ITEM NO. 10.
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measurement and presentation and comparing the information for consistency with management’s responses to our inquiries. We will not express an opinion or provide any form of assurance on the RSI. The following RSI is required by U.S. GAAP and will be subjected to certain limited procedures but will not be audited:
1. Management’s discussion and analysis.
2. Major fund budget to actual schedules.
3. Pension schedules.
4. Other postemployment benefit schedules.
Supplementary Information Other than RSI
Supplementary information other than RSI will accompany the Town’s basic financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the basic financial statements and perform certain additional procedures, including comparing and reconciling the supplementary information to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and additional procedures in accordance with U.S. GAAS.
We intend to provide an opinion on the following supplementary information in relation to the financial statements as a whole:
1. Nonmajor governmental fund combining balance sheets and statements of revenues, expenditures and changes in fund balances.
2. Nonmajor budgetary comparison schedules.
3. Proprietary funds combining balance sheets and statements of revenues, expenditures and changes in net position, and cash flows, as applicable.
4. Fiduciary fund statements, as applicable.
Also, the document we submit to you will include the following other additional information that will not be subjected to the auditing procedures applied in our audit of the basic financial statements:
1. ACFR introductory section.
2. Statistical tables.
Schedule of Expenditures of Federal Awards
We will subject the schedule of expenditures of federal awards to the auditing procedures applied in our audit of the basic financial statements and certain additional procedures, including comparing and reconciling the schedule to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and additional procedures in accordance with auditing standards generally accepted in the United States of America. We intend to provide an opinion on whether the schedule of expenditures of federal
ITEM NO. 10.
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awards is presented fairly in all material respects in relation to the financial statements as a whole.
Data Collection Form
Prior to the completion of our engagement, we will complete the sections of the Data Collection Form that are our responsibility. The form will summarize our audit findings, amounts and conclusions. It is management’s responsibility to submit a reporting package including financial statements, schedule of expenditure of federal awards, summary schedule of prior audit findings and corrective action plan along with the Data Collection Form to the federal audit clearinghouse.
The financial reporting package must be text searchable, unencrypted, and unlocked. Otherwise, the reporting package will not be accepted by the federal audit clearinghouse. We will assist you in the electronic submission and certification. You may request from us copies of our report for you to include with the reporting package submitted to pass-through entities.
The Data Collection Form is required to be submitted within the earlier of 30 days after receipt of our auditors’ reports or nine months after the end of the audit period, unless specifically waived by a federal cognizant or oversight agency for audits. Data Collection Forms submitted untimely are one of the factors in assessing programs at a higher risk.
Auditor Responsibilities
We will conduct our audit in accordance with GAAS and in accordance with Government Auditing Standards. As part of an audit in accordance with GAAS and in accordance with Government Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of controls.
Obtain an understanding of the system of internal control in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.2 However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements, including the disclosures, and whether the financial
ITEM NO. 10.
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statements represent the underlying transactions and events in a manner that achieves fair presentation.
Conclude, based on the audit evidence obtained, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’s ability to continue as a going concern for a reasonable period of time.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements or noncompliance may not be detected exists, even though the audit is properly planned and performed in accordance with GAAS and Government Auditing Standards of the Comptroller General of the United States of America. Please note that the determination of abuse is subjective and Government Auditing Standards does not require auditors to detect abuse.
Our responsibility as auditors is limited to the period covered by our audit and does not extend to any other periods.
Compliance with Laws and Regulations
As previously discussed, as part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we will perform tests of [Entity Name]’s compliance with the provisions of applicable laws, regulations, contracts, and agreements.
However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion.
Audit of Major Program Compliance
Our audit of the Town’s major federal award program(s) compliance will be conducted in accordance with the requirements of the Single Audit Act, as amended; and the provisions of U.S. Office of Management and Budget’s (OMB) Uniform Guidance; and will include tests of accounting records, a determination of major programs in accordance with Uniform Guidance, and other procedures we consider necessary to enable us to express such an opinion on major federal award program compliance and to render the required reports. We cannot provide assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion or withdraw from the engagement.
The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance about whether material noncompliance with applicable laws and regulations, the provisions of contracts and grant agreements applicable to major federal award programs, and the applicable compliance requirements occurred, whether due to fraud or error, and express an opinion on the entity’s compliance based on the audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
ITEM NO. 10.
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Noncompliance with the compliance requirements is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the entity’s compliance with the requirements of the federal programs as a whole.
As part of a compliance audit in accordance with GAAS and in accordance with Government Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks.
Our procedures will consist of determining major federal programs and, performing the applicable procedures described in the U.S. Office of Management and Budget OMB Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the entity’s major programs, and performing such other procedures as we considers necessary in the circumstances. The purpose of those procedures will be to express an opinion on the entity’s compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance.
Also, as required by the Uniform Guidance, we will obtain an understanding of the entity’s internal control over compliance relevant to the audit in order to design and perform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each of the entity’s major federal award programs. Our tests will be less in scope than would be necessary to render an opinion on these controls and, accordingly, no opinion will be expressed in our report. However, we will communicate to you, regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we have identified during the audit.
We will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the entity’s major federal award programs, and a report on internal controls over compliance that will report any significant deficiencies and material weaknesses identified; however, such report will not express an opinion on internal control.
Management’s Responsibilities
Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;
2. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements;
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3. For identifying, in its accounts, all federal awards received and expended during the period and the federal programs under which they were received;
4. For maintaining records that adequately identify the source and application of funds for federally funded activities;
5. For preparing the schedule of expenses of federal awards (including notes and noncash assistance received) in accordance with the Uniform Guidance requirements;
6. For designing, implementing, and maintaining effective internal control over federal awards that provides reasonable assurance that the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards;;
7. For identifying and ensuring that the Town complies with laws, regulations, grants, and contracts applicable to its activities and its federal award programs and implementing systems designed to achieve compliance with applicable laws, regulations, grants, and contracts applicable to activities and its federal award programs;
8. For disclosing accurately, currently, and completely the financial results of each federal award in accordance with the requirements of the award;
9. For identifying and providing report copies of previous audits, attestation engagements, or other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented;
10. For taking prompt action when instances of noncompliance are identified;
11. For addressing the findings and recommendations of auditors, for establishing and maintaining a process to track the status of such findings and recommendations and taking corrective action on reported audit findings from prior periods and preparing a summary schedule of prior audit findings;
12. For following up and taking corrective action on current year audit findings and preparing a corrective action plan for such findings;
13. For submitting the reporting package and data collection form to the appropriate parties;
14. For making the auditor aware of any significant vendor / contractor relationships where the vendor / contractor is responsible for program compliance;
15. To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, and relevant to federal award programs, such as records, documentation, and other matters; b. Additional information that we may request from management for the purpose of the audit; and
c. Unrestricted access to persons within the Town from whom we determine it necessary to obtain audit evidence.
d. A written acknowledgement of all the documents that [management] expects to issue that will be included in the annual report and the planned timing and method of issuance of that annual report;4 and
e. A final version of the annual report (including all the documents that, together, comprise the annual report) in a timely manner prior to the date of the auditor’s report.
16. For including the auditor’s report in any document containing basic financial statements that indicates that such basic financial statements have been audited by the Town’s auditor;
ITEM NO. 10.
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17. For adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the current year period(s) under audit are immaterial, both individually and in the aggregate, to the financial statements as a whole;
18. For acceptance of nonattest services, including identifying the proper party to oversee nonattest work;
19. For maintaining adequate records, selecting and applying accounting principles, and safeguarding assets;
20. For informing us of any known or suspected fraud affecting the Town involving management, employees with significant role in internal control and others where fraud could have a material effect on compliance and the financials;
21. For the accuracy and completeness of all information provided;
22. For taking reasonable measures to safeguard protected personally identifiable and other sensitive information; and
23. For confirming your understanding of your responsibilities as defined in this letter to us in your management representation letter.
With regard to the supplementary information and schedule of expenditures of federal awards (SEFA) referred to above, you acknowledge and understand your responsibility (a) for the preparation of the supplementary information and SEFA in accordance with the applicable criteria, (b) to provide us with the appropriate written representations regarding the supplementary information and SEFA, (c) to include our report on the supplementary information and the SEFA in any document that contains the supplementary information and that indicates that we have reported on such supplementary information and the SEFA, and (d) to present the supplementary information and the SEFA with the audited financial statements, or if the supplementary information and the SEFA will not be presented with the audited financial statements, to make the audited financial statements readily available to the intended users of the supplementary information and the SEFA no later than the date of issuance by you of the supplementary information and the SEFA and our reports thereon.
As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit. We understand that your employees will prepare all confirmations we request and will locate any documents or invoices selected by us for testing.
If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers’ proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed.
ITEM NO. 10.
Page | 8 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
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Audit Administration and Fees
Our all-inclusive maximum fee for these services will be as follows (see Exhibit A):
Fiscal year ending June 30, 2025 $48,500
Our fees include out-of-pocket costs (such as report reproduction, word processing, postage, travel, copies, telephone, etc.).
Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit as follows:
Engagement Partner $300 per hour
Associate Partner $250 per hour
Manager $200 per hour
Senior Auditor $150 per hour
Staff Auditor $125 per hour
Administrative $100 per hour
Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes thirty days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report.
You will be obligated to compensate us for all time expended and to reimburse us for all out-ofpocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If cooperation is not provided as anticipated and at a level that hinders the progress of the services to be provided, we retain the right to terminate the contract for cause with thirty (30) days’ notice. During that time, the Town will have the opportunity to provide the cooperation required to complete the audit and C&A may rescind the cancellation.
If the services to be performed by C&A are not performed in an acceptable manner to the Town, the Town may cancel this contract for cause by providing notice to C&A, giving at least thirty (30) days’ notice of the proposed cancellation and the reasons for same. During that time period, C&A may seek to bring the performance of services to a level that is acceptable to the Town, and the Town may rescind the cancellation if such action is in Town’s best interest. Notwithstanding the above provisions, the Town may, upon the expiration of thirty (30) days written notice to C&A, terminate the agreement at will. Payment for services or goods received prior to termination shall be made by the Town provided those goods or services were provided in a manner acceptable to the Town. Payment for those goods and services shall not be unreasonably withheld.
ITEM NO. 10.
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Sheldon Chavan, CPA, is the engagement partner for the audit services specified in this letter.
His responsibilities include supervising Chavan & Associates LLP’s services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report.
Other Matters
During the course of the engagement, we may communicate with you or your personnel via fax or e-mail, and you should be aware that communication in those mediums contains a risk of misdirected or intercepted communications.
Regarding the electronic dissemination of audited financial statements, including financial statements published electronically on your Internet website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document.
The audit documentation for this engagement is the property of Chavan & Associates LLP and constitutes confidential information. However, we may be requested to make certain audit documentation available to state and federal agencies and the U.S. Government Accountability Office pursuant to authority given to it by law or regulation, or to peer reviewers. If requested, access to such audit documentation will be provided under the supervision of Chavan & Associates LLP’s personnel. Furthermore, upon request, we may provide copies of selected audit documentation to these agencies and regulators. The regulators and agencies may intend, or decide, to distribute the copies of information contained therein to others, including other governmental agencies. We agree to retain our audit documentation or work papers for a period of at least seven years from the date of our report.
We will be available during the year to consult with you on financial management and accounting matters of a routine nature. You agree to inform us of facts that may affect the financial statements of which you may become aware during the period from the date of the auditor’s report to the date the financial statements are issued. In accordance with the requirements of Government Auditing Standards, a copy of our latest external peer review report of our firm is available upon request or on our website.
During the course of the audit, we may observe opportunities for economy in, or improved controls over, your operations. We will bring such matters to the attention of the appropriate level of management, either orally or in writing.
Professional standards prohibit us from being the sole host and/or the sole storage for your financial and non-financial data. As such, it is your responsibility to maintain your original data and records and we cannot be responsible to maintain such original information. By signing this engagement letter, you affirm that you have all the data and records required to make your books and records complete.
ITEM NO. 10.
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Nonattest Services
With respect to any nonattest services we perform, the Town’s management is responsible for (a) making all management decisions and performing all management functions; (b) assigning a competent individual to oversee the services; (c) evaluating the adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the services performed; and (e) establishing and maintaining internal controls, including monitoring ongoing activities.
Nonattest services include the preparation of the audited financial statements, note disclosures, supplemental information (as noted above), the schedule of expenditures of federal awards, the data collection form, the state controller’s annual reports; statistical schedules that are derived from the audited financial statements. These items will be prepared from information prepared and provided by the Town during our audit, such as the Town’s trial balance.
We will not assume management responsibilities on behalf of the Town. However, we will provide advice and recommendations to assist management in performing its responsibilities.
Our responsibilities and limitations of the engagement are as follows:
We will perform the services in accordance with applicable professional standards, including GAAS, GAGAS and Uniform Guidance as previously noted. The nonattest services are limited to the services previously outlined. Our firm, in its sole professional judgment, reserves the right to refuse to do any procedure or take any action that could be construed as making management decisions or assuming management responsibilities, including determining account coding and approving journal entries. Our firm will advise the Town with regard to the nonattest services provided, but the Town must make all decisions with regard to those matters.
Government Auditing Standards require that we document an assessment of the skills, knowledge, and experience of management, should we participate in any form of preparation of the basic financial statements and related schedules or disclosures as these actions are deemed a non-audit service.
Reporting
We will issue a written report upon completion of our audit of the Town’s basic financial statements. Our report will be addressed to the Town Council. Circumstances may arise in which our report may differ from its expected form and content based on the results of our audit.
Depending on the nature of these circumstances, it may be necessary for us to modify our opinions, add an emphasis-of-matter or other-matter paragraph(s) to our auditor’s report, or if necessary, withdraw from the engagement. If our opinions on the basic financial statements are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement.
ITEM NO. 10.
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In accordance with the requirements of Government Auditing Standards, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance over financial reporting will not be an objective of the audit and, therefore, no such opinion will be expressed.
At the conclusion of our audit engagement, we will communicate to management and the Council the following significant items from the audit:
Our view about the qualitative aspects of the Town’s significant accounting practices; Significant difficulties, if any, encountered during the audit; Uncorrected misstatements, other than those we believe are trivial, if any; Disagreements with management, if any;
Other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to those charged with governance regarding their oversight of the financial reporting process;
Material, corrected misstatements that were brought to the attention of management as a result of our audit procedures;
Representations we requested from management;
Management’s consultations with other accountants, if any; and Significant issues, if any, arising from the audit that were discussed, or the subject of correspondence, with management.
If the foregoing is in accordance with your understanding, please indicate your agreement by signing this letter and emailing it to us at [email protected]. If you have any questions, please let us know.
We appreciate the opportunity to be your financial statement auditors and look forward to working with you and your staff.
Very truly yours,
Sheldon Chavan, CPA, Managing Partner
Chavan & Associates, LLP
ITEM NO. 10.
Page | 12 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
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RESPONSE:
This letter correctly sets forth the understanding of the Town of Los Gatos.
Signature:
Title:
Date:
ITEM NO. 10.
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Exhibit A
Services Hours 2025
Town Audit 340 $ 34,000
Single Audit 30 3,000
GANN Limit 4 500
ACFR Preparation 48 6,000
Consulting, Updates and Guidance N/A Included
Present Reports to Board and Committees N/A Included
Conversion Entries N/A Included
Subtotal Base Audit 422 43,500
Annual Financial Transactions Report 16 2,250
Measure G AUP 24 2,750
Total All-Inclusive Maximum Price 462 $ 48,500
ITEM NO. 10.
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December 19, 2024
Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
We are pleased to confirm our understanding of the services we are to provide for the Town of Los Gatos (the “Town”) for the fiscal year ending June 30, 2025. We will audit the Transportation Development Act (TDA) financial statements and the related notes to the TDA financial statements for each fiscal year then ended. This includes the annual fiscal audit as required by PUC Section 99245. Our audit will be conducted with the objective of our expressing an opinion on each opinion unit and an opinion on compliance regarding the Town’s compliance with the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission.
Audit of the Financial Statements
We will conduct our audit in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS), and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America (GAGAS). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error, fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. If appropriate, our procedures will therefore include tests of documentary evidence that support the transactions recorded in the accounts. As part of our audit process, we will request written representations from your attorneys, and they may bill you for responding. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements or noncompliance (whether caused by errors, fraudulent financial reporting, misappropriation of assets, detected abuse, or violations of laws or governmental regulations) may not be detected exists, even though the audit is properly planned and performed in accordance with U.S. GAAS and Government Auditing Standards of the Comptroller General of the United States of America. Please note that the Attachment 3
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determination of abuse is subjective and Government Auditing Standards does not require auditors to detect abuse.
In making our risk assessments, we consider internal control relevant to the Town’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit. Our responsibility as auditors is limited to the period(s) covered by our audit and does not extend to any other periods.
We will issue a written report upon completion of our audit of the Town’s basic financial statements. Our report will be addressed to the governing body of the Town. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions on the basic financial statements are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement.
In accordance with the requirements of Government Auditing Standards, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance over financial reporting will not be an objective of the audit and, therefore, no such opinion will be expressed. We also will perform tests and procedures required by the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission.
Audit of TDA Compliance
Our audit of the Town’s compliance will be made in accordance with the requirements of the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission; and will include tests of accounting records and other procedures we consider necessary to enable us to express such an opinion on TDA program compliance and to render the required reports. We cannot provide assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion or withdraw from the engagement.
ITEM NO. 10.
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Management’s Responsibilities
Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;
2. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements;
3. For identifying, in its accounts, all TDA awards received and expended during the period and the TDA programs under which they were received.
