
Rogers, Anderson, Malody & Scott, LLP was founded in 1948 and is located at 735 E.
Carnegie Drive, Suite 100, San Bernardino, California. We are one of the oldest CPA firms in
Southern California, with over 65 years of public practice experience, specializing in
governmental agency and not - for - profit organization auditing, accounting and management
advisory services. Over fifteen thousand hours per year are devoted to this area of our practice,
which includes cities, redevelopment agencies, water districts, other special districts, not -for-
profit corporations and joint power authorities.
Our firm has a total staff of forty people, which includes fifteen certified public accountants. Our
staff consists of six partners, four managers, twelve supervisors /senior accountants, fourteen
staff accountants and four support staff. Our audit staff consists of twenty -two members who
devote over 85% of their time to municipal /not- for - profit engagements. Tentatively, the audit
team assigned to the City's engagement will consist of the following full -time staff: two audit
partners, one audit manager, one audit senior and two staff auditors. All personnel are located
in our San Bernardino office.
We understand that organizations desire that its auditors have a thorough understanding of the
complex accounting and compliance issues confronting entities such as yours. Our firm has a
long history of governmental /not- for - profit accounting and auditing. Over the years, we have
gained valuable experience, acquired in -depth knowledge, and obtained the technical expertise
needed for governmental /not - for - profit accounting and auditing.
Our firm is committed to providing our clients with the highest quality service at the most
reasonable fee. The professionals assigned to the City's financial audit have each made
providing quality service their priority.
Please see Attachment B for a complete list of all of our current municipal clients.
Single audit experience
Most of our city clients, and some of our other governmental and not - for - profit clients, have
been subject to an audit in accordance with OMB Circular A -133. We also have experience in
auditing American Recovery and Reinvestment Act (ARRA) grants. We recently performed
single audits for the following entities:
City of Capitola
City of Chino
City of Goleta
City of Norco
City of Fillmore
City of Rosemead
City of San Juan Capistrano
City of La Verne
City of La Mesa
City of Mission Viejo
City of Redondo Beach
City of Twentynine Palms
Community Action Partnership of San
Bernardino County
University Enterprises Corporation at CSUSB
Western Municipal Water District
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19 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Firm qualifications and experience (continued)
Housing Authority and Successor Agency experience
For the fiscal years ended June 30, 2012 and 2013 the firm audited the following Housing
Authorities and Successor Agencies for the following Cities:
City of Capitola
City of Chino
City of Goleta
City of Norco
City of Fillmore
City of Grand Terrace
City of El Cajon
Town of Yucca Valley
City of Lemon Grove
City of San Bernardino
City of San Juan Capistrano
City of La Verne
City of San Jacinto
City of Twentynine Palms
City of La Mesa
City of Rosemead
City of Mission Viejo
City of Redondo Beach
City of Sierra Madre
City of Moorpark
The firm also performed the Due Diligence Reviews Agreed -Upon Procedures for fourteen
Successor Agencies.
Tax department
We are a full service firm with an experienced tax department and have prepared federal and
state tax forms for not - for - profit corporations, including Federal Forms 990 and 990 -T, State of
California Forms 199, 109, and RRF -1.
CAFR preparation
We have extensive experience in the preparation of Comprehensive Annual Financial Reports
(CAFR). For the fiscal year ended June 30, 2012, we prepared 15 CAFR's, and each entity
received the Certificate of Achievement for Excellence in Financial Reporting from the GFOA.
For the fiscal year ended June 30, 2013, we prepared 16 CAFR's for our clients for their
submittal to the GFOA. In addition, we have helped many cities develop their first year's report
for submittal.
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20 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Firm qualifications and experience (continued)
Other services
Our firm provides various other services in addition to auditing services to governmental and
not - for - profit entities, including:
• Study and evaluation of financial condition and fiscal policies
• Transient Occupancy Tax Agreed Upon Procedures
• Financial projections
• Organizational studies
• Franchise (refuse, cable) Agreed Upon Procedures
• EDP control reviews and computer feasibility studies
• Accounting policies and procedures
• Cost control and cost allocation plans
• Capital improvement program procedures and policies
• Cash management studies
• Financing and public bond offering assistance
• Franchise agreement assistance (ambulance, cable, television, refuse, etc.)
Quality control
We have an extensive quality control review process to ensure your audit meets the highest
standards. In addition to the preparation of financial reports by the engagement team and
review by the engagement manager, each report is also examined by the engagement partner
and the technical review partner, and is proofread by two professional staff. Our firm is a
member of the AICPA's Governmental Audit Quality Center (GAQC) and the AICPA's Private
Company Practice Section (PCPS). We perform an in -house peer review over our audit and
attest engagements annually, and receive an independent external peer review every three
years.
External quality control examinations
As a member of the AICPA Private Companies Practice Section, our firm has participated in
"Peer Review" since 1993 and has been examined every three years since that date.
Throughout our participation in this program, the firm has received unqualified opinions from
the peer reviewers. A copy of our most recent external quality control review dated May 31,
2012 for the year ended November 30, 2011 (Attachment A) is attached. The latest review
included reviews of specific governmental and not - for - profit entities.
The firm is not aware of any federal or state desk reviews or field reviews of its audits during
the last three years.
The firm has never had any disciplinary action taken or pending against it with state regulatory
bodies or professional organizations, nor has it ever had any pending or settled litigation, civil
or criminal investigations. Our firm does not have a record of substandard work.
