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Rogers, Anderson, Malody & Scott LLP - ProposalCity of La Quinta Request for Proposal for Professional Auditing Services For the fiscal years ending June 30, 2017, 2018, 2019, 2020 and 2021 Submitted by: ROGERS, ANDERSON, MALODY & SCOTT, LLP Certified Public Accountants License #2596 FEIN 95-2662063 735 E. Carnegie Drive, Suite 100 San Bernardino, California 92408 (909) 889-0871 March 1, 2017 CONTACT: TERRY SHEA, PARTNER terry@ramscpa.net ALTERNATE CONTACT: BRAD WELEBIR, PARTNER bwelebir@ramscpa.net R ROGERS. ANDERSON. MALODY & SCOTT. LLP CERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 s City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Table of Contents Page Transmittal Letter I Technical Proposal 1Independence 1License to practice in California 1Firm qualifications and experience About our firm Single audit experience Housing Authority and Successor Agency experience CAFR preparation Governmental Audit Quality Center Range of services Engagement quality control External quality control review Disciplinary action Equal Opportunity Employer Partner, supervisory and staff qualifications Partner and supervisory staff involvement Staff continuity Continuing professional education Assigned personnel Engagement team resumes 5 Similar engagements with other government entities 14 Specific audit approach Services to be provided Engagement approach Audit approach and audit segmentation Understanding of internal control over financial reporting Sample sizes Approach in drawing samples for compliance testing Computer technology in the audit Analytical procedures Approach in determining applicable laws and regulations Evaluation of internal controls and management letter comments Audit timing 15 Attachment A: Current and Recent Government Clients Served Attachment B: Insurance Certificate V R A ROGERS, ANDERSON. MALODY & SCOTT. LLP CERTIFIED PUBLIC ACCOUNTANTS. SINCE 1940 Mi •• y March 1,2017 r 735 E. Carnegie Dr. Suite 100 San Bernardino. CA 92408 909 889 0871 T 909 889 5361 F City of La Quinta Attention; Karla Campos, Finance Director/Treasurer 78495 Calle Tampico La Quinta, CA 92253 ramscpa.net f PARTNERS Brenda L. Odie. CPA. MST Terry P. Shea. CPA Kirk A. Franks, CPA Scott W. Manno. CPA, CGMA Leena Shanbhag, CPA, MST. CGMA Bradferd A. Welebir. CPA. MBA, CGMA Jay H. Zercher. CPA (Partner Emeritus) Phillip H. Waller. CPA (Partner Emeritus) /■ V. Dear Evaluation Committee,1 I am pleased to respond, on behalf of Rogers, Anderson, Malody & Scott, LLP, (RAMS) to your request for a proposal regarding professional auditing services. As a recognized industry leader and innovator, our goal for the past 68 years has been to provide honest, accurate, objective results to all of our clients, including governmental organizations such as yours. Our success in this effort is witnessed by both the growth of our firm and the list of long-term clients who trust us. At RAMS, we are committed to achieving the highest quality audit possible. We understand the complexity of performing govemmentai audits and that’s why we have a dedicated team of auditors that possess the specialized knowledge and experience to help ensure compliance and changes in regulations that may impact your organization. We plan and execute our audits in a way that maximizes audit efficiency and effectiveness and provides you the highest quality services. We are aware that the City has other proposals to consider. We believe that RAMS would be the appropriate choice for the audit engagement for the following reasons, which are provided in more detail in our proposal. Our firm: V. / y ■-■ MANAGERS / STAFF Jenny Liu. CPA, MST Seong-Hyea Lee. CPA, MBA Charles De Simoni. CPA Nathan Statham, CPA. MBA Gardenya Duran. CPA Brianna Schultz, CPA Lisa Dongxue Guo, CPA, MSA \ • Has an established reputation in the governmental and not-for-profit accounting and auditing community for providing excellent, timely service and high quality reporting to our clients. • Performs a risk based audit which enables us to focus on key audit areas allowing us to become more efficient resulting in lower audit fees. • Provides auditing services to over 50 govemmentai agencies and not-for- profit organizations, including over 20 cities, most of which have enterprise activities. • Understands the audit process, as a whole, can be a stressful experience for you and your staff; we understand that you will have other commitments and your regular workloads during the audit period. We make every effort to ensure the audit process, from the interim fieldwork to the preparation of the required financial reports, will be as trouble-free as possible for you and your staff. We accomplish this through comprehensive planning of the audit and utilizing our staff in the most efficient and effective manner while keeping disruptions and miscommunications to a minimum. • Has audit team members that are personable and easy to work with. Through open and responsive communication with all parties involved in the audit process, we work to have the most efficient audit possible by minimizing operational distractions of your staff, while maximizing quality service and products. \ I V. 'v V_-' MEMBERS American Institute of Certified Public Accountants V PCPS The AlCPA Alliance for CPA Firms / Governmerttal Audit Quality Center California Society of Certified Public Accountants Iv- I STABILITY. ACCURACY. TRUST. I / y Provides extensive training and continuing education to all of our audit staff through a combined use of in-house instruction and third-party providers. Our audit team members are experienced with and receive regular training in performing Single Audits in accordance with Federal OMB Uniform Guidance. Is committed to helping you meet all reporting/auditing deadlines, resolving any issues encountered during your audit (e.g., accounting or auditing, new pronouncements, etc.), and providing you with quality audit services. Has an extensive internal quality control review process to ensure your financial reports meet the highest standards. In addition to the preparation of financial reports by the engagement team and review by the engagement manager, each report is also examined by 2 partners and 2 professional proofreaders. Has assisted many of our clients with the preparation of their Comprehensive Annual Financial Reports, and all of our clients that have submitted their reports for the Government Finance Officers Association (GFOA) or California Society of Municipal Finance Officers (CSMFO) awards have received the awards. Our participation as a GFOA reviewer also Indirectly benefits our clients in the quality review process. Is a full service firm, with specialists in auditing, reviews and compilations, tax planning and preparation, as well as business consulting. The diverse experience and accessibility of the professionals in these areas help us to provide a comprehensive approach to a wide variety of needs. Believes that our fee estimate and arrangement provides a fair and reasonable cost, commensurate with the experience of the audit team members, to perform the annual audit services for the City. I-J • ’ ' .V X,..' / Mr. Shea and Mr. Welebir are authorized to represent the firm, are empowered to submit the bid and authorized to sign a contract with the City. We understand the work to be done as listed in the section of this proposal titled Services to be provided. This proposal is a firm and irrevocable offer for ninety (90) days. In addition, we will be committed to meeting any agreed upon time frames. We are an equal opportunity employer. We have the required Insurance policies (Professional Liability, Workers’ Compensation, Comprehensive General Liability, and Auto) in coverage amounts of not less than $1,000,000 each. V We can be reached at: 735 E. Carnegie Drive, Suite 100, San Bernardino, CA 92408, (909) 889-0871 terrv@ramscDa.net or bwelebir@ramscDa.net. t I Thank you for the opportunity to present our proposal qualifications and to serve as independent auditors to the City. We will be committed to exceeding your expectations of an auditor and believe this proposal provides you with information about our firm, the service team members and our customized audit approach. We look forward to having a long and mutually beneficial relationship with the City. Please contact us if you have any questions regarding this proposal. ^ / i Respectfully yours, ROGERS^NDERSON. MALODY& SCOTT, LLP Terry ^ysa, CPA Partner .-V 1. 