4. For maintaining records that adequately identify the source and application of funds for TDA funded activities;
5. For the design, implementation, and maintenance of internal control over TDA awards;
6. For establishing and maintaining effective internal control over TDA awards that provides reasonable assurance that the Town is managing TDA awards in compliance with section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission;
7. For identifying and ensuring that the Town complies with laws, regulations, grants, and contracts applicable to its activities and its TDA award programs and implementing systems designed to achieve compliance with applicable laws, regulations, grants, and contracts applicable to activities and its TDA award programs;
8. For disclosing accurately, currently, and completely the financial results of each TDA award in accordance with the requirements of the award;
9. For identifying and providing report copies of previous audits, attestation engagements, or other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented;
10. For taking prompt action when instances of noncompliance are identified;
11. For addressing the findings and recommendations of auditors, for establishing and maintaining a process to track the status of such findings and recommendations and taking corrective action on reported audit findings from prior periods and preparing a summary schedule of prior audit findings;
12. For following up and taking corrective action on current year audit findings and preparing a corrective action plan for such findings;
13. For submitting the reporting package to the appropriate parties;
14. For making the auditor aware of any significant vendor / contractor relationships where the vendor / contractor is responsible for program compliance;
15. To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, and relevant to federal award programs, such as records, documentation, and other matters;
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b. Additional information that we may request from management for the purpose of the audit; and
c. Unrestricted access to persons within the Town from whom we determine it necessary to obtain audit evidence.
16. For including the auditor’s report in any document containing basic financial statements that indicates that such basic financial statements have been audited by the Town’s auditor;
17. For adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the current year period(s) under audit are immaterial, both individually and in the aggregate, to the financial statements as a whole;
18. For acceptance of nonattest services, including identifying the proper party to oversee nonattest work;
19. For maintaining adequate records, selecting and applying accounting principles, and safeguarding assets;
20. For informing us of any known or suspected fraud affecting the Town involving management, employees with significant role in internal control and others where fraud could have a material effect on compliance and the financial statements;
21. For the accuracy and completeness of all information provided;
22. For taking reasonable measures to safeguard protected personally identifiable and other sensitive information; and
23. For confirming your understanding of your responsibilities as defined in this letter to us in your management representation letter.
As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit. We understand that your employees will prepare all confirmations we request and will locate any documents or invoices selected by us for testing.
If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers’ proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed.
Audit Administration and Fees
Our all-inclusive maximum fee for these services will be as follows:
Fiscal year ending June 30, 2025 $4,000
Our fees include out-of-pocket costs (such as report reproduction, word processing, postage, travel, copies, telephone, etc.).
ITEM NO. 10.
Page | 5 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit as follows:
Engagement Partner $300 per hour
Associate Partner $250 per hour
Manager $200 per hour
Senior Auditor $150 per hour
Staff Auditor $125 per hour
Administrative $100 per hour
Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes thirty days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report.
You will be obligated to compensate us for all time expended and to reimburse us for all out-ofpocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If cooperation is not provided as anticipated and at a level that hinders the progress of the services to be provided, we retain the right to terminate the contract for cause with thirty (30) days’ notice. During that time, the Town will have the opportunity to provide the cooperation required to complete the audit and C&A may rescind the cancellation.
If the services to be performed by C&A are not performed in an acceptable manner to the Town, the Town may cancel this contract for cause by providing notice to C&A, giving at least thirty (30) days’ notice of the proposed cancellation and the reasons for same. During that time period, C&A may seek to bring the performance of services to a level that is acceptable to the Town, and the Town may rescind the cancellation if such action is in Town’s best interest. Notwithstanding the above provisions, the Town may, upon the expiration of thirty (30) days written notice to C&A, terminate the agreement at will. Payment for services or goods received prior to termination shall be made by the Town provided those goods or services were provided in a manner acceptable to the Town. Payment for those goods and services shall not be unreasonably withheld.
Sheldon Chavan, CPA, is the engagement partner for the audit services specified in this letter.
His responsibilities include supervising Chavan & Associates LLP’s services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report.
Other Matters
During the course of the engagement, we may communicate with you or your personnel via fax or e-mail, and you should be aware that communication in those mediums contains a risk of misdirected or intercepted communications.
ITEM NO. 10.
Page | 6 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Regarding the electronic dissemination of audited financial statements, including financial statements published electronically on your Internet website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document.
The audit documentation for this engagement is the property of Chavan & Associates LLP and constitutes confidential information. However, we may be requested to make certain audit documentation available to state and federal agencies and the U.S. Government Accountability Office pursuant to authority given to it by law or regulation, or to peer reviewers. If requested, access to such audit documentation will be provided under the supervision of Chavan & Associates LLP’s personnel. Furthermore, upon request, we may provide copies of selected audit documentation to these agencies and regulators. The regulators and agencies may intend, or decide, to distribute the copies of information contained therein to others, including other governmental agencies. We agree to retain our audit documentation or work papers for a period of at least seven years from the date of our report.
We will be available during the year to consult with you on financial management and accounting matters of a routine nature. You agree to inform us of facts that may affect the financial statements of which you may become aware during the period from the date of the auditor’s report to the date the financial statements are issued.
With respect to any nonattest services we perform, the Town’s management is responsible for (a) making all management decisions and performing all management functions; (b) assigning a competent individual to oversee the services; (c) evaluating the adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the services performed; and (e) establishing and maintaining internal controls, including monitoring ongoing activities.
Nonattest services include the preparation of the audited financial statements and note disclosures. These items will be prepared from information prepared and provided by the Town during our audit, such as the Town’s trial balance.
We will not assume management responsibilities on behalf of the Town. However, we will provide advice and recommendations to assist management in performing its responsibilities.
Our responsibilities and limitations of the engagement are as follows:
We will perform the services in accordance with applicable professional standards, including GAAS and GAGAS.
This engagement is limited to the services previously outlined. Our firm, in its sole professional judgment, reserves the right to refuse to do any procedure or take any action that could be construed as making management decisions or assuming management responsibilities, including determining account coding and approving journal entries. Our firm will advise the Town with regard to the nonattest services provided, but the Town must make all decisions with regard to those matters.
ITEM NO. 10.
Page | 7 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Government Auditing Standards require that we document an assessment of the skills, knowledge, and experience of management, should we participate in any form of preparation of the basic financial statements and related schedules or disclosures as these actions are deemed a non-audit service.
During the course of the audit, we may observe opportunities for economy in, or improved controls over, your operations. We will bring such matters to the attention of the appropriate level of management, either orally or in writing.
At the conclusion of our audit engagement, we will communicate to management and the Council the following significant items from the audit:
Our view about the qualitative aspects of the Town’s significant accounting practices; Significant difficulties, if any, encountered during the audit; Uncorrected misstatements, other than those we believe are trivial, if any; Disagreements with management, if any;
Other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to those charged with governance regarding their oversight of the financial reporting process;
Material, corrected misstatements that were brought to the attention of management as a result of our audit procedures;
Representations we requested from management;
Management’s consultations with other accountants, if any; and Significant issues, if any, arising from the audit that were discussed, or the subject of correspondence, with management.
In accordance with the requirements of Government Auditing Standards, a copy of our latest external peer review report of our firm is available upon request or on our website.
If the foregoing is in accordance with your understanding, please indicate your agreement by signing this letter and emailing it to us at [email protected] or follow the DocuSign link in the email provided. If you have any questions, please let us know.
We appreciate the opportunity to be your financial statement auditors and look forward to working with you and your staff.
Very truly yours,
Sheldon Chavan, CPA, Managing Partner
Chavan & Associates, LLP
ITEM NO. 10.
Page | 8 16450 Monterey Road, Ste. 5, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
RESPONSE:
This letter correctly sets forth the understanding of the Town of Los Gatos.
Signature:
Title:
Date:
ITEM NO. 10.
1 of 2
Chavan & Associates, LLP. – First Amendment
1st AMENDMENT TO AGREEMENT
This AMENDMENT TO AGREEMENT is dated for identification this 2nd day of April, 2024 and amends that certain agreement for Auditing Services dated 1/12/2022, made by and between the Town of Los Gatos, ("Town,") and the Chavan & Associates, LLP. (“Consultant.”)
RECITALS
A. Town and Consultant entered into an Auditing Services Agreement on 1/12/2022, (“Agreement”), a copy of which is attached hereto and incorporated by reference as Attachment 1 to this Amendment.
B. Town desires to amend the Agreement to update the scope of work and compensation sections.
AMENDMENT
1. Section 2.1, “Scope of Services” is amended to include the additionalservices described in that certain proposal sent to the Town on October 8, 2021 and Engagement letter dated March 25,2024, which is hereby incorporated by reference and included as attachments 1 and 2, respectively.
2. Section 2.6, “Compensation” is amended to read Compensation for the consultant’s professional services will be increased by $15,500 for total agreement thatshall not exceed $132,500, inclusive of all costs. Payment shall be based upon Town approval of each task.
3. All other terms and conditions of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, the Town and Consultant have executed this Amendment.
Town of Los Gatos Approved as to Consent:
By: _______________________________ By: ______________________________ Laurel Prevetti, Town Manager Chavan & Associates, LLP
Department Approval:
_______________________________________
Gitta Ungvari
Director of Finance
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75 4/3/2024
4/3/2024
4/8/2024
ITEM NO. 10.
2 of 2
Chavan & Associates, LLP. – First Amendment
Approved as to Form: Attest:
______________________________ ______________________________ Gabrielle Whelan, Town Attorney Wendy Wood, CMC, Town Clerk DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75 4/8/2024 4/9/2024
ITEM NO. 10.
Page | 1 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
March 25, 2024
Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
We are pleased to confirm our understanding of the services we are to provide for the Town of Los Gatos (the “Town”) for the fiscal years ending June 30, 2017, 2020, 2021, 2022 and 2024.
We will audit the Transportation Development Act (TDA) financial statements and the related notes to the TDA financial statements for each fiscal year then ended. This includes the annual fiscal audit as required by PUC Section 99245. Our audit will be conducted with the objective of our expressing an opinion on each opinion unit and an opinion on compliance regarding the Town’s compliance with the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission.
Audit of the Financial Statements
We will conduct our audit in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS), and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America (GAGAS). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error, fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. If appropriate, our procedures will therefore include tests of documentary evidence that support the transactions recorded in the accounts. As part of our audit process, we will request written representations from your attorneys, and they may bill you for responding. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements or noncompliance (whether caused by errors, fraudulent financial reporting, misappropriation of assets, detected abuse, or violations of laws or governmental regulations) may not be detected exists, even though the audit is properly planned and performed in accordance with U.S. GAAS and Government Auditing Standards of the Comptroller General of the United States of America. Please note that the Attachment 2
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 2 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
determination of abuse is subjective and Government Auditing Standards does not require auditors to detect abuse.
In making our risk assessments, we consider internal control relevant to the Town’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit. Our responsibility as auditors is limited to the period(s) covered by our audit and does not extend to any other periods.
We will issue a written report upon completion of our audit of the Town’s basic financial statements. Our report will be addressed to the governing body of the Town. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions on the basic financial statements are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement.
In accordance with the requirements of Government Auditing Standards, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance over financial reporting will not be an objective of the audit and, therefore, no such opinion will be expressed. We also will perform tests and procedures required by the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission.
Audit of TDA Compliance
Our audit of the Town’s compliance will be made in accordance with the requirements of the regulations of the Transportation Development Act, including section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission; and will include tests of accounting records and other procedures we consider necessary to enable us to express such an opinion on TDA program compliance and to render the required reports. We cannot provide assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion or withdraw from the engagement.
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 3 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Management’s Responsibilities
Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;
2. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements;
3. For identifying, in its accounts, all TDA awards received and expended during the period and the TDA programs under which they were received.
4. For maintaining records that adequately identify the source and application of funds for TDA funded activities;
5. For the design, implementation, and maintenance of internal control over TDA awards;
6. For establishing and maintaining effective internal control over TDA awards that provides reasonable assurance that the Town is managing TDA awards in compliance with section 6666 of Title 21, of the California Code of Regulations, and the allocation instructions and resolutions of the Metropolitan Transportation Commission;
7. For identifying and ensuring that the Town complies with laws, regulations, grants, and contracts applicable to its activities and its TDA award programs and implementing systems designed to achieve compliance with applicable laws, regulations, grants, and contracts applicable to activities and its TDA award programs;
8. For disclosing accurately, currently, and completely the financial results of each TDA award in accordance with the requirements of the award;
9. For identifying and providing report copies of previous audits, attestation engagements, or other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented;
10. For taking prompt action when instances of noncompliance are identified;
11. For addressing the findings and recommendations of auditors, for establishing and maintaining a process to track the status of such findings and recommendations and taking corrective action on reported audit findings from prior periods and preparing a summary schedule of prior audit findings;
12. For following up and taking corrective action on current year audit findings and preparing a corrective action plan for such findings;
13. For submitting the reporting package to the appropriate parties;
14. For making the auditor aware of any significant vendor / contractor relationships where the vendor / contractor is responsible for program compliance;
15. To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, and relevant to federal award programs, such as records, documentation, and other matters; DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 4 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
b. Additional information that we may request from management for the purpose of the audit; and
c. Unrestricted access to persons within the Town from whom we determine it necessary to obtain audit evidence.
16. For including the auditor’s report in any document containing basic financial statements that indicates that such basic financial statements have been audited by the Town’s auditor;
17. For adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the current year period(s) under audit are immaterial, both individually and in the aggregate, to the financial statements as a whole;
18. For acceptance of nonattest services, including identifying the proper party to oversee nonattest work;
19. For maintaining adequate records, selecting and applying accounting principles, and safeguarding assets;
20. For informing us of any known or suspected fraud affecting the Town involving management, employees with significant role in internal control and others where fraud could have a material effect on compliance and the financial statements;
21. For the accuracy and completeness of all information provided;
22. For taking reasonable measures to safeguard protected personally identifiable and other sensitive information; and
23. For confirming your understanding of your responsibilities as defined in this letter to us in your management representation letter.
As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit. We understand that your employees will prepare all confirmations we request and will locate any documents or invoices selected by us for testing.
If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers’ proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed.
Audit Administration and Fees
Our all-inclusive maximum fee for these services will be as follows:
Fiscal year ending June 30, 2017 $2,500
Fiscal year ending June 30, 2020 (Program 1) $2,500
Fiscal year ending June 30, 2020 (Program 2) $2,500
Fiscal year ending June 30, 2021 $500
Fiscal year ending June 30, 2022 $2,500
Fiscal year ending June 30, 2024 $2,500 to $5,000
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 5 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Our fees include out-of-pocket costs (such as report reproduction, word processing, postage, travel, copies, telephone, etc.).
Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit as follows:
Engagement Partner $175 per hour
Associate Partner $125 per hour
Manager $95 per hour
Senior Auditor $80 per hour
Staff Auditor $65 per hour
Administrative $50 per hour
Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes thirty days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report.
You will be obligated to compensate us for all time expended and to reimburse us for all out-ofpocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If cooperation is not provided as anticipated and at a level that hinders the progress of the services to be provided, we retain the right to terminate the contract for cause with thirty (30) days’ notice. During that time, the Town will have the opportunity to provide the cooperation required to complete the audit and C&A may rescind the cancellation.
If the services to be performed by C&A are not performed in an acceptable manner to the Town, the Town may cancel this contract for cause by providing notice to C&A, giving at least thirty (30) days’ notice of the proposed cancellation and the reasons for same. During that time period, C&A may seek to bring the performance of services to a level that is acceptable to the Town, and the Town may rescind the cancellation if such action is in Town’s best interest. Notwithstanding the above provisions, the Town may, upon the expiration of thirty (30) days written notice to C&A, terminate the agreement at will. Payment for services or goods received prior to termination shall be made by the Town provided those goods or services were provided in a manner acceptable to the Town. Payment for those goods and services shall not be unreasonably withheld.
Sheldon Chavan, CPA, is the engagement partner for the audit services specified in this letter.
His responsibilities include supervising Chavan & Associates LLP’s services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report.
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 6 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Other Matters
During the course of the engagement, we may communicate with you or your personnel via fax or e-mail, and you should be aware that communication in those mediums contains a risk of misdirected or intercepted communications.
Regarding the electronic dissemination of audited financial statements, including financial statements published electronically on your Internet website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document.
The audit documentation for this engagement is the property of Chavan & Associates LLP and constitutes confidential information. However, we may be requested to make certain audit documentation available to state and federal agencies and the U.S. Government Accountability Office pursuant to authority given to it by law or regulation, or to peer reviewers. If requested, access to such audit documentation will be provided under the supervision of Chavan & Associates LLP’s personnel. Furthermore, upon request, we may provide copies of selected audit documentation to these agencies and regulators. The regulators and agencies may intend, or decide, to distribute the copies of information contained therein to others, including other governmental agencies. We agree to retain our audit documentation or work papers for a period of at least seven years from the date of our report.
We will be available during the year to consult with you on financial management and accounting matters of a routine nature. You agree to inform us of facts that may affect the financial statements of which you may become aware during the period from the date of the auditor’s report to the date the financial statements are issued.
With respect to any nonattest services we perform, the Town’s management is responsible for (a) making all management decisions and performing all management functions; (b) assigning a competent individual to oversee the services; (c) evaluating the adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the services performed; and (e) establishing and maintaining internal controls, including monitoring ongoing activities.
Nonattest services include the preparation of the audited financial statements and note disclosures. These items will be prepared from information prepared and provided by the Town during our audit, such as the Town’s trial balance.
We will not assume management responsibilities on behalf of the Town. However, we will provide advice and recommendations to assist management in performing its responsibilities.
Our responsibilities and limitations of the engagement are as follows:
We will perform the services in accordance with applicable professional standards, including GAAS and GAGAS.
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 7 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
This engagement is limited to the services previously outlined. Our firm, in its sole professional judgment, reserves the right to refuse to do any procedure or take any action that could be construed as making management decisions or assuming management responsibilities, including determining account coding and approving journal entries. Our firm will advise the Town with regard to the nonattest services provided, but the Town must make all decisions with regard to those matters.
