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Lance, Soll & Lunghard LLP - Proposal1 1" n' M'ifriiii i 1 r - •■" ' in' r ai II iMr I 'I I I I PREPARED BY: CF’As ANn al:'.Lance, Soli & Lunghard, LLP Certified Public Accountants 203 N. Brea Blvd., Suite 203 Brea, CA 92821 (714) 672-0022 Proposal Presented to CITY OF LA QUINTA Professional Auditing Services CONTACT PERSON:r ocLiseaBryan S. Gruber, CPA, Partner Brvan.aruber@lslcpas com (714) 672-0022 March 1, 2017 •••• •••• (_PAc AND '.D'. 2TRANSMITTAL LETTER BENEFITS TO WORKING WITH LSL 3 A. INDEPENDENCE B. LICENSE TO PRACTICE IN CALIFORNIA C. FIRM QUALIFICATIONS AND EXPERIENCE Address(es) of Office(s) and Number of Years Number of Employees Contact Regarding this Proposal Additional Information External Quality Control Reviews 4 4 4 4 4 4 4 4 D. PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE Key Personnel and Respective Responsibilities Continuing Education Resumes 5 5 5 6-12 E. SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES GFOA Award Program LSL Listing of Current Government Audit Clients Peer Review 13 13 14 15 F. SPECIFIC AUDIT APPROACH Proposed Approach to the Engagement. Identification of Potential Audit Problems Management Letter Sample 16 16 18 19 K. INSURANCE CERTIFICATE 21 www.lslcpas.com March 1, 2017 City of La Quinta Finance Department 78495 Calle Tampico, La Quinta, CA 92253 LANCE, SOLL & LUNGHARD, LLP (LSL) is pleased to respond to your request for proposal for financial external auditing services. As a leader in the field of governmental accounting and auditing, we are grateful for this opportunity to present our professional qualifications. Because of our extensive municipal experience, dedication to excellence and determination to retain the brightest talent, we hope you find that LSL is the most qualified accounting firm to provide professional auditing services to the City of La Quinta. ANNUAL SERVICES The City of La Quinta (City) will receive the following for the fiscal years ending June 30, 2017 through June 30. 2021. Perform an audit of all funds of the City in accordance with auditing standards general accepted in the United States of America and Government Auditing Standards, issued by the Comptroller of the United States, and express an opinion on the fair presentation of the basic financial statements. We will prepare and word process the City’s Comprehensive Annual Financial Report (CAFR). • Perform, a Single Audit of all federal grants received by the City in accordance with the Uniform Guidance, and issue a report on compliance with requirements applicable to each major federal program and internal control over compliance in accordance with the Uniform Guidance. Issue a separate “management letter” to communicate to management any reportable conditions found during the audit. Reportable condition will be identified as material weakness or significant deficiency. Non-reportable conditions will be reported in a separate letter to management. • Perform agreed-upon procedures on the City’s Appropriations Limit Schedule to ensure compliance with Section 1.5 of Article Xlll-B of the California Constitution. Prepare the State Controller’s Reports for the City. We are committed to providing the services discussed above in accordance with the timetable specified in your request for proposal. This proposal is a firm and irrevocable offer for the fiscal years ending June 30, 2017 through June 30, 2021. For purposes of this proposal. Bryan S. Gruber. Partner is authorized to make representations for our firm. I can be reached at the address below or by phone at (714)672-0022, by Fax at (714)672-0331 or through email at brvan.Qruber@lslcDas.com. Very truly yours Bryan S. Gruber, CPA Engagement Partner Lance, Soil & Lunghard, LLP 203 N. Brea Blvd., Suite 203 Brea, California 92821 ^ PrimeGlobal Ati AiMHietfon of Aceoartl\i\^ F\rms www.lslcpas.com ;a:'-KLc2i BENEFITS TO WORKING WITH LSL In today’s environment, keeping up \A/ith the numerous accounting and regulatory changes can seem unmanageable. Finance departments are facing more complexity, risk, and change than ever before, and with less resources. As the industry continues to evolve, a strategic relationship with LSL, can help you better manage these changes and be more equipped for the future. Training and communication is the bridge that connects us. We offer to our clients; 1) Annual Governmental Accounting Update - Three Tickets Included Annually, we hold a ’72 day seminar providing an update to new accounting and regulatory standards impacting local governments. The goal Is to provide useful relevant information that impacts your organization. In 2017, for convenience, we will also allow the Update to be viewed as a web event. 2) Annual Onsite Client Specific Training - One Event Included Tailored training for your organization on topics that are most relevant and needed for you and your team. Topics may include fraud risk management, internal controls, accounting pronouncements, governmental accounting, and CAFR preparation. 3) Focused Topic Specific Webinars and Ongoing News & Alerts - Access to Events and Information Included Important topics effecting local governments sometimes need more attention and explanation. In addition to our annual update, our webinars and news offer a short focused approach to these critical areas. 