EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: April 4, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Tomohito Oku, Finance Director
Bo-Kyoung Kim, Financial Services Manager
SUBJECT: Contract with Eide Bailly LLP to perform Audit services Recommendation
Adopt a resolution authorizing the City Manager to execute an agreement with Eide Bailly for audit services in amounts not to exceed $67,568.00 for fiscal year 2022-2023, $73,895.05 for fiscal year 2023-2024, and $76,305.38 for fiscal year 2024-2025; with an option to extend for two additional years if service remains acceptable to the City.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Ensure our financial and organizational health
Background
Government agencies are required by law to undertake an independent audit of their annual financial statements. The purpose of the audit is for the independent audit firm to express an opinion about whether the City’s financial statements are free of material misstatements and present fairly its financial position, in conformance fairly with generally accepted accounting principles, and in compliance with the Government Accounting Standards Board statements.
The City’s audited financial statements also serve to provide relevant financial information to its residents, City Council, City staff, creditors, investors, and other interested parties Analysis
Over the last nine years, the City has contracted with Badawi & Associates for audit services.
The current engagement concluded with the completion of the annual financial audit for the fiscal year ending June 30, 2022. Per the City’s financial policy and the best practice recommended by Government Finance Officers Association (GFOA), the City is required to solicit a competitive request for proposal for audit services no less frequently that every five years. However, due to the outbreak of the Covid-19 pandemic and remote work environment, staff sought Council approval to extend the agreement with Badawi & Associates for a total of two additional years, and the City Council granted such extensions.
On February 22, 2023, the City initiated a competitive Request for Proposal (RFP) to solicit bids/proposals for a new contract for audit services with a contract term of three years and an option to extend for two additional years. The City received three audit proposals as follows:
[Annual cost]
Badawi & Associates Eide Bailly The Pun Group
$ 68,958.33 $ 72,589.48 $ 67,484.67
Staff noted all cost proposals were within the budget and competitive with an insignificant difference. Per GFOA best practice recommendation, it reads “the audit procurement process should be structured so that the principal factor in the selection of an independent auditor is the auditor’s ability to perform a quality audit, and price should not be allowed to serve as the sole criterion for the selection of an independent auditor”. Accordingly, these proposals were evaluated by three City staff and an outside panel member based on the responses from interviews conducted on March 23, 2023, as well as additional due diligence with reference checks in addition to the cost proposals. This comports with the City’s purchasing ordinance, which allows the City to consider factors other than price. East Palo Alto Municipal Code Section 2.84.080(H) (“ability, capacity, skill” and “quality of performance by the bidder of previous...services for the city...”).
Based on the above evaluation process, staff has concluded that Eide Bailly is the lowest responsible bidder for providing audit services to the City of East Palo Alto. The attached resolution will authorize the City Manager to enter into an agreement with Eide Bailly to provide annual auditing services through the fiscal year ending 2025 with an option to extend for additional two years. As part of the agreement, the City reserves the right to extend the term of the contract for two additional years if Eide Bailly’s services remain acceptable to the City.
Fiscal Impact
The professional services agreement with Eide Bailly is for the fiscal year ending June 30 2023 through 2025. The fees are within the finance department baseline budget criteria. The fees for the respective years are not to exceed:
FY 2022-23 $ 67,568.00
FY 2023-24 $ 73,895.05
FY 2024-25 $ 76,305.38
Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.
Attachments
1. Resolution