1,,/ AlCPA)Governmental Audit Quality Center City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Independence Rogers, Anderson, Malody & Scott, LLP is independent of the City of La Quinta, and any component units as defined by general standard number two of the generally accepted auditing standards. We are also independent of the City of La Quinta, and any component units, as defined by the second general standard for government auditing in the U.S. Government Accountability Office’s Government Auditing Standards {2011). The Firm provided the City with a part time contract accountant from December of 2014 to September 2016. The employee is no ionger an employee of our firm. License to practice in California Rogers, Anderson, Malody & Scott, LLP is licensed to practice in the State of California. The key professional staff, which includes the partners, managers, and supervisors, are all certified public accountants licensed to practice in the State of California and are in compliance with ali appiicable Board of Accountancy standards. Firm qualifications and experience About our firm RAMS was founded in 1948 and is located at 735 E. Carnegie Drive, Suite 100, San Bernardino, California and offers the full range of services expected of a full service accounting firm. We are one of the oldest and most trusted and respected CPA firms in Southern California, with over 68 years of public practice experience, specializing in governmental agency and not-for-profit organization auditing, accounting and management advisory services. Over fifteen thousand hours per year are devoted to this area of our practice, which includes cities, redevelopment successor agencies, water districts, other special districts, not-for-profit corporations and joint power authorities. We do not use our government accounting and auditing practice as “fill work” for the firm, it is a primary focus of it. We understand that organizations desire that its auditors have a thorough understanding of the complex accounting and compliance issues confronting entities such as yours. Our firm has a long history of governmental accounting and auditing. Over the years, we have gained valuable experience, acquired in- depth knowledge, and obtained the technical expertise needed for governmental accounting and auditing. This expertise has enabled us to provide exceptional, high quality service and to provide solutions at fees we feel represent our value to our clients. In addition, we use our participation in various industry associations to continuously update our knowledge with respect to issues relating to governmental accounting, auditing and operations. Any insight we gain is immediately passed on to our clients if we feel they will benefit from it. AICPA)Governmental Audit Quality Center -1- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) Our firm has a total staff of thirty-six people, which includes twelve certified public accountants. The staff consists of six partners, three managers, eight supervisors/senior accountants, fourteen staff accountants and five support staff. The audit staff consists of twenty members who devote over 80% of their time to municipal engagements. The engagement team assigned to the City’s engagement will consist of the following full-time staff: one audit partner, one audit manager, one audit supervisor and one audit senior and three to four staff auditors. All personnel are located in our San Bernardino office. Our firm is committed to providing our clients with the highest quality service at the most reasonable fee. The professionals assigned to the City’s financial audit have each made providing quality service their priority. Single audit experience Most of our city clients, and some of our other governmental and not-for-profit clients, have been subject to an audit in accordance with Uniform Guidance. We recently performed single audits for the following entities: City of La Mesa City of Mission Viejo City of Redondo Beach City of Twentynine Palms University Enterprises Corporation at CSUSB Western Municipal Water District City of La Verne City of Capitola City of Chino City of San Marcos City of Poway City of Fillmore City of Rosemead City of San Juan Capistrano Housing Authority and Successor Agency experience For the fiscal years ended June 30, 2015 and 2016 the firm audited the Housing Authorities and Successor Agencies for the following Cities: City of San Juan Capistrano City of La Verne City of San Jacinto City of Twentynine Palms City of La Mesa City of Rosemead City of Mission Viejo City of Redondo Beach City of Claremont City of Hawthorne City of Capitola City of Chino City of San Marcos City of Moorpark City of Fillmore City of Sierra Madre City of El Cajon Town of Yucca Valley City of Poway City of West Covina CAFR preparation We have extensive experience in the preparation of Comprehensive Annual Financial Reports (CAFR). For the fiscal year ended June 30, 2014 and 2015, our staff prepared over 17 CAFR’s, and each entity received the Certificate of Achievement for Excellence in Financial Reporting from the GFOA. For the fiscal year ended June 30, 2016, again, our staff will prepare over 20 CAFR’s for our clients for their submittal to the GFOA. In addition, we have helped many cities and special districts develop their first year’s report for submittal. The audit partner on the engagement is also a technical reviewer for the GFOA CAFR award program. In addition, we review all of the CAFR’s for compliance with the GFOA certificate program checklist. AICPA)Governmental Audit Quality Center -2- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) Governmental Audit Quality Center As a member of the American Institute of CPAs Governmental Audit Quality Center, we are committed to adhering to the highest quality standards by voluntarily agreeing to the Center membership requirements, which include designating a partner responsible for the quality of our governmental and not-for-profit audit practice, establishing quality control programs, performing annual internal inspection procedures, and making our peer review report findings publicly available. At RAMS, our goal is to continue to enhance our quality initiatives within our governmental and not-for-profit audit practice to deliver the highest quality audit services possible. In addition, the Governmental Audit Quality Center provides access to comprehensive resources that will assist us in further enhancing the quality of your audit. The Center membership provides us with timely information on a variety of technical, legislative and regulatory subjects that we can in turn apply to your audit to help ensure compliance with the appropriate standards and changes in regulations which we pass on to our clients. Range of services Our firm provides various other services in addition to auditing services to governmental and not-for-profit entities, including: Finance director and accounting support services Study and evaluation of financial condition and fiscal policies Transient Occupancy Tax Agreed Upon Procedures Franchise (refuse, cable) Agreed Upon Procedures Accounting policies and procedures Capital improvement program procedures and policies Cash management studies Financing and public bond offering assistance Franchise agreement assistance (ambulance, cable, television, refuse, etc.) In addition, the firm provides accounting, auditing, attest and consulting services to for profit and not-for-profit entities. We also provide tax preparation and tax consulting services to individuals, corporations and partnerships. We provide our municipal audit clients tax consultation at no extra charge. Engagement quality control We have an extensive internal quality control review process to ensure your audit meets the highest standards. In addition to the preparation of financial reports by the senior member of the engagement team, each report is reviewed by the engagement manager and is also examined by the engagement partner and the technical review partner, and is proofread by two professional staff. In addition, all audit workpapers are reviewed by the in-charge auditor and the partner in-charge of the engagement. AICPA)Governmental Audit Quality Center -3- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) External quality control review As a member of the AlCPA Private Companies Practice Section, our firm has participated in “Peer Review” since 1993 and has been examined every three years since that date. Participation in this program ensures that all of our engagements meet the standards of the AlCPA, the Yellow Book and the California State Board of Accountancy. Throughout our participation in this program, the firm has received pass ratings from the peer reviewers. The latest review below included reviews of specific governmental entities. AjjJnrrDuring the current review, an independent firm reviewed our policies and procedures and then inspected a representative sample engagement workpapers and reports, including governmental engagements subject to 0MB A-133. For the year ended November 30, 2014, our firm received a “pass" rating which indicates our auditing practice is suitably designed and complied with to provide reasonable assurance of performing and reporting in conformity with applicable standards. The results provided confirmation that the custom audit approach and procedures we use are technically sound and in compliance with applicable standards. andentities Grant Bennett Associates SYSTT M RlLVirU RLPORT June 30.2015 To tbecmnmof Kofm. Anderson. M«lod> & Scon. I I.P *nd ihe Peer CommiaccoftbeCalilbmia Sociei> ofCertified Pubik Accounianis We have reviewed the s)stem of qwtiit) comnd for the accouniing and auditing practice of R<^crv Anderson. Ntikidy & ScoO. LLP (dK finn) in effeet for the >ear aided November 30.2014. Our peer review n as conducted in accordance with the Sundirtb for Performing and Reporting on Peer Reviews evuWfcJied b> the Peer Review Board of ihi* Ami>nran Inuiluie of t'mifiert PiiNIe Accountants As part of nur peer review, we considered reviews b> regulatory enlitiev if applicable, in determining the nature and extent of our procedures. The firm is responsible fo r designing a system of quaiit) cuntrolandcomplying with it to provide the finn with reasonable assurance of paforming and reporting in conformit) with applicable professional standards m all material respects. Our responsibility is lo express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review The naiuie. objectives, scope, limitations of. and the procedures paformed in a System Review we dachbed in the standards at w ww aicpa ore orsumnurs. As required by the standards, engagements seketed for resiew included engagemems performed unda the (hn'enmenl AuJiimg SunJunlf and audits of employee bettefit plans. In our opinion, the system of quality control for the accounting and wditing practice of Rogers. Anderson, hiaiody & Sc<^ LLP in eflect for dw year otded Nosember 30. 