4) Meetings with Boards & Committees - Two meetings Included We believe communication is the key to a successful relationship and offer two annual meetings with your Board or Committees. Both meetings encourage dialogue between the auditor and board during the preliminary and concluding segments of the audit. www.lslcpas.com • ••• NUMBER OF EMPLOYEES Our firm has approximately 65 employees including 9 partners and professional staff of approximately 50, Governmental staff consists of four partners, one senior manager, two managers, three supervisors, four seniors and 14 staff auditors. All professional staff assigned to the proposed engagement work on a full-time basis. A. INDEPENDENCE We meet the independence requirements as defined by Government Auditing Standards for the City of La Quinta and all the component units. Within the last 5 years, we have provided professional services to the City of La Quinta and its component units. We have performed financial auditing services to the City of La Quinta. There is no conflict of interest and we are considered independent by the standards. Our partners do not own any other business organization that has in the past, or will in the future, be providing services, supplies, materials or equipment to the City of La Quinta. Lance, Soli & Lunghard, LLP (LSL) will provide written notice of any professional relationship entered into during the period of the proposed agreement. CONTACT REGARDING THIS PROPOSAL Mr. Bryan S. Gruber, CPA, Partner 203 N. Brea Blvd, Suite 203, Brea. CA 92821 Phone: (714) 672-0022 Brvan.qruber@lslcpas.com ADDITIONAL INFORMATION LSL is a regional public accounting firm that is currently meeting the auditing needs of nearly 60 governmental entities throughout California. This experience has led to the development of efficient procedures that provide numerous client benefits. Our clients have grown to understand that an audit from LSL provides them with a wealth of knowledge, confidence and value added services. For this and many other reasons, our firm has consistently been named one of the “Top Accounting Firms” in Orange County by the Orange County Business Journal Top Workplaces- 2016” in B. LICENSE TO PRACTICE IN CALIFORNIA LSL is a limited liability partnership and is not a wholly owned subsidiary of a parent company. LSL is a public accounting firm licensed by the State of California. Department of Consumer Affairs, as a Public Accounting Partnership. As a firm, we are members of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. All key staff to be assigned to this engagement are or will be licensed by the State of California to practice as Certified Public Accountants. Orange County by the Orange County Register. We were also on the list of CalCPA Top 150 firms in 2016. EXTERNAL QUALITY CONTROL REVIEWS We have participated in the peer review program since its inception. The most recent peer review was conducted by Sikich, LLP. All peer reviews covered governmental engagements. Our most recent peer review is included on page 15. C. FIRM QUALIFICATIONS AND EXPERIENCE ADDRESS(ES) OF OFFICE(S) AND NUMBER OF YEARS Our headquarters are in Orange County in the City of Brea, California. We have two other offices in Temecula Valley and Silicon Valley. The audit for the City of La Quinta will be staffed from our Orange County location. We first opened our doors 87 years ago in 1929. There have been no disciplinary actions against our organization since its inception. All our Single Audit reports are desk reviewed either by the Federal cognizant agency or the State Controller’s Office acting as the Oversight Agency. We have never had a report rejected by any of these agencies. In fact, we are highly regarded and recognized by the staff of the State Controller’s Office for top quality reports. WWW, lslcpas.com • ••• • • □.PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE KEY PERSONNEL AND RESPECTIVE RESPONSIBILITIES The most critical component in the successful completion of an audit is the personnel assigned to carry out the responsibilities. We have assembled a team composed of individuals with the optimum mix of talents. Bryan S. Gruber, CPA Engagement Partner The individuals assigned have experience in performing the tasks for which they are responsible, as well as familiarity with all municipal accounting operations. In addition, each has developed extensive skills in a variety of other complementary subjects through their work with clients in other industries. Thus, the experience gained on previous assignments can be applied and tailored to the unique needs of your organization. Lance, Soil & Lunghard, LLP will not be subcontracting any portion of the audits of the City of La Quinta. Engagement partners, managers, seniors and staff may be changed if these personnel leave the firm, are promoted or are assigned to another office. Deborah A. Harper, CPA Quality Assurance Partner The partners at Lance, Soli & Lunghard, LLP are routinely an integral part of the audit process and will be overseeing and supervising staff personnel in the field. For the City of La Quinta, the personnel assigned to the engagement will be as follows:Maria-Luisa Valdez, CPA Assurance Manager CONTINUING EDUCATION As a fi rm policy, all professional government staff meet the requirement of 40 hours of continuing education every year, with at least 24 hours in governmental accounting and auditing in a two-year period. Our educational programs include training from CaiCPA, AlCPA, Government Audit Quality Center, and GFOA. Darin Russame Assurance Senior DETAILED DISCUSSION OF EXPERIENCE A detailed discussion of the experience of key staff members is on the following pages. www.lslcpas.com