HomeMy WebLinkAboutC20185 - Lance Soll & Lunghard - Audit ServicesContract No. C20185
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CITY OF PALM DESERT
FINANCE DEPARTMENT
STAFF REPORT
REQUEST: APPROVE THE EXTENSION OF THE CONTRACT WITH LANCE, SOLL &
LUNGHARD, LLP TO PERFORM AUDITING SERVICES FOR THE CITY OF
PALM DESERT, REDEVELOPMENT AGENCY AND HOUSING AUTHORITY
APPLICANT: LANCE SOLL & LUNGHARD, LLC
203 N. BREA BLVD., SUITE 203
BREA, CA 92821-4056
DATE: FEBRUARY 08, 2007
CONTENTS: ONE (1) COPY OF PROPOSED AUDITING FEES
ENGAGEMENT LETTER
Recommendation:
By Minute motion, that the City Council approve the extension of Contract No.
C20185 with Lance Soll & Lunghard, LLC to perform auditing services for the
City of Palm Desert, Redevelopment Agency and Housing Authority.
Background:
Lance, Soll & Lunghard, LLC has been providing auditing services to the City of Palm Desert for
the last five years. Their services have included auditing the City, Redevelopment Agency, the
Housing Authority's Apartment Complexes, Desert Willow and the City's Office Complex. In
addition, they have performed reviews on Waste Management, Time Warner Cable, and various
hotels on behalf of the City. Staff finds that Lance, Soll & Lunghard have a professional staff that
is knowledgeable in the accounting arena and we feel comfortable in calling them when we
have accounting questions.
We took the proposed contract extension to the Audit, Finance and Investment Committee on
January 23, 2007 and they recommended that the extension be forwarded to the City Council
for review and approval of a five-year extension.
Staff requests that the City Council approve the extension of Contract No. C20185 with Lance
Soll & Lunghard, LLC to perform auditing services for the City of Palm Desert, Redevelopment
Agency and Housing Authority.
Submitted By:
Paul S. Gibson, Director of Finance
Approved by:
Carlos L. Ortega%City Manager
CITY COUNCIL ACTION:
APPROVED v/ 4 DENIED
RECEIVED OTHER
MEETING�DATE .-g-Q'7
d�'nson,Fetaason, FTner-/-y SiQIP.Qp.1, f%%y
NOES: Minna, �/ �J
ABSENT: tkn.
ABSTAIN: Aisne,
VERIFIED BY: tfoi
Original on File withJCity Clerk's Office Original on file with
*Removed for separate consideration - then APPROVED the,RN
City Clerk's Office
recommendation, as amended, with a one-year extension of the
contract, with staff directed to bring the matter back at the
appropriate time for a discussion on further extension or
initiation of a new RFP for Auditing Services. 5-0
BY RDA
ON
VERIFIED BY
Original on file with City Clerk's Office
*'6xi BY HOUSG AUTH
ON
VERIFIED BY.
REGULAR PALM DESERT CITY COUNCIL MEETING FEBRUARY 8, 2007
CONSENT CALENDAR
L. REQUEST FOR APPROVAL of the Extension of Contract to Perform Auditing Services for
the City of Palm Desert, Palm Desert Redevelopment Agency, and Palm Desert Housing
Authority (Contract No. C20185) (Joint Consideration with the Palm Desert
Redevelopment Aency and the Palm Desert Housing Authority).
Contract No. C20185
��; , �.- • ,�T
�� ' - Brandon W.Burrows
Lance �-j��„ , .��_ _� , .��i��r��N I Donald L.Parker
i.)'_
SO" � Michael K.Chu
Lun hard David E.Hale
9 1m1 JA►� 29 PM I� 40 AProJessWnolCoryora7ion
Donald G.Slater
LLP Richard K.Kikuchi
Cern'fced Public Accountants Retired
Robert C.Lance
�v�a��a
Richard C.Soll
Fred J.Lunghard,Jr.
