SR-03-18-2014-3KID
City of City Council
Santa Monica'
City Council Meeting: March 18, 2014
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To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Auditing Services for the City of Santa Monica
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a second modification to Professional Services Agreement #9373 in the
amount of $44,000 with Macias Gini & O'Connell, a California -based company, to
provide financial auditing services. This will result in a five -year amended agreement
with a new total amount not to exceed $797,281, with future year funding contingent on
Council budget approval.
Executive Summary
The City of Santa Monica engages an independent auditing firm to audit its financial
statements in accordance with generally accepted accounting principles and to perform
agreed -upon procedures in accordance with attestation standards established by the
American Institute of Certified Public Accountants. In 2011, the firm of Macias, Gini and
O'Connell was selected through a competitive process to provide these services for up
to a five -year term. Since that time, the dissolution of Redevelopment and the
implementation of new Governmental Accounting Standards Board standards has
necessitated additional work. Staff recommends modifying the agreement to include
that work. This would result in a new five -year not to exceed amount of $797,281.
Background
The City engages an independent auditing firm to perform an examination of the City's
basic financial statements as well as an examination of the City's Redevelopment
Agency financial statements, the City's Big Blue Bus (BBB) Fund financial statements,
the City's Air Quality Improvement Program, and the City's Schedule of Expenditures of
Federal Awards (Single Audit). The Auditor also performs agreed -upon procedures to
test and report on the City's GANN appropriation limit calculation. At its May 10. 2011
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meeting, Council awarded a contract with Macias Gini & O'Connell in a five -year
amount of $675,000 to perform these services.
On November 13 2012, Council authorized a modification to the agreement in the
amount of $78,281 to perform due diligence reviews for the Successor Agency.
Discussion
The Governmental Accounting Standards Board (GASB) has implemented changes that
affect the City's auditing process and therefore require additional work by Macias Gini &
O'Connell:
1. GASB 65 — Establishes accounting standards that reclassify certain items
previously classified as assets and liabilities. This will require additional review to
ensure that the City is compliant with the new standards.
2. GASB 68 — Modifies the reporting of pension obligations.
In addition to ensuring compliance with the new GASB requirements, Macias Gini &
O'Connell was requested to re -test the National Transit Database Agreed Upon
Procedures for the BBB as a result of discrepancies within the Transit Master System
utilized by the Big Blue Bus.
This additional work is necessary to ensure that City remains in compliance with GASB
standards and is necessary to complete the annual audit process. The additional work
outlined above would increase the five -year agreement by an amount not to exceed
$44,000.
PAI
Financial Impacts & Budget Actions
The agreement modification to be awarded to Macias Gini & O'Connell is $44,000, for
an amended agreement total not to exceed $797,281. Funds are available in the FY
2013 -14 budget in division 01222; the contract will be charged to account
01222.577040.
Prepared by: Yiannis Kalaitzidis, Financial Operations Manager
Director of Finance
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Forwarded to Council:
Rod Gould
City Manager
Reference:
Amended Contract No. 9373
(CCS)