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HomeMy WebLinkAboutCC 4 PROF AUDIT SVCS 01-15-90n DATE: TO: FROM: JANUARY 9, : WILLIAM A. HUSTON, CITY MANAGER RONALD A. NAULT, DIRECTOR OF FINANCE CONSENT CAL NDAR NO. 4 1-15-90' ° Inter - Com SUBJECT: REQUEST FOR PROPOSALS FOR PROFESSIONAL AUDITING SERVICES RECOMMENDATION: Approve the RFP for professional auditing services as recommended by the City's Audit Committee and authorize the Finance Director to advertise and otherwise distribute the RFP. DISCUSSION: One of the primary responsibilities of the City of Tustin's Audit Committee is the selection of the City's outside auditors. The Audit Committee has been working on the attached RFP for two months using the model RFP presented in the Audit Management Handbook, published by the Government Finance Officer's Association of America, (GFOA), as a guideline. The RFP was approved unanimously by the Audit Committee prior to presentation to the City Council. "aq6Ak Ro d A. Nault Director of Finance RAN: 1s Attachment a:agenda.rfp 0 CITY OF TUSTIN AUDIT COMMITTEE REQUEST FOR PROPOSALS FOR PROFESSIONAL AUDITING SERVICES November 71 1989 c 0 300 CENTENNIAL WAY TUSTIN s THIS PAGE IS INTENTIONALLY BLANK 0 CITY OF TUSTIN REQUEST FOR PROPOSALS TABLE OF CONTENTS I. INTRODUCTION A. General Information B. Term of Engagement " C. Subcontracting - II. NATURE OF SERVICES REQUIRED A. General B. Scope of Work to be Performed C. Auditing Standards to be Followed D. Reports to be Issued E. Special Considerations F. Working Paper Retention and Access to Working Papers III. DESCRIPTION OF THE GOVERNMENT A. Name and Telephone Number of Contact Persons B. Background Information C. Fund Structure D. Budgetary Basis of Accounting E. Federal and State Financial Assistance F. Pension Plans G. Component Units H. Joint Ventures I. Magnitude of Finance Operations J. Computer Systems K. Availability of Prior Reports and Working Papers IV. TIME REQUIREMENTS A. Proposal Calendar B. Notification and Contract Dates C. Date Audit May Commence D. Schedule for the 1990 Fiscal Year Audit 1. Interim Work 2. Detailed Audit Plan 3. Fieldwork 4. Draft Reports E. cEntrance Conferences, Progress Reporting and Exit Conferences '. Date Final Report is due V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance B. Electronic Data Processing (EDP) Assistance C. Work Area, Telephone, Photocopying and FAX Machines D. Report Preparation VI. PROPOSAL REQUIREMENTS A. General Requirements 1. Pre -proposal Conference and On-site Inspections 2. Inquiries 3. Submission of Proposals B. Technical Proposal 1. General Requirements 2. Independence 3. License to Practice in California 4. Firm Qualifications and Experience 5. Partner, Supervisory and Staff Qualifications and Experience 6. Prior Engagements with the City of Tustin 7. Similar Engagements with Other Government Entities 8. Specific Audit Approach 9. Identification of Anticipated Potential Audit Problems 10. Report Format C. Sealed Dollar Cost Bid 1. Total All -Inclusive Maximum Price tl2. Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each. 3. Out-of-pocket Expenses in the Total All- inclusive Maximum 4. Rates for Additional Professional Services 5. Manner of Payment VII. EVALUATION PROCEDURES A. Audit Committee B. Review of Proposals C. Evaluation Criteria 1. Mandatory Elements 2. Technical Qualifications 03. Price D. Oral Presentations E. Final Selection F. Right to Reject Proposals APPENDICES A. Most recent Auditor's Management Letter and Most Recent Audit Report B. Organizational Chart C. Proposer Guarantees and Warranties D. Format for Schedule of Professional Fees and Expenses to Support the Total All-inclusive Maximum Price E. List of Statements and Schedules that the City will Prepare for the Auditor on the City of Tustin F. List of Statements and Schedules that the City will Prepare for the.Auditor on the Redevelopment Agency 6 CITY OF TUSTIN REQUEST FOR PROPOSALS I. INTRODUCTION A. General Information The City of Tustin is requesting proposals from qualified firms of certified public accountants to audit its financial statements for the fiscal year ending June 30, 1990, with the option of auditing its financial statements for each of the four subsequent fiscal years. These audits are to be performed in accordance with generally accepted auditing standards, the standards set forth for financial audits in the current U.S. General Accounting Office's (GAO) Government Auditing Standards, the provisions of the federal Single audit Act of 1984 and U.S. Office of Management and Budget (OMB) Circular A-128, audits of. State and Local Governments. There is no expressed or implied obligation for the City of Tustin to reimburse responding firms for any expenses incurred in preparing proposals in response to this request. A mandatory pre -proposal conference for all the firms interested in submitting a proposal will be held at 3 p.m. on February 26, 1990 at City of Tustin, 300 Centennial Way in the Council Chambers to answer questions about the engagement. After this pre -proposal conference, any inquiries concerning the request for proposals should be addressed to Ronald A. Nault, Finance Director. To be considered, seven (7) copies of a proposal must be received by Ronald A. Nault, Finance Director at 300 Centennial Way, Tustin, CA, 92680 by 12 noon on March 9, 1990. The City of Tustin reserves the right to reject any or all proposals submitted. Proposals submitted will be evaluated by a five ( 5 ) member Audit Committee. The Audit Committee is selected by the City Council consisting of five members, representative of the citizens and businesses of the community. During the evaluation process, the Audit Committee and the City.of Tustin reserve the right, where it may serve the City of Tustin's best interest, to request additional information or clarifications from proposers, or to allow corrections of errors or omissions. At the discretionoof the City of Tustin or the Audit Committee, firms submitting proposals may be requested to make oral presentations iis part of the evaluation process. 