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21 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Partner, supervisory and staff qualifications and experience
The quality of service you receive is dependent on the capabilities of the individuals assigned to
the engagement, and the manner in which those personnel resources are organized to efficiently
focus their abilities on providing you with the requested audit services.
Our engagement team will provide significant experience coupled with an extensive, practical
understanding of governmental and not - for - profit accounting and auditing. These professionals are
highly trained and knowledgeable and have a thorough understanding of the environment in which
governmental and not - for - profit entities operate.
Partner and supervisory staff involvement
All partners and supervisory staff are working professionals and are actively and continually
involved in all aspects of their engagements. We believe that partner and supervisory staff
involvement in all areas of the audit is a key aspect of the overall audit process. This
involvement includes being on -site for interim and year -end field work, thus facilitating a proper,
efficient and effective audit, with minimal disruption of your staff. In addition, the time spent on-
site by the partners and supervisory staff ensures they gain an understanding of the entire
organization's accounting processes and procedures. This understanding will enable them to
evaluate and develop opportunities for efficiency as well as offer practical and functional advice
for improving your accounting processes and procedures.
Continuity of audit staff is a principal concern with our firm. Therefore, we plan to provide staff
continuity from year to year, which is in the best interest of the organization and our firm.
Continuity ensures an orderly, efficient, and less disruptive audit experience. Since we cannot
guarantee staff will remain with us, principal supervisory and management staff, including
engagement partners, managers, other supervisory staff, and specialists, may be changed if
those personnel leave the firm or are promoted.
In summary, we want to emphasize the credentials of the above professionals who will be
directly responsible for the quality of service that you will receive. Additionally, our audit team
has another attribute that is very important, even though it is intangible -- the professionals
assigned to the audits have previously worked together as a multi - disciplined team, thus
ensuring a smooth, efficient and effective audit. We are committed to allocating the necessary
resources to ensure that we provide continuity of personnel throughout the term of our
relationship with the City.
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22 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY ' .
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Partner, supervisory and staff qualifications and experience (continued)
Continuing professional education
All professionals at our firm participate in continuing professional education (CPE) programs,
which are sponsored by various organizations including the Government Finance Officers
Association, the American Institute of Certified Public Accountants, the California State Society
of Certified Public Accountants, the California Society of Municipal Finance Officers and the
City of Government Accountants. Participation in these programs helps us to ensure that our
clients are serviced with the best trained and most proficient government and not - for - profit
auditors and accountants available. In addition, we provide in -house training taught by our
partners and senior level staff using published resources. -
In accordance with our firm's Quality Control document and Government Auditing Standards
(GAS), all staff members who work on audits subject to GAS are required to complete CPE in
accordance with GAS standards.
Assigned personnel
It is our goal to provide the City with capable, competent, and personable individuals who offer
an extensive background, not only in governmental and not - for - profit accounting and auditing,
but also in general business practices. We offer practical solutions, as well as provide technical
support. This enables you to stay at the forefront of governmental and not - for - profit accounting
and provides you with the support you need in dealing with the complex issues confronting
entities such as yours.
In addition, our engagement team has the managerial and supervisory experience to provide
the City with a comprehensive audit of the highest quality, while still focusing on personal
service. The resumes of the key engagement personnel assigned to the audit are presented
near the end of this proposal. The following individuals will be assigned to the engagement for
the entire contract period:
Terry Shea, CPA — Audit Partner
Mr. Terry Shea, CPA, will be the audit partner. He is licensed to practice as a certified
public accountant in the State of California. Mr. Shea has been in public accounting for 33
years serving local governments such as yours. As the engagement partner, he will be
responsible for overall engagement quality, as well as ensuring that the engagement is
performed in the most effective and efficient manner. He will review all work - papers
prepared during the engagement, in addition to all required reports.
Mr. Shea has assisted the following entities in their endeavors to obtain the CSMFO and /or
GFOA awards for outstanding financial reporting: City of Goleta, City of Mission Viejo, City
of Norco, City of Redondo Beach, City of La Verne, City of Eastvale, City of Rolling Hills
City of Moorpark, City of Dana Point, City of San Juan Capistrano and the Ventura Regional
Sanitation District. He currently serves as the Contract Finance Director for two Riverside
County cities and one Los Angeles County city.
iM
23 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Partner, supervisory and staff qualifications and experience (continued)
Scott Manno, CPA, CGMA — Quality Control Partner
Mr. Scott Manno, CPA, CGMA, is a municipal audit partner with the firm and will be the
quality control partner. Mr. Manno has been in public accounting for 17 years serving local
governments such as yours. As the quality control partner, he will be responsible for
engagement quality and will review all required reports.
Mr. Manno has assisted the following entities in their endeavors to obtain the CSMFO
and /or GFOA awards for outstanding financial reporting: Town of Yucca Valley, Elsinore
Valley Municipal Water District, Rincon del Diablo Municipal Water District, Western
Municipal Water District, City of Ontario, the Ventura Regional Sanitation District, the City of
Norco, Vista Irrigation District, and the City of Twentynine Palms. From 1997 -2000, Mr.
Manno served as a technical reviewer under the CSMFO award program and currently
participates as a technical reviewer under the GFOA award program.
Brad A. Welebir, CPA, MBA — Manager
Mr. Brad A. Welebir, CPA, is a manager with the firm. He is licensed to practice as a
certified public accountant in the State of California. Mr. Welebir has over nine years of
public accounting experience. He has provided accounting, auditing, and consulting
services for municipalities, special districts, water agencies, and various nonprofit
organizations. He will be responsible for planning the audit, supervising the staff assigned
to the engagement, and performing reviews of all work - papers prepared for the
engagement. In addition, he will also be responsible for the preparation of any required
reports.
