HomeMy WebLinkAboutArthur Young & Company - 1981-12-07 AGREEMENT BETWEEN THE CI Y OF HUNTINGTON BEAC4 AND
CERTIFIED PUKIC ACCGUN' IS FOR AUDITING SERVICES
THIS AGREEMENT, -n tle arto ertered 'n!o by -:rid between the et} Eft Hur�ti .gtor, Seatn, a
municipal corp;�raticn„ 'S`ereinafter reI'ern-d to as "�ity" anu Arthur Ycunq :t t ,,-y".any,
a general partrersn p, Certifted P�jtiic htre,vaa ter referred as
.• k5. IS to intent f },Y ttJ M UV piy7 L;y,r Vke
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state 't�t�i
departaiera y, Pot— "19 ,t!; rttir,
Agercy, Comwnity 5evtitci ;: -ent `t7E"ant 4-id any "4c'y
t o . ie to 1 c i n 4 , W t
,. k`' <,sf it ,� tc -4. �,a� i'.i � i 'S
R-'pFart arse to tnp. rt'. u9rt "t7ts o; Vie Natei_tra$
Accounting t1lTd' St tF7lkt =fix lgeftnlvt th ws3�x'd'dwEtes"C1i �t�Gt' l".y, Ea,i3#�. r�
Auditors d. i E'z'tY tesd Ai.,t lic Act ,,,tarts, du y a tharizeC to practice and ;
Ii'Icen,.. o as such oy the ""alifti:rnia State Llt ar6 c"t i 4E"tr"4+`r` tans.
NOW, T#�R-EFO E, -h parties hereto mutial Fy agrr e as folk lows:
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1. FINANCIAL AUDIT PROCEDURES ANO Sf>.QPE
A. City hereby engages Auditors, and Auditors hereby agree to examine the
City 's annual rinencial statements as described in Recital #1 in order
to express an opinion as to the fairness of their presentation ;n
conformity with generally &cepted accounting „rinciples, and
compliance with Revenge Sha. ing Acts and reg:.lations.
3. The examination shall be mane in -^onrpliance witrTM ttie 'ity Anarter, :n
accordance with generally a-cepted,a�diti�+,g t;ardar s �p �`caba in try
circucr,�,tahces and shall eor+or„s witb tke gaide lres W fGrtl'tt �r., A!".'PA
industry Audit Guide, "Audits of S;at-V and cd'
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The 6s3, itts?tirsn of airar-cia, rec-3.�i ar»o 5t;,wj ,Mt ;';, i , � fC4'
Fe eral Revenue Snariry fur,;s st,s; corf;.jr.-� t, ti tL
Office of RJet? Soaring, r;y 'iStates ;kk pxa a `:". .. i"'rt aac, r�w
to be b3Sbased ;,gyp. tests and
transcription s,"ffAcie'4t ,c sat°sfy %w�9 '"5 €�'. '�?'75' � t w� Vid
fairnp, s cf pr'esentai, aiGn of 0,'v "finaeicta cccj"t°;r." Pt .-t r jtjr;
results of City, ,.rid aee not tn. tx"+Pr1 detaz e,,'. 4k,&4r"4ra" I-y-'s al
transactions,
C. The Auditor soal3 ?,,,i ve the -esP, n5t t, wi Ih qoeer g G±^ '.Vvl
auditing standaer,s and within the irt,ef—r. ,t '1mItat cans of tl"e &,Wtlr
o .
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process, to plan the exavdnr tr.ion to search for errors or irregularities
(as defined in authoritative professional literature) tbdt-would have a
material effect an the finarcitl statements. Auditor's search for
Material .errors or irregalarities small be accoriolism d by performing
tnose auciting procedures t, at in auditor's 'juigmP.it are appropriate in
the c ircuins.t.ances to fcrrn a,• pinioct ur, the fi namial state-nents, as a
whole. it is lj nd'er:,tco4i tnfit Aadit is examinatiar, which is based on
4`.ne +c'.:Ce"t at ;electi"e te,°tier;() rr tile aat.a t+elnq e'R+ww'm dt is .Eubj-ct
the nth ren riox a.ac r,,tterit3 V,rriz�rs cr irregularit'les, if they
exist, 011 fi r+.,t to an -atO r*,dI errZrS" or
�,O. Mi ttL`d, �"'.,' a�`°9 h H� } „c§'".y.....,i l r' and a,a pr(oirr2'ate1y
re y.t •> t:. x.ttv a ty y k z ' ar,4! t''e ;,'**j 3+�,.>t;SriSw
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C,,*rd4ct1E"c i"t wx3.0E^atI vt, A4,ditor snai . ti? aurire ,-if Oe
in a4tr.;ritatiife �3�rfN$�iil �hl
ag1!4(' OCLE jrrt a t" a,t r".iy rrs,wt: a "yext -3N2 efft .t a7` vie
aaa:k``a ?dd�t5,. jxai 'e.i,iicyns �.E.fa4kctt�d f -act Kith
{.i...r . � +:',P ya'�i.:(ti fie ak?ti } w..��w:iX�kwY arc.. :, f 44';`..+t i .wi''d S' ,: J ii ,
�x''k'xCo4vinq pt,,sSl!jle Oiler a' j i5 -*1?qs d'",tyta: L-e tO ;)#`;iv1de
5s r r trat iylegdl acts gill to detettt:d, altn iqh prrjcedurei brat
are ptir%mr pr i-iri l fr r tie purpou t fcri'`,nq a,! up l r,crc cri the
i`inancibl St: °":'t t S us a wl. ale may also bring possitpie illegal 6cts to
the audl,Vw:e's attention.
The :xam3rall' sas ncl€ ac tie use o
orocedures if rtquircd in the iudgment of Auditor,
F. During, the course of audit fieldwork, the auditors shall discuss 4ith
City personnel any proposed audit er:tries. Upon completion of
fieldwork, the auditors shal' submit a typewritten list of al : audit
journal entries, The auditors shall discuss these with City personnel
prior to any report preparation to prevent misunderstandings and
subsetiuent adjustments- to printed audit reports. The auditors shall
indicate which journal entries should be ^.-esed in the next fis:al
year.
G. The auditors shall submit to the City upon conclusion of fieldwork
typewritten copies of ail fend balanca reconciliations.
At the conclusion of the Auditor's iicteriri a"dit Yorx., 4o ich will be
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sched+,led prior to fiscal year end., Auditc;r *ii t; review management letter
comments with City personnel and by ;lcrly 15, 196,11, comrents and
recocnendations shall be included in a management letter issued to the City
Council.
A. The City shall have the final approval of any personnel assigned to tht
engageiient. if the Citw' does not desire that any one individual be
assigned to the engagement, the Auditor shall assign a suitabl
replacement.
B, ors any subsequent years, co:itinuity snal l_ be maintaine- at the partner
and manager level while allriring for sufficient rotation of staff to
provide a fresh: exatnination of controls and detailed records.
4. COMPLETIC4 OF AUDIT AND DELIiERY OF REPORTS
A. Aoditors shall corrplew all financial reports, the aud�t fieldwork, itne
management letter and the c• pl'rance reports by �cto:rer '15, lg 4.. the
Auditors shall to respdnsib e for the preparet;or,, printing,
proofreading and binning of all, financial reports. Clity personnel
shall prepare certain audit scneddles and to A,;ditbrs according
to the A4ditors' re ui.remert .,
S. kaiditors shall deliver 16 b'=wnd cciples of ail required reports tp the
City by the date spec i f i ec .-Loy-
COPER b+ IONS
A. Auditors small provide ccns;rtrrg services f ,TM .tie p'ur;ltse cl,
identifying r:Anage-ent and 'iata prccessicr'g € 'o eae .s any: to assist a.
reducirfq s.ch prrblers Aua.i'tors raay assist r,4nagement i;, devii loping
an of rective management in rir# atrorr, system in impr vir.9 productivity
o+^ City ertp.#oyietls, 1n Aent fylpnrp the t9Yii«lwni"`lat r}.—tilsJ' idf CIA' ° 'fin...
improving persoorrel-related fu,%,ti ns, and in ejrtminat'rig cema n
operational problems
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a. Auditors shall perform dperitional audits in 5elect`i ,areas each year,
as requested oar City, focusing on the problr,ns as noted above.
