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16-0517_WHITE NELSON DIEHL EVANS LLP_F5_Agenda ReportTO : FROM: City of San Juan Capistrano Agenda Report Honorable Mayor and Members of the City Council ~njamin Siegel, City Manager SUBMITIED BY: David Ott, Interim Assistant City Manager PREPARED BY: DATE : Michelle Short, Senior Accountant, ~ May 17, 2016 ~ 5/17/2016 F5 SUBJECT: Consideration of Approval of a Professional Services Agreement for Independent Audit Services (White Nelson Diehl Evans LLP) RECOMMENDATION : By motion, approve a Professional Services Agreement for Independent Audit Services with White Nelson Diehl Evans LLP in a not to exceed amount of $234,725. EXECUTIVE SUMMARY: Properly performed audits play a vital role in the public sector by helping to preserve the integrity of the public finance functions and by maintaining citizens' confidence in their elected leaders. As recommended by the Government Finance Officers Best Practice for Audit Procurement, governmental entities should undertake a full-scale competitive process for the selection of independent auditors at the end of the term of each audit contract. The Fiscal Year 2014-2015 annual audit was the final contract term of the current auditors, Rogers, Anderson, Malody and Scott, LLP. Staff has completed the process of competitive procurement and recommends White Nelson Diehl Evans LLP to provide independent audit services for the City of San Juan Capistrano, San Juan Capistrano Housing Authority and San Juan Capistrano Public Financing Authority for a term of three years, plus two one-year renewal options. DISCUSSION/ANALYSIS: Staff initiated the process of competitive procurement by issuing a Request for Proposal (RFP) for independent audit services in January 2016. The RFP was sent to eleven firms and posted on websites for the California Society of Municipal Finance Officers and Public Purchase in addition to the City's website. The performance of the current City Council Agenda Report May 17, 2016 Page 2 of 3 auditors, Rogers, Anderson, Malady and Scott, LLP, had met expectations and it was acceptable for the firm to participate in the bid process. Ten proposals were received from responsible bidders. A committee consisting of two City staff members and a Chief Financial Officer (CFO) from another government entity evaluated the proposals based on criteria in the RFP. Because of his recent association with one of the auditing firms, the City's Interim CFO did not participate in the scoring or ranking of the firms. Once the successful firm was selected, the City's Interim CFO, who has an extensive audit background, approved the selection. The proposals were ranked according to scores received on the evaluation criteria. The top three Proposers were invited to participate in an oral interview with the Selection Committee consisting of the Interim Assistant City Manager, Assistant Finance Director and Senior Accountant. Following the conclusion of this stage of the evaluation process, the Proposers were ranked once again and the highest ranked Proposer was White Nelson Diehl Evans LLP. White Nelson Diehl Evans LLP is a California certified public accounting and consulting firm that has specialized in providing services to the governmental industry for over 80 years. Over the past year, the firm provided services to approximately 1 00 governmental organizations. On an annual basis, the firm issues over 150 reports on audits of governmental agencies including cities, the Successor Agency to Redevelopment Agencies, Special Districts and Joint Power Authorities. FISCAL IMPACT: The cost of independent auditing services for the first two years is $91,110, and is included in the 2016-17 and 2017-18 Proposed Budgets. ENVIRONMENTAL IMPACT: Not applicable . PRIOR CITY COUNCIL REVIEW : Not applicable . COMMISSION/COMMITTEE/BOAR D REV IEW AND RECOMMENDATIONS: This item does not go through the Commission/Committee review process. NOTIFICATION: Nitin Patel, White Nelson Diehl Evans LLP Craig Hartzheim, Moss, Levy & Hartzheim, LLP Sanwar Harshwal, Patel & Associates, LLP City Council Agenda Report May 17,2016 Page 3 of 3 Kenneth Pun, The Pun Group Brad Welebir, Rogers Anderson, Malady &Scott, LLP Richard Kikuchi, Lance, Soli & Lunghard, LLP Ahmed Badawi, Badawi & Associates Certified Public Accountants Marcus D. Davis, Davis Farr LLP Ron Lopez, Gruber and Associates Certified Public Accountants Roger Alfaro, Vavrinek, Trine Day & Co., LLP ATTACHMENT : Attachment 1 -Professional Services Agreement for Independent Audit Services (White Nelson Diehl Evans LLP) CITY OF SAN JUAN CAPISTRANO PROFESSIONAL SERVICES AGREEMENT This Agreement is made and entered into as of May 17, 2016 by and between the City of San Juan Capistrano, a municipal corporation organized and operating under the laws of the State of California with its principal place of business at 32400 Paseo Adelanto, San Juan Capistrano, CA 92675 ("City"), and White Nelson Diehl Evans, a Limited Liability Partnership with its principal place of business at 2875 Michelle Drive, Suite 300, Irvine, CA 92606 (hereinafter referred to as "Consultant"). City and Consultant are sometimes individually referred to as "Party" and collectively as "Parties" in this Agreement. RECITALS A. City is a public agency of the State of California and is in need of professional services for the following project: Independent Audit Services (hereinafter referred to as "the Project"). B. Consultant is duly licensed and has the necessary qualifications to provide such services. C. The Parties desire by this Agreement to establish the terms for City to retain Consultant to provide the services described herein. AGREEMENT NOW, THEREFORE, IT IS AGREED AS FOLLOWS: 1. Services. Consultant shall provide the City with the services described in the Scope of Services attached hereto as Exhibit "A." In the Scope of Services, "Entities to be Included in Audit," page 8 of Exhibit A, the City of San Juan Capistrano shall include the Successor Agency to the San Juan Capistrano Community Redevelopment Agency. 2. Compensation . a. Subject to paragraph 2(b) below, the City shall pay for such services in accordance with the Schedule of Charges set forth in Exhibit "B." b. In no event shall the total amount paid for services rendered by Consultant under this Agreement exceed the sum of $234,725. This amount is to cover all printing and related costs, and the City will not pay any additional fees for printing expenses. Periodic payments shall be made within 30 days of receipt of an invoice which includes a detailed description of the work performed. Payments to Consultant for work performed will be made on a monthly billing basis. 