The URL can be used to link to this page

The PUN Group Accountant & Advisors - ProposalTECHNICAL PROPOSAL CITY OF LA QUINTA LA QUINTA, CALIFORNIA Proposal to Perform Auditing Services For the five (5) fiscal years ending June 30, 2017 through June 30, 2021 MARCH 1, 2017 Kenneth H. Pun, CPA, CGMA Managing Partner 74998 Country Club Drive, Suite 220, Palm Desert, California 92260 Phone: (760) 459-8177 | Fax: (760) 459-8174 | Email: ken.pun@pungroup.com California CPA License Number: PAR 7601 Federal Identification Number: 46-4016990 I nr. PUN GROUP 1. OUM •\\r> 6. \L')V CITY OF LA QUINTA Proposal to Perform Auditing Services TABLE OF CONTENTS 1Letter of Transmittal 3Section I - Independence 3Section II - License to Practice in California 4Section ill - Firm Qualifications and Experience About The Pun Group, LLP Staff Consistency Other Services Offered by the Firm Af^liation with Allinial Global (Global Capabilities) Local Office’s Information Technology (IT) Audit Capabilities Most Recent External Quality Control Review Federal or State Desk Review Disciplinary Action 4 4 5 5 5 6 7 7 8Section IV - Partner, Supervisory and Staff Qualifications and Experience Proposed Engagement Team Quality-Control System Professional Development Engagement Team Resumes d 10 10 10 Section V - Similar Engagements with Other Government Entities Firm’s Municipal Clients 19 21 Section Vi - Specific audit Approach Scope of Work. Reports to be Issued Working Paper Retention and Access to Working Papers Objectives of Our Services Proposed Segmentation of the Engagement and Timeline Level of Staff and Number of Hours to be Assigned to Each Proposed Segment of the Engagement Sample Size and the Extent to Which Statistical Sampling is to be Used in this Engagement Type and Extent of Analytical Procedures to be Used in the Engagement Method Used to Gain and Document an Understanding of the City of La Quinta’s Internal Control Structure Determination of Laws and Regulations that Will be Subject to Audit Test Work Selection of Drawing Audit Samples for Purposes of Tests of Compliance 25 25 26 26 27 28 28 29 29 29 30 30 CITY OF LA QUINTA Proposal to Perform Auditing Services Location of the Office in Which the Audit Team Wili be Based and Its Engagement Team Experience. Sample of Type of Management Letter Issued by The Firm GASB Implementation Specialist Client Training Seminar 30 30 30 31 Section VII - Identification of Anticipated Potential Audit Problems 32 Section VIII - Final Considerations 33 Benefits of Choosing The Pun Group, LLP. Thank You 33 33 APPENDICES 35 Proof of Insurance 37 Management Letter Issued by The Firm - Sample.38 THE PUN GROUP ACCOUNTANTS & ADVISORS March 1. 2017 City of La Quinta Finance Department - Audit Proposal Attn.: Ms. Karla Campos | Finance Director/Treasurer 78495 Calle Tampico La Quinta, California 92253 Dear Ms. Karla Campos: Please allow us to introduce our Firm and share our qualifications and proposed audit plan for the City of La Quinta (the “City”) pursuant to your Request for Proposal for Auditing Services for the five (5) fiscal years ending June 30, 2017 through June 30, 2021. The Pun Group, LLP (the “Firm"), has the knowledge and experience necessary to become the City’s next public accounting firm, and the work plan to ensure a smooth audit process. This letter is an acknowledgement of the Firm’s understanding of the work to be performed. We hereby offer our commitment to perform all of the required work, complete the audit, and issue the necessary auditor’s report within the time periods outlined by the City. We are secure in affirming our commitment because we have: • A lengthy legacy of serving California cities • Prodigious experience serving governmental entities • An efficient, lower-cost approach to auditing that focuses on high-risk areas I will serve as your primary contact for contract negotiations. I am the managing partner of the Firm and have been authorized to legally bind the Firm. My contact information follows: Mr. Kenneth H, Pun, CPA, CGMA Managing Partner 74998 Country Club Drive, Suite 220 Palm Desert, California 92260 (760) 459-8177 ken.pun@pungroup.com Name: Position: Address; Telephone: Email: You may also contact the following partner, who is authorized to represent the Firm: Mr. Gary M. Caporicci, CPA, CGFM, CFF Partner 200 East Sandpointe Avenue, Suite 600 Santa Ana, California 92707 (949) 777-8802 gary.caporicci@pungroup.com Name: Position; Address: Telephone; Email: The Pun Group is the right choice for the City of La Quinta because we are experienced and focused in your industry. We have audited and consulted multiple California cities, performing similar scope of work to the City’s request. We have assisted many clients in earning the GFOA Certificate of Achievement for Excellence in Financial Reporting. 74998 Country Club Drive, Suite 220, Palm Desert, California 92260 Tel: 760-459-8177 • Fax: 760-459-8174 \vvvw.|uingroup.coni City of La Quinta Finance Department - Audit Proposal Ms. Karla Campos | Finance Director/Treasurer Page 2 Our depth of resources and specific government experience are substantial, and we are committed to deploying these resources and our experience on behalf of the City. Simply put, the City will become one of our most important clients, and will receive the priority service it deserves. We have assigned Gary Caporicci, our GASB Implementation Specialist, who is appointed to the State Retirement Advisory Committee by the State Controller, in assisting the City in the implementation of GASB’s new standards. Our goal for this audit is to complete the process in accordance with regulations while minimizing disruption to the City’s daily operations. The Firm will: • Develop a solid familiarity with the City’s operations. • Create a detailed audit plan during initial stages of the audit. • Maintain an open communication line between the Engagement Team and the City’s Management. • Assign duties to qualified staff members. This method ensures that the audit process will be performed steadily, communicated clearly, and completed efficiently. The Firm is an Equal Opportunity Employer and complies with all Federal and State hiring requirements. This proposal meets the requirements of the City’s Request for Proposal. This letter and the accompanying proposal represent a firm and irrevocable offer valid for a period of 90 days. The Firm hereby acknowledges the receipt of the Q&A, dated February 1, 2017. Proof of current General Liability, Business Auto Liability, Professional Liability, and Workers’ Compensation insurance can be found at the Appendices section under this proposal. We will provide a copy of our Certificate of Insurance with coverages and amounts specified in the contract with the City within 10 calendar days after the notice of contract award. Also, upon the notice of contract award the Firm will obtain a valid Business License with the City of La Quinta. If you have any questions about the proposal or the Firm, do not hesitate to contact us. We look forward to speaking with you. Sincerely, The Pun Group. LLP Certified Public Accountants and Business Advisors Kenneth H. Pun, CPA, CGMA Managing Partner 2 CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION I - INDEPENDENCE The Pun Group, LLP (the “Firm") requires all employees to adhere to strict independence standards in relation to the Firm’s clients. These independence standards exceed, in many instances, the standards promulgated by the American Institute of Certified Public Accountants (AlCPA). The Pun Group. LLP certifies that it is independent of the City of La Quinta (the "City”) and its component units. The Firm meets independence requirements defined by the United States Government Accountability Office’s (U.S. GAO’s) Government Auditing Standards, and the American Institute of Certified Public Accountants (AlCPA). The Firm has had no professional relationships involving the City of La Quinta or any of its agencies and component units for the past five (5) years. The Firm has no business interests which will conflict in any way with maintaining independence in regards to the City of La Quinta. The Firm will give the City of La Quinta written notice of any professional relationships entered into during the period of the agreement. SECTION II - LICENSE TO PRACTICE IN CALIFORNIA The Firm and all key professional staff are licensed by the State of California to practice as Certified Public Accountants, and meet the Continuing Professional Education requirements under U.S. GAO’s Government Auditing Standards to perform the proposed audits. State of California Department of Consumer Affairs California Board of Accountancy Pursuant to the provisions of Chapter 1, Division 3 of the Business and Professiorts Code, the firm of THE PUN GROUP, LLP is duty registered and entitled to practice as e partnership of Certified Public Accountants In the State of California fn Witness Whereof, the President and Secrelary-Treasurer affix their hands and the seal of the Caiifomia Board of Accountancy on this seventeenth day of December, 2013 PRESDENT / dca SECRETARY-TREASURER PAR 7601ceunoi 01oaun w MS 3 i’LINt.KOLIC CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION III - FIRM QUALIFICATIONS AND EXPERIENCE About The Pun Group, LLP The Pun Group, LLP, Certified Public Accountants and Business Advisors, founded in 2012, is a limited liability partnership. We are a full-service accounting firm that is comprised of forty (40) professionals who work on a full time basis and provide auditing, accounting, and advisory services. Our Partners Group have served governmental agencies since 1989, under the umbrella of its predecessor firm, Caporicci & Larson, where all key personnel assigned provided outstanding services to governmental entities throughout California. Out of the forty (40) professionals, thirty (30) of them are focused in the Government Assurance Practice. The Firm has offices in Palm Desert, Orange County, San Diego (California), Phoenix (Arizona), and Las Vegas (Nevada). The combination of hands-on experience and practical knowledge exercised by our audit professionals makes the Firm unique in our field. Our technical knowledge and thorough understanding of current regulations and issues— along with the Firm’s commitment to hard work, integrity, and teamwork on every engagement—enable us to help our clients succeed. Our Governmental Partners Group—which include Kenneth H. Pun, Gary M, Caporicci, Paul J. Kaymark, Lisa B. Lumbard, Jack F, Georger, Frances J. Kuo and Heidy Chow—provide auditing, accounting, and advisory services to numerous governmental entities throughout the United States. With more than two hundred (200) years of combined experience in the governmental industry we have become a trusted business partner, and well-respected as one of the most socially responsible accounting firms. In addition to annual financial audits, team members undertake special studies in financial management, accounting, cost-accounting-system analysis, internal audit services, and internal control documentation and testing. By participating in industry associations and activities, we are always up to date on the latest industry changes and the impact they will have on your operations. We will keep you and our colleagues in the Firm, fully informed of these developments. Our team is committed to bringing the full breadth and depth of our expertise to the audit of the City offering an outstanding value. Our Palm Desert office, located at 74998 Country Club Drive, Suite 220, Palm Desert, California 92260, in conjunction with our Orange County office will perform the requested services for the City. However, we may assign additional staff from our San Diego (California) office to the engagement, at no additional cost to the City. No subcontractors will be used. While many accounting Firms can perform an audit, not all can build a great working relationship with their clients. The Pun Group, LLP prides itself on developing lasting, personal relationships with our clients. Our hands-on partner involvement and low personnel turnover are crucial tools to our success and highly beneficial to the City. Our Firm has: • Extensive experience in audits of local governments as well as experience with preparation of Comprehensive Annual Financial Reports, and comprehensive assistance with the implementation of new GASB Pronouncements. • Strong work ethic and willingness to respond to the City of La Quinta requirements and needs. Staff Consistency The Firm is committed to maintaining staff continuity throughout audit engagements. While we cannot guarantee that our staff members will stay with the Firm, we encourage loyalty by paying competitive wages, offering opportunities for promotion, using state-of-the-art equipment, and providing excellent working conditions. We also offer benefits including retirement plans, medical plans, profit-sharing programs, and continuing education. The Firm is an equal-opportunity employer and complies with all federal and state hiring requirements. The Firm also supports affirmative-action philosophies and works hard to provide opportunities for self-enhancement to members of disadvantaged groups. We guarantee that the partners assigned to this audit will be involved throughout the entire engagement term, and that assigned staff members will return to the City in future years if they are still with the firm. One of our primary audit concerns is staff continuity, and our hands-on partner involvement ensures that qualified and experienced professionals will perform audits efficiently and effectively every year of the engagement. 