The URL can be used to link to this page

AC 05-31-2023 Searchable PacketCITY OF CUPERTINO AUDIT COMMITTEE AGENDA 10300 Torre Avenue, City Hall Conference Room A / Teleconference Wednesday, May 31, 2023 4:00 PM Special Meeting IN PERSON AND TELECONFERENCE / PUBLIC PARTICIPATION INFORMATION Members of the public wishing comment on an item on the agenda may do so in the following ways: 1) Appear in person at Cupertino City Hall. Members of the audience who address the Committee must come to the lectern/microphone, and are requested to complete a Speaker Card and identify themselves. Completion of Speaker Cards and identifying yourself is voluntary and not required to attend the meeting or provide comments. 2) E-mail comments by 9:00 a.m. on Wednesday, May 31, 2023 to the Audit Committee at AuditCommittee@cupertino.org. These e-mail comments will be received by the Audit Committee members before the meeting and posted to the City’s website after the meeting. 3) Teleconferencing Instructions Members of the public may observe the teleconference meeting or provide oral public comments as follows: Oral public comments will be accepted during the teleconference meeting. Comments may be made during “oral communications” for matters not on the agenda, and during the public comment period for each agenda item . To address the Committee, click on the link below to register in advance and access the meeting: Online Register in advance for this webinar: https://cityofcupertino.zoom.us/webinar/register/WN_Y3nC49CRRw6pVy4sNxA_OA Phone Page 1 1 Audit Committee Agenda May 31, 2023 Dial: 669-900-6833 and enter Webinar ID: 959 0022 1725 (Type *9 to raise hand to speak, *6 to unmute yourself). Unregistered participants will be called on by the last four digits of their phone number. Or an H.323/SIP room system: H.323: 162.255.37.11 (US West) Meeting ID: 959 0022 1725 SIP: 95900221725@zoomcrc.com After registering, you will receive a confirmation email containing information about joining the webinar. Please read the following instructions carefully: 1. You can directly download the teleconference software or connect to the meeting in your internet browser. If you are using your browser, make sure you are using a current and up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers, including Internet Explorer . 2. You will be asked to enter an email address and a name, followed by an email with instructions on how to connect to the meeting. Your email address will not be disclosed to the public. If you wish to make an oral public comment but do not wish to provide your name, you may enter “Cupertino Resident” or similar designation. 3. When the Chair calls for the item on which you wish to speak, click on “raise hand.” Speakers will be notified shortly before they are called to speak. 4. When called, please limit your remarks to the time allotted and the specific agenda topic . 5. Members of the public that wish to share a document must email AuditCommittee@cupertino.org prior to speaking. ROLL CALL ORDERS OF THE DAY POSTPONEMENTS ORAL COMMUNICATIONS This portion of the meeting is reserved for persons wishing to address the Committee on any matter within the jurisdiction of the Committee and not on the agenda. Speakers are limited to three (3) minutes. In most cases, State law will prohibit the Commission from making any decisions with respect Page 2 2 Audit Committee Agenda May 31, 2023 to a matter not on the agenda. NEW BUSINESS 1.Subject: ACTION ITEM External Auditor Selection Subcommittee Report on City of Cupertino Auditor Selection Recommended Action: Accept subcommittee recommendation and forward to City Council Staff Report A - Cupertino Professional Auditing Services RFP 2023 B – RFP Distribution List C - The Pun Group - Engagement Team Roles and Experience 2.Subject: ACTION ITEM Consider retaining the City’s Internal Auditor, Moss Adam, LLP, for an additional three-year term and forward to City Council for approval . Recommended Action: Consider retaining the City’s Internal Auditor, Moss Adam, LLP, for an additional three-year term and forward to City Council for approval . Staff report STAFF AND COMMITTEE REPORTS COMMITTEEMEMBER ATTENDANCE AT UPCOMING MEETINGS AND EVENTS FUTURE AGENDA SETTING ADJOURNMENT In compliance with the Americans with Disabilities Act (ADA), anyone who is planning to attend this meeting who is visually or hearing impaired or has any disability that needs special assistance should call the City Clerk's Office at 408-777-3223, at least 6 hours in advance of the meeting to arrange for assistance. In addition, upon request, in advance, by a person with a disability, meeting agendas and writings distributed for the meeting that are public records will be made available in the appropriate alternative format. Any writings or documents provided to a majority of the members after publication of the agenda will be made available for public inspection. Please contact the City Clerk’s Office in City Hall located at 10300 Torre Avenue, Cupertino, California 95014, during normal business hours. IMPORTANT NOTICE: Please be advised that pursuant to Cupertino Municipal Code section 2.08.100 written communications sent to the Cupertino City Council, Commissioners or City staff concerning a matter on the agenda are included as supplemental material to the agendized item. These written communications are accessible to the public through the City’s website and kept in packet archives. Do not include any personal or private information in written communications to the City that you do not wish to make public, as written communications are considered public records and will Page 3 3 Audit Committee Agenda May 31, 2023 be made publicly available on the City website. Members of the public are entitled to address the members concerning any item that is described in the notice or agenda for this meeting, before or during consideration of that item. If you wish to address the members on any other item not on the agenda, you may do so during the public comment . Page 4 4 CITY OF CUPERTINO Agenda Item 23-12382 Agenda Date: 5/31/2023 Agenda #: 1. ACTION ITEM Subject:External Auditor Selection Subcommittee Report on City of Cupertino Auditor Selection Accept subcommittee recommendation and forward to City Council CITY OF CUPERTINO Printed on 5/30/2023Page 1 of 1 powered by Legistar™5 AUDIT COMMITTEE STAFF REPORT Meeting: May 31, 2023 Subject External Auditor Selection Subcommittee Report on City of Cupertino Auditor Selection Recommended Action Accept subcommittee recommendation and forward to City Council Reasons for Recommendation Background The City and Crowe, LLP recently completed a five-year professional auditing services contract with an additional one-year extension, spanning fiscal years 2016-17 to 2021-22. The Sarbanes-Oxley Act requires audit partners, individuals responsible for the audit engagement and its performance, to rotate in a five-year cycle; providing a “fresh look” by a newly involved partner might turn up financial reporting issues that the prior partner had ignored or missed. Although the cycle rotation does not require changing audit firms, some experts argue that changing firms allows for: an auditor’s advice to remain unbiased; enhanced independence, objectivity, and professional skepticism; and an opportunity to tailor new engagements based on the client's changing needs. Following industry best practices, the City prepared a Request for Proposal (RFP) for Auditor Services (Attachment A). The City also established the External Auditor Selection Subcommittee (Subcommittee), comprised of the Audit Committee Members, Sheila Mohan and J.R. Fruen, and City staff. On February 3, 2023, the RFP was distributed to the firms included on the distribution list (Attachment B). As a result of the RFP, City staff received seven proposals by the prescribed March 3 deadline. The seven proposals were received from the following partners and firms:  Ahmed Badawi, CPA, Partner of Badawi & Associates  Jeff Jensen, CPA, Partner of Crowe, LLP  Nathan Edelman, CPA, Partner of Eide Bailly, LLP  Benjamin Lau, CPA, CGMA, Partner of Macias, Gini, and O’Connell, LLP  Vikki C. Rodriguez, CPA, Partner of Maze and Associates  Craig A. Hartzheim, CPA, Partner of Moss, Levy & Hartzheim, LLP 6  Kenneth H. Pun, CPA, CGMA, Partner of The Pun Group, LLP The Subcommittee evaluated the proposals for technical qualifications (expertise, experience, and audit approach), using a point formula to score each proposal against the criteria outlined in the RFP. The Subcommittee agreed to interview the top three firms: Crowe, LLP, third-ranked; Maze and Associates, second-ranked; and The Pun Group, first-ranked. Interviews were conducted the week of May 8. Firm Selection Considering the proposal evaluations and interviews, the Subcommittee recommends awarding the professional auditing services contract to The Pun Group. Although the three firms offer similar services, the recommendation gives heavy weight to receiving a fresh look at the City’s financial reports and processes. Additional factors considered with the recommendation of The Pun Group include the use of artificial intelligence to enhance (not as a replacement) sample selection and a workflow management software solution that would allow for City staff to easily track the progress of each audit. The Pun Group has a solid track record in providing services to local municipalities and provided a highly qualified engagement team (Attachment C) to provide the City with the required governmental auditing experience and technical capabilities