2014. has been suitably dnigned and cornplied with to prut kfe the firm with reasortable assuraiKC of performing and reporting in conformity with applkableproressfonal standards in ^1 nutaial respects. Firms can receive a rating of triih ikfktetKMieiiorfail Refers. Anderson. hUlody £ Scon. LLP received a peer review rating of/vnt The firm is not aware of any federal or state desk reviews or field reviews of its audits during the last three years. Disciplinary action The firm has never had any disciplinary action taken or pending against it with state regulatory bodies or professional organizations, nor has it ever had any pending or settled litigation, civil or criminal investigations. GRANT BENNETT ASSOCIATES APROFf SSION.-M CORPORATKTN Certified Public Acciiunumis GBA P.O. Boi 223096 Prmcavgto. Hi 96722 888/769-7323 >375 Exposibon Bouirvsrd. Su4e 230 Socramonlo. CA 956tS 916/922-5109 FAX 916/64- Our firm does not have a record of substandard work. CPA In addition to the external quality control review, our firm performs in-house peer reviews over our audit and attest engagements annually. Equal Opportunity Employer Our firm is an equal opportunity employer and is committed to providing employment opportunities to all qualified persons regardless of race, color, sex, religion, national origin or handicap. Our staff represents a wide range of cultures and ethnic backgrounds. We provide opportunities for advancement for all staff based on ability, skill and desire to advance. AlCPA)Governmental Audit Quality Center .4. City Of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications The quality of service you receive is dependent on the capabilities of the individuals assigned to the engagement, and the manner in which those personnel resources are organized to efficiently focus their abilities on providing you with the requested audit services. These professionals are highly trained and knowledgeable and have a thorough understanding of the environment in which governmental and not-for- profit entities operate. This experience is a critical component in providing the City with an effective and efficient audit. Our engagement team will provide significant experience coupled with an extensive, practical understanding of governmental and not-for-profit accounting and auditing along with a broad business perspective. Each member will have access to a wide range of technical resources and knowledge bases which will enable them to provide the City with practical observations and effective solutions. City of La Quinta City Council Concurring PartnerQuality Control Reviewer Engagement Partner Brad Welebir, CPA, CGMA, MBATerry Shea, CPAScott Manno, CPA Manager Charles DeSimont, CPA, CGMA Supervisor Nathan Statham, CPA, MBA Professional staff as needed AICPA)Governmental Audit Quality Center -5- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Partner and supervisory staff involvement All partners and supervisory staff are working professionals and are actively and continually involved in ail aspects of their engagements. We believe that partner and supervisory staff involvement in all areas of the audit is a key aspect of the overall audit process. This involvement includes being on-site for interim and year- end fieldwork, thus facilitating a proper, efficient and effective audit, with minimal disruption of your staff. In addition, the time spent on-site by the partners and supervisory staff ensures they gain an understanding of the entire City’s accounting processes and procedures. This understanding will enable them to evaluate and develop opportunities for efficiency as well as offer practical and functional advice for improving your accounting processes and procedures. All professionals on this engagement have worked on audits similar in nature to the City’s, therefore, the City will not have to train our engagement team. Staff continuity Continuity of audit staff is a principal concern with our firm. In order to retain our staff, we offer extremely competitive wages, opportunities for advancement, generous medical packages, a retirement plan, bonus opportunities, as well as educational benefits. Even with the benefits we provide, we realize we may lose staff at any given time. Knowing this, we plan to provide staff continuity from year to year, which is in the best interest of the City and our firm. Continuity ensures an orderly, efficient, and less disruptive audit experience. Since we cannot guarantee staff will remain with us, principal supervisory and management staff, including engagement partners, managers, other supervisory staff, and specialists, may be changed if those personnel leave the firm or are promoted. However, the City reserves the right to accept or reject replacements. We believe that due to the significant involvement of the partners on all of our engagements, any staff transition would have a minimal effect on the audit efficiency and effectiveness of subsequent years. Continuing professional education Our team of auditor specialists stays current in this highly technical practice area by adhering to the continuing professional education requirements of Government Auditing Standards as well as the State Board of Accountancy guidelines. All professionals at our firm participate in continuing professional education (CPE) programs, which are sponsored by various organizations including the Government Finance Officers Association, the American Institute of Certified Public Accountants, the California State Society of Certified Public Accountants, the California Society of Municipal Finance Officers and the Association of Government Accountants. Participation in these programs helps us to ensure that our clients are serviced with the best trained and most proficient government and not-for-profit auditors and accountants available. In addition, we provide in-house training taught by our partners and senior level staff using published resources. All staff are required to attend fraud and ethics training. It is our goal to provide our professional staff continuing education which exceeds the minimum standard of 80 hours over two years. In accordance with our firm’s Quality Control document and Government Auditing Standards (GAS), all staff members who work on audits subject to GAS are required to complete CPE in accordance with GAS standards which require 24 hours directly related to governmental accounting and auditing. In addition to the required CPE, we also use the following to increase our technical knowledge: view the Governmental Audit Quality Center Annual Webcast Update and other relevant seminars and review monthly publications from the AlCPA, the GFOA, and various other resources. We also attend conferences and seminars sponsored by the GFOA, California Society of Municipal Finance Officers and the California Special District Association. We also provide free of charge to all of our clients an annual GASB update, this is an 8 hour CPE course and is presented by Eric Berman, the author of the Governmental GAAP Guide. AlCPA)Governmental Audit Quality Center -6- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Assigned personnel It is our goal to provide you with capable, competent, and personable individuals who offer an extensive background, not only in governmental and not-for-profit accounting and auditing, but also in general business practices. We offer practical solutions, as well as provide technical support. This enables you to stay at the forefront of governmental and not-for-profit accounting and provides you with the support you need in dealing with the complex issues confronting entities such as yours. In addition, our engagement team has the managerial and supervisory experience to provide the City with a comprehensive audit of the highest quality, while still focusing on personal service. The resumes of the key engagement personnel assigned to the audit are presented near the end of this proposal. The following individuals will be assigned to the engagement for the entire contract period: Terry Shea, CPA - Partner, Engagement Partner Terry is a municipal audit partner with the firm and will be the engagement partner. He is licensed to practice as a certified public accountant in the State of California. He has been in public accounting for 35 years specializing in serving local governments such as yours. As the engagement partner, he will be responsible for overall engagement quality, as well as ensuring that the engagement is performed in the most effective and efficient manner. Terry will directly oversee all engagement staff while assisting in planning and performing the engagement as well as reviewing all work-papers prepared during the engagement, in addition to ail required reports. Brad A. Welebir, CPA, CGMA, MBA - Partner, Concurring Brad is a partner with the firm. He is licensed to practice as a certified public accountant in the State of California. Brad has over 12 years of public accounting experience and has provided accounting, auditing, and consulting services for municipalities, special districts, water agencies, and various nonprofit organizations. As the concurring partner. Brad will work directly with Scott in planning and performing the engagement. In addition, he will provide technical consultation for the engagement team. Scott W. Manno, CPA, CGMA- Partner, Quality Control Reviewer Scott will be the Quality Control