4 CITY OF LA QUINTA Proposal to Perform Auditing Services Other Services Offered by the Firm Auditing and Accounting The Pun Group, LLP provides all levels of attestation services, including audits, reviews, and special examinations on specific accounts, items, and transactions. Additionally, we provide the following: preparation of financial statements, projections, and forecasts; practical analysis of financial information on ratios, inventory, revenues, and expenses; SEC compliance: IFRS conversions. Business/Tax Consulting We provide guidance to closely held, emerging, and family-owned businesses. Our extensive experience with privately held businesses during their entire life cycle allows us to assist our clients to create value, increase profitability, secure financing, and reach goals. Business Valuation We provide many business valuation services, including, but not limited to, the following: mergers and acquisitions, joint-venture agreements, goodwill impairment, fairness opinions, restructuring from public to private entities, and allocation of purchase price, economics, financial modeling, business management, marketing, psychology, law, competitive analysis, consumer behavior, and market research. Professional designations held by our members include CFE, CVA, CGMA, CIA, CGFM, CFF and MFAA. Our multi-disciplinary team includes JDs, and MBAs who have expertise in Financial Recoverv/Forensic Services We provide many forensic accounting services, including, but not limited to the following: fraud and mismanagement, fraudulent transfers, stockbrokerage churning, fraud risk assessment, safeguarding of assets, organizational reviews. Our forensic accounting and fraud investigation team excels in solving complex economic crimes. We provide guidance on the prevention and detection of fraud. Members of the team speak as leading experts at forensic accounting and fraud investigation conferences around the nation. Tax Services Our Firm provides many tax services, including, but not limited to the following: planning/consulting, compliance, (RS and state representation, estate planning and valuation. We have specialists in international, federal, state and local taxes. Through careful planning, we can assist our clients with tax strategies for ail levels of taxation. Affiliation with Altinial Global (Global Capabilities) The Pun Group, LLP is an independent member of Allinial Global (formerly PKF North America), an association of over 100 independent accounting and consulting firms. Based in North America, Allinial Global offers international support by connecting its GLOBAL member firms to providers and global networks of accounting firms worldwide. A MEMBER OF A\\\m\ Local Office’s Information Technology (IT) Audit Capabilities In order to promote audit efficiency, the Firm uses the following technology in providing auditing services: The Firm uses ProSystem fx® Engagement for audit documentation. It allows real time synchronization of the workpapers and real time quality control review. Citrix Receiver allows the engagement team to access the Firm’s secure network through internet anywhere they are. The Firm uses ProSystem fx® Portal for file sharing with the client. Provided by client, items are uploaded to this secured site and are downloaded and reviewed prior to the fieldwork. 5 CITY OF LA QUINTA Proposal to Perform Auditing Services Most Recent External Quality Control Review The Firm participates in the AlCPA Peer Review Program, which is designed to identify weaknesses in accounting- service policies, practices, and procedures. In 2015, an independent reviewer assessed the Firm’s quality-control policies, reviewed administrative records, interviewed professional personnel, and inspected the Firm’s working papers and reports from a representative sample of accounting and auditing engagements, including governmental audits. The reviewer concluded that the Firm fully complies with the AlCPA’s stringent standards for quality control. A quality-control reviewer considers, among other things, a firm’s policies regarding hiring, training, supervision delegation of responsibilities, and access to technical resources. The reviewer determined that the Firm’s accounting and auditing work and internal quality-control system meet the AlCPA's guidelines for professional standards. The Firm’s participation in the Peer Review Program demonstrates our commitment to quality. We also affirm our dedication to excellent client service through our voluntary memberships in the AlCPA—including the AlCPA’s Governmental Audit Quality Center—and CalCPA. GYL Uec (•rtM Mk lOMMin ^ (mhHhm SvMcni RftiewRcpon The I’un (iruup, LLI’ Santa Ana. Califotnia; and the Peer Review Committee ofthe California Society of CPAs r- We have reviewed the system of quality control few the accounting and auditing pnctice of The Pun Croup. Ll-P (the firm) in effect for the year ended December 31, 2014 Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews esiablished by the Peer Review Board of the American Instilute of Certified Public Accountants. As pan of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of out procedures. The firm is responsible for designing a system of quality control and complying with it to [mivide the firm with reasonable assurance of performing and reporting in conliirmily with applicable professional slandaids in all material respects Our responsibility is to express an opinion on the design of the system of quality control and i2k firm's compliance therewith based The nature, ubjcclives, scope, limilalioiut of. and ihc procedures performed n arc described in the standards at www.aicpa orpiprsitmmarv on our rev in a System Rev As required by the standards, engagements selected fot review included an engagement performed under (jo\emmtni Aiidiiing Slandards I In our opinion, the system ofquality ctmirol for the accounting and auditing practice ofThe iPun Croup. LLP in effect for the year ended December 31. 2014. has been suitably Idesigned and complied with to provide the fimt with reasonable assurance of performing I and reporting in conformity with applicable professional standards in all material respects I Firms can receive a rating ofpass, pass »iih de/ki*acyfiis) or Jail. The Pun Group, LLP I has received a peer review rating of passSIZOl'sacours Salle toe UalBrl«.CA*l7«4 9U9iM«.9990 800.644.0696 909»tK.96.33 6\'i P Onujio. CaJjfomia October 13.2015 3 Y/zm-. isQur H r'DAMERICAS 6 RiM.KOUr CITY OF LA QUINTA Proposal to Perform Auditing Services ( o* iiooGaimtfDr si» W Mj|«c CA 94404O CalCPA Peer Review Program February 4, 2016 KeniTeth Hing-Kwong Pun The Pun Group LLP 200 E Sandpoinie Ave Suite 600 Santa Ana, CA 92707 Dear Mr Pun: It Is my pleasure to notify you that on January 27, 2016 the California Peer Review Committee accepted the report on the irwst recent system peer review of your fimi. The due date for your neirt review is June 30. 2018. This is the date by which all review documents should be completed and submitted to the administering entity. As you know, the report had a peer review rating of pass The Committee asked me to convey its congratulations to the firm Sincerely, Linda McCrone, CPA Director, Peer Review Program cc: John Lerias Firm Number. 8192426 Review Number 372240 A CPA’Pmt Rtwtw Program T I6S0) S22-3044 F: (6S0I S22-30iO De«*'e^rwe,'il{panClWot*w«l Federal or State Desk Review No federal or state desk reviews or field reviews have been undertaken of any audits performed by the Firm or any of its partners, managers, or professionals during the past three (3) years. Disciplinary Action No disciplinary action has been taken by state regulatory bodies or professional organizations against the Firm or any of its partners, managers, or professionals during the past three (3) years. The Firm has no conditions such as bankruptcy, pending litigations, planned office closures, mergers or any organizational conflict of interest that may affect the ability of the Firm to perform the required duties requested by the City of La Quinta. 7 UNf.KOUr CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION IV - PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE Proposed Engagement Team The Engagement Team is carefully chosen to provide the City with all the services needed to successfully complete the audit. The Engagement and Concurring Partners are personally involved in the audit, and the Engagement Team has significant experience in governmental auditing. Our broad experience and technical capabilities allow us to provide technical support, interpret findings, and offer effective solutions to any issues that may arise. CITY OF LA QUINTA r 'Ir rGASB Implementation Specialist Engagement Partner Engagement Quality Control Reviewer John (“Jack”) F. Georger, Jr. CPA, CIA Kenneth H. Pun CPA, CGMAGary M. Caporicci CPA, CGFM, CFF J r Engagement Project Managerr Compliance Project Manager Frances J. Kuo CPA, CGMAColey Delaney JCPA J r 1 Supervisory Team Catherine Choi Sophia Kuo, CPA, MBA L J Professional Staff The personnel assigned to this engagement are fully qualified to perform an efficient audit of the City, and their extensive experience will be critical to the audit process. Our professionals are familiar with the complexities of governmental accounting, auditing, and financial reporting, including but not limited to, all GASB pronouncements, the Single Audit Act, Uniform Guidance (formerly known as 0MB Circular A-133), and fund operations. If the Firm changes key personnel we will provide the City with a written notification. Engagement personnel will only be changed with the express prior written permission from the City. Audit personnel may be replaced only by those with similar or better qualifications and experience. If the City wishes to extend the annual contract beyond the proposed years, the Firm will accommodate requests by the City to rotate partners, managers and or supervisors assigned to the City’s audit with personnel with similar or higher qualifications and experience. 8 I’ClM.KOlll’ CITY OF LA QUINTA Proposal to Perform Auditing Services Kenneth H. Pun, CPA, CGMA ] Engagement Partner With over sixteen years of public accounting experience, Kenneth Pun is the Assurance Partner and the Partner In- Charge of the Governmental and Not-for-Profit Practice at the Firm. He specializes in audits and management consulting for governmental organizations. Ken will actively act as the Engagement Partner with the assigned task of directly overseeing the Engagement Team. He will be responsible for the speedy delivery of services for the City of La Quinta. In addition, he will manage engagement planning and fieldwork, review for quality and approve work papers and reports. John (“Jack”) F. Georger, Jr., CPA, CIA | Engagement Quality Control Reviewer Throughout his forty years of experience, Jack has worked diligently alongside numerous governmental municipalities, including cities, counties, and transportation agencies, as well as not-for-profit entities, providing clients with financial and compliance auditing as well as consultation services. As an Assurance Partner in our Firm, he advises clients with their complex accounting questions, and supports the engagement team with audit issues. Jack is responsible for the review of all reports issued by the Firm to ensure the utmost quality and compliance with professional standards. He is responsible for the final quality-control review within the engagement. Gary M. Caporicci, CPA, CGFM, CFF | GASB Implementation Specialist Gary Caporicci is an appointed member of the State Controller’s Retirement Advisory Committee. Mr. Caporicci will utilize his expertise in providing advice and consultation during the implementation of the new GASB standards. As an assurance partner with over forty years of experience, Gary has provided financial and compliance audit and consultation services to governmental clients including cities, counties, transportation agencies, and school districts, as well as various not-for-profit entities. Gary will be responsible in providing advice and consultation for the implementation of these new standards. Frances J. Kuo, CPA, CGMA | Engagement Project Manager Frances Kuo will bring her attention to detail and commitment to delivering a high quality audit to the City of La Quinta. Frances will work closely with the Assurance partners directing the audit team in its daily activities and tasks. She is an Assurance Services Partner who has extensive experience in auditing local governmental entities including cities, counties, transportation agencies, special districts, and not-for-profit entities. Coley Delaney, CPA | Compliance Project Manager Working as a Compliance Manager, Coley will direct the audit team in all compliance-related matters. He is an Assurance Services Director in the Firm whose extensive auditing experience includes cities, counties, special districts, and not-for-profit entities. Catherine Choi / Sophia Kuo, CPA, MBA | Supervisory Team Catherine and Sophia will direct the audit staff and coordinate with the City of La Quinta personnel to create a seamless transition during the auditing process, and will secure the effective implementation of the audit approach. Professional Staff All governmental-audit members are qualified to perform financial and compliance audits of governmental agencies. This ensures that the staff quality will be consistent throughout the engagement term. Because we support both staff development and engagement continuity, we encourage senior and staff accountants to take increased responsibilities on their previous engagements as they advance professionally. 