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SR-11-14-1978-6QSanta Monica, California November 2, 1978 L P TO: Mayor and City Council Nov 1 4 1978 FROM: City Staff SUBJECT: Recommendation to accept proposal for annual audit contract extension. Introduction This report concerns acceptance of a proposal to extend the current three -year contract for annual audits for an additional three year period, 1979 through 1981. Funds will be budgeted yearly in account number 01- 700 - 274 - 000 -704. Background The City's current contract with Alexander Grant & Company will expire with the completion of the 1978 audit. Council approved the initial contract with this company in March, 1976, when bid results were: Elmer Fox, Westheimer & Co. $18,000.00 Alexander Grant & Co. 15,250.00 Touche, Ross & Co. 18,500.00 Ernst & Ernst 18,900.00 The Alexander Grant bid was subject to annual increases in the Consumer Price Index -Los Angeles. The final audit under the existing contract is now in progress and its cost is estimated to be in the area of $18,000.00. This approximates the second lowest bidder's price for 1977. The initial $18,450.00 yearly charge in the attached proposal from Alexander Grant & Company is substantially the original $15,250.00 bid with adjustment made for Consumer Price Index changes thereafter. 40 Nov 1 4 1978 Alexander Grant & Company were the City's auditors during the transition between the previous and current accounting systems and are aware of the peculiarities of interface between these two systems. The Alexander Grant staff's familiarity with record locations and with functions of the city departments will diminish the orientation and escort requirements of the City Controller's office that could be anticipated should a new auditing agency be employed. Recommendation It is recommended that the proposal by Alexander Grant & Company to extend the existing three -year contract for an additional three years, 1979 through 1981, inclusive, be accepted, Prepared By: R.N. Aronoff, Purchasing Agent Alexendep Dan 8 COMPANY CERTIFIED PUBLIC ACCOUNTANTS October 30, 1978 Honorable City Council City of Santa Monica 1685 Main Street Santa Monica, California 90401 Gentlemen: INTERNATIONAL FIRM ALEXANDER GRANT TANSLEY WITT We are pleased to submit this letter to extend our services for an additional three years as auditors for the City of Santa Monica. We will conduct the annual audit for the City of Santa Monica for the fiscal years ending June 30, 1979 through 1981. Our annual examinations will include the following financial statements for the respective fiscal years ending June 30, 1979 through 1981: (1) Combined balance sheet of all funds as at the respective June 30, (2) General government revenue, expenditures and fund balances for the respective year ending June 30, (3) Balance sheet for each fund as at June 30. (4) Statement of revenue, estimated and actual, for each budgeted fund for the year ending June 30. (5) Statement of expenditures and encumbrances compared with authorizationsfor each budgeted fund for the year ending June 30. (6) Statement of changes in fund balance for each of the above funds for the year ending June 30. (7) Statement of changes in financial position for each enterprise fund for the year ending June 30. 6842 VAN NUYS BOULEVARD VAN NUYS, CA 91405 (213) 786 -3551 Honorable City Council City of Santa Monica - 2 - October 30, 1978 We will also include financial statements for the Parking Authority of the City of Santa Monica for each re- spective year. Our annual examination will be made in accordance with the generally accepted auditing standards adopted by the American Institute of Certified Public Accountants and will include tests of accounting data and procedures we con- sider necessary under the circumstances. The objective of our engagement is the completion of an examination of the financial statements referred to above and, upon its completion and subject to its findings, the expression of an opinion on such financial statements. An examination made in accordance with generally accepted auditing standards is subject to certain limitations and the inherent risk that errors or irregularities, if they exist, will not be detected. However, if during the course of our examination, we become aware of such errors or irregu- larities, we will bring them to your attention. Should you then wish us to expand our normal auditing procedures, we will be pleased to work with you on developing a separate engagement for that purpose. When the annual audit is complete, we will provide a post -audit review for the Director of Finance and other interested personnel of the City to discuss accounting pro- cedures and to recommend measures that might be employed to correct problems, if any, that we have observed during the audit. Our fee will be based upon our regular per diem rates, and it is our expectation that our fee for the annual audit of the City of Santa Monica for the fiscal year ending June 30, 1979 will approximate $18,450, although circumstances may arise which will require our services to be extended. How- ever, we will not exceed the above fee estimate without your approval and authorization to extend our services, except that, in addition to our regular charges, our billings will include any directly connected out -of- pocket expenses incurred on your behalf to a maximum of $450. In arriving at our estimated fee, we have taken into consideration the fact that the City's accounting department will continue to cooperate with us, as they have done for the past three years, by preparing data as we request for use for our audit personnel. Our fee estimate is contingent upon our being awarded a three -year contract. Accordingly, our annual fee for the three years will approximate $18,450 with the provision that the second and third (fiscal years ending June 30, 1980 and 1981, respectively) are subject to cost of living increments as determined by the percentage increase in the consumer price index for Los Angeles, for the respective periods of July 1 through June 30, as published by the U. S. Department of Labor. Honorable City Council City of Santa Monica Our billings are that you may readily relate This proposal includes only scribed in this letter. - 3 - October 30, 1978 rendered on a monthly basis so our charges to the work performed. those services specifically de- If you are in agreement with the terms of this letter, please sign one copy and return it for our files. We appreciate the opportunity to work with you and continue our pleasant association. Very truly yours, ALEXANDER GRANT & COMPANY Daniel Matter Partner x10 r L� . y% Galay j ana�ing Par tney� DM:ds Enc. The foregoing letter fully describes the services required and is accepted by us. CITY OF SANTA MONICA M Title Date Reference: Contract No. 3128 (CCS)