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Home My WebLink AboutDIEHL, EVANS AND COMPANY - 1997-05-19CITY OF HUNTINGTON BEACH 2000 MAIN STREET CALIFORNIA 92648 OFFICE OF THE CITY CLERK CONNIE BROCKWAY CITY CLERK LETTER OF TRANSMITTAL OF ITEIi APPROVED BY THE CITY COUNCIL/ REDEVELOPMENT AGENCY OF THE CITY OF HU'NTINGTON BEACH DATE: December 4, 2000 TO: Diehl Evans & Co., LLP Tame 2121 Alton Parkway Street Irvine, CA 92606 City, State, Zip ATTENTION: Nitin Patel, Partner DEPARTNIENT: REGARDItiG: Professional Services Contract for Audit Services See Attached Action Agenda Item E-3 Date of Approval 12-04-00 Enclosed For Your Records Is An Executed Copy Of The Above Referenced Agenda Item. Remarks: Connie Brockway City CIerk Attachments: Action Agenda Page x Agreement x Bonds CC: R. Sedlak Name Name Name Name C. Mendoza RCA Deed Admin. Serv. x x Department RCA Agreement RCA Agreement Department RCA Agreement Department RCA Agreement Department X X Risk Management Dept Insurance x Other V4 Insurance Insurance Insurance InsLranre X Insurance Other Other Other Other (Telephone, 714-536-5227) . 0 (!�j� R_5vtAk., yc7: Council/Agency Meeting Held: l .20- 00 rerred ontinued to: 2- Approved El Conditionally Approved ❑ Denied _ City Clerk' s Signature Council Meeting Date: Department 1D Number: AS-00-031 CITY OF HUNTINGTON BEACH REQUEST FOR ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL' SUBMITTED BY: RAY SILVER, City Administrator o2A.J PREPARED BY: Clay Martin, Acting Director of Administrative ServicesCq SUBJECT: Approve Extension of Audit Contract with Diehl, Evans and Comp -any to Cover Fiscal Year 1999-2000 Statement of Issue, Funding Source, Recommended Action, Alternative Action($), Analysis, Environmental Status, Attachment{sj Statement of Issue: The City Charter requires an annual audit be conducted. The City's contract with Diehl, Evans and Company expires after the fiscal year 1998/99 audit. Staff is recommending that the contract be extended one additional year. Fundina Source: Funds for the audit are available in the 2000/2001 budget in the General Fund under account 10040101.69355. Recommended Action: 1. Approve the -. professional services contract between the City of Huntington Beach and Diehl, Evans and Company to perform the City's annual audit for fiscal year 1999/2000 for a contract price of $48,300 and authorize the Mayor and City Clerk to execute. 2. Approve waiver of insurance and indemnification requirements as recommended by the settlement committee. Alternative Actions : Obtain proposals from different audit firms. s r C... �3 =-i r-r _ ! C 0 REQUEST FOR ACTION 0 MEETING DATE: DEPARTMENT ID NUMBER: AS-00-031 Analysis: The City Council is required by the City Charter to contract with a qualified audit firm to conduct a financial audit of the City. The primary objective of the audit is to determine that the City's financial statements are fairly presented in accordance with generally accepted accounting principles and legal requirements. Additionally, a management letter -is issued to the City Council that details any suggestions for improvements in operations. The audit takes a significant amount of staff time. Auditors must review accounting documents, analyze transactions, evaluate controls, etc. Auditors must familiarize themselves with the City's business systems, personnel, and procedures. They must also obtain copies of all relevant documents, bond indentures, grant agreements, etc. On a firm's first year of an audit, City staff often has to spend significant extra time with the audit firm's personnel to help them understand the City's financial system and to retrieve relevant documents. Staff effort on the first year of any audit is often double that of other years. Beginning last December, the City began the B.E.A.C.H. Project which will replace all of the existing business software in the City. One-half of the Accounting division has dedicated significant time to the project. Three of the key individuals for the annual audit are assigned at least 75% of their time to the project. Temporary employees have been hired to backfill these permanent employees, but the temporary employees do not have the complete knowledge of the City to fully assist any new auditors to gain the necessary knowledge to perform a thorough, efficient audit of the City. The B.E.A.C.H. Project is a major undertaking which requires the full attention of management and professional staff. Staff does not feel it would be beneficial for the City to contract with new auditors at this time.. Staff plans to request proposals from different firms beginning with the 2000-2001 audit. Staff is therefore recommending that the audit contract with Diehl, Evans and Company be extended to include fiscal year 1999-2000. Diehl, Evans has audited the City for the last three fiscal years and has provided quality, professional service. The price of the 1998-99 audit was $46,000. Diehl, Evans has submitted a proposal for 1999-2000 of $48,300. For fiscal year 2000-2001, staff will solicit proposals from different audit firms. The Settlement Committee agreed to delete the following from the City's standard contract: Except such loss or damage which was caused by the sole negligence or willful misconduct of City. City shall be reimbursed by consultant for all costs and attorney's fees incurred by City in enforcing this obligation. Diehl, Evans was concerned that this would shield the City from liability if city employees or officials were partially, but not solely, negligent or where the City was involved in misconduct that was not willful. Diehl, Evans also asked that the City allow a $25,000 to $50,000 annual deductible for professional liability insurance. The Settlement Committee agreed to these requests. Environmental Status: NIA Attachments): audit contract 1999-2000 -2- 11l8100 11:20 AM * REQUEST FOR ACTION I* MEETING DATE: DEPARTMENT ID NUMBER: AS-00-031 I 1 Amendment to Contract with Diehl, Evans and Company to Include Fiscal Year 1999-2000 RCA Author: Robert Sedlak, Principal Accountant audit contract 1999-2000 -3- 11/3100 3:07 PM • • AT TACHMENT #1 i 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PROFESSIONAL SERVICES CONTRACT BETWEEN THE CITY OF HL'NTIl`GTON BEACH AND DIEFIL EVANS & COMPANY, L.L.P. FOR AUDIT SERVICES Table of Contents Scope of Services Page No. DesignatedContacts...........................................................................................•.....1 Time of Performance...............................................................................................2 Compensation..........................................................................................................2 ExtraWork...............................................................................................................2 Methodof Payment..................................................................................................2 HoldHarmless.........................................................................................................4 Workers' Compensation Insurance............................................................................4 General Liability Insurance.......................................................................................5 Professional Liability Insurance ................ ........................................................... ...6 Certificates of Insurance..........................................................................................6 Independent Contractor— ...... ................ ............... -- ........... ............................ ---7 Termination of Agreement.......................................................................................7 Assignment and Subcontracting...............................................................................8 City Employees and Officials..................................................................................8 Notices.....................................................................................................................8 Modification.............................................................................................................9 Captions ................................... ........................................................................... .....9 SectionHeadings.....................................................................................................9 Interpretation of Agreement.....................................................................................9 DuplicateOriginal ................... .................................................................................10 Immigration..............................................................................................................10 Legal Services Subcontracting.................................................................................10 Attorney's Fees .............................. ...........................................................................11 Entirety.....................................................................................................................11 PROFESSIONAL SERVICES CONTRACT BETWEEN THE CITY OF HUNTINGTON BEACH AND DIEHL EVANS & COMPANY, L.L.P. FOR AUDIT SERVICES THIS Agreement is made and entered into this 4t.h day of December 2000, by and between the City of Huntington Beach, a municipal corporation of the State of California, hereinafter referred to as "CITY," and DIEHL EVANS & COMPANY, L.L.P., a California limited liability partnership, hereinafter referred to as "AUDITOR." WHEREAS, CITY desires to engage the services of an independent auditor to audit all City accounts for fiscal year I 999/2000 pursuant to Charter Section 616; and Pursuant to documentation on file in the office of the City Clerk, the provisions of the Huntington Beach Municipal Code, Chapter 3.03, relating to procurement of professional service contracts have been complied with; and AUDITOR has been selected to perform said services, NOW, THEREFORE, it is agreed by CITY and AUDITOR as follows: SCOPE OF SERVICES AUDITOR shall provide all services as described in the Request for Proposal ("RFP"), and AUDITOR'S Proposal dated September 30, 1999 (both of which are hereinafter referred to as Exhibit "A"), which are attached hereto and incorporated into this Agreement by this reference. These services shall sometimes hereinafter be referred to as the "PROJECT." 2. DESIGNATED CONTACTS CITY shall assign a staff coordinator to work directly with AUDITOR in the performance of this Agreement. AUDITOR hereby designates Nitin Patel who shall represent it and be its sole contact and agent in all consultations with CITY during the performance of this Agreement. 00agreeidiehVIO%19 00 3. TIME OF PERFORMANCE Time is of the essence of this Agreement. The services of AUDITOR are to commence as soon as practicable after the execution of this Agreement and all tasks specified in Section 1 shall be completed no later than one (1) year from the date of this Agreement. These times may be extended with the written permission of CITY. The time for performance of the tasks identified in Section l are generally to be shown in the Scope of Services on the Work Program: Project Schedule. This schedule may be amended to benefit the PROJECT if mutually agreed by CITY and AUDITOR. 4. COMPENSATION• In consideration of the performance of the services described herein, CITY agrees to pay AUDITOR a fee not to exceed Forty Eight Thousand Three Hundred Dollars ($48,300). 5. EXTRA WORK In the event CITY requires additional services not included in Section 1, or changes in the scope of services described in Section 1, AUDITOR will undertake such work only after receiving written authorization from CITY. Additional compensation for such extra work shall be allowed only if the prior written approval of CITY is obtained. 6. METHOD OF PAYMENT A. AUDITOR shall be entitled to progress payments toward the fixed fee set forth herein in accordance with the progress and payment schedules set forth in Section 1. B. Delivery of work product: A copy of every, report, prepared by AUDITOR shall be submitted to CITY to demonstrate progress toward completion of tasks. In the event CITY rejects or has comments on any such product, CITY shall identify specific 2 00agreeidieh I; 10. 1900 • 0 requirements for satisfactory completion. Any such product which has not been formally accepted or rejected by CITY shall be deemed accepted. C. AUDITOR shall submit to CITY an invoice for each progress payment due. Such invoice shall: 1) Reference this Agreement; 2) Describe the services performed; 3) Show the total amount of the payment due; 4) Include a certification by a principal member of AUDITOR's firm that the work has been performed in accordance with the provisions of this Agreement; and S) For all payments include an estimate of the percentage of work completed. Upon submission of any such invoice, if CITY is satisfied that AUDITOR is making satisfactory progress toward completion of tasks in accordance with this Agreement, CITY shall promptly approve the invoice, in which event payment shall be made within thirty (30) days of receipt of the invoice by CITY. Such approval shall not be unreasonably withheld. If CITY does not approve an invoice, CITY shall notify AUDITOR in writing of the reasons for non -approval within seven (7) calendar days of receipt of the invoice, and the schedule of performance set forth in Section I shall be suspended until the parties agree that past performance by AUDITOR is in, or has been brought into compliance, or until this Agreement is terminated as provided herein. D. Any billings for extra work or additional services authorized by CITY shall be invoiced separately to CITY. Such invoice shall contain all of the information required 3 00agreei'dieht/10/1 9J00 • • above, and in addition shall list the hours expended and hourly rate charged for such time. Such invoices shall be approved by CITY if the work performed is in accordance with the extra work or additional services requested, and if CITY is satisfied that the statement of hours worked and costs incurred is accurate. Such approval shall not be unreasonably withheld. Any dispute between the parties concerning payment of such an invoice shall be treated as separate and apart from the ongoing performance of the remainder of this Agreement. 7. HOLD HARMLESS AUDITOR shall protect, defend, indemnify and save hold harmless CITY, its officers, officials, employees, and agents from and against any and all liability, loss, damage, expenses, costs (including without limitation, costs and fees of litigation of every nature) arising out of or in connection with AUDITOR's performance of this Agreement or its failure to comply with any of its obligations contained in this Agreement by AUDITOR, its officers, agents or employees. 8. WORKERS' COMPENSATION INSURANCE Pursuant to California Labor Code Section 1861, AUDITOR acknowledges awareness of Section 3740 et seq. of said Code, which requires every employer to be insured against liability for workers' compensation; AUDITOR covenants that it will comply with such provisions prior to commencing performance of the work hereunder; and shall indemnify, defend and hold harmless CITY from and against all claims, demands, payments, suit, actions, proceedings, and judgments of every nature and description, including attorney's fees and costs presented, brought or recovered against the CITY, for or on account of any liability under any of said acts which may be incurred by reason of any work to be performed by AUDITOR under this Agreement. 4 00agree`diehVI Om 19.00 AUDITOR shall maintain workers' compensation insurance in an amount of not less than One Hundred Thousand Dollars (5100,000) bodily injury by accident, each occurrence, One Hundred Thousand Dollars ($100,000) bodily injury by disease, each employee, Two Hundred Fifty Thousand Dollars ($250,000) bodily injury by disease, policy limit. AUDITOR shall require all subcontractors to provide such workers' compensation insurance for all of the subcontractors' employees. AUDITOR shall furnish to CITY a certificate of waiver of subrogation under the terms of the workers' compensation insurance and AUDITOR shall similarly require all subcontractors to waive subrogation. 9. GENERAL LIABILITY I`ISLRAN In addition to the workers' compensation insurance and AUDITOR's covenant to indemnify CITY, AUDITOR shall obtain and furnish to CITY, a policy of general public liability insurance, including motor vehicle coverage covering the PROJECT. The policy shall indemnify AUDITOR, its officers, agents and employees, while acting within the scope of their duties, against any and all claims arising out of or in connection with the PROJECT, and shall provide coverage in not less than the following amount: combined single limit bodily injury and property damage, including products/completed operations liability and blanket contractual liability, of 51,000,000 per occurrence. If coverage is provided under a form which includes a designated general aggregate limit, the aggregate limit must be no less than 51,000,000 for this PROJECT. The policy shall name CITY, its agents, its officers, employees and volunteers as Additional Insureds, and shall specifically provide that any other insurance coverage which may be applicable to the PROJECT shall be deemed excess coverage and that AUDITOR's insurance shall be primary. 5 00agree diealm 10 19.00 10. PROFESSIONAL LIABILITY INSURANCE AUDITOR shall furnish a professional liability insurance policy covering the work performed by it hereunder. Said policy shall provide coverage for AUDITOR's professional liability in an amount not less than S1,000,000 per occurrence and in the aggregate. A claims -made policy shall be acceptable if the policy further provides that: A. The policy retroactive date coincides with or precedes the initiation of the scope of work (including subsequent policies purchased as renewals or replacements). B. AUDITOR will make every effort to maintain similar insurance during the required extended period of coverage following project completion, including the requirement of adding all additional insureds. C. If insurance is terminated for any reason, AUDITOR agrees to purchase an extended reporting provision of at least two (2) years to report claims arising from work performed in connection with this Agreement. D. The reporting of circumstances or incidents that might give rise to future claims. 11. CERTIFICATES OF INSURANCE Prior to commencing performance of the work hereunder, AUDITOR shall furnish to CITY certificates of insurance subject to approval of the City Attorney evidencing the foregoing insurance coverages as required by this Agreement; the certificates shall: A. provide the name and policy number of each carrier and policy; B. shall state that the policy is currently in force; and 6 00agree.!diehl?] Oil9100 • • C. shall promise that such policies shall not be suspended, voided or canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior ,�Nritten notice: however, ten (10) days' prior written notice in the event of cancellation for nonpayment of premium. AUDITOR shall maintain the foregoing insurance coverages in force until the work under this Agreement is fully completed and accepted by CITY. The requirement for carrying the foregoing insurance coverages shall not derogate from the provisions for indemnification of CITY by AUDITOR under the Agreement. CITY or its representative shall at all times have the right to demand the original or a copy of all said policies of insurance. AUDITOR shall pay, in a prompt and timely manner, the premiums on all insurance hereinabove required. 12. INDEPENDENT CONTRACTOR AUDITOR is, and shall be, acting at all times in the performance of this Agreement as an independent contractor herein and not as an employee of the CITY. AUDITOR shall secure at its expense, and be responsible for any and all payment of all taxes, social security, state disability insurance compensation, unemployment compensation and other payroll deductions for AUDITOR and its officers, agents and employees and all business licenses, if any, in connection with the services to be performed hereunder. 13. TERMINATION OF AGREEMENT All work required hereunder shall be performed in a good and workmanlike manner. CITY may terminate AUDITOR's services hereunder at any time with or without cause, and whether or not PROJECT is fully complete. Any termination of this Agreement by CITY shall be made in writing, notice of which shall be delivered to AUDITOR as provided herein. In 7 00agrecdfchll0:19.i00 • • the event of termination, all finished reports shall, at the option of the CITY, become its property and shall be delivered to it by AUDITOR. 14. ASSIGNMENT AND SUBCONTRACTING This Agreement is a personal service contract and the supervisory work hereunder shall not be delegated by AUDITOR to any other person or entity without the express written consent of CITY. 15. CITY EMPLOYEES AND OFFICIALS AUDITOR shall employ no CITY official nor any regular CITY employee in the work performed pursuant to this Agreement. No officer or employee of CITY shall have any financial interest in this Agreement in violation of the applicable provisions of the California Government Code. 16. NOTICES Any notice or special instructions required to be given in writing under this Agreement shall be given either by personal delivery to AUDITOR's agent (as designated in Section I hereinabove) or to CITY's Director of Administrative Services as the situation shall warrant, or by enclosing the same in a scaled envelope, postage prepaid, and depositing the same in the United States Postal Service, addressed as follows: TO CITY: John Reekstin Director of Administrative Services City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 WiMMM-13W61-3 Nitin Patel, Partner Diehl Evans & Company, L.L.P. 2121 Alton Parkway Irvine, CA 92606 8 00agrec dieh1 10 19X00 17. MODIFICATION No waiver or modification of any language in this Agreement shall be valid unless in writing and duly executed by both parties. 18. CAPTIONS Captions of the sections of this Agreement are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Agreement 19. SECTION HEADINGS. The titles, captions, section, paragraph, subject headings and descriptive phrases at the beginning of the various sections in this Agreement are merely descriptive and are included solely for convenience of reference only and are not representative of maters included or excluded from such provisions, and do not interpret, define, limit or describe, or construe the intent of the parties or affect the construction or interpretation of any provision of this Agreement. 20. INTERPRETATION OF THIS AGREEMENT The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against any of the parties. If any provision of this Agreement is held by an arbitrator or court of competent jurisdiction to be unenforceable, void, illegal or invalid or affect the remaining covenants and provisions of this Agreement. No covenant or provision shall be deemed dependent upon any other unless so expressly provided here. As used in this Agreement, the masculine or neuter gender and singular or plural number shall be deemed to include the other whenever the context so indicates or requires. Nothing contained herein shall be construed so as to require the commission of any act 9 00agree dSehl. 