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Clifton Larson Allen LLP
©2023 CliftonLarsonAllen LLP Proposal to provide professional auditing services to the: City of La Quinta, California This proposal is a firm and irrevocable offer for 90 days from the due date of the proposal. Prepared by: Daphnie Munoz, CPA, Principal daphnie.munoz@CLAconnect.com Direct 714‐795‐5474 CLAconnect.com CPAS | CONSULTANTS | WEALTH ADVISORS CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor. 1. Cover Letter November 9, 2023 Ms. Claudia Martinez, Finance Director/Treasurer City of La Quinta 78495 Calle Tampico La Quinta, CA 92253 Via email submittal only Dear Ms. Martinez: Thank you for inviting us to propose. CLA (CliftonLarsonAllen LLP) looks forward to the opportunity to provide services the City of La Quinta, California (the City). Introduction to the firm As a professional services firm, CLA exists to create opportunities for our clients, our people, and our communities through industry‐focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. We do this when we live the CLA Promise – a promise to know you and help you. General qualifications of the firm We are confident that our extensive experience serving similar governmental entities, bolstered by our client‐ oriented philosophy and depth of resources, will make CLA a top qualified candidate to fulfill the scope of your engagement. The following differentiators are offered for the City’s consideration: • Industry‐specialized insight and resources – As one of the nation’s leading professional services firms, and one of the largest firms who specialize in regulated industries, CLA has the experience and resources to assist the City with their audit needs. In addition to your experienced local engagement team, the City will have access to one of the country’s largest and most knowledgeable pools of regulated industry resources. • OMB Uniform Guidance (UG) experience – CLA performs single audits for hundreds of organizations annually, ranking top in the nation for the number of single audits performed by any CPA firm. The single audit requires a specific set of skills to properly perform the procedures. As such, we have developed a group of professionals who specialize in providing single audit services. • Strong methodology and responsive timeline – In forming our overall audit approach, we have carefully reviewed the RFP and other information made available and considered our experience performing similar work for other municipalities. Our local government clients are included amongst the more than 4,200 governmental organizations we serve nationally. Our staff understands your complexities not just from a compliance standpoint, but also from an operational point of view. We have developed a work plan that takes into consideration your unique needs as a governmental entity in California. The work plan also minimizes the disruption of your staff and operations and provides a blueprint for timely delivery of your required reports. • Communication and proactive leadership – The City will benefit from a high level of hands‐on service from our team’s senior professionals. We can provide this level of service because, unlike other national firms, CliftonLarsonAllen LLP CLAconnect.com our principal‐to‐staff ratio is similar to smaller firms – allowing our senior level professionals to be involved and immediately available throughout the entire engagement process. Our approach helps members of the engagement team stay abreast of key issues at the City and take an active role in addressing them. • A focus on providing consistent, dependable service – We differ from other national firms in that our corporate practice focuses on the needs of non‐SEC clients, thus allowing us to avoid the workload compression typically experienced by firms that must meet public companies’ SEC filing deadlines. CLA is organized into industry teams, affording our clients with specialized industry‐specific knowledge supplemented by valuable local service and insight. Therefore, the City will enjoy the service of members of our state and local government services team who understand the issues and environment critical to governmental entities. Executive summary of the specific approach We understand that we provide a service to the City. We are committed to providing an effective and efficient audit that will meet the proposed timing of the project deliverables by assigning experienced governmental auditors. Understanding the size of the City of La Quinta and the scope of work requested in the proposal, we are proposing an engagement team with extensive governmental audit experience. The staffing plan includes Daphnie Munoz, CPA, the engagement principal with more than 25 years of experience; Rebecca Hoang, CPA, with 11 years of experience who will manage the audit; and Stephne Coverstone, CPA, a senior with five years of experience who will be on‐site supervising and performing the audit fieldwork. We are confident that the proposed staffing plan with an engagement team experienced in governmental audits and who are familiar with municipal procedures will result in an effective and efficient audit that meets the project timing and deliverables requirements with minimum disruption to your staff Scope of our Services The scope of our services for the year ending June 30, 2024 would be as follows: • A financial audit of the basic financial statements of the City of La Quinta in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States, to be included in the Annual Comprehensive Financial Report (ACFR). • A Single Audit of Federal Grants to be performed to meet the requirements of Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform Guidance) for the City. • An agreed‐upon procedures review of the calculation of the City’s GANN Appropriations Limit (GANN), as required by Section 1.5 of Article XIIIB of the California Constitution. • A management letter containing any comments or recommendations resulting from our review of the systems of internal controls in connection with the financial audits. • A report communicating information related to the audit to those in charge of governance at the conclusion of the audits. • Preparation of the annual State Controller’s Report Authorization I, Daphnie Munoz, your engagement principal, will serve as the City’s primary contact person for this engagement. As a principal of CLA, I am authorized to sign, bind, and commit the firm to the obligations contained in this proposal and the City’s RFP. My contact information is: Name: Daphnie Munoz, CPA, Principal Phone: 714‐795‐5474 Fax: 714‐978‐7893 Email: daphnie.munoz@CLAconnect.com We want to serve you and we have the qualifications to deliver quality, timely work. Throughout this proposal, we take you on a journey outlining how we’ll work together and the value you can come to appreciate when we exceed expectations. Please contact me if I can provide additional information on our firm or our proposal. Sincerely, CliftonLarsonAllen LLP Daphnie Munoz, CPA Principal 714‐714‐795‐5474 daphnie.munoz@CLAconnect.com ©2023 CliftonLarsonAllen LLP | iii Table of Contents 1. Cover Letter .......................................................................................................................... i Experience and Technical Competence .................................................................................... 4 1. Background ........................................................................................................................... 4 2. Independence ..................................................................................................................... 11 3. License to practice ............................................................................................................... 12 3. Complete Pricing List ..................................................................................................... 14 4. Complementary Services Offered and Corresponding Prices ......................................... 14 5. Staffing and Project Organization ...................................................................................... 