3. Additional Work. If changes in the work seem merited by Consultant or the City, and informal consultations with the other party indicate that a change is warranted, it shall be processed in the following manner: a letter outlining the changes shall be forwarded to the City by Consultant with a statement of estimated changes in fee or time schedule. An amendment to this Agreement shall be prepared by the City and executed by both Parties before performance of such services, or the City will not be required to pay for ATTACHMENT 1 the changes in the scope of work. Such amendment shall not render ineffective or invalidate unaffected portions of this Agreement. 4. Maintenance of Records. Books, documents, papers, accounting records, and other evidence pertaining to costs incurred shall be maintained by Consultant and made available at all reasonable times during the contract period and for four ( 4) years from the date of final payment under the contract for inspection by City . 5. Time of Performance. Consultant shall perform its services in a prompt and timely manner and shall commence performance upon receipt of written notice from the City to proceed ("Notice to Proceed"). Consultant shall complete the services required hereunder within the activity schedule in Exhibit "A." The Notice to Proceed shall set forth the date of commencement of work . 6. Delays in Performance . a. Neither City nor Consultant shall be considered in default of this Agreement for delays in performance caused by circumstances beyond the reasonable control of the non-performing party. For purposes of this Agreement, such circumstances include but are not limited to, abnormal weather conditions; floods; earthquakes; fire; epidemics; war; riots and other civil disturbances; strikes, lockouts, work slowdowns , and other labor disturbances; sabotage or judicial restraint. b. Should such circumstances occur, the non-performing party shall, within a reasonable time of being prevented from performing, give written notice to the other party describing the circumstances preventing continued performance and the efforts being made to resume performance of this Agreement. 7. Compliance with Law . a . Consultant shall comply with all applicable laws, ordinances, codes and regulations of the federal , state and local government, including Cai/OSHA requirements. b. If required, Consultant shall assist the City, as requested, in obtaining and maintaining all permits required of Consultant by federal, state and local regulatory agencies. c. If applicable, Consultant is responsible for all costs of clean up and/ or removal of hazardous and toxic substances spilled as a result of his or her services or operations performed under this Agreement. 8. Standard of Care Consultant's services will be performed in accordance with generally accepted professional practices and principles and in a manner consistent with the level of care and skill ordinarily exercised by members of the profession currently practicing under similar conditions. 2 ATTACHMENT 1 9. Assignment and Subconsullant Consultant shall not assign, sublet, or transfer this Agreement or any rights under or interest in this Agreement without the written consent of the City, which may be withheld for any reason. Any attempt to so assign or so transfer without such consent shall be void and without legal effect and shall constitute grounds for termination. Subcontracts, if any, shall contain a provision making them subject to all provisions stipulated in this Agreement. Nothing contained herein shall prevent Consultant from employing independent associates, and subconsultants as Consultant may deem appropriate to assist in the performance of services hereunder. 10. Ind epe ndent Consu ltant Consultant is retained as an independent contractor and is not an employee of City. No employee or agent of Consultant shall become an employee of City. The work to be performed shall be in accordance with the work described in this Agreement, subject to such directions and amendments from City as herein provided . 11. Insurance. Consultant shall not commence work for the City until it has provided evidence satisfactory to the City it has secured all insurance required under this section . In addition, Consultant shall not allow any subcontractor to commence work on any subcontract until it has secured all insurance required under this section. a. Commercial Ge neral Liability (i) The Consultant shall take out and maintain, during the performance of all work under this Agreement, in amounts not Jess than specified herein, Commercial General Liability Insurance, in a form and with insurance companies acceptable to the City. (ii) broad as the following : Coverage for Commercial General Liability insurance shall be at least as (1) Insurance Services Office Commercial General Liability coverage (Occurrence Form CG 00 01) or exact equivalent. (iii) Commercial General Liability Insurance must include coverage for the following: (1) Bodily Injury and Property Damage (2) Personal Injury/Advertising Injury (3) Premises/Operations Liability ( 4) Products/Completed Operations Liability (5) Aggregate Limits that Apply per Project (6) Explosion, Collapse and Underground (UCX) exclusion deleted (7) Contractual Liability with respect to this Contract (8) Broad Form Property Damage (9) Independent Consultants Coverage (iv) The policy shall contain no endorsements or prov1s1ons limiting coverage for (1) contractual liability; (2) cross liability exclusion for claims or suits by one insured against another; (3) products/completed operations liability; or (4) contain any other exclusion contrary to the Agreement. 3 ATTACHMENT 1 (v) The policy shall give City, its officials, officers, employees, agents and City designated volunteers additional insured status using ISO endorsement forms CG 20 10 10 01 and 20 37 10 01, or endorsements providing the exact same coverage. (vi) The general liability program may utilize either deductibles or provide coverage excess of a self-insured retention, subject to written approval by the City, and provided that such deductibles shall not apply to the City as an additional insured. b. Automobi le Liability (i) At all times during the performance of the work under this Agreement, the Consultant shall maintain Automobile Liability Insurance for bodily injury and property damage including coverage for owned, non-owned and hired vehicles, in a form and with insurance companies acceptable to the City. (ii) Coverage for automobile liability insurance shall be at least as broad as Insurance Services Office Form Number CA 00 01 covering automobile liability (Coverage Symbol 1, any auto). (iii) The policy shall give City, its officials, officers, employees, agents and City designated volunteers additional insured status. (iv) Subject to written approval by the City, the automobile liability program may utilize deductibles, provided that such deductibles shall not apply to the City as an additional insured , but not a self-insured retention. c. Work ers ' Com pe nsat ion/Emplo ye r's Liability (i) Consultant certifies that he/she is aware of the provisions of Section 3700 of the California Labor Code which requires every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions of that code, and he/she will comply with such