HomeMy WebLinkAboutDavis Farr LLP - 2022-05-03 2000 Main Street.
Huntington Beach. CA
City of Huntington Beach 92r48
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File #: 22-364 MEETING DATE: 5/3/2022
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Sean Joyce, Interim City Manager
VIA: Dahle Bulosan, Chief Financial Officer
PREPARED BY: Zack Zithisakthanakul, Principal Finance Analyst
Subject:
Approve and authorize execution of a three-year Professional Service Contract with Davis
Farr LLP in the amount of $156,076 to perform financial audit services
Statement of Issue:
City Council approval is requested to approve and authorize a three-year professional services
contract with Davis Farr LLP in the amount of S156.076 to perform financial audit services.
Financial Impact:
Sufficient appropriation is budgeted annually for audit services. The total three-year contract equals
$156,076. Year one (Fiscal Year 2021/22) of the contract is allocated as follows: General Fund
Finance Department ($46,040 in business unit 10035205) and West Orange County Water Board
Fund (S5,500 in business unit 50885101). Fiscal Years 2022/23 (S51 ,540) and 2023/24 ($52.996) will
be budgeted accordingly to cover the cost of year two and three of the audit services contract.
Recommended Action:
Approve and authorize the Mayor and City Clerk to execute the "Professional Services Contract
Between the City of Huntington Beach and Davis Farr LLP for Financial Audit Services."
Alternative Action(s):
Do not approve the recommended action and direct staff accordingly.
Analysis:
The City of Huntington Beach is required by Charter Section 616 to arrange for an independent audit
of its financial statements each year. This contract is for a financial audit of all funds of the City's
reporting entity, a Single Audit Report of the City's federal grant programs, an AB 2766 Audit relating
to the City's Air Quality Fund, and an audit of the West Orange County Water Board (WOCWB), a
fiduciary fund of the City of Huntington Beach. The City Council will also receive a management
letter that will detail recommendations to improve the City's control and financial management. The
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File #: 22-364 MEETING DATE: 5/3/2022
audit is to be performed with auditing standards generally accepted in the United States and
Government Auditing Standards issued by the Comptroller of the United States.
Staff issued Request for Proposals (RFPs) for audit services to prospective independent auditors
who had requested to be on a bidders' list or were listed on the California Society of Municipal
Officers' website. In addition, the RFP was posted on the City's website. Five proposals were
received. The auditing firms were asked to submit cost proposals providing financial audit services
for Fiscal Years ending June 30, 2022, 2023, and 2024.
Below is a summary of the total base fee for the three years:
Audit Firms Year 1 1 Year 2 Year 3 Total'
Badawi & Associates Certified Public Accountants 45.4251 48,211 S 140,42d
Davis Farr. LLP FS;I
'Cost proposals include the audit of four major federal grant programs with the exception of Badawi &Associates CPAs,which includes only two major
programs.
The following is a summary of Davis Farr's cost proposal and the accounts in which the amounts are
proposed to be charged:
Account Year 1 Year 2 Year 3 Total'
Total 51,541 51 54 52 99 s 156 07
Staff analyzed and reviewed all five proposals based on a variety of factors, including the firm's
references, responsiveness to the RFP, qualifications in performing audits for governmental entities
of similar size and scope, other relevant experience, and resumes of key staff to be assigned on the
engagement. Staff is recommending Davis Farr LLP as the most qualified firm to perform auditing
services for the City of Huntington Beach given the size and complexity of the City's finances
including its enterprise funds and operations, fiduciary activities, federal grants and related programs,
outstanding bond debt, and overall financial structure.
Environmental Status:
Not applicable.
Strategic Plan Goal:
Financial Sustainability, Public Safety or Other
Attachment(s):
1. Professional Service Agreement with Davis Farr LLP to perform an audit of all funds of the
City's reporting entity.
2. Rating Sheet
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File #: 22-364 MEETING DATE: 5/3/2022
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PROFESSIONAL SERVICES CONTRACT BETWEEN
Ti-IE CITY OF HUNTINGTON BEACH AND
DAVIS FARR L.LP
FOR
FINANCIAL AUDIT SERVICES
THIS AGREE\9EN"f ("Agreement") is made and entered into by and between the City of
1-luntington Beach, a municipal corporation of the State of' California, hereinafter referred to as
"CITY," and Davis Farr LLP. a California Limited Liability Partnership, hereinafter referred to as
"CONSULTANT."
