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Vavrinek, Trine, Day & Co., LLP - Proposalf I I i 1 4 t 4 i \ Submitted by: Phillip White, Partner 4 Vavrinek, Trine, Day & Co., LLP 19340 Jesse Ln., Suite 260 Riverside. CA 92508/ P 951.367.3000 E pwhite@vtdcpa.com L Table of Contents Transmittal Letter a Section 1 - Independence and License to Practice 1. Independent Standards of the GAO Affirmation 2. Licensed Certified Public Accountant Affirmation 2 2 Section 2 ~ Firm Qualifications and Experience 1. Firm’s Background 2. Firm’s Qualifications 3. Government Finance Officers Association (GFOA) 4. Commitment to Diversity 5. Record of Substandard Audit Work 4 5 5 6 6 Section 3 - Partner. Supervisory and Staff Qualifications 1. Engagement Team 2. Organizational Resumes 3. Commitment to Consistent and Quality Staff and Backup Plan 8 9 15 Section 4 - Similar Engagements 1. Our Experience 2. Similar Engagements 17 18 Section 5 - Specific Audit Approach 1. Project Management 2. Complete Work Plan/Project Description 3. Proposed Audit Plan 4. Use of Computer Assisted Auditing Techniques Software 5. Engagement Timeline 23 23 24 29 29 Section 6 - identification of Anticipated Potential Audit Problems 1. Identification of Potential Audit Issues 31 Section 7 - Cost Fee Proposal 1. Cost Fee Proposal (All Inclusive Maximum Price) 2. Cost Fee Detail by Area 33 34 Section 8 - Appendices A. Peer Review Report B. Exceptions to Professional Service Agreement C. Certificate of Insurance 39 40 41 VAVRINEK«TRtNE, DAY ^ CO., LLP Certified Public Accountants VALUE THE March 1, 2017 Ms. Karla Campos Finance Director/Treasurer City of La Quinta 78495 Calle Tampico La Quinta, CA 92253 Dear Ms. Campos We are pleased to respond to the Request for Proposal to provide professional auditing services for the City of La Quinta (City). Vavrinek, Trine, Day & Co., LLP (VTD) is a leading provider of auditing services to cities, counties and special districts. We feel that Vavrinek, Trine, Day & Co., LLP is the best selection for the City. This proposal demonstrates our capability and commitment to serve. As a leader in our industry VTD ranks in the top 100 CPA Firms in the nation. VTD is a member of the American Institute of Certified Public Accountants (AlCPA); participates in the AICPA’s Major Firms Group; is a member of the AICPA’s Governmental Audit Quality Center (GAQC) and is registered with the Public Companies Accounting Oversight Board. We are also active members in the Government Finance Officers Association (GFOA) and several of our partners serve on the GFOA CAFR Special Review Committee. We are pleased to present our proposal to provide our services to the City of La Quinta The audit team assigned to perform the audit are experienced CPA’s who have provided audit services to similar agencies. Our practice is dedicated to serving governmental agencies year round. Our team has extensive and specific continuing professional education (CPE) that is specific to governmental audits. Our team has attended national training sessions lead by the AICPA, 0MB, GAO, and OIG relating to all of governmental auditing. Our team has provided significant hours of “one on one” assistance relating to the implementation of GASB 68, Accounting and Financial Reporting for Pensionssind other accounting issues. In addition to the individualized services provided to our clients VTD has provided several training sessions to industry groups regarding current GASB pronouncements and single audit reporting requirements. areas 0 o o o Our success has been driven by utilizing staff that is experienced and well trained in governmental operations. We recognize that communication, expertise and audit approach are important factors to deliver an effective audit. We have addressed each factor within our response. 19340 Jesse Lane. Suite 260, Riverside. CA 92508 P 951.367.3000 F 951.367.3010 W www.vtdcpa.com ...J As noted above, Vavrinek, Trine, Day & Co., LLP is a specialist in providing governmental auditing services. Our experience includes providing auditing services to over 300 governmental agencies; including but not limited to cities, counties, transportation agencies, hospitals, water and sanitation districts and a variety of other governmental agencies. We also rank in the top 15 providers in the nation when auditing federal grants via the single audit. n other important aspects of our proposal include: o The partner and manager will be proactive in working with the implementation of new accounting and auditing standards, p The partner will ensure that all inquiries are responded to promptly, b The use of portal technology to securely share and documents. I I I VTD|invests significant resources in our quality control program. This is evidenced by a fully staffed quality control department; our QC Partner, Manager, and Supervisor have no client responsibilities and do not have charge hour requirements. Important highlights of our QC process include:n o Conducting our annual (internal) peer review process: We require that outside (external) reviewers participate as part of our annual peer review inspections, o Coordinating the external peer review every 3 years. 0 Overseeing the Firm’s risk assessment and client acceptance process, p Ensuring adherence to independence requirements. n I We hope that as you read through this proposal, you recognize the philosophy of our firm which is to provide each of our clients vrith exceptional service and experienced staff. Our dedication to quality, professional standards, and service are unmatched in the industry. o ( 1 n Thank you for providing us the opportunity to present our proposal. Should you have any questions, please feel free to contact Phillip White, CPA, Partner who is authorized to make representations and have contractual responsibility on beh^f of Vavrinek, Trine, Day & Co., LLP. Mr. White may be reached at (951) 367-3000, or via email at pwhite@vtdcpa.com. The mailing address which is detailed on the cover page can also be used for correspondence. The offer is a firm, irrevocable offer for 60 days from the date of this proposal and all of the information submitted is true and correct. n Very truly yours. r~! I I Phillip White, Partner Of Vavrinek, Trine, Day & Co., LLP I I I \ n 1 b I I SECTION 1i 1 Independence and License to Practice j > J N i t \ L Independence and License to Practice Independent Standards of the GAO Affirmation1. Vavrinek, Trine, Day & Co., LLP is independent of the City of La Quinta (City) and its component units as defined by auditing standards generally accepted in the United States of America and the U.S. General Accounting Office's Governmental Auditing Standards. The firm has not had any professional relationships involving the City for the past five years. The firm will not enter into any relationships that would impair our independence during the term of the contract if awarded. VTD will not be using subcontractors to serve the City. Licensed Certified Public Accountant Affirmation2. Vavrinek, Trine, Day & Co., LLP is licensed to practice public accounting in the State of California and has complied with all applicable requirements. In addition, all of the key professional staff that will be assigned to the audit are also licensed to practice in the State of California and have complied with all applicable State Board of Accountancy standards. 