Loading...
Brown Armstrong CPA - ProposalBrown Armstrong Certified Public Accountants f .v,s- ) ;v\;i* n ..v\ i I V & TechnicalProposal ^ i yN*iIV Eric H. Xin, CPA, MBA/Paitner E: exin@bacpas.com Proposal for Auditing Services City of La Quinta March 1, 2017 T: (661) 324-4971 4200 Truxtun Ave., Suite 300 Bakersfield, CA 93309 • ■ii.T l>2i TABLE OF CONTENTS BROWN ARMSTRONG I I nI • Page 1Transmittal Letter Technical Proposal 3A. Independence * 3B. License to Practice In California 3C. Firm Qualifications and Experience D. Partner, Supervisory and Staff Qualifications and Experience 5 E. Similar Engagements with Other Government Entities 15 F. Specific Audit Approach 17 G. Total Maximum Price 24 H. Insurance 25 EXHIBITS Exhibit I - External Quality Control Review Report 28 Exhibit II - Summary of Recent Governmental Audit Experience 29 Exhibit III - Sample Management Letter 30 Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants I BROWN ARMSTRONG BROWN ARMSTRONG Certified Public Accountants CERTIFIES -RUBLie' •■‘AeCQUNTANTS -■ 4*:*Transmittal Letter March 1, 2017 V 1Ks \city of La Quinta Finance Department - Audit Proposal 78495 Calle Tampico La Quinta, CA 92253 ■tn. N .V '*0V A'I BAKERSFIELD OFFICEV (MAIN OFFICE)'' ' s. 4200 TRU>gTJN AVENUE SUrTE 300 BAKERSFIELD. ,CA 93309 ' TEL 661.324.4971 FAX 661.324.4997." / y' Brown Armstrong Accountancy Corporation (Brown Armstrong) Is pleased to submit this proposal to perform auditing services for the City of La Quinta for the fiscal years ending June 30, 2017, 2018, 2019, 2020, and 2021. This proposal will demonstrate to you that our firm is uniquely qualified to serve as your auditors. A \\•». •• Av B^L info@bacpas.comI We have thoroughly read your request for proposal, understand the work to be done, and feel that we are the best candidate to meet your needs. We are committed to performance and efficient completion of this audit on or before the dates specified In your request for proposal. ■' A"'\ FRESNO OFFICE. . 7673 N.-1NGBAM AVENUE ' ■'-jSUITilOr FRESNO, GA-93711 TEL- 559.476.3592 Brown Armstrong Is one of the largest regional accounting firms in California. Our mission is simple, we set out "'to exceed expectations and provide opportunities" for our clients. Our seventy-one (71) employees lead us in achieving this mission by working with our clients individually to overcome any challenges with a special combination of knowledge and experience in city audits. We have audited numerous agencies similar to yours for four decades. We are experts In governmental accounting and auditing and have assisted numerous clients in receiving the Certificate of Achievement for Excellence in Financial Reporting. A-- 1firi ■i vv FAX '55?.476;3593 \\\ .\ PASADENA OFFICE . ^V,' \\ -260 S. L0S:R0BLES AVENUE •AA SUITE 310 PASADENA. CA 91 101 Ta\ 626.204.6542.At Brown Armstrong, we understand that your timeframes must be met. As one of our key strengths, we develop an approach by which specific deliverables are achieved within set timeframes. We will work with you to develop a timeline that meets your specific requirements, meeting dates, field work dates, status reporting dates, and final report dates. • i'-* ■\ V■j STOCKTON OFFICE•V5250 CLAREMONT aW2j|^'-.. \SUITE I50T-Our firm partners, managers, and seniors are actively Involved in trade associations such as the Government Finance Officers Association (GFOA) and the California Society of Municipal Finance Officers (CSMFO). Several of our Partners are pro bono recognized reviewers for the GFOA Certificate of Achievement Award Committee. We enthusiastically contribute our time to this Award process because as we review CAFRs from ail across the United States, we maintain current, up-to-date knowledge of municipal accounting principles. Beyond the activity in trade associations, we offer our clients the education and organization to prepare themselves for upcoming regulation and compliance changes. I■ STOCKTON,.0^95207 . -TEL 209.451.4833' \ -^7 O J V." , REGISTERffiVvith.tHeTCblic CoijipcnyV■ Accounting Ortw^Board and,^MEMBER ofTha/^eric^lnstitute of^ WB-Certtfied Pt^fc Accountfib \■V wm- „ V '1. • ■•7M 1* 1 Our approach, people, commitment to timelines, and dedication to financial reporting excellence makes Brown Armstrong the best-qualified firm to meet your needs. Brown Armstrong will not be using any subcontractors on this engagement as we feel that our full involvement is necessary to build a relationship with our client. Brown Armstrong has been in business for over 40 years. Over the past five (5) years, we have performed over 900 audits of public agencies. I will be the engagement partner and primary liaison responsible for all services to the City of La Quinta (the City), and I am entitled to represent the firm, empowered to submit this bid, and authorized to sign a contract with the City. I can be contacted at 4200 Truxtun Avenue, Suite 300, Bakersfield, CA 93309, Te! (661) 324-4971, Fax (661) 324-4997, or by email, exln@bacpas.com. Please contact me if I can clarify or expand on any item contained in this proposal. We are available for an oral presentation, if requested. This proposal is a firm and irrevocable offer for sixty (60) days. We appreciate the opportunity to provide you with the outstanding service you expect and deserve. Sincerely, BROWN ARMSTRONG ACCOUNTANCY CORPORATION By: ^ric H. Xin, CPA, MBA Partner 2 TECHNICAL PROPOSAL BROWN ARMSTRONG I I n City Audit Experts Brown Armstrong Is a full service regional accounting firm. Our services include auditing, management advisory and Information services, tax strategy and preparation, accounting and bookkeeping services. We base our success on the relationships fostered, and performance of the best quality service possible. Our partners and staff are not strangers to auditing cities. The team assembled for you has been specially chosen to fit your needs. From staff accountant to partner, this group is trained to understand city audit requirements and carry out the desired scope of work based on your needs. Not only is our team of professionals trained to perform audits, but all members have experience auditing cities similar to the City of La Quinta (the City). This knowledge and background will lead to an efficient, timely, and quality audit that will keep your operation running smoothly. A. Independence Our firm, its shareholders and employees are independent of the City, as defined by generally accepted auditing standards and the U.S. General Accounting Office's Government Auditing Standards. In addition, we are independent of the component units of the City as defined by those same standards. We have had no professional relationships Involving the City for the past five (5) years. We do not have a conflict of interest relative to performing the proposed audit. In the event our firm is to enter into any professional relationships during the period of our agreement, we will provide the City with written notice of this fact. B. License to Practice in California Brown Armstrong and all assigned key professional staff are properly licensed to practice in California. C. Firm Qualifications and Experience Our firm had its roots in the late 1960's when founders Peter C. Brown and Burton H. Armstrong began their public accounting careers with Big Eight international accounting firms. Brown formed a local accounting firm in 1974 and was joined in 1985 by Armstrong to form a premier public accounting firm. Now, with 71 highly skilled employees. Brown Armstrong continues its growth by offering auditing, tax, accounting, consulting, and assurance services to governmental entities, nonprofits, corporations, partnerships and individuals. Our governmental audit staff is made up of thirty-eight (38) professionals who are experts in their field. We have crafted expertise in auditing the public sector since the birth of the company. We offer unmatched customer service, reliability, and quality. Through tireless planning, relationship building, and knowledge of the realm, we are dedicated to serving our clients and exceeding their needs and expectations. Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 3 TECHNICAL PROPOSAL We have four (4) offices located throughout the state of California. Our main office is located in Bakersfield, California. We have additional offices in Fresno, Pasadena, and Stockton to better serve our client's needs. All of the work performed on this engagement will be from our Bakersfield and Pasadena offices. The firm now employs 71 people as follows: Government*TotalPersonnel Shareholders (Partners) Managers Seniors Supervisors Staff Accountants Technicians and Other Support 9 6 15 8 57 5 3 1514 21 1 Total 21 * Indicates employees involved in providing services to local governments. All staff assigned to this engagement will be employed on a full-time basis. We are not proposing as a joint venture or consortium. External Quality Control Review Report As part of our commitment to quality control, our firm is a member of the Center for Public Firms Auditors Section (Center) of the American Institute of Certified Public Accountants (AICPA). We have completed several External Quality Control reviews under the AICPA's guidance, all of which included one or more governmental audits. Exhibit I of this proposal contains a copy of our most recent report. As indicated in that report, our Firm received a peer review rating of a "pass," which is the highest rating available. Desk or Field Reviews and Disciplinary Actions In the normal course of business, our firm has been subjected to several field reviews during the past five years. Additionally, all of our reports are subjected to annual desk reviews by federal and state cognizant agencies. All of our reports for the past five years were accepted by these agencies. We have no disciplinary action taken or pending against the Firm during the past five years with state regulatory bodies or professional organizations. Pending Litigation One claim has recently been made against our firm by a City client due to an embezzlement scheme. It is our conclusion the claim lacks merit, and we are vigorously defending our firm against such claim. We perform quality audits pursuant to all professional standards. The quality and competency of our audits has been confirmed based on the clean results of our recent peer review. Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 4 TECHNICAL PROPOSAL D. Partner, Supervisory and Staff Qualifications and Experience When you choose Brown Armstrong for your auditing services, you aren't just choosing an accountant; you're choosing a resource, a friend, and an expert. You don't need to dread your upcoming audit, the audit team assigned to your engagement will not only meet the deadlines you have in place, but will work with you to keep you current on the latest regulations. Our professional auditing staff is experienced in working with clients in all levels of the public sector, but the team we have chosen for you have specific skills that make them the best fit for your needs. From our governmental audit staff of thirty-eight (38), we have assembled an audit team consisting of members who are extremely qualified to perform your audit. All team members notated as a CPA are registered or licensed to practice as a certified public accountant In California. Below is an organizational chart of the proposed engagement team structure. Resumes and continuing professional education information for these individuals can be found on the following pages. City of La Quinta Professional Auditing Services r City of Quinta A I Rosalva Flores, CPA Technical Review Partner Eric H. Xin, CPA, MBA Engagement Partner I Lindsey B. McGuire, CPA Shareholder-in-Training I Melissa Cabezzas, CPA Engagement Manager I Janet Espinoza, CPA Engagement Senior 7 \ Ryan Dalmas Engagement Staff Wenceslao Acevedo Engagement Staff Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 5 TECHNICAL PROPOSAL Eric H. Xin, CPA, MBA Engagem :ner L Roles and Responsibilities • Overall responsibility for the audit and delivery of client service • Approves the overall audit risk assessment and audit procedures • Communicates with executive management, and members of the City, regarding audit planning, fieldwork and reporting • Available throughout the year to ensure proactive Issue identification and service delivery Eric Xin is a principal with over 20 years of experience in governmental accounting. Eric has grown within the firm serving a diverse client base. His expertise ranges from municipal entities and special districts to retirement systems and nonprofit organizations. He enjoys working "hands-on" with his clients and will never be too far away from audit procedures. Eric has always ensured that we have the highest level of audit and consulting services for all of his clients. He is actively involved in a number of professional organizations such as the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. In addition, he is a reviewer for the GFOA Certificate of Achievement Program. Clients Served •Only chosen clients are listed Cities City of Fresno City of Bakersfield City of Visalia City of Tulare City of Santa Barbara City of Modesto City of Delano Counties County of Kern County of Santa Barbara County of Merced County of Fresno County of Riverside County of Stanislaus County of Tulare County of San Joaquin County of Kings Special Districts Westside Health Care District Los Osos Community Services District San Joaquin Valley Air Pollution - Control District Education Nankai University, China, July 1989 B.S., Business California State University, Bakersfield, June 1996 Masters of Business Administration Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 6 TECHNICAL PROPOSAL /f. Lindsey B. McGuire, CPA Roles and Responsibilities • Overall responsibility for the audit and delivery of client service • Approves the overall audit risk assessment and audit procedures • Communicates with executive management, and members of the City, regarding audit planning, fieldwork and reporting • Available throughout the year to ensure proactive Issue identification and service delivery Lindsey will be the co-partner on this project. She has more than 8 years of governmental auditing experience. She has been with the firm since August of 2012 and her primary business focus is governmental entitles audit and accounting. Before Brown Armstrong, Ms. McGuire worked for KPMG in Orange County for 6 years and was an Audit Manager. Her audit specialties include special districts, counties, cities, and retirement systems. Lindsey strives to exceed client expectations and provide excellent service. She is actively involved in a number of professional organizations such as the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. ,4^ ^ Clients Served Cities City of Bakersfield City of Visalia . ’•Only chosen clients are listed Counties County of Kern County of Merced County of Napa County of Riverside County of San Luis Obispo County of Santa Barbara County of Santa Cruz County of Tulare Education Azusa Pacific University, 2006 Bachelors of Science Degree in Accounting Retirement Systems Kern County Deferred Compensation Plans Public Employees Retirement System of Nevada Portfolio San Joaquin County Employees Retirement Association San Luis Obispo County Pension Trust Southwest Contractors, Inc. Profit Sharing Plan Brown Armstrong Providing Auditing <& Accounting Services for Over 40 YearsCertified Public Accountants 7 TECHNICAL PROPOSAL Rosalva Flores^.CpA' Tech Roles and Responsibilities • Responsible for assisting the Engagement Partner In performing the audit risk assessment and design audit procedures. • Assists in audit documentation review in significant areas. • Reviews financial statements to ensure they are in conformance with GAAP and GFOA requirements. • Advises the audit team regarding technical matters and provides concurring approval of financial statements and audit reports. Rosalva, a partner at Brown Armstrong's Bakersfield office, will be the Technical Review partner for this engagement. She has over 18 years experience In auditing governmental entities and brings expertise In many areas. Her primary audit focus is in counties, cities, and special districts. Not only does she have experience in the audit process, but she will be an integral member of the team when it comes to keeping standards up to date. She is a reviewer for the GFOA Certificate of Achievement Program and reviews the Governmental Accounting Standards Board (GASB) advisory committees' latest pronouncements. He is actively involved in a number of professional organizations such as the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Clients Served *Only chosen clients are listed Cities City of Bakersfield City of Baldwin Park City of Burlingame City of Delano City of Fresno City of Madera City of Tulare City of Visalia Retirement Systems Contra Costa County Employees' Retirement System Fresno City Employees' Retirement System Kern County Employees' Retirement System San Joaquin County Employees' Retirement System Education California State University, Bakersfield, 1998 Bachelor of Science Degree in Business Administration, Concentration in Accounting Special Districts Belridge Water Storage District Casitas Municipal Water District Kern Tulare Water District Mojave Public Utility District Brown Armstrong Providing Auditing <& Accounting Services for Over 40 YearsCertified Public Accountants 8 TECHNICAL PROPOSAL Melissa L. Cabezzas, CPA G Melissa is the engagement manager of the project and located in our Pasadena office. She has more than eight years of governmental auditing experience at Brown Armstrong. Her primary business focus Is governmental entities audit and accounting. Her audit specialties include retirement systems, cities, and counties. Roles and Responsibilities • Reports to the Partners regarding audit and technical matters • Assists in the coordination of planning, fieldwork, and reporting matters • Reviews audit documentation for significant audit areas • Is in constant communication with executive management and members of the City regarding audit planning, fieldwork, and reporting Melissa will be highly involved in the field work and a face to face presence for Brown Armstrong. She and the senior accountant will be easily accessible for the City at all times. Her ability to manage an audit has become invaluable for Brown Armstrong. She is actively involved in a number of professional organizations such as