to complete timely and accurate audits and reports successfully. Due to the proprietary information provided in all proposals submitted, proposals cannot accompany this report. If Audit Committee members would like to review the proposals and ask questions, please schedule a meeting with the Administrative Services Director to obtain more background on the Subcommittee’s selection process. Sustainability Impact No sustainability impact. Fiscal Impact Funds for this agreement include Professional Auditing Services for Fiscal Years 2022-23 to 2024-25, with optional two one-year extensions. Fiscal Year Amount FY 2022-23 133,500 FY 2023-24 140,175 FY 2024-25 147,184 Total 420,859 Fiscal Year (Optional) Amount FY 2025-26 154,543 FY 2026-27 162,270 7 California Environmental Quality Act No California Environmental Quality Act impact. _____________________________________ Prepared by: Jonathan Orozco, Finance Manager Reviewed by: Kristina Alfaro, Administrative Services Director Approved for Submission by: Matt Morley, Assistant City Manager Attachments: A – City of Cupertino Professional Auditing Services RFP Starting FY 2022-23 B – RFP Distribution List C – The Pun Group – Engagement Team Roles and Experience Summaries 8 1 CITY OF CUPERTINO REQUEST FOR PROPOSAL FOR PROFESSIONAL AUDITING SERVICES RFP Issue Date: February 3, 2023 Submittal Due Date: March 3, 2023 at 5:00pm OFFICE OF THE DIRECTOR OF ADMINISTRATIVE SERVICES CITY HALL • 10300 TORRE AVENUE • CUPERTINO, CA 95014‐3255 TELEPHONE: (408) 777‐3356 • FAX: 408‐777‐3109 Attachment A 9 2 REQUEST FOR PROPOSAL CITY OF CUPERTINO TABLE OF CONTENTS 1. INTRODUCTION ............................................................................................................................................................... 3 2. BACKGROUND .................................................................................................................................................................. 3 3. PURPOSE OF THIS REQUEST FOR PROPOSAL .......................................................................................................... 6 4. SCOPE OF SERVICES ........................................................................................................................................................ 6 5. COST PROPOSAL .............................................................................................................................................................. 6 6. RFP SCHEDULE ................................................................................................................................................................. 7 7. SUBMITTAL REQUIREMENTS ....................................................................................................................................... 8 8. CONTRACT REQUIREMENTS ...................................................................................................................................... 13 9. EVALUATION CRITERIA .............................................................................................................................................. 13 10. SELECTION PROCESS .................................................................................................................................................... 14 11. ATTACHMENTS .............................................................................................................................................................. 15 ATTACHMENT A: Scope of Work and Technical Specifications ............................................................................. 16 ATTACHMENT B: Cost Proposal .................................................................................................................................. 21 ATTACHMENT C: Sample of Cupertino Professional Services Contract................................................................ 23 ATTACHMENT D: Insurance Requirements ............................................................................................................... 32 City of Cupertino RFP for Professional Auditing Services 10 3 1. INTRODUCTION The City is requesting proposals from certain qualified certified public accounting firms to audit its financial statements for the fiscal year ending June 30, 2023, and the two subsequent fiscal years thereafter, with an option to extend the contract for two one‐year periods, not to exceed a total of five fiscal years. 2. BACKGROUND City Profile The City of Cupertino was incorporated in 1955 and is in Santa Clara County, approximately 32 miles south of San Francisco International Airport and directly west of the City of San Jose on the western edge of the Santa Clara Valley. The city covers an area of 13 square miles and has a population of approximately 66,274. Cupertino is a General Law City and operates under the Council‐Manager form of government. The City Council has five members elected at large to overlapping, four‐year terms. The council members elect the Mayor and Vice Mayor for a one‐year term. The City’s departments include the City Manager’s Office, City Attorney’s Office, Administrative Services, Innovation & Technology, Community Development, Parks & Recreation, and Public Works. Police service is provided by a contract with the Santa Clara County Sheriff’s Office, and fire service is provided by a separate taxing entity, the Santa Clara County Central Fire Protection District. Water service within the City is provided by Santa Clara Valley Water District and the San Jose Water Company, and sewer service is provided by the Cupertino Sanitary District. The City’s fiscal year begins on July 1 and ends on June 30. The City’s FY 2022‐23 Adopted Budget is $130,587,325 for all funds and $95,167,779 for the General Fund. The City has 225 full‐time equivalent employees. The Cupertino Public Facilities Corporation is a blended component unit of the city. Its main function is to finance debt as a nonprofit corporation. In September 2020, the Corporation refunded its outstanding $22 million in Certificates of Participation. Information about the city's budget, enforceable obligations schedule, and state controller report can be found on the city's website at cupertino.org/budget. The city's financial reports are submitted to the Government Finance Officers Association for review by the Certificate of Achievement for Excellence in Financial Reporting program. Cupertino has received this award every year since 1998. 11 4 Fund Structure The City of Cupertino uses the following fund types in its financial reporting: Fund Type Individual Funds General Fund 1 Special Revenue Funds 8 Debt Service Funds 1 Capital Project Funds 3 Enterprise Funds 4 Internal Service Funds 7 Budgetary Basis of Accounting The City of Cupertino prepares an annual budget on a basis consistent with generally accepted accounting principles. Federal and State Financial Assistance Typical major Single Audit programs in recent years were Community Development Block Grant (CDBG), Coronavirus Relief Fund, and Coronavirus State and Local Fiscal Recovery Funds (SLFRF). The city usually receives Federal Highway Administration grants when available. Pension and OPEB Plans The City of Cupertino uses California Public Employees’ Retirement System (CalPERS) for its defined benefit pension plan. The City has a Section 115 Pension Trust to reduce pension cost volatility and a Section 115 OPEB Trust to pre‐fund its OPEB obligations. The Section 115 Trusts are administered by Public Agency Retirement Services. Component Units The Public Facilities Corporation is a blended component unit that is included in the City of Cupertino’s financial statements. Finance Operations The Administrative Services Department is headed by Kristina Alfaro, Director of Administrative Services. The department includes the Administration, Finance, and Human Resources divisions. Finance consists of 9.95 full‐time‐equivalent positions, which are shown by program below: Program Number of Positions Accounting 6.85 Business Licenses 1.10 Budget 1.00 Purchasing 1.00 12 5 Total 9.95 Computer Systems The City’s enterprise resource planning (ERP) system is Tyler Technologies’ New World, which was implemented in December 2014. The City is currently in the process of identifying a new ERP to replace New World. In addition, the City uses Accela for planning and building permits and business licenses. The City uses Active Network for Parks and Recreation activity and event registrations. Financial transactions in Accela and Active Network are imported into the New World general ledger. Internal Audit In FY 2019‐20, the City established an Internal Audit function to promote efficient, effective, safe, and transparent City operations. Moss Adams LLP serves as the City’s Internal Auditor. The City’s internal audit reports are available at cupertino.org/internal‐audit. Current External Auditor The City’s current external auditor, Crowe LLP, has audited the City’s financial statements for the last six years since FY 2016‐17. Availability of Prior Year Reports and Working Papers The City’s prior audited financial statements are available on the City’s website at cupertino.org/budget. The City will use its best efforts to make prior audit reports and supporting working papers available to Proposers to aid their response to this RFP. Statements and Schedules to be Prepared by the City City staff currently produces schedules for most balance sheet accounts at year‐end (accounts receivable listing, accounts payable listing, compensated absences listing, bank