CC - Item 4G - Contract with Mayer Hoffman McCanni
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ROSEMEAD CITY COUNCIL
STAFF REPORT
T0: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: ANDREW C. LAZZARETTO, CITY MANAGE
DATE: MAY 8, 2007
SUBJECT: APPROVAL OF CONTRACT WITH MAYER HOFFMAN MCCANN, P.C.
FOR FISCAL YEAR 2007
SUMMARY
The California Government Code requires that an independent audit of the City of
Rosemead's records, books, and inventories be conducted and a report issued thereon.
The services provided by the independent auditor are to support the City's reporting
function as well as to provide ongoing technical support when necessary. The current
contract with McGladrey & Pullen ended after audit services for fiscal year ending June
30, 2006 were completed. The City spent $89,100 for audit services performed by
McGladrey & Pullen for fiscal year 2006.
On April 24, 2007 the City Council authorized the City Manager to seek proposals to
contract with a new public accounting firm to perform the annual audits of the financial
statements of the City of Rosemead, the Rosemead Community Development
Commission, and the Rosemead Housing Development Corporation. In addition, the
accounting firm will also perform the audit to satisfy the requirement imposed by the
Single Audit Act and the U.S. Office of Management and Budget (OMB Circular A-133).
City staff requested proposals from five well established, full service independent
accounting firms with municipality specialization including McGladrey & Pullen.
Each firm was evaluated based on the competitive selection process, in which the
evaluation of proposals was not limited to price alone. Audit service proposal pricing
ranged from $44,610 to $73,300, with only $390 separating the two lowest bids. Each
firm demonstrated strong technical experience auditing similar entities, performing the
types of work outlined, and the ability to provide ongoing technical support when
necessary. However, a critical factor in the overall rating was the firms' commitment to
the internal control review process and ongoing consultative support. The proposal of
$45,000 from Mayer Hoffman McCann, not only addressed their reporting of internal
control matters of significant deficiency or material weakness by letter to the City
Council, but also included the preparation of a letter to City management with other
recommendations from their review of internal control procedures. City staff views this
APPROVED FOR CITY COUNCIL AGENDA: l
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City Council Meeting
May 8, 2007
Page 2 of 5
benefit as significant due to numerous staff and operational changes throughout the City
which may have a direct impact on internal controls. The proposal also included a
provision for additional client training at their annual client training conference. Further,
the proposal reiterated that the firm's policy is to provide unlimited telephone
consultations to their municipal clients regarding accounting and other technical
matters. The selection of Mayer Hoffman McCann will result in a $28,300 cost savings
in audit service fees.
Staff Recommendation
Staff recommends that the City Council authorize the Mayor to execute a contract with
the public accounting firm of Mayer Hoffman McCann, P.C. to perform the annual audits
of the financial statements of the City of Rosemead, the Rosemead Community
Development Commission, and the Rosemead Housing Development Corporation for
the amount of $45,000.
ANALYSIS
Four well established, full service independent accounting firms with California
municipality specialization were contacted to solicit bid proposals. In addition, the
current audit firm of McGladrey & Pullen was contacted for a proposal for fiscal year
2007. Copies of the proposals received by the City are included as attachments A
through E. An arrangement letter was submitted by McGladrey & Pullen due to the
firm's history of auditing the City of Rosemead for over 20 years.
Evaluation Criteria
Each firm was evaluated based on the competitive selection process, in which the
evaluation of proposals was not limited to price alone. Technical merit, consultative
support and firm capability were also given significant consideration in the selection
process.
The competitive selection evaluation criteria were as follows:
A. Firm Qualifications
Technical experience of the firm as documented by experience in auditing
similar entities and performing the type of work outlined; size and structure
of the firm; ability to provide ongoing technical and consultative support
when necessary.
Specific firm qualifications considered included:
Documented experience in auditing similar government agencies.
2. Adherence to the strict quality control measures and high
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City Council Meeting
May 8, 2007
Page 3of5
professional standards of the Public Company Accounting
Oversight Board, the American Institute of Certified Public
Accountants and the California State Board of Accountancy.
3. Enrollment in continuous professional education classes with a
focus on governmental accounting and auditing topics.
4. Ability to react quickly to changes in the auditing profession
including early implementation of new audit requirements.
5. Technical knowledge and resources to meet the City's audit report
deadlines and special request needs.
B. Personnel Qualifications
Qualifications of Partners and staff at various levels. The City expects the
field senior in-charge to be a CPA candidate with at least three years
experience in auditing municipalities or other governmental entities.
C. Methodoloay
Responsiveness of the proposal in clearly stating an understanding of the
audit services to be performed, including appropriateness and adequacy
of proposed procedures, reasonableness of time estimates and timeliness
of expected completion.
D. Dollar Cost Bid
Cost of contracted services.
Discussion of Criteria Evaluation
Firm Qualifications
All five firms have been servicing local governments for over 40 years. Each firm
demonstrated strong technical experience auditing similar entities, performing the types
of work outlined, and the ability to provide ongoing technical support when necessary.
However, a critical factor in the overall rating was the firms' commitment to the internal
control review process and ongoing consultative support. The proposal from Mayer
Hoffman McCann, not only addressed their reporting of internal control matters of
significant deficiency or material weakness by letter to the City Council, but also
included the preparation of a letter to City management with other recommendations
from their review of internal control procedures. City staff views this benefit as
significant due to numerous staff and operational changes throughout the City which
may have a direct impact on internal controls.
Mayer Hoffman McCann's proposal included the provision to keep City staff abreast of
new developments affecting local government finance. The proposal also included a
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City Council Meeting
May 8, 2007
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provision for additional client training with respect to new GASB pronouncements at
their annual client training conference. Further, the proposal reiterated that the firm's
policy is to provide unlimited telephone consultations to their municipal clients regarding
accounting and other technical matters. Advice can be solicited regarding the
application of generally accepted accounting principles, establishment and segregation
of funds, advice regarding debt issuance, financial statement preparation and content
and other matters relating to the City.
Personnel Qualifications
The engagement partner, technical review partner and engagement manager for each
firm were each well experienced and comparable, and therefore did not provide a major
point to distinguish between the firms.
Methodology
McGladrey & Pullen, being the only firm who has audited the City of Rosemead, clearly
understands the scope of the work, and the time necessary to complete the audit. The
other four firms were, however, able to clearly demonstrate their understanding of the
audit services to be performed, including the appropriateness and adequacy of
proposed procedures, reasonableness of time estimates and timeliness of expected
completion.
Dollar Cost Bid
The hours and price for each firm are listed below:
McGladrey & Pullen
Mayer Hoffman McCann
Diehl, Evans & Co.
Lance Soll & Lunghard
Vasquez & Company
Price for audit Hours for services
$73,300
Not Provided
$45,000
430
hours
$44,610
430
hours
$59,510'
Not
Provided
$64,500
550
hours
* The dollar cost bid from Lance Soil & Lunghard was for a period of three years through fiscal
2009. The bid for fiscal 2008 and 2009 was $61,306 and $63,145, respectively.
FINANCIAL REVIEW
The cost of the fiscal year 2007 audit, under the terms of the contract is $45,000.
Funds for the fiscal year 2007 audit have been included in the fiscal year 2008
recommended operating budget. The City will realize a cost saving of $28,300 in fees.
City Council Meeting
May 8, 2007
Paae 3 of 3
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
L ISA TC-
Lisa Pedote
Chief Financial Officer
•
McGladrey& Pul en
Certified Public Accountants
April 6, 2007
To the Honorable City Council
City of Rosemead, California
Attention: Mr. Andrew Lazzaretto, City Manager
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McGladrey & Pullen, LLP
18401 Von Karman Ave, 5th Floor
Irvine California 92612$531
0 949 255 6600 F 949 255 5091
This letter is to explain our understanding of the arrangements for the services we are to perform for the City of
Rosemead, California (the City) for the year ending June 30, 2007. We ask that you either confirm or amend this
understanding.
We will perform an audit of the City's governmental activities, each major fund and the aggregate remaining fund
information as of and for the year ending June 30, 2007, which collectively comprise the basic financial statements.
We understand that these financial statements will be prepared in accordance with accounting principles generally
accepted in the United States of America, The objective of an audit of financial statements is to express an opinion
on those statements.
We will also perform an audit of the basic financial statements of the Rosemead Community Development
Commission (the Commission) and the Rosemead Housing Development Corporation (the Corporation) to be issued
by the City as of and for the year ended June 30, 2007. We understand that these financial statements will be
prepared in accordance with accounting principles generally accepted in the United States of America.
We will also perform the audit of the City as of June 30, 2007 so as to satisfy the audit requirements imposed by the
Single Audit Act and the U.S. Office of Management and Budget (OMB Circular No. A-133).
We will conduct the audit in accordance with auditing standards generally accepted in the United States of America;
Government Auditing Standards issued by the Comptroller General of the United States; and the provisions of the
Single Audit Act, OMB Circular A-133 and OMB's Compliance Supplement. Those standards, circulars or
supplements require that we plan and perform the audit to obtain reasonable rather than absolute, assurance about
whether the financial statements are free of material misstatement, whether caused by error, fraudulent financial
reporting or misappropriation of assets. Accordingly, a material misstatement, whether caused by error, fraudulent
financial reporting or misappropriation of assets, may remain undetected. An audit includes examining, on a test
basis evidence supporting the amounts and disclosures in the financial statements. As a result, an audit is not
designed to detect errors or fraud that are immaterial to the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit will provide a reasonable basis for our reports.
In addition to our reports on the above-mentioned financial statements, we will also issue the following reports or
types of reports:
• A report on the fairness of the presentation of the City's schedule of expenditures of Federal awards for the
year ended June 30, 2007.
• Reports on internal control related to the financial statements and major programs. These reports will
describe the scope of testing of internal control and the results of our tests of internal controls.
McGladrey & Pullen, LLP is a member firm of RSM International,
an affiliation of separate and independent legal entities.
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City of Rosemead
April 6, 2007
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• Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We will
report on any noncompliance which could have a material effect on the financial statements and any
noncompliance which could have a direct and material effect on each major program.
• A schedule of findings and questioned costs.
• A summary schedule of prior audit findings.
• Completion of the Data Collection Form for Reporting on Audits of States, Local Governments, and Non-
Profit Organizations as required by OMB Circular A-133.
• Agreed-upon procedures sufficient to provide an Independent Accountant's Report on Agreed-Upon
Procedures Applied to Appropriations Limit Worksheets for the City.
• A management report of recommendations to improve managerial or operational effectiveness and
efficiency, including certain matters that are not considered to be reportable conditions.
• An Audit Committee or equivalent letter as promulgated by the reporting standards of the Government
Auditing Standards.
The funds that you have told us are maintained by the City and that are to be included as part of our audit are those
identified in your budget for the year ended June 30, 2007.
The federal financial assistance programs that you have told us the City participates in and that are to be included as
part of the single audit going forward are as follows:
• Community Development Block Grant CFDA #14.218
• HOME Investment Partnership Program CFDA #14.239
• Community-oriented Policing Services CFDA #16.580
• Local Law Enforcement Block Grant CFDA #16.592
• Narcotics Forfeiture and Seizure CFDA #16.xxx
The component units whose financial statements you have told us are to be included as part of the City's basic
financial statements are as follows: the Rosemead Community Development Commission and the Rosemead
Housing Development Corporation.
Our reports on internal control will include any reportable conditions and material weaknesses in the system of which
we become aware as a result of obtaining an understanding of internal control and performing tests of internal control
consistent with requirements of the standards and circular identified above, Our reports on compliance will address
material errors and fraud; violations of compliance requirements, and other responsibilities imposed by state and
federal statutes and regulations and assumed by contracts; and any state or federal grant, entitlement or loan
program questioned costs of which we become aware, consistent with requirements of the standards and circulars
identified above.
If circumstances arise related to the condition of your records; the availability of sufficient, competent evidential
matter; or indications of a significant risk of material misstatement of the financial statements because of error,
fraudulent financial reporting, misappropriation of assets or noncompliance, which in our professional judgment
prevent us from completing the audit or forming an opinion, we retain the unilateral right to take any course of action
permitted by professional standards, including declining to express an opinion or issue a report, or withdrawal from
the engagement.
City of Rosemead
April 6, 2007
Page 3
As you know, management is responsible for (1) preparing the City's financial statements and scheduling Federal
awards; (2) establishing and maintaining effective internal control over financial reporting and safeguarding assets
and internal control over compliance, including monitoring ongoing activities, and informing us of all significant
deficiencies in the design or operation of such controls of which it has knowledge; (3) properly recording transactions
in the records; (4) identifying and ensuring that the City complies with the laws and regulations applicable to its
activities, and for informing us about all known material violations of such laws or regulations; (5) designing and
implementing programs and controls to prevent and detect fraud, and informing us about all known or suspected
fraud affecting the entity involving management, employees who have significant roles in internal control and others
where the fraud could have a material effect on the financial statements; (6) informing us of its knowledge of any
allegations of fraud or suspected fraud affecting the entity received in communications from employees, regulators or
others; (7) making all financial records and related information available to us; (8) adjusting the financial statements
to correct material misstatements; (9) following up and taking corrective action on audit findings, including the
preparation of a summary schedule of prior audit findings, and a corrective action plan; and (10) report distribution
including submitting the reporting package. At the conclusion of our audit, we will request certain written
representations from management about the financial statements and matters related thereto. We will also require
that you affirm to us that the effects of any uncorrected misstatements aggregated by us during the current
engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to
the financial statements taken as a whole.
The City Council is responsible for informing us of its views about the risks of fraud within the entity, and its
knowledge of any fraud or suspected fraud affecting the entity. We will also determine that certain matters related to
the conduct of the audit are communicated to the Council, including (1) fraud involving senior management and fraud
(whether caused by senior management or other employees) that causes a material misstatement of the financial
statements, (2) illegal acts that come to our attention (unless they are clearly inconsequential), (3) disagreements
with management and other serious difficulties encountered in performing the audit, and (4) various matters related
to the entity's accounting policies and financial statements.
The City of Rosemead, California, hereby indemnifies McGladrey & Pullen, LLP and its partners, principals and
employees and holds them harmless from all claims, liabilities, losses and costs arising in circumstances where there
has been a known misrepresentation by a member of City of Rosemead, California's management, regardless of
whether such person was acting in the City's interest. This indemnification will survive termination of this letter.
You have informed us that you intend to prepare a comprehensive annual financial report (CAFR) and submit it for
evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial
Reporting Program. Our participation in the preparation of the CAFR is to consist of providing the City with a reader's
proof copy of the City's financial statements (i.e., Section II minus the Management Discussion & Analysis). We will
need to at least read the material included in the Introductory and Statistical Sections. The preparation of the material
included in the Introductory and Statistical Sections can be quite time-consuming. We request that we be given at
least one week to review the City's version of these sections prior to publishing the final document.
The working papers for this engagement are the property of McGladrey & Pullen, LLP. However, you acknowledge
and grant your assent that representatives of the cognizant or oversight agency or their designee, other government
audit staffs and the U.S. General Accounting Office shall have access to the audit working papers upon their request,
and that we shall maintain the working papers for a period of at least seven years after the date of the report, or for a
longer period if we are requested to do so by the cognizant or oversight agency. Access to requested workpapers will
be provided under the supervision of McGladrey & Pullen, LLP audit personnel and at a location designated by our
Firm.
We will assist the City in the preparation of its CAFR and in the preparation of the financial reports for the
Commission and Corporation for the fiscal year ended June 30, 2007.
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City of Rosemead
April 6, 2007
Page 4
The two overarching principles of the independence standards of Government Auditing Standards issued by the
Comptroller General of the United States provide that management is responsible for the substantive outcomes of
the works and, therefore, has a responsibility and is able to make any informed judgment on the results of the
services described above. Accordingly, the City agrees to the following:
1. Mr. Andrew Lazzaretto, City Manager, and Ms. Lisa Pedote, Finance Director, will be accountable and
responsible for overseeing the preparation of the financial statements and related footnotes for the
Commission and Corporation.
2. The City will establish and monitor the performance of the preparation of the financial statements and
related footnotes for the Commission and Corporation to ensure that they meet management's objectives.
3. The City will make any decisions that involve management functions related to the preparation of the
financial statements and related footnotes for the Commission and Corporation and accepts full
responsibility for such decisions.
4. The City will evaluate the adequacy of services performed and any findings that result.
During the course of our engagement, we may accumulate records containing data, which should be reflected in your
books and records. You will determine that all such data, if necessary, will be so reflected. Accordingly, you will not
expect us to maintain copies of such records in our possession.
From time to time and depending upon the circumstances, we may use third-party service providers to assist us in
providing professional services to you. In such circumstances, it may be necessary for us to disclose confidential
client information to them. We enter into confidentiality agreements with all third-party service providers and we are
satisfied that they have appropriate procedures in place to prevent the unauthorized release of your confidential
information to others.
The assistance to be supplied by organization personnel, including the preparation of schedules and analyses of
accounts, will be discussed and coordinated with Ms. Lisa Pedote, Finance Director. The timely and accurate
completion of this work is an essential condition to our completion of the audit and issuance of our audit report.
Our fees are based on the time required by the individuals assigned to the engagement, plus direct expenses. Interim
billings will be submitted as work progresses and as expenses are incurred. Billings are due upon submission. Our
fees for the services described in this letter for the fiscal year ended June 30, 2007 are shown below:
Preparation of the City's June 30, 2007 audited basic financials statements, including $2,650 for
Proposition A Fund $ 27,000
Preparation of the City's audited financial statements to satisfy the audit requirements imposed by the
Single Audit Act and OMB Circular No. A-133 6,800
Preparation of the Commission's June 30, 2007 audited component unit financial statements 16,300
Preparation of the Corporation's June 30, 2007 audited component unit financial statements 9,000
Preparation of the June 30, 2007 limited procedures review on the Appropriations Limit Calculation in
accordance with Article XI I I B of the California Constitution 2,200
Assistance in the preparation of the City's Commission's and Corporation's annual audited financial
statements for the year ended June 30, 2007 12.000
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City of Rosemead
April 6, 2007
Page 5
These fees were based on the fees charged for the fiscal year ended June 30, 2006 adjusted for increases being
experienced in the public accounting profession. This fee structure is dependent on the accurate and timely
completion of the schedules we will communicate through the client participation schedule and on the premise that
there are no more than two major federal financial assistance programs and the City is designated as a low risk
auditee as that term is defined in circular OMB A-133. Should events modify the scope of our engagement, including
the scope of the engagement has changed, the assistance which the City has agreed to furnish is not provided, or
unexpected conditions are encountered, our fee arrangement with the City will require written modification.
Our professional standards require that we perform certain additional procedures, on current and previous years'
engagements whenever a partner or professional employee leaves the firm and is subsequently employed by or
associated with a client. Accordingly, the City agrees it will compensate McGladrey & Pullen, LLP for any additional
costs incurred as a result of the employment of a partner or professional employee of McGladrey & Pullen, LLP.
In the event we are requested or authorized by the City or are required by government regulation, subpoena or other
legal process to produce our documents or our personnel as witnesses with respect to our engagements for the City,
the City will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our
professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such
requests.
Professional standards and our Firm policies require that we perform certain additional procedures whenever our
reports are included, or we are named as accountants, auditors or "experts," in a document used in a public offering
of debt securities. Our report on the financial statements is not to be included in an official statement or other
document involved with the sale of debt instruments without our prior consent. Additionally, if you intend to publish or
otherwise reproduce the financial statements and/or make reference to us or our audit, you agree to provide us with
printer's proofs or master for our review and consent before reproduction and/or release occurs. You also agree to
provide us with a copy of the final reproduced material for our consent before it is distributed or released. Our fees for
any additional services that may be required under our quality assurance system as a result of the above will be
established with you at the time such services are determined to be necessary.
It is agreed by City and McGladrey & Pullen, LLP or any successors in interest that no claim arising out of services
rendered pursuant to this agreement by or on behalf of City shall be asserted more than two years after the date of
the last audit report issued by McGladrey & Pullen, LLP.
In accordance with Government Auditing Standards, a copy of our most recent peer review report has been provided
to you, for your information.
City of Rosemead
April 6, 2007
Page 6
If this letter defines the arrangements, as you understand them, please sign and date the enclosed copy and return it
to us. We appreciate your business.
McGladrey & Pullen, LLP
Jeffrey M. Altshuler, Partner
Confirmed on behalf of the addressee:
Signature
Date
40 9
CITY OF ROSEMEAD
CALIFORNIA
Mayer
Hoffman
McCann P.C.
An Independent CPA Firm
Mayer Hoffman McCann P.C.
Conrad Government Services Division
9 9
PROPOSAL OF INDEPENDENT AUDIT SERVICES
TO THE
CITY OF ROSEMEAD, CALIFORNIA
Submitted by:
MAYER HOFFMAN McCANN P.C.
CONRAD GOVERNMENT SERVICES DIVISION
2301 DUPONT DR., SUITE 200
IRVINE, CALIFORNIA 92612
April 2, 2007
CONTACT PERSON - JENNIFER CHRISTIAN, SHAREHOLDER
PHONE NO: (949) 474-2020, EXT. 272
FACSIMILE NO: (949) 263-5520
EMAIL: jcluistian c cbiz.com
WEBSITE: w% w.mhm-pc.com
MAYER HOFFMAN McCANN P.C.
CALIFORNIA LICENSE NO. CORP 5091
MAYER HOFFMAN McCANNT P.C.