Problems shall be defined in detail, recof;erdations deveioped and
expected benefits identrfiee,. Such operational. audits will be
corsiderec additional servifes, �,utside of the scope of the annual
finan ia6 4udits, and cot included in t?ie compensation set forth in
Se:.tions 7A 7B and 7C here r n below.
6. PERIOD €OVERED BY AGREEMENT
fi
hT v agreement stall coder the P'scal Year lud3 , r t5 agreement :
terminated by rather ! ;,ty upw O)i' ty t3 }}; d3ys Oritterg rvatoe.
A. t440ii tors agree to perfor" tre f inaric i a l at.J r t Ind interim
;audit procedures as set fzr*.n herein for a 'tax s"a fee as set
for"tb herein.
Fiscal Year. Fee
The maximum anhual fee shall include all costs anc expenses Uf thr:
Auditor for perforwariCr» of tree exuar irat rxr; Set fdrttr in I.A. a cve.
C. For other services requ.esteit by u i ty to lze pe.`f:Cormed by Auditor,
Auditor shalt charge for hos;rs worked by its various levels of
personnel at its standarJ rites applicable to eatrh level. r „raximum
fee estimate „rill be provtdad by Auditor and approved by City prior- to
co ence'^ent of st cb ser•vicx=$.
The raaxiawl annua' fee set `crtr4 ab ve aril ary subsegLuerit fr~i:S agreed,
upon for ipperati m.-I audits �:Orite'q)mate that c+nditicrs;a satisfactory to
thevi rr� l r ress and. c€.�inF letioxr .C.#'f 0-,e Sajd"".1'!`'I Nye. enctf it i Bred and
that ''ity personnel will fj,nish true jgreeu uper a5siFtdre;. irr a tinely
anger. tEY'eirr0vjj'r, if fn"jsu3' Circi-starCf:'s are Y:',tic wiOc.r rake
it, necessary aG' _ °tiitvhrs *�' N a�izJt; � ra! iezrk, *idztors stiall re;Ort
S,j-'n c,,r, i r~ nr',s prior ta -4-I'rt ak ir'.x4 ar,4,t, nral tip.°rY. t, t�`; „aty+
TSCi"Tir s$Ecitcr 'wPii e►k? it J` u 'st atua i ."3; � :rcir:s3ti
Fees for ser-iiCes r er'zd,rec Shall ; acc p%,,i tn l w4 tr w.ne .
and s�t3l n ei' t$ "t ?e4 Ss 3i mu, '�# Oft�,n i. w4 EB�'ce d !no dtl— pr:'yi� iki tilt
will to m de e;ithir� thirty (361) .,,Iys after sutrissiors cr eacri sepa
invoice. Final pay€ert shall be ma,e w+w � i ty r'ece x ves
ctL-,pleted copies of all required repixts.
AUD MiR ;.
Records of ,reftursab'e expenses pertainir.[ to the work and rectiras of ry
t,
account between City and Auditor small be maintained on an accounting oasis
acceptable to the City and shall tae available for examination by City of its
authorized representatives) at a time agreeable to_City_and Auditor within
one (l) week following a request f)y City to examine such records. Failure
by Auditor to permit such examination wi`nin one (j) week of a request small
per-nit Zity to wiinhold all furt,mer payinents La:il such examination is
completed unless an extens4or of time for ex&rination is auit).orized by the
City in writing.
Auditors srta}l provide advice and ccr 41tation can matters tnat may arise
from, tiro to time that will affe+-t a cvjnting, auditing or Operating
procedt�:es. tt�;Ijitors stall prQv))ae ""ity staff wits: a;*ce and crr�sc:ltation
as req,,ired tnraa,,pout the year s elatirru t , s4;oject nitte,r of t s agreement.
'• E X i w i #t ee r a.
It is contetaplated that from t',-ie tjj test„� %.rty wisr, t.Altors to perform
accncritincg and auditing seryice^s in addition to tnose wWch are usual and
customary in making an exams natiin of the financial state=-vents or City If
so, Auditors shaft l be dompensateo for any such s- ry ices performed which are
authorized prior tP.ereto iry the 1 ,ty at their standard hourly rates charged
to other governmental customers for scch services. The City shall not be
liable for any extra work unless aithorized, in writinq in advance by the
City Admtni.,trator.
ill
12. CHANGES
'fhe City may, from time to time, request changes in the scope of services of
the agreement to be performed hereunder. Such changes including any
increase or decrease in the amount of Auditor°s compensati'on, which are
mutually agreed upon by and betw*,en the City and the Auditor, shall be
incorporate3 in written amendments to this agreement
13. TIME Oc PERFORMANCE
Time is of the essence, and Auditor shall perform the services required by
this agreement in an expeditious and timely manner so as not to unreasonably
delay the performance of this agreement.
14. TIME OF COMAENCEIMENT
Upon written notification by City to proceed, Auditor shall commence with
the performance of the services and duties set forth in this agreement.
15. INDEPENDENT CONTRACTOR
At all times during the term of this agreement, Auditor shall be an
independent cozr.ractor and snail not be an employee of City. City shall
have the right to c.kntrol Auditor only insofar as the results of Auditor's
services rendered pursuant to this agreement; however, City shall not have
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the right to control the means by which Auditor accomplished services
rendeted pursuant to this agreement.
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16. FAIR EMPLOYMENT PRACTICES/EQUAL #OPPORTUNITY ACTS
In the performance of this agreement, the Auditor shall comply with all
applicable provisions of the California Fair Employment Practices Act
(CaiiforrJ a Government Code Section 12940 et seq.) and tho applicable equal
employment provisions of the Civil Rights ;act of 1964 (42 I.S.C. 2000e, et
seq.).
17. AGENCY
Except as City may specify in writing, Auditor nave no authority,
express or implied, to act on behalf of City in any capacity whatsoever as
an agent. Auditor shall have no authority, express or implied, pursuant to
this agreement to bind City to ar>y obligation whatsoever.
18. PRODUCTS CONSULTING
All products of consulting, including but not limited to the study results,
data, any computer programs and all supporting documentation for, such
programs and their methodology, shall becor;e the property of City, and shall
be delivered to City before the completion of performance under this
agreement_.
19. SUCCESSORS AND ASSIGNS
This agreement covers professional services of a specific and unique mature,
and Auditor shall not assign or attempt ;to assign ajy other portion of this;
agreement without written approval of City.
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20. CONFLICT Of INTEREST
Auditor agrees not to accept any employment during the term of this
agreement by any other person, firm or corporation which employment is or
mad+ likely develop a conflict of interest between City`s interest and the
interests of third parties. "Conflict" as used herein sha.11 be defined and
interpreted in accordance with Section 1090 of the California Government
Code
21. NOTICE
Whenever it shall be necessary for eitrer party to serve notice on the other
respecting this agreement, such notice snall be served by eervified mail
addressed to the City Administrator of the City at 2000 alain Street,
Huntington Beach, California or to Auditor at :3200 Park Center Drive, Suite
900, Post Office Box 2410, Costa Mesa, California 92626 unless and until
different addresses may be furnished in writing b, either party to the
other, and such notice shall be oeemed to gave been serocd within
seventy-two, (72) hours after the sane has been deposited in the United
States Post Office by certified rail. This shall oe valid and sufficient
service of notice fur all purpose
22. EXTENT Of AGREEMENT
This agreement represents the entire and' inteyrated agreement between City
and Auditor and supersedes any and all prior negotiations,, representation;i
or agreements, either written- or oral. This agreement may be amended only
by writtpn' instrament, signed by both City and Auditor.
(llj
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'Z3. EFFECTIVE DATE W THIS AGREEMENT
This agreement, made in duplicates shall be effective from and after the
h date signed by City.
