Item 1.8 - Contract for Professional Auditing Services; Davis Farr, LLPCity of PowayE)COUNCIL AGEN®A REPORT
DATE: April 16, 2019
TO: Honorable Mayor and Members of the City Council
FROM: Tina White, City Manager
CONTACT: Donna Goldsmith, Director of Finance
858) 668-4411 or dgoldsmith( )oway.org
APPROVED
APPROVED AS AMENDED
SEE MINUTES)
DENIED
REMOVED
CONTINUED
RESOLUTION NO.
Debra Weatherington, Senior Accountant
858) 668-4429 or dweatherington gnpoway.org
SUBJECT: Award of Contract to Davis Farr, LLP for Professional Auditing Services
Summary:
Based upon a recent Request for Proposals (RFP) process, staff is seeking approval to enter into
an agreement with Davis Farr, LLP to provide professional auditing services to the City of Poway
for three (3) fiscal years beginning with the fiscal year ending June 30, 2019, with the option to
extend the agreement for two additional one-year terms.
Recommended Action:
It is recommended that the City Council award a contract to Davis Farr, LLP for professional
auditing services and authorize the City Manager to execute all necessary documents associated
with the agreement. The initial term of the contract is three years with the option to extend for
two additional one-year terms.
Discussion:
The City of Poway's (City) current contract with Rogers, Anderson, Malody & Scott, LLP for
auditing services has expired. In January 2019, 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. Optional services
include preparation of the annual State Controller's Report and Franchise Fee, Operating Lease
and Transient Occupancy audits.
The RFP was posted on the California Society of Municipal Officer's website, as well as the City's
online a -bid board. Seven (7) firms submitted proposals. Based upon review of each firm's
pricing, qualifications, and responsiveness to the RFP requirements, staff conducted interviews
with the three (3) highest rated firms. Following the interviews, staff conducted reference checks
on the top two finalists.
1 of 40 April 16, 2019, Item #1.8
Findings:
After a thorough evaluation of submitted proposals, Davis Farr, LLP was selected as the firm best
suited to meet the City's current and future needs. Davis Farr, LLP has extensive experience
working with the public sector, including the audit of other local cities such as Carlsbad and
Santee.
Staff recommends the City enter into an agreement with Davis Farr, LLP for a period of three
years, with the option to extend for two additional one-year terms.
Environmental Review:
None.
Fiscal Impact:
There is currently $60,000 available for these services in the fiscal year 2018-19 Adopted Budget.
These funds are split between the Director of Finance's operating budget ($51,000; 110010-
17030) and the Development Services Housing Authority Division's operating budget ($9,000;
309030-17030).
Public Notification:
None.
Attachment:
A. Professional Services Agreement with Davis Farr, LLP
Reviewed/Approved By:
Wendy Kaserman
Assistant City Manager
2 of 40
Reviewed By: Approved By: '
A
t"
Alan Fenstermacher Tina M. White
City Attorney City Manager
April 16, 2019, Item #1.8
City of Poway
STANDARD AGREEMENT FOR SERVICES
This Agreement, entered into this 17 day of April, 2019, by and between the CITY
OF POWAY (hereinafter referred to as "City") and DAVIS FARR, 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 a certified public accounting firm 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:
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 Aareement.
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 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.
3 of 40 ATTACHMENT A April 16, 2019, Item #1.8
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.
B. 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.
S. 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 code. 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.
4 of 40 April 16, 2019, Item #1.8
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 the Political Reform Act and/or
implementing regulations promulgated by the Fair Political Practices Commission,
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.
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)
5of40 April 16, 2019, Item #1.8
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 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.
6 of 40 4 April 16, 2019, Item #1.8
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.
e) Consultant shall, upon receipt of written notice of any Claim, promptly take all
action necessary to make a claim under any applicable insurance policy or policies Consultant is
carrying and maintaining; however, if Consultant fails to take such action as is necessary to make
a claim under any such insurance policy, Consultant shall reimburse City for any and all costs,
charges, expenses, damages and liabilities incurred by City in making any claim on behalf of
Consultant under any insurance policy or policies required pursuant to this Agreement.
f) The obligations described in Section 15(a) through (e) above shall not be
construed to negate, abridge or otherwise reduce any other right or obligation of indemnity which
would otherwise exist as to any party or person indemnified pursuant to this Section 15.
g) The rights and obligations of the parties described in this Section 15 shall survive
the termination of this Agreement.
16. Assumption of Risk.
Except for injuries to persons caused by the willful misconduct of any Indemnitee and not
covered by insurance maintained, or required by this Agreement to be maintained, by Consultant:
a) Consultant hereby assumes the risk of any and all injury and damage to the personnel
including death) and property of Consultant that occurs in the course of, or in connection with,
the performance of Consultant's obligations under this Agreement, including but not limited to
Consultant's Scope of Services; and (b) it is hereby agreed that the Indemnitees are not to be
liable for injury or damage which may be sustained by the person, goods or property of Consultant
or its employees in connection with Consultant's performance its obligations under this
Agreement, including but not limited to Consultant's Scope of Services.
17. 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.
18. 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.
7 of 40 April 16, 2019, Item #1.8
Consultant's personnel shall at all times comply with City's drug and alcohol
policies then in effect.
19. Notices.
Notices shall be given as described on Exhibit "A" entitled "Special Provisions"
attached hereto and made a part hereof.
20. Governing Law, Forum Selection and Attorneys' Fees.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of California. Each party to this Agreement consents to personal jurisdiction in San
Diego County, California, and hereby authorizes and accepts service of process sufficient for
personal jurisdiction by first class mail, registered or certified, postage prepaid, to its address for
giving notice as set forth in Exhibit "A" hereto. 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, unless the parties mutually agree to submit their dispute to arbitration. 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. The prevailing party in any such
action or proceeding shall be entitled to recover all of its reasonable litigation expenses, including
its expert fees, attorneys' fees, courts costs, arbitration costs, and any other fees.
