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HomeMy WebLinkAbout07 APPROVE AGREEMENT WITH DAVIS FARR LLP FOR INDEPENDENT AUDIT SERVICES.aes.04.27.26Docusign Envelope ID: 04F7BOA2-4F90-8132-81B2-354BF8C45917 � Agenda Item 7 Reviewed: AGENDA REPORT City Manager Q�S Finance Director MEETING DATE: MAY 5, 2026 TO: ALDO E. SCHINDLER, CITY MANAGER FROM: JENNIFER KING, FINANCE DIRECTOR/CITY TREASURER SUBJECT: APPROVE AGREEMENT WITH DAVIS FARR LLP FOR INDEPENDENT AUDIT SERVICES SUMMARY: The City issued a Request for Proposal (RFP) for professional auditing services and received eight proposals. The Audit Commission appointed an Ad -Hoc Committee, consisting of Chair Lillyan Chandler and Commissioner John Wende, to evaluate proposals from the top ranked audit firms. On April 23, 2026, the Audit Commission received feedback from the Ad Hoc Committee. After deliberation, the Audit Commission recommended that the City Council approve a service agreement with Davis Farr LLP as the City's independent auditor. RECOMMENDATION: Recommend the City Council: 1. Approve a professional service agreement with David Farr LLP as the independent certified public accounting firm to perform auditing services for three years beginning with the fiscal year ending June 30, 2026, with the option of providing the same services for two subsequent fiscal years. 2. Authorize the City Manager or designee to execute necessary contract documents and subsequent amendments with Davis Farr LLP subject to any non -substantive modifications as may be deemed necessary and/or recommended by the City Attorney. FISCAL IMPACT: The all-inclusive fee proposed by Davis Farr LLP for the fiscal year ending June 30, 2026 is $54,240. The Fiscal Year 2026-2027 proposed budget includes sufficient funding to cover the scope of work associated with this agreement. Total maximum cost over a five-year contract term (initial three years plus two optional years if exercised) is $281,336 and will be incorporated in the annual proposed budget for Council's consideration. Docusign Envelope ID: 04F7BOA2-4F90-8132-81 B2-354BF8C45917 City Council Agenda Report Approve Agreement for Independent Audit Services May 5, 2026 Page 2of3 CORRELATION TO THE STRATEGIC PLAN: The recommendation correlates to the strategic plan by implementing Goal C, sustain long- term financial strength with adequate reserves and enhanced capacity to provide a sustainable level of City services. Specifically, a non-federal entity such as the City that spends more than $1 million in federal funds annually, is required by federal guidelines and California State Controller's Office to undergo an annual organization -wide audit performed by an independent Certified Public Accountant (CPA). Meeting the annual audit requirement is essential to obtain federal and/or state funding for City programs. BACKGROUND AND DISCUSSION: Each year an independent audit of the City is conducted in conformity with generally accepted auditing standards (GAAS). Those standards require that an independent CPA plans and performs the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Davis Farr LLP last concluded their work as the City's auditor upon completion of the audit for Fiscal Year 2024-2025. In February 2026, the City issued a Request for Proposal (RFP) for Professional Auditing Services. The RFP was posted on the OpenGov Procurement platform (an online public bidding portal and also distributed via the California Society of Municipal Finance Officers (a statewide professional association with over 2,000 members). Proposals were due by mid - March. The City received eight proposals. Staff conducted the initial evaluation of all proposals based on qualifications and experience of the audit team, responsiveness in clearly stating their understanding of the work to be performed, service capacity/time commitment of key staff, audit fees, and references. Davis Farr LLP and Vasquez & Company LLP were the highest ranked firms. The Audit Commission appointed an Ad -Hoc Committee, consisting of Chair Lillyan Chandler and Commissioner John Wende, to evaluate and interview the two highest ranked firms. The Ad Hoc Committee evaluated each firm based on the following technical criteria: • qualifications and experience of the firm and team lead • the ability and resources of the audit firm to perform a quality audit • demonstrated commitment to federal, state, and local government audit practices David Farr LLP was ranked the highest based on the aforementioned technical criteria and factoring in the proposed costs. David Farr LLP is a full -service regional accounting firm, which has extensive experience in providing audit services to local governments. The firm has served as an independent Docusign Envelope ID: 04F7BOA2-4F90-8132-81 B2-354BF8C45917 City Council Agenda Report Approve Agreement for Independent Audit Services May 5, 2026 Page 3of3 auditor to the cities of Costa Mesa, Garden Grove, Huntington Beach, and Newport Beach, and special districts such as the Orange County Water District and Irvine Ranch Water District. The audit team will be headed by Marcus Davis, who has over 42 years of experience in local government auditing. At the April 23, 2026 meeting, the Audit Commission received and discussed the Ad Hoc Committee's feedback. The Audit Commission recommended that the City Council approve a service agreement with Davis Farr LLP as the City's independent auditor. Jennifer King Finance Director/City Treasurer Elsa Chow Deputy Director of Finance