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HomeMy WebLinkAboutC20182 Lance, Soll & Lunghard, LLP - Audit Servicesy INTER OFFICE MEMO To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL From: Paul S. Gibson, Director of Finance Subject: Approval of Contract with Lance, Soll & Lunghard, LLP (Joint Consideration with the Palm Desert Redevelopment Agency, and Housing Authority) Date: May 13, 2004 RECOMMENDATION Approve the contract with Lance, Soll & Lunghard, LLP, for audit services of the City of Palm Desert, Palm Desert Redevelopment Agency, Desert Willow Golf Resort, Palm Desert Recreation Facilities Corporation, and the Housing Authority for the fiscal year ended June 30, 2004. BACKGROUND On June 13, 2002 , the City Council approved a five-year contract with Lance, Soll & Lunghard, LLP, to conduct audits of the City of Palm Desert, Palm Desert Redevelopment Agency, Desert Willow Golf Resort, Palm Desert Recreation Facilities Corporation, and the Housing Authority. This is the third year of the existing contract and the increase in fees are consistent with the approved five year contract. On February 25, 2004, the Investment and Finance Committee met and recommended to continue the audit contract with Lance Soll & Lunghard LLP. Staff recommends to continue the contract with Lance, Soll & Lunghard, LLP, in relation to the audit services provided for the City, Redevelopment Agency, Desert Willow Golf Resort, Palm Desert Recreation Facilities Corporation and the Housing Authority. Respectfully Submitted, Reviewed and Concurred, Paul S. Gibson, Director of Finance Carlos L. Ortega, y Manager PSG: JLE. jle [nghardLuLance Soil & LLP crry- iN/ i7 iENT 7 sr 9: 53 Certified Public Accountants March 15, 2004 Mr. Paul S. Gibson, CCMT Director of Finance/City Treasurer City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260-2578 Dear Mr. Gibson: Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional Corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C. Soli Fred J. Lunghard, Jr. 1928-1999 We are pleased to confirm our understanding of the services we are to provide for the City of Palm Desert for the fiscal year ending June 30, 2004, are as follows: 1. Perform a financial audit of the Basic Financial Statements of the City of Palm Desert that would include the following oversight and component units: • City of Palm Desert • Palm Desert Redevelopment Agency • City of Palm Desert Golf Course Facility Corporation • Palm Desert Housing Authority • Palm Desert Financing Authority We understand that we will be responsible for preparing this report. These financial statements will be included within a Comprehensive Annual Financial Report (CAFR), which will be submitted under the Government Finance Officers Association of the United States and Canada's Certificate of Achievement for Excellence in Financial Reporting program. Our audit would express an opinion as to whether the financial statements and associated notes conform to accounting principles generally accepted in the United States of America and these statements will be prepared in accordance with GASB 34. 2. Perform a Single Audit of all federal grants of the City utilizing generally accepted governmental auditing standards. This audit would be performed according to the requirements of OMB Circular A-133, Government Auditing Standards issued by the GAO and the AICPA Industry Audit Guide. 75 Years 1929 2004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.Islcpas.com Lance Sop s Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 2 3. Perform a financial audit of the Component Unit Financial Statements of the Palm Desert Redevelopment Agency. Again, we understand that we will prepare these financial statements and our opinion would indicate adherence to generally accepted accounting principles. A separate compliance audit would be performed and an opinion issued as required by Section 33080.1 of the Health and Safety Code. This audit would be done in accordance with Guidelines for Compliance Audits of California Redevelopment Agencies of the State Controller's Office. 4. Review and prepare a report on compliance with the City of Palm Desert's Investment Policy. 5. Perform a financial audit of the City of Palm Desert Golf Course Facility Corporation and issue the Independent Auditor's Report on the General Purpose Financial Statements. We are to be responsible for this financial statement and our opinion would indicate adherence to generally accepted accounting principles. 6. Review and issue a report on the calculation of the City's Appropriations Limit (GANN), as required by Article XIIIB Section 1.5 of the California Constitution. 7. Perform a review and make recommendations on the internal control structure, which consists of the Control Environment, Accounting System and Control Procedures. This may involve the issuance of a management letter. Also, we shall make an immediate and written report of any irregularities and illegal acts or indication of illegal acts coming to our attention. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and will include tests of the accounting records of City of Palm Desert and other procedures we consider necessary to enable us to express an unqualified opinion that the financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles. If our opinion is other than unqualified, we will fully discuss the reasons with you in advance. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. runhard L..�../ Lr. LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 3 You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the City's or component unit's management, employees who have significant roles in internal control and others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the City or component units which have been received in communications from employees, former employees, regulators or others. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. However, because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts, including fraud or defalcations, may exist and not be detected by us. We will advise you, however, of any matters of that nature that come to our attention. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the maintenance of adequate records and related internal control structure policies and procedures, the selection and application of accounting principles, and the safeguarding of assets. The work undertaken pursuant to this letter shall be completed according to a time schedule mutually agreed upon by the City and Lance, Soll & Lunghard, LLP. Our fees for these services will be based on the actual time spent at our standard hourly rates. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered as work progresses and are payable on presentation. Final billings would be rendered subsequent to the submission of final reports. You would be billed for the time to complete the services discussed extended at standard rates, but not to exceed the maximum fee. If unexpected circumstances arise during the course of our examination your approval will be obtained before we proceed further and incur additional costs. Mghard s LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 4 Maximum fees for the audits for the fiscal year ending June 30, 2004 are as follows: Lance, Soll & Lunghard, LLP Preparing Reports Engagement Services 2003-04 a. City of Palm Desert $ 28,080 b. Palm Desert Redevelopment Agency * 22,720 c. City of Palm Desert Golf Course Facilities 12,680 d. Single Audit 2,530 e. Gann Limit Verifications 720 f. Investment Policy Compliance Verification 2,620 Sub -total 69,350 Meals, Lodging and Transportation 9,250 Total All -Inclusive Price $ 78,600 City of Palm Desert Preparing Reports Engagement Services 2003-04 a. City of Palm Desert $ 26,580 b. Palm Desert Redevelopment Agency * 21,720 c. City of Palm Desert Golf Course Facilities 12,180 d. Single Audit 2,530 e. Gann Limit Verifications 720 f. Investment Policy Compliance Verification 2,620 Sub -total 66,350 Meals, Lodging and Transportation 9,250 Total All -Inclusive Price $ 75,600 *Includes the Palm Desert Housing Authority Lance Soll & ghard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 5 It should be noted that the amounts proposed above are based upon operations of the City and related entities as they presently stand. Should operations change substantially (creation of additional enterprise operations, substantial bonding, or substantial federal grants, etc.) then these amounts would be subject to further negotiation. Standard Hourly Rates (Auditing and Consulting Services) Partner $ 148.00 Manager 93.00 Senior auditor 70.00 Staff auditor 65.00 We appreciate the opportunity to be of service to City of Palm Desert and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, RICHARD K. KIKUCHI, CPA PARTNER LANCE, SOLL & LUNGHARD, LLP RESPONSE: This letter correctly sets forth the understanding of CITY OF PALM DESERT By: Title: Date: JOHNSTON & CO. Certified Public Accountants 21031 Ventura Boulevard, Suite 1105 Woodland Hills, California 91364 (818) 346-9800 Fax (818) 346-0609 www johnstoncpa.com August 14, 2001 To the Partners, Lance Soll Lunghard LLP We have reviewed the system of quality control for the accounting and auditing practice of Lance Soll Lunghard LLP (the firm) in effect for the year ended May 31, 2001. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (AICPA). The design of the system and compliance with it are the responsibility of the firm. Our responsibility is express an opinion on the design of the system, and the firm's compliance with the system based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the polices or procedures may deteriorate. In our opinion, the system of quality control for the auditing practice of Lance Soll Lunghard LLP in effect for the year ended May 31, 2001, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. Soil Lanc&e Lunghard LLP Certified Public Accountants March 15, 2004 Mr. Paul S. Gibson, CCMT Director of Finance/City Treasurer City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260-2578 Dear Mr. Gibson: Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional Corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C. Soll Fred J. Lunghard, Jr. 1928-1999 We are pleased to confirm our understanding of the services we are to provide for the City of Palm Desert for the fiscal year ending June 30, 2004, are as follows: 1. Perform a financial audit of the Basic Financial Statements of the City of Palm Desert that would include the following oversight and component units: • City of Palm Desert • Palm Desert Redevelopment Agency • City of Palm Desert Golf Course Facility Corporation • Palm Desert Housing Authority • Palm Desert Financing Authority We understand that we will be responsible for preparing this report. These financial statements will be included within a Comprehensive Annual Financial Report (CAFR), which will be submitted under the Government Finance Officers Association of the United States and Canada's Certificate of Achievement for Excellence in Financial Reporting program. Our audit would express an opinion as to whether the financial statements and associated notes confoiin to accounting principles generally accepted in the United States of America and these statements will be prepared in accordance with GASB 34. 2. Perform a Single Audit of all federal grants of the City utilizing generally accepted governmental auditing standards. This audit would be performed according to the requirements of OMB Circular A-133, Government Auditing Standards issued by the GAO and the AICPA Industry Audit Guide. 75 Years 19292004 of Excellence 203 N. Brea Blvd. • Suite 203 • Brea, CA 92821-4056 • (714) 672-0022 • Fax (714) 672-0331 • www.(sicpas.com ISLance Soli s Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 2 3. Perform a financial audit of the Component Unit Financial Statements of the Palm Desert Redevelopment Agency. Again, we understand that we will prepare these financial statements and our opinion would indicate adherence to generally accepted accounting principles. A separate compliance audit would be performed and an opinion issued as required by Section 33080.1 of the Health and Safety Code. This audit would be done in accordance with Guidelines for Compliance Audits of California Redevelopment Agencies of the State Controller's Office. 