9 'UNC.KOLII' CITY OF LA QUINTA Proposal to Perform Auditing Services Quality-Control System Our Firm meticulously monitors the quality and contents of our reports. The Pun Group LLP is 100% committed to providing only the highest grade of work possible for our clients and for those who rely on our audits. The Firm strives to exceed professional industry standards because of the continuing respect for our clients and our emphasis on creating long-lasting relationships. The Pun Group LLP works exclusively with those who share the same moral integrity and values. Our quality-control system was crafted with excellence in mind. It not only meets AlCPA standards, but also matches our own elevated standards, which includes the following professional-development activities. Professional Development Each Engagement Team member is up-to-date with continuing professional education requirements. The Firm encourages staff members to participate in the continuing education programs offered by the AlCPA and the CalCPA Education Foundation in order to always keep our staff well versed in the changing field and any new regulations. These classes include, among others: Basic Concepts of Governmental Accounting, Financial Reporting and Auditing Government Auditing Standards GASB Basic Financial Statements for State and Local Governments Single Audits: Uniform Guidance (formerly known as 0MB Circular A-133) Governmental and Nonprofit Annual Update Governmental Accounting and Auditing: The Annual Update Auditing Standards: A Comprehensive Review In addition, the Firm provides comprehensive in-house training for all levels of staff. The program includes seminars developed by the Firm, educational programs developed by the AlCPA and CalCPA, and on-the-job training. Every year, all professional and administrative staff members receive an annual overview and review of topics such as these: Principles of accounting and financial reporting for state and local governments Governmental fund types Newly issued U.S. generally accepted auditing standards and government auditing standards Internal control evaluation approaches, including COSO Internal Control Framework Updates on recent governmental accounting and reporting guidelines and pronouncements Single Audit requirements and approaches Risk based audit approaches Working paper techniques Current issues facing the governmental community These ongoing continuing education activities and training programs ensure that the Engagement Team is always receiving the most current and pertinent information; we believe that an educated staff is a necessity when providing the most efficient and effective audit of the City. Engagement Team Resumes City of La Quinta deserves experienced professionals who work as a team. The Pun Group, LLP will provide qualified employees to perform the audit; no subcontractors will be used. Resumes for key Engagement Team members follow. 10 l‘flN(.KOUI’ CITY OF LA QUINTA Proposal to Perform Auditing Services Kenneth H. Pun, CPA*, COMA Engagement Partner Kenneth H. Pun is the Managing Partner and the Director of the Governmental and Not-for Profit Practice of the Firm. Prior to founding his own practice, Ken was employed by Caporicci & Larson, a specialty CPA firm recognized as one of California's foremost experts in governmental and not-for-profit accounting, auditing, and advisory service. He started with the firm in 2001 and was promoted to Partner in 2008. He has performed numerous audits for cities, counties, transportation agencies, community college districts, other special districts, and not-for-profit healthcare entities of various sizes. By leveraging more than seventeen years of public accounting experience with a high level of expertise, Ken is often engaged by clients as a result of premier level of service he provides, his commitment, and his innovative methods of increasing operational efficiencies and reducing costs. Ken is a trusted advisor and a leader of accounting services to governmental and not-for-profit organizations. In addition to working with clients, Ken provides the audit teams with direction and technical guidance to ensure adherence to The Pun Group’s quality controls, and he assists with the development of the Assurance Services practice. Ken also speaks on topics related to audits and quality control and shares his expertise with clients through annual educational seminars. EDUCATION BS Degree in Business Administration, emphasis in Accounting from the University of California, Riverside *Licensed by the State of California PROFESSIONAL & CIVIC AFFILIATIONS 3 Member, American Institute of Certified Public Accountants (AICPA) Member, California Society of Certified Public Accountants (CalCPA) Member, CalCPA Governmental Accounting and Auditing Committee Member, CalCPA Governmental Accounting and Auditing Conference Planning Committee Member, Government Finance Officers Association (GFOA) Member, California Society of Municipal Finance Officers (CSMFO) Speaker, CSMFO Conference (2014) Instructor, CalCPA Fall Series (2014) - Long Beach and Orange County Chapter PROFESSIONAL EXPERIENCE 3 3 3 3 3 3 City of Arvin C^of Arcadia of Calexico City of Carpinteria of Chula Vista City of Clovis air of Desert HotClilinfli City of Fairfield Capf Hemet City of Huntington Park aitoLLakewood City of Morro Bay City of Cerritos m of Cleariake Town of Danville MM. Encinitas City of Gardena Hermosa Beach C|t^_onndus^ City of National City ^fcof Placerville City of Ridgecrest agof Solana Beach City of Stockton Anderson Health Clinic City of San Bernardino Qtf of Shafler Alliance Medical Center Centro Medico CBBWBBitf Clinic Family Health Centers of San DiegoDesert Hot Springs HeaKh and Wellness Foundation jBB^:Conya!escent.H<BaBt . . McCloud Healthcare Clinic MarinSt. Health and Wellness Center Mountain Valleys Health Centers Redwood Coast Medical Services aiinoltdwin Medical Center Tulare Community Health Clinic United Health Centers of San Joaquin Valley 74998 Country Club Drive, Suite 220, Palm Desert, California 92260 Email; Ken,Pun@pungroup.com | Phone: (760) 459-8177 | Fax: (760) 459-8174 11 i'l!iN(,Roi.ir CITY OF LA QUINTA Proposal to Perform Auditing Services North CoiiOTranstt District^ Shasta Regional Transportaflon Agency LasjlminesJ^unicjlfWater District Gold Coast Transit San Diego Me^-ppolitan Transit System Sunline Transit Encinitas Ranch Golf AuthorityLas Virgenes-Triunfo Joint Powers Authority Marina Coast Water DistrictFailbrook Healthcare District Nev^ort Coast Elementary School DistrictMenlo Park Fire Protection District College DistrictFlood Control and Water Conservation District SouthwesternRiverside OTHER RELEVANT EXPERIENCE City of Stockton The City of Stockton filed a petition for Chapter 9 bankruptcy protection with the United States Bankruptcy Court on June 28, 2012, the largest municipality bankruptcy at the time. The Firm was engaged as audit liaison and advisor in 2012 for the City’s 2011 audit. The City also engaged the Firm to help drafting the Comprehensive Annual Financial Report in accordance with U.S. GAAP and in compliance with GFOA guidelines for the certificate of achievement for excellence in financial reporting program. With the superb sen/ices provided, the City of Stockton also engaged the Firm to provide audit service for the years ending June 30, 2012 through 2015 due to the early termination of the contract from its predecessor firm. Mr. Kenneth H. Pun has been assigned as the engagement partner who facilitated the audit process since then. The engagement team completed the audit and issued the audit reports for the year ended June 30, 2012 and 2013 within the one year timeframe. City of Desert Hot Springs The City of Desert Hot Springs engaged the Firm to provide professional auditing services since June 30, 2013. During the audit, certain deficiencies were noted that the City cited as the cause of their financial hardship, The City reduced its overall workforce resulting in many positions unfilled. However, our firm was still able to complete the engagement in a timely manner and provide valuable recommendations to the City Council in addressing their deficiencies. In addition, during the year ended June 30, 2013, the City entered into a very complicated financial arrangement. New Market Tax Credit financing, for the construction of the Desert Hot Springs Health and Wellness Center. Our firm has provided guidance to the City in addressing complex accounting issues and helped drafting the stand-alone financial statements to fulfil the addition reporting requirements under the New Market Tax Credit financing, San Diego Metropolitan Transit System ("MTS”) On January 1, 2003, California Senate Bill 1703 (SB 1703) became effective. SB 1703 required the consolidation of the planning and programming functions of MTS and the North County Transit District (NCTD) into the San Diego Association of Governments (SANDAG) in an initial transfer to take place prior to July 1, 2003. SB 1703 also required the consolidation of certain project development and construction functions of MTS and NCTD into SANDAG in a subsequent transfer to take place prior to January 30, 2004, The initial transfer occurred on July 1, 2003, and the subsequent transfer occurred on October 13, 2003. With these actions, employees were transferred from MTS and NCTD to SANDAG, and certain planning, development, and construction functions were also transferred. After the enactment of SB 1703, Mr. Kenneth H. Pun was able to convert MTS financial model from general-purpose government to stand-alone business-type activities government under GASB Statement No. 34 in 2007. By doing so, MTS has significantly improved their financial reporting. CONTINUING PROFESSIONAL EDUCATION V Various municipal accounting courses offered by the AICPA, CalCPA Education Foundation and local universities including: o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits: Uniform Guidance (formerly 0MB Circular A-133) Financial Accounting Standards Board Annual Updates o Statement on Standards for Accounting and Review Services Updates V Has met the current CPE educational requirements to perform audits of governmental agencies. o 74998 Country Club Drive, Suite 220, Palm Desert, California 92260 Email: Ken.Pun@pungroup.com | Phone; (760) 459-8177 | Fax: (760) 459-8174 12 [’1!|S(.K0UP CITY OF LA QUINTA Proposal to Perform Auditing Services CPA*, CIAJohn F. Georger, Jr. Engagement Quality Control Reviewer Jack Georger is the Partner of the Governmental Division by leveraging more than forty years of public accounting and auditing experience in the government, agribusiness, financial services, manufacturing and non-profit sectors. Mr. Georger brings an in-depth knowledge and practical expertise to each client engagement. Mr. Georger coordinates, plans, and manages financial audit activities, consulting activities, federal and state compliance audit activities, performance audits and numerous quality control and internal control reviews for a broad mix of governmental agencies and programs throughout the United States, Jack is a continuing professional education course instructor for the AlCPA. Annually, he instructs over 300 hours on accounting and auditing subjects. He has coauthored training material in governmental accounting and auditing for the AlCPA and is the technical reviewer of the CCH Knowledge-Based Audits Governments with Single Audits. TM of State and Local Mr. Georger is licensed to practice as a certified public accountant in the states of California, New York, Virginia, Maryland, District of Columbia, Georgia, South Carolina, Missouri, Connecticut (inactive), and Wyoming (inactive), and is a Certified Internal Auditor (CIA). EDUCATION Bachelor of Science, George Mason University Fairfax, Virginia 'Licensed by the State of California, New York. Virginia. Maryland. District of Columbia, Georgia, South Carolina, Missouri and Connecticut (inactive) and Wyoming (inactive) PROFESSIONAL & CIVIC AFFILIATIONS Member and Instructor, American Institute of Certified Public Accountants (AlCPA) Member, Institute of Internal Auditors Member, California Society of Certified Public Accountants (CalCPA) Member, CalCPA Government Accounting and Auditing Committee Member, New Yoilc Society of Certified Public Accountants (NYSSCPA) Chairman, NYSSCPA Government Accounting and Auditing Committee Member, NYSSCPA Auditing Standards Committee Member, NYSSCPA Financial Accounting Standards Committee Member, NYSSCPA Not-for-Profit Committee Member, Missouri Society of Certified Public Accountants (MSCPA) South Carolina Association of Certified Public Accountants (SCACPA) Member, Government Finance Officers Association (GFOA) - CAFR Reviewer 3 / 3 3 / 3 3 3 3 3 3 3 KEY CLIENTS • Local Governments: Town of Andrews, South Carolina County of Isle of Wight, Virginia City of Richmond, Virginia o o o CONTINUING PROFESSIONAL EDUCATION 3 Instructor of over 300 hours of municipal accounting courses offered by the AlCPA Has met the current CPE educational requirements to perform audits of governmental agencies.3 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email: Jack.Georger@pungroup.com | Phone: (949) 777-8804 | Fax: (949) 777-8850 13 l'CiN(.Roiir CITY OF LA QUINTA Proposal to Perform Auditing Services Gary M. Caporicci , CPA*, CGFM, CFF GASB Implementation Specialist Gary M. Caporicci has more than forty years of diversified business experience, including a specialization in audit and management consulting for government organizations. Gary’s clients include public and private universities and colleges, city and county governments, state agencies, joint power authorities, healthcare agencies, transportation agencies, and special districts. Known for his expertise in the areas of construction and government, Gary wrote the AlCPA audit guides on these topics, and he has authored many audit and accounting courses for professional groups, as well as academic institutions. He frequently speaks and lectures at many professional organizations, governmental seminars, and conferences held by industry associations, other accounting firms, and universities. In addition, he authors white papers for the California Committee on Municipal Accounting. Prior to working with the Firm, Gary founded his own accounting practice. He also spent eleven years with a ‘‘Big Eight” professional services firm, where he was an Audit Manager and gained broad experience in a wide range of industries such as government, construction, manufacturing, mutual funds, and insurance. Prior to that, Gary held a consultant position with a “Big Four” practice and was Vice President of a national insurance and financial services company. In 2015 Gary Caporicci was appointed to the State Retirement Advisory Committee by the State Controller. EDUCATION V BS Degree in Accounting and Finance from the Armstrong University 'Licensed