Reviewer. Scott will be responsible for the final quality control review of all released reports. He has over 20 years of practical, governmental accounting and auditing experience. Scott is a working partner and will be actively and continually involved in all aspects of the engagement. Charles De Simoni, CPA - Engagement Manager Charles is a manager with the firm. He is licensed to practice as a certified public accountant in the State of California. Charles has over 8 years of public accounting experience and has provided accounting, auditing, and consulting services for municipalities, special districts, water agencies, and various nonprofit organizations. Charles will work directly with Brad and Scott while supervising the engagement team during all phases of the engagement. In addition, he will oversee the preparation of any required reports. AICPA)Governmental Audit Quality Center -7- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Nathan Statham, CPA, MBA - Audit Supervisor Nathan Is an Audit Supervisor with the firm. He has over 6 years’ experience in providing accounting and auditing services for municipalities, special districts and various nonprofit organizations. As an audit supervisor, Nathan will work closely with the engagement partner and manager and be responsible for planning the audit, supervising the staff assigned to the engagement, and performing reviews of all work- papers prepared for the engagement. In addition, Nathan will also be responsible for the preparation of any required reports. Senior and staff level accountants All staff employed by us and working on governmental audits are qualified to perform governmental audits. Each staff member is encouraged to take on increased responsibility for engagements previously worked on. This enables our staff to grow on each engagement and allows them to continue to gain the skills and knowledge required to perform the audits. In summary, we want to emphasize the credentials of the above professionals who will be directly responsible for the quality of service that you will receive. Additionally, our audit team has another attribute that is very important, even though it is intangible - the professionals assigned to the audits have previously worked together as a multi-disciplined team, thus ensuring a smooth, efficient and effective audit. We are committed to allocating the necessary resources to ensure that we provide continuity of personnel throughout the term of our relationship with the City. Full engagement team resumes are provided as follows. AICPA)Governmental Audit Quality Center -8- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Terry P. Shea, CPA Engagement Partner Professional experience Mr. Shea began his career with Thomas, Byrne and Smith in 1981. He spent five years with the firm primarily working on audits of municipalities, special districts, redevelopment and other governmental agencies. He joined Rogers, Anderson, Malody & Scott, LLP in 1987 where he has completed governmental audits including municipalities and provided financial consulting services for various cities. Education/licenses Bachelor of Arts degree from California State University, Fullerton Certified Public Accountant - State of California Related professional experience Partial listing of governmental entities served (‘includes enterprise fund accounting): City of Loma Linda* City of Palm Desert City of San Jacinto* City of San Marcos* City of Coachella City of Goleta City of Mission Viejo* City of Riverside* City of El Cajon* City of Indian Wells City of Fillmore City of Redondo Beach* City of Poway City of San Marcos City of La Mesa* City of Grand Terrace* City of Twentynine Palms City of Corona* City of Norco* City of Indio* City of Fontana* Mr. Shea served as the Interim Finance Director for the City of Perris from July 1998 to October 2001. He currently serves as the Contract Finance Director for one Riverside County city and one Los Angeles County city. Continuing professional education Mr. Shea has completed over 120 hours of continuing professional education courses in the past three years, of which, the following select courses are relevant to this engagement: ¨ American Institute of Certified Public Accountants, Foundations in Governmental Accounting ¨ American Institute of Certified Public Accountants, Governmental and Not-for Profit Conference ¨ California Society of CPAs Education Foundation, Governmental Auditing Skills ¨ Thomson Reuters, Audits of State and Local Governments Professional affiliations Mr. Shea is a member of the following professional organizations: American Institute of Certified Public Accountants (AlCPA) California Society of Certified Public Accountants (CalCPA) Government Finance Officers Association (GFOA) California Society of Municipal Finance Officers (CSMFO) ¨ ¨ ¨ ¨ AlCPA)Governmental Audit Quality Center -9- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Brad A. Welebir, CPA, CGMA, MBA Concurring Partner Professional experience Mr. Welebir joined Rogers, Anderson, Malody & Scott, LLP in January 2004. He works primarily on audits of governmental agencies, smali to mid-sized businesses, and nonprofit organizations. Mr. Welebir serves as a technical reviewer for the GFOA CAFR Award program. Education/licenses Masters of Business Administration - Accounting Emphasis from California State University, Fullerton Bachelor of Arts in Business Administration from La Sierra University Certified Public Accountant - State of California Chartered Global Management Accountant - American Institute of Certified Public Accountants Related professional experience Partial listing of governmental entities recently served ('includes enterprise fund accounting): City of Poway City of Twentynine Palms City of Loma Linda* City of Chino* City of Sierra Madre* City of San Jacinto* City of Moorpark* City of Fillmore* Town of Yucca Valley City of San Juan Capistrano City of La Verne City of Mission Viejo* City of Rosemead City of Redondo Beach* Continuing professional education Mr. Welebir has completed over 120 hours of continuing professional education courses in the past three years of which the following select courses are relevant to this engagement: ¨ California Society of CPAs Education Foundation, Governmental Accounting and Auditing Update ¨ American Institute of Certified Public Accountants, 0MB A-133 Single Audit Update ¨ California Society of Municipal Finance Officers, Annual Conference Sessions ¨ Government Finance Officers Association, GAAP Update Professional affiliations Mr. Welebir is a member of the following professional organizations: American Institute of Certified Public Accountants (AlCPA) California Society of Certified Public Accountants (CalCPA) Government Finance Officers Association (GFOA) California Society of Municipal Finance Officers (CSMFO) California Special Districts Association (CSDA) ¨ ¨ ¨ ¨ ¨ AlCPA)Governmental Audit Quality Center -10- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Scott W. Manno, CPA, CGMA Quality Control Partner Professional experience Mr. Manno began his career with Thomas, Bigbie and Smith in 1995. He spent six years with the firm primarily working on audits of municipalities, special , - • i districts and redevelopment agencies as well as various nonprofit X ' i organizations. He joined Rogers, Anderson, Malody & Scott, LLP in July 2001. Currently, Mr. Manno serves as a technical reviewer for the GFOA CAFR Award program. Since 2010, Mr. Manno has been serving as a technical volunteer on the California Special Districts Association Audit Committee and is now a member of the Association’s fiscal committee providing accounting ; and fiscal program guidance. Also. Mr. Manno recently did a presentation on t fraud at a state conference. In addition, he is part of the California State Society of Certified Public Accountants Governmental Accounting and Auditing Committee which meets periodically to discuss current events, pronouncements, etc., including the upcoming implementation of GASB 68. Education/licenses Bachelor of Science degree from California State University, San Bernardino Certified Public Accountant - State of California Chartered Global Management Accountant - American Institute of Certified Public Accountants Related professional experience Partial listing of governmental agencies recently served ('includes enterprise fund accounting): City of El Cajon* City of Twentynine Palms City of Chino* City of Hawthorne* City of Sierra Madre* City of San Jacinto* City of Ontario* City of Capitola* City of Fillmore* Town of Yucca Valley City of Lake Elsinore* City of La Verne City of Blythe* City of Rosemead City of Moorpark* City of Loma Linda* Mr. Manno has completed approximately 132 hours of continuing professional education courses over the past three years of which the following select courses are relevant to this engagement: ¨ Association of Certified Fraud Examiners, How to Detect and Prevent Financial Statement Fraud ¨ American institute of Certified Public Accountants, Governmental Accounting and Reporting Professional affiliations Mr. Manno is a member of the following organizations: ¨ American Institute of Certified Public Accountants (AlCPA) ¨ California Society of Certified Public Accountants (CalCPA) ¨ Association of Certified Fraud Examiners (ACFE) ¨ Association of Government Accountants (AGA) ¨ Government Finance Officers Association (GFOA) ¨ California Special Districts Association (CSDA) ¨ California Society of Municipal Finance Officers (CSMFO) AlCPA)Governmental Audit Quality Center -11- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Charles