reconciliations, schedule of fixed assets, etc.). The auditor is expected to produce any other necessary schedules. City staff will help obtain any necessary information. Finance Department Contact and Assistance The Finance Department staff and responsible management personnel will be available during the audit to assist the firm by providing information, documentation, and explanations. The Finance Manager, or designee, will be the liaison between the audit firm and the City's accounting staff. Work Area and Equipment When the auditor is required to be on‐site at the City’s offices, the City will provide the auditor with reasonable work space, desks, and chairs. The auditor will also have access to the internet, copying, fax, and phones. Date Audits May Commence 13 6 Work on audits contemplated under this agreement may commence as early as June 1, 2022. Schedule of Fieldwork for FY 2022-23 audit Each of the following should be completed by the auditor: • Interim Fieldwork: Interim fieldwork should commence in August. • Detailed Audit Plan: A detailed audit plan should be provided, including a list of all schedules to be prepared by the City by the end of interim fieldwork. The auditors should coordinate with the City’s Audit Committee to obtain the Committee’s input for the detailed audit plan. • Year-end Fieldwork: Year‐end fieldwork should commence in September. • Draft Reports: Draft reports should be available by January 12, 2024. • Final Reports: Final reports should be available by February 3, 2024. 3. PURPOSE OF THIS REQUEST FOR PROPOSAL The City of Cupertino is requesting proposals from certain qualified certified public accounting firms to audit its financial statements for the fiscal year ending June 30, 2023 and the two subsequent fiscal years thereafter, with an option to extend the contract for two one‐ year periods, not to exceed a total of five fiscal years. These audits are to be performed in accordance with the provisions contained in this request for proposals. 4. SCOPE OF SERVICES The scope of work is provided in Attachment A. The proposal shall address how the Proposer will perform and deliver the indicated services. Work tasks shall include, but are not necessarily limited to those items listed in Attachment A. 5. COST PROPOSAL The City intends to execute a three‐year contract, with an option of two one‐year renewals. Any such renewal after the first three years shall be accomplished by the City providing a written notice of renewal to the Contractor at least 30 days prior to the expiration of the term. The total contract term is not to exceed a maximum of five fiscal years, subject to: • Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Cupertino. • A total maximum price for the five‐year engagement. 14 7 Total Maximum Price The cost proposal should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all‐inclusive maximum price shall contain all direct and indirect costs, including all out‐of‐pocket expenses. The City of Cupertino will not be responsible for expenses incurred in preparing and submitting the technical proposal and cost proposal. Such costs should not be included in the proposal. Format of Cost Proposal The cost proposal should be submitted in a format consistent with Attachment B. Contents of Cost Proposal The cost proposal must include the following information: I. Cost of Services: A total all‐inclusive maximum price for each of the first three years of the engagement and the optional two additional years. The costs should be broken out by year and by the service provided. II. Cost of Services Supporting Detail: Detailed information to support the amounts in the “Cost of Services,” including hourly rates and total hours by staff class, as well as out‐of‐pocket expenses, if applicable, for each aspect of the proposal. III. Rates for Additional Professional Services: If the City requests the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between the City and the firm. Any additional work agreed to between the City and the firm shall be performed at the same rates set forth in the Schedule of Fees for Additional Professional Services in the cost proposal. IV. Firm Information and Certification: Name of firm, contact name, and certification that the person signing the proposal is authorized to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Cupertino. Manner of Payment Progress payments will be made on the basis of hours of work completed during the course of the engagement and out‐of‐pocket expenses incurred in accordance with the firm's cost proposal. Interim billing shall cover a period of not less than a calendar month. No more than 90% of the total fee may be billed prior to the presentation of final audit reports and financial statements. Costs must be detailed on the invoices. 6. RFP SCHEDULE 15 8 Listed below is the RFP schedule. These dates are subject to change. Approximate Dates Task February 3, 2023 Issuance of Request for Proposal February 17, 2023 Deadline to submit RFP questions March 3, 2023 by 5:00 p.m. Deadline to submit proposal March 20‐24, 2023 Interview with finalists March 31, 2023 Notification of selected firm April 24, 2023 Audit Committee approval May 16, 2023 City Council approval and Contract Execution 7. SUBMITTAL REQUIREMENTS Pre‐proposal questions or requests for clarification shall be sent via email to Thomas Leung at ThomasL@cupertino.org and must be submitted by 5:00 p.m. on Friday, February 17, 2023. Email title should include the words “Audit Services RFP.” Questions or clarifications not sent to ThomasL@cupertino.org nor by the due date and time, will not receive a response. Any response provided by the City shall be posted at https://apps.cupertino.org/bidmanagement/index.aspx. Proposals are due by Friday, March 3, 2023, by 5:00 p.m. Late submittals will not be considered. Proposals must be in PDF format and are to be uploaded to the City’s bid management platform at https://apps.cupertino.org/bidmanagement/index.aspx. The proposal shall be precise and not include any unnecessary promotional material. The City prefers a quality submittal over quantity. Succinct, responsive proposals are welcomed. Submittals will not be returned. The proposal shall include the submittal requirement information in addition to the cost proposal to be deemed qualified for selection. If the requested information is not provided, the submittal shall be considered non‐responsive. General Requirements Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposal unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the City and the firm selected. The City reserves the right to reject any or all responses received as a result of this solicitation; to extend the submission due date for; to modify, amend, reissue or rewrite this document; 16 9 and to procure any or all services by other means. The City will not be liable for any costs incurred for the preparation of proposals or for developing and carrying out interviews, if needed. Submission of a proposal indicates acceptance by the Contractor of the conditions contained in this RFP. Materials submitted by respondents are subject to public inspection under the California Public Records Act (Government Code Sec. 6250 et seq.), unless exempt. All submittals shall include a Technical Proposal and a Cost Proposal. Format of Technical Proposal The format of the Technical Proposal shall be as follows: I. Title Page Show the RFP subject, name of the audit firm, local address, telephone number, name and title and email address of contact person, and date of submission. II. Table of Contents Include a clear and complete identification of the materials submitted by section and page number. Cross‐referencing to section and page number in the RFP would be helpful. III. Transmittal Letter Include an original, signed transmittal letter that contains the following. • General introduction and briefly stating the Proposer’s understanding of the audit services to be performed; • A positive commitment to perform the service within the time period specified; • The name(s) of the person(s) authorized to represent the Proposer, title, address, and telephone number. • Statement which indicates an understanding of the Scope of Work as presented in this specification and confirmation that all terms and conditions of the RFP are understood and acknowledged by the undersigned. • Statement that the Proposer accepts the City’s service contract, including specifically the City’s Indemnification requirements and insurance coverage requirements, without modification. Proposers failing to provide this statement may be considered non‐responsive and eliminated from further consideration. IV. Technical Proposal The technical proposal should follow the order set forth in the Contents of Technical Proposal of this request for proposal. 