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HomeMy WebLinkAboutAgenda Statement 1977/07/12 Item 13CITY OF CHULA VISTA COUNCIL AGENDA STATEMENT IteT No.~~ Fa~° meeting of ,1~12/Zj ITEM TITLE RESOLUTION 871 4: Accepting letter of proposal from Carroll and Pendleton, Associates, Certified Public Accountants, for the audit of City records for the fiscal years / ~ 1977-78, 1978-79 and 1979-80 SUBMITTED BYG~ Director of Finance ITEM EXPLANATION (4/5TH'S VOTE REQUIRED YES NO X } We have received the following three proposals for the-audit of City records for the period July 1, 1977 through June 30, 1980. Most certified public accounting firms are requesting contracts of three to five years duration in order to plan the neces- sary staffing and work load and also to keep costs at a competitive level, City Redevelopment Block Total Firm Audit Agency Grant Fees Carroll and Pendleton, Associates Year Ending 6/30/78 6/30/79 6/30/80 Price Waterhouse and Co. Year Ending 6/30/78 6/30/79 6/30/80 Peat Marwick Mitchell and Co. 5,800 1,500 for both agencies 1,200 8,500 6,090 Cannot be estimated - - 6,359 Cannot be estimated - - 8,000 900 for both agencies 2,500 11,400 Subject to adjustment based on cost-of-living index Subject to adjustment based on cost-of-living index Year Ending 6/30/78 7,800 1,500 to 3,500 for each agency 10,800 - 14,800 6/30/79 8,400 Cannot be estimated - - 6/30/80 9,000 Cannot be estimated - - (Continued) tXNltSllS Agreement Resolution x Ordinance Plat Notification List Other X ENVIRONMENTAL DOCUMENT: Attached Submitted on FINANCIAL IMPACT $7,500 is budgeted in account 100-0420-5201 and $1,500 in account 240-2410-5201 STAFF RECOMMENDATION Accept the proposal of Carroll and Pendleton, Associates. BOARD/COMMISSION RECOMMENDATION A p p R~ v E D N/A by the City Council COUNCTL ACTION of Chula `,Ti i:,a, California Dated ..7..' ~~.'.,7.7.......~..~.... ltem No. 13 For Meeting of 7/12/77 Sup~leme~tal Page 2 ' Although all three firms are well qualified to perform the necessary audit, the firm of Carroll and Pendleton is the only firm that provides for monthly visits to the City by the owner-partner, This monthly service has proven extremely beneficial to the City in the past and it has enabled the Finance Department to stay on top of potential problem areas before development. His professional fees are very competitive and are under the other firms bid prices. Funds are available in the 1977-78 budget to accommodate the bid of Carroll and Pendleton, Associates, The Redevelopment Agency audit is billed separately and paid by the Redevelop- ment Agency; and the Community Development Block Grant audit, that is required by federal law, is chargeable to the grant funds. PEAT, MAI~WICK, MITCHELL & CO. CERTIFIED PUBLIC ACCOUNTANTS 1850 FIFTH AVENUE SAN DIEGO. CALIFORNIA ~J2101 June 30, 1977 Mr. Gordon K. Grant, Finance Director City of Chula Vista 276 Fourth Avenue Chula Vista, California 92010 Dear Mr. Grant: We recognize that the City of Chula Vista is one of the fastest growing communities in San Diego County and, therefore, will continue to face many challenges and opportunities in the coming years. Peat, Marwick, Mitchell & Co. would be delighted to be associated with the City as you carry out your services to the community. As Managing Partner of the San Diego office of Peat, Marwick, Mitchell & Co., I will take a personal interest in this important engagement to in- sure that the necessary resources are committed to provide the City with the highest quality of professional services. We appreciate the opportunity to present the enclosed proposal to perform an examination of the financial statements of the City of Chula Vista, the Bayfront Redevelopment Agency and the Town Centre Redevelopment Agency. Should you have any questions about our Firm or any portion of our proposal, please do not hesitate to call us. Very truly yours, PEAT, MARWICK, MITCHELL & CO. ~.~' ~~~ / Nessim A. Tiano Managing Partner NAT:JK P. M. M. 8~ CO. Mr. Gordon K. Grant, Finance Director City of Chula Vista June 29, 1977 9 Engagement Manager Mr. G. Steve Hamm, an audit manager in our San Diego office, will serve as engagement manager and will provide overall coordination and guidance to all personnel participating in the audit. He will supervise the work of PMM&Co. auditors in collecting and analyzing data and report preparation. He will regularly review all phases of the engagement with the engagement partner. Computer and Statistical Audit Specialist Mr. Eric T. Bjoin is an audit manager in our San Diego office who has received extensive training in the application of advanced statistical and computer audit techniques. As the computer audit specialist he will perform the review of controls within the City Computer Center and assist the in-charge accountant in developing System 2170 applications and evaluating the results of computer- ized audit procedures. Mr. Bjoin will assist the audit team in evaluating the validity of the audit approach and the conclusions which are based on statis- tical audit applications. Professional Staff The in-charge accountant and other personnel forming our audit team will be selected from the many individuals of our professional staff experienced in municipal auditing and accounting, Technical Resources Partner Mr. Michael C, Moreland, a partner in our Los Angeles office, has many years of experience in all areas of auditing, financial reporting and the evaluation of financial controls for a variety of municipalities, redevelopment agencies and other public sector organizations. Mr. Moreland will be available for consultation on special and unusual matters which may occur during the course of the engagement. Resumes of these audit team members are presented in Appendix B. FEES AND COSTS Fees for our services are based on the time expended on an engagement at the hourly rates indicated b~low> Our hourly rates are directly related to each individual's level of compensation, which is based on his experience and training. P M. M. 8~ CO. Mr. Gordon K. Grant, Finance Director City of Chula Vista June 29, 1977 10 The hourly rates fo`r our services are as follows: Partners $ 60 Managers 40 Supervisors 30 Senior Accountants 23 Staff Accountants 20 Assistant Accountants 18 Clerical 9 Plus out-of-pocket expenses, at cost We estimate our fees, including out-of-pocket expenses for the City of Chula Vista as follows: Year ending June 30, 1978 $ 7,800 Year ending June 30, 1979 8,400 Year ending June 30, 1980 9,000 We believe that these are not only fair and reasonable, but they are also at a level which will provide professional services of the very highest quality. Should the amount of time expended for services rendered be less than antici- pated, such reduction shall be reflected in the final billing. Our estimate of fees for the Bayfront and Town Centre Redevelopment Agencies for the fiscal year ending June 30, 1978 is between $1,500 and $3,500 for each age.ncyo We are quoting our fee estimate for these agencies in this manner since the operations of these two entities are just beginning and the extent of time required to complete the audits in the future cannot be accurately estimated at this time. We will, therefore, reach an agreement with the City on the cost of auditing these two agencies for the fiscal years June 30, 1979 and 1980, when more information is available concerning the volume and extent of their trans- actions, As you would expect, all new audit engagements require some initial investment of time to become familiar with the new client organization, to develop a per- manent file of working papers, and to perform other one-time start-up activities. Since we hope to establish a long-term professional relationship with the City of Chula Vista, we will absorb such first. year costs. In the event we are unable to perform the proposed services for the above- estimated fees due to (1) extensive irregularities or unforeseen conditions, (2) incompleteness of records, (3) poor working conditions, or (4) other justi- fiable reasons, we will provide appropriate City personnel with all of the pertinent facts, together with our estimate of the additional fees to complete the engagement. * ~ ~ ~ ~ ~ f P. ~l . M . 8~ C O. Mr. Gordon K. Grant, Finance Director City of Chula Vista June 29, 1977 11 We appreciate the courtesies afforded us during our fact-gathering visits to the City and we look forward to serving the City on this very important engagemento We would be pleased to discuss this proposal orally with you and other Gity representatives at your convenience. Very truly yours, PEAT, MARWICK, MITCHELL & CO, Paul E. Schedler, Partner PES:PAM ~. 1'1Ce 600 B STREET ater louse ~j~o ~ 4N DI,E 20,o AUFORNIA 92101 // June 30, 1977 Mr. Gordon K. Grant Director of Finance City of Chula Vista 276 Fourth Avenue Chula Vista, California 92010 Dear Mr. Grant: We are pleased to have the opportunity to acquaint you with our firm and our ability to serve as independent accountants for the City of Chula Vista. Our discussions with you have been most helpful in providing us with a basic understanding of the City`s operations and its financial organization and we appreciate the time and courtesies extended • to us. Based on these discussions, we are confident that we can provide the full range of professional services necessary to effectively serve the present and future needs of the City. The thrust of this proposal is directed toward answering a single question - Why will you be better served by Price Waterhouse & Co. than any other accounting firm? This question is addressed by describing our approach to the audit in the terms we believe are most important to you, namely, the individuals who will perform the work, our firm's commitment to communication, our understanding of your needs, and our total service approach ar~d q~ialifications . 