2 \ I \ / f ! 4 S I ; SECTION 2 I :Firm Qualifications and Experience I 1 i / : t i: c J I, 7 4 1 r / ( L Firm Qualifications and Experience Firm's Background1. VAVRINEK, TRINE, DAY & CO.. LLP - VTD VTD was established in 1948. Our firm offers a full range of services for several different lines of businesses throughout California. Proudly, our governmental practice is key to our firm's success. VTD has experienced a solid 69 years of growth and commitment to client service. Now with over 40 partners and over 200 professional staff, VTD is one of the top CPA firms in the western region. VTD is ranked within the "top 100" CPA firms in the United States with a significant percentage of our practice devoted to the governmental audit and consulting practice. VTD is a leader in providing audit, consulting, and tax services to various industries including, but not limited to, large municipal and regional governments, financial institutions, manufacturing, and retail enterprises, and not-for-profit corporations. As governmental auditing is our primary practice, we do not use governmental clients to fill our down time. Our governmental audit and governmental consulting practices provide a year- round client base for VTD. VTD is organized into industry practice groups. In today's regulatory environment it is necessary to specialize in specific industry practice areas so that our clients are provided with the highest quality service. In order to accomplish this we have structured our firm with the following industry practice groups: State and Local Government SEC/PCAOB K-12 School Districts Tax Compliance Manufacturing, Retail, and Distribution Financial Services Higher Education Healthcare Not-for-Profit The State and Local Government practice group has over 50 professional staff that are devoted to audits similar to the City of La Quinta on a full-time basis. Our Riverside office will have the primary responsibility of servicing the City of La Quinta. This will enable us to meet all of the requirements within a timely and professional manner. 4 PROFESSIONAL ASSOCIATIONS We are members of the American Institute of Certified Public Accountants (AICPA), and we have registered with the Public Companies Accounting Oversight Board (PCAOB). In addition, our firm is a member of the AICPA's Governmental Audit Quality Center. Several of the firm's partners serve on several Audit and Accounting subcommittees for CalCPA. We are active members in the Governmental Finance Officers Association (GFOA) and attend training seminars provided by GFOA. Several of our partners serve on the GFOA CAFR Special Review Committee. We are also active members of the California Society of Municipal Finance Officers (CSMFO). 2. Firm's Qualifications QUALITY CONTROL Our firm has a program of quality control to ensure that our engagements meet the standards of the AICPA and Yellow Book, including qualifications, independence, due professional care, and quality control. VTD has a full-time Quality Control Partner delegated the responsibility of implementing and monitoring the firm's quality control policies and procedures. VTD also has a quality control committee that meets regularly to discuss emerging issues and new professional pronouncements, which are then communicated to our professional staff to ensure the firm has a working knowledge of professional standards. We have undergone voluntary, independent, external quality reviews (peer reviews). We received our most recent peer review in 2015 for the 2014 year, at which time we received an unqualified opinion regarding our audit and accounting practice. A copy is included as Appendix A. This peer review included a review of specific government engagements. We also undergo periodic inspections by the PCAOB. 3. Assisting local governmental units in obtaining the Government Finance Officers Association (GFOA) "Certificate of Achievement for Excellence in Financial Reporting." Many our clients participate in the Government Finance Officers Association (GFOA) "Certificate of Achievement for Excellence in Financial Reporting" program. VTD has demonstrated that we can meet our client’s expectations in regards to a quality product within GFOA requirements, and we have also proven that we can meet or exceed all timelines established by our clients. We have prepared GFOA award winning CAFRs for numerous clients. 5 I I 4. Commitment to Diversity 7 [ I Vavrinek, Trine, Day & Co., LLP is an equal opportunity employer. Our staff represents a range of cultural and ethnic backgrounds that provide for a world-view. The diversity of our workforce helps to improve our employee satisfaction, productivity, and the retention of our staff. Our firm provides opportunities for advancement to all staff demonstrating the skill, ability, and desire to succeed and advance their professional career with us.n 5. VXD does not have a record of substandard audit work > Vavrinek, Trine, Day & Co., LLP does not have a record of substandard audit work as a result of State or Federal Desk Reviews. There have been no disciplinary actions from regulatory agencies or professional organizations nor do we have any outstanding claim of substandard work or unsatisfactory performance pending with the State Board of Accountancy or other professional organizations within the past five years. I I O I I I I f 1 I j I I p 6 F .j I I t SECTION 3 Partner^ Supervisory and Staff Qualifications and experience « i ) \ ( Partner, Supervisory, and Staff Qualifications and Experience 1. Engagement Team The engagement team for the proposed audit services will include: Phillip White, CPA, Partner - Mr. White will have the overall responsibility for the audit and coordinate the execution of the audit plan as well as assisting in technical issues. Roger Alfaro, CPA, Partner - Mr. Alfaro will participate as a technical review partner. He will work with the team assisting in technical issues. Lauryn Stapleton, CPA, Audit Manager - Ms. Stapleton will serve as an audit project manager and will participate in the day-to-day management and delivery of services to the