HomeMy WebLinkAboutC-3350 - Annual Financial Audit for the fiscal years ending June 30, 2003, 2004 and 2005.MAY : :. `r 2003
CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 13
May 27, 2003
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Administrative Services Department
Dennis Danner, Director, (949) 644 -3123
dd an ne r@ city. newport-beach.ca. us
SUBJECT: ANNUAL FINANCIAL AUDIT CONTRACT RENEWAL
RECOMMENDATION:
Authorize the City Manager to renew the contract wit
Associates, L.L.P., to perform the City's annual financial
June 30, 2003, 2004, and 2005. This item has been
Committee and they concur in this recommendation.
DISCUSSION:
h the CPA firm of Conrad AND
audit for the fiscal years ending
reviewed by the City's Finance
The CPA firm of Conrad AND Associates, L.L.P., has performed the City's annual
financial audit for the past three fiscal years ending on June 30, 2000, 2001, and 2002.
In the opinion of staff, they have performed the City's annual financial audit in an
outstanding manner at a very reasonable price. In addition, they were invaluable in
assisting the City to successfully implement GASB Statement #34 in the first year it was
required (fiscal year ended June 30, 2002). This Statement greatly changed the way the
financial information of the City was reported and presented.
Council Policy F -15, pertaining to the City's annual financial audit, states in part that the
City will normally award an audit contract for a three -year period. The Policy further
states that the audit contract may be renewed for an additional three -year period,
without going through a new invitation for bid procedure, with the same firm, if the City
Council is satisfied with the performance of the auditors and authorizes the extension.
Conrad AND Associates, L. L. P., is proposing the renewal with a minor fee increase of
2.5 percent for each of the three years of the extension, or a price of $41,830, $42,876,
and $43,948 for the fiscal years ending June 30, 2003, 2004, and 2005 respectively.
Staff believes this minor fee increase is appropriate.
Annual Financial Audit Contract Renewal
May 27, 2003
Page 2
Funding Availability
Funding for audit services is available and included in the annual budget.
Alternatives:
Obtain bids for audit services and select a different CPA firm.
Submitted by:
Dennis C. Danner, Director
Attachment: Contract
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CONRAD AND
ASSOCIATES, L.L.P.
April 28, 2003
Dennis Danner
Administrative Service Director
City of Newport Beach
P.O. Box 1768
Newport Beach, California 92658 -8915
Dear Dennis:
0
CERTIFIED PUBLIC ACCOUNTANTS
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92614
(949) 4 74 -2 02 0
Fax (949) 263 -5520
Thepurpose of this letter is to set forth the nature, terms, and objectives of our engagement to audit the
financial statements of the City of Newport Beach for the fiscal years ending June 30, 2003, 2004 and
2005.
ABOUT CONRAD AND ASSOCIATES, L.L.P.
Our firm is on the forefront of financial . reporting for local governments. We currently serve as the
auditor for 43 cities throughout southern California, including nearly half of the cities in Orange County.
We have already implemented GASB Statement No. 34 for 12 of our 43 city clients. Mr. Al -Imam of
our office assisted GASB in the preparation and editing of GASB's most recent GASB 34
Implementation Guide. Mr. Al -Imam is also a member of CCMA and has authored a number of
CCMA white papers, including the recent CCMA white paper on the classification of revenues under
GASB No. 34.
SCOPE OF OUR ENGAGEMENT
We trust that you have been happy with our services. We value the City of Newport Beach as an
important client of our firm.
We will conduct our audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We will report to you in writing any material weaknesses in
internal control or other reportable conditions detected by our procedures, as well as recommendations
for improvement in .City policies and procedures revealed by our procedures.
We agree to conduct our audits for the years ending June 30, 2003, 2004, and 2005 for $41,830,
$42,876, and $43,948, respectively. This reflects a small annual fee increase of only 2.5 %.
Should the City request additional services beyond the scope of the normal annual audit, we will bill you
for such additional services at the following rates:
Classification
Partner
$186
Senior Manager
133'
Manager
106
Supervisor
95
Senior Accountant
80
Staff Accountant
64
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUrE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
April 28, 2003
City of Newport Beach
Annual Audit Engagement Letter
Page 2
At the start of the final exam phase of the audit, the City will provide trial balances reflecting necessary
year end adjustments, as well as necessary schedules, analyses, and reconciliations supporting and
agreeing to the material asset and liability balances in the year end trial balances of the City. Should the
City desire assistance in reconciliations, analysis, or journal entry preparation, we would be pleased to
assist the City at the hourly rates set forth above. The City will draft, word process, copy, and bind the
comprehensive annual financial report (CAFR).
Our fee contemplates no substantial changes in the scope of the audit (e.g., added enterprise activity,
component units, etc.) we would discuss with you any impact of the same on the scope of the audit.
The auditing standards require that we disclose to you the following: Auditors are responsible for
planning the audit in a manner to provide reasonable, but not absolute, assurance that the financial
statements are free of material misstatement. Management is responsible for maintaining the accounting
records in accordance with generally accepted accounting principles and for adjusting the accounting
records to correct misstatements so that the effects of any uncorrected misstatements are immaterial,
both individually and in the aggregate to the financial statements taken as a whole. Also, because an
audit is performed on a limited test basis, it cannot be relied upon to disclose instances of
noncompliance, fraud or irregularity. However, we will report to you any such matters that come to our
attention.
We are looking forward to continuing our service to the City of Newport Beach. If you are in agreement
with the foregoing arrangements for the City audit, please sign and return the enclosed copy of this letter
for our files.
Sincerely,
CONRAD AND ASSOCIATES, L.L.P.
Ken Al -Imam, C.P.A.
Partner
Accepted:
CITY OF NEWPORT BEACH
0
Title:
Date:
ONRAD AND
ASSOCIATES, L.L.P.
April 28, 2003
Dennis Danner
Administrative Service Director
City of Newport Beach
P.O. Box 1768
Newport Beach, California 92658 -8915
Dear Dennis:
-1- - c-33S-0
is
CERTIFIED PUBLIC ACCOUNTANTS
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92614
(949) 474 -2020
Fax (949) 263 -5520
The purpose of this letter is to set forth the nature, terms, and objectives of our engagement to audit the
financial statements of the City of Newport Beach for the fiscal years ending June 30, 2003, 2004 and
2005.
ABOUT CONRAD AND ASSOCIATES, L.L.P.
Our firm is on the forefront of financial reporting for local governments. We currently serve as the
auditor for 43 cities throughout southern California, including nearly half of the cities in Orange County.
We have already implemented GASB Statement No. 34 for 12 of our 43 city clients. Mr. Al -Imam of
our office assisted GASB in the preparation and editing of GASB's most recent GASB 34
Implementation Guide. Mr. Al -Imam is also a member of CCMA and has authored a number of
CCMA white papers, including the recent CCMA white paper on the classification of revenues under
GASB No. 34.
SCOPE OF OUR ENGAGEMENT
We trust that you have been happy with our services. We value the City of Newport Beach as an
important client of our firm.
We will conduct our audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We will report to you in writing any material weaknesses in
internal control or other reportable conditions detected by our procedures, as well as recommendations
for improvement in City policies and procedures revealed by our procedures.
We agree to conduct our audits for the years ending June 30, 2003, 2004, and 2005 for $41,830,
$42,876, and $43,948, respectively. This reflects a small annual fee increase of only 2.5 %.
Should the City request additional services beyond the scope of the normal annual audit, we will bill you
for such additional services at the following rates:
Classification
Partner
$186
Senior Manager
133
Manager
106 .
Supervisor
95
Senior Accountant
80
Staff Accountant
64
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
April 28, 2003
City of Newport Beach
Annual Audit Engagement Letter
Page 2
At the start of the final exam phase of the audit, the City will provide trial balances reflecting necessary
year end adjustments, as well as necessary schedules, analyses, and reconciliations supporting and
agreeing to the material asset and liability balances in the Year end trial balances of the City. Should the
City desire assistance in reconciliations, analysis, or journal entry preparation, we would be pleased to
assist the City at the hourly rates set forth above. The City will draft, word process, copy, and bind the
comprehensive annual financial report (CAFR).
Our fee contemplates no substantial changes in the scope of the audit (e.g., added enterprise activity,
component units, etc.) we would discuss with you any impact of the same on the scope of the audit.