Government Auditing Standards require that we document an assessment of the skills, knowledge, and experience of management, should we participate in any form of preparation of the basic financial statements and related schedules or disclosures as these actions are deemed a non-audit service.
During the course of the audit, we may observe opportunities for economy in, or improved controls over, your operations. We will bring such matters to the attention of the appropriate level of management, either orally or in writing.
At the conclusion of our audit engagement, we will communicate to management and the Council the following significant items from the audit:
Our view about the qualitative aspects of the Town’s significant accounting practices; Significant difficulties, if any, encountered during the audit; Uncorrected misstatements, other than those we believe are trivial, if any; Disagreements with management, if any;
Other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to those charged with governance regarding their oversight of the financial reporting process;
Material, corrected misstatements that were brought to the attention of management as a result of our audit procedures;
Representations we requested from management;
Management’s consultations with other accountants, if any; and Significant issues, if any, arising from the audit that were discussed, or the subject of correspondence, with management.
In accordance with the requirements of Government Auditing Standards, a copy of our latest external peer review report of our firm is available upon request or on our website.
If the foregoing is in accordance with your understanding, please indicate your agreement by signing this letter and emailing it to us at [email protected] or follow the DocuSign link in the email provided. If you have any questions, please let us know.
We appreciate the opportunity to be your financial statement auditors and look forward to working with you and your staff.
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
Page | 8 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Very truly yours,
Sheldon Chavan, CPA, Managing Partner
Chavan & Associates, LLP
RESPONSE:
This letter correctly sets forth the understanding of the Town of Los Gatos.
Signature:
Title:
Date:
DocuSign Envelope ID: EBB2886B-AF0D-4565-A90D-225839A6BB75
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
AGREEMENT FOR CONSULTANT SERVICES
THIS AGREEMENT is made and entered into on 01/12/22 by and between TOWN OF LOS GATOS, a California municipal corporation, ("Town") and Chavan & Associates, LLP, ("Consultant"), whose address is 15105 Concord Circle, Suite 130, Morgan Hill CA 95037. This Agreement is made with reference to the following facts.
I. RECITALS
1.1 The Town desire to engage Consultant to provide professional auditing services.
1.2 The Consultant represents and affirms that it is willing to perform the desired work pursuant to this Agreement.
1.3 Consultant warrants it possesses the distinct professional skills, qualifications, experience, and resources necessary to timely perform the services described in this Agreement.
Consultant acknowledges Town has relied upon these warranties to retain Consultant.
2.1 2.2
2.3 2.4
2.5 II. AGREEMENTS
Scope of Services. Consultant shall provide services as described in that certain proposal sent to the Town on October 8, 2021, which is hereby incorporated by reference and attached as Attachment 1.
Term and Time of Performance. This contract will remain in effect from 01/01/22 to 01/31/25.
Compliance with Laws. The Consultant shall comply with all applicable laws, codes, ordinances, and regulations of governing federal, state and local laws. Consultant represents and warrants to Town that it has all licenses, permits, qualifications and approvals of whatsoever nature which are legally required for Consultant to practice its profession. Consultant shall maintain a Town of Los Gatos business license pursuant to Chapter 14 of the Code of the Town of Los Gatos.
Sole Responsibility. Consultant shall be responsible for employing or engaging all persons necessary to perform the services under this Agreement.
Information/Report Handling. All documents furnished to Consultant by the Town and all reports and supportive data prepared by the Consultant under this Agreement are the Town's property and shall be delivered to the Town upon the completion of Consultant's services or at the Town's written request. All reports, information, data, and exhibits prepared or assembled by Consultant in connection with the performance of its services pursuant to this Agreement are confidential until released by the Town to the public, and Chavan & Associates -Agreement for Auditing Services Page 1 of6 Attachment 5
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E the Consultant shall not make any of the these documents or information available to any individual or organization not employed by the Consultant or the Town without the written consent of the Town before such release. The Town acknowledges that the reports to be prepared by the Consultant pursuant to this Agreement are for the purpose of evaluating a defined project, and Town's use of the information contained in the reports prepared by the Consultant in connection with other projects shall be solely at Town's risk, unless Consultant expressly consents to such use in writing. Town further agrees that it will not appropriate any methodology or technique of Consultant which is and has been confirmed in writing by Consultant to be a trade secret of Consultant.
2.6 Compensation. Compensation for Consultant's professional services shall not exceed $117,000, inclusive of all costs. Payment shall be based upon Town approval of each task.
2. 7 Billing. Billing shall be monthly by invoice within thirty (30) days of the rendering of the service and shall be accompanied by a detailed explanation of the work performed by whom at what rate and on what date. Also, plans, specifications, documents or other pertinent materials shall be submitted for Town review, even if only in partial or draft form.
2.8 2.9
Payment shall be net thirty (30) days. All invoices and statements to the Town shall be addressed as follows:
Invoices:
Town of Los Gatos
Attn: Accounts Payable
P.O. Box 655
Los Gatos, CA 95031-0655
Availability of Records. Consultant shall maintain the records supporting this billing for not less than three years following completion of the work under this Agreement. Consultant shall make these records available to authorized personnel of the Town at the Consultant's offices during business hours upon written request of the Town.
Assignability and Subcontracting. The services to be performed under this Agreement are unique and personal to the Consultant. No portion of these services shall be assigned or subcontracted without the written consent of the Town.
2.10 Independent Contractor. It is understood that the Consultant, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and not an agent or employee of the Town. As an independent contractor he/she shall not obtain any rights to retirement benefits or other benefits which accrue to Town employee(s). With prior written consent, the Consultant may perform some obligations under this Agreement by subcontracting, but may not delegate ultimate responsibility for performance or assign or transfer interests under this Agreement. Consultant agrees to testify in any litigation brought regarding the subject of the work to be performed under Chavan & Associates -Agreement for Auditing Services Page2of6
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E this Agreement. Consultant shall be compensated for its costs and expenses in preparing for, traveling to, and testifying in such matters at its then current hourly rates of compensation, unless such litigation is brought by Consultant or is based on allegations of Consultant's negligent performance or wrongdoing.
2.11 Conflict of Interest. Consultant understands that its professional responsibilities are solely to the Town. The Consultant has and shall not obtain any holding or interest within the Town of Los Gatos. Consultant has no business holdings or agreements with any individual member of the Staff or management of the Town or its representatives nor shall it enter into any such holdings or agreements. In addition, Consultant warrants that it does not presently and shall not acquire any direct or indirect interest adverse to those of the Town in the subject of this Agreement, and it shall immediately disassociate itself from such an interest, should it discover it has done so and shall, at the Town's sole discretion, divest itself of such interest. Consultant shall not knowingly and shall take reasonable steps to ensure that it does not employ a person having such an interest in this performance of this Agreement. If after employment of a person, Consultant discovers it has employed a person with a direct or indirect interest that would conflict with its performance of this Agreement, Consultant shall promptly notify Town of this employment relationship, and shall, at the Town's sole discretion, sever any such employment relationship.
2.12 Equal Employment Opportunity. Consultant warrants that it is an equal opportunity employer and shall comply with applicable regulations governing equal employment opportunity. Neither Consultant nor its subcontractors do and neither shall discriminate against persons employed or seeking employment with them on the basis of age, sex, color, race, marital status, sexual orientation, ancestry, physical or mental disability, national origin, religion, or medical condition, unless based upon a bona fide occupational qualification pursuant to the California Fair Employment & Housing Act.
Ill. INSURANCE AND INDEMNIFICATION
3.1 Minimum Scope of Insurance:
i. Consultant agrees to have and maintain, for the duration of the contract, General Liability insurance policies insuring him/her and his/her firm to an amount not less than: one million dollars ($1,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. ii. Consultant agrees to have and maintain for the duration of the contract, an Automobile Liability insurance policy ensuring him/her and his/her staff to an amount not less than one million dollars ($1,000,000) combined single limit per accident for bodily injury and property damage. iii. Consultant shall provide to the Town all certificates of insurance, with original endorsements effecting coverage. Consultant agrees that all Chavan & Associates -Agreement for Auditing Services Page3of6
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
3.2 3.3
certificates and endorsements are to be received and approved by the Town before work commences.
iv. Consultant agrees to have and maintain, for the duration of the contract, professional liability insurance in amounts not less than $1,000,000 which is sufficient to insure Consultant for professional errors or omissions in the performance of the particular scope of work under this agreement.
General Liability:
i. The Town, its officers, officials, employees and volunteers are to be covered as insured as respects: liability arising out of activities performed by or on behalf of the Consultant; products and completed operations of Consultant, premises owned or used by the Consultant. This requirement does not apply to the professional liability insurance required for professional errors and omissions.
ii. The Consultant's insurance coverage shall be primary insurance as respects the Town, its officers, officials, employees and volunteers. Any insurance or self-insurances maintained by the Town, its officers, officials, employees or volunteers shall be excess of the Consultant's insurance and shall not contribute with it.
iii. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the Town, its officers, officials, employees or volunteers.
iv. The Consultant's insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability.
All Coverages. Each insurance policy required in this item shall be endorsed to state that coverage shall not be suspended, voided, cancelled, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the Town. Current certification of such insurance shall be kept on file at all times during the term of this agreement with the Town Clerk.
Workers' Compensation. In addition to these policies, Consultant shall have and maintain Workers' Compensation insurance as required by California law and shall provide evidence of such policy to the Town before beginning services under this Agreement. Further, Consultant shall ensure that all subcontractors employed by Consultant provide the required Workers' Compensation insurance for their respective employees.
Chavan & Associates -Agreement for Auditing Services Page4of6
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
3.4 4.1
4.2 Indemnification. The Consultant shall save, keep, hold harmless and indemnify and defend the Town its officers, agent, employees and volunteers from all damages, liabilities, penalties, costs, or expenses in law or equity that may at any time arise or be set up because of damages to property or personal injury received by reason of, or in the course of performing work which may be occasioned by a willful or negligent act or omissions of the Consultant, or any of the Consultant's officers, employees, or agents or any subconsultant.
IV. GENERAL TERMS
Waiver. No failure on the part of either party to exercise any right or remedy hereunder shall operate as a waiver of any other right or remedy that party may have hereunder, nor does waiver of a breach or default under this Agreement constitute a continuing waiver of a subsequent breach of the same or any other provision of this Agreement.
Governing Law. This Agreement, regardless of where executed, shall be governed by and construed to the laws of the State of California. Venue for any action regarding this Agreement shall be in the Superior Court of the County of Santa Clara.
4.3 Termination of Agreement. The Town and the Consultant shall have the right to terminate this agreement with or without cause by giving not less than fifteen days (15) written notice of termination. In the event of termination, the Consultant shall deliver to the
4.4 4.5
4.6 Town all plans, files, documents, reports, performed to date by the Consultant. In the event of such termination, Town shall pay Consultant an amount that bears the same ratio to the maximum contract price as the work delivered to the Town bears to completed services contemplated under this Agreement, unless such termination is made for cause, in which event, compensation, if any, shall be adjusted in light of the particular facts and circumstances involved in such termination.
Amendment. No modification, waiver, mutual termination, or amendment of this Agreement is effective unless made in writing and signed by the Town and the Consultant.
Disputes. In any dispute over any aspect of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, including costs of appeal.
Notices. Any notice required to be given shall be deemed to be duly and properly given if mailed postage prepaid, and addressed to:
Town of Los Gatos
Attn: Town Clerk
110 E. Main Street
Los Gatos, CA 95030
Chavan & Associates -Agreement for Auditing Services
Chavan & Associates, LLP
Attn: Sheldon Chavan
15105 Concord Circle, Suite 130
Morgan Hill, CA 95037
Page5of6
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E or personally delivered to Consultant to such address or such other address as Consultant designates in writing to Town.
4.7 Order of Precedence. In the event of any conflict, contradiction, or ambiguity between the terms and conditions of this Agreement in respect of the Products or Services and any attachments to this Agreement, then the terms and conditions of this Agreement shall prevail over attachments or other writings.
4.8 Entire Agreement. This Agreement, including all Exhibits, constitutes the complete and exclusive statement of the Agreement between the Town and Consultant. No terms, conditions, understandings or agreements purporting to modify or vary this Agreement, unless hereafter made in writing and signed by the party to be bound, shall be binding on either party.
IN WITNESS WHEREOF, the Town and Consultant have executed this Agreement.
Town of Los Gatos by:
DocuSigned by:
1/21/2022 ��ffi�67M'"Fr-___ ------------- Laurel Prevetti, Town Manager Recommended by:
DocuSigned by:
Rf'� {J,1AW"4 1/16/2022
fjrfe918�8�way, Finance Director
Approved as to Form:
DocuSigned by:
kvf lJJ; S clw1f ij
FE9038555B?11G ...
Robert Schultz, Town Attorney
Attest:
DocuSigned by:
5h
6 e1f�v1Nik MMc, cPMc
Town Clerk
1/21/2022
1/21/2022
Chavan & Associates - Agreement for Auditing Services
Consultant, by:
Chavan & Associates, LLP
1/13/2022
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E
TECHNICAL PROPOSAL FOR CONDUCTING
THE ANNUAL INDEPENDENT AUDIT
OF THE
TOWN OF Los GATOS
Submitted October 81 2021
•
Chavan & Associates, LLP
Certified Public Accountants
15105 Concord Circle, Suite 130
Morgan Hill, CA 95037
Phone:(650)346-1329
Fax: (408) 872-4159
E-mail: [email protected]
Contact: Sheldon Chavan, Partner
ITEM NO. 10.
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Title
Transmittal Letter .............................................................................................................................................. ..
A. Independence, License to Practice in CA, and Firm Qualifications & Experience ...................................... ..
Independence ....................................................................................................................................... .
License to Practice in California ............................................................................................................ .
Contractor Identification and Introduction ......................................................................................... ..
Firm Size, Staff Size, Location and Staffing .......................................................................................... ..
Range of Services .................................................................................................................................. .
Contract Terminations and Affirmation Concerning Substandard Audit Work .................................... .
Equal Opportunity Employer ............................................................................................................... ..
Subcontractor ....................................................................................................................................... .
Business Licenses .................................................................................................................................. .
Insurance ............................................................................................................................................. ..
Quality Control Review ........................................................................................................................ ..
B. Partner, Supervisory and Staff Qualifications and Resumes ...................................................................... .
Sheldon Chavan, CPA, Managing Partner ............................................................................................ ..
Paul Pham, CPA, Partner ...................................................................................................................... .
Niru Machiraju, CPA, Audit Supervisor ................................................................................................. .
Andrew Quintero, Senior Auditor ........................................................................................................ .
Matthew Ojeda, Senior Auditor ........................................................................................................... .
Professional Education and Training .................................................................................................... .
C. Similar Engagements .................................................................................................................................. .
D. Specific Audit Approach ............................................................................................................................ ..
Phase I - Planning and Risk Assessment .............................................................................................. ..
Phase II - Substantive Audit Procedures and Compliance .................................................................... .
Phase Ill - Financial Statement Preparation and Review ...................................................................... .
Compliance and Program Specific Auditing ......................................................................................... ..
Recommendations for Improved Operations ...................................................................................... ..
Irregularities and Illegal Acts ............................................................................................................... ..
Control Risk Assessment ..................................................................................................................... ..
Analytical Procedures .......................................................................................................................... ..
Identification of Potential Audit Problems ........................................................................................... .
Resources Available for Standards Interpretations ............................................................................. ..
Summary of Audit Phases .................................................................................................................... ..
Summary of Team Assignments ........................................................................................................... .
Summary of Roles and Responsibilities ................................................................................................ .
Summary of Staff Hours by Phase ........................................................................................................ .
Summary Timeline ............................................................................................................................... ..
Audit Scope .......................................................................................................................................... .
E. Discussion of Relevant Accounting Issues .................................................................................................. .
F. Additional Information .............................................................................................................................. ..
Current Client List ................................................................................................................................ ..
Technology in the Audit ....................................................................................................................... .
Proposal Exceptions ............................................................................................................................ ..
C&A's Responsibility for Detecting Fraud ............................................................................................ ..
Attachments:
Attachment A-Most Recent External Quality Control Review Attachment B -Prepared by Client List
Attachment C -Proposal Warranties
Attachment D -Conflict of Interest Statement
Attachment E -Non-collusion Declaration
Attachment F -References
Attachment G -Statement Regarding Insurance Coverage and Worker's Compensation Insurance Ack. Certificate
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E This Page Intentionally Left Blank
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E • Chavan and Associates, llp
Certified Public Accountants
October 8, 2021
Gitta Ungvari, Finance and Budget Manager
Town of Los Gatos, Finance Department
110 E. Main Street
Los Gatos, CA 95030
We are pleased to have this opportunity to submit our proposal to provide auditing services for the Town of Los Gatos (the "Town"). Our understanding of the work outlined in the request for proposal is that we will audit the financial statements of the Town for fiscal years ending June 30, 2022, 2023 and 2024, with two option years.
Our audits will be performed in accordance with auditing standards generally accepted in the United States of America, the standards set forth for financial audits in the United States General Accounting Office's (GAO) Government Auditing Standards, the provisions of the Federal Single Audit Act of 1984 and the Single Audit Act Amendments of 1996; the U. S. Office of Management and Budget's (0MB) guidance for federal awards and agreements as provided in the Code of Federal Regulation (CFR) 2 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and relevant Governmental Accounting Standards Board (GASB) Statements. We will also apply the necessary procedures to prepare the reports as requested in the RFP, such as the ACFR, single audit reports, management letter, optional measure GAU P's, and preparation of the financial transactions and compensation report.
As a result of our audit, we will express an opinion on the fair presentation of the basic financ ial statements, as listed in the RFP, in accordance with GAAP. We will also issue a report on internal controls over financial reporting and on compliance with applicable laws and regulations in accordance with Government Auditing Standards.