the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Clients Served *Only chosen clients are listed Cities City of Bakersfield City of Burlingame City of Chowchilla City of Delano City of Seaside City of TulareEducation Counties County of Kern County of Kings County of Merced County of San Joaquin County of Santa Barbara County of Stanislaus County of Tulare California State University, Bakersfield, 2008 Bachelor of Science Degree in Business Administration, Concentration in Accounting and Business Administration Special Districts Kern-Tulare Water District Los Osos Community Services District Minter Field Airport District Rosamond Community Services District San Joaquin Area Flood Control District Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 9 TECHNICAL PROPOSAL j Janet Espinoza, CPA ^Engagement Serifs' r^- L Janet will be the engagement senior and has three years of governmental auditing experience. She has shown excellent performance in leading fieldwork, compiling and preparing financial statements, performing tests and analytical reviews, as well as creating strong working relationships with clients. She has executed audits in the past with little issues and is great at maximizing efficiency while performing audit work. She is actively involved in a number of professional organizations such as the American Institute Accountants and the California Society of Certified Public Accountants. of Certified Public A M Education ^ California State University, Bakersfield, 2014 Bachelor of Science Degree in Business Administration, Concentration in Accounting Clients Served ♦Only chosen clients are listed Cities City of Burlingame City of Fresno City of Modesto City of Visalia Counties County of Fresno County of Kings County of Riverside County of San Joaquin County of San Luis Obispo County of Santa Cruz County of Stanislaus County of Tulare Roles and Responsibilities • Leading fieldwork audit team • Reviews, analyzes, and documents client internal controls • Completes complex audit procedures • Researches and performs tests and analytical reviews on issues under direction of the Engagement Manager • Reviews financial statements and workpapers before sending the drafts to Engagement Manager and partners for further review Transit Districts Solano County Transit Stanislaus Council of Governments Special Districts Goleta Water District Kern County Sanitary Waste Pension Plans Kern County Deferred Compensation Plan Los Angeles Fire and Police Pension Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 10 TECHNICAL PROPOSAL Clients Served ♦Only chosen clients are listedm RyaniDalmasg^Engagement Staff Nonprofits Bakersfield ARC, Inc.Counties County of Fresno County of Kern County of Merced County of Riverside County of San Louis Obispo i Special Districts San Joaquin Valley Air Pollution Control District Lamont Public Utility District Keen County Superintendent of Schools Richgrove Elementary School District Tulare County Association of Governments Education California State University, Bakersfield, 2015 Retirement SystemsLos Angeles Ci^ Employees' Retirement System Bachelor of Science Degree in Business Administration, Concentration in Accounting Clients Served ♦Only chosen clients are listedWenceslao j^Aceved Counties County of Riverside County of Kern County of Santa Barbara County of Tulare Cities City of Burlingame City of FresnoEngagement Staff ■c Education California State University, Bakersfield, 2015 Retirement Systems San Mateo County Employees' Retirement Association San Diego County Employees' Retirement Association Ventura County Employees' Retirement Association Special Districts Eastern Kern Air Poliution Control DistrictBachelor of Science Degree in Business Administration, Concentration in Accounting Transit Districts Goiden Empire Transit District Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 11 TECHNICAL PROPOSAL Continuing Professional Education ^Relevant Education Listed Eric Xin GAAP Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 Governmental Topics: Pension Plans, SCO Cities Financial Transaction Report, Conservation Projects, Gas Tax Accruals, Fair Value Issues, and Independence, 2016 GAQC Annual Update, 2016 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Single Audit Update, Internal Control Challenges, and Fraud, 2016 Annual Conference of the State Association of County Auditors, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 GASB Update/Fiduciary Responsibilities of Public Officials, 2015 Accounting and Auditing Update, 2015 Fraud and the CPA Profession, 2015 GASB 38 Implementation Briefing, 2015 0MB A133 Update - Audits of State, Local and Nonprofits, 2014 GAys^P Update, 2014 California Frauds, Scams and Scandals, 2014 Accounting and Auditing Update, 2014 Lindsey McGuire GAAP Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 The New Data Collection Form and FAC Update, 2016 Revenue: Present and Future, 2016 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Single Audit Update, Internal Control Challenges, and Fraud, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 GASB Update/Fiduciary Responsibilities of Public Officials, 2015 Audit Update and Pension Accounting/Financial Reporting, 2015 Fraud and the CPA Profession, 2015 Accounting and Auditing Update, 2015 California Frauds, Scams and Scandals, 2014 Accounting and Auditing Update, 2014 Performing Effective and Efficient Single Audits, 2014 Rosalva Flores GAAP Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 Single Audit Update, Internal Control Challenges, and Fraud, 2016 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 Accountancy Laws, Ethics, Taxes and Financial Reporting Review - Ethics, 2015 Accountancy Laws, Ethics, Taxes and Financial Reporting - Regulatory Review, 2015 GASB Statement No. 68 Audit and Accounting Workshop, 2015 GASB Update/Fiduciary Responsibilities of Public Officials, 2015 Accounting and Auditing Update, 2015 Fraud and the CPA Profession, 2015 Avoiding Common Audit Deficiencies in Yellow Book and Single Audits, 2015 GAAP Update, 2014 Accounting and Auditing Update, 2014 I Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Servicesfor Over 40 Years 12 TECHNICAL PROPOSAL Melissa Cabezzas Fraud - Practical Approach to Prevention and Detection, 2017 GAAP Update, 2017 Single Audits: A Case Study Approach, 2017 The New Data Collection Form and FAC Update, 2016 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Single Audit Update, Internal Control Challenges, and Fraud, 2016 Employee Benefit Plans Annual Audit Conference, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 GASB Update/Fiduciary Responsibilities of Public Officials, 2015 Audit Update and Pension Accounting/Financial Reporting, 2015 Professional Ethics for Accountants - A Comprehensive Update, 2015 Accounting and Auditing Update, 2015 Fraud and the CPA Profession, 2015 GAAP Update, 2014 California Frauds, Scams and Scandals, 2014 Accounting and Auditing Update, 2014 Janet Espinoza Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Single Audit Update, Internal Control Challenges, and Fraud, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 GASB Update/Fiduciary Responsibilities of Public Officials, 2015 Audit Update and Pension Accounting/Financial Reporting, 2015 Accounting and Auditing Update, 2015 Fraud and the CPA Profession, 2015 Ryan Dalmas GAAP Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 Wenceslao Acevedo GAAP Update, 2017 Practical Approach to Prevention and Detection, 2017 Single Audits: A Case Study Approach, 2017 Single Audit Update, Internal Control Challenges, and Fraud, 2016 GASB Update and Common Accounting & Financial Reporting Issues, 2016 Ethical and Legal Standards for CPAs, 2016 Public Company Update: SEC, PCAOB, and Other Developments, 2016 Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 13 TECHNICAL PROPOSAL Continuino Professional Education Each year Brown Armstrong organizes four days of CPE seminars in Bakersfield (two, two- day sessions covering 32 hours of CPE) for its professionai staff and clients' personnel. One of the two-day CPE seminars is in the middle of January. It covers accounting and auditing updates relating to for-profit businesses (FASB, PCAOB, and SAS). Another two-day CPE seminar covering primarily governmental accounting and auditing updates (GASB, Yellowbook, Single Audit) is typically in May. The course material covers emerging issues, current pronouncements, auditing standards, risk alerts, Information systems, reporting issues, and other topics of interest which concern auditing and accounting with an emphasis on governmental Issues. Course materials are prepared by professional lecturers, our partners, managers, and seniors based on their own experience, research, and learning. Last year's attendance included Brown Armstrong professionals and nearly 60 clients and their accounting staff. All staff assigned to governmental entities meets the CPE requirements in accordance with Government Auditing Standards. In-house training is provided to our junior professional staff annually and covers a range of topics from taxation to Information systems. These sessions are usually conducted over several days; both in spring and late fall. Frequently our clients request that members df their accounting divisions be included In our in-house training, and we are happy to help our client's staff achieve their continuing professional education requirements. Staff Continuity The engagement partner, manager, other supervisory staff, and specialists may be changed if those personnel leave the firm, are promoted or assigned to another office. These personnel may also be changed for other reasons only with the express prior written permission of the City. We understand that the City retains the right to approve or reject replacements. Other audit personnel may be changes at the discretion of our Firm, provided that replacements have substantially the same or better qualifications or experience. Every effort will be made to ensure continuity of audit personnel and allow for a smoother audit process during the term of the engagement. Our firm policy is to provide staff consistency on engagements; however; having a large public sector focus allows us to provide options for staff rotation if requested. Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 14 TECHNICAL PROPOSAL E. Similar Engagements with Other Governmental Entities Significant Engagements Following is a list of the most significant engagements performed in the last five (5) years that are similar to your City's engagement. All clients listed below may be contacted as references. All CAFRs and financial statements listed in the scope of services below were prepared in conformance with GAAP requirements. Note that an * indicates a Government Finance Officers Association Certificate of Achievement in Financial Reporting winner. 2015-Present CAFR/Single Audit/Airport PFC, Health and Welfare Audit, NTD Reporting Eric H. Xin, CPA, MBA/Rosalva Flores, CPA 2,500 Michael Lima, Finance Director/Controller (559) 621-7006 Michael.Uma@fresno.gov City of Fresno* Scope of Work: Engagement Partner: Total Hours: Contact: County of Riverside* Scope of Work: 2019-Present CAFR/Single Audit/AUP/Tobacco Securitization/Waste Management Audit/Air Quality Improvement/ Eric H. Xin, CPA, MBA 2,000 Paul Angulo, County Audit Controller (951) 955-3800 pangulo@co.riverside.ca.us Engagement Partner: Total Hours: Contact: County of Santa Cruz* Scope of Work: 2014-Present CAFR/Single Audit/RDA Successor Agency/Sanitation District Jian Ou-Yang, CPA 1,200 Edith Driscoll, Auditor-Controller Treasurer and Tax Collector (831) 454-2683 edith.driscol!@santacruzcounty.us Engagement Partner: Total Hours: Contact: City of Bakersfield* Scope of Work: Engagement Partner: Total Hours: Contact: 1990-present CAFR/Single Audit/GANN Limit/Prop 10/AUP/RDA Eric H. Xin, CPA, MBA 1,100 Nelson Smith, Finance Director (661) 326-3742 nsmith@bakersfieldcity.us City of Tulare* Scope of Work: 1999-Present CAFR/Single AudIt/RDA Successor Agency/Measure R/TDA Thomas M. Young, CPA 1,000 Darlene Thompson, Finance Director (559) 684-4255 dthompson@ci.tulare.ca.us Engagement Partner: Total Hours: Contact: Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 15 TECHNICAL PROPOSAL I I Brown Armstrong Certified Public Accountants Providing Auditing <& Accounting Services for Over 40 Years 16 TECHNICAL PROPOSAL Local Government Experience Our firm has extensive experience in audits of local governments, having performed over 900 audits of public agencies over the past five (5) years. We are also highly experienced in the preparation of financial statements in conformance with GAAP. Several of these are local government agencies with a population of over 50,000 and over $100 million In general governmental revenues. We have also performed Single Audits for many of these agencies. Current Clients Our firm has extensive California Governmental experience. We currently audit counties, cities, and numerous other local governments. Exhibit II of this proposal presents a summary of our recent governmental clients. Below is a list of our current municipal clients. Due to our excessive client list, we have provided a few of our current clients below. GFOA Award RecipientClientYears Audited Audit Manager City of Bakersfield Lindsey McGuire1990 - Present Yes City of Fresno 2015 - Present Neeraj Datta Yes Sarabeth Prior (Acting Manager)City of Lindsay 2010 - Present No City of Tulare 1999 - Present Melissa Cabezzas Yes County of Fresno 2012 - Present Neeraj Datta Yes County of Kern 1989 - Present Lindsey McGuire Yes County of Merced 2007 - Present Eric Xin No County of Napa 2016 - Present Lindsey McGuire Yes County of Riverside 2009 - Present Lindsey McGuire Yes County of San Luis Obispo 2015 - Present Lindsey McGuire Yes Lindsey McGuire/ Melissa Cabezzas County of Santa Barbara 2007 - Present Yes County of Santa Cruz 2014 - Present Lindsey McGuire Yes County of Stanislaus 2007 - Present Jian Ou-Yang No County of Tulare 2007 - Present Neeraj Datta Yes Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 17 TECHNICAL PROPOSAL F. Specific Audit Approach Our audits will be conducted in accordance with generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants and the provisions of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and will be fully compliant with all current GASB pronouncements. The methods employed to formulate our auditors' opinions consist of several functions. These functions and the related time requirements, as well as the timing are: Planning We will begin the planning of the engagement upon notification of award of the contract. We will review the City's budget, prior year financial statements, procedural manuals, review miputes and other planning procedures. From the Information we gather, we will develop a preliminary audit strategy. During planning, we will form an audit risk based on our review. A pre-audit conference will be scheduled during the first day of interim. Information Technology within the Financial Statement Audit Brown Armstrong utilizes the risk-based audit approach that recognizes the pervasiveness of Information Technology within business processes and financial transaction cycles. The first step is determining the level of IT sophistication, ranking entities by high, medium and low sophistication. High and Medium sophistication requires the assistance of a subject matter expert to evaluate and test the Information Technology and related controls. Once we have identified the relevant information systems we will test the IT General Controls surrounding the system to determine that the system can be relied upon. We will then test relevant application controls and integrate that control assessment with our manual control testing and risk assessment process. We also may utilize various Computer Assisted Audit Tools to improve both the efficiency and effectiveness of our substantive procedures. In addition to the procedures noted above, we will provide recommendations to management on how to Improve or streamline internal controls as they relate to your deployed Information Technology. Extent of EDP Software in the Engagement Each staff person has access to a personal computer, and has knowledge of CCH Pfx Engagement software we have purchased for auditing municipalities and report writing. We use this software in the beginning, inputting all prior year actual numbers, and the client current year budget, including amendments. We then input year-to-date numbers and run analytical work at the end of the audit comparing appropriation-expenditure numbers to prior year and budget amounts. All significant differences are investigated. Our software is capable of complete report writing, including combining statements and footnotes. Identification of Computer Software Brown Armstrong uses Windows Server 2008 virtuai servers in a VMWare environment hosted on redundant Cisco UCS physical servers. We use Microsoft Exchange Server 2010 for our email, and we have a centralized data storage system running on a Netapp disk array. Our network backbone is comprised of Cisco routers and switches and we have WAN connections to our satellite offices. Our servers are on protected power and have redundant drive arrays to eliminate any single points of failure. All of our data is backed up using Zetta.net, which is HIPAA, FINRA, FIRPA, ITAR, SEC 17A-4 and SOX compliant. In addition, our IT system is reviewed (peer review) by a third-party IT consulting firm on a bi-annual basis to ensure we are up-to-date on security and efficiency issues. Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 18 TECHNICAL PROPOSAL All key personnel assigned to your audit have computer application skills and experience In auditing computerized accounting systems. In addition, Brown Armstrong contracts with an outside IT consulting firm to perform testing on audit client's EDP and computer logistics on an as-needed basis. In 2007, Brown Armstrong switched to paperless audits utilizing CCH Pfx Engagement software. Our staff is equipped with portable computer equipment that enables them to work effectively from the field. Our laptops have both hard drive encryption technology and tracking software to help us locate them in the case they are lost or stolen, and client data is regularly cleared off the local drives after jobs are finished. The data on each laptop in our main auditing software (CCH Pfx Engagement) is synched both with the central file room in our office and between each laptop in the field so there are multiple copies of the data available in case a laptop fails. Also, we use ACL software in performing computer assisted audit procedures. Several of the procedures we have performed using ACL were: - Selection of warrants for test of control procedures - Test for duplicate payments - Test for potential employee fraud - Transfer of trial balance data to our financial statement preparation software I - Test of inventory pricing In performing such procedures, our clients were requested to provide us with their disbursements, payroll and other modules in either Dbase, ASCI or spreadsheet formats. ACL is able to read such files and perform various data mining functions such as sorting, recalculating, comparing, etc. Additionally, Brian Letlow, our IT Director, provides a wide range of computer support to the Firm and its clients. Mr. Letlow is a Certified Network Engineer (CNE) and Certified Network Administrator (CNA). Stiidv and Evaluation of Internal Controls This is the cornerstone of the engagement. Internal accounting control generally comprises the plan of organization and procedures and records that are concerned with the safeguarding of assets and reliability of financial records. We will begin by preparing flow charts and other memoranda to fully describe all financial systems. We will then review the documents to isolate the significant strengths and weaknesses that would affect the extent of substantive audit procedures to be employed. Each strength is then tested and the results subjected to evaluation. These evaluations assist us in determining the amount of reliance we can place on those significant strengths we have identified. Test of Controls and Compliance Based on our preliminary assessment of the internal control structure and risk factors, we anticipate performing internal control testing in the following areas: Sample Size 40-60 40-60 40-60 Area Receipts and revenues; Disbursements and accounts payable; and Payroll and related liabilities. I Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 19 TECHNICAL PROPOSAL Sample sizes will depend on the extent of reliance placed on the given sample and the volume of transactions involved. Statistical and random sampling will be used to ensure that all samples truly represent the population being tested. We will use Excel and audit command language (ACL) software and your on-site automated data system on an "inquiry only" basis for purposes of identifying the postings of items selected for testing. Findings will be discussed with management for accuracy and the process of recommendations immediately started. At this point we make adjustments to our auditing plan to compensate for the significant strengths and weaknesses thus identified and substantiated. Substantive Tests In this portion of the examination, we obtain sufficient competent evidential matter through inspection, observation, inquiries and confirmations to afford a.reasonable basis for an opinion regarding the financial statements under audit. The extent and timing thereof is determined by the results of our study and evaluation of internal control. Compliance Tests Concurrent with the substantive testing, we perform the compliance tests which have been designated to meet the objectives stated by the U.S. Comptroller General of the Office of Management and Budget and the State Controller's Office. Included in this auditing phase are all procedures relating to Federal assisted programs. These procedures would include: • Setting of auditing scope with cognizant agency and obtaining approval of reporting formats (previously noted under the "planning" discussion). • Review and testing of internal control, practices and policies designed to provide reasonable assurance that the City's controls relating to the management of federal financial assistance programs are functioning and are in compliance with applicable laws and regulations. • For major federal assistance programs: reviewing cash receipts to ascertain agreement with grant terms; reviewing program funding for matching requirements; testing a representative sample of disbursements for compliance; tracing financial data to submitted reports. • Summarizing financial data for final reports. Analytical Procedures We will perform analytical procedures during all phases of our audit (audit planning, field work and audit completion). We will build our expectations based on historical experience and known current year factors and will investigate significant departures at the financial statement level to decide if we can reach our comfort level for certain audit areas. We will also perform substantive analytical procedures, where we use analytical procedures as the principal substantive test of a significant financial statement assertion, based on the auditor's judgment and on the expected effectiveness and efficiency of available procedures. Brown Armstrong Providing Auditing & Accounting Servicesfor Over 40 YearsCertified Pubiic Accountants 20 TECHNICAL PROPOSAL Approach to Determine Applicable Laws and Regulations Subject to Audit Test Work Our experience with various municipal audit clients, most with federal or state monies, has created a reservoir of knowledge of many laws and regulations. However, by inquiry and observation, we will determine all major programs participated in by the City. We then consult the actual law, the Federal Register, Catalogue of Federal programs, or the California State Controllers guide to State and Federal Compliance to obtain understanding of the requirements of the law. For major programs, we specifically test those requirements by inspection of documents. Approach for Drawing Audit Samples for Compliance Tests Compliance test samples will be drawn usually by statistical sampling techniques. The universe from which the sample is drawn begins at the beginning of the year under audit, and ends with the end of that year. If a null is picked, it is replaced in draw sequence until sufficient live Items comprise the planned sample size. We will request the City to provide us with all disbursements and payroll data files for the year in spreadsheet format from which to draw our samples. Supervision and Review The review process is constant throughout the engagement. Each working paper prepared by a staff accountant is reviewed by the engagement senior and/or manager. All working papers are then reviewed by the engagement partner. To be effective, the reviews must be conducted as the engagement progresses and as each important step is completed. Our procedure is for the audit manager and partner to review the work at the conclusion of each significant task through the engagement as an integral quality control procedure. The financial statements and report thereon are then reviewed byjan audit partner not directly Involved in the engagement for concurrence of opinion prior to release of the report to the City. I If conditions are discovered which lead to the belief that material errors, defalcations or other irregularities may exist, or if any other circumstances are encountered that require extended services, we will promptly advise you. No extended services will be performed unless they are authorized in the contractual agreement or in an amendment to the agreement. Exit Conference with Management An important process In our audit plan is to hold an exit conference with management. The purpose of the exit conference is to discuss the results of the audit, communicate to management any reportable conditions identified during our audit to allow management to respond to the finding(s) and discuss the draft report and timeline of the final delivery of the reports. Expression of Opinion - Our Primary Purpose Our final review of the working papers includes a determination as to whether or not we have a basis to support our conclusion that the financial statements are presented fairly, in conformity with generally accepted accounting principles applied on a consistent basis, and that they contain adequate informative disclosure. As a normal part of any examination we conduct, a management letter Is prepared which identifies observations we have made in the course of our work with respect to accounting practices which are not generally accepted, deficiencies in internal control and operational inefficiencies, if any. A sample management letter is included In Exhibit III of this proposal. At appropriate times operating personnel are consulted to ensure the correctness of our Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 21 TECHNICAL PROPOSAL understanding. These findings are then communicated In writing to management and the Board together with our specific recommendations for improvements in accounting practices, operating practices and Internal control procedures. As a result of the aforementioned procedures, we will express an opinion as to the fair presentation of the financial statements of the City in accordance with generally accepted accounting principles applied on a basis consistent with the preceding year. Office Location All of the work performed on this engagement will be from our Bakersfield and Pasadena offices. Pertinent information for those offices is as follows: 260 S. Los Robles, Suite 310 Pasadena, CA 91101 Tel. (888) 565-1040 Fax (661) 324-4997 4200 Truxtun Ave., Suite 300 Bakersfield, CA 93309 Tel. (661) 324-4971 Fax (661) 324-4997 Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 22 TECHNICAL PROPOSAL The following Audit Schedule provides a detail of the timing and time requirements for your audit: DETAILED AUDIT SCHEDULE Time Period Staff HoursAudit Tasks Contract AwardApril April/May/June Planning and Administration: • Obtain and review copies of key work papers of prior audit firm. • Pre-audit conference. • Review and evaluate City’s accounting and financial reporting. Prepare an overall memo of recommendations, potential issues, and suggestions for improvements. • Entrance conference with Management to discuss audit approach, timing, assistance, and issues. Discuss SAS-99 approach. • Prepare overall memo confirming audit procedures, timing, and assistance. • Prepare detailed audit work plan and audit programs, audit budget and staffing schedule. Provide schedules to City Management. • Obtain a preliminary Schedule of Expenditures of Federal Awards and sub-recipient disbursements for the latest closed month. 