provisions before commencing work under this Agreement. (ii) To the extent Consultant has employees at any time during the term of this Agreement, at all times during the performance of the work under this Agreement, the Consultant shall maintain full compensation insurance for all persons employed directly by him/her to carry out the work contemplated under this Agreement, all in accordance with the "Workers' Compensation and Insurance Act ," Division IV of the Labor Code of the State of California and any acts amendatory thereof, and Employer's Liability Coverage in amounts indicated herein. Consultant shall require all subconsultants to obtain and maintain, for the period required by this Agreement, workers' compensation coverage of the same type and limits as specified in this section. d . Professional Liabili ty (Erro rs and Omissions ) At all times during the performance of the work under this Agreement the Consultant shall maintain professional liability or Errors and Omissions insurance appropriate to its profession, in a form and with insurance companies acceptable to the City and in an amount indicated herein. This insurance shall be endorsed to include contractual liability applicable to this Agreement and shall be written on a policy form coverage specifically designed to protect against acts, errors or omissions of the Consultant. "Covered Professional Services" as designated in the policy must specifically include work performed under this Agreement. The policy must "pay on behalf of' the insured and must include a provision establishing the insurer's duty to defend. 4 ATTACHMENT 1 e. Minirnum Policy Limits Requir ed (i) The following insurance limits are required for the Agreement: Commercial General Liability Automobile Liability Employer's Liability Professional Liability Combined Single Limit $1,000,000 per occurrence/ $2,000,000 aggregate for bodily injury, personal injury, and property damage $1,000,000 per occurrence for bodily injury and property damage $1,000,000 per occurrence $1,000,000 per claim and aggregate (errors and omissions) (ii) Defense costs shall be payable in addition to the limits. (iii) Requirements of specific coverage or limits contained in this section are not intended as a limitation on coverage, limits, or other requirement, or a waiver of any coverage normally provided by any insurance. Any available coverage shall be provided to the parties required to be named as Additional Insured pursuant to this Agreement. f. Evidence Required Prior to execution of the Agreement, the Consultant shall file with the City evidence of insurance from an insurer or insurers certifying to the coverage of all insurance required herein. Such evidence shall include original copies of the ISO CG 00 01 (or insurer's equivalent) signed by the insurer's representative and Certificate of Insurance (Acord Form 25-S or equivalent), together with required endorsements. All evidence of insurance shall be signed by a properly authorized officer, agent, or qualified representative of the insurer and shall certify the names of the insured, any additional insureds, where appropriate, the type and amount of the insurance, the location and operations to which the insurance applies, and the expiration date of such insurance. g. Policy Provisions Required (i) Consultant shall provide the City at least thirty (30) days prior written notice of cancellation of any policy required by this Agreement, except that the Consultant shall provide at least ten (10) days prior written notice of cancellation of any such policy due to non- payment of premium. If any of the required coverage is cancelled or expires during the term of this Agreement, the Consultant shall deliver renewal certificate(s) including the General Liability Additional Insured Endorsement to the City at least ten (10) days prior to the effective date of cancellation or expiration. (ii) The Commercial General Liability Policy and Automobile Policy shall each contain a provision stating that Consultant's policy is primary insurance and that any insurance, self- insurance or other coverage maintained by the City or any named insureds shall not be called upon to contribute to any loss. 5 ATTACHMENT 1 (iii) The retroactive date (if any) of each policy is to be no later than the effective date of this Agreement. Consultant shall maintain such coverage continuously for a period of at least three years after the completion of the work under this Agreement. Consultant shall purchase a one (1) year extended reporting period A) if the retroactive date is advanced past the effective date of this Agreement; B) if the policy is cancelled or not renewed; or C) if the policy is replaced by another claims-made policy with a retroactive date subsequent to the effective date of this Agreement. (iv) All required insurance coverages, except for the professional liability coverage, shall contain or be endorsed to waiver of subrogation in favor of the City, its officials, officers, employees, agents, and volunteers or shall specifically allow Consultant or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. Consultant hereby waives its own right of recovery against City, and shall require similar written express waivers and insurance clauses from each of its subconsultants. (v) The limits set forth herein shall apply separately to each insured against whom claims are made or suits are brought, except with respect to the limits of liability. Further the limits set forth herein shall not be construed to relieve the Consultant from liability in excess of such coverage, nor shall it limit the Consultant's indemnification obligations to the City and shall not preclude the City from taking such other actions available to the City under other provisions of the Agreement or law. h. Qualifying Insurers (i) All policies required shall be issued by acceptable insurance companies, as determined by the City, which satisfy the following minimum requirements: (1) Each such policy shall be from a company or companies with a current A.M. Best's rating of no less than A:VII and admitted to transact in the business of insurance in the State of California, or otherwise allowed to place insurance through surplus line brokers under applicable provisions of the California Insurance Code or any federal law. i. Additional Ins urance Provisions (i) The foregoing requirements as to the types and limits of insurance coverage to be maintained by Consultant, and any approval of said insurance by the City, is not intended to and shall not in any manner limit or qualify the liabilities and obligations otherwise assumed by the Consultant pursuant to this Agreement, including but not limited to, the provisions concerning indemnification. (ii) If at any time during the life of the Agreement, any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, City has the right but not the duty to obtain the insurance it deems necessary and any premium paid by City will be promptly reimbursed by Consultant or City will withhold amounts sufficient to pay premium from Consultant payments. In the alternative, City may cancel this Agreement. (iii) The City may require the Consultant to provide complete copies of all insurance policies in effect for the duration of the Project. (iv) Neither the City nor any of its officials, officers, employees, agents or volunteers shall be personally responsible for any liability arising under or by virtue of this Agreement. 