10 19 00 0 0 contrary to law, and wherever there is any conflict between any provision contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no right to contract, then the latter shall prevail, and the provision of this Agreement which is hereby affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law. 21. DUPLICATE ORIGINAL The original of this Agreement and one or more copies hereto have been prepared and signed in counterparts as duplicate originals, each of which so executed shall, irrespective of the date of its execution and delivery, be deemed an original. Each of the parties hereto shall retain an originally signed copy hereof. Each duplicate original shall be deemed an original instrument as against any party who has signed it. 22. IMMIGRATION AUDITOR shall be responsible for full compliance with the immigration and naturalization laws of the United States and shall, in particular, comply with the provisions of the United States Code regarding employment verification. 23. LEGAL SERVICES SUBCONTRACTING PROHIBITED AUDITOR and CITY agree that CITY is not liable for payment of any subcontractor work involving legal services, and that such legal services are expressly outside the scope of services contemplated hereunder. AUDITOR understands that pursuant to Huntington Beach City Charter Section 309, the City Attorney is the exclusive legal counsel for CITY; and CITY shall not be liable for payment of any legal services expenses incurred by AUDITOR. 10 00agreeld fehl110i 19100 24. ATTORNEY'S FEES In the event suit is brought by either party to enforce the terms and provisions of this Agreement or to secure the performance hereof, each party shall bear its own attorney's fees. 25. ENTIRETY The Agreement contains the entire agreement between the parties respecting the subject matter of this Agreement and supercedes all prior understanding and agreements whether oral or in writing. The foregoing sets forth the entire Agreement between the parties. IN' WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their authorized offices the day, month and year first above written. DIEHL EVANS & COMPANY, LLP CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California By: � L,-t— Pr-t'►.L prt6 Jp o Nitin Patel, Partner By: _2)�±� ;� Michael Ludin, Partner REVIEWED AND APPROVED: City dministrator ATTEST: City Clerk 12-13-oof AS TO FORM: - , A-tl City Attorney IO`Ld-ate U' /;L Al-oo 661U INITIATED AND APPROVED: `"lei%in Direfftor of Administrative Services 00amefdiehl'1019 00 11 • - d� __ I' �� ,�•. III. ., .. _ � ILIA... �.• ,�,. 5..m..,WON 1 0 0 1 CITY OF HUNTINGTON BEACH AUDIT PROPOSAL FOR THE YEAR ENDING SEPTEMBER 30, 2000 1 1 0 TITLE PAGE 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 RFP Subject: Certified Audits on the City of Huntington Beach For the Year Ending September 30, 2000 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: xrA�,v.diehlevansxorri Email: nitinp@diehlevans.com Contact Persons: Nitin P. Patel, CPA Engagement Partner Michael R. Ludin, CPA Consulting Partner Date: July 17, 2000 ICITY OF HUNTI GTON BEACH 0 ITABLE OF CONTENTS ' July 17, 2000 Page Number ' Letter of Transmittal 1 - 2 Qualifications of the Firm: ' Size and Location of Firm 3 Range of Activities 3 ' Licensing and Independence Participation in "Quality Review' Programs 3 3 Education Programs 4 Participation in Professional Organizations 4-5 ' GFOA and CSMFO Award Programs 5 City Client References 6 ' Redevelopment Agency and Enterprise Fund Experience 7 Water Districts and Special Districts 8 Nonprofit Corporations and Joint Power Authorities 8 Experience With Government Bond Offerings 9 Computer Auditing Capabilities 10 Audit Team 1 1 ' Commitment Related To Personnel 1 i Nondiscrimination Policy I I ' Management Consulting Services: Consulting on Governmental Tax Issues 12 Cable Television Consulting Services 13 ' Cable Television Industry References 14 Hotel Transient Occupancy Tax Reviews 15 ' Litigation Support and Dispute Resolution Services for Governmental Agencies 16 Reviews of Solid Waste Contractors 17 ' Redevelopment Agency Consulting 18 Cost Allocation Plans 18 Computer Consulting Services 19 Resume of Management Consultant 20 - 21 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 CITY OF HUNTI)\ GTON BEACH TABLE OF CONTENTS (CONTINUED) July 17, 2000 Page Number Audit Scope and Approach: Entities To Be Included In Audit 22 Reports To Be Issued and Due Dates 22 Commitment to Deliver Reports on a Timely Basis 22 Audits To Be In Accordance With GARS and Other Requirements 23 Special Services 23 Audit Approach 24 Single Audit Approach 24 - 25 Approach In Determining Laws and Regulations Subject to Audit 25 Method of Sampling 25 Management Letters 26 Other Professional Services 26 Retention Of and Access To Audit Workpapers 26 Audit Timing 26 Schedules to be Prepared by City Staff 27 Fees and Hourly Rates: Maximum Fees 27 Composition of Current Audit Fee 28 Hourly Rates For Special Services 28 Attachment I - Resumes of Partners and Personnel Assigned to Audit 29 - 31 Attachment II - Results of Outside Quality Review 32 i • • 1 I July 17, 2000 ivlr. Dan Villella Director of Finance City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Dear Mr. Villella: We are pleased to present our proposal to serve as independent auditors for the City of Huntington Beach. We have prepared this information in accordance with the guidelines set forth in your request for proposal. Why We Are The Best Qualified Firm We consider ourselves to be the best qualified firm to perform auditing and accounting services for the City of Huntington Beach. Please consider these qualifications: • Our firm has extensive experience in auditing governmental entities. We currently audit seventeen cities, sixteen redevelopment agencies, eleven water districts, nine other special districts, and over thirty nonprofit corporations and joint power authorities. • Unlike many of the large, national and international accounting firms, we have a relatively low staff turnover rate. This has allowed us to keep continuity in our engagement teams from year to year, and has allowed our professional staff to gain extensive municipal auditing experience. Since they are familiar with municipal procedures and records, this will eliminate much disruption to your staff. We make a commitment to retain the same staff on the audit from year to year, except where such personnel leave the firm. if a staff member is replaced, we also make a commitment to replace that person with staff of at least equal experience. • The City will require a single audit of its federal grants, in accordance with Government Auditing Standards and OMB Circular A-133. We perform single audits on substantially all of our city clients. 1 i i «'hv We Are The Best Qualified Firm Continued ' • You have expressed a desire to again submit your reports for the national and California award programs. We have extensive experience in assisting our city clients in obtaining the GFOA ' "Certificate of Achievement for Excellence in Financial Reporting" and the CSMFO "Outstanding Award". We have worked closely with GFOA reviewers to resolve questions on reports, and Three members of our audit team are "reviewers" for the CSMFO award program. Over the past five years, all of our city clients that have applied have received the GFOA and CSMFO awards. We will assist you to ensure that the City's financial statements continue to meet all appropriate reporting standards. ' • We are a full service CPA firm. Our Management Consulting Department can provide the City with a wide variety of services, including cable television franchise fee and rate regulation compliance reviews, hotel transient occupancy tax reviews, litigation support and dispute resolution services, reviews of solid waste contractors, consulting on redevelopment agency matters, cost allocation plans and computer systems consulting. ' We make a commitment to deliver all necessary reports based on the timetable presented herein on page 22. Also, our understanding of the work to be performed is set forth on pages 22 through 26. 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. Also, our goal -is to maintain a close, personal relationship with you and your staff, one which is a year-round working relationship. You should feel comfortable in calling on us for advice at any time. We will always be available should you require our services. ' We respectfully request that we be selected as the independent auditors for the City for the year ending September 30, 2000. We look forward to personally meeting with you to discuss our qualifications. ' We thank the Cityfor the opportunity to resent our proposal. Please feel free to contact me or PP tY P P p ' Mr. Ludin, at (949) 399-0600 if you have any questions. This proposal constitutes a firm and irrevocable offer for 90 days from the date of this letter. Mr. Ludin and I are authorized to represent our firm, and bind the firm to a contract. Very truly yours, ' DIEHL, EVANS & COMPANY, LLP 1 By: N . e' P Nitin P. Patel, CPA Engagement Partner 11 QUALIFICATIONS OF THE FIRM SIZE AND LOCATION OF THE FIRM 1 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 70 years of public practice experience. Diehl, Evans & Company, LLP has extensive experience in governmental auditing and accounting. Over twenty thousand hours per year are devoted to this area of our practice for over 100 governmental units ' including cities, redevelopment agencies, water districts, special districts, nonprofit corporations and joint power authorities. Your City would be served from our Irvine office, which has three partners, two principals, four managers ' and approximately ten other 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 Income Tax Preparation Limited Procedure Reviews Management Consulting Services Our specific services for governmental agencies are more fully set forth in this proposal. 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" (1994 Edition), as ' published by the U.S. General Accounting Office. Our firm is independent of the City and its component units as defined by the 1994 Governmental Auditing Standards. PARTICIPATION IN "QUALITY REVIEW" PROGRAMS 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,2000 our f rm underwent a quality review b a group of outside CPAs under provisions of q Y Y g P � the AICPA Quality Review Program. These reviews are required every three years. The 2000 review included a review of our audits of governmental agencies. On February 11, 2000 we received a final report with an unqualified opinion on our systems and procedures. A copy of the outside CPA'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. -3- EDUCATION PROGRAMS Diehl, Evans & Company, LLP has a formal continuing education program. All firm auditors are required to obtain 40 hours of continuing education per year, and at least 24 hours of government related continuing education courses every two years. 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 use by our staff. The manual is updated at least annually. Noted below 's a description of certain -house education n N o � p on m m on courses take by our partners and staff to meet ' the governmental continuing education requirements. All personnel involved with governmental auditing are required to attend these courses. • 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 the Gann Computation Redevelopment Agency Compliance Audits - Interpreting the Health and Safety Code Computer Auditing in the Governmental Environment t. The Single Audit - New Provisions under OMB Circular A-133 1 . Laws and Regulations in the Government Sector PARTICIPATION IN PROFESSIONAL ORGANIZATIONS 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. GFOA, GASB and FASB ' Our firm is an associate member of the Government Finance Officers Association of the United States and Canada (GFOA). 1 Also, we have subscriptions with the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standard Board (FASB). We receive all GASB and FASB Statements, Interpretations, Technical Pronouncements and Newsletters. We regularly analyze these pronouncements ' and advise our governmental clients of changes in accounting rules. 1 1 r • PARTICIPATION IN PROFESSIONAL ORGANIZATIONS CONTINUED 1 CSMFO and CRA ' Our partners (Mr. Michael Ludin, Mr. Craig Spraker and Mr. Nitin Patel) and our Director of Management Consulting (Mr. Bill 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 also is 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 Mr. Ludin, Mr. Spraker, Mr. Patel, 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. Ludin and Mr. Morgan have both served as chairman of this committee, and have been involved over the years in preparing position papers issued on governmental accounting matters. GFOA AND CSMFO AWARD PROGRAMS 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 1 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: Big Bear Lake Del Mar Los Alamitos San Juan Capistrano Burbank Garden Grove Palm Desert Santa Clarita ' Cerritos Healdsburg Placentia Signal Hill Chino Huntington Beach Rancho Palos Verdes Simi Valley Claremont Irvine Redondo Beach Thousand Oaks Coronado Lakewood San Clemente Westminster -5- � CITY CLIENT REFERENCES i One means of judging the high quality of our auditing and accounting services would be contact with some of our existing clients. We are including the names and phone numbers of our current city clients. We encourage you to contact any of these individuals. City of Cathedral City City of Del Mar Mr. Dudley Haines Ms. Suzanne Wellcome Director of Administrative Services Financial Director (760) 770-0340 (619) 755-9354 City of Cerritos Ms. Becky Lingad Finance Manager (310) 860-0311 City of Chino Mr. Patrick J. Griffin Assistant City Manager (909) 627-7577 City, of Commerce Mr. Thomas Bachman Director of Finance (323) 722-4805 City of Downey Mr. Lee Powell Assistant City Manager (310) 869-7331 City of Garden Grove Mr. Anthony J. Andrade Controller (714)741-5061 City of Hesperia Mr. Mel Drown Finance Director (760) 947-1442 City of Co3onado City of Huntington Beach Mr. Jack Van Sambeek Mr. Dan Villella Director of Administrative Services Finance Director (619) 522-7300 (714) 536-5225 City of Lakewood Mr. Larry Schroeder Director of Finance (310) 866-9771 1 City of Los Alamitos Mr. Gerard Goedhart Assistant City Manager (714) 827-5670 City of Palm Desert Mr. Paul S. Gibson Director of Finance (619) 346-0611 City of Signal Hill Mr. Dennis MacArthur Director of Finance (213) 426-7333 City of Simi Valle Mr. Steve Elam Director of General Services (805) 583-6749 Cite of Tustin Mr. Ron Nault Director of Finance (714) 573-3060 Ci1y of Westminster Ms. Sheri Peasley Director of Finance (714) 898-3311 I 1 REDEVELOPMENT AGENCY EXPERIENCE Currently, we audit the following sixteen redevelopment agencies. Cathedral City Redevelopment Agency Cerritos Redevelopment Agency Chino Redevelopment Agency Commerce Redevelopment Agency Coronado Redevelopment Agency Downey Redevelopment Agency Garden Grove Redevelopment Agency Hesperia Redevelopment Agency Huntington Beach Redevelopment Agency Lakewood Redevelopment Agency Marin County Redevelopment Agency Palm Desert Redevelopment Agency Signal Hill Redevelopment Agency Simi Valley Redevelopment Agency Tustin 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 other enterprise funds audited by our firm over the past five years: _ City Enterprise Big Bear Lake Water Burbank Water, Electric, Refuse, Golf Cerritos Reclaimed Water Chino Water, Sewer, Sanitation System Claremont Transit, Sewer, Sanitation, Cemetery Coronado Golf Course, Sewer Del Mar Sewer Downey Golf Course, Transit System Healdsburg Water, Sewer, Electric, Transit, Airport Huntington Beach Water, Golf, Housing, Refuse Lakewood Water Redondo Beach Harbor San Juan Capistrano Water, Sewer Santa Clarita Transit Seal Beach Sewer Simi Valley Water, Sanitation, Transit Westminster Water -7- WATER DISTRICTS AND SPECIAL DISTRICTS Noted below is a listing of water and special districts audited by our firm over the past year. Borrego Water District Castaic Lake Water Agency Cucamonga County Water District ' Devil's Den Water District El Toro Water District P I 1 Beach Cities Health District Dana Point Sanitation District Downey Cemetery District Garden Grove Sanitation District Water Districts La Puente Valley County Water District Leucadia County Water District Mesa Consolidated Water District Newhall County Water District Trabuco Canyon Water District Vallecitos Water District Special Districts Midway City Sanitary District Orange County Cemetery District Orange County Vector Control District Sunset Beach Sanitary District Valley Wide Recreation and Park District NONPROFIT CORPORATIONS AND JOINT POWER AUTHORITIES Noted below is a 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 combined into the general purpose fitiancial statements of cities or other organizations which exercise oversight responsibility. Cathedral City Community Service District Cathedral City Public Financing Authority Coronado Financing Authority Coronado Improvement Corporation Del Mar Public Facilities Corporation Discovery Museum of Orange County ' Downey Civic Center Corporation Downey Recreational Area Authority Downey Water Facilities Corporation Garden Grove Cable Corporation Garden Grove Fire Training Facility Garden Grove Improvement Corporation 1 Garden Grove Library Corporation Garden Grove Willowick Golf Course 1 Human Options, Inc. Huntington Beach Public Financing Authority Huntington Beach Public Improvement Corp. International Fire Code Institute, Inc. Irvine Child Development Center Operating Corporation Irvine Senior Foundation Irvine Unified School District - District Advisory Forum Public Cable Television Authority South County Senior Services Southeast Area Animal Control Authority United Cerebral Palsy Association of Orange County -8- 1 0 • EXPERIENCE WITH GOVERNMENT BOND OFFERINGS I Most of our governmental clients regularly issue bonds and other financing vehicles. Our firm is often 1 involved with the following types of financing: Tax Anticipation Notes ' Tax Allocation Bonds Revenue Bonds Certificates of Participation Special Assessment District Bonds Residential Mortgage Revenue Bonds Industrial Development Bonds Municipal Sale/Leaseback Arrangements 1 Lease Purchases Bank Notes The Firm provides a variety of services in connection with these financing arrangements, depending on ' the extent of our association with the offering. Under guidelines provided by the AICPA, we are "associated with" an offering if we provide any of the following services: 1. Manually sign the auditors' report included in the offering document. 2. Provide a "consent letter" or "comfort letter" in connection with the official statement. 3. Review drafts of the official statement at the City's request. ' 4. Assist in the preparation of supplemental financial information included in the official statement. ement. rUnder these circumstances, we perform a "subsequent events" review of the City's financial condition immediately prior to the effective date of the offering. Such reviews are not part of our standard fee arrangements, and would be subject to a separate fee quotation. Finally, we regularly issue separate certified audit reports on individual bond issues, such as mortgage revenue bonds and industrial development bonds. 1-9- ' 0 0 COMPUTER AUDITING CAPABILITIES I In connection with our evaluation of internal controls, our in-house computer audit consultant will perform a review of your EDP systems. His review will include the following areas: • Organizational controls. • Physical controls over the hardware and peripheral equipment. ' • Operational controls (input, processing and output controls). More specifically, our auditors verify to what extent the City is utilizing: I • Terminal controls (password restrictions, etc.) ' • Program access restrictions 1 • Master file change controls • On-line editing ' • Batch and hash total controls I• Back-up procedures ' • Management review of documents and reports provided by the computer system After our internal controls evaluation, we will determine to what extent computer auditing techniques will ' be utilized. For some testing, we may audit "through" the City's EDP -produced records, rather than "around" them. The extent of our computer auditing will be determined based on our analysis of the cost effectiveness of these techniques. For cities that use a fully -integrated, on-line computer system, our audit staff members may become knowledgeable with the City's procedures for accessing and making "inquiries" into the various computer ' applications. In some instances, we may be able to randomly access and print-out sample data without significant assistance from City staff. Otherwise, we may need to request that City programmers assist us in accessing and printing -out the desired data. Alternatively, we may download selected City data into ' our portable computers, and then perform random audit tests on the data using our own computer -auditing software programs. IEach of our audit staff members is equipped with portable computers that are used to assist in workpaper preparation, trial balance adjustments, etc. We utilize Accountants Trial Balance, Lotus 1-2-3, Excel, IWord,WordPerfect, dBase and other programs to assist us in our audit work. 1 I _10- AUDIT TEAM 0 will consist of the en artner, audit d The audit team engagement p it manager, senor an one staff accountant. 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. Michael R. Ludin, CPA, will act as consulting partner on any unusual accounting or auditing ' problems. The manager will coordinate the engagement, supervise the senior accountant, schedule all field work, monitor time budgets, review all workpapers and resolve any accounting or auditing problems prior to submission of final reports. ' The audit senior will be Mr. Donald Osborn. He will assume responsibility for all field work, prepare the audit plan and audit programs, review and analyze internal controls, research accounting and auditing problems, prepare (or assist in preparing) the City's financial statements, prepare management letters and supervise staff assistants. ' Resumes for the above partners and personnel are included at Attachment I on pages 29 through 31. 