Notwithstanding the foregoing, in the event that the subject of such an 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, and neither party shall be entitled to recover their
litigation expenses.
21. 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.
22. 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.
23. 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.
24.
Contractor hereby certifies that all persons providing services to City by Contractor
are not current members of the California Public Employees' Retirement System (CalPERS) and
shall not become members of CalPERS while providing services to City.
8 of 40 6 April 16, 2019, Item #1.8
Contractor further provides that in the event Contractor assigns a retired annuitant
receiving a pension benefit from CalPERS to perform services for City, the retired annuitant is in
full compliance with Government Code section 7522.56. A copy of Government Code section
7522.56 is attached hereto as Exhibit "B."
Further, Contractor hereby fully and unconditionally indemnifies City from all
penalties, fees, employer and employee contributions, or any other assessments imposed by
CalPERS in the event CalPERS determines the person assigned by Contractor to provide
services to City has been misclassified.
25. Severability.
If any provision of this Agreement is determined by any court of competent jurisdiction or
arbitrator to be invalid, illegal, or unenforceable to any extent, that provision shall, if possible, be
construed as though more narrowly drawn, if a narrower construction would avoid such invalidity,
illegality, or unenforceability or, if that is not possible, such provision shall, to the extent of such
invalidity, illegality, or unenforceability, be severed, and the remaining provisions of this
Agreement shall remain in effect.
Remainder of page intentionally left blank)
9 of 40 April 16, 2019, Item #1.8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first above written.
CITY OF POWAY CONSULTANT
By: By:
Tina White, City Manager
Date:
ATTEST:
Faviola Medina, City Clerk
APPROVED AS TO FORM:
By:
Alan Fenstermacher, City Attorney
10 of 40
Shannon Ayala, CPA, Partner
Date:
April 16, 2019, Item #1.8
SPECIAL PROVISIONS"
W3:11-3l11dV_1W
A. Scope of Services.
Consultant agrees to perform consulting services as required by City, which shall
consist of the professional auditing services further described in the Scope of Services submitted
with the proposals dated February 22, 2019, which is included in this document as Attachment A,
and incorporated by reference, as if its contents were fully set forth herein. Consultant shall
provide the necessary qualified personnel to perform the services.
B. Compensation and Reimbursement.
City shall pay Consultant a fee in accordance with the Fee Proposals submitted
with the proposals dated February 22, 2019, which are included in this document as Attachment
B. Total fee is not to exceed $332,065, which is inclusive of expenses and includes the two
optional one-year extensions as well as additional optional services. 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.
C. Term of Agreement.
This Agreement shall be effective from the period commencing April 17, 2019, and
ending April 16, 2022 unless sooner terminated by City as provided in the section of this
Agreement entitled "Termination." This Agreement may be extended for up to two additional one-
year periods upon approval in writing of the City Manager and Consultant. 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.
D. Consultant's Insurance.
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.
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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."
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
P.O. Box 789
Poway, CA 92074
To Consultant: Davis Farr, LLP
5927 Priestly Drive, Suite 201
Carlsbad, CA 92008
12 of 40 2 April 16, 2019, Item #1.8
EXHIBIT "B"
Cal Gov Code 6 7522.56
Deering's California Codes are current through all 1016 chapters of the 2018 Regular
Session and the November 6, 2018 Ballot Measures.
Deering's California Codes Annotated > GOVERNMENT CODE > Title 1 General > Division i
Miscellaneous > Chapter 21 Public Pension and Retirement Plans > Article 4 California Public
Employees' Pension Reform Act of 2013
7522.56. Provisions applicable to person receiving pension benefit from public
retirement system; Section supersedes conflicting provisions
a)This section shall apply to any person who is receiving a pension benefit from a public
retirement system and shall supersede any other provision in conflict with this section.
b) A retired person shall not serve, be employed by, or be employed through a contract
directly by, a public employer in the same public retirement system from which the retiree
receives the benefit without reinstatement from retirement, except as permitted by this
section.
c) A person who retires from a public employer may serve without reinstatement from
retirement or loss or interruption of benefits provided by the retirement system upon
appointment by the appointing power of a public employer either during an emergency to
prevent stoppage of public business or because the retired person has skills needed to
perform work of limited duration.
d)Appointments of the person authorized under this section shall not exceed a total for all
employers in that public retirement system of 960 hours or other equivalent limit, in a
calendar or fiscal year, depending on the administrator of the system. The rate of pay for the
employment shall not be less than the minimum, nor exceed the maximum, paid by the
employer to other employees performing comparable duties, divided by 173.333 to equal an
hourly rate. A retired person whose employment without reinstatement is authorized by this
section shall acquire no service credit or retirement rights under this section with respect to
the employment unless he or she reinstates from retirement.
e)
1)Notwithstanding subdivision (c), any retired person shall not be eligible to serve
or be employed by a public employer if, during the 12 -month period prior to an
appointment described in this section, the retired person received any unemployment
insurance compensation arising out of prior employment subject to this section with
13 of 40 April 16, 2019, Item #1.8
Cal Gov Code § 7522.56
a public employer. A retiree shall certify in writing to the employer upon accepting
an offer of employment that he or she is in compliance with this requirement.
2)A retired person who accepts an appointment after receiving unemployment
insurance compensation as described in this subdivision shall terminate that
employment on the last day of the current pay period and shall not be eligible for
reappointment subject to this section for a period of 12 months following the last day
of employment.