Throughout the contract period, we will provide consultation on accounting and compliance issues and attend meetings to discuss the audit and management comments. It is our commitment to the Town that we will complete the work within the agreed time frame and that we have the resources, time and personnel to dedicate to this engagement for the entirety of the contact. We are confident Chavan & Associates LLP ("C&A") is the best-qualified firm to serve as your independent auditors. A brief list of reasons includes:
• We specialize in the audits of local governments and not for profit entities. • Our partners have 37 years of combined experience auditing local governments. • Our firm and key professionals are properly licensed to practice in the state of California. • Our service will be dependable, reliable and timely.
• We will be sensitive to your workload. We understand you and your staff must keep up with your current work as well as deal with the audit.
Page Ii 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E • Chavan and Associates, llp
Certified Public Accountants
• Our staff and partners are available twelve months of the year to serve our audit clients.
You are important to our firm and we promise a high level of involvement and enthusiasm at all levels.
• Our managing partner will be the lead for your audit. He will attend all conferences and meetings and will supervise the audit directly during each year and phase of the engagement. Our Managing Partner will be the person that prepares your Annual Comprehensive Report which will then be reviewed by our Associate Partner. • We offer flexible staffing and scheduling, especially during COVID-19. We can send a full team onsite, work 100% remotely, or send a small team on site to minimize exposure. All of our team members are vaccinated and will follow your policies in regard to COVID-19. • To improve the efficiency of the audit process, we use an online software, Engagement Organizer (EO), to provide a list of information and monitor the workflow during the audit.
The link to EO is provided early during the planning process and includes items for both interim and year-end work, such that we can edit the list as needed moving forward. All documents can be uploaded here and notes, status updates and comments are done through EO. We also have a secure portal as an additional way to share information.
We are secure in our belief that our firm is the best qualified to meet your needs. Once you have examined our proposal and contacted our references, we feel you will agree.
Staffing for the audit will include one Engagement Partner, one Associate Partner, one Supervisor, one Senior Auditor, one Professional Staff and one Administrative Staff. The Engagement Partner, one Senior and two Staff will be assigned to visit your offices, as feasible with regard to COVID-19 circumstances. The Engagement Partner, Associate Partner, Supervisor and Senior Auditor will be available throughout the entire contract period.
Sheldon Chavan (15105 Concord Circle, Suite 130, Morgan Hill, CA, 95037, 650-346-1329, [email protected]) is the partner authorized to sign and obligate the firm contractually and represent the firm. He is empowered to submit the bid and authorized to sign a contract. This proposal is a firm and irrevocable offer for 90 days.
We look forward to being of service to you.
Very truly yours,
CtA
Sheldon Chavan, C.P.A., Partner
Chavan & Associates, LLP
Pagel ii 15105 Concord Circle, Ste. 130, Morgan Hill, CA 95037 Tel: 408-217-8749 • E-Fax: 408-872-4159
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section A
Independence, License to Practice in California,
and Firm's Qualifications & Experience
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Independence
Section A
Independence, License to Practice in California,
and Firm's Qualifications & Experience
Town of Los Gatos Proposal for Auditing Services
C&A is independent of the Town and all of its component units as defined by generally accepted auditing standards and the U.S. General Accountability Office's Government Auditing Standards. In all matters relating to the audit work, the audit organization and individual auditors, whether government or public, should be free from personal and external impairments to independence, should be fiscally independent, and should maintain an independent attitude and appearance.
C&A did not have any professional relationships involving the Town of Los Gatos, or any of its agencies and component units, for the past five (5) years that would cause a conflict of interest relative to the scope of services identified in the request for proposal. However, C&A did provide the Town's auditing services for the fiscal year ended June 30, 2016 and the 4 years prior. Providing audit services to an entity does not create a conflict of interest, nor compromise independence.
License to Practice in the State of California
C&A and all key professionals are properly licensed to practice as certified public accountants in the State of California and do not have any record of substandard work or unsatisfactory performance pending with the State Board of Accountancy. C&A is registered with the California State Board of Accountancy and our stat number is PAR 7294.
Contractor Identification and Introduction
Company Name:
Address:
Office:
Fax:
E-mail:
CA File Number:
FEIN:
Authorized to Sign:
Chavan & Associates, LLP (C&A)
15105 Concord Circle, Suite 130, Morgan Hill, CA 95037
408-217-8749
408-872-4159
[email protected]
202009218003
27-0630496
Sheldon Chavan, Partner; Paul Pham, Partner
Our partners have performed audits under Governmental Auditing Standards, the Single Audit Act and the State Controller's Office Minimum Audit Requirements for a combined 37 years; Sheldon for 23 years and Paul Pham for 14 years. In August of 2009, we established C&A as a limited liability partnership. C&A is a local audit firm in San Jose, CA specializing in Single AuditJ
local government auditing and consulting. We have audited and prepared Annual Comprehensive Financial Reports {ACFRs) and basic financial statements as required by the Government Finance Officers Association {GFOA) and the Governmental Accounting Standards Board {GASB) for cities, fire districts, water districts, sanitation districts, JPAs and other types of special districts. Our partners have been reviewers of ACFRs for the GFOA and CSMFO. Most recently, C&A prepared ACFRs of City of Saratoga, the City of Oroville, City of Suisun, City of Pacific Grove, and City of Carmel -by-the Sea for the year ending June 30, 2020 (working on 2021). Our goal at C&A is to provide premium audit services at a llchavan & Associates, LLP Page 1
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section A
Independence, License to Practice in California,
and Firm's Qualifications & Experience
Town of Los Gatos Proposal for Auditing Services
reasonable fee. We believe that continuous partner involvement helps us achieve our goal, which is why our partners are constantly involved in every audit. Ultimately, minimizing on-the-job training allows us to focus exclusively on servicing our clients.
After starting the firm with only 9 clients in 2009, we currently have 100 government, nonprofit and grant clients, 40 of which were required to have a single audit under uniform guidance in 2019-20. Our firm's experience includes numerous audits under state and federal compliance audit guides, including the Minimum Audit Requirements and Reporting Guidelines for Cities as required by the State Controller's Office. What makes us unique from other audit firms is that we eliminate "on-the-job" training through intensive in-house training, audit planning, and by having partners in the field throughout the entire engagement ( not just "spot-checking"). The daily interaction with our Engagement Partner has been invaluable to our clients as it provides the opportunity for immediate feedback and the chance to ask questions related to accounting, account coding, grant requirements, ACFR requirements, budgeting, and much more. Auditing is the main focus of our practice and we are available to start as early as February 1st, however our calendar is flexible.
C&A is also a member of the AICPA's Government Audit Quality Center which promotes the importance of quality governmental audits and the value of such audits to purchasers of governmental audit services. GAQC is a voluntary membership center for CPA firms and state audit organizations that perform governmental audits.
Firm Size, Staff Size, Location and Staffing
We also have twelve professional, full-time staff in addition to our three partners and one administrative person that will be available to assist as needed throughout the engagement. Our engagement partners are directly involved with the audits. Our central office is located in Morgan Hill, CA. Staffing for the Town's audit will include the following professionals (audit experience):
Sheldon Chavan, CPA, Managing Partner (23 years)
Paul Pham, CPA, Partner (14 years)
Niru Machiraju, CPA, Supervisor (6 years)
Andrew Quintero, Senior Auditor (4 years)
Matthew Ojeda, Senior Auditor (6 years)
One of the professional staff could change from year to year. The Town will be notified of any staff changes prior to field work. The Engagement Partner, manager, and supervisor will be the same during each year of the engagement.
llchavan & Associates, LLP Page2
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Range of Services
Section A
Independence, License to Practice in California,
and Firm's Qualifications & Experience
Town of Los Gatos Proposal for Auditing Services
The following summarizes the range of services we provide:
Number Management, Contractor
of Percent by Accounting & Prequalification Nonprofit
Entity Type Clients Entity Auditing Other Services Tax
Local Education Agencies 37 37% 89% 0% 14% 0%
Charter Schools 11 11% 100"/4 0% 0% 100%
Non-profit Organizations 17 17% 94% 0% 0% 82%
Cities and Towns 10 10% 90% 0% 0% 0%
Special Districts 17 17% 88% 12% 0% 0%
Privately Held 7 7% 71% 29% 0% 0%
GAS GAG AS Single Bond EAAP
Audit Audit Audit Audit Audit Other
Contract Terminations and Affirmation Concerning Substandard Audit Work C&A and all assigned personnel do not have any record of substandard work, contract failures, outstanding claims, litigation, investigations, or other unsatisfactory performanc e issues against us or pending with the State Board of Accountancy or any other entity. In addition, we have not had any federal or state desk review or field reviews of our audits. C&A has no record of lost clients or contract failures.
Equal Opportunity Employer
C&A is an equal opportunity employer and is in compliance with the Civil Rights Act of 1964, the State Fair Employment Practice Act, and all applicable federal and state laws and regulations relating to equality.
Subcontractor
C&A will not be engaged with any subcontractors during this engagement.
Business Licenses
C&A will obtain and maintain a valid business license with throughout the duration of the contract, as applicable.
llchavan & Associates, LLP Page 3
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section A
Independence, License to Practice in California,
and Firm's Qualifications & Experience
Town of Los Gatos Proposal for Auditing Services
Insurance
C&A maintains the following insurance:
• Commercial General Liability Insurance (bodily injury and property damage) is $4,000,000 per occurrence. The carrier is Hartford Insurance Company.
• Automobile Bodily Injury and Property damage liability insurance is $2,000,000 per occurrence. The carrier is Hartford Insurance Company.
• Professional Liability Insurance carrier is Philadelphia Insurance Company. The per claim/aggregate limit of the liability is $3,000,000.
• Workers Compensation Insurance carrier is Twin City Insurance Company. The per claim/aggregate limit of the liability is $1,000,000.
Quality Control Review
We are enrolled in the AICPA quality control peer review program. Our peer review was performed in compliance with AICPA and GAO requirements and included a selection of government audit engagements. Our audits complied with auditing standards generally accepted in the United States of America and Generally Accepted Governmental Auditing Standards.
II Chavan & Associates, LLP Page 4 11
ITEM NO. 10.
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section B
Partner, Supervisory and Staff Qualifications and Resumes
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
We are aware of the need for continuity of personnel on the engagement and promise that the Engagement Partner will be directly involved in the audit during each year of the contract. We believe that extensive partner involvement provides continuity that could not be achieved in any other way. All staff committed in this proposal will be available for the entire June 30, 2022 audit and are available 12 months a year for questions, comments and implementation support. We understand that the Engagement Partners, managers and other supervisory staff and specialists may be changed only with the express prior written permission of the Town. Other audit personnel may be changed at our discretion as long as the replacements have substantially the same or better qualifications or experience. The Town retains the right to approve or reject replacements.
Sheldon Chavan, CPA
Managing Partner (Member CalCPA, AICPA, GFOA, CSMFO, GAQC) Sheldon holds a B.S. in Accounting from San Jose State University. He began his career in public accounting in 1998 and has been auditing local governments and nonprofit organizations ever since. Sheldon is a CPA licensed in California and a member of AICPA, CalCPA, CSMFO, GAQC and GFOA. He has also been a member of the GFOA Special Review Committee, with responsibility for reviewing ACFR's for award of the Certificate of Excellence in Financial Reporting. Sheldon has prepared/reviewed ACFR's for the City of Berkeley, City of Sunnyvale, City of Pittsburg and many others
over his career. Most recently, Sheldon prepared
the ACFR of the City of Oroville, City of Saratoga
and the City of Pacific Grove for the fiscal years
ended June 30, 2020 (partial listing).
Sheldon has managed governmental audits his entire career, which includes the technical review of all work papers, staffing, scheduling, reporting, state compliance, federal compliance, state controllers reports and much more. He is responsible for running the audit in the field and providing accounting and auditing technical support to other partners and staff, primarily in the areas of compliance with auditing standards generally accepted in the United States of America, the standards set forth for financial audits in the United States General Accounting Office's (GAO) Government Auditing Standards, and the provisions of the Federal Single Audit Act and the United States Office of Management and Title 2 CFR Part 200 (Uniform Guidance).
Sheldon also ensures that each staff has met the continuing professional education requirements under these standards and teaches several in-house seminars a year. He also administers our firm's quality control system as required by GAAS and Yellow Book standards. Sheldon has been performing audits under the Single Audit Act his entire career. Understanding the complexities of the various federal programs is one of his specialties. Over the years, Sheldon has audited major programs such as National School Lunch, Title II Education Technology, IDEA Special Education Local Assistance, Title I, Education Jobs Fund, Title IV Drug Free Schools, NCLB Title 111, Title II Improving Teacher Quality, CDBG, Shelter Plus Care, Home Investment in Affordable Housing, HUD Section 8, Highway Planning and Construction, Medi-Cal, Low-income Low Energy Assistance, and many more.
Sheldon has extensive experience auditing government bond programs and can assist the Town with bond covenant calculations, bond compliance, tax filings, bond arbitrage issues and any other general II Chavan & Associates, LLP Page 5
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
reporting requirements. In addition, we currently have multiple clients for which we complete special bond performance audits each year. We also provide contractor prequalification services for some clients who use restricted bond funds for modernization and infrastructure improvements.
Sheldon's recent continuing professional education:
Description of Program/Training
Yellow Book:Revised Government Auditing Standards
Government Audting Standards -Yellow Book
Frequent Government and NPO Frauds: Misuse of Assets
Governmental and Nonprofit Annual Update: Federal Government Activities Single Audit Lighting Round
Governmental Audit Quality Cetner Annual Update Webcast Program-Specific Audits' plus 'AuditTools and Guidance' Applying Risk Assessment Standards: Understanding the Entity and Its Environment GASB Updates
Governmental Accounting and Auditing Conference Webcast - 5121266C Not-for-Profit Organizations Conference Webcast - 5121343C Cases in NFP Acct. & Auditing: 'Financial Statement Requirements' plus 'Net Asset Classifications' Governmental Auditing: Course Two Performance Audits
Governmental Auditing: Course Three Financial Audits, Attestation Engagements, and ..
Governmental Accounting and Reporting
Ethics: AA&C LLP - Accounting Firm Practice Development Committee State and Local Govt Planning Considerations
Cases in NFP Acct. & Auditing: Contributions
Field Work Documentation: Preparation, Maintenance, Types of Workpapers School District Update Including LCFF and LCAP Compliance School Districts Conference
Understanding the Changes to Yellow Book Independence
California Regulatory Review Course
Fraud Audit Techniques Using Excel
Applying the Uniform Guidance in Your Single Audits
Testing Compliance' plus 'Reporting Requirements
Fid Act Understanding impacts of GASB 84
Its Here! Fid Act Implementation Considerations
Accounting and Auditing Conference
Bernard Madoff Investment Securities' Auditor'
The Detection and Prevention of Fraud in Financial Statements Governmental Auditing: Course One Fundamental Principles for Government Auditing II Chavan & Associates, LLP Page 6
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
The following is a partial list of Sheldon's clients over the years:
Cities and Towns Special Districts/JPA's School Districts/COE's Nonprofits and Other City of Albany
City of Berke! ey
City of Carmel-by-the-Sea
City of Del Rey Oaks
City of Marina
City of Novato
City of Oroville
City of Pacific Grove
City of Pittsburg
City ofpointArena
City of Salinas
City of San Rafael
City of Saratoga
City of Scotts Valley
City of Sonoma
City of South San Francisco
City of Sui sun City
City of Sunnyvale
City ofTr acy
Town of Los Gatos
Town of Windsor
Bay Area Water Services & Cons
Central Marin Sanitation Agency
East Bay Dischargers Authority
Fairfield-Suisan Sanitation
Half Moon Bay Fire Protection
Hayward Area Parks and Rec
Highland Recreation District
Los Tranco s Water Di strict
Mckinney Water District
Menlo Park Fire Protection
Midpen Regional Open Space
Pleasant Hill Parks and Rec
Point Montara Fire District
Santa Clara Regional Open Space
Saratoga Cemetery District
South Bayside System Authority
South San Francisco Conf. Ctr.
Sausalito-Marin City Sanitation
Tahoe Reqional Planning Agency
The Ci ties Group
Valley of the Moon Fire
West Bay Sanitary Di strict
West County Wastewater Di strict
Westborough Water Di strict
Woodside Fire Protection Di strict
II Chavan & Associates, LLP
Antelope Elementary
Belmont Redwood Shores
Burlingame
Cabrillo Unified
Campbell Union
Cloverdale Unified
Cotati Rohnert Park
Hi II sborough City
La Honda Pescadero
Lakeside
Las lomitas Elementary
Lassen View Elementary
Los Altos Elementary
Luther Burbank
Manton Joint Union
Menlo Park City
Millbrae Elementary
Mineral
Mountain View Whisman
Orchard
Pacifica
Plum Valley
Portola Valley Elementary
Red Bluff
Salinas Union High
San Bruno Park
San Carlos Elementary
San Mateo County Office
San Mateo Union High
Scotts Valley Unfi ed
Sequoia Uni on High
Sonoma Valley Unified
Uni on School District
West County Agency ILEA)
Windsor Unified
Woodside Elementary
2006 Washington St.
Bay Area Special Education JPA
Bay ftlea Water Users Association
Black Adoption Placement
Boys and Girls Clubs of Sonoma
Center for Empowering Refugees
Children of Grace
Collective Roots
Credo High School
Diagnostics for the Real World
Hidaya Foundation
Livebooks
Mashery
Mission Charter
Mission Language and Vocational
Morgan Hill Charter Foundation
Morgan Hill Charter School
Nob Hi 11 Home Owners Assoc.