1921t-1999
January 24, 2007
Mr. Paui S.Gibson, CCMT
Director of Finance/Ciry Treasurer
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Dear Mr. Gibson:
We are pleased ta confirm aur understanding of the services we are to provide the City of Palm Desert for
the year ended June 30, 2007. We will audit the financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each major fund and the
aggregate remaining fund information, which collectively comprise the entitys basic financial statements,
of the City of Palm Desert as of and for the year ended June 30, 2007. If applicable, we would conduct
separate financial audits of the Component Unit Financial Statements as specfied in our agreement with
the City. Also, the document we submit to you will include the following additional information that will be
subjected to the auditing procedures applied in our audit of the financial statements:
1. ManagemenYs discussion and analysis.
2. Budgetary comparison schedules.
3. Infrastructure information under the mod�ed approach of reporting.
4. Combining and individual fund schedules presented as supplemental schedules.
If a Comprehensive Annual Financial Report (CAFR) is to be issued, the document will also include the
following additional information that will not be subject to the auditing procedures applied in our audit of
the financial statements, and for which our accountanYs report will discfaim an opinion.
1. Statistical data included in the CAFR.
2. Transmittal letter included in the CAFR.
Audit Objectives
The objective of our audit is the expression of an opinion as to whether your financial statements are fairly
presented, in all material respects, in conformity with U.S. generally accepted accounting principles and
to report on the fairness of the additional informat+on referred to in the first paragraph when considered in
relation to the financial statements taken as a whole. Our audit will be conducted in accordance with U.S.
generally accepted auditing standards and the standards for financial audits contained in Government
Auditing S`tandards, issued by the Comptroller General of the United States, and will include tests of the
accounting records of the City of Palm Desert and other procedures we consider necessary to enable us
to express such an opinion. If our opinion on the�nancial statements is other than unqual�ed,we will
75 YEARS
1929r��_////_2�004
�� G�;C�.II�'8 203 N.Brea Blvd.,Suite 203• Brea,CA 92821-4056• ('I14)672-0022• Fax(714)672-0331• www.lslcQ s.�
Contract No. C20185
Lance
Shc s
L
unghp rd
CER7IF1E0 WBL�C ACCOUNTANIS
City of Palm Desert
January 24, 2007
Page 2
fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or
are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a
report as a result of this engagement.
We will also provide a report(that does not include an opinion) on intemal control related to the financia!
statements and compliance with laws, regulations and the provisions of contracts or grant agreements,
noncompliance with which could have a material effect on the financial statements as required by
Government Auditing Standards. This report will include a statement that the report is intended solely
for the information and use of the audit committee, management and specfic legislative or regulatory
bodies and is not intended to be and should not be used by anyone other than these specifled parties.
Management Responstbilkies
Management is responsible for establishing and maintaining intemal control and for compfiance with laws,
regula�ons, contracts and agreements. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and re{ated costs of the controls. The
objectives of internal control are to provide management with reasonable, but not absolute, assurance
that assets are safeguarded against loss from unauthorized use or disposfion, that transacctions are
executed in accordance with managemenYs authorizations and recorded properly to permit the
preparabon of financial statements in accordance with generally accepted accounting principles.
Management is responsible for making all financial records and related information available to us. We
understand that you will provide us with such 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 principfes and their application and will advise you in the preparation of your financial
statements, but the responsibility for the financial statements remains with you. As part of our
engagement, we may propose standard, adjusting or correcting joumal entries to your financial
statements. You are responsible for reviewing the entries and understanding the nature of any proposed
entries and the impact they have on the financial statements. That responsibility includes the
establishment and maintenance of adequate records and effective internal control over financial reporting,
the selection and application of accoun6ng principles and the safeguarding of assets. Management is
responsible for adjusting the financial statements to correct material misstatements and for confir►ning to
us in the representation letter that the effects of any uncorrected misstatements aggregated by us during
the current engagement and pertaining to the latest period presented are immaterial, both individually and
in the aggregate, to the financial statements taken as a whole.
You are responsibie for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud affecfing the govemment involving (a)
management, (b) employees who have significant roles in intemal control, and (c) others where the fraud
could have a material sffect on the financial statements. You are also responsible for informing us of your
knowledge of any allegations of fraud or suspected ftaud affecting the govemment received in
communications from empbyees, former employees, grantors, regulators or others. In addfion, you are
responsible for identifying and ensuring that the entity complies with applicable laws and regulations.
