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HomeMy WebLinkAboutC36120 - Auditing Svcs FYE 06-30-2017 through 2022 Contract No. C36120 CITY OF PALM DESERT FINANCE DEPARTMENT STAFF REPORT REQUEST: AWARD OF CONTRACT NO. C36120 TO LANCE, SOLL & LUNGHARD, LLP, TO PERFORM PROFESSIONAL AUDITING SERVICES FOR THE FISCAL YEARS ENDING JUNE 30, 2017 THROUGH 2022 IN THE AMOUNT OF $79,278 FOR THE FIRST YEAR SUBMITTED BY: JOSE LUIS ESPINOZA, CPA, ASSISTANT FINANCE DIRECTOR DATE: MAY 11, 2017 CONTENTS: CONTRACT NO. C 36120 PROPOSAL FROM LANCE, SOLL & LUNGHARD, LLP Recommendation By Minute Motion, that the City Council: 1. Approve award of contract to Lance, Soll & Lunghard, LLP to perform professional auditing services for the fiscal years ending June 30, 2017 through 2022 in the amount of $79,278 for the first year, and subsequent years as outlined in Exhibit C of the attached contract; and 2. Authorize the Finance Director to negotiate other services that may be necessary from time to time in an amount reasonable for such services; and 3. Authorize the Mayor to execute the contract and the City Manager or her designee to take any actions necessary to facilitate the contract. Committee Recommendation The Audit, Investment and Finance Committee reviewed this item at their April 25, 2017 meeting and unanimously recommended that the City Council approve as presented. Strategic Plan Objective Not applicable. Background On March 7, 2017, staff issued a Request for Proposals for certified public accounting firms to provide professional auditing services for the fiscal years ending June 30, 2017 through 2022. Five proposals were received, which were reviewed by five staff members and two members of the Audit, Investment & Finance Committee. The top two firms were selected to provide a presentation/interview for a six person panel consisting of the following: G:\Finance\Niamh Ortega\Staff Reports\Auditors\SR-Auditor Selection FY Ending June 30 2017.Doc Staff Report Award of Contract for Professional Auditing Services — Lance, Soil & Lunghard, LLP May 11, 2O17 Page 2 of 2 • Robert Leo, Audit, Investment and Finance Committee member • Russell Campbell, Audit, Investment and Finance Committee member • Susan Marie Weber, Council member • Ryan Stendell, Director of Community Development • Anthony Hernandez, Senior Financial Analyst • Veronica Tapia, Senior Management Analyst The presentations/interviews were conducted on April 17, 2107 with Lance, SoII & Lunghard, LLP and Vavrinek, Trine, Day & Co., LLP. The panel voted 5-1 to recommend Lance, SoII & Lunghard, LLP to perform auditing services for the City of Palm Desert. A copy of the proposal is attached for your reference. Fiscal Impact The City performs an annual audit and as such, funds are budgeted annually. The cost is $79,278 for each of the fiscal years ending June 30, 2017 through 2019. Subsequent years increase by $1,571 and $1,616 respectively, with the final year ending June 30, 2022 at a cost of $84,102. Detailed costs of each fiscal year are included in "Exhibit C" of the attached contract. These funds will be budgeted accordingly in future fiscal years. Submitted y: Approval: Jose L is spinoza, CPA Lauri Aylaian Assis nt finance Director City Manager Department Head: . Moore Director of Finance JMM:JLE:nmo G:\Finance\Niamh Ortega\Staff Reports\Auditors\SR-auditor selection FY ending June 30 2017.doc Contract No. C36120 AUDITING SERVICES CITY OF PALM DESERT PROFESSIONAL CONSULTANT SERVICES AGREEMENT 1. PARTIES AND DATE. This Agreement is made and entered into thisl1th day of May, 2017, by and between the City of Palm Desert, a municipal corporation, organized under the laws of the State of California, with its principal place of business at 73-510 Fred Waring Drive, Palm Desert, California, 92260 ("City") and LANCE, SOLL & LUNGHARD, a LIMITED LIABILITY PARTNERSHIP, with its principal place of business at 203 N. Brea Blvd, Suite 203, Brea, CA 92821 ("Consultant"). City and Consultant are sometimes individually referred to herein as "Party" and collectively as "Parties." 2. RECITALS. 2.1 Consultant. Consultant desires to perform and assume responsibility for the provision of certain professional AUDITING SERVICES required by the City on the terms and conditions set forth in this Agreement. Consultant represents that it is experienced in providing professional AUDITING SERVICES to public clients, is licensed in the State of California, and is familiar with the plans of City. 2.2 Project. City desires to engage Consultant to render such professional AUDITING SERVICES for THE CITY OF PALM DESERT FINANCIAL STATEMENTS ("Project") as set forth in this Agreement. 3. TERMS. 3.1 Scope of Services and Term. 3.1.1 General Scope of Services. Consultant promises and agrees to furnish to the City all labor, materials, tools, equipment, services, and incidental and customary work necessary to fully and adequately supply the professional AUDITING SERVICES necessary for the Project ("Services"). The Services are more particularly described in Exhibit "A" attached hereto and incorporated herein by reference. All Services shall be subject to, and performed in accordance with, this Agreement, the exhibits attached hereto and incorporated herein by reference, and all applicable local, state and federal laws, rules and regulations. 3.1.2 Term. The term of this Agreement shall be from May 11, 2017 to June 30, 2022, unless earlier terminated as provided herein. Consultant shall complete the Services within the term of this Agreement, and shall meet any other established schedules and deadlines. Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 2 of 15 3.2 Responsibilities of Consultant. 3.2.1 Independent Contractor; Control and Payment of Subordinates. The Services shall be performed by Consultant or under its supervision. Consultant will determine the means, methods and details of performing the Services subject to the requirements of this Agreement. City retains Consultant on an independent contractor basis and not as an employee. Consultant retains the right to perform similar or different services for others during the term of this Agreement. Any additional personnel performing the Services under this Agreement on behalf of Consultant shall also not be employees of City and shall at all times be under Consultant's exclusive direction and control. Neither City, nor any of its officials, officers, directors, employees or agents shall have control over the conduct of Consultant or any of Consultant's officers, employees, or agents, except as set forth in this Agreement. Consultant shall pay all wages, salaries, and other amounts due such personnel in connection with their performance of Services under this Agreement and as required by law. Consultant shall be responsible for all reports and obligations respecting such additional personnel, including, but not limited to: social security taxes, income tax withholding, unemployment insurance, disability insurance, and workers' compensation insurance. 3.2.2 Schedule of Services. Consultant shall perform the Services expeditiously, within the term of this Agreement, and in accordance with the Schedule of Services set forth in Exhibit "B" attached hereto and incorporated herein by reference. Consultant represents that it has the professional and technical personnel required to perform the Services in conformance with such conditions. In order to facilitate Consultant's conformance with the Schedule, City shall respond to Consultant's submittals in a timely manner. Upon request of City, Consultant shall provide a more detailed schedule of anticipated performance to meet the Schedule of Services. 3.2.3 Conformance to Applicable Requirements. All work prepared by Consultant shall be subject to the approval of City. 3.2.4 Substitution of Key Personnel. Consultant has represented to City that certain key personnel will perform and coordinate the Services under this Agreement. Should one or more of such personnel become unavailable, Consultant may substitute other personnel of at least equal competence upon written approval of City. In the event that City and Consultant cannot agree as to the substitution of key personnel, City shall be entitled to terminate this Agreement for cause. As discussed below, any personnel who fail or refuse to perform the Services in a manner acceptable to the City, or who are determined by the City to be uncooperative, incompetent, a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property, shall be promptly removed from the Project by the Consultant at the request of the City. The key personnel for performance of this Agreement are as follows: RICHARD K. KIKUCHI, PARTNER. 3.2.5 City's Representative. The City hereby designates JANET MOORE, DIRECTOR OF FINANCE, or his/her designee, to act as its representative in all matters pertaining to the administration and performance of this Agreement ("City's Representative"). Consultant shall not accept direction or orders from any person other than the City Manager, City's Representative or his/her designee. City's Representative shall have the power to act on behalf of the City for review and approval of all products submitted by Consultant, but not the authority to enlarge the Scope of Work or change the total compensation due to Consultant under this Agreement. The City Manager shall be G V-,nancekN,amh OrtegalActuanal ServiceslAgreement-Prof Auditing Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 3 of 15 authorized to act on City's behalf and to execute all necessary documents which increase the Scope of Work or change the Consultant's total compensation, subject to the provisions contained in Section 3.3 of this Agreement. 3.2.6 Consultant's Representative. Consultant hereby designates RICHARD K. KIKUCHI, or his/her designee, to act as its representative for the performance of this Agreement ("Consultant's Representative"). Consultant's Representative shall have full authority to represent and act on behalf of the Consultant for all purposes under this Agreement. The Consultant's Representative shall supervise and direct the Services, using his/her best skill and attention, and shall be responsible for all means, methods, techniques, sequences, and procedures and for the satisfactory coordination of all portions of the Services under this Agreement. 3.2.7 Coordination of Services. Consultant agrees to work closely with City staff in the performance of Services and shall be available to City's staff, consultants and other staff at all times. 3.2.8 Standard of Care; Performance of Employees. Consultant shall perform all Services under this Agreement in a skillful and competent manner, consistent with the standards generally recognized as being employed by professionals in the same discipline in the State of California. Consultant represents and maintains that it is skilled in the professional calling necessary to perform the Services. Consultant warrants that all employees and subconsultants shall have sufficient skill and experience to perform the Services assigned to them. Finally, Consultant represents that it, its employees and subconsultants have all licenses, permits, qualifications and approvals of whatever nature that are legally required to perform the Services, and that such licenses and approvals shall be maintained throughout the term of this Agreement. As provided for in the indemnification provisions of this Agreement, Consultant shall perform, at its own cost and expense and without reimbursement from the City, any services necessary to correct errors or omissions which are caused by the Consultant's failure to comply with the standard of care provided for herein. Any employee of the Consultant or its sub-consultants who is determined by the City to be uncooperative, incompetent, a threat to the adequate or timely completion of the Project, a threat to the safety of persons or property, or any employee who fails or refuses to perform the Services in a manner acceptable to the City, shall be promptly removed from the Project by the Consultant and shall not be re-employed to perform any of the Services or to work on the Project. 