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HomeMy WebLinkAboutC-4776 - PSA for Auditing ServicesTHIS AMENDMENT NO. TWO TO PROFESSIONAL SERVICES AGREEMENT ("Amendment No. Two") is made and entered into as of this 3rd day of June, 2015 ("Effective Date'), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and WHITE NELSON DIEHL EVANS, LLP, a California limited liability partnership ("Consultant'), whose address is 2875 Mitchell Drive, Suite 300, Irvine, California 92606, and is made with reference to the following: RECITALS A. On May 10, 2011, City and Consultant entered into a Professional Services Agreement ("Agreement') for auditing services ("Project'). B. On November 20, 2014, City and Consultant entered into Amendment No. One to the Agreement ("Amendment No. One") to reflect additional services not previously included in the Agreement, to extend the term of the Agreement to March 31, 2016, and to increase the total compensation. C. City desires to enter into this Amendment No. Two to reflect additional Services not included in the Agreement, as amended. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. SERVICES TO BE PERFORMED Exhibit A to the Agreement shall be supplemented to include the Scope of Services, attached hereto as Exhibit A and incorporated herein by reference ("Services" or "Work"). Exhibit A to the Agreement and Exhibit A to Amendment No. Two shall collectively be known as "Exhibit A." The City may elect to delete certain Services within the Scope of Services at its sole discretion. 2. INTEGRATED CONTRACT Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Agreement shall remain unchanged and shall be in full force and effect. [SIGNATURES ON NEXT PAGE] r r� 'T s AMENDMENT NO. TWO TO L PROFESSIONAL SERVICES AGREEMENT WITH WHITE NELSON DIEHL EVANS, LLP FOR AUDITING SERVICES THIS AMENDMENT NO. TWO TO PROFESSIONAL SERVICES AGREEMENT ("Amendment No. Two") is made and entered into as of this 3rd day of June, 2015 ("Effective Date'), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and WHITE NELSON DIEHL EVANS, LLP, a California limited liability partnership ("Consultant'), whose address is 2875 Mitchell Drive, Suite 300, Irvine, California 92606, and is made with reference to the following: RECITALS A. On May 10, 2011, City and Consultant entered into a Professional Services Agreement ("Agreement') for auditing services ("Project'). B. On November 20, 2014, City and Consultant entered into Amendment No. One to the Agreement ("Amendment No. One") to reflect additional services not previously included in the Agreement, to extend the term of the Agreement to March 31, 2016, and to increase the total compensation. C. City desires to enter into this Amendment No. Two to reflect additional Services not included in the Agreement, as amended. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. SERVICES TO BE PERFORMED Exhibit A to the Agreement shall be supplemented to include the Scope of Services, attached hereto as Exhibit A and incorporated herein by reference ("Services" or "Work"). Exhibit A to the Agreement and Exhibit A to Amendment No. Two shall collectively be known as "Exhibit A." The City may elect to delete certain Services within the Scope of Services at its sole discretion. 2. INTEGRATED CONTRACT Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Agreement shall remain unchanged and shall be in full force and effect. [SIGNATURES ON NEXT PAGE] IN WITNESS WHEREOF, the parties have caused this Amendment No. Two to be executed on the dates written below. APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE Date: S/L?-14 � CITY OF NEWPORT BEACH, a California municipal corporation Date: BY: r — C'�� B Y Aaron C.arp (Am of ltvlor D =Mat sie icz City Attorney Finance Director ATTEST: Date: , BrownLeilani 1. City Clerk �, to U CONSULTANT: WHITE NELSON DIEHL EVANS, LLP, a California limited liability partnership Date: & - .__ ► 5 -- By: By: Nitin Patel General Partner [END OF SIGNATURES] Attachments: Exhibit A - Scope of Services WHITE NELSON DIEHL EVANS, LLP Page 2 EXHIBIT A SCOPE OF SERVICES This Scope of Services shall supplement the Amendment No. One to Professional Services Agreement between the City of Newport Beach and White Nelson Diehl Evans LLP dated November 20, 2014 to provide services to the City of Newport Beach (the City) for the year ending June 30, 2015. We will audit the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements, of the City as of and for the year ending June 30, 20 15. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis, to supplement the City's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. As part of our engagement, we will apply certain limited procedures to the City's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1) Management's Discussion and Analysis. 2) Defined Benefit Plan Schedules Required by GASB Statement No. 68, Accounting and Financial Reporting for Pensions - An Amendment of GASB Statement No. 27. We have also been engaged to report on supplementary information other than RSI that accompanies the City's financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole: 1) Combining and individual fund financial statements. 2) Schedule of expenditures of federal awards. WHITE NELSON DIEHL EVANS, LLP Page A-1 The following other information accompanying the basic financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements, and our auditors' report will not provide an opinion or any assurance on that other information: 1) Introductory Section. 2) Statistical Section. Audit Objectives: The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the third paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on: 1) Internal control related to the financial statements and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. 2) Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states (1) that the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. The OMB Circular A-133 report on internal control over compliance will include a paragraph that states that the purpose of the report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Both reports will state that the report is not suitable for any other purpose. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major program(s) in accordance with Circular A-133, and other procedures we consider necessary to enable us to express such opinions. We will issue written reports upon completion of our Single Audit. Our reports WHITE NELSON DIEHL EVANS, LLP Page A-2 will be addressed to the City Council. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis -of -matter or other -matter paragraphs. If our opinions on the financial statements or the Single Audit compliance opinions are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or issue reports, or may withdraw from this engagement. Audit Procedures - General: An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the City or to acts by management or employees acting on behalf of the City. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform the appropriate level of management of any material errors or any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations WHITE NELSON DIEHL EVANS, LLP Page A-3 from you about your responsibilities for the financial statements; schedule of expenditures of federal awards; federal award programs; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by general accepted auditing standards. Audit Procedures - Internal Controls: Our audit will include obtaining an understanding of the City and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weakness. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A-133. Audit Procedures - Compliance: As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City's compliance with provisions of applicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of test of transactions and other applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the WHITE NELSON DIEHL EVANS, LLP Page A-4 City's major programs. The purpose of those procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-133. Other Services We will also assist in preparing the financial statements and related notes of the City in conformity with U.S. generally accepted accow1ting principles and OMB Circular A-133 based on information provided by you. These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. Management Responsibilities: Management is responsible for (1) establishing and maintaining effective internal controls, including internal controls over compliance, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; (2) following laws and regulations; (3) ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements; and (4) ensuring that management is reliable and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements, schedule of expenditures of federal awards, and all accompanying information in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness for that information. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional information that we may request for the purpose of the audit, and (3) unrestricted access to persons within the City from whom we determine it necessary to obtain audit evidence. Your responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the City involving (1) management, (2) employees who have significant roles in WHITE NELSON DIEHL EVANS, LLP Page A-5 internal control, and (3) others where the fraud could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the City received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the government complies with applicable laws, regulations, contracts, agreements, and grants. Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, or abuse that we report. Additionally, as required by OMB Circular A-133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. You are responsible for identifying all federal awards received and understanding and complying with the compliance requirements and for the preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received) in conformity with OMB Circular A-133. You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards. You also agree to make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the schedule of expenditures of federal awards in accordance with OMB Circular A-133; (2) you believe the schedule of expenditures of federal awards, including its form and content, is fairly presented in accordance with OMB Circular A-133; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. You are also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles (GAAP). You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information. You also agree to make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. WHITE NELSON DIEHL EVANS, LLP Page A-6 Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible' for identifying and providing report copies of previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. You are also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. You agree to assume all management responsibilities relating to the financial statements, related notes, and any other nonaudit services we provide. You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements and related notes and that you have reviewed and approved the financial statements and related notes prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an individual, preferable from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, yon understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. Engagement Administration, Fees and Other: Noted below is a listing of work required by City staff to assist in the audits. 1. Preparation of trial balances for all funds, after posting of all year-end journal entries. 2. Preparation of schedules supporting all major balance sheet accounts, and selected revenue and expenditure accounts. 3. Typing of all confirmation requests. 4. Pulling and refilling of all supporting documents required for audit verification. 