by the State of California PROFESSIONAL & CIVIC AFFILIATIONS 3 Member and Instructor, American Institute of Certified Public Accountants (AlCPA) Member, Author and Instructor, California Society of Certified Public Accountants (CalCPA) Past Chair. CalCPA Governmental Accounting and Auditing Committee Chair and Speaker, CalCPA Governmental Accounting and Auditing State Conferences Member, CalCPA Council Chair, California Committee on Municipal Accounting (CCMA) Member, Government Finance Officers Association (GFOA) Member, California Society of Municipal Finance Officers (CSMFO) Member. Governmental Accounting Standards Board (GASB), Member, Deposit and Investment Risks Disclosure Task Force (GASB No. 40) National Reviewer and Speaker, Government Finance Officers Association Adjunct Professor, National University Past Member, Texas Governmental Accounting and Auditing Committee GFOA Certificate for Excellence in Financial Reporting - Reviewer V 3 3 3 3 3 V V 3 3 3 3 V CONTINUING PROFESSIONAL EDUCATION 3 Author and instructor of various municipal accounting courses offered by CalCPA Education Foundation and local universities including: o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits; Uniform Guidance (formerly 0MB Circular A-133) Has met the current CPE educational requirements to perform audits of governmental agencies.V 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email: Gary.Caporicci@pungroup.com | Phone: (949) 777-8802 | Fax: (949) 777-8850 14 i’l!jN(.ROUI CITY OF LA QUINTA Proposal to Perform Auditing Services Frances J. Kuo, CPA*, CGMA Engagement Project Manager Frances Kuo is a Partner in The Pun Group, LLP’s Assurance division. Frances has over eleven years of accounting and auditing experience working with governmental agencies, not-for-profit entities, and employee benefit plans. Frances also has particular expertise in conducting financial audits under GAO Yellow Book standards and compliance audits in accordance with Uniform Guidance (formerly 0MB Circular A-133). Frances has performed audits and other attestation services for several municipalities throughout California including cities, counties, redevelopment agencies, public financing authorities, housing authorities, transportation agencies, and special Districts, i She has assisted these clients with publishing their Comprehensive Annual Financial S Reports in compliance with GASB Statement No. 34. | Ms. Kuo is the in-house instructor who provides training, both theoretical and on-the-job training, to lower level staff. She has developed training materials on the risk based audit approach, GASB Statement No, 34 reporting. Single Audits, and employee benefit plan audits. EDUCATION h J BS Degree in Business Administration, Emphasis in Accounting, from the University of California, Riverside BA Degree in Economics from the University of California, Riverside ^Licensed by the State of California, Arizona and Virginia. 3 PROFESSIONAL A CIVIC AFFILIATIONS Member. American Institute of Certified Public Accountants (AlCPA) Member, California Society of Certified Public Accountants (CalCPA) Member, California Society of Municipal Finance Officers (CSMFO) RELEVANT PROJECT EXPERIENCE 3 3 3 Crt^ofBradbui^ City of Gardena la • Citv of Desert Hot;;Springs soir City of Hemet '" cT^TOonlere^^f^" I • Conejo Recreation and Park District San Diego Transit Corporation Retirement Plan City Of Iri3us!rv^^^”^' " • City of Ridgecrest of Hermosa Beach WT Mountains Recreation and Conservation ■j.n San Diego Association of Governments Southwestern Community College Distnct ^^ftangRaiTTa^Tikig University Fou'naationo^ffienM"^s!n3 CONTINUING PROFESSIONAL EDUCATION 3 Various municipal accounting courses offered by the AlCPA, CalCPA Education Foundation and local universities including: o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits: Uniform Guidance (formerly 0MB Circular A-133) o Financial Accounting Standards Board Annual Updates o Statement on Standards for Accounting and Review Services Updates Has met the current CPE educational requirements to perform audits of governmental agencies.3 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email; Frances,Kuo@pungroup.com | Phone: (949) 777-8805 | Fax: (949) 777-8850 15 l*(!i\(,Kour CITY OF LA QUINTA Proposal to Perform Auditing Services Coley Delaney, CPA* Compl iance Project Manager Coley Delaney is a Director within The Pun Group, LLP’s Assurance division. In his ten years of accounting and auditing experience, Coley has worked with governmental agencies, not-for-profit entities and private for-profit entities. Coley specializes in conducting financial audits under GAO Yellow Book standards and compliance audits in accordance with Uniform Guidance (formerly known as 0MB Circular A-133). Coley has performed audits and other attestation services for several governmental agencies throughout California including cities, counties, redevelopment agencies, public financing authorities, housing authorities, transportation agencies, and special districts, and he has helped them publish their Comprehensive Annual Financial Reports in compliance with GASB Statement No. 34. Mr. Delaney develops training materials and shares his expertise internally with other Firm professionals. Coley is a frequent speaker at in-house seminars on topics related to government auditing standards and Single Audits. EDUCATION 3 BA Degree in Business Economics Emphasis in Accounting from the University of California, Santa Barbara. 'Licensed by the State of California PROFESSIONAL & CIVIC AFFILIATIONS 3 Member, American Institute of Certified Public Accountants (AlCPA) Member, California Society of Certified Public Accountants (CalCPA)3 RELEVANT PROJECT EXPERIENCE City of Arvin Mg of Chula Vista City of Clovis tttof Fairfield City of Gardena City of Arcadia Mt of Cleartake Towffi of Danville M^sLEndnitas ~~ City of Hermosa Beach /.'TEi Park City of National City oiy of San Bemar^no 1 l^iBBBiieamiCenters of SarLM^g United Health Centers of San Joaquin Valley btTransit District • Southwestern Community College District BMESS— City of Poway Bteof Sotana Beach City of Stockton RedwoodCoasL MedlcaLServIj^s San Diego Metropolitan Transit System SunLine Transit Fallbrook Healthcare District CONTINUING PROFESSIONAL EDUCATION Various municipal accounting courses offered by the AlCPA, CalCPA Education Foundation and local universities including; o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits: Uniform Guidance (formerly 0MB Circular A-133) o Financial Accounting Standards Board Annual Updates o Statement on Standards for Accounting and Review Services Updates Has met the current CPE educational requirements to perform audits of governmental agencies.3 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email: Coiey.Delaney@pungroup.com j Phone: (858) 242-5101 | Fax: (858) 242-5150 16 iTINr.KOUr CITY OF LA QUINTA Proposal to Perform Auditing Services Catherine Choi Supervisory Team Catherine Choi is a Supervisor of The Pun Group, LLP. She has more than eight years of governmentai experience that ranges from GASB audit/reporting. Internal Controls/COSO Framework, Single Audit, Corporate Financial Reporting, Data Analysis and Taxation. In various engagements, Catherine has been involved in providing significant services to various governmental entities and actively contributed and participated in the planning process, implementation of the audit work plan, supervision of staff, compliance testing for the Single Audit Concept and preparation of the Comprehensive Annual Financial Reports. EDUCATION 3 BS Degree in Accounting from the California Polytechnic University of Pomona. RELEVANT PROJECT EXPERIENCE City of Cerritos Bwof Hemet ~ ~^^of Hermosa Beach of Gardena • City of Desert Ho^Sprir^s El Centro ~ • City of Morro Bay Las Virgenes Municipal Water District Coul Sanitation DistrictParkLos • County of San Diego Intergovernmental Training and Development Center Torrance Unified School District BlMlHills Unified SchooJ DistricL Garvey School District Bellflov«r Unified School District Monrovia Unified School District Rosemead SchocM District Unified School District Pacoima Charter School Riverside County Flood Control and Water Conservation District CONTINUING PROFESSIONAL EDUCATION 3 Various municipal accounting courses offered by the AlCPA, CalCPA Education Foundation and local universities including: o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits: Uniform Guidance (formerly 0MB Circular A-133) o Financial Accounting Standards Board Annual Updates o Statement on Standards for Accounting and Review Services Updates Has met the current CPE educational requirements to perform audits of governmental agencies.3 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email: Catherine.Choi@pungroup.com | Phone: (949) 777-8813 | Fax: (949) 777-8850 17 I’flNt.KOUl CITY OF LA QUINTA Proposal to Perform Auditing Services Sophia Kuo. CPA*, MBA Supervisory Team Sophia Kuo is a Supervisor of The Pun Group, LLP. She has over five years of public accounting experience including governmental experience that ranges from GASB audit/reporting, Internal Controls/COSO Framework, Single Audit, Corporate Financial Reporting, Data Analysis and Taxation- In various engagements, Sophia has been involved in providing significant services to various governmental entities and actively contributed and participated in the planning process, implementation of the audit work plan, supervision of staff, compliance testing for the Single Audit Concept and preparation of the Comprehensive Annual Financial Reports. EDUCATION 3 MAcc from Idaho State University MBA from Idaho State University BA Degree in International Trade and Finance, emphasis in Finance from Fu Jen Catholic University 'Licensed by the State of California PROFESSIONAL & CIVIC AFFILIATIONS 3 Member, American Institute of Certified Public Accountants (AlCPA) Member, California Society of Certified Public Accountants (CalCPA) RELEVANT PROJECT EXPERIENCE City of Arvin ^ of Cerritos City of Arcadia Desert Hot City of Hermosa BeachCity of Gardena Ollf of HuntiiMan Park Ci^ (^Stockton Ventura Cot^P United Health Centers of the San Joaguin y^Usy ^401J^lan^ Tulare l5»l»«»'HeWh'Clinic^'Q1 Commission City of Lakewood Munic^^.Water Dist^Las SunLine Transit Agency Easter Seals of SouOiefn Cajifomia^OIK Wft CONTINUING PROFESSIONAL EDUCATION V Various municipal accounting courses offered by the AlCPA, CalCPA Education Foundation and local universities including: o Governmental and Nonprofit Annual Update o Government Auditing Standards o GASB Basic Financial Statements for State and Local Governments o Single Audits: Uniform Guidance (formerly 0MB Circular A-133) o Financial Accounting Standards Board Annual Updates o Statement on Standards for Accounting and Review Services Updates V Has met the current CPE educational requirements to perform audits of governmental agencies. 200 East Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Email: Sophia.Kuo@pungroup.com | Phone: (949) 777-8809 | Fax: (949) 777-8850 18 CITY OF LA QUINTA Proposal to Perform Auditing Services SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENTSECTION V ENTITIES The following five clients are examples of some of the engagements that are similar to the requirements in the City’s proposal. Additional references are available upon request. Please feel free to contact these governmental agencies to learn more about their experiences working with us. Reference 1: City of Stockton June 30, 2012 to Present The Firm has provided professional auditing services to the City of Stockton which includes the audit of the City’s CAFR, Single Audit, and Measure W. In addition, the firm has performed agreed-upon procedures of the Appropriation Limit. Name of Client; Service Period: Scope of Work: GFOA Award: Engagement Partner: Engagement Manager: Total Hours: Principal Client Contact: Yes Kenneth H. Pun | Concurring Partner: Heidy Chow Average 2,500 hours per year Mr. Edwin Gato, Accounting Manager edwin.qato@stockton.ca.qov 425 N. El Dorado Street Stockton, CA 95202 (209) 937-8499 Compliance Manager: Gary M. Caporicci Frances Kuo Reference 2: Name of Client; Service Period: Scope of Work: San Diego Metropolitan Transit System June 30, 2005 to Present The Firm has provided professional auditing services to the San Diego Metropolitan Transit System, since 2005, which includes the audit of the CAFR and Single Audit. In addition, the Firm has performed agreed-upon procedures on the Indirect Cost Rates, compliance with California Transportation Development Act for MTS, San Diego Transportation Corporation and San Diego Trolley Incorporated, compliance on National Transit Database and compliance audit on Public Transportation Modernization Improvement and Service Enhancement Account. GFOA Award: Engagement Partner: Engagement Manager: Total Hours; Principal Client Contact: Yes Kenneth H. Pun | Concurring Partner: Gary M. Caporicci Coley Delaney j Compliance Manager; Frances Kuo Average 1,850 hours per year Ms. Erin Dunn, Controller erin.dunn@sdmts.com 1255 Imperial Avenue, Suite 1000, San Diego, CA 92101 (619) 557-4536 19 CITY OF LA QUINTA Proposal to Perform Auditing Services Reference 3: Name of Client; Service Period; Scope of Work; City of Desert Hot Springs June 30. 