Nathan Statham, CPA, MBA — Senior Accountant
Mr. Nathan Statham, CPA, is a senior accountant with the firm. He is licensed to practice
as a certified public accountant in the State of California. Mr. Statham has two and a half
years of public accounting experience. He has provided accounting, auditing, and
consulting services for municipalities, special districts, water agencies, and various
nonprofit organizations. He will be responsible for planning the audit, supervising the staff
assigned to the engagement, and performing reviews of all work - papers prepared for the
engagement. In addition, he will also be responsible for the preparation of any required
reports.
IV!
24 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Similar engagements with other governmental entities
Similar engagements with other governmental entities
1.
Entity:
CITY OF NORCO
Scope of work:
Financial Audit/Single Audit/CAFR* /Successor Agency
Date:
Years ending June 30, 2001 through 2014
Engagement partner.'
Mr. Terry P. Shea
Total hours:
Approximately 400 hours each year
Contact person:
Ms. Olivia Hoyt, Accounting Manager,
(951) 735 -3900, ohoyt @ci.norco.ca.us
2.
Entity:
CITY OF EL CAJON
Scope of work:
Financial Audit/CAFR* /Successor Agency
Date:
Years ending June 30, 2008 through 2014
Engagement partner:
Mr. Scott Manno/Terry Shea
Total hours:
Approximately 400 hours each year
Contact person:
Ms. Holly Reed -Falk, Finance Manager,
(619) 441 -1763, HRfalk @cityofelcajon.us
3.
Entity:
CITY OF REDONDO BEACH .
Scope of work:
Financial Audit/Single Audit/CAFR* /Successor Agency
Date:
Year ending June 30, 2012 through 2013
Engagement partner:
Mr. Terry P. Shea
Total hours:
Approximately 500 hours each year
Contact person:
Mr. Craig Koehler, Finance Director,
(310) 937 -6629, Craig.koehler @redondo.org
4.
Entity:
CITY OF CHINO
Scope of work:
Financial Audit/Single Audit/CAFR* /Successor Agency
Date:
Year ending June 30, 2011 through 2014
Engagement partner.
Mr. Scott Manno
Total hours:
Approximately 450 hours each year
Contact person:
Mr. Rod Burns, Director of Finance,
(909) 334 -3262, rburns @cityofchino.org
5.
Entity:
CITY OF LA MESA
Scope of work:
Financial Audit/Single Audit /CAFR* /Successor Agency
Date:
Years ending June 30, 2011 through 2014
Engagement partner
Mr. Terry P. Shea
Total hours:
Approximately 325 hours each year
Contact person:
Ms. Sarah Waller - Bullock, Finance Director,
(619) 667 -1122, sbullock @ci.la- mesa.ca.us.
* = received GFOA award.
M
25 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach)
Specific audit strategy
The following is a summary of the audit team's approach for the City's engagement. The audit will
be divided into the following phases:
Interim phase — planning, pre -audit administration and internal control testing
During this phase of the audit, our principal objectives will be as follows:
✓ Discuss the dates of the interim and year -end field work.
✓ Perform risk assessment procedures by completing the following procedures:
- Obtain an understanding of the City and its environment, including its internal
control, sufficient to plan the audit.
- Evaluate the design and effectiveness of the City's internal controls and
determine whether they have been implemented.
- Perform walkthrough of all significant transaction classes.
- Perform tests of controls, if applicable.
In order to achieve the desired objectives of this phase of the audit, we will:
• Meet with the City's staff in order to determine convenient dates in which we can begin
our audit, and to discuss the assistance to be provided by the City's staff.
Review and evaluate the City's accounting and reporting processes by reviewing the
prior year's audit work - papers, any City - prepared documents such as budgets, in -house
financial reports, policies and procedures manuals, minutes of board meetings, etc.,
and by using various analytical procedures. Analytical procedures will enhance our
understanding of the City and will help us identify areas that may need further
assessment and additional testing.
Review and retain copies of any pertinent local, state and federal statutes, regulations,
or charters that apply to the City. We will also review and retain copies of any
agreements or contractual obligations (e.g., debt and grant documents, lease
agreements, revenue agreements, etc.).
Evaluate the design of controls that are relevant to the audit by obtaining a thorough
understanding of the City's internal controls over financial reporting and compliance by
documenting key internal control components, utilizing questionnaires, walkthroughs,
inquiring of the City's personnel, and observing and reviewing key supporting
documentation (a more thorough explanation of this process is discussed later in the
technical proposal).
Hold brainstorming sessions with engagement team members to discuss the
susceptibility of the City's financial statements to material misstatement and fraud.
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26 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
• Review and analyze supporting data and determine what reliance will be placed on
internal controls and assess control risk.
• Test controls, if control risk is assessed below the maximum, by selecting a sample of
transactions within the audit area being tested and reviewing supporting documentation,
and evaluating the completeness of the documentation tested, as well as the adequacy
of support and approvals as they appear on the support.
• Document and review with management, any findings noted during the testing of
internal controls and provide a preliminary management letter that will include our
recommendations for improving any weaknesses in operations noted during our internal
control analysis and tests of controls. The letter will also include suggestions for
improving the efficiency of the City's operations.