4 - 2 - Our audit plan for the City of Chula Vista will be pre- pared after interviews are conducted by our audit and manage- ment advisory services staff with the City Manager, City Councilmen, and financial and operating executives of the City. It~is our intention to review the audit plan each year in concept with an audit committee of the Council (or the entire Council if desired) prior to commencing our audit. During this review we often find a need for applying special audit emphasis to areas of concern and a possibility for reducing our scope in other areas. All of the key staff members assigned to the audit are experienced in governmental auditing, accounting and operations. It is important to note that our audit services as described in this letter and detailed in our proposal section entitled "Our Total Service Concept", including monthly reviews by the audit partner or manager assigned to the engagement, are all included in our normal audit fee. Should special services be required beyond our normal auditing, we would be pleased to discuss specific fee arrangements for each engagement. In recognition of the growing importance of governmental accounting and auditing, Price Waterhouse has established an Office of Government Services in Washington, D.C., which concentrates entirely on matters affecting state and local government and actions of the federal government which affect our clients. The services of this office will be fully available to the City of Chula Vista as needed in dealing with matters such as requests for grants, municipal security offerings, revenue sharing and other technical matters that may arise. -3- The members of our audit team will be happy to meet with representatives of the City of Chula Vista to answer any questions that`may arise. We hope this proposal conveys our enthusiastic desire to be of service to the City since we are convinced we can offer the highest quality of accounting service that the City desires. Yours very truly, ~-e~~. rice 'ater ousc ~~ ~~~, FEE ARRANGEMENT The time spent by our staff in an initial examination is far greater than in subsequent years because of the need to become familiar with records and procedures and to develop background information. Specialists in the areas of financial planning and control and data processing from our Management Advisory Services Department will participate in developing such information. They will review all significant aspects of the City's operations, including the purchasing function, the data processing department, etc. Suggestions for improvements in procedures, if any, resulting from such reviews will, of course, be communicated to management. On the assumption that our appointment as independent accountants would be on .a continuing basis, we believe it appropriate to absorb such first year costs and have estimated our fees accordingly. Therefore, we would like to suggest an intial term of our contract to be for at least a three-year period. A cancellation option of sixty days by either party would be acceptable. Fees for our services are generally determined on the basis of established rates per hour for particular staff members assigned. We consider it appropriate to reduce our standard fee in view of the nature of the work and the public service aspects of this assignment. We are agreeable to entering into a contract with the City for fees not to exceed the following for each year of the prospective three-year period subject to adjustment in the second and third year, based on a change in the cost of living index. - 2 - Audits and management letters for: 1. All City of Chula Vista funds (including revenue sharing, CETA, and local transportation funds) 2, The two City of Chula Vista Redevelop- ment Agency project areas 3. Community Development Block Grant Funds $ 8,000 900 2,500 11 400 As stated in the forepart of this proposal, we would like to assure you that under no circumstances would we compromise our excellence in auditing and reporting and only in extra- ordinary circumstances would we seek to increase the above quoted fees. All staff assigned to your engagement, particu- larly the partners and managers, will be available for con- sultation with you at any time during the year. Our commit- ment to the "total service concept" will be honored. However, if extraordinary circumstances indicate that more intensive and detailed work be performed to investigate specific problems, we would provide all pertinent facts relative to the extraordinary circumstances together with our estimate of the cost of the additional services.