WHEREAS. CITY desires to engage the services of a consultant to provide financial audit
services: and
Pursuant to documentation on file in the office of' the City Clerk, the provisions of the
Huntington Beach tunicipal Code. Chapter 3.03, relating to procurement of professional service
contracts have been complied with: and
CONSULTANT has been selected to perform these services,
NOW. THEREFORE, it is agreed by CITY and CONSULTANT as hollows:
I. SCOPE OF SERVICES
CONSULTANT shall provide all services as described in Exhibit "A," which is
attached hereto and incorporated into this Agreement by this reference. These services shall
sometimes hereinafter be referred to as the "PROJECT."
CONS UL:fANT hereby designates Jennifer Farr who shall represent it and be its
sole contact and went in all consultations with CITY during the performance of this Agreement.
2. CITY STAFF ASSISTANCE
CITY shall assign a staff coordinator to work directly with CONSULTANT in the
performance of this Agreement.
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3. TERM, TIME OF PERFORMANCE
Time is of the essence of this Agreement. The services of CONSULTANT are to
commence on Jd 20.E 2, (the "Commencement Date"). This Agreement
shall automatically terminate three (3) years from the Commencement Date, unless extended or
sooner terminated as provided herein. All tasks specified in Exhibit "A" shall be completed no
later than three (3) years from the Commencement Date. The time for performance of the tasks
identified in Exhibit "A" are generally to be shown in Exhibit "A." This schedule may be
amended to benefit the PROJECT if mutually agreed to in writing by CITY and CONSULTANT.
In the event the Commencement Date precedes the Effective Date, CONSULTANT
shall be bound by all terms and conditions as provided herein.
4. COMPENSATION
In consideration of the performance of the services described herein, CITY agrees to
pay CONSULTANT on a time and materials basis at the rates specified in Exhibit "B," which is
attached hereto and incorporated by reference into this Agreement, a fee, including all costs and
expenses, not to exceed One Hundred Fifty Six Thousand Seventy Six Dollars ($156,076).
5. EXTRA WORK
In the event CITY requires additional services not included in Exhibit "A" or
changes in the scope of services described in Exhibit "A," CONSULTANT 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
CONSULTANT shall be paid pursuant to the terms of Exhibit "B."
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7. DISPOSITION OF PLANS. ESTINIATES AND OTHER DOCUNIENTS
CONSULTANT agrees that title to all materials prepared hereunder, including,
without limitation, all original drawings, designs, reports. both field and office notices, calculations,
computer code, language, data or programs, maps, memoranda, letters and other documents, shall
belong to CITY, and CONSULTANT shall turn these materials over to CITY upon expiration or
termination of this Agreement or upon PROJECT completion, whichever shall occur first. These
materials may be used by CITY as it sees fit.
8. HOLD HARN4LESS
CONSULTANT hereby agrees to protect. defend, indemnify and hold harmless
CITY, its officers, elected or appointed officials, employees, agents and volunteers from and against
any and all claims. damages, losses, expenses; judgments, demands and defense costs (including,
Without limitation, costs and fees of litigation of every nature or liability of any kind or nature)
arising out of or in connection with CONSULTANT's (or CONSULTANT'S subcontractors. if any)
negligent (or alleged negligent) performance of this Agreement or its failure to comply with any of
its obligations contained in this Agreement by CONSULTANT, its officers, agents or employees
except such loss or damage which was caused by the sole negligence or willful misconduct of'
CITY. The only limitations on this provision shall be those imposed by AICPA Code of
Professional Conduct ET Section 1,228.020: i.e., loss or damage which was caused by the sole
negligence or willful misconduct of the City. CONSUL rANT will conduct all defense at its sole
cost and expense and CITY shall approve selection of CONSULTANT's counsel. This indemnity
shall apply to all claims and liability regardless of whether any insurance policies are applicable.
The policy limits do not act as limitation upon the amount of indemnification to be provided by
CONSULTANT.
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9.. PROFESSIONAL LIABILITY INSURANCE
CONSULTANT shall obtain and furnish to CITY a professional liability insurance
policy covering the work performed by it hereunder. ']'his policy shall provide coverage for
CONSULTANT'S professional liability in an amount not less than One Million Dollars
($1,000,000.00) per occurrence and in the aggregate. The above-mentioned insurance shall not
contain a self-insured retention without the express written consent of CITY; however an insurance
policy "deductible" of Ten Thousand Dollars ($10,000.00) or less is permitted. 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. CONSULTANT shall notify CITY of circumstances or incidents that might
<,ive rise to future claims.
CONSULTANT will make every effort to maintain similar insurance during the
required extended period of coverage following PROJECT completion. If insurance is terminated
for any reason. CONSULTANT 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.