This phase of the engagement for the audit will take approximately 80 hours and be performed by
the manager, senior /supervisor accountant and two staff accountants with direct supervision by the
audit partner.
Year -end phase I — substantive testing
During this phase of the audit, our principal objectives will be as follows:
✓ Assess the risk of material misstatement at the financial statement level and specific
assertions.
✓ Design overall responses to assessed risks and further audit procedures.
✓ Perform substantive tests, as needed, and complete the audit.
✓ Evaluate audit findings, if applicable.
In order to achieve the desired objectives of this phase of the audit, we will:
• Determine whether our testing supports the assessed level of risk initially assigned at
the financial statement level and at the assertion level.
• Identify significant risks.
• Develop a detailed audit plan.
• Design substantive tests of account balances, modified specifically for the City's
operations and assessed level of risk. Substantive procedures could, depending on our
risk assessment, consist of the following:
• Confirmation of cash and investment balances
• Testing of cash and investment reconciliations
• Testing GASB 40 disclosures
• Testing for compliance with the City's investment policy
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27 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
• Testing of interest income allocations to the various funds
• Analytical review and subsequent receipt testing of significant receivables
• Evaluate if receivables are valued properly and perform tests of balances in
conjunction with the testing of revenues
• Testing of significant inventory and other asset accounts
• Testing of additions and deletions to capital assets, including CIP accounts
• Perform a search for unrecorded liabilities
• Testing of significant liability and accrued liability accounts
• Evaluate the support for compensated absences
• Review the valuation of claims and judgments
• Testing of long -term debt balances and debt covenants
• Analytical review of interest expense
• Testing of net position (net asset) classifications
• Testing of revenues through either analytical procedures and /or detailed testing
• Testing of expenses through either analytical procedures and /or detailed testing
• Payroll testing for compliance with approved salary schedules
• Examination of interfund transfers and testing of transfers out of restricted funds
• Review the minutes of the board meetings
• Review significant contracts, debt issuances, leases and other agreements
• Review of subsequent events after year end (through the completion of our audit)
• Testing for significant commitments to be disclosed in the financial statements
• Confirm with legal counsel any significant legal matters affecting the City's
financial position
The above list is not all- inclusive. After our detailed risk assessment procedures, we will determine
which procedures to perform relative to the audit. All of our audits are customized to each entity,
helping to ensure a complete, effective, and efficient audit.
This phase of the engagement will take approximately 240 hours and be performed by the
manager, senior accountant and two staff accountants with direct supervision by the audit partner.
Year -end phase 11 — reporting /audit conclusion
During this phase of the audit, our principal objectives will be as follows:
✓ Evaluate whether the financial statements, taken as a whole, are free from material
misstatement.
✓ Form an opinion and issue the audit reports.
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28 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
In order to achieve the desired objectives of this phase of the audit, we will:
• Determine whether, based on our substantive testing and other procedures, the
financial statements, taken as a whole, are free of material misstatement. This will
provide the basis for our opinion.
• Review of all audit work - papers by the engagement partner and manager to ensure that
the audit was performed in accordance with the required standards (GAAS, GAGAS,
etc.).
• Prepare drafts of all required reports by the agreed -upon dates.
• Conduct an independent review of the financial statement draft by the firm's technical
review partner.
• Issue all reports by the agreed -upon dates.
This phase of the engagement will take approximately 130 hours and be performed by the audit
manager, senior and one staff accountant with direct supervision by the audit partner. In addition,
the quality control partner will perform a quality control review of the financial statements.
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29 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
Understanding of internal control
Our approach to obtaining an understanding of the City's internal control over financial reporting
will be performed in accordance with professional standards as promulgated by the American
Institute of Certified Public Accountants -- our understanding will include the Control Environment,
Risk Assessment, Control Activities, Information and Communication, and Monitoring. Our
approach is as follows:
Control Environment. Through inquiry of the City's personnel, prompted by questionnaires,
personal knowledge, and review of the minutes of the City's board meetings, we will obtain an
understanding of management's and the City Council's attitudes, awareness and actions
concerning the control environment, focusing on the substance of the controls rather than their
form.
Risk Assessment. Through inquiry of the City's personnel and the use of questionnaires, we will
obtain sufficient knowledge of the City's risk assessment process to understand how management
considers risks relevant to financial reporting objectives and decides upon actions to address those
risks. This will include understanding how management identifies risks, estimates the significance
of these risks, assesses the likelihood of their occurrence, and relates them to financial reporting.
Control Activities. Certain control procedures will be documented during our analysis of the
control environment and the accounting system. However, many specific control procedures will
still need to be documented that will focus primarily on the City's major transaction cycles. As
mentioned above, we will test the City's control procedures on which we intend to rely for
safeguarding assets from unauthorized use or disposition and detecting /preventing unauthorized
transactions. Any flow charts, organizational charts and any other manuals, programs, and
financial and management information systems will be analyzed during this process.
Information and Communication. Through inquiry of the City's personnel, we will identify the
major.types of transactions engaged in by the City. We will become familiar with the treatment of
those transactions, including how the transactions are initiated, the related accounting records, and
the manner of processing the transactions. Finally, we will obtain an understanding of the City's
financial reporting process used to prepare financial reports, including the approaches used in
making accounting estimates and disclosures.
Monitoring. Through the inquiry of the City's personnel and the use of questionnaires, we will
obtain sufficient knowledge of the major types of activities the City uses to monitor internal control
over financial reporting. We will also determine how those activities are used to initiate corrective
actions.