City. Renita Dukes, CPA, Audit Supervisor - Ms. Dukes will assist in the management of the project. Other Seniors and Audit Associates - additional seniors and audit associates to be assigned. Firm's Management Support Personnel - Client technical questions are fielded by the engagement team throughout the year. In addition to the resources listed above, VTD has a dedicated quality control division which assists the audit team in technical research on an needed basis. as 8 2. Organizational Resumes While VTD has a team of over 50 auditors specializing in municipal audits, we have selected the following team that we believe is best suited to provide timely, consistent and quality services to the City. MR. PHIL WHITE. CPA - PARTNER Experience Mr. White has been conducting audits of cities, large regional and special purpose governmental entities for over 13 years. His experience includes cities, redevelopment agencies, transit agencies, counties, public utilities, and single audits. Mr. White has provided audit services for various municipalities conducting single audits and audits of comprehensive annual financial reports including, but not limited to: CITIES COUNTIES County of Orange County of Riverside County of Sacramento County of San Bernardino County of San Diego County of Ventura OTHER AGENCIES Arrowhead Regional Medical Center Chino Valley Independent Fire District John Wayne Airport Riverside County Medical Center San Bernardino County Flood Control San Mateo County Transit District Santa Clara Valley Transportation Authority South Bay Regional Communications Authority Tri-City Mental Health Western Riverside Council of Governments City of Dana Point City of Folsom City of Glendale City of Gonzales City of Greenfield City of Huntington Park City of La Palma City of Palmdale City of Paramount City of Piedmont City of Rancho Mirage City of Rancho Palos Verdes Mountain Area Regional Transit Authority City of Roseville City of Santa Clarita City of Temecula TRANSIT AGENCIES Imperial County Local Transportation Aut Omnitrans Orange County Transportation Authority San Bernardino County Transportation Au hority Imperial County Transportation Authority Morongo Basin Transit Authority UTILITIES Beaumont - Cherry Water District Glendale Water and Power Helix Water District Municipal Water District of Orange County Yucaipa Valley Water District thority Santa Clara Valley Transportation Authority Mr. White has also provided training to our staff through in-house conferences to ensure consistency and knowledge throughout the entire team providing services to our clients. Mr. White also provides audit and accounting updates for many of his governmental clients and industry groups. Mr. White participates as a CAFR reviewer within the GFOA Certificate Program Special Review Committee. Area of Specialization Governmental Audits of Cities, Counties, Public Utilities, Transit Agencies, Special Districts, Non-profits, 0MB A-133 Single Audits 9 n if ( Professional Afflliations i American Institute of Certified Public Accountants California Society of Certified Public Accountants i California Society of Municipal Finance Officers Government Finance Officers Association Special Review Committee rf \ ! Education Bachelor of Science - Finance San Francisco State University, San Francisco, California■» Continuing Education Audit Risk Assessment GASB 74 and 75, and other GASB updates i Fraud Professional Conduct and Ethics Revised Yellow Book Standards i Single Audits under Uniform Guidance Internal control documentation and testing Accounting and Auditing Updates * V J I o 10 MR. ROGER ALFARO. CPA. CITP * PARTNER Experience Mr. Alfaro has been conducting audits of governmental entities for over 18 years. His experience includes cities, counties, financing authorities, public utilities, transit authorities and the single audit. Mr. Alfaro has conducted single audits and the audits of basic financial statements for several local governments whose assets exceed $1 billion. His single audit experience includes the major federal program audits of cities, transit agencies, and counties including; CDBG, Airport Improvement Program, Highway Planning and Construction grants. Mr. Alfaro has provided audit services for various governmental clients conducting single audits and audits of comprehensive annual financial reports including: UTILITIES/JPA/SPECIAL DISTRICTSCITIESCOUNTIES City of Burbank City of Camarillo City of Glendale City of Gonzales City of Huntington Beach City of Indian Wells City of Laguna Beach City of Laguna Niguel City of Modesto City of Paramount City of Pleasanton City of Rancho Mirage County of Orange County of Placer County of Riverside County of Sacramento County of San Bernardino Glendale Water and Power John Wayne Airport Moulton Niguel Water District Omnitrans Alameda County Transportatio County of San Diego County of Sonoma County of Ventura n District Alameda County Transportation Improvement District Arrowhead Regional Medical Center Chino Valley Independent Fire District County of Yolo Orange County Transportation Authority Riverside County Waste Management Sacramento International Airport San Bernardino County Transportation Authority San Mateo County Transit District Santa Clara Valley Transportation Authority Tri-City Mental Health Ventura County Air Pollution Control District Ventura County Transportation Commission Western Riverside Conservation Authority Western Riverside Council of Governments Yucaipa Valley Water District FIRST 5 COMMISSIONS First 5 Contra Costa City of Rancho Palos Verdes First 5 Los Angeles First 5 Orange County First 5 Placer City of Sacramento City of Santa Clara City of Temecula City of Temple City City of Walnut City of Walnut Creek City of Whittier City of Whittier First 5 Riverside First 5 Sacramento First 5 San Bernardino Mr. Alfaro has advised and assisted many clients with disclosure and financial reporting requirements pursuant to the GFOA certificate program. Many of Mr. Alfaro’s clients served have reports prepared in compliance with the requirements of this program, including the City of Indian Wells, City of Rancho Mirage, City of Temecula, City of Whittier, Western Riverside Council of Governments, and Orange County Transportation Authority (OCTA). Area of Specialization Governmental Audits of Cities, Counties, Redevelopment Agencies/Successor Agencies, Public Utilities, Transportation Agencies, Special Districts, Non-profits n MS. LAURYN STAPLETON. CPA > MANAGER Experience Ms. Stapleton has been conducting audits of governmental agencies for over five years. Her experience includes work on cities, special districts and counties including the following: CITIES City of Dana Point City of Indian Wells City of