17 10 Contents of Technical Proposal The purpose of the Technical Proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of the City in conformity with the requirements of this RFP. As such, the substance of proposals will carry more weight than their form or manner of presentation. The Technical Proposal should demonstrate the qualifications of the firm and staff to be assigned to this engagement. It should also specify an audit approach that will meet the RFP requirements. The Technical Proposal should address all the points in the order outlined in the RFPs (excluding any cost information which should only be included in the Cost Proposal section). The proposal should be prepared simply and economically, providing a straightforward, concise description of the Proposer’s capabilities to satisfy the requirements of the RFP. While additional data may be presented, the areas detailed below must be included. They represent the criteria against which the proposal will be evaluated. I. License to Practice in California An affirmative statement should be included verifying that the firm and all assigned key professional staff are properly licensed to practice in California. II. Independence The firm should provide an affirmative statement that it is independent of the City of Cupertino as defined by auditing standards generally accepted in the United States of America and the General Accounting Office’s Governmental Auditing Standards. III. Insurance The insurance requirements are contained in Attachment D. The selected firm will maintain the minimum insurance requirements during the entire term of their engagement. To confirm this requirement, within 15 days from the execution of the Agreement, the selected firm shall furnish the City satisfactory evidence of the insurance requirement and evidence that each carrier is required to give at least 30 days prior written notice of the cancellation of any policy during the effective period of the Agreement. The City shall be named as an additional named insured under the selected firm’s policies as noted in the Agreement. IV. Firm Qualifications and Experience • To qualify, the firm must have extensive experience in audits of local governments as well as experience with preparation of Comprehensive Financial Statements in GASB 34 format. The Proposer should state the size of the firm, the size of the firm’s governmental audit staff, the location of the office from which the work on this engagement is to be performed, the number and nature of the professional staff to be employed in this engagement on a full‐time basis and the number and nature of the staff to be so employed on a 18 11 part‐time basis. Consistency of staff is an important consideration. If the Proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. If the Proposer will be subcontracting any portion of the audit to another individual or firm, the proposal must include a list of all subcontractors to be used. No substitutions of subcontractors may be made without prior written consent of the City. • The Proposer is also required to submit a copy of the report on its most recent external quality control (peer) review, with a statement whether that quality control review included a review of specific government engagements (required by Government Audit Standards (1994)). • The Proposer shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the Proposer shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations. V. Partner, Supervisory and Staff Qualifications and Experience • Identify the principal supervisory and management staff, including engagement partners, managers, and other supervisors and specialists, who would be assigned to the engagement and indicate whether each such person is licensed to practice as a Certified Public Accountant in California. Also, provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. • Provide as much information as possible regarding the number, qualifications, experience, and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. Indicate how the quality of staff will be assured over the term of the agreement. • Principal supervisory and management staff, including engagement partners, managers, other supervisors, and specialists may be changed during the course of the agreement; however, the City reserves the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the Proposer provided that replacements have substantially the same or better qualifications or experience. 19 12 VI. Similar Engagements with other Governmental Entities For the firm’s office that will be assigned responsibility for the audit, list the most significant engagements performed in the last three years that are similar to the engagement described in this RFP. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. Also, please indicate whether the audit was part of a Comprehensive Annual Comprehensive Financial Report prepared in conformance with the GASB 34 requirements. Please provide a list of not less than three client references for which services similar to those outlined in this RFP are currently being provided. For each reference listed, provide the name of the organization, the approximate gross cost of the contract, dates for which the service(s) are being provided, type of service(s) being provided and the name, address, and telephone number of the responsible person within the reference’s organization. The City reserves the right to contact any or all of the listed references regarding the audit services performed by the Proposer. VII. Specific Audit Approach The proposal should set forth a work plan, including an explanation of the audit methodology to be followed to perform the services required in Attachment A of this RFP. In developing the work plan, reference should be made to such sources of information as the City’s budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. • Proposed segmentation of the engagement • Level of staff and number of hours to be assigned to each proposed segment of the engagement • Extent of use of computer software in the engagement • Type and extent of analytical procedures to be used in the engagement • Approach to be taken to gain and document an understanding of the City’s internal control structure • Approach to be taken in determining laws and regulations that will be subject to audit test. • Approach to be taken in drawing audit samples for purposes of tests of compliance • Types of assistance expected from City staff. • Anticipated completion date of audit field work • Anticipated completion date of financial statements and notes review, audit reports, and recommendations to management 20 13 • The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific governmental engagements. • The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three years with state regulatory bodies or professional organizations, as well as any pending or settled litigation within the past three years. VIII. City Staff Hours An estimate of the number of additional City staff hours required to assist the auditors and the tasks required by City staff. Do not include time preparing correspondence, discussions with auditors, or preparing balance sheet support schedules. Include any time pulling invoices, copying, or otherwise assisting the auditors. IX. Identification of Anticipated Potential Audit Problems The Proposer should identify and describe any anticipated potential audit problems, the firm’s approach to resolving these problems, and any special assistance that will be requested from the City. 8. CONTRACT REQUIREMENTS The Proposer shall execute a standard City of Cupertino services contract, defining basic contractual relationships with attachments that specify the scope of services, compensation schedule, and deliverable schedule. A sample City professional services contract is attached to this RFP as Attachment C. Please note that insurance requirements are identified in Attachment D. Please also note that this contract is subject to payment of Prevailing Wages pursuant to California Labor Code Section 1720, et seq. 9. EVALUATION CRITERIA The proposals will be evaluated using the following criteria. Firms meeting the mandatory criteria will have their proposals evaluated and scored for expertise and experience, audit approach, and cost. Mandatory Requirements • The Firm is independent and licensed to practice in California. • The Firm has no conflict of interest with regard to any other work performed by the auditor for the City. • The Firm submits a copy of its most recent external quality control review report, 21 14 and the Firm has a record of quality audit work. • The Firm adheres to the instructions in this RFP on preparing and submitting the proposal. • The Firm accepts the terms and conditions, including the insurance requirements, contained in the City’s sample professional services agreement (Attachments C and D). Expertise and Experience • The Firm’s past experience and performance on comparable government engagements with an emphasis on local government audit experience. • The Firm’s past experience auditing federal grant programs in accordance with the Uniform Guidance. • The quality of the Firm’s professional personnel to be assigned to the engagement and the quality of the Firm’s management support personnel to be available for technical consultation. • The Firm’s ability to assist the City in implementing current and proposed GASB pronouncements, including but not limited to providing example schedules and footnotes, when applicable. Audit Approach • The thoroughness of the approach to conducting the audit of the City and the demonstration of the understanding of the objectives and scope of the audit. • The adequacy of the proposed staffing plan for various segments of the audit engagement. • The adequacy of sampling techniques. • The adequacy of analytical procedures. • The proposed timeline to complete the audit. Cost Cost will not be the primary factor in the selection of an audit firm. The City may select a firm that is not the lowest cost. 10. SELECTION PROCESS Review of Proposals Proposals submitted will be evaluated by an Auditor Selection Subcommittee consisting of two members of the Audit Committee and City Finance Staff. Proposals of firms meeting the mandatory criteria will be evaluated for technical qualifications (expertise, experience, and audit