5. Preparation of the Comprehensive Annual Financial Report and notes to the financial statements. Our maximum annual fees for the year ending June 30, 2015 are as follows: City audit Single Audit of Federal Grants $35,852 $6,351 $42,203 WHITE NELSON DIEHL EVANS, LLP Page A-7 The maximum annual fees stipulated herein contemplate that conditions satisfactory to the normal progress and completion of the examination will be encountered and the City accounting personnel will furnish the agreed upon assistance in connection with the audit. However, if unusual circumstances are encountered which make it necessary for us to do additional work; we shall report such conditions to the responsible City officials and provide the City with an estimate of the additional accounting fees involved. At the conclusion of the engagement, we will complete the appropriate sections of the Data Collection Form that summarizes our audit findings. It is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and corrective action plan) along with the Data Collection Form to the federal audit clearinghouse. We will coordinate with you the electronic submission and certification. If applicable, we will provide copies of our report for you to include with the reporting package you will submit to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. We will provide copies of our reports to the City; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of White Nelson Diehl Evans LLP and constitutes confidential information. However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to grantor agencies or their designees, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of White Nelson Diehl Evans LLP personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. In accordance with our film's current record retention policy, all of your original records will be returned to you at the conclusion of this engagement. Our audit documentation files will be kept for a period of seven years after the issuance of the audit report. All other files will be kept for as long as you retain us as your auditors. However, upon termination of our service, all records will be destroyed after a period of seven years. Physical deterioration or catastrophic events may further shorten the life of these records. The audit documentation files of our firm are not a substitute for your original records. WHITE NELSON DIEHL EVANS, LLP Page A-8 We expect to begin our interim fieldwork in July 2015 and final fieldwork in October 2015. In addition, we expect to issue our reports no later than December 31, 2015. Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our most recent peer review report accompanies this. WHITE NELSON DIEHL EVANS, LLP Page A-9 Heidenreich & Heidenreich, CPAs, PLLC 102015.51" street, Sulte 11170 Phoenix AZ 85044 (480)704.6301 fax 785-4619 System Review Report August 3, 2012 To the Owners of White Nelson Diehl Evans, LLP and the Peer Review Committee of the CA Society of CPAs We have reviewed the system of quality control for the accounting and auditing practice of White Nelson Diehl Evans, LLP (the firm) in effect for the year ended March 31, 2012. 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. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.orgiprsummary. As required by the standards, engagements selected for review included engagements performed under the Government Auditing Standards and audits of employee benefit plans. In our opinion, the system of quality control for the accounting and auditing practice of White Nelson Diehl Evans, LLP in effect for the year ended March 31, 2012, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects_ Firms can receive a rating of pass, pass with deficiency(ies) or fail. White Nelson Diehl Evans, LLP has received a peer review rating of pass. Jlai"vre. & Jl.¢iaewraicii. Heidenreich & Heidenreich, CPAs, PLLC r -- r - AMENDMENT NO. ONE TO PROFESSIONAL SERVICES AGREEMENT WITH WHITE NELSON DIEHL EVANS LLP FOR AUDITING SERVICES THIS AMENDMENT NO. ONE TO PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and entered into as of this 20th day of November, 2014 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and WHITE NELSON DIEHL EVANS LLP, a California limited liability partnership ("Consultant"), whose address is 2875 Mitchell Drive, Suite 300, Irvine, California 92606, and is made with reference to the following: RECITALS A. On May 10, 2011, City and Consultant entered into a Professional Services Agreement ("Agreement") for auditing services ("Project"). B. City desires to enter into this Amendment No. One to reflect additional Services not included in the Agreement, as amended, to extend the term of the Agreement to March 31, 2016 and to increase the total compensation. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. TERM . Section 1 of the Agreement is amended in its entirety and replaced with the following: "The term of this Agreement shall commence on the Effective Date, and shall terminate on March 31, 2016, unless terminated earlier as set forth herein." 2. COMPENSATION TO CONSULTANT Exhibit B to the Agreement shall be supplemented to include the Schedule of Billing Rates, attached hereto as Exhibit B and incorporated herein by reference ("Services' or "Work"). Exhibit B to the Agreement shall collectively be known as "Exhibit B." Section 4 of the Agreement is amended in its entirety and replaced with the following: "City shall pay Consultant for the Services on a time and expense not -to - exceed basis in accordance with the provisions of this Section and the Schedule of Billing Rates attached hereto as Exhibit B and incorporated herein by reference. Consultant's compensation for all Work performed in accordance with this Agreement, including all reimbursable items and subconsultant fees, shall not exceed Two Hundred Thirteen Thousand Seven Hundred Thirty Four Dollars and 001100 ($213,734.00) without prior written authorization from City. No billing rate changes shall be made during the term of this Agreement without the prior written approval of City." The total amended compensation reflects Consultant's additional compensation for additional Services to be performed in accordance with this Amendment No. One, including all reimbursable items and subconsultant fees, in an amount not to exceed Forty Two Thousand Two Hundred Three Dollars and 001100 ($42,203.00), 3. INTEGRATED CONTRACT Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Agreement shall remain unchanged and shall be in full force and effect. [SIGNATURES ON NEXT PAGE] White Nelson Diehl Evans LLP Page 2 IN WITNESS WHEREOF, the parties have caused this Amendment No. One to be executed on the dates written below. APPROVED AS TO FORM: CITY ATTORIVY'S OFFICE Date: 11 /V /11 IN Aaron C" Harp City Attorney ATTEST: Date: I By: Leilani I. Brown City Clerk CITY OF NEWPORT BEACH, a California municipal corporation Date: �) By: �- \\q Dave City Manager CONSULTANT: White Nelson Diehl Evans LLP, a California limited liability partnership Date: By:� Nitin Patel General Partner [END OF SIGNATURES] Attachments: Exhibit B — Schedule of Billing Rates White Nelson Diehl Evans LLP Page 3 EXHIBIT B SCHEDULE OF BILLING RATES White Nelson Diehl Evans LLP Page B-1 Schedule of Fees City's Financial Audit City's Single Audit Total Fees FY 2014-15 $ 35,852 6,351 $ 42,203 CERTIFICATE OF INSURANCE CHECKLIST City of Newport Beach This checklist is comprised of requirements as outlined by the City of Newport Beach. * Date Received: 3/9/15 Dept./Contact Received From: Anthony Date Completed: 3/10/15 Sent to: Anthony By: Chris/Alicia Company/Person required to have certificate: White Nelson Diehl Evans, LLP Type of contract: All Others I. GENERAL LIABILITY EFFECTIVE/EXPIRATION DATE: 1/1/14 to 6/1/15 A. INSURANCE COMPANY: Sentinel Insurance Company Ltd B. AM BEST RATING (A-: VII or greater): A; XV C. ADMITTED Company (Must be California Admitted): Is Company admitted in California? ® Yes ❑ No D. LIMITS (Must be $1 M or greater): What is limit provided? 1,000,000/2,000,000 E. ADDITIONAL INSURED ENDORSEMENT — please attach ® Yes ❑ No F. PRODUCTS AND COMPLETED OPERATIONS (Must (What is limits provided?) include): Is it included? (completed Operations status does F. PRIMARY & NON-CONTRIBUTORY WORDING (For Waste not apply to Waste Haulers or Recreation) ® Yes ❑ No G. ADDITIONAL INSURED FOR PRODUCTS AND G. HIRED AND NON -OWNED AUTO ONLY: COMPLETED OPERATIONS ENDORSEMENT (completed H. NOTICE OF CANCELLATION: Operations status does not apply to Waste Haulers) ® Yes ❑ No H. ADDITIONAL INSURED WORDING TO INCLUDE (The City its officers, officials, employees and volunteers): Is it included? ® Yes ❑ No I. PRIMARY & NON-CONTRIBUTORY WORDING (Must be included): Is it included? ® Yes ❑ No J. CAUTION! (Confirm that loss or liability of the named insured is not limited solely by their negligence) Does endorsement include "solely by negligence" wording? ❑ Yes ®No K. ELECTED SCMAF COVERAGE (RECREATION ONLY): ® N/A ❑ Yes ❑ No L. NOTICE OF CANCELLATION: ❑ N/A ® Yes ❑ No II. AUTOMOBILE LIABILITY EFFECTIVE/EXPIRATION DATE: 1/1/14 to 6/1/15 A. INSURANCE COMPANY: Sentinel Insurance Company Ltd B. AM BEST RATING (A-: VII or greater) A; XV C. ADMITTED COMPANY (Must be California Admitted): Is Company admitted in California? ® Yes ❑ No D. LIMITS - If Employees (Must be $1 M min. BI & PD and $500,000 UM, $2M min for Waste Haulers): What is limits provided? 1,000,000 E. LIMITS Waiver of Auto Insurance / Proof of coverage (if individual) (What is limits provided?) N/A F. PRIMARY & NON-CONTRIBUTORY WORDING (For Waste Haulers only): ® N/A ❑ Yes ❑ No G. HIRED AND NON -OWNED AUTO ONLY: ❑ N/A ® Yes ❑ No H. NOTICE OF CANCELLATION: ❑ N/A ® Yes ❑ No III. WORKERS' COMPENSATION EFFECTIVE/EXPIRATION DATE: 6/1/14 to 6/1/15 A. INSURANCE COMPANY: Hartford Insurance Company of the Midwest B. AM BEST RATING (A-: VII or greater): A; XV C. ADMITTED Company (Must be California Admitted): ® Yes ❑ No D. WORKERS' COMPENSATION LIMIT: Statutory ® Yes ❑ No E. EMPLOYERS' LIABILITY LIMIT (Must be $1 M or greater) 1,000,000 F. WAIVER OF SUBROGATION (To include): Is it included? ® Yes [:]No G. SIGNED WORKERS' COMPENSATION EXEMPTION FORM: ® N/A ❑ Yes ❑ No H. NOTICE OF CANCELLATION: ❑ N/A ® Yes ❑ No ADDITIONAL COVERAGE'S THAT MAYBE REQUIRED IV. PROFESSIONAL LIABILITY ® N/A ❑ Yes ❑ No V POLLUTION LIABILITY ® N/A ❑ Yes ❑ No V BUILDERS RISK ® N/A ❑ Yes ❑ No HAVE ALL ABOVE REQUIREMENTS BEEN MET? ® Yes ❑ No IF NO, WHICH ITEMS NEED TO BE COMPLETED? Approved: (3 - Agent of Alliant Insurance Services Broker of record for the City of Newport Beach 3/10/15 Date RISK MANAGEMENT APPROVAL REQUIRED (Non -admitted carrier rated less than _ Self Insured Retention or Deductible greater than $ ) ❑ N/A ❑ Yes ❑ No Reason for Risk Management approval/exception/waiver: Approved: Risk Management * Subject to the terms of the contract. OCAMICO C Y77(��, CAMICO Insurance Services New York 1800 Gateway Drive, Suite 300, San Mateo, CA 94404 45 Broadway, 16th Floor, New York, NY 10006 Tel: 800.652.1772 • Fax: 800.227.2090 Tel: 212.908.1298 CA License # 0009618 www.camico.com CERTIFICATE OF INSURANCE Date: March 16, 2012 To: Deputy Admin Services Director City of Newport Beach 3300 Newport Blvd/PO Box 1768 Newport Beach, CA 92658 Re: White, Nelson & Co. CPAs and Consultants, LLP 2875 Michelle Drive, Suite 300 Irvine, CA 92606 Policy No.: CPLI00621-12 This is to certify that as of the date hereof a Liberty Insurance Underwriters Inc. policy of accountants professional liability insurance insuring White, Nelson, Diehl, Evans, LLP as the Named Insured is in effect. The policy period of such policy is 01/01/2012 to 01/01/2013 and the per claim/aggregate limits of liability thereunder are $5,000,000 / $10,000,000 respectively. Such insurance is subject to cancellation as provided in the policy and to non -renewal by the Company or by the Named Insured. Coverage is subject to all the terms and conditions of the policy. By issuing this Certificate, CAMICO undertakes no obligation to inform any person of the cancellation or non -renewal of the policy or of exhaustion of the limits of liability thereunder. CAMICO INSURANCE SERVICES I:3`1 Ate,'/ "' 11 Ronald C. Parisi, CPA, JD Executive Vice President of Risk Management LIU-CRT-2004-LET (ed. 10/10) ©DIEHL, EVANS & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS 1 APARTl�FSti81NQ.UDM ACCOUNTANCY CORMRATTQNS 5 CORPORATE PARK, SUITE loo V IRVINE, CALIFORNIA 92606-5165 (949) 399 -MO • FAX (949) 399-0610 W .diddcnm.0 September 30, 2011 City of Newport Beach Dan Matusiewicz 3300 Newport Boulevard Newport Beach, CA 92663 FUCHAMR. LUDIN, CPA CRAIGW. SPEAKER, CPA NMNF. PATQ., CPA ROBERT 1. CALLANAN. CPA •PHMM H HOLTRAW, CPA •THOMAS K PBRLOWSKi CPA -HARVEY 1.. SCHROEDER, CPA KENNETH R M ESo CPA •A We are pleased to announce our merger with White, Nelson and Company, LLP. Our combined firm now is practicing as White Nelson Diehl Evans LLP. Diehl, Evans and Company, LLP firm began its professional practice as a partnership in the 1950s, after Ellis Diehl had been practicing on his own for about 25 years. The growth of the firm over the past several decades has been predominantly internal, stemming from the referrals of our current clients and other professionals, except for the acquisition of existing firms in Carlsbad and Newport Beach. The growth and development of our professional staff has evolved in a similar manner. We have attracted high-quality, committed professionals and have invested in their training, development and growth. As a result of these efforts, we have experienced good growth throughout the years. This has been in no small way also directly related to the success our clients have had in their business and personal pursuits. We decided to seek a merger with another firm because we believe that a larger organization will allow us to provide a wider array of services with more depth. As you may know, finding and retaining excellent people is a constant challenge. Our new, larger firm will help us be more successful in recruiting and our associates will benefit from even more and stronger career opportunities. Our new combined firm has 18 partners and over 100 associates. White, Nelson and Company