15 1. Staffing ................................................................................................................................ 15 2. Key personnel ...................................................................................................................... 15 3. Technical and management approach ................................................................................ 16 4. Engagement segmentation of audit hours ....................................................................... 27 6. Subcontractors .............................................................................................................. 27 7. Disclosures .................................................................................................................... 28 8. Acknowledgement of Insurance Requirements ............................................................. 29 9. Non‐Collusion Affidavit Form ........................................................................................ 30 10. Acknowledgement of Addenda ..................................................................................... 31 Appendix ............................................................................................................................... 33 A. Your service team ............................................................................................................... 34 B. Quality control procedures and peer review report ............................................................ 37 ©2023 CliftonLarsonAllen LLP | 4 Experience and Technical Competence A. Background History of CLA On January 1, 2012, two regional firms, Clifton Gunderson and LarsonAllen, merged to become CLA. They were driven by a shared vision to be a different kind of firm and a dream to be America’s leading providers of professional services. We’re celebrating 11 years as CLA, but the roots of our culture reach back much further. Across decades, the philosophies that drove our legacy firms — from how they served clients and treated their people to how they did business — shared many attributes. We still find them present today in what we call the CLA Promise. You deserve to work with people whose values match your own. Our values drive our behavior and lead to service delivery that exceeds expectations and provides you with the CLA client experience. What does that mean? It means you’ll work with a team with the resources to support the whole of your organization. You can count on industry specialized professionals who bring ideas and strategies that are relevant and actionable. Quite simply, you’ll encounter value beyond the expected. We put relationships first. Our family culture is at the center of our success, and we invite different beliefs and perspectives to the table, so we can truly know and help our clients, our communities, and each other. ©2023 CliftonLarsonAllen LLP | 5 Here’s what you can experience. Your time is valuable: We know how to deliver quality, timely work and we take care of the details so you can focus on what really matters: the important decisions that drive your success. Firm overview It takes balance. With CLA by your side, you can find everything you need in one firm. Professionally or personally, big or small, we can help you discover opportunities and bring balance to get you where you want to go. ©2023 CliftonLarsonAllen LLP | 6 Opportunities for you You’ll find resources you would expect in the largest firms, with the personal touch of people who live and work in your community. You’ll access leaders and professionals in communities across the country, rather than from one central headquarters. We work together to look at your organization holistically, and then help you address challenges by offering support where you need it, from traditional audit and tax to outsourcing and wealth advisory. As you navigate opportunities and challenges in a competitive and constantly changing environment, we’ll embrace change, learn from it, and design processes to make interactions easier, more transparent, and seamless. Opportunities for our people At CLA, people find meaningful work in a fun, compelling, and energizing culture. Our people design their own customized careers through our inspired careers strategic advantage. In 2022 our total headcount was up a record‐breaking 11% and we saw an incredible retention rate of 83%. Inspired by their careers, our family members develop client relationships that bring deeper knowledge and help you shine. We’re one family, working together to create opportunities. What’s more, CLA is building a diverse, inclusive, and equitable culture that welcomes different beliefs and perspectives. We want to be representative of the communities we serve and foster an environment of inclusion and belonging, resulting in enhanced value for our clients, our communities, and each other. Inclusive: We embrace all voices and create opportunities by removing barriers and helping our people build inspired careers. Opportunities for our community CLA’s community impact team unifies the work and missions of our diversity, equity, and inclusion council and the CLA Foundation with a laser focus on advancing education, employment, and entrepreneurship within CLA and throughout our society. Since 2015, our CLA Foundation has granted more than $8 million from nominations made by and funds raised from CLA family members. Each grant recipient’s work aligns with the foundation’s mission to create career opportunities through education, employment, and entrepreneurship by connecting diverse networks inclusive of all genders and races, veterans, and the disability community. Read more in CLA’s annual Promise Report. ©2023 CliftonLarsonAllen LLP | 7 State and local government experience You can benefit from a close personal connection with a team of professionals devoted to governments. Our goal is to become familiar with all aspects of your operations — not just the information needed for the year‐ end audit so that we can offer proactive approaches in the areas that matter most to you: • Finding new ways to operate more effectively and efficiently • Responding to regulatory pressures and complexities • Maintaining quality services in the face of revenue reductions • Providing transparent, accurate, and meaningful financial information to stakeholders, decision‐makers, and your constituents We understand the legislative changes, funding challenges, compliance responsibilities, and risk management duties that impact you. Our experienced government services team can help you navigate the challenges of today, all while seamlessly strategizing for the future. Size of firm’s governmental audit staff With more than 550 professionals dedicated to our state and local government practice, CLA has one of the largest governmental audit and consulting practices in the country and brings extensive experience providing a variety of such services to state and local government entities. Our state and local government team serves more than 4,200 governmental engagements nationwide, including numerous cities, counties, municipalities, states and state agencies, and school boards. In addition, we perform single audits for hundreds of organizations annually, ranking top in the nation for the number of single audits performed by any CPA firm. Office location assigned to manage your engagement The City will be served by our specialized government engagement team located in our Irvine, California office: CliftonLarsonAllen LLP, 2875 Michelle Drive, Suite 300, Irvine, California. The Irvine office has 15 professionals solely focused on providing high quality accounting, auditing, and consulting services to California municipalities, special districts, school districts, community colleges and other government entities. ©2023 CliftonLarsonAllen LLP | 8 Single audit experience CLA performs the largest number of single audits in the United States We audited nearly $278 billion dollars in federal funds in 2021. The chart below illustrates CLA’s experience in serving organizations that receive federal funds and demonstrates our firm’s dedication to serving the