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May 16, 2023
ITEM TITLE
Agreement: Approve a Sixth Amendment to the Agreement with the Accounting Firm of Lance Soll and Lunghard, LLP to Provide Audit Services
Report Number: 23-0105
Location: No specific geographic location
Department: Finance
Environmental Notice: The activity is not a "Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution approving an amendment to the agreement between City and the accounting firm Lance Soll and Lunghard, LLP for audit services for Fiscal Year 2022-23.
SUMMARY
Finance Department is requesting the approval of the sixth amendment to the agreement with Lance Soll and Lungard, LLP (LSL) to provide audit services for an additional year, Fiscal Year (FY) 2022-23, for an amount not to exceed $149,951. Section 1017 of the Chula Vista Charter requires an annual independent audit of the City. In 2014, the City approved the agreement with LSL to provide audit services for FY 2013-14 to FY 2017-
18. Since then, due to timing and management staff turnovers in the Finance Department, the City has approved five amendments to the agreement for audit services through FY 2021-22.
The Finance Department desires to transition preparation of the Annual Comprehensive Financial Report (ACFR) from the contract auditor to Finance staff, starting with the FY 2022-23 ACFR. To ensure the ACFR preparation is transitioned efficiently and properly, a change to the accounting firm is not advisable at this time.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under P a g e | 2
Section 15378 of the S tate CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activit y is not subject to CEQA. Thus, no environmental review is required
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
DISCUSSION
Section 1017 of the Chula Vista Charter requires an annual independent audit of the City. In 2014 the Finance Department posted a Request for Proposal (RFP) to provide audit services to the City for FY 2013-14 through FY 2017-18. Based on that solicitation, the City approved the agreement with LSL. A brief vacancy and onboarding of a new Finance Manager during the FY 2018-19 audit resulted in reprioritizing of projects.
Once the FY 2018-19 audit was completed, staff was required to begin and complete the FY 2019-20 audit.
This timing did not allow for the Finance Department to conduct a solicitation; therefore, the City approved fifth amendment to the agreement with LSL to provide audit services for FYs 2020-21 and 2021-22. In FY 2021-22, a new Director of Finance, a new Assistant Director of Finance, and a new Finance Manager were hired. Traditionally included in the audit services agreement, the Finance Department requested the accounting firm at the time to prepare the ACFR. The new Finance management team desires to prepare the ACFR internally by Finance staff, starting with FY 2022 -23 ACFR. To ens ure the ACFR preparation is transitioned efficiently and properly, a change to the accounting firm is not advisable at this time; therefore, the Finance Department is requesting the approval of the sixth amendment to the agreement with LSL to provide audit services for an additional year, Fiscal Year 2022-23, for an amount not to exceed $149,951.
In accordance with Municipal Code Section 2.56.110.H.2, Impractical or Impossible, when it is determined by the Purchasing Agent (for contracts with a maximum contract amount of $100,000 or less) or by resolution of the City Council (for contracts with a maximum contract amount in excess of $100,000) that the competitive bidding requirements are impractical, or impossible, or that City interests would be materially better served by applying a d ifferent purchasing procedure, the Pu rchasing Agent or City C ouncil, respectively, may award the contract utilizing a lternative p rocedures consistent wi th best purchasing practices.
The California Government Code Section 12410.6 (b) mandates that the engagement partner on a financial audit be rotated every six (6) years. This section states, commencing with FY 2013-14, a local agency shall not employ a public accounting firm to provide audit services to a l ocal agency if the lead audit partner or coordinating audit partner having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local agency for six consecutive fiscal years. For purposes of calculating the six consecutive fiscal years, the local agency shall not take into account any time that a public accounting firm was employed by that local agency prior to FY 2013-14. The Controller may waive t his requirement if he or she finds that a nother eligible public accounting firm is not a vailable to perform the audit. Based on S ection 12410.6 (b), LSL and the City are in compliance with this code. LSL partner Rich Kikuchi was the lead audit partner from FYs 2014-15 through 2017-18, Brandon Young was transitioned to the lead audit partner for FYs 2018-19 and 2019-20, and Ryan Domino was transitioned to P a g e | 3
the lead audit partner for FYs 2020-21 and 2021 -22 and will continue to be the lead audit partner for FY 2022-23.
LSL is a regional, full-service firm with of fices in Brea (head quarters), Laguna Hills, Santa Ana, and Sacramento, California, and The Woodlands, Texas. Established in 1929, LSL has grown as a leader in the governmental auditing industry. The firm has 135 employees including 14 partners. Their governmental staff consists of three partners, two senior managers, three managers, two supervisors, four seniors, and ten professional staff. The engagement with the City will be staffed from their Brea office. Current local clients to the City of Chula Vista include the City of Oceanside and the City of Carlsbad.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property h oldings of the City C ouncil members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq).
CURRENT-YEAR FISCAL IMPACT
The contract is budgeted in the General Fund in the current fiscal year.
ONGOING FISCAL IMPACT
All costs incurred for these services are budgeted in the General Fund annually.
ATTACHMENTS
1. Sixth Amendment
2. Agreement
Staff Contact: Sarah Schoen, Director of Finance/Treasurer