3.2.9 Laws and Regulations. Consultant shall keep itself fully informed of and in compliance with all local, state and federal laws, rules and regulations in any manner affecting the performance of the Project or the Services, including all Cal/OSHA requirements, and shall give all notices required by law. Consultant shall be liable for all violations of such laws and regulations in connection with Services. If Consultant performs any work knowing it to be contrary to such laws, rules and regulations, Consultant shall be solely responsible for all costs arising therefrom. Consultant shall defend, indemnify and hold City, its officials, directors, officers, employees, agents, and volunteers free and harmless, pursuant to the indemnification provisions of this Agreement, from any claim or liability arising out of any failure or alleged failure to comply with such laws, rules or regulations. G 1FinancclNiamh OrtegatActuanal ServiceslAgreement-Prof Auditing Svcs 04191?doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soll & Lunghard, LLP Page 4 of 15 3.2.10 Insurance. Consultant shall not commence work under this Agreement until it has provided evidence satisfactory to the City that it has secured all insurance required under this section. In addition, Consultant shall not allow any subconsultant to commence work on any subcontract until it has provided evidence satisfactory to the City that the subconsultant has secured all insurance required under this section. Without limiting Consultant's indemnification of City, and prior to commencement of Work, Consultant shall obtain, provide and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to City. General Liability Insurance: Consultant shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than $1,000,000 per occurrence, $2,000,000 general aggregate, for bodily injury, personal injury, and property damage, including without limitation, blanket contractual liability. Defense costs shall be paid in addition to the limits. The policy shall contain no endorsements or provisions limiting coverage for (1) contractual liability; (2) cross liability exclusion for claims or suits by one insured against another; or (3) contain any other exclusion contrary to the Agreement. Automobile Liability Insurance: Consultant shall maintain automobile insurance at least as broad as Insurance Services Office form CA 00 01 covering bodily injury and property damage for all activities of the Consultant arising out of or in connection with Work to be performed under this Agreement, including coverage for any owned, hired, non-owned or rented vehicles, in an amount not less than $1,000,000 combined single limit for each accident. Professional Liability (Errors & Omissions) Insurance: Consultant shall maintain professional liability insurance that covers the Services to be performed in connection with this Agreement, in the minimum amount of $1,000,000 per claim and in the aggregate. Any policy inception date, continuity date, or retroactive date must be before the effective date of this agreement and Consultant agrees to maintain continuous coverage through a period no less than three years after completion of the services required by this agreement. Covered professional services shall specifically include all work to be performed under the Agreement and delete any exclusions that may potentially affect the work to be performed (for example, any exclusions relating to lead, asbestos, pollution, testing, underground storage tanks, laboratory analysis, soil work, etc.). If coverage is written on a claims-made basis, the retroactive date shall precede the effective date of the initial Agreement and continuous coverage will be maintained or an extended reporting period will be exercised for a period of at least three (3) years from termination or expiration of this Agreement. Workers' Compensation Insurance: Consultant shall maintain Workers' Compensation Insurance (Statutory Limits) and Employer's Liability Insurance (with limits of at least $1,000,000). Consultant shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of the City of Palm Desert, its officers, agents, employees and volunteers. G IFinancelN,amh OrtegalActuanal ServiceslAgreement-Prof Auditing Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soli & Lunghard, LLP Page 5 of 15 Other provisions or requirements Insurance for Subconsultants: All Subconsultants shall be included as additional insureds under the Consultant's policies, or the Consultant shall be responsible for causing Subconsultants to purchase the appropriate insurance in compliance with the terms of these Insurance Requirements, including adding the City as an Additional Insured to the Subconsultant's policies. Consultant shall provide to City satisfactory evidence as required under Insurance Section of this Agreement. Proof of Insurance: Consultant shall provide certificates of insurance to City as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers' compensation. Insurance certificates and endorsement must be approved by City's Risk Manager prior to commencement of performance. The certificates and endorsements for each insurance policy shall be signed by a person authorized by that insurer to bind coverage on its behalf. Current certification of insurance shall be kept on file with City at all times during the term of this contract. City reserves the right to require complete, certified copies of all required insurance policies, at any time. Duration of Coverage: Consultant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the Work hereunder by Consultant, his agents, representatives, employees or subconsultants. City's Rights of Enforcement: In the event any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, City has the right but not the duty to obtain the insurance it deems necessary and any premium paid by City will be promptly reimbursed by Consultant or City will withhold amounts sufficient to pay premium from Consultant payments. In the alternative, City may cancel this Agreement. Acceptable Insurers: All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VI (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk Manager. Waiver of Subrogation: All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against the City of Palm Desert, its elected or appointed officers, agents, officials, employees and volunteers or shall specifically allow Consultant or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. Consultant hereby waives its own right of recovery against the City of Palm Desert, and shall require similar written express waivers and insurance clauses from each of its subconsultants. Enforcement of Contract Provisions (Non Estoppel): Consultant acknowledges and agrees that any actual or alleged failure on the part of the City to inform Consultant of non- compliance with any requirement imposes no additional obligations on the City nor does it waive any rights hereunder. Primary and Non-Contributing Insurance: All insurance coverages shall be primary and any other insurance, deductible, or self-insurance maintained by the indemnified parties G FinancelN,amh Ortega Actuarial Services\Agreement-Prof Auddmg Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soll & Lunghard, LLP Page 6 of 15 shall not contribute with this primary insurance. Policies shall contain or be endorsed to contain such provisions. Requirements Not Limiting: Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. Notice of Cancellation: Consultant agrees to oblige its insurance agent or broker and insurers to provide to City with a thirty (30) day notice of cancellation (except for nonpayment for which a ten (10) day notice is required) or nonrenewal of coverage for each required coverage. Additional Insured Status: General liability, Automobile Liability, and if applicable, Pollution Liability, policies shall provide or be endorsed to provide that the City of Palm Desert and its officers, officials, employees, and agents shall be additional insureds with regard to liability and defense of suits or claims arising out of the performance of the Agreement, under such policies. This provision shall also apply to any excess liability policies. City's Right to Revise Specifications: The City reserves the right at any time during the term of the contract to change the amounts and types of insurance required by giving the Consultant ninety (90) days advance written notice of such change. If such change results in substantial additional cost to the Consultant, the City and Consultant may renegotiate Consultant's compensation. Self-Insured Retentions.: Any self-insured retentions must be declared to and approved by City. City reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible. Self-insurance will not be considered to comply with these specifications unless approved by City. Timely Notice of Claims: Consultant shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Consultant's performance under this Agreement, and that involve or may involve coverage under any of the required liability policies. Safety: Consultant shall execute and maintain its work so as to avoid injury or damage to any person or property. In carrying out its Services, the Consultant shall at all times be in compliance with all applicable local, state and federal laws, rules and regulations, and shall exercise all necessary precautions for the safety of employees appropriate to the nature of the work and the conditions under which the work is to be performed. Safety precautions, where applicable, shall include, but shall not be limited to: (A) adequate life protection and lifesaving equipment and procedures; (B) instructions in accident prevention for all employees and subconsultants, such as safe walkways, scaffolds, fall protection ladders, bridges, gang planks, confined space procedures, trenching and shoring, equipment and other safety devices, equipment and wearing apparel as are necessary or lawfully required to prevent accidents or injuries; and (C) adequate facilities for the proper inspection and maintenance of all safety measures. G 1F,nancelN,amh OrtegalActuanal ServiceslAgreemenl-Prof Auddhng Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soll & Lunghard, LLP Page 7 of 15 Additional Insurance: Consultant 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. 3.3 Fees and Payments. 3.3.1 Compensation. Consultant shall receive compensation, including authorized reimbursements, for all Services rendered under this Agreement at the rates set forth in Exhibit "C" attached hereto and incorporated herein by reference. The total compensation for the fiscal year ended June 30, 2017 shall not exceed SEVENTY NINE THOUSAND, TWO HUNDRED SEVENTY EIGHT DOLLARS ($79,278.00) without authorization of the City Council or City Manager, as applicable, per the Palm Desert Municipal Code. Extra Work may be authorized, as described below, and if authorized, will be compensated at the rates and manner set forth in this Agreement. 