The auditing standards require that we disclose to you the following: Auditors are responsible for
planning the audit in a manner to provide reasonable, but not absolute, assurance that the financial
statements are free of material misstatement. Management is responsible for maintaining the accounting
records in accordance with generally accepted accounting principles and for adjusting the accounting
records to correct misstatements so that the effects of any uncorrected misstatements are immaterial,
both individually and in the aggregate to the financial statements taken as a whole. Also, because an
audit is performed on a limited test basis, it cannot be relied upon to disclose instances of
noncompliance, fraud or irregularity. However, we will report to you any such matters that come to our
attention.
We are looking forward to continuing our service to the City of Newport Beach. If you are in agreement
with the foregoing arrangements for the City audit, please sign and return the enclosed copy of this letter
for our files.
Sincerely,
CONRAD AND ASSOCIATES, L.L.P.
Ken Al -Imam, C.P:A.
Partner
Accepted:
CITY OF NEWPORT BEACH
By:
Title:
Date: Z00
0 0 c -336�
PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT, entered into this 13th day of June, 2000, by and between
CITY OF NEWPORT BEACH , a Municipal Corporation (hereinafter referred to as
"City"), and CONRAD AND ASSOCIATES, L.L.P whose address is 1100 Main Street,
Suite C, Irvine, California, 92614, (hereinafter referred to as "AUDITOR "), 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 is required to secure an audit of its Financial Statements and Federal
financial assistance (Single Audit) each year.
C. 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, 2000, with an option to audit each of the two subsequent fiscal
years upon the terms and conditions contained in this Agreement.
D. The principal members of AUDITOR, are for purpose of this Agreement,
Ken AI -Imam, CPA, Michael A. Harrison, CPA, Steven Dobrenen, CPA,
and Ron K. Lopez.
E. 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 under the terms of conditions provided
in this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned
Parties as follows:
TERM
The term of this Agreement shall commence on the 13th day of June, 2000, and
shall terminate upon completion of the 2001102 fiscal Audit, unless terminated earlier as
set forthin Section 26.
2. SERVICES TO BE PERFORMED
AUDITOR shall diligently perform all the duties set forth in the scope of services,
attached hereto as Exhibit "A" and incorporated herein by reference.
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3. COMPENSATION TO AUDITOR
City shall pay AUDITOR for the services in accordance with the provisions of this
Section and the scheduled billing rates, attached hereto as Exhibit "B" and incorporated
herein by reference. No rate changes shall be made during the term of this Agreement
without prior written approval of City. AUDITOR's compensation for all work performed
in accordance with this Agreement shall not exceed the total contract price of
$38,465.00 for fiscal year 1999 -00, $39,620.00 for fiscal year 2000 -01 and $40,810.00
for fiscal year 2001 -02.
3.1 AUDITOR shall maintain accounting records of its billings which includes
the name of the employee, type of work performed, times and dates of all work which is
billed on an hourly basis and all approved incidental expenses including reproductions,
computer printing, postage and mileage.
3.2 AUDITOR shall submit monthly invoices to City payable by City within
thirty (30) days of receipt of invoice subject to the approval of City and based upon the
following: progress payments will be made on the basis of hours of work completed
during the course of the engagement in accordance with the AUDITOR's fixed all -
inclusive contract price. Interim billing shall not cover a period of not less than a
calendar month.
3.3 AUDITOR shall not receive any compensation for extra work without prior
written authorization of City. Any authorized compensation shall be paid in accordance
with Exhibit "B ".
3.4 City shall reimburse AUDITOR only for those costs or expenses which
have been specifically approved in this Agreement, or specifically approved in advance
by City.
3.5 Notwithstanding any other paragraph or provision of this Agreement,
beginning on the effective date of this Agreement, City may withhold payment of ten
percent (10 %) of each approved payment as approved retention pending delivery of the
AUDITOR'S final report.
4. STANDARD OF CARE
4.1 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 the 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. AUDITOR
represents and warrants to City that it has or shall obtain all licenses, permits,
qualifications and approvals required of its profession. AUDITOR further represents
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and warrants that it shall keep in effect all such licenses, permits and other approvals
during the term of this Agreement.
4.2 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, or any other delays beyond AUDITOR's
control or without AUDITOR's fault.
S. INDEPENDENT PARTIES
City retains AUDITOR on an independent contractor basis and AUDITOR is not
an 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 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 details in means of performing the work provided that AUDITOR is in
compliance with the terms of this Agreement. Anything in this Agreement which may
appear to give City the right to direct AUDITOR as to the details of the performance of
the services or to exercise a measure of control over AUDITOR shall mean that
AUDITOR shall follow the desires of City only with respect to the results of the services.
6. COOPERATION
AUDITOR agrees to work closely and cooperate fully with City's designated
Engagement 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
this Audit.
7. ENGAGEMENT MANAGER
AUDITOR shall assign the Audit to an Audit Manager, who shall coordinate all
phases of the Audit. This Audit Manager shall be available to City at all reasonable
times during the Engagement term. AUDITOR has designated Ken AI -Imam, CPA to be
its Audit Manager. AUDITOR shall not bill any personnel to the Audit other than those
personnel identified in Exhibit W, whether or not considered to be key personnel,
without City's prior written approval by name and specific hourly billing rate. AUDITOR
shall not remove or reassign any personnel designated in this Section or assign any
new or replacement person to the Audit without the prior written consent of City. City's
approval shall not be unreasonably withheld with respect to removal or assignment of
non -key personnel.
AUDITOR, at the sole discretion of City, shall remove from the Audit any of its
personnel assigned to the performance of services upon written request of City.
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AUDITOR warrants that it will continuously furnish the necessary personnel to complete
the Audit on a timely basis as contemplated by this Agreement.
8. TIME OF PERFORMANCE
Time is of the essence in the performance of the services under this Agreement
and the services shall be performed by AUDITOR in accordance with the schedule
specified in Exhibit "C ". 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
AUDITOR for delay. Notwithstanding the foregoing, AUDITOR shall not be responsible
for delays which are due to causes beyond AUDITOR's reasonable control. However,
in the case of any such delay in the services to be provided for the Audit, each party
hereby agrees to provide notice to the other party so that all delays can be addressed.
8.1 AUDITOR shall submit all requests for extensions of time for performance
in writing to the Engagement Administrator not later than ten (10) calendar days after
the start of the condition which purportedly causes a delay, and not later than the date
upon which performance is due. The Engagement Administrator shall review all such
requests and may grant reasonable time extensions for unforeseeable delays, which
are beyond AUDITOR's control.
8.2 For all time periods not specifically set forth herein, AUDITOR shall
respond in the most expedient and appropriate manner under the circumstances, by
either telephone, fax, hand delivery or mail.
9. CITY POLICY
AUDITOR will discuss and review all matters relating to policy and Audit direction
with the Audit Administrator in advance of all critical decision points in order to ensure
that the Audit proceeds in a manner consistent with City goals and policies.
10. CONFORMANCE TO APPLICABLE REQUIREMENT
All work prepared by AUDITOR shall conform to applicable city, county, state and
federal law, policies, rules, regulations and permit requirements and be subject to
approval of the Audit Administrator and City.
11. PROGRESS
AUDITOR is responsible to keep the Audit Administrator and /or his /her duly
authorized designee informed on a regular basis regarding the status and progress of
the Audit work, activities performed and planned, and any meetings that have been
scheduled or are desired.
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12. HOLD HARMLESS
AUDITOR shall indemnify, defend, save and hold harmless City, its City Council,
boards and commissions, officers and employees from and against any and all loss,
damages, liability, claims, allegations of liability, suits, costs and expenses for damages
of any nature whatsoever, including, but not limited to, bodily injury, death, personal
injury, property damages, or any other claims arising from any and all negligence acts
or omissions of AUDITOR, its employees, agents or subcontractors in the performance
of services or work conducted or performed pursuant to this Agreement, excepting only
the sole negligence or willful misconduct of City, its officers or employees, and shall
include attorneys' fees and all other costs incurred in defending any such claim.
13. INSURANCE
Without limiting AUDITOR's indemnification of City, and prior to commencement
of work, AUDITOR shall obtain and provide and maintain at its own expense during the
term of this Agreement policy or policies of liability insurance of the type and amounts
described below and satisfactory to City. Certification of all required policies shall be
signed by a person authorized by that insurer to bind coverage on its behalf and must
be filed with City prior to exercising any right or performing any work pursuant to this
Agreement. Except workers compensation and errors and omissions, all insurance
policies shall add City, its elected officials, officers, . agents, representatives and
employees as additional insured for all liability arising from AUDITOR's services as
described herein.
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 Bests Key
Rating Guide: unless otherwise approved by the City Risk Manager.
A. Worker's compensation insurance covering all employees and principals
of AUDITOR, per the laws of the State of California.