approach), using a point formula to score each proposal against the criteria described in the previous section. Firms with unacceptably low technical scores will be eliminated from further consideration. The cost proposals of the remaining firms 22 15 will then be reviewed, and additional points will be added to the technical score, based upon the proposed prices. The maximum score for price will be assigned to the firm offering the lowest total price (excluding the optional services). During the evaluation process, the City reserves the right, where it may serve the City’s best interest, to request additional information or clarification from proposers or to allow corrections of errors or omissions. The City reserves the right to retain all proposals submitted and use any idea(s) in a proposal, regardless of whether that proposal is selected. Oral Presentations During the evaluation process, the City may, at its discretion, request any or all firms to make oral presentations. Such presentations will provide firms with an opportunity to answer any questions the City may have on the firm’s proposal. Not all firms may be asked to make such oral presentations. Partners, managers, and supervisory staff (down to the auditor in charge of field work) to be assigned to the audit must attend the oral presentation. The oral presentation may be in‐person or virtual at the City’s discretion. Final Selection Recommendation for award is contingent upon the successful negotiation of final contract terms. Negotiations shall be confidential and not subject to disclosure to competing Proposers unless an agreement is reached. If contract negotiations cannot be concluded successfully within a time period determined by the City, the City may terminate negotiations and commence negotiations with the next highest‐scoring Proposer or withdraw the RFP. Right to Reject Proposals The City reserves the right without prejudice to reject any or all proposals. 11. ATTACHMENTS The following attachments are provided with the RFP package: • Attachment A – Scope of Work and Technical Specifications • Attachment B – Cost Proposal • Attachment C – Sample of Cupertino Services Contract • Attachment D – Insurance Requirements END OF REQUEST FOR PROPOSAL 23 ATTACHMENT A: Scope of Work and Technical Specifications A. Scope of Work to be Performed The City of Cupertino is soliciting the services of qualified firms of certified public accountants to audit its financial statements for the fiscal year ending June 30, 2023, and the two subsequent fiscal years thereafter, with the option to audit the financial statements for each of the two subsequent fiscal years. The selected independent auditor will be required to perform the following tasks: 1. Annual Financial Statement Audit: The audit firm will perform an audit of all funds of the City of Cupertino. The audit will be conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller of the United States. The City’s Annual Financial Report (ACFR) will be prepared and processed by the audit firm. The ACFR will be in full compliance with all current GASB pronouncements. The audit firm will render its auditor's report on the basic financial statements, which will include both Government‐Wide Financial Statements and Fund Financial Statements. The audit firm will also apply limited audit procedures to Management’s Discussion and Analysis (MD&A) and required supplementary information. 2. Management Letter: The audit firm shall issue a separate “management letter” that includes recommendations for improvements in internal control, accounting procedures, and other significant observations that are considered to be non‐ reportable conditions. Management letters should be addressed to the City Manager. 3. Single Audit Report: The audit firm will perform a single audit on the expenditures of federal grants in accordance with OMB Circular A‐133 and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for fiscal years in which the City exceeds the applicable reporting thresholds. In addition, the audit firm will render the appropriate reports on internal controls and compliance. The single audit report should include an appropriate schedule of expenditures of federal awards, footnotes, findings and questioned costs, including reportable conditions and material weaknesses, and a follow up on prior audit findings, where required. 4. Proposition 111 (Gann Appropriations Limit) AUP: The audit firm shall perform agreed‐upon audit procedures pertaining to the City’s Gann Appropriations Limit and render a letter, annually, to the City regarding compliance. 24 5. Investment Policy AUP: The audit firm shall perform agreed‐upon audit procedures including tests of internal controls pertaining to the City’s Investment Policy and render a letter, annually, to the City regarding compliance and level of reliance on related internal controls. The procedures as a minimum will include tests sufficient to satisfy two provisions in the City’s Investment Policy 1) independent verification of securities held in custody for the City as specified in the section “Safekeeping of Securities” and 2) an independent analysis of internal control, account activity, and compliance with policies and procedures as specified in the section “Internal Control.” 6. Storm Drain AUP: The audit firm shall perform agreed‐upon audit procedures pertaining to the City’s 2019 Clean Water and Storm Protection Fee and render a letter, annually, to the City regarding compliance with the Cupertino Municipal Code. B. Auditing Standards to be Followed To meet the requirements of this Request for Proposal, the audit shall be performed in accordance with all applicable and generally accepted auditing standards, including, but not limited to, the following: • Generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants • The standards applicable to financial audits contained in the most current version of the Generally Accepted Government Auditing Standards (Yellow Book), issued by the Comptroller General of the United States • The provisions of the Single Audit Act as amended in 1996 • The provisions of U. S. Office of Management and Budget (OMB) Circular A‐133, Audits of State and Local Governments and Non‐ Profit Organizations and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for fiscal years in which the City exceeds the applicable reporting thresholds. C. Working Paper Retention and Access to Working Papers All working papers and reports must be retained, at the auditor's expense, for a minimum of five (5) years, unless the firm is notified, in writing, by the City of Cupertino of the need to extend the retention period. The auditor will be required to make working papers available, upon request, to the following parties or their designees: • City of Cupertino • Department of Housing and Urban Development • U.S. Governmental Accountability Office (GAO) • Parties designated by the federal or state governments or by the City of Cupertino as part of an audit quality review process 25 • Auditors of entities of which the City of Cupertino is a sub‐recipient of grant funds • Auditors of entities of which the City of Cupertino is a component unit D. Reports to be Issued Following the completion of the audit of the fiscal year's financial statements, the auditor shall issue: • Annual Comprehensive Financial Report: An Annual Comprehensive Financial Report (ACFR) covering all City funds. In addition to the ACFR, the auditor shall provide a report on internal control over financial reporting and on compliance based on the audit of the financial statements performed in accordance with Government Auditing Standards (16 copies and 1 digital file in searchable Adobe Acrobat format). • Single Audit Report: A Single Audit Report, which includes a report on compliance and on the internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards and a report on compliance and internal controls over compliance applicable to each major federal award program. In addition, the Single Audit Report should also include all other necessary components as required by OMB Circular A‐133 and the Uniform Administrative Requirements, Cost Principles, and Audit requirements for Federal Awards (8 copies and one digital file in searchable Adobe Acrobat format). • Proposition 111 (Gann Appropriations Limit) AUP Report: A report on the City’s compliance with the Gann Appropriations Limit. • Investment Policy AUP Report: A report regarding compliance with the City’s Investment Policy after performing agreed‐upon procedures (AUP). Specifically, the report should allow the Audit Committee and City Council to place reliance on the internal controls of the City in arriving at the investment schedule provided periodically to the Audit Committee including account activity and compliance with policies and procedures listed in the City's Investment Policy. • Storm Drain AUP Report: A report regarding the compliance with the City’s Municipal Code after performing agreed‐upon procedures (AUP) on the 2019 Clean Water and Storm Protection Fee. • TDA: A separate audit if the City receives Transportation Development Act (TDA) funds which require a financial and compliance audit and a separate audit report in accordance with the TDA section of the California Administrative Code. • State Controller’s Report: A State Controller’s Annual Report of Financial Transactions for the City. 26 • Report on Internal Controls: A report examining the City’s internal accounting and administrative controls to determine that accounting procedures are adequate to safeguard assets and provide