Laguna Beach City of La Palma City of Paramount City of Rancho Mirage City of Temecula City of Walnut COUNTIES County of Orange County of Sonoma County of Ventura OTHER AGENCIES Chino Valley Independent Fire District Western Riverside Council of Governments Millennium Housing Authority Riverside County Regional Conservation Authority TRANSIT AGENCIES San Bernardino Association of Governments (TDA/Measure I Audits) Ventura County Transportation Commission City of Barstow (Transit Fund) Victor Valley Transit Authority Area of Specialization Governmental audits of Cities and Successor Agencies, Counties, Transportation Agencies, Special Districts, 0MB A-133 Single Audits, and TDA Compliance Audits Professional Affiliations American Institute of Certified Public Accountants Education Bachelor of Science - Accounting California State University - Long Beach Continuing Education Audit Risk Assessment Fraud Risk Assessment Single Audits under Uniform Guidance Yellow Book: Government Auditing Standards GASB 68 - 84 Clarified Auditing Standards 13 MS. RENITA DUKES, CPA - SUPERVISOR Experience Ms. Dukes has been conducting audits of governmental agencies for over three years. Her experience includes work on large counties, special districts, and cities including the following: CITIES City of La Palma City of Paramount City of Palmdale City of Temecula OTHER AGENCIES Beaumont Cherry Valley Water District First 5 San Bernardino Millennium Housing Authority Visit Huntington Beach Western Riverside County Regional Conservation Authority Yucaipa Valley Water DistrictCOUNTIES County of Los Angeles County of San Bernardino County of Sonoma TRANSIT AGENCIES San Bernardino County Transportation Authority Professional Affiliations Member of the American Institute of Certified Public Accountants Education Bachelors of Science - Accounting California State University- San Bernardino Recent Continuing Education Audit Risk Assessment Fraud Risk Assessment Single Audits under Uniform Guidance Yellow Book: Government Auditing Standards GASB 68-84 Clarified Auditing Standards 14 t 3. Commitment to Consistent and Quality Staff and Backup PlanI 1 We understand the City of La Quinta desires an audit firm that provides consistency with staff. VTD's philosophy is to staff each of our audits with consistent staff in order to provide the most effective and efficient audit for our clients. Engagement personnel may be changed if those personnel leave the firm, are promoted or are assigned to a different office. Personnel may also be changed for other reasons with prior permission of the City. In addition, VXD maintains a depth of resources to allow for transition of the partner, manager ^d supervisor levels should the need arise. I 1, n t 1 ( VXD staff has also attended national training sessions, such as the annual AICPA National Governmental Accounting and Auditing Update, so that all of the key staff assigned to the City's audit understands both local as well as national trends and issues. .0 r-‘ I I ( I I r I I 1 I I j. r' I r~ I L I . n 15 SECTION 4 Similar Engagements a / Similar Engagements 1. Our Experience VTD's Government Practice Group has professionals that are fully devoted to audits similar to the City of La Quinta. VTD provides services to over 300 governmental agencies. A summary of clients served includes, but is not limited to: COUNTY GOVERNMENTS County of Orange County of Placer County of Riverside County of Sacramento County of San Bernardino County of Sonoma County of Ventura County of Yolo County of Shasta WATER AGENCIES Beaumont Cherry Valley Water District Elsinore Valley Municipal Water District Helix Water District Montara Water and Sanitary District Monterey Regional Water Pollution Control Agency Moulton Niguel Water District Municipal Water District of Orange County Reclamation District #2035 Sacramento County Water Agency Sacramento Groundwater Authority Santa Clara Water District Suisun-Solano Water Authority Yolo-Davis Clean Water JPA Yucaipa Valley Water District CITIES City of Alameda City of Brentwood City of Chico City of Concord City of Dana Point City City City City City City of Gonzales City of Grand Terrace City of Greenfield City of Huntington Park City of Huntington Beach City of Indian Wells City of Laguna Beach City of Laguna Niguel City City City City City of Paramount City of Pleasanton City of Rancho Mirage City of Rancho Palos Verdes City of Rohnert Park City of Roseville City of Sacramento City of San Jacinto City of San Leandro City of San Ramon City of Santa Clara City of Santa Clarita City of Saratoga City of South Gate City of South Lake Tahoe City of Suisun City City of Temecula City of Walnut Creek City of Whittier of Davis of Fairfield of Folsom of Foster City of Glendale of Los Altos of Monte Sereno of Napa of Palmdale FIRST 5 COMMISSIONS Contra Costa First 5 Commission First 5 Sacramento Fresno First 5 Commission Los Angeles First 5 Commission Orange County Childrens & Families Commission POWER AGENCIES Riverside First 5 Commission Alameda Municipal Power Glendale Water and PowerSan Bernardino First 5 Commission Sonoma First 5 Commission Yolo First 5 Commission Marin Energy Authority Silicon Valley Power TRANSIT AGENCIES Capital Southeast Connector JPA High Desert Connector JPA Omnitrans Orange County Transportation Authority Sacramento Area Council of Governments San Joaquin Regional Rail Commission Santa Clara Valley Transportation Authority SR 91 Expresslanes Ventura County Transportation Commission Solano County Transportation Authority SEWER, SANITATION & FLOOD AGENCIES Alameda County Waste Management Authority Bayshore Sanitary District Central Contra Costa Sanitary District Central Marin Sanitation Agency Cupertino Sanitary District Delta Diablo Sanitation District East Bay Discharge Authority Fairfield-Suisun Sanitary District Knights Landing Community Services District Madison Community Services District Orange County Waste & Recycling Oro Loma Sanitary District Riverside County Waste Management Ross Valley Sanitation District Sacramento Area Sewer District Sacramento Regional County Sanitation District Union Sanitary District Vallejo Sanitation and Flood Control District West Bay Sanitary District West Valley Sanitation District OTHER AGENCIES Sacramento County Airport System Sacramento Solid Waste Fund Yolo County Habitat JPA Yolo Solano Air Quality District East Bay Regional Park District 17 As we have noted VXD has significant experience auditing municipal and special purpose governments. The key components to our success include consistency of properly trained staff, assignment of staff with experience, timely communication in ail aspects of the audit, planning, and understanding how to structure each audit to