As AND a: s-i BRYAN S. GRUBER, CPA ENGAGEMENT PARTNER ACHIEVEMENTS Bryan has made numerous presentations at local chapter meetings for CSMFO on current accounting and auditing material. He also currently serves as a technical reviewer for the Government Finance Officers Association (GFOA). Bryan has been involved with teaching current audit and accounting related material at Lance, Soil & Lunghard, LLP’s in house training seminars. He serves as firm IT Specialist for his involvement in IT related controls, data mining and analysis, and auditing software. LICENSE Certified Public Accountant - California 2008 CONTINUING EDUCATION Total hours were 132 in last three years of which 74 were in governmental accounting and auditing subjects. Bryan has met the Governmental Auditing Standards requirement for governmental CPE, MEMBERSHIPS California Society of Certified Public Accountants (CalCPA) American Institute of Certified Public Accountants (AlCPA) California Society of Municipal Finance Officers, Associate Member (CSMFO) Government Finance Officers Association, Associate Member (GFOA) Association of Local Government Auditors EXPERIENCE Over twelve years of experience in governmental audits including CAFR audits, component-unit audits and Single Audits. Bryan has also made numerous presentations to City Councils, Boards of Directors and Audit Committees. He has been involved in the following municipal engagements; Mr. Gruber has also been involved in the following engagements: City of Agoura Hills City of Azusa City of Burbank City of Duarte City of Emeryville City of Hidden Hills City of La Quinta Monterey Regional Water Pollution Control City of Rolling Hills Orange County Water District Three Valleys Municipal Water District City of Oceanside City of Palm Springs City of San Dimas City of Solana Beach City of Vista hocusea Y www.lslcpas.com • ••• • ••• Bryan S. Gruber, CPA, Partner (Continued) This work entailed; • The preparation of the Comprehensive Annual Financial Report for those entities involved in the award programs of the Government Finance Officers Association of the United States and Canada. • Review the audit of these entities provide and technical assistance throughout the year to provide the most up to date Information with current GASB pronouncement. • Present the overall audit results to audit committees or other Board Members. EDUCATION Bachelor of Arts Degree in Business Administration with an emphasis in Accounting - California State University, Fullerton 2004 www.lslcpas.com DEBORAH A. HARPER, CPA QUALITY ASSURANCE PARTNER ACHIEVEMENTS Ms Harper was accepted as a 2015 and 2016 executive committee member of the AlCPA Government Audit Quality Center, which is a national division for governments. As an executive board member, Ms. Harper participates in the development, review, and first hand discussion of new standards and guidance published in the AlCPA Audit Guides which is provided to audit firms across the country. In 2017, Ms. Harper also accepted participation in the GASB Research Note Disclosure Reexamination Roundtable. Deborah leads the Lance, Soli & Lunghard, LLP training program and serves as the firm Learning Director. LICENSE Certified Public Accountant - California 2005 CONTINUING EDUCATION Total hours were 132 in last three years of which 68 were in governmental accounting and auditing subjects. Deborah has met the Governmental Auditing Standards requirement for governmental CPE. MEMBERSHIPS California Society of Certified Public Accountants (CalCPA) American Institute of Certified Public Accountants (AlCPA) California Society of Municipal Finance Officers, Associate Member (CSMFO) Government Finance Officers Association, Associate Member (GFOA) Governmental Accounting and Auditing Committee AlCPA Government Audit Quality Center EXPERIENCE Over fifteen years of experience in governmental audits. During her time with the firm, Deborah has performed all phases of our government audits and made numerous presentations to Boards of Directors and Audit Committees. She has been involved on the following similar engagements: e:iKj n) 8 www.lslcpas.com • ••• • ••• • • Deborah A. Harper, CPA, Partner (Continued) City of Glendora City of Simi Valley City of Thousand Oaks City of Corona City of Diamond Bar City of Banning City of Claremont City of Brea City of Fullerton Cucamonga Valley Water District Coachella Valley Water District Inland Empire Utilities Agency City of Irvine City of Aliso Viejo City of Laguna Niguel City of Monrovia City of Orange City of Seal Beach City of Chino Hills This work entailed: • The preparation of the Comprehensive Annual Financial Report for those entities involved in the award programs of the California Society of Municipal Finance Officers and the Government Finance Officers Association of the United States and Canada. • Review the audit of these entities and provide technical assistance throughout the year to deliver the most up to date information with current GASB pronouncement. • Present the overall audit results to audit committees or other Board Members. EDUCATION Bachelor of Arts Degree in Business Administration with an emphasis in Accounting - California State University, Fullerton 2000 www.lslcpas.com I ISC MARIA-LUISA VALDEZ, CPA ASSURANCE MANAGER LICENSE Certified Public Accountant - California 2009 CONTINUING EDUCATION Total hours were 160 in last four years of which 100 were in governmental accounting and Yellow Book auditing subjects. Maria-Luisa has met the Governmental Auditing