FEDERAL IDENTIFICATION NO. 43-1947695
• •
PROPOSAL OF AUDIT SERVICES
TO THE
CITY OF ROSEMEAD
TABLE OF CONTENTS
Section
MAYER HOFFMAN McCANN P.C
A About Mayer Hoffman McCann P.C.
Page
B Our Prior Experience Auditing Cities, Redevelopment Agencies,
Housing Authorities and Other Local Government 3
C Capabilities in General Consulting and Compliance Auditing 7
ENGAGEMENT TEAM PROFILE
D Qualifications and Related Experience of the
Personnel who will Service the City of Rosemead 9
SCOPE OF WORK AND APPROACH
E Approach, Timing and Work Program of Our Engagement Team 10
F Our Finn's Understanding of the Objectives and Scope
of the Engagement 17
REFERENCES
G References of Local Government Clients 19
FEESTRUCTURE
H Our Hourly Rates and Maximum Fee to Perform this Engagement 20
BIOGRAPHIES
Resumes of Audit engagement Team
CONCLUDING COMMENTS
Mayer Hoffman McCann P.C. Peer Review Report
• •
Mayer Hoffman McCann P.C.
An Independent CPA Firm
Conrad Government Services Division
2301 Dupont Drive. Suite 200
Irvine, California 92612
949.474-2020 ph
949-263-5520 fx
www.mhm-pc.com
April 2, 2007
City of Rosemead
Lisa Pedote, Chief Financial Officer
8838 E Valley Boulevard
Rosemead, California 91770
The Conrad Government Services Division of Mayer Hoffman McCann P.C. is pleased to
respond to your request to serve as the independent auditors for the City of Rosemead for the
fiscal years ending June 30, 2007 with optional extensions through 2011.
Conrad Government Services Division of Mayer Hoffman McCann P.C. (MHM) would be your
best selection for the following reasons which are set forth in greater detail in our proposal:
• The Conrad Government Services Division of MHM currently serves approximately 85
California municipal clients, including serving as independent auditors for 46
California cities. We also serve the redevelopment agencies of those cities.
• Mayer Hoffman McCann P.C. is a national CPA Firm. In California, Mayer Hoffman
McCann P.C. has offices in Los Angeles, Oxnard, Bakerfield, Irvine, San Diego and
San Jose. More than 400 accounting and audit professionals serve clients from the
California offices. As a national firm, MHM reacts quickly to changes in the auditing
profession including early implementing many of the new audit requirements contained
in Statement on Auditing Standards No. 103 through 112.
• The audit of the City of Rosemead would be serviced out of the Irvine Conrad
Government Services office, formally known as Conrad and Associates, LLP. Of the
90 professionals in the Irvine office, over 60 of them attend our annual Local
Government Audit Training. Because of the large number of professionals with
specialized training, we have the knowledge and resources to meet your audit report
deadlines and perform a quality audit for the City.
• The Conrad Government Services Division of MHM.'s audit team of Jennifer
Christian, Engagement Shareholder, Ken Al-Imam, Technical Review Shareholder,
Will Kakolokula, Engagement Manager and Lara Banut, In-Charge have a proven track
record in serving California cities, redevelopment agencies, special districts and
authorities.
• We currently serve as independent auditors for major cities and special districts in
Southern California including the following Los Angeles County cities: the cities of
Burbank, Pasadena, Santa Monica, and Torrance.
•
City of Rosemead
Page Two
•
• In addition to providing extensive local government and other audit and information
technology training for our staff, the Conrad Government Services Division provides an
annual Governmental Accounting Standards Board (GASB) Technical Update each
spring for our clients.
• We understand the scope of work to be performed and we can and will deliver the
services desired by the City of Rosemead.
• Mayer Hoffman McCann P.C. adheres to the strict quality control measures and high
professional standards of the Public Company Accounting Oversight Board (PCAOB),
the American Institute of Certified Public Accountants (AICPA) and California State
Board of Accountancy. MUM is a member of the AICPA's Center for Public Company
Audit Firms, Employee Benefit Plan Audit Quality Center, Governmental Audit Quality
Center and the AICPA's Private Company Practice Section (PCPS).
• We believe that our fee estimate and structure will assure the City of Rosemead of a fair
and reasonable cost (based upon the experience of our audit team) to perform the
annual audit examination for the City.
• Ms. Jennifer Christian, Shareholder and Mr. Ken AI-Imam, Shareholder, are authorized
shareholders of the Conrad Government Services Division of Mayer Hoffman and are
authorized to bind our Firm in contractual matters with the City of Rosemead. Ms.
Christian and Mr. Al-Imam are also authorized to make representations for the Firm to
the City of Rosemead.
• Mayer Hoffman McCann P.C. and all key personnel are licensed and in good standing
with the California State Board of Accountancy to practice as independent certified
public accountants. Additionally, Mayer Hoffman McCann P.C. is independent with
respect to the City of Rosemead within the Government Auditing Standards. Mayer
Hoffman McCann P.C. is an Equal Opportunity Employer. We are committed to
providing outstanding service to the City and in meeting the requested time deadlines.
We will maintain our working papers for a period of seven years. Our Firm has
currently in force all insurance coverages as required by the City of Rosemead.
The Conrad Government Services Division of Mayer Hoffman McCann P.C. thanks the City of
Rosemead for the opportunity to present our proposal qualifications and for the opportunity to be
appointed as your independent auditors. Our proposal remains a firm and irrevocable offer for 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 (949) 474-2020, Ext. 272.
Very truly yours,
MAYER HOFFMAN McCANN P.C.
CONRAD GOVERNMENT SERVICES DIVISION
Jennifer Christian. C.P.A.
Shareholder
Mayer
Hoffman
McCann P.C.
1 0 •
• •
SECTION A
ABOUT MAYER HOFFMAN McCANN P.C.
Mayer Hoffman McCann P.C. is a National CPA Firm. The firm is independently owned and
operated through its 193 shareholders. The firm began in Kansas City, Missouri in 1954. After
years of steady growth the Firm expanded into a National Practice. Mayer Hoffman McCann
P.C. currently operates from 29 offices throughout the United States and is licensed in 48 States.
Mayer Hoffman McCann P.C. is closely aligned with CBIZ (NYSE:CBZ). The 193 shareholders
in 29 Mayer Hoffman McCann P.C. offices direct the resources of approximately 1800
Accounting and Audit professionals who services the attest clients of Mayer Hoffman McCann
P.C.
'rhe Western Region Office of Mayer Hoffman McCann P.C. work closely together in servicing
clients and sharing professional resources among offices. Those offices locations are as follows:
• Irvine California (Conrad Government Services Division)
• Irvine, California (SEC services office)
• Los Angeles, California
• Bakersfield, California
• Oxnard, California
• San Diego, California
• Salt Lake City, Utah
• Phoenix, Arizona
• Tucson, Arizona
The Western Region offices have more than 425 professional accounting and audit personnel
available to the 56 shareholders of Mayer Hoffman McCann P.C. in the ten Western Region
offices.
The Conrad Government Services Division of Mayer Hoffman McCann P.C. commenced on
January 1, 2006. This Division is the former CPA practice of Conrad and Associates, L.L.P., a
35 year old CPA firm which has been nationally and locally recognized for its expertise in
Governmental Accounting and Auditing. The Conrad Government Services Division is the
technical and practice unit designated within Mayer Hoffman McCann P.C. for technical
expertise and training for Mayer Hoffman McCann P.C. on a national level.
National and Local Government Expertise in the Conrad Government Services Division is
directed through the following shareholders of Mayer Hoffman McCann P.C. who devote their
time to servicing governmental clients:
• Ronald L. Conrad, Shareholder
• Michael A. Harrison, Shareholder
• Ken Al-Imam, Shareholder
• Jennifer Christian, Shareholder
• Marcus Davis, Shareholder
• Rene Jorgeson, Principal
• Ronald Rolwes, Shareholder
Mayer Hoffman McCann P.C. is a National CPA Firm and ranked among the top 10 Accounting
Service Providers in the country. MHM adheres to the strict quality control measures and high
professional standards of the Public Company Accounting Oversight Board (PCAOB), the
• 9
American Institute of Certified Public Accountants (AICPA), and the California State Board of
Accountancy (as well as other states when applicable). Our Firm is a member of the AICPA's
Center for Public Company's Audit firms, Employee Benefit Plan Audit Quality Center,
Governmental Audit Quality Center and the AICPA's Private Company Practice Section (POPS).
As a member of the Private Companies Practice Section and PCAOB our audit procedures and
working papers are regularly examined by another CPA firm in the firm-on-firm peer review
program. In addition, all aspects of the firm's quality control practices have been reviewed,
including the firm's commitment to extensive training programs. In every member firm, each
member of the professional staff must enroll in continuous professional education courses. Each
is required to take at least, 120 hours of classes over a three-year period. 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. A copy of Mayer Hoffman McCann P.C.'s Quality Control Review report
for the year ended June 30, 2005 is included at the end of our technical proposal. In all instances
of Peer Review both Mayer Hoffman McCann P.C. and the Conrad Government Services
Division have never had a record of substandard audit Nvork. Additionally, the results of field
audits and desk reviews by Government Agencies and other Regulatory Agencies of
Govenunental audits conducted by our Firm have always indicated that our audit work met the
requirements of documentation. No disciplinary actions have been taken or are pending against
our Firm during the past three years.
•
SECTION B
0
The Conrad Government Services Division of Mayer Hoffman McCann P.C. is vastly
experienced in the audits of local government units (all funds audit examinations of cities
including single audits performed under OMB Circular A-133, financial and compliance audits
of California Redevelopment Agencies, audit examinations of public housing authorities, joint
powers authorities and special districts). Among the local government entities which the
Conrad Goverrunent Services Division has served during the past fiscal year are the following;
All Funds Examinations of California Cities
Los Angeles County
City of Bell
City of Burbank
City of Carson
City of Hawaiian Gardens
City of La Verne
City of Lomita
City of Pasadena
City of San Gabriel
City of Santa Monica
City of South Gate
City of Temple City
City of Torrance
City of West Covina
Orange County
City of Aliso Viejo
City of Costa Mesa
City of Laguna Beach
City of Laguna Niguel
City of Laguna Woods
City of La Palma
City of Newport Beach
City of Orange
City of Placentia
City of Rancho Santa Margarita
City of Villa Park
•
SECTION B, (CONTINUED)
Riverside County
City of Hemet
City of Indio
City of Rosemead
City of Palm Springs
City of Rancho Mirage
Citv of Riverside
San Bernardino County
City of Highland
City of Redlands
City of Upland
City of Yucaipa
City of Yucca Valley
City of Victorville
San Diego County
City of El Cajon
City of Escondido
City of National City
City of Santee
City of San Marcos
City of Solana Beach
Other Counties
City of Gilroy
City of Goleta
0
Experience with Redevelopment A-.encies
The Conrad Government Services Division of Mayer Hoffman McCann, P.C. currently or has
previously performed financial and compliance audits of the following redevelopment agencies:
Pasadena Redevelopment Agency
Indio Redevelopment Agency
Brea Redevelopment Agency
Santa Ana Redevelopment Agency
Buena Park Redevelopment Agency
Rancho Mirage Redevelopment Agency
Stanton Redevelopment Agency
Rialto Redevelopment Agency
San Marcos Redevelopment Agency
Azusa Redevelopment Agency
Vista Redevelopment Agency
L J
SECTION B, (CONTINUED)
•
Experience with Redevelopment Agencies, (Continued)
South Gate Redevelopment Agency
La Palma Redevelopment Agency
Downey Redevelopment Agency
Temple City Redevelopment Agency
San Jacinto Redevelopment Agency
Westminster Redevelopment Agency
Norwalk Redevelopment Agency
Palm Springs Redevelopment Agency
Carlsbad Redevelopment Agency
Cathedral City Redevelopment Agency
Desert Hot Springs Redevelopment Agency
Escondido Redevelopment Agency
Banning Redevelopment Agency
Redlands Redevelopment Agency
La Verne Redevelopment Agency
Gilroy Redevelopment Agency
Hemet Redevelopment Agency
Highland Redevelopment Agency
Costa Mesa Redevelopment Agency
Delano Redevelopment Agency
Rosemead Redevelopment Agency
Whittier Redevelopment Agency
San Carlos Redevelopment Agency
Bell Redevelopment Agency
Pomona Redevelopment Agency
Hesperia Redevelopment Agency
Orange Redevelopment Agency
San Clemente Redevelopment Agency
La Puente Redevelopment Agency
Placentia Redevelopment Agency
Victorville Redevelopment Agency
Arcadia Redevelopment Agency
Santa Monica Redevelopment Ag ency
Torrance Redevelopment Agency
Goleta Redevelopment Agency
Yucaipa Redevelopment Agency
Our experience with redevelopment agencies is extensive and includes the following:
• Assistance in the accounting for developer disposition agreements (DDA's) and owner
participation agreements
• Computations of obligations under pass-through agreements
• Assistance in the use of tax-sharing agreements as an economic incentive
• Consultations regarding the financial benefit to the City resulting from redevelopment
activities
• Tax increment financing of projects
• Consultations regarding low-moderate income housing requirements
•
SECTION B (CONTINUED)
•
• The establishment, merging, and adding of project areas
• The use of rehab loans in redevelopment agencies
• Assistance in issuance (and refundings) of Tax Allocation Bonds
• The establishment of redevelopment fund structure
• Use of City loans and advances
Exnerience in Auditing Public Housine Authorities and PrOLramS
Name of Housing, Authority
Type of Audit
Dates
Housing Authority of the City of Los Angeles
A-133 Single Audit
12/04-12/06
Santa Monica Housing Authority
A-133 Single Audit
06/03-06/06
Pomona Housing Authority
A-133 Single Audit
6/95-6/98
Hawaiian Gardens Housing Authority
A-133 Single Audit
6/94-6/06
Nonvalk Housing Authority
A-133 Single Audit
6/86-6/00
Carlsbad Housing Authority
A-133 Single Audit
6/93-6/01
County of Riverside Housing Authority
A-133 Single Audit
6/98
Santa Ana Housing Authority
A-102/A-128 Single Audits
6/83-6/88-6/05
South Gate Housing Authority
A-133 Single Audit
6/97-6/06
San Bernardino Housing Authority
A-133 Single Audit
9/95-9/05
Ventura Area Housing Authority
A-133 Single Audit
6/00-6/06
Oxnard Housing Authority
A-133 Single Audit
6/00-6/06
Imperial Valley Housing Authority
A-133 Single Audit
6/02-6/06
6
i
u
SECTION C
CAPABILITIES IN GENERAL CONSULTING AND COMPLIANCE AUDITING
In addition to our annual auditing services, we have assisted our clients by performing both attest
services and various management advisory and other accounting services, including:
• Investment Portfolio reviews and policy on derivative use
• Reviews of water billing systems
• Special fraud audits
• Special hotel-motel bed tax audits
• Other gross receipts audits (cable television franchise fees, excavation tax, etc.)
• Contractual agreement compliance audits
• Review of central purchasing systems
• Review of warehouse controls and inventory systems
• Review of operations in City Treasurers' Office
• Reviews of cash controls in parks and recreation departments
• Review of investment policies and modifications thereto
• Special EDP reviews
• Review of permitting process within city building departments
• Analysis of investment yields
• Assistance in presentations to city councils
• Assistance in setting up special accounting systems for redevelopment agencies
• Assistance to Bond underwriters in providing "comfort letters" on debt issues of
municipalities
• Consultations regarding the maximizing of tax increment revenue for redevelopment
agencies
• Organizational review of finance departments
• Tax advice regarding deferred compensation, employee benefits, use of city vehicles, etc.
• Review of financial forecasts
• Assistance in cash reconciliation problems
7
0 ,
SECTION C, (CONTINUED)
• Determination of the cost of excess sewer capacity for a developer/city contractual
arrangement
• Assistance in the selection of qualified finance personnel for employment by the City
• Assistance in computation of Proposition I 1 I Gann Limitations
• Management reviews of finance and City Treasurer's office
• Assistance in establishing accounting for development projects and fees to comply with
AB 1600
• Special Reviews of the Validity of Changes in Tax Increment Revenue from year to year
within Redevelopment Agencies
• Assistance in Section 8 Housing program portability issues
• Assistance in the acquisition of private water companies and the accounting issues related
thereto
Engagement Team
Profile
f do&
C7
SECTION D
•
QUALIFICATIONS AND RELATED EXPERIENCE OF THE PERSONNEL
WHO WILL SERVICE THE CITY OF ROSEMEAD
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 Rosemead have
served together as a team of professionals on numerous financial audit examinations of local
goverunent entities, including complex governmental agencies.
We believe that efficient administrative management and supervision of the audits is an
extremely critical factor in achieving the desired results for the City Council of the City of
Rosemead. In that regard, we propose to establish the following procedures.
Ms. Jennifer Christian, CPA, Engagement Shareholder, who has extensive local goverrunent
auditing experience, will be responsible for the coordination of the audit of the City of Rosemead
and fulfillment of the requirements of the City Council of the City. Ms. Christian, as the
Engagement Shareholder, will be in the field to plan and coordinate the management of the audit
examination of the City of Rosemead. She will work closely with the Finance Director and
Finance Department staff and be responsible to the City Council of the City. She serves as a
reviewer for the CSMFO award program for CAFR's, has been a speaker on new GASB
pronouncements, and created the examples for the CCMA White Paper on the new Statistical
Section. Ms. Christian is also in charge of Technology and Recruiting in the Irvine office.
Mr. Ken Al-Imam will serve as Technical Review Shareholder. In this capacity, Mr. Al-
Imam will act as a Technical and Consulting Shareholder to Ms. Christian and the Director of
Finance. As a second shareholder reviewer, he will perform quality control reviews of audit
reports issued by our firm. Mr. A]-Imam is past Chairman of the state-wide "Governmental
Accounting and Auditing Committee" for the California Society of Certified Public Accountants
and served from 1996-2001 as Chairman of the Governmental Accounting and Auditing
Committee for the Long Beach-Orange County Chapter of the California Society of CPA's. He
is also an active member and past president of CCMA (California Committee on Municipal
Accounting). He has made presentations in public hearings before the Governmental Accounting
Standards Board (GASB) and has been part of the committee contributing to the past two GAS13
#34 implementation guides.
Mr. Will Kakolokula, CPA, will serve as Engagement Manager of the audit of the City of
Rosemead. He will work closely with Ms. Christian, Ms. Lisa Pedote, Finance Director, and
Finance Department personnel. He will plan and review the audit work and work closely with
Ms. Banut, Senior Auditor. Mr. Kakolokula has extensive local government auditing experience,
including performing as Engagement Manager on numerous city, redevelopment agency, special
district and authority audits. Mr. Kakolokula is also a presenter at the firm-wide training for the
Conrad Government Services Division of MHM in the area of local govermnental accounting
and auditing.
Ms. Lara Banut, CPA, will serve as the In-Charge Auditor. She will work closely with Ms.
Lisa Pedote, Finance Director and Mr. Kakolokula, Engagement Manager. Ms. Banut will
supervise and review all work of accountants in the field with her. Ms. Banut has been with the
firm for several years and is currently the In-Charge Auditor on a number of local government
audits.
Scope of Work
& Approach
•
•
SECTION E
APPROACH, TIMING AND WORK PROGRAM OF OUR ENGAGEMENT TEAM
The audit approach of the Conrad Government Services Division of MHM 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 in the Finance Department.
• Whenever possible, we use accounting support already prepared by the Finance
Department in order to avoid duplication or unnecessary requests for audit supporting
schedules.
• Because of our firm's expertise in local governmental auditing, our staff are trained
and familiar with local government accounting. You will spend no time in training
our personnel.
• When formulating internal control recommendations, we obtain a thorough
understanding of the specific circumstances at your City in order 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.
The AICPA recently released Statement on Auditing Standards No. 103 through 112. These
standards relate to audit documentation, audit risk, materiality, planning, understanding the
entity's environment, and evaluating audit evidence. The new standards are required to be
implemented over a two year period beginning with audits with fiscal years ending after
December 15, 2006. Mayer Hoffman McCann, P.C. has taken the progressive approach of early
implementing many of the new standards. Many of these new requirements are included in the
following audit approach.
AUDIT PLANNING PROCEDURES
Following our appointment as auditors of the City, Ms. Christian, Engagement Shareholder, Mr.
Kakolokula, Engagement Manager, and Ms, Banut, In-Charge will meet with Ms. Lisa Pedote,
Finance Director and other key Finance Department staff for the purpose of planning the audit of
the City. In addition to establishing an effective and efficient communication link with City
personnel, the following will be accomplished:
Dates for audit field work of the various audit examinations will be finalized.
- Arrangements will be made with City personnel for the typing of confirmation requests.
We will determine a materiality level for the financial statements taken as a whole for the
purpose of-
10
a) Determining the extent and nature of risk assessment procedures
b) Identifying and assessing the risks of material misstatement
c) Determining the nature, timing, and extent of further audit procedures; and
d) Evaluating whether the financial statements are presented fairly in conformity
with generally accepted accounting principles
We will perform a risk assessment of the City of Rosemead including:
a) Inquiries of management and others within the City
b) Analytical procedures
c) Observation and inspection
In accordance with SAS 99, we will assess the risk of material misstatement of the
financial statements due to fraud. We will identify for the City of Rosemead those areas
(account balances, transaction classes, funds, activities, etc.) for which there is a
heightened risk of fraud or misstatement. We will also obtain from management their
thoughts concerning audit and fraud risk. We will then tailor our audit testing and
transaction testing for the year to be specifically skewed to these areas of significant risk.