ensure efficiencies are achieved. VTD’s success in retaining our clients is due to our commitment to outstanding quality, timely completion of work and our ability to retain key staff. VTD is properly staffed and trained to perform the required services. Each of the key auditors chosen •to participate with the City of La Quinta audit has worked with similar entities. The City will not have to train our audit team. Each of the auditors also has a detailed understanding of the interaction of different internal control systems and the strict timelines that are required to complete each aspect of the audit. VTD staff also attends national training sessions, such as the annual AICPA National Governmental Accounting and Auditing Update, so that ail of the key staff assigned to the City’s audit understands both local as well as national trends and issues. I I VTD has a demonstrated capacity to perform the required services. We have managed our growth to ensure that new clients receive experienced staff and quality audits. We also ensure that existing clients do not experience a decline in service when new clients are added. To accomplish this VTD will only proposes on clients when key staff have been trained, possess on the job experience to act as the in charge auditor, and when staffing levels allow for the addition of the new work. We are extremely confident that all of our references will note that their service level has not diminished over the life of the contract. VTD has reviewed the requirements of the City of La Quinta and determined that you will be properly serviced with experienced and well trained staff. We have also determined that our staffing schedule allows for VTD to meet and/or exceed all timelines as established in the request for proposal. 2. Description of work performed for other agencies with similar services/references VTD has provided similar audit services for several other jurisdictions similar to that which is requested by the City of La Quinta. We have provided a listing of governmental entities with various types of services performed for each as follows: City of Rancho Mirage City of Indian Wells City of Glendale City of Whittier City of Santa Clarita 18 CITY OF RANCHO MIRAGE Mr. Isaiah Hagerman, Finance Director 69825 Highway 111, Rancho Mirage, CA 92270 (760) 770-3207 Engagement Partner: Roger Alfaro/Phil White Dates Services provided: Most recent audit for the fiscal year ended June 30, 2016 Number of Years: 5+ City Population: 18,000 Total Hours: Approximately 400 Scope of Work Comprehensive Annual Financial Report- GFOA Award Single Audit Agreed Upon Procedures over the City’s Expenditure Limit CITY OF INDIAN WELLS Mr. Kevin McCarthy, Finance Director 44-950 Eldorado Drive, Indian Wells, CA 92210 (760) 346-2489 Engagement Partner: Roger Alfaro Dates Services provided: Most recent audit for the fiscal year ended June 30, 2016 Number of Years: 1 City Population; 5,000 Total Hours: Approximately 700 Scope of Work Comprehensive Annual Financial Report- GFOA Award (includes operations of the Indian Wells Golf Resort) Single Audit Agreed Upon Procedures over the City’s Expenditure Limit Agreed Upon Procedures over Golf Course Operations Agreed Upon Procedures over Tennis Garden 19 I CITY OF GLENDALE Ms. Shu-Jun Li, Accounting Manager 141 N. Glendale Avenue, Glendale, CA 91206 (818) 548-2085 Engagement Partner; David Showalter Dates Services provided: Most recent audit for the fiscal year ended June 30, 2016 Number of Years: 3+ City Population: 199,000 Total Hours: Approximately 1,500 Scope of Work Comprehensive Annual Financial Report - GFOA Award (full service City includes Police and Fire department operations) Glendale Water & Power Financial Report Single Audit Agreed Upon Procedures over the City’s Expenditure Limit CITY OF WHITTIER Mr. Rod Hill, City Controller 13230 Penn Street, Whittier CA 90602 (562) 567-9810 Engagement Partner: Roger Alfaro Dates Services provided: Most recent audit for the fiscal year ended June 30, 2016 Number of Years: 5+ City Population: 87,000 Total Hours: Approximately 700 Scope of Work Comprehensive Annual Financial Report - GFOA Award Single Audit Whittier Utility Authority - Water, Sewer and Solid Waste operations Agreed Upon Procedures over the City’s Expenditure Limit 20 CITY OF SANTA CLARITA Ms. Carmen Magana, Director of Administrative Services 23920 Valencia Boulevard, Santa Clarita, CA 91355 (661) 255-4997 Engagement Partner: Phil White Dates Services provided: Most recent audit for the fiscal year ended June 30, 2016 Number of Years: 1 City Population: 214,000 Total Hours: Approximately 1,000 Scope of Work Comprehensive Annual Financial Report - GFOA Award Single Audit Successor Agency / Housing Authority Air Quality Improvement Fund Transit Fund GANN Limit Agreed Upon Procedures Santa Clarita Public Television Authority Audit Open Space Preservation District Audit Santa Clarita Watershed Authority 21 1 I ( ( i » I •* ( ¨ ( SECTION 5 t Specific Audit Approach 1 I I 1 \ 4 I t f k < I L Specific Audit Approach 1. Project Management The audits will be conducted in accordance with generally accepted auditing standards issued by the American Institute of Certified Public Accountants (AlCPA), Governmental Auditing Standards published by the Comptroller General of the United States, and the requirements described in the 2 CFR 200 Uniform Grant Guidance. VTD provides auditing services to over 300 governmental agencies. The key to our success is to structuring our audit teams with skillfully trained professional who are dedicated to serving local government. During the planning phase of the audit, VTD will work with the City to complete a matrix in order to map out all of the significant dates for the provision of service including key contacts, fieldwork entrance and exit dates, deliverable dates, report review dates, final due dates, and board presentation dates. By preparing a comprehensive matrix for each report, all the information regarding the timing of the audits and various projects is documented in one central location and is agreed upon between the auditor and the City. The timeline will then only be modified through communication between VTD and the City. 2. Complete Work Plan/Project Description OVERVIEW OF THE AUDITS As required by the Request for Proposal our audit plan covers the engagements for: Audit of the City's CAFR as of June 30 Single Audit as required by the Uniform Guidance Procedures over the GANN Limit Government Auditing Standards Report on Internal Control Over Financial Reporting and on Compliance Auditor Required Communications Additional 40 hours of partner/manager time on accounting questions Preparation of the State Controller’s Report 23 n The audits