De Simoni, CPA, CGMA Engagement Manager Professional experience Mr. De Simoni joined Rogers, Anderson, Malody & Scott, LLP in January 2009. He works primarily on audits of governmental agencies, small to mid-sized businesses, and nonprofit organizations. Prior to joining our firm, he worked at Jasper Engines, where he was assistant branch operations manager. Education/licenses Bachelor of Science in Business Administration from California State University, San Bernardino Certified Public Accountant - State of California Chartered Global Management Accountant - American Institute of Certified Public Accountants Related Professional Experience Partial listing of governmental entities recently served {‘includes enterprise fund accounting): City of Norco* City of Capitola* Town of Yucca Valley* City of Moorpark* Helendale Community Services District* City of Grand Terrace* City of Chino* City of Redondo Beach* City of San Bernardino* East Valley Water Agency* City of Fillmore* City of Rosemead Continuing Professional Education Mr. De Simoni has completed over 120 hours of continuing professional education courses in the past three years of which the following select courses are relevant to this engagement; ¨ Government Finance Officers Association, Annual Governmental GAAP Update ¨ American Institute of Certified Public Accountants, Annual Update for Accountants and Auditors ¨ California Society of CPAs Education Foundation, Local Government Financial Year End Close ¨ American Institute of Certified Public Accountants, GASB Update Professional AWIiations Mr. De Simoni is a member of the following professional organizations: American Institute of Certified Public Accountants (AlCPA) California Society of Certified Public Accountants (CalCPA) California Society of Municipal Finance Officers (CSMFO) Government Finance Officers Association (GFOA) ¨ ¨ ¨ ¨ AlCPA)Governmental Audit Quality Center -12- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory and staff qualifications (continued) Nathan Statham, CPA, MBA, Supervisor Certified Public Accountant Professional Experience Mr. Statham joined Rogers, Anderson, Malody & Scott, LLP in January 2012. He works primarily on audits of governmental agencies and nonprofit organizations. Prior to joining our firm, he began his career in the real estate finance industry. Education Masters of Business Administration - Finance Emphasis from California State University, San Bernardino December 2011 Bachelor of Arts in Business Administration from California State University, San Bernardino December 2009 Certified Public Accountant - State of California Related Professional Experience Organizations that Mr. Statham has served include the following (‘includes enterprise fund accounting): California State University San Bernardino Foundation* City Poway* City of West Covina* City of Hawthorne Elsinore Valley Municipal Water District City of Redondo Beach* City of El Cajon* City of Fillmore* Ventura County Public Finance Authority* Crestline Village Water District* National Orange Show* Continuing Professional Education Mr. Statham has completed 52 hours of continuing professional education courses in the past two years of which the following select courses are relevant to this engagement: ¨ California Society of CPAs Education Foundation, Governmental Accounting and Auditing Update ¨ American Institute of Certified Public Accountants, Single Audit Advanced Concepts ¨ Governmental Accounting Standards Board, Other Postemployment Benefits ¨ Thompson Reuters, GAO Standards - Yellow Book ¨ KPMG, CSU GAAP Auxiliary Audit Professional Affiliations Mr. Statham is a member of the following professional organizations: ¨ American Institute of Certified Public Accountants (AlCPA) ¨ California Society of Certified Public Accountants (CSCPA) ¨ California Society of Municipal Finance Officers (CSMFO) AlCPA)Governmental Audit Quality Center -13- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Similar engagements with other government entities Significant engagements performed City of Redondo Beach Financial Audit/Single Audit/CAFRTSuccessor Agency Year ending June 30, 2012 - present Approximately 450 hours each year Mr. Terry Shea Mr. Craig Koehler, Finance Director, (310) 937-6629 Entity: Scope of \Aork: Date: Total hours: Engagement partner: Contact person: City of Chino Financial Audit/Single Audit/CAFR*/Successor Agency Year ending June 30, 2011 - present Mr. Scott Manno Approximately 450 hours each year Mr. Rod Bums, Director of Finance, (909) 334-3262 Entity: Scope of \ficrk: Date: Engagement partner: Total hours: Contact person: City of El Cajon Financial Audit/Single Audit/CAFR*/Successor Agency Year ending June 30. 2008 - present Mr. Scott Manno Approximately 425 hours each year Ms. Holly Reed-Falk, Finance Manager, (619)441-1763 Entity: Scope of Work: Date: Engagement partner: Total hours: Contact Person: Entity: Scope of vuork: Date: Engagement partner: Total hours: Contact person: City of La Mesa Financial Audit/Single Audit/Successor Agency Year ending June 30, 2011 - present Mr. Terry Shea/ Scott Manno Approximately 350 hours each year Mrs. Sarah Bullock, Director of Finance, (619) 667-1125 Entity: Scope of Work: Date: Total hours: Engagement partner: Contact Person: City of La Verne Financial Audit/Single Audit/CAFR*/Successor Agency Years ending June 30, 2012 - present Approximately 325 hours each year Mr. Terry Shea Mr. Richard Martinez, Finance Officer, (909) 596-8726 * = received GFOA Award or CSMFO Award. All of the Audits were part of a Comprehensive Annual Financial Report in conformance with the GASB 34 requirements. See Attachment A for a listing of current and recent government clients served. AICPA)Governmental Audit Quality Center -14- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach Services to be provided The City desires the auditor to express an opinion on the fair presentation of its basic financial statements. We are not required to express an opinion on the combining and individual non-major fund financial statements and schedules. However, we will provide an “in-relation-to" report based on the auditing procedures applied during the audit of the basic financial statements. We will apply certain limited procedures to the supplementary information, management’s discussion and analysis, and budgetary comparison information, but we will not express an opinion. We are not required to express an opinion on the introductory and statistical sections. In addition, we shall: • Provide opinions as to the compliance with the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (0MB Uniform Guidance). The Firm is to provide an "in-relation- to" report on the Schedule of Expenditures of Federal Awards based on the auditing procedures applied during the audit of the financial statements. This the new Single Audit guidance. • Test compliance with Article XIIIB pertaining to the City's appropriation limit, and prepare an Agreed-Upon Procedures report to the City Council regarding compliance. • Prepare Management Letter that includes significant and less significant (i.e. reportable and non reportable) recommendations for improvements to internal control. • We will meet with the City Council to present and discuss the financial statements, management letter, and other relevant subjects. • We will also meet with the Investment Advisory Board to present and discuss the City financial statements as they relate to cash and investments and discuss any internal control weaknesses with the Board. • We will keep the City and it’s component units abreast of new developments affecting municipal finance and reporting, including any State of California state mandated procedures and the impacts of any new GASB standards. • Included in the fee proposal is an additional 40 hours of partner/manager time budgeted for research and assistance to City staff concerning accounting and other technical matters that may arise. • We will prepare the annual State Controller’s Report and provide the City with confirmation of its submittal. Our audit(s) will be in accordance with: • Generally Accepted Auditing Standards as promulgated by the American Institute of Certified Public Accountants, including requirements found in the new AlCPA audit guide “Audits of State and Local Governments”. • Government Auditing Standards issued by the Comptroller of the United States of America. • Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (0MB Uniform Guidance). • Specific auditing standards relating to any grant agreement determined to be material by the auditor. Reports to be issued: • A report of the fair presentation of the financial statements in conformity with generally accepted accounting principles, basic financial statements, including government-wide financial statements and fund financial statements, for all funds, and accompanying notes. • A 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. • Single Audit Report which will include a report on compliance with requirements applicable to each major federal program and internal control over compliance in accordance with the Uniform Guidance. • Other Auditor Communications required by SAS or other governing standards. • We shall print and bind by December 10'^ of each year, 20 copies of the CAFR, 10 copies of the Single Audit Report and 10 copies of the Management Report.. AlCPA)Governmental Audit Quality Center -15- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) All working papers and reports will be retained (at our expense) for a minimum of seven (7) years, unless we are notified by the City of the need to extend that