OA retired person shall not be eligible to be employed pursuant to this section for a period
of 180 days following the date of retirement unless he or she meets one of the following
conditions:
1)The employer certifies the nature of the employment and that the appointment is
necessary to fill a critically needed position before 180 days have passed and the
appointment has been approved by the governing body of the employer in a public
meeting. The appointment may not be placed on a consent calendar.
2)
A)Except as otherwise provided in this paragraph, for state employees, the state
employer certifies the nature of the employment and that the appointment is
necessary to fill a critically needed state employment position before 180 days
have passed and the appointment has been approved by the Department of
Human Resources. The department may establish a process to delegate
appointing authority to individual state agencies, but shall audit the process to
determine if abuses of the system occur. If necessary, the department may assume
an agency's appointing authority for retired workers and may charge the
department an appropriate amount for administering that authority.
B)For legislative employees, the Senate Committee on Rules or the Assembly
Rules Committee certifies the nature of the employment and that the
appointment is necessary to fill a critically needed position before 180 days have
passed and approves the appointment in a public meeting. The appointment may
not be placed on a consent calendar.
C)For employees of the California State University, the Trustees of the California
State University certifies the nature of the employment and that the appointment is
necessary to fill a critically needed position before 180 days have passed and
approves the appointment in a public meeting. The appointment may not be placed
on a consent calendar.
3)The retiree is eligible to participate in the Faculty Early Retirement Program
pursuant to a collective bargaining agreement with the California State University
that existed prior to January 1, 2013, or has been included in subsequent agreements.
4)The retiree is a public safety officer or firefighter hired to perform a function or
functions regularly performed by a public safety officer or firefighter.
14 of 40 April 16, 2019, Item #1.8
Cal Gov Code § 7522.56
g)A retired person who accepted a retirement incentive upon retirement shall not be eligible
to be employed pursuant to this section for a period of 180 days following the date of
retirement and subdivision (f) shall not apply.
h)This section shall not apply to a person who is retired from the State Teachers'
Retirement System, and who is subject to Section 24214 24214.5 or 26812 of the
Education Code.
i)This section shall not apply to (1) a subordinate judicial officer whose position, upon
retirement, is converted to ajudgeship pursuant to Section 69615, and he or she returns to
work in the converted position, and the employer is a trial court, or (2) a retiree of the
Judges' Retirement System or the Judges' Retirement System 11 who is assigned to serve in a
court pursuant to Section 68543.5.
History
Added Stats 2012 ch 296 S 15 (AB 340) effective January 1, 2013. Amended Stats 2013 ch 528
11 (SB 13), effective October 4, 2013 (ch 528 prevails); ch 76 § 75 (AB 383), effective January
1, 2013; Stats 2014 ch 238 61 (AB 2476), effective January 1, 2015.
Annotations
Notes
Amendments:
Note—
Amendments:
2013 Amendment:
Substituted (1) "have passed" for "has passed" in the first sentence of subds (1)(1) and (f)(2); (2)
or firefighter hired to perform a function or functions regularly performed by a public safety
officer or firefighter" for "of firefighter" in subd (f)(4); and (3) "Judges' Retirement System" for
Judges' Retirement System 1" in subd (i).
16 of 40 April 16, 2019, Item #1.8
ATTACHMENT A
p• DavisFarr
CERTIFIED PUBLIC ACCOUNTANTS
CITY OF POWAY
PROPOSALFOR
PROFESSIONAL AUDITING SERVICES
Prepared By:
Davis Farr LLP
5927 Priestly Drive, Suite 201
Carlsbad, CA 92008
February 22, 2019
Contact Person:
Shannon Ayala, CPA I Partner
Main: 760.536.5140 1 Direct: 760.298.5872
Email: sayala@davisfarr.com
16 of 40 April 16, 2019, Item #1.8
City of Poway
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Table of Contents
Transmittal Letter
Section A - About Davis Farr LLP............................................................................................................ 1
Section B - Our Prior Experience Auditing Government Agencies...................................................... 2
Section C - Client References................................................................................................................... 4
Section D - Partner, Supervisory and Staff Qualifications and Experience ........................................ 5
Section E -Audit Approach 11
Section F - Implementation of New GASB Pronouncements............................................................. 16
SectionG - Scope of Work..................................................................................................................... 17
SectionH - Proposed Timing................................................................................................................. 18
Section I - Segmentation of the Audit.................................................................................................. 18
APPENDIX
Peer Review Documentation
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Oj ®avisFarr
CERTIFIED PUBLIC ACCOUNTANTS
February 22, 2019
City of Poway
Attn: Donna Goldsmith, Finance Director
13325 Civic Center Drive
Poway, CA 92064
Dear Ms. Goldsmith:
Davis Farr LLP
2301 Dupont Drive I Suite 200 1 Irvine, CA 92612
Main: 949.474.20201 Fax: 949.263.5520
We are pleased to provide our proposal to perform audit services to the City of Poway (the "City')
for the fiscal years ending June 30, 2019 through 2021, with options to extend for two additional
years.
Our service philosophy is one of open and constant communication, a proactive approach and
responsive, value-added services. We will listen to your ideas and concerns and will bring creative
solutions to you in both financial and other operational areas. We are aware that while the City
has solicited numerous proposals, Davis Farr LLP would be your best selection for the following
reasons which are set forth in greater detail in our proposal:
We take a proactive leadership role in local government accounting and auditing issues.
We serve on the Government Accounting and Audit Committee of the Cal CPA Society
and are frequent speakers on technical topics at conferences and training events
throughout California.
In addition to providing extensive audit and information technology training for our staff,
Davis Farr LLP provides an annual Governmental Accounting Standards Board (GASB)
Technical Update each spring for our clients. Our commitment to training our clients
benefits you by ensuring you receive accurate and timely information that impact
budgeting and financial reporting.