will be conducted in accordance with generally accepted auditing standards issued by the American Institute of Certified Public Accountants (AICPA), GovernmentAuditing Standards'pvhlishQdi by the Comptroller General of the United States, and the requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 and Title 2 U.S. Code of Federal Regulations Part200^ Uni form Administrative Requirements, Cost Principles, and Audit Requirements forFederalAwards (Uniform Guidance). f Level of staff and number of hours assigned to each segment Partner Manager Supervisor Senior Staff Clerical Total f J Audit of City, Housing Authorityj Successor Agency, Financing Authority and partner/manager hours Single Audit (assuming one major program) GANN Limit State Controller’s Report Totals I 52860128961201204 24 1 3748 1 1 3 5' 9 2469 120 156 594711371055 c Audit Hours by Area\ Pre-Audit Planning Interim Audit Final Audit Total Audit of City, Housing Authority, Successor Agency, Financing Authority and partner/manager hours Single Audit (assuming one major program) GANN Limit State Controller's Report Totals 26 238 264 528I 1 6 30 37 2 3 5 1 11 12 24 28 257 309 594 I I n 3. Our Proposed Audit Plan n Ourlengagement approach for the City of La Quinta audit has detailed goals by which the engagement partner can measure progress. Oiir audit plan includes frequent contact between the partners and the I engagement team to assure that objectives are attained according to the audit schedules and any problems are communicated and dealt with on a timely basis. Our engagement approach benefits from our |rast_experience working with governmental entities; we understand the key areas of risk over the financial and accounting process. More importantly, the approach provides for a complete reassessment of the management and control environment in each year's audit and thus is capable of responding to changes and will ensure that deadlines are met in issuing the annual financial statements. —t f 24 The key characteristics of our engagement approach are: • Knowledge ofthe City of La Quinta and similar entities. We have extensive experience auditing governmental entities similar to the City. This experience enables us to perform a more efficient audit and identify key audit risks. • Cost-effectiveness. Our experienced auditors’ low percentage of turnover reduce your cost Timeliness. We take deadlines, both yours and ours, seriously. Partner-manager involvement. Deciding on audit strategies requires seasoned judgment. Our partners and managers have been heavily and continuously involved in governmental audits. Furthermore, you will be able to consult with senior team members whenever needed throughout the year. We are available during the year for any additional consultation that may arise and specified in the request for proposal. PROJECT MANAGEMENT - OVERALL AUDIT Our audit plan for the scope for each of the fiscal years involves six (6) stages for each audit. These stages are: Stage 1, Planning Stage 2, Risk Assessment Stage 3, Preparation of the Overall Audit Plan Stage 4, Conducting the Interim Audit Stage 5, Conducting the Final Audit Stage 6, Reporting These stages will be applied to the City’s CAFR audit as well as the other audits. The audit approach will be tailored to the risk of each individual entity and the scale will also be adjusted as necessary to ensure that each entity’s financial statements are fairly stated. Stage 1, Planning VTD will meet with key staff to plan the audit services for the year. These meetings will discuss all audit issues and the proposed interim work plan. During this phase, we will accomplish: • Identifying the key personnel and contacts in the Finance Department and other departments. • Identify the City of La Quinta’s significant classes of transactions and business processes. Obtain an understanding of audit risk areas. Developing an understanding of unusual transactions or events that have occurred during the fiscal year. Formalizing logistics. Finalizing the timeframes for interim fieldwork. 25 Stage 2, Risk Assessment Based upon the information obtained in the planning meetings VTD will perform a risk assessment as required by Statements on Auditing Standards (SAS) to be used in the preparation of the overall audit plan. As part of this risk assessment we will perform the following: Obtain an understanding of the entity and its environment and its risks and material compliance requirements. VTD will refer to the City of La Quinta’s prior year Comprehensive Annual Financial Report, annual budget document, municipal code/charter and other relevant documentation to assist with our understanding of the City of La Quinta’s business environment and risks. VTD will also conduct inquiry with key individuals within the City of La Quinta who are responsible for executing the City of La Quinta’s strategic plan. Obtain an understanding of the entity’s internal controls. VTD will refer to the City of La Quinta’s organizational charts, budget, written policies and procedures, financial accounting systems to assist with our understanding of internal controls. VTD will also perform inquiry, observation, inspection, and walk-throughs of key internal controls to ensure these key controls are properly designed and implemented. Key internal control cycles include - Year-end Closing Budgeting Risk Management Human Resources/ Payroll/Pensions IT Controls, related to all aspects of the audit User access Preliminary analytical review, determination of preliminary materiality levels. Analysis of known misstatements, if any. Consideration of risk of material misstatement at the individual account balance, class of transactions and disclosure level. Revenue collection/Billing Procurement/Cash Disbursements Security Backup and reco Investment Management Debt Management Financial Reporting very Systems interfaces Fraud Prevention Programs Grants Management Assessing the risks of material misstatement at both the financial statement and relevant assertion levels. Assess the risk of material noncompliance with laws and regulations that have a direct and material effect on the financial statements. Evaluation of the City's information technology and general information technology controls. 