2013 to Present The Firm has provided professional auditing services to the City of Desert Hot Springs which includes the audit of the City’s Basic Financial Statements, and Single Audit. In addition, the firm has performed agreed-upon procedures of the Appropriation Limit and Transient Occupancy Tax (TOT), GFOA Award; Engagement Partner; Engagement Manager; Total Hours; Principal Client Contact; N/A Kenneth H. Pun | Concurring Partner; Gary M. Caporicci Frances Kuo Average 500 hours per year Ms. Linda Kelly, Financial Specialist lkellv@citvofdhs.orq 65-950 Pierson Blvd. Desert Hot Springs, CA 92240 (760) 329-6411 ext. 289 I Compliance Manager; Coley Delaney Reference 4: City of Clovis June 30, 2006 to Present The Firm has provided professional auditing services to the City of Clovis which includes the audit of the City’s CAFR, Successor Agency and Single Audit. In addition, the firm has performed agreed-upon procedures of the Appropriation Limit. Name of Client; Service Period; Scope of Work: GFOA Award: Engagement Partner: Engagement Manager: Total Hours; Principal Client Contact: Yes Kenneth H. Pun | Concurring Partner: Gary M. Caporicci Coley Delaney j Compliance Manager; Frances Kuo Average 400 hours per year Ms. Jamie Hughson, Finance Director iamieh@ci.clovis.ca.us 1033 Fifth Street Clovis. CA 93612 (559) 324-2106 Reference 5: Town of Danville June 30, 1999 to Present The Firm has provided professional auditing services to the Town of Danville which includes the audit of the City’s CAFR, Financing Authority, the Lighting and Landscaping Assessment District’s Basic Financial Statements, and Single Audit. In addition, the firm has performed agreed-upon procedures of the Appropriation Limit. Name of Client Service Period Scope of Work GFOA Award: Engagement Partner: Engagement Manager: Total Hours; Principal Client Contact: Yes Kenneth H. Pun | Concurring Partner: Gary M. Caporicci Coley Delaney Average 300 hours per year Ms. Lani Ha, Accounting Manager lha@danville.ca.gov 510 La Gonda Way Danville, CA 94526 (925)314-3358 Compliance Manager: Frances Kuo 20 KIN(,R01II’ CITY OF LA QUINTA Proposal to Perform Auditing Services Firm’s Municipal Clients The Pun Group, LLP has performed numerous audits of governmental organizations subject to financial and compliance audits. These audits were performed in accordance with auditing standards generally accepted in the United States, Government Auditing Standards. Uniform Guidance (formerly known as 0MB Circular A-133) and its Compliance Supplement (when applicable), Office of the State Controller’s Minimum Audit Requirements and Reporting Guidelines for California Special Districts. A list of current engagements is as follows: Financial Audit Single Audit GFOA Certificate Engagement Partner Total Hours Municipalities Dates City of Arvin 2013-Present Yes Yes N/A Kenneth H. Pun 400 City of Bradbury 2012 - Present Yes N/A N/A Kenneth H. Pun 150 City of Calexico 2007 - Present Yes N/A Kenneth H. PunYes 750 City of Cerritos 2009 - Present Yes Yes Yes Kenneth H. Pun 400 City of Clovis 2006 - Present Yes Yes Yes Kenneth H. Pun 400 City of Culver City 2016 - Present Yes Yes Yes Kenneth H. Pun 535 Town of Danville 1999 - Present Yes Yes Yes Gary Caporicd 300 City of Desert Hot Springs 2013 - Present Yes N/A N/A Kenneth H. Pun 500 City of Encinitas 2014-Present Yes Yes Yes Kenneth H. Pun 350 City of Escondido 2016 - Present Yes Yes Kenneth H, PunYes 400 City of Gardena 2007 - Present Yes Yes Yes Gary Caporicci 700 City of Hemet 2015 - Present Yes Yes N/A Kenneth H. Pun 380 City of Hermosa Beach 2004 - Present Yes N/A Yes Kenneth H. Pun 200 City of Huntington Park 2015 - Present Yes Yes N/A Kenneth H. Pun 650 City of Industry 2015 - Present Yes Yes Yes Kenneth H. Pun 600 City of Laguna Niguel 2016 - Present Yes Yes Yes Kenneth H, Pun 390 City of Lakewood 2013 - Present Yes Yes Yes Kenneth H. Pun 380 City of Lynwood 2016-Present Yes Yes Yes Kenneth H, Pun 585 City of Monterey 2016 - Present Yes Yes Yes Kenneth H. Pun 620 City of Morro Bay 2015 - Present Yes Yes N/A Kenneth H. Pun 400 City of National City 2013- Present Yes Yes Yes Kenneth H. Pun 600 City of Placentia 2016 - Present Yes Yes Yes Kenneth H. Pun 620 City of Placerville 2008 - Present Yes Yes N/A Kenneth H. Pun 350 City of Pomona 2016 - Present Yes Yes Yes Kenneth H, Pun 650 21 Hfjsc.KOur CITY OF LA QUINTA Proposal to Perform Auditing Services Financial Audit Single Audit GFOA Certificate Engagement Partner Total Hours Municipalities Dates 2016-Present Yes Yes Yes Kenneth H. PunCity of Redding 500 City of Ridgecrest 2009 - Present Yes Yes Yes Kenneth H, Pun 300 City of San Bernardino 2015-Present Yes Yes N/A Kenneth H. Pun 3,000 City of Seal Beach 2017 - Present Yes Kenneth H, PunYesYes 410 City of Shatter 2017 - Present Yes Yes Yes Kenneth H. Pun 400 2016 - Present Yes Yes Kenneth H. PunCity of South Gate Yes 480 City of Stockton 2012 - Present Yes Yes N/A Kenneth H, Pun 2,500 Gold Coast Transit System 2015 - Present Yes Yes Yes Paul J. Kaymark 150 San Diego Metropolitan ! Transit 2005 - Present Yes Yes Yes Kenneth H. Pun 1,850 Shasta Regional T ransportation Agency i Ventura County RaiFroad 2015-Present Yes N/A N/A Kenneth H. Pun 200 2015-Present Yes N/A N/A Paul J. Kaymark 60 LLC Ventura County Transportation Commission 2015-Present Yes Yes Yes Kenneth H. Pun 400 Yes N/A N/A Paul J. Kaymark 90Altadena Library District 2015-Present Antelope Valley State Water Contractors Association Barstow Heights Community Services District Big Bear City Airport District Big Bear City Community Services District Bodega Bay Fire Protection District Casitas Municipal Water District California Domestic Water Company Coachella Valley Resource Conservation District Desert Recreation District Desert Recreation Foundation Diablo Water District East Orange County Water District El Toro Water District 2015 - Present Yes N/A N/A Paul J. Kaymark 40 2015-Present Yes N/A N/A Paul J. Kaymark 40 N/A Paul J. Kaymark 1202015-Present Yes N/A N/A N/A Paul J. Kaymark 2002015-Present Yes N/A Paul J. Kaymark 1402015-Present Yes N/A N/A Paul J. Kaymark 2302015-Present Yes N/A Yes N/A N/A Paul J. Kaymark 2002016-Present Paul J. Kaymark 502016 - Present Yes N/A N/A Yes N/A N/A Paul J. Kaymark 1502015 - Present N/A Paul J. Kaymark 402015 - Present Yes N/A N/A Paul J. Kaymark 3502015 - Present Yes N/A N/A N/A Paul J. Kaymark 1302015 - Present Yes N/A N/A Paul J. Kaymark 2702015-Present Yes Encinitas Ranch Golf Authority Fallbrook Healthcare District Yes N/A N/A Kenneth H. Pun 1002015-Present Kenneth H. Pun 75YesN/A N/A2008 - Present Golden Hills Community Services District N/A N/A Paul J. Kaymark 1802016-Present Yes 22til 'UN (.ROUP CITY OF LA QUINTA Proposal to Perform Auditing Services Single Audit GFOA Certificate Engagement Partner Total Hours Financial Audit Municipalities Dates Las Virgenes Municipal Water District Kenneth H. Pun 300YesN/A N/A2014 - Present Paul J. Kaymark 100YesN/A N/ALos Angeles Waterkeeper 2016-Present Kenneth H, Pun 240Marina Coast Water District 2012 - Present Yes N/A Yes Menlo Park Fire Protection District Kenneth H. PunYesYesYes 2402015-Present Newport Coast Elementary School Foundation N/A Kenneth H. Pun 202010 - Present Yes N/A North Count Fire Protection District N/A Paul J. Kaymark 1202015-Present Yes N/A N/A Paul J. Kaymark 60North County Dispatch JPA 2015 - Present North of the River Municipal Water District Orange County Coastkeeper 2015 - Present 2015 - Present Yes N/A N/A N/A Paul J. Kaymark 150Yes N/A Paul J. Kaymark 60YesN/A N/A Paul J. Kaymark 180Palmdale Water District 2015 - Present Yes N/A Paul J. Kaymark 1102015 - Present Yes N/A N/APalos Verdes Library District Port of Hueneme - Oxnard Harbor District Rancho Santa Fe Fire Protection District Riverside County Flood Control and Water Conservation District San Bernardino County Fire Protection District Kenneth H. Pun2015 - Present Yes N/A Yes 250 Paul J. Kaymark 1202015 - Present Yes N/A N/A 2015 - Present Yes N/A Yes Kenneth H. Pun 250 Paul J. Kaymark 2002016 - Present Yes N/A N/A San Diego Coastkeeper 2015 - Present Yes N/A N/A Paul J. Kaymark 75 San Dieguito Water District Audit Kenneth H, Pun 752014 - Present Yes N/A N/A San Elijo Joint Powers 2016 - Present Yes N/A N/A Kenneth H. Pun 146 Authority San Mateo Mosquito and Vector Control District Paul J. Kaymark 1302015 - Present Yes N/A N/A South Bay Regional Public Communications Authority Southwestern Community College District Stallion Springs Community Services District Tehacapi Valley Recreation & Park District The Farm Mutual Water Company Trabuco Canyon Water District Twentynine Palms Water District 2015 - Present Yes N/A N/A Paul J. Kaymark 100 Kenneth H. Pun 7202009 - Present Yes Yes N/A 2015 - Present Yes N/A N/A Paul J. Kaymark 220 2016 - Present Yes N/A N/A Paul J, Kaymark 50 2015 - Present Yes N/A N/A Paul J. Kaymark 170 2015-Present Yes N/A N/A Paul J. Kaymark 200 Paul J. Kaymark2016-Present Yes N/A N/A 160 Valley Sanitary District 2015-Present Yes N/A Yes Kenneth H, Pun 140 23 1’I!in(,rou[' CITY OF LA QUINTA Proposal to Perform Auditing Services Financial Audit Single Audit GFOA Certificate Engagement Partner Total Hours Municipalities Dates West County Agency 2015-Present Yes N/A N/A Paul J. Kaymark 55 West County Wastewater District N/A2015-Present Yes N/A Paul J. Kaymark 240 West Valley Mosquito And Vector Control District 2016-Present Yes N/A N/A Paul J. Kaymark 100 West Valley Water District 2015 - Present Paul J. KaymarkYesN/A N/A 320 Wilmington Cemetery District 2015 - Present Yes N/A N/A Paul J. Kaymark 65 Alliance Medical Center 2013 - Present Yes N/A N/A Kenneth H. Pun 300 Anderson Valley Health Clinic 2012 - Present Yes N/A N/A Kenneth H. Pun 200 Desert Hot Springs Health and Wellness Foundation 2013 - Present Yes N/A N/A Kenneth H. Pun 100 Family Health Centers of San 2009 - Present Yes Yes Yes Kenneth H. Pun 600 Industry Convalescent Hospital 2015 - Present Yes N/A N/A Kenneth H. Pun 230 Marin City Health and Wellness Center 2010-Present Yes Yes N/A Kenneth H. Pun 110 McCloud Healthcare Clinic 2013 - Present Yes Yes N/A Kenneth H. Pun 200 Mountain Valleys Health Centers Redwood Coast Medical Services Yes N/A2015-Present Yes Kenneth H. Pun 200 2008 - Present Yes Yes N/A Kenneth H. Pun 200 Ritter Center 2013 - Present Yes N/A N/A Kenneth H. Pun 100 Shingletown Medical Center 2013 - Present Yes Yes N/A Kenneth H. Pun 190 Tulare Community Health Clinic/Altura Centers United Health Centers of San Joaquin Valley 2008 - Present Yes Yes N/A Kenneth H. Pun 200 Yes Yes N/A Kenneth H. Pun 3002010-2016 24 i*fi\(,KOur CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION VI - SPECIFIC AUDIT APPROACH Scope of Work The City of La Quinta, Housing Authority, Finance Authority, and Successor Agency expect an audit opinion for each of their financial reports to fairly represent their financial position and to conform with generally accepted accounting principles (GAAP) and applicable laws and regulations. These audits are to be performed in accordance with all applicable and generally accepted auditing standards, including, but not limited to, the following: • Generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants. • The standards applicable to financial audits contained in the most current version of the Generally Accepted Government Auditing Standards (Yellow Book), issued by the Comptroller General of the United States. • The provisions of the Single Audit Act as amended in 1996. • The provisions of U.S. Office of Management and Budget (0MB) Uniform Guidance (formerly known as Circular A-133), Audits of State and Local Governments and Non-Profit Organizations and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. To accomplish this task, the Firm will: Perform an audit of all funds of the City. The audit will be conducted in accordance with Generally Accepted Government Auditing Standards, The CAFR will be in full compliance with all current GASB pronouncements. 3 Provide assistance in meeting the requirements for the Government Finance Officers Association (GFOA) "Certificate of Achievement for Excellence in Financial Reporting". Prepare a Single Audit Report which will include the following: Report on compliance and on internal control over financial reporting based on audit of fi nancial statements performed in accordance with Government Auditing Standards. Report on compliance with requirements applicable to each major program, internal control over compliance, and on the schedule of expenditures of federal awards in accordance with Uniform Guidance, "Audits of State and Local Governments", and the Single Audit Act of 1984 (Public Law 98-502). Schedule of Expenditures of Federal Awards, Notes to Schedule of Expenditures of Federal Awards. Schedule of Findings and Questioned Costs. Any other required schedules or reports. Prepare the Data Collection Form for Reporting on Audits of States, Local Governments, and Non- Profit Organizations. o o o o o o o Perform agreed-upon auditing procedures pertaining to the City's GANN Limit (Appropriations Limit) and render a letter annually to the City regarding compliance. 3 Prepare and submit the California State Controller's Cities Financial Transaction Report, Issue a separate "management letter" that includes recommendations for improvements on internal control, accounting procedures and other significant observations that are considered to be no reportable conditions. Management letters should be addressed to the City Manager, Provide assistance in the implementation of applicable GASB pronouncements not yet in effect as well as keep the City, Housing Authority, Finance Authority, and Successor Agency staff abreast of new developments affecting municipal finance and reporting, impact on accounting and reporting should the State of California impose state-mandated procedures, impacts of Government Accounting Standards Board disclosure requirements, required changes in grant procedures, and others. 