1 The City of Tustin reserves the right to retain all proposals submitted and to use any ideas in a proposal regardless of whether that proposal is selected. Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposals, unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the City of Tustin and the firm selected. It is anticipated the selection of a firm will be completed by April 2, 1990. Following -the notification of the selected firm it is expected a contract will be executed between both parties by April 3, 1990. B. Term of Engagement A five (5) year contract is contemplated, subject to the annual review and recommendation of the Audit Committee, the satisfactory negotiation of terms (including a price acceptable to both the City of Tustin and the selected firm), the concurrence of the City of Tustin and the annual availability of an appropriation. C. Subcontracting Firms submitting proposals are encouraged to consider subcontracting portions of the engagement to small audit firms or audit firms owned and controlled by socially and economically disadvantaged individuals. If this is to be done, that fact, and the name of the proposed subcontracting firms, must be clearly identified in the proposal. Following the award of the audit contract, no additional subcontracting will be allowed without the express prior written consent of the City of Tustin. II. NATURE OF SERVICES REQUIRED A. General The City of Tustin is soliciting the services of qualified firms of certified public accountants to audit its financial statements for the fiscal year ending June 30, 1990, with the option to audit the City of Tustin's financial statements for each of the four (4) subsequent fiscal years. These audits are to be performed in accordance with the provisions contained in this request for proposals. B. scope of Workoto be Performed The City of Tu§tin desires the auditor to express an opinion on the fair presentation of its general purpose financial statements in conformity with generally accepted accounting principles. 2 The auditor is not required to audit the combining and individual fund and account group financial statements and supporting schedules. However, the auditor is to provide an "in -relation - to" report on the combining and individual fund financial statements and supporting schedules based on the auditing procedures applied during the audit of the general purpose financial statements. The auditor is not required to audit the statistical section of the report. The auditor is not required to audit the schedule of federal financial assistance. However, the auditor is to provide an "in - relation -to" report on that schedule based on the auditing procedures applied during the audit of the financial statements. C. Auditing Standards to be Followed To meet the requirements of this request for proposals, the audit shall be performed in accordance with generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the current U.S. General Accounting Office's Government Auditing Standards, the provisions of the Single Audit Act of 1984 and the provisions of U.S. Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. An opinion on compliance with the rules and regulations for redevelopment agencies, as published by the Office of State Controller will also be required. D. Reports to be issued Following: the completion of the audit of the fiscal year's financial statements, the auditor shall issue: 1. A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles. 2. A report on the internal control structure based on the auditor's understanding of the control structure and assessment of control risk. 3. A report on compliance with applicable laws and regulations. 4. An "in -relation -to" report on the schedule of federal financial assistance. 1 1 5. A report on the internal control structure used in administering federal financial assistance programs. 3 A 6. A report on compliance with laws and regulations related to major and non -major federal financial assistance programs. This report should include an opinion on compliance with specific requirements applicable to major federal financial assistance programs, a report on compliance with general requirements applicable to non -major federal financial assistance program transactions tested. In the required report(s) on internal controls, the auditor shall communicate any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Reportable conditions that are also material weaknesses shall be identified as such in the report. Non -reportable conditions discovered by the auditors shall be reported in a separate letter to management, which shall be referred to in the report(s) on internal controls. The reports on compliance shall include all instances on non- compliance. Irregularities and illegal acts. Auditors shall be required to make an immediate written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties: City Manager, City Attorney, Audit Committee. Reporting to the Audit Committee. Auditors shall assure themselves that the City of Tustin's Audit Committee is informed of each of the