- Analytical procedures will be utilized in planning the audit which will focus on:
a) Enhancing our understanding of the City of Rosemead and the transactions and
events that have occurred since its last audit; and
b) Identifying areas that may represent specific risks relevant to the audit.
- Critical audit areas will be identified and the universe of transactions will be identified for
purposes of sampling of transactions and other audit tests in conjunction with determining
whether reliance can be placed upon the system of internal accounting controls.
We will identify areas of potential concern to City management.
- We will interview key personnel to obtain an understanding of the City's internal controls.
Our interviews will focus on the five key internal components: control environment, risk
assessment, information and communication systems, control activities, and monitoring.
We will initially focus on the following accounting cycles of the City:
• Cash Reeeipting;
• Treasury Management,
• Infrastructure and Capitalization of Assets;
• Purchasing/Accounts Payable and Cash Disbursements Cycle; and
• Payroll Cycle/Human Resources.
0
i
Comments and recommendations relating to the accounting system will be discussed with
appropriate City persomnel and where appropriate be included in our management letter
which will be issued at the conclusion of the
- Based upon our planning procedures we will develop and tailor our audit program of the
city.
In conjunction with our planning of the engagement, we will perform our interim audit work
which will be conducted in June 2007. Additional procedures that will be accomplished during
our interim audit procedures include the following-
Testing of audit areas where reliance can be placed upon internal control structure for
audit purposes.
Reviewing of minutes of the Board of Directors.
Following up on unusual items noted from analytical procedures. (We will perform
significant comparison and inquiry regarding fluctuations of revenues and expenditures
by fund budgets versus actual).
4. Performing tests of investment compliance.
Reviewing of important contracts, debt issues, leases and joint power agreements.
6. Performing required compliance and internal control testing relating to the federal
grant programs of the City, if any.
Providing the City with suggestions regarding the close of the City's books after year
end. Our assistance and communication in the closing of the City's books is expected
to minimize the number of audit adjustments required after the close of City's books.
YEAR-END SUBSTANTIVE PROCEDURES
On October 15, 2007 (after the final closing of the books and preparation of final trial balances
by City personnel for the year ended June 30), we will commence performing our year-
end substantive audit. Our final examination will include tests which we deem necessary,
including:
1. Confirmation of cash and investment balances.
2. Testing of bank reconciliations.
3. Testing of allocations of interest income to the various funds.
4. Examination of support and subsequent receipt (if any) of significant receivable
balances.
5. Testing of interfund loans and transfers.
6. Performing a search for unrecorded liabilities.
6. Testing of long term debt balances and debt convenants.
12
•
E
7. Consideration of support and proper valuation of the liabilities for compensated
absences and claims and judgments.
8. Testing of support for other significant assets and liabilities of the City.
9. Testing for the proper establishment of reserves and designations.
10. Review of significant events after year end (through the completion of our audit).
11. Review of attorney letters for significant legal matters affecting the City's financial
position.
12. Testing of revenues and expenditures and lesser significant asset and liability balances
through analytical procedures and other substantive procedures as necessary.
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. At the completion of the audits each year, Ms. Christian,
Mr. Kakolokula and Ms. Banut will meet with Ms. Pedote to review our audit findings and any
adjusting journal entries. Based upon the City's records being closed and ready for audit, we plan
to comply with the audit timeline set forth in the RFP for finalization of all audit reports.
The following are tasks which will be accomplished for the fiscal years ended June 30, 2007 and
subsequent years related to GASB #34:
• Review of the City's Determination of major funds;
• Review of the City's classification of revenues (CCMA White Paper);
• Review of the City's reconciliation spreadsheet to convert governmental funds
from the modified accrual to full accrual basis of accounting;
• Review of entity wide financial statements;
• Review of expanded disclosures for capital assets;
• Review of expanded disclosures for long-term debt;
• Review of City's disclosures explaining how numbers change from modified
accrual basis of accounting to full accrual basis of accounting;
• Review of City's budget-actual schedules for general and major funds;
• Auditing of infrastructure data;
• Review of City developed Management Discussion and Analysis; and
• Testing of Management Discussion and Analysis information.
As a part of our Single Audit for the years in which the City expends greater than $500,000 in
federal funding, we would supplement our approach with the following procedures in performing
the single audit. (This would be accomplished as a part of our planning and interim audit work.)
Re-review all pertinent federal and AICPA publications including:
The Single .4udit Act Amendments of 1996 (Public Law 104-156) signed into law
on July 5, 1996 and effective for the fiscal years ending on or after June 30, 1997.
This law amends the Single Audit Act of 1984 (Public Law 98-502) previously
applicable to local governments
13
• OMB Circular A-133 entitled Audits of States, Local Governments, and Non-
Profit Organizations
• GAO Government Auditing Standards (Yellow Book), 2003 revision
• AICPA Audit and Accounting Guide Audits of State and Local Government Units
(1994 revision) and Statement of Position 98-3, Audits of States, Local
Governments, and Not-for-Profit Organizations Receiving Federal Awards
• SAS No. 74, Compliance Auditing Considerations in Audits of Governmental
Entities and Other Recipients of Federal Financial Assistance
• Revised Compliance Supplement for Single Audits of State and Local
Governments
• Catalog of Domestic Assistance Programs
• OMB Circular A-87
• OMB Circular A-102
2. Identify the federal programs administered by the City of Rosemead and the amounts
expended during the audit period.
3. Apply the risk-based auditing approach mandated by the Single Audit Act Amendments
of 1996 (Public Law 104-156) and OMB Circular A-133 entitled Audits of States,
Local Governments, and Non-Profits Organizations for the determination of major
programs to be selected under the single audit process. As prescribed by the directives
of' the new single audit requirements, this will involve a consideration of the
complexity of the program, prior audit findings, changes in personnel, the competency
of personnel, the extent to which sub-recipients are used, the extent of overview and
monitoring by granting agencies, the extent of recent changes in program requirements,
the newness of the program, the size of the program, and the inherent risk of the
program.
4. Identify the oversight audit agency.
5. Identify and list the major compliance supplements and subrecipients of the City, if
any.
6. Review the administrative control systems to ensure compliance.
7. Execute the sampling plan.
8. Perform audit procedures for the selected transactions.
9. Test compliance with other material compliance requirements.
10. Test matching requirements, if any.
11. Test indirect costs, if any.
14
12. Review reports and claims for advances and reimbursements to the federal
government.
13. Review processing of audit reports for state and local government subrecipients.
14. Prepare the independent auditors' reports required by OMB Circular A-133.
15. Prepare the data collection form required to be filed with the Single Audit Central
Clearinghouse.
Utilization of Computers on Governmental Audits
Each audit team in our firm is assigned and utilizes a portable personal computer at the job site.
We extensively use the computer in the conduct of our audit and in the preparation of the
financial statements. Additionally, each of our audit Seniors are knowledgeable of controls
surrounding the EDP environment and assessing the effectiveness of those controls within the
audit of the local government. In January 2007, Mayer Hoffman McCann, P.C. implemented the
use of CaseWare, a paperless auditing software that organizes audit documentation. We have the
ability to accept audit documentation in either electronic or hard copy format.
Audit Sampling
In accordance with SAS No. 111, Audit Sampling, we will consider the tolerable misstatement
and the expected misstatement, the audit risk, the characteristics of the population, the assessed
risk of material misstatement, and the assessed risk for other substantive procedures when
determining the number of items to be selected in a sample.
Analvtical Procedures to Improve Understanding of Client
Analytical procedures are used by our firm in general planning to improve the auditor's
understanding of the governmental unit's operations and to identify audit areas for increased
attention. SAS No. 56 requires the use of analytical procedures in the planning and overall
review stages of all audits.
SAS No. 56 states that "analytical procedures should be applied to some extent... for all audits
of financial statements made in accordance with generally accepted auditing standards" for the
following purpose among others:
To assist the auditor in planning the nature, timing and extent of other auditing procedures.
Analytical procedures may be used in both general planning and audit program planning.
SAS No. 56 describes the two broad uses of analytical procedures in audit planning as follows:
Enhancing the auditor's understanding of the client's business and the transactions and
events that have occurred since the last audit date; and
Identifying areas that may represent specific risks relevant to the audit.
15
• •
Comparisons of account balances between accounting periods and ratio and trend analysis
usually improve the auditor's understanding of the client and its operations and may identify
critical audit areas, e.g., comparing general and special revenue fund expenditures by functions
and revenue by source for the past two years provides an understanding of the governmental
unit's operations and may identify a revenue source that requires increased attention in the
current audit.
SAS No. 56 requires use of analytical procedures in audit planning, but does not specify
particular procedures that are always necessary. Our firm believes that in a governmental
engagement, the auditor's preliminary analytical procedures should include, as a minimum, a
comparison of current account balances in the working trial balance to similar amounts in the
prior annual period's financial statements and the current period's budget. However, a
thoughtful consideration of expected relationships among account balances and periods by an
experienced auditor is far more important than a mechanical comparison. The auditor should
think about these relationships and bring to bear other knowledge about the governmental unit
and government operations.
Consideration of Laws and Regulations
Our audit approach recognizes the importance of laws and regulations in planning the audit of a
local governmental entity. As a part of the audit, our firm obtains an understanding of those laws
and regulations that have a direct and material effect on the determination of financial statement
amounts. We then design the audit to provide reasonable assurance of detecting material
instances of noncompliance that will have a direct and material effect on the determination of
financial statement amounts.
Assistance from City Staff
Maximum cooperation and assistance from City staff is expected by the auditors including typing
of confirmation requests, and normal year-end schedule preparation (i.e., lead schedules, bank
reconciliations and other support for significant asset and liability balances of the City). We
would also expect reasonable assistance from City staff in providing required documentation
during the audit examination.
Segmentation of the Audit
The following is our estimate of the hours by professional staff classification required for the
audit and single audit:
Professional Hours and Segmentation of Audit
Interim Final Total Percentage
Partner
8
22
30
7%
Manager
15
45
60
14%
Senior Auditor
60
120
180
42%
Staff Auditor
50
110
160
37%
Total
133
297
430
100%
16
•
SECTION F
u
OUR FIRM'S UNDERSTANDING OF THE OBJECTIVES AND
SCOPE OF THE ENGAGEMENT
Our understanding of the objectives and scope of the work to be performed is based upon your
request for proposal.
Based upon the foregoing we understand the objectives and scope of work to be as follows:
We will perform an audit examination of the financial statements of the City of
Rosemead for the fiscal year ending June 30, 2007 with optional extensions through
2011. Our examination will be conducted in accordance with generally accepted auditing
standards, State Controller audit guidelines, 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. Mayer Hoffman McCann, PC
will prepare the financial statements. The City will prepare management discussion and
analysis, the introductory section and the statistical section of the report. We will ensure
that the CAFR is prepared in conformity with the 2005 edition of the GAAFR, the
GAAFR Update, and subsequent GASB pronouncements. We will apply to the
management discussion and analysis those procedures required by the auditing standards
to be applied to required supplementary information (understanding the method of
preparation, the source and basis for the information presented, comparing for
consistency to the audited data pertaining to the City, and ascertaining that the
management's discussion and analysis contains all of the information required by GASB
Statement No. 34 and does not contain information prohibited to be presented in the
management's discussion and analysis). We will copy and bind the final report.
2. We will perform a financial and compliance audit of the governmental activities, each
major fund and the aggregate remaining fund information of the Rosemead Community
Development Commission for the year ended June 30, 2007 with optional extensions
through 2011. Our audit will be conducted in accordance with auditing standards
generally accepted in the United States, Government Auditing Standards and the
Guidelines far Compliance Audits of California Redevelopment Agencies. We will draft
and word process the CDC Component Unit GASB #34 financial statements.
3. We will perform a financial audit of the governmental activities, each major fund and the
aggregate remaining fund information of the Rosemead Housing Development
Corporation for the year ended June 30, 2007 with optional extensions through 2011.
Our audit will be conducted in accordance with auditing standards generally accepted in
the United States, Government Auditing Standards and the Guidelines for Compliance
Audits of California Redevelopment Agencies. We will draft and word process the
Housing Development Component Unit GASB #34 financial statements.
4. We will perform a "Single Audit" of the City of Rosemead in accordance with the Single
Audit Act Amendments vf'1996 (Public Law 104-156) and OMB Circular A-133 entitled
Audits of States, Local Governments, and Alon-Profits Organizations. Our single audit
will cover all federal grants received by the City and its component units either as a
primary or secondary recipient for fiscal year ended June 30, 2007 with optional
extensions through 2011. The City will provide to the Auditors the Schedule of Federal
Financial Assistance encompassing all direct and pass-through federal funds received by
17
the City and component units. We will render our reports on the single audit in
accordance with the single audit requirements.
5. 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 weukness, as defined
by SAS No. 112. We will immediately report any irregularities or illegal acts that come to
our attention to the City Council.
6. We will also prepare a letter to City management that will provide other
recommendations to the City ensuing from our review of the City's internal control
procedures. This letter will address nonreportable conditions (those constructive
comments not required to be included in the letter of reportable conditions to City
Council. We will discuss those comments with Ms. Lisa Pedote, Director of Finance prior
to its finalization.
7. We desire to keep its local government clients abreast of new developments affecting
local government finance. We will also advise City staff of new accounting developments
during the interim/planning stage of each year's audit. We plan on providing additional
client training to our clients in our May 30, 2007 client training conference with respect
to new GASB pronouncements.
8. Finally, we perceive the scope of our work as being advisors to the City of Rosemead
regarding generally accepted accounting principles. Our firm's policy is to provide
unlimited telephone consultations to our municipal clients regarding accounting and
other technical matters. Throughout the year, Ms. Lisa Pedote, Finance Director and other
finance personnel of the City, will have access to Ms. Christian, Engagement Partner, Mr.
Kakolokula, Engagement Manager, and Ms. Banut, Engagement In-Charge, to seek
advice in the application of generally accepted accounting principles, the establishment
and segregation of funds, advise regarding debt issuance, financial statement preparation
and content and other matters relating to the City.
With respect to the City of Rosemead, Mayer Hoffman McCann P.C. meets the independence
requirements of generally accepted accounting standards and the Government Auditing Standards
(2003 revision) published by the U.S. General Accounting Office. Our firm has never had a
record of substandard audit work. The Conrad Government Services Division of MI-IM does not
intend to use subcontractors for this engagement. We are independent with respect to the City of
Rosemead. No conflicts of interest exist relative to our firm performing the audit.
18
• 0
References
9 0
SECTION G
REFERENCES OF LOCAL GOVERNMENT CLIENTS
For your convenience, we have listed below references with regard to audit work currently being
performed by the Conrad Government Services Division of Mayer Hoffman McCann P.C. for
several local governments in Southern California. For each of the references, we currently serve
as independent auditors for the year ended June 30, 2006 and have served these cities for a
number of years. All of the Cities noted below received the GFOA award during the last year
submitted.
Name of City/Contact Person
City of Burbank
Bob Torrez. Financial
Services Director
(818) 238-5500
2. City of Costa Mesa
Marc Puckett, Director
(714) 754-5243
3. City of Santee
Tim McDurmott
Director of Finance
(619) 258-4100
Engagement
Team Members Approx Hours
Al-Imam/Christian 900
Al-Imam 700
Christian/Banut 400
19
•
Fee Structure
• a
SECTION H
OUR HOURLY RATES AND MAXIMUM FEE TO PERFORM THIS ENGAGEMENT
The following is a summary or our fixed fee (including out-of-pocket expense) for performing
the audit engagement for the City of Rosemead:
Estimated Fiscal Year
Description Hours Ended June 30, 2007
Audit of City, CAFR preparation,
Single audit, Gann letter,
Management letter
Audit of CDC
Audit of Housing Corporation
Total
290 $30,300
100 10,500
40 4.200
430 $45,000
For the years ended June 30, 2008 through 2011, a nominal 3% increase will be added to the
prior year audit fee.
The following discounted hourly rates by professional staff were used to determine the cost
noted above:
Standard
Discounted
Classification
Hourly Rate
Discount
Hourly Rate
Shareholder
$325
$125
$200
Manager
180
55
125
Senior Auditor
125
25
100
Associate Auditor
95
10
85
Tlie above maximum fees contemplate that the books will be closed and ready for audit, that
substantially all adjusting entries will be made by City staff prior to the start of final fieldwork,
that City staff will provide supporting schedules and reconciliations for all significant asset and
liability balances. The fee for the single audit contemplates one major program (one grant with
federal expenditures in excess of $300,000). Additional major programs can be tested at an
additional fee of $1,500 per program.
If additional time is needed for us to assist the City in the resolution or investigation of
accounting errors, discrepancies, or reconciliation issues, assistance in the preparation of year end
schedules, or to reflect in our workpapers entries made after the start of the audit, we will
perform such additional work at our standard hourly rates indicated above.
20
0 Page I of 2
Lisa Pedote
From: Jennifer Christian (CBIZ Orange County) [JChristian@CBIZ.com]
Sent: Monday, April 02, 2007 6:23 PM
To: Lisa Pedote
Subject: RE: Audit Proposal
Hi Lisa,
Attached is a pdf of the proposal. You will receive 3 original bound proposals on Wednesday.
Hopefully the $20,000 discount from your prior audit firm will entice City Council to make a change
Regarding the Stat Schedules, we will have a separate engagement letter under our consulting name,
CBIZ. The engagement will be based on actual hours incurred and will not exceed $4,500.
Please send me an e-mail back confirming that you received this. Sometimes big files don't make it
through span filters.
Jennifer Christian, C.P.A.
Shareholder
Mayer Hoffman McCann P.C.
-----Original Message-----
From: Lisa Pedote [mailto:lpedote@cityofrosemead.org]
Sent: Monday, April 02, 2007 2:32 PM
To: Jennifer Christian (CBIZ Orange County)
Subject: RE: Audit Proposal
really hope so. Give me a call if you can. I have a few things to share with you. I'll be in my office until a
meeting at 3 pm.
Lisa Pe dote, CPA
Chief Financial Officer
City of Rosemead
(626) 569-2121 - phone
(626) 569-2303 - fox
LPedote@cityofrosemead.org
From: Jennifer Christian (CBIZ Orange County) [mailto:]Christian@CBIZ.com]
Sent: Monday, April 02, 2007 2:30 PM
To: Lisa Pedote
Subject: RE: Audit Proposal
That is WAY too high. I think you will be happy with our fee.
Jennifer
-----Original Message-----
From: Lisa Pedote [mailto:lpedote@cityofrosemead.org]
Sent: Monday, April 02, 2007 2:29 PM
To: Jennifer Christian (CBIZ Orange County)
4/3/2007
0 Page 2 of 2
Subject: RE: Audit Proposal
The original proposal was written for $65k.
L45a Pedote, CPA
Chief Financial Officer
City of Rosemead
(626) 569-2121- phone
(626) 569-2303 - fax
LPedote@cityofrosemead.org
From: Jennifer Christian (CBIZ Orange County) [mailto:JChristian@CBIZ.com]
Sent: Monday, April 02, 2007 2:28 PM
To: Lisa Pedote
Subject: Audit Proposal
Hi Lisa,
What were you paying McGladrey for the audit last year? I am sure we can save you some money.
Jennifer Christian, C.P.A.
Shareholder
Mayer Hoffman McCann P.C.
2301 Dupont Drive, Suite 200
Irvine, CA 92612
Ph. (949) 474-2020 x.272
Fx. (949) 263-5520
4/3/2007
/Qc.h m ere C
CITY OF ROSEMEAD
AUDIT PROPOSAL
FOR THE YEAR ENDING
JUNE 30, 2007
•
TITLE PAGE •
RFP Subject: Certified Audits on the City of Rosemead
For the Year Ending June 30, 2007
Name of Proposer: Diehl. Evans & Company, LLP
Certified Public Accountants and Consultants
Local Address:
2121 Alton Parkway, Suite 100
Irvine, CA 92606-4906
Telephone:
(949) 399-0600
Fax:
(949) 399-0610
Website:
ww-w.diehlevans.com
Email:
nitinp@diehlevans.com
Contact Persons:
Nitin P. Patel, CPA
Engagement Partner
Robert J. Callanan, CPA
Concurring Review Partner
Date:
April 5, 2007
• CITY OF ROSEMEAD
TABLE OF CONTENTS
Letter of Transmittal
April 5, 2007
Firm Profile and Qualifications:
Licensing and Independence
Size and Location of Firm
Range of Activities
Participation in "Quality Review" Programs
Education Programs
Participation in Professional Organizations
GFOA and CSMFO Award Programs
Computer Auditing Capabilities
' Firm Experience with Governmental Entities
Nonprofit Corporations and Joint Power Authorities
City Client References
Redevelopment Agency and Enterprise Fund Experience
' Single Audit Experience
Water Districts and Other Special Districts
1
1
Partner, Supenisory and Staff Qualifications and Experience:
Audit Team
Commitment Related To Personnel
Nondiscrimination Policy
Resumes of Audit Team Personnel
•
Scope of Work, Timing and Audit Approach:
Entities to Be Included In Audit
Reports To Be Issued and Due Dates
Audit Timing
Commitment to Deliver Reports on a Timely Basis
Audits To Be In Accordance With GAAS and Other Requirements
Audit Approach
Single Audit Approach
Determining Laves and Regulations Subject to Audit
Method of Sampling
Analytical Procedures
Management Letters
Retention Of and Access to Audit Workpapers
Other Professional Services
Segmentation of the Audit Hours, By Partner and Staff Level
Page
Number
1-2
3
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4
4
5
6
6
7
8
9
10
11
11
11
12 - 15
16
16
17
17
17
18 - 19
19-20
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21
21
21
21
21
22
•
CITY OF ROSEMEAD •
TABLE OF CONTENTS
(CONTINUED)
April 5, 2007
Page
Number
Discussion of Relevant Accounting Issues:
GASB Statement No. 45
GASB Statement No. 47
GASB Statement No. 48
GASB Statement No. 49
Work Required by City Staff
Fees and Hourly Rates:
Maximum Fees
Composition of Current Audit Fee
Hourly Rates For Special Services
Consulting Services Department:
Overview of Services Provided
Attachment I - Results of Outside Quality Review
23
23
23
23
24
25
25
26
27
n
0
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
MICHAEL R LUDIN. CPA
A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS CRAIG W. SPRAKER. CPA
NRTN P. PATEL CPA
ROBERT J. CALLA-NAN, CPA
2121 ALTON PARKWAY, SUITE 100 'PHILIP H. HOLTKAMP. CPA
'THOMAS M. PEKLOWSKI, CPA
IRVINE, CALIFORNIA 926064956 'HARVEYJ SCHROEDER. CPA
(949) 399-0600 • FAX (949) 399-0610 KENNETH R. AMES. CPA
W W W.dichieyans.COni 'A PRO"MIONAL CORPORATION
April 5, 2007
Ms. Lisa Pedote
Chief Financial Officer
City of Rosemead
8838 East Valley Boulevard
Rosemead, CA 91770
Dear Ms. Pedote:
We are pleased to present our proposal to serve as independent auditors for the City of Rosemead. We
have prepared this information in accordance with the guidelines set forth in your request for proposal.