shares the same values as Diehl, Evans and Company. We conducted an extensive search over many years looking for an opportunity like this. White, Nelson and Company exceeded our hopes for a firm we can combine with and continue the tradition for excellent service, expertise, and an environment our clients and associates want to be a part of. As a result of this merger, we will be able to provide many new services and areas of expertise. We look forward to discussing those in more depth with you. OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330 CARLSBAD. CALIFORNIA 92008-2389 ESCONDIDO, CALIFORNIA 92025-2598 (760) 729.2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890 However, there are several things we want to point out that will not change: • You will continue to work with the same people in our firm that you have in the past. All of our accountants will continue in their current roles. • We will continue with governmental accounting, auditing, and consulting as a primary focus of the firm. • Our fee structure will not change. • Services provided in the past will continue to be offered by White Nelson Diehl Evans LLP. Around December 1, our Irvine office will be moving just over a mile away to White, Nelson and Company's location at 2875 Michelle Drive, Suite 300, Irvine, CA 92606. Our existing phone numbers will continue to be operational for the time being although we anticipate consolidating phone numbers as soon as possible. There will be no changes to our Carlsbad and Escondido offices locations or phone numbers. If you have any questions about this exciting news and what it will mean for you, please contact any of us at any time. We look forward to introducing you to some of our new partners and associates. We are grateful to you not only for giving us the opportunity to provide you with accounting services but for your loyalty and friendship, which have enriched our relationship. We are confident that our new affiliation will serve us all well. The Partners and Associates of Diehl, Evans and Company, LLP We are presently working on an engagement for you under an engagement letter signed by us as Diehl, Evans and Company, LLP. We anticipate completing the engagement after the merger has been completed and anticipate signing the auditors' report as "White Nelson Diehl Evans LLP". As this is a change from what is in the engagement letter, we will appreciate your acknowledgement of the merger and your approval of the change from Diehl, Evans and Company, LLP to White Nelson Diehl Evans LLP by signing a copy of this letter below and returning it to us. Acknowledgement of the merger and approval of the change in auditors: City of Newport Beach By: Name l0. 2-olf Date V77� PROFESSIONAL SERVICES AGREEMENT WITH DIEHL, EVANS & COMPANY, LLP FOR AUDITING SERVICES THIS AGREEMENT FOR PROFESSIONAL SERVICES ("Agreement') is made and entered into as of this 10`h day of May, 2011 by and between the CITY OF NEWPORT BEACH, a California Municipal Corporation ("City"), and DIEHL, EVANS & COMPANY, LLP, a California limited liability company ("Auditor"), whose address is 5 Corporate Park, Suite 100, Irvine, CA 92606 and is made with reference to the following: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. City desires to retain Auditor to perform an Audit Examination ("Audit') of its financial statements and a Single Audit for the fiscal year ending June 30, 2011, with an option to audit each of the three subsequent fiscal years upon the terms and conditions contained in this Agreement. The full scope of the Project is defined in Exhibit A. C. The principal member of Auditor for purposes of Project shall be Nitin Patel, engagement partner. D. Auditor possesses the skill, experience, ability, background, certification and knowledge to provide services described in this Agreement. E. The City has solicited and received a proposal from Auditor, has reviewed the previous experience and evaluated the expertise of Auditor, and desires to contract with Auditor to render professional services under the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. TERM The term of this Agreement shall commence on the above written date, and shall terminate on March 31, 2015 unless terminated earlier as set forth herein. 2. SERVICES TO BE PERFORMED Auditor shall diligently perform all the services described in the Scope of Services attached hereto as Exhibit A and incorporated herein by reference ("Work" or "Services"). The City may elect to delete certain tasks of the Scope of Services at its sole discretion. 3. TIME OF PERFORMANCE Time is of the essence in the performance of Services under this Agreement and Auditor shall perform the Services in accordance with the schedule included in Exhibit A. The failure by Auditor to strictly adhere to the schedule may result in termination of this Agreement by City, and the assessment of damages against the Auditor for delay. Notwithstanding the foregoing, Auditor shall not be responsible for delays due to causes beyond Auditor's reasonable control. However, in the case of any such delay in the Services to be provided for the Project, each party hereby agrees to provide notice to the other party so that all delays can be addressed. 3.1 Auditor shall submit all requests for extensions of time for performance in writing to the Project Administrator not later than ten (10) calendar days after the start of the condition that purportedly causes a delay. The Project Administrator shall review all such requests and may grant reasonable time extensions for unforeseeable delays that are beyond Auditor's control. 3.2 For all time periods not specifically set forth herein, Auditor shall respond in the most expedient and appropriate manner under the circumstances, by telephone, fax, hand -delivery or mail. 4. COMPENSATION TO AUDITOR City shall pay Auditor for the Services on a time and expense not -to -exceed basis in accordance with the provisions of this Section and the Schedule of Billing Rates attached hereto as Exhibit B and incorporated herein by reference. Auditor's compensation for all Work performed in accordance with this Agreement, including all reimbursable items and subcontractor fees, shall not exceed One Hundred Seventy One Thousand, Five Hundred Thirty One Dollars and no/100 ($171,531) over the four year period which shall be paid as follows: Not to exceed Fifty One Thousand and Five Dollars ($51,005) for FY 10-11; Thirty Nine Thousand, Three Hundred Eighty Two Dollars ($39,382) for FY 11-12; Forty Thousand, One Hundred Seventy Dollars ($40,170) for FY 12-13 and Forty Thousand, Nine Hundred Seventy Four Dollars ($40,974) for FY 13-14 without prior written authorization from City. No billing rate changes shall be made during the term of this Agreement without the prior written approval of City. 4.1 Auditor shall submit monthly invoices to City describing the Work performed the preceding month. City shall pay Auditor no later than thirty (30) days after approval of the monthly invoice by City staff. 4.2 City shall reimburse Auditor only for those costs or expenses specifically approved in this Agreement, or specifically approved in writing in advance by City. Unless otherwise approved, such costs shall be limited and include nothing more than the following costs incurred by Auditor: Diehl, Evans & Company, LLP Page 2 4.2.1 The actual costs of subcontractors for performance of any of the Services that Auditor agrees to render pursuant to this Agreement, which have been approved in advance by City and awarded in accordance with this Agreement. 4.2.2 Approved reproduction charges. 4.2.3 Actual costs and/or other costs and/or payments specifically authorized in advance in writing and incurred by Auditor in the performance of this Agreement. 4.3 Auditor shall not receive any compensation for Extra Work performed without the prior written authorization of City. As used herein, "Extra Work" means any Work that is determined by City to be necessary for the proper completion of the Project, but which is not included within the Scope of Services and which the parties did not reasonably anticipate would be necessary at the execution of this Agreement. Compensation for any authorized Extra Work shall be paid in accordance with the Schedule of Billing Rates as set forth in Exhibit B. 4.4 Notwithstanding any other provision of this Agreement, when payments made by City equal 90% of the maximum fee provided for in this Agreement, no further payments shall be made until City has accepted the final Work under this Agreement. 5. PROJECT MANAGER Auditor shall designate a Project Manager, who shall coordinate all phases of the Project. This Project Manager shall be available to City at all reasonable times during the Agreement term. Auditor has designated Nitin Patel to be its Project Manager. Auditor shall not remove or reassign the Project Manager or any personnel listed in Exhibit A or assign any new or replacement personnel to the Project without the prior written consent of City. City's approval shall not be unreasonably withheld with respect to the removal or assignment of non -key personnel. Auditor, at the sole discretion of City, shall remove from the Project any of its personnel assigned to the performance of Services upon written request of City. Auditor warrants that it will continuously furnish the necessary personnel to complete the Project on a timely basis as contemplated by this Agreement. 6. ADMINISTRATION This Agreement will be administered by the Administrative Services Department. Dan Matusiewicz or his designee shall be the Project Administrator and shall have the authority to act for City under this Agreement. The Project Administrator or his/her authorized representative shall represent City in all matters pertaining to the Services to be rendered pursuant to this Agreement. Diehl, Evans & Company, LLP Page 3 In order to assist Auditor in the execution of its responsibilities under this Agreement, City agrees to, where applicable: 7.1 Provide access to, and upon request of Auditor, one copy of all existing relevant information on file at City. City will provide all such materials in a timely manner so as not to cause delays in Auditor's Work schedule. 8. STANDARD OF CARE 8.1 All of the Services shall be performed by Auditor or under Auditor's supervision. Auditor represents that it possesses the professional and technical personnel required to perform the Services required by this Agreement, and that it will perform all Services in a manner commensurate with community professional standards. All Services shall be performed by qualified and experienced personnel who are not employed by City, nor have any contractual relationship with City. By delivery of completed Work, Auditor certifies that the Work conforms to the requirements of this Agreement and all applicable federal, state and local laws and the professional standard of care. 8.2 Auditor represents and warrants to City that it has, shall obtain, and shall keep in full force in effect during the term hereof, at its sole cost and expense, all licenses, permits, qualifications, insurance and approvals of whatsoever nature that is legally required of Auditor to practice its profession. Auditor shall maintain a City business license and a California license to practice as a firm of Certified Public Accountants during the term of this Agreement. 8.3 Auditor shall not be responsible for delay, nor shall Auditor be responsible for damages or be in default or deemed to be in default by reason of strikes, lockouts, accidents, or acts of God, or the failure of City to furnish timely information or to approve or disapprove Auditor's Work promptly, or delay or faulty performance by City, contractors, or governmental agencies. 9. HOLD HARMLESS To the fullest extent permitted by law, Auditor shall indemnify, defend and hold harmless City, its City Council, boards and commissions, officers, agents, volunteers, and employees (collectively, the "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney's fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any Work performed or Services provided under this Agreement including, Diehl, Evans & Company, LLP Page 4 without limitation, defects in workmanship or materials or Auditor's presence or activities conducted on the Project (including the negligent and/or willful acts, errors and/or omissions of Auditor, it's principals, officers, agents, employees, vendors, suppliers, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable or any or all of them). Notwithstanding the foregoing, nothing herein shall be construed to require Auditor to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall be construed as authorizing any award of attorney's fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided by the Auditor. 