following. i 1. The auditor's responsibility under generally accepted ' auditing standards 2. Significant accounting policies 3. Management judgments and accounting estimates 4. Significantfaudit adjustments 5. Other information in documents containing audited financial statements 4 EJ 6. Disagreements with management 7. Management consultation with other accountants 8. Major issues discussed with management prior to retention 9. Difficulties encountered in performing the audit E. Special Considerations 1. The City of Tustin will send its comprehensive, annual financial report to the Government Finance Officers Association of the United States and Canada for review in its Certificate of Achievement for Excellence in Financial Reporting program. It is anticipated that the auditor will not be required to provide special assistance to the City of Tustin to meet the requirements of that program. 2. The City of Tustin currently anticipates it will prepare one or more official statements in connection with the sale of debt securities which will contain the general purpose financial statements and the auditor's report thereon. The auditor shall be required, if requested by the fiscal advisor and/or the underwriter, to issue a consent and citation of expertise" as the auditor and any necessary "comfort letters." 3. The City of Tustin has determined that the State Controller's Office will function as the cognizant agency in accordance with the provisions of the Single Audit Act of 1984 and U.S. Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. 4. The schedule of federal financial assistance and related auditor's report, as well as the reports on the internal control structure and compliance are not to be included in the comprehensive annual financial report, but are to be issued separately. 5. A list of findings and other weaknesses from the City of Tustin's most recent financial statement audit are attached to this document (Appendix A). 5 n F. Working Paper Retention and Access to Working Papers All working papers and reports must be retained, at the auditor's expense, for a minimum of three (3) years, unless the firm is notified in writing by the City of Tustin of the need to extend the retention period. The auditor will be required to make working papers available, upon request, to the following parties or their designers: City of Tustin State Controller's Office U.S. General Accounting Office (GAO) and, Parties designated by the federal or state governments or by the City of Tustin as part of an audit quality review process. Auditors of entities of which City of Tustin is a sub - recipient of grant funds. Auditors of entities of which the City of Tustin is a component unit. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance. III. DESCRIPTION OF THE GOVERNMENT A. The auditor's principal contact with the City of Tustin will be Ronald A. Nault, Finance Director, or a designated representative, who will coordinate the assistance to be provided by the City of Tustin to the auditor. The Finance Director can be reached at (714) 544-8890. B. Background Information The City of Tustin serves an area of 11 square miles with a population of 47,000. The City of Tustin's fiscal year begins on July 1, and ends on June 30. The City of Tustin is a full service City providing Administration, Community Development, Public Works, Police and Community Services to the community. Fire Protection Services are contracted for with the County of Orange. The City of Tustin has a total payroll of $5,108,000 covering 245 full time employees. The City of Tustin is organized into • departments and agencies. The accounting and financial reporting functions of the City of Tustin are centralized. G More detailed information on the government and its finances can be found in Budget Documents, Official Statements, And Annual Financial Reports. C. Fund Structure The City of Tustin uses the following fund types and account groups in its financial reporting: Number of Number with Individual Legally Adopted Fund Type/Account Group Funds Annual Budgets General Fund Special Revenue Funds Debt Service Funds Capital Projects Fund Enterprise Funds Internal Service Funds Expendable Trust Funds Nonexpendable Trust Funds Pension Trust Funds Agency Funds General Fixed Assets Account Group General Long -Term Debt Account Group D. Budgetary Basis of Accounting 1 1 3 3 3 6 6 1 1 1 3 1 NA 1 NA The City of Tustin prepares its budgets on a basis consistent with generally accepted accounting principles. E. Federal and State Financial Assistance During the fiscal year to be audited, the City of Tustin received the following financial assistance: State Grants: Sr. Center, State of California Parks and Recreation; State of California SCBA Bond Act; (OTS), Office of Traffic Safety, HCDA, AHFP, and OCUTT. F. Pension Plans o The City of Tustin is a member of the State of California's Public Employee's Retirement System. 