STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of September 10, 2024
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Edwin Gato, Director of Finance
SUBJECT: Authorization to Extend the Audit Services with The Pun Group for three years ending June 30, 2025, June 30, 2026, and June 30, 2027, with the option to extend for an additional two fiscal years.
RECOMMENDED ACTION:
Adopt a Resolution authorizing the City Manager to Execute a three-year agreement for independent auditing services with the Pun Group with the option to extend for an additional two fiscal years.
BACKGROUND:
The Pun Group has served as the City’s independent auditor for the past five years. It has audited the City’s internal controls and financial statements for fiscal year (FY) 2019-20 to FY 2023-24. The City’s contract with the firm has now expired. The Finance Department, with limited staffing, is in the midst of significant special projects, with the development of Long-Range Financial Forecast (LRFF), revenue enhancements initiatives, migrating and implementing subsidiary systems, and rate analysis. Given the excellent service that the Pun Group has provided to the City and has developed an understanding of the City’s operations which resulted in delivering quality audit services, the City Council is requested to authorize the City Manager to enter into an agreement with the Pun Group for additional three years, with the option to extend for two subsequent years.
ANALYSIS:
The City arranges for an annual audit of its financial statements by independent auditors. The auditors play a critical role in evaluating the City’s system of internal controls and overall financial management and condition. They also assist in the preparation of the Comprehensive Annual Financial Report (CAFR) and aid with the implementation of new Governmental Accounting Standard Board (GASB) pronouncements.
On April 28, 2020, the City entered into a contract for auditing services with the Pun Group for a period of five years, covering audits of the City’s activities for FY 19-20 through FY 23-24. The City’s contract with the firm has now expired.
The Finance Department is in the midst of a significant special projects, with the development of Long-Range Financial Forecast (LRFF), revenue enhancements initiatives, migrating and implementing subsidiary systems, and rate analysis for the Sewer system. It is the opinion of staff that the Pun Group has provided excellent customer service, technical expertise and understanding of the City’s operations. Due to their excellent work, competitive pricing, staff believes that it would be prudent to engage the Pun Group for an additional three years of auditing services with the option to extend for an additional two subsequent years, so that the City will not need to transition to a new firm during this critical period.
The Pun Group is highly qualified to continue to provide both independent audit services to the City and to implement new GASB pronouncements due to their experience, qualifications, and demonstrated ability. The firm continue to meet the independence standards of the U.S. General Accounting Office Government Auditing Standards.
The Pun Group has performed excellent auditing services to the City over the past five years. The firm has proven to be very knowledgeable and has valuable resources which have assisted the City in implementing new accounting standards, and assist in strengthening the City’s internal control. Staff is recommending extending the contract for three years with the option to extend for additional two fiscal years.
FISCAL IMPACT:
The following are the total fixed fees for fiscal years ending June 30, 2025, June 30, 2026, and June 30, 2027, with option for the City to extend the contract for an additional two fiscal years.
The Single Audit fees is based on (1) major programs. The fee to audit additional major programs will be $3,500 each programs determined to be “major” will be based on OMB Uniform Grant Guidance.
The budget to support the first year of audit services is included in the FY 2024-25 General Fund Budget under Finance Department Professional Services line item (100-4625-611.60-00). The budget for the subsequent years’ audit services will be established in the annual budget process.
ATTACHMENTS:
Attach 1- Resolution
Attach 2- The Pun Group Proposal
Financial Impact
Description: Auditing Services – Year 1
Funding Source: General Fund – Finance (100-4625-611.60-00) Budget Recap:
Total Estimated cost: $61,000 New Revenue: None
Amount Budgeted: $65,000 Lost Revenue: N/A
New funding required: No New Personnel: N/A
Council Policy Change: Yes No