reasonable assurance of proper recording of financial transactions. In the required reports on internal controls, the auditor shall communicate any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions that are also material weaknesses shall be identified as such in the report. Non‐reportable conditions discovered by the auditors shall be reported in a separate letter to management, which shall be referred to in the reports on internal controls. The reports on compliance shall include all instances of noncompliance. Irregularities and illegal acts. Auditors shall be required to make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties: Pamela Wu, City Manager Christopher Jensen, City Attorney Kristina Alfaro, Treasurer/Director of Administrative Services Angela Chen, Chair of the Audit Committee Reporting to the Audit Committee. Auditors shall ensure that the Audit Committee is able to review the annual audit report and management letter in advance of final release to City Council. Reporting to the Administrative Services Department. Auditors shall ensure that the Director of Administrative Services is informed of each of the following: • The auditor’s responsibility under generally accepted auditing standards. • Management judgments and accounting estimates. • Significant accounting policies. • Significant audit adjustments. • Other information in documents containing audited financial statements. • Disagreements with management. • Management consultation with other accountants. 27 • Major issues discussed with management prior to retention. • Difficulties encountered in performing the audit. E. Special Considerations • The City of Cupertino has obtained the “Certificate of Achievement for Excellence in Financial Reporting” from the Government Finance Officers Association of the United States and Canada. The City intends to continue to receive this award annually and will expect the ACFR to meet the requirements of that program. • The City of Cupertino has determined that the United States Department of Housing and Urban Development will function as the cognizant agency in accordance with the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget (OMB) Circular A‐133, Audits of State and Local Governments and Non‐Profit Organizations, and the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The schedule of expenditures of federal awards and related auditor's report, as well as the reports on the internal controls and compliance, are not to be included in the annual comprehensive financial report, but are to be issued separately. The auditors will be responsible for preparation of this report. • The auditors will be consulted on an occasional basis throughout the year as an informational source. Auditors may be asked to provide guidance on the implementation of Governmental Accounting Standards Board (GASB) requirements and specifics of federal and state regulations as they may affect local government accounting. In addition, the auditors may be asked to assist with the implementation of the new pronouncements. • The audit partner or manager may be required to occasionally attend a City Council or Audit Committee meeting to explain or clarify financial statement information or accounting requirements. 28 ATTACHMENT B: Cost Proposal I. Cost of Services(1) Total Maximum Price per Fiscal Year Audit Services FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 Audit of Financial Statements and Preparation of ACFR TDA Single Audit with one major program (if applicable) Proposition 111 (Gann Appropriations Limit) AUP Investment Policy AUP Storm Drain AUP State Controller’s Report Report of Internal Controls Total Maximum Price (1) All‐inclusive maximum price, including services, out‐of‐pocket expenses, meals, lodging, transportation, printing, and other costs. 29 II. Cost of Services Supporting Detail(1) Schedule of Professional Fees and Expenses for the Audit of Fiscal Year ______(2) Staff Rate Hours Price (rate x hours) Partners Managers Supervisory Staff Staff Other (Specify) Subtotal Staff Billable Expenses Rate Units Price (rate x units) Meals & Lodging Transportation and Mileage Other (Specify) Subtotal Billable Expenses Total Maximum Price (1) The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all‐inclusive maximum price. (2) A separate schedule should be completed for each fiscal year. III. Rates for Additional Professional Services Position Hourly Billing Rate Partners Managers Supervisory Staff Staff Other (Specify) 30 ATTACHMENT C: Sample of Cupertino Professional Services Contract 31 32 33 34 35 36 37 38 39 ATTACHMENT D: Insurance Requirements 40 41 RFP Distribution List Attachment B Contact Name Firm Address City State ZIP Phone Email Website Notes Jeff Ira, CPA CG UHLENBERG 333 Twin Dolphin Dr., Ste 230 Redwood City CA 94065 650‐802‐8668 jennifer@cgucpa.com; paul@cgucpa.com https://cgucpa.com/ No longer provides auditing services Madeline Johnson Brown Armstrong Accountancy Corporation 4200 Truxtun Avenue, Suite 300 Bakersfield CA 93309 661‐324‐4971 mjohnson@ba.cpa www.ba.cpa Ingrid Sheipline Richardson & Company, LLP 550 Howe Avenue, Suite 210 (916) 564‐8727 ext 224 (Ingrid) ext 221 (Michelle) Ext 226 (Brian)isheipline@richardsoncpas.com richardsoncpas.com Rachel Litwack O'Connor & Company 1101 Fifth Avenue, Suite 360 San Rafael CA 94901 4154571215 rachel@maocpa.com www.maocpa.com Kenneth H. Pun The Pun Group, LLP 200 E. Sandpointe Ave., Suite 600 Santa Ana CA 92707 (949)777‐8800 info@pungroup.com https://pungroup.cpa/ Sheldon Chavan Chavan & Associates, LLP 15105 Concord Circle Suite 130 6503461329 sheldon@cnallp.com www.cnallp.com Matt Geerdes Crowe LLP 630.706.2061 matt.geerdes@crowe.com www.crowe.com Kathy Lai Crowe LLP kathy.lai@crowe.com www.crowe.com Eden Casareno Eadie & Payne LLP, CPAs 1839 W. Redlands Blvd Redlands CA 92373 909‐793‐2406 ecasareno@eadiepaynellp.com http://eadiepaynellp.com/ Craig R. Fechter Fechter & Company, CPAs 3445 American River Drive, Suite A Sacramento CA 95864 916‐333‐5360 cfechter@fechtercpa.com https://www.fechtercpa.com/ Gilbert & Associates Inc.2880 Gateway Oaks Dr, Ste 100 Sacramento CA 95833 916‐646‐6464 info@gilbertcpa.com http://gilbertcpa.com/ Amanda McCarty Grant Thornton 10 Almaden Blvd, Suite 800 San Jose CA 95113 408‐275‐9000 amanda.mccarty@us.gt.com https://www.grantthornton.com/ Harshwal & Company LLP 333 Hegenberger Rd $238 Oakland CA 94612 510‐452‐5051 info@harshwal.com https://www.harshwal.com/ Autumn Rossi Hayashi & Wayland Accounting & Consulting, LLP 1188 Padre Drive, Suite 101 Salinas CA 93901 831‐759‐6300 autumnr@hw‐cpa.com https://www.hw‐cpa.com/ Brian Henderson Hudson, Henderson & Company, Inc.7473 N. Ingram, Ste. 102 Fresno CA 93711 559.412.7576 info@hhccpas.com http://www.hhccpas.com/ James Marta, CPA James Marta & Company 701 Howe Avenue, Suite E3 Sacramento CA 95825 916‐993‐9494 jmarta@jpmcpa.com http://www.jpmcpa.com/ Joseph Arch, CPA JJACPA, Inc.7080 Donlon Way, Suite 204 Dublin CA 94568 925‐556‐6200 joe@jjacpa.com www.jjacpa.com Macias, Gini & O'Connell LLP 60 South Market, Suite 1500 San Jose CA 95113 (408) 418‐4000 JVermeulen@mgocpa.com https://www.mgocpa.com/ Mann, Urreutia, Nelson, CPA's 1760 Creekside Oaks Dr., Suite 160 Sacramento CA 95833 916‐929‐0540 bam@muncpas.com http://www.muncpas.com/ undeliverable Katherine Yuen Maze & Associates 3478 Buskirk Ave #215 Pleasant Hill CA 94523 925‐930‐0902 katheriney@mazeassociates.com; maze@mazeassociates.com https://www.mazeassociates.com/ Grace Zhang Maze & Associates 3478 Buskirk Ave #215 Pleasant Hill CA 94523 925‐930‐0902 Gracez@mazeassociates.com https://www.mazeassociates.com/ Amy L. Meyer, CPA (VP)Maze & Associates 3478 Buskirk Ave #215 Pleasant Hill CA 94523 925‐930‐0902 amym@mazeassociates.com https://www.mazeassociates.com/ Patricia Kaufman McGilloway, Ray, Brown & Kaufman 2511 Garden Road, Suite A180 Monterey CA 93940 866‐373‐2511 patriciak@mcgilloway‐ray.com https://www.mrbkcpa.com/ Bret Rutter Moss Adams, LLP 635 Campbell Technology Parkway Campbell CA 95008 (408) 558‐7500 bret.rutter@mossadams.com Williams, Adley & Co., LLP 7677 Oakport St., Suite 100 Oakland CA 94621 510‐893‐8114 info@wacllp.com http://www.wacllp.com/ undeliverable 42 Attachment C The Pun Group – Engagement Team Roles and Summary Experience Kenneth H. Pun, CPA, CGMA | Engagement/Lead Partner Role Kenneth Pun is the Managing Partner and an Assurance Partner at the Firm. With over twenty-one years of public accountfng experience in the state and local government sector, he specializes in audits, management, and consultfng for governmental organizatfons. Mr. Pun served as the Contract Deputy Finance Director for the City of San Marino in 2017. He has served as the Chair of the California Society of CPAs Governmental Auditfng Accountfng Committee. He is a Certffied Public Accountant and a Chartered Global Management Accountant. Mr. Pun will actfvely serve as the Engagement/Lead Partner overseeing the Engagement Team, developing the audit plan, reviewing fieldwork for quality, approving final reports, and communicatfng with the Finance Department. He will also be responsible for the tfmely delivery of all services for the City. Experience Kenneth H. Pun is the Managing Partner and an Assurance Partner at The Pun Group LLP, which he founded in 2012 after serving in senior-level positfons for well-established natfonal and regional firms. Under his leadership, The Pun Group has become one of the “Top Accountfng Firms” in Orange County, according to the Orange County Business Journal. The Pun Group is also on the list of CalCPA's Top 150 firms. Prior