7 W G. Component Units The City of Tustin is defined, for financial reporting purposes, in conformity with the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, Section 2100. Using these criteria, component units are included in the City of Tustin's financial statements. The management of the City of Tustin has identified the following component units for inclusion in the City of Tustin's financial statements: City of Tustin Water Corporation Tustin Community Redevelopment Agency These component units are to be audited as part of the audit of the City of Tustin's financial statements. H. Joint Ventures The City of Tustin does participate in joint ventures with other governments. Name of Name of Other Type of Joint Venture Participating Governments) Services Provided Orange County Cities Cities of Brea; Insurance Pooling Risk Management Cypress, Laguna & excess insurance Authority Beach; La Palma; Los Alamitos;.Orange; San Clemente; Stanton; Seal Beach; Yorba Linda; Westminster, Irvine I. Magnitude of Finance Operations The Finance Department is headed by Ronald A. Nault, Director of Finance and consists of 11 employees. The principal functions performed and the number of employees assigned to each are as follows: Function Administration General Accounting Accounts Payable Payroll Clerical Utility Billing Meter Reading A 8 Number of Employees 2 1 1 1 1 3 2 J. Computer Systems Hardware: Type of Equipment Number Make of Equipment Networked? 71 Hewlett Packard 3000 935 No Software: n Vendor Maj or Applications Infocomp General Ledger, Utility Billing Proj etek Payroll R. Availability of Prior Audit Reports and Management Letters Interested proposers who wish to review prior years' audit reports and management letters should contact Ronald A. Nault at 300 Centennial Way, Tustin, CA 92680, (714) 544-8890. IV. TIME REQUIREMENTS A. Proposal Calendar The following is a list of key dates up to and including the date proposals are due to be submitted: Request for proposals issued February 02, 1990 Pre -proposal conference February 26, 1990 Due date for proposals March 09, 1990 B. Notification and Contract Dates Selected firm notified Aprii U31 lyyu Contract date April 03, 1990 C. Date Audit May Commence The City of Tustin will have all records ready for audit and a 11 management personnel available to meet with the firm's personnel as of August 15, 1990. P) 11 D. Schedule for the 1990 Fiscal year Audit (A similar schedule will be developed for audits of future fiscal years if the City of Tustin exercises its option for additional audits.) Each of the following shall be completed by the auditor no later than the dates indicated. °` 1. Interim Work The auditor shall complete all interim work between May/June. 2. Detailed Audit Plan The auditor shall provide the City of Tustin by July 1, 1990 both a detailed audit plan and a list of all schedules to be prepared by the City of Tustin. 3. Fieldwork The auditor shall complete all fieldwork by September 14, 1990. 4. Draft Reports The auditor shall have drafts of the audit report(s) and recommendations to management available for review by the Audit committee and the chief financial officer by October 15, 1990. E. Entrance Conferences, Progress Reporting and Exit Conferences (A similar time schedule will be developed for audits of future fiscal years if the City of Tustin exercises its option for additional audits). At a minimum, the following conferences should be held by the dates indicated on the schedule: Week of * Entrance conference with the Audit Committee and Finance;Director April 9 * Entrances conference with all key Finance Department personnel. April 9 10 The purpose of this meeting will be to discuss prior audit problems and the interim work to be performed. This meeting will also be used to establish overall liaison for the audit and to make arrangements for work space and other needs of the auditor. * Progress conference with the Finance Director and department heads of key offices or programs. June 4 The purpose of this meeting will be to summarize the results of the preliminary review and to identify the key internal controls or other matters to be tested. * Progress conference with Audit Committee and the Finance Director. June 11 The purpose of this meeting will be to discuss the year-end work to be performed. * Entrance conference with the Finance Director to commence year-end audit work. August 13 * Exit conference with the Finance Director. September 16 The purpose of this meeting will be to summarize the results of the field work and to review significant findings. F. Date Final Report°is Due The Auditor shall prepare draft financial statements and notes by October 15, 1990. The auditor shall provide all recommendations, revisions and suggestions for improvement to the Finance Director by October 15, 1990. A revised report, including a draft auditor's report shall be delivered to the Audit Committee by October 29, 1990. The Chief Fiscal Officer and the Audit Committee will complete their review of the draft report as expeditiously as possible. It is not expected that this process should exceed one week. During that period, the auditor should be available for any meetings that mayfbe necessary to discuss the audit reports. Once all issues for discussion are resolved, the final signed report shall be delivered to Ronald A. Nault within ten working days. It is anticipated that this process will be completed and the final report delivered by November 15, 1990. 