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. ENE 1 0 MANAGEMENT CONSULTING SERVES CONSULTING ON GOVERNMENTAL TAX ISSUES Over the years, Diehl, Evans & Company, LLP has developed a wide knowledge of tax issues related to governmental entities and their employees. Our Tax Department regularly issues tax opinions to governmental agencies setting forth the tax consequences of various proposed transactions. We also assist ' our governmental clients with tax reporting and compliance requirements. Each year our firm publishes a "Government Tax Manual". This manual is distributed to both client and ' nonclient governmental units at a series of tax workshops which normally are presented in December each year. Noted below are areas where we have extensive experience in assisting clients with their tax questions: ITaxation of Employeege Benefits I• Expense Reimbursement Plans • Fringe Benefit Rules Related to Automobiles and Other Vehicles 1 • Cafeteria Plans • 457 Deferred Compensation Plans • Group Term Life Insurance Plans 1 ' Tax Reporting and_ Compliance * Employee vs. Independent Contractor Issues 1 • Form W-2 and Form 1099 Reporting ' • Payroll Tax Reporting • Workers' Compensation Tax Issues Other Areas of Emphasis • Assistance in the Formation of Government -Related Nonprofit Corporations • Assistance in Selection of Retirement Plans 1 -12 CA* TELEVISION CONSULTING SEES Our Management Consulting Department offers a wide range of services to California cities and counties with respect to the cable television industry. Our cable work for governmental agencies can be grouped into four broad categories of service: Cable TV Eranchise Fee Compliance Reviews - We have reviewed the cable franchise agreements of various cities, and then have written programs to review compliance with various key financial provisions of the agreements. Our concentration has been on verifying the proper reporting of "gross revenues" (including advertising revenues) and the proper and timely payment of franchise fees. • Cable TV Rate Regulation Reviews - This work involves compliance reviews of FCC Forms 1205, ' 1210, 1220 and 1240, with reports to the cities on the propriety of cable rates and equipment and installation charges. In prior years, we reviewed three "cast -of -service" filings on Form 1220. ' • Assistance with Cable TV Franchise Transfers - We have worked closely with certain cities on the transfer of their franchise from one cable operator to another. We have participated in negotiations between the City and its cable operators, have assisted in drafting transfer resolutions, settlement ' agreements, City staff reports, etc. Also, we have performed a comprehensive "due diligence" review of a cable operator for two of our city clients. This involved extensive on -site work at the cable company's headquarters in Dallas, Texas. ■ • Expert Witness Testimony - In 1997, Mr. William Morgan was retained by the City and County of San Francisco to act as an "expert witness" in a possessory interest tax dispute between the City and its r cable operator. Over the past six years, we have provided cable TV consulting services to the following thirty-one ■ California cities and counties: City of Alhambra City of Lakewood City of Berkeley City of La Palma City of Burbank City of Lomita City of Camarillo City of Manhattan Beach City of Concord City of Milpitas City of Costa Mesa City of Moorpark City of Cypress City of Oceanside ' City of El Cerrito City of Richmond City of Encinitas City and County of San Francisco City of Escondido City of Stanton City of Fountain Valley City of Temecula City of Garden Grove City of Vista City of Glendale City of West Covina City of Glendora City of Westminster City of Hermosa Beach Contra Costa County City of Huntington Beach ' Listed on the following page are references for a number of these cities and certain attorneys that have retained our services for work in the cable field. ■ -13- ' • 0 CABLE TELEVISION INDUSTRY REFERENCES 1 Ms. Sheri D. Ungar Mr. Scott F. Field ' Deputy City Attorney Deputy City Attorney City of Burbank City of Huntington Beach 275 East Olive Avenue P.O. Box 190 ' Burbank, CA 91510-6459 Huntington Beach, CA 92648 (818) 238-5700 (714) 536-5662 Mr. Peter Dragovich Ms. Joan Barry Senior Administrative Analyst Program Specialist City of Concord City of Oceanside 1950 Parkside Drive, MS/01 300 North Coast Highway Concord, CA 94519-2578 Oceanside, CA 92054 (510) 671-3085 (760) 966-4763 Ms. Patricia Burke Mr. Vern Waton Cable TV Administrator Assistant Assessor Contra Costa County City and County of San Francisco 10 Douglas Drive, Suite 210 875 Stevenson Street Martinez, CA 94553 San Francisco, CA 94103 (825) 313-1183 (415) 554-5501 Mr. Brett Hodgkiss Mr. Karl Schwarm Management Analyst Management Analyst ' City of Encinitas City of Vista 505 South Vulcan Avenue 600 East Eucalyptus Avenue Encinitas, CA 92024-3633 Vista, CA 92085 (619) 633-2616 (760) 726-1342 Mr. Clayton C. Phillips Mr. Jack J. Keating Director of Finance Communications Director City of Escondido City of West Covina 201 North Broadway 1444 W. Garvey Ave. South Escondido, CA 92025 West Covina, Ca 91793 (619) 741-4675 (626) 814-8580 ' Ms. Christina Sansone Mr. William M. Marticorena Deputy City Attorney Attorney at Law City of Glendale Rutan & Tucker, LLP 613 East Broadway, #220 Suite 1400 Glendale, CA 91206-4394 611 Anton Boulevard 1 (818) 548-2080 Costa Mesa, CA 92626 (714) 641-5100 -14- HOTEL TRANSIENT OCCUPANCY TAX REVIEWS Over the (past five) years, our firm has developed extensive experience in performing limited procedures ' reviews on various hotels and motels for compliance with City Transient Occupancy Tax Ordinances. In many instances, our work has uncovered substantial noncompliance by hotel operators and the underreporting of transient occupancy taxes to the City. These engagements normally include the following procedures: • A review of the Citv's TOT Ordinance to identify all major areas requiring compliance by the hotel, ' and a review of the City's internal policies and procedures for monitoring the receipt of TOT. • Documentation of each hotel's internal controls over the accounting for, and reporting of, room rents. ' • V f "'exemptions" v " enftcatton otaken by the hotel for government employees and non -transient guests. ' * Testing of the mathematical accuracy of annual, quarterly or monthly TOT reports; computation of late payment penalties and interest due to the City. Noted below are five cities for which we have performed TOT reviews, together with the number of hotels reviewed and appropriate references. Big Bear Lake 2 Ms. Julie Wiley Senior Accountant (909) 866-5831 ' Burbank 15 Mr. Robert P. Elliot Deputy Finance Officer ' (818) 238-5500 Irvine 7 Mr. Jeffrey F. Niven ' Manager of Fiscal Services (949) 724-6027 ' Manhattan Beach 8 Mr. Russell J. Morreale Financial Services Manager (310) 545-5621 tPalm Desert 8 Mr. Paul S. Gibson Director of Finance ' (619) 346-0611 40 1 I - 15 - 0 0 LITIGATION SUPPORT AND DISPUTE RESOLUTION SERVICES FOR GOVERNMENTAL AGENCIES Diehl, Evans & Company, LLP has provided extensive assistance to governmental entities in resolving litigations and disputes. In some instances, we have been hired directly by a City or redevelopment agency to provide a financial analysis of a disputed transaction, and then to assist the governmental agency in negotiating a settlement with an adversarial party. In other instances, we have been retained by attorneys for a governmental agency to work in a confidential attorney/client relationship, to prepare for depositions and trial. We are also available to act as "expert witnesses" should the need arise. Noted below are examples of litigation support and dispute resolution services provided to California governmental agencies in recent years. Dispute Resolution Services for, Redevelopment Agencies In recent years, a Southern California redevelopment agency entered into a development agreement with a local company to construct commercial office buildings on land owned by the agency. Management of the agency suspected that the developer had overcharged the agency for construction costs on the buildings. Our firm was retained to do an investigation of building construction costs. As a result of our review, the redevelopment agency filed a civil lawsuit against the developer to recover improperly charged construction costs. Our firm then was retained by agency attorneys to assist in preparing for trial and in negotiating a settlement with the developer. Also, another Southern California redevelopment agency entered into a development agreement with an outside developer to construct and operate a commercial shopping center. Under terms of the development agreement, the agency was to share in the distribution of net rental income from the operation of the shopping center. However, the shopping center never produced net distributable income, in part, because of excessive charges against the project by the developer. We were retained by the redevelopment agency to analyze the propriety of costs and expenses charged to the project, and to assist the agency in negotiating a settlement in its dispute with the developer. Fraud Investigation for Police Department ■ Our firm was retained by a Southern California Police Department to assist the Criminal Investigations Division with the prosecution of fraud cases. Our work on these fraud cases included the following ' services: • Analysis of business records confiscated through search warrants and subpoenaed bank records • Review of case files prepared by police detectives • Tracing of cash receipts and cash disbursements related to the embezzlement of funds • Preparation of reports for the Police Department, summarizing the facts of each case, the source and disposition of embezzled funds, and the identification of evidence to be used at trial. ' 0 is REVIEWS OF SOLID WASTE CONTRACTORS 1 Franchise Com liance Reviews Two Southern California cities have retained our firm to perform comprehensive franchise compliance reviews of their solid waste contractors. On one City, our engagement included a review of the City's franchise agreement, an investigation of the waste contractor's revenues and expenses for unusual or questionable items, a recalculation of the contractor's profit using various assumptions, an analysis of dump fees for residential, commercial and other routes, a review of the contractor's tax returns, a comparison of the refuse rates with other cities in the area, an impact study on the reduction of refuse collection from biweekly to weekly, and a cost study ton the effect of using the SERRF project dumpsite versus the County Landfill in Puente Hills. ' On another City, our engagement included a review of the franchise agreement, a review of the waste contractor's systems and procedures, a physical inventory of commercial and residential trash containers, a review of the propriety of disposal charges from the landfill site and a survey of residential users 1 regarding customer service issues. ' Review of Pilot Recycling Program Several Orange County cities entered into certain agreements with a disposal company to conduct a "pilot" ' recycling program over a six month period. Our firm was retained to determine the actual cost of the pilot recycling program and to determine the amount of recycling revenue generated from the sale of recycled materials. Because of the condition of the disposal company's accounting records, it was necessary for us ' to completely reconstruct all cost data for the pilot program. Our experience with this pilot program provided us with practical insight into the accounting and record keeping problems unique to disposal ' companies. Assistance with Trash Rate Negotiations ' We have been retained on two engagements to assist cities with trash rate negotiations. Schedules and other information were provided to each City by the trash Contractor justifying proposed rate increases. tOur findings assisted the cities in negotiating trash rates for residential customers within each City. 1.1 I -17- 1 • • REDEVELOPMENT AGENCY CONSULTING We are one of the most experienced CPA firms in California in providing consulting services to redevelopment agencies. We regularly consult with executive directors and finance directors of agencies on how to structure transactions to meet all requirements of the Health and Safety Code. We also provide advice on such matters as low and moderate income housing strategies, mergers of project areas, transfers ' and loans between project areas and techniques for creating agency indebtedness. In recent years, we have performed management studies on three redevelopment agencies. These engagements involved a complete review of each agency's operations. Reports were issued setting forth suggestions for changes in operational policies and procedures. Also, the chart of accounts for each agency ' was revised and expanded to bring the accounting system into compliance with state law. Also, our firm periodically conducts redevelopment agency workshops and publishes a "Redevelopment ' Handbook". This publication sets forth generally accepted accounting principles and reporting standards for agencies, and explains how to comply with various sections of the California Community Redevelopment Law and the Government Code. Our handbook is recognized as an authoritative guide in ' California, as it has been reproduced and distributed by the California Redevelopment Association. ' COST ALLOCATION PLANS Our governmental agencies often require an overhead cost allocation plan. The primary purposes of such a plan are to allocate indirect costs among the departments or agencies benefiting from the overhead, and to set or revise user fees which are based primarily on a cost reimbursement basis. ' We have a thorough knowledge of the various authoritative pronouncements upon which such plans are prepared, including: ' • Office of Management and Budget Circular A-87. ' • "Cost Accounting for California Cities", published by the League of California Cities. "Cost Accounting Policies and Procedures Manual", published by the California Uniform Public ' Construction Cost Accounting Commission (CUCCAC). Cost allocation plans prepared by our firm have included detailed narrative descriptions of the operation of each department or agency and comprehensive schedules showing allocations of cost. ' During 1998, our firm prepared a City -Wide Cost Allocation Plan for the City of Indio. 1 1 -18- • 0 COMPUTER CONSULTING SERVICES Our in-house computer consultants can provide the City with a wide range of computer services. Noted below are some of the specific services we provide: System Desi n: Determination of Customer Needs Determination of Hardware heeds Software Selection Evaluation: Preparation of RFPs to send to vendors Evaluation of responses from vendors Documentation and Training: Preparation of user manuals Disaster Recovery Manuals System documentation User training Support and Consultation: Backup and Security Procedures Ongoing training Recommendations for hardware and software upgrades Computer Trainin Our in-house computer consultants can train your staff in many of the most up-to-date software packages available, including word processing, spreadsheets, Windows and network operating system software. Training is available either onsite or in Diehl, Evans & Company, LLP offices, and is taught at beginning, intermediate and advanced levels. - 19- RESUME OF MANAGEMENT CONSULTANT ' WILLIAM S. MORGAN ' Qualifications Certified Public Accountant (CPA) ' Director of Management Consulting, Diehl, Evans & Company, LLP 1 1 Education University of Southern California Bachelor of Science in Accounting, 1967 Professional Orijanizations American Institute of Certified Public Accountants (M. ember) AICPA Management Consulting Services Division (Member) California Society of Certified Public Accountants (Member) California Society of Municipal Finance Officers (Associate Member) California Redevelopment Association (Associate Member) Committees of CSCPA: Governmental Accounting and Auditing Committee, Orange County Chapter (Past Chairman) Litigation Consulting Services and Alternative Dispute Resolution Committee Fraud Investigations Committee Range of Experience Mr. Morgan was employed by Arthur Young and Company (now Ernst and Young) from 1967 through 1972. He has been employed by Diehl, Evans & Company, LLP since 1972 with emphasis in services for governmental agencies. He has extensive experience in management consulting, tax consulting, auditing and financial reporting for governmental units. He is a frequent public speaker on governmental issues. Examples of Management Consulting Projects Performed or Supervised • Expert Witness Testimony • Mediation of Lawsuit City of San Francisco vs. Viacom Cable Acted as "Mediator" in Lawsuit Between City of Lake Forest and County of Orange -20- 1 0 • RESUME OF MANAGEMENT CONSULTANT (CONTINUED) ' WILLIAM S. MORGAN (CONTINUED) 1 Examples of Management Consulting Projects Performed or Supervised (Continued) • Computer System "Needs Analysis" And Software Selection • Cable TV Franchise Fee and Rate Regulation Compliance Reviews • Fraud Investigations • Transient Occupancy Tax Reviews on City Hotels/Motels • Reviews of City Treasurer Operations • Systems and Procedures Studies on Redevelopment Agencies • Performance and Operational Review of Redevelopment Agency • Cost Allocation Plans • Reviews of City Solid ' Waste Contractors/ Trash rate Negotiations ' • Special Study on Economic and Tax Consequences of Closing the Long Beach Naval Hospital City of Ventura City of Whittier 31 California Cities Under Contract Over the Past Six .Years Burbank Police Department Los Angeles District Attorney's Office Phoenix, AZ Police Department City of Burbank City of Irvine City of Manhattan Beach City of Palm Desert City of Huntington Beach City of Palm Desert Marin County Redevelopment Agency South Gate Redevelopment Agency Burbank Redevelopment Agency City of Indio City of Fullerton City of Monterey Park City of Irvine (Waste Management of Orange County Inc.) City of Signal Hill (EDCO Disposal) City of Lakewood (B-Z Disposal Services) Cities of Dana Point, San Juan Capistrano and San Clemente (Solag Disposal) Regional Waste Management Authority, Yuba City (Yuba -Sutter Disposal, Inc.) City of Lakewood 1 -21 - AUDIT SCOPE AND APPROACH ' ENTITIES TO BE INCLUDED IN AUDIT ii 1 I 1 City of Huntington Beach Redevelopment Agency of the City of Huntington Beach Huntington Beach Public Financing Authority Central Net Operations Authority REPORTS TO BE ISSUED AND DUE DATES City of Huntington Beach - Comprehensive Annual Financial Report Redevelopment Agency of the City of Huntington Beach - Annual Report, Including Report on Compliance Huntington Beach Public Financing Authority Central Net Operations Authority AB 2766 Subvention Funds Report Management Letter Report on Compliance with Article XIIIB Appropriation Limit Due Dates March 31, 2001 March 31, 2001 March 31, 2001 March 31, 2001 March 31, 2001 March 31, 2001 March 31, 2001 ' Single Audit Reports: May 31, 2001 • Independent Auditors' Report on Compliance and on Internal ' Controls Over Financial Reporting Based on Audit of Financial Statements Performed in Accordance With Government Auditins 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. COMMITMENT TO DELIVER REPORTS ON A TIMELY BASIS ' If all books and records, schedules and documents are made available to us by January 15, we make a commitment to have audit team members available and to provide all reports by the due dates specified above. 1 1 -22- • i AUDITS TO BE IN ACCORDANCE WITH GAAS AND OTHER RE UIREMENTS 1 1 F 1 We will audit the general purpose 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 audits will be in accordance with generally accepted auditing standards as set forth by the AICPA, and will include such auditing procedures as we consider necessary under the circumstances. The combining, individual fund and account group financial statements will be subjected to auditing procedures as we consider necessary in relation to the general purpose financial statements taken as a whole. The scope of our audits 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 (1994 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 procedures review of the City's Gann Spending Limitation Computation as required by Section 1.5 of Article XIIIB of the California Constitution. Our review will be performed in conformance with the provision of the "League of California Cities Uniform Guidelines". SPECIAL SERVICES The City may request certain special services, such as transient occupancy tax reviews or reviews of compliance with provisions of franchise agreements. With regard to these engagements, we intend to perform limited procedures reviews in connection with each assignment, in accordance with the provision of Statement on Auditing Standards No. 75. Under the provisions of SAS 75, 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 generally accepted auditing standards. Such special services are not part of our standard fee arrangements and would be subject to a separate fee quotation. 1 - 23 - 0 • AUDIT APPROACH Planning and Initial -Work: After our appointment as auditors, members of our audit team will meet with you and your staff to discuss the scope and timing of the audits and any accounting issues known at that time. We will update our 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. 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 Statement on Auditing Standards No. 55, "Consideration of the Internal Control Structure in a Financial Statement Audit", as amended by Statement on Auditing Standards No. 78. ' 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, major receivables, long-term debt and major revenues if ' appropriate. • Detailed audit of all significant balance sheet and revenue and expenditure/expense accounts for each fund group. ' • 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. ' Our firm uses comprehensive audit programs for Cities, Redevelopment Agencies and Single Audits. The programs are amended, as necessary, for each audit. 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-I33, Government AuditingSrds issued by the GOA (the "Yellow Book") and AICPA Statement on Auditing Standards No. 68, "Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance". When we begin the single audit, we will identify the Major and Nonmajor Federal Financial Assistance Programs of the City. Each Major and Norma}or 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. 1 24 - SINGLE AUDIT APPROACH (CONTINUED) 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 test the internal controls that are in place to determine if they are effective in detecting material noncompliance. 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. Our compliance testing will include testing on the 14 compliance areas as applicable that are identified in the OMB Circular A-133 Compliance Supplement. We will use the OMB Circular A-133 Compliance ' Supplement to identify program specific requirements. If the information for testing specific requirements is not identified in the Compliance Supplement, we will use the grant agreement. As part of our single audit, we will request that the City complete the "Data Collection Form" required to be completed by the Single Audit Act Amendments of 1996. The form will assist us in identifying the federal programs which will be required to be tested. 