10. INDEPENDENT CONTRACTOR It is understood that City retains Auditor on an independent contractor basis and Auditor is not an agent or employee of City. The manner and means of conducting the Work are under the control of Auditor, except to the extent they are limited by statute, rule or regulation and the expressed terms of this Agreement. Nothing in this Agreement shall be deemed to constitute approval for Auditor or any of Auditor's employees or agents, to be the agents or employees of City. Auditor shall have the responsibility for and control over the means of performing the Work, provided that Auditor is in compliance with the terms of this Agreement. Anything in this Agreement that may appear to give City the right to direct Auditor as to the details of the performance or to exercise a measure of control over Auditor shall mean only that Auditor shall follow the desires of City with respect to the results of the Services. 11. COOPERATION Auditor agrees to work closely and cooperate fully with City's designated Project Administrator and any other agencies that may have jurisdiction or interest in the Work to be performed. City agrees to cooperate with the Auditor on the Project. 12. CITY POLICY Auditor shall discuss and review all matters relating to policy and Project direction with City's Project Administrator in advance of all critical decision points in order to ensure the Project proceeds in a manner consistent with City goals and policies. 13. PROGRESS Auditor is responsible for keeping the Project Administrator and/or his/her duly authorized designee informed on a regular basis regarding the status and progress of the Project, activities performed and planned, and any meetings that have been scheduled or are desired. Diehl, Evans & Company, LLP Page 5 14. INSURANCE Without limiting Auditor's indemnification of City, and prior to commencement of Work, Auditor shall obtain, provide and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to City. 14.1 Proof of Insurance. Auditor shall provide certificates of insurance to City as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers' compensation. Insurance certificates and endorsement must be approved by City's Risk Manager prior to commencement of performance. Current certification of insurance shall be kept on file with City at all times during the term of this contract. City reserves the right to require complete, certified copies of all required insurance policies, at any time. Auditor shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the Work hereunder by Auditor, his agents, representatives, employees or subcontractors. The cost of such insurance shall be included in Auditor's bid. 14.2 Acceptable Insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk Manager. 14.3 Coverage Requirements. 14.3.1 Workers' Compensation Coverage. Auditor shall maintain Workers' Compensation Insurance (Statutory Limits) and Employer's Liability Insurance (with limits of at least one million dollars ($1,000,000)) for Auditor's employees in accordance with the laws of the State of California, Section 3700 of the Labor Code In addition, Auditor shall require each subcontractor to similarly maintain Workers' Compensation Insurance and Employer's Liability Insurance in accordance with the laws of the State of California, Section 3700 for all of the subcontractor's employees. Any notice of cancellation or non -renewal of all Workers' Compensation policies must be received by City at least thirty (30) calendar days (ten (10) calendar days written notice of non- payment of premium) prior to such change. Diehl, Evans & Company, LLP Page 6 Auditor shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees and volunteers. 14.3.2 General Liability Coverage. Auditor shall maintain commercial general liability insurance in an amount not less than one million dollars ($1,000,000) per occurrence for bodily injury, personal injury, and property damage, including without limitation, blanket contractual liability. 14.3.3 Automobile Liability Coverage. Auditor shall maintain automobile insurance covering bodily injury and property damage for all activities of the Auditor arising out of or in connection with Work to be performed under this Agreement, including coverage for any owned, hired, non -owned or rented vehicles, in an amount not less than one million dollars ($1,000,000) combined single limit for each accident. 14.3.4 Professional Liability (Errors & Omissions) Coverage. Auditor shall maintain professional liability insurance that covers the Services to be performed in connection with this Agreement, in the minimum amount of three million dollars ($3,000,000) limit per claim and in the aggregate. 14.4 Other Insurance Provisions or Requirements. The policies are to contain, or be endorsed to contain, the following provisions: 14.4.1 Waiver of Subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against City, its elected or appointed officers, agents, officials, employees and volunteers or shall specifically allow Auditor or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to a loss. Auditor hereby waives its own right of recovery against City, and shall require similar written express waivers and insurance clauses from each of its subcontractors. 14.4.2 Enforcement of Contract Provisions. Auditor acknowledges and agrees that any actual or alleged failure on the part of the City to inform Auditor of non-compliance with any requirement imposes no additional obligations on the City nor does it waive any rights hereunder. 14.4.3 Requirements not Limiting. Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific Diehl, Evans & Company, LLP Page 7 reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. 14.4.4 Notice of Cancellation. Auditor agrees to oblige its insurance agent or broker and insurers to provide to City with thirty (30) days notice of cancellation (except for nonpayment for which ten (10) days notice is required) or nonrenewal of coverage for each required coverage. 14.4.5 Timely Notice of Claims. Auditor shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Auditor's performance under this Agreement. 14.4.6 Additional Insurance. Auditor shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the Work. 15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS Except as specifically authorized under this Agreement, the Services to be provided under this Agreement shall not be assigned, transferred contracted or subcontracted out without the prior written approval of City. Any of the following shall be construed as an assignment: The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Auditor or of the interest of any general partner or joint venture or syndicate member or cotenant if Auditor is a partnership or joint -venture or syndicate or co tenancy, which shall result in changing the control of Auditor. Control means fifty percent (50%) or more of the voting power, or twenty-five percent (25%) or more of the assets of the corporation, partnership or joint -venture. 16. SUBCONTRACTING The parties recognize that a substantial inducement to City for entering into this Agreement is the professional reputation, experience and competence of Auditor. Assignments of any or all rights, duties or obligations of the Auditor under this Agreement will be permitted only with the express written consent of City. Auditor shall not subcontract any portion of the Work to be performed under this Agreement without the prior written authorization of City. 17. OWNERSHIP OF DOCUMENTS The audit work papers are the property of the Auditor, however, all working papers and reports must be retained, at the Auditor's expense, for a minimum of three (3) years, unless Auditor is notified in writing by the City of the need to extend the retention period. The Auditor will be required to make working papers available, upon request, to the City or their designees. Diehl, Evans & Company, LLP Page 8 In addition, Auditor shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance as determined by City. Bi 0147► I91 11:12"G11111IVA All Documents, including drafts, notes and communications that result from the Services in this Agreement, shall be kept confidential unless City authorizes in writing the release of information. 19. INTELLECTUAL PROPERTY INDEMNITY The Auditor shall defend and indemnify City, its agents, officers, representatives and employees against any and all liability, including costs, for infringement of any United States' letters patent, trademark, or copyright infringement, including costs, contained in Auditor's Reports, drafts or documents under this Agreement. f��t)l:7xK�7:7�by Auditor shall keep records and invoices in connection with the Work to be performed under this Agreement. Auditor shall maintain complete and accurate records with respect to the costs incurred under this Agreement and any Services, expenditures and disbursements charged to City, for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to Auditor under this Agreement. All such records and invoices shall be clearly identifiable. Auditor shall allow a representative of City to examine, audit and make transcripts or copies of such records and invoices during regular business hours. Auditor shall allow inspection of all Work, data, Documents, proceedings and activities related to the Agreement for a period of three (3) years from the date of final payment to Auditor under this Agreement. 21. WITHHOLDINGS City may withhold payment to Auditor of any disputed sums until satisfaction of the dispute with respect to such payment. Such withholding shall not be deemed to constitute a failure to pay according to the terms of this Agreement. Auditor shall not discontinue Work as a result of such withholding. Auditor shall have an immediate right to appeal to the City Manager or his/her designee with respect to such disputed sums. Auditor shall be entitled to receive interest on any withheld sums at the rate of return that City earned on its investments during the time period, from the date of withholding of any amounts found to have been improperly withheld. In the event of errors or omissions that are due to the negligence or professional inexperience of Auditor which result in expense to City greater than what would have resulted if there were not errors or omissions in the Work accomplished by Auditor, the additional expense shall be borne by Auditor. Nothing in this paragraph is intended to limit City's rights under the law or any other sections of this Agreement. Diehl, Evans & Company, LLP Page 9 23. CITY'S RIGHT TO EMPLOY OTHER AUDITORS City reserves the right to employ other auditor(s) or consultants in connection with the Project. 24. CONFLICTS OF INTEREST The Auditor or its employees may be subject to the provisions of the California Political Reform Act of 1974 (the "Act"), which (1) requires such persons to disclose any financial interest that may foreseeably be materially affected by the Work performed under this Agreement, and (2) prohibits such persons from making, or participating in making, decisions that will foreseeably financially affect such interest. If subject to the Act, Auditor shall conform to all requirements of the Act. Failure to do so constitutes a material breach and is grounds for immediate termination of this Agreement by City. Auditor shall indemnify and hold harmless City for any and all claims for damages resulting from Auditor's violation of this Section. 25. NOTICES All notices, demands, requests or approvals to be given under the terms of this Agreement shall be given in writing, and conclusively shall be deemed served when delivered personally, or on the third business day after the deposit thereof in the United States mail, postage prepaid, first-class mail, addressed as hereinafter provided. All notices, demands, requests or approvals from Auditor to City shall be addressed to City at: Attn: Dan Matusiewicz Deputy Administrative Director City of Newport Beach 3300 Newport Boulevard PO Box 1768 Newport Beach, CA 92658 All notices, demands, requests or approvals from City to Auditor shall be addressed to Auditor at: Attention: Nitin Patel, CPA Diehl, Evans & Company, LLP 5 Corporate Park, Suite 100 Irvine, CA 92606 26. CLAIMS The Auditor and the City expressly agree that in addition to any claims filing requirements set forth in this Agreement, the Auditor shall be required to file any claim the Auditor may have against the City in strict conformance with the Tort Claims Act (Government Code sections 900 et seq.). Diehl, Evans & Company, LLP Page 10 27. TERMINATION In the event that either party fails or refuses to perform any of the provisions of this Agreement at the time and in the manner required, that party shall be deemed in default in the performance of this Agreement. If such default is not cured within a period of two (2) calendar days, or if more than two (2) calendar days are reasonably required to cure the default and the defaulting party fails to give adequate assurance of due performance within two (2) calendar days after receipt of written notice of default, specifying the nature of such default and the steps necessary to cure such default, and thereafter diligently take steps to cure the default, the non -defaulting party may terminate the Agreement forthwith by giving to the defaulting party written notice thereof. Notwithstanding the above provisions, City shall have the right, at its sole discretion and without cause, of terminating this Agreement at any time by giving seven (7) calendar days prior written notice to Auditor. In the event of termination under this Section, City shall pay Auditor for Services satisfactorily performed and costs incurred up to the effective date of termination for which Auditor has not been previously paid. On the effective date of termination, Auditor shall deliver to City all reports, documents and other information developed or accumulated in the performance of this Agreement, whether in draft or final form. 28. COMPLIANCE WITH ALL LAWS Auditor shall at its own cost and expense comply with all statutes, ordinances, regulations and requirements of all governmental entities, including federal, state, county or municipal, whether now in force or hereinafter enacted. In addition, all Work prepared by Auditor shall conform to applicable City, county, state and federal laws, rules, regulations and permit requirements and be subject to approval of the Project Administrator and City. 29. WAIVER A waiver by either party of any breach, of any term, covenant or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, whether of the same or a different character. 