11 The final, report and seven signed copies should be delivered to Ronald A. Nault, Director of Finance, 300 Centennial Way, Tustin, CA 92680. V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance The Finance Department staff and responsible management Personnel will be available during the audit to assist the firm by providing information, documentation and explanations. The preparation of confirmations will be the responsibility of the City of Tustin. In addition, clerical support will be made available to the auditor for the preparation of routine letters and memoranda. B. Electronic Data Processing (EDP) Assistance EDP personnel will be available to assist the auditor in performing the engagement. They will also be available to provide systems documentation and explanations. The auditor will not be provided computer time and the use of the City of Tustin's computer hardware and software. C. Work Area, Telephones, Photocopying and FAX Machines The City of Tustin will provide the auditor with reasonable work space, desks and chairs. The auditor will also be provided with access to telephone line, photocopying facilities and FAX machines. D. Report Preparation Report preparation and editing shall be the responsibility of the auditor. VI. PROPOSAL REQUIREMENTS A. General Requirements 1. Pre -proposal Conference and On-site Inspections A mandatory conference for firms interested in submitting proposals will be held at 3 p.m. February 26, 1990 at City of Tustin, 300 Centennial Way in the -Council Chambers. Both verbal and written questions will be accepted during the conference. 0 Representatives of the various departments Tustin will be;available to conduct on-site interested proposers. 12 A within the City of inspections for 2. Inquiries Inquiries concerning the request for proposals and the subject of the request for proposals must be made to: Ronald A. Nault, Director of Finance 300 Centennial Way Tustin, CA 92680 (714) 544-8890 1 CONTACT WITH PERSONNEL OF THE CITY OF TUSTIN OTHER THAN RONALD A. NAULT, FINANCE DIRECTOR REGARDING THIS REQUEST FOR PROPOSALS MAY BE GROUNDS FOR ELIMINATION FROM THE SELECTION PROCESS. 3. Submission of Proposals The following material is required to be received by 12 noon on March 91 1990 for a proposing firm to be considered. a. A master copy (so marked) of a Technical Proposal and six (6) copies to include the following: i. Title Page Title page showing the request for proposals' subject; the firm's name; the name, address and telephone number of a contact person; and the date of the proposal. ii. Table of Contents iii. Transmittal Letter A signed letter of transmittal briefly stating the proposer' s understanding of the work to be done, the commitment to perform the work within the time period, a statement why the firm believes itself to be best qualified to perform the engagement and a statement that the proposal is a firm and irrevocable offer for 120 days. iv. Detailed Proposal The detailed proposal should follow the order set forth in Section VI B of this request for proposals. v., Executed copies of Proposer Guarantees and Warranties, attached to this request for proposals (Appendix C.) 13 b. The Proposer shall submit an original and six (6) copies of a dollar cost bid in a separate sealed envelope marked as follows: SEALED DOLLAR COST BID PROPOSAL FOR CITY OF TUSTIN FOR PROFESSIONAL AUDITING SERVICES DATE c. The Proposer should send the completed proposal consisting of the two separate envelopes to the following address: Ronald A. Nault Director of Finance 300 Centennial Way Tustin, CA 92680 B. Technical Proposal 1. General Requirements The purpose of the technical proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of the City of Tustin in conformity with the requirements of this request for proposals. As such, the substance of proposals will carry more weight than their form or manner of presentation. The technical proposal should demonstrate the qualificaions of the firm and of the particular staff to be g assi ned to Nis engagement. It should also specify an audit approach that will meet the request for proposals requirements. THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE TECHNICAL PROPOSAL DOCUMENT. The technical proposal should address all the points outlined in the request for proposals (excluding any cost information which should only be included in the sealed dollar cost bid). The proposal should be prepared simply and economically, providing a straightforward, concise description of the proposer's capabilities to satisfy the requirements of the request for proposals. While additional data mway be presented, the following subjects, items No's. 2 through 10, must be included. They represent the criteria against which ;the proposal will be evaluated. 14 2. Independence The firm should provide an affirmative statement that it is independent of the City of Tustin as defined by generally accepted auditing standards. The firm also should provide an affirmative statement that it is independent of all of the component units of the City of Tustin as defined by those same standards. The firm should also list and describe the firm's (or proposed subcontractors') professional relationships involving the City of Tustin or any of its component units for the past five (5) years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. In addition, the firm shall give the City of Tustin written notice of any professional relationships entered into during the period of this agreement. 3. License to Practice in California An affirmative statement should be included indicating that the firm and all assigned key professional staff are properly licensed to practice in California. 