If CONSULTANT fails or refuses to produce or maintain the insurance required by
this section or fails or refuses to furnish the CITY with required proof that insurance has been
procured and is in force and paid for, the CITY shall have the right, at the CITY's election, to
forthwith terminate this Agreement. Such termination shall not effect Consultant's right to be paid
for its time and materials expended prior to notification ol'termination. CONSULTANT waives the
right to receive compensation and agrees to indemnify the CITY for any work performed prior to
approval of insurance by the CITY.
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10. CERTIFICATE OF INSURANCE
Prior to commencing performance of the work hereunder, CONSULTAN'f shall
furnish to CITY a certificate of insurance subject to approval of the Cite Attorney evidencing the
foregoing insurance coverage as required by this Agreement; the certificate shall:
A. provide the name and policy number of each carrier and policy;
E. state that the police is currently in force; and
C. shall promise that such police shall not be suspended. voided or canceled by
either party, reduced in coverage or in limits except after thirty (30) days'
prior written notice; however, ten (10) days' prior written notice in the event
of cancellation for nonpayment of'premium.
CONSULTANT shall maintain the foregoing insurance coverage in force until the
work under this Agreement is fully completed and accepted by CITY.
The requirement for carrying the foregoing insurance coverage shall not derogate
from CONSULTANT's defense, hold harmless and indemnification obligations as set forth in this
Agreement. CITY or its representative shall at all times have the right to demand the original or a
copy of the policy of' insurance. CONSULTANT shall pay, in a prompt and timely manner. the
premiums on the insurance hereinabove required.
11. INDEPENDENT CONTRACTOR
CONSULTANT 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 CITY. CONSULTANT
shall secure at its own cost and 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 CONSULTANT and its officers, agents and employees and all business
licenses. if am, in connection with the PROJECT and/or the services to be performed hereunder.
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12. TERMINATION OF AGREEMENT
All work required hereunder shall be performed in a good and workmanlike manner.
CITY may terminate CONS UL,TANT's services hereunder at any time with or without cause, and
whether or not the PROJECT is fully complete. Any termination of this Agreement by CITY shall
be made in writing. notice of which shall be delivered to CONSULTANT as provided herein. In the
event of termination, all finished and unfinished documents, exhibits, report, and evidence shall. at
the option of CITY, become its property and shall be promptly delivered to it by CONSULTANT.
13. ASSIG.MME'-NT AND DELEGATION
This Agreement is a personal service contract and the work hereunder shall not be
assigned, delegated or subcontracted by CONSULTANT to any other person or entity without the
prior express written consent of CIIY. If an assignment, delegation or subcontract is approved, all
approved assignees, delegates and subconsultants must satisfy the insurance requirements as set
forth in Sections 9 and 10 hereinabovc.
14. COPYRIGHTSWATENTS
CITY shall own all rights to any patent or copyright on any work. item or material
produced as a result of this Agreement.
15. CITY EMPLOYEES AND OFFICIALS
CONSULTANT shall employ no CITY official nor any regular CITY employee in
the work performed pursuant to this Agreement. No officer or employee of CI"IY shall have any
financial interest in this Agreement in violation of the applicable provisions of the California
Government Code.
16. NOTICES
Anv notices. certificates. or other communications hereunder shall be given either by
personal delivery to CONSULTANT's agent (as designated in Section 1 hereinabove) or to CITY as
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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. to the addresses specified below. CITY and
CONSULTANT may designate difTerent addresses to which subsequent notices, certificates or
other communications will be sent by notifying the other party via personal delivery. a reputable
overnight carries or U. S. certified mail-return receipt requested:
TO CITY: TO CONSULTANT:
City of Huntington Beach Davis Farr LLP
A'fTN: Dahle Bulosan Jennifer Farr
2000 Main Street 2301 Dupont Drive, Suite 200
Huntington Beach, CA 92648 Irvine, CA 92612
17, CONSENT
When CITY's consent/approval is required under this Agreement, its
consent/approval for one transaction or event shall not be deemed to be a consent/approval to any
subsequent occurrence of the same or any other transaction or event.
18. MODIFICATION
No waiver or modification of any language in this Agreement shall be valid unless in
writing and duly executed by both parties.
19. SECTION HEADINGS
The titles, captions, section, paragraph and 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 matters 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.
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20. INTERPRETATION OP TI-IIS 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. such holding shall not invalidate 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 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 duplicate original shall be deemed
an original instrument as against any party who has signed it.
22. IMMIGRATION
CONSULTANT 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.