Standards requirement for governmental CPE. MEMBERSHIPS California Society of Certified Public Accountants (CalCPA) American Institute of Certified Public Accountants (AICPA) EXPERIENCE Over nine years of experience in governmental audits. Maria-Luisa has established herself as an outstanding asset and resource at LSL. She has demonstrated her talent in the area of municipal accounting and auditing. During her time with the firm, Maria-Luisa has performed all phases of our municipal audits, including CAFR audits, redevelopment agency audits and Single Audits. She has been involved in the following municipal engagements: City of Whittier Maria-Luisa served as the audit lead for the City of Whittier. As the audit lead, it has been Maria-Luisa’s responsibility to supervise all areas of the financial audit, which includes both the basic financial statements (CAFR) and Single Audit. City of Malibu Maria-Luisa serves as the Audit Manager for the City of Malibu in the current year. As the Audit Manager, it has been Maria-Luisa's responsibility to oversee the fieldwork for all areas of the Financial Audit and the Single Audit in accordance with A-133. The City of Malibu receives the GFOA Award for Excellence in Financial Reporting each year. ocus 10 www.lslcpas.com • ••• •• Maria-Luisa Valdez, CPA, Manager (Continued) Maria-Luisa has also served the following engagements: County of San Bernardino City of La Habra County of San Diego County of Ventura County of Los Angeles City of Oceanside City of Agoura Hills City of Barstow City of San Buenaventura City of Garden Grove City of Santa Ana City of Compton California Prison Authority First 5 Los Angeles Ventura County Air Pollution Control District City of Vernon California State University System City of Whittier Henry Mayo Newhall Memorial Hospital City of Covina California State Auditor - Bureau of State Audits City of Riaito EDUCATION Bachelor of Science Degree in Accountancy, Minor in Applied Mathematics - Loyola Marymount University, Los Angeles 2007 11 WWW,lslcpas.com DARIN RUSSAME ASSURANCE SENIOR LICENSE Certified Public Accountant - In Progress CONTINUING EDUCATION Total hours were 104 in last three years of which 101 were in governmental accounting and auditing subjects. Darin has met the Governmental Auditing Standards requirement for governmental CPE. EXPERIENCE Darin has progressed in an outstanding manner. During her time with the firm, Darin has performed all phases of our government audits, including water districts, other special districts, CAFR audits, successor agency audits and Single Audits. She has been involved in the following municipal engagements: Emeryville Azusa Inland Empire Utilities Agency Big Bear Lake Lawndale La Quinta Oceanside Diamond Bar Cathedral City EDUCATION Bachelor of Science Degree, Economics - University of California, Irvine 2005 ocusea 12 vvww.lslcpas.com • ••• • ••• City of Oceanside - Audit and preparation of a Comprehensive Annual Financial Report (CAFR) v\/hich receives the GFOA award in addition to various compliance and single audits. These services have been provided for over6 years. Last audit performed was for June 30, 2016. Total hours were approximately 750, Engagement partner is: Mr. Bryan S. Gruber Contact person: Ms. Jane McPhereon, Finance Director Phone: (760) 435-3855 Email: JMcPherson@ci.oceanside.ca.us E. SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES Our activities overall cover auditing and attestation, business advisory, taxes and planning, and accounting and financial services. Approximately 50% of our practice deals with the government sector and related services. Generally, our government sector services break down into the following major classifications; compliance, performance, strategic planning and tax services. A complete listing of our 61 current government audit clients, along with phone numbers of contact personnel and reference as to services provided, is contained on page 14. We welcome you contact any or all of these to get their opinion on the services we provide. City of Emeryville - Audit and preparation of a Comprehensive Annual Financial Report (CAFR) which receives the GFOA award in addition to various compliance and single audits. These services have been provided for over 10 years. Last audit performed was for June 30, 2016. Total hours were approximately 1000. Engagement partner is: Mr. Bryan S. Gruber Contact person: Ms. Susan Hsieh, Finance Director Phone: (510) 596-4352 Email: shsieh@emervville.orQ GFOA AWARD PROGRAM We prepare the financial statements and footnote disclosures for most of our clients that have received the GFOA award. All of our governmental partners, managers and seniors have been closely involved in the preparation of these reports. City of Palm Springs - Audit and preparation of a Comprehensive Annual Financial Report (CAFR) which receives the GFOA award in addition to various compliance and single audits. These services have been provided for over 6 years. Last audit performed was for June 30. 