3 25 i'tljsc.ROLir CITY OF LA QUINTA Proposal to Perform Auditing Services Ensure that the City is informed of each of the following; The auditor’s responsibility under generally accepted auditing standards Significant accounting policies and regulations Management judgments and accounting estimates Significant audit adjustments Other information in documents containing audited financial statements Disagreements with management Management consultation with other accountants Major issues discussed with management prior to retention Difficulties encountered in performing the audit o o o o o o o o o 3 3 Provide an additional 40 hours of consulting for research and assistance to the City staff concerning accounting and other technical matters each year. These hours are outside of the scope of work related to the audit services, and have been quoted as a separate line item in the cost schedule. The Firm will be available to meet each year with the City Council to present and discuss the financial statements, management letter, and other relevant subjects. The Firm will be available for consultation by phone on accounting and financial issues during the year at no extra cost. The Firm will also serve as auditor for certain addition projects and studies as may be deemed necessary by the City. The Firm will make an immediate written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the Finance Director, the City Manager, and the City Attorney. Supplemental reports, audits, or agreed-upon procedures must be added in a written agreement prior to commencing audit work. The Firm and the City will discuss and approved the scope and associated costs of these tasks. Reports to be Issued The following reports will be issued at the fiscal year’s financial statements completion, print, bound and delivered to the City no later than December 10*^ of each year: City CAFR Single Audit Report Management Letter 20 copies 10 copies 10 copies Working Paper Retention and Access to Working Papers The Firm will retain, at its own expense, all working papers and reports for a minimum of (7) seven years, unless the City notifies the Firm in writing of the need to extend the retention period. Upon request, the Firm will make working papers available to City of La Quinta or other governmental agencies included in the federal or state grant audits. The Firm will comply with reasonable requests from successor auditors and allow them to review working papers that relate to matters of continuing accounting significance. 26 CITY OF LA QUINTA Proposal to Perform Auditing Services Objectives of Our Services Our primary objective for the proposed audit is to examine the City’s financial statements and express our opinion on their fairness of presentation, in accordance with generally accepted accounting principles. Other objectives that will benefit the City include the following: • To offer beneficial observations and recommendations about policies and procedures for accounting and operating controls • To identify opportunities to make City operations more efficient and reduce costs • To perform the audit efficiently and effectively, so disruption to office operations is minimized • To provide continuing advisory services to help the City implement recommendations • To meet these objectives at no additional cost to the City The Engagement Team will perform the audit in accordance with the Firm’s quality-control procedures, which include following standard audit programs, careful planning, using industry-standardized software for auditing and internal control documentation, and welcoming an objective review of audit work. The Firm will supply portable computers to the onsite staff members. Our audit approach emphasizes careful planning, open communication, and proper assignment of responsibilities. This method ensures that audit requirements will be met with minimal disruption of the City’s daily operations, and that the audit will proceed efficiently with full understanding between the Engagement Team and the City. 27 l*(!j\(.KOur CITY OF LA QUINTA Proposal to Perform Auditing Services Proposed Segmentation of the Engagement and Timeline The audit will be performed in four phases: Initial Planning Meeting \ During a mutually acceptable time frame, normally May through June of each year. The Engagement Partner and Manager will meet with City’s Management to get up to speed with City policies and procedures, establish any specific requirements Management may have, identification of unique transactions, implementation of new GASB pronouncements, and develop the audit work plan for the engagement. Interim \ May commence July of each year. The Engagement Team—including the Engagement Partner—will assess accounting policies adopted by the City, obtain an understanding of the City and its operating environment, review internal controls on all significant transaction classes, perform walkthroughs and/or tests of internal control, perform preliminary analytical procedures, evaluate Single Audit compliance {if needed), identify any audit issues, and prepare confirmation correspondence. The Engagement Team and City Management will establish expectations including responsibilities and assignments for the year-end audit, and will hold a progress status meeting at the end of the Interim phase. Year-End \ May commence during the first week of September of each year. The Engagement Team—including the Engagement Partner—will conduct audit procedures on account balances in the general ledger, finish confirmation procedures, perform preliminary analytical procedures, search for unrecorded liabilities, perform substantive analytical review procedures, complete work on compliance with Federal Assistance, and conclude fieldwork. The Engagement Team and City Management will hold an exit conference at the end of the Year-End phase. Reporting j Draft copies of reports will be provided by November 20'^ of each year; Final reports and management letter will be provided no later than December 10*^ of each year. The Firm will review and prepare audit reports and perform quality control procedures in accordance with the Quality Control Standards issued by the AlCPA. We will also review reports for compliance with GFOA reporting guidelines at no additional cost. Any comments will be issued in a letter to Management. At the City’s request, the Engagement Partner and Manager will present the audit to the City’s governing body. The Firm will complete the audit fieldwork and issue all reports within the established timeframe, assuming no internal City circumstances delay the audit. Level of Staff and Number of Hours to be Assigned to Each Proposed Segment of the Engagement The Pun Group, LLP understands that the City is not only looking to employ our auditing services, but is also seeking to receive value within that professional relationship. We believe that our value is derived from our in-depth knowledge, experience, and commitment that our auditing firm employs. We stress and emphasize “employ”, because all of the knowledge and expertise listed on paper will not benefit you unless it is applied. That is why we have developed a plan that we feel will accomplish the objectives of the City and your particular needs. Our Firm will utilize the information that you have shared with us and our experience from our previous audits of this nature, from various government entities and cities to develop an effective plan for all major areas. Example of Major Areas (not limited to): • Audit of the City’s financial statements and the related notes to financial statements • Single Audit procedures and required reporting (if applicable) • Agreed-upon procedures on Appropriations Limit calculation • Communication with those charged with governance • Internal Control and Management Letters (if applicable) 28 CITY OF LA QUINTA Proposal to Perform Auditing Services Total Hours; Staff Classification Perform ing Work Estimated Hours Annually 80Partners Managers 97 Supervisory 96 119Senior Accountants Staff Accountants 141 10Clerical Total Annual Hours 543 Hours by Audit Phase hlours 54Phase I - Planning Phase II - Interim 163 190Phase III - Year End 136Phase IV- Reporting 543Total Annual Hours: Sample Size and the Extent to Which Statistical Sampling is to be Used in this Engagement In our audit approach, statistical sampling is used in conjunction with our skilled judgment and knowledge of each situation. The population size and assurance level needed from any given test wilt determine the sample size used in our testing. Type and Extent of Analytical Procedures to be Used in the Engagement We use analytical procedures during the interim phase to set up expectations for the year-to-date results and balances and compare them with budgeted and prior-year amounts. This allows us to forecast year-end amounts, reducing the workload during the year-end phase and allowing us to focus on areas of concern. We also use trend and ratio analysis to identify any uncertain or unusual events. In order to perform these analysis, our firm performs a survey of cities and counties and develops benchmarks on certain key financial indicators, such as cost of services to tax revenues ratios, average general fund balance, capital assets, debt per capital, general fund unassigned fund balance to total general fund expenditures, etc. Our staff members have previous experience in successfully implanting analytical procedures to the City’s benefit. Method Used to Gain and Document an Understanding of the City of La Quinta’s internal Control Structure Audit risk assessment will be established by an internal control review, combined with the Engagement Team’s understanding of the City’s operations and accounting software. Using the Committee of Sponsoring Organizations (COSO) Framework, staff members will evaluate the City’s processes and identify any control deficiencies. These diagnostic review procedures allow the Engagement Team to evaluate the City’s systems and controls and to provide constructive feedback to City Management. The Engagement Team will perform a walkthrough of the City’s accounting systems, including processes for financial reporting, revenue recognition and cash receipts, purchasing/contract management and cash disbursements, and payroll and related liabilities, etc. Auditors will document the process with a flowchart or narrative summary. 29 l'fj\(.ROur CITY OF LA QUINTA Proposal to Perform Auditing Services Determination of Laws and Regulations that Will be Subject to Audit Test Work The Firm stays continually up to date with audit requirements—including new regulations, compliance supplements, state guidelines, and pertinent contracts—to ensure that we conduct audits in accordance with applicable laws and regulations. We test transactions for compliance with the Single Audit Act, California Government Code, GANN Appropriations Limit, provisions of applicable grant guidelines, requirements of local measures, etc. For example, the Single Audit Act requires that we determine which grants to include in our audit and select transactions from those grants for detailed testing. While most transactions are tested as part of the Interim phase, we cannot determine which grants to test for the Single Audit until the Year-End phase of audit. Our compliance audits of cash, investments, debt covenants, and other areas are performed in accordance with the California Government code, which has many provisions and regulations covering investments. Selection of Drawing Audit Samples for Purposes of Tests of Compliance To test compliance, we follow the AlCPA’s Audit Sampling Considerations of Uniform Guidance Compliance Audits. We will select an appropriate sample size based on our professional judgment and knowledge. Any deviations from control and compliance requirements will be documented. Location of the Office in Which the Audit Team Will be Based and Its Engagement Team Experience Our Palm Desert office, located at 74998 Country Club Drive, Suite 220, Palm Desert, California 92260, in conjunction with our Orange County office will perform the requested services for the City. However, we may assign additional staff from our San Diego (California) office to the engagement, at no additional cost to the City. The personnel assigned to this engagement are fully qualified to perform an efficient audit of the City, and their extensive experience will be critical to the audit process. Our professionals are familiar with the complexities of governmental accounting, auditing, and financial reporting, including but not limited to, all GASB pronouncements, the Single Audit Act, Uniform Guidance (formerly known as 0MB Circular A-133), and fund operations. Their resumes can be found on pages 11 through 18 of this proposal. Sample of Type of Management Letter Issued by The Firm A sample of a Management Letter issued by the Firm can be found at the Appendices section of this proposal. GASB Implementation Specialist Gary M. Caporicci, the Firm’s GASB Implementation Specialist, is an appointed member to the State Retirement Advisory Committee by the State Controller and has tremendous expertise in assisting clients with the implementation of GASB pronouncements. For more than 40 years, Mr. Caporicci has successfully provided professional auditing, accounting, financial reporting and management advisory/consulting services to a broad spectrum of governmental entities. Caporicci is a leader in the new GASB standards going into effect in the coming years. He will actively assist the City during the process of implementation and compliance related to new accounting standards. 30 KiNc.ROur CITY OF LA QUINTA Proposal to Perform Auditing Services Client Training Seminar Every year, the Firm hosts a conference to update governmental clients on new technical accounting and financial issues. The day-long session—held in Danville, Clovis and Orange County—qualifies for eight hours of CPE with the California Board of Accountancy. Participants of last year’s training seminar received a high-level examination of numerous technical issues, including the following: Survey of Cities and Counties GASB Updates Lookback on implementation of GASB 68 and 71 Single Audit Update - Are you ready for the Uniform Guidance new Audit Requirements? The importance of fiscal policies The Latest and Greatest on Pensions, OPEB, Bankruptcies, Local Initiatives, and the Future of the Defined Benefit Plan GASB 74 and 75 - the New OPEB Standards 3 3 3 3 Importantly, all of our clients are invited to attend the Pun Group, LLP client training seminar FREE OF CHARGE. 