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SR 08-27-2019 3H City Council Report City Council Meeting: August 27, 2019 Agenda Item: 3.H 1 of 4 To: Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department Subject: Award Request for Proposal and enter into agreement with Moss Adams, LLP to provide Internal Audit Services Recommended Action Staff recommends that the City Council: 1. Award RFP# 231 to Moss Adams, LLP, a Washington -based company, to provide internal audit services for the Finance Department; 2. Authorize the City Manager to negotiate and execute an agreement with Moss Adams, LLP, in an amount not to exceed $150,000 for one year, with four additional one-year renewal option(s) on the same terms and conditions, for a total amount not to exceed $750,000 over a five-year period with future year funding contingent on Council budget approval. Summary The City of Santa Monica uses an internal audit firm to conduct regular reviews of City operations to identify weaknesses in processes and procedures, internal controls, and/ or other operational or system vulnerabilities that could lead to increased financial and other risk to the City. Common areas of study for internal audit include cash handling, billing, accounts receivable and payroll functions; individual department operations; and information technology functions and systems. Using an internal audit firm is a best practice to ensure independence of the internal audit function and to maximize city resources spent on internal audit. This practice supports the City’s guiding values of stewardship and accountability through increased transparency and operational efficiency. Following a competitive process, staff recommends the City partner with Moss Adams for internal audit services. Discussion In 2014, the City of Santa Monica transitioned from conducting internal audits with City staff to partnering with a third party. The City has employed Moss Adams, LLP in this 2 of 4 capacity since August 2014, with one modification in March 2019 to increase contract authority. Since that time, Moss Adams has worked with City staff to complete an organization-wide risk assessment, eight audits, an internal controls review, and an additional comprehensive compensation study. The City’s existing agreement with Moss Adams expired August 23, 2019. Vendor Selection The City issued a request for proposals for internal audit services on May 16, 2019. In addition to vendors notified through PlanetBids and ProcureNow, the City’s online bidding systems, City staff reached out to vendors that participated in the previous solicitation and to large firms providing audit services to notify t hem of the opportunity. The City received four submissions and shortlisted the two top proposers. A team consisting of representatives from the Finance Department, Human Resources, the City Attorney’s Office, City Manager’s Office, and two Audit Subcommittee members reviewed the top proposals. Following this review, staff recommends Moss Adams as the City’s internal audit services provider over the next five years. Bidder Recommendation Best Qualified Person/Firm Best Qualified Firm Evaluation Criteria Knowledge and Prior Experience; Capacity and Technical Resources; Audit Approach and Work Plan; Costs; References; Presentation Municipal Code SMMC 2.24.190 RFPs Received Clifton Larson Allen Eide Bailly Lotus, Inc. Moss Adams, LLP RFP Data Posted On Posted On Advertised In (City Charter & SMMC) Vendors Downloaded Date Publicly Opened 5/16/19 City's Online Bidding Sites Santa Monica Daily Press 16 6/12/19 Justification to Award Staff shortlisted and then interviewed the top two firms. Based on this criteria and criteria in SMMC 2.24.190, staff recommends Moss Adams as the best qualified person or firm to provide Internal Audit Services based on personnel background and expertise, audit approach and understanding of the City’s needs, capacity, and experience with similar projects, and the ability to meet the City’s cost requirements. Moss Adams stood 3 of 4 out from the other firms in its similar experience with related work in other California cities, including some with which Santa Monica commonly draws comparisons. The firm also demonstrated expertise in key areas in which the City has interests and needs. Past Council Actions Meeting Date Description August 26, 2014 (Attachment A) Internal Audit Services for the City of Santa Monica March 26, 2019 (Attachment B) First Modification to Agreement #9956 with Moss Adams for Internal Audit Services Financial Impacts and Budget Actions Staff seeks authority to approve funding from the General Fund to award an agreement with $150,000 for internal audit services. Agreement Request Request Amount FY 2019-20 Budget Department Account # Total Contract Amount $150,000 01200001.552010 $750,000 Funds are available in the FY 2019-20 budget. Future year funding is contingent on Council budget approval. Prepared By: Alicia Endo, Administrative Staff Assistant Approved Forwarded to Council Attachments: A. Attachment A-August 26, 2014 (weblink) 4 of 4 B. Attachment B-March 26, 2019 (weblink) REFERENCE: Agreement No. 10929 (CCS)