retention period. We will make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which we become aware to the following: • City Manager • Finance Director • City Attorney Engagement approach Our engagement approach for your audit will be developed using established goals which will enable measurement of the audit process by the engagement partner and supervisor. Our approach involves frequent communication between the partner and the engagement team to ensure that all audit objectives are achieved in accordance with the established goals and that any issues which may arise are communicated and dealt with on a timely basis. Our overall knowledge and expertise in governmental accounting and auditing has allowed us to identify key audit and accounting risks in the government environment. More importantly, the approach provides for a complete reassessment of the management and control environment in each year's audit and thus is capable of responding to changes and will ensure that deadlines are met in issuing the annual financial statements. Our engagement approach has been developed and refined over many years. The backbone of our approach revolves around the following six constants: • Knowledge and experience. We have been auditing governmental entities like the City, both large and small, for over 68 years. This experience has allowed us to gain in-depth knowledge of the governmental environment which in turn allows us to perform a more efficient and effective audit and enables us to perform detailed risk assessment procedures. These risk assessment procedures allow us to identify significant audit risk areas within the City. • Oversight. Professional judgment is not developed overnight. Our partners, managers and supervisors have been deeply involved in governmental audits on a continuous basis for most of their professional careers. By having direct partner and manager oversight, we are able to design audit strategies that result in effective and efficient audits. • Timeliness. Deadlines are not just “dates” to us, they are professional commitments. All required deadlines will be met. • Open communication. Open lines of communication with ail parties (the engagement team members and City Management and staff) throughout the audit process helps to eliminate "surprises.” Proper planning and proper use of experienced engagement personnel tend to provide for an effective and efficient audit process. Consequently, inefficiencies, disruptions, and lack of understanding are kept to a minimum. • Availability. All engagement team members are available throughout the year for any questions or additional consultation. • Cost effectiveness. Our customized audit approach and procedures and our experienced auditors help to reduce your overall audit costs. AICPA)Governmental Audit Quality Center -16- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) As indicated in the next section of the proposal, the overall objective of the engagement with the City is to conduct audit of the financial statements in accordance with required auditing standards and the expression of an opinion on those financial statements. Beyond that initial objective, we believe that our engagement approach provides certain other value added characteristics, at no additional cost, that will benefit the City over the long term; an • All of our audits are designed to be performed in an efficient and effective way to minimize disruption to the office operations. • We offer practical observations and recommendations relating to internal control issues, implementation of accounting standards and the policies and procedures regarding both. • We identify opportunities for operating efficiencies which can be used to decrease operating costs of the City. Audit approach and audit segmentation The following is a summary of the audit team’s audit approach for the City’s engagement. The audit will be divided into the following segments: Segment 1 - Interim testing - planning, pre-audit administration and internal control testing During this phase of the audit, our principal objectives will be to gather information about the City and its environment, including internal control over financial reporting. In order to achieve the desired objectives of this phase of the audit, we will: • Meet with the City’s staff in order to determine convenient dates in which we can begin our audit, and to discuss the assistance to be provided by the City’s staff. • Hold brainstorming sessions with engagement team members to discuss the susceptibility of the City’s financial statements to material misstatement and fraud. • Review and evaluate the City’s accounting and reporting processes by reviewing the prior year's audit workpapers, any City-prepared documents such as budgets, in-house financial reports, policies and procedures manuals, minutes of board meetings, etc., and by using various analytical procedures. Analytical procedures will enhance our understanding of the City and will help us identify areas that may need further assessment and additional testing. • Review and retain copies of any pertinent local, state and federal statutes, regulations, or charters that apply to the City. • Evaluate the design of controls that are relevant to the audit by obtaining a thorough understanding of the City’s internal controls over financial reporting and compliance by documenting key internal control components, utilizing questionnaires, walkthroughs, inquiring of the City’s personnel, and observing and reviewing key supporting documentation (a more thorough explanation of this process is discussed later in the technical proposal). Test controls, if control risk is assessed below the maximum, by selecting a sample of transactions within the audit area being tested and reviewing supporting documentation, and evaluating the completeness of the documentation tested, as well as the adequacy of support and approvals as they appear on the support. AICPA)Governmental Audit Quality Center -17- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) • Document and review with management, any findings noted during the testing of internal controls and provide a preliminary management letter that will include our recommendations for improving any weaknesses in operations. The letter will also include suggestions for improving the efficiency of the City’s operations. This phase of the engagement for the audit will be performed by the senior/supervising accountant and two staff accountants with direct supervision by the audit manager and partner. Segment 2 - Year end testing - substantive testing During this phase of the audit, our principal objectives will be to assess the risk of material misstatement at the financial statement level and specific assertions, design overall responses to assessed risks and further audit procedures, perform substantive tests, as needed, and complete the audit and evaluate audit findings, if applicable. In order to achieve the desired objectives of this phase of the audit, we will: • Determine whether our testing supports the assessed level of risk initially assigned at the financial statement level and at the assertion level. • Identify significant risks. • Develop a detailed audit plan. • Design substantive tests of account balances, designed and modified specifically for the City’s operations and assessed level of risk. Substantive procedures could, depending on our risk assessment, may consist of the following (the list below is not all inclusive): o Confirmation of cash and investment balances o Testing of cash and investment reconciliations o Testing GASB 40 disclosures o Testing for compliance with the City’s investment policy Testing of interest income allocations to the various funds o Analytical review and subsequent receipt testing of significant receivables Evaluate if receivables are valued properly and perform tests of balances in conjunction with the testing of revenues Testing of significant inventory and other asset accounts Testing of additions and deletions to capital assets, including CIP accounts o Perform a search for unrecorded liabilities o Testing of significant liability and accrued liability accounts o Evaluate the support for compensated absences o Review the valuation of claims and judgments o Testing of long-term debt balances and debt covenants o Analytical review of interest expense o Testing of net position (net asset) classifications Testing of revenues through either analytical procedures and/or detailed testing o Testing of expenses through either analytical procedures and/or detailed testing Payroll testing for compliance with approved salary schedules Examination of interfund transfers and testing of transfers out of restricted funds o o o o o o o AlCPA)Governmental Audit Quality Center -18- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Review the minutes of the council meetings Review significant contracts, debt issuances, leases and other agreements Review of subsequent events after year end (through the completion of our audit) Testing for significant commitments to be disciosed in the financial statements Confirm with legal counsel any significant legal matters affecting the City’s financial position This phase of the engagement for the audit will be performed by the senior/supervising accountant and two staff accountants with direct supervision by the audit manager and partner. Segment 3 - Reporting - Report preparation/audit conclusion (workpaper review) During this phase of the audit, our principal objectives wiil be to evaiuate whether the financial statements, taken as a whole, are free from material misstatement