Egli
30 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
Sample sizes
Our sample sizes will be determined in accordance with the AICPA's Audit and Accounting Guide,
Audit Sampling, and will be selected using professional judgment as permitted by SAS No. 111:
Amendment to Statement on Auditing Standards No. 39, Audit Sampling. Our methods are
designed to provide the most audit coverage without expending excess time. Our sample sizes will
depend upon our preliminary assessment of control risk, as well as our planned substantive testing
and analytical procedures.
Approach in drawing samples for compliance testing
Our approach to be taken in drawing audit samples for purposes of tests of compliance will depend
on the number of transactions, the amounts of financial assistance provided (as applicable), and
the City's internal controls over the respective programs. We will select samples that will provide
sufficient evidence of the City's compliance with the laws and regulations that will have a material
effect on compliance with laws and regulations.
Computer technology in the audit
Our firm has adopted a paperless audit approach. Using our engagement software, all audit team
members are linked to each other using a local router which enables them to share information at
an almost real -time speed. In addition, once your trial balances and financial statements are
entered into our software, we are able to observe your statements in the field allowing us to notice
any variances and address them at your office. With this in mind, we would prefer all audit
information in an electronic format, particularly trial balances and general ledgers. If electronic
formatting is not available, all audit teams have portable scanners and printers while on location
during fieldwork. In addition, we can access our accounting and auditing resources through either a
wireless or wired internet connection. We link the CAFR schedules directly to our audit software
trial balances, and as result, we can provide the City with fund financial statements almost
immediately after importing the trial balances. Additionally, journal entries are easy to post to the
CAFR schedules and the risk of data entry error is minimized. We can provide the City with our
audited trial balances which show the coding of the CAFR schedules for ease of review for City
staff. These reports show each account coded to a specific CAFR line item as well as journal
entries posted during the audit.
EDP software
It is our intent to audit around the City's computer system. However,
be more efficient and cost effective to audit through the City's system,
procedures after discussing the matter with the City.
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if we determine that it would
we will apply the necessary
31 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
Analytical procedures.
We will utilize analytical review procedures throughout our audit of the City. During the interim
phase of our audit, we will compare current and prior year unadjusted balances to determine areas
that may need additional analysis; we will also compare current year actual amounts to the City's
annual budget. During the final phase of our audit, we will perform procedures similar to those
mentioned above, as well as compare certain financial ratios for current and prior years. We will
also conduct certain "reasonableness" tests. Finally, after we have completed our field work, we
will compare current and prior year audited balances, keeping in mind expected relationships
obtained from our knowledge of the City and various other entities.
Approach in determining applicable laws and regulations
We understand the importance of laws and regulations in planning an audit of a local government
or not - for - profit entity. As part of our audit process, our audit team will obtain an understanding of
the laws and regulations that will have a direct and material effect on the City's financial
statements. In determining which laws and regulations are applicable to the City's financial
statement audit, we will consult the following sources:
♦ AICPA Audit and Accounting Guide, Audits of State and Local Governments
♦ The Division of Local Government Fiscal Affairs Minimum Audit Requirements
♦ US Government Accountability Office's Government Auditing Standards (The
Yellow Book), 2011 Revision
♦ Applicable contracts /grants of the City of Poway
♦ The Single Audit Act Amendments of 1996
♦ Office of Management and Budget (OMB) Circular A -133, Audits of States, Local
Governments and Non - Profit Organizations
♦ OMB Circular A -87, Cost Principles for State and Local Governments
♦ OMB's Circular A -133, Compliance Supplement
After consulting the applicable sources, we will design our audit to provide reasonable assurance
of detecting material instances of noncompliance.
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32 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Specific audit strategy (audit approach) (continued)
Evaluation of internal controls and management letter comments
During our audit, we will consider the City's internal control over financial reporting (internal control)
as a basis for designing audit procedures that are appropriate in the circumstances for the purpose
of expressing our opinion on the financial statements, but not for the purpose of expressing an
opinion on the effectiveness of the City's internal control. Our consideration of internal control is not
designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. There are three classifications of
internal control deficiencies. We will work carefully with your staff to ensure the correct
classification of any identified internal control deficiencies. The three classifications are as follows:
• Control deficiency — a minor internal control deficiency that can be communicated either
verbally or in writing to management.
• Significant deficiency — a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by
those charged with governance, and must be communicated in writing.
• Material weakness — a deficiency, or a combination of deficiencies in internal control,
such that there is a reasonable possibility that a material misstatement of the entity's
financial statements will not be prevented, or detected and corrected, on a timely basis,
and must be communicated in writing to those charged with governance.
When we prepare internal control recommendations, we obtain a thorough understanding of the
specific circumstances surrounding the finding, and discuss the matters with management prior to
drafting the letter. We work with your staff to ensure that the recommendation is reasonable and
practical to implement.
-16-
33 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Identification of anticipated potential audit problems
Identification of anticipated potential audit problems
One potential problem could be the implementation of GASB Statement No. 65, "Items Previously
Reported as Assets and Liabilities ". Our approach to solving this problem would be to examine the
City's CAFR and identify potential items that would be impacted by GASB 65. We would discuss
those items with the City staff to obtain a clear understanding of the items in order to determine the
proper treatment and reporting under GASB 65, and then assist City staff with the implementation
of the statement.