O'Conner Water
One Million Lights
Orange County Charter School
Pathway to Choices
Pyramid AJ ternatives
Redwood City Education Foundation
San Jose Conservation Charter
San Jose Conservation Corps
Singularity University
Sociometri cs
South Tahoe Area Transit Authority
Stone Bridge Charter School
Woodside Atherton Authority
Work2future Foundation
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
Paul Pham, CPA
Associate Partner (AICPA, CalCPA)
Paul received his Bachelor of Science from Pacific University and hopes to pursue a Master of Accountancy in the near future. He is currently preparing to sit for the CPA exam and plans to complete his CPA certification by the end of the year. Paul has been working in public and private accounting since 2007 and has completed Fourteen governmental audit seasons. He has completed financial and compliance audits for the entities (including LEA's) listed below since 2007. Besides the standard control documentation and substantive testing required for GAAS audits, Paul has performed audits and prepared reports under 0MB Subpart F and the Single Audit Act for most of the entities listed below. He has audited Federal grants from various agencies, including FEMA, HUD, FTA, the Department of Education (Title I, Special Education, Title II, Adult Ed) and much more.
Paul's recent continuing professional education:
Desaiption of Program/Tra,ning
GAGAS - Ethical Princi pies In Government Auditing
GAGAS - Field Work and Reporting Standards
GAGAS - Field Work Standards For Financial Audits
GAGAS - General Field Work And Reporting Standards
GAGAS - General Standards
Government Auditing
Maj or Changes to Auditing Standards
Limiting Auditor Liability
Auditor Communications: Critical New Requirements
School Districts Conference
GAGAS - Reporting Standards For Financial Audits Governmental Accounting, Reporting, and Auditing Update GAGAS- Use and Application of GAGAS GASB Basic Financial Statements for State and Local Governments The following is a partial list of Paul's clients over the years:
Cities and Towns Special Districts School Districts/COE's Nonprofits and Olarter Schools City of Albany Bay Area Water Services & Cons
City of Berkeley Central Marin Sanitation Agency
City of Carmel-by-the-Sea Fai rfield-Suisan Sanitation District CityofDel Rey Oaks Menlo Park Fire Protection
City of Orovi II e Mi dpen Regional Open Space
City of Pacific Grove Santa Clara Regional Open Space
City of Point Arena Saratoga Cemetery District
City of Rocklin South Bayside System Authority
Oty of Saratoga South San Francisco Conf. Ctr.
City of Sonoma Suasalito-Mari n City Sanitation District City of Suisun City Tahoe Reqional Planning Agency
Antelope Elementary
Burlingame
Cabrillo Unified
Cotati Rohnert Park
Hillsborough City
Bay Area Water Users Association
Black Adoption Placement
Boys and Girls Clubs of Sonoma
Center for Empowering Refugees
Children of Grace
Collective Roots
Credo High School
Hidaya Foundation
Livebooks
Mashery
Mission Charter
City ofTracy The Cities Group
Town of Los Gatos Valley of the Moon Fire
La Honda Pescadero
Las Lomitas Elementary
Lassen View Elementary
Los Altos Elementary
Luther Burbank
Manton Joint Union
Millbrae Elementary
Mineral
Mission Language and Vocational School
NASAAMES Exchange
West Bay Sanitary District
Westborough Water District
II Chavan & Associates, LLP
Mountain View Whisman
Orchard
Pacifica
Plum Valley
Portola Valley Elementary
Red Bluff
San Bruno Park
San Carlos Elementary
San Lorenzo Valley Unified
San Mateo County Office
Scotts Valley Unfied
Sequoia Union High
Sonoma Valley Unified
Soquel Elementary
Union School District
West County Agency (LEA)
Windsor Unified
Woodside Elementary
Orange County Charter School
Pathway to Choices
Pyramid Alternatives
Redwood City Education Foundation
San Jose Conservation Charter
San Jose Conservation Corps
Sociometrics
South TahoeArea Transit Authority
Stone Bridge Charter School
Work2future Foundation
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
Niru Machiraju, CPA
Audit Supervisor (Member AICPA, CalCPA)
Niru received her Bachelor and Master of Science in Accounting from the University of Saint Thomas. She received her CPA license in 2020. Niru has been working in public accounting since 2015 and has completed six audit seasons. During the 2021 audit season, she completed the financial and compliance audits for the entities listed below and has additional experience in the manufacturing, distribution. and non-profit industries. Niru has audited over sixty local governments and nonprofits since 2015. Besides the standard control documentation and substantive testing required for GAAS audits, Niru has performed audits and prepared reports under GAGAS and Uniform Guidance. She has also audited Federal grants from various agencies, including HUD and the Department of Education (Title I, Special Education) and much more.
Mona's recent continuing professional education:
Description of Program/Training
GAGAS -Ethical Principles In Government Auditing
GAGAS -Field Work and Reporting Standards
GAGAS -Field Work Standards For Financial Audits
GAGAS -General Field Work And Reporting Standards
GAGAS -General Standards
GAGAS -Reporting Standards For Financial Audits
GAGAS -Use and Application of GAGAS
Government Auditing
Major Changes to Auditing Standards
Limiting Auditor Liability
Auditor Communications: Critical New Requirements
School Districts Conference
Governmental Accounting, Reporting, and Auditing Update GASB Basic Fina ncia I Statements for State and Loca I Governments The following is a list of Mona's clients over the past year:
Cities and Towns Special Districts School Districts/COE's Nonprofits and Other City of Albany
City of Carmel-by-the-Sea
City of Del Rey Oaks
City of Orovi 11 e
City of Pacific Grove
City of Poi nt Arena
City of Rocklin
City of Sar a toga
City of Marina
City of Sui sun City
Bay Area Water Services & Cons
Chico Area Recreation and Park District
Lake Canyon Community Services District
Midpen Regional Open Space
Ross Valley Sanitary District
Santa Clara Regional Open Space
South San Francisco Conf. Ctr.
Stege Sanitary District
Suasal ito-Marin City Sanitation Di strict
The Cities Group
Va 11 ey of the Moon Fi re
West Bay Sanitary District
Westborough Water Di strict
II Chavan & Associates, LLP
Antelope Elementary
Burlingame
Cabrillo Unified
Cotati Rohnert Park
Hillsborough City
Las Lomitas Elementary
Lassen View Elementary
Los Altos Elementary
Luther Burbank
Mil I brae Elementary
Orchard
Pacifica
Red Bluff
San Bruno Park
San Carlos Elementary
San LorenzoValley Unified
San Mateo County Office
Sequoia Union High
Sonoma Valley Unified
Soquel Elementary
Union School Di strict
West County Agency {LEA)
Woodside Elementary
Bay Area Water Users Association
Boys and Girls Clubs of Sonoma
Center for Empowering Refugees
Children of Grace
Credo High School
Hidaya Foundation
Mission Charter
NASA AMES Exchange
Pathway to Choices
Peninsula Conflict Resolution Center
Redwood City Education Foundation
Stone Bridge Charter School
Work2future Foundation
Stone Bridge Charter School
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
Andrew Quintero
Senior Auditor
Andrew has successfully completed three seasons of governmental auditing. Andrew has performed tests of controls, substantive tests, state compliance testing and Federal compliance testing for various special districts and cities. He has been the Senior Auditor in-charge of clients such as the Town of Yountville, City of Suisun City, Fairfield-Suisun Sanitary District and many more. Besides the standard control documentation and substantive testing required for GAAS audits, Andrew has performed audits and prepared reports under 0MB Subpart F and the Single Audit Act. He has audited Federal grants from various agencies, including Special Education, National School Lunch, Title I, Department of Education grants and others.
Andrew's recent continuing professional education:
Description of Program/Training
GAGAS -Ethical Principles In Government Auditing
GAGAS - Field Work and Reporting Standards
GAGAS - Field Work Standards For Financial Audits
GAGAS -General Field Work And Reporting Standards
GAGAS -General Standards
GAGAS -Reporting Standards For Financial Audits
GAGAS - Use and Application of GAGAS
The following is a list of Andrew's clients:
Government Auditing
Major Changes to Auditing Standards
Limiting Auditor Liability
Auditor Communications: Critical New Requirements
School Districts Conference
Governmental Accounting, Reporting, and Auditing Update GASB Basic Fina ncia I Statements for State and Loca I Governments Cities and Towns Special Districts School Districts/COE's Non profits and Other G ty of Oroville Bay Area Water Supply Conservation .A.3ency Jefferson Uiim High School District Peninsula Conflict Resoluti m Center d ty of Paci fie Grove Castro Valley Sanitary District John Swett Lliified School District Redwood City Education Foundation Gty of Point Arena El Dorado Hills Community Services District Las Lomitas School District San Mateo County Exposition and Fair Association d ty of Rocklin Lake Canyon Community Services District Lassen Vi eN lhion Elementary Sc hod District Sonoma Valley Hospital Foundation City of Saratcga Midpeninsul a Reg:ional Open Space District Los Altos School District The Moca Foundation City of Suisun City Puri ssima Hil Is Water District Luther &Jrbank Sc hod District The San Jose Library Foundation Town of Yountvi lie Ross Valley Sanitary District
Santa Oara County Regional Open SpaceAuth
Sausalito-Marin GtySanitation District
StegeSanitary District
Silica, Valley Clean Water
South San Fancisco Conf erence Center
The Cities' Group
Valley of the Moc.,n Fire District
West Bay Sanitary D·strict
WestValleySanitation District
Westborough Water District
II Chavan & Associates, LLP
Menlo Park City School District
Millbrae School District
Mountain Vi eN Whisman School District
Napa Valley lhified School District
Orchard Schod District
Pacifica Schod District
Red BluffJointlhion High School District
Red Bluff Union ElementarySchod District
Roseland Elementary School D·strict
San Bruno ParkSchod District
San Carlos School District
San LcrenzoValley Unified School District
San Mateo Foster City School District
San Rafa<J a ty Schoci s
Santa Rosa OtySchools
Woodside Elementary
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
Matthew Ojeda
Senior Auditor
Matthew graduated from the San Jose State University, with a B.S. in Accounting. Starting in public accounting in 2014, he has successfully completed six seasons of governmental auditing. Matthew has performed tests of controls, substantive tests, state compliance testing and Federal compliance testing for various special districts and school districts. Besides the standard control documentation and substantive testing required for GAAS audits, Matthew has performed audits and prepared reports under 0MB Subpart F and the Single Audit Act. He has audited Federal grants from various agencies, including Special Education, National School Lunch, Title I, Department of Education grants and others.
Matthew's recent continuing professional education:
Description of Program/Training
GAGAS - Ethical Principles In Government Auditing
GAGAS - Field Work and Reporting Standards
GAGAS - Field Work Standards For Financial Audits
GAGAS - General Field Work And Reporting Standards
GAGAS - General Standards
GAGAS- Reporting Standards For Financial Audits
GAGAS - Use and Application of GAGAS
Government Auditing
Major Changes to Auditing Standards
Lirniti ng Auditor Lia bi I ity
Auditor Communic ations: Critical New Requirements
School Districts Conference
Governmental Accounting, Reporting, and Auditing Update GASB Basic Financial Statements for State and Loca I Govern rnents The following is a list of Matthew's clients over the years:
Cities and Towns Special Districts School Districts/COE's Nonprofits and Other City of Del Rey Oaks
City of Oroville
City of Pacific Grove
City of Point Arena
City of Rocklin
City of Saratoga
City of Sui sun City
Town of Los Gatos
Castro Valley Sanitary District
Central Marin Sanitation Agency
Fairfield•Suisan Sanitation District
Midpen Regional Open Space Auth
Oro Lorna Sanitary District
Santa Clara Regional Open Space Auth
Saratoga Cemetery District
Sausalito-Marin City Sanitation District
Si I icon Valley Clean Water
The Cities Group
West Valley Sanitation District
II Chavan & Associates, LLP
Ante I ope El ernenta ry
Burli ngarne
Cabrill o Unified
Cotati Rohnert Park
Golden Valley Unified
Hillsborough City
Las Lornitas Elementary
Lassen View Elementary
Los Altos Elementary
Luther Burbank
Millbrae Elementary
Mission Preparatory School
Mountain View Whisman
Napa Valley Unified
Orchard
Pacifica
Palo Alto Unified
Portola Valley Elementary
Red Bluff
Roseland Charter
Roseland Elementary
San Bruno Park
San Carlos Elementary
San Lorenzo Valley Unified
San Mateo County Olli ce
San Mateo Foster City
Santa Rosa City School
Scotts Va 11 ey Unfi ed
Sequoia Union High
Sonoma Valley Unified
Soquel Elementary
South San Francisco Unified
Union School District
Woodside Elementary
Boys and Girls Club of Central Sonoma County
Boys and Girls Clubs of Sonoma Valley
Credo High School
Diagnostics for the Rea I World
Mission Language and Vocational School
Morgan Hi II Charter Foundation
Morgan Hi II Charter School
Orange County Charter School
Organic Farming Research Foundation
Proheatlh Homecare
Redwood City Education Foundation
San Jose Conservation Charter
San Jose Conservation Corps
San Mateo County Exposition Fair Association
Sociometrics
Work2future Found a ti on
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section B - Partner, Supervisory and Staff Qualifications and Resumes Town of Los Gatos Proposal for Auditing Services
Professional Education and Training
Our professionals complete 80 hours of continuing professional education every two years in auditing and accounting which includes at least 80 hours of governmental auditing and accounting training specific to local governments. We use a combination of in-house seminars, self-study and outside seminars sponsored by AICPA, G FOA, the California Education Foundation and other recognized groups.
All assigned staff meet the educational requirements for Governmental engagements as specified by the California Board of Accountancy, Federal General Accounting Office, Governmental Accounting Standards Board, and the AICPA as appropriate.
II Chavan & Associates, LLP Page 12
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E This Page Intentionally Left Blank
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section C
Similar Engagements
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section C - Similar Engagements
Town of Los Gatos Proposal for Auditing Services
Client References and Similar Engagements
The following projects were completed by C&A in 2019-20 and are ongoing in 2020-21:
Entity Name City of Del Rey Oaks City of Saratoga
Contact Person Roberto Moreno Dennis Jaw
Title Chief Business Officer Finance Manager
Addr ess 650 Canyon Del Rey Road, Del Rey Oaks, CA 93940 13777 Fru itvale Ave, Saratoga, CA 95070 Phone 831-394-8511 408-868-1227
E-mail [email protected] [email protected]. us Audit Period 6/30/2021 6/30/2021
Hours 260 360
Fiscal Years Audit ed 3 5
Partner Sheldon Chavan Sheldon Chavan
GFOAAward No Yes
EntitvTvpe City City
Financ e Dept Staff 3 6
Scope of Work Report Prep CAFR Review
GAGASAudit GAGAS Audit
SAS 114 Report Single Audit/OMB
Management Letter SAS 114 Report
GANN Limit AUP Management Letter
Measure S Audit IDA Audit
Year Round Consultation GANN Limit AUP
Year Round Consultation
Entity Name City of Rocklin City of Suisun City
Contact Person Angela Doyle Elizabeth Luna
Title Senior Accountant Accounting Services Manager
Addr ess 3970 Rocklin Road, Rocklin, CA 95677 701 Civic Center Blvd., Suisun City, CA 94533 Phone 916-625-5033 707-421-3215
E-mail [email protected] s [email protected]
Audit Period 6/30/2021 6/30/2021
Hours 340 400
Fiscal Years Audited 4 5
Partner Sheldon Chavan Sheldon Chavan
GFOAAward No Yes
Entity Type City City
General Fund Budget $10,000,000 $36,800,000
Finance Dept Staff 2 10
Scope of Work ACFR ACFR
GAGASAudit GAGAS Audit
Single Audit/OMB Single Audit/OMB
SAS 114 Report SAS 114 Report
Management Letter Management Letter
GANN Limit AUP GANN Limit AUP
PFA Audit IDA Audit
Successor Agency Audit successor Agency Audit
Year Round Consultation Year Round Consultation
II Chavan & Associates, LLP
City of Carmel
Robin Scattini
Finance Director
PO Box CC, Carmel-by-the Sea, CA 93921
831-620-2019
[email protected]. us
6/30/2021
320
3 Sheldon Chavan
Yes
City
3 CAFR Prep
Single Audit/OMB
SAS 114 Report
Management Letter
GANN Limit AUP
Measure S Audit
SCO FTR/Streets
Year Round Consultation
City of Pacific Grove
Tori Hannah
Administrative Services Director
300 Forest Ave, Pacific Grove, CA 93950
831-648-3103
thannah@cityofpacifi cgrove. org
6/30/2021
340
5 Sheldon Chavan
Yes
City
$17,500,000
6 ACFR
GAGAS Audit
Single Audit/OMB
GANN Limit AUP
SAS 114 Report
Management Letter
Measure S Audit
Year Round Consultation
Pa e 13
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section D
Specific Audit Approach
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
The C&A audit approach begins with an entrance conference between Sheldon Chavan and management to gather information for risk assessment and audit planning. Upon the conclusion of the entrance conference, Sheldon will plan and schedule C&A's three phase audit approach and prepare a list of items to be provided for Phase I of the audit. Significant aspects of each phase are outlined below as augmented based on our review of the Town's financial reports, RFP, Budget documents, and Council and Finance Commission agendas and minutes:
Phase I - Planning and Risk Assessment
This phase is designed to evaluate your operating and accounting procedures and will provide the basis for a significant portion of our letter to management. The results of our work during this phase will determine our audit approach for significant accounts and compliance. We plan to begin this phase by meeting with management and the Finance Commission to plan the audit and discuss any significant issues with the proposed audit plan and timeline.
At least six weeks prior to the beginning of this phase, we intend to provide the Town with a link to Engagement Organize ("EO")r detailing the information and timing that will be needed in order to facilitate the completion of the audit in a timely manner. Having all items in EO uploaded prior to the beginning of the audit field work will allow us to complete the audit within the allotted time frame or earlier. We will also begin the testing of federal compliance for major programs during this phase, if applicable. The EO will include Phase I, 11, and Ill items once uploaded and will updated during the year.
The Town will be able to leave notes on each item, upload attachments and message our team through EO.