and form an opinion(s) and issue our report. o o o o o In order to achieve the desired objectives of this phase of the audit, we will: • Determine whether, based on our substantive testing and other procedures, the financial statements, taken as a whole, are free of material misstatement. This will provide the basis for our opinion{s). • Review of ail audit workpapers by the engagement partner and manager/supervisor/senior to ensure that the audit was performed in accordance with the required standards (GAAS, GAGAS, etc.). • Prepare drafts of all required reports by the agreed-upon dates. • Conduct an independent review of the financial statement draft by the engagement’s quality control partner. • Issue all reports by the agreed-upon dates. This phase of the engagement will be performed by the audit senior/supervising accountant and one staff accountant with direct supervision by the audit manager and partner. In addition, the engagement’s quality control partner will perform a detailed quality control review of the financial statements. Staffing by segment TotalPartner Manager Supervisor StaffSegment 61 153162056Segment 1 Segment 2 Segment 3 Totals 255931022634 10214374110 5101862045268 The above procedures are a general list of procedures to be performed. After our initial review of the City and our detailed risk assessment, we will customize the engagement and gear it towards the needs of the City and the audit itself. In doing so, we will determine which procedures to perform relative to our risk assessment. All of our audits are customized to each entity, helping to ensure a complete, effective, and efficient audit. The foundation of the above approach is based on open communication coupied with a strong knowiedge of City operations and detailed planning at the initial stages of the audit. Our firm is dedicated to performing a timely audit engagement. Prior to the start of the audit, we wiii meet with City staff and decide on adequate timeframes, agreed upon by both the City and us, for the performance of the audit and the release of the financial statements. We will dedicate the necessary resources to meet any agree upon time frames. AICPA)Governmental Audit Quality Center -19- City of La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Understanding of internal control over financial reporting Our approach to obtaining an understanding of the City’s internal control over financial reporting will be performed in accordance with professional standards as promulgated by the American Institute of Certified Public Accountants -- our understanding will include the Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. We will use customized procedures which we have developed internally to evaluate your internal control systems. By combining our customized procedures and our detailed knowledge of the City and its environment, we will be able to provide constructive feedback in areas we feel need improvement. In addition to our customized procedures, we will also perform the following: Control Environment Through inquiry of the City’s personnel, prompted by questionnaires, personal knowledge, and review of the minutes of the City’s board meetings, we will obtain an understanding of management’s and the City Council’s attitudes, awareness and actions concerning the control environment, focusing on the substance of the controls rather than their form. Risk Assessment Through inquiry of the City’s personnel and the use of questionnaires, we will obtain sufficient knowledge of the City’s risk assessment process to understand how management considers risks relevant to financial reporting objectives and decides upon actions to address those risks. This will include understanding how management identifies risks, estimates the significance of these risks, assesses the likelihood of their occurrence, and relates them to financial reporting. Control Activities. Certain control procedures will be documented during our analysis of the control environment and the accounting system. However, many specific control procedures will still need to be documented that will focus primarily on the City’s major transaction cycles. As mentioned above, we will test the City’s control procedures on which we intend to rely on for safeguarding assets from unauthorized use or disposition and detecting/preventing unauthorized transactions. Any flow charts, organizational charts and any other manuals, programs, and financial and management information systems will be analyzed during this process. Information and Communication. Through inquiry of the City's personnel, we will identify the major types of transactions engaged in by the City. We will become familiar with the treatment of those transactions, including how the transactions are initiated, the related accounting records, and the manner of processing the transactions. Finally, we will obtain an understanding of the City’s financial reporting process used to prepare financial reports, including the approaches used in making accounting estimates and disclosures. Monitoring. Through the inquiry of the City’s personnel and the use of questionnaires, we will obtain sufficient knowledge of the major types of activities the City uses to monitor internal control over financial reporting. We will also determine how those activities are used to initiate corrective actions. AICPA)Governmental Audit Quality Center -20- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Sample sizes Our sample sizes will be determined in accordance with the AlCPA’s Audit and Accounting Guide, Audit Sampling, and will be selected using professional judgment as permitted by SAS No. 111: Amendment to Statement on Auditing Standards No. 39, Audit Sampling. Our methods are designed to provide the most audit coverage without expending excess time. Our sample sizes will depend upon our preliminary assessment of control risk, our planned substantive testing and analytical procedures as well as our professional judgement. Approach in drawing samples for compliance testing Our approach to be taken in drawing audit samples for purposes of tests of compliance will depend on the number of transactions, the amounts of financial assistance provided {as applicable), and the City’s internal controls over the respective programs. Our audits are designed to ensure we will select samples that will provide sufficient evidence of the City’s compliance with the laws and regulations that will have a material effect on compliance with laws and regulations. Computer technology in the audit (use of EDP software) Our firm has adopted a paperless audit approach. Using our engagement software, all audit team members are linked to each other using a local router which enables them to share information at an almost real-time speed. In addition, once your trial balances and financial statements are entered into our software, we are able to observe your statements in the field allowing us to notice any variances and address them at your office. With this in mind, we would prefer all audit information in an electronic format, particularly trial balances and general ledgers. If electronic formatting is not available, all audit teams have portable scanners and printers while on location during fieldwork. In addition, we can access our accounting and auditing resources through either a wireless or wired internet connection. We link the CAFR schedules directly to our audit software trial balances, and as result, we can provide the City with fund financial statements almost immediately after importing the trial balances. Additionally, journal entries are easy to post to the CAFR schedules and the risk of data entry error is minimized. We can provide the City with our audited trial balances which show the coding of the CAFR schedules for ease of review for City staff. These reports show each account coded to a specific CAFR line item as well as journal entries posted during the audit. Analytical procedures In order to properly utilize analytical procedures, industry background and knowledge are needed. With our firm’s long history and qualified staff, we believe we have the necessary knowledge and experience to affectively apply analytical procedures. We will utilize analytical review procedures throughout our audit of the City. During the interim phase of our audit, we will compare current and prior year unadjusted balances to determine areas that may need additional analysis; we will also compare current year actual amounts to the City’s annual budget. During the final phase of our audit, we will perform procedures similar to those mentioned above, as well as compare certain financial ratios for current and prior years. We will also conduct certain “reasonableness” tests. Any significant variances are investigated further through inquiry and other substantive testing as deemed necessary until resolved to our satisfaction. Finally, after we have completed ourfieldwork, we will compare current and prior year audited balances, keeping In mind expected relationships obtained from our knowledge of the City and various other entities. In addition, we may choose to use various other analytical techniques such as trend analysis, etc. Unlike many other firms, we use analytical procedures to supplement our substantive testing, not supplant them. AICPA)Governmental Audit Quality Center -21- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Approach in determining applicable laws and regulations We understand the importance of laws and regulations in planning an audit of a local government or not-for- profit entity and design all of our audits to