government and nonprofit industry. It is more important than ever to find qualified auditors who have significant experience with federal grants specific to the City and can enhance the quality of the City’s single audit. Therefore, the single audit will be performed by a team of individuals who are managed by personnel who specialize in single audits in accordance with OMB’s Uniform Guidance and who can offer both knowledge and quality for the City. As part of our quality control process, the single audit will be reviewed by a firm Designated Single Audit Reviewer. You'll need an audit firm experienced in performing single audits and a familiarity with the specific programs in which you are involved and will benefit from CLA’s experience in this area. Single Audit Resource Center (SARC) award CLA received the Single Audit Resource Center (SARC) Award for Excellence in Knowledge, Value, and Overall Client Satisfaction. SARC's award recognizes audit firms that provide an outstanding service to their clients based on feedback received from an independent survey. The survey queried more than 10,000 nonprofit and government entities about the knowledge of their auditors, the value of their service, and overall satisfaction with their 2021 fiscal year‐end audit. The SARC award demonstrates CLA’s dedication to serving the government and nonprofit industry and maintaining the most stringent regulatory requirements in those sectors. ©2023 CliftonLarsonAllen LLP | 9 Deep industry connections CLA actively supports industry education as a thought leader and industry speaker. We focus on supporting the educational needs of the industry through nationally sponsored trade events. Our team of professionals is sought after, both as educators and as experienced speakers who are invited to speak and teach at major professional events by leading trade associations, including those shown here. We are also actively involved in and/or are members of the following professional organizations: • American Institute of Certified Public Accountants (AICPA) • AICPA’s State and Local Government Expert Panel • AICPA’s Government Audit Quality Center (GAQC) • Government Finance Officers Association (GFOA) • Special Review Committee for the GFOA’s Certificate of Achievement for Excellence in Financial Reporting (Certificate) Program • AICPA Single Audit Quality Task Force • Association of Government Accountants • California Society of Municipal Finance Officers Our involvement in these professional organizations, combined with various technical services we subscribe to, allows use to be at the forefront of change in the constantly changing government environment. We take our responsibility for staying current with new accounting pronouncements, auditing standards, other professional standards and laws and regulations seriously. Insight to strengthen your organization When you’re ready to go beyond the numbers to find value‐added strategies, we offer resources to help you respond to challenges and opportunities including: National webinars — Access complimentary professional development opportunities for your team. Articles and white papers — Stay current on industry information as issues arise. Curious: We care, we listen, we get to know you. CSMFO ©2023 CliftonLarsonAllen LLP | 10 Thought leadership CLA goes beyond the numbers and offers value‐added strategies. Rest assured, you will hear from us throughout the year. We send periodic email publications and host webcasts to keep clients and friends of the firm informed of relevant industry updates. Below are just a few of the resources we offer. You can register for our webcasts and find our extensive resource library on our website, CLAconnect.com. ©2023 CliftonLarsonAllen LLP | 11 Support at every turn With dedicated services specific to state and local governments, you have access to guidance on all aspects of your operations. • Affordable Care Act (ACA) reporting and compliance • Audit, review, and compilation of financial statements • Compliance audits (HUD, OMB Single Audits) • COVID‐19 funding support • Cybersecurity • Enterprise risk management • Forensic accounting, auditing, and fraud investigation • Fraud risk management • Grant compliance • Implementation assistance for complex Governmental Accounting Standards Board (GASB) statements • Internal audit • Outsourced business operations • Performance auditing • Purchase card (p‐card) monitoring and analytics • Risk assessments • Strategic, financial, and operational consulting • Telecom management services Independence can easily become impaired when providing consulting services; therefore, we do not provide any services to our audit clients beyond those allowed. If additional work is requested by the City outside of the scope of the audit, we will discuss with you our proposed fee for additional services prior to beginning the new services. B. Independence CLA is independent of the City of La Quinta and all of the component units of the City under the American Institute of Certified Public Accountant’s Code of Professional Conduct and its interpretations, the U.S. Government Accountability Office’s Government Auditing Standards, and the U.S. Department of Labor’s 29 CFR 2509.75‐9 Interpretive Bulletin and the independence rules of the Public Company Accounting Oversight Board (PCAOB) and/or the U.S. Securities and Exchange Commission, as required. Our firm‐wide quality control policies and procedures foster strict compliance with these professional standards. In addition, the individuals assigned to your engagement are independent of the City. Professional relationships CLA has no known previous relationships involving the City of La Quinta or its component units within the past five years. We will give the City written notice of any professional relationships entered into during the period of this engagement if selected as the City’s service provider. ©2023 CliftonLarsonAllen LLP | 12 C. License to practice CLA is a limited liability partnership and is duly licensed to practice public accountancy in the state of California. All key professional staff assigned to the City’s engagement are registered, licensed CPAs in California. A copy of our state license is provided below: 2. References of California Government Agencies Our clients say it best. And their independent, authentic perspective is invaluable in learning about the experience you’ll have when working with us. We encourage you to connect with our clients to hear it firsthand. City of Glendale Client Contact Shu‐Jun Li, Deputy Director of Finance Phone | Email 818‐551‐3078 | sli@glendaleca.gov Address 141 North Glendale Ave. Suite 346, Glendale, CA 91206 Services Provided City audit, electric and water utility funds audit, successor agency audit, single audit, NTD AUP City of Santa Ana Client Contact Sarah Ro, Accounting Manager Phone | Email 714‐647‐5437 | sro@santa‐ana.org Address 20 Civic Center Plaza, Santa Ana, CA 92701 Services Provided City audit, water utility funds audit, successor agency audit, single audit, investment AUP, measure X examination, SCO report ©2023 CliftonLarsonAllen LLP | 13 City of Burbank Client Contact Heidi Okomoto, Accounting Manager Phone | Email 818‐238‐5509 | hokimoto@burbankca.gov Address 301 E. Olive Avenue, Burbank, CA 91502 Services Provided City audit, electric and water utility funds audit, single audit, investment AUP, AQMD audit Transparent: We place honesty and integrity at the center of all communication. We welcome you to start an open and candid conversation with those who know us best. Similar governmental clients served in California City of Alhambra City of Hesperia City of Portola City of Banning City of Industry City of Rancho Palos Verdes City of Benicia City of Irvine City of Redding City of Burbank City of La Cañada Flintridge City of San Buenaventura City of Camarillo City of La Habra City Of Sand City City of Carlsbad City of La Palma City of Santa Ana City of Carmel‐by‐the‐Sea City of Lake Forest City of Santa Barbara City of Cerritos City of Long Beach City of Santa Fe Springs City of Chico City of McFarland City of Temple City City of Colton City of Monterey Park City of Vernon