3.3.2 Payment of Compensation. Consultant shall submit to City an invoice which indicates work completed and hours of Services rendered by Consultant. The invoice shall describe the amount of Services provided since the initial commencement date, or since the start of the subsequent billing periods, as appropriate, through the date of the invoice. City shall, within 30 days of receiving such invoice, review the invoice and pay all non-disputed and approved charges thereon. If the City disputes any of Consultant's fees, the City shall give written notice to Consultant within thirty (30) days of receipt of an invoice of any disputed fees set forth therein. 3.3.3 Reimbursement for Expenses. Consultant shall not be reimbursed for any expenses unless authorized in writing by City, or included in Exhibit "C" of this Agreement. 3.3.4 Extra Work. At any time during the term of this Agreement, City may request that Consultant perform Extra Work. As used herein, "Extra Work" means any work which is determined by City to be necessary for the proper completion of the Project, but which the Parties did not reasonably anticipate would be necessary at the execution of this Agreement. Consultant shall not perform, nor be compensated for, Extra Work without authorization from the City Council or City Manager, as applicable, per the Palm Desert Municipal Code. 3.3.5 Prevailing Wages. Consultant is aware of the requirements of California Labor Code Section 1720, et seq., and 1770, et seq., as well as California Code of Regulations, Title 8, Section 16000, et seq., ("Prevailing Wage Laws"), which require the payment of prevailing wage rates and the performance of other requirements on "public works" and "maintenance" projects. If the Services are being performed as part of an applicable "public works" or "maintenance" project, as defined by the Prevailing Wage Laws, Consultant agrees to fully comply with such Prevailing Wage Laws. City shall provide Consultant with a copy of the prevailing rates of per diem wages in effect at the commencement of this Agreement. Consultant shall make copies of the prevailing rates of per diem wages for each craft, classification or type of worker needed to execute the Services available to interested parties upon request, and shall post copies at the Consultant's principal place of business and at the project site. Consultant shall defend, indemnify and hold the City, its officials, officers, employees, agents, and volunteers free and harmless from any claim or liability arising out of any failure or alleged failure to comply with the Prevailing Wage Laws. G IF,nanceWiamh OrlegalActuanal Serv'ceslAgreemenf-Prof Audrtmg Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 8 of 15 3.4 Accounting Records. 3.4.1 Maintenance and Inspection. Consultant shall maintain complete and accurate records with respect to all costs and expenses incurred under this Agreement. All such records shall be clearly identifiable. Consultant shall allow a representative of City during normal business hours to examine, AUDITING, and make transcripts or copies of such records and any other documents created pursuant to this Agreement. Consultant 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. 3.5 General Provisions. 3.5.1 Termination of Agreement. 3.5.1.1 Grounds for Termination. City may, by written notice to Consultant, terminate the whole or any part of this Agreement at any time and without cause by giving written notice to Consultant of such termination, and specifying the effective date thereof, at least seven (7) days before the effective date of such termination. Upon termination, Consultant shall be compensated only for those services which have been adequately rendered to City, and Consultant shall be entitled to no further compensation. Consultant may not terminate this Agreement except for cause. 3.5.1.2 Effect of Termination. If this Agreement is terminated as provided herein, City may require Consultant to provide all finished or unfinished Documents and Data and other information of any kind prepared by Consultant in connection with the performance of Services under this Agreement. Consultant shall be required to provide such document and other information within fifteen (15) days of the request. 3.5.1.3 Additional Services. In the event this Agreement is terminated in whole or in part as provided herein, City may procure, upon such terms and in such manner as it may determine appropriate, services similar to those terminated. 3.5.2 Delivery of Notices. All notices permitted or required under this Agreement shall be given to the respective parties at the following address, or at such other address as the respective parties may provide in writing for this purpose: Consultant: LANCE, SOLL & LUNGHARD, LLP 203 N. BREA BLVD, SUITE 203 BREA, CA 92821 ATTN: RICHARD K. KIKUCHI, CPA, PARTNER City: City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 ATTN: JANET MOORE, FINANCE DIRECTOR Such notice shall be deemed made when personally delivered or when mailed, forty-eight (48) hours after deposit in the U.S. Mail, first class postage prepaid and addressed to the G iF nance,Niamh OrlegalAcluanal Se v ceslAgreemenl-Prof Audthng Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soll & Lunghard, LLP Page 9 of 15 party at its applicable address. Actual notice shall be deemed adequate notice on the date actual notice occurred, regardless of the method of service. 3.5.3 Ownership of Materials and Confidentiality. 3.5.3.1 Documents & Data; Licensing of Intellectual Property. This Agreement creates a non-exclusive and perpetual license for City to copy, use, modify, reuse, or sublicense any and all copyrights, designs, and other intellectual property embodied in plans, specifications, studies, drawings, estimates, and other documents or works of authorship fixed in any tangible medium of expression, including but not limited to, physical drawings and data magnetically or otherwise recorded on computer diskettes, which are prepared or caused to be prepared by Consultant under this Agreement ("Documents & Data"). Consultant shall require all subconsultants to agree in writing that City is granted a non-exclusive and perpetual license for any Documents & Data the subconsultant prepares under this Agreement. Consultant represents and warrants that Consultant has the legal right to license any and all Documents & Data. Consultant makes no such representation and warranty in regard to Documents & Data which were prepared by design professionals other than Consultant or provided to Consultant by the City. City shall not be limited in any way in its use of the Documents & Data at any time, provided that any such use not within the purposes intended by this Agreement shall be at City's sole risk. 3.5.3.2 Confidentiality. All ideas, memoranda, specifications, plans, procedures, drawings, descriptions, computer program data, input record data, written information, and other Documents & Data either created by or provided to Consultant in connection with the performance of this Agreement shall be held confidential by Consultant. Such materials shall not, without the prior written consent of City, be used by Consultant for any purposes other than the performance of the Services. Nor shall such materials be disclosed to any person or entity not connected with the performance of the Services or the Project. Nothing furnished to Consultant which is otherwise known to Consultant or is generally known, or has become known, to the related industry shall be deemed confidential. Consultant shall not use City's name or insignia, photographs of the Project, or any publicity pertaining to the Services or the Project in any magazine, trade paper, newspaper, television or radio production or other similar medium without the prior written consent of City. 3.5.4 Cooperation; Further Acts. The Parties shall fully cooperate with one another, and shall take any additional acts or sign any additional documents as may be necessary, appropriate, or convenient to attain the purposes of this Agreement. 3.5.5 Attorney's Fees. If either party commences an action against the other party, either legal, administrative or otherwise, arising out of or in connection with this Agreement, the prevailing party in such litigation shall be entitled to have and recover from the losing party reasonable attorney's fees and all other costs of such action. 3.5.6 Indemnification. 3.5.6.1 Scope of Indemnity. To the fullest extent permitted by law, Consultant shall defend, indemnify and hold the City, its directors, officials, officers, employees, volunteers and agents free and harmless from any and all claims, demands, causes of action, costs, expenses, liability, loss, damage or injury of any kind, in law or equity, to property or persons, including wrongful death, in any manner arising out of, c.lrmancewamh OrtegalActuanal SermcesWgreement-Mot Aud t ng Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 10 of 15 pertaining to, or incident to any alleged acts, errors or omissions, or willful misconduct of Consultant, its officials, officers, employees, subcontractors, consultants or agents in connection with the performance of the Consultant's Services, the Project or this Agreement, including without limitation the payment of all consequential damages, expert witness fees and attorneys fees and other related costs and expenses. Notwithstanding the foregoing, to the extent Consultant's Services are subject to Civil Code Section 2782.8, the above indemnity shall be limited, to the extent required by Civil Code Section 2782.8, to claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant. 3.5.6.2 Additional Indemnity Obligations. To the fullest extent permitted by law, Consultant shall defend, with counsel of City's choosing and at Consultant's own cost, expense and risk, any and all claims, suits, actions or other proceedings of every kind covered by Section 3.5.6.1 that may be brought or instituted against City or its directors, officials, officers, employees, volunteers and agents. Consultant shall pay and satisfy any judgment, award or decree that may be rendered against City or its directors, officials, officers, employees, volunteers and agents as part of any such claim, suit, action or other proceeding. Consultant shall also reimburse City for the cost of any settlement paid by City or its directors, officials, officers, employees, agents or volunteers as part of any such claim, suit, action or other proceeding. Such reimbursement shall include payment for City's attorney's fees and costs, including expert witness fees. Consultant shall reimburse City and its directors, officials, officers, employees, agents, and/or volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by the City, its directors, officials officers, employees, agents, or volunteers. 3.5.7 Entire Agreement. This Agreement contains the entire Agreement of the parties with respect to the subject matter hereof, and supersedes all prior negotiations, understandings or agreements. This Agreement may only be modified by a writing signed by both parties. 3.5.8 Governing Law. This Agreement shall be governed by the laws of the State of California. Venue shall be in Riverside County. 3.5.9 Time of Essence. Time is of the essence for each and every provision of this Agreement. 3.5.10 City's Right to Employ Other Consultants. City reserves right to employ other consultants in connection with this Project. 3.5.11 Successors and Assigns. This Agreement shall be binding on the successors and assigns of the parties. 