2002 AGN MAY 07 I20 - Laserfiche WebLink

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Item #20 CITY OF COLTON AGENDA REPORT FOR CITY COUNCIL MEETING OF MAY 7, 2002 TO: Honorable Mayor and City Council Members FROM: Dilu de Alwis, Finance Director SUBJECT: Cancellation of the existing contract for audit services with McGladrey & Pullen and awarding a contract to Lance, Soil & Lunghard. DATE: April 25, 2002 The City is audited each fiscal year by an independent certified public accounting firm. This is a financial audit performed in accordance with generally accepted auditing standards. For fiscal years 1997 through 2000, Lance Soil & Lunghard, LLP, audited the City. Because it is a good practice to rotate audit firms periodically, a request for proposal (RFP) was issued in fiscal year 2001, to procure a new audit firm. The RFP provided for the possibility of a four (4) year arrangement, but obligated the City on a year -by -year basis with annual reviews. On April 3, 2001 the City Council awarded a contract to McGladrey & Pullen LLP for audit services, and the City thereafter authorized performance of the services for the fiscal year ending June 30, 2001. DISCUSSION/ ANALYSIS In response to RFP's and upon staff recommendation, the City Council awarded a professional services agreement to McGladrey & Pullen LLP for audit services beginning with the 2001 fiscal year for $47, 900. As a first time audit, the process we went through was "grueling" to say the least. As part of the agreement, the firm was to meet certain deadlines, which were not met, causing staff to request extensions, which were granted in two instances and denied in another. These deadlines were, where the City of Colton was to submit the Comprehensive Annual Financial Report (CAFR), to the California Municipal Finance Officers Association (CSMFO) and the Government Finance Officers Association (GFOA) for the annual award for excellence in financial reporting, which we take pride in. Staff did apply and receive an extension from GFOA and did submit the CAFR for the award, however CSMFO denied our request, which prevented our participation. Further, the firm was late in completing the Childcare audit, which was submitted later after obtaining an extension from the State of California Department of Education. In addition to the above-mentioned issues staff had with the firm, on April 15, 2002, the firm issued a letter where they are proposing to bill the City of Colton an additional $25,140 (53% increase) for "extra hours" incurred during the audit. Included in this additional cost, are hours the firm spent in reviewing city leases and other legal agreements, discussions with RDA and city staff on open issues etc., which staff feels should be within the normal scope of the audit. Staff feels it is in the best interest of the City not to exercise its rights to utilize the services of McGladrey and Pullen LLP for the 2001-02 and 2002-03 fiscal year audits. Staff also recommends awarding a contract to Lance, Soll & Lunghard LLP for audit services for fiscal year 2001-02 in the amount of $56,120. Because Lance, Soll & Lunghard have experience with the City, and staff was relatively satisfied with their service, at this late juncture, it is necessary to renew a relationship with them verses issuing another RFP. Additionally due to the need to implement GASB 34, in fiscal year 2002-03 staff recommends the retention of Lance, Soil & Lunghard LLP to provide the City with Audit services for this year at a cost of $57,800. At the end of this engagement, staff will issue another RFP for future fiscal year audits.