AWARD OF CONTRACT FOR AUDIT SERVICES

 

Recommendation:

It is recommended that the City Council award a three year audit contract (covering fiscal years 1999-00 through 2001-02, totaling $61,580, with an option to extend the agreement for two additional fiscal years), to the firm of Caporicci, Cropper & Larson, LLP (CC& L).

 

Background:

The City contracted with Caporicci & Larson for audit services from 1995 through 1997 with an extension through 1999. (The firm has since merged with another firm, adding another partner to the name.)

Government Finance Officers Association (GFOA) Recommended Practice for Audit Procurement was followed for auditor selection (best practices).

A request for proposals for audit services for fiscal years 1999-02, with a two-year extension option, was issued on June 8, 2000; six proposals were received by the City Clerk on June 29, 2000.

The City Treasurer, Finance Director and Accounting Supervisor (Selection Panel) reviewed the proposals and rated the firms on the quality of the written response and the contract cost. Based on those ratings, the top three firms were interviewed by the Selection Panel.

 

Analysis:

One of the factors that weighed heavily in the selection is a major change in financial reporting that will take place during this contract, assuming the two-year extension option is exercised. Governmental Accounting Standards Board (GASB) 34 is effective for cities our size during fiscal year 2002-03. Two of the major impacts in the new model are (1) changes to the existing financial statements and the addition of government-wide statements with a different basis of accounting; and (2) the accounting and recording of infrastructure assets (streets, street lights, sewer systems, etc.). The firm selected will assist the City in planning for, as well as implementing, GASB 34.

Of the three firms interviewed, Caporicci, Cropper & Larson and Moreland and Associates were the most knowledgeable about GASB 34 and seemed most capable of assisting the City with implementation.

The Selection Panel recommends that the City retain CC & L for the following reasons:

• The firm is knowledgeable about GASB 34 and capable of assisting the City with implementation at the earliest time desired. The partner in charge teaches accounting classes, including GASB 34, at the college level and has already converted one city to GASB 34 for modeling purposes.
• The firm is familiar with the City’s processes and records. The time that would be spent with a new firm to familiarize them with the City can be spent on GASB 34 planning.
• Their performance on past audits has been very good. The partner is always available for consultation when needed.
• While the cost should not be a primary consideration for professional services, CC & L’s fees are lower than in the past contract by $5,170 and $7,120 lower than Moreland & Associates.

The Selection Panel discounted any concern about rotation of auditors since different managers will be assigned during the contract period, giving fresh perspective, and since both partners participate in the audit. The continuity, experience and GASB 34 expertise was valued higher than any concern about rotation.

Below is a comparison of proposed audit fees and hours for the three firms in the initial three years.

 

Year	Moreland & Associates, Inc.		Lance, Soll & Lunghard, LLP		Caporicci, Cropper & Larson, LLP
	Fee	Est. Hrs .	Fee	Est. Hrs.	Fee	Est. Hrs.
99-00	$22,000	399	$18,940	284	$19,550	330
00-01	22,900	399	20,420	284	20,515	319
01-02	23,800	399	21,040	284	21,515	319
TOTAL:	$68,700		$60,400		$61,580
NOTE: There will likely be additional costs for GASB 34 implementation.

All proposals are available in the Finance Department. Gary Caporicci will be present at the City Council meeting.

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