1 APPROACH IN DETERMINING LAWS AND ' REGULATIONS SUBJECT TO AUDIT 1 Under provisions of AICPA Statement on Auditing Procedures No. 68, 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 tinder 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 writh our audit. ' METHOD OF SAMPLING AICPA Statement on Auditing Standards No. 39 allows an auditor to utilize either judgement sampling ' or statistical sampling techniques, based on the auditor's professional evaluation. We anticipate using judgment sampling techniques. We will not determine our sample sizes for substantive testing of year-end ' balances until our preliminary evaluation of internal controls. u 1 -25- 1 i i MANAGEMENT LETTERS 1 In connection with each audit, a complete review of internal controls will be made of all significant I 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. 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 I any accounting or computer matters, and we will be available to attend City Council (Board of Directors) meetings as needed. RETENTION OF AND ACCESS TO AUDIT WORKPAPERS In accordance with provisions of OMB Circular A-133 and GAO requirements, our audit workpapers will be maintained for at least three 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 workpapers. AUDIT TIMING 1 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 January 15, the time schedule for the various phases of the audit would be approximately as follows: Interim Work July - August Observations/ Inventory Confirmation Mailings September 30 ' Year-end Field Work January 15 - February 28 Deliver Reports See Due Dates on Page 22 26 - SCHEDULES TO BE PREPARED BY CITY STAFF 1 I 1 1 1. Bank reconciliation for all accounts 2. Schedule of investments 3. Schedule of receivables 4. Inventory listings 5. Schedule of general fixed assets 6. Schedule of fixed assets including depreciation for proprietary funds 7. Schedule of general long-term debt 8. Schedule of long-term debt for proprietary funds 4. Schedule of interfund receivableslpayables and interfund transfers 10. Schedule of deposits payable 11. Schedule of accounts payable including accrued liabilities 12. Schedule of reserves of fund balances 13. Schedule of contributed capital for proprietary fund types 14. Schedule of deferred revenue 15. Schedule of compensated absences 16. Schedule of interest income allocations FEES AND HOURLY RATES MAXIMUM FEES Our maximum fees for the year ending September 30, 2000 veil] be as follows: City Audit (CAFR) $ 22,200 CAFR Preparation 5,800 ':Management Letter 450 Report of Compliance and Article 81113 - Appropriation Limit 750 Redevelopment Agency - Audit 6,000 Redevelopment Agency Financial Statement Preparation 1,000 Huntington Beach Public Financing Authority 1,800 Central Net Operations Authority 2,100 AB 2766 Subvention Funds Report 1,700 Single Audit of Federal Grants 6,500 TOTALS $ 48,300 -27- 0 0 COMPOSITION OF CURRENT AUDIT FEE Our proposed fee for the year ending September 30, 2000 is computed as follows: Standard Hours Rates Partners 80 x $ 140 = $ 11,200 Manager 100 x 95 = 9,500 Senior Accountant 350 x 65 — 22,750 Staff Accountants 350 x 55 W 19,250 Clerical 40 x 40 = 1,600 64,300 Discount (25%) (16,000 TOTAL 920 S 48,300 HOURLY RATES FOR SPECIAL SERVICES 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: Nitin Patel, CPA - Partner Michael Ludin, CPA - Partner Bill Morgan, CPA - Director of Management Consulting '.Manager Senior Staff Accountants 2000 $ 140 140 140 95 65 55 -28- 1 0 0 ' ATTACHMENT I RESUMES OF PARTNERS AND PERSONNEL ASSIGNED TO AUDIT 11 • 0 PARTNERS AND PERSONNEL ASSIGNED TO AUDIT NITIN 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 Professional Organizations 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 Range 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. -29- • 1 _ MICHAEL R. LUDIN, CPA 1 Position Consulting Partner 1 Education California State University, Fullerton Bachelor of Arts in Business Administration, with concentration in Accounting, 1975 ' Prof nal esst ' Organizations American Institute of Certified Public Accountants California Society of Certified Public Accountants Governmental Accounting and Auditing Committee of the Orange County Chapter, California Society of CPAs, Past Chairman Associate Member of Government Finance Officers Association (GFOA) ' Associate Member of California Society of Municipal Finance Officers (CSMFO) CSMFO Professional and Technical Standards Committee - Report Reviewer for ' Award Program Range o Experience Has been with Diehl, Evans & Company, LLP since 1978 with emphasis in governmental auditing and financial reporting. Experience includes supervision of over one hundred audits of governmental agencies including cities, redevelopment agencies, nonprofit corporations, and joint ' power authorities. Public speaker on municipal accounting and frequent instructor at firm's in-house ' governmental accounting and auditing seminars. 1 Managing Director of firm's Irvine office. -30- • is PARTNERS AND PERSONNEL ASSIGNED.TO AUDIT (CONTEN?UED) 1 Position Education Current Experience DONALD D. OSBORN Audit Senior Miami University Master of Accountancy San Diego State University Bachelor of Arts in Accountancy Experience with Diehl, Evans & Company, LLP includes financial and single audit work and related report preparation for the following governmental and nonprofit entities: City of Cathedral City City of Huntington Beach City of Downey Vocational Visions, Inc. International Fire Code Institute City of Garden Grove City of Simi Valley Trabuco Canyon Water District South County Senior Services, Inc. Prior Experience Immediately prior to working for Diehl, Evans & Company, LLP, he worked for Barona Casino in Lakeside, CA for four years as an internal auditor and staff accountant. As an internal auditor, he verified video machine receipts and payouts to amounts that were reported by cashiers/clerks. As a staff accountant, his routine duties included verifying daily revenue for the casino's several income sources, such as video machine receipts, poker/cardroom and blackjack "pit" revenues, restaurant sales and bingo revenue. Other duties also included assisting in the annual closing process and preparing information returns required to be filed with taxing authorities by the casino in accordance with laws and regulations. He also helped in the design and preparation of reports that contained "audited" daily revenues from all sources that were distributed daily to the casino's management and the tribal council. -31 - ' ATTACHMENT II RESULTS OF OUTSIDE QUALITY REVIEW 41 Perry M. Henderson CPA, NM PA February 11, 2000 To the Partners To Diehl, Evans and Company, LLP: I have reviewed the system of quality control for the accounting and auditing practice of ' Diehl, Evans and Company, LLP in effect for the year ended September 30,1999. 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 (AICPA). The design of the system and compliance with it are the responsibility of the firm. My responsibility is to ' express an opinion on the design of the system, and the first's compliance with the system based on my review. The review was conducted in accordance with standards established by the Peer Review ' Board of the AICPA. In performing the review, I obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, I bested compliance with the firms quality control policies and procedures to the extent I considered appropriate. These tests covered the application of the fircWs policies and procedures on selected engagements. Because the review was based on selective bests, 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 trot, 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 policies or procedures may deteriorate. ' In my 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 30,1999, 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 first with reasonable assurance of conforming with professional standards. ' Perry .Henderson, CPA ' Master, Public Adrrrinismaon; Member. Amencan Institute of CPAs, SEC Pmerice Section, Califomis Socials of CPAs, AICPA Key Lepiative Conrxt Proram. Caidomta Society of Municipal Finance Officets, Califomia Association of Nonprdits. Present and Pant wnrl" iuCludeet Cluimun, CSCPA Nonprofit Otganiations Commirtee, Canis &It Chwer; Member, CSCPA Pea Review Committee: CSCPA Pm6nonal Conduce Committee, Adiwa Fecal4 Member, Univetsity of Redlads; Author & Lecturer. ' 12N Nevada Street, Suite 203 * Redlands, CA 92374 0 Phone: (909) 792-4268 • Pax: (909) 792-5659 e-mail pmhcpa@compuserve.com ' -32- "A-C&D. CERTIFICAME 4F LIABILITY INSU NC °AioMAs oa ! Mitchell & Mitchell-Lic0620650 250 Bel Marin Reyes Blvd, Bld E (Novato CA 94949 Phorie:415-883-2525 Fax:415-883-7752 Diehl, Evans &paCCongaus , LLP ZrvineYCA 9 612 ' 9ui a 200 COVERAGES / THIS CERTIFICATE I UED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. INSURERS AFFORDING COVERAGE INSURER A: CDTC CNA CPA Pro xq am INSURER B: INSURER a INSURER Q INSURER E.- THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH T1415 CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POuCIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS- LTR TYPE OF INSURANCE POLICY NUMBER DA E MMIO DA MMIDDfYY LIMITS GENERAL LIABILITY COMMERC,AL GENERAL LIABILITY CLAIM5MADE .00CUR - ----- EACH OCCURRENCE s FIRE DAMAGE (Any one fire) 3 EBHEtfi(ArtyonrPanrorlj^ I -- PERSONAL A ADV INJURY 18 GENERALAIGREOATE Is ORW L AGGREGATE LIMIT APPLIES PER: POLICY � ECT LOG PRODUCTS - COMPIOP AGO s AUTOMOBILE LIABILITY ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS HIRED AUTOS NON•OWNEDAUTOS tij, L 7 T` A' GAI r' i T v'SI AT tr'LI Y y ' D Cltp Attorney I � COMBINED SINGLE LIMIT (En a=ldsrd) BODILY INJURY (Per Parson) s BODILYY s PROPERTY DAMAGE (Per seeldenQ s GARAGE LIABILITY ANY AUTO AUTO ONLY- EA ACCIDENT s OTHER THAN EA ACC AUTO ONLY: AGG i s EXCESS LIABILITY OCCUR CUUMS MADE DEDUCTIBLE RETENTION II I EACH OCCURRENCE s AGGREGATE > S ` s is WORKERS COMPENSATION AND EMPLOYERS-LIABILTY SPRY LIMITS I N EL DISEASE -EA EMPLOYEE S EL asEA5E - POLt Y LIMIT . S X OTMER Prof. Liability 1- API( 188122222 10/01/00 10/01/01 1 3,000,000 Per Claim 3,0001000 AZZM2&te DESCRIPTION OF OPERATIONJIL=roNBMENICL>'S EXCLUSIONS ADDED BY ENoORSEMENTISPECIAL PROVISIONS Prior Acts Date: rULL PRIOR ACTS f+Car I I1-1a.A 1 C nULLfr-M I N ADDITIONAL INSURED; INSURER LETTER: CITXHM The City of Huntington Beach, its agenta,offioers &enployeea Christi ldendoza 2000 Main Street Huntington Beach CA 92648 G:AML;XLLA 1 IUN SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLER BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING INSURER WILLr MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIRCATE HOLDER NAMED TO THE womw 1 i i8 ACORD 26-9 (7/87) CACORD CORPORATION 1988 MMorfyi I r�RDy CERTfFIC OF L�ABI ITN fNSU NEE :::. DATE IM 12/16/1999 UDER (949)582-5220 FAX Wj582-3512 THIS CERTIFICATE IIVUED AS A MATTER OF INFORMATION P I B Insurance Agency Inc. ONLY AND CONFERSRIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR License Number 0719264 ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW, 26441 Crown Valley Parkway COMPANIES AFFORDING COVERAGE Mission Viejo, CA 92691 .. Zurich COMPA?'4'Y' Attn: Greg Havill Ext 3816 A INSURED Diehl Evans & Company LLP COMPANY Golden Eagle Insurance Corp. a 2121 Alton Parkway Ste 100 ... . .. - Irvine, CA 92606-4906 COMPANY C COMPANY 777 7R THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE F614'THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED 13Y THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMBS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. Co LTR: TYPE OF INSU"Nrf POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION! LIMITS DATE (MWDWM DATE MMMM GENERAL LIABILITY GENERAL AGGREGATE S 2,000,000 X COMMERCIAL GENERAL LIABILITY .. .... ...... -. . .:. .... __ .. - . . PRODUCTS-COMPIOPAGr. 3 2 000,000 X : OCCUR CLAIMS MADE -02 A PPS034235037 PERSONAL A ADV INJURY S 1,000,000 . ......... ...... 12/31/1999 12/31/2000:w URY ...... . OWNER'S 8 CONTRAo7oq,S PROT EACH OCCURRENCE S 1,000,000 FIRE DAMAGE (Any one Itre) S 1,000,000 . . ................. ..... .... .. .. MED EXP (Any oqe person) 10,000 AUTOMOBILE LIARILrrY ANY AUTO COMBINED SINGLE LIMIT 1,00.0,000 ALL OWNED AUTOS i BODILY INJURY A . . SCHEDULED AUTOS PPS034235037-02 12/31/1999 12/31/2000 (Par parson) x HIRED AUTOS BODILY INJURY X NON -OWNED AUTOS (Par accidant) T' A A: . . ....... .. . C-p.T". i PIROPERTY DAMAGE GARAIIIIII L1AOLLrTY AUTO ONLY. EA ACCIDENT -5 --------- - ANY AUTO 11y OTHER THAN AUTO -ONLY a P y city Attorney EA CH Acr_PoENT:: S AGGREGATES EXCESS MARFUrrY XVU'L. I N "r.7; L:-- EACH OCCURRENCE S ........ . ... ..... ..... UMBRELLA FORM :AGGREGATE i $ OTHER THAN UMBRELLA FORM :$ WORKERS COMPENSAT100 AND STATU- CI X & EMPLOYERS' LIABILITY B 'NWC482579-02 0!��H.. ANT CC . IDENT 5 1,000.00.0 12/31/2000 . .. ... ...... . .. .. .. .......... THE PROPRIETOR/12/31/1999 INCL : EL DISEASE - POLICY LIMIT 1,000,000 PARTNEFtsiEXECLMVE OFFICERS ARE EXCL: EL DISEASE - EA EMPLOYEE! S 1,000,000 OTHER Cac #1-Building: Lacs i$643,000.Special R/C $500 ded A #1,2,3,4,Buisness PP5034235037-02 :Personal 12/31/1999 12/31/2000� :Loc#1-BPF`S37S,0O0;Loc2-$75,00O Property Loc3-S65,00O.;Loc4 S1000. DESCRIPTION Of OPERATIONVLCCATICN&VENICLEWapFrCLU ITEMS tHE CITY OF HUNTINGTON BEACH, ITS AGENTS, OFFICERS, & EMPLOYEES ARE NAMED AS ADDITIONAL INSUREDS -4/RESPECT TO GL PER CG2010 11/85 ATTACHED. NEXCEPT 10 DAYS NOTICE OF CANCELLATION FOR NON-PAYMENT OF PREMIUM OR NON -SUBMISSION OF PAYROLL REPORT. SHOULD ANY OF THE ABOVE DESCRIBED POLICIES Be CANCELLED BEFORE THE EXPIRATION DATE THERLOP, THE ISSUING COMPANY WILL NNO)OW11 MOUL CITY OF HUNTINGTON BEACH 30 DAYS WRITTEN NOTICE TO THE cuRTirmAT9 HOLDEIR. NAMED TO THE LEFT. ATTN: CHRISTI MENDOZA 1IQfflfix%xW(MKxx 2000 MAIN STREET ~km)d)QL,44wvmixxkmumauxmNmvaoemxxxxxxxxx HUNTINGTON BEACH, CA 92648 AUTHORIZED REFIRBSEKTATIVE �Greg Havi l l /SHARON 0111 1:� Q�!? -- - - - - 5.4 rpm �J • POLICY NUMBER: PPS034235037-02 NAMED INSURED: DIEHL EVANS & COMPANY COMMERCIAL GENERAL LIABILITY THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED - OWNERS, LESSEES OR CONTRACTORS (FORM B) This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART. SCHEDULE Name of Person or Organization - CITY OF HUNTINGTON BEACH ALL OPERATIONS ITS AGENTS. OFFICERS & EMPLYOEES 2000 MAIN STREET HUNTINGTON BEACH, CA 92649 (If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.) WHO IS AN INSURED (Section 11) is amended to include as an insured the person or organization shown in the Schedule.. but only with respect to liability arising out of "your work" for that insured by or for you. CG 20 101185 Copyright, Insurance Services Office, Inc., 1984 • • CITY OF HUNTINGTON BEACH APPLICATION FOR INSURANCE REQUIREMENTS WAIVER OR MODIFICATION I. Name/Title/Department of Requesting Staff Member _ go i r l Sed Zak. f -t nz_i p# T . /4cc�, f d SvcJ 2. Date of RequestU /1/ ! 0 0 3. Name of Contractor/Permittee- 4. Description of work to be performed A v 0[I Svcs 5. 6. 7. 8. Value of Contract Length of Contract A?, 300 Type of Insurance Waiver or Mo(VC ificat]'on Requested: (a) Limits: 0(0 G W(b) Coverage 3,(lowtoco,0(),j Have you contacted Ris Management to determine if professional liability coverage is available through SCOPE? 9. Reason for Request for Waiver or Reduction of Limits Con 1(4 C wr r e9_ N_est 10. Identify the risks to the City J_PffiVrequest ffoorrww, Department Head Signature / (/ l Recommendation: Approve Risk Manager's Si Vficattons ranted n1 t n i i''7 l f vjle l7fa yrfw� (This section to be completed by Risk jkfanager) Deny (This section to be completed by City Atiorney) Recommendation: Approve Deny Citv Attornev's Si Settlement Committee approv I (is [is not] required for this waiver. If Settlement Committee approval is required, submit this form to City tyefney's Office to be -placed on the agenda. Recommendation: Approve Y/ Deny City. Council appro4isI not] required for this waiver. If City Council approval is required, attach this form to the RCA afteA�deration by the Settlement Committee. This insurance waiver [is not] on City Council agenda. Reviewer's initial . RCA OUTING SHEET INITIATING DEPARTMENT: Administrative Services SUBJECT: Approve Extension of Audit Contract with Diehl, Evans and Company to Cover Fiscal Year 1999-2000 COUNCIL MEETING DATE: RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (wlexhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (wlexhibits if applicable) (Signed in full by the City Attome Attached Subleases, Third Party Agreements, etc. (Approved as to form bX City Attome Not Applicable Certificates of Insurance (Approved by the City Attome Attached Financial Impact Statement Unbud et, over $5,000) Not Applicable Bonds If a licable) Not Applicable Staff Report If applicable) Not Applicable Commission, Board or Committee Report (If applicable) Not Applicable Find inL s/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS I REVIEWED RETURNED FORWARDED Administrative Staff 1 p , o,a Assistant City Administrator Initial City Administrator Initial City -Clerk EXPLANATION FOR RETURN OF lq�- Z,� .41,, e- � , 4V 2-a - 44L V efe 51� Mrj HN CITY OF HUNTINGTON BEACH INTER -DEPARTMENT COMMUNICATION Connie Brockway, City Clerk Office of the City Clerk Liz Ehring, Deputy City Clerk II Date: Meeting Date: Agenda Item: v The City Clerk's Office/City Administrator's Office must return your agenda item due to the following requirements that have not been met. When your Agenda Item is ready to resubmit, please return to: Elaine Kuhnke, Management Assistant, Administration I. Signature(s) Needed A On RCA B On Agreement C Other RVIJ 2. Attachments ` A Missing B Not identified C Other 3. Exhibits A Missing B Not identified C Other 4. Insurance Certificate (Proof Of Insurance) A Not attached B Not approved by City Attorney's Office C Signed form notifying City Clerk that depart nt will be responsible for obtaining insurance cenificate on this item. (See form attached) S. Wording On Request For Council tion (RCA) Unclear A Recommended Action on RCA not omplete - - / 1 B Clarification needed on RCA C Other 6. City Attorney Approval Required 7. Agreement Needs To Be Changed A Page No. 8. Other G agandalmiadmaform 4."J& CITY OF HUNTINGTON BEACH . INTER -DEPARTMENT COMMUNICATION HUNTINGTON BEACH Connie Brockway, City Clerk Office of the City Clerk. Liz Ehring, Deputy City Clerk 11 To: �,Vw v-f -- Date: 11 6 e d Meeting Date: � d LDvd Agenda pry on sed City CduncilAgen Items: The City Clerk's Office/City Administrator's Office must agenda item due to the following requirements that have not been met. When your Agenda Item is resubmit, please return to: Elaine Kuhnke, Management Assistant, Administration i your to 1. Signature(s) Needed A On RCA B On Agreement C Other 2. Attachments A Missing B Not identified C Other 3. Exhibits A Missing B Not identified C Other 4. Insurance Certiflcate (Proof Of Insurance) A Not attached B Not approved by City Attorney's Office C Signed form notifying City Clerk that department will be re onsible for obtaining insurance certificate on this item. (See form attachedl 5. Wording On Request For Council Action (RCA 4nclear A Recommended Action on RCA not complete B Clarification needed on RCA C Other 6. City Attorney Approval Required 7. Agreement Needs To Be Changed A Page No. D� 8. Other Loe G:e9endNmisrlreWorm �/?7 t Council/Agency Meeting Held: 97 Z& 7" Deferred/Continued to: w``pproved 0 Conditionally Approved © Denied ,Q City erk's Signature Council Meeting Date: May 19, 1997 Department ID Number: 97-017 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: MICHAEL T. UBERUAGA, City Administra o PREPARED BY: Robert J. Franz, Deputy City Administra or SUBJECT: Audit Contract for 1996/97, 1997/98, and 1998/99 Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: The City Charter section 607 requires that the City have an annual financial audit. Funding Source: Fees for the audit are budgeted in the 1996/97 adopted General Fund budget. Appropriate amounts will be budgeted in future years to pay for annual audits. Recommended Action: Approve the attached contract with Diehl, Evans and Company to perform the City's annual audit for fiscal years 1996/97,1997/98, and 1998/99 with waiver of 30 day notice of cancellation requirement. Alternative Action(s): Select one of the following -firms to perform the audit: I. McGladrey, Pullen and Company 2. Conrad and Associates 3. Moreland and Associates REQUEST FOR COUNCIL ACTT• MEETING DATE: DEPARTMENT ID NUMBER: Analysis: The City's charter requires an annual financial audit. KPMG Peat Marwick has been the City's auditors for the past six years (two different three year contracts). Staff sent requests for proposal to sixteen different firms. The City Treasurer requested an expansion to the audit to review in greater detail the controls over cash in the Treasurer's office as part of the 1996/97 audit. Four firms responded to the RFP with the following proposed fees: Firm: 1996/97 1997/98 1998/99 Diehl, Evans and Company $44,350 $38,450 $39,450 Moreland and Associates 44,000 41,000 42,500 Conrad and Associates 48,375 44,972 46,097 McGladrey, Pullen and Company 52,850 53,603 56,083 The Director of Finance, City Treasurer, and Principal Accountant interviewed all of the firms. All of the firms have the ability to perform the audit. Staff contacted three references for each of the firms. All of the references were positive, with the references for McGladrey, Pullen and Company being particularly positive. Based on the review of the proposals, interviews, and references, staff is recommending that Diehl, Evans and Company be selected to perform the audit. Diehl, Evans and Company is one of the leading firms in municipal accounting in California. They also served as the City's auditors from 1985 to 1990 and gave competent, professional service. The proposed audit fee for 1996/97 is $8,150 less than what was paid for the 1995/96 audit so this contract represents a significant savings. Reports on the following entities are included in the contract: Comprehensive Annual Financial Report (CAFR) • Redevelopment Agency of the City of Huntington Beach • Huntington Beach Public Financing Authority • Huntington Beach Public Facilities Corporation • Central Net Operations Authority The contract also includes the issuance of the following additional, required reports on the City's financial activity: • AB 2766 Subvention Funds Report • Report on Compliance with Article 13B Appropriation Limit • Single Audit of Federal Grants • Management Letter Environmental Status: NIA AUDITRCA.DOC -2- 05107/97 7:39 AM RAUEST FOR COUNCIL ACTI011 MEETING DATE: Attachment(s): . DEPARTMENT ID NUMBER: Contract with Diehl, Evans and Company 2. Work Proposal and Amendment from Diehl, Evans & Co. (Exhibit A to the above contract) AUDITRCA.DOC -3- 05/07/97 2:56 PM CITY OF HUNTINGTON BEACH [Z-2000 MAIN STREET CALIFORNIA 92648 OFFICE OF THE CITY CLERK CONNIE BROCKWAY CRY CLERK CITY CLERK LETTER OF TRANSMITTAL REGARDING ITEM APPROVED BY THE CITY COUNCILIREDEVELOPMENT AGENCY APPROVED ITEM DATE: 7 TO:,. �Wgk �� . ,L • P. ATTENTION: Name D DD DEPARTMENT: str t � l� / REGARDING: im state, Zip See Attached Action Agenda Item _ Date of Approval ff7 Enclosed For Your Records Is An Executed Copy Of The Above Referenced Item For Your Records. �" , w, jw e4", Connie Brockway City Clerk Attachments: Action Agenda Page RCA Deed Remarks: Agreement Bonds Insurance Other CC: ✓ Name Depar'ment RCA N a.