Contract No. C20185
Lance
Sd1 s
L
LLP
CER71f/fD OUBL/C ACCOUNTANTS
Ciry of Palm Desert
January 24, 2007
Page 3
Audit Procedures-Generaf
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit will invoNe judgment about the number of transactions to be
examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than
absolute assurance about whether the financial statements are free of material misstatement, whether
from errors,fraudulent financial reporting, misappropria6on of assets or violations of laws or govemmental
regulations that are attributable to the entitty or to acts by management or employees acting on behaff of
the entity. Because an audit is designed to p�ovide reasonable, but not absolute assurance and because
we will not pertorm a detailed examina6on of all transactions, there is a risk that material misstatements
may exist and not be detected by us. In addition, an audit is not designed to detect immaterial
misstatements or violations of laws or govemmental regulations that do not have a direct and material
effect on the financial statements. However, we wilf inform you of any material errors that come to our
attention, and we will inform you of any fraudulent financiaf reporting or misappropriation of assets that
comes to our attention. We will also inform you of any violations of laws or govemmental regulations that
come to our attention, unless clearly inconsequential. 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.
Our procedures wi11 inc{ude tests of documentary evidence supporting the transacfions 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 f�om your attomeys as part of the
engagement, and they may bill you for responding to this inquiry.At the conclusion of our audit, we will
also require certain written representations from you about the financial statements and related matters.
Identifying and ensuring that the City of Palm Desert complies with faws, regulations, conVacts and
agreements is the responsibility of management. As part of obtaining reasonable assurance about
whether the financial statements are free of material misstatement, we will perform tests of the City of
Palm Desert's compliance with applicable laws and regulations and the provisions of contracts and
agreements. However, the objective of our audit will not be to provide an opinion on overall compliance
and we wi{I not express such an opinion.
Audit Procedures-Intemal Controls
In planning and performing our audit, we will consider the intemal control sufficient to plan the audit in
order to determine the nature, timing and extent of our audi6ng procedures for the purpose of expressing
our opinion on the City of Palm Desert's financial statements.
We will obtain an understand'+ng of the design of the relevant controls and whether they have been placed
in operation, and we will assess control risk. Tests of controls may be perfortned to test the effectiveness
of certain controls that we consider relevant to preventing and detecting errors and fraud that are material
to the financial statements and to preventing and detecting misstatements resuldng from illegal acts and
other noncompliance matters that have a direct and material effect on the financial statements. Tests of
controls are required only if contro{risk is assessed below the maximum level. Our tests, if perfoRned,will
be less in scope than would be necessary to render an opinion on internal control and, accordingly, no
opinion will be expressed in our report on internal control issued pursuant to Government Auditing
Standards.
Contract No. C20185
� �Lance
��� L`��I,I'LSdI s
L�J���
CERT/fIED iUBUC ACCq/NTANTS
City of Palm Desert
January 24, 2007
Page 4
An audit is not designed to provide assurance on intemal control or to identify reportable conditions.
However, we will inform the goveming body or audit committee of any matters involving intemal control
and its opera�on that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to sign�cant deficiencies in the design or operation of the intemal control that, in our
judgment, coutd adversely affect the entity's ability to record, process, summarize and report financial
data consistent with the assertions of management in the financial statements. We will also inform you of
any nonreportable conditions or other matters involving intemal control, if any, as required by
Government Auditing Standards.
Audit Administration, Fees, and Other
If applicable, we would perform all other services as specified in our agreement with the City. If the
addfional services to be provided is considered nonattest (nonaudit) services, management is
responsible for making all management decisions and pertorm all management functions; designate a
competent employee, preferably within senior management, to oversee the services; evaluate the
adequacy and results of the services; and establish and maintain internal controls, including monitoring
ongoing activities.
The audit documentation for this engagement is the property of Lance, Soll & Lunghard, LLP and
constitutes confidential information. However, pursuant to authority given by law or regulation, we may be
requested to make certain audit documentation available to your City's Cognizant or Oversight Agency for
Audit or its designee, a federal agency providing direct or indirect funding, or the U.S. General Accounting
Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight
responsibilities. We will notify you of any such request. If requested, access to such audit documentation
will be provided under the supervision of Lance, Soll & Lunghard, LLP personnel. Furthermore, upon
request, we may provide copies of selected audit documenta6on to the aforementioned parties. These
parties may intend, or decide, to distribute the copies or information contained therein to others, including
other govemmental agencies.