City of Covina City of Murrieta City of Victorville City of Del Mar City of Norco City of El Segundo City of Pasadena City of Escondido City of Pico Rivera City of Fillmore City of Placentia City of Glendale City of Porterville ©2023 CliftonLarsonAllen LLP | 14 3. Complete Pricing List Our fees are based on the timely delivery of services provided, the experience of personnel assigned to the engagement, and our commitment to meeting your deadlines. CLA understands the importance of providing our clients with value‐added strategies. As part of our fee, we propose to hold routine, proactive quarterly meetings to review and discuss the impact of new accounting issues and other business issues you are facing. We'll help you decide how to handle challenges as they come up — and take advantage of every potential opportunity. Year 1Year 2Year 3Year 4Year 5 Service 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28 City of La Quinta Audit 60,475$ 63,500$ 66,680$ 70,010$ 73,510$ Single Audit (A) 6,030 6,330 6,650 6,980 7,330 GANN Limit Verifications 585 610 640 670 700 Prepartion of SCO Report 3,840 4,030 4,230 4,440 4,660 Sub Total 70,930 74,470 78,200 82,100 86,200 5% Technology and Client Service Fee 3,550 3,720 3,910 4,110 4,310 Total 74,480$ 78,190$ 82,110$ 86,210$ 90,510$ (A) Includes testing for one major program Fee for each additional program 4,000$ 4,200$ 4,410$ 4,630$ 4,860$ 4. Complementary Services Offered and Corresponding Prices If the City wishes us to perform consulting or other services outside the scope of the services described herein, a separate written request from the City will be required. Our hourly rates for these services during each year under the basic contract will be as follows: 2024 2025 2026 2027 2028 Partners 345$ 345$ 355$ 355$ 366$ Directors 215 215 221 221 228 Supervisory Staff 150 150 155 155 159 Staff 95 95 98 98 101 Clerical 85 85 88 88 90 Fiscal Year Ending June 30, ©2023 CliftonLarsonAllen LLP | 15 5. Staffing and Project Organization The true value in working with our team is you ability to develop a personal and professional relationship with leaders who understand your industry, challenges, and opportunities. A. Staffing We staff our engagements based on our client’s specific needs, offering local or national resources as necessary. Our principals and directors are directly involved in fieldwork to help proactively identify significant issues and resolve them with management — which means the engagement is essentially complete when fieldwork ends. While it is not our policy to rotate the engagement team management, we do have the resources to offer additional involvement or bring in other members of our firm as necessary. Our approach recognizes that the most valuable time spent at your location is spent with key decision makers asking clarifying questions, discussing organizational strategies, and dealing with sensitive reporting issues. We believe this approach is effective, cost‐efficient, and produces a high‐quality audit. We will have approximately four to five professionals assigned to the City’s engagement, which includes a principal, director, senior and up to two associates. B. Key personnel Your team will work directly with our team, with the full support of an entire CLA family behind it. Meet your proposed service team below. Engagement Team Member Role Years’ Experience Daphnie Munoz, CPA Engagement Principal Daphnie will have overall engagement responsibility including planning the engagement, developing the audit approach, supervising staff, and maintaining client contact throughout the engagement and throughout the year. Daphnie is responsible for total client satisfaction through the deployment of all required resources and continuous communication with management and the engagement team. 25+ Rebecca Hoang, CPA Engagement Director Rebecca will act as the lead director on the engagement. In this role, Rebecca will assist the engagement principal with planning the engagement and performing complex audit areas. She will perform a technical review of all work performed and is responsible for the review of 11+ ©2023 CliftonLarsonAllen LLP | 16 Engagement Team Member Role Years’ Experience comprehensive annual financial report and all related reports. Stephen Coverstone, CPA Senior Stephen will be responsible for the day‐to‐ day activities for this engagement, including the supervision of all staff assigned. 5+ Additional Staff – We will assign additional staff to your engagement based on your needs and their experience providing services to state and local governments. Ideally, the staff assigned to your team will be from our California offices with state and local governments as their industry focus at CLA. Continuity of service We are committed to providing continuity throughout this engagement. It is our policy to maintain the same staff throughout an engagement, providing maximum efficiency and keeping the learning curve low. With a solid, steady engagement team, each year brings the additional benefits of trust and familiarity. We are also flexible in exploring alternative strategies to non‐mandatory rotation policies. In any business, however, turnover is inevitable. If and when it happens, we will provide summaries of suggested replacements and will discuss re‐assignments prior to finalizing. We have a number of qualified staff members to provide the City with quality service over the term of the engagement. CLA is committed to maintaining high staff retention rates, which we believe are a strong indicator of service quality. High retention rates also indicate that our staff members have the resources they need to perform their tasks and maintain a positive work/life balance. Collaborative: Support from a responsive local team complemented by national resources. We consider the whole of your organization, bringing innovative teams to the table. C. Technical and management approach Understanding of the work to be performed We have read the Request for Proposal (RFP) and understand the scope of the work to be performed as detailed in the RFP under “Scope of Work". Should CLA be selected to serve this engagement, we will perform these services within the time period specified in the RFP and as finalized in the planning stages of the engagement. To meet the requirements of the RFP, the audit will be performed in accordance with auditing standards generally accepted in the United States of America, as set forth by the American Institute of Certified Public Accountants; the standards set forth for financial audits in Government Auditing Standards issued by the Comptroller General of the United States; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and any other applicable federal, state, and local laws or regulations. ©2023 CliftonLarsonAllen LLP | 17 Easing the transition We recognize that a move to a new firm presents an opportunity as well as a challenge. Over our 60‐year history, we have transitioned many clients from predecessor firms and have a collegial and professional relationship with many firms. Our seamless transition reduces your team’s time and we don’t charge for it. We consider it an investment in our relationship. Financial statement audit approach Phase 1: Planning and strategy The main objective of the planning phase is to identify significant areas and design efficient audit procedures. Conduct an entrance meeting – Daphnie Munoz and staff will meet with City personnel to agree on an outline of responsibilities and time frames o Establish audit approach and timing schedule o Determine assistance to be provided by the City personnel o Discuss application of generally accepted accounting principles o Address initial audit concerns o Establish report parameters and timetables o Progress reporting process o Establish principal contacts Gain an understanding of your operations, including any changes in organization, management style, and internal and external factors influencing the operating environment Identify significant accounts and accounting applications, critical audit areas, significant provisions of laws and regulations, and relevant controls over operations Determine the likelihood of