6 ATTACHMENT 1 j. Subconsu llanl Insurance Requirements. Consultant shall not allow any subcontractors or subconsultants to commence work on any subcontract until they have provided evidence satisfactory to the City that they have secured all insurance required under this section. Policies of commercial general liability insurance provided by such subcontractors or subconsultants shall be endorsed to name the City as an additional insured using ISO form CG 20 38 04 13 or an endorsement providing the exact same coverage. If requested by Consultant, City may approve different scopes or minimum limits of insurance for particular subcontractors or subconsuftants. 12. Indemnification. a . To the fullest extent permitted by law, Consultant shall defend (with counsel reasonably approved by the City), indemnify and hold the City, its officials, officers, employees, agents and volunteers free and harmless from any and all claims, demands , causes of action, suits, actions, proceedings, costs, expenses, liability, judgments, awards, decrees, settlements, loss, damage or injury of any kind, in law or equity, to property or persons, including wrongful death, (collectively, "Claims') in any manner arising out of, pertaining to, or incident to any alleged acts, errors or omissions, or willful misconduct of Consultant, its officials, officers, employees , subcontractors, consultants or agents in connection with the performance of the Consultant's services, the Project or this Agreement, including without limitation the payment of all consequential damages, expert witness fees and attorneys' fees and other related costs and expenses. Notwithstanding the foregoing, to the extent Consultant's services are subject to Civil Code Section 2782.8, the above indemnity shall be limited, to the extent required by Civil Code Section 2782.8, to Claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the Consultant. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by the City, its officials , officers, employees, agents or volunteers . b. Aeditional Ind em nity Obligations . Consultant shall defend, with counsel of City's choosing and at Consultant 's own cost, expense and risk, any and all Claims covered by this section that may be brought or instituted against the City, its officials, officers, employees, agents or volunteers. Consultant shall pay and satisfy any judgment, award or decree that may be rendered against the City, its officials, officers, employees, agents or volunteers as part of any such claim, suit, action or other proceeding. Consultant shall also reimburse City for the cost of any settlement paid by the City, its officials , officers , employees, agents or volunteers as part of any such claim, suit, action or other proceeding. Such reimbursement shall include payment for the City's attorney's fees and costs, including expert witness fees. Consultant shall reimburse the City, its officials, officers, employees, agents and volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Consultant's obligation to indemnify shall not be restricted to insurance proceeds, if any, received by the City, its officials, officers, employees, agents and volunteers. 13. California Labo r Code Requi rements. a. Consultant is aware of the requirements of California Labor Code Sections 1720 et seq. and 1770 et seq., which require the payment of prevailing wage rates and the performance of other requirements on certain "public works" and "maintenance" projects. If the services are being performed as part of an applicable "public works" or "maintenance" project, as defined by the Prevailing Wage Laws, and if the total compensation is $1 ,000 or more, Consultant agrees to fully comply with such Prevailing Wage Laws , if applicable . Consultant shall defend, indemnify and hold the City, its elected officials, officers, employees and agents free and harmless from any claims , liabilities, costs, penalties or interest arising out of any failure or alleged failure to comply with the Prevailing Wage Laws. It shall be mandatory upon the Consultant and all subconsultants to comply with all California 7 ATTACHMENT 1 Labor Code prov1s1ons, which include but are not limited to prevailing wages, employment of apprentices, hours of labor and debarment of contractors and subcontractors. b. If the Services are being performed as part of an applicable "public works" or "maintenance" project, then pursuant to Labor Code Sections 1725 .5 and 1771.1, the Consultant and all subconsultants performing such Services must be registered with the Department of Industrial Relations. Consultant shall maintain registration for the duration of the Project and require the same of any subconsultants, as applicable. This Project may also be subject to compliance monitoring and enforcement by the Department of Industrial Relations. It shall be Consultant's sole responsibility to comply with all applicable registration and labor compliance requirements. 14. Verifi cati on of Empl oyment Eligib il ity. By executing this Agreement, Consultant verifies that it fully complies with all requirements and restrictions of state and federal law respecting the employment of undocumented aliens, including, but not limited to, the Immigration Reform and Control Act of 1986, as may be amended from time to time, and shall require all subconsultants and sub-subconsultants to comply with the same . 15. Laws and Venue . This Agreement shall be interpreted in accordance with the laws of the State of California . If any action is brought to interpret or enforce any term of this Agreement, the action shall be brought in a state or federal court situated in the County of Orange , State of California . 16. Termination or Abandonment a. City has the right to terminate or abandon any portion or all of the work under this Agreement by giving ten (10) calendar days written notice to Consultant. In such event, City shall be immediately given title and possession to all original field notes, drawings and specifications, written reports and other documents produced or developed for that portion of the work completed and/or being abandoned. City shall pay Consultant the reasonable value of services rendered for any portion of the work completed prior to termination. If said termination occurs prior to completion of any task for the Project for which a payment request has not been received, the charge for services performed during such task shall be the reasonable value of such services, based on an amount mutually agreed to by City and Consultant of the portion of such task completed but not paid prior to said termination. City shall not be liable for any costs other than the charges or portions thereof which are specified herein. Consultant shall not be entitled to payment for unperformed services, and shall not be entitled to damages or compensation for termination of work. b. Consultant may terminate its obligation to provide further services under this Agreement upon thirty (30) calendar days' written notice to City only in the event of substantial failure by City to perform in accordance with the terms of this Agreement through no fault of Consultant. 