30. INTEGRATED CONTRACT This Agreement represents the full and complete understanding of every kind or nature whatsoever between the parties hereto, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein. No verbal agreement or implied covenant shall be held to vary the provisions herein. 31. CONFLICTS OR INCONSISTENCIES In the event there are any conflicts or inconsistencies between this Agreement and the Scope of Services or any other attachments attached hereto, the terms of this Agreement shall govern. Diehl, Evans & Company, LLP Page 11 32. INTERPRETATION The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of the Agreement or any other rule of construction which might otherwise apply. 33. AMENDMENTS This Agreement may be modified or amended only by a written document executed by both Auditor and City and approved as to form by the City Attorney. rcLl�9 l/ :?1-31A11Will If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. 35. CONTROLLING LAW AND VENUE The laws of the State of California shall govern this Agreement and all matters relating to it and any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange. 36. EQUAL OPPORTUNITY EMPLOYMENT Auditor represents that it is an equal opportunity employer and it shall not discriminate against any subcontractor, employee or applicant for employment because of race, religion, color, national origin, handicap, ancestry, sex or age. 37. NO ATTORNEY'S FEES In the event of any dispute or action arising under this Agreement the prevailing party shall not be entitled to attorney's fees. Diehl, Evans & Company, LLP Page 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the dates written below. APPROVED AS TO FORM: OFFICE OF THE CIY ATTORNEY Date: . y/>4/ 11 IVA Assistant City ATTEST: Date: l By: a4y� Leilani I. Brown City Clerk ldovm.w%b� CITY OF NEWPORT BEACH, A California municipal corporation Date: By: -IL 4cz� Michael F. Henn Mayor AUDITOR: DIEHL, EVANS & COMPANY, LLP Date: 5-11 G It/ By: /V /. • P � Date: By: Attachments: Exhibit A — Scope of Services Exhibit B — Schedule of Billing Rates Diehl, Evans & Company, LLP Page 13 Exhibit A SCOPE OF PROJECT The objectives and scope of the work to be performed is based upon the request for proposal. Based upon the foregoing Auditor understands the objectives and scope of work to be as follows: 1) Auditor will perform an audit examination of the governmental activities, business type activities, each major fund and the aggregate remaining fund information for the City of Newport Beach for the four years beginning with the fiscal year ending June 30, 2011. The examinations will be conducted in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards as set forth by the GAO, and the requirements of the American Institute of Certified Public Accountants' Industry audit Guide entitled "Audits of State and Local Governmental Units." City Staff will draft and word process the Comprehensive Annual Financial Report (CAFR) of the City of Newport Beach. Auditor will review the report for conformity with the reporting standards set forth by GFOA for their CAFR award programs. Auditor will finalize financial statements opinion by the second week of December each year. The auditors will provide their auditors' report thereon. Auditor will apply to management's discussion and analysis those procedures required by the auditing standards to be applied to required supplementary information (understanding the method of preparation, the source and basis for the information presented, comparing for consistency to the audited data pertaining to the City, and ascertaining the management's discussion and analysis contains all the information required by GASB Statement No. 34 and does not contain information prohibited to be presented in the management's discussion and analysis). 2) As part of the Single Audit for the years in which the City expends greater than $500,000 in federal funding, Auditor will supplement their approach by reviewing all pertinent federal and AICPA publications including The Single Audit Act Amendments of 1996 (Public Law 104-156); OMB Circular A-133 entitled Audits of States, Local Governments, and Non -Profit Organizations; GAO Government Auditing Standards (Yellow Book), 2007 version; AICPA Audit and Accounting Guide Audits of State and Local Governments Units and Statement of Position 98- 3, Audits of States, Local Governments, and Not -for -Profit Organizations Receiving Federal Awards; SAS No. 117, Compliance Auditing Consideration in Audits of Governmental Entities and Other Recipients of Federal Financial Assistance and Catalog of Domestic Assistance Programs. The single audit will cover all federal grants received by the City and its component units either as a primary or secondary recipient for fiscal years ended June 30, 2011 through June 30, 2014.The City will provide to the Auditors the Schedule of Federal Financial Assistance encompassing all direct and pass-through federal funds received by the City and component units. Auditor will render reports on the single audit in accordance with the single audit requirements by OMB Circular A-133. Auditor will also prepare the electronic submission of the data collection form required to be filed with the Single Audit Central Clearinghouse. 3) Auditor will perform agreed-upon audit procedures to test and report on the City's Gann Limit for the four years beginning with the fiscal years ending June 30, 2011 through June 30, 2014. 4) Auditor will perform the financial audit of the Integrated Law and Justice Agency of Orange County (ILJAOC), and the single audit, if needed, for the fiscal year ending June 30, 2011. Auditor will draft and prepare the financial statements for the Agency and issue their reports on compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. 5) Auditor will provide the Finance Committee communications required by the auditing standards: the auditor's responsibility under generally accepted auditing standards, significant accounting policies, management judgment and accounting estimates, significant audit adjustments, other information in documents containing audited financial statements, disagreements with management, management consultation with other accountants, major issues discussed with management prior to retention, difficulties encountered in performing the audit, errors, irregularities, and illegal acts detected in the course of the audit. 6) Auditor will immediately report in writing any irregularities or illegal acts that come to their attention to the City Council, City Attorney, and the City Manager as required by the auditing standards. 7) For each year of their engagement, Auditor will prepare a letter to the City Council reporting matters, dealing with internal control that meet the threshold of being reportable conditions, as defined by professional auditing standards. 8) Auditor will prepare a management letter that will provide other recommendations to the City ensuing from their review of the City's internal control procedures. This letter will address non -reportable conditions (those constructive comments not required to be included in the reportable conditions to City Council or in the single audit report). Auditor will discuss those comments with the Administrative Services Director or her designee prior to its finalization. 9) Auditor will keep City staff abreast of all new developments affecting local government finance and relevant accounting issues. Auditor will advise and assist City staff in understanding of and implementation of new GASB pronouncements. 10) Auditor will be available to assist with other professional assistance requiring research and answer accounting and reporting issues raised by the City. Such assistance may include, but is not limited to tax matters, review of bond documents, cost allocation plans and employee benefit programs. 11) Finally, Auditor perceives the scope of their work as being advisors to the City of Newport Beach regarding generally accepted accounting principle, debt issuances, and other matters relating to the City. Diehl, Evans & Company, LLP also offer a wide range of consulting services to governmental agencies and the firm's Director of Consulting Services, Mr. William S. Morgan, CPA has over thirty years of experience in providing accounting, auditing, and consulting services. Under the attestation standards, the City may request a specific procedure or study it wishes to have performed. Auditor would then perform those procedures and report on their findings. Such special services are not part of their standard fee and would be subject to a separate fee quotation. City of Newport Beach, California Maximum Price Summary Our maximum fee for the four years ending June 30, 2014 will be as follows: Service Fiscal Year Option Period 2010-11 2011-12 2012-2013 2013-2014 City of Newport Beach: Financial Audit, including SAS No. 114 and SAS No. 115 letters, GANN Limit Review and related reports $ 32,800 Total $ 33,456 $ 34,125 $ 34,808 $ 135,189 Single Audit 5,810 5,926 6,045 6,166 City Total 38,610 39,382 40,170 40,974 159,136 Integrated Law & Justice Agency for Orange County (ILJAOC): Financial Audit, including SAS No. 114 and SAS No. 115 letters and related reports 9,060 Single Audit ILJAOC Total Grand Total • m 3,335 3,335 12,395 12,395 $ 51,005 $ 39,382 $ 40,170 $ 40,974 $ 171,531 Manner of Payment Progress payment will be made on the basis of hours of work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billings shall cover a period of not less than a calendar month and are payable on presentation. No more than 90% of the total fee may be billed prior to the presentation of final audit reports and financial statements. Also, fees will be payable in full regardless of findings that result from this engagement. Exhibit B - continued Hourly Rates For Additional Professional Services 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: Nitin P. Patel, CPA - Engagement Partner Robert J. Callanan, CPA - Concurring Review Partner Bill Morgan, CPA - Director of Consulting Services Managers Supervisory Staff Staff Clerical Fiscal Year Option Period 2010-11 2011-12 2012-2013 2013-2014 $ 195 $ 199 $ 203 $ 207 195 199 203 207 195 199 203 207 135 138 140 143 105 107 108 111 85 87 88 90 50 51 52 53 CITY OF = Hiivaoareen �gvvv°ar BEACH i,.,� 1 �; 21111RT. AC City Council Staff Report Agenda Itern-Na--- May 10, 2011 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Tracy McCraner, Administrative Services Director/Treasurer 949-644-3123, tmccraner@newportbeachca.gov PREPARED BY: Dan Matusiewicz, Deputy Administrative Services Director /� APPROVED: C_ �7/( TITLE: Financial Statement Audit Contract Approval ABSTRACT: In accordance with Council Policy F-15 (Annual Audit), the Administrative Services Department solicited new proposals from qualified auditing firms. Based on the results of the Request for Proposal (RFP) process, staff is recommending, with the concurrence of the Finance Committee, the selection of a new external auditor. RECOMMENDATION: Authorize the Mayor and City Clerk to sign a contract with Diehl, Evans & Company, LLP to perform the City's annual financial audit for the fiscal year 2010-11, with the option, to renew the contract for three additional one-year terms. FUNDING REQUIREMENTS: The 2011-12 proposed budget, if approved, includes sufficient funding for the first one- year term of this contract while funding for the three remaining one-year terms is contingent upon budget appropriation each fiscal year. If approved, an annual appropriation of approximately $40,000 would be included in the Administrative Services Department, Audit Services account (0650-8077). DISCUSSION: Per Council Policy F-15, the City issued an RFP to audit firms on February 16, 2011. Of the seven