CITY COUNCIL STAFF REPORT
Meeting: July 7, 2022
Subject
Consider authorizing the City Manager, or Designee, to execute a one-year agreement with Crowe LLP for auditor services for a total contract amount of $148,600 Recommended Action
Authorize the City Manager, or Designee, to execute a one-year agreement with Crowe LLP for auditor services for a total contract amount of $148,600 Adopt Resolution No. 22-XXX approving Budget Modification #2223-219 increasing appropriations in the General Fund (100-41-405) by $43,600 Discussion
On December 12, 2016, the City issued a request for proposal (RFP) for certified public accounting firms to audit the City’s financial statements for the fiscal year ending June 30, 2017, and the two subsequent fiscal years thereafter, with an option to extend for two one-year periods, not to exceed a total of five fiscal years.
The City received six proposals, which were reviewed and evaluated by the Auditor Procurement Subcommittee. The Auditor Procurement Subcommittee, which the Audit Committee established on November 9, 2016, consisted of the following members:
Audit Committee Chair
Audit Committee Member
Finance Manager/Deputy City Treasurer
After reviewing and evaluating the proposals, the subcommittee interviewed three firms. The subcommittee unanimously recommended that the Audit Committee approve the City Manager to engage Crowe Horwath LLP (now known as Crowe LLP) to perform independent auditor services beginning with the fiscal year ending June 30, 2017.
On February 27, 2017, the Audit Committee passed a motion to accept the subcommittee’s recommendation to select Crowe to perform independent auditor and related services beginning with the fiscal year ending June 20, 2017.
The City entered into five separate engagements with Crowe for the Fiscal Year (FY) 2016-17, 2017-18, 2018-19, 2019-20, and 2020-21 audits. The table below shows the services provided and associated costs since 2017.
Fiscal Year
Cost
Services
2017-18
127,200
FY 2016-17 Audit ($107,200), FY 2017-18 Audit ($20,000) 2018-19
64,600
FY 2017-18 Audit ($64,600)
2019-20
83,000
FY 2018-19 Audit ($76,000), FY 2019-20 Audit ($7,000)
2020-21
94,000
FY 2019-20 Audit ($69,000), FY 2020-21 Audit ($25,000)
2021-22
76,500
FY 2020-21 Audit ($76,500)
Total
$445,300
Although professional services are exempt from bidding requirements in Municipal Code Chapter 3.22, staff nonetheless intended to complete a new competitive process to select a firm to provide independent auditor services for FY 2021-22. However, staff was delayed in issuing a Request for Proposal (RFP). At the December 13, 2021, Audit Committee meeting, the Finance Manager informed the Audit Committee that the City intended to engage Crowe for one additional year and pursue an RFP process for the FY 2022-23 audit.
As a result, staff recommends authorizing the City Manager, or Designee, to execute an agreement with Crowe for the FY 2021-22 audit until the City can conduct the RFP process. The fees would be $141,100 for the financial statement audit and agreed-upon procedures (AUP) and $7,500 for the single audit as described below.
Description of Services
Fee Amount
Audit of City of Cupertino, California financial statements for the year ending June 30, 2022 (includes ACFR, TDA, City Investment Policy AUP, Proposition 111 AUP, Storm Drain AUP, City State Controller Report and Report of Internal Controls) $141,100
Single Audit of City of Cupertino, California with one major program $7,500
Next Steps
At the July 27, 2022, Audit Committee meeting, staff plans to recommend that the Audit Committee form an auditor selection subcommittee. Staff would work with the subcommittee to develop and publish an RFP. After proposals are received, the subcommittee would evaluate the proposals and recommend an auditor for the FY 2022-23 audit. Staff would then bring the Audit Committee’s recommendation to City Council for consideration.
Sustainability Impact
No sustainability impact.
Fiscal Impact
The FY 2022-23 adopted budget for external audit services is $105,000. An additional appropriation of $43,600 is requested to account for increases in the cost of services. If the budget adjustment is approved, the total FY 2022-23 budget for external audit services will be $148,600. _____________________________________
Prepared by: Thomas Leung, Senior Management Analyst
Reviewed by: Kristina Alfaro, Director of Administrative Services Approved for Submission by: Dianne Thompson, Assistant City Manager Attachments:
A – Draft Resolution
B – City of Cupertino Financial Statement Engagement Letter 2022 Draft C – City of Cupertino GANN AUP Engagement Letter 2022 Draft D – City of Cupertino Investment AUP Engagement Letter 2022 Draft E – City of Cupertino Storm Drain AUP Engagement Letter 2022 Draft 2 2