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23. LEGAL SERVICES SUBCONTRACTING PROHIBITED
CONSULTANT 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. CONSULTANT understands that pursuant to
Hmuinglon Beach City Charter Section '09, 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
CONSULTANT.
24. ATTORNI--Y'S FEES
In the event suit is brought by either party to construe. interpret and/or enforce the
terms and/or provisions of this Agreement or to secure the performance hereof, each party shall bear
its own attorneys fees, such that the prevailing party shall not be entitled to recover its attorney's
fees from the nonprevailing party.
25. SURVIVAL
Terms and conditions of this Agreement, which by their sense and context survive
the expiration or termination of this Agreement, shall so survive.
26. GOVERNING LAW
phis Agreement shall be governed and construed in accordance with the laws of the
State of California.
27. SIGNATORIES
Each undersigned represents and warrants that its signature hereinbelmv has the
power, authority and right to bind their respective parties to each of the terms of this Agreement,
and shall indemnify CITY Hilly for any injuries or damages to CITY in the event that such authority
or power is not. in fact, held by the signatory or is withdrawn.
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28. ENTIRETY
The parties acknowledge and agree that they are entering into this Agreement freely
and voluntarily following extensive arm's length negotiation. and that each has had the opportunity
to consult with legal counsel prior to executing this Agreement. The parties also acknowledge and
agree that no representations, inducements. promises, agreements or warrmtics, oral or otherwise,
have been made by that party or anyone acting on that party's behalf. which are not embodied in this
Agreement. and that that party has not executed this Agreement in reliance on any representation,
inducement, promise, agreement, warranty, fact or circumstance not expressly set forth in this
Agreement. ']'his Agreement, and the attached exhibits, contain the entire agreement between the
parties respecting the subject matter of this Agreement, and supersede all prior understandings and
agreements whether oral or in xvriting between the parties respecting the subject matter hereof.
29. EFFECTIVE DATE
This Agreement shall be effective on the date of its approval by the Cite Council.
This Agreement shall expire when terminated as provided herein.
IN WITNESS WHEREOF. the parties hereto have caused this Agreement to be executed by
and through their authorized officers.
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CONSULTANT,
CITY OF HUNTINGTON BEACH, a
Davis Farr LLP municipal corporation of the State of
— California
By. -
Jo than Foster Partner Mayor
print name
ITS: (circle are)Chairmai/PresidcntNice President
City Clerk
By:
AND
INITIATED AND APPROVED:
l�
Jennifer Farr. Partner
print nan1e Chief Financial Officer
ITS: (eirde one)SeavtarylChief Financial Officer/AM
Secretary-Trtastim
REVIEWED AND APPROVED:
City Manager
APPROVED AS TO FORM:
City Attomey
COUNTERPART
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CONSULTANT,
CITY OF HUNTINGTON BEACH, a
Davis Fart LLP municipal corporation of the State of
Calis *
By: f i
print name
ITS: (circle one)Chairtnan/PresidenWice President
City Clerk
AND
INITIATED AND APPROVED:
By:
p""`nar"e tef Financial Officer
ITS: (circle one/ Secretan,`Chief Financial Officer/Asst.
Secretary-Treasurer
REVIE •D AN APPROVED:
City Manage
APPROVED AS
ty Attorney
COUNTERPART
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EXHIBIT "A"
A. STATEMENT OF WORK: (Narrative of work to be performed)
• Will perform an audit examination of the financial statements of the City of Fluntington
Beach and West Orange County Water Board for the fiscal years ending ,June 30, 2022
through 2025. Our examination will be conducted in accordance with generally accepted
auditing standards, the AICPA Audit and Accounting Guide. Audits of State and Local
Government Units, and the Government Auditing Standards issued by the Comptroller
General of the United States. We will ensure that the report is prepared in conformity with
the most recent edition of the GAAFR, the GA.AFR Update, and subsequent GASB
pronouncements.
When necessary, we will perform a compliance audit of federal expenditures in accordance
with the Unifiu'm Administrative Requirements. Cost Principles and Audit Requirements jar
Federal.4wards in any year the City has federal expenditures of more than $750,000.
• Will perform agreed-upon-procedures over the City's Gann Appropriations Limit.
• Will issue the AB 2766 Audit Report over the AQIv1D fund
• Will prepare a letter to the City Council summarizing the audit results in accordance with
the Codification of Auditing Standards Section 260.
• Will prepare a letter to the City Council reporting matters dealing with internal control that
meet the threshold of being a significant deficiency or material weakness, as defined by the
Codification of Auditing Standards Section 265. We will immediately report am
irregularities or illegal acts that come to our attention to management and/or those charged
with governance.
