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SR-11-13-2012-3MSuccessor Agency Meeting: November 13, 2012 Agenda Item: 3® M To: Chairperson and Successor Agency From: Andy Agle, Director of Housing and Economic Development Subject: Due Diligence Reviews for the Successor Agency Recommended Action Staff recommends that the Successor Agency authorize the Executive Director to negotiate and execute an amendment to the professional services agreement No. 9373 (CCS) with Macias, Gini and O'Connell to perform two Due Diligence Reviews in accordance with ABX1 26 and AB1484, in an amount not to exceed $78,281. Executive Summary Pursuant to Assembly Bill (AB) 1484, the Successor Agency is required to employ a licensed accountant, approved by the Los Angeles County Auditor - Controller, to conduct Due Diligence Reviews (DDRs) of the Successor Agency's accounts. The purpose of the DDRs is to determine the unobligated balances available, if any, for transfer from the Successor Agency to the affected taxing entities (ATEs). On August 2, 2012, the County Auditor - Controller approved the Successor Agency's request to retain Macias, Gini and O'Connell (MGO) to undertake the preparation of both DDRs. Background Sections 34179.5 and 34179.6 of the California Health and Safety Code require that each successor agency employ a licensed accountant, approved by the county auditor - controller and with experience and expertise in local government accounting, to conduct DDRs of the remaining assets of each former redevelopment agency and determine the unobligated balances available for transfer from each successor agency to the county auditor- controller's trust fund for redistribution to other ATEs. AB 1484 requires two separate DDRs to be prepared. The first DDR relates to the housing assets of the former Redevelopment Agency and the second DDR relates to all 91 other assets. The DDRs must be submitted to the Santa Monica Redevelopment Successor Agency Oversight Board (Oversight Board) for review and approval. Following Oversight Board approval, DDRs must be submitted to the state Department of Finance (DOF), Los Angeles County Auditor - Controller, Los Angeles Chief Administrative Officer and the State Controller's Office, as required by AB 1484. Both DDRs must be completed according to strict schedules. Following a competitive process, Council approved a five -year contract with MGO for $675,000 to provide auditing services for various City departments, including the former Redevelopment Agency, now the Successor Agency, on May 10 2011. To date, MGO has conducted an audit of the former Redevelopment Agency for the year ending June 30, 2011, and was recently retained by the Los Angeles County Auditor - Controller to complete the Redevelopment Agreed -Upon Procedures Audit of the former Redevelopment Agency as required per AB 1X26. Discussion Based on MGO's extensive audit experience, their familiarity with the former Redevelopment Agency's accounting records, and the limited time constraints for completion of the DDRs, staff forwarded a written request to the Los Angeles County Auditor - Controller requesting approval for MGO to conduct and prepare the DDRs. The County Auditor - Controller approved MGO as the DDR auditor for Santa Monica. Staff recommends that the Successor Agency amend the existing contract with MGO to include preparation and completion of the DDRs in order to provide the necessary auditing services required by state law. 6 Financial Impacts & Budget Actions The professional services agreement amendment to be awarded to Macias, Gini and O'Connell to conduct due diligence reviews in accordance with ABX1 26 and AB1484 is not to exceed $78,281, for a new agreement total of $753,281. Expenses will be paid from funds received by the Successor Agency from Redevelopment Property Tax Trust Fund (RPTTF) distributions, to the extent authorized by DOF. The contract costs will be charged to account 01263.555060. Prepared by: Elsa Trujillo, Senior Development Analyst Approved: -2 Andy Agle, Director < --J Forwarded to Council: Rod Gould Housing and Economic Development City Manager 3 Reference Amended Contract No. 9373 (CCS).