We extensively utilize IDEA data mining software to evaluate anomalies in your accounting
data. This helps focus our auditors' attention on potential errors in the accounting records
and transactions that could be more susceptible to fraud.
We appreciate the opportunity to share our credentials and look forward to developing our
professional relationship. Our proposal for fiscal years 2019- 2023 remain a firm and irrevocable
offer for the 90 days. I look forward to you contacting me so that I may answer further any
questions which you may have. You may contact me at (760) 298-5872.
Very truly yours, ' "_/
n'nIlIiNLF'IAh uM'
Shannon Ayala, /CPA
Partner
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section A — About Davis Farr LLP
Background Information — Davis Farr LLP is a full-service accounting firm that specializes in
providing attest and advisory services to federal, state, and local governments as well as non-
profit entities out of our Carlsbad and Irvine offices. Our personnel have served governmental and
non-profit entities for over 40 years. A breakdown of our government audit personnel by
classification is as follows:
License to Practice in California — Davis Farr LLP and all key personnel are licensed with the
California State Board of Accountancy to practice as independent certified public accountants.
There has been no disciplinary action taken or pending against the firm during the past three
years with state regulatory bodies or professional organizations.
Independence — Davis Farr LLP is independent with respect to the City of Poway as defined by
U.S. General Accounting Office's Government Auditing Standards and Generally Accepted Auditing
Standards.
Quality Control — Davis Farr LLP and its Partners are members of the American Institute of
Certified Public Accountants (AICPA) and is a member of the AIPCA's Government Audit Quality
Center. Our firm is a voluntary participant in the AICPA Peer Review Program. Included in the
appendix is our most recent Peer Review report where our firm received a Pass. A Pass
demonstrates the highest level of quality control in a Peer Review. Davis Farr LLP has not had any
federal or state desk reviews or field reviews during the past three years with the exception of a
review performed by the Department of Transportation (DOT). The report concluded that our
audit work complied with the requirements of the single audit act, the uniform guidance, and
DOT's major programs and included a recommendation related to documentation. There has been
no disciplinary action taken or pending against the firm during the past three years with state
regulatory bodies or professional organizations.
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section A — About Davis Farr LLP, (Continued)
Training — Every professional of the firm must enroll in continuing professional education courses.
Each person is required to take at least 80 hours of training over a two-year period including 24
hours a year specific to government accounting and audit topics. Courses cover a wide spectrum
of professional and technical subjects, and include Fraud Auditing, Professional Ethics and
Governmental Accounting and Auditing topics to help the practitioner maintain his/her
professional expertise.
Section B — Our Prior Experience Auditing Government Agencies
Davis Farr LLP is a leader in the local government sector throughout the Southern California Area.
Currently, we service approximately 60 local, state, and federal government entities. Davis Farr LLP
services routinely provided to our clients include, but are not limited to:
Financial statement audits prepared in accordance with generally accepted auditing
standards (GAAS) and Government Auditing Standards.
Financial statement reviews & compilations prepared in accordance with Statements
on Standards for Accounting and Audit Services (SSARS), issued by the AICPA Accounting
and Audit Services Committee (ARSC).
Attestation engagements involving internal control related to the financial statements
and compliance with laws, regulations, and the provisions of contracts or grant
agreements, noncompliance with which could have a material effect on the financial
statements in accordance with Government Auditing Standards.
Compliance audits of federally -funded assistance agreements and negotiated contracts
as well as all engagements involving internal control related to major programs and an
opinion (or disclaimer of opinion) on compliance with laws, regulation, and the provisions
of contracts or grant agreements that could have a direct and material effect on each
major program in accordance with the new Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards.
Agreed upon procedures audits for special projects. We perform a number of agreed
upon procedure audits to help our clients evaluate contract and law compliance for
Transient Occupancy Taxes, Franchise Taxes, Utility User Taxes, Management Agreements
to operate golf courses and other government owned facilities, and cost or revenue
sharing agreements between government agencies. Additionally, we regularly perform
agreed upon procedures for special internal projects such as evaluating compliance with
purchasing policies, testing credit card transactions, performing petty cash counts, and
other procedures.
We typically supplement these services by providing management with sound recommendations
to strengthen internal controls and/or improve operating efficiencies.
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section B — Our Prior Experience Auditing Government Agencies, (Continued)
Our government expertise includes Cities, Special Districts, and other Governmental entities.
Among the government agencies that the professionals of Davis Farr LLP have served recently are
the following:
Bighorn Desert View Water Agency
City of Avalon
City of Carlsbad
City of Commerce
City of Coronado
City of Dana Point
City of Delano
City of EI Segundo
City of Fontana
City of Fresno Housing Authority
City of Garden Grove
City of Huntington Beach
City of Mission Viejo
City of Jurupa Valley
City of San Bernardino Water Department
City of Santee
City of Torrance
City of Upland
City of Victorville
City of Villa Park
City of Woodland
Coachella Valley Conservation Authority
Coachella Valley Enterprise Zone
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County of Fresno Housing Authority
County of San Diego
Eastern Municipal Water District
Irvine Ranch Water District
Leucadia Wastewater District
Municipal Water District of Southern California
Oxnard Housing Authority
Placer County Water Agency
Rancho California Water District
Salton Sea Authority
San Diego Association of Governments
San Diego County Water Authority
San Diego Local Agency Formation Commission
San Diego Pooled Insurance Authority
San Gabriel Basin Water Quality Authority
South Coast Water District
South Montebello Irrigation District
Sweetwater Authority
Tahoe Regional Planning Agency
Tahoe Transportation District
Ventura Housing Authority
Walnut Valley Water District
West Basin Municipal Water District
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April 16, 2019, Item #1.8
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section C — Client References
For your convenience, we have listed below references for audit work currently being performed
by Davis Farr LLP personnel for several Cities throughout Southern California. For each of the
references, we currently serve as independent auditors and have served these clients for a number
of years.