B. Commercial general liability insurance covering third party liability risks,
including without limitation, contractual liability, in a minimum amount of $1
million combined single limit per occurrence for bodily injury, personal
injury and property damage. If commercial general liability insurance or
other form with a general aggregate is used, either the general aggregate
shall apply separately to this Engagement, or the general aggregate limit
shall be twice the occurrence limit.
C. Commercial auto liability and property insurance covering any owned and
rented vehicles of AUDITOR in a minimum amount of $1 million combined
single limit per accident for bodily injury and property damage.
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D. Professional errors and omissions insurance which covers the services to
be performed in connection with this Agreement in the minimum amount of
One Million Dollars ($1,000,000.00).
Said policy or policies shall be endorsed to state that coverage shall not be
canceled by either party, except after thirty (30) days' prior notice has been given in
writing to City. AUDITOR shall give City prompt and timely notice of claim made or suit
instituted arising out of AUDITOR's operation hereunder. 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.
AUDITOR agrees that, in the event of loss due to any of the perils for which it
has agreed to provide comprehensive general and automotive liability insurance,
AUDITOR shall look solely to its insurance for recovery. AUDITOR hereby grants to
City, on behalf of any insurer providing comprehensive general and automotive liability
insurance to either AUDITOR or City with respect to the services of AUDITOR herein, a
waiver of any right of subrogation which any such insurer of said AUDITOR may acquire
against City by virtue of the payment of any loss under such insurance.
14. PROHIBITION AGAINST TRANSFERS
AUDITOR shall not assign, sublease, hypothecate or transfer this Agreement or
any for the services to be performed under this Agreement, directly or indirectly, by
operation of law or otherwise without prior written consent of City. Any attempt to do so
without consent of City shall be null and void.
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
venturer or syndicate member or cotenant if AUDITOR is a partnership or joint - venture
or syndicate or cotenancy, which shall result in changing the control of AUDITOR, shall
be construed as an assignment of this Agreement. 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.
15. OWNERSHIP OF DOCUMENTS
All working papers and reports must be retained, at the auditor's expense, for a
minimum of three (3) years, unless the firm is notified in writing by the City of the need
to extend the retention period. Working papers will remain the property of AUDITOR to
support the work performed by the AUDITOR. The AUDITOR will be required to make
working papers available, upon request, to the following parties or their designees:
City of Newport Beach
Department of Housing and Urban Development
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Department of Justice
Department of Transportation
U.S. General Accounting Office (GAO)
Parties designated by the federal or state governments or by the City as part of
an audit quality review process
Auditors of entities of which the City is a subrecipient of grant funds
In addition, the firm shall respond to the reasonable inquiries of successor
auditors and allow successor auditors to review working papers relating to matters of
continuing accounting and auditing significance.
Documents, including drawings and specifications, prepared by AUDITOR
pursuant to this Agreement are not intended or represented to be suitable for reuse by
City or others on any other Audit. Any use of completed documents for other Audits and
any use of incomplete documents without specific written authorization from AUDITOR
will be at City's sole risk and without liability to AUDITOR. Further, any and all liability
arising out of changes made to AUDITOR's deliverables under this Agreement by City
or persons other than AUDITOR is waived against AUDITOR and City assumes full
responsibility for such changes unless City has given AUDITOR prior notice and has
received from AUDITOR written consent for such changes.
AUDITOR shall, at such time and in such form as, City may require, furnish
reports concerning the status of services required under this Agreement.
16. CONFIDENTIALITY
The information, which results from the services in this Agreement, is to be kept
confidential unless the release of information is authorized by City.
17. CITY'S RESPONSIBILITIES
In order to assist AUDITOR in the execution of his responsibilities under this
Agreement, City agrees to provide the following:
A. Access to, and upon request of AUDITOR, one copy of all existing record
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.
B. City will prepare the financial statements complete with year -end
adjustments.
C. City will make available to the AUDITOR, general ledger and subsidiary
ledger balances, supporting schedules, necessary reconciliations in
agreement with general ledger balances and customary supporting
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analyses and schedules maintained by the Administrative Services
Department.
D. City will prepare all written independent confirmations for AUDITOR
mailing.
E. City Staff will retrieve and re -file all records requested by the AUDITOR.
F. City will provide the AUDITORS access to workspace, desk and chairs to
perform the engagement.
G. City will provide the AUDITORS access to telephones, photocopying
equipment and fax machines necessary to perform the engagement as
well as de minimus use of said equipment to maintain contact with other
clients during the term of this engagement.
18. ADMINISTRATION
This Agreement will be administered by the Adminstrative Services Department.
Dan Matusiewicz, Accounting Manager shall be considered the Engagement
Administrator and shall have the authority act for City under this Agreement. The
Engagement Administrator and /or his/her authorized designee shall represent City in all
matters pertaining to the services to be rendered pursuant to this Agreement.
19. 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. All such records shall
be clearly identifiable. AUDITOR shall allow a representative of City to examine, audit
and make transcripts or copies of such records during normal 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
under this Agreement.
20. WITHHOLDINGS
City may withhold payment 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 designee with respect to such disputed sums. AUDITOR
shall be entitled to receive interest on any withheld sums at the rate of seven percent
(7 %) per annum from the date of withholding of any amounts found to have been
improperly withheld.
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21. 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 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 any other sections of this Agreement.
22. CITY'S RIGHT TO EMPLOY OTHER AUDITOR(S)
City reserves the right to employ other AUDITOR(S) or accountants in
connection with thisAudit.
23. CONFLICTS OF INTEREST
A. 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 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.
B. 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
termination of this Agreement by City. AUDITOR shall indemnity and hold
harmless City for any and all claims for damages resulting from
AUDITOR's violation of this Section.
24. SUBAUDITOR AND ASSIGNMENT
A. Except as specifically authorized under this Agreement, the services
included in this Agreement shall not be assigned, transferred, contracted
or subcontracted without prior written approval of City.
25. NOTICES
All notices, demands, requests or approvals to be given under 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:
Administrative Services Department
City of Newport Beach
3300 Newport Boulevard
P. O. Box 1768
Newport Beach, CA, 92658 -8915
(949) 644 -3126
Fax 644 -3339
All notices, demands, requests or approvals from City to AUDITOR shall be
addressed to AUDITOR at:
CONRAD AND ASSOCIATES, L.L.P.
1100 Main Street, Suite C
Irvine, California 92614
(949) 474 -2020, x217
Fax 263 -5520
Attn: Ken AI -Imam, Partner
26. TERMINATION
In the event either part hereto fails or refuses to perform any of the provisions
hereof at the time and in the manner required hereunder, 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) days, or if more than two (2) days are reasonably required to cure the default
and the defaulting party fails to give adequate assurance of due performance within two
(2) days after receipt of written notice of default, specifying the nature of such default
and the steps necessary to cure such default, the nondefaulting party may terminate the
Agreement forthwith by giving to the defaulting party written notice thereof.
26.1 Notwithstanding the above, City shall have the option, at its sole discretion
and without cause, of terminating this Agreement at any time by giving seven (7) days'
prior written notice to AUDITOR as provided herein. Upon termination of this
Agreement, City shall pay to the AUDITOR that portion of compensation specified in this
Agreement that is earned and unpaid prior to the effective date of termination.
27. COMPLIANCE'S
AUDITOR shall comply with all laws, state or federal and all ordinances, rules
and regulations enacted or issued by City.
28. 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.
29. 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. Any modification of this
Agreement will be effective only by written execution signed by both City and AUDITOR.
APPROVED AS TO FORM
AND CONT T:
By: 16
ko'DWdlauson,
Assistant City Attorney
for the City of Newport Beach
ATTEST:
LaVonne Harkless
City Clerk
f: lusers\catlsharedlaglconrad.doc
CITY OF NEWPORT BEACH
A Municipal. Corporation
IN
for the City of Newport Beach
/Ken AAman ,CPA
Partner
11
11
SECTION G
0
Our understanding of the objectives and scope of the work to be performed based upon your
request for proposal is as follows:
1. We will perform an audit examination of all fiend types and account groups of the City of
Newport Beach for the year ending June 30, 2000 with an option to audit each of the two
subsequent fiscal years. Our examination will be conducted in accordance with generally
accepted government auditing standards. The City will draft and word process the
comprehensive annual financial report (CAFR).
