CDC - Item 2B - Approval Of Contract With Mayer Hoffman Mccann, P.C. For Fiscal Year 2007ROSEMEAD COMMUNITY
DEVELOPMENT COMMISSION
E~f
v .ly..,
STAFF REPORT
TO: HONORABLE CHAIRMAN AND COMMISSION MEMBE
FROM: ANDREW C. LAZZARETTO, EXECUTIVE DIRECTO
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 COMMUNITY DEVELOPMENT COMMISSION AGENDA: (S
• •
Community Development Commission Meeting
May 8, 2007
Paoe 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:
1. Documented experience in auditing similar government agencies.
2. Adherence to the strict quality control measures and high
Community Development Commission Meeting
May 8, 2007
Paae 3 of 5
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. Methodology
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
Community Development Commission Meeting
May 8, 2007
Page 4 of 5
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 Soll & 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.
Community Development Commission Meeting
May 8, 2007
Paae 5 of 5
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
LISA CRwVV- ;e
Lisa Pedote
Director of Finance
Attachment A:
Arrangement Letter from McGladrey & Pullen
Attachment B:
Audit Proposal from Mayer Hoffman McCann, P.C.
Attachment C:
Audit Proposal from Diehl, Evans & Company
Attachment D:
Audit Proposal from Lance Soll & Lunghard, LLP
Attachment E:
Audit Proposal from Vasquez & Company, LLP