firms that were invited to propose, four firms submitted proposals by the March 14, 2011 deadline including Diehl, Evans & Company, LLP, Mayer Hoffman McCann P.C., Macias, Gini & O'Connell and Lance, Soli & Lunghard, CPAs. Proposals were submitted in two parts, including a written technical proposal and a separate dollar cost bid. Financial Statement Audit Contract Approval May 10, 2011 Page 2 Coordinated by the Accounting Manager, proposals were reviewed and scored by a four - person Audit Selection Committee comprised of financial administration staff from the Administrative Services Department, Public Works Department and Library Services Department. The written technical proposals were scored and ranked before dollar cost bids were reviewed. The Committee evaluated each firm's proposals based on minimum qualifications; knowledge and expertise in local government auditing; comparable government engagements; proposed staffing experience; ability to provide tax and other technical consultation services; adequacy of audit approach and other intangibles. All four firms were well qualified and scored well, based on the technical content of the proposals. The Audit Selection Committee rated Diehl, Evans and Company, LLP and Macias, Gini & O'Connell (MGO) as the top contenders for further consideration in the selection process. Dollar cost bids were then opened revealing the following four-year average cost per proposal: Firm Mayer Hoffman McCann Diehl, Evans & Co.LLP Lane, Soll & Lunghard CPAs Macias, Gini & O'Connell 4 -Year Average Hours Proposed 340 380 388 424 4 -Year Average Annual Fee $38,048 $39,784 $41,053 $42,311 MGO and Diehl, Evans & Company were invited for an interview on April 5, 2011. The interview process consisted of each firm making a brief presentation followed by approximately 30 minutes of questions and answers. Staff then conducted extensive reference calls to various municipalities listed in their respective proposals. Diehl, Evans & Company proposed a very seasoned team of experienced field staff, senior partners and senior consulting staff and consistently received outstanding references for their knowledge and experience, access to senior staff and ability to meet client deadlines. Staff recommends retaining the services of Diehl, Evans & Company, LLP as the City Auditor, based on the following factors: Quality and experience of proposed engagement staff Long established presence in Southern California Financial Statement Audit Contract Approval May 10, 2011 Page 3 • Technical expertise in complex local government issues • Outstanding references This recommendation was previously presented to the Finance Committee on April 11, 2011 and the committee concurred with the staff recommendation. Diehl Evans & Company has long been established in Southern California, having been in business for over 75 years. Serving the governmental sector for over 61 years, they are well known and respected for their expertise in tax issues and complexities that are unique to local government. The total compensation over the four-year period for the City's annual audits shall not exceed $159,136 as reflected in the table below. The City is also responsible for administering the audit of the Integrated Law and Justice Agency of Orange County ("ILJAOC) for one more year, the proposal includes the audit services for ILJAOC for $12,395 which is entirely paid by the ILJAOC. City of Newport Beach FY 10-11 $38,610 FY 11-12 $39,382 FY 12-13 $40,170 FY 13-14 $40,974 Total City Obligation $159,136 ILJAOC FY 10-11 $12,395 Grand Total $171,531 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act ("CEQX) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Financial Statement Audit Contract Approval May 10, 2011 Page 4 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Submitted by: a,K' Tracy McCr ne Administrativ ervices Director/Treasurer Attachments: A..Professional Services Agreement PROFESSIONAL SERVICES AGREEMENT WITH DIEHL, EVANS & COMPANY, LLP FOR AUDITING SERVICES THIS AGREEMENT FOR PROFESSIONAL SERVICES ("Agreement') is made and entered into as of this 10th day of May, 2011 by and between the CITY OF NEWPORT BEACH, a California Municipal Corporation ("City"), and DIEHL, EVANS & COMPANY, LLP, a California limited liability company ("Auditor"), whose address is 5 Corporate Park, Suite 100, Irvine, CA 92606 and is made with reference to the following: RECITALS A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. City desires to retain Auditor to perform an Audit Examination ("Audit') of its financial statements and a Single Audit for the fiscal year ending June 30, 2011, with an option to audit each of the three subsequent fiscal years upon the terms and conditions contained in this Agreement. The full scope of the Project is defined in Exhibit A. C. The principal member of Auditor for purposes of Project shall be Nitin Patel, engagement partner. D. Auditor possesses the skill, experience, ability, background, certification and knowledge to provide services described in this Agreement. E. The City has solicited and received a proposal from Auditor, has reviewed the previous experience and evaluated the expertise of Auditor, and desires to contract with Auditor to render professional services under the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is mutually agreed by and between the undersigned parties as follows: 1. TERM The term of this Agreement shall commence on the above written date, and shall terminate on March 31, 2012 unless extended or terminated as set forth herein. The Administrative Services Director or his/her designee may extend this Agreement for three (3) additional one (1) year terms for a total of four (4) years. 2. SERVICES TO BE PERFORMED Auditor shall diligently perform all the services described in the Scope of Services attached hereto as Exhibit A and incorporated herein by reference ("Work" or "Services"). The City may elect to delete certain tasks of the Scope of Services at its sole discretion. 3. TIME OF PERFORMANCE Time is of the essence in the performance of Services under this Agreement and Auditor shall perform the Services in accordance with the schedule included in Exhibit A. The failure by Auditor to strictly adhere to the schedule may result in termination of this Agreement by City, and the assessment of damages against the Auditor for delay. Notwithstanding the foregoing, Auditor shall not be responsible for delays due to causes beyond Auditor's reasonable control. However, in the case of any such delay in the Services to be provided for the Project, each party hereby agrees to provide notice to the other party so that all delays can be addressed. 3.1 Auditor shall submit all requests for extensions of time for performance in writing to the Project Administrator not later than ten (10) calendar days after the start of the condition that purportedly causes a delay. The Project Administrator shall review all such requests and may grant reasonable time extensions for unforeseeable delays that are beyond Auditors control. 3.2 For all time periods not specifically set forth herein, Auditor shall respond in the most expedient and appropriate manner under the circumstances, by telephone, fax, hand -delivery or mail. 4. COMPENSATION TO AUDITOR City shall pay Auditor for the Services on a time and expense not -to -exceed basis in accordance with the provisions of this Section and the Schedule of Billing Rates attached hereto as Exhibit B and incorporated herein by reference. Auditor's compensation for all Work performed in accordance with this Agreement, including all reimbursable items and subcontractor fees, shall not exceed One Hundred Seventy One Thousand, Five Hundred Thirty One Dollars and no/100 ($171,531) over the four year period which shall be paid as follows: Not to exceed Fifty One Thousand and Five Dollars ($51,005) for FY 10-11; Thirty Nine Thousand, Three Hundred Eighty Two Dollars ($39,382) for FY 11-12; Forty Thousand, One Hundred Seventy Dollars ($40,170) for FY 12-13 and Forty Thousand, Nine Hundred Seventy Four Dollars ($40,974) for FY 13-14 without prior written authorization from City. No billing rate changes shall be made during the term of this Agreement without the prior written approval of City. 4.1 Auditor shall submit monthly invoices to City describing the Work performed the preceding month. City shall pay Auditor no later than thirty (30) days after approval of the monthly invoice by City staff. 4.2 City shall reimburse Auditor only for those costs or expenses specifically approved in this Agreement, or specifically approved in writing in advance by City. Unless otherwise approved, such costs shall be limited and include nothing more than the following costs incurred by Auditor: Diehl, Evans & Company, LLP Page 2 4.2.1 The actual costs of subcontractors for performance of any of the Services that Auditor agrees to render pursuant to this Agreement, which have been approved in advance by City and awarded in accordance with this Agreement. 4.2.2 Approved reproduction charges. 4.2.3 Actual costs and/or other costs and/or payments specifically authorized in advance in writing and incurred by Auditor in the performance of this Agreement. 4.3 Auditor shall not receive any compensation for Extra Work performed without the prior written authorization of City. As used herein, "Extra Work" means any Work that is determined by City to be necessary for the proper completion of the Project, but which is not included within the Scope of Services and which the parties did not reasonably anticipate would be necessary at the execution of this Agreement. Compensation for any authorized Extra Work shall be paid in accordance with the Schedule of Billing Rates as set forth in Exhibit B. 4.4 Notwithstanding any other provision of this Agreement, when payments made by City equal' 90% of the maximum fee provided for in this Agreement, no further payments shall be made until City has accepted the final Work under this Agreement. 5. PROJECT MANAGER Auditor shall designate a Project Manager, who shall coordinate all phases of the Project. This Project Manager shall be available to City at all reasonable times during the Agreement term. Auditor has designated Nitin Patel to be its Project Manager. Auditor shall not remove or reassign the Project Manager or any personnel listed in Exhibit A or assign any new or replacement personnel to the Project without the prior written consent of City. City's approval shall not be unreasonably withheld with respect to the removal or assignment of non -key personnel. Auditor, at the sole discretion of City, shall remove from the Project any of its personnel assigned to the performance of Services upon written request of City. Auditor warrants that it will continuously furnish the necessary personnel to complete the Project on a timely basis as contemplated by this Agreement. 6. ADMINISTRATION This Agreement will be administered by the Administrative Services Department. Dan Matusiewicz or his designee shall be the Project Administrator and shall have the authority to act for City under this Agreement. The Project Administrator or his/her authorized representative shall represent City in all matters pertaining to the Services to be rendered pursuant to this Agreement. Diehl, Evans & Company, LLP Page 3 7. CITY'S RESPONSIBILITIES In order to assist Auditor in the execution of its responsibilities under this Agreement, City agrees to, where applicable: 7.1 Provide access to, and upon request of Auditor, one copy of all existing relevant information on file at City. City will provide all such materials in a timely manner so as not to cause delays in Auditor's Work schedule. 8. STANDARD OF CARE 8.1 All of the Services shall be performed by Auditor or under Auditor's supervision. Auditor represents that it possesses the professional and technical personnel required to perform the Services required by this Agreement, and that it will perform all Services in a manner commensurate with community professional standards. All Services shall be performed by qualified and experienced personnel who are not employed by City, nor have any contractual relationship with City. By delivery of completed Work, Auditor certifies that the Work conforms to the requirements of this Agreement and all applicable federal, state and local laws and the professional standard of care. 8.2 Auditor represents and warrants to City that it has, shall obtain, and shall keep in full force in effect during the term hereof, at its sole cost and expense, all licenses, permits, qualifications, insurance and approvals of whatsoever nature that is legally required of Auditor to practice its profession. Auditor shall maintain a City business license and a California license to practice as a firm of Certified Public Accountants during the term of this Agreement. 8.3 Auditor shall not be responsible for delay, nor shall Auditor be responsible for damages or be in default or deemed to be in default by reason of strikes, lockouts, accidents, or acts of God, or the failure of City to furnish timely information or to approve or disapprove Auditors Work promptly, or delay or faulty performance by City, contractors, or governmental agencies. 