ATTEST: CITY OF HUNTINGTON BEACH,
a municipal corporation
s 1
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City Clerk Mayor
APPROVED: ARTHUR YOUNG C0,11FANY
G �
Chief,,Admin' strative Seri ces, Partner
APPROVED ,AS TO FORM'
t to e t
ciyA my yr
ate,
" -_- BET CITY Or, HtTI INGION BEACH, AND
C..r,. .1FIED PUBLIC ACCOUNTFANrS, FOR AUDITLNG MVICES
THIS AGRMENP, made and entered. into, by and between the City of Huntington
Bear, a municipal corporation, hereinafter referred to as "City" and Arthur s
Young & Co., a-general. partnership, Certified Public Accountants, hereinafter
referred to as "Auditors".
RECITW S
1. It is the intention of City to provide for the examination of its
financial statenents and to pro Aide :cr manage-nent audits of the
various City Departments, Parking Authority, and Redevelopment
Agency of the City.
2. Auditors are Certified. Public Accountants, duly authorized to practice
and licensed as such by the C:l.ifornia State Board. of Accountancy;
NUN, Th'EREFURE, the parties hereto mutually agree as follows:
1. FINANCIAL AUDIT PROCMURES kN'D SMPE
A. City hereby engages Auditors, and Auditors hereby agree to
examine the annual financial statements of the C4ty, Parking
Authority, Redevelopment Agency, Public Facility Corporatica
and Com..inity Development Block Pr06—L8 in order to express
an opinion as to the fairness of tr 'ir presentation in
confonnity with generally accepted Pfacounting principles,
and compliance with Revenue Sharing Acts and Regulations.
B. The examination shall be made in compliance with the City
Charter, in accordance with generally accepted auditing
standards applicable in the circumstances and shall confoTv'
cl
w-itJoe guidelines set forth in AI*s Industry Audit Guide,
'"Audits of State and Local Governmental Units". The examination'
of financial, records and study of compliance for Federal Revenue
Sharing Funds shall conform to guidelines issued by the Office of
Revenue Sharing, United States Department of Treasury. It is
tacderstood that the audits and examinations specified herein are
to be based upon tests and samples of the a, 3ounting records and
transcription sufficient to satisfy Auditors of their accuracy and
fairness of presentation of the financial condition and operating
results of City, and are not to canprise detailed exani.nati�-ns of
all transactions.
C. The Auditor shall have the responsibility, within generally accepted
auditing standards and within the inherent limitations of the
auditing process, to plan the examination 'to search for errors or
irregularities (as defined in authoritative professional, literature)
that would have a material effect on the financial statements.
Auditor's search for zateri:al errors or irregularities shall be
accomplished by performing those auditing procedures that in Auditor's
judgement are appz�opriate in the circimtistances to four an opinion,
on the financial statements as a whole. It is understood that
Auditor's examination, which is based on the concept of Selective
testing of the data Ming examint.-d, is t-:,sbject to the inherent
risk that material errors or irregularities, if they exist,
Will not be detcxsted. Should any miter al errors or irregularities
be noted, they shall be promptly and appropriately reported to the
Cicy Council and the City; administrator.
(2)
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D. In. cActing its examination, Auditowa-11 be aware of the
possibility that illegal. acts (as definer in authoritati.ve pro-
fessional literature) may have occurred that may have a material
effect on the financial statements. Examinations conducted in
accordance with generally accepted audi.4ing standards are of
limited effectiveness in discovering possible illegal acts and
cannot be eti-pected to provWde assurance that illegal act: will.
be detected, although procedures that are performed primarily
for the purpose of forming an opinion on the financial statements
as a whole may also bring possible illegal acts to the auditor's
attention,
E. The examination shall include the use of computer-assisted audit
procedures if requered: in the judgement of Auditor.
2. REC3fiUE.�'"tZ1ATIONS ON INTERNAL CONTIML,
Auditor shall, rev'_ ,w internal controls of Oita~ financial systems and
procedures during the course of its examinations as required Gy generaliy
accepted auditing standards and rec- mend improvements in these areas.
as well as such other areas as may cane to its attention during the
course of its examination.
At the conclusion of Auditor's interim audit work, which will be
scheduled prior to fiscal year-end, Auditor will review management
letter canr;ents with City personnel and at 'the conclusion of the
examination, Auditor's comments and reconmendations shall, be included
in a management letter issued to the City Cou,cil. In addition,
as requested throughout the fis�..al year, the Auditors shall report
to the City Council the progress made in impl menting the recamiendat ons
contained in their management letters..
(3)
3. ASSIGNN ND CONTINUITY OF AUDIT PERSD
A. .Auditors shall provide a high level of municipal expertise and
main-:ain continuity of personnel assigned. to the engagement. "hose
individuals specifically identified, in Auditor's proposal dated
November 13, 1981 shall be assigned by Auditor as specified. The
assignment of such persons is a material consideration in the
entering into this Agreement with Auditor by City and there shall
be no substitution of assignment of any individual so specified
lAdthout prior written approval ,by City. Whttre the individuai leaves
the Auditor's employ or is transferred, the City shall have the
right of approval of any replacement
B. In any subsequent years, continuity shall be maintainzd at the
pat-tner and no.nager level %bile allowing for sufficient rotation
of staff to provide a fresh examination of controls and detailed
-ecords,
4. 17MION OF AUDIT AND DMIVERY OF RETORTS
A. Auditors shall complete all field work, the management letter
and the compliance reports within ninety* (90) days after the books
and records of the City are closed.
B. auditors shall deliver one reproducable master of each of their
reports, for inclusion in the Annual Financial Report of City,
Parking Authority, Redevelopment Agency, Public Facilities
Corporation, Community Development Block Programs, and their
Federal Revenue Sharing compliance report no Late..., than fifteen
(15) working days aiter the completion of the field work.
C. All required financial statements, exhibits, and schedules shall
by prepared by City personnel and revieved. by Auditor,
(4)
5. QPIIRA2IC NALNAuF1OU ASSISMNICE
A. Auditors shall provide rcnsulting services for the purpose of
identifying manar7enent and data processing problems and to assist
in reducing such problems. Auditors may assist management in
developing an effective management informat ot- system, in improving
productivity of City empl.oyees,, in identifying the financial needs
of City in improving personnel-related functions, and in elim nati',g
certain operational problems.
B. Auditors shall perform operational audits in selected areas each year,
as requested by City, focusing on the problems as noted above.
Problems shall be defined in detail, reconme ndations developed and
expected benefits identified. Such operational audits will be
considered additional services-, outside of the scope of the annual
financial audits, and not included in the ccrmensation, set forth in
sections 7A, 7B and 7C herein below.
6. PERIOD COVE BY ACREE ENr
This Agreement shall cover the fiscal year 1982-83. This Agreement may
be terminated by City upon 30 days written notice.
7. tS TVl SATICxN
A. Auditors agree to perform the Financial Audit Procedures and 'Interim
Audit Procedures as set forth herein for a Maximum Annual Fee as
set forth herein
Fiscal Year Fee
1982-83 S32,tM
B. lbe Wiximan Annual Fee shall include all costs and expenses of the
.Auditor for perfoxmance of the examination. set forth in 1. A above-
I N
M .
C. For co services requested by City joe perforred by Auditor,
Audi° yr shall charge for hours worked by its vex ous levels of
personnel at its standard rates applicable to each level. A maximun
fee Estimate will be provided by Auditor and approved by City prior
to ccamenceTent of such services.
D. The MiLxir=: Annual Fee set forth above and any subsequent fees
agreed upon for operational audits contemplate that conditions
satisfactory* to the nornai progress and completion of the audit will
be encountered and that City personnel will furnish the agreed upon
assistance in a timely manner.. However, if unusual circumstances
axe encountered, which make it necessary for Auditors to do additional
cork, :auditors shall report such conditions prior to undertaking such
additional work to the City Administrator and the ( t— une 1, and
request additional_canpe*isation at Auditor's agree Yates.:
3. PAYNON P OF FEES
Fees for services rendered shall be billed in accordance .._. the proposal
and shall be billed not more often than once a month. Payment therefore
will be made within thirty (30) days after sutmissions of each separate
invoice.