effective Information Systems (IS) ‐ related controls Perform a preliminary overall risk assessment Confirm protocol for meeting with and requesting information from relevant staff Establish a timetable for the fieldwork phase of the audit Determine a protocol for using TeamMate Analytics and Expert Analyzer (TeamMate), our data extraction and analysis software, to facilitate timely receipt and analysis of reports from management Compile an initial comprehensive list of items to be prepared by the City, and establish deadlines We will document our planning through: • Entity profile — This profile will help us understand the City's activities, organizational structure, services, management, key employees, and regulatory requirements. • Preliminary analytical procedures — These procedures will assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain evidential matter. They will focus on enhancing our ©2023 CliftonLarsonAllen LLP | 18 understanding of the financial results and will be used to identify any significant transactions and events that have occurred since the last audit date, as well as to identify any areas that may represent specific risks relevant to the audit. • General risk analysis — This will contain our overall audit plan, including materiality calculations, fraud risk assessments, overall audit risk assessments, effects of our IS assessment, timing, staffing, client assistance, a listing of significant provisions of laws and regulations, and other key planning considerations. • Account risk analysis — This document will contain the audit plan for the financial statements, including risk assessment and the extent and nature of testing by assertion. • Prepared by client listing — This document will contain a listing of schedules and reports to be prepared by the City personnel with due dates for each item. • Assurance Information Exchange (AIE) — CLA uses a secure web‐based application to request and obtain documents. This application allows clients to view detailed information, including due dates for all items CLA is requesting. Clients can attach electronic files and add commentary directly on the application. A key element in planning this audit engagement will be the heavy involvement of principals and managers. We will clearly communicate any issues in a timely manner and will be in constant contact as to what we are finding and where we expect it will lead. Using the information we have gathered and the risks identified, we will produce an audit program specifically tailored to the City that will detail the nature and types of tests to be performed. We view our programs as living documents, subject to change as conditions warrant. Phase 2: Systems evaluation We will gain an understanding of the internal control structure of the City for financial accounting and relevant operations. Next, we will identify control objectives for each type of control material to the financial statements, and then identify and gain an understanding of the relevant control policies and procedures that effectively achieve the control objectives. Finally, we will determine the nature, timing, and extent of our control testing and perform tests of controls. This phase of the audit will include testing of certain key internal controls: Electronic data, including general and application controls reviews and various user controls Financial reporting and compliance with laws and regulations We will test controls over certain key cycles, not only to gather evidence about the existence and effectiveness of internal control for purposes of assessing control risk, but also to gather evidence about the reasonableness of an account balance. Our use of multi‐purpose tests allows us to provide a more efficient audit without sacrificing quality. Our assessment of internal controls will determine whether the City has established and maintained internal controls to provide reasonable assurance that the following objectives are met: Transactions are properly recorded, processed, and summarized to permit the preparation of reliable financial statements and to maintain accountability over assets Assets are safeguarded against loss from unauthorized acquisition, use, or disposition Transactions are executed in accordance with laws and regulations that could have a direct and material effect on the financial statements We will finalize our audit programs during this phase. We will also provide an updated prepared by client listing based on our test results and anticipated substantive testing. ©2023 CliftonLarsonAllen LLP | 19 During the internal control phase, we will also perform a review of general and application IS controls for applications significant to financial statements to conclude whether IS general controls are properly designed and operating effectively. Based on our preliminary review, we will perform an initial risk assessment of each critical element in each general control category, as well as an overall assessment of each control category. We will then assess the significant computer‐related controls. For IS‐related controls we deem to be ineffectively designed or not operating as intended, we will gather sufficient evidence to support findings and will provide recommendations for improvement. For IS controls we deem to be effectively designed, we will perform testing to determine if they are operating as intended through a combination of procedures, including observation, inquiry, inspection, and re‐performance. Phase 3: Testing and analysis The extent of our substantive testing will be based on results of our internal control tests. Audit sampling will be used only in those situations where it is the most effective method of testing. After identifying individually significant or unusual items, we will decide the audit approach for the remaining balance of items by considering tolerable error and audit risk. This may include (1) testing a sample of the remaining balance; (2) lowering the previously determined threshold for individually significant items to increase the percent of coverage of the account balance; or (3) applying analytical procedures to the remaining balance. When we elect to sample balances, we will use TeamMate to efficiently control and select our samples. Our workpapers during this phase will clearly document our work as outlined in our audit programs. We will provide the City with status reports and be in constant communication with the City to determine that all identified issues are resolved in a timely manner. We will hold a final exit conference with the City to summarize the results of our fieldwork and review significant findings. Phase 4: Reporting and follow up Reports to management will include oral and/or written reports regarding: Independent Auditors' Report Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditors' Report on Compliance for Each Major Federal Program, Report on Internal Control Over Compliance, and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance Management Letter • Written Communication to Those Charged with Governance, which includes the following areas: o Our responsibility under auditing standards generally accepted in the United States of America o Changes in significant accounting policies or their application o Unusual transactions o Management judgments and accounting estimates o Significant audit adjustments o Other information in documents containing the audited financial statements o Disagreements with the City o The City’s consultations with other accountants o Major issues discussed with management prior to retention o Difficulties encountered in performing the audit ©2023 CliftonLarsonAllen LLP | 20 o Fraud or illegal acts Once the final reviews of working papers and financial statements are completed, our opinion, the financial statements, and management letter will be issued. The City will be given a draft of any comments we propose to include in the management letter. Items not considered major may be discussed verbally with management instead of in the management letter. Our management letter will include items noted during our analysis of your operations. We will make a formal presentation of the audit