2. For fiscal years where federal grant expenditures exceed $300,000, we will perform a
"single audit" of the City of Newport Beach in accordance with the Single Audit Act
Amendments of 1996 (Public Law 104 -156) and OMB Circular A -133 entitled Audits of
States, Local Governments, and Non - Profits Organizations. Our single audit will cover
all federal grants received by the City of Newport Beach and its component units either
as a primary or secondary recipient. The City will provide to the auditors a schedule
identifying the expenditure of federal funds, including expenditures to be funded with
federal funds to be received indirectly through state, local, or other entities. We will
render our reports on the single audit (as well as the required data collection form) in
accordance with the single audit requirements as described in Section F of this proposal.
3. We will test the City's appropriation limit and provide a letter of Agreed Upon
Procedures for the year ending June 30,2000 with an option for each of the two
subsequent fiscal years.
4. We will provide an immediate written report of all irregularities and illegal acts or
indications of illegal acts of which we become aware during the course of our audit to the
City Manager, City Attorney, and the Administrative Services Director.
S. We will prepare a management letter that will provide recommendations to the City
ensuing from our review of the City's internal control procedures. This letter will include
nonreportable conditions (those constructive comments not required to be included in the
single audit report). We will discuss those comments with the Finance Director prior to ..
its finalization.
6. We will report to the Audit Committee the following matters:
• The auditor's responsibility under generally accepted auditing standards
• Significant accounting policies
• Management judgments and accounting estimates
• Significant audit adjustments
• Other information in documents containing audited financial statements
• Disagreement with management
• Management consultation with other accountants
• Major issues discussed with management prior to retention
• Difficulties encountered in performing the audit
EXHIBIT A
Ll
NRAD AND
ASSOCIATES, L.L.P.
Mr. Dennis C. Danner
Administrative Services Director
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92663
Dear Mr. Danner:
0
CERTIFIED PUBLIC ACCOUNTANTS
April 21, 2000
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92614
(949) 474 -2020
Fax (949) 263 -5520
Enclosed please find Section H of our proposal which sets forth our cost proposal which
we have separated from our technical proposal for audit services to be performed by
Conrad and Associates, L.L.P.
I certify that I am entitled to represent the firm, empowered to submit the bid and
authorized to sign a contract with the Authority.
The total all- inclusive maximum price for each year is as shown below, including any
out -of- pocket expenses. For each of the two succeeding option years, we would agree to
a nominal 3% fee increase.
For each year, our fee would be as follows:
Fiscal
Total
Year
Fee
1999 -00
$38,465
2000 -01 39,620
2001 -02, 40,810
Our three -year average for the all- inclusive maximum fee is only $39,632.
Sincerely,
CONRAD AND ASSOCIATES, L.L.P.
Ken Al -Imam, C.P.A.
Partner
EXHIBIT B
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
9 0
CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for the Audit of the
1999 -00 Financial Statements
The above rates cover all of our out of pocket expenses.
Any special projects, extra work, accounting assistance or additional assignments will be
performed at the hourly rates indicated below:
Partner
Percentage
2000 -01
180
Standard Discounted
Total
125
of
133
Hourly
Hourly
Fixed
Classification
Hours
Hours
Ratf&
Rates
Price
Partners
6%
35
$175.00
$ 115.00
$ 4,025
Managers
14%
85
100.00
90.00
7,650
Supervisory Staff
40%
235
75.00
64.00
15,040
Staff
40%
235
60.00
50.00
11,750
Other (specify)
NZA
-
-
-
-
Total all- inclusive price
100%
590
$.38,465
The above rates cover all of our out of pocket expenses.
Any special projects, extra work, accounting assistance or additional assignments will be
performed at the hourly rates indicated below:
Partner
1999 -00
$175
2000 -01
180
2001 -02
186
Senior Manager
125
129
133
Manager
100
103
106
Supervisor
90
93
95
Senior Accountant
75
77
80
Staff Accountant
60
62
64
0 0
CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for the Audit of the
2000 -01 Financial Statements
The above rates cover all of our out of pocket expenses.
Percentage
Standard
Discounted
Total
of
Hourly
Hourly
Fixed
Classification
Hours
Hours
Rates
Rates
Pnce
Partners
6%
35
$ 180.25
$ 118.45
$ 4,146
Managers
14%
85
103.00
92.70
7,880
Supervisory Staff
40%
235
77.25
65.92
15,491
Staff
40%
235
61.80
51.50
12,103
Other (specify)
NLA
-
-
-
-
Total all- inclusive price
100%
590
$39,620
The above rates cover all of our out of pocket expenses.
U
0
CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for the Audit of the
2001 -02 Financial Statements
The above rates cover all of our out of pocket expenses.
Three -year average all- inclusive maximum price for aforementioned audits $39,632
Percentage
Standard
Discounted
Total
of
Hourly
Hourly
Fixed
Classification
Hours
Hours
Rates
Rates
Price
Partners
6%
35
$ 185.66
$ 122.00
$ 4,270
Managers
14%
85
106.09
95.48
8,116
Supervisory Staff
40%
235
79.57
67.90
15,957
Staff
40%
235
63.65
53.05
12,467
Other (specify)
N/A
-
-
-
Total all- inclusive price
100%
590
$40,810
The above rates cover all of our out of pocket expenses.
Three -year average all- inclusive maximum price for aforementioned audits $39,632
0 0
SECTION H, (Continued)
We will progress bill the City for the above services as the engagement hours are
expended. Final billing will be made upon delivery of the final audit reports.
Our fees contemplate conditions satisfactory for the performance of the audit, including
the City providing at the start of the audit, trial balances reflecting year end adjustments,
necessary subsidiary schedules supporting asset and liability balances, all necessary
reconciliations in agreement with general ledger balances, and customary supporting
analyses and schedules normally maintained by the Finance Department. The City will
type confirmation requests and pull supporting documentation. If there are changes in the
scope of the audit (additional federal grant programs, substantial additional debt issues,
added project areas, added enterprise activity, additional component units, etc.), we
would discuss these changes with the Finance Director and the effect of these changes on
the professional audit hours and costs of the engagement.
7. CONRAD and ASSOCIATES, LLY. desires to keep its local government clients abreast of
new developments affecting local government finance. In July 1999, we held a client
training seminar for firm clients that focused on the then just recently released GASB
Statement No. 34 (issued earlier that month). We were probably the first firm in southern
California to thoroughly research this important new pronouncement line by line and to
immediately provide training to our clients within 30 days of its issuance. We will also
advise City staff of new accounting developments during the interim/planning stage of
each year's audit. We plan on providing additional client training to our clients in our
July 2000 client training conference with respect to GASB No. 34.
8. Finally, we perceive the scope of our work as being advisors to the City of Newport
Beach regarding generally accepted accounting principles. We will provide unlimited
telephone consultations regarding accounting.and other technical matters. Throughout the
year, Mr. Dennis C. Danner, Administrative Services Director and Mr. Dan Matusiewicz,
Accounting Manager will have access to the Engagement Partner, Ken Al -Imam,
Technical Review Partner, Michael A. Harrison, Engagement Manager, Steven Dobrenen
and Engagement In- charge, Ron Lopez, to seek advice in the application of generally
accepted accounting principles, the establishment and segregation of funds, advise
regarding debt issuance, financial statement preparation and content and other matters
relating to the City, including matters of taxation and policy relating to City fringe
benefits. We will also provide advice and consultation to the City regarding GASB
Statement No. 34.
With respect to the City of Newport Beach and the City's component units, Conrad and
Associates, L.L.P. meets the independence requirements of generally accepted accounting
standards and the Government Auditing Standards (1994 revision) published by the U.S. General
Accounting Office. Our firm has never had a record of substandard audit work. Conrad and
Associates, L.L.P. does not intend to use subcontractors for this engagement. We are
independent with respect to the City of Newport Beach. No conflicts of interest exists relative to
our firm performing the audit. Our firm has the insurance limits indicated in the City's request
for proposal.
30
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Exhibit C
Schedule for the 2000 Fiscal Year Audit (A similar time schedule will be
developed for audits of future fiscal years if the City of Newport Beach
exercises its option for additional audits.)
Each of the following should be completed by the auditor no later than the
dates indicated.
1. Interim Work
The auditor shall complete interim work by July 14, 2000.
2. Detailed Audit Plan
The auditor shall provide the City of Newport Beach by July 21,
2000, both a detailed audit plan and a list of all schedules to be
prepared by the City of Newport Beach.
3. Fieldwork
The auditor shall complete all fieldwork by October 27, 2000.
4. Reports
The auditor shall have the final opinion letter by November 10,
2000
The auditor shall have the draft Management letter due by
December 15, 2000.