2016. Total hours were approximately 750. Engagement partner is: Mr. Bryan S. Gruber Contact person: Mr. Geoffrey Kiehl, Finance Director Phone: (760) 323-8221 Email: Geoffrey.kiehl@palmsprinQsca.QOv 13 www.lsicpas.com •••• •••• •• LSL LISTING OF CURRENT GOVERNMENT AUDIT CLIENTS TelephoneService Code YearContact PersonClient Afloto HWe American Water Woits Aeeociation Me. M. Brodeiy, Finance Manapef F 2 61ft-&97-7300 4 90S-291-2114Me. S. Ramakriehnan. Aetl. Exec. Oirector F F. S, U 626-612-5291Me. T. Johneon. Firtance Dimclof 19Atuea F, S. U 17 SSI-922-3118Me. M. Oeao. AccourtinQ ManagerBanfMfw Me. Shaty Un. Interim Firtance Directof F 4 323-588-6211Bel F. S 18 9(»666-5831Me. K. Ent, Director ot Admin. SefwceeBifl Bear Lake 714-990-7683Mr. L. Squire, FirterKial Servicae Manaper F, S 4Brea 818-238-5467Me. C. L Giraido. FinarKial Servicee Dir (5Burtwik 909-244-29S5Mr. T. Shea, Firtartce Director F 20Canyon Lake Cathedral City 760-77003786Mr. K Bienaek, Fiscal Officer F.S 900-364-2600Me. J. Lancaster, Finer>ee Director F, S 18Chino Hllle 619-691-5250Mr. P. BMby, Director ot Finar¥;e Mr. G. Lee^, Diraclor^ Adminietrative Servicee F.S 3Chula Vista 760046-1127 760-398-2661 Coachella VaBey Aeeociation ot Govemmente F 2 F, SCoachella Valley Water Dietrici Me. K. Godbey, Finance Director 3 951-736-2315 61»«22-7300 F, S, U 5Ms. K. Eden, Finance OeeetorCorona Mr. E. Ge<eaily. Firwce Marteger F, S 9Corortado 900463-7453Mr. C. Brantley, Finance Oftcer F.S 4Cucamonga VMMy Water District Me. D. Horwyvwet, Firamce Director F, S 5 900839-7051Diamond Bar Me. J. Mjchaete-Aguilar. Fittance Director F.S 2 707-676-7000 xlOeDixon F.S 3 562-904-7265Mr. A. Gat^dhy, FirtarKe DirectorDoeirtey Duarte F 9 626-357-7931Me. K. Petersen, Firtance Director 510-596-4352Me. S. Heieh, Firtartce Deeclor F, S 12Emerydie FuBerton F, S 5 714-738-6522Me. J. James, Director ot Admin. Servicee 626-914-8238Me. E. Stoddard, Accountirtg Manager F, S 12Glettdora 906624-6621Me. C. Forturte, Finanee Diraclor F 3Grartd Terrace 562-758-6501Greater Loe Angeles Vector Control Mr. T. Dewar, Dietfict Manager F 6 F 30 818-888-9281Hidden Hills Me. C. PagBa, City Clerk F. S 760691-4029Mr. Rob Rockwell, Aseietani City ManageryDirector ot Finance 1Mio Me. Christina Valericia, Chiet Financial OBcer F, S, U 909693-1600Inland Erttpire UtlMiee Agency Imperial Beach k>giewood kwwdale 1 Mr. q. Bradley. Fin»Ke Director Me. S. Koike. Aeeietant FIrtance Diractor F 12 619628-1361 310-412-6724F. S, U 1 Me. E. Carraon, Firwnce Director F 20 626-430-2221 Lawndale Mr. K, Louie, Director of FinancWCity Treasurer Mr. J. Al-kttam, Adminietrathe Director/Treeeurer F 2 310-973-3246 F 2 562-431-3538 x222Loe Alamkoe Me. R. Feldman, FIrtartce Diractor 310-456-2489F12Malibu F 14 310602-5553Mttihattan Beech Mr. B. Moe, Flnar>ce Director F. S 15 626-932-5510MonroviaMr. M. Aharado, Director of Admin. Servicee 831-645-4623Monterey Regionel Water Polulioo Control Agency Me. T. Hannah, Chief FinancIM OBcer F 2 7OceansideMe. J. McPherson, Finance Director F, S 760435-3839 F, S 909-395-2352OnlyioMe. D. Nunes, Director of Fiscal Servicee 19 714-5736304 714-3>8-3271 F.S 5OrCounty Fire Authority Mr. Jm Ruane, Finance Manager Mr. R. Fick. Chief Firwtcial OAcer F. 8 4Orange County Water District F. 8 6 7804236229Palm Springe Pasadena Mr. G. Kiehl, Finance Diractor F, 8. U 626-744-7497Mr, R. RidMy. ControBer Me, T. Layne, FinarKe OBcer Me. M. Mariecal. Water Manager Mr. M. OBfien, Finance Director 2 Rancho Cucanwga San Diego County Water AUhority San Dimas F, S. U 38 809 889 1651 858-822-6679'I 1 F, 8 55 909 3946200 San Juan Water District Me. Donna Silva. Interim Finance and Admin Manager F 3 916-791-6907 San Marino Me. L Bailey, Flnwice Diraclor Mr. B. Samario, Fnartce Direetor F 23 626-3000700 SarNa Barbara F,S " 5 806-897-1978 Santa Fe Springe Mr. J Gomez, Director of Firtanca arvd AdministrMiw Services fT 2 562-868-0511 Santa Monica Me, G, DecevaHee-Hughee, Firtance Director F, S 1 3194566281 F, S 5Seal Beach Me. V. Beatley, Firtance Director Mr. L, StaNhoieler. Controder Me. M. Berkuti, Firtartce Marveger Mr. J. Adame, Fiiwtce Director 562-431-2527 Six Baeine F 4 949420-3030 858-720-2463Solorta Beech F 6 ThouearKi Oaks F. S 9 905-449-2235 Three Valteyi Water District Mr. R. Hansen, General Manager Me. L. Warrem, Firtar>ce Marvager F 8 909626-4631 7606396170x1023VistaF7 Service Codes: F - Financial Audit, S - Singie Audit, i - Internal Audit, U - Utilities * Participated in the GFOA Award Programs and has received or anticipates receiving outstanding awards 14 www.isicpas.com • ••• • ••• PEER REVIEW 1735 Merriman Road Akron, OH 44313 330.864-6661 //www.sikich.com Certified Public Accountants & Advisors Members of American Institute of Certified Public Accountants SYSTEM REVIEW REPORT October 26, 2016 To the Partners of Lance, Soli & Lunghard, LLP and the Peer Review Committee of the California Society of CPA's: We have reviewed the system of quality control for the accounting and auditing practice of Lance, Soil & Lunghard. LLP (the Firm) in effect for the year ended May 31, 2016. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. As a 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 control and the firm’s compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aiCDa.orQ/Drsummarv. 