results to those charged with governance, if requested. Single audit approach The OMB’s Uniform Guidance (2 CFR Part 200) is effective for federal grants made on or after December 26, 2014. This affects how federal grants are managed and audited and impacts every organization that receives federal assistance. Grant compliance can be a confusing topic and many of our clients rely on their federal funding as a major revenue source, so it is important that they understand what these changes mean to their organization. As a leader in the industry, CLA was out in front of these changes and informed our clients of how to be proactive about these changes could impact their entity. CLA professionals are available to provide guidance and tools tailored to the City’s needs, and to assist in compliance with these rules. The AICPA clarified auditing standard, AU‐C 935 “Compliance Audits”, requires risk‐based concepts to be used in all compliance audits including those performed in accordance with 2 CFR Part 200. Our risk‐based approach incorporates this guidance. We conduct our single audit in three primary phases, as shown, below: Phase 1: Risk assessment and planning The risk assessment and planning phase encompasses the overall planning stage of the single audit engagement. During this phase, we work closely with the City’s management to determine that programs and all clusters of programs are properly identified and risk‐rated for determination of the major programs for testing. We also review the forms and programs utilized in the prior year to determine the extent of any changes which are required. We accomplish this by following the methodology below: Determine the threshold to distinguish between Type A and B programs, including the effect of any loans and loan programs ©2023 CliftonLarsonAllen LLP | 21 Utilizing the preliminary Schedule of Expenditure of Federal Awards, we can identify the Type A and significant Type B programs (25% of Type A threshold) in accordance with the Uniform Guidance Identify the programs tested and the findings reported for the past two fiscal years. Determine and document the program risk based on the past two single audits Prepare and distribute Type B program questionnaires to determine risk associated with Type B programs Determine the major programs to be tested for the current fiscal year based on the previous steps Based on our determination of the major programs, we obtain the current year compliance supplement to aid in the determination of Direct and Material Compliance requirements, and customize the audit program accordingly Determine the preferred methods of communication during the audit Phase 2: Major program testing We determine the programs to be audited based on the risk assessment performed in the planning phase. We perform the audit of the programs in accordance with UG. To accomplish this, we perform the following: Schedule an introductory meeting and notify the City’s management of the major programs for the current fiscal year Plan and execute the testing of the expenditures reported on the Schedule of Expenditures of Federal Awards Perform tests of compliance and internal controls over compliance for each major program identified Schedule periodic progress meetings to determine that schedules are adhered to and identify issues as they arise Conduct entrance and exit conference meetings with each grant manager Phase 3: Final assessment and reporting We re‐perform the steps noted in the preliminary assessment and planning stage once the final Schedule of Expenditures of Federal Awards is received to determine if additional major programs were identified. Based on the final determination of the programs we perform the following: Identify Type A and significant Type B programs which were not previously identified Re‐assess the risk and determine if we are required to audit additional programs Perform compliance testing at the entity wide level related to procurement and cash management requirements Perform testing to validate the status of prior year findings for those programs not selected for audit. Prepare the Schedule of Findings and Questioned Costs Conduct exit conference with the City’s management to review drafts of required reports: o Independent Auditors’ Report on Internal Control over financial reporting and on compliance and other matters based on an audit of Financial Statements Performed in Accordance with Government Auditing Standards o Independent Auditors’ Report on Compliance for Each Major Federal Program, Report on Internal Control Over Compliance, and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance Throughout the single audit, we maintain communication through periodic progress meetings with those designated by the City. These meetings will be on a set schedule, but as frequently as the City determines. During these meetings, we discuss progress impediments and findings as they arise. ©2023 CliftonLarsonAllen LLP | 22 Commitment to communication with management Continual communication starts when an engagement letter is issued and continues throughout the remainder of the year. This includes the exchange of ideas and advice as changes are considered or implemented by the entity or the accounting profession. Our commitment to this practice encourages open lines of communication and often prevents or mitigates service delivery issues. During the engagement, we will hold regular status meetings with the City to address and understand day‐to‐ day operations, results, and outlying issues. Tracking and formally reporting the engagement status can: • Provide a consistent technique for monitoring progress against plan • Identify issues quickly to allow for timely corrective action • Provide an objective rather than subjective evaluation of status • Provide timely information on a regular basis • Assist with obtaining buy‐in of audit recommendations on a timely basis We will make an immediate, written report of all irregularities, illegal acts or indications of illegal acts of which we become aware, to the following parties: the City Council, the City Manager, the City Attorney, the Finance Committee, and the Director of Finance. Data analytics In addition to standard auditing methodology, a distinguishing aspect of CLA’s audit services incorporates the power of data analytics to multiply the value of the analyses and the results we produce for clients. CLA’s data methodology is a six‐phase, systematic approach to examining an organization’s known risks and identifying unknown risks. Successful data analysis is a dynamic process that continuously evolves throughout the duration of an engagement and requires collaboration of the engagement team. Data analytics are utilized throughout our audit process, our Risk Assessment, Data Analytics and Review (“RADAR”) is a specific application of general ledger data analytics that has been implemented on all audit engagements. RADAR is an innovative approach created and used only by CLA that aims to improve and replace traditional preliminary analytics that were being performed. The phases in our data analytics process are as follows: 1. Planning In the planning stage of the engagement, the use of data analysis is considered and discussed to determine that analytics are directed and focused on accomplishing objectives within the risk assessment. Areas of focus, such as journal entries, cash disbursements, inventory, and accounts receivable are common. 2. Expectations We consider the risks facing our client and design analytics to address these risks. Through preliminary discussions with management and governance, we develop and document expectations of financial transactions and results for the year. These expectations will assist in identifying anomalies and significant audit areas in order to assess risk. ©2023 CliftonLarsonAllen LLP | 23 3. Data acquisition Sufficient planning, a strong initial risk assessment, and an adequate understanding of your systems will serve as the foundation necessary to prepare our draft data request list. We will initially request information in written format and conduct follow‐up conversations helping CLA practitioners share a mutual understanding of the type of data requested and the format required. If there are going to be any challenges/obstacles related to obtaining data, or obtaining data in the preferred format, they will generally be discovered at this point. 