3.5.12 Assignment or Transfer. Consultant shall not assign, hypothecate, or transfer, either directly or by operation of law, this Agreement or any interest herein without the prior written consent of the City. Any attempt to do so shall be null and void, and any assignees, hypothecates or transferees shall acquire no right or interest by reason of such attempted assignment, hypothecation or transfer. G IF,nancelN,amh OrtegalActuanal ServiceslAgroement-Prof Audding Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soll & Lunghard, LLP Page 11 of 15 3.5.13 Construction; References; Captions. Since the Parties or their agents have participated fully in the preparation of this Agreement, the language of this Agreement shall be construed simply, according to its fair meaning, and not strictly for or against any Party. Any term referencing time, days or period for performance shall be deemed calendar days and not work days. All references to Consultant include all personnel, employees, agents, and subconsultants of Consultant, except as otherwise specified in this Agreement. All references to City include its elected officials, officers, employees, agents, and volunteers except as otherwise specified in this Agreement. The captions of the various articles and paragraphs are for convenience and ease of reference only, and do not define, limit, augment, or describe the scope, content, or intent of this Agreement. 3.5.14 Amendment; Modification. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing and signed by both Parties. 3.5.15 Waiver. No waiver of any default shall constitute a waiver of any other default or breach, whether of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily given or performed by a Party shall give the other Party any contractual rights by custom, estoppel, or otherwise. 3.5.16 No Third-Party Beneficiaries. There are no intended third party beneficiaries of any right or obligation assumed by the Parties. 3.5.17 Invalidity; Severability. If any portion of this Agreement is declared invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions shall continue in full force and effect. 3.5.18 Prohibited Interests. Consultant maintains and warrants that it has not employed nor retained any company or person, other than a bona fide employee working solely for Consultant, to solicit or secure this Agreement. Further, Consultant warrants that it has not paid nor has it agreed to pay any company or person, other than a bona fide employee working solely for Consultant, any fee, commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting from the award or making of this Agreement. For breach or violation of this warranty, City shall have the right to rescind this Agreement without liability. For the term of this Agreement, no member, officer or employee of City, during the term of his or her service with City, shall have any direct interest in this Agreement, or obtain any present or anticipated material benefit arising therefrom. 3.5.19 Equal Opportunity Employment. Consultant represents that it is an equal opportunity employer and it shall not discriminate against any subconsultant, employee or applicant for employment because of race, religion, color, national origin, handicap, ancestry, sex, or age. Such non-discrimination shall include, but not be limited to, all activities related to initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff or termination. 3.5.20 Labor Certification. By its signature hereunder, Consultant certifies that it is aware of the provisions of Section 3700 of the California Labor Code which require every employer to be insured against liability for Worker's Compensation, or to undertake self-insurance in accordance with the provisions of that Code and agrees to comply with such provisions before commencing the performance of the Services. G IHnancelNiamh OrtegalActuanal ServtcesOgreement-Prof Auditing Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 12 of 15 3.5.21 Authority to Enter Agreement. Consultant has all requisite power and authority to conduct its business and to execute, deliver, and perform the Agreement. Each Party warrants that the individuals who have signed this Agreement have the legal power, right, and authority to make this Agreement and bind each respective Party. 3.5.22 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original. 3.6 Subcontracting. 3.6.1 Prior Approval Required. Consultant shall not subcontract any portion of the work required by this Agreement, except as expressly stated herein, without prior written approval of City. Subcontracts, if any, shall contain a provision making them subject to all provisions stipulated in this Agreement. CITY OF PALM DESERT LANCE, SOLL & LUNGHARD, LLP By: By: Lauri Aylaian, City Manager Richard K. Kikuchi, CPA, Partner ATTEST: By: Rachelle D. Klassen, City Clerk City of Palm Desert, California APPROVED AS TO FORM: By: Robert W. Hargreaves, City Attorney Best, Best & Krieger LLP G IFinanceWramh OrtegalActuanat ServiceslAgreement-Prof Auditing Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 13 of 15 EXHIBIT "A" SCOPE OF SERVICES PROVIDE AUDITING SERVICES TO THE CITY OF PALM DESERT FOR ITS FINANCIAL REPORT FOR THE FISCAL YEARS ENDING JUNE 30, 2017 THROUGH 2022 G IFinanceW,amh OrtegalActuanal Services Agreement-Prof Auddmg Svcs 041917.doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 14 of 15 EXHIBIT "B" SCHEDULE OF SERVICES Completion date* Description of Tasks Mid-June-July 1 June Interim Fieldwork,to be completed by July Mid-September- Second week of September—Year-end audit field work,completed by October 1 October 1 October 25 Draft financial statements and audit letters provided by end of 3`d week of October November 30 Final financial statements and audit letters issued by end of November * These dates may be modified to accommodate scheduling if mutually agreed upon by both parties. G IFinanceWamh OrtegalActuarial Services Agreement-Prof Auddmg Svcs 041917 doc Contract No. C36120 Agreement— Professional Auditing Services — Lance, Soil & Lunghard, LLP Page 15 of 15 EXHIBIT "C" COMPENSATION Schedule of Professional Fees and Expenses Summary For Fiscal Years Ended June 30, 2017 Through 2022 City of Palm Desert Fees with AUDITORS Preparing Reports IIV.ii.:_a' _ .,,205'. .. .,y • B-1;' •0'19 i '. _V'20-2 .- 02142 City of Palm Desert t1 i $ 43,318 $ 43,318 $ 43,318 $ 44,185 $ 45,069 $ 45,971 Successor Agency to the Palm 8.436 8.436 8,436 8,600 8.770 8,940 Desert Redevelopment Agency Palm Desert Recreation 10,310 10.310 10.310 10,510 10,720 10.930 Facilities Corporation CO Single Audit 6.040 6.040 6,040 6.161 6.284 6.410 Gann Limit Verifications 414 414 414 423 432 441 Testing of the Palm Desert Housing Authority Records at 10,760 10.760 10.760 10,970 11.190 11,410 Lodi CA and Palm Desert Locations Total All Inclusive Price $ 79,278 $ 79,27tl $ 79,278 $ 80,049 $ 82,465 $ 84,102 I ,1 Report prepared by the Auditors City of Palm Desert Foes w'9.. Y Pre•arin• R_ayorts f 2016.17 2017.18 2018-1•-.., 2019 20•21 _ 121y ' City ol Palm Desert(2} $ 37,292 $ 37,292 $ 37,292 $ 38.038 $ 38,799 $ 39.575 Successor Agency to the Palm 8,436 8,436 8,436 8,600 8,770 6.040 Desert Redevelopment Agency Palm Desert Recreation 7,646 7,646 7,646 7,810 7,960 8,110 Facilities Corporation(2) Single Audit 6.040 6.040 6.040 6.161 8,284 6.410 Gann Limit Verifications 414 414 414 423 432 441 Testing of the Palm Desert Housing Authority Records at 10,760 10,760 10,760 10.970 11 190 11,410 Lodi,CA and Palm Desert Locations Total All Inclusive Price $ 70,588 $ 70,588 $ 70,588 t $ 72,002 $ 73,435 $ 74,886- 2}. Report prepared by the City Additional fees require authorization by the City Manager prior to beginning work. G:4Finance4Niamh OrtegaiActuana!Servoces4.4greemen!-Prof Auditing Svcs 041917 doc * Contract No. C36120 ' li • LsLO.:••: : I 0 i . PREPARED BY: i 111 Lance,Soil&Lunghard,LLP Certified Public Accountants le 203 N. Brea Blvd,Suite 203 Brea,CA 92821 (714)672-0022 , mg '1 4M1 01 1 . a • Proposal Presented to , . IIII IN CITY OF PALM DESERT 4 I 111 .4. PROPOSAL FOR,. PROFESSIONAL AUDITING SERVICES .. , .. . me a t II 4 , 1 CONTACT PERSON: i • Richard K. Kikuchi, CPA, Partner i Richard.Kikuchi©Islcoas.com • 714-672-0022 Phone Focused 714-672-0331 Fax • ALTERNATE CONTACT PERSON: on YOU , • Deborah A.Harper,CPA, Partner Deborah.Harperalslwas.corn • • 714-672-0022 Phone 714-672-0331 Fax • March 31,2017 : • , , ...- - . • 1111111 NA. r 4 is im ' ait • 1 , a Contract No. C3612O •..• LSL••:: a TRANSMITTAL LETTER 2 I BENEFITS TO WORKING WITH LSL 3 la INDEPENDENCE 4 I LICENSE TO PRACTICE IN CALIFORNIA 4 IL QUALIFICATIONS AND EXPERIENCE 4 Size of Firm and Size of Firm's Government Audit Staff 4 II Location of Offices 4 Number and Nature of Professional Staff to be Employed on the Engagement 4 IL Joint Venture and Consortuim 4 External Quality Control Review 4 111 Desk Reviews of Audits 4 Disiplinary Action 5 IS Professional Assistance 5 GFOA Award Program 5 . IL Quality Assurance Policy and Procedures 5 Ig PEER REVIEW 6 16 PARTNER,SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE 7 Richard K.Kikuchi,CPA,Engagement Partner 8 li Deborah A.Harper,CPA,Quality Assurance Partner 10 Brandon T,Young,CPA,Assurance Manager 12 Kirk T. Hamblin,CPA,Assurance Field Manager 13 li PRIOR ENGAGEMENT WITH THE CITY OF PALM DESERT 14 11 SIMILAR ENGAGEMENT WITH OTHER ENTITIES 14 IS SAMPLE OF MANAGEMENT LETTER 15 LSL LISTING OF CURRENT GOVERNMENT AUDIT CLIENTS 17 ili SPECIFIC AUDIT APPROACH 18 Proposed Segmentation of the Engagement 18 IL Level of Staff and Number of Hours to be Assigned 19 Sample Size 20 ag Extent of Use of Software 20 Analytical Procedures 20 IS Understanding of the Citys Internal Controls Structure 20 Determining Laws and Regulation Subject to Audit Test Work 21 I Drawing Audit Samples 21 Review Computer Data System for Internal Control 21 111 PROPOSED TIMELINE 22 I APPENDIX A-PROPOSER GUARANTEES 23 APPENDIX B-PROPOSER WARRANTIES 24 L www.Islcpas.com Contract No. C36120 Ls LI:: •• March 31, 2017 IL City of Palm Desert Jose Luis Espinoza, CPA Assistant Finance Director 73-510 Fred Waring Drive Palm Desert, CA 92260 LANCE,SOLL&LUNGHARD, LLP(LSL)is pleased to respond to your request for proposal for audit services. As a leader in the field of governmental accounting and auditing, we appreciate this opportunity to present our professional qualifications. Because of our extensive municipal experience, dedication to excellence and determination to retain the brightest talent,we hope you find that LSL is the most qualified accounting firm to provide professional audit services to the City of Palm Desert. ANNUAL SERVICES The City of Palm Desert(City)will receive the following services for the fiscal year ending June 30, 2017,with the option of auditing its financial statements for each of the five-subsequent fiscal years ended June 30, 2018, 2019, 2020, 2021,and 2022: • Perform an audit of all funds of the City in accordance with generally accepted auditing standards(GAAS) and the standards set forth for financial audits in the General Accounting Office's (GAO) Government Auditing Standards, and express an opinion on the fair presentation of the basic financial statements. We will also issue a report on internal control over financial reporting and on compliance and other matter in accordance with Government Auditing Standards. At the option of the City, we will prepare and word process the City's Comprehensive Annual Financial Report(CAFR). Perform a Single Audit of all federal grants received by the City in accordance with the Uniform Guidance, and issue a report on compliance with requirements applicable to each major federal