31 l’U\(.KOur CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION VII PROBLEMS IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT While we do not expect any problems with the audit, we will carefully investigate and monitor the following relevant accounting issues: Investments: • Compliance with GASB 31 and GASB 34 • Authorization and approval process for City investments • Controls to assure City’s compliance with investment limitations and types of specific investments • Monitoring by the City of its investments Financial Reporting: • CAFR compliance with current reporting and disclosure requirements issued by GASB • CAFR eligibility for financial reporting conformance awards issued by GFOA • Compliance with the various GASBs in effect, especially the implementation of GASB 68 and 71 related to pension accounting • Compliance with infrastructure obligations and regulatory provisions Internal Control Structure: • City’s internal control functions and compliance with proper internal control philosophies • Computer-system processes and controls, and adequacy of the control environment Over the period of the engagement, several new GASB pronouncements will become effective. The Engagement Team will pay specific attention to the following new and upcoming pronouncements, and any others that become effective during the proposal period, in order to determine proper implementation procedures; GASB 72 - Fair Value Measurement and Application GASB 73 - Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 GASB 74 - Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans GASB 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions GASB 76 - The Hierarchy of Generally Accepted Account Principles for State and Local Governments GASB 77 - Tax Abatement Disclosures GASB 78 - Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans GASB 79 - Certain External Investment Pools and Pool Participants GASB 80 - Blending Requirements for Certain Component Units—an amendment of GASB Statement 14 GASB 81 - Irrevocable Split-Interest Agreements GASB 82 - Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73 GASB 83 - Certain Asset Retirement Obligations GASB 84 - Fiduciary Activities 32 CITY OF LA QUINTA Proposal to Perform Auditing Services SECTION VIII - FINAL CONSIDERATIONS Benefits of Choosing The Pun Group, LLP The Pun Group, LLP is recognized for its professionalism, integrity, and providing clients with effective resolutions for their unique circumstances and issues. Our Firm prides itself on being able to provide personalized client services, and with that sentiment In mind, we have carefully chosen our engagement teams. The Pun Group’s main objective is always to provide the City with solutions and directions, led by highly experienced and capable partners who can successfully implement the work and produce the results you expect. This philosophy and mindset allows us to provide a superior level of service. We trust that this proposal has given you the Information you need about the Firm, the Engagement Team members, overall audit approach, cost-saving measures, and audit fees. We are committed to exceeding your expectations, and we look fonvard to bringing our experience and expertise to the City of La Quinta and providing you with the excellent level of service that you expect and deserve. Thank You Thank you for giving us the opportunity to introduce the Firm and submit our qualifications to provide you with audit services. Please direct inquiries to: Mr. Kenneth H. Pun, CPA, CGMA Managing Partner 74998 Country Club Drive, Suite 220 Palm Desert, California 92260 ken.pun@pungroup.com (760) 459-8177 Sincerely, The Pun Group, LLP Certified Public Accountants and Business Advisors 33 ] t APPENDICES "■'1 35 r I li N This page intentionally left blank. 36 CITY OF LA QUINTA Proposal to Perform Auditing Services Proof of Insurance DATE (MhVDOnrYYY)ACORiy CERTIFICATE OF LIABILITY INSURANCE 3/8/2016 -mis 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: It the certiTtcete holder is en ADDITIONAL INSURED, the pohcy(ies| muti be eiKiorsed. It SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endofsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such eodorsementlsl. ddnTAif NAME, PHONE^£.Na.£xn. ADDfiEss. connie@wgbib com Connie Jones 714-505-7000 PRODUCBI Wood Gutmann & Bogart 15901 Red Hill Ave., Suite 100 Tustin CA 92780 FAX 714-573-1770. lA/C.NOl. INSURER(S}AFFOROINO COVERAGE INSURER A TRAVELERS CAS INS CO OF AMER INSURER B Travelers Property Casualty Co of A iNsuRERC Argonaut Insurance Company TRAVELERS CAS INS CO OF AMERINSURER D NAIC* 19046 25674PUN&M-1INSURED The Pun Group, LLP 200 East Sandpointe Avenue, Suite 600 Santa Ana CA 92707 19046 MSURER E CERTIFICATE NUMBER: 351569536COVERAGES REVlStON NUMBER: THIS IS TO CERTIFY THAT THE POLIOES Of INSURANCE LISTED BELOW HAVE SEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED NOTWITHSTANDING ANY REQUIREMENT. TERM OR CONCXTtON OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTinCATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POUGES DESCRIBED HEREIN IS SUBJECT TO AU THE TERMS EXCLUSIONS AND CONDITIONS Of SUCH POUCIES UMTS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS AOOLSUBA ISO WVP iNsa POUCYEFF POLICY EXP IWMMfYYYYI IMMDOnfrYYI 3'1'2016 3/1/2017 TYPE OF INSURANCE LIMITSPOLCY NUMBERLIB A X COMMERCIAL GBIERAL LIABILITY 6e07GS92120-16 EACH OCCURRENCE S2.000.000 OAMAGETeSEWTfD n . PR£¥?S6.S.IE*9KU™6!^1 . *300,000 MED EXP (Anr 00* AAfAOA) PB5SONAL S AOV INJURY GEI«RAl AGGREGATE SS.OOO S2.000.000 S4.000.000 CLAIMS-MADE X . OCCUR PRODUCTS . COSmOPAGG S4.000,000 OENTL AGGREGATE LIMIT APPLIES PER PRO JECTX POLICY LOC sOTHER CBLOHSBSHBLETrMtT (Ea ACOdAntl aOCXLY INJURY S BODILY INJURY (P» Accidanll S PhO^ElHV dMaaSE [Pei acodert; * s 0 AUTOMOBILE LIABH.ITY 3'1.'2016 3/1/2017 1.000.000BA-8Ge7e703 AMY AUTO X HIRED AUTOS gCHgLAED - NONOWeCO * AUTOS s UMBRS-LALlAe OCCUR EACH OCCURRENCE S EXCESS LIAB CLAIMS-MADE AGGREGATE S PEP RETENtiJ.t S B WORKERS COMF>ENSATION AND EMPLOYERS LtABIUTY ANY PROPfilETO«»=ARTNe«/eXECUTIVE CFFiCERiMEMBER EXCLUDED? (Mendttpiy m NHJ F lee deecnbe lAidei 'DESCRIRTiWi OF OPERATIONS UB4548T41-2-16 3/1/2018 3/1/2017 * , STATUTE . . ER. E L EACH ACCICCNT Y/N SI.000.000 EL DISEASE EAEMPLOY^ Sl.000,000 EL CX5EASE-POLICY LIMIT S1.000.000 □NIA C E40 Ratio 12/2S/11 Pending 3'1'2016 3/1/2017 3.000.000 agg 1.000000 DESCRIPTION Of OPERATIONS / LOCATONS / VSnCLES lACORD 101. AOdmonei RenaiKt ScneOule. may be (BechM If leoi* v*ce i« required) Proof Of Insurance Only 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 POLICY PROVISIONS.Proof Of Insurance Only AUTHORiZSI REPRESEN1ATIVE i>©:izr 01988-2014 ACORO CORPORATION. All rights reserved. ACORO 25 (2014A)1)The ACORD name and logo are registered marks of ACORD 37HfiSf.KOUl’ CITY OF LA QUINTA Proposal to Perform Auditing Services Management Letter Issued by The Firm - Sample City of Stockton Stockton. California Report on Internal Control Related Matters Identified in the Audit For the Year Ended June 30, 2016 11 If. PLINGKOLIP U t Mni>OK' 38 FI!i\<.roui' CITY OF LA QUINTA Proposal to Perform Auditing Services Citv of Stockton I'able ot't 'oiiteiit Report on Internal Control Matters 1 Findings: Material \\ caknesses: Findii^ 2016-01 Internal Conirols 0Finding 2016-02 Accounting Manual ... 4 Finding 2016-03 - .-Vccounting Sv siem 6 SigniHcant Deririencies: Finding 2016-04 - .Abilin' to Retain Qualified AccountinaPersonnel 8 39 WlN(,ROlll' CITY OF LA QUINTA Proposal to Perform Auditing Services I Vi THE PUN GROUP ACCOUNTANTS & ADVISORS I lonorable Mayor and Members of die Cit>' Counci 1 of the City of Stockton Stockton. California In planning and performing our audit of the financial statements of the Cit>' of Stock-Ton. Calif<^TUAfltig*‘City ’) as of and for the year ended .lune 30. 2016. in accordance with auditing standards goicrally accept^ ifr^^^'iiited Stales of .'\merica. \vc considered tlie City 's internal ccaitrol over financial repeating (internal contrdf )'i^a basis for designing audit procedures that are appropriate in tlie ciraimstances for the purpose of expressing c^ir opinions rti tlie financial statements, but not for the purpose of e^q)ressing an opinion on the eflectiveness (rf^^e City's internal ccatirol. Accordingly, we do not express an opinion on the effectiveness of tlie City's inteniaNprilrol.'i Our consideration of internal control was for the limited purpS^^'described infth*.prcceding paragraph and was not designed to identify all deficiencies in internal control thatjnighbbe matei^Sp-Y^Tnesses or significant deficiencies and therefore material wcakne.s.ses or si^iific^it deficiep^t^ exist thafy^Mre not identified. However, as discussed below, vve identified certain deficiencies in intemal;^^Bi^ol that we c^haid'er to be material weaknesses and odier deficiencies that we consider to be significant defi^nciH-’ of a control does not allow management orA deficiency in interna} control exists wlien ’^ design or^.o employees, in the nonniil course of ffirb^hng their .^d^igned functions, to prevent or detect imd correct, misstatements cm a timely basis. A materic{ljk eakne^ ^-aydeficiency or a combination of deficiencies in internal control, such that there is a reasonable possibility that a'^nwerial misstatement of the entilv's financial statements will not be prevented, or detected and corrected, im .# timely basis. A significant deficiency is a deficiency , or a combination of deficiencies, in inlenial cental thai is less severe than a material weakness, yet important enough to merit attention by those charged with govemai^Hi^/' The City's written responses included ioif{Hs?6port have not been subjected to the audit procedures applied in the audit of the financial statements and. accoidjii^ . we express no opinion on them. Iliis communication is intenrkib^otely for the inlbnnalitm and use of management, audit committee. City Council, others within the organi^uH^rh< and agencies and pa.ss-lhrough entities requiring compliance with generally accepted government aud^liDgl^ standards, and is not intended to be and should not be used by anyone other than these specified partiej^’; / Santa .^kna, California IXicember 30. 2016 200 hajit .Sandpointe Avenue, .Suite 600, .S<inta Ana, California 92707 Tch 9+9-777-8800 ‘Toll Tree; 855-276-4272 • Fax: 9+9-777-8850 %v\vw.piingrou p.com 40 HIIis<.KOur CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Report on IntemnI C ontrol Kelsitod Matters Identified in the Audit For the Y ear Kiided June 30, 2016 Finding 2016-01 InUrniil ('nntrols (Yiterla; Management is responsible for designing, implementing, and maintaining appropriate internal control over financi reporting and compliance. tO¨ i. Internal control is defined as a process implemented and monitored b\' the City Council, management aiK^ Either personnel. The Internal Control System should be designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • Reliability of financial reporting; • Lfiectiveness and efficiency of operations; and • Compliance with applicable laws and regulations. \ Tlie Internal Control Framework would include eslablisliing or enliancing guidance s Idnpwing areas: Control environment sets the tone of an oiganization. iftfluencing the cofttft^ consciousness of its people. It is die foundation for all oUier components of internal control: providing d|»Cffrftne and structure. Risk ossessmeni is the entity 's identification aod^al^fls of relc:Vdfft.jfsks to achievement of its objectives, forming a basis for determining how the risk.s Kfiottfd be managed^ Control ucth’ities are the policies and proc^ufvsf (liat help enSwt tliat management directives arc carried out. Information anJ communication sysletas support the iAanfificilion. capture, and exchange of inlormation in a form and time frame that emable pe^le todarrv out tl^Hr rOKponsibilitics. Monitoring is a process that a.sses#fes Ok quality- ofj,jflqpal control performance over time. 2 41 Kis<.ROur CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton RopoiT on Internal C ontro] Related Matters Identifled in the Audit (C ontinued) For the \ ear Knded June 30,2016 Finding 2016-Ul Internal C'oiitrols (Conlinued) Condition: I1ie Cit>' is in the process of upgrading its administrative and financial services b>' adding qualified personnel: hiring consultants with certain eNpertise: contracting with professional accountants to provide both internal and extemdl auditing: and, making appropnatc and informed decisions. As part of the upgrading process, the Citv' has cstablichbd a document titled “Auditing Findings Response Tracking Report” (the “Report"), The Repoil displays findings identified by City management. State Gas Tax Audit. State Controller s Ofnee (SCO) Audits, prior e.xtemal audit firm. County Grand Jurv Report and the City's Internal .Auditor. The findings in the latest Report totaled 323 items as of December 2016 organized in the following risk categories: TotalRisk Category Code Description Open Closed Closedpen 46‘’o 54®oProcessesA 100°,O 0°B ('apilal Pnigram Operations Service Dehverv Risk Management Managcmcttf Organbation and Stalling .Asset Management Internal Controb Fundrig and Hoonomies Human Resources Governance Technology Con^ihancc Procurement .Acuouriing and F inarunal Reportrg Fraud Public Safely O 10()°o 0°c o 67°o 33°oD 67°o .33«bF. 43°b 57°oF 63°o 38°oG 33°o 67°oH 5 3 63% 100°b 38®o 0°o I ->0J 1^23°b 77°o7K 29 3 91°o 9°oL 6 9 40°o 60°oM 26 81°b 19°oN6 26 47 36°o 64°of) 0 0 0O. o 0°op 0°o 100°o00 Audiffllidings, Tutul Percentage 156 167 52%100%48% Cause: The City does-nol have detailed policies and procedures for its accounting systems that emphasize (he need for proper revievV'and approval for certain transactions that are susceptible to fraud. Effect; Tlie City mast establish an effective system of internal controls that would provide reasonable assurance regarding aeliievemcnl of the City's objeetives. An effective system of internal control reduces, to an acceptable level, the risk of not acliicving the City *s objective and may relate to all three objectives presented above. 