-ne Department RCA lama Department RCA Risk Management Department Insurance Copy .Agreement Insurance O•.hcr Agreement Insurance Other Agreement Insurance Other G: Follo%%tip'agrrnt v!ransltr 17ete phone: 714-536-5227I • • AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND DIEHL EVANS & CO. FOR AUDIT SERVICES 1. TERM OF AGREEMENT 2. WORK STATEMENT 3. CITY STAFF ASSISTANCE 4. TIME OF PERFORMANCE 5. COMPENSATION 6. EXTRA WORK 7. METHOD OF PAYMENT 8. ADVICE AND CONSULTATION 9. INDEMNIFICATION AND HOLD HARMLESS 10. WORKKERS' COMPENSATION 11. INSURANCE 12. CERTIFICATES OF INSURANCE; ADDITIONAL INSURED ENDORSEMENTS 13. INDEPENDENT CONTRACTOR 14. TERMINATION OF AGREEMENT 15. ASSIGNMENT AND SUBCONTRACTING 16. CITY EMPLOYEES AND OFFICIALS 17. FAIR EMPLOYMENT PRACTICES/EQUAL OPPORTUNITY ACTS 18. AGENCY 19. CONFLICT OF INTEREST 20. NOTICES 21. IMMIGRATION 22. LEGAL SERVICES SUBCONTRACTING PROHIBITED 23. ENTIRETY 1 1 2 2 2 2 3 4 4 4 5 6 6 7 7 7 7 7 8 8 8 9 9 DIEHLEWDOC&k105101197 az ii.,-t,,V:z f-. �4 0 s • AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND DIEHL EVANS & CO., L.L.P. FOR AUDIT SERVICES THIS AGREEMENT is made and entered into this 19 t h day of mA 1997, by and between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California, hereinafter referred to as "CITY", and DIEHL EVANS & CO., L.L.P., a California limited liability partnership, hereinafter referred to as "AUDITOR." WHEREAS, CITY desires to engage the services of an independent auditor to audit all CITY accounts for fiscal years 1996-97, 1997-98, and 1998-99, pursuant to Charter Section 616; and Pursuant to documentation on file in the office of the City Clerk, the provisions of HBMC Chapter 3.03 relating to procurement of professional service contracts has been complied with; and AUDITOR has been selected to perform said services, NOW, THEREFORE, it is agreed by CITY and AUDITOR as follows: This Agreement shall commence on the day and year set forth herein as the execution date and shall terminate upon completion of AUDITOR's submittal of their final report for the fiscal year ending September 30, 1999. AUDITOR shall audit all CITY accounts and provide all services as described in the Request for Proposal, AUDITOR's proposal dated March 21, 1997, and Scope of Services (hereinafter collectively referred to as Exhibit -"A"), which is attached hereto and incorporated into this Agreement by this reference. Said services shall sometimes hereinafter be referred to as "PROJECT." 1 g:lagreemenldie h Ievn.05101197 AUDITOR hereby designates Nitin Patel and Mike Ludin who shall represent it and be its sole contacts and agents in all consultations with CITY during the performance of this Agreement. 3. CITY STAFF ASSISTANCE CITY shall assign a staff coordinator to work directly with AUDITOR in the performance of this Agreement. Time is of the essence of this Agreement. The services of the AUDITOR are to commence as soon as practicable after the execution of this Agreement, and all tasks specified in Exhibit "A" shall be completed as soon as practicable after the end of each fiscal year. The time for performance of the tasks identified in Exhibit "A" are generally to be shown in the Scope of Services on the Work Program/Project Schedule. This schedule may be amended to benefit the PROJECT, if mutually agreed by the CITY and AUDITOR. AUDITOR shall complete all reports by the dates detailed in the Proposal. In consideration of the performance of the services described herein, CITY agrees to pay AUDITOR fees as follows: FY 1996/97 - $44,350; FY 1997198 - $38,450; FY 1998/99 - $39,450. The maximum annual fee shall include all costs and expenses of AUDITOR for performance of the services described herein. In the event CITY requires additional services not included in Exhibit "A," or changes in the scope of services described in Exhibit "A," AUDITOR will undertake such work after receiving written authorization from CITY. Additional compensation for such extra work shall be allowed only if the prior written approval of CITY is obtained. If unusual circumstances are encountered which make it necessary for AUDITOR to do additional work, AUDITOR shall report such conditions to CITY's City Council and City 2 g :lag re e m e nld ie h lei n. 0 5 /01197 Administrator prior to undertaking such additional work, and request additional compensation at AUDITOR's agreed billing rates, all of which shall be subject to a written amendment hereto, approved by the City Council. 7. F PAYMENT A. AUDITOR shall be entitled to progress payments toward the fixed fee set forth herein in accordance with the progress and payment schedules set forth in Exhibit "A". U P +ply Iq1 B. Delivery of work product: A copy of every t report prepared by AUDITOR shall be submitted to the CITY to demonstrate progress toward completion of tasks. In the event CITY rejects or has comments on any such product, CITY shall identify specific requirements for satisfactory completion. Any such product which has not been formally accepted or rejected by CITY shall be deemed accepted. C. The AUDITOR shall submit to the CITY an invoice for each progress payment due. Such invoice shall: 1) Reference this Agreement; 2) Describe the services performed; 3) Show the total amount of the payment due; 4) Include a certification by a principal member of the AUDITOR's firm that the work has been performed in accordance with the provisions of this Agreement; and 5) For all payments, include an estimate of the percentage of work completed. Upon submission of any such invoice, if CITY is satisfied that AUDITOR is making satisfactory progress toward completion of tasks in accordance with this Agreement, CITY shall promptly approve the invoice, in which event payment shall be made within thirty (30) days of receipt of the invoice by CITY. Such approval shall not be unreasonably withheld. If CITY does not approve an invoice, CITY shall notify AUDITOR in writing of the reasons for non -approval, within seven (7) calendar days of receipt of the invoice, and the schedule of 3 g:lagreemenldiehleirn.05101 /97 0 • performance set forth in Exhibit "A" shall be suspended until the parties agree that past performance by AUDITOR is in, or has been brought into compliance, or until this Agreement is terminated as provided herein. D. Any billings for extra work or additional services authorized by CITY shall be invoiced separately to the CITY. Such invoice shall contain all of the information required above, and in addition shall list the hours expended and hourly rate charged for such time. Such invoices shall be approved by CITY if the work performed is in accordance with the extra work or additional services requested, and if CITY is satisfied that the statement of hours worked and costs incurred is accurate. Such approval shall not be unreasonably withheld. Any dispute between the parties concerning payment of such an invoice shall be treated as separate and apart from the ongoing performance of the remainder of this Agreement. reports. E. Final payment shall be made when CITY receives AUDITOR's final audit AUDITOR shall provide advice and consultation on matters that may arise from time to -time that will affect accounting, auditing, or operating procedures. AUDITOR shall provide CITY staff with advice and consultation as required throughout the year relating to subject matter of this Agreement. AUDITOR hereby agrees to indemnify, defend, and hold and save harmless CITY, its officers and employees from any and all liability, including any claim of liability and any and all losses or costs arising out of the negligent performance of this Agreement by AUDITOR, its officers or employees. AUDITOR shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California, the applicable provisions of the California Labor Code and all amendments thereto; and all similar state or federal acts or laws applicable; 4 g Aagreemenld ieh levn.05/06/97 and shall indemnify, defend and hold harmless CITY from and against all claims, demands, payments, suits, actions, proceedings, and judgments of every nature and description, including attorney fees and costs presented, brought or recovered against CITY, for or on account of any liability under any of said acts which may be incurred by reason of any work to be performed by AUDITOR under this Agreement. AUDITOR shall obtain and furnish evidence to CITY of maintenance of statutory workers compensation insurance and employers liability in an amount of not less than $100,000 bodily injury by accident, each occurrence, $100,000 bodily injury by disease, each employee, and $250,000 bodily injury by disease, policy limit. 11. INSURANCE In addition to the workers compensation insurance and AUDITOR's covenant to indemnify CITY, AUDITOR shall obtain and furnish to CITY the following insurance policies covering the PROJECT: A. General Liability Insurance A policy of general public liability insurance, including motor vehicle coverage. Said policy shall indemnify AUDITOR, its officers, agents, and employees, while acting within the scope of their duties, against any and all claims of arising out of or in connection with the PROJECT, and shall provide coverage in not less than the following amount: combined single limit bodily injury and property damage, including products/completed operations liability and blanket contractual liability, of $1,000,000 per occurrence. If coverage is provided under a form which includes a designated general aggregate limit, the aggregate limit must be no less than $1,000,000. Said policy shall name CITY, its officers, and employees as Additional Insureds, and shall specifically provide that any other insurance coverage which may be applicable to the PROJECT shall be deemed excess coverage and that AUDITOR's insurance shall be primary. B. Professional Liability Insurance. AUDITOR shall acquire a professional liability insurance policy covering the work performed by it hereunder. Said policy shall provide coverage for AUDITOR's professional 5 glagreemeMdiehlevn.05106197 0 • liability in an amount not less than $500,000 per claim. A claims made policy shall be acceptable. 12. CERTIFICATES C Prior to commencing performance of the work hereunder, AUDITOR shall furnish to CITY certificates of insurance, subject to approval of the City Attorney, evidencing the foregoing insurance coverages as required by this Agreement; said certificates shall provide the name and policy number of each carrier and policy, and shall state that the policy is currently in force and shall promise to provide that such policies will not be canceled or modified without thirty (30) days' prior written notice of CITY. AUDITOR shall maintain the foregoing insurance coverages in force until the work under this Agreement is fully completed and accepted by CITY. The requirement for carrying the foregoing insurance coverages shall not derogate from the provisions for indemnification of CITY by AUDITOR under the Agreement. CITY or its representative shall at all times have the right to demand the original or a copy of all said policies of insurance. AUDITOR shall pay, in a prompt and timely manner, the premiums on all insurance hereinabove required. A separate copy of the additional insured endorsement to each of AUDITOR's insurance policies, naming the CITY, its officers, and employees as Additional Insureds shall be provided to the City Attorney for approval prior to any payment hereunder. 13. INDEPENDENT CONTRACTOR AUDITOR is, and shall be, acting at all times in the performance of this Agreement as an independent contractor. AUDITOR shall secure at its expense, and be responsible for any and all payment of all taxes, social security, state disability insurance compensation, unemployment compensation, and other payroll deductions for AUDITOR and its officers, agents, and employees and all business licenses, if any, in connection with the services to be performed hereunder. 6 gAagreemenWiehlevn.05101197 �d=1N ji11►►,rIMk"[•]ff_[O zI*= ,I4►It0 All work required hereunder shall be performed in a good and workmanlike manner. CITY may terminate AUDITOR's services hereunder at any time with or without cause, and whether or not PROJECT is fully complete. Any termination of this Agreement by CITY shall be made in writing, notice of which shall be delivered to AUDITOR as provided herein. Either party may terminate this Agreement upon thirty days' written notice, delivered in 7,0 ,, P rt&.ya, accordance with the provisions under Paragraph, /f of this Agreement. This Agreement is a personal service contract, and the supervisory work hereunder shall not be delegated by AUDITOR to any other person or entity without the consent of CITY. AUDITOR shall employ no CITY official nor any regular CITY employee in the work performed pursuant to this Agreement. No officer or employee of CITY shall have any financial interest in this Agreement in violation of the applicable provisions of the California In the performance of this Agreement, AUDITOR shall comply with all applicable provisions of the California Fair Employment Practices Act (California Government Code §12940, et seq.) and the applicable equal employment provisions of the Civil Rights Act of 1964 (U.S. C. 2000e, et seq.) . 18. AGENCY Except as CITY may specify in writing, AUDITOR shall have no authority, express or implied, to act on behalf of CITY as its agency in any capacity whatsoever. AUDITOR shall have no authority hereunder, express or implied, to bind CITY to any obligation whatsoever. 7 gAagreemenldieh1evn.05101197 During the term hereof, AUDITOR shall not accept or perform any employment, or have any financial interest, which in any way conflicts with its performance of this Agreement. Huntington Beach City Charter §616 provides that during the term hereof, AUDITOR may have no personal interest, direct or indirect, in the fiscal affairs of the CITY government or any of its officers. 20. NOTICES Any notice or special instructions required to be given in writing under this Agreement shall be given either by personal delivery to AUDITOR's agent (as designated in Section 1 hereinabove) or to CITY's Director of Finance, as the situation shall warrant, or by enclosing the same in a sealed envelope, postage prepaid, and depositing the same in the United States Postal Service, addressed as follows: TO CITY: Dan Villella Director of Finance City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 TO AUDITOR: Nitin Patel, Partner DIEHL EVANS & CO., L.L.P. 18401 Von Karman, Ste. 200 Irvine, CA 92612-1642 AUDITOR SHALL be responsible for full compliance with the immigration and naturalization laws of the United States and shall, in particular, comply with the provisions of the United States Code regarding employment verification. 8 gAagreemenldiehievn.051D1197 0 • AUDITOR and CITY agree that CITY is not liable for payment of any subcontractor work involving legal services, and that such legal services are expressly outside the scope of services contemplated hereunder. AUDITOR understands that pursuant to Huntington Beach City Charter Section 309, the City Attorney is the exclusive legal counsel for CITY; and CITY shall not be liable for payment of any legal services expenses incurred by AUDITOR. The foregoing, and Exhibit "A": attached hereto, set forth the entire Agreement between the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their authorized offices the day, month and year first above written. DIEHL EVANS & CO., L.L.P., a California limited liability partnership By: IV Nitin Patel, Partner By 4�4fx� ` 9 (Name) (Title) CITY OF HUNTINGTON BEACH, A municipal corporation of the State of California 4004 A(1490� Mayor APPROVED AS TO FORM: 1 u_3 �,�City Attorney j - 1 - � 1 0 gAagreemenldieh1evn.05101l97 • r 1 u CITY OF HUNTINGTON BEACH • AUDIT PROPOSAL FOR THE THREE YEARS ENDING SEPTEMBER 30, 1999 • • • • • C: TITLE PAGE • RFP Subject: Certified Audits on the City of Huntington Beach For the Three Years Ending September 30, 1999 Name of Proposer: Diehl, Evans & Company, LLP Certified Public Accountants Local Address: 18401 Von Karman, Suite 200 Irvine, CA 92612-1542 Telephone: (714) 757-7700 Contact Persons: Michael R. Ludin, CPA Engagement Partner Nitin P. Patel, CPA Supervising Partner William S. Morgan, CPA Director of Management Consulting Date: March 21, 1997 • 7 :m AN 0 • 0 CITY OF HUNTLNGTON BEA(* • TABLE OF CONTENTS March 21, 1997 Page Number Letter of Transmittal 1 - 2 Qualifications of the Firm: Size and Location of Firm 3 Range of Activities 3 Licensing and Independence 3 Participation in "Quality Review" Programs 4 Education Programs 4 Participation in Professional Organizations 5 • GFOA, CSMFO and FASB Award Programs 5 City Clients 6 City Client References 7 Redevelopment Agency and Enterprise Fund Experience 8 Water Districts and Special Districts 9 Nonprofit Corporations and Joint Power Authorities 10 Experience With Government Bond Offerings 11 Computer Auditing Capabilities 12 Audit Team 13 Commitment Related To Personnel 13 Nondiscrimination Policy 13 Management Consulting Services: Cable Television Consulting Services 14 - 15 Hotel Transient Occupancy Tax Reviews 16 Litigation Support and Dispute Resolution Services for Governmental Agencies 17 Services for Law Enforcement Agencies 18 Reviews of Solid Waste Contractors 19 Consulting on Governmental Tax Issues 20 Redevelopment Agency Consulting 21 Cost Allocation Plans 21 Resume of Management Consultant 22 - 23 • 0 • • C • • • • • • • CITY OF HUNTINGIrON BEACH• TABLE OF CONTENTS (CONTINUED) March 21, 1997 Audit'Scope and Approach: Entities To Be Included In Audit Reports To Be Issued and Due Dates Commitment to Deliver Reports on a Timely Basis Audits To Be In Accordance With GAAS and Other Requirements Special Services Audit Approach Single Audit Approach Method of Sampling Management Letters Other Professional Services Retention Of and Access To Audit Workpapers Audit Timing Work Required By City Staff Schedules to be Prepared by City Staff Fees and Hourly Rates: Maximum Fees Composition of Current Audit Fee Hourly Rates For Special Services Attachment I - Proposal to Perform Review of Internal Controls in Treasurer's Office Attachment II - Resumes of Partners and Personnel Assigned. to Audit Attachment III - Results of Outside Quality Review Page Number 24 24 24 25 25 26 26 - 27 27 28 28 28 28 29 29 30 30 31 32 - 34 35 - 38 W 0 L 0 0 i El El • Ll • • QUALIFICATIONS OF THE FIRM DIEHL, EVANS & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS A PARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS 18401 VON KARMAN, SUITE 200 IRVINE. CALIFORNIA 92612-1542 (714) 757-7700 • FAX (714) 757-2707 • March 21, 1997 Mr. Robert J. Franz i Deputy City Administrator City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 • i • • • • Dear Mr. Franz: Z 39" OO • RODNEY K. M[DANIEL, CPA MICHAELR- LUDIN. CPA CRAIG W SPRAKER, CPA NITIN P PATEL, CPA ' PHILIP H. HOLTKAMP, CPA THOMAS M. PERLOWSKI. CPA HARVEY). SCHROEDER, CPA • A PROFES51ONAL CORPCRAT'0% We are pleased to present our proposal to again serve as independent auditors for the City of Huntington Beach for the three years ending September 30, 1999. As you are aware, our firm has audited the City of Huntington Beach and its related entities in prior years. We have prepared this information in accordance with the guidelines set forth in your request for proposal. Our proposal to review the internal controls in the Treasurer's office is included in Attachment 1. Wh W Th ified F' We consider ourselves to be the best qualified firm to perform auditing and accounting services for the City of Huntington Beach. Please consider these qualifications: • Our firm has extensive experience in auditing governmental entities. We currently audit twenty-one cities, eighteen redevelopment agencies, nine water districts, nine other special districts, and thirty-six nonprofit corporations and joint power authorities. • We will supervise this engagement with partners who are familiar with the City. Mr. Nitin Patel will serve as the supervising partner, in charge of the day to day operations of the audit. I will serve as the engagement partner with final responsibility for all facets of the audit. Both of us were involved with the City's audits from 1987 through 1990, We make a commitment to retain the same staff on the City from year to year, except where such personnel leave the firm. If a staff member is replaced, we also make a commitment to replace that person with staff of at least equal experience. -1- . OTHER OFFICES AT= 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330 CARLSBAD, CALIFORNIA 92008-2389 ESCONDIDO. CALIFORNIA 92025.2598 (619) 729-2343 • FAX (619) 729-2234 (619) 741-3141 • FAX (619) 741-9890 9 i Why We Are The Best Qpalified Firm Continued • You have expressed a desire to again submit your reports for the GFOA and CSMFO award programs. We have extensive experience in assisting our city clients in obtaining the GFOA "Certificate of Achievement for Excellence in Financial Reporting" and the CSMFO "Outstanding Award". We have worked closely with GFOA reviewers to resolve questions on reports, and three members of our audit team are "reviewers" for the CSMFO award program. We will assist you to ensure that the City's financial statements continue to meet all appropriate reporting standards. The City will require a single audit of its federal grants, in accordance with Government Auditing Standards and OMB Circular A 128. We perform single -audits on substantially all of our city clients. • We are a full service CPA firm. Our Management Consulting Department can provide the City with a wide variety of services, including cable television franchise fee and rate regulation compliance reviews, hotel transient occupancy tax reviews, litigation support and dispute resolution services, special services for police departments, reviews of solid waste contractors, consulting on redevelopment agency matters, cost allocation plans and computer consulting. We make a commitment to deliver all necessary reports based on the timetable presented on page 24. Also, our understanding of the work to be performed is set forth on pages 24 through 28. • 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. Also, our goal is to maintain a close, personal relationship with you and your staff, one which is a year-round working relationship. You should feel comfortable in calling on us for advice at any time. We will always be available should you require our services. C 11 • We respectfully request that we be selected as the independent auditors for the City for the three years ending September 30, 1999. We look forward to personally meeting with you to discuss our qualifications. We thank the City for the opportunity to present Nitin Patel, at (714) 757-7700 if you have any irrevocable offer for 90 days from the date of this our firm, and bind the firm to a contract. our proposal. Please feel free to contact me, or questions. This proposal constitutes a firm and letter. Mr. Patel and I are authorized to represent Very truly yours, DIEHL, EVANS & COMPANY, LLP By �� e, "e�- — chael R. Ludin, CPA Engagement Partner -2- SIZE AND LOCATION OF 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 70 years of public practice experience. Diehl, Evans & Company, LLP has extensive experience in governmental auditing and accounting. Over twenty thousand hours per year are devoted to this area of our practice for over 100 governmental units including cities, redevelopment agencies, water districts, special districts, nonprofit corporations and joint power authorities. • Your City would be served from our Irvine office, which has four partners, two principals, four managers and approximately fifteen other professional staff members. RANGE OF ACTIVITIES Diehl, Evans & Company, LLP is a full service CPA firm. We offer a broad range of services, including: 0 • Certified Audits • • • Compilations and Reviews • Limited Procedure Reviews a Tax PIanning • Income Tax Preparation • Management Consulting Services Our specific services for governmental agencies are more fully set forth in this proposal. 