Single audit and remaining final audit reports and
recommendations to management available for review by the Audit
Committee by January 31, 2001,
EXHIBIT C
C3�)
June 13, 2000
Agenda Item No. 17
CITY OF NEWPORT BEACH
ADMINISTRATIVE SERVICES DEPARTMENT
Resource Management • Fiscal Services • M.I.S. • Revenue • Accounting
DATE: June 13, 2000
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Dennis C. Danner, Administrative Services Director 0' AO
i
i 3
SUN
IYJ
RE: FINANCIAL AUDIT AND SINGLE AUDIT SERVICES FOR FISCAL YEARS
2000, 2001 AND 2002
RECOMMENDATION
That the City Council approve the selection of the auditing firm of Conrad AND Associates, L.L.P.
and enter into a contract with said firm to audit the City's financial statements and perform a
Single Audit of the City's Federal assistance for the fiscal years ending June 30, 2000, 2001, and
2002. The total all- inclusive maximum fees for each year, including any out -of- pocket expenses
and a three percent fee adjustment for each of the two succeeding years are $38,465, $39,620 and
$40,810 respectively. Upon satisfactory completion of the work performed during each of the first
three years, the City Council may extend the auditing services agreement up to an additional three
years without obtaining written proposals.
SELECTION PROCESS
1. Council Policy A -14 requires the City to obtain bids for audit services every three years.
However, upon satisfactory completion of the work performed during each of the first
three years, the City Council may extend the auditing services agreement up to an
additional three years without obtaining written proposals. Since the City was in
transition between City Managers during the last fiscal year, the City Council extended the
contract with KPMG for one additional year beyond what this policy requirement allows.
2. KPMG has been the City's auditors for the past seven years, and their most recent fees for
this service were $47,000.
3. Staff solicited proposals for the audit of the City for fiscal years ending June 30, 2000, 2001, .
and 2002. Twelve firms that had expressed an interest in providing auditing services over
the last seven years were invited to bid. Proposals were submitted in two parts, including a
written technical proposal worth seventy-five points and a separate sealed dollar cost bid
worth twenty -five points. After a pre - proposal conference held on March 23rd, where the
scope of required services were discussed at length, eight firms responded with proposals.
4. With general coordination by the Accounting Manager, proposals were reviewed and
scored by a three- person selection committee comprised of the Deputy City Manager,
Administrative Services Director and the Deputy Administrative Services Director. The
Financial Audit and Single AugServices •
Page 2
written technical proposals were reviewed and scored by the selection committee before
the sealed dollar cost bids were opened and scored.
5. The three -year average bid of proposing firms were as follows:
Firm
3 -Year Average 3 -Year Average
Hours Proposed Annual Fee
Caporricci, Cropper & Larson
609
$ 36,080
Thomas, Bigbie & Smith
488
$ 37,883
McGladrey & Pullen
510
$ 39,048
Conrad AND Associates, L.L.P.
590
$ 39,632
Lance, Soll & Lunghard
682
$ 41,080
Diehl Evans & Co. L.L.P.
465
$ 42,475
Vavrinek, Trine & Day, L.L.P.
546
$ 43,201
KPMG L.L.P.
475
$ 51,900
6. Because point totals were so closely grouped, only three firms, KPMG, Vavrinek, Trine &
Day, and Thomas, Bigbie & Smith were eliminated from further consideration. The
remaining firms were invited to meet with the selection committee. After these one -hour
interviews, the firms were further evaluated based on audit approach, situational
questions, and current technical topics.
7. The selection committee then called client references, including cities not listed in their
proposal.
8. Although the selection committee was split between second and third choices, the
committee unanimously selected Conrad AND Associates, L.L.P. as the top firm.
DISCUSSION
The criteria staff used in evaluating each firm's audit proposals and interviews included the
following: minimum technical qualifications, depth and commitment to government services,
proposed staff expertise, availability to City staff for technical consultation, comparable or
prestigious municipal engagements, adequacy of audit process, and proposed staffing plan.
Although pricing should not play a large role in awarding auditing services, a few points were
awarded (deducted) as each firms three -year average bid deviated from the median bid of
$40,356. All of the eight respondents exceeded the minimum requirements to provide audit
services, however we believe Conrad AND Associates, L.L.P. is best suited to the City's needs at this
time.
General Firm Qualifications - Conrad AND Associates, L.L.P. has a staff of sixty-five individuals,
including sixty-one professionals through its Business Services Firm, Conrad Business Services,
Inc. The firm has one office located in Irvine. Four of the firm s eight partners devote more than
seventy-five percent of their time in managing governmental audit and general consulting
engagements related to governmental clients. Three of the firm's partners have extensive "Big 5"
public accounting experience in addition to extensive local firm experience. One of the tax partners
has an advanced degree in taxation as well as being a C.P.A. This tax expertise adds an additional
Financial Audit and Single Au ii rvices
Page 3
0
dimension for the City in areas of taxation affecting local governments. Since 1971, Conrad AND
Associates, L.L.P. has specialized in governmental and nonprofit accounting and auditing. For the
past 28 years, the firm has been performing accounting and audit services to the private and public
sector and not - for - profit organizations.
Specific Government Engagement Experience - Conrad AND Associates' services to governmental
organizations represents one of the largest segments of the firms business. With a strong presence
in Orange County, they audit the cities of Santa Ana, Costa Mesa, Orange, Brea, Mission Viejo,
Laguna Beach, Laguna Hills, San Clemente, Buena Park, and many others.
Specific Staff Government Engagement Experience
Mr. Ken Al -Imam, C.P.A., Engagement Partner, who has 18 years of local government auditing
experience, will be responsible for the audit engagement and the proper conduct of all
professional services rendered to the City. Mr. Al -hnam, as the Engagement Partner, will
participate in the planning and coordination of the audit examination of the City. He will be in the
field to personally direct the audit engagement, and to provide consultation to Administrative
Services senior staff members with respect to significant accounting matters pertaining to the City.
Mr. Al -Imam has been a speaker at a number of CSMFO local chapters on matters pertaining to
technical issues and new Governmental Accounting Standards Board (GASB) pronouncements.
Mr. Al -Imam is co -chair of the California Committee on Municipal Accounting (CCMA) and he is
the current chairperson of the statewide Governmental Accounting and Auditing Committee of the
California Society of Certified Public Accountants. He has made presentations in public hearings
before GASB. Mr. AI -Imam is also responsible for the firm -wide training of audit personnel at
Conrad AND Associates, L.L.P. in the area of local governmental accounting and auditing.
Mr. Michael A. Harrison, C.P.A., serves as a partner in the firms local government auditing
practice. He has over 27 years of auditing experience including 23 years of providing services to
special districts and cities. Mr. Harrison will serve as Technical Review Partner. In this capacity,
Mr. Harrison will act as a technical and consulting partner to Mr. Al -Imam and be an additional
resource to Administrative Services senior staff members. As a second partner reviewer, he will
perform quality control reviews of the audit reports issued for the City of Newport Beach. Mr.
Harrison is a member of the Governmental Accounting and Auditing Committee for the Long
Beach - Orange County Chapter of the California Society of CPA's. Mr. Harrison also serves as a
reviewer for the CSMFO award program for CAFR's and has been a speaker on technical topics for
both the California Society of CPA's and the California Society of Municipal Finance Officers
Mr. Steven Dobrenen, C.P.A., Senior Manager, will serve as the Engagement Manager on this
audit. Mr. Dobrenen will conduct in -field reviews of all work papers prepared by the In- Charge
Auditor and the staff auditors assigned to this engagement. He will discuss with Administrative
Services staff and or Audit Committee, the audit and accounting issues that arise during the
course of the audit. Mr. Dobrenen has extensive audit experience spanning over ten years.
Mr. Ron Lopez will serve as In- charge Auditor on the audit of the City of Newport Beach. He will
work closely with Administrative Services accounting staff. He will plan and conduct the audit
work and supervise the Staff Auditors who will work with him. Mr. Lopez has extensive local
government auditing experience.
Financial Audit and Single All Services •
Page 4
Audit Approach - Conrad AND Associates' audit approach was described in great detail in their
proposal. The steps as described appear to be of appropriate detail to provide the citizens of
Newport Beach an audit of sufficient quality and value commensurate with the high standards of
our community. We believe their procedures provide adequate and appropriate: planning and
communication with staff; use of analytical procedures; assessment of the control environment;
sampling techniques; testing of system transactions; review of potential internal control
weaknesses; determination of appropriate materiality levels; review of important contracts and
agreements; various types of compliance testing; independent confirmations of account balances;
testing of various accounting reconciliation and allocation processes; etc. Additional detail can be
obtained in Section F of their audit proposal available upon request from the Administrative
Services Department.
