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July 8, 2025
ITEM TITLE
Agreement: Approve an Agreement with Macias Gini & O’Connell, LLP to Provide Internal Audit Services Report Number: 25-0130
Location: No specific geographic location
Department: Finance
G.C. § 84308 Regulations Apply: Yes
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 agreement with Macias Gini & O’Connell, LLP to provide internal audit services.
SUMMARY
The Finance Department seeks City Council approval to contract with an external, independent firm to establish and perform the functions of an internal audit program. The program will begin with 1) establishing a Council Policy to define the purpose, authority , and responsibility of the in ternal audit program , 2) performing an entity-wide risk assessment of the City to establish an internal audit plan and 3) establishing a Transient Occupancy Tax (TOT) audit program covering both traditional hotel establishments and short - term rental properties.
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 Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment.
Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable
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DISCUSSION
The Finance Department recommends the establishment of an internal audit program. While the City has historically conducted internal audits on an as-needed basis, it does not currently maintain an internal audit function. Internal auditing provides a proactive, independent assessment of risk and internal controls across City operations.
The internal audit function operates independently of management and does not assume any operational or decision-making responsibilities. An internal audit function can enhance organizational value by:
Reviewing existing processes and recommending opportunities to improve efficiency and effectiveness.
Evaluating the internal control environment and testing the design and operation of key controls. Assessing compliance with applicable laws, policies, procedures, and contract requirements.
The Finance Department recommends contracting with an independent firm to perform the internal audit functions. Working with an independent firm provides the following key benefits:
Objective and independent of City staff.
Adherence to auditing standards.
Broad range of subject matter expertise.
Scalable support based on City’s evolving needs.
Cost effectiveness.
To procure internal audit services, the City’s Finance Department solicited proposals in accordance with Chula Vista Municipal Code Section 2.56.110. The solicitation was issued on October 4, 2024, and closed on November 1, 2024. The City received ten prop osals in response to the City’s Request for Proposals (RFP) P04-2025 from the following firms: Baker Tilly, Eide Bailly LLP, GPP Analytics Inc., Macias Gini & O’Connell LLP, Marcum LLP, Moss Adams LLP, Plante Moran, UHY Advisors Mid-Atlantic, Inc., Vasquez & Company, LLP, and Weaver and Tidwell, L.L.P. The City’s selection committee invited five firms to an interview. The City’s selection committee members reviewed, scored, and discussed the firms based on experience, personnel, qualifications, fee proposal , interview, and adherence of firm’s proposal to RFP guidelines. After a comprehensive assessment, staff recommends contracting with Macias Gini & O’Connell LLP for these services.
The agreement provides compensation on a time and materials basis. The required services under the agreement include items like reviewing internal controls, performing a risk assessment of the City, and preparing annual audit work plans. The agreement requires advance approval by City staff of a statement of work before any t ime is incurred. Each statement of work will include a not -to-exceed amount for the particular service and will be approved via a City issued purchase order. The compensation for the initial, three-year term is set at a not-to-exceed amount of $675,000. The agreement includes one option to extend for a two-year term. If the City exercises its option to extend, the hourly rates under the contract will increase by 3% annually beginning in year 3.
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Macias Gini & O’Connell LLP was founded in 1987. The firm has o ver 35 years of experience working with public agencies on audit, internal audit, and management advisory projects. The firm has experience building internal audit programs from the ground up and leading government internal audit functions. The firm has a staff of more than 700 professionals (125 in the State and local government practice) located in 18 offices.
The firm has served as the independent auditor to six of the top 10 largest California cities and six of the top 10 largest California counties. Current clients include the City of Los Angeles, the County of Los Angeles, the City and County of San Francisco, and more.
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 holdings of the City Council 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.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
Approval of this resolution will award an agreement with Macias Gini & O’Connell LLP to provide internal audit services to the City. Sufficient funds were budgeted in the General Fund for fiscal year 2025-26 for these costs. There is no additional fiscal impact anticipated as a result of this action.
ONGOING FISCAL IMPACT
The ongoing fiscal impact to the General Fund is estimated at $225,000 per fiscal year. All ongoing costs for these services will be incorporated as part of the annual budget development process in future years.
ATTACHMENTS
1. Macias Gini & O’Connell, LLP Consultant Services Agreement Staff Contact: Sarah Schoen, Director of Finance/Treasurer Amy Pope, Finance Manager