Each of the clients noted above had an audit prepared with GAAP and Government Auditing
Standards and the financial statements received the GFOA award.
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City of Santee 450 Tim 619.258.4200 ext. 143
10601 Magnolia Avenue McDermott, tmcdermott@cityofsanteeca.gov
Santee, CA 92071 Finance
Director
City of Garden Grove 1,000 Ellis Chang, 714.741.5066
1122 Acacia Parkway Finance ellisc@ggcity.org
Garden Grove, CA 92840 Manager
City of Carlsbad 750 Aaron Beanan, 760.602.2414
1635 Faraday Avenue Finance aaron.beanan@carlsbadca.gov
Carlsbad, CA 92008 Manager
Sweetwater Authority 250 Rich Stevenson, 619.409.6711
505 Garrett Avenue Finance rstevenson@sweetwater.org
Chula Vista, CA 92910 Director
City of Mission Viejo 400 Cheryl Dyas, 949.470.3059
200 Civic Center Director of cdyas@cityofmissionviejo.org
Mission Viejo, CA 92691 Administrative
Services
Each of the clients noted above had an audit prepared with GAAP and Government Auditing
Standards and the financial statements received the GFOA award.
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section D — Partner, Supervisory and Staff Qualifications and Experience
The successful outcome of any audit requires personnel with the managerial and technical skills
to perform the work required. The engagement team who will serve the City of Poway have served
together as a team of professionals on numerous financial audit examinations of local government
entities. While not anticipated, any personnel substitutions will be of equally qualified personnel.
We believe that efficient administrative management and supervision of the audits is an extremely
critical factor in achieving the desired results for City of Poway. In that regard, our proposal
organizational structure for providing independent auditing services is as follows:
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Shannon Ayala, CPA
PARTNER
California CPA Certificate No. 88126, January 2004
Ms. Ayala will serve as the Partner on this audit. She will oversee the project to ensure all required
deadlines are met, provide technical assistance to the audit teams, and review the final reports
before they are released. Ms. Ayala is a Certified Public Accountant with seventeen years of audit
experience, spending most of that time on audits for local governments in San Diego County. Ms.
Ayala has performed financial statement audits of cities and special districts; grant specific audits
of funds awarded by Federal, state, and county governments; Single Audits in accordance with
Uniform Guidance, and compliance audits.
EMPLOYMENT HISTORY
Davis Farr LLP: June 2015 -current
Ten years at a National CPA firm
Two years at Lennar Homes
EDUCATION
Bachelor of Science —Accounting, San Diego State University
GOVERNMENT AGENCY AUDIT EXPERIENCE
City of Carlsbad
City of Del Mar
City of San Marcos
Imperial County Local Agency Formation
Commission
Leucadia Wastewater District
San Diego Association of Governments
San Dieguito River Park Joint Powers Authority
Sweetwater Authority
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City of Coronado
City of Escondido
City of Santee
San Diego Local Agency Formation
Commission
Rancho California Water District
San Diego County Water Authority
Salton Sea Authority
Vallecitos Water District
April 16, 2019, Item #1.8
City of Poway
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
JENIFER FARR, CPA, MBA
PARTNER
California CPA Certificate No. 76292, October 1998
Ms. Farr will serve as the Quality Control Reviewer on the engagement. As a second reviewer, Ms.
Farr will be involved in approving the audit plan, reviewing key audit workpapers, reviewing all
reports, and acting as a second technical resource to the City. Ms. Farr is a Certified Public
Accountant with over 20 years of experience in local government auditing. Ms. Farr is a frequent
speaker on matters pertaining to technical issues and new GASB pronouncements. Ms. Farr is also
responsible for training in the area of local governmental accounting and auditing.
EDUCATION
PROFESSIONAL AFFILIATIONS & AWARDS
California Society of Certified Public Accountants
o Government Accounting & Auditing Committee
California Society of Municipal Finance Officers
American Institute of Certified Public Accountants
GFOA CAFR Reviewer
Recipient of the Cal CPA 2015 Women to Watch award in the
Experienced Leader category
Bachelor of Arts - Business Administration/Accounting (California State University,
Fullerton)
Bachelor of Arts - English (California State University, Fullerton)
Masters of Business Administration (California State University, Fullerton)
AUDITS OF CALIFORNIA CITIES
City of Avalon City of Highland
City of Benicia City of Indian Wells
City of Burbank City of La Quinta
City of Carlsbad City of Mission Viejo
City of Commerce City of National City
City of Campbell City of Orange
City of Coronado City of Palm Springs
City of Costa Mesa City of Rosemead
City of Culver City City of San Bruno
City of Dana Point City of Santee
City of Delano City of Upland
City of Fontana City of Victorville
City of Fountain Valley City of Villa Park
City of Garden Grove City of Walnut Creek
City of Half Moon Bay City of Whittier
City of Hayward City of Woodland
7¢
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
ERICK MARTIN, CPA
MANAGER
CA CPA Certificate No. 121760, December 2013
Mr. Martin has over seven years of audit experience, spending the majority of that time on audits
for local governments. Mr. Martin has performed financial statement audits of cities and special
districts; grant specific audits of funds awarded by Federal, state, and county governments; Single
Audits, and compliance audits. Mr. Martin will be responsible for managing the audit engagement
and will supervise the staff assigned.