Location - Conrad AND Associates, L.L.P. is located at 1100 Main Street in Irvine. Their close
proximity will help facilitate immediate, personal attention if any problems arise.
Estimated Pricing and Time Requirement - Although pricing is not the most important issue in
selecting an auditing firm, the fee proposed ($38,465) is reasonable and below the budgeted
amount. In addition, the 590 hours estimated for performing the audit is realistic for auditing an
entity the size and complexity of the City of Newport Beach. The current proposal is for a fixed fee
contract and no additional work will be performed or authorized without a written agreement on
behalf of both the audit firm and the City.
0
0
PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT, entered into this 13th day of June, 2000, by and between
CITY OF NEWPORT BEACH , a Municipal Corporation (hereinafter referred to as
"City "), and CONRAD AND ASSOCIATES, L.L.P whose address is 1100 Main Street,
Suite C, Irvine, California, 92614, (hereinafter referred to as "AUDITOR "), 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 cant' on its business
as it is now being conducted under the statutes of the State of California
and the Charter of City.
B. City is required to secure an audit of its Financial Statements and Federal
financial assistance (Single Audit) each year.
C. 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, 2000, with an option to audit each of the two subsequent fiscal
years upon the terms and conditions contained in this Agreement.
D. The principal members of AUDITOR, are for purpose of this Agreement,
Ken AI -Imam, CPA, Michael A. Harrison, CPA, Steven Dobrenen, CPA,
and Ron K. Lopez.
E. 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 under the terms of conditions provided
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 13th day of June, 2000, and
shall terminate upon completion of the 2001 /02 fiscal Audit, unless terminated earlier as
set forthin Section 26.
2. SERVICES TO BE PERFORMED
AUDITOR shall diligently perform all the duties set forth in the scope of services,
attached hereto as Exhibit "A" and incorporated herein by reference.
1
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3. COMPENSATION TO AUDITOR
City shall pay AUDITOR for the services in accordance with the provisions of this
Section and the scheduled billing rates, attached hereto as Exhibit °B" and incorporated
herein by reference. No rate changes shall be made during the term of this Agreement
without prior written approval of City. AUDITOR's compensation for all work performed
in accordance with this Agreement shall not exceed the total contract price of
$38,465.00 for fiscal year 1999 -00, $39,620.00 for fiscal year 2000 -01 and $40,810.00
for fiscal year 2001 -02.
3.1 AUDITOR shall maintain accounting records of its billings which includes
the name of the employee, type of work performed, times and dates of all work which is
billed on an hourly basis and all approved incidental expenses including reproductions,
computer printing, postage and mileage.
3.2 AUDITOR shall submit monthly invoices to City payable by City within
thirty (30) days of receipt of invoice subject to the approval of City and based upon the
following: progress payments will be made on the basis of hours of work completed
during the course of the engagement in accordance with the AUDITOR's fixed all -
inclusive contract price. Interim billing shall not cover a period of not less than a
calendar month.
3.3 AUDITOR shall not receive any compensation for extra work without prior
written authorization of City. Any authorized compensation shall be paid in accordance
with Exhibit "B ".
3.4 City shall reimburse AUDITOR only for those costs or expenses which
have been specifically approved in this Agreement, or specifically approved in advance
by City.
3.5 Notwithstanding any other paragraph or provision of this Agreement,
beginning on the effective date of this Agreement, City may withhold payment of ten
percent (10 %) of each approved payment as approved retention pending delivery of the
AUDITOR'S final report.
4. STANDARD OF CARE
4.1 All of the services shall be performed by AUDITOR or under AUDITORS
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 the 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. AUDITOR
represents and warrants to City that it has or shall obtain all licenses, permits,
qualifications and approvals required of its profession. AUDITOR further represents
2
• •
and warrants that it shall keep in effect all such licenses, permits and other approvals
during the term of this Agreement.
4.2 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, or any other delays beyond AUDITOR's
control or without AUDITOR's fault.
5. INDEPENDENT PARTIES
City retains AUDITOR on an independent contractor basis and AUDITOR is not
an 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 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 details in means of performing the work provided that AUDITOR is in
compliance with the terms of this Agreement. Anything in this Agreement which may
appear to give City the right to direct AUDITOR as to the details of the performance of
the services or to exercise a measure of control over AUDITOR shall mean that
AUDITOR shall follow the desires of City only with respect to the results of the services.
6. COOPERATION
AUDITOR agrees to work closely and cooperate fully with City's designated
Engagement 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
this Audit.
7. ENGAGEMENT MANAGER
AUDITOR shall assign the Audit to an Audit Manager, who shall coordinate all
phases of the Audit. This Audit Manager shall be available to City at all reasonable
times during the Engagement term. AUDITOR has designated Ken AI -Imam, CPA to be
its Audit Manager. AUDITOR shall not bill any personnel to the Audit other than those
personnel identified in Exhibit W, whether or not considered to be key personnel,
without City's prior written approval by name and specific hourly billing rate. AUDITOR
shall not remove or reassign any personnel designated in this Section or assign any
new or replacement person to the Audit without the prior written consent of City. City's
approval shall not be unreasonably withheld with respect to removal or assignment of
non -key personnel.
AUDITOR, at the sole discretion of City, shall remove from the Audit any of its
personnel assigned to the performance of services upon written request of City.
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AUDITOR warrants that it will continuously furnish the necessary personnel to complete
the Audit on a timely basis as contemplated by this Agreement.
8. TIME OF PERFORMANCE
Time is of the essence in the performance of the services under this Agreement
and the services shall be performed by AUDITOR in accordance with the schedule
specified in Exhibit "C ". 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
AUDITOR for delay. Notwithstanding the foregoing, AUDITOR shall not be responsible
for delays which are due to causes beyond AUDITOR's reasonable control. However,
in the case of any such delay in the services to be provided for the Audit, each party
hereby agrees to provide notice to the other party so that all delays can be addressed.
8.1 AUDITOR shall submit all requests for extensions of time for performance
in writing to the Engagement Administrator not later than ten (10) calendar days after
the start of the condition which purportedly causes a delay, and not later than the date
upon which performance is due. The Engagement Administrator shall review all such
requests and may grant reasonable time extensions for unforeseeable delays, which
are beyond AUDITOR's control.
8.2 For all time periods not specifically set forth herein, AUDITOR shall
respond in the most expedient and appropriate manner under the circumstances, by
either telephone, fax, hand delivery or mail.
8. CITY POLICY
AUDITOR will discuss and review all matters relating to policy and Audit direction
with the Audit Administrator in advance of all critical decision points in order to ensure
that the Audit proceeds in a manner consistent with City goals and policies.
10. CONFORMANCE TO APPLICABLE REQUIREMENT
All work prepared by AUDITOR shall conform to applicable city, county, state and
federal law, policies, rules, regulations and permit requirements and be subject to
approval of the Audit Administrator and City.
11. PROGRESS
AUDITOR is responsible to keep the Audit Administrator and /or his/her duly
authorized designee informed on a regular basis regarding the status and progress of
the Audit work, activities performed and planned, and any meetings that have been
scheduled or are desired.
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12. HOLD HARMLESS
AUDITOR shall indemnify, defend, save and hold harmless City, its City Council,
boards and commissions, officers and employees from and against any and all loss,
damages, liability, claims, allegations of liability, suits, costs and expenses for damages
of any nature whatsoever, including, but not limited to, bodily injury, death, personal
injury, property damages, or any other claims arising from any and all negligence acts
or omissions of AUDITOR, its employees, agents or subcontractors in the performance
of services or work conducted or performed pursuant to this Agreement, excepting only
the sole negligence or willful misconduct of City, its officers or employees, and shall
include attomeys' fees and all other costs incurred in defending any such claim.
13. INSURANCE
Without limiting AUDITOR's indemnification of City, and prior to commencement
of work, AUDITOR shall obtain and provide and maintain at its own expense during the
term of this Agreement policy or policies of liability insurance of the type and amounts
described below and satisfactory to City. Certification of all required policies shall be
signed by a person authorized by that insurer to bind coverage on its behalf and must
be filed with City prior to exercising any right or performing any work pursuant to this
Agreement. Except workers compensation and errors and omissions, all insurance
policies shall add City, its elected officials, officers, agents, representatives and
employees as additional insured for all liability arising from AUDITOR's services as
described herein.
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 Bests Key
Rating Guide: unless otherwise approved by the City Risk Manager.
A. Worker's compensation insurance covering all employees and principals
of AUDITOR, per the laws of the State of California.