4. Technical data analysis Technical analysis of the data requires the skillful blend of knowledge and technical capability. Meaningful technical analysis provides the engagement team with a better understanding of the organization. The additional clarity assists the engagement team to better assess what is “normal” and, in turn, be better suited to spot anomalies, red flags, and other indications of risk. Analytics generally fall into five categories, each looking into the data set in a different way and deployed with a different purpose. 5. Interpret results and subsequent risk assessment Trends and anomalies will be identified through the performance of the above referenced analytics. Comments regarding the interpretation of those trends and anomalies will be captured. When trends are identified, they are reconciled against expectations. For anomalies identified, the approach to further audit procedures will be considered. 6. Response and document The last process is to capture responses and determine that our procedures are properly documented. Abstracts, charts, or summaries of both trends and anomalies are retained in audit documentation to support our identification of risks. Our analysis can be tailored and customized to help analyze an array of information, including client‐specific and proprietary data. Key benefits of data analytics include: • Built‐in audit functionality including powerful, audit specific commands and a self‐documenting audit trail • 100% data coverage, which means that certain audit procedures can be performed on entire populations, and not just samples • Unlimited data access allows us to access and analyze data from virtually any computing environment • Eliminates the need to extrapolate information from errors (a common effort when manually auditing data) and allows for more precise conclusions ©2023 CliftonLarsonAllen LLP | 24 Assistance from client We request that the City provide access to all records required for the audits and other requirements of the contract. In addition, we request that you assign a “project coordinator” through whom we will communicate and coordinate activities. We do not foresee needing City staff other than during normal business hours. To assist in this process, we will provide a detailed Prepared by Client list early in the engagement. We will ask that your accounting staff provide us with standard schedules, as well as additional requested supporting items. We anticipate that your accounting personnel will need to locate and submit to us certain invoices, vouchers, cancelled checks, and other documents and records. We are extremely flexible as to the format in which we receive this information and will determine through the use of the latest technology that your personnel will not be asked to perform any unnecessary or extensively disruptive tasks. We will depend on your staff to provide us with as much information as possible, in an effort to limit everyone’s time on the engagement and, ultimately, to save your organization money. Digital strategies Leverage data and automation to help you power success. Digital strategy provides a road map for tomorrow and identifies actionable opportunities for your organization. Properly harnessed, technology and data reveal deep insight to your organization. We can help you develop digital strategies to leverage trends, overcome challenges, and innovate for the future. We help our clients put data to work to: Improve revenue and expense forecasting Reduce time to market Improve strategic decision making Reduce client acquisition costs Improve jobsite and production line safety Reduce equipment downtime Improve cash flow Reduce client churn Streamline operational processes Reduce fraud through automated anomaly detection Increase employee retention and engagement Reduce pricing volatility ©2023 CliftonLarsonAllen LLP | 25 Consulting and outsourcing An organization that is strong across functional areas can turn business challenges into opportunity. As human resources compliance issues become increasingly complex, organizations need flexibility to expand and contract to meet rapidly changing business needs. CLA can help you manage your day‐to‐day operations so you can focus on what you do best — providing a full range of municipal and public enterprise services. Whether you need a team to become an extension of yours or simply want resources to lean on, we have the experience to offer relevant guidance and services customized and scaled to your needs — even as those needs change. ©2023 CliftonLarsonAllen LLP | 26 Engagement timeline Count on clear communication and regular updates. Per our discussions we have designed a plan that meets your needs and key deadlines. In our planning meeting, we will discuss this timeline with you in greater detail and adjust as appropriate. Date Completed By Task March Pre‐interim work Review prior year workpapers Request initial planning documents from the City April 30 Initial planning meeting June 30 Interim audit work September 30 Field audit work See below Draft and final reports To be determined by City Presentation to the City Council and Finance Committee Ongoing Planning and update meetings Reports to be issued Report Draft Due Date Final Due Date Independent Auditor’s Report on Annual Comprehensive Financial Report November 30 December 31 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards November 30 December 31 Communication to Those In Charge of Governance November 30 December 31 Report on Compliance with Article XIIIB Appropriation Limit November 30 December 31 Independent Auditors' Report on Compliance for Each Major Federal Program, Report on Internal Control Over Compliance, and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance January 31 February 28 Preparation of State Controller’s Report January 15 January 31 ©2023 CliftonLarsonAllen LLP | 27 D.Engagement segmentation of audit hours Principals Director Supervisory Staff Staff Clerical Total City of La Quinta audit 40 70 120 130 15 375 Single audit 3 7 12 16 2 40 GANN Limit Verification 1 ‐ 3 1 5 Preparation of SCO Report 1 3 ‐ 30 ‐ 34 Total Hours 44 81 132 179 18 454 Ability to complete audits on schedule While our size and depth of resources allow us to conduct several audits at the same time, we also realize that the timely completion and issuance of the audit is an integral part of the overall service experience. The quality of the work may be exceptional, yet if it takes too long, the value of that service is lost. Conversely, we have seen the audit completed in a very short period at the expense of quality. Our goal is to begin the audit when the client is ready. We provide advance work letters, “to‐do” lists, and whatever we can – up front – so that once the audit starts, it will be done efficiently and effectively. When we leave, we usually provide the audit entries for the client to post so they can run their internal departmental and other reports. Once we leave the client, our goal is to issue the final audit reports according to your timetable. This requires a lot of coordination of activities with our clients, but we have found this to be a good balance in providing quality and timely services. Our project management methodology results in a client service plan that provides for regular, formal communication with the entire management team and allows us to be responsive to your needs. The schedule allows for input from your personnel to make certain that the services are completed based on your requirements. The plan may also be amended during the year based on input from the audit committee. Reliable: Look for us to respond in hours, not days. We strive to deliver service that exceeds your expectations. 