Davis Farr LLP: June 2015 -current
National CPA firm: January 2011 -June 2015
EDUCATION
Bachelor of Business Administration — Accounting
California State University, Fullerton
AUDITS OF CALIFORNIA CITIES
City of Costa Mesa
City of Villa Park
City of San Marcos
City of Upland
City of Moreno Valley
City of Garden Grove
City of EI Segundo
AUDITS OF SPECIAL PURPOSE GOVERNMENTS
Palm Springs Desert Resorts Conventions and Visitors Authority
Walnut Valley Water District
Mesa Consolidated Water District
Irvine Ranch Water District
Puente Basin Water Agency
Orange County Sanitation District
Coachella Valley Mosquito District
West Basin Municipal Water District
San Bernardino Municipal Water Department
2E
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
JEFFREY OLINAREZ
SENIOR AUDITOR
ROLE ON PROJECT
Jeffrey will serve as the in -charge on this audit. He will conduct the day to day fieldwork, supervise
staff auditors on the engagement, and will prepare all financial statements and reports. His
experience has encompassed financial and compliance audits of governmental and non-profit
engagements, which have been performed in accordance with "Government Auditing Standards"
which have all included a review of the entity's internal control and financial management system.
EMPLOYMENT HISTORY
Davis Farr LLP, Senior Auditor—January 2018 through present
Davis Farr LLP, Staff Auditor — July 2016 through December 2017
EDUCATION
Bachelor of Science in Accounting
Azusa Pacific University, Azusa, CA
RELEVANT EXPERIENCE
AUDITS OF CALIFORNIA CITIES (including Single Audits)
City of Fontana
City of Victorville
City of Mission Viejo
City of Santee
AUDITS OF SPECIAL PURPOSE GOVERNMENTS (includino Single Audits)
Beach Cities Health District
Eastern Municipal Water District
Irvine Ranch Water District
Sweetwater Authority
South Bay Irrigation District
Rancho Cucamonga Water District
INTERNAL CONTROL AND GRANT SPECIFIC AUDITS FOR US FEDERAL AGENCIES
Centers for Medicare & Medicaid Services
Special Inspector General for Afghanistan Reconstruction
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
DIEGO VANEGAS, CPA, CISA, CITP
PARTNER
INTRODUCTION
Mr. Vanegas, CPA, CISA, CITP has over 10 years of progressive governmental accounting and audit
experience, including extensive compliance audit experience for governmental and non-profit
agencies. He has been involved in financial/compliance audits, internal control audits and
assessments, operational/performance audits, and cost proposal analysis/price reviews for various
governmental agencies. Mr. Vanegas has served in many capacities depending on the size and
requirements of the engagements. He has participated in audits of federal agencies such as NSF,
CMS, and CNCS, among others. Additionally, Mr. Vanegas has been involved in agreed -upon -
procedures and audit engagements of state/local agencies. These engagements have often
combined both financial and compliance aspects of the audit as well as Information Technology
IT). Furthermore, he has strong internal control audit experience through the performance of
SSAE 16 Service Organization Controls (formerly known as SAS 70) audits of the internal controls
of service organizations, as well as knowledge of Government Auditing Standards, Office of
Management and Budget (OMB) Circular A-87 and the Federal Acquisition Regulations (FAR).
EMPLOYMENT HISTORY
Davis Farr LLP: June 2015 through present
Top 10 National CPA Firm: Manager, Senior Associate, Associate — May 2005 to June
2015
EDUCATION
Bachelor of Science in Business Administration, with an emphasis in Accounting
California State University - Los Angeles
Bachelor of Science in Computer Information Systems, with an emphasis in Business
Systems California State University - Los Angeles
Certified Public Accountant, State of California, No. 113040
Certified Information Technology Professional, No. 3298
Certified Information Systems Auditor
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section E —Audit Approach
Davis Farr plans and conducts our engagements in the most efficient manner possible, and our
audit approach is unique with regard to the following:
Our firm is sensitive to the priorities and work requirements of our clients. We work around
the schedules of our clients when scheduling segments of the audit or requesting
documentation in order to minimize disruption of City staff and to complete the audit in
a timely manner.
Whenever possible, we use accounting support already prepared by the City staff to avoid
duplication or unnecessary requests for audit supporting schedules.
Our firm's expertise is in governmental auditing. Our auditors are GASB experts and skilled
at addressing audit issues that are specific to local governments. You will not spend time
training our personnel.
When formulating internal control recommendations, we obtain a thorough
understanding of the specific circumstances at your City to provide a tailored, practical
recommendation.
Throughout the year we are a resource to our clients in providing accounting advice,
researching technical questions, dealing with tax problems, and helping with other
problems as they arise.
Audit Software - We utilize CaseWare audit software for the electronic City of workpapers. We
have the ability to accept audit documentation in either hard copy or electronic format. CaseWare
allows us the ability to import trial balances that can be provided in either excel or a text
document. Some of the benefits of using CaseWare trial balance software are as follows:
We can create our own lead sheets (i.e., analytical review comparison schedules). This
limits the amount of time finance staff spends creating audit schedules. Our software
automatically generates analytical review reports by account numberfor ease of analyzing
significant fluctuations between fiscal years.
We can link the financial statement schedules directly to the CaseWare trial balances. As
a result, we can provide the City with financial statements almost immediately after
receiving the trial balance from the City. Additionally, journal entries are easy to post to
the financial statement schedules and the risk of data entry error is minimized.
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Section E —Audit Approach, (Continued)
We can provide the City with reports showing the coding of the financial statement
schedules for ease of review by City staff. These reports show each account coded to a
specific financial statement line item as well as journal entries that are posted during the
audit.
Creating color PDF's of final reports is a seamless process for our audit staff.
Data Mining Software
We have a dedicated team of personnel trained to use special data mining software, IDEA. Our
software uses source data from your accounting system to search for anomalies, such as duplicate
or voided checks, cross-referencing vendor addresses with employee addresses, detecting
accounting transactions recorded on the weekend, reviewing journal entry postings for
unauthorized individuals. The IDEA software identifies specific transactions for the auditors to
review for potential fraud or error.