• Will meet with the City Council to discuss the results of the audit.
• Finally, we perceive the scope of our work as being advisors to the City regarding generally
accepted accounting principles. Throughout the year, the management and other finance
personnel of the City will have access to its to seek advice in the application of generally
accepted accounting principles, advice regarding debt issuance, financial statement
preparation and content, tax and any other matters relating to the City. Each year, we will go
over upcoming accounting standards in a meeting with City staff.
13. CONSULTANT'S DUTIES AND RESPONSIBILITIES:
Consultant plans and conducts engagements in the most efficient manner possible, and consultant's
audit approach is unique with regard to the following:
• Consultant firm is sensitive to the priorities and work requirements of our clients. Consultant
will work around the schedules of clients when scheduling segments of the audit or
requesting documentation in order to minimize disruption of City staff and to complete the
audit in a timely manner.
• Whenever possible. Consultant will use accounting support already prepared by the City
staff in order to avoid duplication or unnecessary requests for audit supporting schedules.
• Consultant firm's expertise is in governmental auditing. Consultant's auditors are GAS13
experts and skilled at addressing audit issues that are specific to local governments. You will
not spend time training our personnel.
EXFIIBIT A
• When formulating internal control recommendations, Consultant will obtain a thorough
understanding of' the specific circumstances at your City in order to provide a tailored,
practical recommendation.
• Throughout the year Consultant is a resource to our clients in providing accounting advice.
researching technical questions, dealing with tax problems, and helping with other problems
as they arise.
Audit Software - Consultant utilizes Caseware audit software for the electronic City of
workpapers. Consultant has the ability to accept audit documentation in either hard copy or
electronic format. Case%varc alloys Consultant the ability to import trial balances that can be
provided in either excel or a text document.
Data Mining Software - `v'.'e have a dedicated team of personnel trained to use special data mining
software. IDEA. Our software uses source data front your accounting system to search for
anomalies, such as duplicate or voided checks, cross-referencing vendor addresses with employee
addresses, detecting accounting transactions recorded on the weekend, reviewing journal entry
postings for unauthorized individuals. The IDEA software identifies specific
transactions for the auditors to review for potential fraud or error.
Internal Control Evaluation
Consultant's approach to evaluating internal controls involves observation and inquiry. Consultant
spend time with the personnel responsible for the accounting cycles to gain an understanding of the
processes. Consultant also carefully evaluate your policies and procedures. After our initial
evaluation. Consultant identify key controls in City processes and design test to evaluate the
effectiveness of those processes. In the initial year of' the audit, Consultant will focus on the
following accounting cycles:
• Billing and cash receipting
• Capital assets
• purchase and disbursements
• payroll
• Investment and cash controls
• Information systems
In flrture years. Consultant will review the accounting cycles noted above but also look at other
processes such as credit card transactions, petty cash, inventory controls. offsite cash receipting,
employee reimbursements. contract compliance, and other areas. Consultant's goal is to modify our
audit approach every year to further evaluate the City's internal controls.
Planning and Inquire
During the planning phase of the audit. Consultant plans to perform the following procedures:
• Meet with finance personnel to obtain an understanding of' significant transactions during
the year
• Communicate with the City Council in regards to fraud, compliance with laws, and any
concerns they have regarding the finances of the City
• Perform internal control evaluations as noted on the previous page
• Determine materiality levels that will be used in selecting audit transactions
EXFIlBIT A
• Perform a risk assessment to develop the audit plan for the year
• Review minutes of'City Council meetings
• Review important new contracts, bond documents. and agreements
• Evaluate compliance with investments
• Test purchase orders and contract management
• Test a sample of cash disbursements to determine adherence to policies and internal controls
• Perform a review ol'the organizations information systems and controls
• Perform compliance testing of federal grants, as necessary
• Review the prior audited financial statements and provide feedback to Cite staff regarding
best practices for financial reporting
• Provide a GASB Update and templates for implementing new accounting standards
including the pension and OPE13 standards.
Year-End 'Testing
After the books are closed and ready for audit. Consultant will perform year-end procedures which
include the following:
• Confirm 100% of all cash and investment balances and test market values provided by your
investment custodians.
• Test for proper cutoffs of accounts receivable and grants receivable.
• Confirm and test material notes and loans receivable.
• Test additions and deletions to capital assets. We will review depreciation expense for
reasonableness.
• Test inter-fund transactions including due to/due from other funds, advances, and transfers.
%Ve will review legal documents supporting loans and test the allowability of transfers out of
restricted funds.
• rest current liabilities and perform a search for unrecorded liabilities.