4. Firm Qualifications and Experience The proposal should state the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in this engagement on a full-time basis and the number and nature of the staff to be so employed on a part-time basis. If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements. The firm shall also provide copies of the results of any federal or state desk reviews or field reviews of its audits ,during the past three (3) years. In addition, the firm shall provide It information on the circumstances and status of any disciplinary 15 action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations. i S. Partner, Supervisory and Staff Qualifications and Experience The firm should identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement and indicate whether each such person is licensed to practice as a certified public accountant in California. The firm also should provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. The firm should provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. The firm also should indicate how the quality of staff over the term of the agreement will be assured. Engagement partners, managers, other supervisory staff and specialists may be changed if those personnel leave the firm, are promoted or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of the City of Tustin. However, in either case, the City of Tustin retains the right to approve or reject replacements. Consultants and firm specialists mentioned in response to this request for proposals can only be changed with the express prior written permission of the City of Tustin, which retains the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience. 6. Prior Engagements with the City of Tustin The firm should list separately all engagements within the last five (5) years, ranked on the basis of total staff hours, for the City of Tustin by type of engagement (i.e., audit, management advisory servicesi other). For each engagement, the firm should indicate the scope of work, date, engagement partners, total hours, the location of the firm's office from which the engagement was performed, and the name and telephone number of the principal client contact. 16 7. Similar Engagements with Other Government Entities For the ,firm's office that will be assigned responsibility for the audit, list the most significant engagements (maximum of 5) performed in the last five (5) years that are similar to the engagement described in this request for proposals. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. 8. Specific Audit Approach The proposal should set forth a work plan, including an explanation of the audit methodology to be followed, to perform the services required in Section II of this request for proposals. In developing the work plan, reference should be made to such sources of information as the City of Tustin's budget and related materials, organizional charts, manuals and programs, and financial and other anagement information systems. Proposers will be required to provide the following information on their audit approach: a. Proposed segmentation of the engagement b. Level of staff and number of hours to be assigned to each proposed segment of the engagement NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL c. Sample sizes and the extent to which statistical sampling is to be used in the engagement d. Extent of use of EDP software in the engagement e. Type and extent of analytical procedures to be used in the engagement f. Approach to be taken to gain and document an understanding of the City of Tustin's internal control structure g. Approach to be taken in determining laws and regulations that will be subject to audit test work 0 h. Approach to be taken in drawing audit samples for purposes of tests of compliance 17 9. Identification of Anticipated Potential Audit Problems The proposal should identify and describe any anticipated potential audit problems, the firm's approach to resolving these problems and any special assistance that will be requested from the City of Tustin. 10. Report Format The proposal should include sample formats for required reports. NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL C. Sealed Dollar Cost Bid 1. Total All-inclusive Maximum Price The sealed dollar cost bid should contain all pricing information relative to performing the audit engagement as described in this request for proposals. The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of-pocket expenses. An escalation factor should be addressed in the sealed dollar cost bid that will allow for an accurate evaluation of the total cost for the five (5) year engagement period. The City of Tustin will not be responsible for expenses incurred in preparing and submitting the technical proposal or the sealed dollar cost bid. Such costs should not be included in the proposal. The first page of the sealed dollar cost bid should include the following information: a. Name of Firm b. Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid and au,horized to sign a contract with the City of Tustin. g c. A Total All-inclusive Maximum Price for the 1990 engagement. 2. Rates by Partner, Specialist, Supervisory and Staff Level times Hours Anticipated for Each The second page of the sealed dollar cost bid should include a schedule of professional fees and expenses, presented in the format provided in the attachment (Appendix E, part 1), that supports the total all-inclusive maximum price. The cost of special' services 18 0 described in Section II E of this request for proposals should be disclosed as separate components of the total all-inclusive maximum price using the format provided in Appendix E. parts 2 and 3. 3. Out-of-pocket Expenses Included in the Total All-inclusive Maximum Price and Reimbursement Rates Out -of pocket expenses for firm personnel (e.g., travel, lodging and subsistence) will be -reimbursed at the rates used by the City " of Tustin for its employees. All estimated out-of-pocket expenses to be reimbursed should be presented in the sealed dollar bid in the format provided in the attachment (Appendix E). All expense reimbursements will be charged against the total all-inclusive maximum price submitted by the firm. In addition, a statement must be included in the sealed dollar cost bid stating the firm will accept reimbursement for travel, lodging and subsistence at the prevailing City of Tustin rates for its employees. 