Why We Are The Best Qualified Firm
1
We consider ourselves to be the best qualified firm to perform auditing and accounting services for the
City of Rosemead. Please consider these qualifications:
Diehl, Evans and Company, LLP has been providing auditing services to governmental agencies
since 1950. A significant part of our practice is devoted to providing professional services to your
specialized industry and over the past year, our firm audited twenty-six cities, twenty-five
redevelopment agencies and many other governmental agencies.
Our firm has devoted a substantial amount of time and resources in order to provide governmental
agencies with quality audits. Our knowledge of the industry is best demonstrated by the fact that
our clients who apply for the "Outstanding Award in Financial Reporting" issued by the California
Society of Municipal Finance Officers (CSMFO) and the "Certificate of Achievement in Financial
Reporting" issued by the Government Finance Officers Association (GFOA) consistently receive
these awards. A list of these clients is presented on page 6 of this proposal.
We understand that we provide a service to the City. Our audit approach is tailored to meet all
technical requirements while maintaining professional skepticism without forgetting that we
provide a service. We are able to achieve this by partner involvement in all phases of the audit and
assigning experienced governmental audit staff to the engagement. Partner involvement will result
in decisions being made on a timely basis and experienced staff will minimize disruption to your
staff.
OTHER OFFICES AT:
1
2965 ROOSEVELT STREET
CARLSBAD. CALIFORNIA 92009.2389
(760) 729-2343 • FAX (760) 729-2234
613 W. VALLEY PARKWAY. SUITE 330
ESCONDIDO, CALIFORNIA 92025-2598
(760) 741-3141 • FAX (760) 741.9890
' The scope of our services the year ending June 30. 2007 would a as follows:
' . A financial audit of the basic financial statements of the City of Rosemead in accordance with
Governmental Auditing Standards to be included in the Comprehensive Annual Financial
Report (CAFR).
' • A financial and compliance audit of the Rosemead Community Development Commission.
' A financial and compliance audit of the Rosemead Housing Development Corporation.
' • A Single Audit of Federal Grants to be performed to meet the requirements of the U.S. Office
of Management and Budget (OMB) Circular A-133.
• An agreed-upon procedures review of the calculation of the City's GANN Appropriations
Limit (GANN), as required by Section 1.5 of Article XIIIB of the California Constitution.
' • A management letter containing any comments or recommendations resulting from our review
of the systems of internal controls in connection with the financial and compliance audits.
We make a commitment to deliver all necessary reports based on the timetable presented herein on
page 16. Also, a more detailed discussion of our understanding of the work to be performed is set
' forth on pages 16 through 21.
Our goal is to provide the City with the highest quality of service, including a CAFR which meets all
' required reporting standards and a comprehensive management letter which is practical and helpful to
management in improving operations. We are confident that our service and experience will be of
benefit to the City and will provide added value over and above the performance of the audit itself.
' Throughout the year, you should feel comfortable in calling us for advice, as we are never too busy to
meet the needs of our clients. We encourage you to verify our level of service, as well as the
availability of Ms. Daphnie Fuertez, CPA, the audit manager, and myself by contacting the references
' provided in this proposal.
11
We thank the City for the opportunity to present our proposal. Please feel free to contact me, or
Mr. Robert J. Callanan, at (949) 399-0600 if you have any questions. This proposal constitutes a firm
and irrevocable offer for 60 days from the date of this letter. Mr. Callanan and I are authorized to
represent our firm, and bind the firm to a contract.
By:
Very truly yours,
DIEHL, EVANS R COMPANY, LLP
Nitin P. Patel, CPA
Engagement Partner
FIRM PROFILE AND QUALIFICAONS
LICENSING AND INDEPENDENCE
' Our firm, and all of our certified personnel, are properly licensed to practice public accounting in
California.
' Also, we meet the independence requirements of "Governmental Auditing Standards" (2007 Edition),
as published by the U.S. General Accounting Office. We will provide written notice to the City of any
professional relationships entered into during our term as auditors for the City. We have not provided
t auditing or any other services to the City during the past five years.
SIZE AND LOCATION OF THE FIRM
Diehl, Evans & Company. LLP is a Southern California accounting firm with offices in Irvine,
Carlsbad and Escondido. We are one of the oldest CPA firms in Southern California, with over 75 years
of public practice experience.
' Diehl, Evans & Company, LLP has extensive experience in providing auditing, accounting and
consulting services in the governmental sector. Over twenty thousand hours per year are devoted to
' this area of our practice for nearly 100 governmental units including cities, redevelopment agencies,
water districts, special districts, nonprofit corporations and joint power authorities.
Our firm has 45 employees which includes 40 professional staff members. Your City would be served
from our Irvine office, which has 20 professional staff members.
RANGE OF ACTIVITIES
Diehl, Evans & Company, LLP is a full service CPA firm. We offer a broad range of services,
including:
Certified Audits
Tax Planning
Compilations and Reviews
Agreed-Upon Procedure Reviews
Financial Services
Income Tax Preparation
Consulting Services
Our specific services available to governmental agencies are more fully set forth in this proposal.
In 1986, our firm began an annual internal quality review program, whereby all three offices are
reviewed for compliance with all current accounting and auditing requirements. Formal reports of
these reviews are presented to the partners, and adjustments in our auditing and reporting procedures
are made as necessary.
In January 2006, our firm underwent a quality review by an independent CPA firm, under provisions of
the AICPA Quality Review Program. These reviews are required every three years and covered our
audits of governmental agencies. We received a final report dated January 13, 2006 with an
unqualified opinion on our systems and procedures. A copy of the independent CPA firm's report is
included herein at Attachment II. Accordingly, we are confident that our current auditing standards and
techniques meet all existing requirements.
No regulatory action has ever been taken against any office of our firm due to substandard work. We
had no significant deficiencies noted in any federal or state desk reviews over the past three years.
EDUCATION PROGRAMS
Diehl, Evans & Company, LLP has a formal continuing education program. All firm auditors are
required to obtain 80 hours of continuing education every two years in the accounting and auditing
area as required by Government Auditing Standards, and at least 24 hours of government related
continuing education courses. Our staff is continually expanding their knowledge of the governmental
industry through our in-house training programs, programs offered by the AICPA, the California
Society of Certified Public Accountants and other professional organizations, and through on-the-job
training. We also publish an Auditing Manual For Governmental Entities for internal use by our staff.
The manual is updated at least annually.
Noted below is a description of certain in-house education courses taken by our partners and staff to
' meet the governmental continuing education requirements. All personnel involved with governmental
auditing are required to attend these courses.
• Implementation of GASB Statement No. 34, Basic Financial Statements - and Management's
Discussion and Analysis - for State and Local Governments
• Understanding, and Auditing, Deposits and Investments of California Governmental Units
• Reviews of Internal Controls in Accordance With Statements on Auditing Standards 55 and 78
• Assessing Audit Risk and Materiality in Conducting An Audit
• Understanding Statement on Auditing Standards No. 99 - Consideration of Fraud in a Financial
Statement Audit
• Redevelopment Agency Compliance Audits - Interpreting the Health and Safety Code
• Computer Auditing in the Governmental Environment
• The Single Audit - New Provisions under OMB Circular A-133
• Laws and Regulations in the Government Sector
1 -4-
1
Our partners and staff are actively involved in professional organizations in the governmental
accounting field. Noted below is a summary of our participation in various national and California
governmental organizations.
AICPA
Our firm is a member of the AICPA Governmental Audit Quality Center. The Center is a firm-based
voluntary membership Center whose primary purpose is to promote the importance of quality
governmental audits to purchasers of governmental audit services. The Center provides members with
an online forum tool for sharing best practices, as well as discussions on audit, accounting, and
regulatory issues. As a member of the Center, the firm receives updates on changes in auditing and
accounting standards that effect governmental audits. The quality control partner is required to attend
an annual web cast to discuss auditing and reporting issues effecting governmental audits. Our firm
uses the resources of the Center to maintain the quality of our governmental audits.
GFOA, GASB and FASB
1
Our firm is an associate member of the Government Finance Officers Association of the United States
and Canada (GFOA).
Also, we have web based access to the latest pronouncements issued by the Governmental Accounting
Standards Board (GASB) and the Financial Accounting Standard Board (FASB), including
Interpretations, Technical Pronouncements and Newsletters. We regularly analyze these
pronouncements and advise our governmental clients of changes in accounting rules.
' CSMFO and CRA
Three of our Irvine office partners (.Mr. Michael Ludin, Mr. Nitin Patel and Mr. Robert Callanan) and
' our Director of Consulting Services (Mr. William S. Morgan) are associate members of the California
Society of Municipal Finance Officers (CSMFO). Our personnel regularly attend local CSMFO
chapter meetings throughout Southern California, and the annual statewide conference. We often
' provide public speakers for these meetings.
Our firm is also an active member in the California Redevelopment Association (CRA). We receive
monthly newsletters from CRA to keep us up to date on legal developments affecting redevelopment
agencies. Mr. Morgan periodically serves as a public speaker for seminars and workshops sponsored
by CRA.
CSCPA
All partners, Mr. Morgan and several of our managers are all members of the Governmental
Accounting and Auditing (GAA) Committee of the Orange County Chapter, California Society of
Certified Public Accountants (CSCPA). Mr. Patel, Mr. Ludin and Mr. Morgan have each served as
chairman of this committee. Mr. Ludin and Mr. Morgan have been involved over the years in
preparing position papers issued on governmental accounting matters. Mr. Patel is a member of the
State Governmental Accounting and Auditing Committee.
-5-
fl
*GFOA AND CSMFO AWARD PROGO kS
The partner and manager will be involved in all phases of report preparation or review, including the
drafting of footnotes. Reporting checklists will be used to assure compliance with all reporting
requirements. Based on the high quality of our review process, we have been able to assist various
cities in obtaining the GFOA "Certificate of Achievement for Excellence in Financial Reporting" and
the "Outstanding Award" for financial reporting from CSMFO. During the past five years, the
following clients received awards:
Alhambra
Fullerton
Lake Elsinore
San Juan Capistrano
Cerritos
Garden Grove
Lakewood
Santa Clarita
Chino
Healdsburg
Mission Viejo
Signal Hill
Commerce
Hesperia
Montebello
Simi Valley
Coronado
Huntington Beach
Norwalk
Temecula
Del Mar
Indian Wells
Palm Desert
Thousand Oaks
Diamond Bar
Irvine
Pico Rivera
Tustin
Westminster
1
11
COMPUTER AUDITING CAPABILITIES
Each of our audit staff members is equipped with laptop computers with engagement software that are
used for workpaper preparation and preparation of financial statements. Utilizing Microsoft Excel or
other spreadsheet programs, we will transfer the trial balance data through direct input or through
downloading from the client's accounting system. This will allow us to perform analytical reviews of
accounts and preparation of financial statements. This process will reduce the time included in
preparation of lead schedules and the financial statements.
-6-
FIRM EXPERIENCE WITH GOVERNMEN0L ENTITIES
One means of judging the high quality of our auditing and accounting serices would be contact with
some of our existing clients. We are including the names and phone numbers of our city clients over
the past year. We encourage you to contact any of these individuals.
City of Alhambra
Mr. Dean Johnson
Financial Services Manager
(626) 570-5017
Citv of Fullerton
Mr. Glenn Steinbrink
Director of
Administrative Services
(714) 738-6523
City of Norwalk
Ms. Jana Stuard
Controller/Deputy City
Treasurer
(562) 929-5748
Citv of Avalon
Ms. Betty Jo Garcia
'
Finance Director
(310) 510-0220
City of Buena Park
'
Mr. Sung Hyun
Director of Finance
(714) 562-3713
City of Cerritos
'
Ms. Becky Lingad
Finance Manager
(562) 860-0311
City of Chino
Mr. David D. Cain
Director of Finance
(909) 627-7577
'
City of Coronado
Mr. Jack Van Sambeek
Director of
Administrative Services
(619) 522-7300
City of Diamond Bar
Ms. Linda Magnuson
Finance Director
(909) 839-7051
'
City of Downey
Mr. John Michicoff
'
Finance Director
(562) 904-7262
'
Citv of Encinitas
Ms. Jennifer Smith
Finance Director
(760) 633-2600
City of Healdsburg
Ms. Tamera Haas
Finance Director
(707) 431-3311
City of Hesperia
Mr. A.B. Brand
Interim Finance Director
(760) 947-1442
City of Indian Wells
Mr. Kevin McCarty
Director of Finance
(760) 346-2489
Citv of Irvine
Mr. Paul Boyer
Finance Administrator
(949) 724-6031
Citv of Lake Elsinore
Mr. Matt Pressey
Director of
Administrative Services
(951) 674-3124
City of Lakewood
Mr. Larry Schroeder
Director of Finance
(562) 866-9771
City of Mission Viejo
Mr. Bob Barry
Accounting Manager
(949) 470-3004
City of Montebello
Mr. Chickwan Michael Tam
Director of Finance
(323) 887-1419
-7-
City of Pico Rivera
Mr. Robert S. Ridley
Director of Finance
(562) 801-4395
Citv of San Juan Capistrano
Ms. Cindy Russell
Director of
Administrative Services
(949) 443-6301
Citv of Santa Clarita
Mr. Darren Hernandez
Director of Administrative
Services
(661) 255-4920
Citv of Sienal Hill
Mr. Dennis MacArthur
Director of Finance
(562) 989-7319
Citv of Temecula
Mr. Jason Simpson
Assistant Director
of Finance
(951) 694-6430
Citv of Thousand Oaks
Ms. Candis L. Hong
Director of Administrative
Services
(805) 449-2200
City of Westminster
Ms. Sherry Johnson
Accounting Manager
(714) 898-3311
•
REDEVELOPMENT AGENCY EXPERANCE
Over the past year we audited twenty-five redevelopment agencies.
Alhambra Redevelopment Agency
Avalon Redevelopment Agency
Buena Park Redevelopment Agency
Cerritos Redevelopment Agency
Chino Redevelopment Agency
Coronado Redevelopment Agency
Downey Redevelopment Agency
Fullerton Redevelopment Agency
Healdsburg Redevelopment Agency
Hesperia Redevelopment Agency
Indian Wells Redevelopment Agency
Irvine Redevelopment Agency
Lake Elsinore Redevelopment Agency
Lakewood Redevelopment Agency
Marin County Redevelopment Agency
Mission Viejo Redevelopment Agency
Montebello Redevelopment Agency
Norwalk Redevelopment Agency
Pico Rivera Redevelopment Agency
San Juan Capistrano Redevelopment Agency
Santa Clarita Redevelopment Agency
Signal Hill Redevelopment Agency
Temecula Redevelopment Agency
Thousand Oaks Redevelopment Agency
Westminster Redevelopment Agency
ENTERPRISE FUND EXPERIENCE
Most cities audited by our firm have a water utility enterprise fund. Noted below is a partial listing of
water utility and other enterprise funds audited by our firm over the past five years:
City Enterprise
Alhambra Water, Sewer, Storm Drain, Sanitation, Golf Course
Avalon Harbor, Sewer, Saltwater, Solidwaste, Hospital
Buena Park Water
Cerritos
Chino
'
Coronado
Del Mar
Downey
Encinitas
'
Fullerton
Garden Grove
Healdsburg
'
Lakewood
Mission Viejo
Montebello
'
Norwalk
Palm Desert
'
Pico Rivera
San Juan Capistrano
Santa Clarita
'
Signal Hill
Simi Valley
Thousand Oaks
'
Tustin
Westminster
1
Reclaimed Water
Water, Sewer, Sanitation System
Golf Course, Sewer
Sewer
Golf Course, Transit System
Water, Sanitation
Water, Refuse
Water, Sanitation, Mobile Home Parks
Electric, Water, Sewer, Transit
Water
Animal Services, Television
Water, Golf, Transit
Transit
Golf, Building
Water
Water, Sewer
Transit
Water
Water, Sanitation, Transit
Water, Sewer, Golf
Water
Water
- 8 -
1
1
1
•
SINGLE AUDIT EXPERIENCE
We perform single audit services for most of our cities that receive federal funds as required by
OMB Circular A-1 33. Ovenbe past year, Single Audits were performed for the following cities.
City of Alhambra
City of Lakewood
City of Buena Park
City of Mission Viejo
City of Cerritos
City of Montebello
City of Chino
City of Norwalk
City of Coronado
City of Pico Rivera
City, of Downey
City of San Juan Capistrano
City of Encinitas.
City of Santa Clarita
City of Fullerton
City of Signal Hill
City of Hesperia
City of Temecula
City of Indian Wells
City of Thousand Oaks
City of Irvine
City of Westminster
WATER DISTRICTS AND OTHER SPECIAL DISTRICTS
Noted below is a listing of water and special districts audited by our firm over the past year.
Water Districts
Borrego Water District
Jurupa Community Services District
La Habra Heights County Water District
La Puente Valley County Water District
Laguna Beach County Water District
Orange County Water District
Pomona-Walnut-Rowland Joirit
Water Line Commission
Puente Basin Water Agency
Rancho California Water District
San Dieguito Water District
Santa Fe Irrigation District
Walnut Valley Water District
Other Special Districts
Coachella Valley Association Downey Cemetery District
of Governments Sunset Beach Sanitary District
Costa Mesa Sanitary, District Valley Wide Recreation and Park District
-9-
1
Noted below is a partial listing of nonprofit corporations and joint power authorities audited by our
firm over the past year. A substantial number of these entities are "component units" which are
h
'
t
combined, into the basic financial statements of governmental organizations which exercise oversig
responsibility.
Buena Park Foundation
Healdsburg Public Improvement Corporation
'
Cal State L.A. Metrolink Authority
Lake Elsinore Financing Authority
Conejo Open Space Conservation Agency
Lake Elsinore Recreation Authority
'
Coronado Financing Authority
Norwalk Financing Authority
Coronado Improvement Corporation
Pico Rivera Water Authority
Cove Community Public Safety Commission
Public Cable Television Authority
'
th
it
'
i
A
Del Mar Public Facilities Corporation
u
or
y
ng
Redwood Empire Financ
'
Downey Civic Center Corporation
San Juan Capistrano Housing Corporation
Downey Recreational Area Authority
Santa Clarita Watershed Recreation'
and Conservation Authority
1
Downey Water Facilities Corporation
South County Senior Services '
El Toro Reuse Planning Authority
Southeast Area Animal Control Authority
'
Encinitas Ranch Golf Authority
Walnut Valley Building Corporation
1
1 -10-
' •
PARTNER, SUPERVISORY AND STAFF QUALIFICATIMS AND EXPERIENCE
' AUDIT TEAM
The audit team assembled consists of individuals who have extensive experience auditing
governmental agencies and are familiar with municipal accounting. In addition, each team member's
skill and experience developed working in other industries our firm serves can be applied to the
individual requirements of the City of Rosemead.
' The personnel assigned to the engagement team are as follows:
The engagement partner will be Mr. Nitin P. Patel, CPA. He will be the primary contact for all matters
involving the City audit and will be responsible for assuring that all work for the City is performed in a
complete and timely manner.
Mr. Robert J. Callanan, CPA, will be the Concurring Review Partner and will perform a quality review
of all reports issued in connection with the audit. He will also consult in the accounting treatment of
unusual transactions or audit issues.
' Ms. Daphnie Fuertez, CPA, will serve as the audit manager. She will schedule the fieldwork, supervise
the staff accountants, review the wcrkpapers and assist in the audit of any complex or unusual audit
' areas.
The audit senior will be Ms. Sarah H. Ro, CPA. She will be onsite performing the fieldwork including
performing tests of internal controls, substantive tests of balances, analytical tests and prepare financial
statements.
' Resumes for the above partners and personnel are included at pages 12 - 15.
' COMMITMENT RELATED TO PERSONNEL
We make a commitment to retain the same personnel on the City from year to year, except where such
personnel leave the firm, or where the change is approved by the City. If a staff member is replaced,
we make a commitment to replace that person with staff of at least equal experience.