• Review unearned revenue balances for proper cutoffs.
• Test the balances of accrued payroll and employee related liabilities.
• Confirm long-term debt with independent parties.
• In years of new debt issuances. will review the journal entry to record the debt to ensure the
accuracy of the accounting.
• Testing of actuarial valuations and calculations related to OPE'-B obligations and disclosures
under GASB 75.
• Testing of actuarial valuations and calculations related to pension obligations and new
disclosures under GASB 68.
• Evaluation of claims and judgments payable.
• Testing of restrictions and classifications of net position.
• Analyze grant revenues and expenses to ensure proper matching within the fiscal year.
• Test the reasonableness of interest income, realized, and unrealized gains/losses on
investments.
• Analytically and substantively test revenues and expenses reported in the financial
statements.
• Incorporate an element of unpredictability every year that will focus on an audit area that is
not typically considered a high or significant risk area such as petty cash, credit card
purchases, new vendors, travel expenses, etc.
EXHIBIT A
The aforementioned tests are only a fey of the tests performed during the examination and by no
means is it meant to be all inclusive. During the final stage of the audit Consultant will meet with
Finance staff'to review any audit findings and adjusting journal entries.
Single Audit Approach
As part of the Consultant's Single Audit for the years in which the City expends granter than
5750.000, Consultant will perform the following procedures in accordance with the Uniform
Guidance:
• Perform an evaluation of the major programs required to be tested
• Review OMB guidance and the OMB Compliance Supplement for the grant program
audited.
• Review internal controls for cacti of the applicable 14 compliance areas for each program
audited.
• Using AICPA sampling guidance, Consultant will select a sample for each of the applicable
14 compliance areas for each program audited. Consultant will test the sample for
compliance with those 14 areas.
• "fest the indirect cost rate. ifapplicable
• Review monitoring reports for noncompliance and follow up on the resolution of past
noncompliance. ifapplicable.
• Issue a single audit report of federal expenditures.
• File the data collection form within the specified deadline.
Completion of the Audit and Preparation of Financial Statements
The nature and extent of the work required is dependent on Consultant's assessment of' the
likelihood of misstatements in the financial statements together with our conclusions from the
planning and testing stages of the audit. All of the audit information is then used to reach a
conclusion on whether the financial statements taken as a whole conform with generally accepted
accounting principles.
• Consultant will review significant events after year end
• Consultant will review attorney letters for significant legal matters
• Consultant will prepare the financial statements and other reports
• Consultant will ensure accurate and complete disclosures in the notes to the financial
statements.
• Consultant reports will undergo five levels of review belorc a draft is given to the City
• Consultant will provide a draft of the reports to the City within two weeks of leaving the
field
• Unless prepared by the City. Consultant will print and bind all reports for the City as well as
providing Color PDF's of the final reports.
• Consultant will meet with the City Council to present the results of the audit.
C. CITT'S DUTIES AND RESPONSIBILITIES:
Communicate with Consultant on an as-needed basis and provide requested documentation to
consultant in a timely manner.
EXHIBIT A
D. WORK PROGRA\,I/PROJGC"f SCHEDULE:
To be determined
L'X1-IIBIT A
EXHIBIT "13"
Payment Schedule (Fixed Fee Payment)
I. CONSULTANT shall be entitled to month[\, progress payments toward the fixed fee set
forth herein in accordance with the following progress and payment schedules.
SEE ATTACHED EXIi1BIT 13
2. Delivery of work produce A copy of every memorandum. letter, report, calculation and
other documentation prepared by CONSULTANT 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 requirements for satisfactory completion.
3. CONSULTANT shall submit to CITY an invoice for each monthly progress payment
clue. Such invoice shall:
A) Reference this Agreement;
13) Describe the services performed;
C) Show the total amount of the payment due:
D) Include it certification by a principal member of CONSULTANT's firm that the
work has been performed in accordance with the provisions of this Agreement:
and
E) For all payments include an estimate of the percentage of work completed.
Upon submission of any such invoice, if CITY is satisfied that CONSULTANT is making
satisfactory progress toward completion of tasks in accordance with this Agreement. CITY shall
approve the invoice, in which event payment shall be made within thin (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 CONSULTANT in writing of the reasons for non-approval and the schedule
of performance set forth in Exhibit "A" may at the option of CITY be suspended until the parties agree
that past performance by CONSULTAN"f is in, or has been brought into compliance. or Until this
Agreement has expired or is terminated as provided herein.
d. Any billings for extra work or additional services authorized in advance and in writing
by CITY shall be invoiced separately to 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.