3 42 l*i!lS(,KOUI’ CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Report on lntei*ns)l Control Kehtted Matters Identified in the Audit (Continued) For the \'ear Kiided June 3U, 2016 Keconimendalion: Wc recommend the Citv’ work closely with the Internal Auditors to design, implement and maintain its system of internal controls using the Internal Control Framework as outline above. Management \ iew and Corrective Action Plan; I hc City is in agreement with tliis finding and recommendation. Ihe Cit>' Manager's Ottice asked the Cifr .Vuditor's Otiice to conduct a more robust and improved lisk assessment process. It was identified by new management as one of the Citv ’s 37 Strategic Initiatives. The Cit>' has since contracted out the Intcinal .\uditor role to Moss .Adams LLP. a reputable CPA firm, to conduct a full risk assessment and several reviews of the City's internal controls. The internal auditors began an internal audit plan in November 2013. This internal audit fda& w» originally to take place over a minimum 18-24 month period and is continuing to take place into the current liscal year. The result will be an evaluation and documentation of the Cit>’'s design of internal controls, further rtcommendations to change internal controls, evaluation of new or revised policies and procedures, and traioiog^or senior management, Cit>' Council and staff on internal controls. ITiat body of woii has bepn prioritized hascd'uiL)hoSe business cycles that arc of highest risk to the City for material misstatement to finaKiJl reporting. Ac fi nal result of the work will be implementation of new internal eontrols. new standards of^peratigre. new and subsequent testing to ensure they arc working as planned. These actions should rcmcdwttwtfyfindina.w^tonjhistrativc Services has categorized all findings and is prioritizing action items with the greate^uwet on the Ci&'s mtcmal control structure to mitigate those areas of liiglicst risk. As indicated in the above tab ^iglffficani progress in implementing effective internal controls and closed .some of the findings. t 43 l’flN(.ROUI’ CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Rcpoit on Intemsil Control Rolsited Matters Identified in the Audit (Continued) For tlie ^ ear Kiided June 30.2016 Finding 2016-02 AccouiUing Manuiil Criteria: An Accounting Manual would aid the Administralivc Services Department and the Cily in providing training for accounting personnel, communicating and providing a source of reference to approved policies, and mainlaini^^ consistenev of recording iinancial transactions. During the performance of our audit for the year ended June 30. 2016, we noted that the City does not have an updated policies and procedures manual (Accounting Manual) which would define personnel roles and responsibilities, described appropriate procedures for recording significant U-ansactions in finance and accounting systems, define and set procedures for management oversight and review, establish key internal controls, and ensure accounting and reporting requirements established by G.A.AI’ arc followed. Condition: ('ause: Tlie Cit>- has been in a two year long process of restructuring its management icani and a significant amount of time and efTort was required of the new team in preparing the Chapter 9 filings and catching up on the long overdue audits. 'I'hcrcibrc, ('it>' management has not had sulllcicnt timeto fbeps on the development of a comprehensive accounting manual and it has not taken the highest priority. the ^il F^fTecl: Without the .Accounting Manual, personnel responsible for understanding of their role and respon.sihifilres or the accoonsing standards applicable to their function In addition, the absence of standardized procedures has and wHI crealo-inBCDcienl and inconsistent pnicessing of transactions. .Absent clear guidance, delays in iinancial reporting occur ^stafl^ are unaware of where to find the answers. ily work and transactions do not have a clear VKpcommendalion; Wc recommend that the (.'ity develop a comprehensive .Accounting Manual that would set the guidelines for recording significant transactions in the general ledger. In addition. Management should consider developing an .Accounting Manual which includes at a minimueu • Descriptions of functitms each position performs * Specific duties and responsibilities (desk procedures) • Minimum r^qived qualifications or standards • Council.Alanagement approved policies relating to specific transactions • Procedures for processing of specific financial activities • monitoring and review controls 5 44 f^ClNtiROUP CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Report on Intemnl f ontrol Kehitod Matters Identified in the Audit (C ontinued) For the ^'ear Knded June 30, 2016 Finding 2016-02 Aecdunling Manual (('ontiiiued) Management Mew and t'orrective Action Plan; Ihe City agrees with the finding and recommendation. Ihe Cit>’ also agrees that there has not been sufficient time or prioriU given developing the manual: althoi^h it was not due to the lack of understanding that the Cit>' needed to develop one. ITic CiU’ needed to focus on delivering accurate and timely financial reporting before it could foctw on developing an accounting manual. In some instances, the Cit>' has documented its accounting processes but has not finished due to w^M; bankruptcy and the City's financial records and associated audits. With the largest burden on the .Accounting Disision for the implementation of the Flan of .\djustment and the new G.ASB Statements 68 and 71 on Pension .Accounting, management and staff turned inward towards operational impro\cmcnls. reviews of policies and procedures, and the establishment of belter internal controls. on the Now that the Citt’ has exited bankruptcy and is in the process of fiilly staffing the .Accouftting Division, the .Accounting Division plans to begin drafting the .Accounting Manual and vvork with the Citv''s iniemai auditors to review and complete this project in 2017. Ihc Cit>- will consider this rccooimcndation in connection with the work it is currently performing as a result of the Risk .Assessment and Intcmal^Confrol Review 1^' Moss .Adams. The Citv' will work on the first draff of the .Accounting Manual in conjuncti revisioas to policies and jiroccdurcs which the City Accounting Manual. .'ork on unprovements to the internal controls andti hen use for tlic development of a formal Comprehensive o 45 i’HlSt.KOUr CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Report on IntemnI C ontroi Related Matters Identifled in the Audit (Continued) For the Y ear Fnded June 30, 2016 Finding 2016-03 Accounting System Oiteria; Reliable and updated financial systems are critical in producing accurate and timely financial statements. ('oiiditioii: We evaluated the financial systems employed by the City in managing its overall fiscal operatioti&y including processing of billings and payments, preparation of financial reports, budgets, and analysis of trends. These systems form the basis for all financial reporting that is critical to the decision making process, and ultimately, the basis for tlic financial stability of the City. We found that the s> stems employed by the City arc outdated and are not adequate nor are appropriate for a City of this size and cumpfc.vily. Specific deficiencies of the system employed include, but are not limited to: Inability to automatically post activity from outsourced operations such a$ bankipg. loan .servicer, paricing. paiiving tickets, library and other au.xiliary systems. There is a sufficiently high volume of manuall3|^pos^J#ansacti^i^W.^ord daily financial activities due to the lack of integration. Manual entries are tim^consumii^^^ject to significant risk of error, and eaase delays in monthly and year end close process. N. r 1, 2. needed^Comple.x proce.sses for the retrieval of daU that is reports used for budgeting and limited financial reporting contain unresolved errors in the data. a dav-to-dav basis. In addition,3. certain kev TTie library’s accounting hillir^ and AR system is iwit integrated into the City's GI.. The City in only able to reconcile the two .systems on an annual Insla due to the time it consumes. 4 ihe result of these overall system deficiencies is a gigniticanl degradation in efficiency of slafi. who must utilize manual processes or other sofhvarc products Tor ihe recording and repoiiing of routine financial activity, such as billings, personnel and payroll data, inventories, capital asset, depreciation, budgeting, etc. Cause; Tlio City has a twenty plas yeai ited accounting system that needs to be updated. Accounting records and historical fir^^i^^condilions of the ('ity. Hie lack of integration of the ('ily's subledger can cause the general ledser to be mis^t^. Kfrecl; I data cannot be easily accessed by management and others needed in analysis of current Rrco uuncBMi Ihe City R strongly ui^ed to begin the process of review of other softwaix; applications that are specifically designed for municipal entities and have the full hinclionality needed for a City of this size and complexity. Hiese other software applications should be evaluated in liglit of their genera! acceptance in cities of tliis nature and size, the level of internal user support required to operate tire software, the training required for users and the cost. 7 46 HIIin(.roup CITY OF LA QUINTA Proposal to Perform Auditing Services City of Stockton Repoi-t on Infomnl C ontrol Rchited Matters Identified in the Audit (Continued) Fur the ^'ear Knded June 3U, 2(116 Management N'iew and ('orrecli\e Action Plan: Management concurs that we need to replace our accounting system and review other software platforms and applications that can support the City based on its size and complexity'. I'hc City also agrees that it is problematic to retrieve data from the system in a variety' of formats due to the age and limited capabilities of the current fi nancijjl^^ system. The Citv Council approved an RiT on Januaty' 12, 2016. to obtain the scivices of an Enterprise Resource Ptaittxing (“ERP”) Consultant for the needs analysis. {.)n Januarv' 24. 2017. Council approved moving forward with a different ERR consultant to assist the City- in selection and implementation of a new financial system and also approv*ed 11 new Citv positions to serve as the core project team. A software vendor contract is anticipated to be awarded by December 2017. In the meantime, the City upgraded the IITE system to version 9.3 in .Vugust 2016 and began Ih^process of evaluating potential improvements to processes and procedures made possible by this upgrade. % itionallv fca-siblc at this timeWith an outdated fi nancial system, it is neither cost effective nor technologically and to achieve full automation within the subsidiarv' sv stems or sub-ledgers for library services and loans receivable and parking tickets. The City’s current financial system does not provide the capability to automatically post every single transaction carried on in the subsidiarv ledgers or from other noiiintegratcd subsvsiems as it works in a batch enviroraneni However, the City 's utility billing. aeeoUttU reeeivable and cash receipts subsidiarv ledger modules arc integrated with the City''8 general ledger tlirough automated system iiueifaces. Tltcse subsidiarv' ledgers account for the largest share of City revenues. We agree reconciling the various systems is difficult and linff-consuming. and that more efficient operations could be achieved with a new or fully upgraded financial system. Moss .Adams also identified the inlerfaee of key data in il.s Report on General Computer Controls dated June 20 Management also concurs that regular rcconciliatiun is an indusirv best practice that the City will continue to pursue and implement as an o|>ei'aliunal standard. Dalil the City operationalises a new fi nancial system, if will continue to operate in a partially manual mode without needed modem business analytics, processes or tools. 8 47 I’I!is(.koui' CITY OF LA QUINTA Proposal to Perform Auditing Services Cit\' of Stockton Repoi't on IntcmnI C ontrol Rdnted Mattel's identified in the Audit (Continued) For the Year Rnded June 3U, 2i)16 Finding 2016-0-1 Ability to Retain Qualilled Accounting Personnel Criteria: In order to have effective accounting systems and internal controls, the City should retain qualified accounting personnel who can initiate, record and process the various transactional flows of the City'. Having qualified account!^ personnel arc a key dement to running a successful Accounting Department. C'ondition: During the fiscal year ended June 30. 2016. the City has lust significant accounting personnel wilhi|| the department. The City's accounting personnel decreased more than 50®o compared to (he same year ended June 30. 2015. and the City has not been able to fill qualified personnel to desire positions. \Cau.so:. V Ihc City experienced high turnover and understaffing during and subsequent to Effect: Bn oe IIncfrcctivc internal control to ihc financial slatemcpia accounting personnel. TIte laek of the funetionai acCpupfing departnlCDt for the City ean eause material weakness to the fi nancial statements in the future. caused by poor segregation of duties and laek of Recommendation:r A. onntd for vu'.Accounting Department, and also take necessary actionsWe recommend that the City hire qualified to retain its personnel. e»Nfaiiagement A'iew and Corrective Action Plan; Management agrees that qualified aecoutulng personnel arc essential to maintaining effective internal controls and accuiate financial statements. Tlic City completed a full evaluation and revision of the .Accountant job description that incorporates more stringent minimum requirements for accounting educational coursework to attract a more focused and experienced professional workftjrcc. Hie City also revised the test for the .Accountant job classification with the same financial and analytical fiacu*. .A recent recruitment resulted in the hiring of five entry-level accountants who will begin employment mid-fiscal year, fine vacancy remains with Ihc rcciuilmcnl cxjxictcd to be completed in spring 2017. 9 Q 48 I’fiNt.ROur EkPERIENG UT IVj i i ir PUN GROUP74998 Country Club Drive, Suite 220, Palm Desert, California 92260 Phone: (760) 459-8177 | Fax: (760) 459-8174 | www.pungroup.com > OLINIASl^C^ .M)VliOK>