We plan the audit and obtain our understanding of the internal control structure, control environment, and accounting system through:
• Inquiries of appropriate management and staff personnel. • Inspection of the Town's documents, records, budget and related materials, organizational charts, manuals and programs. • Observation of the Town's activities and operations to corroborate the results of inquiries. • Testing of the controls to determine they are operating as planned. • Performance of preliminary analytical review on interim financials. The analytical review entails comparing similar information for the same time frame from the prior year and also comparing current year-to-date information to the budget to determine areas that may need additional attention during Phase II.
• Review and evaluation of the Town's financial and other management information system controls and procedures. Our staff has gained invaluable experience with systems such as HTE, Multiple Operation Management (MOM), Springbrook, Pentamation, QuickBooks, Digital Schools, SunGuard, Escape, FUND$, CECC, SACS, Financial 2000, SASi and many others. It is our goal to maximize the usage of your computer system during the audit.
This phase constitutes approximately 42% of all non-clerical hours of the engagement and may be combined with Phase II if desired. At the completion of Phase I, an exit conference will be held to discuss findings and recommendations and prepare for Phase II.
II Chavan & Associates, LLP Page 14
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
Phase II - Substantive Audit Procedures and Compliance
This phase is designed to complete our substantive and compliance audit procedures on the accounts of the Town. The approach for Phase II will be based on the results of Phase I. Audit programs will be tailored for your Town's needs. This work will begin after the closing of your books.
Sample size and selection is based on our assessment of risk and planned or actual deviations. A typical sample size will be 25 to 60 items and be randomly selected. Our sampling methods vary depending on the type of tests we perform. Sample selection for compliance work will be based on the respective compliance and audit guides, KC, our experience and judgment, and other various sources. We use Knowledge Coach (KC) audit programs by Commerce Clearing House (CCH) to assist in our risk determination and sampling selection. We also use ProSystems fx Engagement paperless audit, Microsoft Excel, and Microsoft Word on laptops to perform the audit. Generally, we prefer information provided in electronic format, however we use production scanners in the office and portable scanners in the field for information that is unavailable in electronic format.
Analytical procedures during Phase II involve comparing current data to prior year and budget data, calculating dollar and percentage variances and investigating differences. We also analyze trends and relationships of the various financial statement components and ratios.
Laws and regulations subject to audit will be determined based on inquiry and familiarity we gain with the Town and with state and federal compliance requirements. We also attend seminars and webinars related to state and federal regulations to keep abreast of ne w requirements.
Phase II will take approximately 42% of the engagement hours. At this time, an exit conference will be held to discuss findings and recommendations, the status of new accounting principles and reporting requirements, and prepare for Phase Ill.
Phase Ill - Financial Statement Preparation and Review
This phase consists of preparing or assisting with the preparation of your financial statements, as required in the RFP, in conformity with accounting principles generally accepted in the United States of America. We will also prepare all other financial and compliance reports required of us as listed on the RFP. The required reports and management letter will be submitted to management as noted in the timeline in the RFP, unless otherwise agreed. We will also ensure that new GASB pronouncements identified in phase I and II have been appropriately accounted for and disclosed in the financial statements and that the impact of these statements is sufficiently presented in our audit reports. The most efficient way to ensure we meet the reporting deadlines is to have the audited trial balance and final adjustment completed by the last day of field work. This, in combination of the automation provided by Prosystems engagement will reduce the lag time from the completion of field work and report issuance.
Our reporting process is automated through our audit software. Once we obtain the Town's trial balance in electronic format, we can import that into our system, which will automatically code and update all financial statements and most note disclosures in the financial statements and notes. We can II Chavan & Associates, LLP Page 15
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
also auto link tables, charts and other documents the Town would like to generate. All of this information can be shared through our online secure lockbox/fileshare website at www.cnallp.com and through our online engagement portal which is linked to our list of items. All agreed upon adjustments will be linked in our audit software. This greatly reduces the report preparation time and involvement of Town staff and creates more opportunity for review of information systems, internal controls and management recommendations. At the end of this phase we will provide a summary of audit adjustments and uncorrected misstatements (passed adjustments).
We anticipate that Phase Ill will comprise approximately 16% of the engagement hours, including the majority of the clerical hours. The timing of each phase of the audit is estimated based on the assumption that the Town will meet their close schedule and responsibilities as noted in the request for proposal.
Please note that we generally hold entrance conferences at the beginning of Phase I and II and exit conferences at the end of Phase I, II and Ill. However, we are available to meet with the Town at any time.
Compliance and Program Specific Auditing
Included in all phases are specific procedures required to complete individual compliance items.
Analytic and sampling procedures generally follow those described in the preceding phase, but are modified, when needed, to meet specific guidelines of the programs audited.
Recommendations for Improved Operations
We feel we have accumulated valuable knowledge in accounting and auditing which has allowed us to offer a wide range of specific recommendations to increase the efficiency and effectiveness of our audit clients. With our background, we can provide services that may be very beneficial to you presently and in the future. As our client, you can look to us for informed support year-round in all areas of interest or concern. In the course of our engagement with the Town, we will provide prompt, knowledgeable answers to your questions regarding all aspects of accounting, finance, management, and operations. It is our policy to discuss discrepancies and recommendations with Town staff directly involved and then with management, as necessary. If an item warrants inclusion in the report as a finding, we will obtain management's responses to each finding. All responses will be reviewed with management and relevant committees before they are presented to the Town Council.
Irregularities and Illegal Acts
We will make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which we become aware to the Audit Committee (or similar) and Attorney.
Control Risk Assessment
As part of our audit approach, we use KC forms, narratives, questionnaires and summary schedules to gain an understanding of the control environment and assess its overall effectiveness. This helps us identify the types of potential misstatements and factors that affect the risk of material misstatement and their impact on the audit plan.
Analytical Procedures
Analytical procedures are used at three points of time during our audit; planning, substantive testing, and final review of the completed financial statements. Analytical procedures are used to obtain II Chavan & Associates, LLP Page 16
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
knowledge of conditions and events, to indicate the presence of possible misstatements, to provide substantive evidence of balances and to assess the financial condition of the Town.
As we obtain knowledge about the Town, we will be able to direct our attention to areas requiring greater audit emphasis as well as provide substantive evidence in support of recorded account balances.
Identification of Potential Audit Problems
Each year we approach the audit objectively and use a risk-based approach to anticipate any potential audit problems. If anything were to come to our attention during the course of the audit, it would be reported to the proper management level depending on the nature of the problem and as noted in the RFP.
Resources Available for Standards Interpretations
In addition to the items published by GFOA, AICPA, FASB, and GASB, we use RIA checkpoint and Thompsons as our main online reference material. As our client, the Town will have access to all our resources.
Summary of Audit Phases {Generalized, Not All-Inclusive) Entrance Conference
Planning Analytics
Interim List of Items
Risk Assessment
Internal Control Documentation & Testing
Management Points
Major Program and Major Funds
Exit Conference
Entrance Conference
General Audit Procedures
Confirmations
Final Major Programs and Major Funds
Finalize Audit Programs
Trial Balance and Leads
Substantive and Compliance Tests
Management Points
Initial Audit Adjustments
Initial Report Preparation
'-------------------! Exit Conference
The audit plan will
be customized to
meet your needs!
Phases I and II can
be combined.
II Chavan & Associates, LLP
0 0
Finalize TB and Audit Adjustments
Finalize Management Points and Findings
Final Review of Audit Files by Managers and Partners
Prepare, Assist With or Review Conversion Entries
Prepare Final Letters and Correspondence
Prepare and Issue First Drafts of Audited Financials,
Compliance Reports and Opinions
Issue Final Audit Report
Final Exit Conference and Planning for Next Fiscal
Year
Council Meeting, As Necessary
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
Summary of Team Assignments {Generalized, All-Inclusive) ► Engagement Partner I
• Overall Review
•Audit Planning and Risk Assessment
• Entrance/Exit Conferences
•Team meetings
•Team Assignments
•Quality Control
t Engagement Partner �
•Overall Review
•Review Audit Plan
•Review Audit Programs
•Update Team Assignments
•Review Major Fund/Major
Program Det.
•Analytics
•Review Working papers,
Management Points and AJE's
•Guide Audit Team
•Entrance and Exit Conferences
t Engagement Partner t
•Final Review & Sign-off
•Finalize Audit Plan
•Finalize Audit Programs
•Final Analytics
•Prepare CAFR and Review
Supporting Schedules
•Review all Other Reports
•Review and Finalize all
Required Management letters
and Correspondence
•Exit Conferences, Committee
and Board Presentations
► Associate Partner �
•Team Planning
•Audit Binder Review
•Working Paper Review
•Management Point Review
•Concurring Partner Review
•Quality Control
t Associate Partner t
•Team Planning
•Audit Binder Review
•Working Paper Review
•Management Point Review
•Concurring Partner Review
•Quality Control
t Associate Partner t
•Final Audit Binder Review
•Final Working Paper Review
•Final Management Point
Review
•Concurring Partner Review
•Quality Control
II Chavan & Associates, LLP
I Senior �
•Audit Planning
•Audit Binder Preparation
•Major Fund and Major Program
Determination
•Audit Programs
•Internal Control Doc. and Testing
•Compliance Control Doc. and
Testing
t Senior t
•Planning Update
•Audit Binder Update
•Finalize Major Program and
Major Fund Determination.
•Update and Finalize Audit
Programs
•Substantive Testing for
Significant Accounts
•Compliance Testing
•Guide and Monitor Staff
•Confirmations
t Senior �
•Finalize Audit Binder
•Review Staff Working papers
•Review Staff Management
Points
•Review Reports
•Prepare Assigned Reports
•Review CAFR Prepared by
Engagement Partner
► Staff (
•Internal Control Doc. and Testing
• Significant Transaction Areas
• Dept. and Desk Level Controls
•Compliance Control Doc. and
Testing
• Single Audit
•TDA/MTC
•Team Planning
•Team Meetings
I Staff (
•Substantive Testing
•Significant Transaction Areas
(Cash, Investments, Capital
Assets, long-term Debt,
Pensions, Fund Balance, Net
Position, Revenue,
Expenditures)
•Compliance Testing
•Single Audit (Uniform
Guidance)
•TDA/MTC
•Team Planning
•Team Meetings
I Staff t
•Finalize Working Papers
•Finalize Management Points
•Prepare Assigned Reports
•Assist with Report Review
The above chart provides a
general overview of typical team
assignments.
•Correspondence
• Staff Support
•Information Technology Support
•Information Technology
Support
•Confirmations
•Information Technology
Support
•Report Binding and Delivery
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
Summary of Roles and Responsibilities {Not All-Inclusive) General Roles and Responsibilities
C&A LLP
The Engagement Partner will be
responsible the overall planning,
scheduling, review and coordination
of Phase I.
The Associate Partner will provide
fieldwork support when necessary
and help maintain quality control.
The Senior/Manager will review
workpapers, letters and reports and
help maintain quality control.
The Senior Professional Staff will
focus on the more complex areas of
controls and support the
Engagement Partner.
The Professional Staff will focus on
detail of tests of controls over
financial, federal compliance and
other areas as needed.
Town' Staff
During this phase, your staff will be
expected to provide a preliminary
balance sheet and revenues and
expenditures by fund, policies and
procedures for key controls, a
preliminary summary of federal
grants, the original budget, contact
information for departments and
confirmations, and generally
provide the information included in
the lists of items for interim. We
also plan to interview various staff
to document and test controls.
Testing controls will include
sampling for significant areas. Our
documentation of internal controls
will be done in person and via
interviews, unless otherwise
requested.
II Chavan & Associates, LLP
The Engagement Partner's focus will
include finalizing the audit
programs, substantive analytics, and
overseeing the audit.
The Associate Partner will provide
fieldwork support when necessary
and help maintain quality control.
The Senior/Manager will review
workpapers, letters and reports and
help maintain quality control.
The Senior Professional Staff will
focus on substantive tests for
significant accounts.
The Professional Staff will focus on
substantive tests for significant
accounts, federal compliance, and
other required audits.
Town' Staff
During this Phase, your staff will be
expected to provide the final
balance sheet and revenue
expenditures by fund and accounts
from the GL. We will prepare
leadsheets in our audit software,
but the organization should have
adequate support for significant
accounts. We will perform a review
of journal entries at this time and
again before the final reports are
issued, thus we will need access to
journal entries. We will request
reports for major grant programs,
certain other programs, and
business type activities. We will also
perform a number of analytical
procedures which will require staff
responses, and this will be done in
person in most cases.
The Engagement Partner's focus will
be on overall reporting, guidance
and working with District staff to
complete the reporting phase.
The Associate Partner will assist in
report prepartion and client
communication.
The Senior/Manager will review
workpapers, letters and reports,
and help maintain quality control.
The Senior Professional Staff will
focus on report preparation and
assisting the engagement partner
and guiding our staff.
The Professional Staff will act in a
support role during this phase.
Authoritie's Staff
We expect the Town' staff to review
and respond to all reports required
to complete the audit. We
anticipate the Town will provide or
assist us in gathering information
needed for the ACFR and note
disclosures. Management will be
required to sign a representation
letter which will be provided by us.
Management will be required to
provide responses to any and all
recommendations and findings
included in the management letter.
Report preparation will be
completed as outlined in the RFP,
unless otherwise agreed prior to
Phase Ill of the audit.
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
Summary of Staff Hours by Phase
Phases Total
Level of Staff I II Ill Hours
Engagement Partner 32 32 24 88
Associate Partner 4 4 4 12
Supervisor 32 32 8 72
Senior Staff 36 36 8 80
Professional Staff 42 42 8 92
Administrative Staff 2 2 4 8
Totals 148 148 56 352
Summary Timeline
Segment Estimated
Entrance Conference March 1, 2022
Audit Planning C&A's Office March 1, 2022
List of Items Required by Client March 15, 2022
Interim Testing May 2, 2022
Interim Exit Conference and Completion May 9, 2022
Preparation and Mailing of Confirmation Letters to 3rd Parties July 1, 2022 Year-end Field Work Planning Meeting August 1, 2022
Update List of Items Required by Client - Final (Initial Done at Interim) August 1, 2022 Year-end Field Work and Compliance Testing September 26, 2022 Exit Conference September 30, 2022
Progress List of Management Point and Recommendations October 7, 2022 Final List of Management Point and Recommendations October 21, 2022 Audit Adjustments October 21, 2022
Draft Reports, Financials, Management Letters November 4, 2022 Final Reports, Financials, Management Letters November 25, 2022 Council, Commission & Public Presentations As Needed
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Phase
11/111
11/111
Ill
Ill
Ill
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Audit Scope
Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
We understand the scope of our services to be as follows:
A. Audit and issue a report on the fair presentation of the Basic Financial Statements of the Town of Los Gatos in accordance with generally accepted auditing standards; the standards set forth for financial audits in the U.S. General Accountability Office's most recent Government Auditing Standards; the provisions of the federal Single Audit Act of 1984 and the Single Audit Act Amendments of 1996; 0MB guidance for federal awards and agreements as provided in the Code of Federal Regulation (CFR ) 2 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; and relevant GASB Statements. The audit shall be conducted for the purpose of forming an opinion on the Town's Basic Financial Statements taken as a whole, and to determine whether the operations were conducted in accordance with legal and regulatory requirements.
B. Prepare, with limited involvement of the Town, the Comprehensive Annual Financial Report (Annual Financial Report) for the Town of Los Gatos and the activities of the private-purpose trust funds of the Successor Agency to the Los Gatos Redevelopment Agency. The Town shall retain ultimate responsibility for the approval and dissemination of the Annual Financial Report; however, C&A shall prepare the draft and complete related tasks, including but not limited to the following:
a. Evaluate the document against the Annual Financial Report reporting checklists of the Government Finance Officers Association (GFOA) and the California Society of Municipal Finance Officers (CSMFO) to ensure eligibility for their respective Annual Financial Report award programs. It is the Town's intention to continue to receive these awards annually and expect that the Annual Financial Report will meet their requirements. b. Verification of implementation of recommended improvements from prior year submissions to GFOA under the Annual Financial Report award program.
c. Proofreading and overall review, including layout, design, and making suggested improvements to the document.
d. Printing and binding of the final document.
e. Assisting with the written responses to the recommendations and questions posed by the Finance Commission prior to the Annual Financial Report's consideration by Town Council..
C. In the required reports on internal controls, C&A shall communicate any reportable conditions found during the audits. A reportable condition is defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Reportable conditions that are also material weaknesses shall be identified as such in the report. Non-reportable conditions discovered shall be reported in a separate letter to management, which shall be referred to in the reports on internal controls. The reports on compliance shall include all instances of noncompliance.
D. C&A will prepare a management letter, if applicable, reporting material weaknesses and significant control deficiencies. Prior to completion of the management letter, C&A shall meet with the Town Manager, Director of Finance, the Finance and Budget Manager, the Town Finance Commission, and II Chavan & Associates, LLP Page 21
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section D - Specific Audit Approach
Town of Los Gatos Proposal for Auditing Services
other Town staff as assigned to review findings and recommendations in detail before the final letter and Town responses are published.
E. Optional Services
a. Development of Agreed Upon Procedures for the review and reporting of Measure G district sales tax revenues and expenditures.
b. Preparation of the Cities Financial Transactions and Compensation Report (State Controller's Report).
F. Deliverables
a. One electronic file, in PDF format, and 25 bound copies, of the Annual Financial Report, including the necessary audit opinion letters.
b. One electronic file, in PDF format, and 25 bound copies, of the federal single audit report, if applicable, including the necessary audit opinion letters. c. One electronic file, in PDF format, and 25 bound copies, of the management letter, if applicable. d. One electronic file, in PDF format, and 25 bound copies, of the required Appropriations Limit Review reporting upon agreed-upon procedures on compliance with Proposition 111 for the year audited.