17. Docu men ts . Except as otherwise provided in "Termination or Abandonment," above, all original field notes , written reports, Drawings and Specifications and other documents, produced or developed for the Project shall, upon payment in full for the services described in this Agreement, be furnished to and become the property of the City . 18. Orga nization Consultant shall assign Nitin Patel as Project Manager. The Project Manager shall not be removed from the Project or reassigned without the prior written consent of the City. 8 ATTACHMENT 1 20. Limitation of Agreeme nt. This Agreement is limited to and includes only the work included in the Project described above . 21. Notice Any notice or instrument required to be given or delivered by this Agreement may be given or delivered by depositing the same in any United States Post Office, certified mail, return receipt requested, postage prepaid, addressed to: CITY: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn : Michelle Bannigan and shall be effective upon receipt thereof. 22. Third Party Rights CONSULTANT: White Nelson Diehl Evans LLP 2875 Michelle Drive, Suite 300 Irvine, CA 92606 Attn: Nitin Patel Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than the City and the Consultant. 23 . Eq ual Opp ortun ity Em ploym ent. Consultant represents that it is an equal opportunity employer and that it shall not discriminate against any employee or applicant for employment because of race, religion, color, national origin, ancestry, sex, age or other interests protected by the State or Federal Constitutions. Such non- discrimination shall include, but not be limited to, all activities related to initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising , layoff or termination . 24. Entire Ag reemen t This Agreement, with its exhibits, represents the entire understanding of City and Consultant as to those matters contained herein , and supersedes and cancels any prior or contemporaneous oral or written understanding, promises or representations with respect to those matters covered hereunder. Each party acknowledges that no representations, inducements, promises or agreements have been made by any person which are not incorporated herein, and that any other agreements shall be void. This Agreement may not be modified or altered except in writing signed by both Parties hereto. This is an integrated Agreement. 25. Se verab ility The unenforceability, invalidity or illegality of any provision(s) of this Agreement shall not render the provisions unenforceable, invalid or illegal. 26. Successors a nd Ass ig ns This Agreement shall be binding upon and shall inure to the benefit of the successors in interest, executors , administrators and assigns of each party to this Agreement. However, Consultant 9 ATTACHMENT 1 shall not assign or transfer by operation of law or otherwise any or all of its rights, burdens, duties or obligations without the prior written consent of City. Any attempted assignment without such consent shall be invalid and void . 27. Non-Waiver None of the provisions of this Agreement shall be considered waived by either party, unless such waiver is specifically specified in writing . 28. Time of Essence Time is of the essence for each and every provision of this Agreement. 29. City 's Righi to Employ Other Consultants City reserves its right to employ other consultants, including engineers, in connection with this Project or other projects . 30. Prohibited Interests Consultant maintains and warrants that it has not employed nor retained any company or person, other than a bona fide employee working solely for Consultant, to solicit or secure this Agreement. Further, Consultant warrants that it has not paid nor has it agreed to pay any company or person, other than a bona fide employee working solely for Consultant, any fee, commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting from the award or making of this Agreement. For breach or violation of this warranty, City shall have the right to rescind this Agreement without liability. For the term of this Agreement, no director, official, officer or employee of City, during the term of his or her service with City, shall have any direct interest in this Agreement, or obtain any present or anticipated material benefit arising therefrom. [SIGNATURES ON FOLLOWING PAGE] 10 ATTACHMENT 1 SIGNATURE PAGE FOR PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND WHITE NELSON DIEHL EVENS LLP IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. CITY OF SAN JUAN CAPISTRANO WHITE NELSON DIEHL EVENS LLP By: By: Pam Patterson, Esq., Mayor Its: Printed Name: _________ _ ATTEST: By: Maria Morris, City Clerk APPROVED AS TO FORM: By: 11 ATTACHMENT 1 SIGNATURE PAGE FOR PROFESSIONAL SERVICES AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND WHITE NELSON DIEHL EVENS LLP IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above. CITY OF SAN JUAN CAPISTRANO WHITE NELSON DIEHL EVENS LLP By: By: Pam Patterson, Esq., Mayor Its: Printed Name: 1\/ f r I v p a I £L ATTEST: By: Maria Morris, City Clerk APPROVED AS TO FORM: By: Jeff Ballinger, City Attorney 11 ATTACHMENT 1 EXHIBIT A Scope of Services SPECIFIC AUDIT APPROACII SEGMENTATION OF THE AUDIT HOURS. BY PARTNER AND STAFF LEVEL Supervisory Description of Services Partners Managers Staff Staff Clerical Total Audit of City of San Juan Capistrano 12 24 104 104 244 Audit of San Juan Capistrano Housing Authority 1 4 30 35 Single Audit, when applicable 1 4 30 2 37 Preparation of Annual Street Report 2 10 12 Preparation of City State Controller's Report 2 30 32 Preparation of San Juan Capistrano Public Financing Authority State Controller's Report 1 9 10 Preparation of CAFR 4 30 4 38 Total Hours 14 41 104 243 6 408 SEGMENTATION OF THE AUDIT HOURS. BY PHASES OF THE AUDIT Supervisory Partners Managers Staff Staff Clerical Total Planning 2 4 8 14 Interim Fieldwork 4 8 24 80 116 Final Fieldwork and Review 8 29 72 163 6 278 Total Hours 14 41 104 243 6 408 METHOD OF SAMPLING Our approach is to utilize random sampling based in our testing of the internal control systems related to cash receipts, cash disbursements, payroll and utility billings. Based on a statistical conclusion used by the firm our sample sizes can range from 25 to 60 transactions for each system. A random sample selection allows each item in the population of an equal chance of being selected. In addition, for