Internal Control Evaluation
Our approach to evaluating internal controls involves observation and inquiry. We spend time
with the personnel responsible for the accounting cycles to gain an understanding of the
processes. We also carefully evaluate your policies and procedures. After our initial evaluation,
we identify key controls in your processes and design test to evaluate the effectiveness of those
processes. In the initial year of the audit, we will focus on the following accounting cycles:
Billing and cash receipting
Capital assets
Purchase and disbursements
Payroll
Investment and cash controls
Information systems
In future years, we will review the accounting cycles noted above but also look at other processes
such as credit card transactions, petty cash, inventory controls, offsite cash receipting, employee
reimbursements, contract compliance, and other areas. Our goal is to modify our audit approach
every year to further evaluate your internal controls.
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During the planning phase of the audit, we plan to perform the following
procedures:
Meet with finance personnel to obtain an understanding of significant
transactions during the year.
Communicate with the City Council regarding fraud, compliance with laws,
and any concerns they have regarding the finances of the City.
Perform internal control evaluations as noted on the previous page.
Determine materiality levels that will be used in selecting audit transactions.
Perform a risk assessment to develop the audit plan for the year.
Review minutes of City Council meetings.
Review important new contracts, bond documents, and agreements.
Evaluate compliance with investments.
Test purchase orders and contract management.
Test a sample of cash disbursements to determine adherence to policies and
internal controls.
Perform a review of the organization's information systems and controls.
Perform compliance testing of federal grants, as necessary.
Review the prior audited financial statements and provide feedback to City
staff regarding best practices for financial reporting.
Provide a GASB Update and templates for implementing new accounting
standards.
After the books are closed and ready for audit, we will perform our year-end
procedures which include the following:
We will confirm 100% of all cash and investment balances and test market
values provided by your investment custodians.
We will test for proper cutoffs of accounts receivable and grants receivable.
We will confirm and test material notes and loans receivable.
We will test additions and deletions to capital assets. We will review
depreciation expense for reasonableness.
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We will test interfund transactions including due to/due from other funds,
advances, and transfers. We will review legal documents supporting loans
and test the allowability of transfers out of restricted funds.
We will test current liabilities and perform a search for unrecorded liabilities.
We will review unearned revenue balances for proper cutoffs.
We will test the balances of accrued payroll and employee related liabilities.
Testing of actuarial valuations and calculations related to OPEB obligations.
Testing of actuarial valuations and calculations related to pension obligations
and new disclosures under GASB 68.
Evaluation of claims andjudgments payable.
Testing of restrictions and classifications of net position.
Analyze grant revenues and expenses to ensure proper matching within the
fiscal year.
Test the reasonableness of interest income, realized, and unrealized
gains/losses on investments.
Analytically and substantively test revenues and expenses reported in the
financial statements.
We will incorporate an element of unpredictability every year that will focus
on an audit area that is not typically considered a high or significant risk area
such as petty cash, credit card purchases, new vendors, travel expenses, etc.
The aforementioned tests are only a few of the tests performed during the
examination and by no means is it meant to be all inclusive. During the final stage
of the audit we will meet with Finance staff to review our audit findings and any
adiustinci iournal entries.
As part of our Single Audit for the years in which the City expends granter than
750,000, we will perform the following procedures in accordance with the Uniform
Guidance:
Perform an evaluation of the major programs required to be tested
Review OMB guidance and the OMB Compliance Supplement for the grant
program audited.
Review internal controls for each of the applicable 14 compliance areas for
each program audited.
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Using AICPA sampling guidance, we will select a sample for each of the
applicable 14 compliance areas for each program audited. We will test the
sample for compliance with those 14 areas.
Test the indirect cost rate, if applicable
Review monitoring reports for noncompliance and follow up on the
resolution of past noncompliance, if applicable.
Issue a single audit report of federal expenditures.
File the data collection form within the specified deadline.
The nature and extent of the work required is dependent on our assessment of the
likelihood of misstatements in the financial statements together with our
conclusions from the planning and testing stages of the audit. All of the audit
information is then used to reach a conclusion on whether the financial statements
taken as a whole conform with generally accepted accounting principles.
We will review significant events after year end
We will review attorney letters for significant legal matters
We will prepare the Comprehensive Annual Financial Report (CAFR)
We will ensure accurate and complete disclosures in the notes to the financial
statements.
As requested, we will meet with the City Council to present the results of the
audit.
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PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section F — Implementation of New GASB Pronouncements
The City will be required to implement the following accounting standards during the upcoming
fiscal years. Part of our service to you includes consulting on these new auditing standards. A
sampling of significant new GASB pronouncements planned or proposed for local governments
that will impact the City of Poway are listed below:
This statement addresses accounting and financial reporting for certain asset
retirement obligations. We will meet with you each year to determine if you
have any obligations subject to this standard. The standard will be effective
for the fiscal year ending June 30, 2019.
This statement establishes criteria for identifying fiduciary activities of all state
and local governments. The statement describes four fiduciary funds that
should be reported, if applicable: (1) pension trust funds, (2) investment trust
funds, (3) private -purpose trust funds, and (4) custodial funds. We will work
with the City to identify the activities required to be reported in these four fund
types and provide transition guidance for the fiscal year ending June 30, 2020.
Effective for the June 30, 2019 financial statements, the objective of this
statement is to improve consistency in accounting and financial reporting for
in -substance defeasance of debt. We will evaluate the applicability of the
standard for the City.
The objective of this statement is to better meet the information needs of the
financial statement users by improving accounting and financial reporting for
leases by governments. The standard will be effective for the fiscal year ending
June 30, 2021.
The primary objective of this Statement is to improve the information that is
disclosed in notes to government financial statements related to debt,
including direct borrowings and direct placements. The standard will be
effective for the fiscal year ending June 30, 2019.