G. Irregularities and Illegal Acts. Auditors shall be required to make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties:
a. Los Gatos Town Council
b. Town Manager
c. Town Attorney
H. We will provide consultation regarding accounting and compliance issues found throughout the contract period.
I. We will attend Town Council meetings as requested throughout the contract period.
J. A partner will be available to present the audit report to the Finance Commission and/or Council.
K. All working papers and reports will be retained, at the auditor's expense, for a minimum of seven (7) years, unless the firm is notified in writing by the Town of the need to extend the retention period.
C&A will make such working papers available, on request, to the following parties or their designees:
a. Town of Los Gatos
b. Parties designated by the Town, or federal or state governments, as part of an audit quality review process
c. Auditors of entities of which the Town is a subrecipient of grant funds L. C&A shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance.
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section E
Discussion of Relevant Accounting Issues
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section E - Discussion of Relevant Accounting Issues
Town of Los Gatos Proposal for Auditing Services
Discussion of Relevant Accounting Issues
The Governmental Accounting Standards Board (GASB) continues to issue new statements in an effort to make financial information accounted for, and reported by, local governments more reliable. Often, the statements issued by GASB are confusing and difficult to apply. Therefore, it is our goal to keep our clients informed about upcoming standards and how they may affect their future. Our technical expertise and guidance in the implementation and interpretation of GASB statements will be available throughout the year. We offer inclusive consultation throughout the term of our contract. We also offer in-house training via internally developed seminars. For example, we have given presentations and training on compliance requirements for specific grants and the key controls needed to meet those requirements. Generally, these sessions provide about 8 hours of training, in addition to year-round consultation, and are included in the audit.
In addition, we will send periodic e-mails and newsletters when significant new accounting pronouncements are issued. The most important factors we have discussed include: The potential impact of new pronouncements, the due date and the changes in the reporting presentation, planning the Town should do to ensure it is prepared and the assistance we can provide to ensure compliance.
We also prepare template note disclosures and update our template financial statements to meet the reporting standards. In relation to GASB 84, we provided clients with an analysis workbook that is a Q&A document to help them identify component units and how to report pensions, postemployment plans and custodial funds.
The following is a summary of upcoming accounting pronouncements that could have an impact on the Town:
1. Disclosure Framework:
The objective of this project is to develop concepts related to a framework for the development and evaluation of notes to financial statements for the purpose of improving the effectiveness of note disclosures in government financial reports. The framework will establish criteria for the Board to use in evaluating potential note disclosure requirements during future standards-setting activities and in reexamining existing note disclosure requirements. Those concepts also will provide governments a basis for considering the essentiality of information items for which the GASB does not specifically provide authoritative disclosure guidance.
Update: The Concepts Statement, Communication Methods in General Purpose External Financial Reports that Contain Basic Financial Statements; Notes to Financial Statements, has taken a turn from the original timeline. There were specific discussions related to the concept of essentiality. As the concept of essentiality is significant to the Concepts Statement, it would have a broad impact to users of the financial statements and Governmental Accounting Standards Advisory Council indicated some concern over the significance of the change in the proposed definition; the Board voted to re-expose the proposed concepts in an exposure draft. GASB anticipates the comment period on this revised exposure draft of this Concepts Statement to open in July 2021.
2. Financial Reporting Model:
Reexamination of Statements Nos. 34, 35, 37, 41 and 46 and Interpretation 6: The objective of this project is to make improvements to the financial reporting model, including Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local II Chavan & Associates, LLP Pa e23
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section E - Discussion of Relevant Accounting Issues
Town of Los Gatos Proposal for Auditing Services
Governments, and other reporting model-related pronouncements (Statements No. 35, Basic Financial Statements-and Management's Discussion and Analysis-for Public Colleges and Universities, No. 37, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments: Omnibus, No. 41, Budgetary Comparison Schedules-Perspective Differences, and No. 46, Net Assets Restricted by Enabling Legislation, and Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements). The objective of these improvements would be to enhance the effectiveness of the model in providing information that is essential for decision-making and enhance the ability to assess a government's accounting and to address certain application issues, based upon the results of the pre-agenda research on the financial reporting model.
Update: After public hearings were held in March and April 2021, GASB is currently redeliberating the drafted Statement, Financial Reporting Model Improvements. The agenda on this Concepts Statement extends into 2022 with a draft expected in first quarter 2022.
3. Revenue and Expense Recognition:
The overall objective of this project is to develop a comprehensive, principles-based model that would establish categorization, recognition and measurement guidance applicable to a wide range of revenue and expense transactions. Achieving that objective will include: (1) development of guidance applicable to topics for which existing guidance is limited, (2) improvement of existing guidance that has been identified as challenging to apply, (3) consideration of a performance obligation approach to the GASB's authoritative literature and (4) assessment of existing and proposed guidance based on the conceptual framework. The expected outcome of the project is enhanced quality of information that users rely upon in making decisions and assessing accountability.
On the heels of the Financial Accounting Standards Boards (FASB) roll out of the revenue recognition guidance, GASB has taken up a similar project reviewing the guidance for recognition of revenues and expenses. Deliberations are anticipated to be ongoing through November 2022.
While this project is not anticipated for completion until 2025, the broad application and impact will make it one to keep up to date with its progress.
4. GASB Statement No. 87- Leases
Most organizations have transitioned their immediate focus on the implementation of GASB 87 as it will become effective for most fiscal 2022 year-end financial statements. GASB 87 defines a lease as a contract that conveys control of the right to use another entity's non-financial asset for a period of greater than one year. Purchased power agreements are exempt from this treatment (unlike the Financial Accounting Standards Board lease standard). GASB 87 is effective for fiscal years beginning after June 15, 2021.
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ITEM NO. 10.
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section F
Additional Information
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section F -Additional Information
Town of Los Gatos Proposal for Auditing Services
Current Client List
Cities/Towns CAFR GAS GAGAS Single Audit
City of Albany • • •
City of Del Rey Oaks • •
City of Lincoln •
City of Marina • • • •
City of Orovil I e • • • •
City of Pacific Grove • • • •
City of Point Arena • •
City of Rocklin • • • •
City of Saratoga • • • •
City of Suisun City • • • •
Town of Yountville • • •
Local Education Agencies CAFR GAS GAGAS Single Audit
An tel ope School District • •
Berkeley Ulified School District
BurlingameSchool District • . .
Cabrillo U,ified School D'strict • • .
Corning Uni on High School District . . .
Cotati -Rohnert Park Unified School District . . .
Cottonwood Uni on School District • •
Golden Valley Unified School District . . .
Hills borough City School District . . .
Jefferson Union High School District . . .
John Swett Ulified School District
Las Lomi tas School D. strict • •
Lassen View Union Elementary School District • •
Los Altos School District • • • •
Luther Burbank School District . . .
Menlo Park Gty School District . . .
Mil I brae School District . .
Mountain View Whisman School District . . .
Napa Val I ey Unified School District . . •
Orchard School District . •
Pacifica School District . • •
Red Bluff Joint Uli on High School D. strict • . .
Red Bluff Union Elementary School District • • •
Rosel and Elementary School District . • •
San Bruno Park School District . . .
San Carlos School District . . .
San LorenzoValleyUnified School District • • •
San Mateo Foster City School District . . •
San Rafael City Schools
Santa Rosa City Schools • • •
Sequoia Ulion High School District • • •
Sonoma Valley Unified School District . . .
Soquel Uni on Elementary School District • • •
South San Francisco Ulified School District
Union School District . . .
West County Transportation Agency . .
Woodside Elementary School Di strict • •
II Chavan & Associates, LLP
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Section F -Additional Information
Town of Los Gatos Proposal for Auditing Services
Charter Schools CAFR GAS GAGAS Single Audit
Charter School of Morgan Hill ., .,
Cottonwood Creek Charter School ., .,
Credo High School ., .,
Kid Street Charter School ., .,
The Reach Charter School ., .,
Mission Preparatory School ., .,
Pathways Charter School ., .,
Roseland Charter School ., ., .,
RSTEMAcadamy Charter School ., .,
Stone Bridge Charter School ., .,
Woodland Star Charter School ., .,
Special Districts CAFR GAS GAGAS Single Audit
Bay Area Water Supply Cooservation Agency ., ., .,
Castro Valley Sanitary District ., .,
El Dorado Hil Is Community Services District ., ., .,
Lake Canyon Community Services District ., .,
Midpeninsul a Region al Open Space District ., ., .,
Purissima Hills Water District
Ross Val I ey Sanitary Ci strict ., ., .,
Santa Clara County Regional Open Space Auth ., ., .,
Sausalito-Marin City Sanitation District ., ., .,
Stege Sanitary District ., .,
Silicon Valley Clean Water ., .,
South San Fanci sco Conference Center .,
The d ti es' Group ., .,
Valley of the Moon Fire District ., .,
West Bay Sanitary District ., .,
West Val I ey Sanitation District ., .,
Westborough Water District
Non Profit Organizations CAFR GAS GAGAS Single Audit
Boys and Girls Clubs of Sonoma Valley .,
Center for Empowering Refugees & Immigrants .,
Chi I dren of Grace
Far West Wheel Chair Association .,
Hidaya Found a ti on .,
Mission Language and Vocational School .,
Morgan Hill Charter School Foundation .,
NASA AM ES Exchange .,
O'Connor Tract Co-Operative Water Co. .,
Peninsula Conflict Resolution Center .,
Redwood City Education Foundation .,
San Mateo County Exposition and Fair Association .,
Sonoma Val I ey Hospital Foundation .,
The Moc a Found a ti on .,
The San Jose Llbrary Foundation .,
Tru .,
Work2fu rure Foundation ., ., .,
Privately Held Corporations CAFR GAS GAGAS Single Audit Air Filter/Control
Dfusion, Inc. ., ., .,
Diagnostics for the Real World ., ., .,
FRTek US, LLC .,
Pathway to Choices .,
Roberts of Woodside
Sociometrics ., ., .,
II Chavan & Associates, LLP
EAAP Other Bond (P39)
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ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Technology in the Audit
Section F -Additional Information
Town of Los Gatos Proposal for Auditing Services
C&A is a paperless firm and we use secure cloud servers for file sharing. We have Lenovo laptops and Fujitsu scanners that we use in the field. Our secured laptops are synchronized to our cloud server every day to avoid loss of data. The scanners allow for flexibility during the audit since it is not feasible to expect every document in electronic format.
Our secure online fileshare and engagement organizer provide for a better option over e-mailing electronic files. Each of our clients has an account login username and password through our website or an emailed link that allows them to upload files. This is especially helpful with sensitive information such as payroll data as it is much more secure than e-mail.
Our audit software is ProSystems fx Engagement which we compliment with Knowledge Coach (KC) audit programs and workpapers. These programs allow us to roll-forward audit information without having to replace the audit programs in the binder because they automatically update with changes in auditing and accounting standards every month. Finally, we have purchased data extraction software for each of our laptops that convert Adobe and other file types to Word and Excel.
All of the above-mentioned technological innovations make the audit more efficient and provides us the opportunity to spend time in areas that are more meaningful to the District. It also reduces the time and effort required by District staff to provide information and minimizes redundancy from year to year in the audit.
Proposal Exceptions
C&A did not have any exceptions or requested changes to the Town's RFP conditions or requirements.
C&A's Responsibility for Detecting Fraud
While audits are not designed to root out every instance of fraud, we have a responsibility to detect material misstatements in the financial statements caused by either fraud or error. Accordingly, generally accepted auditing principles prescribe specific audit procedures to detect fraud that must be carried out during each audit. C&A must hold a fraud brainstorming session at the beginning of the audit. This session is designed to provide a time for the audit team to consider how the client could commit fraud. The brainstorming meeting is used to set a tone of professional skepticism in the audit.
Because committing material financial statement fraud often requires adjustments to financial records, C&A will test journal entries for any signs of manipulation. Another likely place for fraud is in accounting estimates since management may be able to influence accounting estimates to manipulate the financial statements. Generally, we perform procedures to determine if the methodology for completing accounting estimates has changed from the prior year and examine the directionality of estimates as a whole. We also closely examine significant unusual transactions outside of normal operations. This examination requires organizations to explain the purpose and rationale for the transaction and we corroborate management's response with other information received during the audit.
II Chavan & Associates, LLP Page 27
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachments
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment A - Peer Review Report
REPORT ON THE FIRM'S SYSTEM OF QUALITY CONTROL
June 18, 2021
To the Partners ofChavan & Associates, LLP
and the Peer Review Committee of the
California Society of Certified Public Accountants
We have reviewed the system of quality control for the accounting and auditing practice of Chavan & Associates, LLP in effect for the year ended December 31, 2019. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants (Standards).
A summary of the nature, objectives, scope, limitations of, and the procedures performed in a System Review as described in the Standards may be found at www.aicpa.org/prsummary. The summary also includes an explanation of how engagements are identified as not having been performed or reported in conformity with applicable professional standards, if any, are evaluated by a peer reviewer to determine a peer review rating.
Firm's Responsibility
The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. The firm is also responsible for evaluating actions to promptly remediate engagements deemed as not performed or repo1ted in conformity with professional standards, when appropriate, and for remediating weaknesses in its system of quality control, if any.
Peer Reviewer's Responsibility
Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review.
Required Selections and Considerations
Engagements selected for review included engagements performed under Government Auditing Standards including compliance audits under the Single Audit Act.
As a part of our peer review, we considered reviews by regulatory entities as communicated by the firm, if applicable, in determining the nature and extent of our procedures.
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment A - Peer Review Report
To the Partners ofChavan & Associates, LLP
and the Peer Review Committee of the
California Society of Certified Public Accountants
Opinion
In our opinion, the system of quality control for the accounting and auditing practice of Chavan & Associates, LLP in effect for the year ended December 31, 2019, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Chavan & Associates, LLP has received a peer review rating of pass.
Santa Ana, California
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment A - Peer Review Report
PowELL & SPAFFORD, 1 c.
CERl 11-lt-D PUl31 IC .\CCOL;'-T'-\ '1 IS
Report on the Firm's System of Quality Control
To Chavan & Associates, LLP
and the Peer Review Committee of the California Society of CPAs Jessie C. Powell, CPA (Rel.)
Palrick D. Spofford, CPA
Lv IHI I I 1, ih, ( .1.r, r n, I ,� { 'If I ( f .\,1 f unbnn, \ I, 1111 .--r: ,._\m, rH 111 l,i,,lituft .J ( 1, l,fu. / I ul !u �\1 rrunl,,1', We have reviewed the system of quality control for the accounting and auditing practice of Chavan & Associates, LLP (the firm) in effect for the year ended December 31, 2016. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants (Standards).
A summary of the nature, objectives, scope, limitations of, and the procedures performed in a System Review as described in the Standards may be found at www.aicpa.org/prsummary. The summary also includes an explanation of how engagements identified as not performed or reported in conformity with applicable professional standards, if any, are evaluated by a peer reviewer to determine a peer review rating.
Firm's Responsibility
The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. The firm is also responsible for evaluating actions to promptly remediate engagements deemed as not performed or reported in conformity with professional standards, when appropriate, and for remediating weaknesses in its system of quality control, if any.
Peer Reviewer's Responsibility
Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review.
Required Selections and Considerations
Engagements selected for review included engagements performed under Government Auditing Standards, comp I iance audits under the Single Audit Act and audits of employee benefit plans.
As a part of our peer review, we considered reviews by regulatory entities as communicated by the firm, if applicable, in determining the nature and extent of our procedures. -1-
447 Mis OU Pi C url • ccllands, CA 92373 • PO. ox ...J.7 • Redlands, CA '2375
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment A - Peer Review Report
Deficiencies Identified in the Firm's System of Quality Control We noted the following deficiencies during our review:
I. The firm's quality control policies and procedures addressing continuing professional education (CPE) are not sufficient to provide reasonable assurance that its personnel will have the education necessary to perform engagements in accordance with professional and regulatory requirements. The courses taken by firm personnel did not provide them with sufficient information about current developments in auditing matters. This contributed to audit engagements performed under Government Auditing Standards, including compliance audits under the Single Audit Act and audits of employee benefit plans, not conforming to professional standards in all material respects in the areas of proper presentation and disclosure for required supplemental information (RSI), documentation of independence, preparation of the schedule of expenditures of federal awards and documentation of testing specific to major program compliance. The audits of employee benefit plans did not conform to professional standards related to reporting, internal control documentation and participant testing.
2. The firm's quality control policies and procedures regarding monitoring did not provide it with reasonable assurance that the policies and procedures relating to the system of quality control are operating e
ffectively. The firm's quality control policies and procedures did not include ongoing inspection, and post issuance reviews to assist in providing ongoing consideration and evaluation of the quality control system.
Opinion
ln our opinion, except for the deficiencies previously described, the system of quality control for the accounting and auditing practice of Chavan & Associates, LLP in effect for the year ended December 3 I, 20 I 6, has been suitably designed and comp I ied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.
Firms can receive a rating of pass, pass with deficiency (ie!)) or fail. Chavan & Associates, LLP has received a peer review rating of pass with deficiencies.