Maximum fees for the audits for the fiscal year ending June 30, 2007 are as follows:
Lance. Soll 8�Lunahard. LLP Preaarins� Reaorts
Ens�astement Services 2006-07
a. City of Palm Desert $ 29,790
b. Palm Desert Redevelopment Agency' 24,100
c. City of Palm Desert Golf Course Facilities 13,450
d. Single Audit 2,690
e. Gann Limit Verifications 760
f. Investrnent Policy Compliance Verification 2.780
Sub-total 73,570
Meals, Lodging and Transportation 9.250
Total All-Inclusive Price $ 82.820
Contract No. C20185
�� ��Lance
L� IISdI s
11 111lL►xghard
�J L�LLP
CERIif/F0 PUBUC ACCOI/NTANIS
City of Palm Desert
January 24, 2007
Page 5
City of Palm Desert Preparing Reports
En�as�ement Services 2006-07
a. City of Palm Desert $ 28,290
b. Pa1m Desert Redevelopment Agency* 23,100
c. City of Palm Desert Goff Course Facilities 12,950
d. Single Audit 2,690
e. Gann Limit Verfications 760
f. Investment Policy Compliance Verification 2.780
Sub-total 70,570
Meals, Lodging and Transportation 9.250
Total All-Inclusive Price � 79.820
"Includes the Palm DeseR Housing Autliority
Standard Hourlv Rates(Auditing and Consulting Services)
Partner $162.00
Manager 101.00
Senior auditor 76.00
Staff auditor 71.00
Our invoices for these fees will be rendered as work progresses and are payable on presentation. In
accordance with our firm policies, work may be suspended if your account becomes 90 days or more
overdue and may not be resumed until your account is paid in fuli.
Government Auditing Standards require that we provide you with a copy of our most recent extemal
peer review report and any letter of comment, and any subsequent peer review reports and letters of
comment received during the period of the contract Our 2004 peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City of Palm Desert and believe this letter accurately
summarizes the significant terms of our engagement. lf you have any questions, please let us know. If
you agree with the terms of our engagement as described in this letter, please sign the enclosed copy
and retum it to us.
Very truly yours,
��, ,��ofl �� , ���
����
Lance, Soll & Lunghard, LLP
Contract No. C20185
Lance
Soll s
Lunghard
LLP
CER7iFlEO PUBLIC ACCIX/NTANT$
City of Palm Desert
January 24, 2007
Page 6
RESPONSE:
This letter correctly sets forth the understanding of the City of Palm Desert
By:
Title:
Date:
� , Brandon W.Burrows
" Lance Donald L.Parker
SO�� & Michael K.Chu
David E.Hale
Lu n g h a rd A Projessbiwl CorporWlon
LLP Donald G.Slater
Richard K.Kikuchi
Certified Public Accountants Retired
Robert C.L.ance
1914199/
Richard C.Soll
Fred J.Lunghard,Jr.
���� ,
December 11, 2006
Mr. Paul S. Gibson, CCMT
Finance DirectorfTreas�rer
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260-2578
Dear Mr. Gibson:
As you are awaze, our contract with the City of Palm Desert for auditing services expired
with the fiscal year ending June 3Q, 2006. Over the past five years, we have provided the City
with auditing and accounting services which:
• Produced an award winning CAFR meeting all the requirements necessary to
receive the Government Finance Of6cer's and California Society of Municipal
Officer's Awazd for Excellence in Financial Reporting.
� Provided assistance and information to City staff when required and helpful
recommendations to management.
We have made it an absolute priority to provide the City of Palm Desert with the best
service available and we would like to continue to provide tlus level of service to the City. Since
we are familiaz with your accounting system and the City,we will be able to perform an efficient �
audit,which will benefit the City with continuity of firm personnel and minimal disruption to
City staff during the audit. In addition,we have structured staff rotation on your engagement so
that the City will always receive a fresh look at its system and records.
Towards this end,we would like to propose a new five year contract to provide
continuous and undisrupted auditing services to the City of Palm Desert. The en�a�ement team
for your audit will continue to be headed bv mvself Shirsh Patel as manaeer and Kellv C�lver
will be assigned as the senior auditor. Also, as a part of our services, Lance, Soll &Lunghazd,
LLP will continue to provide extensive GASB assistance to the City of Palm Desert throughout
the year.