J. UDITORS
Records of .reimbursable expenses pertaining to the work and records of
account between City and Auditor shall be maintained,on an accounting
basis acceptable to the City and shall be available for examination
by City of its authorized representatives) at a time agreeable to
City and Auditor within one (l) week following a request by city to
examine such. records. Failure by Auditor to permit such examination
within one (1) week of a request shall permit 'City to withhold all
(6)
further pants until such examination is feted' unless, an
ectension of time for examination is authorized by the City in waiting.
10. AMFIC E OD CONSMTAT ION
Auditors shall provide advice and consultation on matters that may
arise fr m time-to time that will affect accounting, auditing, or
operating procedures. auditors shall provide City staff with advice
and consultation as required throughout the year relating to subject
matter of this Agreement.,
11. EN ADRD ARY SERVICES
It is contemplated that frca, tis-m to time City may wish Auditors to
perform accounting and auditing services in addition to those which
are usual and customary in making an examination of the financial
statements of City. If so, Auditors shall be canpensated for any such
services perforaned which are authorized prior thereto by the City at
their standard hourly rates charged to other govermmental' customers
for such services. The City shall not be liable for any extra work-
unless authorized in writing in advance by the City Administrator.
The City may, fray time 'to time, request changes in the Scope Services`
of the agrecnt to be "performed hereunder. Such changes including any
increase or decrease in the amount of Auditor's ccmpensaon, which are
mutually agreed upon by and between the City and the Auditor, shall be
incorporated in written amendments to this Agreement.
13. TD E OF, PEt�7�,tii�u4GE
Time is of 'the essence, and Auditor shall perforn the services required
(7)
by this Oeement in an expeditious and Wly manner so as not to
unreasonably delay the performance of this Agreement.
14. TIME OF CX}'NL1ONCEN1ENT
Upon written notification by City to proceed, Auditor shall cannence
with the performance of the services and duties set forth in this
Agreement
15. INIDII ENIDEU CDN'RACTOR
At all times during the term o' this Weement, Auditor shall be an
independent contractor and shall not be an employee of City. City
shall; have the right to control Auditor only insofar as the results of
Auditor's services rendered pursuant to this-Agreement; hcwever, City
shall not have the right to control the means by which Auditor accomp-
lished services rendered pursuant to this Agreement.
16. FAIR EMPLOYNE m PRAMC ES/EQUAL OPPORI'f-NrI1* ACTS
In the performance of this Agreement, the Auditor shall comply with all
applicable provisions of the California Fair Ertmloyment Practices Act
(California Government Code Section 12940 et eq.) and the applicable
equal Enployment provisions of the Civil Rights Act of 1g64 (42 U.S.C.
2400e, et seq.).
17. AG2`CY
Elvicept as City may specify in writing, Auditor shall have no authority,
express or implied, to act on beh�,-Lf of City in any, capacity whatsoever
an agent. Auditor shall have no authority, express ci- implied,
Pursuant to this Agreement to bind City to any obligation, whatsoever.
18. PR'j-DtJCTTS *NSMffTI\G
All products of consulting, including bin not limited to the study
results, data, any computer programs and all supporting documentation
for such programs ^nd their methodology, shall becane the property of
City, and shall be delivered to City before the completion of perfor-
mance under this Agreement.
l9. St SSOPS .9)D _ASSIGNS
This agree ent covers professional services of a specific and unique
nature, and :auditor shall not a.ssi gn or attempt to assign any other
portion of this Agreement without written approval of City.
20. Ca-\t'FLICr OF LNTEREST
Auditor agrees not to accept any employment daring the term of this
Agreenent by any other person, firm or corporation which employment is
or may likely develop a conflict of interest bevSeen. City's interest
and,the interests of third parties. "Conflict" as used herein shall be
defined and interpreted in accoruance with Sectio.l 1090 of the Califor-
nia Government Code.
21. \MICIr
Whenever it shall be necessary for either party to serve notice on the
other respecting this Agreement, such notice shall be served by certified
mail addressed to the City Administrator of t ,e City at 2000 Main Street,
Huntington Beach, California. or to Auditor at 3200 Park Center Drive,
Suite 900, Post Office Box 2410, Costa Mesa, California 92626 unless
and until different addresses mad• lie furnished in writing by either panty
to 4-he other, and such notice shall be deed to have been served within
seventy-t%,3 (i2) hours after V h,s been deposited is the United
(9)
States Po
Office by certified mail.. Th ;hall be valid and -
sufficient service of notice for all purpcse.
22. LYI�i`�1T OF 96REay404T
This Agreement represents the entire and integrated Agreement between_
City and Auditor and supersedes any and all prior negotiations,
representations or agm4Ark-nts;, either written Or oral. 'Ihi s
Agreement may be amended only by written instrument, signed by
both City and. Auditor:
23. LF'E=IVE DATE Or THIS AGREENOvT
This Agreement, made in duplicate, shall be effective fx , and after
the date signed by City.
ATI'EST:- CITY OF HUDTrTN=-N BEACH,
a municipal co.-i Oration'
City Clerk Mayor
APPROVED: ARTHLR YOUNG & ONPANY
By;
Cb!,- f, Administrative Services Partner
APPROVED:
City Administrator
APPROVED AS TO FORM:_
CYY AftqCV
Cl�}
o�1Gr»a/
A,IQRE MENT'BETWE EN CITY 0r' k fiUN rIlNCTO( 1 BEACH,
CERTIFIED PUBLIC ACCOUNTANTS,FOR AUDITING SERVICES
THIS AGREEMENT, made and entered into, by and between the City of Huntington Bear,.
a municipal corporation,, hereinafter referred to as "City" and ArthUr Young & Co., ,�.
general partnership, Certified Pualic Accountants, hereinafter referred to as"Auditors".
RECITAi_S
1. It is the intention of "ity to provide for the examination of its financial
statements and to provide far management audits of the various City
Departments, Park nq Authority, and Redevelopment Agency of the City.
2. Auditors are Certified Public Accountants, riuly authorized to practice and
licensed as such by the California State Board of Accountancy;
NOW, THEREFORE, the parties hereto mutunlly agree as folio vs:
1. FINANCIAL AUDIT DROCEDURE'S A'QJ %3C.OPE
A. City hereby engages Auditors, and Auditors hereby agree to examine
the annual financial statr ments of the "ity, marking Authority,,
Redevelopment Agency, t''.alic r acility Corporation and Community
Development loornent l3l rk Prograrns and compliance with Revenue Sharing
Acts and Regulations, as more filly set forth ;n the proposal dated
November 13, 1981, in order to expvt-ss an o,ininn as to the fairness of
their presentation in conformity with generally eorepted accounting'
principles.
8, The examination shall be {node in compliance with the City ':hurter, in
accordance with generally accepted auditing standards applicable .in the
circumstances and in accordance with the propesai dated
November 13, 1981, and shall conform with the guidelines set forth in
AICDA's Industry Audit Guide, "Audits of St<,te and Local Governmental
Units". The examination of financial records and study of comps �.nce
for Federal Revenue Sharing Funds shall conform to guidelines lssupd by
the Office of revenue Sharing, United States Department of Treasury.
It is understood that the audits and examinations specified herei- are to
be 'used upon tests and samples of the accounting records and
transcription sufficient to satisfy Auditors of the!, ac,uracy and
fairness of preset-Cation of the financial condition and operating results
of ity, and are not to r.,ornprise detailed examin&tlons of all
transactions.
The Auditor shall have tide responsihillty, within generally accepted
auditing standards and .within the inherent limitations of the auditing
process, tto plan the examination to search for e;-rors or irregularities
(as defined in authoritative professional literature) that 4 Quld have a
material effe°:A on the financial statements. Auditor's search for
material errors oz irregularities shall he accomplished by performing
those auditing proreduren treat in Auditor's judgement are appropriate in
the circurnstar.K,,es to form an opinion on the financial statements as a
whole. It is understood that Audiror's examination, which is based on
the concept of select!vF testing o,' the date being examined., is subject
to the inherent risk that material errors or irregularities, if they exist,
will not be detected. Should any material errors or irregularities be
noted, they shall be promptly and appropriately reported to the City
Council and the City Administrator.
