DATE:
June 21, 2022
TO:
Mayor and Council Members
FROM:
Nils Bensten, City Manager
BY:
Melinda Sayre, Director of Government Services/City Clerk Jacquelyn Castillo, Administrative Analyst
SUBJECT:
Contract for Audit Services of Cannabis Businesses
RECOMMENDED ACTION
It is recommended that the City Council authorize the City Manager to enter into a three-year Professional Services Agreement (PSA) with Hinderliter De Llamas and Associates (HdL) in an amount not-to-exceed $532,000, for audit services of cannabis businesses.
BACKGROUND
Each business that is operating in the City is audited both financially and for compliance with state and City regulations each year they are in business. On December 11, 2019, the City entered into a piggyback contract with HdL in the amount not-to-exceed $50,000 and expiring on February 20, 2022. On August 3, 2021, the City Council approved an amendment of $58,000 to the existing contract with HdL, for a revised not-to-exceed contract amount of $108,000.
ISSUES/ANALYSIS
The current contract with HdL is set to expire on June 30, 2022. On March 10, 2022, the City issued a Request for Proposal (RFP) for cannabis audit services and received four proposals on April 12, 2022. The RFP was made up of two parts, Part 1 – Technical Proposal, and Part 2 – Fee Proposal. Fee Proposals remained sealed and held until all Technical Proposals were evaluated and ranked.
As part of Part 1, a panel of three staff members reviewed and evaluated the proposals based on certain criteria such as project understanding, qualifications, experience, and approach to the scope of work. The consultants and their cumulative scores are included below with the top three consultants highlighted.
The purpose of the cumulative scoring system is to ensure that each consultant complied with the RFP directives, and to provide a way to narrow down the top candidates prior to the City reviewing fee proposals. This also ensures that the consultant who is recommended to receive the contract meets the City’s high standards for the services requested, based upon the review of their proposal by a panel.
Based on the cumulative scores from the panel; HdL Companies was the top-rated consultant, and best meets the City’s service needs. Therefore, it is recommended that the City Council approve the award of Professional Services Agreement to HdL.
HdL has increased its audit fees from $7,250 to $12,000. The proposed contract amount considers the 65% increase in audit fees and the number of active cannabis businesses requiring audit services as well as existing cannabis businesses that will require audit services in the next three years as they progress in their medical cannabis project status.
Contract cannabis audit services are necessary to provide the City with ongoing technical support and subject matter expertise to ensure proper oversight and management of all commercial cannabis businesses, including compliance with all applicable State and local laws and an annual financial audit to verify the accuracy of the revenue reported to the City during the review period.
FISCAL IMPACT
The Fiscal Year (FY) 2022-23 Operating Budget includes funding for contract cannabis audit services and will be included in the annual budget by staff for the duration of the contract (FY 2022-23 through FY 2024-25). Additionally, each establishment pays the City for their respective annual audit as part of the cannabis application and business license process.
ALTERNATIVE(S)
Provide alternative direction to staff.
ATTACHMENT(S)
None
Page PAGE 2 of NUMPAGES 2
Staff Report to the Mayor and Council Members
June 21, 2022
Contract for Audit Services of Cannabis Businesses
City of Hesperia
STAFF REPORT