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" (1994 Edition), as published by the U.S. General Accounting Office. -3- 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, 1994, our firm underwent a quality review by a group of outside CPAs, under provisions of the AICPA Quality Review Program. These reviews are required every three • years. The 1994 review included a review of our audits of governmental agencies. On January 28, 1994 we received a final report with an unqualified opinion on our systems and procedures. Currently, we are undergoing our 1997 review. A copy of the outside CPAs report is included herein at Attachment I1I. 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. We have never been involved in litigation resulting from our audit work. EDUCATION PROGRAMS Diehl, Evans & Company, LLP has a formal continuing education program. All firm auditors are required to obtain 40 hours of continuing education per year, including at least 24 hours of government related continuing education courses every two years. 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 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. • 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 the Gann Computation • 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 128, OMB Circular A 133 and applicable AICPA standards • Laws and Regulations in the Government Sector -4- • PARTISATION IN PROFESSIONAL ORAZATIONS 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. GFOA, GASB and FASB Our firm is an associate member of the Government Finance Officers Association of the United • States and Canada (GFOA). Also, we have subscriptions with the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standard Board (FASB). We receive all GASB and FASB Statements, 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 partners (Mr. Michael Ludin, Mr. Craig Spraker and Mr. Nitin Patel) and our Director of Management Consulting (Mr. Bill 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 also is 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 • Mr. Ludin, Mr. Spraker, Mr. Patel, 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. Ludin and Mr. Morgan have both served as chairman of this committee, and have been involved over the years in preparing position papers issued on governmental accounting matters. • GFOA AND CSMFO AWARD PROGRAMS The partner and manager will be involved in all phases of report preparation, 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 CSMFD During the past five years, the following clients received awards: Cerritos Downey Irvine San Clemente • Claremont Encinitas Lakewood Santa Clarita Coronado Garden Grove Monrovia Thousand Oaks « Cypress Healdsburg PIacentia Tustin -5- • • CITY CLIENTS 40 We have listed below the cities which were under contract with us during the past six fiscal years. For your information, we are including the approximate population, the period of • service, the partner and manager in charge on the audit. Period of Service City Population From To Beaumont 10,200 1992 1995 Big Bear Lake 5,400 1993 Present • Burbank 98,700 1996 Present Cerritos 59,400 1969 Present Chino 64,000 1995 Present Claremont 37,000 1991 1995 Coronado 26,500 1970 Present 0 Cypress 44,200 1993 1995 Del Mar 4,860 1994 Present Downey 87,200 1987 Present 1960 1984 Encinitas 53,000 1986 1995 • Garden Grove 149,700 1994 Present Healdsburg 9,300 1991 Present Huntington Beach 191,600 1984 1990 1963 1972 Irvine 111,500 1993 Present Lakewood 76,700 1974 Present 1963 1971 La Palma 16,100 1974 1991 La Puente 34,200 1963 Present Los Alamitos 11,700 1996 Present 1988 1991 1978 1981 1971 1974 Monrovia 34,000 1976 1992 Ontario 129,300 1966 1990 Palm Desert 25,000 1992 Present Placentia 42,000 1986 Present 1973 1983 1964 1969 Rancho Palos Verdes 41,000 1993 Present Redondo Beach 64,000 1996 Present San Clemente 43,000 1992 1995 San Juan Capistrano 27,400 1993 Present Santa Clarita 147,000 1992 1996 Seal Beach 26,000 1963 Present Signal Hill 8,500 1962 Present South Gate 79,000 1988 1994 Thousand Oaks 109,000 1993 Present 1963 1980 Tustin 50,700 1985 1994 -6- • MY CLIENT REFERENCES • One means of judging the high quality of our auditing and accounting services would be contact with some of our existing clients. We are including the names and phone numbers of our current city clients. We encourage you to contact any of these individuals. City of BigBear Lake City of Garden Grove Cif of Placentia Ms. Pam Nelson Mr. Anthony J. Andrade Mr. Howard Longballa Finance Manager Controller Director of Finance (909) 866-5831 (714) 741-5061 (714) 993-8237 City of Burbank City of Healdsbura City of Rancho Mr. Robert P. Elliot Mr. Kurt Hahn Palos Verdes 0 Deputy Finance Officer Financial and Economic Mr. Brent Mattingly (818) 238-5500 Services Director Assistant City Manager (707) 431-3305 (310) 377-0360 City of Cerritos City of Irvine City of Redondo Beach Ms. Becky Lingad Jeffrey F. Niven Ms. Agnes T. Walker Finance Manager Manager of Fiscal Financial Services Director (310) 860-0311 Services (310) 372-1171 (714) 724-6027 �yd G City of Chino City of Lakewood City of San Juan Mr. Patrick J. Griffin Mr. Larry Schroeder Capistrano Director of Finance Director of Finance Ms. Cynthia Pendleton (909) 627-7577 (310) 866-9771 Director of Administrative Services (714) 493-1171 City of Coronad City__of Los Alamitos Mr. Jack Van Sambeek Mr. Gerard Goedhart Director of Administrative Assistant City Manager City of Seal Beach Services (714) 827-5670 Ms. Elizabeth Stoddard (619) 522-7300 Director of Administrative Services 40 City of La Puente (310) 431-2527 City of Del Mar Ms. Elaine Aguilar Ms. Suzanne Wellcore Assistant City Manager Financial Director (918) 330-4511 City of Signal Hill (619) 755-9354 Mr. Dennis MacArthur Director of Finance • City of Palm Desert (213) 426-7333 _City of Downey Mr. Paul S. Gibson Mr. Lee Powell Director of Finance Assistant City Manager (619) 346-0611 Ci of Thousand Oaks (310) 869-7331 Mr. Robert S. Biery Director of Finance (805) 4%-8619 • -7- EVELOPMENT AGENCY EXPEIANCE C Currently, we audit the following eighteen redevelopment agencies. Big Bear Lake Redevelopment Agency Marin County Redevelopment Agency Burbank Redevelopment Agency Palm Desert Redevelopment Agency Cerritos Redevelopment Agency Placentia Redevelopment Agency Chino Redevelopment Agency Rancho Palos Verdes Redevelopment Agency Coronado Redevelopment Agency Redondo Beach Redevelopment Agency Downey Redevelopment Agency San Juan Capistrano Redevelopment Agency Garden Grove Redevelopment Agency Seal Beach Redevelopment Agency Healdsburg Redevelopment Agency Signal Hill Redevelopment Agency Lakewood Redevelopment Agency Thousand Oaks Redevelopment Agency ENTERPRISE FUND EXPERIENCE Most cities audited by our firm have a water utility enterprise fund. Noted below is a partial listing of other enterprise funds audited by our firm over the past five years: City EnteiRrise Cerritos Reclaimed Water Claremont Transit, Sewer, Sanitation, Cemetery Coronado Golf Course, Sewer Del Mar Sewer Downey Golf Course, Transit System Healdsburg Water, Sewer, Electric, Transit, Airport Monrovia Sewer, Sanitation Santa Clarita Transit Seal Beach Sewer South Gate Sewer, Refuse 0 5:11 0 WAR DISTRICTS AND SPECIAL D&IC'I'S Noted below is a listing of water and special districts audited by our firm over the past year. Water Districts Borago Water District La Puente Valley County Water District Capistrano Valley Water District Newhall County Water District Castaic Lake Water Agency Orange County Water District Cucamonga County Water District Yorba Linda Water District Devil's Den Water District 0 Beach Cities Health District Dana Point Sanitation District Downey Cemetery District Garden Grove Sanitation District 0 a 0 S12ecial Districts Midway City Sanitary District Orange County Vector Control District Palos Verdes Library District Sunset Beach Sanitary District Valley Wide Recreation and Park District • -9- NONPROFIT &RPORATIONS AIND JOINT PQV*,. AUTHORITIES 0 • • • • Noted below is a 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 combined into the general purpose financial statements of cities or other organizations which exercise oversight responsibility. Affordable Housing Projects of Orange County, Inc. AIDS Services Foundation Alameda Corridor Transportation Commission Big Bear Lake Public Financing Authority California Council on Science and Technology Coronado Financing Authority Coronado Improvement Corporation Del Mar Public Facilities Corporation Downey Civic Center Corporation Downey Recreational Area Authority Downey Water Facilities Corporation Garden Grove Cable Corporation Garden Grove Fire Training Facility Garden Grove Improvement Corporation Garden Grove Library Corporation Garden Grove Willowick Golf Course Healdsburg Public Improvement Corporation Human Options, Inc. Huntington Beach Community Clinic International Fire Code Institute, Inc. Irvine Child Development Center Operating Corporation Irvine Senior Foundation Irvine Unified School District - District Advisory Forum Laguna Shand The Orange Trust Placentia Civic Center Authority Public Cable Television Authority Redwood Empire Financing Authority San Clemente Seniors, Inc. San Juan Capistrano Community Housing Corporation Southeast Area Animal Control Authority United Cerebral Palsy Association of Orange County WomeWs Transitional Living Center, Inc. • -10- • EXPER&CE WITH GOVERNMENT BON RINGS C Most of our governmental clients regularly issue bonds and other financing vehicles. Our firm is often involved with the following types of financing: Tax Anticipation Notes Tax Allocation Bonds • Revenue Bonds C Certificates of Participation Special Assessment District Bonds Residential Mortgage Revenue Bonds Industrial Development Bonds • Municipal Sale/Leaseback Arrangements Lease Purchases Bank Notes • The Firm provides a variety of services in connection with these financing arrangements, depending on the extent of our association with the offering. Under guidelines provided by the AICPA, we are "associated with" an offering if we provide any of the following services: • 1. Manually sign the auditors' report included in the offering document. 2. Provide a "consent letter" or "comfort letter" in connection with the official statement. 3. Review drafts of the official statement at the City's request. • 4. Assist in the preparation of supplemental financial information included in the official statement. Under these circumstances, we perform a "subsequent events" review of the City's financial condition immediately prior to the effective date of the offering. Such reviews are not part of • our standard fee arrangements, and would be subject to a separate fee quotation. • Finally, we regularly issue separate certified audit reports on individual bond issues, such as mortgage revenue bonds and industrial development bonds. • -11- WMPUTER AUDITLNG CAPABIL S • In connection with our initial evaluation of internal controls, our in-house computer audit consultant will perform a review of your EDP systems. His review will include the following areas: Organizational controls. • Physical controls over the hardware and peripheral equipment. • Operational controls (input, processing and output controls). More specifically, our auditors verify to what extent the City is utilizing: & • Terminal controls (password restrictions, etc.) • • Program access restrictions • Master file change controls * On-line editing • Batch and hash total controls • • Back-up procedures • Management review of documents and reports provided by the computer system After our internal controls evaluation, we will determine to what extent computer auditing . techniques will be utilized. For some testing, we may audit "through" the City's EDP - produced records, rather than "around" them. The extent of our computer auditing will be determined based on our analysis of the cost effectiveness of these techniques. For cities that use a fully -integrated, on-line computer system, our audit staff members may become knowledgeable with the City's procedures for accessing and making "inquiries" into the • various computer applications. In some instances, we may be able to randomly access and print-out sample data without significant assistance from City staff. Otherwise, we may need to request that City programmers assist us in accessing and printing -out the desired data. Alternatively, we may download selected City data into our portable computers, and then perform random audit tests on the data using our own computer -auditing software programs. • Each of our audit staff members is equipped with portable computers that are used to assist in workpaper preparation, trial balance adjustments, etc. We utilize Accountants Trial Balance, Lotus 1-2-3, Excel, WordPerfect, dBase and other programs to assist us in our audit work. • 9va 0 0 MANAGEMENT CONSULTING SERVICES 0 • 0 • 0 AUDIT TEAM 0 The audit team will consist of the engagement partner, supervising partner, audit manager, senior and tvm staff auditors. Mr. Michael R. Ludin, CPA, will be the engagement partner. He will have final responsibility for all facets of the audit. He will be the primary contact person with the City for any audit or reporting issues. The supervising partner will be Mr. Nitin P. Patel, CPA. He 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 serve as the audit manager. He will prepare the audit plan and audit programs, coordinate the engagement, supervise the senior accountant, schedule all field work, monitor time budgets, review all workpapers and financial statements, and resolve arty accounting or auditing problems prior to submission of final reports. The audit senior will be Mr. Jake Rahn, CPA. He will assume responsibility for all field work, including review of internal controls and the preparation of management letters. He will also supervise the assistant staff auditors. Resumes for the above partners and personnel are included at Attachment U on pages 35 through 38. • 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. • 0 • -13- CAW TELEVISION CONSULTING SWICES Our Management Consulting Department offers a wide range of services to California cities and / counties with respect to the cable television industry. Our cable work for governmental agencies can be grouped into three broad categories of service: • Cable TV Franchise Fee Compliance Reviews - We have reviewed the cable franchise agreements of various ,cities, and then have written programs to review compliance with various key financial provisions of the agreements. Our concentration has been on verifying the proper reporting of "gross revenues" (including advertising revenues) and the proper and timely payment of franchise fees. • Cable TV Rate Regulation Reviews - This work involves compliance reviews of FCC Forms 393, 1200, 1205, 1210, 1220 and 1240, with reports to the cities on the propriety of cable rates and equipment and installation charges. Over the past year, we have reviewed three "cost -of -service" filings on Form 1220. • Assistance with Cable TV Franchise Transfers - We have worked closely with certain cities on the transfer of their franchise from one cable operator to another. We have participated / in negotiations between the City and its cable operators, have assisted in drafting transfer resolutions, settlement agreements, City staff reports, etc. Also, we have performed a comprehensive "due diligence" review of a cable operator for two of our city clients. This involved extensive on -site work at the cable company's headquarters in Dallas, Texas. / Over the past three years, we have provided cable TV consulting services to the following twenty-two California cities: City of Alhambra City of Hermosa Beach City of Burbank City of Huntington Beach City of Camarillo City of Lakewood City of Concord City of La Palma City of Costa Mesa City of Lomita City of Cypress City of Manhattan Beach City of Encinitas City of Milpitas City of Escondido City of Moorpark City of Fountain Valley City of Stanton City of Garden Grove Cityof Temecula City of Glendale City of Westminster City of Glendora / Listed on page 15 are references for a number of these cities and certain attorneys that have retained our services for work in the cable field. / / -14- • CA& TELEVISION INDUSTRY REF&NCES Ms. Sheri D. Ungar Ms. Christina Sansone Deputy City Attorney Deputy City Attorney . City of Burbank City of Glendale 275 East Olive Avenue 613 East Broadway, #220 Burbank, CA 91510-6459 Glendale, CA 91206-4394 (818) 238-5700 (818) 548-2080 • Mr. Larry R. Davis Mr. Scott E Field Assistant City Manager Deputy City Attorney City of Camarillo City of Huntington Beach 601 Carmen Drive P.O. Box 190 • Camarillo, CA 93010 Huntington Beach, CA 92648 (805) 388-5309 (714) 536-5662 Mr. Peter Dragovich Mr. Russell I Morreale Senior Administrative Analyst Financial Services Manager City of Concord City of Manhattan Beach 1950 Parkside Drive, MS101 1400 Highland Avenue Concord, CA 94519-2578 Manhattan Beach, CA 90266 (510) 671-3085 (310) 545-5621 • Mr. Gary A. Bacock Mr. Richard T. Hare Personnel Director Deputy City Manager City of Cypress City of Moorpark 5275 Orange Avenue 799 Moorpark Avenue Cypress, CA 90630 Moorpark, CA 93021 (714) 229-6684 (805) 529-6864 Mr. Brett Hodgkiss Mr. Howard G. Stephens . Management Analyst Executive Director City of Encinitas Public Cable Television Authority 505 South Vulcan Avenue 9220 El Morada Encinitas, CA 92024-3633 Fountain Valley, CA 92708 (619) 633-2616 (714) 968-2024 . Mr. Clayton C. Phillips Mr. William M. Marticorena Director of Finance Attorney at Law City of Escondido Rutan & Tucker • 201 North Broadway Suite 1400 Escondido, CA 92025 611 Anton Boulevard (619) 741-4675 Costa Mesa, CA 92626 (714) 641-5100 • -15- 0 HQ* TRANSIENT OCCLTANCY TA&VIEWS Over the past three years, our firm has developed extensive experience in performing limited procedures reviews on various hotels and motels for compliance with City Transient Occupancy Tax Ordinances. In many instances, our work has uncovered substantial noncompliance by hotel operators and the underreporting of transient occupancy taxes to the City. These engagements normally include the following procedures: • A review of the City's TOT Ordinance to identify all major areas requiring compliance by r the hotel, and a review of the City's internal policies and procedures for monitoring the receipt of TOT. • • • • • • • Documentation of each hotel's internal controls over the accounting for, and reporting of, room rents. • Verification of "exemptions" taken by the hotel for government employees and "non - transient" guests. • Testing of the mathematical accuracy of annual, quarterly or monthly TOT reports; computation of late payment penalties and interest due to the City. Noted below are four cities for which we recently performed TOT reviews, together with the number of hotels reviewed and appropriate references. Number of Hotels/ City Motels Reviewed References Burbank 15 Mr. Robert P. Elliot Deputy Finance Officer (818) 238-5500 Irvine 7 Mr. Jeffrey F. Niven Manager of Fiscal Services (714) 724-6027 Manhattan Beach 8 Mr. Russell J. Morreale Financial Services Manager (310) 545-5621 Palm Desert 8 Mr. Paul S. Gibson Director of Finance (619) 346-0611 38 • -16- LITIGATICAUPPORT AND DISPUTE RESOL9I0N SERVICES FOR GOVERNMENTAL AGENCIES • Diehl, Evans & Company, LLP has provided extensive assistance to governmental entities in resolving litigations and disputes. In some instances, we have been hired directly by a City or redevelopment agency to provide a financial analysis of a disputed transaction, and then to assist the governmental agency in negotiating a settlement with an adversarial party. In other instances, we have been retained by attorneys for a governmental agency to work in a confidential attorney/client relationship, to prepare for depositions and trial. We are also available to act as "expert witnesses" should the need arise. Noted below are examples of litigation support and dispute resolution services provided to California governmental agencies in recent years. Dispute Resolution Services for Redevelopment Agencies In recent years, a Southern California redevelopment agency entered into a development agreement with a local company to construct commercial office buildings on land owned by the agency. Management of the agency suspected that the developer had overcharged the agency for construction costs on the buildings. Our firm was retained to do an investigation of building construction costs. As a result of our review, the redevelopment agency filed a civil lawsuit against the developer to recover improperly charged construction costs. Our firm then was retained by agency attorneys to assist in preparing for trial and in negotiating a settlement with the developer. Also, another Southern California redevelopment agency entered into a development agreement with an outside developer to construct and operate a commercial shopping center. Under terms of the development agreement, the agency was to share in the distribution of net rental income from the operation of the shopping center. However, the shopping center never produced net distributable income, in part, because of excessive charges against the project by the developer. We were retained by the redevelopment agency to analyze the propriety of costs and expenses charged to the project, and to assist the agency in negotiating a settlement in its dispute with the developer. Fraud Investigations tions for Police_ Department Our firm was retained by a Southern California Police Department to assist the Criminal Investigations Division with the prosecution of fraud cases. Our work on these fraud cases included the following services: • Analysis of business records confiscated through search warrants and subpoenaed bank records • Review of case files prepared by police detectives • Tracing of cash receipts and cash disbursements related to the embezzlement of funds • Preparation of reports for the Police Department, summarizing the facts of each case, the source and disposition of embezzled funds, and the identification of evidence to be used at trial. • -17- 0 SEROS FOR LAW ENFORCEMENT AINCIIES • • Reviews of Property and Evidence Control Procedures In recent years, our Management Consulting Department has been retained by two