disbursements, we may select a stratified sample of all transactions over a specified dollar amount for review. EXHIBIT A-Page 1 of 9 EXHIBIT A Scope of Services COMPUTER AUDITING CAPABILITIES White Nelson Diehl Evans LLP uses technology to make the audit process more effective. We utilize a paperless audit software, ProSystem fx Engagement, which allows us to manage our audit documentation electronically. Some ofthe benefits of paperless audit are: • Receive the City's schedules in either hard copy or electronic format. • Import and integrate trial balance data from virtually any accounting system. We avoid the time and expense of keying in account numbers, descriptions and account balances. We simply take your electronic trial balance and import it directly into our audit software. • Create our own lead sheets, which can include prior year balances. This helps us to easily identify significant fluctuations between fiscal years. • CAFR schedules are linked to trial balances. CAFR is updated automatically for any last minute journal entries, if any. Our approach includes using IDEA (Interactive Data Extraction and Analysis) which is a data analysis sohware that can be used to analyze large amounts of information. It allows the firm to extract data from the City's accounting records to tailor specific audit tests based on risk assessments. Some audit procedures that IDEA can be utilized for are: • Mechanical accuracy of worksheets or general ledgers. • Exception and gap/completeness testing for missing check numbers. • Cross checking different data bases for common information such as employee names. • Duplicate testing of invoice numbers. • Completeness of general ledger balances. The firm also has document management sohware which allows our clients to access our web portal. We utilize the web portal to transfer data files that are confidential or too large to be sent by e-mail. ANALYTICAL PROCEDURES Analytical procedures are used in the planning and final stages of the audit. In the planning phase, we use analytical procedures to identify unusual financial transactions and comparing relationships to expected results. We compare current year information to the prior years for balance sheet items, revenues and expenditures. In addition, revenues and expenditures are compared to budgets to identify unexpected results. In the final stages of the audit, the financial statements are reviewed to identify expected relationships such as comparing debt paid to expenditures recorded on governmental funds, transfers between funds, depreciation expense, etc. For all significant relationships identified, explanations are obtained as to why the situation occurred and additional audit procedures are applied to resolve any concerns. APPROACHTOINTERNALCONTROL Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Our understanding of the internal EXHIBIT A-Page 2 of 9 EXHIBIT A Scope of Services controls will be completed by completing narratives and checklists for various processes related to internal control. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform Guidance), we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to the Uniform Guidance. An audit is not designed to provide assurance on internal control or to identify significant deficiencies. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and the Uniform Guidance. SINGLE AUDIT APPROACH The single audit will be performed in accordance with all the requirements of the Single Audit Act, the Uniform Guidance and Government Auditing Standards issued by the GAO (the "Yellow Book") for cities that expend greater than $750,000 in federal awards in fiscal year 2015-2016 and subsequent years. • We will identify the Major and Non major Federal Programs of the City through the risk-based approach required by the Uniform Guidance. This approach includes consideration of current and prior audit experience, oversight by Federal agencies and pass-through entities, and the inherent risk of the federal program. • We will review all federal and industry-specific publications and guidance and inform the City of any recent changes. • We will perform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with applicable compliance requirements. If weaknesses in the internal controls are noted, we will modify our audit program as needed. • Our audit will include tests of transactions related to major federal award programs for compliance with applicable compliance requirements and certain provisions of laws, regulations, contracts and grant agreements. • Our procedures will consist of the applicable procedures described in the Uniform Guidance for the types of compliance requirements that could have a direct and material effect on each EXHIBIT A-Page 3 of 9 EXHIBIT A Scope of Services of the City's major programs. The purpose of those procedures will be to express an opinion on the City's compliance with requirements applicable to major programs in our report on compliance issued pursuant to the Uniform Guidance. • We will assist the City in completing and filing the Data Collection Form. DETERMINING LAWS AND REGULATIONS SUBJECT TO AUDIT Under provisions of AICPA Auditing Standards, management of the City is responsible for identifying to its outside auditors any laws and regulations which would have a significant effect on the audit. This would include federal laws (such as federal grant regulations), State laws (such as permitted investments under the California Government Code} and local laws (such as restrictions on special revenues levied by the City). After our selection as auditors, we will consult with City officials regarding these matters, to determine what laws and regulations need to be evaluated in connection with our audit. If a City is not able to identify specific laws and regulations that effect it, we have references {California Government Code and Health and Safety Code) to the more common laws, rules and regulations in our standard audit programs for the usual activities of a California City or Successor Agency to the Redevelopment Agency which will assist us in identifying laws and regulations to review in the audit. CONSIDERATION OF FRAUD IN A FINANCIAL STATEM ENT AUDIT Under the provisions of AU Section 316, Consideration of Fraud in a Financial Statement Audit, we will gather information necessary to identify risks of material misstatement due to fraud by (a) inquiring of management and others within the City about the risks of fraud, (b) considering the results of the analytical procedures performed in planning the audit, (c) considering fraud risk factors, and (d) considering any other information that comes to our attention during the audit. Prior to the commencement of final fieldwork, we will conduct a brainstorming session among the audit team members to identify any specific risk factors based on our understanding the City. Also, prior to final fieldwork, we will send a planning letter to all City Council members inquiring as to their knowledge of any fraud. Should any fraud risk factors be identified, our audit plan will incorporate specific procedures to address such risks. IRREGULARITIES AND ILLEGAL ACTS We will make an immediate, written report of all irregularities, illegal acts or indications of illegal acts of which we become aware, to the following parties: Mayor, City Manager, Assistant City Manager, and CFO/City Treasurer. POTENTIAL AUDIT PROBLEMS We do not anticipate any significant potential audit problems. If any potential audit problems are identified, we will immediately discuss them with the City's management. Our approach is to coordinate the resolution of any problems with the City's management. Considering our experience with auditing governmental entities and resources, we expect minimal disruption to the City's management in resolving any identified audit problems. '· -. -.. >. -r-, .