D. In conducting its examination, Auditor shall be aware of the possibility
that illegal acts (as Jetined in authoritative professional literature) :may
have occurred that may have a material effect on the financial
statements. Examinations conducted in accordance with generally
accepted auditing standards are of limited effectiveness in discovering
possible illegal acts' and cannot be expected to provide assurance that
illegal ants will he detected, although procedures that are performed
primarily for the purpose of forming an opinion on the financial
statements as a whole may also 'ring possible illegal acts to, the
auditor's attention:
E. The examination shall include the use of computer-assisted audit
procedures as set forth in Auditor's proposal dated November 13, 1951
and which is incorporated by reference herein:
2. RECOMME'Nf)ATI()NS ON INTERNAL CONTROL
Auditor shall review internal controls of '-ity financial systems and
procedures during the course of its examinations as 'required by generally
accepted auditing standards and recommend improvements in these areas as
well as such other areas as may coma to its attention during the, course of its
examination.
-3-
7i
At the conclusion of Auditor's interim audit work, which will be scheduled
prior to fiscal year-end, and at the conclusion of the examination, Auditor's
comments and recommendations shall be Included in separate management
letters issued to the City Council. In addition, as requested throughout the
fiscal year the Auditors si All report to the City Council the progress made in
implementing the recommendations contained in their management letters.
3. ASSIGNMENT ANO CONTINUITY OF AUDIT PERSONNEL
A. Auditors shall provide a high level of municipal expertise and naintain
continuity of ,personnel assigned to the engagement. Those individuals
specifically identified In Auditor's proposal dated November 13, 1981
shall 'fie assigoad by Auditor as :r eci fied. The assignment of such
persons is a material consideration in the entering ;nto this Agreement
with Auditor by City and there shall he no substitution of assignment of
any individual so specified without ;prior written approval by City.
Where the individual leaves the Auditor's employ of 's transferred, the
'City shall have the right of approval of any replacement.
9. In any subsequent Years, cantinuity shali °xe maintained at the partner
and manager level while allowinq for sufficient rotation of staff to
provide a fresh examination of controls and detailed records.
#. compl_FTION r)F AUDIT AND DELIVERY CIF REPORTS
A. Auditors shall complete bit field Awork and the final management letter
and the compliance reports within ninety (90) days after the books and
records of the City are closed.
3
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B. Auditors shall deliver one reproddcable master of the City's financial
statements, together with their report thereon, for inclusion in the
Annual Financial Report of City, Parking Authority, Redevelopment
Agency, Public Facilities Corporation, Community Development Block
Programs, And their Federal Revenue Sharing compliance report no
later than fifteen (15) working days after the completion of the field
work.
5. OPERATIONS MANAGEMENT A5515TANCE
A. Auditors shall provide consulting services for the purpose of identifying
management and data processing problems and to assist in reducing
such problems. Auditors may assist management in developing an
effective management information system, in improving productivity of
City employees, in identifying the financial needs of City in improving
personnel-related functions, and in eliminating certain operational
problems
B. Auditors shall perform operational audits in selected areas each year,
as requested by City, focusing on the problerns as r rted above.
Problems shall be defined in detail, recommendations developed and
expected benefits identified. Such operational audits will be considered
additional services;, outside of the scope of the annual financial audits,
and not included in the compensation set forth in sections 8A, 86 and
8C he;-ein below.
6. PERIOD COVERED BY AGREEMENT
This Agreement shall cover the fiscal year 1981-82. This Agreen,ent may be
terminated by City upon 30 days written notice.
-5-
7. COMPENSATION
A. Auditors agree to perfori'n the ,Financial Audit Procedures and interim
Audit Procedures as set 'forth herein for a Maximum Annual Fee as set
forth herein,
Fiscal Year Pee
(1) 1981-82 $29,000
B. The ?Maximum Annual Fee shall include all cost. and expenses of the
Auditor for performance of said services to include but not be limited
to non-recurring costs related to the ini.t'al examination, initial
development of computer-assisted audit procedures in 1982, all labor,
overhead; and any other costs which are not incurred as a result of any
significant chancre in City operations which have not been disclosed to
Auditor as of the date of the proposal of Auditor.
C. For other services requested by City to be performed by Auditor,
Auditor shall charge for hours worked by its various levels of personnel
at itr standard rates applicable to each level. A maximum fee estimate'
will. be provided by Auditor and approved by City prior to
commencement of such services. It is understood that Auditor's 'fee is
$5,000 if audit is expanded by City to include fixed assets.
D. The Maximum Annual Fee set forth above and any subsequent fees
agreed upon for operational audits contemplate that conditions
satisfactory to the normal progress and completion of the audit will be
encountered and that City personnel will furnish the agreed upon
assistance in a timely manner. However, if unusual circumstances are
-6-
encountered, which make it necessary for Auditors to do additional
work, Auditors shall report such ronditione prior to undertaking such
additional work to the City Administrator and the City Council, and
request additional compensation at Au.;itor's agreed billing rates.
8. PAYMI NT OF FEES
Fees for services rendered shall be billed in accordance with the proposal.and
shall be billed vot more often than once a month. Payment therefore will be
made within thirty (30)days after submissions of each separate invoice.
9,. AUDITORS
Records of reimbursable expenses pertaining to the work and records of
account between City and Auditor shall be maintaiied on an accounting basis
acceptable to the City and shall be available for examination by City of its
authorized repre.sentative(s; at a time agreeable to City and Auditor within
one '1) week following a request by City to examine such ,,:cords. Failure. by
Auditor to permit such examination within one (1) week of a request shall
permit City to withhold all further payments until such examination its
completed unless an extension of time for examination is authorized by the
City in writing.
10. ADVICE AND CONSULTATION
Auditnrs shall provide advi�e and consultation on matters that may arise
from time to time that will affect accounting, auditing, or operating
procedures.- Auditors shall provide City staff with advice and consultation as
required throughout the year relating to subject matter of Wis Agreement.
-7-
KA
11. E�"TRAORUINAR`f SERVICES
It is contemplated that from time to time City may wish Auditors to perform
accounting and auditing services in addition to those which are usual .and
customary in making an examination of the financial statements of City. If
so, Auditors shall be compensated for any such services performed which are
authorized prior thereto by the City at their standard hourly rates charged to
other governmental customers for such services. The City shall not be liable
for any extra work unless authorized in writing in advance by the City
Administrator.
13. CHANGES
The City may, from time to time, request changes in the Scope of Services of
the Agreement to be performed hereunder. Such changes including any
increase or decrease in the amount of Auditor's compensation, which are
mutually agreed upon by and between the (<Ity and the Auditor, shall be
incorporated in written amendments to this Agreement.
13. TIME OF PERFORMANCE
Time is of the essence, and auditor shall perform the services required by
this Agreement in an expeditious and timely manner so as not to unreasonably
delay the performance of this Agreement.
14. TIME OF COMMENCEMENT
Upon written notification by City to proceed, Auditor shalt commence with
the performance of the services and duties set forth in this Agreement.
15. - INDEPENDENT CONTRACTOR
At all times during the team of this Agreement, Auditor shall be an
independent contractor and shall not be an employee of City. City,shall have
the right to control Auditor only insofar as the results of Auditor's services
rendered oursuant to this ,Agreement; however, City shall not have the right
to control the means 5y which Auditor accomplished' services rendered
pursuant to this Agreement.
16. FAIR EMPLOYMENT PRACTICES/Ef UAL OPPO ZTUNITY ACTS
In the performance of this Agreement, the Auditor shall comply with all
applicable provisions of the 7alifornia Fair Employment Practices 'Act
(California Government ^ode Section 12940 eta.) and the applicable equal
employment provisions of the '1vil Rights Act of 1964 (42 U.S.C. 2000e,
17. AGENCY
Except as City may specify in writing, Auditor shall have no authority,
express or implied, to act on behalf of ticy in any capacity whatsoever as an
agent. Auditor shall have no authority, express or implied, pursuant to this;
Agreement to bind City to any obligation whatsoever.