to founding The Pun Group, Ken served clients in a variety of industries, including small to very large state and local governmental agencies, insurance companies, not-for-profits, healthcare, technology, and manufacturing and distributfon clients. His career in public accountfng was spent primarily with Regional firms and Natfonal firms. Leveraging more than 21 years of public accountfng experience, Ken has earned a reputatfon of being a trusted advisor to governmental and Healthcare organizatfons throughout California and neighboring states. Municipalitfes and public agencies engage him because of his premier level of client service, commitment, and innovatfve methods of increasing operatfonal efficiencies and reducing costs. Ken maintains his deep commitment to professional educatfon through his work as an instructor for the California Educatfon Foundatfon. He has authored training materials in governmental accountfng and auditfng, such as Financial Reportfng for State and Local Governments, 2018 Government Auditfng Standards, and Single Audit Fundamentals for California Educatfon Foundatfon. He is also the technical reviewer of the CCH Knowledge-Based Audits™ of State and Local Governments with Single Audits. He advises clients on those topics at influentfal industry forums. Internally, Ken mentors audit teams by providing directfon and technical guidance to ensure adherence to the firm’s quality controls Frances J. Kuo, CPA, CGMA | Technical/Concurring Partner Role 43 Attachment C Frances Kuo is a Partner at the Firm. She has extensive experience in providing audit and advisory services to local government agencies, including public pension plans, citfes, countfes, special districts, community colleges, and joint powers authoritfes, as well as not for-profit organizatfons. Ms. Kuo brings a wealth of experience from her background in audits and advisory services in areas such as internal controls, policy development, and accountfng system implementatfon. She is a Certffied Public Accountant and a Chartered Global Management Accountant. Ms. Kuo will act as the Technical/Concurring Partner and provide a second partner review of significant high-risk areas, audit reports, and resolutfon of significant accountfng, auditfng, and reportfng matters. Experience Frances Kuo is a Partner in The Pun Group, LLP’s Assurance division. Frances has over sixteen (16) years of accountfng and auditfng experience working with governmental agencies, not-for-profit entftfes, and employee benefit plans. Frances also has partfcular expertfse in conductfng financial audits under GAO Yellow Book standards and compliance audits in accordance with Uniform Guidance, formerly known as OMB Circular A-133 standards. Frances has performed audits and other attestatfon services for several municipalitfes throughout California, including citfes, countfes, successor agencies to former redevelopment agencies, public financing authoritfes, housing authoritfes, transportatfon agencies, and special districts. She has assisted these clients in publishing their Annual Comprehensive Financial Reports in compliance with GASB Statement No. 34. Frances is the in-house instructor who provides training, both theoretfcal and on-the-job training, to lower-level staff. She has developed training materials on the risk-based audit approach, GASB Statement No. 34 reportfng, Single Audits, and employee benefit plan audits. Andrew Roth, CPA | Compliance Partner Role Andrew Roth is a Partner within the Firm and will serve as the primary point of contact for your team. He holds an Advanced Certfficatfon in Single Audits through the AICPA. Andrew draws more than a decade of governmental and not-for-profit experience in the areas of financial audit and reportfng under governmental and financial accountfng standards, evaluatfon of internal controls under the Committee of Sponsoring Organizatfons of the Treadway Commission (COSO) Integrated Framework, the performance of Single Audits under the Uniform Guidance, subrecipient monitoring of Federal Grants, corporate financial reportfng, data analytfcs, and exempt taxatfon. He is a Certffied Public Accountant. Mr. Roth will lead the audit team in all compliance-related matters, including the Uniform Guidance and Single Audit, and reports issued under specific laws and regulatfons. Experience Andrew Roth is a Partner within The Pun Group LLP. He has more than twelve (12) years of governmental and not-for-profit experience in the areas of financial audit and reportfng under governmental and financial accountfng standards, evaluatfon of internal controls under the Committee of Sponsoring Organizatfons of the Treadway Commission (COSO) Integrated Framework, the performance of Single 44 Attachment C Audits under the Uniform Guidance, subrecipient monitoring of Federal Grants, corporate financial reportfng, data analytfcs, and exempt taxatfon. His client portiolio consists of moderate to large municipalitfes (citfes and countfes), municipal transportatfon districts, water districts, municipal electric utflitfes, and not-for-profit organizatfons whose missions involve building communitfes. His governmental agency clients have federal grant expenditures that range from $100 million to $750 million annually. In various engagements, Andrew has been responsible for leading the service delivery where he has actfvely contributed and managed the planning process, implementatfon of the audit work plan, supervision of multfple audit teams, and provided yearly team updates on the changes in compliance testfng requirements for the Single Audits, and preparatfon of all deliverables including the Annual Comprehensive Financial Reports, the Single Audit, Compliance Reports, Data Collectfon Forms, and City Council/Board presentatfons. He has also been a guest speaker on topics involving Federal grants, such as updates to Yellow Book Standards, Compliance Auditfng, and Updates to the Uniform Guidance Procurement Requirements. John (“Jack”) F. Georger, CPA, CIA, CGMA | Quality Control Reviewer Role Throughout his forty years of experience, Mr. Georger has spent many years in the “Big 4” and natfonal firms. He worked diligently alongside numerous governmental municipalitfes, including citfes, countfes, and transportatfon agencies, as well as not-for-profit entftfes, providing clients with financial and compliance auditfng as well as consultatfon services. Mr. Georger annually instructs over 300 hours in accountfng and auditfng subjects and has authored training material in governmental accountfng and auditfng for the AICPA. Mr. Georger is also the technical reviewer of the CCH Knowledge-Based Audits™ of State and Local Governments with Single Audits, GAAP Guide (FASB), and Governmental GAAP Guide (GASB), the gold standard for audit firms throughout the United States. As the Chief Quality Officer in our Firm, he advises clients with their complex accountfng questfons and supports the engagement team with audit issues. He is a Certffied Public Accountant, a Certffied Internal Auditor, and a Chartered Global Management Accountant. Mr. Georger is responsible for reviewing all reports issued by the Firm to ensure the utmost quality and compliance with professional standards and the final quality-control assessment within the engagement. Experience Jack Georger is the Chief Quality Officer within The Pun Group LLP’s Assurance division. By leveraging more than forty (40) years of public accountfng and auditfng experience in the government, agribusiness, financial services, manufacturing, and nonprofit sectors, Mr. Georger brings in-depth knowledge and practfcal expertfse to each engagement. Jack coordinates, plans, and manages financial audit actfvitfes, consultfng actfvitfes, federal and state compliance audit actfvitfes, performance audits, and numerous quality control and internal control reviews for a broad mix of governmental agencies and programs throughout the United States. Mr. Georger leads our Peer Review department providing peer review services to other firms under the practfce monitoring program of the AICPA. 45 Attachment C Mr. Georger is a contfnuing professional educatfon course instructor for the AICPA. Annually, he instructs over 300 hours in accountfng and auditfng subjects. Jack has authored training material in governmental accountfng and auditfng for the AICPA. He is the technical reviewer of the CCH Knowledge-Based Audits™ of State and Local Governments with Single Audits, GAAP Guide (FASB), and Governmental GAAP Guide (GASB). Mr. Georger is licensed to practfce as a certffied public accountant in the states of California, New York, Virginia, Maryland, the District of Columbia, Missouri (inactfve), Connectfcut (inactfve), and Wyoming (inactfve). He is a Certffied Internal Auditor (CIA). Gary M. Caporicci, CPA, CGFM, CFF | GASB Implementatfon Specialist Role Gary Caporicci is an appointed member of the State Controller’s Retfrement Advisory Committee. Mr. Caporicci is a leading expert and has authored and taught several courses for CalCPA and AICPA on GASB 68, Accountfng and Financial Reportfng for Pensions, and GASB 75, Accountfng and Financial Reportfng for Postemployment Benefits Other than Pensions. As an assurance partner with over forty years of experience, Mr. Caporicci has performed financial, compliance audit, and consultatfon services to government clients, including citfes, countfes, transportatfon agencies, and school districts, as well as various notior-profit entftfes. He is a Certffied Public Accountant, a Certffied Government Financial Manager, and Certffied in Financial