NONDISCRIMINATION POLICY
' Our firm has a policy to provide equal employment opportunities to all qualified persons without
regard to race, color. age. sex, religion, national origin or handicap.
•
NIT1N P. PATEL, CPA
Position Engagement Partner
Education University of California at Irvine
Bachelor of Arts in Economics
California State University at Long Beach
Masters of Accounting Program
•
Licensing Certified Public Accountant in California since 1988
' Professional
Oraanizahons
American Institute of Certified Public Accountants
California Society of Certified Public Accountants
California Society of Municipal Finance Officers (CSMFO)
'
- Associate Member
CSMFO Professional and Technical Standards Review Committee
'
- Report Reviewer for Award Program
Governmental Accounting and Auditing Committee of Orange
'
County - Committee Chairman (2001-2002)
1
California Accounting and Auditing Committee Member
Ranee of
Experience
Has been with Diehl, Evans & Company, LLP since 1986 with emphasis in
'
governmental accounting and financial reporting.
Responsible for firm's in-house governmental accounting and auditing training
programs.
Experience includes supervision of over one hundred audits of governmental
'
agencies including cities, redevelopment agencies, non-profit corporations; joint
powers authorities and special districts.
'
Other experience includes providing consulting services for governmental
agencies including special internal control reviews, cost allocation plans, cable
'
television rate reviews, reviews of City Treasurer operations and transient
occupancy tax reviews of city hotels/motels.
'
Continuing
Professional
Education
For the period of January 1. 2004 through December 31, 2006:
Total Government Hours: 103.00
-12-
1
CPA
N
,
ROBERT J. CALLANA
Position
Concurring Review Partner
'
Education
Aquinas College, Grand Rapids, Michigan
Bachelor of Arts, Business Administration, 1988
Bachelor of Science, Accounting, 1988
Licensing
Certified Public Accountant in California since 1993
l
f
i
ona
Pro
ess
Organizations
American Institute of Certified Public Accountants - Member
California Society of Certified Public Accountants - Member
California Society of Municipal Finance Officers (CSMFO) -
Associate Member
'
CSMFO Professional and Technical Standards Committee -
Report Reviewer for Award Program
Range of
Experience
Seventeen years of experience as Certified Public Accountant with Diehl, Evans
& Company, LLP
di
ng
Two years of experience as Chief Financial Officer of a mortgage len
corporation
Overall Experience includes:
• Extensive supervision of audits of governmental agencies including cities,
redevelopment agencies, water districts, other special districts, non-profit
corporations and joint power authorities.
• Numerous presentations of accounting, auditing, tax and personnel topics at
in-house training programs
• Conversion of an accounting system
• Review and development of accounting control procedures, chart of
accounts and internal accounting reports
' • Several operational reviews of internal control systems, such as cash
management, business licensing and grant accounting
' Continuing
Professional
' Education For the period of January 1, ?004 through December 31, 2006:
Total Government Hours: 119.00
1 -1~-
Position
Education
' Licensing
1
1
fl
1
Rance of
Experience
Prior
Experience
Continuing
Professional
Education
•
DAPI I N IE FUERTEZ, CPA
Audit Manager
De La Salle University, Philippines
Bachelor of Science in Accounting, 1995
Certified Public Accountant in California since 2001
Has been with Diehl, Evans & Company, LLP since September 1998. She has
audited and prepared financial reports on cities, redevelopment agencies and
nonprofit corporations. Experience includes auditing for the following clients:
Cities and Other Entities:
City of Alhambra
City of Diamond Bar
City of Downey
City of Indian Wells
City of Lake Elsinore
City of Mission Viejo
City of Montebello
City of Palm Desert
City of Rancho Palos Verdes
City of San Juan Capistrano
City of Santa Clarita
City of Thousand Oaks
City of Tustin
City of Westminster
Southeast Area Animal Control
Authority
United Cerebral Palsy Association
Water Districts:
Castaic Lake Water Agency
El Toro Water District
Laguna Beach County Water District
Rancho California Water District
Santa Clarita Water Company
Trabuco Canyon Water District
Special Districts:
Coachella Valley Association
of Governments
Downey Cemetery District
Prior to working for Diehl, Evans & Company, LLP, she worked for Union
Incorporated in Irvine, CA for two years as a staff accountant. Her routine duties
as staff accountant included verifying daily cash receipts, sales reports and
processing weekly payroll. Other duties included preparing month-end journal
entries, assisting in the annual closing process and account reconciliation
reports.
For the period of January 1, 2004 through December 31, 2006:
Total Government Hours 100.00
-14-
SARAH H. RO. CPA
Position Audit Senior
Education University of California, Los Angeles
' Bachelor of Science in Economics, 1996
' Licensing Certified Public Accountant in California since 2004
Rance of
Experience Joined Diehl, Evans & Company, LLP in July 2003, concentrating on audits and
the preparation of financial reports for governmental agencies. Other experience
' includes audits of nonprofit organizations and 401(k) Plans. Prior to coming to
Diehl, Evans & Company, LLP, Ms. Ro provided business process outsourcing
services to private corporations at Arthur Andersen, LLP, located in Irvine,
California. Prior audit engagements with Diehl, Evans & Company, LLP
include:
' Cities: Special Districts:
City of Chino Beach Cities Health District
City of Commerce Coachella Valley Association
City of Indian Wells of Governments
City of Thousand Oaks Cucamonga Valley Water District
City of Westminster Walnut Valley Water District
1
' Continuing
Professional
Education For the period of January 1, 1004 through December 31, 2006:
Total Government Hours 100.00
1 -15-
I i
A PROACH
SCOPE OF WORK, TIMING AND AUDIT P
ENTITIES TO BE INCLUDED IN AUDIT
' City of Rosemead
Rosemead Community Development Commission
Rosemead Housing Development Corporation
REPORTS TO BE ISSUED AND DUE DATES
Due Dates
'
l
City of Rosemead - Comprehensive Annua
Financial Report
December 3
'
Rosemead Community Development Commission -
Annual Report, Including Report on Compliance
December 3
'
Rosemead Housing Development Corporation -
Annual Report, Including Report on Compliance
December 10
Management Letter
December 10
Report on Compliance with Article XIIIB
Appropriation Limit
December 3
Single Audit Reports:
December 17
• Independent Auditors' Report on Internal Control
Over Financial Reporting and on Compliance and
Other Matters Based on Audit of Financial
Statements Performed in Accordance With
Government Auditing Standards
• Independent Auditors' Report on Compliance with
Requirements Applicable to Each Major Program
and Internal Control Over Compliance in
Accordance with OMB Circular A-133 and
Supplementary Schedule of Expenditures of
Federal Awards.
1 -16-
AUDIT TIMING
' Assuming that the City's books are closed and ready for examination and that all necessary schedules
and documents are available for our use by October 15th each year, the suggested time schedule for the
various phases of the audit would be approximately as follows:
Entrance conference with key City staff. Discussion of any Week of May 21
prior audit concerns and the performance of interim work. y
Interim audit fieldwork and management review Week of June 4
' Final audit fieldwork and management review October 15 - November 2
Exit conference to summarize the results of the fieldwork and October 29
to review significant findings
' Deliver Final Reports See page 16
COMMITMENT TO DELIVER REPORTS ON A TIMELY BASIS
If all books and records, schedules and documents are made available to us by October 15th, we make a
commitment to have audit team members available and to provide all reports by the due dates specified
above.
AUDITS TO BE IN ACCORDANCE WITH GAAS AND OTHER REQUIREMENTS
We will audit the financial statements of the City and the component units noted on the preceding
page. The financial statements of all entities where the City exercises oversight will be combined with
the City's financial statements, in accordance with GASB Statement 14. Our audit will be in
accordance with auditing standards generally accepted in the United States of America as set forth by
the AICPA, and will include such auditing procedures as we consider necessary under the
circumstances. We will apply certain limited procedures, which consist principally of inquiries of
management regarding methods of measurement and presentation of required supplementary
information. However, we do not audit such information and do not express an opinion on it. Any
supplemental financial statements will be subjected to auditing procedures as we consider necessary in
relation to the financial statements taken as a whole. The scope of our audit will not include any
statistical information, and we will not express an opinion concerning it.
Our audits will conform with the guidelines set forth in the AICPA's Industry Audit Guide, Audits of
State and Local Governmental Units. Also, each examination will comply with the standards for
financial and compliance audits contained in the Government Auditing Standards (2007 Edition),
issued by the U.S. General Accounting Office, and the requirements of OMB Circular A-133.
Our audit of the Redevelopment Agency will include an audit on compliance in accordance with
Health and Safety Code Section 33080.1 and Sections I through V of the "Guidelines for Compliance
Audits of California Redevelopment Agencies" issued by the State Controller's Office.
Also, we will perform a limited
Computation as required by Section
will be performed in conformance
Guidelines".
procedures review of the City's Gann Spending Limitation
n 1.5 of Article XIIIB of the California Constitution. Our review
with the provision of the "League of California Cities Uniform
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1
1
1
AUDIT APPROACH
Our firm uses a standardized governmental audit program which we will modify to the City of
Rosemead's operations. The audit programs are modified to accommodate specific client
circumstances such as providing services directly or through contracts, specific statutes and other
unique characteristics. Our audit programs are organized using a combination of review and testing of
internal controls, substantive tests of the balance sheet and analytical review of revenues and
expenditures. The phases of the audit are as follows:
1. Planning and Initial Work:
In the preaudit conference, an important objective will be to establish a process of communication
between our audit team and City staff to minimize disruption to City staff. At this meeting we will
discuss the scope and timing of the audits, documents needed for our permanent files and the list of
schedules that the City normally prepares in conjunction with the year end closing. We will
schedule about one week of interim audit work during June each year. During our initial audit, we
will prepare narratives or other documentation of the major internal accounting control systems,
such as revenue and cash receipts, cash disbursements, purchasing and accounts payable, payroll,
inventory, property and equipment, grant administration and the budget process. These are used to
evaluate the systems of internal control and to revise our standard audit programs as needed. As
part of our planning and interim work, we will also gather information necessary to identify risks
of material misstatements due to fraud by (a) inquiring of management and others within the City
about the risks of fraud, (b) considering the results of analytical procedures, (c) considering fraud
risk factors and (d) other information. During the audit work in subsequent years, we will note
changes in the systems, if any. Each year we will select a random sample of transactions from
throughout the year to determine that the systems are functioning as described to us. We will
identify the strengths of the systems upon which we can rely in planning our substantive tests and
in setting materiality limits. Our internal control review will meet all the requirements of AICPA
Statements on Auditing Standards.
2. Final Audit Work:
During the final audit work, we will concentrate on auditing the final amounts that appear in the
City's CAFR. Our work may include:
• Confirmation of cash and investments balances and testing of bank reconciliations.
• Confirm significant receivable balances or review subsequent cash receipts to verify
receivable balance.
• Search for unrecorded liabilities.
1
• Test capital asset additions and depreciation expense.
18-
s
I AUDIT APPROACH (CONTIN)
2. Final Audit Work (Continued):
0 Confirm long-term debt balances and review the accounting treatment of debt issued or
refunded.
' • Test support for other significant assets or liabilities.
• Analytical procedures on balance sheet and revenue and expenditure accounts, to evaluate
and explain unusual fluctuations from prior year balances or current year budgeted
amounts.
• Review of attorney letters for significant legal matters affecting the City's financial
position.
' The audit workpapers will be reviewed by our management team in the field so that at the
conclusion of the fieldwork we are able to report any adjustments or findings. An exit conference
will be held to review any significant adjustments or findings.
SINGLE AUDIT APPROACH
The single audit will be performed in accordance with all the requirements of the Single Audit Act
Amendments of 1996, OMB Circular A-133, Government Auditing Standards issued by the GOA (the
"Yellow Book") and A1CPA Statement on Auditing Standards No. 68, "Compliance Auditing
Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance".
Our audit will include tests of transactions related to major federal award programs for compliance
with applicable laws and regulations and the provisions of contracts and grant agreements. Because an
' audit is designed to provide reasonable, but not absolute assurance and because we will not perform a
detailed examination of all transactions, there is a risk that material misstatements or noncompliance
may exist and not be detected by use. In addition, an audit is not designed to detect immaterial
misstatements or violations of laws or governmental regulations that do not have a direct and material
effect on the financial statements or major programs. However, we will inform you of any material
errors and any fraudulent financial reporting or misappropriation of assets that comes to our attention.
We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. We will include such matters in the reports required for a
Single Audit.
We will perform tests of controls to evaluate the effectiveness of the design and operation of controls
that we consider relevant to preventing or detecting material noncompliance with compliance
requirements applicable to each major federal award program. However, our tests will be less in scope
than would be necessary to render an opinion on those controls and, accordingly, no opinion will be
expressed in our report on internal control issued pursuant to OMB Circular A-133
I -19-
1
1
1
1
SINGLE AUDIT APPROACH (CONTIPED)
We will plan and perform the audit to obtain reasonable assurance about whether the auditee has
complied with applicable laws and regulations and the provisions of contracts and grant agreements
applicable to major programs. Our procedures will consist of the applicable procedures described in
the OMB Circular A-133 "Compliance Supplement" for the types of compliance requirements that
could have a direct and material effect on each of the City's major programs. The purpose of those
procedures will be to express an opinion on the City's compliance with requirements applicable to
major programs in our report on compliance issued pursuant to OMB Circular A-133.
When we begin the single audit, we will identify the Major and Nonmajor Federal Financial Assistance
Programs of the City. Each Major and Nonmajor program will be identified as either a low risk or high
risk program. Programs to be tested will be selected based on our assessment of risk for each program.
We will identify the types of activities that are either specifically allowed or prohibited by the laws,
regulations, and contract or grant agreements pertaining to the programs and document an
understanding of the internal controls the City has to provide reasonable assurance that federal awards
are expensed only for allowable activities or costs.
We will select a sufficient number of transactions to support a low level of assessed control risk. If no
exceptions in the function of key controls are noted, we will conclude that a low level of control risk
was achieved. If weaknesses in the internal controls are noted, we will modify our audit program as
needed.
As part of our single audit, we will request that the City assist in completing the Data Collection Form.
The form will assist us in identifying the federal programs which will be required to be tested.
DETERMINING LAWS AND REGULATIONS SUBJECT TO AUDIT
Under provisions of AICPA Statement on Auditing Procedures No. 74, Management of the City is
responsible for identifying to its outside auditors any laws and regulations which would have a
significant effect on the audit. This would include federal laws (such as federal grant regulations),
State laws (such as permitted investments under the California Government Code) and local laws (such
as restrictions on special revenues levied by the City). After our selection as auditors, we will consult
with City officials regarding these matters, to determine what laws and regulations need to be
evaluated in connection with our audit. If a City is not able to identify specific laws and regulations
that effect it, we have references (California Government Code and Health and Safety Code) to the
more common laws, rules and regulations in our standard audit programs for the usual activities of a
California City or Redevelopment Agency which will assist us in identifying laws and regulations to
review in the audit.
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0 -0
METHOD OF SAMPLING
Our approach is to utilize random sampling based in our testing of the internal control systems related
to cash receipts, cash disbursements, payroll and utility billings. Based on a statistical conclusion used
by the firm our sample sizes can range from 25 to 60 transactions. A random sample selection allows
each item in the population of an equal chance of being selected. In addition, for disbursements, we
may select a stratified sample of all transactions over a specified dollar amount for review.
ANALYTICAL PROCEDURES
Analytical procedures are used in the planning and final stages of the audit. In the planning phase, we
use analytical procedures to identify unusual financial transactions and comparing relationships to
expected results. We compare current year information to the prior years for balance sheet items,
revenues and expenditures. In addition, revenues and expenditures are compared to budgets to identify
unexpected results. In the final stages of the audit, the financial statements are reviewed to identify
expected relationships such as comparing debt paid to expenditures recorded on governmental funds,
transfers between funds, depreciation expense, etc. For all significant relationships identified,
explanations are obtained as to why the situation occurred and additional audit procedures are applied
to resolve any concerns.
MANAGEMENT LETTERS
In connection with each audit, a complete review of internal controls will be made of all significant
accounting procedures. Our firm uses an internal control questionnaire and a computer systems
questionnaire to develop information for the management letter. Upon the completion of each audit
and discussion with appropriate City staff, our firm will submit a management letter which shall
identify weaknesses observed during these reviews and throughout the audit, assess their effects on
financial management and recommend steps toward eliminating the weaknesses.
RETENTION OF AND ACCESS TO AUDIT WORKPAPERS
In accordance with provisions of OMB Circular A-133, GAO requirements, and the California Board
of Accountancy, our audit workpapers will be maintained for at least seven years after the date of the
report. These workpapers will be made available as necessary to your cognizant audit agency (or its
designee), to GAO representatives, or to any other federal or state agency needing access to the
workpapers. Also, our firm will respond to any reasonable inquiries of successor auditors and we will
allow any successor auditors to review our work-papers.
OTHER PROFESSIONAL SERVICES
We will be available for any other professional assistance you require to research and answer
accounting and reporting problems raised by the City; regardless of the time of year. Such assistance
may include, but is not limited to, tax questions, the review of bond documents, cost allocation
programs and employee benefit programs. We also will keep the City informed of new developments
affecting municipal finance and reporting, changes in grant rules and regulations, etc. We will be
available for training sessions on any accounting matters, and we will be available to attend City
Council meetings as needed.
21-
0
City Audit, including
Gann Appropriations Limit
Community Development
Commission
Housing Development
Corporation
Single Audit of Federal Grants
TOTAL, HOURS
Supervisory
Partner
Manager
Staff
Staff
Clerical
Total
16
20
120
120
20
296
4
12
20
20
4
60
2
-
16
12
2
32
2
6
20
12
2
42
24
38
176
164
28
430
DIS• SION OF RELEVANT ACCOUN*G ISSUES
GASB STATEMENT NO. 45
GASB Statement No. 45 on Accounting and Financial Reporting by Employers for Postemployment
Benefits Other Than Pensions is effective based on a government's total annual revenues in the first
fiscal year ending after June 15, 1999. For governments with total annual revenues of $100 million or
more, the Statement is effective for periods beginning after December 16, 2006. This Statement
improves the relevance and usefulness of financial reporting by (a) requiring systematic, accrual-basis
measurement and recognition of OPEB cost (expense) over a period of time that approximates
employees' years of service and (b) providing information about accrued liabilities associated with
OPEB and whether and to what extent progress is being made in funding the plan.
GASB STATEMENT NO. 47
GASB Statement No. 47 on Accounting for Termination Benefits is effective in two parts. For
termination benefits provided through an existing defined benefit OPEB plan, the provisions should be
implemented simultaneously with the requirements of GASB Statement No. 45. For all other
termination benefits, the Statement is effective for periods beginning after June 15, 2005. This
Statement improves financial reporting by adopting uniform recognition requirements for all voluntary
termination benefits, establishing guidance for accrual basis accounting and reporting of termination
benefits in the period in which the employer becomes obligated to provide benefits to terminated
employees, and elaborating on measurement issues associated with all forms of termination benefits.
GASB STATEMENT NO. 48
GASB Statement No. 48 on Sales and Pledges of Receivables and Future Revenues and Intra-Entity
Transfers of Assets and Future Revenue is effective for financial statements for periods beginning after
December 15, 2006. This statement improve financial reporting by establishing criteria that
governments will use to ascertain whether proceeds received in a lump sum for future revenues should
be reported as revenue or a liability. It also requires that specific relevant disclosures be made to
inform financial statement users about the unavailability of future revenues that have been pledged or
sold.
GASB STATEMENT NO. 49
GASB Statement No. 49 on Accounting and Reporting for Pollution Remediation Obligations is
effective for periods beginning after December 15, 2007. This statement will enhance the
comparability of financial statements among governments to account for pollution remediation
obligations that previously may not have been reported. This statement requires more timely and
complete reporting of pollution remediation obligations as their components become more reasonably
estimable.
23 -
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• WORK REQUIRED BY CITY STW
Our fixed annual fees contemplate that conditions satisfactory to the normal progress and completion
of the examination will be encountered and that City accounting personnel will furnish the
agreed-upon assistance in connection with the audit. However, if unusual circumstances are
encountered which make it necessary for us to do additional work; we shall report such conditions to
the responsible City officials and provide the City with an estimate of the additional accounting fees
involved.
Noted below is a listing of work required by City staff to assist in the audit.
1. Technical assistance in familiarizing our staff with:
• The flow of information through the various departments and accounting systems.
• Reports generated by your accounting system.
• The system of internal controls.
• Controls established to monitor compliance with federal grants.
2. Preparation of trial balances for all funds, after posting of all year end journal entries.
3. Preparation of schedules supporting all major balance sheet accounts, and selected revenue and
expenditure accounts.
4. Typing of all confirmation requests.
5. Pulling and refiling of all supporting documents required for audit verification.
6. Assistance with the preparation of the CAFR and footnotes, including:
a. Determination of major funds.
b. Determination of general and program revenues and allocation of program revenues to:
1. charges for services,
2. operating grants and contributions, and
3. capital grants and contributions.
c. Determining components of net assets into capital assets net of related debt, restricted and
unrestricted assets.
d. Assistance in determining the amounts to be reported (1) in the Reconciliation of the Statement
of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the
Statement of Activities and (2) the Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets.