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 auditing practice of Lance, Soil & Lunghard, LLP in effect for the year ended May 31, 2016 has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Lance, Soil & Lunghard, LLP has received a peer review rating of pass. 15 www.lslcpas.com I'f* F. SPECIFIC AUDIT APPROACH Understanding the Internal Control Structure Over the Financial Statements To gain an understanding of the internal control structure over the financial statements, we will perform procedures as required by SAS 122-125. This will include review of internal controls in the areas of financial reporting; cash; revenues and receivables; expenditures and accounts payable; payroll; capital assets; long-term debt; or grant reporting, as applicable. PROPOSED APPROACH TO THE ENGAGEMENT The audit team will be based out of our Orange County office, which is located in Brea, California. The services will be divided into three segments. Segment 1 - Planning and Obtaining an Understanding: Based on the result of our review, we will issue a management letter (SAS 115 Letter) that will identify any significant deficiencies and/or material weaknesses noted. This report is required by the Government Auditing Standards issued by the Comptroller General of the United States. Auditing Standards require auditors to obtain an understanding of the Entity and its Environment along with Assessing the Risks of Material Misstatements. LSL obtains an understanding through a variety of ways ail throughout the year, but the most pertinent time each year is during our interim on-site visit. We wilt conduct interviews with management of finance along with each audit section responsible party (e.g. cashier, accounts payable clerk, payroll clerk, etc.) to review the processes and controls through observation and discussions. Based on our observations, we will sample as we observe a “walk-through" to verify the system of control is working in accordance with policies and procedures. Planning LSL will provide an annual audit communication letter, engagement letter, and Government Audit Quality Center Information letter. The audit communication letter is to be provided to the Governing Board. In addition, this can be communicated orally to the Governing Board or sub-committee, if requested. This communication will discuss the planning stages, the responsibilities of the Governing Board, Auditors, and Management, and provide an opportunity for communication with us as the auditors. LSL’s audit team will meet prior to our initial on-site visit to brainstorm and discuss economic conditions, industry elements, and new standards that will affect the City of La Quinta. A trial balance is requested for our planning meeting which provides current activity analysis of the City and assists the LSL team in obtaining knowledge and preparing expectations for the audit year. We will compile a list “Prepared by Client” ("PBC") items based on our review of prior year financial statements and information gathered. This will be provided to the City of La Quinta one month prior to our visit or earlier if requested. We operate on a paperless software system and provide a secured cloud based portal for all clients. The City of La Quinta will have their own file which can be customized by the City to organize and upload requested schedules, support documents, etc. We will provide a list each year of randomly selected employees of the City of La Quinta to interview for fraud interviews (SAS 99), which will consist of all levels of the City across all departments. After our interim on-site visit we will have an exit meeting to discuss potential weaknesses, if any, and provide any feedback for improvements or valuable information we have gathered from our outside clientele that would benefit the City of La Quinta. 16 www.lslcpas.com 1. • ••• • ••• If the City of La Quinta can provide a check register electronically for July 1®' forward (period after the audit year) then we can pre-select our sample for accounts payable cut-off test work and provide that information ahead of time. Our PBC list will detail out schedules we would like provided, which is directed straight from the audit report. Support requested and sampling for these schedules will be assessed each year based on the strengths and weaknesses of the internal control processes of the City, and the materiality level of the account. We will discuss our analytical variances with the City and obtain documentation that provides support for the accounts. Segment 2 - Financial Audit Testing: Based on the information gathered each year thus far, we will utilize a customized audit program based on the risk assessment developed during our assessment of the City’s internal controls and government auditing standards. The primary benefit of a tailored program is a focused set of procedures to address relevant areas. We believe that this approach will be the most effective and efficient by linking financial statement assertions, audit objectives, and procedures that are basic to most governmental audit engagements and critical to the compliance with other material laws and regulations. We will annually compile another customized Prepared by Client (PBC) list for the year-end on-site visit provide at least one month prior or earlier if requested. Drawing Audit Samples For tests of controls, we use audit sampling. Tests of controls are procedures directed towards determining the effectiveness of the design or operation of an internal structure policy or procedures. Normally, audit sampling is used for tests of controls and tests of compliance that involve inspection of documents and reports indicating performance of the applicable policy or procedures and compliance with the applicable laws and regulations. These sampling procedures test the operating effectiveness of an internal control structure policy or procedures by determining how the policy or procedure was applied, the consistency with which it was applied during the audit period, and by whom it was applied. To achieve this goal, we will draw samples for disbursements, receipts and payroll when applicable. Each document selected will be tested for various attributes that are designed to verify compliance with different aspects of internal