75 YEARS
1929 2004
�� F,1.'!'��8 203 N.Brea Blvd.,Suite 2D3 •Brea,CA 92821-4056 •(714)672-0022 •Fax(714)672-0331 •www.lsle�.com
Mr. Paul S. Gibson,CCMT
City of Palm Desert
Audit Proposal ,
December 11,2406
Page 2
Please see Attachment A for our proposed fees for the next five years. As you will note,
we have kept the first two vears constant and have then applied a modest price increase. As in
the original contract,I have included the option for either the City or Lance, Soll &Lunghard
preparing the financial statements.
The services to be performed, fee structure and billing methods would remain unchanged
from our contract dated June 14,2002. This would include the termination section that provides
for teimination of the agreement upon 30 days written notice from either party.
Again,Lance, Soll &Lunghard, LLP looks forward to continue to provide quality
services to the City of Palm Desert. Please sign below to acl�owledge your acceptance of this
agreement and retum to my attention. Should you or any other representative of the City of Palm
Desert have additional questions regarding this agreement,please do not hesitate to contact me at
(714)672-0022.
Very truly yours,
.
CHARD K. KIKUCHI, CPA
PARTNER
Paul S. Gibson, Fin Dir/Treas
Date
Attachment A
Proposed Auditin�Fees •
The auditing fees proposed below are based upon the prior audits performed by
Lance, Soll & Lunghard, LLP of the financial statements of the various entities
comprising the City of Palm Desert. Should operations of the entities change
significantly, from those present at June 30, 2006, then the fees shown herein would be
subject to further negotiation. Additionally, the fee.s are based upon the assumption that
accounting functions would be performed and minimal adjustments would be required.
To the extent that this is not the case, the fees shown would be subject to fiuther
negotiation. We do not charge extra for meeting with the governing boards of the
respective entities or for the preparation of comfort or other letters to underwriters for the
inclusion of our report in official statements.
For purposes of this proposal, Lance, Soll & Lunghard, LLP ce�tifies that the
individual signing below is a general partner in the partnership and empowered to submit
this bid. Addidonally, this individual is authorized to execute a contract with the City of
Palm Desert for the services specified in this proposal.
Lance. Soll & Lnnghard.LLP Preparing Reports
EnQasement Service 2006-07 2007-08 2008-09 2009-10 2010-11
a. City of Palm Desert $29,790 $29,790 $30,684 $31,604 $32,552
b. Palm Desert Redevelopment Agency* 24,100 24,100 24,823 25,568 26,335
c. City of Palm Desert Golf Course
Facilities 13,450 13,450 13,854 14,269 14,697
d. Single Audit 2,690 2,690 2,771 2,854 2,939
e. Gann Limit Verifications 760 760 783 806 830
f. Investment Policy Compliance
Verification 2,780 2.780 2,863 2.949 3,038
Total 73 570 73 570 75 ?77 78 O50 80 392
Meals, Lodging and Transportation 9 250 9 250 9 S00 9 500 9 500
Total All-Inclusive Price 82.820 �$�.$Z,� ��.�Z �� $8�
*Includes the Palm Desert Housing Authority
.
�� ,:
Citv of Palm Desert Prenaring Reports
EngaQement Service 2006-07 2007-08 2008-09 2009-10 2010-11
a. City of Palm Desert $28,290 $28,290 $29,139 $30,013 $30,913
b. Palm Desert Redevelopment Agency* 23,100 23,100 23,793 24,507 25,242
c. City of Palm Desert Golf Course '
Facilities 12,950 12,950 13,339 13,739 14,151 ,
d. Single Audit 2,690 2,690 2,771 2,854 2,939
e. Gann Limit Verifications 760 760 783 806 830
f. Investment Policy Compliance
Verification 2.780 2.780 2,863 2,949 3.038
Total 70 570 70 570 72 687 74 868 77 114
Meals, Lodging and Transportation 9 250 9 250 9 500 9 500 9 500
Total All-Inclusive Price $79_820 $79_820 $8� $8� $8�
*Includes the Palm Desert Housing Authority
Hourlv Rates For Additional Services
Should the City or Agency require additional services above and beyond the
scope of this proposal, the hourly rates Lance, Soll & Lunghard, LLP utilizes will be
based on the following:
Partner $162/hour
Manager $101/hour
Senior Auditor $76/hour
Staff Auditor $71/hour
Again, we appreciate the opportunity to submit this proposal for the City of Palm
Desert and its related entities.
.
RICHARD K. KIKLTCHI, CPA
PARTNER