6. Subcontractors While we are not a small or minority‐owned business, we are committed to utilizing the services of such firms whenever possible. This includes using small and/or minority‐owned businesses as subcontractors, as well as vendors. For this engagement, however, we do not foresee using any subcontractors. CLA strives to fill its professional positions with among the best and most experienced accountants regardless of race or gender. ©2023 CliftonLarsonAllen LLP | 28 7. Disclosures No regulatory action has ever been taken against any office of our firm due to substandard work. We had no significant deficiencies noted in any federal or state desk reviews over the past five years. ©2023 CliftonLarsonAllen LLP | 29 8. Acknowledgement of Insurance Requirements ©2023 CliftonLarsonAllen LLP | 30 9. Non‐Collusion Affidavit Form ©2023 CliftonLarsonAllen LLP | 31 10. Acknowledgement of Addenda ©2023 CliftonLarsonAllen LLP | 32 ©2023 CliftonLarsonAllen LLP | 33 Appendix ©2023 CliftonLarsonAllen LLP | 34 A. Your service team Daphnie Munoz, CPA CLA (CliftonLarsonAllen LLP) Audit and Assurance Principal 714‐978‐1300 Irvine, California daphnie.munoz@CLAconnect.com Profile Daphnie is an assurance principal at our CLA’s Irvine office, formerly White Nelson Diehl Evans (WNDE). She has 25 years’ experience with a focus on state and local government audit and assurance services. She earned her CPA designation in 2001 and became an audit and assurance principal in 2011. A key figure in the firm’s government audit practice, Daphnie works closely with government entities to provide thorough attestation services, including single audits. She has extensive experience with a wide range of local government related audit engagements, including cities, successor agencies/redevelopment agencies, federal grants, special districts, compliance audits, and agreed‐upon procedures engagements. Technical experience Government entities, including nonprofits and special districts Education and professional involvement Bachelor of science in accounting from De La Salle University, Manila Certified Public Accountant in the state of California American Institute of Certified Public Accountants (AICPA) California Society of Certified Public Accountants (CalCPA) California Society of Municipal Finance Officers (CSMFO) Government Finance Officers Association (GFOA) Local government experience Cities Alhambra Fillmore Lancaster Santa Barbara Banning Glendale Murrieta Stanton Burbank Hesperia Palos Verdes Estates Torrance Colton Lake Forest Santa Ana ©2023 CliftonLarsonAllen LLP | 35 Rebecca Hoang Tai, CPA CLA (CliftonLarsonAllen LLP) Director 714‐795‐5442 Irvine, California rebecca.hoang@CLAconnect.com Profile Rebecca is licensed to practice as a certified public accountant in California. She is a director at our CLA’s Irvine office, formerly White Nelson Diehl Evans (WNDE) since 2012 and has been an integral member of the team. She currently serves in the firm’s Audit Department, as a director. In this role, she works with clients in a wide variety of industries, including manufacturing, professional services, construction contracting, government agencies, and employee benefit plans. A knowledgeable professional, Rebecca is a great resource for her teammates. She credits her career success to having both a great support system and a number of wonderful mentors to guide her along the way. She was inspired to pursue a career in accounting after several introductory accounting classes she took in college sparked her interest. Technical experience Local government audits, including cities and special districts Education and professional involvement Bachelor of arts in business economics from University of California, Irvine Certified Public Accountant in the state of California American Institute of Certified Public Accountants (AICPA) California Society of Certified Public Accountants (CalCPA) Local government experience Key relevant local government experience Colton Vernon Midway City Sanitary District Escondido Irvine Norco Temple City Lake Forest Chino CLAconnect.com CPAS | CONSULTANTS | WEALTH ADVISORS CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor. ©2023 CliftonLarsonAllen LLP | 36 Stephen Coverstone, CPA CLA (CliftonLarsonAllen LLP) Senior 714‐795‐5362 Irvine, California stephen.coverstone@CLAconnect.com Profile Stephen is a senior with CLA, formerly White Nelson Diehl Evans (WNDE), working primarily with state and local governments. Stephen has more than five years’ experience performing audits for local governments. Proven to deliver high quality work products using efficient and effective communication styles, problem‐solving leadership, and detail‐oriented planning abilities. Continues to develop and apply a growing knowledge of different accounting principles and auditing standards throughout every engagement. Strives to make sure all engagements are progressing timely and being accurately carried out by working directly with experienced staff, as well as engagement principals and managers. Technical experience State and local government o Currently in‐charges the overall audit process including the planning, performing, and preparation of numerous financial statement audits, single audits, and agreed upon procedures for various cities, water districts, and retirement systems o Audits of schedules required by GASB 68 and GASB 75 and performance of related census data testing Education and professional involvement Bachelor of science in accounting from Portland State University in Portland, Oregon Certified Public Accountant in California American Institute of Certified Public Accountants California Society of Certified Public Accountants Key relevant clients Public Agency Retirement Services City of Pasadena City of Irvine CLAconnect.com CPAS | CONSULTANTS | WEALTH ADVISORS CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor. ©2023 CliftonLarsonAllen LLP | 37 B. Quality control procedures and peer review report In the most recent peer review report, dated November 2022, we received a rating of pass, which is the most positive report a firm can receive. We are proud of this accomplishment and its strong evidence of our commitment to technical excellence and quality service. The full report is provided on the following page. In addition to an external peer review, we have implemented an intensive internal quality control system to provide reasonable assurance that the firm and our personnel comply with professional standards and applicable legal and regulatory requirements. Our quality control system includes the following: • A quality control document that dictates the quality control policies of our firm. In many cases, these policies exceed the requirements of standard setters and regulatory bodies. Firm leadership promotes and demonstrates a culture of quality that is pervasive throughout the firm’s operations. To monitor our adherence to our policies and procedures, and to foster quality and accuracy in our services, internal inspections are performed annually. • Quality control standards as prescribed by the AICPA. The engagement principal is involved in the planning, fieldwork, and post‐fieldwork review. In addition, an appropriately experienced professional performs a risk‐ based second review of the engagement prior to issuance of the reports. • Hiring decisions and professional development programs designed so personnel possess the competence, capabilities, and commitment to ethical principles, including independence, integrity, and objectivity, to perform our services with due professional care. • An annual internal inspection program to monitor compliance with CLA’s quality control policies. Workpapers from a representative sample of engagements are reviewed and improvements to our practices and processes are made, if necessary, based on the results of the internal inspection. • Strict adherence to the AICPA’s rules of professional conduct, which specifically require maintaining the confidentiality of client records and information. Privacy and trust are implicit in the accounting profession, and CLA strives to act in a way that will honor the public trust. • A requirement that all single audit engagements be reviewed by a designated single audit reviewer, thereby confirming we are in compliance with the standards set forth in the Uniform Guidance. ©2023 CliftonLarsonAllen LLP | 38