-· '\VliJTF. NEL..;t...-)~~;"'ltt~-11 EV~N~ LLL' \.~"•ll~-:.:Jh .:.:••''"'''•!".'"--,.._' ~!·•~:;Y •'' EXHIBIT A-Page 4 of 9 . : EXHIBIT A Scope of Services AUDITS TO BE JN ACCO RDANC E WI T H GAAS AND OT HER REQUIR EMEN TS We will audit the financial statements of the City and the component units noted on the preceding page. The financial statements of all entities where the City exercises oversight will be combined with the City's financial statements, in accordance with GASB requirements. Our audit will be in accordance with auditing standards generally accepted in the United States of America as set forth by the AICPA, and will include such auditing procedures as we consider necessary under the circumstances. We will apply certain limited procedures, which consist principally of inquiries of management regarding methods of measurement and presentation of required supplementary information. However, we do not audit such information and do not express an opinion on it. Any supplemental financial statements will be subjected to auditing procedures as we consider necessary in relation to the financial statements taken as a whole. The scope of our audit will not include any statistical information, and we will not express an opinion concerning it. Our audits will conform with the guidelines set forth in the AICPA's Industry Audit Guide, Audits of State and Local Governmental Units. Also, each examination will comply with the standards for financial and compliance audits contained in the Government Auditing Standards, issued by the U.S . General Accounting Office, the provisions of the Single Audit Act and the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirement for Federal Awards (Uniform Guidance). Also, we will perform an agreed-upon procedures review of the City's Gann Spending Limitation Computation as required by Section 1.5 of Article XIIIB of the California Constitution. Our review will be performed in conformance with the provision of the "League of California Cities Uniform Guidelines". AUDIT APPROACH • Our audit approach is tailored to meet the technical requirements while maintaining professional skepticism without forgetting that we provide a service. The following aspects of our audit approach will add additional value to the audit services and minimize the amount of time spent by the City's staff in dealing with the audit. • We will assign experienced staff auditors including the in-charge field auditor having at least 3 years of experience. For first year engagements, all other staff will have at least 1 year of experience. You will not spend time training our auditors. • Whenever possible, we will use same format for audit supporting schedules used in prior years for the current year audit. This will reduce time spent by the City staff in dealing with the audit when a different audit firm is chosen. • Throughout the year we are available as a resource to our clients in researching technical questions, dealing with new pronouncements, reviewing complex financial entries and helping with any other issues as they arise. • The work papers will be reviewed by the manager or partner as field work is being completed to minimize additional questions after the fieldwork is completed. ...-~ • ---...... -~ --r--\V~HT E NE.L"'il-j~ :~1£HL E ~•A.~:? LtJ" -:, .... 11 ....... ··,.l h ~~· ... ,~. •: ~· "' ~:.. ·><~'··· . . EXHIBIT A-Page 5 of 9 EXHIBIT A Scope of Services Our firm uses a governmental audit program which will be modified to the City of San Juan Capistrano's operations to accommodate specific client circumstances. Our audit programs are organized by the financial statement approach and general procedures. The requirements by the Standards for assessing risk are utilized to modify the audit programs to focus on the higher risk areas of the financial statements. 1. Audit Planning Procedures: • Pre-audit conference with the City to establish process of communication between the audit team and City staff. • Discuss any new accounting pronouncements to be implemented in the current year. • Establish scope of work and timing of fieldwork. 2. Interim Fieldwork: Gather information about the City and its environment, including internal control: • Evaluate the design of internal controls that are relevant to the audit and determine whether the control, either individually or in combination is capable of effecting, preventing or detecting and correcting material misstatements. • Determine that the controls have been implemented, that is, that the controls exist and that the City is using it. • Specific areas to review include: Accounts payable/cash disbursements Accounts receivable/cash receipts Payroll disbursements Utility billing process Investment compliance Property and equipment • Review of minutes of the City of San Juan Capistrano. • Review of important contracts and debt agreements. • Interim exit conference with the City to review results of interim fieldwork, including any findings. 3. Final Audit Work: During the final audit work, we will assess 11risk" of material misstatement based on understanding of the City's audit environment, including its internal control, to identify account balances to audit that appear in the City's financial statements. Our audit programs will be specifically tailored to address any significant risks identified. The Prepared by Client (PBC) list will be provided at least one month in advance of fieldwork. Our work may include: • Confirmation of cash and investments balances and testing of bank reconciliations. • Confirm significant receivable balances or review subsequent cash receipts to verify receivable balance. • Search for unrecorded liabilities. • Testing of interfund balances and transfers. --• j• ~ ...... , l-\VH!T£i"N'iu::ci~.nnci-tL EVA..'NS LLP ...;...,,~,,~rr"\,•l h .. 