7. Preparation of the management's discussion and analysis, and transmittal letter for the CAFR.
-24-
9
FEES AND HOURLY RATE
MAXIMUM FEES
Our maximum fees for the year ending June 30, 2007 will be as follows:
2007
City Audit, including Gann Appropriations Limit
and preparation of statistical section $ 30,340
Community Development Commission 6,480
Housing Development Corporation 3,270
Single Audit of Federal Grants 4,520
TOTALS $ 44.610
COMPOSITION OF CURRENT AUDIT FEE
Our proposed fee for the year ending June 30, 2007 is computed as follows:
Quoted
Hours
Rates
Partners
24.00
x $ 165.00
= $ 3,960.00
Managers
38.00
x 135.00
= 5,130.00
Supervisory Staff
176.00
x 110.00
= 19,360.00
Staff
164.00
x 90.00'
= 14,760.00
Clerical
28.00
x 50.00
= 1,400.00
430.00
$ 44.610.00
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HOURLY RATES FOR SPECIAL SERWES
If the City wishes us to perform consulting or other services outside the scope of the services
described herein, a separate written request from the City will be required. Our hourly rates
for these services during each year under the basic contract will be as follows:
2007
Engagement Partner
S 165
Concurring Review Partner
165
Director of Consulting Services
165
Managers
135
Supervisory Staff
110
Staff
90
Clerical
50
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CONSULTING SERVICES DEPAROENT
OVERVIEW OF SERVICES PROVIDED
Diehl, Evans & Company, LLP offers a wide range of consulting services to governmental agencies.
This section of our proposal summarizes the primary types of services provided by the firm.
The firm's Director of Consulting Services is Mr. William S. Morgan, CPA. Mr. Morgan has over
thirty years of experience in providing accounting, auditing and consulting services to California cities,
counties, redevelopment agencies, water districts, special districts, joint power authorities and
nonprofit corporations. Many of the firm's consulting projects are planned, supervised and reviewed by
Mr. Morgan.
Our firm provides the following types of services:
• Governmental Tax Consulting
• Performance and Operational Studies
• Redevelopment Consulting Services
• Reviews of City Treasurer Operations
• Cable Television and Broadband Consulting Services
• Reviews of Solid Waste Haulers and
Assistance With Trash Rate Negotiations
• Litigation Support and Dispute Resolution Services
• Fraud Investigations
• Hotel/Motel Transient Occupancy Tax Reviews
• Business License Operation Reviews
With regard to these engagements, we intend to perform limited procedures reviews in connection with
each assignment, in accordance with the AICPA's attestation standards. Under the provisions of the
attestation standards, the City will designate what specific procedures it wishes to have performed. We
will then perform those procedures and report on our findings. This type of engagement will not
constitute a certified audit in accordance with auditing standards generally accepted in the United
States of America. Such special services are not part of our standard fee arrangements and would be
subject to a separate fee quotation.
-27-
1
1
ATTACHMENT I
RESULTS OF OUTSIDE QUALITY REVIEW
' H@PENREICH & HEIDE ETCH
CERTIFIED PUBLIC ACCOU ANTS
12020 S. Warner-Elliot Loop #121 15545 Bear Valley Rd. #B
Phoenix, AZ 85044-2700 Hesperia, CA 92345
(480)704-6301 fax 785-4619 (760) 948-2899 tax 948-7712
sheidenreich@att.net
' January 13, 2006
ry ' To the Owners
Diehl, Evans and Company, LLP
t We have reviewed the system of quality control for the accounting and auditing practice of Diehl,
Evans and Company, LLP (the firm) in effect for the year ended September 30, 2005. A system of
quality control encompasses the firm's organizational structure, the policies adopted and
procedures established to provide it with reasonable assurance of conforming with professional
' standards. The elements of quality control are described in the Statements on Quality Control
Standards issued by the American Institute of CPAs (AICPA). The firm is responsible for
designing a system of quality control and complying with it to provide the firm reasonable
' assurance of conforming with 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
with its system of quality control based on our review.
'
Our review was conducted in accordance with standards established by the Peer Review Board
of the AICPA. During our review, we read required representations from the firm, interviewed firm
personnel and obtained an understanding of the nature of the firm's accounting and auditing
practice, and the design of the firm's system of quality control sufficient to assess the risks implicit
'
in its practice. Based on our assessments, we selected engagements and administrative files to
test for conformity with professional standards and compliance with the firm's system of quality
control. The engagements selected represented a reasonable cross-section of the firm's
'
accounting and auditing practice with emphasis on higher-risk engagements. The engagements
selected included among others, audits of Employee Benefit Plans and engagements performed
under Government Auditing Standards. Prior to concluding the review, we reassessed the
adequacy of the scope of the peer review procedures and met with firm management to discuss
'
the results of our review. We believe that the procedures we performed provide a reasonable
basis for our opinion.
In performing our review, we obtained an understanding of the system of quality control for the
firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality
control policies and procedures to the extent we considered appropriate. These tests covered the
application of the firm's policies and procedures on selected engagements. Our review was
based on selected tests therefore it would not necessarily detect all weaknesses in the system of
quality control or all instances of noncompliance with it. There are inherent limitations in the
effectiveness of any system of quality control and therefore noncompliance with the system of
quality control may occur and not be detected. Projection of any evaluation of a system of quality
control to future periods is subject to the risk that the system of quality control may become
inadequate because of changes in conditions, or because the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Diehl,
Evans and Company, LLP in effect for the year ended September 30, 2005, has been designed
to meet the requirements of the quality control standards for an accounting and auditing practice
established by the AICPA and was complied with during the year then ended to provide the firm
with reasonable assurance of conforming with professional standards.
As is customary in a system review, we have issued a letter under this date that sets forth
comments that were not considered to be of sufficient significance to affect the opinion expressed
in this report.
Heidenreich & Heidenreich
Certified Public Accountants
' HFWENREICH & HEIDEN ICH
CERTIFIED PUBLIC ACCOU NTS
' 12020 S. Warner-Elliot Loop #121 15545 Bear Valley Rd. #B
Phoenix, AZ 85044-2700 Hesperia, CA 92345
(480)704-6301 fax 785-4619 (760) 948-2899 fax 948-7712
sheidenreich@att.net
1
January 13, 2006
' To the Owners
Diehl, Evans and Company, LLP
We have reviewed the accounting and auditing practice of Diehl, Evans and Company, LLP for
the year ended September 30, 2005, and have issued our report thereon dated January 13, 2006.
That report should be read in conjunction with the comment in this letter, which was considered in
' determining our opinion. The matter described below was not considered to be of sufficient
significance to affect the opinion expressed in that report.
' Comment - The firm has established policies for audit documentation, but has not developed
specific guidance to ensure that certain procedures are documented in full as required by
professional standards. As a result, we noted that the firm's documentation was incomplete with
respect to the general audit program on one audit and the program for benefit
' payments/participant accounts on the audit of an Employee Benefit Plan. The workpapers did
contain sufficient documentation to support the audit opinion.
' Recommendation - The firm should revise its policies and procedures relating to performing
audits to include specific guidance for the documentation required by professional standards.
Heidenreich & Heidenreich
Certified Public Accountants
1 0 0
1
i 0
l &
LL ce
LIS ghard Do aldc.sIater
L L P Richard K. Kikuchi
Certified Public Accountants Retired
March 26, 2007
Ms. Lisa Pedote,
Chief Financial Officer
City of Rosemead
8838 E. Valley Boulevard
P.O. Box 399
Rosemead, CA 91770
Dear Ms. Pedote:
Robert C. Lance
1914.1994
Richard C. Soil
Fred J. Lunghard, Jr.
192&1999
Lance, Soll & Lunghard, LLP is pleased to respond to your request for a proposal for professional
auditing services. As a leader in the field of governmental accounting and auditing, we appreciate
the opportunity to present our professional qualifications. Because of our extensive municipal
experience, dedication to excellence and determination to retain the brightest and most talented
professionals, we are certain that Lance, Soll & Lunghard, LLP is the most qualified accounting firm
to provide professional auditing services and report preparation to the City of Rosemead.
The annual services that would be provided to the City of Rosemead, for fiscal year ending June 30,
2007 through June 30, 2009 would be as follows:
Perform a financial audit of the Basic Financial Statements of the City of Rosemead. We
understand that we will be responsible for preparing this report. These financial statements
could be included within a Comprehensive Annual Financial Report (CAFR) which may be
submitted under both the California and National awards programs. Our audit would express
an opinion as to whether the financial statements and associated notes conform to accounting
principles generally accepted in the United States of America.
2. Perform a financial audit of the Component Unit Financial Statements of the Rosemead
Community Development Commission. Again, we understand that we will prepare these
financial statements and accompanying notes thereto. Our opinion would indicate adherence
to generally accepted accounting principles. A separate compliance audit would be performed
and an opinion issued as required by Section 33080.1 of the Health and Safety Code. This
audit would be done in accordance with Guidelines for Compliance Audits of California
Redevelopment Agencies of the State Controller's Office as interpreted in Suggested Auditing
Procedures for Accomplishing Compliance Audits of California Redevelopment Agencies,
issued by the Governmental Accounting and Auditing Committee of the California Society of
Certified Public Accountants. Additionally, we would prepare the State Controller's Report
i FEARS
"Vi'"'i►•, r
' V2 192004
01 FXWQUIl'8 203 N. Brea Blvd., Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 e Fax (714) 672-0331 9 www.IsIcl2as.com
•
L
Soll &
Lnghard
LLP
CERTIFIED PUBLIC ACCOUNTANTS
City of Rosemead
Proposal to Provide Auditing Services
March 26, 2007
Page 2
0
for the Commission and a Department of Housing and Community Development (HCD)
Forms Analysis computation which provides the amounts for completing the financial
sections of the HCD Reporting Forms (either paper or on the automated reporting system).
3. Perform a Single Audit, if necessary, of all federal grants received by the City of Rosemead
utilizing auditing standards generally accepted in the United States of America. This audit
would be performed according to the requirements of OMB Circular A-133, Government
Auditing Standards issued by the GAO and the AICPA Industry Audit Guide.
4. Review and issue a report on the calculation of the City's Appropriations Limit (GANN), as
required by Article XIIIB Section 1.5 of the California Constitution.
5. Perform a financial audit of the Component Unit Financial Statements of the Rosemead
Housing Development Corporation. Again, we understand that we will prepare these
financial statements and accompanying notes thereto. Our opinion would indicate adherence
to generally accepted accounting principles. Additionally, if the Corporation is required to
file a tax return, we would prepare a Non-Profit income tax return (Forms 990 and 199) along
with the Department of Charities Registration Form.
Perform a review and make recommendations on the internal control structure, which
consists of the Control Environment, Accounting System and Control Procedures. Also, we
shall make an immediate and written report of any irregularities and illegal acts or indication
of illegal acts coming to our attention.
Provide the City with services not strictly within the purview of the audit, including but not
limited to rendering assistance in ensuring that appropriate financial controls and procedures
are in place and maintained, updating City staff with the latest development in governmental
accounting/reporting issues and assisting the City in implementing new requirements of the
Governmental Accounting Standards Board (GASB).
To accomplish the engagements listed above, we are proposing the following fees for a three year
period. These proposed fees are based upon a review of the previous fiscal year financial reports of
the various entities comprising the City of Rosemead. Should operations of the entities change
significantly, from those present at June 30, 2006, then the fees shown herein would be subject to
further negotiation. Additionally, the fees proposed are based upon the assumption that accounting
functions would be performed and minimal adjustments would be required. To the extent that this is
not the case, the fees shown would also be subject to further negotiation. The fees we propose would
be as follows.
u
L[SLLuarnc
l sghard
LLP
CERTIFIED PUBLIC ACCOUNTANTS
City of Rosemead
Proposal to Provide Auditing Services
March 26, 2007
Page 3
11 Proposed Fees
Engagements
2006-2007
2007-2008
2008-2009
Totals
City of Rosemead
$ 41,270.00
$ 42,510.00
$ 43,790.00
$ 127,570.00
Community Development Commission
7,860.00
* 8,100.00
* 8340.00
* 24,300.00
Single Audit
2,870.00
2,960.00
3,050.00
8,880.00
GANN Review
1,090.00
1,120.00
1,150.00
3,360.00
Rosemead Housing Authority
3,210.00
3,310.00
3,410.00
9,930.00
City Controller's Report
3,210.00
3,306.00
3,405.00
9,921.00
Totals
$ 59,510.00
$ 61,306.00
$ 63,145.00
$ 183,961.00
* Includes preparation of the State Controller's Report and providing HCD Form information.
Includes preparation of the Non-Profit tax return(s).
This proposal is a firm and irrevocable offer for the fiscal years ending June 30, 2007
through June 30, 2009 for 60 days. For purposes of this proposal, Donald L. Parker, CPA, Partner is
authorized to make representations for our firm. Additionally, in accordance with Government
Auditing Standards, we have attached a copy of our firms' most recent peer review opinion letter.
If you should have any questions, please fee free to contact me at the address and telephone
number listed above or by email at donald.parkeralslcpas.com.
Very truly yours,
DONALD L. PARKER, CPA, PARTNER
LANCE, SOLL & LUNGHARD, LLP
0
R.H. JOHNSTON ACCOUNTANCY INC.
A Professional Corporation
21031 Ventura Boulevard, Suite 210
Woodland Hills, California 91364
(818) 346-9800
Fax (818) 346-0609
September 16, 2004
To the Partners,
Lance Soll & Lunghard LLP
We have reviewed the system of quality control for the accounting and auditing practice of Lance
Soll & Lunghard LLP (the firm) in effect for the year ended May 31, 2004. A system of quality
control encompasses the firm's organizational structure and the policies adopted and procedures
established to provide it with reasonable assurance of conforming with professional standards. The
elements of quality control are described in the Statements on Quality Control Standards issued by
the American Institute of Certified Public Accountants (AICPA). The design of the system and
compliance with it are the responsibility of the firm. Our responsibility is express an opinion on the
design of the system, and the firm's compliance with the system based on our review.
Our. review was conducted in accordance with standards established by the Peer Review Board of
the AICPA. In performing our review, we obtained an understanding of the system of quality control
for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's
quality control policies and procedures to the extent we considered appropriate. These tests covered
the application of the firm's policies and procedures on selected engagements. Because our review
was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality
control or all instances of lack of compliance with it.
Because there are inherent limitations in the effectiveness of any system of quality control,
departures from the system may occur and not be detected. Also, projection of any evaluation of a
system of quality control to future periods is subject to the risk that the system of quality control may
become inadequate because of changes in conditions, or because the degree of compliance with the
polices or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Lance Soll
& Lunghard LLP in effect for the year ended May 31, 2004, has been designed to meet the
requirements of the quality control standards for an accounting and auditing practice established by
the AICPA and was complied with during the year then ended to provide the firm with reasonable
assurance of conforming with professional standards.
A?,Z.l ?Mz-ez~- 4e--- ~ r-~
PROPOSAL FOR AUDITING SERVICES TO
Submitted by
LIMVASQ.UEz
& COMPANY LLP
CITY OF ROSEMEAD
An Independent t."ember of the 8U0 Seidman Alliance ALLIANCE
Members AICPA Division of Firms • Center for Public Company Audit Firms ♦ Registered with the PCACIB
801 S. Grand Avenue, Suite 400, Los Angeles, CA 90017-4646
(213) 629-9094 • Fax (213) 996-4242 ♦ www.vasquezcpa.com
Contact: Mr. Gilbert Vasquez, CPA • May 1, 2007
• •
PROPOSAL FOR AUDITING SERVICES TO
CITY OF ROSEMEAD
Submitted by
NOVASQUEz
WX & COMPANY LLP
I_I R i if [D PWRL!I. ACCOUNTANTS AND BUSINESS CONSULTANTS
QUO
SEIDMAN
An Independent Member of the BDO Seidman Alliance ALLIANCE
Members AICPA Division of Firms ♦ Center for Public Company Audit Firms ♦ Registered with the PCAOB
801 S. Grand Avenue, Suite 400, Los Angeles, CA 90017-4646
(213) 629-9094 ♦ Fax (213) 996-4242 ♦ www.vasquezcoa.com
Contact: Mr. Gilbert Vasquez, CPA • May 1, 2007
• 0
A T/ C?C)-) vn -"7L
•
•
PROPOSAL FOR AUDITING SERVICES TO
Submitted by
IN VASQU EZ
!TA COMPANY LLP
URTW ED PIJN II ACCOUWANTS ANO 1415ANISS CONSULTAN IS
CITY OF ROSEMEAD
An Independent Member of the BDO Seidman Alliance ALLIANCE
Members AICPA Division of Firms • Center for Public Company Audit Firms ♦ Registered with the PCAOB
801 S. Grand Avenue, Suite 400, Los Angeles, CA 90017-4646
• (213) 629-9094 • Fax (213) 996-4242 • www.vasauezcpa.com
Contact: Mr. Gilbert Vasquez, CPA • May 1, 2007
TABLE OF CONTENTS
TRANSMITTAL LETTER 4
FIRM OVERVIEW 5
INDEPENDENCE 6
LICENSE TO PRACTICE IN CALIFORNIA 7
FIRM QUALIFICATIONS AND EXPERIENCE S
PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE ...............................12
SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES .................................................17
SPECIFIC AUDIT APPROACH .........................................................................................................19
IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS 26
PRICE PROPOSAL 27
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IN
•
•
►M®VASQUEZ
WA & COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
is
VASQU
•
& COMPANY LLP
IC ACCOUNTANTS AND BUSINESS CONSULTANTS
I of 01 South Grand Avenue. Suite 400 • Los Angeles. CA 90017-4646 • Ph. (21 3) o29-9094 • Fax (213) 996-4242
May 1, 2007
Ms. Lisa Pedote
Chief Financial Officer
City of Rosemead
8838 Valley Blvd.
Rosemead, CA 91770
RE: Request for Proposal for Professional Auditing Services
Dear Ms. Pedote:
www.vasquezcpa.com
Vasquez & Company LLP (Firm) is please to submit our proposal to the City of Rosemead (City) to
conduct the audit of its financial statements for the fiscal year ending June 30, 2007. Management can
be assured that the audits will 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 U.S. General Accounting Office's Government Auditing Standards, the provisions of the
Federal Single Audit Act of 1996, the provisions of the U. S. Office of Management and Budget Circular
A-133, Audits of State, Local Governments, and Nonprofit Organizations, and the provision contained in
this Request for Proposal. This proposal is an irrevocable offer for 90 days from the date of this proposal.
Our FIRM has performed over 5,000 financial and compliance audits in its 40-year untarnished history - a
statement that cannot be made by many other firms. We have worked extensively with governmental
entities and have the expertise to conduct quality audits in this area.
Our FIRM is uniquely qualified to provide services to the CITY because of our size, resources, the level of
professional expertise of our personnel and experience with similar engagements. We are well qualified to
review and work with the CITY to ensure that the CITY's Comprehensive Annual Financial Report (CAFR) is
consistent with the audited financial statements; the Government Finance Officers Association (GFOA)
certificate of achievement program checklist; the California Society of Municipal Finance Officers (CSMFO)
requirements and that the report is completed and submitted within the specified timeframe. Our knowledge
of the GFOA and CSMFO requirements is demonstrated by the fact that our staff has worked hand-in-hand
with the following clients in achieving their certificate awards: City of San Fernando, City of Gardena and the
City of Baldwin Park and the Central Basin Municipal Water District. In addition, we commit to perform the
work under this proposal within the required timetable.
We thank you for this opportunity to present our FIRM and its professional qualifications to the CITY. We
trust that you will find Vasquez & Company LLP uniquely qualified to provide the CITY with professional
auditing services. Gilbert Vasquez, our managing partner is authorized to represent and negotiate on behalf
of our FIRM. Should you have any questions or desire further assistance, please call Mr. Gilbert R.
Vasquez, Managing Partner, at (213) 629-9094 extension 200.
Sincerely,
VASQUEZ & COMPANY LLP
/ W
Gilbert R. s
Managing a ner
= Registered with Public Company Accounting Oversight Board
Member of Private Companies Practice Section & Center for Public Company Audit Firms
IN
• •
VASQU EZ
COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
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FIRM OVERVIEW
Vasquez & Company LLP is a full service Certified Public Accounting firm comprised of 50 individuals.
Founded in 1967, the Firm has 40 years experience in performing financial and compliance audits for all
types of, not-tor-profit organization, for-profit organizations, public agencies and publicly traded companies.
As a local firm, we are able to offer timely, personalized attention. Our professionals deliver innovative yet
practical solutions that help clients gain competitive advantage.
RANGE OF SERVICES
Our Firm provides audit, consulting, tax, financial advisory, review and compilation. Our audit services
include financial statement audits of companies in private and public sectors, audits of federal grants
under OMB A-133, compliance examination audits, overhead rate audits under FAR Part 31 for private
companies or OMB A-122 for not-for-profit organizations. In addition, we provide internal audit services
to augment the staffing needs of internal audit departments. Our Firm offers accounting services such as:
detailed accounting transactions, handling receipts and bank deposits, personal bill paying, accounts
receivables, business consulting and payroll preparation and reporting. Our financial advisory services
include: management advisory services, pension plan design, business management and estate
planning. Our tax services encompass tax return preparation for not-for-profit organizations, individuals,
corporations and partnerships, sales and use tax review, business tax planning and consulting. The Firm
provides complete technology assurance services for your information technology infrastructure. Our
consultants can augment or provide your internal audit function for technology related matters; implement
security strategies that enable your business; offer sound and practical advice that includes process
control enhancements; or provide your organization with an appropriate technology control strategy. The
Firm provides cost segregation services for commercial real estate owners. Our cost segregation
services provide an independent third-party analysis of project costs that can provide a federal and in
some cases, state tax advantage. In addition, we provide fraud examinations, IRS collections and
procedures consulting and human resources consulting.