Exhibit 13
EXHIBIT B
City of Huntington Beach I Proposal for Professional
Auditing Services
Section I — Proposed Cost
FY 2022 FY 2023 FY 2024 Total
Audit of City 5 35,140 35,140 36,194 106,474
Single Audit(includes 2 major programs) 6,400 6,400 6,592 19,392
Audit of West Orange County Water Board 5,500 5,500 5,66S 16,665
Appropriations Limit Review 500 500 515 1,515
AB 2766 Audit Report 1,000 1,000 1,030 3,030
Total$(not to exceed) $ 48,540 48,S40 49,996 147,076
*includes 2 major programs,additional major programs may be audited
for$1,5W each.
Estimated Audit Segmentation
Rates Hours FY 2022
Partner $ 180 48 $ 8,640
Manager $ 130 80 10,400
In-charge $ 110 170 18,700
Staff $ 90 120 10,800
Total 418 $48,540
Additional services may be performed at the above quoted hourly rates
I
D.
PROFESSIONAL SERVICES CONTRACT BETWEEN
TWEEN
THE CITY OF HUNIINGTON E3IiACI-1 AND
DAVIS FARR LLP
FOR
FINANCIAL AUDIT SERVICES
Table of Contents
IScope of Services.....................................................................................................I
CityStaff Assistance................................................................................................I
3 Icrm: Time of Performance.....................................................................................2
4 Compensation ..........................................................................................................2
5 Extra Work...............................................................................................................2
6 Nlethod of Payment.............................................................................I....................2
7 Disposition of Plans, Estimates and Other Documents ...........................................3
8 Hold Harmless .........................................................................................................3
9 Prolcssional Liabilitv Insurance...............................................................................
10 Certilicate ol'Insurance............................................................................................4
11 Independent Contractor............................................................................................5
12 Termination of A<greement.......................................................................................5
13 Assignment and Delegation............... .....................................................................
14 Copyrights/Patents...................................................................................................6
15 City Employees and Officials..................................................................................6
16 Notices.........................................................................................6
17 Consent ....................................................................................................................7
18 Niodification.............................................................................................................7
19 Section I-leadines ........._..........................................................................................7
20 Interpretation of this Agreement..............................................................................7
21 Duplicate Original....................................................................................................8
22 Immigration...............................................................................................................8
23 Legal Services Subcontracting Prohibited................................................................8
24 Attorneys Fees..........................................................................................................9
26 Survival.....................................................................................................................9
26 Governing Law .........................................................................................................9
27 Signatories.................................................................................................................9
28 Entirety......................................................................................................................9
29 Effective Date................................................................................. 10
A CC)R" CERTIFICATE OF LIABILITY INSURANCE DA7E(MMIDDNY YY
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS
CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES
BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED
REPRESENTATIVE OR PRODUCER,AND THE CERTIFICATE HOLDER.
IMPORTANT: If the certificate holder Is an ADDITIONAL INSURED,the policy(les) must have ADDITIONAL INSURED provisions or be endorsed.
If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on
this certificate does not confer rights to the certificate holder In lieu of such ondorsoment(s).
PRODUCER 1-847-385-6800 CONTACT John Hecht
N
EdgOWOOd Partners InaDlanDe Centel PHONE FA%
.Hv_EeD- 847-385-6800 (NC.No):
Lame, a division of EPIC EMAIL
III Went Campbell ADORES , pagcortualammo.com
4th Floor INSURERSAFFORDINGCOVERAGE NAIC0
Arlington Helghto, IL 60005 INSURERA: GREAT DIVIDE INS CO 25224
INSURED INSURER B:
Davin Parr LLP
INSUHERC:
2301 Dupont Drive, Suite 200 INSURERD:
INSURER E
Irvine, CA 92612 INSURER F:
COVERAGES CERTIFICATE NUMBER: 62227964 REVISION NUMBER:
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 AFFOHDEO BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES.LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAJO CLAIMS.