Southern California Police Departments to review accounting and control procedures in each Department's property and evidence room. Our reviews included the following areas: • Systems and procedures for the collection, documentation, packaging and labeling of property and evidence. • Proper segregation of duties, security procedures and inventory procedures in property and evidence rooms. • Controls over the storage and issuance of weapons. • Recommended accounting controls for the release of property to courts, crime labs, the District Attorney, etc. Consultation Services Regarding Asset Forfeiture Funds We regularly consult with law enforcement agencies throughout Southern California on the procurement, accounting and reporting for asset seizure funds. Our'firms Director of Management Consulting has done extensive research of federal and California laws related to asset forfeiture funds, and presented a seminar on this subject at the 1996 CSMFO Annual Conference. Should your law enforcement agency need services in this area, we will be able to assist your agency with such matters as maximizing the amount of asset seizure funds received, determining the "permissible" and "impermissible" uses of asset seizure funds, determining what current Clinton Administration policies are regarding asset seizure funds, and deciding what funds and accounts should be established in your agency's books and records to be in accordance with federal and state laws. Also, we assist law enforcement agencies in the identification and tracing of assets seized in connection with illegal drug transactions. We develop plans to attack drug trafficking assets and procedures to uncover assets laundered through businesses and financial institutions. Our services include reviews of business and personal accounting records, bank statements, corporate and personal tax returns, real property records and DMV records. • • • -18- • RAEWS OF SOLID WASTE CONTFAMRS Franchise Compliance Reviews In recent years, two Southern California cities have retained our firm to perform comprehensive franchise compliance reviews of their solid waste contractors. For example, on the City of Lakewood, our engagement included a review of the City's franchise agreement, an investigation of the waste contractor's revenues and expenses for unusual or questionable items, a recalculation of the contractor's profit using various assumptions, an analysis of dump fees for residential, commercial and other routes, a review of the contractor's tax returns, a comparison of the refuse rates with other cities in the area, an impact study on the reduction of refuse collection from biweekly to weekly, and a cost study on the effect of using the SERRF project dumpsite versus the County Landfill in Puente Hills. For a reference, please contact Ms. Nancy E. Hicks, former Director of Finance, (909) 861-4335. On the City of Irvine, our engagement included a review of the franchise agreement, a review of the waste contractor's systems and procedures, a physical inventory of commercial and • residential trash containers, a review of the propriety of disposal charges from the landfill site and a survey of residential users regarding customer service issues. For a reference, please contact Mr. Steven Weiss or Mr. Mike Byrne, City of Irvine, (714) 724-6350. • 0 Review _of Pilot Recycling Program Several Orange County cities, along with the County of Orange, entered into certain agreements with a disposal company to conduct a "pilot" recycling program over a six month period. Our firm was retained to determine the actual cost of the pilot recycling program and to determine the amount of recycling revenue generated from the sale of recycled materials. Because of the condition of the disposal company's accounting records, it was necessary for us to completely reconstruct all cost data for the pilot program. Our experience with this pilot program provided us with practical insight into the accounting and record keeping problems unique to disposal companies. For a reference on this engagement, please contact Mr. Douglas Dumhart, City of San Juan Capistrano, (714) 493-1171. Assistance with Contract Negotiations On the City of Signal Hill, our engagement included a review of representations made by a f Solid Waste Contractor during renegotiations of an existing contract. Schedules and other information provided to the City by the Contractor justifying proposed rates were examined and their basis questioned. Our findings assisted the City in negotiating lower rates for residential customers within the City. For a reference on this engagement, please contact Mr. Dennis MacArthur, City of Signal Hill, (310) 989-7319. a 50 0 CON#)LTLN- G ON GOVERNMENTAL TAVISSUES Over the years, Diehl, Evans & Company, LLP has developed a wide knowledge of tax issues related to governmental entities and their employees. Our Tax Department regularly issues tax opinions to governmental agencies setting forth the tax consequences of various proposed transactions. We also assist our governmental clients with tax reporting and compliance requirements. Each year our firm publishes a "Government Tax Manual". This manual is distributed to both 49 client and nonclient governmental units at a series of tax workshops which normally are presented in December each year. • C Noted below are areas where we have extensive experience in assisting clients with their tax questions: Taxation of Employee Fringe Benefits • Expense Reimbursement Plans • Fringe Benefit Rules Related to Automobiles and Other Vehicles • Cafeteria Plans • 457 Deferred Compensation Plans • Group Term Life Insurance Plans Tax Reporting and Compliance • Employee vs. Independent Contractor Issues • Form W 2 and Form 1099 Reporting • Payroll Tax Reporting • Workers' Compensation Tax Issues & Other Areas of Emphasis 10 • Arbitrage Calculations and Rebates • Assistance in the Formation of Government -Related Nonprofit Corporations • Assistance in Selection of Retirement Plans E W011 • R46ELOPMENT AGENCY CONSIANNG We are one of the most experienced CPA firms in California in providing consulting services to redevelopment agencies. We regularly consult with executive directors and finance directors of agencies on how to structure transactions to meet all requirements of the Health and Safety Code. We also provide advice on such matters as Iow and moderate income housing strategies, mergers of project areas, transfers and loans between project areas and techniques for creating agency indebtedness. • In recent years, we have performed management studies on three redevelopment agencies. These engagements involved a complete review of each agency's operations. Reports were issued setting forth suggestions for changes in operational policies and procedures. Also, the chart of accounts for each agency was revised and expanded to bring the accounting system into compliance with state law. • Also, our firm periodically conducts redevelopment agency workshops and publishes a "Redevelopment Handbook". This publication sets forth generally accepted accounting principles and reporting standards for agencies, and explains how to comply with various sections of the California Community Redevelopment Law and the Government Code. Our handbook is recognized as an authoritative guide in California, as it has been reproduced and distributed by the California Redevelopment Association. COST ALLOCATION PLANS Our governmental agencies often require an overhead cost allocation plan. The primary purposes of such a plan are to allocate indirect costs among the departments or agencies benefiting from the overhead, and to set or revise user fees which are based primarily on a cost reimbursement basis. We have a thorough knowledge of the various authoritative pronouncements upon which such plans are prepared, including: • Office of Management and Budget Circular A 87. 0 • "Cost Accounting for California Cities", published by the League of California Cities. • "Cost Accounting Pblicies and Procedures Manual", published by the California Uniform Public Construction Cost Accounting Commission (CUCCAC). • Cost allocation plans prepared by our firm included detailed narrative descriptions of the operation of each department or agency and comprehensive schedules showing allocations of cost. • • -21- • RAME OF MANAGEMENT CONST • • • • • • • • WILLIAM S. MORGMN, CPA Position Director of Management Consulting Education University of Southern California Bachelor of Science in Accounting, 1967 Professional Organizations American Institute of Certified Public Accountants (Member) AICPA Management Consulting Services Division (Member) California Society of Certified Public Accountants (Member) California Society of Municipal Finance Officers and (Associate Member) California Redevelopment Association (Associate Member) Committees of Orange County Chapter of CSCPA: Governmental Accounting and Auditing Committee (Past Chairman) Litigation Services and Alternative Dispute Resolution Committee Range of Experience Mr. Morgan was employed by Arthur Young and Company (now Ernst and Young) from 1967 through 1972. He has been employed by Diehl, Evans & Company, LLP since 1972 with emphasis in services for governmental agencies. He has extensive experience in management consulting, tax consulting, auditing and financial reporting for governmental units. He is a frequent public speaker on governmental issues. Examples of Management Consulting Projects Supervised • Cable TV Franchise Fee and Rate Regulation Compliance Reviews Transient Occupancy Tax Reviews on City Hotels/Motels . 22 California Cities Under Contract Over the Past Three Years City of Burbank City of Irvine City of Manhattan Beach City of Palm Desert • WAI C RESUME MANAGEMENT CONSULTANT&NTINUED) • • • • • • • • F, WILLIAM S. MORGAN, CPA (CONTINUED) Examples of Mapagement Consulting PrLDjects Supervised (Continued) • Reviews of City Police Department Property and Evidence Control Procedures • Systems and Procedures Studies on Redevelopment Agencies • Cost Allocation Plans • Reviews of City Solid Waste Contractors • Litigation Support Services (Special Reports on Fraud Cases) • Special Study on Economic and Tax Consequences of Closing the Long Beach Naval Hospital References Mr. Al Holliman Finance Director City of Vista (619) 726-1340 Mr. Clayton Phillips Director of Administrative and Financial Services City of Escondido (619) 741-4676 Ms. Christina R. Sansone Deputy City Attorney City of Glendale (818) 548-2080 Burbank Police Department Chino Police Department Tustin Police Department Marin County Redevelopment Agency South Gate Redevelopment Agency City of Fullerton City of Monterey Park City of Irvine (Waste Management of Orange County Inc.) City of Lakewood (B-Z Disposal Services) Cities of Dana Point, San Juan Capistrano and San Clemente (Solag Disposal) Burbank Police Department Los Angeles District Attorney's Office City of Lakewood Mr. Scott F. Field Deputy City Attorney City of Huntington Beach (714) 536-5662 Mr. Bill Todd Executive Director Joint Powers Employee Benefit Authority (714) 975-8548 Ms. Eunice Kramer Director of Finance City of El Segundo (310) 322-4670 • -23- i •. AUDIT SCOPE AND APPROACH • OTITIES TO BE INCLUDED IN A& r 0 11 • • 0 • • • City of Huntington Beach Redevelopment Agency of the City of Huntington Beach Huntington Beach Public Financing Authority Huntington Beach Public Facilities Corporation Central Net Operations Authority REPORTS TO BE ISSUED AND DUE DATES City of Huntington Beach - Comprehensive Annual Financial Report Redevelopment Agency of the City of Huntington Beach - Annual Report, Including Report on Compliance Huntington Beach Public Financing Authority Huntington Beach Public Facilities Corporation Central Net Operations Authority AB 2766 Subvention Funds Report Management Letter Report on Compliance with Article XIIIB Appropriation Limit Single Audit Reports: • Independent Auditors' Report on Schedule of Federal Financial Assistance • Independent Auditors' Report on Compliance in Accordance with Government Auditing Standards • Independent Auditors' Report on Compliance with General Requirements Applicable to Federal Financial Assistance Programs Due Dates February 15 February 28 March 15 March 15 March 15 March 31 February 15 February 15 March 31 • Independent Auditors' Report on Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs • Independent Auditors' Report on Compliance with Specific Requirements Applicable to Nonmajor Federal Assistance Programs • Independent Auditors' Report on Internal Control Structure in Accordance with Governmental Auditing Standards • Independent Auditors' Report on Internal Control Structure in Accordance with OMB Circular A 128 COMMITMENT TO DELIVER REPORTS ON A WMELY BASIS If all books and records, schedules and documents are made available to us by December 1, we make a commitment to have audit team members available and to provide all reports by the due dates specified above. • -24- • AUDITS TO BE IN apURDkNCE WITH GARS AND QMR REQUIREMENTS We will audit the general purpose financial statements of the City and the component units noted on page 24. 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 audits will be in accordance with generally accepted auditing standards as set forth by the AICPA, and will include such auditing procedures as we consider necessary under the circumstances. The combining, individual fund and account group financial statements will be subjected to auditing procedures as we consider necessary in relation to the general purpose financial statements taken as a whole. The scope of our audits 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 (1994 Edition), issued by the U.S. General Accounting Office, and the requirements of OMB Circular A 128, Audits of State and Local Governments. 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 procedures review of the City's Gann Spending Limitation Computation as required by Section 1.5 of Article XIIIB of the California Constitution. Our • review will be performed in conformance with the provision of the "League of California Cities Uniform Guidelines". SPECIAL SERVICES The City may request certain special services, such as transient occupancy tax reviews or reviews of compliance with provisions of franchise agreements. With regard to these engagements, we intend to perform limited procedures reviews in connection with each assignment, in accordance with the provision of Statement on Auditing Standards No. 75. Under the provisions of SAS 75, 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 generally accepted auditing standards. Such special services are not part of our standard fee arrangements and would be subject to a separate fee quotation. • • • -25- 0 0 AUDIT APPROACH 0 1. Planning and Initial Work: After our appointment as auditors, members of our audit team will meet with you and your staff to discuss the scope and timing of the audits and any accounting issues known at that time. We will schedule about two weeks of interim audit work during May or 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. 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 Statement on Auditing Standards No. 55, "Consideration of the Internal Control Structure in a Financial Statement Audit", as amended by Statement on Auditing Standards No. 78. 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, major receivables, long-term debt and major revenues if appropriate. • Detailed audit of all significant balance sheet and revenue and expenditure/expense accounts for each fund group. • • 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. • Our firm uses comprehensive audit programs for Cities, Redevelopment Agencies and Single Audits. The programs are amended, as necessary, for each audit. • SINGLE AUDIT APPROACH The single audit will be performed in accordance with all the requirements of the Single Audit Act of 1984, OMB Circular A 128, Governmental Auditing Standards issued by the GAO (the "Yellow Book") and AICPA Statement on Auditing Standards No. 68, "Compliance Auditing Applicable to Governmental Entities and Other Recipients of Governmental Financial Assistance". • -26- • &TGLE AUDIT APPROACH (CON EDl When we begin the Single Audit, we will identify the Major and Nonmajor Federal Financial Assistance Programs of the City. We will prepare narratives or other documentation related to these grant programs and identify the internal control strengths and weaknesses of each program. We will then perform tests of transactions related to'these grant programs in order to satisfy ourselves that the internal controls are functioning as intended. Then we will select transactions, reports, files etc. to test compliance on each system. a Our firm has prepared comprehensive audit programs for all phases of the single audit. These programs are as follows: a. General audit program for single audit of federal grants • b. Single Audit Quality Control Checklist c. Single Audit Internal Control Checklist . d. General Compliance Testing Programs: 1) Political Activities 2) Davis -Bacon Act • 3) Civil Rights • • 4) Cash Management 5) Relocation Assistance and Real Property Acquisition b) Allowable Costs/Cost Principles 7) Drug -free Workplace e. Separate specific compliance audit programs for each type of financial assistance, such as CDBG, Section 8 Housing, OCJP, FAU, Older Americans Act, Job Training Partnership Act, Prop A Transit Funds, and other federal or state grants. METHOD OF SAMPLING AICPA Statement on Auditing Standards No. 39 allows an auditor to utilize either judgement sampling or statistical sampling techniques, based on the auditor's professional evaluation. We anticipate using judgment sampling techniques. We will not determine our sample sizes for substantive testing of year-end balances until our preliminary evaluation of internal controls. • -27- • • 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. • • • C • C 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 or computer matters, and we will be available to attend City Council meetings as needed. RETENTION OF AND ACCESS TO AUDIT WORKPAPERS In accordance with provisions of OMB Circular A 128 and GAO requirements, our audit workpapers will be maintained for at least three 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 workpapers. 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 approximately December 1 each year, the time schedule for the various phases of the audit would be approximately as follows: Interim Work Inventory Observations/Confirmation Mailings Year-end Field Work Deliver Reports June - July September 30 December 1 - January 15 See Due Dates on Page 24 • -28- • • WORK REQUIRED BY CITY S 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. Typing of all confirmation requests. • 4. Pulling and refiling of all supporting documents required for audit verification. 5. Preparation of financial statements and footnotes, as needed. • 6. Preparation of the transmittal letter and all statistical tables for the CAFR. SCHEDULES TO BE PREPARED BY CITY STAFF 1. Bank reconciliation for all accounts 2. Schedule of investments 3. Schedule of receivables 4. Inventory listings 5. Schedule of general fixed assets 6. Schedule of fixed assets including depreciation for proprietary funds 7. Schedule of general long-term debt 8. Schedule of long-term debt for proprietary funds 9. Schedule of interfund receivables/payables and interfund transfers 10. Schedule of deposits payable 11. Schedule of accounts payable including accrued liabilities • 12. Schedule of reserves of fund balances 13. Schedule of contributed capital for proprietary fund types 14. Schedule of deferred revenue 15. Schedule of compensated absences 16. Schedule of interest income allocations -29- 0 • FEES AND HOURLY RATES • • i • • C • • MAXIMUM FEES • Our maximum fees for the three years ending September 30, 1999 will be as follows: 1997 1998 1999 City audit (CAFR) $ 19,900 $ 19,900 $ 20,400 Redevelopment Agency of the City of Huntington Beach including Compliance Report 5,300 5,300 5,450 Huntington Beach Public Financing Authority 1,600 1,600 1,650 Huntington Beach Public Facilities Corporation 1,600 1,600 1,650 • Central Net Operations Authority 1,850 1,850 1,900 AB 2766 Subvention Funds Report 1,500 1,500 1,600 Management Letter 750 750 750 Report on Compliance with Article XIIIB Appropriation Limit 450 450 450 ! Single Audit of Federal Grants 5,500 5,500 5,600 38 450 38,45 39 450 COMPOSITION OF CURRENT AUDIT FEE Our proposed fee for the year ending September 30, 1997 is computed as follows: Standard Hours Rates • Michael Ludin, CPA - Engagement Partner 24 x 125.00 = 3,000 Nitin Patel, CPA - Supervising Partner 80 x $ 125.00 = $ 10,000 Computer Consultant 16 x 80.00 = 1,280 Robert Callanan, CPA - Manager 160 x 80.00 — 12,800 • Jake Rahn, CPA - Senior 270 x 60.00 = 16,200 Staff Accountants 320 x 55.00 = 17,600 Travel, typing and other 20 3,200 64,080 Discount (40%) (25,630) TOTAL ,8�90 38 450 C.' -30- r SURLY RATES FOR SPECIAL SEROCES. 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: 1997 1998 1999 Michael Ludin, CPA - Partner $ 125 $ 125 $ 135 Nitin Patel, CPA - Partner 125 125 135 Robert Callanan, CPA - Manager 80 80 90 Jake Rahn, CPA - Senior 60 60 65 • Staff Accountants 55 55 60 • • • • • E • sit u 0 • • • 0 a r ATTACHMENT I CITY OF HUNTINGTON BEACH PROPOSAL TO PERFORM REVIEW OF INTERNAL CONTROLS IN TREASURER'S OFFICE FOR THE YEAR ENDING SEPTEMBER 30, 1997 • • NATURE OF SERVICES • In connection with the annual audit of the City's Comprehensive Annual Financial Report, the City has requested a one-time review of the internal controls in the Treasurer's office. This • service will be an "agreed -upon Iimited procedures review" on the systems and procedures of the Treasurer's office. The procedures will not be sufficient to render a separate certified opinion on the City's cash and investments. Also, this service will be a "Nonattest Services" engagement. • Our report is expected to read substantially as follows: "City Council City of Huntington Beach Huntington Beach, California • We have performed the procedures enumerated herein, which were agreed to by the management of the City of Huntington Beach (the City), solely to assist the City in assessing the adequacy of internal controls related to systems and procedures in the Treasurer's office as of September 30, 1997. This engagement to apply agreed -upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the management of the City of Huntington Beach. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. Our procedures were more limited than would be necessary to express an opinion on the internal control system of the Treasurer's office, and we do not express such an opinion. Had we made an examination of the internal control system of the Treasurer's office, other • matters might have come to our attention that would have been reported to you. The City Treasurer and City management are responsible for establishing and maintaining a system of internal controls for the Treasurer's office. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and • related costs of control procedures. The objectives of such a system are to provide management with reasonable, but not absolute, assurance that cash and investments are safeguarded against loss from unauthorized investments or dispositions, and that transactions are executed in accordance with management's authorization and recorded properly. • Also, we make no representations or guarantees regarding the safety, liquidity or yield on any investments currently held by the City or to be acquired in the future, and our firm takes no responsibility for any losses sustained as a result of the City's investment policies and procedures. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited. " • -32- 0 COALTANT ASSIGNED TO ENGAGEONT This service will be planned, supervised and reviewed by William S. Morgan, CPA, our firm's . Director of Management Consulting. His resume is included at pages 22 and 23. • 0 11 AGREED -UPON LIMITED PROCEDURES Noted below are the procedures that we propose in connection with this review: 1. We will review the system of internal controls in the Treasurer's office regarding the handling of cash and investments. Our review will include: • Controls over incoming cash and checks • Segregation_ of duties, such that persons who have custody or control of cash and investments are separate from those with record keeping functions • Controls over wire transfers - provisions of wire transfer agreements • Whether investments are purchased using "delivery vs. payment" instructions • Whether investment transactions are confirmed in a timely manner • Control over blank checks and signature plates • Timeliness of bank reconciliations • Adequacy of banking services agreements and lockbox agreements (if any) 0 • Procedures for selecting and monitoring broker/dealers 2. We will review the City's investment policies and practices to determine if investments are being made in accordance with the California Government Code. In connection with this review, we will determine if the City: • • • Annually considers its investment policy in a public session • Has established, in the following order, Safety, Liquidity and Yield, as investment priorities in its policy • Has established that persons authorized to make investment decisions are trustees and therefore fiduciaries subject to the prudent investor standard • Produces quarterly investment reports including certification of compliance with r investment policies and adequate six-month cash flows (Note: Limiting investments to LAIF, County Pools and/or FDIC insured deposits does NOT exempt a City from reporting - it simply allows reports from the above three institutions to be attached to the investment report.) • -33- 2. (Continued): i • Prohibits derivatives such as inverse floaters, interest only collateralized mortgage obligation strips, range notes and zero interest accrual securities as authorized investments 9 • • • Limits holdings in reverse repurchase agreements (reverse repos) to 20 % of portfolio and 92 days in maturity and only with prior Council approval; repos and reverse repos permitted only with primary dealers • Requires delivery of all securities via book entry, third party custodian or physical delivery (no holding of securities by broker) • Limits investment in any one mutual fund to 10 % of investments but allows up to 20 % in any permitted money market mutual fund • Limits investments to only those allowed under the Government Code 3. We will review the City's practices with regards to the insurance and collateralization of public deposits. 4. We will review the City's "Investment Pblicy" and compare it to "model investment policies" published by the California Debt Advisory Commission and GFOA. We will recommend revisions in the City's policy, where appropriate. 5. We will issue a written report on our procedures and findings. FEE Our fee for this review, with our written report thereon, will be $5,900. • -34- • .i . . • . • • . ATTACHMENT II RESUMES OF PARTNERS AND PERSONNEL ASSIGNED TO AUDIT 0 0 • • • P RS AND PERSONNEL ASSIGNED TO AUD T CONTINUED MICHAEL R. LUDINCPA Position Engagement Partner Education California State University, Fullerton i Bachelor of Arts in Business Administration, with concentration in Accounting, 1975 Pro essional • Organizations American Institute of Certified Public Accountants California Society of Certified Public Accountants • Governmental Accounting and Auditing Committee of the Orange County Chapter, California Society of CPAs, Past Chairman Associate Member of Government Finance Officers Association (GFOA) Associate Member of California Society of Municipal Finance Officers (CSMFO) CSMFO Professional and 'Technical Standards Committee - Report Reviewer for Award Program Range of Esperience Has been with Diehl, Evans & Company, LLP since 1978 with emphasis in governmental auditing and financial reporting. Experience includes supervision of over one hundred • audits of governmental agencies including cities, redevelopment agencies, nonprofit corporations, and joint power authorities. Public speaker on municipal accounting and frequent instructor at firm's in-house governmental accounting and auditing seminars. Managing Director of firtn's Irvine office. 0 -35- • • • E F, • C E Nrr1N P PATEL CPA Position Supervising Partner Education University of California at Irvine Bachelor of Arts in Economics Professional Organizations California State University at Long Beach Masters of Accounting Program 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 Range of Experience_ Has been with Diehl, Evans & Company, LLP since 1986. Experience includes governmental auditing for cities, redevelopment agencies and nonprofit corporations. Over the past six years, Mr. Patel has supervised the following governmental agencies: City of Healdsburg Capistrano Valley Water District City of La Puente Citj of Palm Desert City of San Juan Capistrano City of Santa Clarita City of Seal Beach City of South Gate City of lbistin Castaic Lake Water Agency Cucamonga County Water District Devil's Den Water District Elsinore Valley Municipal Water District Orange County Water District Santa Margarita Water District Yorba Linda Water District Marin County Redevelopment Agency • -36- • PARTNERS A41OPERSONNEL_ ASSIGNED TO AUI* (CONTINUED) ROBERT J. CALLANAN, CPA • Position Manager Education Aquinas College, Grand Rapids, Michigan Bachelor of Arts, Business Management, 1988 Bachelor of Science, Accounting, 1988 Professional Organizations American Institute of Certified Public Accountants • California Society of Certified Public Accountants Ranee of Experience Has been with Diehl, Evans & Company, LLP since 1988, concentrating on audits of governmental agencies and nonprofit corporations. Prior audit engagements include: City of Cerritos • City of Chino City of Claremont City of Cypress City of Garden Grove City of Irvine City of Lakewood City of Los Alamitos City of Signal Hill • City of South Gate Pico Water District • Southbay Regional Public Communications Authority Walnut Valley Water District • -37- • PARTNERSERSONNEL ASSIGNED TO MA(CONTINUED) JAKE C. RAHN, CPA • Position Audit Senior Education Concordia University, Irvine Bachelor of Science, Accounting/Management, 1993 • Range of Experience T Joined Diehl, Evans & Company, LLP in May, 1994, • concentrating on audits of governmental agencies and nonprofit corporations. Prior audit engagements include: City of Cerritos City of Downey City of Healdsburg City of Lakewood • City of Placentia City of lAistin Cucamonga County Water District El Toro Water District Marin County Redevelopment Agency • Mental Health Association of Orange County Santa Ana/TVstin Transportation Authority Southeast Area Animal Control Authority • C E -38- 0 ATTACHMENT III RESULTS OF OUTSIDE QUALITY REVIEW • • • • 0 • • 0 AICPA Quality Review Program American Institute of Certified Public Accountants To the Partners DIERL EVANS. & COMPANY Admintstered in California by the Quaiity Revlata Services Divitiow Caliform" Society of Certified Public Accountants 275 Sboreiine Dries Redu+nod City, CA 94063-1412 (41 i) 802-2600 FAX. (413) 902-2350 We have reviewed the system of quality control for the accounting and auditing practice of Diehl, Evans & Company (the ' Firm'l in effect for the year ended June 30. 1993. Our review was conducted in conformity with standards for on site- quality reviews established by the American Institute of Certified Public Accountants. We tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests included a review of selected accounting and auditing engagements. In performing our review, we have given consideration to the quality control standards issued by the AICPA. Those standards indicate that a firtn's system of quality control should be appropriately comprehensive and suitably designed in relation to the f rufs size, organizational structure, operating policies, and the nature of its practice. They state that variance in individual performance can affect the degree of compliance with a firnes quality control system and, therefore, recognize that there may not be adherence to all policies and procedures in every case. . In our opinion, the system of quality control for the accounting and auditing practice of Diehl. Evans & Company in effect for the year ended June 30.1993, met the objectives of quality control standards established by the AICPA and was being complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards in the conduct of that practice. 0 January 27, 1994 a.4. a%i . Carlos G. Punzalan Team Captain • -39- CITY OF HUNTINGTON BEACH AMENDMENT TO ATTACHMENT I IN AUDIT PROPOSAL DATED MARCH 21, 1997 AMENDED PROPOSAL TO PERFORM REVIEW OF INTERNAL CONTROLS IN TREASURER'S OFFICE FOR THE YEAR ENDING SEPTEMBER 30, 1997 MAY 5, 1997 I: 119971firmlpromolhtgbch2. wp 0 NATURE OF SERVICES 0 In connection with the annual audit of the City's Comprehensive, Annual Financial Report, the City has requested a one-time review of the internal controls in the Treasurer's office. Specifically, this service will be an "agreed -upon limited procedures review" on the systems and procedures of the Treasurer's office. The City Treasurer and other members of City management will not provide our firm with "written assertions" about the effectiveness of the internal controls within, or under the control of, the Treasurer's office. Accordingly, this engagement will be a "Nonattest Services" engagement under the provisions of AICPA Statement on Standards for Attestation Engagements No. 2 (SSAE No. 2), paragraphs 8 and 9. Also, the procedures will not be sufficient to render a separate certified opinion on the City's cash and investments. AGREED -UPON LIMITED PROCEDURES Our primary emphasis in this review will be on controls related to the receipting and disbursing of cash. Noted below are specific procedures we propose to perform in each area: Cash Receipts 1. We will review internal controls over incoming cash receipts within the Treasurer's office. 2. The City has a number of offsite locations for the receipt of cash - the Library, the Art Center, the beach (primarily parking meter receipts) and other park and recreation locations. Receipts at these offsite locations are collected by mail, by phone (through credit cards) or in person. Receipts are summarized using City computer software programs, or in some cases, on manual logs. Regarding these locations we will review: • "Pbint of receipt" controls, such as the use of cash registers, prenumbered cash receipt forms, dual custody of cash until deposit, etc. • Controls over, and the timeliness of, cash transfers to the City or the bank. • Proper segregation of duties between those handling cash and ones responsible for summarizing and transmitting related accounting data. • Reports generated and input into the City's cash system. City policies which attempt to minimize the amount of currency handled (such as programs to collect fees in advance through mail deposits or credit card collections). • Analytical controls that may highlight problems with cash collections (such as "exception reports" that highlight unusually high or low daily deposits). -1- AGREEDJK0N LIMITED PROCEDURES - TINUED Cash Disbursements With regard to cash disbursements, we will concentrate our review on the following areas: • Controls over wire transfers, including: - A review of wire transfer agreements with the City's lead bank and with third party custodians, with an emphasis on the controls and security provisions over each party making or receiving wire transfers. - If dual approvals are required for wire transfers over a certain dollar amount. - What City officials are authorized to make wire transfers. - What deposits or investments may be acquired by wire transfer. • Controls over blank checks, signature plates, etc. Other Controls We also will review the following controls: • Segregation of duties within the Treasurer's office between cash and investment custody and recordkeeping functions. • Controls over the City vault. 6 Timeliness of bank reconciliations by members of the Finance Department. CONSULTANTS ASSIGNED TO ENGAGEMENT This service will be planned, supervised and reviewed by William S. Morgan, CPA, our firm's Director of Management Consulting. His resume is included within the City's audit proposal. Certain work on this engagement (primarily work at offsite locations) will be performed by a manager from our Management Consulting Department. FEES AND HOURLY RATES Our fee is computed based on the following hours and hourly rates: William Morgan 24 hours x $ 125.00 -- $ 3,000.00 Nitin Patel (Quality Review) 2 hours x 125.00 -- 250.00 Manager 24 hours x 80.00 = 1,920.00 Report preparation, travel and other out-of-pocket expenses 730.00 50 hours 5 900.00 -2- • REPORT WORDING is Our report is expected to read substantially as follows: "City Council City of Huntington Beach Huntington Beach, California We have performed the procedures enumerated herein, which were agreed to by the management of the City of Huntington Beach (the City), solely to assist the City in assessing the adequacy of cash internal controls related to systems and procedures within, and under the control of, the Treasurer's office as of September 30, 1997. This engagement to apply agreed -upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the management of the City of Huntington Beach. Consequently, we make no representations regarding the sufficiency of the procedures described herein, either for the purpose for which this report has been requested or for any other purpose. Our procedures were more limited than would be necessary to express an opinion on the internal control system of the Treasurer's office, and we do not express such an opinion. Had we made an examination of the internal control system of the Treasurer's office, other matters might have come to our attention that would have been reported to you. The City Treasurer and City management are responsible for establishing and maintaining a system of internal controls for the Treasurer's office. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of such a system are to provide management with reasonable, but not absolute, assurance that cash and investments are safeguarded against loss from unauthorized investments or dispositions, and that transactions are executed in accordance with management's authorization and recorded properly. Also, the scope of this engagement was not directed primarily at investment policies and procedures. Accordingly, we make no representations or guarantees regarding the safety, liquidity or yield on any investments currently held by the City or to be acquired in the future, and our firm takes no responsibility for any losses sustained as a result of the City's investment policies and procedures. This report is intended solely for the use of the City and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures. However, if this report is made a matter of public record, its distribution will not be limited." -3- 9=8 DATE MADGrM 3 a�� :� #� ■mow - - �a.kf:<.�: #.�.:`f ram:-:11;� 'MR..R: ::•R`%�'l1- '�:k# :i R,:71-^1M-�IIG :. . o:o }:.,rpc a o:rn;c;rox;Y:orn••: .e.. >:' <,5:::; o.S..:,.L.,q k::v%;�:%;: x?,'{.+CoR.ykr;. - -a:3�:.•: nti ::q�,o,.k :,� ..}:x?::: j: .R�:}; 't:}.e.s.? :Q4':. Oii'i yi.}': }: :iy%S4':O`:4" }.k}Q Y .SJ. • ..:j:{!?4..: £} a:Y _ -:uti.� z' >r " w..k . ;. N r 4 15 19 9 7 ='v... ..:.. .. n }. .. :•;<j:kid}�., k!'}� 'c.:e.,:.Rr�i L ..r ............. ....... PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND 8 P I B Insurance A enC Inc.CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE �j y DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE PO Box 9055 : POLICIES BELOW. Mission Viejo, CA 92690 COMPANIES AFFORDING COVERAGE (714)582-5220 FSX(7 4)582-3512 comPA"O -A CNA/NATL FIRE INS . CO . HARTFORD Yi R :...ciw+r .S....URED .............. �� Q ....-..-...........: B REPUBLIC INDEMNITY CO. OF AMER DIEHL, EVANS & COMPANY COMPANY C 18401 VON KARMAN, SUITE 200........... ........ .............................. ............................. .... .... ... ... -..-..-...... IRVINE, CA 92715-1542 COMPANY D LETTER COMPANY LETTER THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR 071-IER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. .............v........................................................................................................ .0 TYPE OF INS(IRANCE POLICY NULIBTJi POLICY UFECTTYE POLICY E WMATIONUwm .TA: DATE (MMfDDf M DATE (MMIOONY) .. , • '-------------_..-._.-.._...................................................................-..-..............-..-.•-".-"......................:.............................-..-.................................................:....................................... A crNrxlAL LIABILITY : GENERAL AGGREGATE a 2 0 0 0 0 0 0 }............................................... ..... ...... .c.............c............ X : COMMERCIAL GENERAL LIABILITY 118299881 - : PRODUCTS-CCMPAP AGO. p -:........ ;............................. :....2 H►..0 OO.r..O.�... CLAIMS MADE X OCCUR. ' ' PERSONAL A ADV. NJURY r..:............... P8/21/95 : 08/ 21/ 98....--�-..............D.................-.s..........�.............�.... OWNERS Hl CONTRACTORS PFTOT. ? EACH OCCURRENCE a .... FIRE DAMME (Any am me) : a 15 O J..9.0.9 EAUTOMOBRY LIAS&M A ......... ANY Aum ALL OWNED AUTOS SCHEDULED AUTOS X HIRED AUTOS M1 X NON -OWNED AUTOS GARAGE LABILITY : EKCEN LIABLITY UMBRELLA FORM I AttpI`ITg1�GGRE :.OTHER THAN UMBRELLA FORM � ' ............. ....... ..... .. .. .. .. .. .. .. .. ....... ..... ............. ..... ............................................i...............................................Y . -. ... ... E _ ` STATUTORY LIMITS WORKERS COMPENSATION o-.S_..S _. ....... B : AND 0352T486 12 /31/9 6 12 / 31/ 9 T.EA�*!. ACCIDENT . s--.-1,�. O C O.. 0 ....... DISEASE - POLICY uMrr........ s ..110 O 0 ,.000 EMPLOYERIr LIABILITY d .................................................................................................... ................................ ........................ .........>.............. .................. ; DISEASE - EACH EMPLOYEE.......E s.... 1.►..d O O O O OTHER A :PROPERTY 176299881 0 8/21/9 5 0 8/ 21/ 9 8s BPP—ALL LOOS $ 517 , 0 0 0 LOC 1-5 BLDG.LOC 02 $600,000 ADD�L DESCRIPTION OP OPERAT10N&4=ATIONS/MMLL%SVECIAL BENS A THE CITY OF HUNTINGTON BEACH, ITS AGENTS, OFFICER 'UM EMPLOYEES ARE NAMED AS ADDITIONAL INSUREDS N/RESPECT TO GL PER CG2010(11-85) ATTACHED. (EXCEPT 10 DAYS ATnTTrlr. nT. n%TJtll.T.T.amT^V Vnn WnW_10aVT WWrrl MID Wr%W_S2TTlMMTH2H2TnW r%' bbVT0n1r.1r.% i SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL DIBCEwMMBR-40 MAUL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE CITY OF HUNTINGTON BEACH €r�';LEFT, 10 CHRISTI MENDOZA 2000 MAIN ST ?EEAU7HORR✓:D RCPREBEItTATIYE HUNTINGTON BEACH CA 92648 A �� RISK -MANAGEMENT APR Z 1 !Z 35 N '97 POLICY NUMBER: 116299881 DIEHL, EVANS & CO. COMMERCIAL GENERAL LIA ILITY a�9 l TH]S ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL. INSURED -w OWNERS, LESSEES OR CONTRACTORS (FORM R) This endorsement modifies insurance provided under the following: CO�MIMERCIAL GENERAL LIABILITY COVERAGE PART'. SCHEDULE Name of Person or Organization: CITY OF HUNTINGTON BEACH,ITS AGENTS, OFFICERS AND a1PL0YEES 2000 MAIN STREET HUNTINGTON BEACH, CA. 92648 (If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.) WHO IS AN INSURED (Section II) is'Omended to include as an insured the -person or organization shown in the Schedule• but only with respeci'to liability arising out of "your work" for that insured by or for you. 02 CG 20 10 11 85 Copyright, Insurance Services Office, Inc., 1984 RISK MANAJ, MEHT ApR Z I IZ 35 Ph '91 ��AG�ORD CERTIFICATOOF LIABILITY:INSUR CFPID PM DATEIMMIDDm) .-._ .- IEHEVI 04/17/97 _ .._.. PRODUCER THIS CERTIFICATE IS IS UE 3 AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE Mitchell & Mitchell-Lio0620650 HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR 250 Bel Karin Keys Blvd, Bld E ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. Novato CA 94949 COMPANIES AFFORDING COVERAGE Paul W. Morris COMPANY A CNC CNA CPA Program Phone No. 415-883-252 FaxNe. 15-883-7752 INSURED ` , f COMPANY B COMPANY C. Diehl, Evans & Company, LLP 18401 Von Kerman, Suite 200 COMPANY Irvine CA 92715 D COVERAGES , THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. CO TYPE OP INSURANCE LTR POLICY NUMBER POLICY EFFECTIVE DATE (MMIDDIYY) POLICY EXPIRATION : LIMITS DATE (MMIDDlYY) GENERAL LIABILITY BODILY INJURY OCC S COMPREHEPJSIVE FORM BODILY INJURY AGO S PREMISES/OPERATIONS PROPERTY DAMAGE OCC 5 UNDERGROUND EXPLOSION & COLLAPSE HAZARD PROPERTY DAMAGE AGG $ I PRODUCTS/COMPLETED OPER 81 & PD COMBINED OCC $ CONTRACTUAL BI 8 PD COMBINED AGG S INDEPENDENT CONTRACTORS PERSONAL INJURY AGG S BROAD FORM PROPERTY DAMAGE PERSONAL INJURY AUTOMOBILE LIABILITY BODILY INJURY S ANY AUTO APPROVED AS TO FORM � ' (Per person) ALL OWNED AUTOS (Private Pass) GAIT, HUTT01 BODILY INJURY ALL OWNED AUTOS (Other than Private Passenger) C I T Y� ATTOR REY (Per accidant) S HIRED AUTOS j7 B. PROPERTY DAMAGE $ NON -OWNED AUTOS GARAGE LIABILITY 'U ` s *V Attorney BODILY INJURY & PROPERTY D $ COMBINED EXCESS LIABILITY EACH OCCURRENCE S AGGREGATE S UMBRELLA FORM OTHER THAN UMBRELLA FORM I V r7iS 'WORKERS COMPENSATION AND WORYC STATULIMIT-S Q R I TER -. EMPLOYERS' LIABILITY EL EACH ACCIDENT $ THE PROPRIETOFV INCL EL DISEASE - POLICY LIMIT S PARTNERSIEXECUTIVE i I EL DISEASE - EA EMPLOYEE S j OFFICERS ARE: EXCL ' OTHER Y Prof. Liability APL 128312812 10/01/96 10/01/97 Per Claim $3,000,000 Aggregate $6,D00,000 DESCRIPTION OF OPERATIONSILOCATIONSIVEHICLESISPECIAL ITEMS CERTIFICATE HOLDER CANCELLATION _ SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE CITYR= The City of Huntington Beach, EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL its agents,officers.-&employees, �I 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, Christi Mendoza 2000 Main Street BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY Huntington Beach CA 92648 OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESJENTATIVES. AUTHORIZED REPRESENTATIVF�/� a ,� Paul W. Morr is ll// ACORD 26-N (1I98j OACORD CORPORATION 19H RISK MANAGEMENT APR 2I 12 3s PSI '97 1?97 I'll 2" Rl 3' 39 i ti iJ t� i ti J CITY AT"f0F.NEY ;` UHTT 0N' E E A C H 0