B. Commercial general liability insurance covering third party liability risks,
including without limitation, contractual liability, in a minimum amount of $1
million combined single limit per occurrence for bodily injury, personal
injury and property damage. If commercial general liability insurance or
other form with a general aggregate is used, either the general aggregate
shall apply separately to this Engagement, or the general aggregate limit
shall be twice the occurrence limit.
C. Commercial auto liability and property insurance covering any owned and
rented vehicles of AUDITOR in a minimum amount of $1 million combined
single limit per accident for bodily injury and property damage.
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D. Professional errors and omissions insurance which covers the services to
be performed in connection with this Agreement in the minimum amount of
One Million Dollars ($1,000,000.00).
Said policy or policies shall be endorsed to state that coverage shall not be
canceled by either party, except after thirty (30) days' prior notice has been given in
writing to City. AUDITOR shall give City prompt and timely notice of claim made or suit
instituted arising out of AUDITOR's operation hereunder. 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.
AUDITOR agrees that, in the event of loss due to any of the perils for which it
has agreed to provide comprehensive general and automotive liability insurance,
AUDITOR shall look solely to its insurance for recovery. AUDITOR hereby grants to
City, on behalf of any insurer providing comprehensive general and automotive liability
insurance to either AUDITOR or City with respect to the services of AUDITOR herein, a
waiver of any right of subrogation which any such insurer of said AUDITOR may acquire
against City by virtue of the payment of any loss under such insurance.
14. PROHIBITION AGAINST TRANSFERS
AUDITOR shall not assign, sublease hypothecate or transfer this Agreement or
any for the services to be performed under this Agreement, directly or indirectly, by
operation of law or otherwise without prior written consent of City. Any attempt to do so
without consent of City shall be null and void.
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
venturer or syndicate member or cotenant if AUDITOR is a partnership or joint- venture
or syndicate or cotenancy, which shall result in changing the control of AUDITOR, shall
be construed as an assignment of this Agreement. 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.
15. OWNERSHIP OF DOCUMENTS
All working papers and reports must be retained, at the auditor's expense, for a
minimum of three (3) years, unless the firm is noted in writing by the City of the need
to extend the retention period. Working papers will remain the property of AUDITOR to
support the work performed by the AUDITOR. The AUDITOR will be required to make
working papers available, upon request, to the following parties or their designees:
City of Newport Beach
Department of Housing and Urban Development
Department of Justice
Department of Transportation
U.S. General Accounting Office (GAO)
Parties designated by the federal or state governments or by the City as part of
an audit quality review process
Auditors of entities of which the City is a subrecipient of grant funds
In addition, the firm shall respond to the reasonable inquiries of successor
auditors and allow successor auditors to review working papers relating to matters of
continuing accounting and auditing significance.
Documents, including drawings and specifications, prepared by AUDITOR
pursuant to this Agreement are not intended or represented to be suitable for reuse by
City or others on any other Audit. Any use of completed documents for other Audits and
any use of incomplete documents without specific written authorization from AUDITOR
will be at City's sole risk and without liability to AUDITOR. Further, any and all liability
arising out of changes made to AUDITOR's deliverables under this Agreement by City
or persons other than AUDITOR is waived against AUDITOR and City assumes full
responsibility for such changes unless City has given AUDITOR prior notice and has
received from AUDITOR written consent for such changes.
AUDITOR shall, at such time and in such form as City may require, furnish
reports concerning the status of services required under this Agreement.
16. CONFIDENTIALITY
The information, which results from the services in this Agreement, is to be kept
confidential unless the release of information is authorized by City.
17. CITY'S RESPONSIBILITIES
In order to assist AUDITOR in the execution of his responsibilities under this
Agreement, City agrees to provide the following:
A. Access to, and upon request of AUDITOR, one copy of all existing record
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.
B. City will prepare the financial statements complete with year -end
adjustments.
C. City will make available to the AUDITOR, general ledger and subsidiary
ledger balances, supporting schedules, necessary reconciliations in
agreement with general ledger balances and customary supporting
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analyses and schedules maintained by the Administrative Services
Department.
D. City will prepare all written independent confirmations for AUDITOR
mailing.
E. City Staff will retrieve and re -file all records requested by the AUDITOR.
F. City will provide the AUDITORS access to workspace, desk and chairs to
perform the engagement.
G. City will provide the AUDITORS access to telephones, photocopying
equipment and fax machines necessary to perform the engagement as
well as de minimus use of said equipment to maintain contact with other
clients during the term of this engagement.
18. ADMINISTRATION
This Agreement will be administered by the Adminstrative Services Department.
Dan Matusiewicz, Accounting Manager shall be considered the Engagement
Administrator and shall have the authority act for City under this Agreement. The
Engagement Administrator and /or his/her authorized designee shall represent City in all
matters pertaining to the services to be rendered pursuant to this Agreement.
19. 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. All such records shall
be clearly identifiable. AUDITOR shall allow a representative of City to examine, audit
and make transcripts or copies of such records during normal 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
under this Agreement.
20. WITHHOLDINGS
City may withhold payment 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 designee with respect to such disputed sums. AUDITOR
shall be entitled to receive interest on any withheld sums at the rate of seven percent
(7 %) per annum from the date of withholding of any amounts found to have been
improperly withheld.
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21. 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 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 any other sections of this Agreement.
22. CITY'S RIGHT TO EMPLOY OTHER AUDITOR(S)
City reserves the right to employ other AUDITOR(S) or accountants in
connection with thisAudit.
23. CONFLICTS OF INTEREST
A. 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 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.
B. 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
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.
24. SUBAUDITOR AND ASSIGNMENT
A. Except as specifically authorized under this Agreement, the services
included in this Agreement shall not be assigned, transferred, contracted
or subcontracted without prior written approval of City.
25. NOTICES
All notices, demands, requests or approvals to be given under 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.
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All notices, demands, requests or approvals from AUDITOR to City shall be
addressed to City at:
Administrative Services Department
City of Newport Beach
3300 Newport Boulevard
P. O. Box 1768
Newport Beach, CA, 92658 -8915
(949) 644 -3126
Fax 644 -3339
All notices, demands, requests or approvals from City to AUDITOR shall be
addressed to AUDITOR at:
CONRAD AND ASSOCIATES, L.L.P.
1100 Main Street, Suite C
Irvine, California 92614
(949) 474 -2020, x217
Fax 263 -5520
Attn: Ken AI -Imam, Partner
26. TERMINATION
In the event either part hereto fails or refuses to perform any of the provisions
hereof at the time and in the manner required hereunder, 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) days, or if more than two (2) days are reasonably required to cure the default
and the defaulting party fails to give adequate assurance of due performance within two
(2) days after receipt of written notice of default, specifying the nature of such default
and the steps necessary to cure such default, the nondefaulting party may terminate the
Agreement forthwith by giving to the defaulting party written notice thereof.
26.1 Notwithstanding the above, City shall have the option, at its sole discretion
and without cause, of terminating this Agreement at any time by giving seven (7) days'
prior written notice to AUDITOR as provided herein. Upon termination of this
Agreement, City shall pay to the AUDITOR that portion of compensation specified in this
Agreement that is earned and unpaid prior to the effective date of termination.
27. COMPLIANCE'S
AUDITOR shall comply with all laws, state or federal and all ordinances, rules
and regulations enacted or issued by City.
28. 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
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same or any other term, covenant or condition contained herein, whether of the same or
a different character.
29. 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. Any modification of this
Agreement will be effective only by written execution signed by both City and AUDITOR.
APPROVED AS TO FORM
AND CONTENT:
By:
Robin Clauson,
Assistant City Attorney
for the City of Newport Beach
ATTEST:
IN
LaVonne Harkless
City Clerk
f: W sers\carisharedlaglconrad.doc
CITY OF NEWPORT BEACH
A Municipal Corporation
By:
John Noyes,
Mayor
for the City of Newport Beach
AUDITOR
M
Ken AI -Iman, CPA
Partner
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SECTION G
0
Our understanding of the objectives and scope of the work to be performed based upon your
request for proposal is as follows:
1. We will perform an audit examination of all fund types and account groups of the City of
Newport Beach for the year ending June 30, 2000 with an option to audit each of the two
subsequent fiscal years. Our examination will be conducted in accordance with generally
accepted government auditing standards. The City will draft and word process the
comprehensive annual f nancial report (CAFR).
For fiscal years where federal grant expenditures exceed $300,000, we will perform a
"single audit" of the City of Newport Beach in accordance with the Single Audit Act
Amendments of 1996 (Public Law 104 -156) and OMB Circular A -133 entitled Audits of
States, Local Governments, and Non - Profits Organizations. Our single audit will cover
all federal grants received by the City of Newport Beach and its component units either
as a primary or secondary recipient. The City will provide to the auditors a schedule
identifying the expenditure of federal funds, including expenditures to be funded with
federal funds to be received indirectly through state, local, or other entities. We will
render our reports on the single audit (as well as the required data collection form) in
accordance with the single audit requirements as described in Section F of this proposal.
3. We will test the City's appropriation limit and provide a letter of Agreed Upon
Procedures for the year ending June 30, 2000 with an option for each of the two
subsequent fiscal years.
4. We will provide an immediate written report of all irregularities and illegal acts or
indications of illegal acts of which we become aware during the course of our audit to the
City Manager, City Attorney, and the Administrative Services Director.
5. We will prepare a management letter that will provide recommendations to the City
ensuing from our review of the City's internal control procedures. This letter will include
nonreportable conditions (those constructive comments not required to be included in the
single audit report). We will discuss those comments with the Finance Director prior to
its finalization.
We will report to the Audit Committee the following matters:
• The auditor's responsibility under generally accepted auditing standards
• Significant accounting policies
• Management judgments and accounting estimates
• Significant audit adjustments
• Other information in documents containing audited financial statements
• Disagreement with management
• Management consultation with other accountants
• Major issues discussed with management prior to retention
• Difficulties encountered in performing the audit
EXZHIBIT A
ASSOCIATES, L.L.P.
Mr. Dennis C. Danner
Administrative Services Director
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92663
Dear Mr. Danner:
CERTIFIED PUBLIC ACCOUNTANTS
April 21, 2000
1100 MAIN STREET, SUITE C
IRVINE, CALIFORNIA 92614
(949) 474 -2020
Fax(949)263 -5520
Enclosed please find Section H of our proposal which sets forth our cost proposal which
we have separated from our technical proposal for audit services to be performed by
Conrad and Associates, L.L.P.
I certify that I am entitled to represent the firm, empowered to submit the bid and
authorized to sign a contract with the Authority.
The total all- inclusive maximum price for each year is as shown below, including any
out -of- pocket expenses. For each of the two succeeding option years, we would agree to
a nominal 3% fee increase.
For each year, our fee would be as follows
Fiscal Total
Year Fee
1999 -00 $38,465
2000 -01 39,620
2001 -02 40,810
Our three -year average for the all- inclusive maximum fee is only $39,632.
Sincerely,
CONRAD AND ASSOCIATES, L.L.P.
Keen Al' -Imam, C.P.A.
Partner
EXHIBIT B
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MFMRFP [S AM FRIfAN INCTITI ITC /l[ (`[vTinrn m inr.r •r-�n. r.+.. .� �.... .. ..__ _..
E
E
CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for the Audit of the
1999 -00 Financial Statements
The above rates cover all of our out of pocket expenses.
Any special projects, extra work, accounting assistance or additional assignments will be
performed at the hourly rates indicated below:
Partner
Senior Manager
Manager
Supervisor
Senior Accountant
Staff Accountant
11
$175
Percentage
186
Standard Discounted
Total
133
of
103
Hourly
Hourly
Fixed
Classification
Hours
Hours
Res
R=
Price
Partners
6%
35
$175.00
S115.00
$ 4,025
Managers
14%
85
100.00
90.00
7,650
Supervisory Staff
40%
235
75.00
64.00
15,040
Staff
40%
235
60.00
50.00
11,750
Other (specify)
NIA
-
-
-
-
Total all- inclusive price
100%
590
$.38,465
The above rates cover all of our out of pocket expenses.
Any special projects, extra work, accounting assistance or additional assignments will be
performed at the hourly rates indicated below:
Partner
Senior Manager
Manager
Supervisor
Senior Accountant
Staff Accountant
11
$175
180
186
125
129
133
100
103
106
90
93
95
75
77
80
60
62
64
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CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for the Audit of the
2000 -01 Financial Statements
The above rates cover all of our out of pocket expenses.
Percentage
Standard
Discounted
Total
of
Hourly
Hourly
Fixed
Classification
Hours
Hours
Rates
Rates
Pnce
Partners
6%
35
$ 180.25
$ 118.45
$ 4,146
Managers
14%
85
103.00
92.70
7,880
Supervisory Staff
40%
235
77.25
65.92
15,491
Staff
40%
235
61.80
51.50
12,103
Other (specify)
NIA
-
-
-
Total all- inclusive price
100%
590
$39,620
The above rates cover all of our out of pocket expenses.
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CITY OF NEWPORT BEACH
Schedule of Professional Fees and Expenses for
the Audit of the
2001 -02 Financial Statements
Percentage
Standard
Discounted
Total
of
Hourly
Hourly
Fixed
Classification Hours Hours
Rates
Rates
psilo
Partners 6% 35
$ 185.66
$ 122.00
$ 4,270
Managers 14% 85
106.09
95.48
8,116
Supervisory Staff 40% 235
79.57
67.90
15,957
Staff 40% 235
63.65
53.05
12,467
Other (specify) N/A
_
Total all- inclusive price 100% 590
$40,810
The above rates cover all of our out of pocket expenses.
Three -year average all- inclusive maximum price for aforementioned audits $39,632
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SECTION H, (Continued)
We will progress bill the City for the above services as the engagement hours are
expended. Final billing will be made upon delivery of the final audit reports.
Our fees contemplate conditions satisfactory for the performance of the audit, including
the City providing at the start of the audit, trial balances reflecting year end adjustments,
necessary subsidiary schedules supporting asset and liability balances, all necessary
reconciliations in agreement with general ledger balances, and customary supporting
analyses and schedules normally maintained by the Finance Department. The City will
type confirmation requests and pull supporting documentation. If there are changes in the
scope of the audit (additional federal grant programs, substantial additional debt issues,
added project areas, added enterprise activity, additional component units, etc.), we
would discuss these changes with the Finance Director and the effect of these changes on
the professional audit hours and costs of the engagement.
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CONRAD and ASSOCIATES, L.L.F. desires to keep its local government clients abreast of
new developments affecting local government finance. In July 1999, we held a client
training seminar for firm clients that focused on the then just recently released GASB
Statement No. 34 (issued earlier that month). We were probably the first fine in southern
California to thoroughly research this important new pronouncement line by line and to
immediately provide training to our clients within 30 days of its issuance. We will also
advise City staff of new accounting developments during the interim/planning stage of
each year's audit. We plan on providing additional client training to our clients in our
July 2000 client training conference with respect to GASB No. 34.
Finally, we perceive the scope of our work as being advisors to the City of Newport
Beach regarding generally accepted accounting principles. We will provide unlimited
telephone consultations regarding accounting and other technical matters. Throughout the
year, Mr. Dennis C. Danner, Administrative Services Director and Mr. Dan Matusiewicz,
Accounting Manager will have access to the Engagement Partner, Ken AI -Imam,
Technical Review Partner, Michael A. Harrison, Engagement Manager, Steven Dobrenen
and Engagement In- charge, Ron Lopez, to seek advice in the application of generally
accepted accounting principles, the establishment and segregation of funds, advise
regarding debt issuance, financial statement preparation and content and other matters
relating to the City, including matters of taxation and policy relating to City fringe
benefits. We will also provide advice and consultation to the City regarding GASB
Statement No. 34.
With respect to the City of Newport Beach and the City's component units, Conrad and
Associates, L.L.P. meets the independence requirements of generally accepted accounting
standards and the Government Auditing Standards (1994 revision) published by the U.S. General
Accounting Office. Our firm has never had a record of substandard audit work. Conrad and
Associates, L.L.P. does not intend to use subcontractors for this engagement. We are
independent with respect to the City of Newport Beach. No conflicts of interest exists relative to
our firm performing the audit. Our firm has the insurance limits indicated in the City's request
for proposal.
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Exhibit C
0
Schedule for the 2000 Fiscal Year Audit (A similar time schedule will be
developed for audits of future fiscal years if the City of Newport Beach
exercises its option for additional audits.)
Each of the following should be completed by the auditor no later than the
dates indicated.
1. Interim Work
The auditor shall complete interim work by July 14, 2000.
2. Detailed Audit Plan
The auditor shall provide the City of Newport Beach by July 21,
2000, both a detailed audit plan and a list of all schedules to be
prepared by the City of Newport Beach.
3. Fieldwork
The auditor shall complete all fieldwork by October 27, 2000.
4. Reports
The auditor shall have the final opinion letter by November 10,
2000
The auditor shall have the draft Management letter due by
December 15, 2000.
Single audit and remaining final audit reports and
recommendations to management available for review by the Audit
Committee by January 31, 2001.
EXHIBIT �'