1.8. PRODUCTS OF CONSULTING
All products of consulting, including but not limited to the study results,
data, any computer programs and all supporting documentation for such
programs and their methodology, shall become the property of City, and shall
be delivered to City before the completion of performance under this
Agreement.
fg-
1
19. SUCCESSORS AND ASSIGNS
This Agreement covers professional services of a specific and unique nature,
and Auditor shall not assign or attempt to assign any other portion of this
Agreement without written zipproval of Clty.
2:0. CONFLICT OF INTEREST
Auditor agrees not to accept any°employment during the te.m of this
Agreement by any other person, firm or corporation which employment is or
may likely develop a conflict of interest between City's interest and the
interests of third parties. "Conflict" as used herein shall be defined and
interpreted in accordance with Section 1090 of the California Government
Code.
21. NOTICE
Whenever it shall be necessary for either party to serve notice on the other
respecting this Agreement, such notice shall be served by certified mail
addressed to the City A-tministrator of the City at 2000Main Street,
Huntington leach, California or to Auditor at 3200 Park Center Drive, Suite
900, Post Office Box 2410, ('osta bless, California 92626 unless and until
different addresses may be furnished in writing by either party to the other,
and such notice shall be deemed to have been served within seventy-two (72)
hours after the same has been deposited In the United States Post Office by
certified mail. This shall be valid and sufficient service of notice for all
purpose.
22. EXTENT OF AGREEMENT
This Agreement represents the entire and integrated Agreement between
City and Auditor and supersedes any and all prior
i
negotiations, representations or agreements, either written or orel. This
Agreement may be amended only by written instrument signed by both City
and Au.Iitor`.
23. EFFECTIVE DATE OF THIS AGREEMENT
This agreement, made in duplicate, shall 1-e effective from and after 'tie
date signed by Clty.
ATTEST: CITY OF HUNTINGTON BEACH;
a municipal corporation
City Cleric Mayor
APPROVED: ARTHUR YOUNG &CO.
�}
�•a/ "'.+.> Eby: G,.. V�#G tr§.p g•j,`.�S (..,t"c.{'fir�`""`r,"�-.�.,...
Chief, Administrati Se.rvices� Partner S�
APPROVED:
City Administrator J
APPROVED AS TO FORM:
w
City Attorney J
f
-11-
1 CITY OF HUNTI GTON BEACH
2000 MAIN STREET CALIFORNIA 92648
OFFICE;OF THE CITY CLERK
May 10, 1984
Arthur Young & Company
3200 Park Center Drive Suite 900
P. 0. Box 2410
Costa Mesa, CA 92626
The City Council of the City of Huntington Beach at its regular meeting
held Mondays, May 7, 198U,; approved an ag-cement ;with your firm for
Auditing Services.
Enclosed is a duly executed copy of said agreement.
Rlir-ia M. Wentworth
City Clerc
Enclosure
cc: Judy John, Finance
Robert Franz, Finance
'i
" rtfephsin�~7£4'u443 5P �
REQUESI FOR CITY COUNCIL ACTION
Date April 11, 1984
Submitted to: Honorable My.r and city council 4
Submitted by: Charles W. Thcmpson, Pity Administrator`
;01
Prepared by: Robert J. Franz, Chief of Mmmistrative Servi
Subject: Conk 'act to Provide Audi":tang Services "
Statement of Issue, Recommendation,Analysis,Funding Source,Alternative Actions,Attachments:
-' STATEZ NT OF ISSUE The contract between the City and Arthur Young & Ca[ipany to
provide auditing services requires Council approval. An annual audit is required
by the City Charter.
RBCC?4*F:N1ATIW: Approve the attached contract for a maximum of $42,00.
ANALYSIS: Arthur Young & Ccapany has been engaged as the City's auditors for
Fiscal Years 1981-82 and 1982-83. Arthur Young & Carpany was initially chosen at
the Council meeting of December:8, 1981.
During the last two audits,, Arthur Young & Canpany'has gained a familiarity with
the caiplexities of the City's accour.ti.ng system and of municipal accounting
requirements This fai i,iarity should enable them to canplete the audit in a wre
timely manner than they have in the past. Another accounting firm %,nul.d probably
require additional time to understand the city's acct.'unting system. Arthur Young &
CaTmany has also agreed W perform Ford processing, printing and binding services
which Wire performed by city personnel in the pass. This should also enable them
to oamplete the audit in a more timely manner.
FUNDING SOUPCE: Appropriations of $4.2,000 will be available in the 1984-85 budget.
The audit fee will be: allocated between the general fund, the grant fund, the
redevel9ment agency and aster fund. Additional allocations may be made dependent
upon the audit workload.
ALTMUOM AMONS: Solicit bids from other CAP firms. These bids would have to
be submitted and evaluated in a very shoat period of time since interim audit work
sill start in May, 1984 and any new accounting firm would require advance notice to
schedule workloads
ATTACHMENTS: Proposed contract with ,Arthur Young & carpany-
PIQ 4�81..
F;41—
HU proa V00 U
i al
December 1.5, 198$
The Honorable Ci; ty Council h t5 8 V i5
City of Huntington Beach
Huntington Beacb , California 92648
JAN 19 1983
ATTENTION: Mr. Charles Thompson City Administrator CITY OF HIINTiNGTON BEACH
ADMINISTRATIVE OFFICE`
Members of the City Council:
We have examined the combined :financial statements of the City of
Huntington Beach, California (Cit;) , the Parking Authority of the
City of Huntington Beach (Parking Authority) ;and the Huntington
Beach Public Facilities Corporation (Public Facilities Corpora-
tion) for the year ended June 30, 1982, and have issued our re-
port thereon dated September 16, 1982. As part of our examina-
tion, we made a study Arid evaluation of the City's system of
internal accounting control to establish the level of our reli-
ance on such system in determining the nature, timing, and extent
of other auditing procedures necessary to enable us to express an
opinion on the City's, the Parking Authority's and the Public
Facilities Corporation's financial statements.
The Huntington Beach City Council did not engage us to perform a
study and evaluation of the system of internal accounting control
of the City, the Parking Authority and the Public Facilities
Corporation sufficient in scope to enable us to express an
opinion' thereon in accordance with generally accepted auditing
standards. Accordingly, we do not express such an opinion.
Because of the limited nature of our study and evaluation, it
would not necessarily disclose all material weaknesses' or other
conditions requiring attention in the system of internal
accounting control.
CONDITIONS REQUIRING A'TTBNTIOt?
Our, study and evaluation disclosed no condition that we believe
to be a m&terial weakness, but did disclose the following condi-
tions as to which we believe corrective action should be taken or
y p
1."i�'��'Ya++ 7w1�au.w`4� rd't."-:•� N..�k.:
December 15, 1982
The Honorable City Council
City of Huntington Beach
page
documentation (including cost/benefit considerations) should be
prepared as to the reasons why corrective action was not con-
sidered necessary in the circumstances.
PROPERTY AND EQUIPMENT'
Property capitalization policy
Under its present policy, the City capitalizes purchases of prop-
erty and equipment with costs greater than "$300 and estimated
useful lives in excess of one year. In some instances, such as
trash cans, chairs and calculators, the City will capitalize pur
chrses of less than S300 because of the nature of the item and
its expected life. Because these amounts are insignificant to
the General 'Property and Equipment Account Group and their small
value makes the necessity for a high level of control question-
able, we recommend the City adhere mole strictly to its stated '
policy. If additional control over low-dollar items is desired
we recommend that such items be entered on the system at a zero'
value.
Retirements and transfers
There are no formal procedures to notify the Accounting Depart-
meat of asse't dispositions or transfers, or for the Accounting '
Department to record such transactions in the property and equip-
ment system. We recommend such procedures be established and
communicated to all City departments Further, because of the
easily-mQvable nature of much of the City's equipment, we recom-
mend that formal procedures be established to perform periodic
physical inventories on a cyclical basis. We ;recommend that a
representative of the Accounting Division perform spot audits to
further ensure that retirements and transfers are being recorded.