9. HOLD HARMLESS To the fullest extent permitted by law, Auditor shall indemnify, defend and hold harmless City, its City Council, boards and commissions, officers, agents, volunteers, and employees (collectively, the "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney's fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any Work performed or Services provided under this Agreement including, Diehl, Evans & Company, LLP Page 4 without limitation, defects in workmanship or materials or Auditors presence or activities conducted on the Project (including the. negligent and/or willful acts, errors and/or omissions of Auditor, it's principals, officers, agents, employees, vendors, suppliers, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable or any or all of them). Notwithstanding the foregoing, nothing herein shall be construed to require Auditor to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall be construed as authorizing any award of attorney's fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided by the Auditor. 10. INDEPENDENT CONTRACTOR It is understood that City retains Auditor on an independent contractor basis and Auditor is not an agent or employee of City. The manner and means of conducting the Work are under the control of Auditor, except to the extent they are limited by statute, rule or regulation and the expressed terms of this Agreement. Nothing in this Agreement shall be deemed to constitute approval for Auditor or any of Auditors employees or agents, to be the agents or employees of City. Auditor shall have the responsibility for and control over the means of performing the Work, provided that Auditor is in compliance with the terms of this Agreement. Anything in this Agreement that may appear to give City the right to direct Auditor as to the details of the performance or to exercise a measure of control over Auditor shall mean only that Auditor shall follow the desires of City with respect to the results of the Services. 11. COOPERATION Auditor agrees to work closely and cooperate fully with City's designated Project Administrator and any other agencies that may have jurisdiction or interest in the Work to be performed. City agrees to cooperate with the Auditor on the Project. 12. CITY POLICY Auditor shall discuss and review all matters relating to policy and Project direction with City's Project Administrator in advance of all critical decision points in order to ensure the Project proceeds in a manner consistent with City goals and policies. 13. PROGRESS Auditor is responsible for keeping the Project Administrator and/or his/her duly authorized designee informed on a regular basis regarding the status and progress of the Project, activities performed and planned, and any meetings that have been scheduled or are desired. Diehl, Evans & Company, LLP Page 5 14. INSURANCE Without limiting Auditors indemnification of City, and prior to commencement of Work, Auditor shall obtain, provide and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to City. 14.1 Proof of Insurance. Auditor shall provide certificates of insurance to City as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers' compensation. Insurance certificates and endorsement must be approved by City's Risk Manager prior to commencement of performance. Current certification of insurance shall be kept on file with City at all times during the term of this contract. City reserves the right to require complete, certified copies of all required insurance policies, at any time. Auditor shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the Work hereunder by Auditor, his agents, representatives, employees or subcontractors. The cost of such insurance shall be included in Auditor's bid. 14.2 Acceptable Insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk Manager. 14.3 Coverage Requirements. 14.3.1 Workers' Compensation Coverage. Auditor shall maintain Workers' Compensation Insurance (Statutory Limits) and Employers Liability Insurance (with limits of at least one million dollars ($1,000,000)) for Auditors employees in accordance with the laws of the State of California, Section 3700 of the Labor Code In addition, Auditor shall require each subcontractor to similarly maintain Workers' Compensation Insurance and Employers Liability Insurance in accordance with the laws of the State of California, Section 3700 for all of the subcontractors employees. Any notice of cancellation or non -renewal of all Workers' Compensation policies must be received by City at least thirty (30) calendar days (ten (10) calendar days written notice of non- payment of premium) prior to such change. Diehl, Evans & Company, LLP Page 6 Auditor shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees and volunteers. 14.3.2 General Liability Coverage. Auditor shall maintain commercial general liability insurance in an amount not less than one million dollars ($1,000,000) per occurrence for bodily injury, personal injury, and property damage, including without limitation, blanket contractual liability. 14.3.3 Automobile Liability Coverage. Auditor shall maintain automobile insurance covering bodily injury and property damage for all activities of the Auditor arising out of or in connection with Work to be performed under this Agreement, including coverage for any owned, hired, non -owned or rented vehicles, in an amount not less than one million dollars ($1,000,000) combined single limit for each accident. 14.3.4 Professional Liability (Errors & Omissions) Coverage. Auditor shall maintain professional liability insurance that covers the Services to be performed in connection with this Agreement, in the minimum amount of three million dollars ($3,000,000) limit per claim and in the aggregate. 14.4 Other Insurance Provisions or Requirements. The policies are to contain, or be endorsed to contain, the following provisions: 14.4.1 Waiver of Subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against City, its elected or appointed officers, agents, officials, employees and volunteers or shall specifically allow Auditor or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to a loss. Auditor hereby waives its own right of recovery against City, and shall require similar written express waivers and insurance clauses from each of its subcontractors. 14.4.2 Enforcement of Contract Provisions. Auditor acknowledges and agrees that any actual or alleged failure on the part of the City to inform Auditor of non-compliance with any requirement imposes no additional obligations on the City nor does it waive any rights hereunder. 14.4.3 Requirements not Limiting. Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific Diehl, Evans & Company, LLP Page 7 reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. 14.4.4 Notice of Cancellation. Auditor agrees to oblige its insurance agent or broker and insurers to provide to City with thirty (30) days notice of cancellation (except for nonpayment for which ten (10) days notice is required) or nonrenewal of coverage for each required coverage. 14.4.5 Timely Notice of Claims. Auditor shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Auditors performance under this Agreement. 14.4.6 Additional Insurance. Auditor shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the Work. 15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS Except as specifically authorized under this Agreement, the Services to be provided under this Agreement shall not be assigned, transferred contracted or subcontracted out without the prior written approval of City. Any of the following shall be construed as an assignment: The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Auditor or of the interest of any general partner or joint venture or syndicate member or cotenant if Auditor is a partnership or joint -venture or syndicate or co tenancy, which shall result in changing the control of Auditor. Control means fifty percent (50%) or more of the voting power, or twenty-five percent (25%) or more of the assets of the corporation, partnership or joint -venture. 16. SUBCONTRACTING The parties recognize that a substantial inducement to City for entering into this Agreement is the professional reputation, experience and competence of Auditor. Assignments of any or all rights, duties or obligations of the Auditor under this Agreement will be permitted only with the express written consent of City. Auditor shall not subcontract any portion of the Work to be performed under this Agreement without the prior written authorization of City. 17. OWNERSHIP OF DOCUMENTS The audit work papers are the property of the Auditor, however, all working papers and reports must be retained, at the Auditors expense, for a minimum of three (3) years, unless Auditor is notified in writing by the City of the need to extend the retention period. The Auditor will be required to make working papers available, upon request, to the City or their designees. Diehl, Evans & Company, LLP Page 8 In addition, Auditor shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance as determined by City. 18. CONFIDENTIALITY All Documents, including drafts, notes and communications that result from the Services in this Agreement, shall be kept confidential unless City authorizes in writing the release of information. 19. INTELLECTUAL PROPERTY INDEMNITY The Auditor shall defend and indemnify City, its agents, officers, representatives and employees against any and all liability, including costs, for infringement of any United States' letters patent, trademark, or copyright infringement, including costs, contained in Auditor's Reports, drafts or documents under this Agreement. 20. RECORDS Auditor shall keep records and invoices in connection with the Work to be performed under this Agreement. Auditor shall maintain complete and accurate records.with respect to the costs incurred under this Agreement and any Services, expenditures and disbursements charged to City, for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to Auditor under this Agreement. All such records and invoices shall be clearly identifiable. Auditor shall allow a representative of City to examine, audit and make transcripts or copies of such records and invoices during regular business hours. Auditor shall allow inspection of all Work, data, Documents, proceedings and activities related to the Agreement for a period of three (3) years from the date of final payment to Auditor under this Agreement. 21. WITHHOLDINGS City may withhold payment to Auditor of any disputed sums until satisfaction of the dispute with respect to such payment. Such withholding shall not be deemed to constitute a failure to pay according to the terms of this Agreement. Auditor shall not discontinue Work as a result of such withholding. Auditor shall have an immediate right to appeal to the City Manager or his/her designee with respect to such disputed sums. Auditor shall be entitled to receive interest on any withheld sums at the rate of return that City earned on its investments during the time period, from the date of withholding of any amounts found to have been improperly withheld. 22. ERRORS AND OMISSIONS In the event of errors or omissions that are due to the negligence or professional inexperience of Auditor which result in expense to City greater than what would have resulted if there were not errors or omissions in the Work accomplished by Auditor, the additional expense shall be bome by Auditor. Nothing in this paragraph is intended to limit City's rights under the law or any other sections of this Agreement. Diehl, Evans & Company, LLP Page 9 23. CITY'S RIGHT TO EMPLOY OTHER AUDITORS City reserves the right to employ other auditor(s) or consultants in connection with the Project. 24. CONFLICTS OF INTEREST The Auditor or its employees may be subject to the provisions of the California Political Reform Act of 1974 (the "Act"), which (1) requires such persons to disclose any financial interest that may foreseeably be materially affected by the Work performed under this Agreement, and (2) prohibits such persons from making, or participating in making, decisions that will foreseeably financially affect such interest. If subject to the Act, Auditor shall conform to all requirements of the Act. Failure to do so constitutes a material breach and is grounds for immediate termination of this Agreement by City. Auditor shall indemnify and hold harmless City for any and all claims for damages resulting from Auditor's violation of this Section. 