BDO SEIDMAN ALLIANCE ALUANCE
The Firm is an Independent Member of the BDO Seidman Alliance TM. As part of the BDO Seidman Alliance
we are able to access this nationwide association of 200 independently owned local and regional
accounting, consulting, business and technology firms who share our dedication to exemplary client service,
thus providing enhanced resources that the Firm could utilize in service to the CITY. BDO Seidman is the
seventh largest national accounting firm.
IN
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►i®VASQUEZ
WA & COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
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INDEPENDENCE
The Firm meets the independence requirements of the Government Auditing Standards, 2003 revision,
published by the United States General Accounting Office ("Yellow Book") as it relates to the City.
It is our profession's nature to be objective and unbiased. People depend on the opinions of Certified Public
Accountants and look upon their reports as fair and accurate representations. The nature of our work is
detailed and analytical, yet highly cognizant of the overall perspective. It is also one of our professional
tenets to be independent and impartial in expressing our opinions. We have often been placed in the position
of being the bearer of unpleasant news in situations of non-compliance. It is our strict policy to be
straightforward and impartial whether the news is favorable or unfavorable.
PROFESSIONAL RELATIONSHIPS WITH THE CITY
The Firm has not had in the past five years any professional relationships involving the CITY. In addition, the
Firm will give the CITY written notice of any professional relationships entered into during the period we are
engaged as the CITY's auditors that involves the CITY.
The Firm covenants that it presently has no interest, and shall not acquire any interest direct or indirect or
otherwise, which would conflict in any manner or degree with the performance of the work required
hereunder. We further covenant that, in the performance of this work, no subcontractor persons having such
an interest shall be employed. We certify that no one who has or will have any financial interest in performing
this work is an officer or employee of the CITY.
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■ LICENSE TO PRACTICE IN CALIFORNIA
0
UTH V ASQUEZ
A & COMPANY
LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
• •
LICENSE TO PRACTICE IN CALIFORNIA
Our Firm is properly licensed to conduct public accounting in California. Furthermore, the Firm holds valid
business permits and other documents as required by the City, County, State, and other governmental and/or
regulatory body to legally engage in and perform the services requested under this RFP. The Firm further
assures that key engagement team members will be properly licensed Certified Public Accountants in
California. The Firm certifies that upon notification, it will inform the CITY of any suspension, termination,
lapse, non-renewals, or restrictions of its licenses, certificates, or other required documents.
7
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■ FIRM QUALIFICATIONS AND EXPERIENCE
UTH VASQU EZ
A & COMPANY
LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
FIRM QUALIFICATIONS AND EXPERIENCE
The Firm has performed over 5,000 financial and compliance audits for all types of state and local
governments, not-for-profit organizations, for-profit organizations and publicly traded companies in its 40-
year untarnished history. The Firm is acknowledged for excellent client service and community
accomplishments.
As a local firm, we are able to offer personalized attention. Our professionals deliver innovative yet practical
solutions that help clients gain competitive advantage. We warrant that we possess the necessary skills,
expertise, and qualified personnel to deliver the services called for in this engagement.
RECORD OF QUALTY CONTROL
The Firm has not been subjected to any federal or state desk reviews or field reviews of its audit work for at
least the past five years.
We have maintained an unblemished record of quality professional service during our 40-year history. The
Firm is proud to state that it:
❑ has never been sued,
❑ has never had any complaints filed against it with the California State Board of
Accountancy for substandard work or for any other reason,
❑ has never settled any potential law suit,
❑ has never been requested to resign from any engagement and,
❑ has never received a negative desk or field review from any of our clients' cognizant
agencies regarding any of our audits.
Vasquez & Company LLP is not currently involved in litigation with a current or former client nor is it aware of
any pending or threatened claims or assessments.
PERSONNEL RESOURCES
The Firm consists of approximately 50 individuals as follows:
Partners
3
Principals
8
Managers
3
Supervisors
4
Seniors
15
Staff
7
No. of Professionals
40
Administrative
10
Total
so
Our people are our most important resource. They have developed their skills and have accumulated
their experience through the successful performance of work for numerous clients and through our
comprehensive and formal professional staff training programs.
8
10 01
GOVERNMENT AUDIT TEAM
Our Government Audit team consisting of Mr. Gilbert Vasquez, Managing Partner, Mr. Lee Waddle,
Quality Control Partner, Mr. Vedeo Tinana, Government Practice Principal, and Ms. Linda Narciso,
Manager, supported by six senior auditors with an average of six years experience in conducting audits of
cities, government agencies, and special districts, have assisted several of our clients in achieving their
GFOA certificates of excellence in financial reporting.
PHYSICAL RESOURCES
The Firm occupies an 11,000 square foot office space at 801 S. Grand Avenue, Suite 400, Los Angeles,
CA 90017. We have a computer network with approximately twenty (20) workstations. All the auditors
have laptop computers, which connect to the network via the Internet. Printers are also available for
auditors to bring to the clients' offices, as needed.
EXTERNAL QUALITY CONTROL REVIEW
The Firm is a member of the American Institute of Certified Public Accountants ("AICPA") Division of Firms
and received a clean opinion from the AICPA on its peer review, dated March 4, 2005. This review covered
several government engagements, including a city comparable in size and audit scope to the CITY. A copy
of the peer review opinion follows.
r~ Center for
Public Company
® Audit ti
C mnft Aucft ouaft
Amako hftft d CvdW PUbk AcwwWft • Msbonide R mndd Cm w 201 Plea Tine • JWW CRY. NJ 07311-3881
201938.3030 - 868.817.3277 • hx 201.5215136 • www.41".GWC"1
March 4, 2005
Gilbert R Vasquez, CPA
Vasquez & Company, LLP
510 W Sixth St Ste 400
Los Angeles, CA 90014
Dear Mr. Vasquez:
It is my pleasure to notify you that on February 23, 2005 the
Center Peer Review Committee accepted the report on the most
recent peer review of your firm, the related letter of comments,
and your firm's response thereto. Those documents will now be
placed in the public files of the Center for Public Company
Audit Firms. The exit conference on your next review must occur
by June 30, 2007.
As you know, the reviewer's opinion waa unmodified. The
Committee asked me to convey its congratulations to the firm.
Sincerely,
David Brumbeloe, CPA
Chair
CPCAF Peer Review Committee
CC: Daniel Richard Matter, CPA
Firm Number: 10138115 Review Number: 212351
10
9
MEM 99 sA OF AICFA
DANIEL MATTER & CO.
CERTIPIWO PUBLIC ACCOUNTANTS
Otani ON FOR CPAFttMt 1102 (AST TNOUS,INp OAKS dOULfvwko TVLrPNONE !9051 495.&p
.05 sQCPs•ACPs T14OUSMO OARS, CALIFORNIA 9I592 FACSIMILE (805) 795-703;
495-7786
September 9, 2004
To the Partners
Vasquez & Company LLP
and the Center for Public Company Audit Firms Peer Review Committee
We have reviewed the system of quality control for the accounting and
auditing practice of Vasquez & Company LLP (the firm) applicable to non-SB C
Issuers in effect for the year ended December 31, 2003. The firm's;
accounting and auditing practice applicable to SEC issuers was not reviewed
by us since the Public Company Accounting Oversight Board (PCAOB) is
responsible for inspecting that portion of the firm's accounting and
auditing practice in accordance with PCAOB requirements. A system of
quality control encompasses the firm's organizational structure and the
policies adopted and procedures established to provide it with reasonable
assurance of complying with professional standards. The elements of quality
control are described in the Statements on Quality Control Standards issued
by the American Institute of Certified Public Accountants (the AICPA). The
design of the system, and compliance with it, are the responsibilities of
the firm. Our responsibility is to express an opinion on the design of the
system, and the firm's compliance with that system based on our review.
Our review was conducted in accordance with standards established by the
Peer Review Committee of the Center for Public Company Audit Firms and
included procedures to plan and perform the review that are summarized in
the attached description of the peer review process. Our review would not
necessarily disclose all weaknesses in the system of quality control or all
instances of lack of compliance with it since it was based on selective
tests. Because there are inherent limitations in the effectiveness of any
system of quality control, departures from the system may occur and not be
detected. Also, projection of any evaluation of a system of quality control
to future periods is subject to the risk that the system of quality control
may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and
auditing practice applicable to the non-SEC issuers of Vasquez & Company
LLP in effect for the year ended December 31, 2003 has been designed to
meat the requirements of the quality control standards for an accounting
and auditing practice established by the AICPA, and wan complied with
during the year then ended to provide the firm with reasonable assurance of
complying with applicable professional standards.
An is customary in a peer review, we have issued a letter under this date
that sets forth comments relating to certain policies and procedures or
compliance with them. The matters described in the letter were not
considered to be of sufficient significance to affect the opinion expressed
in this report.
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UTOVASQUEZ
A & COMPANY
LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
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PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND
EXPERIENCE
General
The Firm is able to assemble and manage multi-disciplinary teams of highly qualified and experienced
professionals, drawing upon audit staff resources and the complementary capabilities of technical
advisory groups. Based on our many years of experience, we are able to integrate the roles and
functions of professional, administrative, and supporting staff into a common effort.
In our practice, we employ a team approach. Over time, we have found that our team concept is the most
effective way in which to serve a client's diverse needs. Each member of our proposed team possesses a
level of experience that is directly related to the tasks that he/she will perform. Our audit administration
structure provides for a depth of experience and technical skills from our management personnel. This
ensures that the CITY personnel will have continuous access to an appropriate, knowledgeable
representative of the engagement team.
Engagement Team
The success of any audit engagement depends on the people selected to actually conduct the audit. We
consider it imperative that the selected engagement team:
❖ Possess and demonstrate the necessary technical skills to perform their assigned tasks in an
efficient manner,
❖ Establish a "track record" of effective coordination among each other and with the client in order
to meet the stated audit objective, and
❖ Establish continuity of effort from year to year and among each other in order to avoid
"retraining" our personnel in subsequent years.
Team Member
Mr. Gilbert Vasquez, CPA
Mr. Vasquez will have the responsibility and authority for the audit
Coordinating Partner
engagement and act as the liaison between the CITY and the Firm.
Mr. Lee Waddle, CPA
Mr. Waddle will review all audit reports, financial statements and other
Quality Control Partner
information to ensure compliance with the Firm and all applicable
standards.
Mr. Vedeo Tinana, CPA
Mr. Tinana will have the responsibility of directing the technical
Engagement Principal
performance and oversee the operations of the engagement team.
Ms. Linda Narciso
Ms. Narciso will be responsible for conducting the audit team's day-to-
Manager
day fieldwork.
Staff Continuity
Our commitment to achieve long-term engagement continuity is accomplished through early planning and
thorough management which increases audit efficiency and streamlines the audit process for the CITY. The
selection of personnel we propose for assignment to this engagement has been based on the above criteria.
The Firm covenants that it will not replace any of the "key management personnel" unless circumstances
beyond our control occur (e.g. personnel leave the Firm). Each person to be assigned to the engagement
has been chosen for his or her ability to repeat on future years' engagements. A brief description of the
responsibilities of each of the individuals we propose to assign to the engagement team to serve the CITY is
shown below.
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GILBERT R. VASQUEZ, CPA
Managing Partner
Firm Position
Mr. Vasquez is the founder and managing partner of Vasquez & Company LLP. Since 1967, he has
managed and directed a successful practice in public accounting, auditing, taxation and financial advisory
services.
Areas of Expertise
Mr. Vasquez area of expertise is focused on accounting, taxation, financial, and compliance audits,
internal control review of government agencies, nonprofit organizations, privately held companies and
publicly traded companies.
Standards
Mr. Vasquez is familiar with conducting audits in accordance with the following standards/provisions:
• Generally Accepted Auditing Standards • Generally Accepted Govemment Auditing
(GAAS) Standards (GAGAS)
• Single Audit Act Amendment of 1996 and OMB • Federal Acquisition Regulations
A-133 • Standards of the Public Company Accounting
• OMB Circular A-122 Oversight Board
Representation of Experience
Mr. Vasquez's experience includes his involvement in the following engagements:
• City of Baldwin Park
• City of Cudahy
• City of San Fernando
• County of Los Angeles
• Central Basin Municipal Water District
• Upper San Gabriel Valley Municipal Water
District
• Needles Public Utility Authority
• Los Angeles County Metropolitan
Transportation Authority
• Alameda Corridor Transportation Authority
• City of Los Angeles Community
Redevelopment Agency
• Rio Hondo Community College District
• City of Pico Rivera (Water Distrct)
• Valley County Water District
Educational Background
Mr. Vasquez received his Bachelor of Science in Business Administration, with an emphasis in
Accounting from California State University, Los Angeles. He is also a credentialed Professor of
Accounting.
Professional Aff iliations
Mr. Vasquez was a member of the 1984 Olympic Organizing Committee and currently serves on the
Board of Directors of its successor organization, the Amateur Athletic Foundation of Los Angeles. Mr.
Vasquez continues his membership on several Boards including the National Council of La Raza, Cal
State LA Foundation and Manufacturers Bank.
Mr. Vasquez has also served as member of the Los Angels County Sheriff's Department Board as well as
the Los Angeles Metropolitan YMCA Board. Past corporate board, associations include GTE of
California, Glendale Federal Savings and Loan Association, and Blue Cross of California, and the
American Power Products.
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LEE WADDLE, CPA
Quality Control Partner
Firm Position
Mr. Waddle is the quality control partner for Vasquez & Company, LLP. Mr. Waddle has over 40 years of
professional public and private accounting and auditing experience. Mr. Waddle oversees the Firm's
quality control efforts, internal audit outsourcing practice, and acts as the Firm's primary expert witness.
Areas of Expertise
Mr. Waddle area of expertise is focused on financial and compliance audits, internal control review of
government agencies, nonprofit organizations, privately held companies and publicly traded companies.
Standards
Mr. Waddle's is familiar with conducting audits in accordance with the following standards/provisions:
• Generally Accepted Auditing Standards
(GARS)
• Single Audit Act Amendment of 1996 and OMB
Circular A-133
• OMB Circular A-122
• Generally Accepted Government Auditing
Standards (GAGAS)
• Federal Acquisition Regulations
• Standards of the Public Company Accounting
Oversight Board
Representation of Experience
Mr. Waddle's experience in this area includes his involvement in the following engagements:
• City of Baldwin Park
• City of Gardena
• City of Cudahy
• City of San Fernando
• City of South Gate
• Central Basin Municipal Water District
• Upper San Gabriel Valley Municipal Water
District
• Needles Public Utility Authority
• Bureau of Sanitation - City of Los Angeles
• Alameda Corridor Transportation Authority
• Los Angeles Unified School District
• Rio Hondo Community College District
• Water Replenishment District
• City of Pico Rivera (Water District)
• County of Los Angeles
Professional Background
Prior to joining Firm, Mr. Waddle served as Director of Internal Auditing for Tiger International and as
Assistant Director of Internal Auditing for Whitaker Corporation. Mr. Waddle was a senior audit manager
in charge of quality control for Ernst & Young, LLP in its Orange County office.
Educational Background
Mr. Waddle received his Bachelor of Science in Business Administration, with an emphasis in Accounting,
from the California State University of Los Angeles. He is a member of the California Society of Certified
Public Accountants. Mr. Waddle meets all the Firm and professional CPE requirements.
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VEDEO L. TINANA, CPA
Principal
Firm Position
Mr. Tinana is a Principal with Vasquez & Company LLP. He has over 25 years of professional public
accounting and auditing experience in a wide variety of industries.
Areas of Expertise
His area of expertise is focused on financial and compliance audits of public sector entities and various
nonprofit organizations funded by the Federal government, State of California, County of Los Angeles,
City of Los Angeles, and other local governments. In addition to significant accounting and auditing
experience, he has extensive experience in contract audits, close-out audits involving direct and indirect
cost rates and overhead rate audits.
Mr. Tinana coordinated five CPA firms in a two-year Department of Labor (DOL) project involving quality
control reviews of over 300 pensions and welfare benefit plans in conjunction with the DOL's efforts to
effect a revision to the "CPA Guidelines on Audits of Pension Plans Covered by ERISA". The results of
his findings were presented to the AICPA Committee on Governmental Auditing in Washington D.C.
Grant/Program Audits performed in accordance with program/grant guidelines and specific contract
provisions are significantly represented in Mr. Tinana's area of expertise. In this capacity, he was
involved in extensive reviews of contracts of subgrantees of the City of Los Angeles, County of Los
Angeles and County of Ventura. Over 300 subgrantees were audited, including for-profit entities and
nonprofit agencies with revenues ranging between $50,000 and $7.5 million.
Standards
Mr. Tinana is familiar with conducting audits in accordance with the following standards/provisions
• Generally Accepted Auditing standards (GAAS) Generally Accepted Government Auditing
• Single Audit Act Amendment of 1996 and OMB Standards (GAGAS)
Circular A-133 Federal Acquisition Regulations
• OMB Circular A-122 Standards of the Public Company Accounting
Oversight Board
Representation of Experience
His experience in this area includes his involvement in the following engagements:
• Los Angeles County Metropolitan
Transportation Authority (LACMTA)
• Alameda Corridor Transportation Authority
• Los Angeles Unified School District
• Rio Hondo Community College District
• Valley County Water District
• City of Baldwin Park
• Valley Economic Development Corporation
• Economic Development Corporation of Los
Angeles County
• Compton Unified School District
• Community Development Commission of the
County of Los Angeles
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LINDA NARCISO
Manager
Firm Position
Ms. Narciso has been a practicing accountant since 1992, and is currently a manager with Vasquez &
Company LLP.
Areas of Expertise
Her practice is focused in conducting financial and compliance audits of government agencies, nonprofit
organizations, privately held companies and publicly traded companies. She has also managed
engagements of incurred cost and close-out audits of professional services providers for government
agencies.
Standards
Ms. Narciso is well versed in conducting audits in accordance with the following standards/provisions:
• Generally Accepted Auditing standards . OMB Circular A-122
• Generally Accepted Government Auditing Federal Acquisition Regulation
Standards Standards of the Public Company Accounting
• Single Audit Act Amendment of 1996 and OMB Oversight Board
Circular A-133
Representation of Experience
Ms. Narciso's experience encompasses her involvement in the following engagements:
• Alameda Corridor Transportation Authority • City of Gardena
• Union Station Gateway, Inc. • Los Angeles County Employee's Retirement
• City of San Fernando Association
• City of Cudahy Southern California Association of
Governments
Professional Background
Prior to joining the Firm, Ms. Narciso worked as an audit manager with PricewaterhouseCoopers LLP. As
an audit manager, she participated and supervised various financial statement audits of profit, as well as
not-for-profit organizations.
Education
Ms. Narciso received her Bachelor of Accountancy degree in 1991 at the De La Salle University. Ms.
Narciso continues to stay current on matters of accounting through participation in the Firm's continuing
education program as well as attending conferences and seminars. Ms. Narciso meets the Firm's and the
professional CPE requirements.
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■ SIMILAR ENGAGEMENTS WITH OTHER
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►~r®VASQUEz
UA & COMPANY LLP
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
0
SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES
IN
I!
The Firm's major clients are government and non-profit organizations. We have worked extensively with
governmental entities and have the expertise to conduct quality audits in this area. We have performed
annual financial, compliance and single audits of cities for the past 15 (years). We currently perform
twenty (20) public sector engagements, including audits of water districts, transportation authorities,
community colleges and City and County governmental entities.
Our services have been well received by our clients. We were able to work within the schedule and meet
the deadlines set, unless adverse circumstances arose that were not in our control. In those cases we
have used all possible efforts to meet the objectives set. We have had long-term relationships with some
of our clients and we believe they are in the best position to vouch for our Firm.
Governmental Organization Audits
Vasquez & Company LLP has performed over five (5) thousand audits of governmental organizations
subject to financial and compliance audits in our 40-year history. These audits were performed in
accordance with auditing standards generally accepted in the United State of America (U.S.A),
Government Auditing Standards, Single Audit Act Amendments of 1996 and OMB Circular A-133 and its
Compliance Supplement (when applicable), and the Office of the State Controller's Minimum Audit
Requirements and Reporting Guidelines for California Special Districts (when applicable). A partial list of
the engagements performed over the past three years are as follows:
Nature of Engagement
Engagement Total
Partner/
Hours
Principal
County of Los Angeles
Annual financial statement and Single Audit
Mr. G. Vasquez 2300
Ms. Connie Yee
(A-133) Co-Auditors and subcontractors with
Chief, Accounting Division
KPMG
Mr. V. Tinana
Office of the Controller
500 West Temple Street, Suite 603
1992 to Present
Los Angeles, CA 90012
213 974-8326
City of Gardena
Annual financial, compliance audit for inclusion
Mr. G Vasquez 900
Mr. Mitchell Lansdale
in the City's CAFR prepared in conformance
City Manager
with the GASB 34 requirements and Single
Mr. L. Waddle
1700 West 162' Street
Audit (OMB A-133), '98 to 04 GFOA and
Ms. B. Se-Liban
Gardena, CA 90247
CSMFO Awards
(310) 217-9500
Client since: 1998 to current
City of Baldwin Park
Annual financial, compliance audit for inclusion
Mr. G. Vasquez 750
Ms. Hennie Apodaca
in the City's CAFR prepared in conformance
Interim Finance Director
with the GASB 34 requirements and Single
Mr. L. Waddle
14403 E. Pacific Avenue
Audit (OMB A-133), and the Redevelopment
Mr. V. Tinana
Baldwin Park, CA 91706
Agency Audit '00 to '04 GFOA and CSMFO
(626) 960-4011
Awards
Client since: 2000 to current
City of San Fernando
Annual financial, compliance audit for inclusion
Mr. G. Vasquez 500
W. Lorena Quijano
in the City's CAFR prepared in conformance
Finance Director
with the GASB 34 requirements and Single
Mr. L. Waddle
117 McNeil Street
Audit (OMB A-133), and the Redevelopment
Mr. V. Tinana
San Fernando, CA 91340-2993
Agency Audit, GFOA and CSMFO Awards
(818) 898-1244
Client since: 1993 to 2005
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Central Basin Municipal Water
Annual financial, Single Audit (A-133) and State
Mr. L. Waddle/
450
District
Controller's Report GFOA and CSMFO
Aileen Umali-Hermoso, CPA,
Awards
Mr. G. Vasquez
CGFM
Budget and Finance Officer
Telephone no. (310) 436-2622
Client since: 1999 to resent
City of Cudahy
Annual financial, compliance audit for inclusion
Mr. G. Vasquez
400
Ms. Mellie Deano
in the City's CAFR prepared in conformance
Director of Finance
with the GASB 34 requirements, Single Audit
Mr. L. Waddle
5220 Santa Ana Street
(OMB A-133), and the Redevelopment
Mr. V. Tinana
Cudahy, CA 90201
Agency
(323) 773-5143
Client since: 2000 to current
Valley County Water District
Annual financial statements, State Controller's
Mr. G. Vasquez/
375
Mr. Brian Dickenson
Report and Agreed Upon procedures.