26 Stage 3, Preparation of the Overall Audit Plan Once the planning and risk assessment process are complete an overall audit plan will be prepared. The plan will specify each audit task, staffing assignments, timelines, and due dates. The plan will also break down the work assignments between interim and final audit timelines. The audit plan will include the transaction cycles which have been selected for internal control testing and those for which only the detailed walk through will be performed. We will also prepare the preliminary materiality guidelines, the audit programs, including consideration of: • Identification of areas where special audit considerations are necessary. • Design of further audit procedures to reduce risk if considered necessary. • The development of expectations for analytical procedures, timelines, and assignment of all audit responsibilities. Stage 4, the Interim Audit Our interim fieldwork dates will normally occur during the April - June timeframe. The specific weeks will be determined during the planning meeting and preparation of the audit plan process. We will obtain an understanding of the design and implementation of the financial reporting system to understand the follow of information for: Each class of transactions that is significant to the financial statements. The procedures within both automated and manual systems, by which those transactions are initiated, authorized, recorded, processed, and reported in the financial statements. The related accounting records, whether in electronic or manual supporting information, and specific accounts in the financial statements involved in initiating, authorizing, recording, processing and reporting transactions. How the information systems captures events and conditions other than classes of transactions that are significant to the financial statements. The financial reporting process used to prepare the City of La Quinta’s financial statements, including significant accounting estimates and disclosures. 27 Stage 5, the Final Audit We will commence our final fieldwork as soon as CityiDf La Quinta has sufficiently closed their accounting records. We expect final fieldwork to take place during the last week of September and into October. During this phase, we will perform substantive audit procedures on the year-end statement of net position, revenue and expense accounts. We will use a variety of audit procedures which may include outside confirmations, statistical sampling, and detailed testing of schedules, analytical review, inquiry, and observation. During this phase we will draft the financial statements. Stage 6, the Reporting Phase At the end of the audit process we will meet with key staff to cover the following: Discuss improvements for subsequent years audit plan, Meet with the Board and Finance Committee to present the results of the audit. Communicate with those charged with governance. We will prepare Draft Audit Reports with management letter comments to management prior to the agreed upon issuance date. We will prepare Final Draft Audit Reports and management letter comments for presentation to the City prior to the agreed upon issuance date. Significant deficiencies and material weaknesses (if any) identified during the course of the audit. AU-C 265 requires written communication to management and those charged with governance, of significant deficiencies or material weaknesses, identified during the audit. Other matters that we believe to be of potential benefit to the management of the City of La Quinta, such as recommendations for operational or administrative efficiency, or for improving existing internal controls. Agreed Upon Procedures The City has requested agreed upon procedures over its GANN Limit calculation. VTD provides professional auditing services to over 300 governmental agencies. We have performed numerous agreed-upon-procedure engagements to: verify components of internal control, test adherence to compliance requirements, verify whether subrecipients/vendors have performed services in accordance with governmental agreements, verify calculations related to debt, revenue and cost arrangements, verify conformity with government code for investment compliance and other management objectives. Agreed upon procedure engagements allow management great flexibility to test any subject matter with defined criteria. 28 Our approach to performing agreed upon procedure engagements includes: Obtaining an understanding of the subject matter for which the criteria (procedures) are to be applied. Ascertaining the risks that management is intending to address. Based on the above, we may provide suggestions/alternatives to a specific procedure for management’s consideration. Formalizing the scope for the agreed upon procedures. Scheduling and executing the agreed upon procedures scope. Clarifying any questions or matters that arise during the performance of the procedures. Preparing the report. COMMUNICATION We do not believe in surprises. Although the reporting phase involves a recap of the process we will be in constant communication regarding each aspect of the audit throughout the entire process. You will not have any surprises at the end of the audit. 4. Use of Computer Assisted Auditing Techniques Software in the Engagement The key members assigned to the City’s engagement team are experienced in working with municipal information systems such as SunGard, Oracle, PeopleSoft, IFAS, SAP, Great Plains, EDEN, Tyler Technologies and HARRIS Utility Billing systems. Therefore minimal time would be necessary to train our team in how to most efficiently access the City’s transactions and documents for the audit. VTD will also be using electronic data processing software such as IDEA during the engagement. 5. Engagement Timeline Audit Milestones Planning Meeting (Stage 1) Audit Planning (Stage 2 and 3) Interim Fieldwork (Stage 4) Fiscal Year-End Work (Start) Fiscal Year-End Work (End) (Stage 5) Deliver Draft Auditors' Report (Stage 6) Deliver Final Reports April April/May June September October prior to November 20 prior to December 10 September September September September October prior to November 20 prior to December 10 September September prior to November 20 prior to December 10 29 / f I I : i 7 f t j SECTION 6 Identification of Anticipated Potential Audit Problems i » I i 1 .i Identification of Anticipated Potential Audit Problems 1. Identification of Potential Audit Issues We do not anticipate problems within the audit. However, if audit issues are encountered, our process would include meeting with the City’s management to develop the appropriate response, and identify any special assistance that will be requested from the City. We have however identified the following areas that we believe that we can be of assistance. • GASB Standard Implementations -SevexdA new GASBs will be required to be implemented during the contract term. • Single Audits - Uniform Guidance\izs been issued and is effective for the City for grants awarded after December 26, 2014. • Pensions/OPEB - Standards over pension an OPEB accounting as well as audit procedures have significantly changed in recent years. These areas and related disclosures can be complex