program and internal control over compliance in accordance with the Uniform Guidance. • Perform agreed upon procedures on the City GANN Limit. - Perform an audit report for the Palm Desert Recreational Facilities Corporation, express an opinion on the fair presentation of the financial statements and issue a report on internal control over financial reporting. We are committed to provide the services discussed above in accordance with the timetable specified in your request for proposal. This proposal is a firm and irrevocable offer for six fiscal years beginning with the fiscal year ending June 30, 2017. For purposes of this proposal, Richard K. Kikuchi, Partner is authorized to make representations for our firm. I can be reached at the address below or by phone at(714)672-0022, by Fax at(714) 672-0331 or through email at richard.kikuchi@lslcpas.com. Very truly yours, Richard K. Kikuchi,CPA PrimeGlobal 11 Engagement Partner -� AvAr ., i:�xwJsni Aurwiup r'-, www.lslcpas.com Contract No. C36120 •••• ••LSL :: � r a BENEFITS TO WORKING WITH LSL 111 In today's environment, keeping up with the numerous accounting and regulatory changes can seem IL unmanageable. Finance departments are facing more complexity, risk, and change than ever before, and with less resources. As the industry continues to evolve, a strategic relationship with LSL, can help you better manage these changes and be more equipped for the future. Training and communication is the bridge that connects • us. We offer to our clients: 1) Annual Governmental Accounting Update—Three Tickets Included Annually, we hold a % day seminar providing an update to new accounting and regulatory standards impacting local governments. The goal is to provide useful relevant information that impacts your organization. In 2017,for convenience, we will also allow the Update to be viewed as a web event. 2) Annual Onsite Client Specific Training—One Event Included Tailored training for your organization on topics that are most relevant and needed for you and your team. Topics may include fraud risk management, internal controls, accounting pronouncements, governmental accounting, and CAFR preparation. 3) Focused Topic Specific Webinars and Ongoing News & Alerts — Access to Events and Information Included Important topics effecting local governments sometimes need more attention and explanation. In addition to our annual update, our webinars and news offer a short-focused approach to these critical areas. 4) Meetings with Boards&Committees—Two meetings Included We believe communication is the key to a successful relationship and offer two annual meetings with your Board or Committees. Both meetings encourage dialogue between the auditor and board during the preliminary and concluding segments of the audit. a L www.lslcpas.com 1111111111111. Contract No. C36120 IL IS Ls •••• LSL .. • IS INDEPENDENCE LOCATION OF OFFICES We meet the independence requirements as defined Our headquarters are in Orange County in the City of ;, IL by generally accepted auditing standards (GAAS) Brea, California. We have two other offices in IS and U.S. General Accounting Office's Government Temecula Valley and Silicon Valley. The audit for the Auditing Standards for the City of Palm Desert and all City of Palm Desert will be staffed from our IL its component units. Our partners do not own any Orange County location. other business organization that has in the past, or • IL will in the future, be providing services, supplies, NUMBER AND NATURE OF materials or equipment to the City of Palm Desert:We PROFESSIONAL STAFF TO BE haven't had any professional relationship with the EMPLOYED ON THE ENGAGEMENT City,any of its agencies or component units within the al past five years. Lance, Soli & Lunghard, LLP (LSL) The personnel assigned to this engagement will will provide written notice of any professionalgi include an engagement (field relationship entered into during the period of the partnerpartner), a concurring partner (quality control), an audit IL proposed agreement. manager, a senior and two to three additional staff. All professional staff assigned to the proposed Si LICENSE TO PRACTICE IN engagement will work on a full-time basis. IL CALIFORNIA JOINT VENTURE AND CONSORTUIM 2 LSL is a public accounting firm licensed by the State of California, Department of Consumer Affairs, LSL is a limited liability partnership and is not a wholly IS as a Public Accounting Partnership. As a firm,we are owned subsidiary of a parent company.We have the members of the American Institute of Certified Public resources to perform the audit of the City of Palm : 1112 Accountants and the California Society of Dessert and will not use affiliations or subcontractors Certified Public Accountants. All key staff to be to perform the services described in this proposal. IS assigned to this engagement are or will be licensed by the State of California to practice as EXTERNAL QUALITY CONTROL REVIEW Certified Public Accountants. a We have participated in the peer review program QUALIFICATIONS AND since its inception. The most recent peer review was ii conducted by Sikich LLP. All peer reviews covered EXPERIENCE governmental engagements. Our most recent peer 111 review is included on page 6. SIZE OF THE FIRM AND SIZE OF THE FIRM'S ic GOVERNMENT AUDIT STAFF DESK REVIEWS OF AUDITS IS Our firm has approximately 65 employees including All of our Single Audit reports are desk reviewed 111 9 partners and professional staff of approximately 50. either by the Federal cognizant agency or the State Governmental staff consists of three partners, one Controller's Office acting as the oversight agency.We Sri senior manager, four managers, three supervisors, have never had a report rejected by any of these five seniors, five semi seniors and six staff auditors. agencies. In fact, we are highly regarded and a recognized by the staff of the State controller's Office as a firm that always submits top quality reports. IC www.lsicpas.com gussom ii Contract No. C36120 II L s •••• •••• •• . a DISCIPLINARY ACTION As part of the scope of the audit,we will be available lit to attend meetings and hearings at the request of the There have been no disciplinary actions against our City and to discuss audit findings and 111 organization since its inception. recommendations, as necessary. Also, while performing the audit,we will attend as many"working" IL PROFESSIONAL ASSISTANCE meetings with staff as necessary in performing the 111 scope of this engagement. LSL is a regional public accounting firm that is Ilt currently meeting the auditing needs of nearly GFOA AWARD PROGRAM 60 governmental entitles throughout California. IL This experience has led to the development of We prepare the financial statements and footnote efficient procedures that provide numerous client disclosures for most of our clients that have received iii benefits. Our clients have grown to understand that the GFOA award. All of our governmental partners, , an audit from LSL provides them with a wealth of managers and seniors have been closely involved in IS knowledge, confidence and value added services. the preparation of these reports. Annually, we hold a '/: day seminar providing an QUALITY ASSURANCE POLICY AND II update to new accounting and regulatory standards PROCEDURES impacting local governments. The goal is to provide useful relevant information that impacts your Lance, Soil & Lunghard, LLP has established strict organization. review procedures to ensure quality reporting in a accordance with the standards. These procedures Throughout the year, we will communicate are designed to maximize adherence to quality. periodically new state and national developments affecting municipal finance and reporting, standards The firm's policy of assigning seniors to an and trends including changes in federal/state grant engagement requires that the senior have at least a program accounting and reporting requirements. three years of government auditing experience. He or she must have demonstrated a high degree of We assist our clients with the implementation of new understanding of government accounting and accounting standards. For the implementation of auditing, as well as of the firm's overall client ii GASB 75, Accounting and Financial Reporting for philosophy. Having been assigned to the Postemployment Benefits Other Than Pensions, we engagement before is also an important factor in ill will guide and train finance staff on how to prepare the assigning a senior to an engagement. journal entries and we will prepare the required Si footnote disclosure and required supplementary information. at At your request, we will provide tailored training for your organization on topics that are most relevant and II needed for you and your team. Topics may include fraud risk management, internal controls, accounting i pronouncements, governmental accounting, and CAFR preparation. a IR r. www.Islcpas.com a • Contract No. C36120 •• PEER REVIEW • Sikich. 1735 Merriman Road 330.864-6661 II www.sikich.com Certified OH 44313 Public Accountants&Advisors IL Members of American Institute of Certified Public Accountants SYSTEM REVIEW REPORT October 26, 2016 To the Partners of Lance, Soli& Lunghard, LLP and the Peer Review Committee of the California Society of CPA's: We have reviewed the system of quality control for the accounting and auditing practice of Lance, Soil&Lunghard, LLP(the Firm) in effect for the year ended May 31, 2016. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants.As a part of our peer review,we considered reviews by regulatory entities, if applicable,in determining the nature and extent of our procedures.The Firm is responsible for designing a system al of quality control and complying with it to provide the Firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the 7A standards at www.aicpa.oraiorsummary. As required by the standards, engagements selected for review included engagements performed under Government Auditing Standards and audits of employee benefit plans. In our opinion, the system of quality control for the accounting and auditing practice of Lance, Soil&Lunghard, LLP in effect for the year ended May 31, 2016 has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass,pass with deficiency(ies)or fail. Lance, Soli&Lunghard, LLP has received a peer review rating of pass. p tarp www.lslcpas.com loft Contract No. C36120 ... Ls •••■ •■ goo PARTNER, SUPERVISORY AND STAFF di.. QUALIFICATIONS AND EXPERIENCE t i • �. The most critical component in the successful completion of an audit is the personnel assigned to alml carry out the responsibilities. We have assembled a team composed of individuals with the optimum mix of talents. Richard K. Kikuchi,CPA Engagement Partner The individuals assigned have experience in ;.., performing the tasks for which they are responsible, - as well as familiarity with all municipal accounting operations. In addition, each has developed •- • E•i F extensive skills in a variety of other complementary — , uale subjects through their work with clients in other 1 industries. Thus, the experience gained on previous '- assignments can be applied and tailored to the unique needs of your organization. Lance, Soil & . Lunghard, LLP will not be subcontracting any Deborah A. Harper,CPA loam portion of the audits of the City of Palm Desert. Quality Assurance Partner II Any changes in personnel at the in-charge level or above will be approved by the City of Palm Desert. It LSL's philosophy is to provide quality audit services - a with minimal disruption to City staff. Our focused 4111( 111P efforts to obtain and retain quality staff have further 111 enabled us to provide high level of services to our clients. The partners at Lance, Soil & Lunghard, LLP are oy, routinely an integral part of the audit process and will Brandon T.Young,CPA be overseeing and supervising staff personnel in the Assurance Manager 1111 field. For the City of Palm Desert, the personnel assigned to the engagement will be as follows: i ■ Resumes of the key personnel assigned are included on the following pages and list their governmental IL auditing experience, applicable continuing professional education for the past three years, andMr' III memberships in professional organizations relevant to the performance of the audit of the City of Palm a Desert. Kirk T. Hamblin,CPA . Assurance Field Manager U U 1 www.lslcpas.corn Contract No. C36120 -• L i •••• �. •• RICHARD K. KIKUCHI, CPA mow ENGAGEMENT PARTNER aim for w.. IMO ACHIEVEMENTS Mei Richard currently serves as a technical reviewer for the Government Finance Officers Association(GFOA) and the California Society of Municipal Finance Officers (CSMFO). He sat on the CSMFO Special Districts °"' Technical Committee and has taught an Introductory Governmental Accounting course through the CSMFO Career Development Committee. Richard recently sat on the California State Board of Accountancy's Qualifications Committee, which is an advisory committee established to examine and to make recommendations for all applicants for the license of Certified Public Accountant. 