4Partner Manager Senior Staff Clerical 10 10 20 6 50 C/5 PC O u o PC H Partner Manager Senior Staff Clerical 12April/May/June Internal Control Procedure and Single Audit Procedures (if required): Obtain and document our understanding of the following key internal control systems through walkthroughs, interviews of staff, and review of supporting documentation - all entities: o Budgeting, o Revenue, billing, accounts receivable and cash collections, o Purchasing, expenditures, accounts payable and cash disbursements, o Capital assets and journal entry procedures, o Debt authorization, issuance and repayment, o Payroll, o Understanding of Information Systems, and o Other significant internal control systems as necessary. 40 60 <100 §1 s 213 H s Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 23 TECHNICAL PROPOSAL April/May/June Internal Control Procedure and Single Audit Procedures (if required) (Continued): • Obtain and document all inter-fund / inter-reporting entity advances and current status, along with any allowances for doubtful accounts. Discuss with the City any plans for converting allowances for doubtful accounts into grants. • Document if any on-behalf payments are made between City entities (debt, fringe benefits, other items). • Document City's long-term debt status (including general obligation bonds, certificates of participation, etc.). • Test Revenue Recognition at key points - cash collections for fees, fines, sewer and parking fees, license and permit fees, 3rd party collections. Test business district tax and other non-property tax allocations. • Perform audit tests of grant programs and Compliance with Federal Laws and Regulations. Review grant documents; select sufficient number of transactions to test for compliance with the most recent Compliance supplement. • GANN Limitation Work—Document appropriation limitations. • GANN Limitation Work— Perform GANN Limit Calculation and prepare preliminary report. • Review minutes of Council meetings and other key committees. • Coordinate and assist City staff in the preparation of all appropriate confirmation requests. • Hold progress conference with Management. • Obtain trial balance for interim analytical procedures. • Detailed audit plan provided to the City, including all schedules to be prepared by the City. 0^ o u o PC H Q < S PC H Z Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 24 TECHNICAL PROPOSAL September Year End Audit Procedures: Entrance conference with Management. Follow-up on all outstanding confirmations. Verify and validate account balances by reviewing invoices, vouchers, resolutions, minutes and other documentation, as required. Perform analytical review of revenues and expenditures. Determine reason for all material differences between budget and actual, test and verify City attestations. Test investment and bank reconciliations for the City. Complete payroll testing from journals to 941 amounts (cross fiscal year). Tie 941’$ to other available information. Perform a search for unrecorded liabilities by reviewing disbursements subsequent to June 30, testing terms of contractual obligations, and interviewing staff. Perform review at subsequent event discussions with Management and review of all minutes of City Council and other key committees. Complete Duarte Successor Agency audit procedures. Complete single audit procedures. Complete compliance audits, if applicable. Finalize all potential findings, management letter comments and audit documentation. Hold Exit Conference with Management. 14Partner Manager Senior Staff Clerical 40 60 200 1 315 November / Reporting and Final: December Partner Manager Senior Staff Clerical 20Prepare City’s CAFR and provide suggested changes and improvements following the GFOA checklist. Issue draft reports on: City CAFR Internal Control Over Financial Reporting Management Letter Single Audit GANN Limit Required Communications under SAS-114 and SAS-115 Housing Authority Finance Authority Successor Agency State Controller’s Report Finalize all reports, findings, and recommendations. Available to present all reports to City Committees, Management, and all interested stakeholders and Citizens. o o o o o o o o o o 40 30 50 H 27 0^167 o Ph Total Hours:245 H O < G. Total Maximum Price Our cost proposal is provided as a separate document but is incorporated herein by this reference. Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 25 TECHNICAL PROPOSAL H. Insurance Copies of our current insurance certificates are included below. ACORlf DATE (IWt>aYYVY) S/20/2016CERTIFICATE OF LIABILITY INSURANCE THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON IXE 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), AUTHOREED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: H th« c»rttficatft holder is an ADDITIONAL INSURED, th« poljcy(i«a) mutt bt tndortad. H SUBROGATION IS WAIVED, aubjtct to tht ttrmt and conditiont of tha policy, cotlain poKcwa may raqulra an endorsamant. A statamant on Ihia cartificata doas not confar righta to tfia cartHIcata boldar In Itau of tucb andofaamant(t). lUMIALI tvuigi PHONE Julia D.LindsayPRODUCER Toliun a Wllcat Insuranca Sarvicas LLC iOE52073 5001 California Ava. Suita 150 nsi.(661)616-4700 (A'.C.WlElB .jllndsaygtolmanandwlkar.com NAICfWSUREWa aFFOBIMNG COVERAGE CA 93309Bakarsflald 27120WBURERA:T»nnibmi Int CO 29424INSURED Brown Armstrong Accountancy Corporation 4200 Truxtun Ava. Suita 300 amuRERt^Hartford Casualty ■guRERC:Twin Citv Flra Ins Co.29459 ■PURER 0: ■PURER e : Bakarsflald CA 93309 WWRERF: CERTIFICATE NUMBER:16/17 ALL REVISION NUMBER: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 WIY REQUIREMENT, TERM TO 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 POLIOES. LMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. TYPE OF ■PUmWCC ssusism^ I OCCUmENCEX 1.000.000COMHERCIAL GENERAL UA8ILITY CLAAIS-hWOE OCCUR 300,000A 10,000sianna37306/1/2014 6/1/2011 MED EXP (Ary on» pawn) 1,000,000PERS0NN.6A0V WJUHY 2.000,000GENERAL AG(»EQATEQE^fL AGGREGATE LRHT APPLIES PER: □ Sffi 2,000,000XLOCPRODUCTS - COMWOP AGGPOLICY raUMSSMSliW 1,000,000AUTOMOBILE LiAB&JTY BODILY PilURY |P«r pmon)ANYALfTOA SCH^LED NONOWNEO AUTOS OOOILY KlURY (P« accdM)6/1/2017SlCnKm37306/1/2016 WmRIVUAMAUk IPwaccKMN)X XHIRED AUT06 UHBRELIA UAB EACHOCCUWENCE 13,000, 000OCCUR CLAiMS-MADEEXCESS UAB AGGREGATE 13.000.000BPEP 1 X I RETENTl^51100011994 6/1/2016 6/1/2017 WORKERS COtPENSATlOH AND EMPLOYERS' UABHJTY ANY PnOPnCTOaPARTNEA-EXECunvE OFnCEnWEIPER EXCLUDED^ X Y/K E.L EACH ACCIDENT 1,000,000[n N'A C S1KIM741 6/1/2016 6/1/2017 E.L DISEASE - EA EMPLOYE!1,000,000 gCT»ERAnONS bWoF EL DCEASE - POUCV LIlifT » 1.000.000 A Bualnass Parsonal Pr^arty Raplaeaaant Cost 2,024,300 02,500 S10aKia3730 6/1/2016 6/1/2017 BPPLjnl DwuuJiili OESCRIPTION OF OPERATIONS' LOCATIONS/ VEHKLES (ACOPO 101, AdWIonal IWmsrU SchMuM. trmf tm MtKMU > mo<t tppc* I* !•«*•«) Issuad for proof of covaraga only!t CERTinCATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. Evldanca of Insuranca Only AUTHORIZED REPRESENTATIVE Shaun Kelly/JULIEL CI1988-2014ACORD CORPORATION. All rights resaivad. ACORD25 (2014/01)Tha ACORD name and logo ara registarad marks of ACORD Brown Armstrong Providing Auditing <& Accounting Services for Over 40 YearsCertified Public Accountants 26 TECHNICAL PROPOSAL ACORCf MTtnammnno 01/11/2017CERTIFICATE OF LIABILITY INSURANCE THIS CtRTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NBOAT1VELY AMEND. EXTEND OR ALTER THE COVERAOE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING IN8URBR($). AUTHORIZED REPRESENTATIVE OR PRODUCER. AND THE CERTIFICATE HOLDER. IMPORTANT: If th« cwttficat* Iwldtr It tn ADDITIONAL INSURED, tht pollcy(ltt) mutt havt ADDITIONAL INSURED provltlont or bt tndorttd. If SUBROGATION IS WAIVED, tubjtct to tbt ttrmt and conditions of th« policy, ctrtain pollcitt may raquirt an andorssmant. A statsmant on this cartHlcata dost not confer riahta to tha cartificata bolder In lieu of such andortamanUa). “ IMmI ^ 'David KoanaaPRODUCER InCagre Inauranea Brokara FAXPHONE.947-395-S0OOMa a»n : David.KoanaaSlntagToqroiip.e111 Naat CaB^>all 4tk Fleer Arlington Baighta, IL S0005 WtURERtSI AFPOROaW COVPUOE LIBBRTT SDBPLDB IBB CORP 10735 KAVIOATORS SPBCIALTT IBS CO 36055IHSUREO Brown Xrmacrong Accountancy CorperatlMi ■WJRgia CRUM a FORSTBR SPBCIALTT IBS CO 44530■lauRoc ■tauiwp4200 Truxtun Avanua Suita 300 Bakaraflald, CA 93309 CERTIFICATB NUMBER: 49939476 RBVIBIOW NUMBER:COVBRAOB8 THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE WSURED 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 PERTAW. 