and we have assisted numerous governmental entities with implementation. Our clients participate in numerous types of pension/opeb plans including: State run pension systems (cost-sharing and agent multiple employer) and Local plans (single employer or cost-sharing). APPROACH IN ADDRESSING NEW CASES The City will be required to implement various GASB statements during the term of the contract. These accounting pronouncements impact the reporting of several areas including Other Postemployment Benefits (OPEB), Tax Abatement Disclosures and Leases. We understand that GASB implementations can be difficult and challenging. Therefore we believe in taking a team approach and performing proactive planning to ensure that new GASB Standards are implemented timely and correctly. This starts during the planning and interim phase of the audit and sitting down with management and discussing the potential impacts of the GASB standard and the documentation and information needed to implement. We will assist throughout the process as needed in providing technical guidance regarding the impacts of the change in standards to ensure new standards are successfully captured in the financial statement. 31 SECTION 8 i Appendices i Appendix A - Peer Review Report Yanari Watson McGaughey P.C. Dale M. Yanari (IHt-20(M) ¨ Ranov S. Watson ¨ G. Lance McGaughey ¨ Don W. Gruenler Finanoal Consultants/Certified Public Accountants System Review Report May 22,2015 To the Partners of Vavrinek, Trine, Day & Co., LLP and the National Peer Review Committee We have reviewed the system of quality control for the accounting and auditing practice of Vavrinek, Trine, Day & Co., LLP (the firm) applicable to engagements not subject to PC’AOB permanent inspection 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 established by the Peer Review Board of the American Institute of Certified Public Accountants. As a part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinicm on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prsummary. As required by the standards, engagements selected for review included engagements performed under Government Auditing Standards: audits of employee benefit plans and audits performed under FDICIA. In our opinion, the system of quality control for the accounting and auditing practice of Vavrinek, Trine, Day & Co., LLP applicable to engagements not subject to PCAOB permanent inspection in effect for the year ended December 31. 2014, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating ofpass, pass with deftciency(ies) or fail. Vavrinek. Trine, Day & Co., LLP has received a peer review rating of pass. Yanari Watson McGaughey P.C. 9250 Eait ComuA Avetus, Sum 450 Guumwooe Villaob, Couxado SOI 12-3647 (303) 792-3020 ru(303) 792-5153 mb tile «ww.]rwiiKpa.coai 39 Appendix B - Exceptions to Standard Agreement VTD’s policy is to review contracts and agreements when retained for professional services. We noted the following changes to the sample contract/exhibits: 6.0 Indemnification We propose revising the indemnification language to be more consistent with an auditing services agreement in lieu of Section 6.1 - Consultant shall defend, indemnify and hold the entity, its officials, officers, employees, and agents free and harmless from any and all liability from loss, damage or injury to property or persons, including wrongful death, in any manner arising out of or incident to any negligent acts, omissions, or willful misconduct of Consultant arising out of or in connection with Consultant’s performance of this agreement, including without limitation the payment of attorneys’ fees. Further, consultant shall defend at its own expense, including attorney’s fees, the entity, its officials, officers, employees, and agents in any legal action based upon such negligent acts, omissions or willful misconduct. 7.3 Ownership of Documents: We propose adding a sentence at the end of the section to state, “This section does not apply to the Contractor/Auditors’ working papers or audit documentation, which are the property of the Contractor/Auditor in accordance with professional auditing standards.” 40 Appendix C - Certificate of Insurance See the following page for our Certificate of Insurance showing evidence of sufficent coverage. 41 —1 I DATE (MM/DD/YYYY) 05/13/2016 ACORO CERTIFICATE OF LIABILITY INSURANCE THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). CONTACT NAME;Intearo USA Inc. gc.Ext>=(847) 385-6800 A^REss; david.koenen@integrogroup.com INSURER(S) AFFORDING COVERAGE INSURER A; Federal Insurance Company INSURER B: PRODUCER (847) 385-6800 (847) 385-6801 (847) 385-6801ntegro USA Inc. 11 West Campbell Street 4th Floor NAIC# Ariinaton Heights. IL 60005 20281 (909)466-4410 /avrinek, Trine, Day & Co., LLP 10681 Foothill Blvd., Suite 300 Rancho Cucamonga, CA 91730 NSURED (909)466-4431 INSURER C; INSURER D; INSURER E; INSURER F: COVERAGES L THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD ‘ INDICATED. NOTWITHSTANDING ANY REQUIREMENT. TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS n CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. CERTIFICATE NUMBER:REVISION NUMBER: a55l SUbRINSR POLICY EFF fMM/DD/YYYY) POUCY EXP fMM/DDhrYYY^TYPE OF INSURANCE UMITSPOLICY NUMBERATRINSRWVD GENERAL UABIUTY $1.000.000EACH OCCURRENCE DAMAGE TO RENTED PREMISES fEa occurrence^ MED EXP (Any one person) PERSONAL & ADV INJURY s /$1.000.000 $10.000 $1.000.000 $2.000.000 COMMERCIAL GENERAL LIABILITY /CLAIMS^DE OCCUR 3602-9324 05/13/2016 05/13/2017 V I GENERAL AGGREGATE $ IncludedGEWL AGGREGATE LIMIT APPLIES PER: n pRo- ' I jfeT AUTOMOBILE LIABIUTY /POLICY LOC PRODUCTS n COMP/OP AGG $ COMBINED SINGLE UMIT fEa accident! BODILY INJURY (Per pereon) £ 1.000.000 $ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS NON-OWNED AUTOS 7359-3893A 05/13/2016 05/13/2017 $BODILY INJURY (Per acddenl) /PROPERTY DAMAGE fPer accident!/SHIRED AUTOS S /$10,000,000UMBRELLA UAB EACH OCCURRENCEOCCUR05/13/201705/13/2016 $10,000,0007988-7380EXCESS UAB CLAIMS-MADE AGGREGATE $RETENTION $PEP WC STATU- I TORY LIMITS I E.L. EACH ACCIDENT OTH-WORKERS COMPENSATION AND EMPLOYERS' LIABIUTY EB Y/N ANY PROPRIETOR/PARTNER/EXECUTIVE OFFICER/MEMBER EXCLUDED? (Mandatory in NH) If yes, describe under DESCRIPTION OF OPERATIONS below SNfA E.L. DISEASE • EA EMPLOYEE $ E.L DISEASE - POUCY LIMfr $ DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (Attach ACORD101. Additional Remarks Schedule, if more space is required) . Evidence of coverage. ( CERTIFICATE HOLDER CANCELLATION r SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. 'arties at Interest r AUTHORIZED REPRESENTATIVE i © 1988-2010 ACORD CORPORATION. All rights reserved. ;iCORD 25 (2010/05)The ACORD name and logo are registered marks of ACORD