4. Rates for Additional Professional Services If it should become necessary for the City of Tustin to request the auditor to render any additional services to either supplement the services requested in this request for proposals or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between the City of Tustin and the firm. Any such additional work agreed to between the City of Tustin and the firm shall be performed at the same rates set forth in the schedule of fees and expenses included in the sealed dollar cost bid. 5. Manner of Payment Progress payments will be made on the basis of hours of work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billings shall cover a period of not less than a calendar month. Ten percent (10%) will be withheld from each billing pending delivery of the firm's final reports. VII. EVALUATION PROCEDURES k A. Audit Committee Proposals submitted will be evaluated by a five (5) member Audit Committee selected by the City Council representative of the 19 citizens and businesses of the community of Tustin consisting of: Walter Sullens, Chairman Frank Greinke Jerry Weil Cheryl Gunderson George Jeffries B. Review of Proposals The Audit Committee will use a point formula during the review process to score proposals. Each member of the Audit Committee will first score each technical proposal by each of the criteria described in Section VII C below. The full Audit Committee will then convene to review and discuss these evaluations and to combine the individual scores to arrive at a composite technical score for each firm. At this point, firms with an unacceptably low technical score will be eliminated from further consideration. After the composite technical score for each firm has been established, the sealed dollar cost bid will be opened and additional points will be added to the technical score based on the price bid. The maximum score for price will be assigned to the firm offering the lowest total all-inclusive maximum price. Appropriate fractional scores will be assigned to other proposers. The City of Tustin reserves the right to retain all proposals submitted and use any idea in a proposal regardless of whether that proposal is selected. C. Evaluation Criteria Proposals will be evaluated using three sets of criteria. Firms meeting the mandatory criteria will have their proposals evaluated and scored for both technical qualifications and price. The following represents the principal selection criteria which will be considered during the evaluation process. 1. Mandatory Elements a. The audit firm is independent and licensed to practice in California. b. The audit firm's professional personnel have received adequate continuing professional education within the preceding two years. c. The firm has no conflict of interest with regard to any other work performed by the firm for the City of Tustin. 20 d. The firm submits a copy of its most recent external quality control review report and the f irm has a record of quality audit work. e. The firm adheres to the instructions in this request for proposals on preparing and submitting the proposal. 2. Technical Qualifications: (Maximum Points - 60) r: a. Expertise and Experience (Maximum Points - 30) (1) The firm's past experience and performance on comparable government engagements. (2) The quality of the firm's professional personnel to be assigned to the engagement and the quality of the firm's management support personnel to be available for technical consultation. b. Audit Approach (Maximum Points - 30) (1) Adequacy of proposed staffing plan for various segments of the engagement. (2) Adequacy of sampling techniques (3) Adequacy of analytical procedures 3. Price: (Maximum Points - 40) COST WILL NOT BE THE PRIMARY FACTOR IN THE SELECTION OF AN AUDIT FIRM D. Oral Presentations During the evaluation process, the Audit Committee may, at its discretion, request any one or all firms to make oral presentations. Such presentations will provide firms with an opportunity to answer any questions the Audit Committee may have on a firm's proposal . Not all firms may be asked to make such oral presentations. E. Final Selection The City of Tustin will select a firm based upon the recommendation of the,Audit Committee. It is anticipated that a firm will be selected by April 2, 1990. Following notification of the firm selected, it is expected a _ contract will be executed between both parties shortly thereafter. 21 F. Right to Reject Proposals Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposals unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the City of Tustin and the firm selected. The City of Tustin reserves the right without prejudice to reject any or all proposals. P 0 F 22 APPENDIX A AUDITORS MANAGEMENT LETTER AND COPY OF MOST RECENT AUDIT REPORT 0 A 23 CITY CLERK I AUDIT COMMITTEE CITY TREASURER COMM/ADMIN SERVICES FINANCE 0 APPENDIX B CITY OF TUSTIN ORGANIZATIONAL CHART CITIZENS OF TUSTIN i I MAYOR -------------- REDEVELOPMENT CITY COUNCIL AGENCY 1 1 i i 1 CITY CITY ATTORNEY MANAGER t 1 1 1 ----------------------j------ COORDINATION'AND COOPERATION PUBLIC WORKS SPECIAL DISTRICT CONTRACT SERVICES FIRE PRIVATE UTILITIES ELECTRICITY LIBRARY LIGH'JING REFUSE NATURAL GAS SEWERS ANIMAL CONT TELEPHONE FLOOD CONT. CABLE T.V. AD 85-1 & AD 86-2 24 POLICE I ICOMDEV.MUNITYI I CHIEF CITDE YPCLERK APPENDIX C PROPOSER GUARANTEES AND WARRANTIES A. The proposer certifies it can and will provide and make available, at a minimum, all services set forth in Section II, Nature of Services Required. B. Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing limits not less than one (1) million dollars of coverage for the willful or negligent acts, or omissions of any officers, employees or agents thereof, or show evidence of the ability to provide substitute security equal to the same limit. C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the express prior written permission of the City of Tustin. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. t Signature of Official: Name (typed): Title: Firm: Date: 25 APPENDIX D Part 1 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 1990 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners $ $ $ Managers Supervisory Staff Staff Other (specify): Subtotal $ Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ Out-of-pocket expenses: Meals and Lodging Transportation Other (specify): Total all-inclusive maximum price for 1990 audit $ Note: The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 26 10 APPENDIX D Part 2 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 1991 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners $ $ $ Managers Supervisory Staff Staff Other (specify) : Subtotal $ Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ Out-of-pocket expenses: Meals and Lodging Transportation Other (specify) : Total all-inclusive maximum price for 1991 audit $ Note: The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 27 APPENDIX D Part 3 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 1992 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners $ $ $ Managers Supervisory Staff Staff Other (specify) : Subtotal $ Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ Out-of-pocket expenses: Meals and Lodging Transportation Other (specify): Total all-inclusive maximum price for 1992 audit $ Note: The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 28 APPENDIX D Part 4 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 1993 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners $ $ $ Managers Supervisory Staff Staff Other (specify): Subtotal $ Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ Out-of-pocket expenses: Meals and Lodging Transportation Other (specify): Total all-inclusive maximum price for 1993 audit $ Note: ,The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 29 4 APPENDIX D Part 5 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 1994 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners $ $ $ Managers Supervisory Staff Staff Other (specify): Subtotal $ Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ Out-of-pocket expenses: Meals and Lodging Transportation Other (specify): Total all-inclusive maximum price for 1994 audit $ Note:The rave quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 30 APPENDIX E CITY OF TUSTIN The staff of the City of Tustin will prepare the following statements and schedules for the auditor: 1. Confirmation letters- Note new address on all confirmations. 2. Bank reconciliations for all bank accounts at 6-.30, (including a list of outstanding checks). 3. List of investments at 6-30. 4. List of accrued revenues, both measurable and available (i.e. property taxes, sales tax, interest income, grant revenues). 5. List of miscellaneous accounts receivable. 6. Computation of receivable from customers for water billing. 7. List of inventories. 8. List of prepaid expenses, if any. 9. List summarizing fixed assets. (applicable to general fixed asset account group and water utility) 10. List of fixed asset additions. If if " 11. List of fixed asset deletions. if if " 12. List of donated fixed assets. " " " 13. Copies of any new bond and lease agreements. 14. List of interfund receivables and payables 15. Schedule of operating transfers. 16. Schedule of accounts payable. 17. Schedule of accrued liabilities. 18. Computation of accrued payroll. 19. List of deposits held by the City. 20. Schedule of compensated absences (sick leave, vacation, comp time) . 31 21. Schedule of bond and interest maturities plus redemption for the year. 22. Schedule of all significant notes, contracts, installment obligations and other long term debt. 23. Schedule of claims outstanding. 24. Schedule of interest allocation. 25. List of open purchase orders at 6-30. 26. Schedule of expenses changed from the internal service funds to the general fund. 27. Gann limitation calculation - Resolution No 87-103. 28. Schedule of "contributions" of fixed assets to the City (water) . 29. Schedule to reconcile to prior year fund balances. 30. Internal control review worksheet and checklist. 31. Pers schedule- misc and safety payroll by pay period and related Pers costs. 32. Pull invoice packages as needed. 32 Q APPENDIX F TUSTIN REDEVELOPMENT AGENCY The staff of the City of Tustin will prepare the following statements and schedules for the auditor: 1. Confirmation letters. 2. Bank reconciliations for all bank accounts at 6-30, including list of outstanding checks. 3. List of investments at 6-30. 4. List of accrued revenues. Ex. Property Tax 5. List of inventories. 6. List of prepaid expenses, if any. 7. Copy of any new bond agreements. 8. Schedule of accounts payable. 9. Schedule of land held for resale, if any. 10. Schedule of furniture and equipment, if any. 11. Copies of promissory notes or loan agreements with the City. 12. Copy of statement of indebtedness -South Central Project and Town Center Project. /ls a:citylist.rfp 0 33