WSR TYPE OF INSURANCE R POLICY EFF POLICY EXP LIMITS
LI POLICY NUMBER MMJD MNIDD
COMMERCIALGENERALL1A91LDTY EACHOCCURRENCE f
CLAIMS-MADE ❑OCCUR CREMISES Ea oawnunco f
MED EXP An une $
PERSONAL a ADV INJURY $
GENL AGGREGATE UTAT APPLIES PER: GENERALAGGREGATE $
_ POLICY❑jE`CT- LOC PRODUCTS-COMPIOP ADD S
WHEN, $
AUTO1MOBIL5UABILHY COVBINED SVI LE IMIT f
(Ea,ttg
ANY AUTO BODILY INJURY(Pcr pamon) i
OYMEO SCHEDUED BODILY INJUtY(Pm aaUonO f
AUTOS ONLY AUTOS
HIRED NON OVMED APPROVED $ (fF PROPRTY OAK"E
AUTOS ONLY H
AUTOS ONLY 1Vewabonl) $
f
UMBRELLA LIAR OCCUR DY' ML AEL E.GATES EACHOCCURRENCE $
EXCESSUA6 CLAIMS ALADF. CITY ATTORNC AGGREGATE $
DED RETENTION CITY()P HUNTIN(1TON BACH $
MRRERSCOMPENSATION PORTUH: OTII
AND EMPLOYERS'LIABILITY YIN
ANYPRCF° STOR)PARTNERIEXECUTIVE NIA E.L.EACH ACCIDENT $
OFFICUUMEMBER[%GLUDEO7
(Nantlalory In IN) El.DISEASE-EA EMPLOYE' f
e yyoo.e tl nW.W.,
DESCQaRIPTION OF OPERATIONS Debut E.L.DISEASE-POLICY IMIT $
A Pro Eeaaional Liability CAB201852-05 05/21/21 05/21/22 Each Claim 1,000,000
DESCRIPTION OF OPERATIONS I LOCATIONS I VEHICLES (ACORD 101,Atl411bnd Ramarka Scbtlub,may Da eUacbtl tl mae Spam b Taqulro0)
CERTIFICATE HOLDER CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE
City of Huntington Beach THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN
ACCORDANCE WITH THE POLICY PROVISIONS.
20DO Hein Street AUTHORIZED REPRESENTATIVE
l
Huntington Roach, CA 92649
USA
01988-2015 ACORD CORPORATION. All rights reserved.
ACORD 25(2016/03) The ACORD name and logo are registered marks of ACORD
Cheryl.Donohue®lommo.com_LEN
<o»vocA
City of Huntington Beach
2000 Main Street ♦ Huntington Beach, CA 92648
(714) 536-5227 ♦ N%ivA,.h Lin tingtonbeachca.gov
Office of the City Clerk
Robin Estanislau, City Clerk
May 10, 2022
Davis Farr LLP
Attn: Jennifer Farr
2301 Dupont Drive, Suite 200
Irvine, CA 92612
Dear Ms. Farr:
Enclosed is a fully executed copy of the Professional Services Contract between the
City of Huntington Beach and Davis Farr LLP for Financial Audit Services approved by
City Council on May 3, 2022.
Sincerely,
9af
Robin Estanislau, CIVIC
City Clerk
RE:ds
Enclosure
Sister Cities: Anjo, Japan • Waitakere, New Zealand
PROFESSIONAL SERVICES
SERVICE: Financial Auditing Services
SERVICE DESCRIPTION: Provide financial auditing services for all funds of the City's
reporting entity, Single Audit Report of the City's federal grant programs, AB 2766 Audit
relating to the City's Air Quality Fund, and audit of the West Orange County Water Board
(WOCWB), a fiduciary fund of the City of Huntington Beach.
VENDOR: Davis Farr LLP
OVERALL RANKING: 1
SUBJECT MATTER EXPERTS/RATERS: 1. Principal Finance Analyst—Accounting 2.
Public Works Project Manager 3. Fire Senior Administrative Analyst 4. Senior
Accountant
I. MINIMUM QUALIFICATIONS REVIEW
• Written Proposal Score: 1,715
Davis Farr, LLP— Minimum Qualifications Review
Total Weighted Maximum
Criteria Score Score
Proposal Clarity 145 200
Firm Qualifications 475 500
Staffing/Experience 190 200
Understanding/Methodology 450 500
Cost 375 500
References 80 100
Total 1,715 2,000
II. DUE DILIGENCE REVIEW
• Proposal Ranking: 1
Davis Farr LLP—Summary of Review
• Leader in local government sector auditing throughout Southern
California servicing approximately 60 local, state, and federal
government entities.
• Highly qualified: experience auditing governmental entities for over
30 years.
• Serves on the Government Accounting and Audit Committee of the
Cal CPA Society and are frequent speakers on technical topics at
conferences and training events in California.
• Provides an annual Governmental Accounting Standards Board
(GASB) Technical Update for clients.
• References from the cities of Rancho Santa Margarita, Fountain
Valley, Commerce, Garden Grove, and Dana Point.
Davis Farr LLP— Pricing
• Pricing of 5156,076 is competitive (fourth lowest of five proposals
submitted
198