1 LICENSE Certified Public Accountant-California 1991 ■ CONTINUING EDUCATION Total hours were 142 in last three years of which 64 were in governmental accounting and auditing subjects. Richard has met the Governmental Auditing Standards requirement for governmental CPE. MEMBERSHIPS California Society of Certified Public Accountants(CalCPA) American Institute of Certified Public Accountants(A1CPA) 1E California Society of Municipal Finance Officers,Associate Member(CSMFO) Government Finance Officers Association,Associate Member(GFOA) EXPERIENCE Richard has over 25 years' experience in governmental audits. He is currently involved on the following major municipal engagements: City of Pasadena City of Coronado . City of Santa Monica City of Santa Barbara L..1 City of Big Bear Lake City of Chula Vista ■ City of Irwindale City of Monrovia on YOU City of Santa Fe Springs City of La Quinta City of Indio City of Malibu City of Ontario City of Manhattan Beach City of Rancho Cucamonga American Water Work Association City of Imperial Beach 111 ■ www.Islcpas.corn Contract No. C36120 • Richard K. Kikuchi,CPA, Partner(Continued) ■ This work entailed the preparation of the Comprehensive Annual Financial Report for those entities involved in the award programs of the California Society of Municipal Finance Officers and the Government Finance Officers Association of the United States and Canada. Richard has the responsibility for overseeing federal single audits for these clients. These audits have met the requirements of the OMB and have been desk reviewed by the State Controller's Office. EDUCATION ■ B.A in Business Administration with an emphasis in Accounting-California State University, Fullerton 1985 1111 • ■ ■ t • ■ 11 t ■ .■ www Islopas.coin Contract No. C36120 • ■ ..ii DEBORAH A. HARPER, CPA QUALITY ASSURANCE PARTNER 111 ACHIEVEMENTS i Ms. Harper was accepted as a 2015 and 2016 executive committee member of the AICPA Government Audit Quality Center, which is a national division for governments. As an executive board member, Ms. Harper ■ participates in the development, review, and first hand discussion of new standards and guidance published in the AICPA Audit Guides which is provided to audit firms across the country. Debbie leads the Lance, Soil&Lunghard, LLP training program and serves as the firm Learning Director. LICENSE 1 Certified Public Accountant-California 2005 CONTINUING EDUCATION I Total hours were 132 in last three years of which 68 were in governmental accounting and auditing subjects. Debbie has met the Governmental Auditing Standards requirement for governmental CPE. I — MEMBERSHIPS I II California Society of Certified Public Accountants (CalCPA) American Institute of Certified Public Accountants (AICPA) California Society of Municipal Finance Officers,Associate Member(CSMFO) Government Finance Officers Association,Associate Member(GFOA) Governmental Accounting and Auditing Committee AICPA Government Audit Quality Center a EXPERIENCE Over fifteen years of experience in governmental audits. During her time with the firm, Debbie has performed all phases of our government audits and made numerous presentations to Boards of Directors and Audit Committees. She has been involved on the following similar engagements: • Focused ont • www.Islcpas.corn Contract No. C36120 o. •••• •..• ,�• •• Deborah A. Harper,CPA,Partner(Continued) Cucamonga Valley Water District City of Simi Valley Coachella Valley Water District City of Thousand Oaks Inland Empire Utilities Agency City of Corona City of Irvine City of Diamond Bar . City of Aliso Viejo City of Banning City of Laguna Niguel City of Claremont ■ City of Monrovia City of Brea City of Orange City of Fullerton 111 City of Seal Beach City of Chino Hills City of Glendora This work entailed: ■ The preparation of the Comprehensive Annual Financial Report for those entities involved in the award programs of the California Society of Municipal Finance Officers and the Government Finance Officers Association of the United States and Canada. • Review the of audit these entities and provide technical assistance throughout the year to provide the most up to date information with current GASB pronouncement. • Present the overall audit results to audit committees or other Board Members. a a EDUCATION Bachelor of Arts Degree in Business Administration with an emphasis in Accounting - California State University, Fullerton 2000 1 I s ■ i U ■ U www.lslcpas.corn Contract No. C36120 i.s L�.` •••■ •..• r •• aim BRAN DON T. YOUNG, CPA 41r311'471 ASSURANCE MANAGER ,.� LICENSE Certified Public Accountant-California 2014 CONTINUING EDUCATION Total hours were 125 in last three years of which 74 were in governmental accounting and auditing subjects. Brandon has met the Governmental Auditing Standards requirement for governmental CPE. MEMBERSHIPS California Society of Certified Public Accountants(CalCPA) American Institute of Certified Public Accountants(AICPA) EXPERIENCE Brandon has progressed in an outstanding manner. During his time with the firm, Brandon has performed and managed all phases of our government audits, including cities, special districts, CAFR audits, successor agency audits and Single Audits. He has been involved in the following governmental engagements: City of Chula Vista City of Laguna Niguel ""'m. City of Burbank City of Indian Wells City of Coronado City of Brea "`n City of Rancho Cucamonga City of Santa Barbara City of Santa Monica City of Emeryville City of San Dimas City of Yorba Linda City of Santa Fe Springs City of Manhattan Beach City of Irvine City of Orange City of Pasadena EDUCATION Bachelor of Arts Degree in Accounting—Magna Cum Laude—Vanguard University,2012 hocused on YOU ■ www.lslcpas-cam Oh- Contract No. C36120 •..• ■ LSL :: 11 ■ KIRK T. HAMBLIN, CPA ■ ASSURANCE FIELD MANAGER ■ li I LICENSE 11 Certified Public Accountant—California 2016 CONTINUING EDUCATION Total hours were 144 in last three years of which 92 were in governmental accounting and auditing subjects. Kirk has met the Governmental Auditing Standards requirement for governmental CPE. ■ EXPERIENCE ■ Kirk has progressed in an outstanding manner. During his time with the firm, Kirk has performed all phases of our government audits, including water districts, other special districts, CAFR audits, successor agency audits and inn Single Audits. He has been involved in the following municipal engagements: City of Glendora City of Canyon Lake City of Ontario City of Fullerton City of Palm Springs City of Corona ■ City of Walnut City of Cathedral City City of Rancho Cucamonga City of San Dimas City of Pasadena Orange County Fire Authority City of Chino Hills Three Valleys Municipal Water District EDUCATION ■ Bachelor of Science Degree in Accounting— University of La Verne, 2010 ■ ■ Focused YOU ■ on 11 www.Islcpas corn E Contract No. C36120 IC IL Lsi.:::: •• L ., . PRIOR ENGAGEMENT WITH City of La Qulnta - Audit and preparation of a 111 Comprehensive Annual Financial Report (CAFR) which THE CITY receives the GFOA award in addition to various compliance t and single audits.These services have been provided for the • Within the last five years,we have not been engaged last 8 years. Last audit performed was for June 30, 2016. hou to provide professional services to the City of Palm Totals were approximately 350. Engagement partner Desert or any of its component units. is: Mr.Bryan S.Gruber and Mr. Richard K Kikuchi. isl Contact person:Ms.Karla Campos,Finance Director 7073 IS From fiscal year 2002 through fiscal year 2007, we Phone:mail am s la-du Email: kcam�osCa�la-quinta.orq audited the City of Palm Desert, the Palm Desert iil Redevelopment Agency,the City of Palm Desert Golf City of Cathedral City - Audit and preparation of a Course Facilities Corp, and performed a single audit, Comprehensive Annual Financial Report (CAFR) which III Gann limit verifications,investment policy compliance receives the GFOA award in addition a single audit These : la verification and transient occupancy tax agreed upon services haYe been provided for the last 5 years. Last audit procedures for the City. performed was for June 30, 2016. Total hours were i approximately 520. Engagement partner is: Mr. Bryan S. SIMILAR ENGAGEMENTS Gruber and Mr. Richard K Kikuchi. a Contact person:Ms. Kevin Biersack, Fiscal Officer WITH OTHER GOVERNMENT Phone: (760)770-0378 IS ENTITIES Email: kbiersack@cathedralcity.gov Coachella Valley Association of Governments - City of Palm Springs - Audit and preparation of a Audit and preparation of financial statements and a Comprehensive Annual Financial Report(CAFR)which single audit. These services have been provided for receives the GFOA award in addition to various the last 2 years. Last audit performed was for June i compliance and single audits. These services have 30, 2016. Total time spent on the engagement in the been provided for the last 6 years. Last audit performed fiscal year 2015-16 was approximately 280 hours. was for June 30,2016.Total hours were approximately The engagement partner is Mr. Richard Kikuchi. 750. Engagement partner is: Mr. Bryan S. Gruber and Contact person: Mr. Gary Leong, Director of Mr.Richard K Kikuchi. Administrative Services. a Contact person:Mr.Geoffrey Kiehl,Finance Director Phone: (760)346-1127 Phone: (760)323-8229 Email:oleonq(a cvaq.orq ii Email: Geoffrey.kiehl( Dalmsprinosca.gov City of Indio - Audit and preparation of a A complete listing of our current government audit clients, along with phone numbers of contact Comprehensive Annual Financial Report (CAFR) in personnel and reference as to services provided, is i addition to various compliance and single audits. These included on page 17. We welcome you to contact any services have been provided for fiscal year 2015-16. or all of them to get their opinion on the services we le Total hours were approximately 650. Engagement provide. partner is: Mr. Richard K Kikuchi and Mr. Bryan S. IS Gruber. Contact person: Mr. Rob Rockwell, Assistant City Ili Manager/Finance Director Phone: (760)391-4029 a Email: rrockwell(ca�indio.orq IL I L. www.lslcpas.com P Contract No. C36120 IL F • 's L.,::: •• E SAMPLE OF MANAGEMENT LETTER a LSL '::• •�:• :: CPA' AN'. AD4 PCP! S I INDEPENDENT AUDITORS"REPORT ON INTEftfiAL CONTROL 62 OVER FNANCML REPORT**,AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN MIT OF FINANCIAL STATEMENTS PERFORMED N ACOORDANCE • Si VY TH GOVERIOIDITALE IT SZANIMRDS w To the Honorable Mayor and Msnbrs d tote City Cana i City of ,California We haw andsd. in aomdrse wit Hue and ns slandrds in tie United Sines d 'l Amebas and lie demands nook**, b Muncie! audits •• in Auditing Drdrds bound by lie Campballr Ornrai d the Untied Skies. fwrmid d the govrranen i Mauna& the lanineawappe ar Mice. the w/egale camps/NM mils. each major fund, and the aggimpla wwniniho fund ` Ca/ania. (the Oily)as d and for the yaw ended .lane 30. 