-17-
34 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Resumes of key engagement personnel
Terry P. Shea, CPA
Engagement Partner
Professional experience
Mr. Shea began his career with Thomas, Byrne and Smith in 1981. He spent six years with the firm primarily
working on audits of municipalities, special districts, redevelopment and other governmental agencies. He
joined Rogers, Anderson, Malody & Scott, LLP in 1987 where he has completed governmental audits
including municipalities and provided financial consulting services for various cities.
Education /licenses
Bachelor of Arts degree from California State University, Fullerton
Certified Public Accountant — State of California
Related professional experience
Governmental and not - for - profit entities that Mr. Shea has served include the following ( *includes enterprise
fund accounting):
City of La Mesa*
City of Grand Terrace*
City of Twentynine Palms
City of Corona*
City of Norco*
City of Indio*
Ventura Regional Sanitation
District
City of Fontana*
City of Loma Linda*
City of Palm Desert
City of San Jacinto*
City of San Bernardino*
City of San Bernardino EDA
Crestline -Lake Arrowhead
Water Agency
City of Goleta
City of Mission Viejo*
City of Riverside*
City of El Cajon*
Town of Yucca Valley
City of Indian Wells
University Enterprise Corporation
at CSUSB
Philanthropic City at CSUSB
Associated Students, Inc. at CSUSB
Santos Manuel Student Union
Mr. Shea served as the Interim Finance Director for the City of Perris from July 1998 to October 2001. He
currently serves as the Contract Finance Director for two Riverside County cities and one Los Angeles
County city.
Continuing professional education
Mr. Shea has completed approximately 80 hours of continuing professional education courses in the past
three years, of which, the following select courses are relevant to this engagement:
♦ AICPA —Cities in Governmental Accounting
♦ AICPA — Governmental and Not -for Profit Conference
CSCPA — Governmental Auditing Skills
♦ Thomson Reuters —Audits of State and Local Governments
Professional affiliations
Mr. Shea is a member of the following professional organizations:
♦ American Institute of Certified Public Accountants (AICPA)
♦ California Society of Certified Public Accountants (CSCPA)
Government Finance Officers Association (GFOA)
♦ California Society of Municipal Finance Officers (CSMFO)
-18-
35 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF PO WAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Resumes of key engagement personnel (continued)
Scott W. Manno, CPA, CGMA
Audit Partner— Quality Control
Professional experience
Mr. Manno began his career with Thomas, Bigbie and Smith in 1995. He spent six years with the firm
primarily working on audits of municipalities, special districts and redevelopment agencies as well as various
non - profit organizations. He joined Rogers, Anderson, Malody & Scott, LLP in July 2001.
Education /licenses
Bachelor of Science degree from California State University, San Bernardino
Certified Public Accountant — State of California
Chartered Global Management Accountant — American Institute of Certified Public Accountants
Related professional experience
Governmental agencies that Mr.. Manno has served include the following ( *includes enterprise fund
accounting):
City of Fillmore*
City of Chino*
Town of Yucca Valley*
City of Sierra Madre*
City of Calimesa
City of San Jacinto*
City of La Verne*
City of Lake Elsinore*
Continuing professional education
City of Twentynine Palms
City of Goleta
City of Grand Terrace*
City of Norco*
City of Mission Viejo*
City of La Mesa*
City of Lemon Grove
City of San Juan Capistrano*
Mr. Manno has completed over 170 hours of continuing professional education courses over the past three
years of which the following select courses are relevant to this engagement:
♦ Texas Tech University, Governmental Accounting and Financial Reporting
♦ Texas Tech University, Governmental Accounting, Reporting and Auditing Update
American Institute of Certified Public Accountants, Governmental Accounting and Reporting
Professional affiliations
Mr. Manno is a member of the following organizations:
American Institute of Certified Public Accountants (AICPA)
♦ California Society of Certified Public Accountants (CSCPA)
♦ Association of Certified Fraud Examiners (ACFE)
Association of Government Accountants (AGA)
♦ Government Finance Officers Association (GFOA)
♦ California Society of Municipal Finance Officers (CSMFO)
-19-
36 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Resumes of key engagement personnel (continued)
Brad A. Welebir, MBA, Audit Manager
Certified Public Accountant
Professional Experience
Mr. Welebir joined Rogers, Anderson, Malody & Scott, LLP in January 2004. He works primarily on audits
of governmental agencies, small to mid -sized businesses, and nonprofit organizations. Prior to joining
our firm, he began his career with Sam's Club, where he was the operations manager. He then worked
for La Sierra Academy as an accountant.
Education
Masters of Business Administration — Accounting Emphasis from California State
University, Fullerton in June 2003
Bachelor of Arts in Business Administration from La Sierra University in 1996
Certified Public Accountant — State of California
Related Professional Experience
Organizations that Mr. Welebir has served include the following ( *includes enterprise fund accounting):
City of Mission Viejo*
City of San Juan Capistrano*
Town of Yucca Valley*
City of La Verne*
Helendale Community Services District*
City of Grand Terrace*
Continuing Professional Education
Rossmoor Community Services District
City of Redondo Beach*
City of San Bernardino*
City of Norco*
City of Moorpark
City of Chino*
Mr. Welebir has completed 81 hours of continuing professional education courses in the past two years of
which the following select courses are relevant to this engagement:
♦ Thomson Reuters, Audits of State and Local Governments
♦ American Institute of Certified Public Accountants, Foundations in Governmental Accounting
♦ California Society of CPAs Education Foundation, Governmental Accounting and Auditing
Update
American Institute of Certified Public Accountants, Applying A -133 to Nonprofit and
Governmental Organizations
Professional Affiliations
Mr. Welebir is a member of the following professional organizations:
♦ American Institute of Certified Public Accountants (AICPA)
♦ California Society of Certified Public Accountants (CSCPA)
• California Society of Municipal Finance Officers (CSMFO)
-20-
37 of 44 Attachment A September 16, 2014 Item # 4.1
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Resumes of key engagement personnel (continued)
Nathan Statham, MBA, Senior Accountant
Certified Public Accountant
Professional Experience
Mr. Statham joined Rogers, Anderson, Malody & Scott, LLP in January 2012. He works primarily on
audits of governmental agencies, small to mid -sized businesses, and nonprofit organizations. Prior to
joining our firm, he began his career in the real estate finance industry.