Mr. V. Tinana
General Manager
14521 Ramona Blvd.
2005 to present
Baldwin Park, CA 91706
626 338-7301
Upper San Gabriel Valley
Annual financial, Single Audit (A-133, when
Mr. L. Waddle/
275
Municipal Water District
necessary), and State Controller's report
Mr. Timothy Jochem
Mr. G. Vasquez
General Manager
Client since: 2005 to resent
p
11310 Valley Boulevard
El Monte, California 91731
626 443-2297
Needles Public Utility Authority
Annual financial, Single Audit (A-133, when
Mr. L. Waddle/
250
Ms. Bonnie Lutrell
necessary), and State Controller's Report
Director of Finance
817 Third Street
Client since: 1998 to current
Needles, CA 92363
60 326-2115
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■ SPECIFIC AUDIT APPROACH
►~~®VASQUEZ
III & COMPANY LLP
CERTMED PUBLIC ACCOUNTANTS AND BUSINESS CON SULTANTS
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SPECIFIC AUDIT APPROACH
We firmly believe that our prior experience with other similar entities, coupled with our unique approach to
auditing, will result in a timely, efficient and cost-effective audit for the CITY. Our audit will be conducted with
a minimum of disruption to ongoing day-to-day operations.
Our general audit approach for local government is a business approach. This means we spend more time
understanding the overall nature of the CITY's business. We strongly emphasize early planning,
communication and coordination of our efforts with CITY personnel, which results in the efficiency and
timeliness of our procedures. Our approach stresses early resolution of audit, accounting and reporting-
related issues.
The FIRM utilizes a systems-based, control-oriented audit approach, which will allow our auditors to obtain
an overall understanding of the CITY and its operating environment, while at the same time considering how
to be more efficient in utilizing the CITY's accounting information system. The result of using this approach
is that appropriate personnel resources can be directed to devote audit attention to the critical points in the
transaction cycle.
Our analytical approach and audit working papers techniques are structured to assure consistency and also
force the preparer to focus on areas where controls are weak or nonexistent and need improvement or
implementation. Thus, we will be in a position to assist the CITY in identifying control weaknesses and
developing practical corrective measures.
Proposed Segmentation of the Engagement
The size and depth of our staff, as well as our pledge to the CITY to provide year-to-year staff continuity,
enables us to better coordinate our activities with those of the CITY's staff. Therefore, we can undertake a
wide variety of assignments simultaneously, thereby avoiding delays and bottlenecks in the conduct of our
audits.
The implementation of our audit approach to the CITY and its related entities will be divided into the
following phases:
• Familiarize ourselves
with operating
environment
• Perform risk
assessment
procedures
• Develop audit plan
• Discuss and agree
on financial
statement format
• Identify internal
' Plan and perform
■ Perform completion
control strengths and
substantive
procedures
weaknesses
procedures
■ Perform overall evaluation of
• Evaluate design and
■ Consider audit
the financial statement and
implementation of
evidence
disclosures
selected controls
sufficiency
■ Conduct exit conference
• Understand
■ Conclude on
with management, including
accounting and
critical account
discussion of proposed audit
reporting activities
matters
adjustments and
management letter, if any
Express an audit opinion
• Management report
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Phase l Phase II Phase III Phase IV
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Phase I- Audit Planning
We believe the planning phase lays the foundation for the direction of our audit efforts. It encompasses the
following steps:
Gaining and Documenting an Understanding of the City's Internal Control by:
❑ Conducting entrance conferences with the appropriate City officials. The agenda would include, but
need not be limited to, the following:
•
The application of generally accepted accounting principles
•
Concerns of the City management
•
Report requirements, refinements and deadlines
•
Initial audit report and timing schedule
•
Assistance by the City personnel
•
Establishment of principal contacts
•
Progress reports process
•
New Single Audit Requirements and Other Compliance Issues
•
Consideration of Fraud in a Financial Statement Audit
•
The auditors' responsibility for fraud detection
•
Management's responsibility in fraud prevention
• Scheduling inquiries of management and others (including non-accounting personnel)
about the risk of fraud
❑ Expanding our understanding of the City and its Operating Environments. We will accomplish this by
familiarizing ourselves and updating our knowledge of applicable background information pertinent to
the City, its grants and funding structure through our review of the following:
• Applicable state legislation
• Organizational structure
• Minutes of the City Council and other related entities
• City charters, ordinances and bond covenants
• Policies and procedures manuals, administrative codes, rules and regulations
• Long-range plans of the City and other related entities
• Operational and capital budgets
• Description of the City's financial and other information systems
• Recent financial statements and key operating statistics
• Contracts and major commitments
• Grant agreements
• Cost allocation plans
• Possible effects on the City of the actions of regulatory agencies
• Fraud Risk Assessment Process
❑ Through our background knowledge of the City and its related entities, and as a result of our fact-finding
process, we will develop an in-depth understanding of the areas of concern. We will be in a position to
meet with the City management to discuss areas that might have a significant impact on timing and
completion of the audits or that may be of special concern to management. We will review such areas
in-depth to obtain an early understanding and resolution of any "problem" areas that may impede our
progress and to develop our overall approach so that the City will have sufficient time to develop the
data necessary for completion of the audit with minimum amount of disruption of the day-to-day routine.
We will gather information needed to identify fraud risks.
❑ Our planning process will include a specific review of computer activities performed by the City
personnel.
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Phase II - Control Evaluation
The steps included in this phase are as follows:
❑ Our systems evaluation approach enables us to obtain a better understanding of the various transaction
cycles and sub-cycles and how they relate to each other. By using narrative and flowcharting
techniques for each cycle, we will identify the critical points in the flow of financial information. Our
basic technique begins with information contained in the financial statements and traces such
information back to source data. This process is infinitely better than the traditional tedious method of
going from source data to financial statements.
❑ We will identify the strengths and weaknesses in each of the transaction sub-cycles and sub-audit areas
that have a bearing on the audit objectives. This identification of internal control strengths and
weaknesses will enable the audit team to determine the emphasis to be placed on audit testing. It will
also serve as a basis for the development of conclusions and recommendations regarding weaknesses
in the systems of internal accounting control and opportunities for improving efficiency and
effectiveness.
❑ Our engagement service team will prepare a tailored audit program unique to the City based upon
applicable single audit guidelines and the identification of internal control strengths. Our audit programs
are tailored into a unique, efficient and effective document addressing the audit objectives, issues, and
systems of the City.
❑ We will inquire of management and others (including non-accounting personnel) to identify fraud risks.
❑ Our engagement team will discuss and consider the susceptibility of financial statements to fraud and to
emphasize professional skepticism. We will obtain information necessary to identify risks of material
misstatement due to fraud. We will identify risks that may result in material misstatement due to fraud.
We will assess the identified risks after considering an evaluation of the antifraud programs and
controls. We will respond to the identified risks.
❑ We will provide periodic written progress reports on the planning and test work performed during the
planning and interim fieldwork phases and discuss the schedule to complete the audits in the most
economical manner.
Phase III - Substantive Testing
The third phase of our audits will be the testing or traditional fieldwork phase. The steps involved in this
phase are as follows:
❑ Substantive Testing - The purpose of the substantive tests is to provide reasonable assurance of the
validity of the information produced by the accounting system. These tests will include various detail
tests and analytical procedures, including ratio analysis, comparisons of actual-to-budget information
and other procedures.
❑ Compliance Testing - The purpose of compliance testing is to determine whether the expected
strengths within the system are functioning as prescribed. Sample sizes may range from 40 items to 60
items, depending on how we assess control audit risk and audit detection risk.
❑ Analytical Review Procedures - Analytical review procedures, consisting of statistical, ratio, and trend
analyses are performed during every phase of the audit, from the planning phase to reporting phase.
These analytical testing techniques provide feedback on potential areas of audit concern as well as
provide comfort concerning the overall reasonableness of the financial statements.
❑ We will assess identified fraud risks and respond to the fraud risk assessment.
❑ We will discuss all adjusting journal entries proposed by our auditors and explain them to the City
personnel prior to recording. It is our practice to discuss issues and proposed audit entries with the
program manager or management personnel immediately responsible for the program to ensure that we
have not misunderstood that particular situation. This will ensure that the proposed entry or
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management comment and recommendation are accepted by the immediate manager in charge, and
will ensure that the recommendation is feasible and makes business sense. It is also our policy to
address issues and resolve them as they arise, and not wait until the end of the process and surprise
management with a long list of issues that need to be addressed. In short, there will not be any
surprises to anyone.
❑ Conduct Entrance and Exit Conferences with the City officials - We will meet with management at the
outset of final fieldwork to discuss our approach to the final fieldwork and to update ourselves on any
developments subsequent to interim fieldwork. We will also meet with the appropriate City officials at
the completion of final fieldwork to summarize the results of the audits and discuss any significant
findings before our comments are finalized in writing.
The final element in our work plan is the reporting to the City officials overseeing the audit in order to apprise
them of our progress. We obviously believe communication is vital. We have stressed the importance of
continuous close relationships throughout this proposal and have indicated the various points where we will
meet for specific discussions and decision.
Thus we believe we should have regular progress meetings between our top engagement personnel and
the City officials. It is our intent to use these meetings to report:
❑ Accomplishments
❑ Outlook
❑ Problems that have to be resolved.
It is also our practice to work closely with the State Controller's office to ensure that the final State
Controller's reports meet the needs of all users. Accordingly, we are available to meet with representative
of the State Controller's office, City management, and grant program at any time throughout the
engagement to ensure the efficient completion of the various audits and the acceptability of the related
reports. Further, it is the strict pledge of the Firm to update the appropriate City personnel on a frequent
basis.
Phase IV - Reporting
The last phase of our audit involves preparation of Independent Auditors' Reports, Single Audit Reports,
findings and our management letter comments. Because of our emphasis on early problem resolution in the
planning phase of the examination and extensive interim test work, our final audit fieldwork will be mainly
concerned with reviewing the fair presentation of the final numbers that will appear in the annual financial
reports. Throughout the final phase, Mr. Waddle will monitor and review the work. The critical audit areas
of each fund audited will be reviewed in the field by the engagement manager.
We will evaluate the audit evidence and communicate instances of possible fraud to the proper level of
authority.
We will work closely with the City personnel to prepare the annual financial statements. Prior to the signing
of our accountants' reports, a "cold" review of the draft reports and other documents will be performed, in
order to evaluate the professional excellence of the examination. Mr. Waddle will then give his concurrence
as to the propriety of the accountants' reports. Every effort will be made for early delivery of the reports to
ensure prompt and satisfactory professional service.
Our Approach to the Preparation of Management Letter
Our general approach to the preparation of a management letter includes the following:
❑ A meaningful management letter does not just appear at the end of an audit; its preparation is a
continuing process throughout the course of the audit. Indeed, to be most beneficial, the letter to
management should be issued while the audit is in process, not well after the fact, as is often the case.
We emphasize the importance of the management letter with the entire audit team and believe this
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continual awareness encourages the audit team to view audit situations in terms of constructive
management letter comments.
❑ Our partners and managers devote a significant amount of time to our management letters to help
ensure that events are properly interpreted and that suggestions are practical and cost-effective.
accordingly, we devote considerable attention to developing meaningful comments to management. As
auditors for the City, we will be interested in the City's overall success as an efficient, properly controlled and
cost-effective unit of local government. Therefore, you can expect us to offer constructive suggestions
regarding your operations. Indeed, while the profit motive is not the paramount objective of municipal
government, this does not lessen the need to view the City as a business, and one that should be effectively
and efficiently operated. Thus, we prefer to view management letters as more than a vehicle for citing and
eliminating weaknesses in the system of internal accounting control. Our management letters place heavy
emphasis on the operational side of the governmental unit, and our suggestions for improvements are
designed to improve overall management and result in a better use of resources.
Consideration of Fraud
We will consider the risks of material misstatement of the financial statements due to fraud and design the
audit to provide reasonable assurance of detecting fraud that results in the financial statements being
materially misstated in accordance with SAS No. 99, Consideration of Fraud in a Financial Statement Audit.
The consideration of fraud is not separate from the consideration of audit risk but is integrated into the
overall risk assessment process. Although parts of the presentation in detecting fraud may be perceived a
sequential process, the audit is a continuous process of gathering, updating, and analyzing information
about the fairness of presentation of amounts and disclosure in the financial statements. The procedures
presented in detecting fraud may be performed concurrently with other procedures and the evaluation of
fraud risks will occur continuously throughout the audit.
Number of Hours by Staff Level
Sampling Sizes and the Extent to which Statistical Sampling Is to Be Used in the
Engagement
We will test transaction cycles using statistical and judgmental sampling methodologies to determine
whether the necessary control procedures are prescribed and followed satisfactorily. The sample size will
range from 40 items to 60 items, depending on how we assess control audit risk and audit detection risk. In
addition, if there are any deviations in our sample selection, we will expand the sample size and if the
additional sample confirms the deviation problem, we will use statistical techniques to extrapolate the dollar
value of the deviation.
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Type and Extent of Analytical Procedures to Be Used in the Engagement
The audit team will use our analytical review techniques to identify other areas that might require attention.
Until the year-end account balances are finalized, our review will focus on budgets compared to
actual/projected information. We can thus, identify certain sensitive areas to determine whether they are
indeed areas requiring extra attention. We will also focus on unusual fluctuations occurring within individual
funds to identify accounts and areas which merit further investigation.
Based on our understanding of the City's operating environment, through our analytical review and other
planning procedures, we will meet with the City personnel to highlight areas to be emphasized during the
audit. We will concentrate our efforts on the identified areas of audit concern and areas we know are
important to the City Officials. Some of our preliminary audit concerns are elaborated as follows:
• Compliance with applicable laws, regulations and reporting requirements
• All matters of compliance with GASB statements and interpretations
• Receipt of all revenue to which the City is entitled
• Purchases are authorized and within budgetary limitations
• Encumbrances and liabilities are recorded and charged to proper budgetary accounts
• Proper accounting for equipment and building leases
• Proper recording of outstanding obligations.
Approach to Be Taken to Gain and Document an Understanding of the CITY's Internal Control
Structure
In order to gain and document an understanding of the CITY's internal control structure, we will review the
CITY's policies and procedures, meet with appropriate management personnel to ascertain actual operation
of policies and procedures and carry out compliance tests to document intemal control strengths and
weaknesses. In reviewing controls over EDP systems emphasis would be placed on the following:
• Determination of the organizational and operational controls over the data being processed
including but not limited to, system development and maintenance controls, hardware controls, and
access controls
• Evaluation of the degree of "control consciousness" among personnel
• Determination of the potential impact of general control strengths and weaknesses
• Consideration of the possibility of management override of controls
Our principal sources of information for the EDP systems would be interviews with responsible accounting
personnel, reviews of program documentation for the CITY's systems, as well as direct observations made
by our audit team.
Approach in Determining Laws and Regulations that will be subject to Audit Test Work
With regard to planning for single audit requirements, we will perform the following:
The City will be asked to prepare a schedule that lists each grant program it administered during the
audit period. The grants should be categorized by grantor agency and grant numbers. The
compliance requirements to be tested will be identified for all major grant programs received by the
City. The compliance requirements for the major grants will be extracted from "Major Compliance
Features of Programs Administered by State and Local Governments" for grants covered in that
document.
• Compliance with Laws and Regulations -The purpose of testing compliance with laws and
regulations is to determine whether the City is complying with laws and regulations, specifically as
they apply to state and federal financial assistance. Compliance procedures will include reviewing
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state and federal grant requirements, applicable laws and regulations, allowable costs, eligibility,
sub-recipient monitoring, and other specific agency requirements.
Approach to Be Taken in Drawing Audit Samples for Purposes of Test of Compliance
The Firm also utilizes statistical sampling whenever possible to reduce the number of test items selected
and to increase the reliability of our testing procedures. The decision whether or not to utilize statistical
sampling, in many instances, depends upon the degree of reliance to be placed on internal accounting
controls. The stronger the internal controls, the more likely statistical sampling can and will be used.
Statistical sampling is most often employed in our compliance testing procedures during the Single Audit.
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IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS
Assuming that the CITY is up-to-date with the necessary accounting records, and we receive full
cooperation and all documents requested from CITY personnel within the agreed upon timeframe, the Firm
does not anticipate any audit problems. However, there have been some changes in the auditing
requirements that will require incremental time and effort to conduct and complete under generally accepted
auditing standards.
SAS 112 eliminates the term "reportable condition" from the previous literature and replaces it with the
term "significant deficiency," and incorporates similar definitions of the terms "control deficiency,"
"significant deficiency," and "material weakness" to those used in PCAOB Auditing Standard No. 2.
SAS 112 requires the auditor to communicate in writing, to management and those charged with
governance, within 60 days of the report release date, significant deficiencies and material weaknesses
identified in the audit (including those continuing to exist that were identified in previous years).
As we begin to implement this new standard, we may find the need to communicate more control
deficiencies than under the previous standard. Although we may have known of the existence of
deficiencies in prior years (such as the lack of resources to prepare tax accruals or draft financial
statements), we were not required to communicate them in writing.
GASB Statement No. 43
Financial Reporting for Postemployment Benefit Plans Other than Pension Plans
(Issued April 2004)
This Statement establishes uniform financial reporting standards for other postemployment benefits
(OPEB) plans and supersedes the interim guidance included in Statement No. 26, Financial Reporting for
Postemployment Healthcare Plans Administered Defined Benefit Pension Plans. The approach followed
in this Statement generally is consistent with the approach adopted in Statement No. 25, Financial
Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, with
modifications to reflect differences between pension plans and OPEB plans.
The requirements of this Statement for OPEB plan reporting are effective one year prior to the effective
date of the related Statement for the employer (single-employer plan) or for the largest participating
employer in the plan (multiple-employer plan). The requirements of the related Statement are effective in
three phases based on a government's total annual revenues in the first fiscal year ending after June 15,
1999. Plans in which the sole or largest employer is a Phase 2 government - with total annual revenues
of $10 or more but less than $100 million - are required to implement this Statement in financial
statements for periods beginning after December 15, 2005. Earlier implementation is encouraged.
GASB Statement No. 45
Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than
Pensions
(Issued June 2004)
This Statement establishes standards for the measurement, recognition, and display of OPEB
expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required
supplementary information (RSI) in the financial reports of state and local governmental employers.
This Statement generally provides for prospective implementation- that is, that employers set the
beginning net OPEB obligation at zero as of the beginning of the initial year. Implementation is required in
three phases based on a government's total annual revenues in the first fiscal year ending after June 15,
1999. The definitions and cutoff points for that purpose are the same as those in Statement No. 34, Basic
Financial Statements-and Management's Discussion and Analysis- for State and Local Governments
(GASB 34). This Statement is effective for periods beginning after December 15, 2007, for Phase 2
governments. Earlier implementation is encouraged.
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PRICE PROPOSAL
Our fees for the services outlined in this proposal are based upon our estimates of the time needed to
complete the project at our standard hourly rates. Incidental expenses associated with travel time, travel
expenses and indirect expenses will be added to the fees. You acknowledge that any fee estimates we
have furnished are only our good faith estimates based on our understanding of the engagement
assumptions and the facts and circumstances we are aware of at this time. If the bases for our estimates
are inaccurate, the fees and expenses may be different from those we each anticipate. If significant
additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur
the additional costs. Our standard hourly rates vary according to the degree of responsibility involved and
the experience level of the personnel assigned to your audit. The fees are based on anticipated
cooperation from your personnel and the assumption that unexpected circumstances will not be
encountered during the audit.
We anticipate the maximum annual cost for the audit services for the first year and the subsequent two
years not to exceed the firm fixed prices quoted below.
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CITY - Audit $ 37,200
Community Development Commission - Audit
Rosemead Housing Development Corp - Audit
CITY - Single Audit
GANN Limit Review
Subtotal
9,130
4,400
11,550
220
62,500
Out-Of Pocket Expenses
Grand Total
2,000
$ 64,500
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