2017. and the fiha • sidwaants. which mMwdvaty comprise the Cilys Maio Mancini sldswhr1s. lI •war mason thereon dated .2017. bhlarwal Coirol ever Financial Reporting In Mannino and perfornieo our swat at N., w considered Cats infernal caning over inahaid repotting OnlrrJ eared) • pmeadwas tat an approgilian in is chews nia's s S for the pupate d was'eaina ar . •�+is • detr ains. pumas*but not for e ppose d esor. no an th opinion on e eRd avenees d • • A ou.Vii y. w do root repress an opinion on the alleaWwnes d CIy/s MaA daiwirrocy hi idaani •• Me daaipn ar aOraian d a canal does not Maw rnsnsorarht or ewpiyaas. in the nomad of • - • Ow* anWynd functions. b prawt ar dated and can* ninlaiaasris an s Gnat/ • wince is a deli omen,or a aoabis`ah d dalkienies,in internal award,such that toes a • • pnsalaN m whim y VIM a driel demo t Brie an 's finenn dal Mamma rot not be prevented.ar datadad and ewhawted an a fwdr bus.A airicn!dsfeianw-s a ddrai nsa.or a anent on d d tkiandes,in i trnel wonted tat is less wawa than a aslrid eeabissa.yet ihprte'd snatch b mint aterdbn by those dirgad vital tDvamnnaa. 32 Oar oasidralion of inserts'antra was for the united propose dewed I.tine first OaralMadn or this section and Hass not designed b identify at daticirhdas in Mann award VIM fished be i nlrW seairsssas or. siOhiforht dsicshdes-Oivan those ini Tian.drip ar audit an did not idnd*arm dsidsroies in i le n l oaVd tit we oar eider b be nelafal wabnssec.Hawar.mna ari l walnrsaes nosy oast Oat have not born idendied. Ceuplfahoe and Casa Madera ILAs port d obtaining'reasoruble assuanoe abort atMhwr CWs financial stelensals me Ave barn malarial nhissirtenant we prfarm.ad tests d is mmp/8nm ugh arWn provisions d lams,regitilfas.contrails.and 112 ward aaaa a ts.n naomaianoe Writ which could hove a erect and mslrtel affect on the debirminalion d Minds!Matemsnl mammas. However.p.ouAdno an opinion an oamp6noe net those provisions was not an (Minim d our atilt and a000nlni*.w do not rmrass such an cad imh.The resift d our bests dlsdoeed no S instances of Staidarda noncompliance other ce or oer met that at are inquired ed be'spooled u COrs'm'avd Auditing iv Pilmilabel 4•••••••I L • L Lwww.Isicpas.com a. Contract No. C36120 • Ls [2::• •• SAMPLE OF MANAGEMENT LETTER LSLL": To the Honorable Mayor and Members of the City Council City of .California Purposed this Report •` The purpose of the report is solely b desalt*fie scope of ow testing of internal control and complinoe it and the mulls of Mud lasting.and not to prwlde an opinion or the eRedireeuese of the enateli iliwnsl control or on comptienoe. ibis report is an Naga part of an midi performed in accordance with aGosvnrreet AaadNiv Blra7dlmds in considering the anilys intim& control and compliance_ Accordingly.this corrxrrnioation is not suitable for any other purpose- Z, .44 s„4/...f .rsox Brea.Cantinas 2017 a a kit fit a a L www.Isicpas.com era Contract No. C36120 a.... LS •••• •••I •• ___ 101 ANN LSL LISTING OF CURRENT GOVERNMENT AUDIT CLIENTS Agoura Ms Ms.M.Brodsky, Malaga _ 2 616-597-7300 American Wafer Works Association Ms.S.Rrnakrfsan,Ass!.Exec.Director F 4 aoe-291-2114 .are. ' A2uea Ma.T.Johnson.Finance Oenlar F,S.U 19 626-612-201 Bhp Ms.M.Graan•Accounting Manager F.t,U 17 951-922-3116 Belt Ms.Stne/y Lin.interim Finance Director 4 323.666.6211 eisi Big Bea Lake Ms.K.Ent.Director of Admin.SaHces F.S 18 900466-5631 • Brea Mr.L.Squire.Financial Sank**Manager F.S 4 714-990.7663 Burbank Ma.C.t GHMda,Financial Senicea Dk I 5 616-236-5467 - ,�, Canyon Lake _itr.T.Shea.Finance Director F 20 909-24-2965 • CrAe6'al City Mr.K Biersack.Fiscal Dicer F.S 6 760-70-0378 • Chin Kis Ms.J.Lancaster,finance Director F.S 16 909-364-2600 • Chula Vista -Mr.D.Bilby.Director of Fiance F,S 3 61943915250 - Coachella Valley Association o(Gewm nertts Mr.G.Leong,Director olAdminletre fe tive nices F • 2 760-348-1127 •_ Can./was Valley Wulff Diatrtct Ms.K.Oilflnatca Director F.S 3 760-396.2661 • Corona Ms.K.Eden,Finance Dileclor F,S.U S 951-736-2315 Me.E.Gswalry.Flra+ca Manager F.S 9 619522-7300 I . Cua cnrg Districtinan oa Valley Water Mr.C.Brantley,Franca Calker F,S 4 90 46�7453 ■ _ • Diamond Bs Ms.D.Honeywell,Finnic/a Director F.S 6 909-639-7061 Doran 'Ms.J,Mictrats•Agunr,Finance Director - F.S 2 707-678-7000 x106 • Downey Mr.A.Gadty,Finance Director F.S 3 562-04-7265 I Duarte _Ms.K.Petersen.Finny!'DirectorF r 9 626-357-7031 • EnleryvllYe Ms.S.Hsieh,Finance Director F.S 12 510-65-4352 • Fi$erton Ma.J.Jame*,Director of Admin.Senices F,S 6 714-73645522 ■ Glendora _Ma.E.Stoddard.Accoundn9 Manager _ F.S 12 ENr914-0234 Grand Terrace Ms.C.Fortune,Finance°tractor F 3 909-8246621 Cr al f Loa Angeles Vector Centre _Mr.T.Dater,District Manager F 6 ^ -562.756-6501 ■ Hidden w6s Indio Ms.C.Page*,City Clerk F 30 616-660r9261 Mr.Ron Rockwell,Assistant City Managerl0irectorof F.S 1 180-391-4029 Finance Inland Empire Lfflkti*a Agency Ms.Christina Vale ncia.Chief Financial Oecer F,5,U 1 _ 909.993-1600 -Imaging/BeachMr.D.Smiley.Finance Ands F 12 619-426-1361 • Inglewood Ma.S.Kolka,Assistant Fiance Director _ F.S.U 1 310-412-8724 ■ • hMrtdels Lawndale Ms t.Carson,Finance Director F 20 626-430-2221 "Mr.K.Louie.Director of Finance/Gay Treasirer F 2 310-973-3244 • Los Alamitos Mr.J.Allman,Administrative DlrsctrlTr'aanaer F 2 562-431 7536 x222 ■ • MalOuMs.R Feldmn,finance Director F 12 - 310�.56-2469 • Manhattan Beach Mr.B.Moe,fnance Director F 14 310-602-5453 • MorsWa Mr.M.Ahrens,Director of Admkn,SmNces F,S 15 626-032-5510 -Monterey Regional Water Pdution Control Agency -'Ms.T.Hannah,Chief Financial Oecer F 2 631-646-4623 ■ • Oceanside Ms.J.McPherson,Finance Director f,S 7 - 760.4�F3 39 • • e Ms.D.Hones,Director of Fiscal genic** F.S 19 909-395-2352 Orange County Fire Authotiy Mr.Jm Ru01e,Finance Manager F,S 5 794.6734304 II • gangs County Water District -Mr.R.Fick.Chef Financial Officer F,S 4 3Th-3 . 714- 271 • Palm Springs Mr.G.Kiehl,Finance Director F,S 6 76b-323-8229 ' •Pasadena Mr.R.RConfront.Cofron F,S.U 2 626-744-7427 ■ • Rancho Cucamonga Ma.T.Layne,Fineries Cecsr F.5,U 38 90o-969-1651 San Diego County Water Au honey Ms.M.Medical.Water Manager I 1 656-522-6679 San Dimas Mr.M m H.O'Brien,Finale.*Okecior F.S 55 904744.6206 SsinJuan Wh r District Ma.Donne Seat.interim Finance and Adman Manager F 3 _ 916-7'914a37 San Merin Ms.L.Bailey.Alnico[Selector F 23 626 906-070D • Sons Barbara 'liar.B.Samaria,Finance Director F.S. r 5 606-697-1976 ■ • Santa Fe Springs Mr.J Gomez,Director of Fi mice and Administrative F,S 2 662-266-0511 Senices Sane Monica Ms.G.Decaatlas+k+gres,Finance Director _ f,S 1 310-458-6281 ■ • Seal Beach Me.V.-6ei__iiy``�isrKia Ck*cto( F,5 5 a`62-431-2527 Six Basins Mr.L.Sta69ioala.Ceraralter F 4 949-420-3000 'tonne Beech Ms.M.Britian Finance Hanger F 6 656-720-2463 ■ • Thousand bake _Air.J.Adagio,Plumb Director F,S 9 606 449-2235 Then Minya Wens District Mr.R.Herein.General 1Aaipe► F 5 905-626-4631 • Vista Ms.L.Warm,FYmnce Marnopr F 7 760.639.6170 s1023. • Service Codes:F-Financial Audit,S-Single Audit.I-Internal Audit,U-Utility Operations ■ •Participated in the GFOA Award Programs and has received or anticipates receiving outstanding awards ■ • • • - ■ www.lslcpas.com r Contract No. C36120 r IL Ls •••• •• IL II SPECIFIC AUDIT APPROACH Segment 2-Financial Audit Testing: PROPOSED SEGMENTATION OF THE Based on the information gathered each year thus far, • ENGAGEMENT we will utilize a customized audit program based on I the risk assessment developed during our The services will be divided into three segments. assessment of the City's internal controls and i government auditing standards. The primary benefit • Segment 1-Planning and Obtaining an of a tailored program is a focused set of procedures Understanding: to address relevant areas. We believe that this approach will be the most effective and efficient by LSL will provide an annual audit communication linking financial statement assertions, audit letter, engagement letter, and Government Audit objectives, and procedures that are basic to most . Quality Center Information fetter. The audit governmental audit engagements,and critical to the communication letter is to be provided to the compliance with other material laws and regulations. Governing Board. In addition, this can be We will annually compile another customized communicated orally to the Governing Board or "Prepared by Client" (PBC) list for the year-end sub-committee if requested. This communication will on-site visit provide at least one month prior or earlier discuss the planning stages,the responsibilities of the if requested. IL Governing Board, Auditors, and Management, and We will request a trial balance for our analytical provide an opportunity for communication with us as IS the auditors. review to be provided one week prior to our arrival. LSL's audit team will meet prior to our initial on-site Year end fieldwork will include testing of the balance visit to brainstorm and discuss economic conditions, sheet, revenue and expenditures accounts, industry elements, and new standards that will affect confirmation of selected balances, analytical the City of Palm Desert. A trial balance is requested procedures, evaluation of the internal controls and for our planning meeting to assist the LSL team in preparation of reports and letters. obtaining knowledge and preparing expectations for Segment 3-Conclusion: the audit year. We will compile a list of"Prepared by IS Client" ("PBC") items based on our review of prior year financial statements and information gathered. Based on our year-end exit meeting we will schedule i This will be provided to the City of Palm Desert one a plan to finalize the CAFR in the timetable of the City. month prior to our visit or earlier if requested. We We will schedule dates for the initial and final drafts i operate on a paperless software system and provide including time for the City review and approval of the a secured cloud based portal for all clients. The City financial statements. In addition, this will account for of Palm Desert will have its own folder which can be the review of the engagement partner and quality customized to organize and upload requested assurance partner.After the review and receipt of the I signed Representation Letter from City, we will schedules, support documents,etc. provide the final Reports by the 15" of December Si every year. a la L L www.islcpas.com Contract No. C36120 Lite::: LSL :: ea. LEVEL OF STAFF AND NUMBER OF HOURS TO BE ASSIGNED w.. The level of staff assigned and the number of hours estimated to be spent on each proposed segment is as follows: ti imio Total Proposed Hours SegmentlTask Partners Manager Senior Staff Total _ 1 2 3 City _ - Planning and lrnemat Control Evaluation 4.0 6.0 16.0 24.0 50.0 42.0' 8.6" Cash and knestments - - , - 18.0 18.0 2.0 14.0 2.0 Receivables and Revenues - - - 32.0 32.0 2.0 30.0 - ln entory 3.0 3.0 - 3.0 - Prepaid Items and Deposits - _ 2.0 2.0 - 2.0 - Iw. Capital Assets - y - - 20.0 20.0 - 18.0 2.0 Accounts Payable and Disbursement - - - 32.0 32.0 2.0 28.0 2.0 Payroll - - - _ 6.0 6.0- - 6.0 - "• OPEB - - 3.0 - 3.0 - 2.0 1.0 II Pension Liability GASH 68 - 4.0 12.0 16.0 32.0 16.0 14.0 2.0 Lamp Term Debt&Debt Compliance 12.0 12.0 10.0 2.0 Insurance&Claims Liability - -- - 4.0 4.0' - 4.0II - Grants - _ - _ 16.0 16.0 - 16.0 - Net Position and Fund Balance 4.0 _ 4.0 1.0 2.0_ 1.0lk Compliance - 2.0 4.0 8.0 14.0 8.0' 6.0 - Report Preparation 4.0 6.0� 24.