Updating wager at'as
At year-end,; there were no procedures to regularly update the
water atlas. Since the water atlas is used to update the prop-
erty and equipment master file for the Water Utility Fund, we
` M _
w+,Vxw•l<
December 15, 1982
The Honorable City Council
City of Huntington Beach
page 3
recommend that the atlas be updated on a periodic basis. In ad-
dition, the conx_ols over forwarding the "as-built drawing" from
the Water Inspector in the Public Works Departmen` `n the Water
Engineering Section in the Water Department were n =,nV ,.stentt.
We suggest that as soon as the "as-built drawing" Lz� approved by
the Water Inspector that it be forwarded to the Water Engineering
Section:. Additionally, we recommend that a representative of the
Accounting Division periodically review the water atlas to deter
mine whether or not it ha begin updated_.
Among the benefits to be Obtained by the timely updating of the
street atlas is its use as `a reference for repair and maintenance
work. We understand that the implementation of the above proce-
dures commenced subsequent to year-end_
HUD lnterest. Subsidy and Rehabilitation Loan Fund
During fiscal 1982, the City commenced direct lending under the
Housing and ,Urban Development Act however, this change in the
program was not communicated to the accounting department. As a
result, there are no procedures established to prepare standard
loan documentation files, to perform standard loan maintenance
proc:zdures and to process the accounting transactions of record-
ing the loans and the related monthly repayments of principal a: l
interest income. As a result, it was necessary for the City to
reconstruct the activity for the year during the audit
At a minimum, we believe that the following controls should be
implemented:
The City should consider using a standard loan approval
document which provides the pertinent terms of the, loan
(i.e• name, address, date, amount, interest rate, matu-
rity, borr:.wer's net worth, a. description of the colla-
teral, ,purpose of the loan, and repayment terms) . When
the loan is approved, documentation of this approval
should be z, ted by the Director of Business and Indus-
trial Enterprises and the Chief of Administrative Ser-
vices on the loan approval. document.
When: the loan is, funded, checks should be made payable
,jointly to both the homeowner and the subcontractor who
performed the work.
December 15, 1982
The Honorable City Council
City of Huntington Beach
page 4
Documentation was frequently lacking regarding the exis-
tence of fire and/or flood insurance policies on the
equity-secured loans. We suggest that procedures be
impl-emented to ensure the debtor obtains policies on
these loans.,
In certain instances, we noted that the trust deed was
not filed against the property until after the loan had
been fully funded. We suggest that the trust deed be
filed immediately- after the note has been signed- in,
order to protect the City's position on the deed of
trust.
Currently, the note agreements are maintained in the
loan file. We recommend that all of the notes be re-
moved from the loan files and filed under dual cus-
tody. In addition, the loan files should be locked waen
not in. use.
ProcedurEs should be established between the Housing and
Community Development Department and the Accounting '
Division so that monthly, appropriate entries can be
made to record the loans, interest subsidy payments,
interest income and monthly installment payments of
principal and interest income on the loans.
Procedures should be established to identify problem
loans on a timely basis and the appropriate actions to
be taken on such loans. A policy should be implemented
with respect to the approval of the write-offs of prob-
lem loans.
Self-insurance
The City does not periodically analyze information received from
j; the self`-insurance administrators in order to determine the ade-
quacy of current funding requirements. During the current year,
we noted the City was underfunding the public liabilities and
` worker's compensation risk. We recommend procedures be estLb
. lished to analyze funding ,requirements on a more current basis.
This should probably be performed by an individual' in the self-
insurance Division and could be of the format used by Arthur
Young to audit the adequacy of the liability.
t
December 15, 1982
The Honorable City Council
City of Huntington Beach
page 5'
Collateral for time certificates o3 deposit
During our confirmation procedures for the City's time certifi-
cates of deposit, we noted that at least $1,100,000 deposited
with a ' local bank was unsecured., The Treasurer acted under
authority from the City Council and within the California Govern-
ment Code in making thz deposit. However, in the future, we
recommend that the Treasurer consider for deposits only those
banks that offer collateral for amounts in excess of that secured
by the Federal Deposit Insurance Corporation. This policy should
safeguard the City's assets while still permitting investment in
high-yielding certificates of deposit.
Payroll adjustment procedures
Authorization procedures for wage increases appear to be thor-
ough, requiring the approval of the department head, finance '
director, City administrator and a personnel officer. However,
there is no independent review to ensure that the adjustment has
been made correctly by the payroll clerks. While most errors'
will be caught by the clerk's own review process, a misunder-
standing recently led to the overpayment of four employees over
five-month period until detected by our audit. To help ensure
that payroll adjustments are made correctly, we recommend that
the "job code fix-it audit report" which lists all changes to the
payroll master file be reviewed in depth and initialed by a per-
sonnel aide.
These conditions were considered in determining the nature, tim-
ing, and extent of audit tests applied in our examinatiz,n of the
City's, the larking Authority's and the Public Facilities Corpo.r—
arion's financial statements and this report does not afiect our
report on those financial statements dated September 16, 1982.
CONBIENTS ON OTHER MATTERS
Bank reconciliations
We noted that bank reconciliations were not being ;prepared regu-
larly for the employee health insurance and public liability
accounts. To ansure the accuracy of records,, we recommend that
these accounts be; reconciled monthly on a timely basis.
A
w i
December 15, 1982
The Honorable City Council
City of Huntington Beach
page 6
In addition, we noted that changes in account balances for the
special assessments fund and the imprest account in the worker's
compensation fund are communicated to Accounting infrequently if
at all before the year-end audit. This resulted in
sgnificantdiffer'ences between the general ledger balances and
the Treasurer's records during the year. To properly report '
balances in these accounts during the year, we recommend that the "
Treasurer reconcile his records with Accounting monthly.
Cash Finding Survey
During January we performed a cash finding sufvey and ra;de speci-
fie recommendations regarding investment procedures utilizing
daily bank balances. As of this date, the City has not taken
action to implement these procedures. As a result, the City is
presently foregoing revenue in the form of additional interest
income. we recommend that the specific procedures related to
investments ' as outlined in our le+"er of January 22, 1982, be
implemented as soon as possible.
Deferred Compensation Fund
.As trustee of the Deferred Compensation Fund, the City has a
fiduciary responsibility to the beneficiaries of the Fund.
Although a number of controls already exist, we believe overall
control can he strengthened through the implementation of
additional procedures. We recommend the followings
• Employees who participate in second trust deed invest-
ments should' sign statements stating that they under-
stand that 'they are not entitled to cash out of this
type of investment until the second trust deeds mature.
Current documentation was frequently lacking regarding
adequate fire and/or flood insurance on the equity'
secured. investments. We suggest that procedures be im-
plemented to obtain current policies for all second
{ trust deed investments.
ITS
December 15, 198^
The Honorable City Council
City of Huntington Beach
page ?
The City Council and the City's administrative officials are
responsible for establishing; and maintaining a system of internal
accounting control . In fulfilling this responsibility, estimates
I. and judgments by management are required to assess the
expected benefits and related costs of control procedures. The
objectives of a, system are to provide management with reasonable,
but not absolute, assurance that assets are safeguarded against'
loss from unauthorized use or disposition, and that transactions
are exe- cuted in accordance with management's authorization and
recorded properly to permit the preparation of financial
statements in accordance with:, generally accepted accounting
principles
Because of inherent limitations T -
in an r system of internal ac-
counting counting control, errors or irregularities may nevertheless occur
and not be detected. Also, projection of any evaluation of the
system to future periods is subject to the risk that procedures
may, become ina-4equate because of changes in conditions, or that
the degree of compliance with the procedures may deteriorate. '
This .report is intended solely- for the use of ,management and
should not be used for any other purpose.
We would be pleased to discuss the matters reported` or to respond
to any questions, at your convenience.
Very truly yours,
i
CITY ,OFIHUNTI.NGTON, BEACH
2000 MAIN STREET CALIFORNIA 92648'
OFFICE OF THE CITY CLERK
February 24,' 1983
Arthur Young & Co.