This Statement requires that interest cost incurred before the end of a
construction period be recognized as an expense in the period in which the
cost is incurred for financial statements. The standard will be effective for the
fiscal year ending June 30, 2021.
The primary objectives of this Statement are to improve the consistency and
comparability of reporting a government's majority equity interest in a legally
separate organization. The standard will be effective for the fiscal year ending
June 30, 2020.
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Section G — Scope of Work
Our understanding of the objectives and scope of the work to be performed is as follows:
We will perform an audit examination of the financial statements of the City of Poway for
the fiscal years ending June 30, 2019 through 2021. Our examination will be conducted in
accordance with generally accepted auditing standards, the AICPA Audit and Accounting
Guide, Audits of State and Local Government Units, and the Government Auditing
Standards issued by the Comptroller General of the United States. We will prepare the
Comprehensive Annual Financial Report (CAFR). We will ensure that the report is prepared
in conformity with the most recent edition of the GAAFR, the GAAFR Update, and
subsequent GASB pronouncements. Davis Farr LLP does not have experience with MUNIS
CAFR Builder or any other CAFR software.
We will perform a compliance audit of federal expenditures in accordance with the Uniform
Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards in
any year the City has federal expenditures of more than $750,000.
We will perform a compliance audit of the City's Housing Successor Agency in accordance
with the requirements of the California Health and Safety Code.
We will perform an audit examination of the Poway Public Financing Authority and prepare
the basic financial statements.
We will perform agreed -upon -procedures over the City's Gann Appropriations Limit.
We will prepare a letter to the City Council reporting matters dealing with internal control
that meet the threshold of being a significant deficiency or material weakness, as defined
by SAS No. 115. We will immediately report any irregularities or illegal acts that come to
our attention to management and/or those charged with governance.
As requested, we will meet with the City Council to discuss the results of the audit.
Finally, we perceive the scope of our work as being advisors to the City regarding generally
accepted accounting principles. Throughout the year, the management and other finance
personnel of the City will have access to us to seek advice in the application of generally
accepted accounting principles, advice regarding debt issuance, financial statement
preparation and content, and any other matters relating to the City.
Identification ofAnticipate Potential Audit Problems — We do not anticipate any potential audit
problems.
17
36 of 40 April 16, 2019, Item #1.8
City of Poway
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
Section H — Proposed Timing of the Audit for FY 18/19
The following proposed timing is subject to the City's revision and approval:
Section I — Segmentation of the Audit
The following is our estimate of the hours by professional classification required to perform the
audit:
36 of 40 April 16, 2019, Item #1.8
City of Poway
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
APPENDIX
37 of 40 April 16, 2019, Item #1.8
F®RUM LLKW
Certified Public Accountants:. Business Consultants
System Review Report
DAVIS FARR LLP
Irvine, California;
and the Peer Review Committee of the California Society of CPAs
Jot w Duns, CPA
Sm,i iiN C. Wiuiws, CPA
Josue 0. Rof tmo, CPA
We have reviewed the system of quality control for the accounting and auditing practice of
Davis Farr LLP (the firm) in effect for the year ended May 31, 2016. 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. As part of our peer review, we considered reviews by regulatory entities, if
applicable, in determining the nature and extent of our procedures. 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.orCz/Prsummarv.
As required by the standards, engagements selected for review included engagements
performed under Government Auditing Standards and an examination of a service
organization control (SOC) 1 Type 2.
In our opinion, the system of quality control for the accounting and auditing practice of Davis
Farr LLP in effect for the year ended May 31, 2016, 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 defrciency(tes) or fail. Davis Farr LLP has received a peer review rating of
pass.
Ontario, California
June 29, 2016
CPAMERICA
INTERNATIONAL
A Crowe Ho vnh lntemational
April 16, 2019, Item #1.8
I
ATTACHMENT B
CITY OF POWAY
7zU7.y 1Y.P.]:z]y XY[UJ/II I ge[Y r1C 9
AUDIT FEES
Our fixed fees to perform the audit services are as follows:
The fee is reduced in subsequent years based on the City preparing the CAFR.
Includes 40 hours of assistance.
The single audit fee is for one major program. In the unlikely event that the City is required to
have more than one major program tested as defined by the Uniform Guidance, additional
programs can be audited at an additional fee of $2,500 per program.
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AUDIT FEE
iCRIPTION FY 18/ 19 FY 19/ 20 FY 20/21 FY 21/22 FY 22/23
lit and CAFR*MMMMM
urtation
e** e** MMMMMc
lousing 11
y ®®®®®
1 1 1
blic
iAu
11
g Authority
1 1 1
irnit
Reports, if 11
edit***and ®®®®®
1
Audit Fees r r 1
AL SERVICES -----
e Controller's
e Fee AUP
lg Lease AUP 11 11 11 1 / 11
mrator AUP ', 11 11 11 11 11
1 -inclusive
rn Price
The fee is reduced in subsequent years based on the City preparing the CAFR.
Includes 40 hours of assistance.
The single audit fee is for one major program. In the unlikely event that the City is required to
have more than one major program tested as defined by the Uniform Guidance, additional
programs can be audited at an additional fee of $2,500 per program.
39 of 40 April 16, 2019, Item #1.8
I
CITY OF POWAY
PROPOSAL FOR PROFESSIONAL AUDITING SERVICES
For additional work performed outside the engagement, our rates are as follows by personnel.
Manner of Payment
We will bill the City on the basis of pro -rated audit work completed during the course of the
engagement as follows: 25 percent due at completion of interim audit, 25 percent due at
completion of final audit, 25 percent due after submission to City of first draft of financial
statements and 25 percent balance due after final issuance of financial statements.
40 of 40
20
April 16, 2019, Item #1.8