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. ■HR TVPBCFt^UmWCt rniirriiiMiFiLIE COMMetCUL eeiCRAL UAtnjTY EACH OCCURRENCE aiJMCETOICffEO PHEWSEStEacccuroncai i CLAMS-MUDE OCCUR t $ligDE»(Awrmapatwn) PERSON*!. > M?V Wjunv t QEWV*O0«EG*TEL»lfTAPPUE8PER QErgRALAOOREOATE t PRO-POUCY LOC PRCXX)CTS-COMP>OPAGQ SJECT t AUTOMOtU UABUTY tCD ANY AUTO OWNED AUT06 0NLY HMED AUTOS ONLY BOCXIY MJURY (Per penon)t SOCOULEO AUTOS NON-OVWCD AUTOS ONLY BOOI.Y NJURY (P« acMM) PUUPLUIVUAIRDE t t $ UHBREUAUAt OCCUR EACH OCCURRENCE s excEstuAS gAaisMAoe AGGREGATE $ OED RETEwnCHl 1 I sStute I I ^AMO BiVLOVBtr UABUTY anvproprctor/partkrcxecutta OFFKERACMBERExauDED? Y/N E L EACH ACdOENT sNrA EL OOEASe-EABAPLOYEt % ■ yaaOnoOt retti CCSCRyTWN OP OPCRATIOWS EL DISEASE • POUCYUMT $ A Profaaalonal Liability XS PrefaaaiMtal Liability PL5SABBin.4001 CB17IIPL071565IC ACL'101664 01/01/17 01/01/17 01/01/17 01/01/19 01/01/19 01/01/19 Bach ClalB / Agg Baefa Claim / Agg Baob Claim / Agg SH/IOII 3.SM/5M 2.SB/SB B C X8 Profaaaienal Liability DtaCRiPTlON OP OPCRATKMS; LOCATIONS/VEHKLXt (ACOR0101. AAMoM RMnarkt acneOut*. may be ittaeM Hmereepace H rttuTM) Producat'a CaliComla DOI Licanaa 90877964 Balf Inaurad Katantlon $100,000 « CBRTIFICATB HOLDBH CANCELLATION SHOULD ANY OF THE ABOVE 0E8CRBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED M ACCORDANCE WITH THE POLICY PROVISiONS. Partiaa at Intaraat AUTHORIZE REPftttENTATIVt 1 e 1988-2015 ACORD CORPORATION. All rights retarvad. ACORD 25 (2010/03)The ACORD nsme and logo are registered marks of ACORD Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 27 EXHIBITS I I I I EXHIBITS I < I Brown Armstrong Providing Auditing & Accounting Servicesfor Over 40 YearsCertified Public Accountants 28 EXHIBITS Exhibit I External Quality Control Review Report weaver^ System Review Report To the Sharehokters of Brown Armstrong Accountancy Corporation and the National Peer Review Committee of the AiCPA We have reviewed the system of quality control for the accounting and auditing practice of Brown Armstrong Accountancy Corporation (the firm) applicable to engagements not subject to PCAOB permanent inspection In effect for the year ended October 31. 2015. Our peer review was conducted In accordance with the Standards for Performing and Reporting on Peer Reviews established by the Paer Review Board of the American Institute of CefliTied Public Accountants As part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards In all material respects. Our responsibility is to express an opinion on the design of the system of quality conlrol and the firm's compliance therewith based upon our review, The nature, objectives, scr^, limitations of. and the procedures performed in a System Review are described in the standards at www.alcpa.oro/prsummarv- As required by the standards, engagements selected for review included engagements performed under Government Auditing Standards and audits of employee benefit plans. in our opinion, the system of quality control for the accounting and auditirtg practice of Brown Armstrong Accountancy Corporation applicable to engagements not subject to PCAOB permarvent inspection in effect for the year ended October 31,2015, has been suitably desigr>ed arxl complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable profeeeional etandarde in alt material reepecte. Firms can recenw a rating of pass, pass with deficiency(ies) or fail. Brovm Armstrong Accountancy Corporation has received a peer review rating of pass WEAVER AND TIDWELL. LLP. Dallas, Texas January 29, 2016 rrnrifD ArviSDBS ,'?n MfdtT MuT jfirr .iw cwiits nt msi p,-ri !'r?a?pn Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 29 EXHIBITS Exhibit II Symmary of Recent Oowernmentai Experience SPECIAL DISTRICTSRETIREMENT PLANSCITIES Bear Mountain Recreation & Park District Delano Mosquito Abatement District Fresno Irrigation District Fresno Metropolitan Flood Control District Kem Tulare Water District Kern Water Bank Authority Kings County Economic Development Corporation Mojave Public Utility District Mother Lode Job Training Agency Riverside County Habitat Conservation Agency Pasadena Center Operating Company Pixley Public Utility District Port Hueneme Water Agency Rosamond Community Services District Rose Bowl Operating Company San Joaquin Area Flood Control Agency San Joaquin Valley Air Pollution Control District Stanislaus County Community Services Agency Contra Costa County Employees’ Retirement Association Fresno City Employees’ Retirement System Fresno County Employees’ Retirement Association Imperial County Employees’ Retirement System Kern County Employees’ Retirement Association Los Angeles Fire and Police Pension System Los Angeles City Employees’ Retirement System Los Angeles County Employees’ Retirement Association Marin County Employees’ Retirement Association Merced County Employees’ Retirement Association Orange County Employees' Retirement System San Diego City Employees’ Retirement System San Diego County Employees’ Retirement Association San Joaquin County Employees’ Retirement Association San Mateo County Employees’ Retirement Association Sonoma County Employees’ Retirement Association Tulare County Employees’ Retirement Association Ventura County Employees’ Retirement Association San Francisco Bay Area Rapid Transit District Money Purchase Plan and Deferred Compensation Plan San Luis Obispo County Employees’ Pension Trust Pasadena Fire & Police Retirement System Santa Barbara County Employees' Retirement System Fresno Metropolitan Flood Control District Pension Plan and Trust City of Bakersfield City of Baldwin Park City of Burlingame City of Delano City of Fresno City of Lindsay City of Modesto City of Santa Barbara City of Seaside City of Tulare City of Visalia TRANSIT DISTRICTS SCHOOL DISTRICTS COUNTIES Central Contra Costa Transit Authority Golden Empire Transit District Kem Council of Governments Napa County Transportation and Planning Agency Riverside Transit Agency San Joaquin Council of Governments Santa Cruz Metropolitan Transit District Solano County Transit Stanislaus Council of Governments Tulare County Association of Governments Bakersfield City School District Castaic Union School District Delano Union School District Kern County Superintendent of Schools Richgrove Elementary School District Saugus Union School District Taft Union High School District Tehachapi Unified School District Visalia Unified School District County of Fresno County of Kem County of Kings County of Merced County of Riverside County of San Joaquin County of San Luis Obispo County of Santa Barbara County of Santa Cruz County of Stanislaus County of Tulare NON-PROFITS HEALTH CARE Bakersfield ARC Community Action Partnership of Kem Community Action Partnership of San Luis Obispo Goodwill Industries of South Central California Kem County Bar Association Kern County Library Foundation Missionary Church Western District Pasadena Chamber of Commerce Pasadena Community Access Corporation Tranquil Waters Guidance Center Valley Consortium for Medical Education Women’s Center - High Desert Kern Health Systems Kem Medical Center Liberty Health Advantage Heritage Provider Network Heritage California Medical Group Heritage New York Medical Group Southwest Health Care District West Side Health Care District Riverside County Regional Medical Center San Joaquin County General Hospital Stanislaus County Health Services Agency Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 30 EXHIBITS Exhibit III Sample Management Letter CITY OF XXX REPORT TO THE HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FOR THE YEAR ENDED t Brown Armstrong Providing Auditing <& Accounting Services for Over 40 YearsCertified Public Accountants 31 EXHIBITS CITY OF XXX REPORT TO THE HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FOR THE YEAR ENDED . Tablt of Contonts Page I.Required Communication to the Honorable Mayor and Members of the City Council in Accordance with Professional Standards..1 II.Agreed Upon Conditions Report Designed to Increase Efficiency, Internal Controls, and/or Financial Reporting 4 f Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Pubiic Accountants 32 EXHIBITS REQUIRED COMMUNICATION TO THE HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL IN ACCORDANCE WITH PROFESSIONAL STANDARDS To the Honorable Mayor ar>d Members of the City Council of the XXX We have aurtted the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of XXX (the City) for the year ended you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, as well as certain information related to the planr^ed scope arxl timing of our audit. We have communicated such information in mjr letter to you dated standards also require that we communicate to you the following information related to our audit Professional starrdards require that we provide .. Professional Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounfirrg policies. The significant accounting policies used by City are described n Note 1 to the financial statements. As descrfoed in Note 1(e) of the linanctai statements, the City adopted the following provisions of Governmental Accountirrg Standards Board (GASB) Statement No. 72, Fair Value Measuremertt and Application', GASB Statement No. 73, Accounting and Finandal Reporting for Pensions and Related Assets Tttat Are Not Within the Scope of GASB Statement No. 68, and Amendments to Cerlatfr Provisions of GASB Statements No. 67 and No. 68; GASB Statement No. 76, The Hierarchy of Generaify Accepted Accounting Pnndp/es for State and Local Governments', and GASB Statement No. 79, Certain External Investment Pools and Pool Participants. We noted no transactions entered into by the City during the yev for which there is a tack of authoritative guidance or cormnsus. AH signifirant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an Integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events arfo assumptions about future events. Certain accounting estimates are particuiarly sensitive because of their sigrrificance to the fmancial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City's financial statements were: • Management's estimate of ti>e fair value of investments is derived by various methods as detailed in Note 2 to the financial statements. We evaluated the key factors and assumptions used to develop the fair value of investments in determining that they are reasonable in relation to the financial statements taken as a whole. I Brown Armstrong Certified Public Accountants Providing Auditing & Accounting Services for Over 40 Years 33 EXHIBITS Management’s estimates of the Postemployment Healthcare Plan (OPEB) and net pension liabirty (NPL) for the City's two single empk^r plans are based on actuarial evaluations. We evaluated the key fectors and assumptions used to develc^ the estimates of the OPEB (toligation and NPL to determining that they are reasonable in relation to the financial statements taken as a whole. Estimated Useful Lives of Capitel Assets - Management estimates the lives of capital assets for purposes of calculating annual depreciation expose to be reported to toe City’s Statement of Activities and in the Statement of Revenues, Expenses, ar>d Changes to Net Position, which were determined by martagement based on the nature of toe capital assets. Risk Management Liabilities - Accrual and disclosure of risk management liabirties wNch includes worker’s compensation and general liabilities which were based on actuarial studies performed by an Independent actuary. Certain linarKial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting toe financial statements were as follows: • Cash and Investments (Note 2} • Property, Plant and Equipment - Capital Assets (Note 5) • Risk Management Furto (Note 9) • Emptoyee Benefit Programs (Note 10) The financial statement disclosures are neutral, consistent and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficirities to dealing with management in performing and completing our audit. Corrected and Urtcorrected Misstatements Professionai standards require us to accumulate all known and likely misstatements identified during toe audit, other than those that are clearly trivial, and communicate them to the appropriate level of marvagement. There were no such misstatements. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the ftoancial statements or toe auditor's report We are pleased to report that rw such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included to the management representation letter dated , . Manogemerrt Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, ^milar to obtaining a ‘wcond optolon’ on certain situations. If a consultation involves application of an accounting prtociple to City's financial staterrrents or a determination of the type of auditor's opinion that may be expressed on those statemems. our professional standards require the corrsulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. i Other Audit Fmdirtgs or Issues We generally discuss a varied of matters, including the appkcation of accounting principles and auditing standards, with management each year prior to reterttion as City’s auditors. However, these discissions occurred in the normal course of our professionat relationship and our responses vrere not a condition to our retention. Brown Armstrong Providing Auditing <& Accounting Services for Over 40 YearsCertified Public Accountants 34 EXHIBITS Other Matters We applied certain tmited procedures to management's discussion and analysis, the budgetary comparison schedules for the General Fund and the Grants Special Revenue Fund, the schedules of investment returns, the schedules of changes in net pension liability and related ratios, and the schedules of fundirtg progress for the OPEB Plan, which are required supplementary information (RSI) that supplements the basic firtanctai statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information ar>d comparing the information for consistency with management's responses to our irtquiries, the basic financial statements. ar>d other knowledge we obtamed during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining financial statements, schedule of expenditures of federal awards, and schedule of passenger focHity charge collections and expertoitires, whic^ accompany the friancial statements but are not RSI. With respect to this supplementary information, we made cert»n inquiries of management and evaluated the form, content, and methods of preparing the information to determirre that the information complies with accounting prindf^s ger>eraJ)y accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information te appropriate and complete in relation to our audit of the financial statements. We compared and recondled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were rx)t engaged to report on the introductory and statistical sections, which accompany the financial statements but are not RSI. Such information has r>ot been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordir>gly. we do r>ot express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the information and use of the Honorable Mayor, Members of the City Council, and managefT>ent of the City and is not intended to be, and should r)ot be, used by anyone other than these specified parties. BROWN ARMSTRONG ACCOUNTANCY CORPORATION I Bakersfield, CeUiforrtia Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 35 EXHIBITS AGREED UPON CONDITIONS REPORT DESIGNED TO INCREASE EFFICIENCY, INTERNAL CONTROLS, AND/OR FINANCIAL REPORTING To the Honorable Mayor and Members of the City Council of the City of XXX In planning and performing our audit of the financial stdements of the City of XXX in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control structure over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the fmanctel statements, but r>ot for the purpose of expressing an opinion on the effectiveness of the Ctty’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Cit/s internal control. (the City), for the year erxled A defideney in interrtal corrtrol existe wt>en the design or operation of a control does rtot alow management or employees, in the normal course of performing their assigned functiorrs, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in interr^al control, such that there is a reasonable po»ibility that a material misstatement of the entity's fnancial statements will not be prevented, or detected and corrected on a tim^ basis. A significant deficiency is a deficiency, or a combination of deficiencies, in mtemal control that is less severe than a material weakness, yet important enough to merit attention by those charged with govenwice. i Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to Identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations during our audft, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have fKJt been identified. However, during our audit, we became aware of certain matters that are opportimities for strengteening internal controls and operating efficiencies. The recommerKlations listed in this report summarize our comments and suggestions regarding these matters We will review the status of these comments during our next audit engagement. We have already discussed these comments and suggestions with various City persortnel, and we wil be pleased to discuss these matters in further detail si your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. i Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 36 EXHIBITS I. CURRENT YEAR CONDITIONS AND RECOMMENDATIONS Condition Number 1 - Utllltv Billtna Discount Eliaibilttv Recommendatton Management Resoonae and Planned Corrective Action II. DISPOSITION OF PRIOR YEAR CONDITIONS **•*«•** This information is intended solely for the use of the Honorable Mayor. Members of the City Council, and management of the City of XXX and is not intended ot be, and should not be, used by anyone other than these specified partes BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California Brown Armstrong Providing Auditing & Accounting Services for Over 40 YearsCertified Public Accountants 37