Forensics. Mr. Caporicci will utflize his expertfse in providing advice and consultatfon during the implementatfon of the new GASB standards. Experience Gary M. Caporicci has more than forty years of diversified business experience, including a specializatfon in audit and management consultfng for government organizatfons. Gary’s clients include public and private universitfes and colleges, city and county governments, state agencies, joint power authoritfes, healthcare agencies, transportatfon agencies, and special districts. Known for his expertfse in the areas of constructfon and government, Gary wrote the AICPA audit guides on these topics, and he has authored many audit and accountfng courses for professional groups, as well as academic instftutfons. He frequently speaks and lectures at many professional organizatfons, governmental seminars, and conferences held by industry associatfons, other accountfng firms, and universitfes. Also, he authors white papers for the California Committee on Municipal Accountfng. Before working with the Firm, Gary founded his accountfng practfce. He also spent eleven years with a “Big Eight” professional services firm, where he was an Audit Manager and gained broad experience in a wide range of industries such as government, constructfon, manufacturing, mutual funds, and insurance. Gary has held a consultant positfon with a “Big Four” practfce and was Vice President of a natfonal insurance and financial services company. In 2015 Gary Caporicci was appointed to the State Retfrement Advisory Committee by the State Controller Sophia Kuo, CPA, M.B.A. | Engagement/Project Director 46 Attachment C Role Sophia Kuo is an Assurance Services Director in the Firm who holds an Advanced Certfficatfon in Single Audits through the AICPA. She possesses extensive auditfng experience, including citfes, countfes, special districts, and not-for-profit entftfes. She will work closely with the engagement partners directfng and supervising the audit team in its daily actfvitfes and tasks. She is a Certffied Public Accountant and possesses a MAcc in Accountfng and an M.B.A. in Business Administratfon. Ms. Kuo will serve as the primary point of contact for your team and will work to ensure the services are conducted within the deadlines and will provide updates on our team’s progress to the partners and you. Experience Sophia Kuo is a Director within The Pun Group, LLP’s Assurance division. In her seven years of accountfng and auditfng experience, Sophia has worked with governmental agencies, not-forprofit entftfes, and private for-profit entftfes. She possesses governmental expertfse that ranges from GASB audit/reportfng, Internal Controls/COSO Framework, Single Audit, Corporate Financial Reportfng, Data Analysis, and Taxatfon. Ms. Kuo has performed audits and other attestatfon services for several governmental agencies throughout California. Her portiolio includes citfes, countfes, redevelopment agencies, public financing authoritfes, housing authoritfes, transportatfon agencies, and special districts. Also, she has helped them publish their Annual Comprehensive Financial Reports in compliance with GASB Statement No. 34. 47 CITY OF CUPERTINO Agenda Item 23-12383 Agenda Date: 5/31/2023 Agenda #: 2. ACTION ITEM Subject:Consider retaining the City’s Internal Auditor,Moss Adam,LLP,for an additional three-year term and forward to City Council for approval. Consider retaining the City’s Internal Auditor,Moss Adam,LLP,for an additional three-year term and forward to City Council for approval. CITY OF CUPERTINO Printed on 5/30/2023Page 1 of 1 powered by Legistar™48 AUDIT COMMITTEE STAFF REPORT Meeting: May 31, 2023 Subject Consider retaining the City’s Internal Auditor, Moss Adam, LLP, for an additional three- year term and forward to City Council for approval. Recommended Action Consider retaining the City’s Internal Auditor, Moss Adam, LLP, for an additional three- year term and forward to City Council for approval. Discussion As part of the Fiscal Year (FY) 2019-20 Adopted Budget, City Council approved a $50,000 appropriation for Enterprise Risk Assessment services. On February 10, 2020, the City entered into an agreement with Moss Adams LLP (Moss Adams) under the authority of the City Manager for said services. On August 23, 2021, the City entered into a new agreement with Moss Adams to perform internal auditor services for the FY 2021-22 internal audit work plan. On June 1, 2022, a First Amendment to extend the term of the contract to June 30, 2023 was executed under the authority of the City Manager. The proposed Second Amendment with Moss Adams will provide continued internal auditor services for the City. Staff is presenting this to the Audit Committee and upon approval will recommend to the City Council on June 6, 2023 to increase the contract amount and extend the term to allow Moss Adams to continue to provide essential internal auditing services. An internal audit function was introduced as part of the City Council’s FY 2019-20 Work Program. The project’s objective was to assist the City in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The City issued a Request for Proposal (RFP) on September 3, 2019 and received proposals from multiple qualified firms. A sub-committee, consisting of the City Manager, Director of Administrative Services, Finance Manager, and Audit Committee Chair, evaluated and selected the internal audit firm, Moss Adams, to conduct projects focusing on:  Risks,  Internal Controls, 49  Efficiency and effectiveness,  Best practices, and  Compliance. In conjunction with the establishment of an internal audit function for the City, an internal audit charter and amendments to the City’s Municipal Code were adopted to carry out the services and establish appropriate oversight. On February 11, 2020, the City’s Audit Committee recommended approval of the proposed amendment to the City’s Municipal Code in accordance with the establishment of an internal audit function within the City. On July 7, 2020, the City Council adopted Ordinance No. 20-2208 as recommended, amending Section 2.88.100 (Audit Committee Duties-Powers-Responsibilities) to include two additional duties: “To recommend appointment of internal auditors” and “To review internal audit reports.” The Audit Committee also recommended approval of the proposed internal audit charter, which details the duties of the internal auditor, assigns authority and responsibility to the City’s Audit Committee and City Council, and describes the various communications and reporting during a respective fiscal year. On July 7, 2020, City Council approved the Internal Audit Charter and in FY 2020-21 Moss Adams conducted an Enterprise Risk Assessment which was accepted by the Audit Committee and City Council. In FY 2021-22 an internal audit work plan was accepted by the Audit Committee and City Council which included the following audits, schedule, and budget as noted below:  Procurement Operational Review  Policy Inventory and Plan  Capital Program Effectiveness Study  Fraud, Waste, and Abuse (FWA) Program  Ongoing Program Management In FY 2022-23, an internal audit work plan was accepted by the Audit Committee and City Council which included the following audits, schedule, and budget as noted below:  Fraud, Waste, and Abuse (FWA) Program (FY 22-23 Carryover): Develop an FWA program, including program design, hotline implementation, ongoing hotline administration, and training.  Library Construction Audit: Perform audit of library construction to review reporting, project accounting consistency controls, and related construction controls; identify noncompliant project charges and change orders and control improvement opportunities.  Budget Process Review: Document and review the City’s budget process, compare to best practice, and provide recommendations for improvements in efficiency and effectiveness. 50  Enterprise Leadership Effectiveness Study: Assess the effectiveness of the City’s management and governance collaboration framework and provide recommendations to strengthen and streamline procedures to align with best practices for municipal leadership.  Policy Review Ongoing Support: As the City updates and develops draft financial policies based on the prioritized inventory, review drafts and provide recommendations to align policies with best practice.  Ongoing Internal Audit Services: Attend Audit Committee and Council meetings; prepare status reports, manage internal audit program, and prepare FY 23-24 internal audit plan. The FY 2023-24 internal audit work plan will be brought to the Audit Committee in July 2023 and to City Council in September 2023. If a potential project identified by Moss Adams, the Audit Committee, or City Council is not included in the FY 2023-24 internal audit work plan, it will be considered for inclusion as part of the FY 2024-25 internal audit work plan. If the FY 2023-24 internal audit work plan is approved by City Council, the recommended audits would be completed by Moss Adams and the audit reports would be presented to Audit Committee for review and City Council for acceptance at the standard reporting periods. Sustainability Impact No sustainability impact. Fiscal Impact Funds for this agreement are included in Administrative Services Fiscal Year 2023-2024 Proposed Budget. California Environmental Quality Act No California Environmental Quality Act impact. _____________________________________ 51 Prepared by: Jonathan Orozco, Finance Manager Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Matt Morley, Assistant City Manager Attachments: 52