❑ 6.0 40.0 10.0 30.0 Supervision and Review 8.0 12.0 10.0 30.0 8.0 10A 12.0 II Subtotal • 10.0 •30.0, 101A 171.0 ••313A L 61.0 1R3.0 , 64.0' . Successor Agency Audit Planning and Fiedwork - 2.0 20.0 30.0 52.0 8.0 44.0 Supervision and Review 2.0" 6.0 2.0 - 10.0 - 4.0 6.0 El Subtotal Z O.r 8.0 22.0 30.0- ---l€ZA 8.0 411.0p w-.`-t. _ r Palm Desert Recreational Facility Corp. II - - Audit Planning and Fieldwork 1.0 3.0 42.0 46.0 8.0 38.0 Report Preparation 2.0 4.0 - 12.0 18.0 - 4.0 14.0 IL Supervision and Review 3.0 6.0 - 9.0 2.0 2.0 5.0 Subtotal 8A 13.0 54.0 73.0 10.0 44.0 19.0 e Single Audit(1) Planning 1.0 1.0 3.0 5.0 - 6.0 . ■ Compliance Testwork(Uniform Guidance) - - 2.0 24.0 28.0 - = 26.0 Report Preparation and Supertiiaian 2.0 5.0 5.0 12.0 2A 10.0 Subtotal 3.0-, 0.0 10.0 24.0 43.0_ - 33.0 10.0 I - Gann Limit II Report Preparation and Supervision - 1.0 - 2.0 3.0 3.0 - - Subtotal 1.0 - 2.0 3.0 - 3.0 - _ Palm Desert Housing Authority Audit Planning - - 2.0 2.0 4.0 w 2.0_ 2.0 Audit Fieldwork in Palm Desert 14.❑ 24.D 38.0 38.0 - Audit Fieldwork in Lodi and Trawl Time - - - 30.0 30.0 - 30.0 . Supervision and Review 2.0- 6.0 2.0 - 10.0 - 4.0 6.0 Subtotal 2.0 8.0 18.0 54.0 82.0- 2.0 74.0 6.0 Terdl Proposed Hours ZY-0, 06.0E 151.0 335.0 581.0- 104.0 382.0, 85.0 II (1) Single audit assumes 1 major program being tested. Each additional major program requires 14 hours • Iwww.lslcpas.corn Contract No. C36120 S iii LSL: !! s s s SAMPLE SIZE evaluate if the changes appear reasonable or require further analysis. For all significant differences, la Our approach may be to utilize statistical sampling in explanations are obtained as to why the situation the areas of receipts, disbursements and payroll. occurred and additional substantive procedures may j Here we develop a statistical conclusion based upon be applied and related evidence gathered to resolve an initial computer selected random sample which is concerns and questions. aI based on the population and other risk factors identified. If errors are noted in the sample, the UNDERSTANDING OF THE CITY'S INTERNAL sample size will be expanded. We believe that a CONTROL STRUCTURE 111 random selection can be efficient, while providing each item in the population an equal chance of being To gain an understanding of the internal control II selected. Additionally, we may select a stratified structure over the financial statements, we will sample of all transactions over a specified dollar limit perform procedures as required by SAS 122-125. i for review.This allows us to cover all high dollar value This will include review of internal controls in the transactions not otherwise selected in the random areas of financial reporting; cash; revenues and III sample. Our samples are selected randomly utilizing receivables; expenditures and accounts payable; IDEA data analysis software. payroll; capital assets; long-term debt; or grant IS reporting, as applicable. EXTENT OF USE OF SOFTWARE Ilii Based on the result of our review, we will issue a a LSL performs paperless audits utilizing CaseWare management letter(SAS 115 Letter)that will identify Auditing Software and IDEA Software (for Data any significant deficiencies and/or material Extraction). We extensively use notebook computers weaknesses noted. This report is required by the in the field, with spreadsheet software, for financial Government Auditing Standards issued by the S. statement preparation and analytical procedures We Comptroller General of the United States. do not use audit software that runs through the City's Auditing Standards require auditors to obtain an i computer system understanding of the Entity and its Environment along with Assessing the Risks of Material Misstatements. ANALYTICAL PROCEDURES LSL obtains an understanding through a variety of f ways all throughout the year, but the most pertinent For the audits of the financial statements, we will use time each year is during our interim on-site visit. We i analytical procedures as an overall review of the will conduct interviews with management of finance financial information in the preliminary and final along with each audit section responsible party IL stages of the audits. These procedures are designed (e.g. cashier, accounts payable clerk, payroll clerk, to assist us in planning our audits and in assessing etc.) to review the processes and controls through the propriety of the conclusions reached, and in the observation and discussions. Based on our evaluation of the overall financial statement observations, we will sample as we observe a 11 presentation. The procedures to be utilized consist of "walk-through" to verify the system of control is a determining expectations for changes to significant working in accordance with policies and procedures. revenue, expenditure and balance sheet accounts, IA reading the financial statements and related notes, We will provide a list each year of randomly selected reviewing the budget and related material, and employees of the City of Palm Desert to interview for • a focusing on overall relationships within the financial fraud interviews (SAS 99), which will consist of all statements. Once determined, these are reviewed to levels of the City across all departments. II iS www.Istcpas.corn a Contract No. C36120 a a Ls •••• ,L...: •• a . it REVIEW COMPUTER DATA SYSTEM FOR • After our interim on-site visit, we will have an exit INTERNAL CONTROL 16 meeting to discuss potential weaknesses, if any, and provide any feedback for improvements or valuable Our traditional approach is to "audit around" the l information we have gathered from our outside computer, which means that we verify output by clientele that would benefit the City of Palm Desert. agreeing it, through our audit tests, with corresponding source input transactions. We do not DETERMINING LAWS AND REGULATIONS use audit software that runs through the City's 16 SUBJECT TO AUDIT TEST WORK computer system. Like other aspects of the internal control structure, computer controls and processes The Laws and Regulations that will be subject to audit are documented in our memoranda and II test work are determined from the applicable laws, questionnaires. regulations, contracts, and grant agreements which IS we identify through the understanding we obtain of We review application controls as they relate to the City of Palm Desert and our extensive experience procedures used to initiate, record, process and la with governmental entities. report transactions or other financial data. These controls help ensure that transactions occurred, are DRAWING AUDIT SAMPLES authorized and are completely and accurately recorded and processed. For tests of controls,we use audit sampling. Tests of It controls are procedures directed towards determining We will consider whether specialized skills are the effectiveness of the design or operation of an needed to consider the effect of computer processing 11 internal structure policy or procedures. Normally, on the audit, to understand the internal control audit sampling is used for tests of controls and tests structure policies and procedures or to design and 1111 of compliance that involve inspection of documents perform audit procedures. We will consider the and reports indicating performance of the applicable complexity of the computer system and assess Si policy or procedures and compliance with the whether we can identify the types of misstatements applicable laws and regulations. These sampling that might occur. procedures test the operating effectiveness of an It internal control structure policy or procedures by IDENTIFICATION OF determining how the policy or procedure was applied, la the consistency with which it was applied during the ANTICIPATED POTENTIAL audit period,and by whom it was applied. To achieve AUDIT PROBLEMS a this goal, we will draw samples for disbursements, receipts and payroll when applicable. Each document i selected will be tested for various attributes that are With our familiarity with similar city governments, we designed to verify compliance with different aspects do not anticipate unusual audit problems. With L of internal controls and applicable laws and changes in single audit and GASB pronouncements, la regulations. Additionally, each sample item will be we always anticipate a certain degree of problems. To address these, we offer different training a to the general ledger. Sample sizes vary based on opportunities, first-hand experience with similar local the population and risk based calculations. governments, and implementation experts on our in- it house team. L L www.Isicpas.com • Contract No. C36120 i. a L s LI,••,•, •. 1 a •• .. .. II iiiikeett i it.:......... Our Proposed Timeline Our proposed schedule for the annual audit is as follows ,.I it 111 a I si June Interim audit Second week of Draft Financial Final Financial ai field work September-Year-end Statements and Audit Statements and One week. audit field work- Letters provided by the Audit Letters AU Interim field two weeks. end of the 3rd week of issued by the end IS work will be All field work will be October. of November. completed by completed by July. October 1st. Upon identification or indication of irregularities and illegal acts,we will make an immediate written report to the City Council, the City Manager, the City Attorney, the Audit Committee and the Director of Finance. illi All working papers and reports will be retained (at our expense)for a minimum of seven (7) years, unless we are notified in writing by the City of the need to extend that retention period. Upon written request,we will make working papers available to parties designated by the City. In addition, we will respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing IS accounting significance L a a II L www.lslcpas.com Contract No. C36120 Ls L:::: •• APPENDIX A PROPOSER GUARANTEES 1116 The proposing firm certifies it can and will provide and make available, as a minimum, all services set forth in Section II, Nature of Services Required. i Signature of Official: Name(typed): Richard K. Kikuchi, CPA Title: Engagement Partner Firm: Lance, SoII, and Lunghard, LLP Date: March 31, 2017 ii IS i ; IL www.Islcpas.com Contract No. C36120 • Ls •• IC APPENDIX B PROPOSER WARRANTIES A. The Proposing firm warrants that it is willing and able to comply with State of California laws with respect to foreign(non-state of California)corporations. B. The Proposing firm warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts,or omissions of any officers,employees or agents thereof. C. The Proposing firm warrants that it will not delegate or subcontract its responsibilities under an agreement without the prior written permission of the City of Palm Desert. D. The Proposing firm warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official: 04_,L7./ .._Q, Ilik Name(typed): Richard K. Kikuchi, CPA Title: Engagement Partner Firm: Lance, SoII, and Lunghard, LLP I Date: March 31, 2017 IL 1111 al www.Islcpas.com