25. NOTICES All notices, demands, requests or approvals to be given under the terms of this Agreement shall be given in writing, and conclusively shall be deemed served when delivered personally, or on the third business day after the deposit thereof in the United States mail, postage prepaid, first-class mail, addressed as hereinafter provided. All notices, demands, requests or approvals from Auditor to City shall be addressed to City at: Attn: Dan Matusiewicz Deputy Administrative Director City of Newport Beach 3300 Newport Boulevard PO Box 1768 Newport Beach, CA 92658 All notices, demands, requests or approvals from City to Auditor shall be addressed to Auditor at: Attention: Nitin Patel, CPA Diehl, Evans & Company, LLP 5 Corporate Park, Suite 100 Irvine, CA 92606 26. CLAIMS The Auditor and the City expressly agree that in addition to any claims filing requirements set forth in this Agreement, the Auditor shall be required to file any claim the Auditor may have against the City in strict conformance with the Tort Claims Act (Government Code sections 900 et seq.). Diehl, Evans & Company, LLP Page 10 27. TERMINATION In the event that either party fails or refuses to perform any of the provisions of this Agreement at the time and in the manner required, that party shall be deemed in default in the performance of this Agreement. If such default is not cured within a period of two (2) calendar days, or if more than two (2) calendar days are reasonably required to cure the default and the defaulting party fails to give adequate assurance of due performance within two (2) calendar days after receipt of written notice of default, specifying the nature of such default and the steps necessary to cure such default, and thereafter diligently take steps to cure the default, the non -defaulting party may terminate the Agreement forthwith by giving to the defaulting party written notice thereof. Notwithstanding the above provisions, City shall have the right, at its sole discretion and without cause, of terminating this Agreement at any time by giving seven (7) calendar days prior written notice to Auditor. In the event of termination under this Section, City shall pay Auditor for Services satisfactorily performed and costs incurred up to the effective date of termination for which Auditor has not been previously paid. On the effective date of termination, Auditor shall deliver to City all reports, documents and other information developed or accumulated in the performance of this Agreement, whether in draft or final form. 28. COMPLIANCE WITH ALL LAWS Auditor shall at its own cost and expense comply with all statutes, ordinances, regulations and requirements of all. governmental entities, including federal, state, county or municipal, whether now in force or hereinafter enacted. In addition, all Work prepared by Auditor shall conform to applicable City, county, state and federal laws, rules, regulations and permit requirements and be subject to approval of the Project Administrator and City. 29. WAIVER A waiver by either party of any breach, of any term, covenant or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, whether of the same or a different character. 30. INTEGRATED CONTRACT This Agreement represents the full and complete understanding of every kind or nature whatsoever between the parties hereto, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein. No verbal agreement or implied covenant shall be held to vary the provisions herein. 31. CONFLICTS OR INCONSISTENCIES In the event there are any conflicts or inconsistencies between this Agreement and the Scope of Services or any other attachments attached hereto, the terms of this Agreement shall govern. Diehl, Evans & Company, LLP Page 11 32. INTERPRETATION The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of the Agreement or any other rule of construction which might otherwise apply. 33. AMENDMENTS This Agreement may be modified or amended only by a written document executed by both Auditor and City and approved as to form by the City Attorney. 34. SEVERABILITY If any term or portion of this Agreement is held to be invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement shall continue in full force and effect. 35. CONTROLLING LAW AND VENUE The laws of the State of California shall govern this Agreement and all matters relating to it and any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange. 36. EQUAL OPPORTUNITY EMPLOYMENT Auditor represents that it is an equal opportunity employer and it shall not discriminate against any subcontractor, employee or applicant for employment because of race, religion, color, national origin, handicap, ancestry, sex or age. 37. NO ATTORNEY'S FEES In the event of any dispute or action arising under this Agreement the prevailing party shall not be entitled to attorney's fees. Diehl, Evans & Company, LLP Page 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the dates written below. APPROVED AS TO FORM: OFFICE OF HEITY ATTORNEY Date: (j2 °i 11 CcoC Leonie M Assistant ATTEST: Date: By: Leilani I. Brown City Clerk CITY OF NEWPORT BEACH, A California municipal corporation Michael F. Henn Mayor AUDITOR: DIEHL, EVANS & COMPANY, LLP 0 Date: 0 Attachments: Exhibit A — Scope of Services Exhibit B — Schedule of Billing Rates Diehl, Evans & Company, LLP Page 13 Exhibit A SCOPE OF PROJECT The objectives and scope of the work to be performed is based upon the request for proposal. Based upon the foregoing Auditor understands the objectives and scope of work to be as follows: 1) Auditor will perform an audit examination of the governmental activities, business type activities, each major fund and the aggregate remaining fund information for the City of Newport Beach for the four years beginning with the fiscal year ending June 30, 2011. The examinations will be conducted in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards as set forth by the GAO, and the requirements of the American Institute of Certified Public Accountants' Industry audit Guide entitled "Audits of State and Local Governmental Units." City Staff will draft and word process the Comprehensive Annual Financial Report (CAFR) of the City of Newport Beach. Auditor will review the report for conformity with the reporting standards set forth by GFOA for their CAM award programs. Auditor will finalize financial statements opinion by the second week of December each year. The auditors will provide their auditors' report thereon. Auditor will apply to management's discussion and analysis those procedures required by the auditing standards to be applied to required supplementary information (understanding the method of preparation, the source and basis for the information presented, comparing for consistency to the audited data pertaining to the City, and ascertaining the management's discussion and analysis contains all the information required by GASB Statement No. 34 and does not contain information prohibited to be presented in the management's discussion and analysis). 2) As part of the Single Audit for the years in which the City expends greater than $500,000 in federal funding, Auditor will supplement their approach by reviewing all pertinent federal and AICPA publications including The Single Audit Act Amendments of 1996 (Public Law 104-156); OMB Circular A-133 entitled Audits of States, Local Governments, and Non -Profit Organizations; GAO Government Auditing Standards (Yellow Book), 2007 version; AICPA Audit and Accounting Guide Audits of State and Local Governments Units and Statement of Position 98- 3, Audits of States, Local Governments, and Not -for -Profit Organizations Receiving Federal Awards; SAS No. 117, Compliance Auditing Consideration in Audits of Governmental Entities and Other Recipients of Federal Financial Assistance and Catalog of Domestic Assistance Programs. The single audit will cover all federal grants received by the City and its component units either as a primary or secondary recipient for fiscal years ended June 30, 2011 through June 30, 2014.The City will provide to the Auditors the Schedule of Federal Financial Assistance encompassing all direct and pass-through federal funds received by the City and component units. Auditor will render reports on the single audit in accordance with the single audit requirements by OMB Circular A-133. Auditor will also prepare the electronic submission of the data collection form required to be filed with the Single Audit Central Clearinghouse. 3) Auditor will perform agreed-upon audit procedures to test and report on the City's Gann Limit for the four years beginning with the fiscal years ending June 30, 2011 through June 30, 2014. 4) Auditor will perform the financial audit of the Integrated Law and Justice Agency of Orange County (ILJAOC), and the single audit, if needed, for the fiscal year ending June 30, 2011. Auditor will draft and prepare the financial statements for the Agency and issue their reports on compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. 5) Auditor will provide the Finance Committee communications required by the auditing standards: the auditor's responsibility under generally accepted auditing standards, significant accounting policies, management judgment and accounting estimates, significant audit adjustments, other information in documents containing audited financial statements, disagreements with management, management consultation with other accountants, major issues discussed with management prior to retention, difficulties encountered in performing the audit, errors, irregularities, and illegal acts detected in the course of the audit. 6) Auditor will immediately report in writing any irregularities or illegal acts that come to their attention to the City Council, City Attorney, and the City Manager as required by the auditing standards. 7) For each year of their engagement, Auditor'will prepare a letter to the City Council reporting matters, dealing with internal control that meet the threshold of being reportable conditions, as defined by professional auditing standards. 8) Auditor will prepare a management letter that will provide other recommendations to the City ensuing from their review of the City's internal control procedures. This letter will address non -reportable conditions (those constructive comments not required to be included in the reportable conditions to City Council or in the single audit report). Auditor will discuss those comments with the Administrative Services Director or her designee prior to its finalization. 9) Auditor will keep City staff abreast of all new developments affecting local government finance and relevant accounting issues. Auditor will advise and assist City staff in understanding of and implementation of new GASB pronouncements. 10) Auditor will be available to assist with other professional assistance requiring research and answer accounting and reporting issues raised by the City. Such assistance may include, but is not limited to tax matters, review of bond documents, cost allocation plans and employee benefit programs. 11) Finally, Auditor perceives the scope of their work as being advisors to the City of Newport Beach regarding generally accepted accounting principle, debt issuances, and other matters relating to the City. Diehl, Evans & Company, LLP also offer a wide range of consulting services to governmental agencies and the firm's Director of Consulting Services, Mr. William S. Morgan, CPA has over thirty years of experience in providing accounting, auditing, and consulting services. Under the attestation standards, the City may request a specific procedure or study it wishes to have performed. Auditor would then perform those procedures and report on their findings. Such special services are not part of their standard fee and would be subject to a separate fee quotation. Exhibit B City of Newport Beach, California Maximum Price Summary Our maximum fee for the four years ending June 30, 2014 will be as follows: Fiscal Year Option Period Service 2010-11 2011-12 2012-2013 2013-2014 City of Newport Beach: Financial Audit, including SAS No. 114 and SAS No. 115 letters, GANN Limit Total Review and related reports $ 32,800 $ 33,456 $ 34,125 $ 34,808 $ 135,189 Single Audit 5,810 5,926 6,045 6,166 City Total 38,610 39,382 40,170 40,974 159,136 Integrated Law & Justice Agency for Orange County (ILJAOC): Financial Audit, including SAS No. 114 and SAS No. 115 letters and related reports 9,060 Single Audit ILJAOC Total Grand Total 3,335 3,335 12,395 12,395 $ 51,005 $ 39,382 $ 40,170 $ 40,974 $ 171,531 Manner of Payment Progress payment will be made on the basis of hours of work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billings shall cover a period of not less than a calendar month and are payable on presentation. No more than 90% of the total fee may be billed prior to the presentation of final audit reports and financial statements. Also, fees will be payable in full regardless of findings that result from this engagement. Exhibit B - continued Hourly Rates For Additional Professional Services 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: Nitin P. Patel, CPA - Engagement Partner Robert J. Callanan, CPA - Concurring Review Partner Bill Morgan, CPA - Director of Consulting Services Managers Supervisory Staff Staff Clerical Fiscal Year Option Period 2010-11 2011-12 2012-2013 2013-2014 $ 195 $ 199 $ 203 $ 207 195 199 203 207 195 199 203 207 135 138 140 143 105 107 108 111 85 87 88 90 50 51 52 53