controls and applicable laws and regulations. Additionally, each sample item will be tested for coding to the proper accounts and posting to the general ledger. Sample sizes vary based on the population and risk based calculations. We will request a trial balance for our analytical review to be provided one week prior to our arrival. Analytical Procedures For the audits of the financial statements, we will use analytical procedures as an overall review of the financial information in the preliminary and final stages of the audits. These procedures are designed to assist us in planning our audits and in assessing the propriety of the conclusions reached, and in the evaluation of the overall financial statement presentation. The procedures to be utilized consist of determining expectations for changes to significant revenue, expenditure and balance sheet accounts, reading the financial statements and related notes, reviewing the budget and related material, and focusing on overall relationships within the financial statements. Once determined, these are reviewed to evaluate if the changes appear reasonable or require further analysis. For all significant differences, explanations are obtained as to why the situation occurred and additional substantive procedures may be applied and related evidence gathered to resolve concerns and questions. 17 www.lslcpas.com • ••• • ••• Accounting Standards Board (GASB) including a transmittal letter, a management discussion and analysis (MD&A), and a statistical section. We will review the draft of the CAFR and financial statements for full compliance with the latest Government Accounting Standard Board (GASB) pronouncements for submission under the Government Finance Officers Association of the United States and Canada’s "Certificate of Achievement for Excellence in Financial Reporting” program and provide recommendations and suggestions to the Finance Department. Use of Computer Software in the Engagement We use specialized auditing software to perform our audit in addition to Data Analysis Software to perform audit testing. We also use secure web portals to communicate information. Determining Laws and Regulations Subject to Audit Test Work The Laws and Regulations that will be subject to audit test work are determined from the applicable laws, regulations, contracts, and grant agreements which we identify through the understanding we obtain of the Water Authority and our extensive experience with governmental entities. Exit Conference We conduct an exit meeting to discuss the results and verify goals for reports. Deficiencies would be discussed throughout the fieldwork and summarized at the exit conference. Pending items will be discussed with a schedule of due dates to meet the final report deadlines of delivery by December 10^^, Quality Assurance Policy and Procedures Lance, Soil & Lunghard, LLP has established strict review procedures to ensure quality reporting in accordance with the standards. These procedures are designed to maximize adherence to quality.Segment 3 - Conclusion: Based on our year-end exit meeting we wilt schedule a plan to finalize the CAFR in the timetable of the City. We will schedule dates for the initial and final drafts including time for the City review and approval of the financial statements. In addition, this will account for the review of the engagement partner and quality assurance partner. After the review and receipt of the signed Representation Letter from City, we will provide the final Reports prior to December The firm’s policy of assigning seniors to an engagement requires that the senior have at least three years of government auditing experience. He or she must have demonstrated a high degree of understanding of government accounting and auditing, as well as of the firm’s overall client philosophy. Having been assigned to the engagement before is also an important factor in assigning a senior to an engagement. Any changes in personnel at the senior level or above will be approved by the City of La Quinta, LSL’s philosophy is to provide quality audit services with minimal disruption to the City staff. Our focused efforts to obtain and retain quality staff have further enabled us to provide this to our clients. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS With our familiarity with similar city governments, we do not anticipate unusual audit problems. With changes in single audit and GASB pronouncements, we always anticipate a certain degree of problems. To address, we offer different training opportunities, first-hand experience with similar local governments, and implementation experts on our in-house team. We understand that the City will prepare the basic financial statements, the notes to the basic financial statements and certain required supplemental information as required by the Governmental 18 www.lslcpas.com •••• • ••• INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Sample, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Sample, California, {the City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated November 13, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City’s internal control. Accordingly, we do not express an opinion on the effectiveness of City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 0 PrimeGiobal An Aisoaothn of l»dtpotuhM A<rou>UiHf firm* 19 www.lslcpas.com Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Brea, California November 13, 2017 20 www.lslcpas.com OP ID: GRLANCS01 jXCOKD'^DATE (MiyVDOATYYY) 09/30/2016CERTIFICATE