Education
Masters of Business Administration — Finance Emphasis from California State
University, San Bernardino December 2011
Bachelor of Arts in Business Administration from California State University, San Bernardino December
2009
Certified Public Accountant — State of California
Related Professional Experience
Organizations that Mr. Statham has served include the following ( *includes enterprise fund accounting):
City of San Juan Capistrano
City of Sierra Madre*
City Rosemead*
Western Municipal Water District*
Inland Empire Resource Conservation District
California State University San Bernardino
Foundation*
Continuing Professional Education
City of Redondo Beach*
City of El Cajon*
City of Fillmore*
Ventura County Public Finance Authority*
Crestline Village Water District*
Santa Ana Watershed Association*
Mr. Statham has completed 22 hours of continuing professional education courses in the past two years
of which the following select courses are relevant to this engagement:
California Society of CPAs Education Foundation, Governmental Accounting and Auditing
Update
American Institute of Certified Public Accountants, Single Audit Advanced Concepts
Governmental Accounting Standards Board, Other Postemployment Benefits
Professional Affiliations
Mr. Statham is a member of the following professional organizations:
♦ American Institute of Certified Public Accountants (AICPA)
♦ California Society of Certified Public Accountants (CSCPA)
dAe
38 of 44 Attachment A September 16, 2014 Item # 4.1
CPA, imi CoN,mrNtii♦
System Review Report
May 31, 2012
To the Owners of
Rogers, Anderson, Malody & Scott, LLP
and the Peer Review Committee of the
California Society of Certified Public Accountants
Attachment A
P011IN1 t1 1;11
t.I:t' 161 t iit1P%00, 1,TA 111431 -Ie'1i
3 aPC117C%V 11OtCtJ. k:VA, oIm - iv;t is
! t.t11R` Lev kjwjsAai i Pr1
W 010111 t. :ri,n, s. PA
HRX1 ADhR`r'thATVVt 1R
Lir tldui
We have reviewed the system of quality control for the accounting and auditing practice of Rogers,
Anderson, Malody & Scott, LLP (the firm) in effect for the year ended November 30, .2011. Our peer
review was conducted in accordance with the Standards for_ Performing and Reporting on Peer Reviews
established by the Peer Review Board of the American Institute of Certified Public Accountants. The firm
is responsible for designing a system of quality .control and complying with it to provide the firm .with
reasonable assurance of performing and reporting in conformity with applicable professional standards in
all material respects. Our responsibility is to express an opinion on the design of the system of quality
control and the firm's compliance therewith based on our review. The nature, objectives, scope,
limitations of, and the procedures performed in a System Review are described in the standards at
www.aicpa:orglprsummary.
As required by the standards, engagements selected fdr review _included engagements performed under
Government auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice of Rogers,
Anderson, .Malody & Scott, LLP in effect for the year ended November 30, 2011, has been suitably
designed and complied with to provide the firm with reasonable assurance of performing and reporting in
conformity with applicable professional standards in all material respects. Firms can receive a rating of
pass, pass with deficieney(ies) or fail. Rogers, Anderson., :Malody & Scott, LLP has received a peer
review rating of pass.
iti'tt.f�;pV,..J-nw.�¢:nI Su-i;t, ctti l 10'3?23: l, ?� :"53 • x•t.r ✓l:iiiftr:,ahlarc :lt:t� +t
-22-
39 of 44 Attachment A September 16, 2014 Item # 4.1
Attachment B
CURRENT CLIENTS
-23-
40 of 44 Attachment A September 16, 2014 Item # 4.1
CSMFO/
GFOA
Successor
Housing
Government Client
Years Served
Awards
Agency
Authority
City of Norco
06/30/04
to
06/30/14
Yes
Yes
No
City of Grand Terrace
06/30/04
to
06/30/13
Yes
Yes
City of El Cajon
06/30/07
to
06/30/14
Yes
Yes
Yes
City of Fillmore
06/30/08
to
06/30/14
Yes
Yes
Town of Yucca Valley
06/30/08
to
06/30/14
Yes
Yes
Yes
City of San Juan Capistrano
06/30/11
to
06/30/14
Yes
Yes
Yes
City of La Verne
06/30/11
to
06/30/14
Yes
Yes
Yes
City of San Jacinto
06/30/11
to
06/30/14
Yes
Yes
City of Twentynine Palms
06/30/11
to
06/30/14
Yes
Yes
Yes
City of Chino
06/30/11
to
06/30/14
Yes
Yes
Yes
City of La Mesa
06/30/11
to
06/30/14
Yes