4. Review and prepare a report on compliance with the City of Paim Desert's Investment Policy. 5. Perform a financial audit of the City of Palm Desert Golf Course Facility Corporation and issue the Independent Auditor's Report on the General Purpose Financial Statements. We are to be responsible for this financial statement and our opinion would indicate adherence to generally accepted accounting principles. 6. Review and issue a report on the calculation of the City's Appropriations Limit (GANN), as required by Article X1IIB Section 1.5 of the California Constitution. 7. Perform a review and make recommendations on the internal control structure, which consists of the Control Environment, Accounting System and Control Procedures. This may involve the issuance of a management letter. Also, we shall make an immediate and written report of any irregularities and illegal acts or indication of illegal acts coming to our attention. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and will include tests of the accounting records of City of Palm Desert and other procedures we consider necessary to enable us to express an unqualified opinion that the financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles. If our opinion is other than unqualified, we will fully discuss the reasons with you in advance. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. Lance SoH Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Pahn Desert Engagement Letter March 15, 2004 Page 3 You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the City's or component unit's management, employees who have significant roles in internal control and others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the City or component units which have been received in communications from employees, former employees, regulators or others. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. However, because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts, including fraud or defalcations, may exist and not be detected by us. We will advise you, however, of any matters of that nature that come to our attention. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the maintenance of adequate records and related internal control structure policies and procedures, the selection and application of accounting principles, and the safeguarding of assets. The work undertaken pursuant to this letter shall be completed according to a time schedule mutually agreed upon by the City and Lance, Soll & Lunghard, LLP. Our fees for these services will be based on the actual time spent at our standard hourly rates. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered as work progresses and are payable on presentation. Final billings would be rendered subsequent to the submission of final reports. You would be billed for the time to complete the services discussed extended at standard rates, but not to exceed the maximum fee. If unexpected circumstances arise during the course of our examination your approval will be obtained before we proceed further and incur additional costs. Soll & Lunghard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 4 Maximum fees for the audits for the fiscal year ending June 30, 2004 are as follows: Lance, Soll & Lunghard, LLP Preparing Reports Engagement Services 2003-04 a. City of Palm Desert $ 28,080 b. Palm Desert Redevelopment Agency * 22,720 c. City of Palm Desert Golf Course Facilities 12,680 d. Single Audit 2,530 e. Gann Limit Verifications 720 f. Investment Policy Compliance Verification 2,620 Sub -total Meals, Lodging and Transportation Total All -Inclusive Price City of Palm Desert Preparing Reports 69,350 9,250 $ 78,600 Engagement Services 2003-04 a. City of Palm Desert $ 26,580 b. Palm Desert Redevelopment Agency * 21,720 c. City of Palm Desert Golf Course Facilities 12,180 d. Single Audit 2,530 e. Gann Limit Verifications 720 f. Investment Policy Compliance Verification 2,620 Sub -total 66,350 Meals, Lodging and Transportation 9,250 Total All -Inclusive Price $ 75,600 *Includes the Palm Desert Housing Authority MLance ghsard LLP CERTIFIED PUBLIC ACCOUNTANTS City of Palm Desert Engagement Letter March 15, 2004 Page 5 It should be noted that the amounts proposed above are based upon operations of the City and related entities as they presently stand. Should operations change substantially (creation of additional enterprise operations, substantial bonding, or substantial federal grants, etc.) then these amounts would be subject to further negotiation. Standard Hourly Rates (Auditing and Consulting Services Partner $ 148.00 Manager 93.00 Senior auditor 70.00 Staff auditor 65.00 We appreciate the opportunity to be of service to City of Palm Desert and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, RICHARD K. KIKUCHI, CPA PARTNER LANCE, SOLL & LUNGHARD, LLP RESPONSE: This letter correctly sets forth the understanding of CITY OF PALM DESERT By: Title: Date: JOHNSTON & CO. Certified Public Accountants 21031 Ventura Boulevard, Suite 1105 Woodland Hills, California 91364 (818) 346-9800 Fax (818) 346-0609 www.johnsioncpa.com August 14, 2001 To the Partners, Lance So11 Lunghard LLP We have reviewed the system of quality control for the accounting and auditing practice of Lance Soll Lunghard LLP (the firm) in effect for the year ended May 31, 2001. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (AICPA). The design of the system and compliance with it are the responsibility of the firm. Our responsibility is express an opinion on the design of the system, and the firm's compliance with the system based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the polices or procedures may deteriorate. In our opinion, the system of quality control for the auditing practice of Lance Soll Lunghard LLP in effect for the year ended May 31, 2001, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards.