21-0615_LANCE, SOLL & LUNGHARD_Agenda Report_E6City of San Juan Capistrano
Agenda Report
TO: Honorable Mayor and Members of the City Council
FROM: Benjamin Siegel, City Manager
SUBMITTED BY: Ken Al-Imam, Chief Financial Officer
DATE: June 15, 2021
SUBJECT: Professional Services Agreement for Independent Audit Services
(Lance, Soll & Lunghard, LLP)
RECOMMENDATION:
Approve and authorize the City Manager to sign an agreement with Lance, Soll &
Lunghard, LLP for independent audit services for a term of three years, plus two one-year
option years at a not-to-exceed total cost of $239,440.
EXECUTIVE SUMMARY:
The Fiscal Year 2019-20 annual audit was the final fiscal year encompassed within the
scope of service performed by the City’s current audit firm, CliftonLarsonAllen LLP
(successor firm to White Nelson Diehl Evans LLP). In April 2021, staff released a Request
for Proposals for audit services. Staff has completed its review of the proposals received
and recommends approval of an agreement with Lance, Soll & Lunghard, LLP (LSL). The
agreement provides for independent audit services for a term of three years, plus two
one-year option years to be exercised by staff based upon an evaluation of service
performed to date.
DISCUSSION/ANALYSIS:
Staff initiated a process for competitive procurement for audit services by issuing a
request for proposal (RFP) for independent audit services on April 7, 2021. The RFP was
posted on the websites of the California Society of Municipal Finance Officers and Public
Purchase in addition to the City’s website. The performance of the current auditors,
CliftonLarsonAllen LLP, had met expectations and that firm was encouraged to participate
in the proposal process.
6/15/2021
E6
City Council Agenda Report
June 15, 2021
Page 2 of 2
Nine proposals were received. A staff panel consisting of three members of the Finance
Department evaluated the proposals based on criteria in the RFP.
The proposing firms were evaluated, references were checked and the proposing firms
were ranked based upon the results of the evaluation process. The highest ranked firm
was LSL. Although price was not the primary consideration, the annual cost of LSL’s
services was consistent with the pricing of the highest ranked firms and $3,500 less than
the actual cost of the audit for the prior fiscal year.
LSL is a regional, full-service audit firm with offices in Brea, Santa Ana and Sacramento,
and has specialized in providing services to local governments for over 90 years. LSL
currently serves as the auditor for 47 California cities and has consistently been
recognized as one of the “Top Orange County Firms” by the Orange County Business
Journal.
FISCAL IMPACT:
Approval of the agreement will result in a $3,500 savings in audit costs for the City, in
comparison to audit costs associated with the prior fiscal year.
ENVIRONMENTAL IMPACT:
Not applicable.
PRIOR CITY COUNCIL REVIEW:
On May 17, 2016, the City Council approved an agreement with White Nelson Diehl
Evans LLP for the performance of audit services for three years and two option years.
COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS:
Not applicable.
NOTIFICATION:
Bryan Gruber, Lance, Soll & Lunghard, LLP
Nitin Patel, CliftonLarsonAllen LLP (successor firm to White Nelson Diehl Evans LLP)
ATTACHMENT:
Attachment 1 – Agreement with Lance, Soll & Lunghard, LLP
&,7<2)6$1-8$1&$3,675$12
352)(66,21$/6(59,&(6$*5((0(17
7KLV$JUHHPHQWLVPDGHDQGHQWHUHGLQWRDVRI-XQHE\DQGEHWZHHQWKH&LW\RI6DQ
-XDQ &DSLVWUDQR D PXQLFLSDO FRUSRUDWLRQ RUJDQL]HG DQG RSHUDWLQJ XQGHU WKH ODZV RI WKH 6WDWH RI
&DOLIRUQLD ZLWK LWV SULQFLSDO SODFH RI EXVLQHVV DW 3DVHR $GHODQWR 6DQ -XDQ &DSLVWUDQR &$
³&LW\´ DQG/DQFH6ROO /XQJKDUGD/LPLWHG/LDELOLW\3DUWQHUVKLSZLWKLWVSULQFLSDOSODFHRI
EXVLQHVVDW1%UHD%OYG6XLWH%UHD&$ KHUHLQDIWHUUHIHUUHGWRDV³&RQVXOWDQW´ &LW\
DQG&RQVXOWDQWDUHVRPHWLPHVLQGLYLGXDOO\UHIHUUHGWRDV³3DUW\´DQGFROOHFWLYHO\DV³3DUWLHV´LQWKLV
$JUHHPHQW
5(&,7$/6
$ &LW\LVDSXEOLFDJHQF\RIWKH6WDWHRI&DOLIRUQLDDQGLVLQQHHGRISURIHVVLRQDOVHUYLFHV
IRUWKHIROORZLQJSURMHFW ,QGHSHQGHQW$XGLW6HUYLFHV KHUHLQDIWHUUHIHUUHGWRDV³WKH3URMHFW´
% &RQVXOWDQW LV GXO\ OLFHQVHG DQG KDV WKH QHFHVVDU\ TXDOLILFDWLRQV WR SURYLGH VXFK
VHUYLFHV
& 7KH3DUWLHVGHVLUHE\WKLV$JUHHPHQWWRHVWDEOLVKWKHWHUPVIRU&LW\WRUHWDLQ&RQVXOWDQW
WRSURYLGHWKHVHUYLFHVGHVFULEHGKHUHLQ
$*5((0(17
12:7+(5()25(,7,6$*5(('$6)2//2:6
6HUYLFHV
&RQVXOWDQWVKDOOSURYLGHWKH&LW\ZLWKWKHVHUYLFHVGHVFULEHGLQWKH6FRSHRI6HUYLFHVDWWDFKHG
KHUHWRDV([KLELW³$´,QWKH6FRSHRI6HUYLFHVWREHSHUIRUPHG&RQVXOWDQWVKDOOLQFOXGHWKH6XFFHVVRU
$JHQF\WRWKH6DQ-XDQ&DSLVWUDQR&RPPXQLW\5HGHYHORSPHQW$JHQF\DQGWKH+RXVLQJ$XWKRULW\
ZLWKLQWKHLUSODQQHGVFRSHRIDXGLWSURFHGXUHV&RQVXOWDQWZLOOGUDIWDQGSUHSDUHWKH+RXVLQJ$XWKRULW\
ILQDQFLDOVWDWHPHQWVDQGWKH&LW\¶V&RPSUHKHQVLYH$QQXDO)LQDQFLDO5HSRUWLQLWVHQWLUHW\H[FHSWIRU
WKHLQWURGXFWRU\VHFWLRQWKHVWDWLVWLFDOVHFWLRQDQG0DQDJHPHQW¶V'LVFXVVLRQDQG$QDO\VLV
&RPSHQVDWLRQ
D 6XEMHFW WR SDUDJUDSK E EHORZ WKH &LW\ VKDOO SD\ IRU VXFK VHUYLFHV LQ
DFFRUGDQFHZLWKWKH6FKHGXOHRI&KDUJHVVHWIRUWKLQ([KLELW³%´
E ,QQRHYHQWVKDOOWKHWRWDODPRXQWSDLGIRUVHUYLFHVUHQGHUHGE\&RQVXOWDQWXQGHU
WKLV$JUHHPHQWH[FHHGWKHVXPRI 7KLVDPRXQWLVWRFRYHUDOOSULQWLQJDQGUHODWHGFRVWVDQG
WKH&LW\ZLOOQRWSD\DQ\DGGLWLRQDOIHHVIRUSULQWLQJH[SHQVHV3HULRGLFSD\PHQWVVKDOOEHPDGHZLWKLQ
GD\VRIUHFHLSWRIDQLQYRLFHZKLFKLQFOXGHVDGHWDLOHGGHVFULSWLRQRIWKHZRUNSHUIRUPHG3D\PHQWV
WR&RQVXOWDQWIRUZRUNSHUIRUPHGZLOOEHPDGHRQDPRQWKO\ELOOLQJEDVLV
$GGLWLRQDO:RUN
,IFKDQJHVLQWKHZRUNVHHPPHULWHGE\&RQVXOWDQWRUWKH&LW\DQGLQIRUPDOFRQVXOWDWLRQVZLWK
WKHRWKHUSDUW\LQGLFDWHWKDWDFKDQJHLVZDUUDQWHGLWVKDOOEHSURFHVVHGLQWKHIROORZLQJPDQQHU D
OHWWHURXWOLQLQJWKHFKDQJHVVKDOOEHIRUZDUGHGWRWKH&LW\E\&RQVXOWDQWZLWKDVWDWHPHQWRIHVWLPDWHG
FKDQJHVLQIHHRUWLPHVFKHGXOH$QDPHQGPHQWWRWKLV$JUHHPHQWVKDOOEHSUHSDUHGE\WKH&LW\DQG
ATTACHMENT 1 - Page 1 of 12
H[HFXWHGE\ERWK3DUWLHVEHIRUHSHUIRUPDQFHRIVXFKVHUYLFHVRUWKH&LW\ZLOOQRWEHUHTXLUHGWRSD\IRU
WKH FKDQJHV LQ WKH VFRSH RI ZRUN 6XFK DPHQGPHQW VKDOO QRW UHQGHU LQHIIHFWLYH RU LQYDOLGDWH
XQDIIHFWHGSRUWLRQVRIWKLV$JUHHPHQW
0DLQWHQDQFHRI5HFRUGV
%RRNVGRFXPHQWVSDSHUVDFFRXQWLQJUHFRUGVDQGRWKHUHYLGHQFHSHUWDLQLQJWRFRVWVLQFXUUHG
VKDOO EH PDLQWDLQHG E\ &RQVXOWDQW DQG PDGH DYDLODEOH DW DOO UHDVRQDEOH WLPHV GXULQJ WKH FRQWUDFW
SHULRGDQGIRUIRXU \HDUVIURPWKHGDWHRIILQDOSD\PHQWXQGHUWKHFRQWUDFWIRULQVSHFWLRQE\&LW\
7LPHRI3HUIRUPDQFH
&RQVXOWDQWVKDOOSHUIRUPWKHVHUYLFHVVHWIRUWKLQ([KLELW$DQGIRUWKHILVFDO\HDUVLQGLFDWHGLQ
([KLELW$LQDSURPSWDQGWLPHO\PDQQHU&RQVXOWDQWVKDOOFRPSOHWHWKHVHUYLFHVUHTXLUHGKHUHXQGHULQ
DFFRUGDQFHZLWKWKHDFWLYLW\VFKHGXOHSURYLGHGLQ([KLELW$
'HOD\VLQ3HUIRUPDQFH
D 1HLWKHU&LW\QRU&RQVXOWDQWVKDOOEHFRQVLGHUHGLQGHIDXOWRIWKLV$JUHHPHQWIRUGHOD\VLQ
SHUIRUPDQFHFDXVHGE\FLUFXPVWDQFHVEH\RQGWKHUHDVRQDEOHFRQWURORIWKHQRQSHUIRUPLQJSDUW\)RU
SXUSRVHV RI WKLV $JUHHPHQW VXFK FLUFXPVWDQFHV LQFOXGH EXW DUH QRW OLPLWHG WR DEQRUPDO ZHDWKHU
FRQGLWLRQV IORRGV HDUWKTXDNHV ILUH HSLGHPLFV ZDU ULRWVDQGRWKHUFLYLOGLVWXUEDQFHV VWULNHVORFNRXWV
ZRUNVORZGRZQVDQGRWKHUODERUGLVWXUEDQFHV VDERWDJHRUMXGLFLDOUHVWUDLQW
E 6KRXOGVXFKFLUFXPVWDQFHVRFFXUWKHQRQSHUIRUPLQJSDUW\VKDOOZLWKLQDUHDVRQDEOH
WLPH RI EHLQJ SUHYHQWHG IURP SHUIRUPLQJ JLYH ZULWWHQ QRWLFH WR WKH RWKHU SDUW\ GHVFULELQJ WKH
FLUFXPVWDQFHVSUHYHQWLQJFRQWLQXHGSHUIRUPDQFHDQGWKHHIIRUWVEHLQJPDGHWRUHVXPHSHUIRUPDQFHRI
WKLV$JUHHPHQW
&RPSOLDQFHZLWK/DZ
D &RQVXOWDQWVKDOOFRPSO\ZLWKDOODSSOLFDEOHODZVRUGLQDQFHVFRGHVDQGUHJXODWLRQVRI
WKHIHGHUDOVWDWHDQGORFDOJRYHUQPHQWLQFOXGLQJ&DO26+$UHTXLUHPHQWV
E ,IUHTXLUHG&RQVXOWDQWVKDOODVVLVWWKH&LW\DVUHTXHVWHGLQREWDLQLQJDQGPDLQWDLQLQJ
DOOSHUPLWVUHTXLUHGRI&RQVXOWDQWE\IHGHUDOVWDWHDQGORFDOUHJXODWRU\DJHQFLHV
F ,I DSSOLFDEOH &RQVXOWDQW LV UHVSRQVLEOH IRU DOO FRVWV RI FOHDQ XS DQG RU UHPRYDO RI
KD]DUGRXVDQGWR[LFVXEVWDQFHVVSLOOHGDVDUHVXOWRIKLVRUKHUVHUYLFHVRURSHUDWLRQVSHUIRUPHGXQGHU
WKLV$JUHHPHQW
6WDQGDUGRI&DUH
&RQVXOWDQW¶V VHUYLFHV ZLOO EH SHUIRUPHG LQ DFFRUGDQFH ZLWK JHQHUDOO\ DFFHSWHG SURIHVVLRQDO
SUDFWLFHVDQGSULQFLSOHVDQGLQDPDQQHUFRQVLVWHQWZLWKWKHOHYHORIFDUHDQGVNLOORUGLQDULO\H[HUFLVHG
E\PHPEHUVRIWKHSURIHVVLRQFXUUHQWO\SUDFWLFLQJXQGHUVLPLODUFRQGLWLRQV
$VVLJQPHQWDQG6XEFRQVXOWDQW
&RQVXOWDQWVKDOOQRWDVVLJQVXEOHWRUWUDQVIHUWKLV$JUHHPHQWRUDQ\ULJKWVXQGHURULQWHUHVWLQ
WKLV$JUHHPHQWZLWKRXWWKHZULWWHQFRQVHQWRIWKH&LW\ZKLFKPD\EHZLWKKHOGIRUDQ\UHDVRQ$Q\
ATTACHMENT 1 - Page 2 of 12
DWWHPSWWRVRDVVLJQRUVRWUDQVIHUZLWKRXWVXFKFRQVHQWVKDOOEHYRLGDQGZLWKRXWOHJDOHIIHFWDQGVKDOO
FRQVWLWXWHJURXQGVIRUWHUPLQDWLRQ6XEFRQWUDFWVLIDQ\VKDOOFRQWDLQDSURYLVLRQPDNLQJWKHPVXEMHFW
WRDOOSURYLVLRQVVWLSXODWHGLQWKLV$JUHHPHQW1RWKLQJFRQWDLQHGKHUHLQVKDOOSUHYHQW&RQVXOWDQWIURP
HPSOR\LQJLQGHSHQGHQWDVVRFLDWHVDQGVXEFRQVXOWDQWVDV&RQVXOWDQWPD\GHHPDSSURSULDWHWRDVVLVW
LQWKHSHUIRUPDQFHRIVHUYLFHVKHUHXQGHU
,QGHSHQGHQW&RQWUDFWRU
&RQVXOWDQW LV UHWDLQHG DV DQ LQGHSHQGHQW FRQWUDFWRU DQG LV QRW DQ HPSOR\HH RI &LW\ 1R
HPSOR\HHRUDJHQWRI&RQVXOWDQWVKDOOEHFRPHDQHPSOR\HHRI&LW\7KHZRUNWREHSHUIRUPHGVKDOOEH
LQDFFRUGDQFHZLWKWKHZRUNGHVFULEHGLQWKLV$JUHHPHQWVXEMHFWWRVXFKGLUHFWLRQVDQGDPHQGPHQWV
IURP&LW\DVKHUHLQSURYLGHG
,QVXUDQFH &RQVXOWDQW VKDOO QRW FRPPHQFH ZRUN IRU WKH &LW\ XQWLO LW KDV SURYLGHG
HYLGHQFHVDWLVIDFWRU\WRWKH&LW\LWKDVVHFXUHGDOOLQVXUDQFHUHTXLUHGXQGHUWKLVVHFWLRQ,QDGGLWLRQ
&RQVXOWDQWVKDOOQRWDOORZDQ\VXEFRQWUDFWRUWRFRPPHQFHZRUNRQDQ\VXEFRQWUDFWXQWLOLWKDVVHFXUHG
DOOLQVXUDQFHUHTXLUHGXQGHUWKLVVHFWLRQ
D &RPPHUFLDO*HQHUDO/LDELOLW\
L 7KH&RQVXOWDQWVKDOOWDNHRXWDQGPDLQWDLQGXULQJWKHSHUIRUPDQFHRIDOO
ZRUNXQGHUWKLV$JUHHPHQWLQDPRXQWVQRWOHVVWKDQVSHFLILHGKHUHLQ&RPPHUFLDO*HQHUDO/LDELOLW\
,QVXUDQFHLQDIRUPDQGZLWKLQVXUDQFHFRPSDQLHVDFFHSWDEOHWRWKH&LW\
LL &RYHUDJHIRU&RPPHUFLDO*HQHUDO/LDELOLW\LQVXUDQFHVKDOOEHDWOHDVWDV
EURDGDVWKHIROORZLQJ
,QVXUDQFH6HUYLFHV2IILFH&RPPHUFLDO*HQHUDO/LDELOLW\FRYHUDJH
2FFXUUHQFH)RUP&* RUH[DFWHTXLYDOHQW
LLL &RPPHUFLDO*HQHUDO/LDELOLW\,QVXUDQFHPXVWLQFOXGHFRYHUDJHIRUWKH
IROORZLQJ
%RGLO\,QMXU\DQG3URSHUW\'DPDJH
3HUVRQDO,QMXU\$GYHUWLVLQJ,QMXU\
3UHPLVHV2SHUDWLRQV/LDELOLW\
3URGXFWV&RPSOHWHG2SHUDWLRQV/LDELOLW\
$JJUHJDWH/LPLWVWKDW$SSO\SHU3URMHFW
([SORVLRQ&ROODSVHDQG8QGHUJURXQG 8&; H[FOXVLRQGHOHWHG
&RQWUDFWXDO/LDELOLW\ZLWKUHVSHFWWRWKLV$JUHHPHQW
3URSHUW\'DPDJH
,QGHSHQGHQW&RQVXOWDQWV&RYHUDJH
LY 7KH SROLF\ VKDOO FRQWDLQ QR HQGRUVHPHQWV RU SURYLVLRQV OLPLWLQJ
FRYHUDJH IRU FRQWUDFWXDO OLDELOLW\ FURVV OLDELOLW\ H[FOXVLRQ IRU FODLPV RU VXLWV E\ RQH LQVXUHG
DJDLQVWDQRWKHU SURGXFWVFRPSOHWHGRSHUDWLRQVOLDELOLW\ RU FRQWDLQDQ\RWKHUH[FOXVLRQFRQWUDU\
WRWKH$JUHHPHQW
Y 7KHSROLF\VKDOOJLYH&LW\LWVRIILFLDOVRIILFHUVHPSOR\HHVDJHQWVDQG
&LW\GHVLJQDWHGYROXQWHHUVDGGLWLRQDOLQVXUHGVWDWXVXVLQJ,62HQGRUVHPHQWIRUPV&*DQG
RUHQGRUVHPHQWVSURYLGLQJWKHH[DFWVDPHFRYHUDJH
ATTACHMENT 1 - Page 3 of 12
YL 7KHJHQHUDOOLDELOLW\SURJUDPPD\XWLOL]HHLWKHUGHGXFWLEOHVRUSURYLGH
FRYHUDJHH[FHVVRIDVHOILQVXUHGUHWHQWLRQVXEMHFWWRZULWWHQDSSURYDOE\WKH&LW\DQGSURYLGHGWKDW
VXFKGHGXFWLEOHVVKDOOQRWDSSO\WRWKH&LW\DVDQDGGLWLRQDOLQVXUHG
E $XWRPRELOH/LDELOLW\
L $WDOOWLPHVGXULQJWKHSHUIRUPDQFHRIWKHZRUNXQGHUWKLV$JUHHPHQW
WKH &RQVXOWDQW VKDOO PDLQWDLQ $XWRPRELOH /LDELOLW\ ,QVXUDQFH IRU ERGLO\ LQMXU\ DQG SURSHUW\ GDPDJH
LQFOXGLQJFRYHUDJHIRURZQHGQRQRZQHGDQGKLUHGYHKLFOHVLQDIRUPDQGZLWKLQVXUDQFHFRPSDQLHV
DFFHSWDEOHWRWKH&LW\
LL &RYHUDJHIRUDXWRPRELOHOLDELOLW\LQVXUDQFHVKDOOEHDWOHDVWDVEURDGDV
,QVXUDQFH6HUYLFHV2IILFH)RUP1XPEHU&$FRYHULQJDXWRPRELOHOLDELOLW\ &RYHUDJH6\PERO
DQ\DXWR
LLL 7KHSROLF\VKDOOJLYH&LW\LWVRIILFLDOVRIILFHUVHPSOR\HHVDJHQWVDQG
&LW\GHVLJQDWHGYROXQWHHUVDGGLWLRQDOLQVXUHGVWDWXV
LY 6XEMHFWWRZULWWHQDSSURYDOE\WKH&LW\WKHDXWRPRELOHOLDELOLW\SURJUDP
PD\XWLOL]HGHGXFWLEOHVSURYLGHGWKDWVXFKGHGXFWLEOHVVKDOOQRWDSSO\WRWKH&LW\DVDQDGGLWLRQDO
LQVXUHGEXWQRWDVHOILQVXUHGUHWHQWLRQ
F :RUNHUV¶&RPSHQVDWLRQ(PSOR\HU¶V/LDELOLW\
L &RQVXOWDQWFHUWLILHVWKDWKHVKHLVDZDUHRIWKHSURYLVLRQVRI6HFWLRQ
RIWKH&DOLIRUQLD/DERU&RGHZKLFKUHTXLUHVHYHU\HPSOR\HUWREHLQVXUHGDJDLQVWOLDELOLW\IRUZRUNHUV¶
FRPSHQVDWLRQRUWRXQGHUWDNHVHOILQVXUDQFHLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKDWFRGHDQGKHVKH
ZLOOFRPSO\ZLWKVXFKSURYLVLRQVEHIRUHFRPPHQFLQJZRUNXQGHUWKLV$JUHHPHQW
LL 7RWKHH[WHQW&RQVXOWDQWKDVHPSOR\HHVDWDQ\WLPHGXULQJWKHWHUPRI
WKLV$JUHHPHQWDWDOOWLPHVGXULQJWKHSHUIRUPDQFHRIWKHZRUNXQGHUWKLV$JUHHPHQWWKH&RQVXOWDQW
VKDOOPDLQWDLQIXOOFRPSHQVDWLRQLQVXUDQFHIRUDOOSHUVRQVHPSOR\HGGLUHFWO\E\KLPKHUWRFDUU\RXWWKH
ZRUN FRQWHPSODWHG XQGHU WKLV $JUHHPHQW DOO LQ DFFRUGDQFH ZLWKWKH ³:RUNHUV¶ &RPSHQVDWLRQ DQG
,QVXUDQFH $FW´ 'LYLVLRQ ,9 RI WKH /DERU &RGH RI WKH 6WDWH RI &DOLIRUQLD DQG DQ\ DFWV DPHQGDWRU\
WKHUHRIDQG(PSOR\HU¶V/LDELOLW\&RYHUDJHLQDPRXQWVLQGLFDWHGKHUHLQ&RQVXOWDQWVKDOOUHTXLUHDOO
VXEFRQVXOWDQWV WR REWDLQ DQG PDLQWDLQ IRU WKH SHULRG UHTXLUHG E\ WKLV $JUHHPHQW ZRUNHUV¶
FRPSHQVDWLRQFRYHUDJHRIWKHVDPHW\SHDQGOLPLWVDVVSHFLILHGLQWKLVVHFWLRQ
G 3URIHVVLRQDO/LDELOLW\ (UURUVDQG2PLVVLRQV
$W DOO WLPHV GXULQJ WKH SHUIRUPDQFH RI WKH ZRUN XQGHU WKLV $JUHHPHQW WKH &RQVXOWDQW VKDOO
PDLQWDLQSURIHVVLRQDOOLDELOLW\RU(UURUVDQG2PLVVLRQVLQVXUDQFHDSSURSULDWHWRLWVSURIHVVLRQLQDIRUP
DQG ZLWK LQVXUDQFH FRPSDQLHV DFFHSWDEOH WR WKH &LW\ DQG LQ DQ DPRXQW LQGLFDWHG KHUHLQ 7KLV
LQVXUDQFHVKDOOEHHQGRUVHGWRLQFOXGHFRQWUDFWXDOOLDELOLW\DSSOLFDEOHWRWKLV$JUHHPHQWDQGVKDOOEH
ZULWWHQRQDSROLF\IRUPFRYHUDJHVSHFLILFDOO\GHVLJQHGWRSURWHFWDJDLQVWDFWVHUURUVRURPLVVLRQVRI
WKH&RQVXOWDQW³&RYHUHG3URIHVVLRQDO6HUYLFHV´DVGHVLJQDWHGLQWKHSROLF\PXVWVSHFLILFDOO\LQFOXGH
ZRUNSHUIRUPHGXQGHUWKLV$JUHHPHQW7KHSROLF\PXVW³SD\RQEHKDOIRI´WKHLQVXUHGDQGPXVWLQFOXGH
DSURYLVLRQHVWDEOLVKLQJWKHLQVXUHU
VGXW\WRGHIHQG
H 0LQLPXP3ROLF\/LPLWV5HTXLUHG
L 7KHIROORZLQJLQVXUDQFHOLPLWVDUHUHTXLUHGIRUWKH$JUHHPHQW
ATTACHMENT 1 - Page 4 of 12
&RPELQHG6LQJOH/LPLW
&RPPHUFLDO*HQHUDO/LDELOLW\ SHURFFXUUHQFHDJJUHJDWH
IRUERGLO\LQMXU\SHUVRQDOLQMXU\DQGSURSHUW\
GDPDJH
$XWRPRELOH/LDELOLW\ FRPELQHGVLQJOHOLPLW
(PSOR\HU¶V/LDELOLW\ SHUDFFLGHQWRUGLVHDVH
3URIHVVLRQDO/LDELOLW\ SHU FODLP DQG DJJUHJDWH HUURUV DQG
RPLVVLRQV
LL 'HIHQVHFRVWVVKDOOEHSD\DEOHLQDGGLWLRQWRWKHOLPLWV
LLL 5HTXLUHPHQWVRIVSHFLILFFRYHUDJHRUOLPLWVFRQWDLQHGLQWKLVVHFWLRQDUH
QRWLQWHQGHGDVDOLPLWDWLRQRQFRYHUDJHOLPLWVRURWKHUUHTXLUHPHQWRUDZDLYHURIDQ\FRYHUDJH
QRUPDOO\SURYLGHGE\DQ\LQVXUDQFH$Q\DYDLODEOHFRYHUDJHVKDOOEHSURYLGHGWRWKHSDUWLHVUHTXLUHG
WREHQDPHGDV$GGLWLRQDO,QVXUHGSXUVXDQWWRWKLV$JUHHPHQW
I (YLGHQFH5HTXLUHG
3ULRUWRH[HFXWLRQRIWKH$JUHHPHQWWKH&RQVXOWDQWVKDOOILOHZLWKWKH&LW\HYLGHQFHRI
LQVXUDQFHIURPDQLQVXUHURULQVXUHUVFHUWLI\LQJWRWKHFRYHUDJHRIDOOLQVXUDQFHUHTXLUHGKHUHLQ6XFK
HYLGHQFHVKDOOLQFOXGHRULJLQDOFRSLHVRIWKH,62&* RULQVXUHU¶VHTXLYDOHQW VLJQHGE\WKH
LQVXUHU¶VUHSUHVHQWDWLYHDQG&HUWLILFDWHRI,QVXUDQFH $FRUG)RUP6RUHTXLYDOHQW WRJHWKHUZLWK
UHTXLUHGHQGRUVHPHQWV$OOHYLGHQFHRILQVXUDQFHVKDOOEHVLJQHGE\DSURSHUO\DXWKRUL]HGRIILFHU
DJHQW RU TXDOLILHG UHSUHVHQWDWLYH RI WKH LQVXUHU DQG VKDOO FHUWLI\ WKH QDPHV RI WKH LQVXUHG DQ\
DGGLWLRQDO LQVXUHGV ZKHUH DSSURSULDWH WKH W\SH DQG DPRXQW RIWKH LQVXUDQFH WKH ORFDWLRQ DQG
RSHUDWLRQVWRZKLFKWKHLQVXUDQFHDSSOLHVDQGWKHH[SLUDWLRQGDWHRIVXFKLQVXUDQFH
J 3ROLF\3URYLVLRQV5HTXLUHG
L &RQVXOWDQW VKDOO SURYLGH WKH &LW\ DW OHDVW WKLUW\ GD\V SULRU ZULWWHQ
QRWLFH RI FDQFHOODWLRQ RI DQ\ SROLF\ UHTXLUHG E\ WKLV $JUHHPHQW H[FHSW WKDW WKH &RQVXOWDQW VKDOO
SURYLGH DW OHDVW WHQ GD\V SULRU ZULWWHQ QRWLFH RI FDQFHOODWLRQ RI DQ\ VXFK SROLF\ GXH WR QRQ
SD\PHQWRISUHPLXP,IDQ\RIWKHUHTXLUHGFRYHUDJHLVFDQFHOOHGRUH[SLUHVGXULQJWKHWHUPRIWKLV
$JUHHPHQWWKH&RQVXOWDQWVKDOOGHOLYHUUHQHZDOFHUWLILFDWH V LQFOXGLQJWKH*HQHUDO/LDELOLW\$GGLWLRQDO
,QVXUHG(QGRUVHPHQWWRWKH&LW\DWOHDVWWHQ GD\VSULRUWRWKHHIIHFWLYHGDWHRIFDQFHOODWLRQRU
H[SLUDWLRQ
LL 7KH&RPPHUFLDO*HQHUDO/LDELOLW\3ROLF\DQG$XWRPRELOH3ROLF\VKDOOHDFK
FRQWDLQDSURYLVLRQVWDWLQJWKDW&RQVXOWDQW¶VSROLF\LVSULPDU\LQVXUDQFHDQGWKDWDQ\LQVXUDQFHVHOI
LQVXUDQFHRURWKHUFRYHUDJHPDLQWDLQHGE\WKH&LW\RUDQ\QDPHGLQVXUHGVVKDOOQRWEHFDOOHGXSRQWR
FRQWULEXWHWRDQ\ORVV
LLL 7KH UHWURDFWLYH GDWH LI DQ\ RI HDFK SROLF\ LV WR EH QRODWHU WKDQ WKH
HIIHFWLYHGDWHRIWKLV$JUHHPHQW&RQVXOWDQWVKDOOPDLQWDLQVXFKFRYHUDJHFRQWLQXRXVO\IRUDSHULRGRI
DWOHDVWWKUHH\HDUVDIWHUWKHFRPSOHWLRQRIWKHZRUNXQGHUWKLV$JUHHPHQW&RQVXOWDQWVKDOOSXUFKDVH
DRQH \HDUH[WHQGHGUHSRUWLQJSHULRG$ LIWKHUHWURDFWLYHGDWHLVDGYDQFHGSDVWWKHHIIHFWLYHGDWH
RIWKLV$JUHHPHQW % LIWKHSROLF\LVFDQFHOOHGRUQRWUHQHZHG RU& LIWKHSROLF\LVUHSODFHGE\DQRWKHU
FODLPVPDGHSROLF\ZLWKDUHWURDFWLYHGDWHVXEVHTXHQWWRWKHHIIHFWLYHGDWHRIWKLV$JUHHPHQW
ATTACHMENT 1 - Page 5 of 12
LY $OO UHTXLUHG LQVXUDQFH FRYHUDJHV H[FHSW IRU WKH SURIHVVLRQDO OLDELOLW\
FRYHUDJHVKDOOFRQWDLQRUEHHQGRUVHGWRSURYLGHDZDLYHURIVXEURJDWLRQLQIDYRURIWKH&LW\LWV
RIILFLDOVRIILFHUVHPSOR\HHVDJHQWVDQGYROXQWHHUVRUVKDOOVSHFLILFDOO\DOORZ&RQVXOWDQWRURWKHUV
SURYLGLQJLQVXUDQFHHYLGHQFHLQFRPSOLDQFHZLWKWKHVHVSHFLILFDWLRQVWRZDLYHWKHLUULJKWRIUHFRYHU\
SULRUWRDORVV&RQVXOWDQWKHUHE\ZDLYHVLWVRZQULJKWRIUHFRYHU\DJDLQVW&LW\DQGVKDOOUHTXLUH
VLPLODUZULWWHQH[SUHVVZDLYHUVDQGLQVXUDQFHFODXVHVIURPHDFKRILWVVXEFRQVXOWDQWV
Y 7KHOLPLWVVHWIRUWKKHUHLQVKDOODSSO\VHSDUDWHO\WRHDFKLQVXUHGDJDLQVW
ZKRPFODLPVDUHPDGHRUVXLWVDUHEURXJKWH[FHSWZLWKUHVSHFWWRWKHOLPLWVRIOLDELOLW\)XUWKHUWKH
OLPLWVVHWIRUWKKHUHLQVKDOOQRWEHFRQVWUXHGWRUHOLHYHWKH&RQVXOWDQWIURPOLDELOLW\LQH[FHVVRIVXFK
FRYHUDJH QRU VKDOO LW OLPLW WKH &RQVXOWDQW¶V LQGHPQLILFDWLRQ REOLJDWLRQV WR WKH &LW\ DQG VKDOO QRW
SUHFOXGHWKH&LW\IURPWDNLQJVXFKRWKHUDFWLRQVDYDLODEOHWRWKH&LW\XQGHURWKHUSURYLVLRQVRIWKH
$JUHHPHQWRUODZ
K 4XDOLI\LQJ,QVXUHUV
L $OOSROLFLHVUHTXLUHGVKDOOEHLVVXHGE\DFFHSWDEOHLQVXUDQFHFRPSDQLHV
DVGHWHUPLQHGE\WKH&LW\ZKLFKVDWLVI\WKHIROORZLQJPLQLPXPUHTXLUHPHQWV
(DFKVXFKSROLF\VKDOOEHIURPDFRPSDQ\RUFRPSDQLHVZLWKD
FXUUHQW$0%HVW
VUDWLQJRIQROHVVWKDQ$ 9,,DQGDGPLWWHGWRWUDQVDFWLQWKHEXVLQHVVRI
LQVXUDQFHLQWKH6WDWHRI&DOLIRUQLDRURWKHUZLVHDOORZHGWRSODFHLQVXUDQFHWKURXJKVXUSOXVOLQH
EURNHUVXQGHUDSSOLFDEOHSURYLVLRQVRIWKH&DOLIRUQLD,QVXUDQFH&RGHRUDQ\IHGHUDOODZ
L $GGLWLRQDO,QVXUDQFH3URYLVLRQV
L 7KH IRUHJRLQJ UHTXLUHPHQWV DV WR WKH W\SHV DQG OLPLWV RI LQVXUDQFH
FRYHUDJH WR EH PDLQWDLQHG E\ &RQVXOWDQW DQG DQ\ DSSURYDO RIVDLGLQVXUDQFH E\ WKH &LW\LV QRW
LQWHQGHG WR DQG VKDOO QRW LQ DQ\ PDQQHU OLPLW RU TXDOLI\ WKH OLDELOLWLHV DQG REOLJDWLRQV RWKHUZLVH
DVVXPHGE\WKH&RQVXOWDQWSXUVXDQWWRWKLV$JUHHPHQWLQFOXGLQJEXWQRWOLPLWHGWRWKHSURYLVLRQV
FRQFHUQLQJLQGHPQLILFDWLRQ
LL ,IDWDQ\WLPHGXULQJWKHOLIHRIWKH$JUHHPHQWDQ\SROLF\RILQVXUDQFH
UHTXLUHG XQGHU WKLV $JUHHPHQW GRHV QRW FRPSO\ ZLWK WKHVH VSHFLILFDWLRQV RU LV FDQFHOHG DQG QRW
UHSODFHG&LW\KDVWKHULJKWEXWQRWWKHGXW\WRREWDLQWKHLQVXUDQFHLWGHHPVQHFHVVDU\DQGDQ\
SUHPLXPSDLGE\&LW\ZLOOEHSURPSWO\UHLPEXUVHGE\&RQVXOWDQWRU&LW\ZLOOZLWKKROGDPRXQWVVXIILFLHQW
WRSD\SUHPLXPIURP&RQVXOWDQWSD\PHQWV,QWKHDOWHUQDWLYH&LW\PD\FDQFHOWKLV$JUHHPHQW
LLL 7KH&LW\PD\UHTXLUHWKH&RQVXOWDQWWRSURYLGHFRPSOHWHFRSLHVRIDOO
LQVXUDQFHSROLFLHVLQHIIHFWIRUWKHGXUDWLRQRIWKH3URMHFW
LY 1HLWKHU WKH &LW\ QRU DQ\ RI LWV RIILFLDOV RIILFHUV HPSOR\HHV DJHQWV RU
YROXQWHHUVVKDOOEHSHUVRQDOO\UHVSRQVLEOHIRUDQ\OLDELOLW\DULVLQJXQGHURUE\YLUWXHRIWKLV$JUHHPHQW
M 6XEFRQVXOWDQW ,QVXUDQFH 5HTXLUHPHQWV &RQVXOWDQW VKDOO QRWDOORZ DQ\
VXEFRQWUDFWRUV RU VXEFRQVXOWDQWV WR FRPPHQFH ZRUN RQ DQ\ VXEFRQWUDFW XQWLO WKH\ KDYH SURYLGHG
HYLGHQFHVDWLVIDFWRU\WRWKH&LW\WKDWWKH\KDYHVHFXUHGDOOLQVXUDQFHUHTXLUHGXQGHUWKLVVHFWLRQ
3ROLFLHVRIFRPPHUFLDOJHQHUDOOLDELOLW\LQVXUDQFHSURYLGHGE\VXFKVXEFRQWUDFWRUVRUVXEFRQVXOWDQWV
VKDOOEHHQGRUVHGWRQDPHWKH&LW\DVDQDGGLWLRQDOLQVXUHGXVLQJ,62IRUP&*RUDQ
HQGRUVHPHQW SURYLGLQJ WKH H[DFW VDPH FRYHUDJH ,I UHTXHVWHG E\ &RQVXOWDQW &LW\ PD\ DSSURYH
GLIIHUHQWVFRSHVRUPLQLPXPOLPLWVRILQVXUDQFHIRUSDUWLFXODUVXEFRQWUDFWRUVRUVXEFRQVXOWDQWV
ATTACHMENT 1 - Page 6 of 12
,QGHPQLILFDWLRQ.
D 7RWKHIXOOHVWH[WHQWSHUPLWWHGE\ODZ&RQVXOWDQWVKDOOGHIHQG ZLWKFRXQVHORI
&LW\¶VFKRRVLQJ LQGHPQLI\DQGKROGWKH&LW\LWVRIILFLDOVRIILFHUVHPSOR\HHVYROXQWHHUVDQGDJHQWV
IUHHDQGKDUPOHVVIURPDQ\DQGDOOFODLPVGHPDQGVFDXVHVRIDFWLRQFRVWVH[SHQVHVOLDELOLW\ORVV
GDPDJHRULQMXU\RIDQ\NLQGLQODZRUHTXLW\WRSURSHUW\RUSHUVRQVLQFOXGLQJZURQJIXOGHDWKLQDQ\
PDQQHUDULVLQJRXWRISHUWDLQLQJWRRULQFLGHQWWRDQ\DFWVHUURUVRURPLVVLRQVRUZLOOIXOPLVFRQGXFWRI
&RQVXOWDQWLWVRIILFLDOVRIILFHUVHPSOR\HHVVXEFRQWUDFWRUVFRQVXOWDQWVRUDJHQWVLQFRQQHFWLRQZLWK
WKHSHUIRUPDQFHRIWKH&RQVXOWDQW¶VVHUYLFHVWKH3URMHFWRUWKLV$JUHHPHQWLQFOXGLQJZLWKRXWOLPLWDWLRQ
WKH SD\PHQW RI DOO GDPDJHV H[SHUW ZLWQHVV IHHV DQG DWWRUQH\¶VIHHV DQG RWKHU UHODWHG FRVWV DQG
H[SHQVHV&RQVXOWDQW
VREOLJDWLRQWRLQGHPQLI\VKDOOQRWEHUHVWULFWHGWRLQVXUDQFHSURFHHGVLIDQ\
UHFHLYHGE\&RQVXOWDQWWKH&LW\LWVRIILFLDOVRIILFHUVHPSOR\HHVDJHQWVRUYROXQWHHUV
E ,I&RQVXOWDQW¶VREOLJDWLRQWRGHIHQGLQGHPQLI\DQGRUKROGKDUPOHVVDULVHVRXWRI
&RQVXOWDQW¶VSHUIRUPDQFHRI³GHVLJQSURIHVVLRQDO´VHUYLFHV DVWKDWWHUPLVGHILQHGXQGHU&LYLO&RGH
VHFWLRQ WKHQ DQG RQO\ WR WKH H[WHQW UHTXLUHG E\ &LYLO &RGH VHFWLRQ ZKLFK LV IXOO\
LQFRUSRUDWHGKHUHLQ&RQVXOWDQW¶VLQGHPQLILFDWLRQREOLJDWLRQVKDOOEHOLPLWHGWRFODLPVWKDWDULVHRXWRI
SHUWDLQWRRUUHODWHWRWKHQHJOLJHQFHUHFNOHVVQHVVRUZLOOIXOPLVFRQGXFWRIWKH&RQVXOWDQWDQGXSRQ
&RQVXOWDQWREWDLQLQJDILQDODGMXGLFDWLRQE\DFRXUWRIFRPSHWHQWMXULVGLFWLRQ&RQVXOWDQW¶VOLDELOLW\IRU
VXFKFODLPLQFOXGLQJWKHFRVWWRGHIHQGVKDOOQRWH[FHHGWKH&RQVXOWDQW¶VSURSRUWLRQDWHSHUFHQWDJHRI
IDXOW
&DOLIRUQLD/DERU&RGH5HTXLUHPHQWV
D &RQVXOWDQWLVDZDUHRIWKHUHTXLUHPHQWVRI&DOLIRUQLD/DERU&RGH6HFWLRQV
HWVHTDQGHWVHTZKLFKUHTXLUHWKHSD\PHQWRISUHYDLOLQJZDJHUDWHVDQGWKHSHUIRUPDQFHRI
RWKHUUHTXLUHPHQWVRQFHUWDLQ³SXEOLFZRUNV´DQG³PDLQWHQDQFH´SURMHFWV ³3UHYDLOLQJ:DJH/DZV´ ,I
WKHVHUYLFHVDUHEHLQJSHUIRUPHGDVSDUWRIDQDSSOLFDEOH³SXEOLFZRUNV´RU³PDLQWHQDQFH´SURMHFWDV
GHILQHGE\WKH3UHYDLOLQJ:DJH/DZVDQGLIWKHWRWDOFRPSHQVDWLRQLVRUPRUH&RQVXOWDQW
DJUHHVWRIXOO\FRPSO\ZLWKVXFK3UHYDLOLQJ:DJH/DZV&RQVXOWDQWVKDOOGHIHQGLQGHPQLI\DQGKROG
WKH&LW\LWVRIILFLDOVRIILFHUVHPSOR\HHVDQGDJHQWVIUHHDQGKDUPOHVVIURPDQ\FODLPVOLDELOLWLHV
FRVWVSHQDOWLHVRULQWHUHVWDULVLQJRXWRIDQ\IDLOXUHRUDOOHJHGIDLOXUHWRFRPSO\ZLWKWKH3UHYDLOLQJ
:DJH/DZV,WVKDOOEHPDQGDWRU\XSRQWKH &RQVXOWDQWDQGDOOVXEFRQVXOWDQWVWRFRPSO\ZLWKDOO
&DOLIRUQLD/DERU&RGHSURYLVLRQVZKLFKLQFOXGHEXWDUHQRWOLPLWHGWRSUHYDLOLQJZDJHV /DERU&RGH
6HFWLRQVDQG HPSOR\PHQWRIDSSUHQWLFHV /DERU&RGH6HFWLRQ FHUWLILHG
SD\UROOUHFRUGV /DERU&RGH6HFWLRQVDQG KRXUVRIODERU /DERU&RGH6HFWLRQVDQG
DQG GHEDUPHQW RI FRQWUDFWRUV DQG VXEFRQWUDFWRUV /DERU &RGH 6HFWLRQ 7KH
UHTXLUHPHQWWRVXEPLWFHUWLILHGSD\UROOUHFRUGVGLUHFWO\WRWKH/DERU&RPPLVVLRQHUXQGHU/DERU&RGH
VHFWLRQVKDOOQRWDSSO\WRZRUNSHUIRUPHGRQDSXEOLFZRUNVSURMHFWWKDWLVH[HPSWSXUVXDQWWR
WKHVPDOOSURMHFWH[HPSWLRQVSHFLILHGLQ/DERU&RGH6HFWLRQ
E ,IWKHVHUYLFHVDUHEHLQJSHUIRUPHGDVSDUWRIDQDSSOLFDEOH³SXEOLFZRUNV´RU
³PDLQWHQDQFH´SURMHFWWKHQSXUVXDQWWR/DERU&RGH6HFWLRQVDQGWKH&RQVXOWDQWDQG
DOO VXEFRQVXOWDQWV SHUIRUPLQJ VXFK VHUYLFHV PXVW EH UHJLVWHUHGZLWK WKH 'HSDUWPHQW RI ,QGXVWULDO
5HODWLRQV&RQVXOWDQWVKDOOPDLQWDLQUHJLVWUDWLRQIRUWKHGXUDWLRQRIWKH3URMHFWDQGUHTXLUHWKHVDPHRI
DQ\ VXEFRQVXOWDQWV DV DSSOLFDEOH 1RWZLWKVWDQGLQJ WKH IRUHJRLQJ WKH FRQWUDFWRU UHJLVWUDWLRQ
UHTXLUHPHQWVPDQGDWHGE\/DERU&RGH6HFWLRQVDQGVKDOOQRWDSSO\WRZRUNSHUIRUPHG
RQDSXEOLFZRUNVSURMHFWWKDWLVH[HPSWSXUVXDQWWRWKHVPDOOSURMHFWH[HPSWLRQVSHFLILHGLQ/DERU
&RGH6HFWLRQVDQG
F 7KLV$JUHHPHQWPD\DOVREHVXEMHFWWRFRPSOLDQFHPRQLWRULQJDQGHQIRUFHPHQW
E\WKH'HSDUWPHQWRI,QGXVWULDO5HODWLRQV,WVKDOOEH&RQVXOWDQW¶VVROHUHVSRQVLELOLW\WRFRPSO\ZLWKDOO
ATTACHMENT 1 - Page 7 of 12
DSSOLFDEOHUHJLVWUDWLRQDQGODERUFRPSOLDQFHUHTXLUHPHQWV$Q\VWRSRUGHUVLVVXHGE\WKH'HSDUWPHQW
RI,QGXVWULDO5HODWLRQVDJDLQVW&RQVXOWDQWRUDQ\VXEFRQWUDFWRUWKDWDIIHFW&RQVXOWDQW¶VSHUIRUPDQFHRI
VHUYLFHVLQFOXGLQJDQ\GHOD\VKDOOEH&RQVXOWDQW¶VVROHUHVSRQVLELOLW\$Q\GHOD\DULVLQJRXWRIRU
UHVXOWLQJ IURP VXFK VWRS RUGHUV VKDOO EH FRQVLGHUHG &RQVXOWDQWFDXVHG GHOD\ DQG VKDOO QRW EH
FRPSHQVDEOHE\WKH&LW\&RQVXOWDQWVKDOOGHIHQGLQGHPQLI\DQGKROGWKH&LW\LWVRIILFLDOVRIILFHUV
HPSOR\HHVDQGDJHQWVIUHHDQGKDUPOHVVIURPDQ\FODLPRUOLDELOLW\DULVLQJRXWRIVWRSRUGHUVLVVXHGE\
WKH'HSDUWPHQWRI,QGXVWULDO5HODWLRQVDJDLQVW&RQVXOWDQWRUDQ\VXEFRQWUDFWRU
9HULILFDWLRQRI(PSOR\PHQW(OLJLELOLW\
%\H[HFXWLQJWKLV$JUHHPHQW&RQVXOWDQWYHULILHVWKDWLWIXOO\FRPSOLHVZLWKDOOUHTXLUHPHQWVDQG
UHVWULFWLRQVRIVWDWHDQGIHGHUDOODZUHVSHFWLQJWKHHPSOR\PHQWRIXQGRFXPHQWHGDOLHQVLQFOXGLQJEXW
QRWOLPLWHGWRWKH,PPLJUDWLRQ5HIRUPDQG&RQWURO$FWRI DVPD\EHDPHQGHGIURPWLPHWRWLPH
DQGVKDOOUHTXLUHDOOVXEFRQVXOWDQWVDQGVXEVXEFRQVXOWDQWVWRFRPSO\ZLWKWKHVDPH
/DZVDQG9HQXH
7KLV$JUHHPHQWVKDOOEHLQWHUSUHWHGLQDFFRUGDQFHZLWKWKHODZVRIWKH6WDWHRI&DOLIRUQLD,I
DQ\DFWLRQLVEURXJKWWRLQWHUSUHWRUHQIRUFHDQ\WHUPRIWKLV$JUHHPHQWWKHDFWLRQVKDOOEHEURXJKWLQD
VWDWHRUIHGHUDOFRXUWVLWXDWHGLQWKH&RXQW\RI2UDQJH6WDWHRI&DOLIRUQLD
7HUPLQDWLRQRU$EDQGRQPHQW
D &LW\KDVWKHULJKWWRWHUPLQDWHRUDEDQGRQDQ\SRUWLRQRUDOORIWKHZRUNXQGHUWKLV
$JUHHPHQWE\JLYLQJWHQ FDOHQGDUGD\VZULWWHQQRWLFHWR&RQVXOWDQW,QVXFKHYHQW&LW\VKDOOEH
LPPHGLDWHO\JLYHQWLWOHDQGSRVVHVVLRQWRDOORULJLQDOILHOGQRWHVGUDZLQJVDQGVSHFLILFDWLRQVZULWWHQ
UHSRUWVDQGRWKHUGRFXPHQWVSURGXFHGRUGHYHORSHGIRUWKDWSRUWLRQRIWKHZRUNFRPSOHWHGDQGRU
EHLQJDEDQGRQHG&LW\VKDOOSD\&RQVXOWDQWWKHUHDVRQDEOHYDOXHRIVHUYLFHVUHQGHUHGIRUDQ\SRUWLRQ
RIWKHZRUNFRPSOHWHGSULRUWRWHUPLQDWLRQ,IVDLGWHUPLQDWLRQRFFXUVSULRUWRFRPSOHWLRQRIDQ\WDVNIRU
WKH3URMHFWIRUZKLFKDSD\PHQWUHTXHVWKDVQRWEHHQUHFHLYHGWKHFKDUJHIRUVHUYLFHVSHUIRUPHG
GXULQJVXFKWDVNVKDOOEHWKHUHDVRQDEOHYDOXHRIVXFKVHUYLFHVEDVHGRQDQDPRXQWPXWXDOO\DJUHHG
WRE\&LW\DQG&RQVXOWDQWRIWKHSRUWLRQRIVXFKWDVNFRPSOHWHGEXWQRWSDLGSULRUWRVDLGWHUPLQDWLRQ
&LW\VKDOOQRWEHOLDEOHIRUDQ\FRVWVRWKHUWKDQWKHFKDUJHVRUSRUWLRQVWKHUHRIZKLFKDUHVSHFLILHG
KHUHLQ&RQVXOWDQWVKDOOQRWEHHQWLWOHGWRSD\PHQWIRUXQSHUIRUPHGVHUYLFHVDQGVKDOOQRWEHHQWLWOHG
WRGDPDJHVRUFRPSHQVDWLRQIRUWHUPLQDWLRQRIZRUN
E &RQVXOWDQW PD\ WHUPLQDWH LWV REOLJDWLRQ WR SURYLGH IXUWKHU VHUYLFHV XQGHU WKLV
$JUHHPHQWXSRQWKLUW\ FDOHQGDUGD\V¶ZULWWHQQRWLFHWR&LW\RQO\LQWKHHYHQWRIVXEVWDQWLDOIDLOXUH
E\&LW\WRSHUIRUPLQDFFRUGDQFHZLWKWKHWHUPVRIWKLV$JUHHPHQWWKURXJKQRIDXOWRI&RQVXOWDQW
'RFXPHQWV([FHSWDVRWKHUZLVHSURYLGHGLQ³7HUPLQDWLRQRU$EDQGRQPHQW´DERYHDOO
RULJLQDOILHOGQRWHVZULWWHQUHSRUWV'UDZLQJVDQG6SHFLILFDWLRQVDQGRWKHUGRFXPHQWVSURGXFHGRU
GHYHORSHGIRUWKH3URMHFWVKDOOXSRQSD\PHQWLQIXOOIRUWKHVHUYLFHVGHVFULEHGLQWKLV$JUHHPHQWEH
IXUQLVKHGWRDQGEHFRPHWKHSURSHUW\RIWKH&LW\
2UJDQL]DWLRQ
&RQVXOWDQWVKDOODVVLJQ%U\DQ*UXEHUDV3URMHFW0DQDJHU7KH3URMHFW0DQDJHUVKDOOQRWEH
UHPRYHGIURPWKH3URMHFWRUUHDVVLJQHGZLWKRXWWKHSULRUZULWWHQFRQVHQWRIWKH&LW\
/LPLWDWLRQRI$JUHHPHQW
ATTACHMENT 1 - Page 8 of 12
7KLV$JUHHPHQWLVOLPLWHGWRDQGLQFOXGHVRQO\WKHZRUNLQFOXGHGLQWKH3URMHFWGHVFULEHGDERYH
1RWLFH
$Q\QRWLFHRULQVWUXPHQWUHTXLUHGWREHJLYHQRUGHOLYHUHGE\WKLV$JUHHPHQWPD\EHJLYHQRU
GHOLYHUHG E\ GHSRVLWLQJ WKH VDPH LQ DQ\ 8QLWHG 6WDWHV 3RVW 2IILFH FHUWLILHG PDLO UHWXUQ UHFHLSW
UHTXHVWHGSRVWDJHSUHSDLGDGGUHVVHGWR
&,7<
&LW\RI6DQ-XDQ&DSLVWUDQR
3DVHR$GHODQWR
6DQ-XDQ&DSLVWUDQR&$
$WWQ .HQ$O,PDP
&2168/7$17
/DQFH6ROO /XQJKDUG//3
1%UHD%OYG6XLWH
%UHD&$
$WWQ %U\DQ*UXEHU
DQGVKDOOEHHIIHFWLYHXSRQUHFHLSWWKHUHRI
7KLUG3DUW\5LJKWV
1RWKLQJLQWKLV$JUHHPHQWVKDOOEHFRQVWUXHGWRJLYHDQ\ULJKWVRUEHQHILWVWRDQ\RQHRWKHUWKDQ
WKH&LW\DQGWKH&RQVXOWDQW
(TXDO2SSRUWXQLW\(PSOR\PHQW
&RQVXOWDQWUHSUHVHQWVWKDWLWLVDQHTXDORSSRUWXQLW\HPSOR\HUDQGWKDWLWVKDOOQRWGLVFULPLQDWH
DJDLQVWDQ\HPSOR\HHRUDSSOLFDQWIRUHPSOR\PHQWEHFDXVHRIUDFHUHOLJLRQFRORUQDWLRQDORULJLQ
DQFHVWU\ VH[ DJH RU RWKHU LQWHUHVWV SURWHFWHG E\ WKH 6WDWH RU )HGHUDO &RQVWLWXWLRQV 6XFK QRQ
GLVFULPLQDWLRQVKDOOLQFOXGHEXWQRWEHOLPLWHGWRDOODFWLYLWLHVUHODWHGWRLQLWLDOHPSOR\PHQWXSJUDGLQJ
GHPRWLRQWUDQVIHUUHFUXLWPHQWRUUHFUXLWPHQWDGYHUWLVLQJOD\RIIRUWHUPLQDWLRQ
(QWLUH$JUHHPHQW
7KLV$JUHHPHQWZLWKLWVH[KLELWVUHSUHVHQWVWKHHQWLUHXQGHUVWDQGLQJRI&LW\DQG&RQVXOWDQWDV
WRWKRVHPDWWHUVFRQWDLQHGKHUHLQDQGVXSHUVHGHVDQGFDQFHOVDQ\SULRURUFRQWHPSRUDQHRXVRUDORU
ZULWWHQXQGHUVWDQGLQJSURPLVHVRUUHSUHVHQWDWLRQVZLWKUHVSHFWWRWKRVHPDWWHUVFRYHUHGKHUHXQGHU
(DFK3DUW\DFNQRZOHGJHVWKDWQRUHSUHVHQWDWLRQVLQGXFHPHQWVSURPLVHVRUDJUHHPHQWVKDYHEHHQ
PDGHE\DQ\SHUVRQZKLFKDUHQRWLQFRUSRUDWHGKHUHLQDQGWKDWDQ\RWKHUDJUHHPHQWVVKDOOEHYRLG
7KLV$JUHHPHQWPD\QRWEHPRGLILHGRUDOWHUHGH[FHSWLQZULWLQJVLJQHGE\ERWK3DUWLHVKHUHWR7KLVLV
DQLQWHJUDWHG$JUHHPHQW
6HYHUDELOLW\
7KHXQHQIRUFHDELOLW\LQYDOLGLW\RULOOHJDOLW\RIDQ\SURYLVLRQ V RIWKLV$JUHHPHQWVKDOOQRWUHQGHU
WKHUHPDLQLQJSURYLVLRQVXQHQIRUFHDEOHLQYDOLGRULOOHJDO
6XFFHVVRUVDQG$VVLJQV
7KLV $JUHHPHQW VKDOO EH ELQGLQJ XSRQ DQG VKDOO LQXUH WR WKH EHQHILW RI WKH VXFFHVVRUV LQ
LQWHUHVWH[HFXWRUVDGPLQLVWUDWRUVDQGDVVLJQVRIHDFK3DUW\WRWKLV$JUHHPHQW+RZHYHU&RQVXOWDQW
VKDOOQRWDVVLJQRUWUDQVIHUE\RSHUDWLRQRIODZRURWKHUZLVHDQ\RUDOORILWVULJKWVEXUGHQVGXWLHVRU
ATTACHMENT 1 - Page 9 of 12
REOLJDWLRQVZLWKRXWWKHSULRUZULWWHQFRQVHQWRI&LW\$Q\DWWHPSWHGDVVLJQPHQWZLWKRXWVXFKFRQVHQW
VKDOOEHLQYDOLGDQGYRLG
1RQ:DLYHU
1RQHRIWKHSURYLVLRQVRIWKLV$JUHHPHQWVKDOOEHFRQVLGHUHGZDLYHGE\HLWKHU3DUW\XQOHVV
VXFKZDLYHULVVSHFLILFDOO\VSHFLILHGLQZULWLQJ
7LPHRI(VVHQFH
7LPHLVRIWKHHVVHQFHIRUHDFKDQGHYHU\SURYLVLRQRIWKLV$JUHHPHQW
&LW\¶V5LJKWWR(PSOR\2WKHU&RQVXOWDQWV
&LW\UHVHUYHVLWVULJKWWRHPSOR\RWKHUFRQVXOWDQWVLQFOXGLQJHQJLQHHUVLQFRQQHFWLRQZLWKWKLV
3URMHFWRURWKHUSURMHFWV
3URKLELWHG,QWHUHVWV
&RQVXOWDQW PDLQWDLQV DQG ZDUUDQWV WKDW LW KDV QRW HPSOR\HG QRU UHWDLQHG DQ\ FRPSDQ\ RU
SHUVRQ RWKHU WKDQ D ERQD ILGH HPSOR\HH ZRUNLQJ VROHO\ IRU &RQVXOWDQW WR VROLFLW RU VHFXUH WKLV
$JUHHPHQW)XUWKHU&RQVXOWDQWZDUUDQWVWKDWLWKDVQRWSDLGQRUKDVLWDJUHHGWRSD\DQ\FRPSDQ\RU
SHUVRQ RWKHU WKDQ D ERQD ILGH HPSOR\HH ZRUNLQJ VROHO\ IRU &RQVXOWDQW DQ\ IHH FRPPLVVLRQ
SHUFHQWDJHEURNHUDJHIHHJLIWRURWKHUFRQVLGHUDWLRQFRQWLQJHQWXSRQRUUHVXOWLQJIURPWKHDZDUGRU
PDNLQJRIWKLV$JUHHPHQW)RUEUHDFKRUYLRODWLRQRIWKLVZDUUDQW\&LW\VKDOOKDYHWKHULJKWWRUHVFLQG
WKLV$JUHHPHQWZLWKRXWOLDELOLW\)RUWKHWHUPRIWKLV$JUHHPHQWQRGLUHFWRURIILFLDORIILFHURUHPSOR\HH
RI&LW\GXULQJWKHWHUPRIKLVRUKHUVHUYLFHZLWK&LW\VKDOOKDYHDQ\GLUHFWLQWHUHVWLQWKLV$JUHHPHQW
RUREWDLQDQ\SUHVHQWRUDQWLFLSDWHGPDWHULDOEHQHILWDULVLQJWKHUHIURP
>6,*1$785(621)2//2:,1*3$*(@
ATTACHMENT 1 - Page 10 of 12
6,*1$785(3$*()25352)(66,21$/6(59,&(6$*5((0(17
%(7:((17+(&,7<2)6$1-8$1&$3,675$12
$1'/$1&(62// /81*+$5'//3
,1:,71(66:+(5(2)WKH3DUWLHVKDYHH[HFXWHGWKLV$JUHHPHQWDVRIWKHGDWHILUVWZULWWHQ
DERYH
&,7<2)6$1-8$1&$3,675$12 /$1&(62// /81*+$5'//3
%\ %\
%HQMDPLQ6LHJHO&LW\0DQDJHU
,WV
3ULQWHG1DPH
$77(67
%\
0DULD0RUULV&LW\&OHUN
$33529('$672)250
%\
-HII%DOOLQJHU&LW\$WWRUQH\
Partner
Bryan Gruber
ATTACHMENT 1 - Page 11 of 12
ATTACHMENT 1 - Page 12 of 12
REQUEST FOR PROPOSAL
INDEPENDENT AUDIT
SERVICES
CITY OF SAN JUAN CAPISTRANO
FINANCE DEPARTMENT
Intent to Propose Due on April 16, 2021
Proposal Due May 13, 2021
EXHIBIT A - Page 1 of 21
Table of Contents
Page No.
1. Introduction .................................................................................... …. 1
2. Description of the City Government .............................................. …. 2
3. Nature of Services Required ......................................................... …. 6
4. Proposal Format and Content ....................................................... …10
5 Evaluation Criteria ..................................................................... …14
6 Selection Process ..................................................................... …16
Attachment A –Cost Proposal Template
Attachment B –City’s Standard Professional services agreement
EXHIBIT A - Page 2 of 21
1
1. INTRODUCTION
1.1 Purpose
The City of San Juan Capistrano (City) is requesting proposals from qualified
independent certified public accounting firms to audit its financial statements
for the three fiscal years beginning with the fiscal year ending June 30, 2021,
plus two one-year option periods. This Request for Proposal (RFP)
describes the required Scope of Services, the minimum information that must
be included in the proposal, and the evaluation and selection process.
Failure to submit information in accordance with this RFP’s requirements and
procedures may cause for disqualification. For purposes of the RFP, the
terms “Proposer”, “Auditors”, and “Firm” are interchangeable.
The performance of the current auditors, CliftonLarsonAllen, LLP, has been
satisfactory and that firm may participate in the bid process. The City is
seeking bids because the current audit contract has expired.
1.2 Intent to Propose, Due Date and Delivery
Proposers should email their intent to propose via email to
mdaggettshort@sanjuancapistrano.org with a subject line that reads
“Request for Proposal for Independent Audit Services” by the close of
business on April 16, 2021.
Proposals must be submitted via email to
mdaggettshort@sanjuancapistrano.org with a subject line that reads
“Request for Proposal for Independent Audit Services”. The submitted
proposals must be submitted on or before:
Time: 4 p.m.
Date: Thursday, May 13, 2021
Email: mdaggettshort@sanjuancapistrano.org
Proposals received after this time or submitted in any other manner will not
be accepted.
1.3 Questions Concerning the RFP
Questions and requests for clarification and/or explanation regarding any
aspect of this RFP, should be addressed to Michelle Short, Finance
Manager, at mdaggettshort@sanjuancapistrano.org no later than 4:00 on
Thursday, April 22, 2021. Questions submitted after this time will not receive
a response. Submitted questions must list the following title in the subject
line “RFP for Audit Services”.
EXHIBIT A - Page 3 of 21
2
Respondents shall email Michelle Short at the email indicated above to
indicate their interest in receiving any City issued responses. The questions
submitted and the written responses will be sent via email response to all
respondents who have indicated via email their interest in receiving City
responses. Questions will not be taken by phone or fax.
The City is subject to the California Public Records Act and, therefore, the
Respondent’s submissions, including questions and responses, may be
made available to requesting parties if such information is requested from the
City in accordance with the California Public Records Act. Respondents
should exclude from submittal any information considered confidential.
1.4. Project Schedule
The solicitation, receipt and evaluation of Firms and the selection of the
provider of independent audit services will correspond to the following
schedule:
Release of RFP April 7, 2021
Intent to Propose April 16, 2021
Deadline for Written Questions April 22, 2021
Responses to Questions Posted on Web May 3, 2021
Proposals are Due May 13, 2021
Firm Interviews (if held) TBD
City Council Approval of Contract June 1, 2021
All dates are subject to change at the discretion of the City.
1.5 Conditions for Proposal Acceptance
This RFP does not commit the City to award a contract or to pay any
costs incurred for any services. The City, at its sole discretion, reserves
the right to accept or reject any or all proposals received as a result of this
RFP, to negotiate with any qualified source(s), or to cancel this RFP in
part or in its entirety. The City may waive any irregularity in any
proposal. All proposals will become the property of the City. If any
proprietary information is contained in the proposal, it should be clearly
identified.
2. DESCRIPTION OF THE CITY GOVERNMENT
2.1 Contact Person
The audit firm’s principal contact with the City, and contract administrator, will
be Michelle Short, Finance Manager. Ms. Short will coordinate the audit
process each year, as well as the bid process for professional independent
auditing services.
EXHIBIT A - Page 4 of 21
3
2.2 Background Information
San Juan Capistrano is a general law City incorporated in 1961. The City is
located in the southeastern portion of Orange County, approximately 62 miles
south of the City of Los Angeles and 65 miles north of the City of San Diego.
The City occupies a land area of 14.4 square miles and serves a population
of approximately 35,900. The City is empowered to levy a property tax on
both real and personal property located within its boundaries. Increases in
property tax rates are subject to voter approval. It is also empowered by
state statute to extend its corporate limits by annexation, which has occurred
periodically in the past when deemed appropriate by the governing council.
The City is governed by a five-member City Council under the council-
manager form of government. The City Council is elected at large with
staggered four-year terms and the positions of Mayor and Mayor Pro-Tem
are selected amongst Council members annually. The Council appoints the
City Manager, who in turn appoints the heads of the various departments.
The City provides a range of municipal services that include: public works,
planning and zoning, water and sewer services, parks and recreation,
finance, City Clerk, and City Manager’s office. (Note: The City is currently in
the final stages of transferring the Utilities Operations to another public utility.
It is anticipated that this will be completed within the first year of this audit
contract and will significantly change the City’s organization. Police services
are provided by contract with the Orange County Sheriff's Department. Fire
services are provided through the taxing authority of the County Structural
Fire Fund and the Orange County Fire Authority. The City provides the
collection of wastewater, whereas South Orange County Wastewater
Authority, of which the City is a contributing member, provides the treatment
and disposal.
The City is financially accountable for two other legally separate entities: the
San Juan Capistrano Housing Authority and the San Juan Capistrano Public
Financing Authority. The former San Juan Capistrano Community
Redevelopment Agency (CRA) was dissolved on February 1, 2012. Upon
the dissolution of the CRA, its assets and liabilities were transferred to the
Successor Agency to the CRA. The City is obligated to report the resources
and activities of the Successor Agency in a separate private purpose trust
fund.
2.3 Fund Structure
The City uses the fund types listed below in its financial reporting. Each
governmental and proprietary fund has a legally adopted budget conforming
to GAAP. The City also adopts a seven-year capital improvement program
annually.
EXHIBIT A - Page 5 of 21
4
Number of
Fund Type Funds
General Funds 5
Special Revenue Funds 16
Capital Projects Funds 4
Debt Service Funds 1
Enterprise Funds 3
Internal Service Funds 2
Agency Funds 2
Trust Funds 3
In addition, the City maintains governmental capital assets for infrastructure
and general capital assets in the Governmental Capital Assets Fund and
related long-term debt in the Governmental Long-Term Debt Fund.
2.4 Magnitude of Finance Department
The Finance Department consists of 7 employees in the following 3 divisions:
Administration, Customer Service, and Accounting. The 5 employees in the
Accounting Division perform the following functions for the City: accounts
payable, miscellaneous accounts receivable, payroll, cash management,
budgeting, financial reporting, purchasing, and cash receipts. The City
currently utilizes the MS Govern financial software system for its accounting
function, however, the City will be implementing Tyler Munis during the
contract period. The City also utilizes CIS Infinity for utility billing.
2.5 Budgetary Process
The level of budgetary control is at the fund level. The City Manager or
his/her designee may authorize transfers of appropriations up to $50,000
between accounts within each operating fund. Appropriations for operating
funds that exceed $50,000 or for any capital projects funds must be approved
by the City Council. The City utilizes an encumbrance system, whereby
commitments such as purchase orders and unperformed contracts are
recorded as reserved fund balances at year-end. Unexpended or
unencumbered appropriations lapse at the end of the fiscal year.
Encumbered appropriations are reappropriated in the ensuing year’s budget
by action of the City Manager or his/her designee.
2.6 Pension Plans
The City provides its full-time and certain part-time employees retirement and
disability benefits, annual cost-of-living adjustments and death benefits to
members and their beneficiaries through three defined benefit pension plans
administered by the Orange County Employees’ Retirement System
(OCERS). Employees hired before January 1, 2012, participate in the 2.7%
EXHIBIT A - Page 6 of 21
5
at 55 retirement plan (“Tier 1”). Employees hired from January 1, 2012,
through December 31, 2012, are enrolled in the 2% at 57 retirement plan
(“Tier II”). New employees hired on or after January 1, 2013, are enrolled in
the 2.5% at 67 retirement plan (“Tier III”) as required by the State of California
Public Employees’ Pension Reform Act (“PEPRA”). The City makes
contributions to the plans based on amounts determined by OCERS’
actuaries.
The City also provides postretirement health care benefits to its employees in
through the California Employees Medical and Hospital Care Act (PEMHCA),
commonly referred to as “PERS Health”. PEMHCA provides health insurance
through a variety of Health Maintenance Organization (HMOs) and Preferred
Provider Organizations (PPO) options. These benefits are available to
employees who reach age 50 and completed at least 10 years of service to
the City or qualify for disability retirement under OCERS. The current rate for
retirees is $143.00 per month. The City’s implied subsidy for this program is
currently financed primarily on a pay-as-you-go basis, with cash being
accumulated in the City’s Employee Benefits and Insurance Internal Service
Fund.
2.7 Joint Ventures
The City is currently a member of the following joint ventures:
South Orange County Wastewater Authority (SOCWA)
- This City is one of ten members of this joint powers authority.
SOCWA operates four wastewater treatment plants and two ocean
outfalls in the South Orange County area. The Board of Directors,
which consists of a representative from each member agency,
controls SOCWA’s operations. In addition to annual contributions
to fund SOCWA’s operating budget, member agencies financially
participate at various levels in SOCWA’s capital projects
depending on the member agency’s capacity rights. The City
contributes approximately $2.5 million per year in operating and
capital contributions to SOCWA. As of June 30, 2020, the City’s
net investment in SOCWA was $10.4 million.
San Juan Basin Authority (SJBA)
- This City is one of four members of this joint powers authority. The
Authority’s Board of Directors consists of one representative from
each member. The City’s ownership percentage in the joint
venture varies by fund and project. The City’s net investment in
this joint venture was $26,728 at June 30, 2020. SJBA’s books
are maintained by Santa Margarita Water District.
EXHIBIT A - Page 7 of 21
6
Joint Regional Water Supply System (JRWSS)
- This City is one of nine members of this trust agreement. JRWSS
owns and operates several pipelines that deliver drinking water to
its nine member agencies. The City has 3.44% ownership rights in
JRWSS. South Coast Water District serves as the trustee for
JRWSS. As of June 30, 2020, the City’s net investment in JRWSS
was $1.7 million.
2.8 Availability of Prior Audit Reports
Access to the Fiscal Year 2015-2016 through 2019-2020 Comprehensive
Annual Financial Reports (CAFRs) and Single Audit Reports is available at
the City’s website at the following address:
https://sanjuancapistrano.org/Departments/Finance/Financial-
Reporting/Financial-Reports-by-Subject.
2.9 Schedule of Fieldwork
Upon receiving a Notice to Proceed from the City, the audit firm may
contact Michelle Short, Finance Manager to schedule an audit planning
meeting. The auditors shall provide a schedule for interim audit fieldwork
and submit a detailed audit plan covering interim and final fieldwork dates,
deadlines for issuance of draft and final reports, etc., prior to starting
interim audit fieldwork. Interim audit fieldwork must be completed prior to
August 1, 2021. Final fieldwork may commence on or after October 11,
2021.
Each year of the audit contract, an audit planning meeting, schedule of
interim audit fieldwork and detailed audit plan must be held prior to
commencement of interim audit fieldwork. Final audit fieldwork may
commence in mid-October.
2.10 Entrance Conferences, Progress Reporting and Exit Conferences
At a minimum, the auditors will meet with Finance staff for a planning
meeting (entrance conference), after interim audit fieldwork but prior to
beginning final audit fieldwork, and at or near the end of final fieldwork
(exit conference). In addition, the auditors will provide a regular status
report identifying issues, requested documents, timelines, etc., in order to
meet a “no surprises” requirement in the administration of the audit.
3. NATURE OF SERVICES REQUIRED
The City is soliciting the services of qualified independent certified public
accountant firms to audit its financial statements for fiscal years 2020-2021 through
2022-23, with two one-year extensions for fiscal years 2023-24 and 2024-25.
EXHIBIT A - Page 8 of 21
7
3.1 Scope of Work to be Performed
The auditors will perform an examination of the City’s basic financial
statements and required supplementary information (RSI) in accordance
with the auditing standards outlined in Section 3.2 below, with the
objective of expressing an opinion on each opinion unit of the financial
statements that collectively comprise the basic financial statements. In
addition, the auditors will express an “in-relation-to” opinion on the
combining and individual nonmajor fund financial statements, including
budgetary comparison schedules. Finally, the auditors will determine that
information provided in the introductory and statistical sections of the City’s
CAFR conforms to amounts reported in the basic financial statements.
The City will prepare all schedules and footnotes for the CAFR. The
auditors will be responsible for rendering their opinion and provide the City
one electronic copy in PDF format by December 20th and 20 bound copies
by January 5th of each year.
The auditors will conduct an examination of the separate component unit
financial statements of the San Juan Capistrano Housing Authority in
accordance with the auditing standards outlined in Section 3.2 below. The
auditors will be responsible for rendering their opinion and provide the City
one electronic copy in PDF format by December 1st of each year.
When applicable, the auditors will conduct an examination of the City’s
federal awards in conformance with the auditing standards outlined in
Section 3.2 below. In addition to the audit of the federal awards, the
auditor will review any materials included in the reporting package
accompanying the data collection form. The City will prepare the
Schedule of Expenditures of Federal Awards. The auditors will prepare
the single audit report and provide one electronic copy in PDF format by
December 20th and 15 bound copies by January 5th of each year. The
auditors will complete the data collection form and required filing with the
Federal Audit Clearinghouse and provide the City with one electronic copy
in PDF format of the data collection form by January 20th of each year.
The auditors will perform agreed-upon procedures to test and report on the
GANN appropriation limitation calculation. The auditors will be responsible
for rendering their opinion and provide the City one electronic copy in PDF
format and 10 stapled copies by December 20th of each year.
When applicable, the auditors will issue a “management letter” that
includes significant deficiencies and material weaknesses (as defined by
the applicable auditing standards) that were identified during the audit.
Management letters should be addressed to the City Council and should
include a follow-up on the prior year’s recommendations, if any. The
auditors will provide the City one electronic copy in PDF format and 10
stapled copies by December 20th of each year.
EXHIBIT A - Page 9 of 21
8
The auditors will issue a SAS 114 report addressed to the City Council at
the conclusion of the audit. The auditors will provide the City one
electronic copy in PDF format and 10 stapled copies by December 20th of
each year. (A separate SAS 114 letter addressed to the City Council
should be provided during the planning phase of the audit to open the
“two-way communication” between the auditors and the City Council.)
The auditors shall complete the City’s annual Street Report and
electronically file it with the State Controller’s Office no later than
December 1st of each year.
The auditors shall complete the annual Cities Financial Transactions
Report and electronically file it with the State Controller’s Office no later
than January 31st of each year.
The auditors shall complete the San Juan Capistrano Public Financing
Authority’s annual Special Districts Financial Transactions Report and
electronically file it with the State Controller’s Office no later than January
31st of each year.
The auditors will perform agreed-upon procedures (AUP) to test and report
on the annual expenditures of Measure Y bond proceeds. The scope of
work for this AUP engagement is set forth in Exhibit 1 to this RFP.
Expenditures applicable to this requirement are expected to be incurred
only in the first year of the engagement.
The City has been a recipient of the GFOA Certificate of Achievement
Award for Excellence in Financial Reporting for the past several years and
plans to continue to participate in this program in the future. The auditors
are expected to assist the City, as necessary, to meet the requirements of
the Government Finance Officers Association of the United States and
Canada (GFOA) Certificate of Achievement in Financial Reporting
Program.
The auditors are expected to keep the City informed of new state and
national developments affecting governmental finance and reporting
standards and trends, including upcoming GASB pronouncements and
provide advice for extraordinary transactions. This shall include on format
updating session per fiscal year with selected members of the City’s
financial accounting staff. If there is a charge for this, the cost must be
separately identified in the audit firm’s cost proposal.
The auditors are expected to be responsive to questions or requests made
by the City during the course of the contract period. An option for early
termination of the contract may be exercised by the City for persistent non-
EXHIBIT A - Page 10 of 21
9
responsiveness by the audit firm to City questions or requests or for failure
to meet the deadlines established in the RFP.
The Engagement Partner may be expected to be present at the City
Council meetings when the contract is being awarded or amended and
when the annual reports and management letter are being presented (at
the City Council or City Manager’s request).
3.2 Auditing Standards to be Followed
To meet the requirements of this RFP, the audit shall be conducted in
accordance with the following standards:
- Auditing standards generally accepted in the United States of
America, as promulgated by the American Institute of Certified Public
Accountants (AICPA) or any successor body. Such standards must
include specific requirements founds in the AICPA audit guide, Audits
of State and Local Governments.
- Government Auditing Standards, issued by the Comptroller General of
the United States.
- The provisions of the Single Audit Act of 1996, as amended.
- The provisions of the U.S. Office of Management and Budget (OMB)
Circular A-133, Audits of States, Local Governments and Non-Profit
Organizations.
- Specific auditing standards relating to any grant agreement
determined to be material by the auditors for purposes of the
examination of the basic financial statements.
- Any other applicable standards for conducting examinations and/or
reports to be issued in conjunction with those items outlined in Section
3.1.
3.3 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 the need to extend the retention period. Should standard retention
periods required by any of the standards identified in Section 3.2 be
increased beyond 5 years, the increased retention period shall be
followed. The auditor will be required to make working papers available,
upon request by the City or its designees.
EXHIBIT A - Page 11 of 21
10
The auditor shall respond to reasonable inquiries of successor auditors
and allow successor auditors to review working papers relating to matters
of continuing accounting significance.
3.4 Irregularities and Illegal Acts
The 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: Mayor, City Manager, Assistant City Manager, and
CFO/City Treasurer.
3.5 Subcontracting
Should any firm submitting a proposal consider subcontracting portions of
the engagement, that fact must be clearly identified in the proposal along
with the name of the proposed subcontractor. Following the award of the
audit contract, no additional subcontracting will be allowed without the
express prior written consent by the City’s CFO/City Treasurer.
3.6 Conflict of Interest
The audit firm must submit a disclaimer statement disclosing that the firm
has no conflict of interest with regard to any of the work performed by the
firm for the City. This disclaimer must be included in the Proposal Letter
required in Section 4.3.
3.7 Acknowledgment of Contract Agreement
The audit firm shall enter into a contract with the City by signing the City’s
Professional services agreement. A sample copy of the Agreement is
attached (Attachment B). The audit firm shall acknowledge acceptance of
the terms and conditions described in the sample copy of the Agreement.
If there are any exceptions to the term and conditions, the audit firm
should include those exceptions in the Proposal Letter described in
Section 4.3.
4. PROPOSAL FORMAT AND CONTENT
4.1 Respondents shall submit a proposal that is clear, concise, complete, and
demonstrates the qualifications and experience applicable to the Scope of
Work.
Proposal shall have a cover page with the: project title, proposal due
date, and name, address, and telephone number of the Firm submitting
the proposal.
Proposal shall include a table of contents with a clear listing of headings
EXHIBIT A - Page 12 of 21
11
and pages.
Proposal shall use a 10-point font, at a minimum, and shall be a
maximum of 20 pages, excluding the fee proposal and resumes of key
personnel.
Firm shall submit one (1) original, two (2) hard copies, and one (1)
electronic copy in PDF format of the proposal.
Proposals shall follow the order listed in Section 4.3.
4.2 Proposal Inclusions and Order
Proposal Letter – The proposal letter must be completed and executed
by an authorized representative of the Firm and include the following:
- An executive summary (limited to 2 pages) of the proposal
identifying the Firm/team being presented for consideration;
- Contact person (and related information) for the City’s
correspondence regarding this RFP;
- Acknowledgment of any addenda to the RFP;
- Exceptions the Firm has to the RFP and/or Sample Professional
Services Agreement, if any; and
- Disclaimer of conflict of interest as required in Section 3.6.
Firm Qualifications and Experience
- To qualify, a Firm must have extensive experience in audits of
local governments. The Firm 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,
and the number and nature of the staff to be so assigned to the
engagement. Staff consistency on the engagement from the
Auditor In-Charge position through the Engagement Partner
position is an important consideration.
- An affirmative statement should be included that the Firm and all
assigned key professional staff are properly licensed to practice
public accountancy in California.
- The Firm must provide a list of all current special districts, city,
county, and other local government clients.
EXHIBIT A - Page 13 of 21
12
- The Firm shall provide information on the results of federal or
state desk reviews or field reviews of its audits during the past
three (3) years. The Firm shall provide information on the
circumstances and status of any disciplinary actions taken or
pending against the Firm during the past three (3) years with
State regulatory bodies or professional organizations.
Partner, Supervisory, and Staff Qualifications
- The Firm should provide as much information as possible
regarding the number, qualifications, experience, and training of
the specific staff to be assigned to this engagement.
- Resumes for key personnel (engagement partners, technical
review partners, managers, in-charge auditors, and any
specialists) should be included (as an Appendix to the technical
proposal), indicating the following:
o whether such person is licensed to practice as a certified
public accountant in California;
o information on the government auditing experience of each
person;
o relevant continuing professional education for the past
three (3) years; and
o membership in professional organizations relevant to the
performance of this audit.
- Engagement partners, managers, in-charge auditors, and
specialists may be changed if these personnel leave the firm, are
promoted, or are assigned to another office. These personnel
may also be changed for other reasons with express written
permission from the City. However, in either case, the Firm
provides that replacements will have substantially the same or
better qualifications and experience and the City retains the right
to approve or reject replacements.
EXHIBIT A - Page 14 of 21
13
Similar Engagements with Other Government Entities
- Please provide a list of not less than 5 client references for which
services similar to those outlined in this RFP are currently being
provided by the Firm’s office that will be assigned responsibility for
the audit. For each reference listed, provide the name of the
organization, engagement partner, engagement manager, total
hours for the project, dates for which the service(s) are being
provided, type of service(s) being provided and the name,
address, telephone number, and email of the principal client
contact.
Specific Audit Approach
The proposal must include a detailed work plan, including an explanation
of the audit methodology to be followed in performing the services
required in Section 3 of this RFP. The description should provide
specific tasks and subtasks in ongoing order. The Firm should address
any elements of the Scope of Work it believes are not addressed in
Section 3 but are necessary to complete the work. The detailed work
plan should include a list of all the deliverables. The following
information should be included related to the specific audit approach:
- Proposed segmentation of the engagement.
- Level of staff and number of hours to be assigned to each
proposed segment of the engagement.
- Sample sizes and the extent to which statistical sampling is to be
used on the engagement.
- Extent of use of EDP software in the engagement.
- Type and extent of analytical procedures to be used in the
engagement.
- Approach to be taken to gain an understanding of, document and
test, where applicable, the City’s internal control structure,
including its controls related to federal and state grant programs.
- Approach to be taken in determining laws, regulation, contracts,
and grants subject to audit test work.
- Approach to be taken in including requirements of SAS 99,
Consideration of Fraud in a Financial Statement Audit, within the
audit plan.
EXHIBIT A - Page 15 of 21
14
- Identification of anticipated potential audit issues. (The proposal
must identify and describe any anticipated potential audit issues,
the Firm’s approach to resolving these issues, and any special
assistance that will be requested from City personnel.)
Cost Proposal
The Firm shall submit a cost proposal in a separately sealed envelope
clearly marked “Cost Proposal for Independent Audit Services” using the
format included in Attachment A.
Costs shall indicate the total all-inclusive maximum price. The cost
proposal should include all pricing information relative to performing the
audit engagement as described in this RFP. The total all-inclusive
maximum price to be bid is to contain all direct and indirect costs,
including all out-of-pocket expenses. The City will not be responsible for
expenses incurred in preparing and submitting the proposals. The cost
proposal should also include the Firm’s hourly rates by classification
should the City desire additional services not covered by this RFP.
4.3 Respondents shall submit a proposal that is clear, concise, complete, and
demonstrates the qualifications and experience applicable to the Scope of
Work.
5. EVALUATION CRITERIA
The proposals will be evaluated using the following criteria and weightings:
Mandatory Requirements – 20%
- The Firm is independent and licensed to practice in California.
- The Firm’s professional personnel have received adequate
continuing professional education.
- 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 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.
Expertise and Experience – 30%
EXHIBIT A - Page 16 of 21
15
- The Firm’s past experience and performance on comparable
government engagements.
- The Firm’s quality of the Firm’s professional personnel to be
assigned to the engagement and the quality of the Firm’s
management personnel to be available for technical consultation.
Audit Approach – 40%
- 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.
- Adequacy of the proposed staffing plan for the various segments
of the engagement.
- The timeframe to complete the audit.
- Adequacy of sampling techniques.
- Adequacy of analytical procedures.
- Adequacy of procedures for ensuring compliance with SAS 99.
Cost – 10%
Maximum points will be allotted to the lowest cost proposer. All other
proposers will be scored based on the formula below:
Overall Cost No. of Points
1 (lowest) 10
2 8
3 6
4 4
All Others 2
EXHIBIT A - Page 17 of 21
16
6. SELECTION PROCESS
In accordance with its Municipal Code Section 3-4.306, the City will adhere to
the following procedures in evaluating proposals. A Selection Committee
(Committee), which comprises City's staff and may include outside parties, will
screen and review all proposals according to the weighted criteria set forth
above.
6.1 Responsiveness Screening
Proposals will first be screened to ensure responsiveness to the RFP.
The City may reject as non-responsive any proposal that does not include
the documents required to be submitted by this RFP. At any time during
the evaluation process, the City reserves the right to request clarifications
or additional information from any or all Proposers regarding their
proposals.
6.2 Initial Proposal Review
The Committee will initially review and score all responsive written
proposals based upon the Evaluation Criteria set forth above. The
Committee may also contact the Proposer's references. Proposals that
receive the highest evaluation scores may be invited to the next stage
of the evaluation process. The City may reject any proposal in which a
Proposer’s approach, qualifications, or price is not considered acceptable
by the City. An unacceptable proposal is one that would have to be
substantially rewritten to make it acceptable. The City may conclude the
evaluation process at this point and recommend award to the lowest
responsible bidder. Alternatively, the City may elect to negotiate directly
with one or more Proposers to obtain the best result for the City prior to
making a recommendation or selection.
6.3 Interviews, Reference Checks, Revised Proposals, Discussions
Following the initial screening and review of proposals, the Proposers
included in this stage of the evaluation process may be invited to
participate in an oral interview. The individual(s) from Proposer’s firm that
will be directly responsible for carrying out the contract, if awarded,
should be present at the oral interview. The oral interview may, but is not
required to, use a written question/answer format for the purpose of
clarifying the intent of any portions of the proposal.
In addition to conducting an oral interview, the City may during this stage
of the evaluation process also contact and evaluate the Proposer’s
references, contact any Proposer to clarify any response or request
revised or additional information, contact any current users of a
EXHIBIT A - Page 18 of 21
17
Proposer’s services, solicit information from any available source
concerning any aspect of a proposal, and seek and review any other
information deemed pertinent to the evaluation process.
Following conclusion of this stage of the evaluation process, the
Committee will again rank all Proposers according to the evaluation
criteria set forth above. The Committee may conclude the evaluation
process at this point, and make a recommendation for award, or it
may request Best and Final Offers from Proposers. The City may accept
the proposal or negotiate the terms and conditions of the agreement with
the highest ranked firm, which shall be determined to be the lowest
responsible bidder. The City may recommend award without Best and
Final Offers, so Proposers should include their best proposal with their
initial submission.
6.4 Final Selection
Recommendation for award is contingent upon the successful negotiation
of final contract terms, including audit firm compensation. 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.
6.5 Other matters
Response Preparations: No reimbursement will be made by the City for
costs incurred in the preparation of the response to this RFP. Submitted
materials will not be returned and will become the property of the City.
Right to Reject Proposals: Submission of a proposal indicates
acceptance by the submitting firm of the conditions contained in this
request for proposal unless clearly and specifically noted in the proposal
submitted and confirmed in the agreement between the City and the firm
selected. The City reserves the right without prejudice to reject any or all
proposals, or to waive any requirement of this RFP.
Proposer is encouraged to review this RFP carefully in its entirety prior to
preparation of its Proposal. The City reserves the right to reject any or all
Proposals or to select the Proposal most advantageous to the City. The
City reserves the right to verify all information submitted in the Proposal.
A. Amendments to RFP. The City reserves the right to amend the
RFP or issue to all Proposers a Notice of Amendment to answer
questions for clarification.
B. No Commitment to Award. Issuance of this RFP and receipt of
EXHIBIT A - Page 19 of 21
18
Proposals does not commit the City to award a Contract/
Agreement. The City expressly reserves the right to postpone the
Proposal for its own convenience, to accept or reject any or all
Proposals received in response to this RFP, to negotiate with more than
one Proposer concurrently, or to cancel all or part of this RFP.
C. Amendments to Proposals. No amendment, addendum or
modification will be accepted after the deadline stated herein for
receiving Proposals. Proposer may modify or amend its Proposal only if
the City receives the amendment prior to the deadline stated herein for
receiving Proposals.
D. Non-Responsive Proposals. A Proposal may be considered non-
responsive if conditional, incomplete, or if it contains alterations of form,
additions not called for, or other irregularities that may constitute a
material change to the Proposal.
E. Late Proposals. The City will not be responsible for Proposals that
are delinquent, lost, incorrectly marked, sent to an address other than
that given herein, or sent by mail or courier service and not signed for
by the City.
EXHIBIT A - Page 20 of 21
Scope of Work for AUP Regarding
Use of Measure Y Bond Proceeds
1. Obtain and become familiar with the following:
a. The text of Measure Y
b. The Official Statement of the 2009A Open Space Bonds
c. The description of the projects approved by City Counsel for the use of the bond proceeds
2. Examine supporting documentation for non-payroll transactions represented in the use of these bonds.
Transactions selected for testing will be judgmentally selected by the audit firm for fiscal years ending
June 30, 2018 and 2019 to comprise at least 50% of the total non-payroll expenditures incurred during
the period. Perform the following for each transaction selected:
a. Agree the amount recorded in the accounting system for the selected transaction to the related
vendor invoice.
b. Recompute the mathematical correctness of the vendor invoice.
c. Ascertain whether the invoice was properly approved in accordance with City policies and
procedures.
d. Read the service/project description and other information provided on the invoice and ascertain
whether or not that information supports the relationship of this cost to one of the projects
approved by City Council.
Obtain a labor distribution report that identifies labor charges to the project. Based upon the position titles of the
persons indicated in this report, ascertain whether administrative personnel have charged time to the project.
EXHIBIT A - Page 21 of 21
COST OF SERVICES (ALL-INCLUSIVE/FIXED FEE)
The Single Audit pricing is based on hours that assumes one major program. Each additional major program is $1,800. Out-of-pocket expenses,
such as meals, lodging, printing, and binding costs are included in the not-to-exceed price and will not be billed for separately. The agreed-upon
procedures over the City’s GANN Limit Calculation and Measure Y Bond Proceeds are complimentary and will not be billed for.
Name of Firm:
Office Address:
Contact Name:
Contact Phone:Fax #:
Contact Email:
Description 2020/ 2021 2021/ 2022 2022/ 2023 2023/ 2024 2024/ 2025
(Optional) (Optional)
33,150$ 33,810$ 34,490$ 35,180$ 35,880$
Audit of San Juan Capistrano Housing Authority 2,350$ 2,400$ 2,450$ 2,500$ 2,550$
4,690$ 4,780$ 4,880$ 4,980$ 5,080$
Preparation of Annual Street Report 1,240$ 1,260$ 1,290$ 1,320$ 1,350$
Preparation of City State Controller's Report 3,580$ 3,650$ 3,720$ 3,790$ 3,870$
Preparation of San Juan Capistrano Public Financing Authority State Controller's Report 1,000$ 1,020$ 1,040$ 1,060$ 1,080$
46,010$ 46,920$ 47,870$ 48,830$ 49,810$
Single Audit, when applicable
TOTAL FOR FISCAL YEAR - (Not to Exceed)
Lance, Soll & Lunghard, LLP
203 N. Brea Blvd., Ste. 203, Brea, CA 92821
Audit of City of San Juan Capistrano
(714) 672-0022 (714) 672-0331
Bryan.Gruber@lslcpas.com
Bryan Gruber, CPA, Engagement Partner
REQUIRED SERVICES
EXHIBIT B - Page 1 of 2
BILLABLE HOURLY RATES BY CLASSIFICATION (FOR ADDITIONAL WORK)
CERTIFICATION
For the purpose of this proposal, Bryan Gruber, CPA, Managing Partner, is authorized to make representations for our firm, empowered to submit
this bid and authorized to sign a contract with the City of San Juan Capistrano. The fees quoted in this proposal are valid for 120 days. I can be
reached by phone at (714) 672-0022 or through email at Bryan.Gruber@lslcpas.com.
Bryan Gruber, CPA
LANCE, SOLL & LUNGHARD, LLP
2020/ 2021 2021/ 2022 2022/ 2023 2023/ 2024 2024/ 2025
(Optional) (Optional)
290$ 296$ 302$ 308$ 314$
200$ 204$ 208$ 212$ 216$
165$ 168$ 171$ 174$ 177$
140$ 143$ 146$ 149$ 152$
120$ 122$ 124$ 126$ 129$
105$ 107$ 109$ 111$ 113$
90$ 92$ 94$ 96$ 98$
75$ 77$ 79$ 81$ 83$
AUDITOR'S STANDARD HOURLY BILLING RATES
Position
Partner
Senior Manager
Supervisor
Senior
Experienced Staff
Staff
Clerical
Manager
EXHIBIT B - Page 2 of 2