OF LIABILITY INSURANCE 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 pollcy(Ies) must be endorsed. If SUBROGATION IS W^ED, 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 tire certificate holder in lieu of such ehdorsement(s). . CONTACT NAME:Jose Tapia 415-883-2525 PRODUCER ' Mitchell & Mitche]l-Llc0620650 2S0 Bel Marin Keys Blvd, Bid E Novato, CA 94949 Gustavo Ruano i Not: 415-883-7752PHONE (tUC. No. Ert); A^Ess: JTapia@MitcheHAhdMitcheil.com WSURER(S) AFFORDING COVERAGE NAice iNsu^RA;Sentinel Insurance Company 11000 Lance, Soil & Lunghard, LLP 203 N Brea Blvd Ste 203 Brea, CA 92821-4056 INSURER B; Continental Casulaty Company 20443INSURED INSURER C; INSURER D! INSURER E; INSURER F: REVISION NUMBER:. COVERAGES CERTIFICATE 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 WltH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. UMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. AbbLISliBRI POUCY EFF POUCYEXP TYPE OP INSURANCE uunatMMTOD/YYYYt nyiM/DD/YYYY) INSR POUCY NUMBERLTRmu.mu A X 2,000,000COMMERCIAL GENERAL UABIUTY EACH OCCURRENCE S DAMAGE TO RENTED PREMISES (Ea occurrence!X 1,000,000X 57SBARI9343 04/01/2016 10/12/2017XOCCUR iCLAIMS^DE , 10,000MED EXP (Any one person)$ 2,000,000PERSONAL & ADV INJURY i 4,000,000GENL aggregate LIMIT APPLJES PER; X POLICY PRO JECT LOC GENERAL AGGREGATE $ 4,000,000PRODUCTS • COMP/OP AGG $, $OTHER: COMBINED SINGLE UMIT lEa accidents BODILY INJURY (Per person) - AUTOMOBILE UABILTTY 2,000,000$ A 57SBARI9343 04/01/2016 10/12/2017 SANY AUTO ALL OWNED AUTOS HIRED AUTOS SCHEDULED AUTOS NON-OWNED AUTOS BODILY INJURY (Per acciderU) ■PROP'ERTY DAMAGE' f Per accident . • ’ $ X X $ s X 1,000,000UMBRELLA UAB EACH OCCURRENCE,$OCCUR S7SBARI9343 04/01/2016 10/12/2017A 1,000,000EXCESS UAB CLAIMS-MADE AGGREGATE $ Xi RETENTIONS 10000 sPEP PER OTH-WORKERS COMPENSATION AND EMPLOYERS' UABIUTY STATUTE ER Y/N ANY PROPRIETOR/PARTNER/EXECUTJVE OFFICER/MEMBER EXCLUDED?(Mandate^ InNH) If yes, descrit>e under DESCRIPTION OF OPERATIONS below EL EACH ACCIDENT $N/A E.L. DISEASE-EAEMPLOYEE $ EL DISEASE - POUCY LIMIT S 3,000,000 3,000,000 PROFESSIONAL LIABILITY (E&O) APL27S513554 10/12/2016 10/12/2017 PER CLAIM AGGREGATE B DESCRIPTION OF OPERATIONS / LOCATIONS/VEHICLES (ACORD101, AddlUonal Renurks Schedule, may be attached If more space la required) RE: Operations of the Named Insured as on file with Uie insurance carrier.Certificate holder is Additional Insured with respects to General Liabilitycoverage per SS 00 08 04 05 which includes Primary and Noh-Contiibutory aridWaiver of Subrogation per terms of the written contract with the named insured. CERTIFICATE HOLDER CANCELLATION SHOULD ANY OF THE ABOVE DESCRIBED POUCIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. AUTHORIZED REPRESENTATIVE © 1988-2014 ACORD CORPORATION. All rights reserved.21 ; ACORD 25 (2014/01)The ACORD name and logo are registered marks of ACORD 1 > OATE(MIWDD/mY) 09/28/2016 •8 ACORD CERTIFICATE OF LIABILITY INSURANCE 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 REPRESE^ATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. . • IMPORTANT: If the certificate holder t8 an ADDITIONAL INSURED, the policy{ies) must have ADDITiONAL INSURED provisions or be endorsed. If SUBROGATION IS WAIVED, subject to the tenns and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does riot confer rights to the certificate holder In lieu of such endorsementfs). CONTACT NAME! PHONE CHUCK HYNEMANPRODUCER CHUCK HYNEMAN 18371-A LEMON DRIVE YORBA LINDA CA 92886 FAX . 714-777-9898. 714-777-9823 AMi. Noi E4U1L ADDRESS: No. Ext) r I- NAICS .INSURERfSl AFFORDING COVERAGE 21709. TRUCK INSURANCE EXCHANGEINSURER A: INSURED INSURB^B! KIKUCHI, RICHARD(GEN PARTNER) SOllU, LANCE (GEN PARTNER) 203 N BREA BLVD#203 BREA, CA 92821 INSURBtC; INSURER D: INSURER E! INSURER F; COVERAGES. ,REVISION NUMBER;CERTIFICATE 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 AFFORDED BY THE POLICIES.DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOVW MAY HAVE BEEN REDUCED BY PAID CLAIMS. • .. ADDUSUBR itlSaJODOL POLICY EFF fMMmPnYYYt POUCYEXP iMMmpnnnm INSR LIMITSTTPE OF. INSURANCE POLICY NUMBERLIB COMMERCIALGENERALUABIUTY each OCCURRENCE D S —,J aMACS to RtNTdo - PREMISES lEa o^rrencel SCIAIMS4MDEOCCUR $MED EXP (Any one person) PERSONAL & ADV INJURY v 1 S GENERALAGGREGATE SGENl AGGREGATE UMIT APPUES PER: POLICY S OTHER: I LOC SPRODUCTS - COMP/OP AGS S I COMBINED SINGLE LIMIT lEa aeeidenll • BODILY INJURY (Per pereon). SAUTOMOBILEUABIUTY ~|amyauto; OWNED ' AUTOS ONLY _ HIRED . AUTOS ONLY _ % SCHEDULED AUTOS NON<OWNEO AUTOS ONLY BODILY INJURY (Per acddeni)S PROPERTY DAMAGE IPer acddeni)S s I UMBRELLA LIAB SEACH OCCURRENCEOCCUR CLAl MS-MADEEXCESS LtAB $AGGREGATE SRETENTIONSPEP OTH-PER n STATUTEXWORKERS COMPENSATION AND EMPLOYERS' LIABIUTY ANYPROPRlETOR/PARTNER/EXECUnVE 0FF1CER/MEM8EREXCLUDE07 (MandatoiylnNH)'' If yes, describe under . DESOhiPTION OF OPERATIONS below ER). YfN $ 1,000,000 ,E.L EACH ACCIDENT 10/01/2017-A.10/01/2016A200g 84 07N/A E.L DISEASE-EA EMPLOYEE $ 1.000.000 s 1,000,000E.L DISEASE - POLICY UMIT DESCRlPliON OF OPERATIONS / LOCATIONSVVEKICLES (ACORO 101, Additional Romarks Schedule, may be attached If more epaca la required) CERTIFICATE HOLDER CANCELLATION SHOULD ANY. OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF. NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POUCY PROVISIONS. AUTHORIZED REPRESlfTTATIVE . I \ /i © 1988^2015 ACORD CORPORATION. All rights reserved. ACORD 25 (2016/03)The ACORD name and logo are registered marks of ACORD 22