2 .. ,,.,,n, .. ~~~· .. ,.,. EXHIBIT A-Page 6 of 9 EXHIBIT A Scope of Services • Test capital asset additions and depreciation expense. • Confirm long-term debt balances and review the accounting treatment of debt issued or refunded. • Test support for other significant assets or liabilities. • Analytical procedures on balance sheet and revenue and expenditure accounts, to evaluate and explain unusual fluctuations from prior year balances or current year budgeted amounts. • Review of attorney letters for significant legal matters affecting the City's financial position. • An exit conference will be held to review any significant adjustments odindings. · The audit workpapers will be reviewed by our management team as the work is being performed in the field so that at the conclusion of the fieldwork we are able to report any adjustments or findings. AUDIT APPROACH REDEVELOPMENT AGENCY /SUCCESSOR AG ENCY Recent legislation related to the dissolution of Redevelopment Agencies will impact our audit approach as detailed below. Our procedures will include: • Audit the balances reported for cash, investments, receivables, payables, capital assets and long term liabilities as of end of the year. • Review the activity reported on ROPS. • Review the activities of the Successor Agency to ensure compliance with AB 26, AB 1484 and other relevant legislation enacted. MANAGEMENT LETTERS In connection with each audit, a complete review of internal controls will be made of all significant accounting procedures. Our firm uses an internal control questionnaire, computer systems questionnaire and narration to gain an understanding of the internal control process as part of our audit. We will identify weaknesses and after discussion with the appropriate City staff, we will submit a management letter which will identify weaknesses observed during these reviews and throughout the audit. The management letter will also assess the effect of the management letter comments on the financial reporting process and recommend steps towards eliminating the weaknesses . ..... \ -~ -........ ...... -~ --..., -,- \'\./")-/TENEts -;._-,~ .;1!¥ Hl I V AN ..:_ L,_l' "-'' ''"'' !oA'i ~~ ' IJH oz:..: / ~~<"fl EXHIBIT A-Page 7 of 9 EXHIBIT A Scope of Services SCOPE OF WORK AND TIMING ENTITIES TO BE INCLUDED IN AUDIT City of San Juan Capistrano San Juan Capistrano Housing Authority San Juan Capistrano Public Financing Authority REPORTS TO BE ISSUED AND DUE DATES City of San Juan Capistrano: Comprehensive Annual Financial Report Report on Compliance with Article XIIIB Appropriations Limit (GANN) Management Letter Audit Committee Letter Single Audit Reports: • Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on Audit of Financial Statements Performed in Accordance With Government Auditing Standards • Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance and on the Schedule of Expenditures of Federal Awards. Data Collection Form Filing San Juan Capistrano Housing Authority: Financial Audit State Controllers' Office Reports: Annual Financial Report-City Annual Street Report-City Annual Financial Report-Public Financing Authority Draft November 30 November 30 November 30 November 30 November 30 January 4 November 11 N/A N/A N/A Final* December 20 December 20 December 20 December 20 December20 January 20 December 1 January 31 As required by SCO January 31 *'Final dates included above reflect the date of the electronic copy. Hard copies will be provided by the dates included in the RFP of January 5 (CAFR and single audit) and December 20 (GANN report, management letter, audit committee letter). COMMITMENT TO DELIVER REPORTS ON A TIMELY BASIS If all books and records, schedules and documents are made available to us by October 17, we make a commitment to have audit team members available and to provide all reports by the due dates specified above . EXHIBIT A-Page 8 of 9 EXHIBIT A Scope of Services AUDIT TlMING Assuming that the City's books are closed and ready for examination and that all necessary schedules and documents are available for our use by October lih each year, the suggested time schedule for the various phases of the audit would be approximately as follows: Entrance conference and audit planning meeting with key City staff. Discussion of any prior audit concerns and the performance of interim work. Interim audit fieldwork and conference with City staff to discuss results of interim fieldwork. Final audit fieldwork and management review Exit conference to summarize the results of the fieldwork and to review significant findings Deliver draft copies of reports Deliver final reports CLIENT REFERENCES For a list of client references, see page 8. Completed By June 30 July 31 October 28 November4 November 30 See page 8 RETENTION OF AND ACCESS TO AUDIT WORKPAPERS In accordance with provisions of the Uniform Guidance, GAO requirements, and the California Board of Accountancy, our audit workpapers will be maintained for at least seven years after the date of the report. These workpapers will be made available as necessary to your cognizant audit agency (or its designee), to GAO representatives, or to any other federal or state agency needing access to the workpapers. Also, our firm will respond to any reasonable inquiries of successor auditors and we will allow any successor auditors to review our workpaper. ' -\ ~ -; -, -....--"' y- \XnHir',···H 1 ~0..::"-.J''• JH I U J:V ·-<l'..!Sl •. l .. • • .,, .. 'It,' 'qo ~l• ~ .,·,~···~·-·~ ... .t''~l i\Uto EXHIBIT A-Page 9 of 9 EXHIBIT 8 Schedule of Charges/Payments TOTAl All-INClUSIVE MAXIMUM PRICE Our maximum fees for the five years ending June 30, 2020 will be as follows: Fiscal Year Option Years Description of Services 2015-16 2016-17 -· 29}7-18 2018-1~ 2019-20 Audit of City of San Juan Capistrano $ 29,260 $ 29,260 $ 29,995 $ 30,745 $ 31,515 Audit of San Juan Capistrano Housing Authority 3,625 3,625 3,715 3,805 3,900 Single Audit, when applicable (1) 3,745 3,745 3,840 3,935 4,035 Preparation of Annual Street Report 1,250 1,250 1,280 1,310 1,345 Preparation of City State Controller's Report 3,050 3,050 3,125 3,205 3,285 Preparation of San Juan Capistrano Public Financing Authority State Controller's Report 985 985 1,010 1,035 1,060 Preparation of CAFR 3,640 3,640 3,730 3,825 3,920 Out of pocket expenses (2) Total Not to Exceed Fees $ 45,555 $ 45,555 $ 46,695 $ 47,860 $ 49,060 (1) This fee contemplates auditing two major programs. Additional major programs will be audited for an additional cost of $2,000 each. (2) Out of pocket expenses are included in the fees above . EXHIBIT B-Page 1 of 2 EXHIBIT 8 Schedule of Charges/Payments HOURLY RATES FOR ADDITIONAL PROFESSIONAL SERVICES If the City wishes us to perform consulting or other services outside the scope of the services described herein, a separate written request from the City will be required. Our hourly rates for these services during each year under the basic contract will be as follows: Fiscal Year Option Years Position 2015-16 2016-17 2017-18 2018-19 2019-20 Partners $ 225 $ 225 $ 231 $ 236 $ 242 Managers 175 175 179 184 188 Supervisory Staff 125 125 128 131 135 Staff 90 90 92 95 97 Clerical 60 60 62 63 65 "'\ "" ..... -~ ----....- \X/HJ'T E . ~ ..... l.;.l_~:;;C );::_:,.)-...IJ="'d ,~ '~;_y_,,:;....,-·~•-• ...__ .......... 1\J '·· ~·····"4>•·,!!~~ :1::!!.:.1•-•lh EXHIBIT B-Page 2 of 2