ensure we test transactions for compliance. As part of our audit process, our audit team will obtain an understanding of the laws and regulations that will have a direct and material effect on the City’s financial statements. In determining which laws and regulations are applicable to the City’s financial statement audit, we will consult the following sources: • AlCPA Audit and Accounting Guide. Audits of State and Local Governments • California Government Code (investments, GANN limit requirements, etc.) • U.S. Government Accountability Office’s Government Auditing Standards (The Yellow Book), 2011 Revision • Applicable contracts/grants of the City • Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federai Awards (0MB Uniform Guidance) After consulting the applicable sources, we will design our audit to provide reasonable assurance of detecting material instances of noncompliance while continuing to refer back to the applicable compliance guideline to ensure changes in compliance are not missed. Evaluation of internal controls and management letter comments In connection with each audit, a comprehensive review of internal controls over financial reporting will be performed. Our firm uses customized internal control questionnaires, information technology questionnaires and narratives to gain an understanding of the internal control process during the audit process. If we identify any weaknesses and after discussion with the appropriate City staff, we will submit a management comment letter which will identify weaknesses observed during the audit process. The management comment letter will provide our recommendation for correction and we will also provide management with the opportunity to comment on our findings. There are three classifications of internal control deficiencies. We will work carefully with your staff to ensure the correct classification of any identified internal control deficiencies. The three classifications are as follows: Control deficiency-a minor internal control deficiency that can be communicated either verbally or in writing to management. • Significant deficiency - 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, and must be communicated in writing. • Material weakness - 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, and must be communicated in writing to those charged with governance. When we prepare internal control recommendations, we obtain a thorough understanding of the specific circumstances surrounding the finding, and discuss the matters with management prior to drafting the letter. We work with your staff to ensure that the recommendation is reasonable and practical to implement. AlCPA)Governmental Audit Quality Center -22- City OF La Quinta PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Audit timing Proposed timingAudit segments Auditor Transition Schedule to meet with your prior auditor to review their working papers. Segment 1 - Planning, pre-audit administration and internal control testing Meet with management for pre-audit planning, and to obtain an understanding of systems, internal controls, and current-year issues. Perform interim audit fieldwork and tests of internal controls. May 2017 May 2017 Provide management with a detailed listing of items needed to perform the audit, including the timing of when items are needed.June 2017 Segment 2 - Substantive testing Send confirmations of cash, investment, and other accounts as deemed necessary.July 2017 September 2017Perform substantive audit fieldwork. Segment 3 - Report preparation/audit conclusion (workpaper review) Provide draft financial statements, audit report, and management letter to senior management.November 15, 2017 Decembers, 2017Issuance of auditor reports. AICPA)Governmental Audit Quality Center -23- Attachment A Current and Recent Government Clients Served CSMFO/ GFOA Successor Housing Awards Agency AuthorityYears ServedGovernment Clients Cities Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 06/30/16 6/30/016 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/15 06/30/15 06/30/14 06/30/13 06/30/13 Yes06/30/07 06/30/08 06/30/08 06/30/11 06/30/11 06/30/11 06/30/11 06/30/11 06/30/11 06/30/12 06/30/12 06/30/12 06/30/12 06/30/14 06/30/14 06/30/13 06/30/14 06/30/12 06/30/11 06/30/10 06/30/04 06/30/04 06/30/16 06/30/16 06/30/16 06/30/16 toCity of El Cajon City of Fillmore Town of Yucca Valley City of La Verne City of San Jacinto City of Twentynine Palms City of Chino City of La Mesa City of Rosemead City of Moorpark City of Capitola City of Redondo Beach City of Sierra Madre City of Menifee City of San Marcos City of Loma Linda City of Poway City of Mission Viejo City of San Juan Capistrano City of Goleta City of Norco City of Grand Terrace City of Claremont City of West Covina City of Hawthorne City ofAIiso Viejo to Yes Yes to to to Yesto Yesto to to Yes Yesto Yes Yes ' Yes Yesto Yesto to Yes Yes Yes to Yes Yes Yes Yes Yes Yesto Yes Yes Yes Yes to Yesto Yes Yes Yes Yes to to to Yes Noto Yes Yes Yes Yes Yesto Yes Yes Yes Special Districts 04/30/96 06/30/98 06/30/04 06/30/07 06/30/07 06/30/10 06/30/10 06/30/11 06/30/11 06/30/11 06/30/11 06/30/12 06/30/12 06/30/12 06/30/15 06/30/15 06/30/15 04/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/15 06/30/15 06/30/15 06/30/16 06/30/15 06/30/15 06/30/16 06/30/16 06/30/16 06/30/16 toCrestline Village Water District Crestline-Lake Arrowhead Water San Bdno Valley Muni Water Dist Ventura Regional Sanitation District Satlcoy Sanitary District Helendale CSD Pine Cove Water District Western Municipal Water District WRCRWA Vista Irrigation District Idyllwild Water District Helix Water District 29 Palms Water District Big Bear Area Regional Wastewater Elsinore Valley Municipal Water District Vallecitos Water District Costa Mesa Sanitary District to to Yesto to to to Yesto to Yesto to Yesto to Yesto Yes Yes Yes to to to Attachment A (continued) CSMFO/ GFOA AwardsYears ServedGovernment Clients Special Districts (continued) 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/16 06/30/13 06/30/15 06/30/16 06/30/16 06/30/04 06/30/05 06/30/15 06/30/06 06/30/07 06/30/07 06/30/07 06/30/14 06/30/15 06/30/10 06/30/11 06/30/13 06/30/14 06/30/16 06/30/16 06/30/15 06/30/15 06/30/15 06/30/16 toInland Empire Resource Cons District Rossmoor CSD Rosamond CSD Rim of the World Park & Rec District Ventura County Regional Energy Heartlands Communications Fac Authority Heartlands Fire Training Authority Consolidated Fire Agencies Riverside County Habitat Agency SB Fire Training Idylwild Fire District Capistrano Bay CSD Ventura County Public Fin Authority Nipomo CSD Rubidoux CSD United Water Conservation District RCD of Santa Monica Mountains Sativa-Los Angeles County Water District Riverside County Regional Park District to to to to to to to to to to to to Yes 06/30/16 06/30/16 Yesto to Attachment B LWESTROGEAND-01 DATE(MMrt>D/YYYY) 01/19/2017CERTIFICATE OF LIABILITY INSURANCE TUIQ rPRTiPICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS^ERTIpfcAVE DOK NOT 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 have ADDITIONAL INSURED provisions or be endorsecL If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder In lieu of such endorsement(s). ACT PRODUCER Orion Business Insurance and Risk Management Services, Inc. 1250 Corona Polnte Court, Suite 302 Corona, CA 92879 rAg.Noi:(951) 737-5083(951)281-5353 E-MWL ADDRESS: NAlCffINSURERISl AFFORDING COVERAGE iNsuRERA: Hartford Fire Insurance Co INSURER B: Insurance Company of the West INSURER c: Navioators 19682 27847 INSURED 42307Rogers, Anderson, Malody & Scott LLP 735 E. Carnegie Drive Suite 100 San Bernardino, CA 92408 INSURER D: INSURERE: INSURER F: REVISION NUMBER:CERTIFICATE NUMBER:COVERAGES THiQ IR TO rFRTIFY THAT THE POLICIES OF INSURANCE LISTED BELOWHAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR TH^EPOLK^ PERIODimSfcATE^i? NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANYCERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS POLICY EXP IMWiroP/YYYYI POUCY EFF tMM/DD>YYYYl SUBR YWD ADDL INSP UMITSPOUCYNUMBERTYPE OF INSURANCE . [NSR 1,000,000 sEACH OCCURRENCEACOMMERCIAL GENERAL UABIUTY CLAIMS-MADE [X OCCUR X 1,000,000DAMAGE TO RENTED PREMISES (Ea occugencgl01/01/201801/01/2017 172SBAAR7403 10,000 sMED EXP fAnv one person) 1,000,000 2,000,000 s.PERSONAL & ADV INJURY SGENERAL AGGREGATEGEN'L AGGREGATE LIMIT APPLIES PER: X POLICY LOG 2,000,000 PRODUCTS • COMP/OP AGG S. 1 OTHER:1,000,000COMBINED SINGLE LIMIT (Ea acddemi BODILY INJURY (Per person) i.A AUTOMOBILE LIABILITY ANY AUTO OWNED AUTOS ONLY ASISBonly aJsmw SCHEDULED AUTOS 01/01/201801/01/2017 s72SBAAR7403 BODILY INJURY (Per acddenl) S $ S. 3,000,000 EACH OCCURRENCE S.OCCUR CLAIMS-MADE 10, OM A UMBRELLA UAB EXCESS UAB 3,000,00001/01/201801/01/201772SBAAR7403 AAGGREGATEX DED X RETENTION $OTH-PERX I STATUTE EBBWORKERS COMPENSATION AND EMPLOYERS' UABIUTY ANY PROPRIETOR/PARTNER/EXECUTIVE - -—EXCLUDED? 1,000,00001/01/201801/01/2017Y/N WSD 5035483 00 $E-L. EACH ACCIDENT N/A 1,000,000 Ifves, describe under DESCRIPTION OF OPERATIONS below E.LDISEASE-EAEMPLOYEE S 1,000,000 E.L. DISEASE n POLCY LIMIT S 01/01/2018 See Description01/01/2017LA17APL0BCA38NVErrors & OmissionsC DESCRIPTION OF OPERATIONS/ LOCAnONS / VEHICLES (ACORD 101. AddiUonal RemartaScheduIe.may^be attached if more space Is required)ProfSnal Liabi^ $4.00&00 Per Clarm;$4,000.000 Aggregate; $35,000 Per claim Deductible CANCELLATIONCERTIFICATE HOLDER SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS.Evidence Of Insurance AUTHORIZED REPRESENTATIVE © 1988-2015 ACORD CORPORATION. All rights reserved.ACORD 25 (2016/03) The ACORD name and logo are registered marks of ACORD