3200 Park Center Drive Suite 900
P.O. Box 2410
Costa Mesa, 'CA 9Z626
The City i;.ouncil of the City of '.tuntington Beach at its regular meeting
held Tuesoay, February 22, 1983 approved a contract with your firm for
performance of auditing services for Fiscal Year 1982-83.
Enclosed is a duly executed copy of said agreement for your records.
Alicia M. Wentworth
City Clerk
AMW:'CB:j
Enclosure
(7olspho�a:71B-b3"2V)
REQUEST FOR CITY COUNCIL ACTION
Date February 10, 1983,
Submitted to: Honorable Mayor and City Council RBPItOJtY C: Y x
C G U C11,
Submitted by: Charles W. Thompson, C i ty Admi'n i s t nfff"g ��77�__
Prepared by: F. B. Arguello, Chief of Administrative Se
D . CITY°CLPPK
Subject; Contract for Annual Examination of City Financial Statemen _
t
Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions,Attachments: 1it,,,
STATEMENT OF ISSUE: Approval of contract with Arthur Young & Company to perform auditing
services for City financial operations for Fiscal Year 1982-1983 is hereby requested.
Section 616 of the City Charter states that "The City Council shall prove fc, do
independent annual audit of all City accounts" and that "such audits shall be made by
a certified public accountant or firm of such accountant_ ."
RECOMMENDATION: Approve the contract with Arthur Young 6 Company and authorize Mayor
and City Clerk to sign said contract for performance of auditing services for Fiscal
1982-1983. The fee for said services shall be S32,500.
ANALYSIS: The firm of Arthur Young & Company was sp'ected to perform City auditing
function for Fiscal Year 1981-1982. It was understor that the period of the contract
could be extended on a.year by year basis if cost to 'ty could be successfully negotiated.
The City negotiating teary (comprised of the City Adrini -rator, Chief of Administrative
Services, and the Financial Operations Officer) met with officers of the Arthur Young
& Company firm and arrived upon an agreed price to cover services for Fiscal 1982-1983..
The decrease in cost (Fiscal Year 1981-1982 cost was 534,000) of $1 ,500 is due to a
combination of a reduction in one time fixed asset review cost of $5,000 and a $3,500
increase due to escalating operational costs. The auditing service for Fiscal 1983-1984
and subsequent years may be negotiated on the same basis as this request or the City may
choose to solicit bids from other firms and make anew selection. It is probably best
for all concerned (assuming the negotiated price for future years is acceptable to concerned`
parties) that we should maintain our relationship with Arthur Young & Company for an
additional two to three years.
FUNDING SOURCE: Sufficient budgeted funds are available in Account ><101395 in the
City's General Fund.
ALTERNATIVE ACTIONS: City could request additional bids from .11 available firms and
select one firm from bids submitted. Since time is of the essence, this action would
not be the best action fo- the City to take as of this date:
ATTACHMENT: Contract with Arthur Young & Company.
pto'aka
REQUE F Ty COUNGiPAGTI:tJN .
Date June 30,; 1982
AP VBD BY C12"Y COUNCIL,
Submitted to: Honorable Mayor and Ci, unei 1
Submitted by: Charles W. Thompson, City Administrator -
Prepared by: F. B. Arguello, Chief of Administrative Ser i
CITY CLC
Subject: Contract for Annual Examination of City Financial Statements
Statement of.issue, Recommendation,Analysis, Funding Source,Alternative Actions,Attachments; f
STATEMENT OF ISSUE: Contract between City and Arthur Young, and Co. to provide
auditing services needs Council approval ,
RECOMMENDATION:_ Approve attached contract for a maximum of $34,000.00.
ANALYSIS: At the Coun.cii meeting of Dece, 8, 1981 , City Council chose, from
bids submitted, Arthur Young & Co_ to perfa -n the annual examination of financial
statements. Council also authorized the neg-tiation of a contract for such services.
FUNDING SOURCE: Account 101395 "Contractual Services - Auditing" has an available
appropriation of $31,500 00. Account 894401 has an available $2,500.00 for the
Community Development Blrck Grant portion of the examination,
ALTERNATIVE ACTIONS: None.
ATTACHMENTS: Proposed contract with Arthur Young Co.
PI(7 4(81�
Will-
REQUESOF FOR CITY COUNCIL ACTIO NI�11'
Date December 3, 1981 fi
Submitted to: Honorable Mayor and City Council
COTJ
Submitted by- Council Auditor Selection Committee e' 0yVSD 13
Y GTxc
r �PR
Pre d b Charles W. Thompson, City Ad= ' iistrC7tor1 1`P
P� y= YYY
Subject: Independent Auditor Selection
,ram,
Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions, Attachments:
Statement of Issue:
in accordance with City Charter Section 616, the City Council shall provide for an
independent annual audit of ail City accounts. Such audit must be performed by a
certified pubi'ic accountant or firm of such acvountants.
Recommendation:
It is recommended that the City Council authorize the City Administrator to negotiate
a contract with the firm of Arthur young & Company to provide auditing services to the
City for-a period of one year with a mutual option to renew for an additional two
years. It is recommended that the fir;4 year fee shall not exceed $34 ,000 if the City's
Fixed asset records are deternined to be auditable or $29,000 if it is determined that
the asset records are not to be part of the audit For fiscal year 1982.'
Ana l v i ri;:
The Council 's auditor selection Committee (Mayor Ruts. «=inlev, Councilman Robert Mandic,
City Administrator Charles W. Thompson, and Chief of Administrative Services Frank B,
Arguello) reviewed the seven proposals submitted by Certified Public Accountant firms.
Threw of the proposals were selected for additional review and interview and on Thursday,
December 3, l98! , the firms of Arthur young E Co. , Price Waterhouse, and Deloitte Haskins
and Sells were 'interviewed by the committee.
The proposed fees ranged from $25,000 to 534,000 and, although the committee recognized
that each of the seven firms are capable of ,performing the technical aspects of the
requested service, it was determined that criteria other than price are of prime impor-
tance It was determined that Arthur young and Company best met the requirements of
the Cit; t,ar the following reasons:
(1) The 'Firm maintains a strong local staff (Santa Ana offices) available for
assistance to City in auditing, financial reporting, organization and operational
management areas.
(2) The firma will provide a cash-finding survey (with an estimated value of 53,000)
free of cost. I is anticipated that the resultant improved use of City ,'funds
could approximate the annual cost of the audit.
(31 That, the second and subsequent year fees would be the negotiated fete plus: $2.,000
For fixed asset audit - ,a reduction in future years of 'S3,000 relative to the
adjusted first year cost.
Pr ' r
(4) •The' firm will main�n (within reason) key staff sPey
to provide the highest
degree of conLinuity, It eras determined that the staff involved could best
work with the City Council and laity management in our mutual effort to best
benefit the City.
(5) The firm will work towards making the annual financial reports more meaningful
to the general public.
(b) The firm .ill assist the City in gaining the Municipal Finance Officers Association
Lertificato of Conformance
Fundina Source^c
General fund budget.
Alternative Actions;
(1) Select one of the other six firms.
(2,) Request additional proposals from an expanded list of firms.
4t
CITE/ OF RUNTIWGTOPd BEACH CA 81-34
COUNCIL - ADMINISTRATOR"COMMUNICATION
HUrrt.r10'BEACaf
TO Honorable Mayor and From Charles W. Thompson,
City Council Members City. Administrator
Subject
SELECTION OF AUDITOR Date December 1, 1981
the external auditor has
The Council s committee to select �e Cit s ext rn 1 a t
Y
T
r �.na i reviewed. proposals submitted .� seven audit zsrms:
e1a.m r l
P � P P Y
The intent of the committee, at this stage, was to; review and. dis-
cuss the proposals and to determine what procedure would be followed
II
in developing methodology for the committee's recommendation to the
City Council..
The committee has selected three firms which will be interviewed on
Thursday, December 3, 1981. As a result;, of these interviews, it is
anticipated that a recommendation will be prepared for City Council
action at the regular meeting of December 7 1981.`
Respectfully -submitted,
Charles I9.; Thompson,
City Administrator
CtaT:pj