Yes
City of Rosemead
06/30/11
to
06/30114
Yes
Yes
Yes
City of Moorpark
06/30/12
to
06/30/14
Yes
Yes
Yes
City of Mission Viejo
06/30/12
to
06/30/14
Yes
Yes
Yes
City of Capitola
06/30/12
to
06/30/14
Yes
Yes
Yes
City of Redondo Beach
06/30/12
to
06/30/14
Yes
Yes
Yes
City of Loma Linda
06/30/13
to
06/30/14
Yes
Yes
Yes
City of Sierra Madre
06/30/12
to
06/30/14
Yes
Yes
Crestline Village Water District
04/30/96
to
04/30/14
Crestline -Lake Arrowhead Water
06/30/98
to
06/30/14
San Bdno Valley Muni Water Dist
06/30/04
to
06/30/14
Ventura Regional Sanitation District
06/30/07
to
06/30/14
Yes
Saticoy Sanitary District
06/30/07
to
06/30/14
Helendale CSD
06/30/10
to
06/30/14
Pine Cove Water District
06/30/10
to
06/30/14
Western Municipal Water District
06/30/11
to
06/30/14
Yes
WRCRWA
06/30/11
to
06/30/14
Vista Irrigation District
06/30/11
to
06/30/14
Yes
Idyllwild Water District
06/30/11
to
06/30/14
Helix Water District
06/30/12
to
06/30/14
Yes
29 Palms Water District
06/30/12
to
06/30/14
Big Bear Area Regional Wastewater
06/30/12
to
06/30/14
Yes
Inland Empire Resource Cons Dist
06/30/04
to
06/30/14
Rossmoor CSD
06/30/05
to
06/30/14
Rim of the World Park & Rec Dist
06/30/06
to
06/30/14
Ventura County Regional Energy
06/30/07
to
06/30/14
Heartlands Communications Fac Auth
06/30/07
to
06/30/14
Heartlands Fire Training Auth
06/30/07
to
06/30/14
Santa Ana Watershed Assoc
12/31/09
to
12/31/13
-23-
40 of 44 Attachment A September 16, 2014 Item # 4.1
41 of 44
Attachment B
SB Fire Training 06/30/10 to 06/30/14
Capistrano Bay CSD 06/30/13 to 06/30/14
Ventura County Public Fin Auth 06/30/12 to 06/30/14
CSUSB - Student Union
06/30/05
to
06/30/14
CSUSB - Associated Students Incorp
06/30/10
to
06/30/14
CSUSB - Philanthropic Foundation
06/30/11
to
06/30/14
CSUSB - University Enterprise Corp
06/30/11
to
06/30/14
-24-
Attachment A September 16, 2014 Item # 4.1
DON RIGGINSON, Mayor CITY OF POWAY
DAVE GROSCI I, Deputy Mayor
JIM CUNNINGHAM, CoundImember
JOHN MULLIN, Coundimember
STEVE VAUS, Councilmember
ADDENDUM NO. 1
Professional Auditing Services
RFP 15 -003
TO ALL PROSPECTIVE PROPOSERS:
The following changes are made to the Proposal:
1. Page 15: Replace Attachment A with the'attached Revised Attachment A.
2. Page 16: Replace Attachment B with the attached Revised Attachment B.
Attachment C
POW4�
IN THE CO
All proposers shall acknowledge receipt and acceptance of this Addendum No, 1 and replacement pages by
signing in the space provided and submitting the signed Addendum with the proposal.
Date: f4--/y
Receipt ack dged by:
Authorize ignature /Company Name
Andrew White, Finance Manager /Date
Date
City Hall Located at 13325 Civic Center Drive
Mailing Address: P.O. Box 789, Poway, California 92074.0789
www.poway.org
42 of 44 Attaclifrent A September 16, 2014 Item # 4.1
City of Poway
Proposal for Professional Auditing Services
Audit Work Cost'Proposal Form
Rogers, Anderson, Malody & Scott, LLP
Certified Public Accountants
Service
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
City of Poway Audit and Related
Reports
$ 27,000
$ 27,500
$ 28,000
$ 28,500
$ 29,000
Poway Housing Authority Audit
4,500
4,700
4,900
5,050
5,200
Poway Public Financing
Authority
4,500
4 700
4,900
5,050
5 200
Preparation of Financial
Statements
5,800
5,900
6,000
6,100
6,200
Agreed -Upon Procedures GANN
Limit
700
700
700
700
700
Single Audit and Related
Reports if needed *
3,000
3-10-0-0-
3,000
3,100
3,200
Total for Fiscal Year (not -to
exceed)
$ 45,500
$ 46,500
$ 47,500
$ 48,500
$ 49,500
* = Fee for first major program, each additional major program is $2,000.
43 of 44 Attachment A September 16, 2014 Item # 4.1
City of Poway
Proposal for Professional Auditing Services
Estimate of Cost
Rogers, Anderson, Malody & Scott, LLP
Certified Public Accountants
Name of Firm: Rogers, Anderson, Malody & Scott, LLP
Address: 735 E Carnegie Drive, Suite 100
San Bernardino, CA 92408
Contact Name: Terry Shea, CPA
Contact Phone #: 909 - 889 -0871
Fax #: 909 - 889 -5361
Contact Email: tshea @ramscpa.net
1. Auditor's Standard Billing Rate
Auditor's Standard Hourly Billing Rates
POSITION
2013/14
2014/15
2015/16
2016/17
2017/18
Partner
$ 230
$ 230
$ 235
$ 235
$ 240
Manager
155
155
160
160
165
Senior Accountant
115
115
120
120
125
Staff Accountant
75
80
80
85
85
Clerical
40
40
40
40
40
44 of 44 Attachment A September 16, 2014 Item # 4.1