March 19, 2018
-2-
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment B - Prepared by Client List
LIST OF ITEMS (FORMAT AND PRESENTATION IS A DOWNLOAD FROM ENGAGEMENT ORGANIZER AND LESS PRESENTABLE)
SECTION NAME
Interim - Financial
Interim - General
Interim - Investments
Interim - Cash and Other
Interim - Receipts/Cash
Interim - Disbursements
Interim - Procurement
Interim - Commitments
Interim - Payroll/HR
REQUEST ITEM
1.1 - Preliminary Trial Balance for FY21 (July 1, 2020 to June 30, 2021) - FORMAT: Excel
1.2 - Chart of Accounts, with:
fund names and type ,account type, revenue category, expense department, etc. Please include a description for any new funds not included in the FY21 audited financial statements. - FORMAT: Excel
1.3 - 2021 adopted budget and amendments, if any - FORMAT: Any
1.4 - 2021 reconciliation of budget changes and amendments - FORMAT: Any
1.5 - Most recent board packet and financial information submitted to the board - Unless available online FORMAT: Adobe
2.0 - Internal accounting manual, policies and procedures. - Please ensure this includes all policies regarding purchasing, procurement and vendor card policy, hiring, fund balance or reserve, investment, billing, budget, debt, etc. FORMAT: Adobe
2.1 - Capital asset policy and procedures for property, plant, equipment, infrastructure and construction in progress. - unless included in the internal accounting manual provided above. FORMAT:
Adobe
2.2 -A summary of committees and subcommittees with contact information - FORMAT: Any
2.3 - Council by-laws - FORMAT: Adobe
2.4 - Organizational Chart - FORMAT: Any
2.5 - List of departments and contact information for main contact in each department. - FORMAT: Any
3.0 - Investment policy- unless included in the internal accounting manual provided above. FORMAT:
Any
3.1 - Most recent investment report approved by the Council - FORMAT: Any
4.0 - List of all bank and brokerage accounts under the Town's name and tax ID. Please include the bank and brokerage contact information. Where applicable, please note the purpose, restrictions, fund, etc. associated with each account - FORMAT: Any
5.0 - List of all locations/departments collecting cash and/or checks over the counter. - FORMAT:
Any .. ••
5.1 - Cash receipts listing/register by location through today - FORMAT: Excel
5.2 - For the Enterprise funds, please provide the most recent rate studies and council-approved rate changes.
6.0 - Summary of purchases by vendor through field work date - FORMAT: Excel
6.1 - Warrant register (including any EFT) from 7/1/2020 through field work date. - Please include the account code, vendor, amount, warrant#, and warrant date FORMAT: Excel
6.2 - List of credit cards and store cards/accounts with cardholder names, account numbers, and limits.
If the name of the card and the name used as the vendor for disbursements are different, please indicate the vendor name as well. - FORMAT: Any
6.3X - Support for Sampled Disbursements
7.0- List of projects that required formal bids awarded during fiscal year 2021.
7.1 - List of public projects over $5,000 - FORMAT: Any
8.0 - List of contracts entered into and open for 2021 - FORMAT: Any
9.0X - Payroll Sample
9.0 - Payroll register paid in March 2021 and November 2020 - FORMAT: Adobe
9.1 - List of employees, including identification of employees who work on federal programs, department, and category code (or job title) - FORMAT: Excel
9.2 - List of new hires with hire dates and category code (or job title) - FORMAT: Excel
9.3 - List of terminated employees with termination dates and category code (or job title) - FORMAT:
Any
9.4 - MOUs, employment contracts, management compensation agreements, Council compensations arrangements and supporting salary schedules - FORMAT: Adobe
9.5 - Employee handbook and/or HR policies Handbook - unless included in the internal accounting manual provided above. FORMAT: Adobe
9.6 - Conflict of interests policies for employees and Council, if any- unless included in the internal accounting manual provided above. FORMAT: Adobe
ITEM NO. 10.
DocuSign Envelope ID: 252 9C04 4-9E2 4-4 732-8959-4 82B8D58876E Attachment B - Prepared by Client List
LIST OF ITEMS (FORMAT AND PRESENTATION IS A DOWNLOAD FROM ENGAGEMENT ORGANIZER AND LESS PRESENTABLE)
SECTION NAME
Interim -Debt
Federal Compliance
GANN Limit
Year-End -General
Year-End -Reporting
REQUEST ITEM
9.7 -List of employees receiving early termination benefits and a summary of those benefits, if any - FORMAT: Any
9.8 -Summary list of OP EB plans and retirement plans offered to employees, if any. - FORMAT: Any
9.9 -Census information (list of employees and retirees) sent to the actuarial for the retiree health plan (OP EB) valuation report (GASB 75). Please include their names, date of birth, and female/male. - FORMAT: Excel
9.10 -List of employees currently enrolled in the CalP ERS pension retirement plan. Please include their names, date of birth, and female/male. (GASB 68) FORMAT: Excel
10.0 -All debt agreements - FORMAT: Adobe
10.1 -Amortization schedules for all long-term debt - FORMAT: Excel
10.2 -Summary of capital and operating leases -Only if annual payment exceeds $10,000 FORMAT:
Excel
10.3 -Agreements for any new or amended capital or operating leases. - Only if annual payment exceeds $10,000 FORMAT: Adobe
11.0 -Grant tracker -schedule of expenditures of federal awards through date of field work. Please include the CFDA#, amount awarded, amount spent current year, amount spent for award if multi year award, program name, federal department name, pass-through entities, etc. -Please note if any portion of the State Revolving Fund loan is federally funded and if there were any additional draw downs in FY21. FORMAT: Excel
12.0 -Adopted resolution for the most recent appropriations limits. FORMAT: Adobe
12.1 -City's calculation of the most recent GANN limit
12.2 -Department of Finance Price Factor and population information used for the GANN limit calculation
13.0 -Detailed Trial Balance or Financial Summary Report by Fund and Object for June 30, 2021 - FORMAT: Excel
13.1 -Revenue and Expenditure report with adopted budget, final budget, actual and variance by Fund and Object for the fiscal years ended June 30, 2021 - FORMAT: Excel
13.2 -A list of journal entries from July 1, 2020 through date of field work. -This will also cover subsequent events. FORMAT: Excel
13.3 -List of all related parties known by the Town as well as policies and procedures used by City to identify related parties. FORMAT: Any
13.4 -Significant events after year end, such as debt agreements, significant purchases or contracts.
Required subsequent event disclosure. FORMAT: Any
14.0 -A list of commitments in dollar amounts to vendors and contractors outstanding at 6/30/2021, that have not been recorded in accounts payable or accrued liabilities. (encumbrances, open PO's and contracts) -Required for disclosure. Please list original and remaining commitment balances. This would include fire and police services contracts. FORMAT: Excel
14.1 -A list of Joint Powers Authorities (JPAs) for which the Town is a part of, the purpose of each JPA, the Town's role and contact information - FORMAT: Any
14.2 - The most recently available audit reports from JPAs for which the Town is a member. - FORMAT: Paper or Adobe
Year-End -Cash and Investments 15.0 -Bank reconciliations 6/30/2021 and 7/31/2021 - FORMAT: Any
15.1 -Bank statements for all cash accounts as of 6/30/2021 and 7/31/2021 - FORMAT: Paper or Adobe
15.2 -Summary of restricted cash as of June 30, 2021 - FORMAT: Any
15.3 -Brokerage and/or LAIF statements for the period ended June 30, 2021 - FORMAT: Paper or Adobe
15.4 -If not included in brokerage statements or treasurer's report, please provide a breakdown of investment maturities by type of investment in the categories of 12 moths or less, 13-24 months, 25-3 6 months, 37-48 months and 49-60 months. -If only deposit money in LAIF, checking or savings, this will not be applicable FORMAT: Any
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment B - Prepared by Client List
LIST OF ITEMS (FORMAT AND PRESENTATION IS A DOWNLOAD FROM ENGAGEMENT ORGANIZER AND LESS PRESENTABLE)
SECTION NAME
Year-End -Accounts Receivable
and Revenue
Year-End - Capital Assets (PP&E)
Year-End - lnterfund
Year-End -Accounts Payable
Year-End - Deposit Payable
Year-End - Other Liabilities
Year-End -Accrued Liabilities
Year-End - Payroll
Year-End - PERS
Year-End - OPEB
REQUEST ITEM
15.5 - Summary of fair values by account or type of asset as required by GASB 72 (please contact [email protected] if you need clarification or assistance with this) - If only deposit money in LAIF, checking or savings, this will not be applicable FORMAT: Any
16.0 - Summary schedule of AR by customer, government or other resource as of 6/30/2021 - Please also include a aging report FORMAT: Excel
16.1 - Cash receipts listing/register by location from July 1, 2021 to field work. Please ensure the report at least includes the date, description and amount. FORMAT: Excel
16.2 - Reconciliation of property taxes
16.3 - Schedule of gas tax apportionment from the State Controller's Office
16.4 - Reconciliation of sales tax revenue to the general ledger and copies of BOE remittances
17.0 - Summary schedule showing capital assets beginning balances, additions, deletions, transfers, and ending balances for both governmental and proprietary capital assets by category as of June 30, 2021 - FORMAT: Excel
17.1 - Detailed listing capital assets at June 30, 2021, including cost, accumulated depreciation and current year depreciation - FORMAT: Excel
17.2 - List of all CIP by program with beginning, additions, deletions (transfers), and ending balance for fiscal year ending 6/30/21, if applicable - If possible, please include warrant/EFT #s for additions.
FORMAT: Excel
17.3 - Land or property held for sale and its net realizable value , if any. - FORMAT: Excel
17.4 - Depreciation expense by function for 6/30/2021 - FORMAT: Excel
17.XX Capital Asset Sample Support
18.0 - Summary schedule of balances due to and due from funds as of 6/30/2021 - This schedule should have three columns, the first column will report the fund with the due from (receivable), the second column will report the due to (payable), and the third column should explain the purpose of the transaction FORMAT: Excel
18.1 - Summary schedule of transfers in and transfers out and explanations as to the purpose of the transfers for FYE 2021 - FORMAT: Excel
19.0 - Summary of AP dollar balances by vendor and fund at June 30, 2021 - FORMAT: Excel
19.1 - Warrant register from 7/1/2021 to 9/1/2021. Please ensure this report includes the fund and object for each warrant. Excel format.
20.0 - List of deposit payables and reason for deposits - FORMAT: Any
21.0 - Insurance claim payable schedule showing beginning claim payable, claims incurred, increase/decrease in estimate liability for prior claim, claim paid, and ending claim payable for FYE 2021 - If not applicable, identify the cities total potential exposure after insurance. This could simply be the Town's deductible per occurrence. FORMAT: Any
21.1 - Open insurance claim report as of June 30, 2021 - FORMAT: Any
22.0 - Supporting schedules for accrued salaries and Payroll Register covering the final pay period of the year for FY 2021 - FORMAT: Paper or Adobe
23.0 - Payroll register with YTD totals as of June 30, 2021 - FORMAT: Paper or Adobe
23.1 - Payroll reconciliations from register or 941's to GL for FYR 6/30/2021, if any. - FORMAT: Excel
23.2 - Schedule of vacation and sick accruals, including beginning balance, earned, paid, and ending balance. (Compensated absences) for FYE 6/30/2021 - Please provide in hours and dollars FORMAT:
Excel
24.0 - Cal PERS actuarial valuation report for GASB 68 reporting, if not provided online on Cal PERS website - FORMAT: Paper or Adobe
24.1 - Schedule of CalPERS covered member, noting active and inactive members and which members are receiving benefits, for each plan -If not already provided at interim FORMAT: Any
24.2 - Summary of CalPERS contributions by employer and employee, for each plan - FORMAT: Any
25.0 -Actuarial report for GASB 75, if applicable. - If not already provided at interim FORMAT: Paper or Adobe
25.1 - CERBT or other trust account statement for FYE 6/30/2021 - FORMAT: Paper or Adobe
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E Attachment B - Prepared by Client List
LIST OF ITEMS (FORMAT AND PRESENTATION IS A DOWNLOAD FROM ENGAGEMENT ORGANIZER AND LESS PRESENTABLE)
SECTION NAME
Year-End - Debt
Year-End - Fund Balance/Net
Assets
Year-End - GANN
REQUEST ITEM
26.0 - Schedule of long term debt showing beginning balance, payment, and ending balances and amounts due within one year for FYE 6/30/2021 - FORMAT: Paper or Adobe
26.1 - Debt agreements and amortization schedules, if any changes or for new debt. Please include any new debt issued subsequent to year end as well - If not already provided at interim FORMAT: Any
27.0 - Final summary of fund balance classifications per GASB 54 (Nonspendable, Restricted, Assigned and Unassigned) - FORMAT: Excel
27.1 - Town Council resolution supporting committed fund balances per GASB 54 and any revenue stabilization agreements, if any. - FORMAT: Paper or Adobe
28.0 - GANN Limit resolution and council agenda report for 2021. - Please provide the original resolution and calculation as well as the final resolution and calculation, if applicable FORMAT: Adobe or paper
28.1 - GANN Limit letter from state department of finance with population information - FORMAT:
Adobe or paper
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8D58876E
ATTACHMENT C PROPOSER WARRANTIES
The proposer warrants that it can and will provide and make available, at a minimum, all of the services and deliverables set forth in this RF P.
The proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts or omissions of any officers, employees, or agents in conjunction with the services to be provided. C overage limits shall be $210001000 or more per occurrence, without reduction for claims paid during the policy period. The carrier should be duly insured and authorized to issue similar insurance policies for this nature in the State of C alifornia.
The proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the prior written permission of the Town.
The proposer warrants that all information provided by it in connection with this proposal is true and accurate.
Printed Name: __ Sh_e_ld__o_nC__h_a_v_an _____________________ _ Title: Managing Partner
Firm: _C_ h_a_v_a_n_&_A_ _ ss_o_cia__te_s,__L_L P _____________________ _ Date: ----------------------------- 10/8/2021
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
ATTACHMENT D - CONFLICT OF INTEREST STATEMENT
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE PROPOSAL
PROFESSIONAL AUDITING SERVICES
The undersigned declares:
I/We Chavan & Associates, LLP (Insert Name) have the following financial, business, or other relationship with Town of Los Gatos that may have an impact upon the outcome of the contract. If none, please specify that no other relationships may have an impact on this contract or Project.
None and no other relationships may have an impact on this contract I/We Chavan & Associates, LLP (Insert Name) have the following current clients who may have a financial interest in the outcome of this contract. If none, please specify that no other clients may have a financial interest with an impact on this contract or Project.
None
Pursuant to Government Code section 1090 and any other laws, rules and regulations that may apply, the Proposer covenants that neither it, its subcontractors nor employees presently have an interest, and shall not acquire any interest, direct or indirect, financial or otherwise that would conflict in any manner or degree with contract awarded from this RFP. Proposer certifies that to the best of its knowledge, no one who has or will have any financial interest in the contract awarded from this RFP is an officer or employee of the Town. Through its submittal of a proposal, Proposer acknowledges that it is familiar with Section 87100 et seq. and Section 1090 et seq. of the Government Code of the State of California and will
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8O58876E immediately notify the Town if it becomes aware of any facts concerning the contract to be awarded that constitute a violation of said provisions.
Furthermore, if there is reason to believe that collusion exists among the Proposers, the Town may refuse to consider proposals from participants in such collusion. No person, firm, or corporation under the same or different name, shall make, file, or be interested in more than one proposal for the same work unless alternate proposals are called for. A person, firm, or corporation who has submitted a sub-proposal to a Proposer, or who has quoted prices on materials to a Proposer, is not thereby disqualified from submitting a sub-proposal or quoting prices to other Proposers. Reasonable ground for believing that any Proposer is interested in more than one proposal for the same work will cause the rejection of all proposals for the work in which a Proposer is interested. If there is reason to believe that collusion exists among the Proposers, the Town may refuse to consider proposals from participants in such collusion. Proposers shall submit as part of their proposals documents the completed Non-Collusion Declaration provided herein.
I, on behalf of the Proposer, declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration is executed on October 8. 2021 [date], at Mogan Hill [city], CA [state].
Chavan & Associates, LLP Managing Partner
Proposer Name (Person, Firm, Corp.) Title of Authorized Representative 15105 Concord Circle, Ste 130 Sheldon Chavan
Address Name of Authorized Representative
Morgan Hill, CA 95037
City, State, Zip
10/8/2021
Date Signed
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
ATTACHMENT E-NON-COLLUSION DECLARATION
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE PROPOSAL
PROFESSIONAL AUDITING SERVICES
The undersigned declares:
I am the Managing Partner [Insert Title] of Chavan & Associates, LLP [Insert name of company, corporation, LLC, partnership or joint venture] the party making the foregoing proposal.
The proposal is not made in the interest of, or on behalf of, any undisclosed person, partnership, company, association, organization, or corporation. The proposal is genuine and not collusive or sham. The Respondent has not directly or indirectly induced or solicited any other respondent to put in a false or sham proposal. The Respondent has not directly or indirectly colluded, conspired, connived, or agreed with any bidder or anyone else to put in a sham proposal, or to refrain from responding. All statements contained in the proposal are true.
Any person executing this declaration on behalf of a respondent that is a corporation, partnership, joint venture, limited liability company, limited liability partnership, or any other entity, hereby represents that he or she has full power to execute, and does execute, this declaration on behalf of the respondent.
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
ATTACHMENT F - REFERENCES
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE PROPOSAL
PROFESSIONAL AUDITING SERVICES
List three (3) references for work of a similar nature to the Services performed within the last five (5) years.
Use additional sheets as necessary.
1. 2.
City of Carmel-by-the-Sea
Na me of Agency
Robin Scattini
Contact Name
831-620-2019
Contact Telephone
6/30/2019 to 6/30/2021
Contract Period
PO Box CC, Carmel-by-the-Sea, CA 93921
Agency Address
Finance Director
Contact Title
[email protected] .us
Contact Email Address
$27,000
Contract Amount
ACFR, Audit, Single Audit, GANN, Measure S, Management Letters Description of services performed including costs.
City of Saratoga 13777 Fruitvale Ave, Saratoga, CA 95070 Na me of Agency Agency Address
Dennis Jaw Finance Manager
Contact Name Contact Title
408-868-1227 [email protected]
Contact Telephone Contact Email Address
6/30/2014-6/30/2021 $39,000
Contract Period Contract Amount
ACFR, Audit, Single Audit, Management Letters, GANN, TDA Audit
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4732-8959-482B8O58876E
3. Description of services performed including costs.
City of Del Rey Oaks
Name of Agency
Roberto Moreno
Contact Na me
831-394-8511
Contact Telephone
6/30/2018-6/30/2021
Contract Period
650 Canyon Del Rey Road, Del Rey Oaks, CA 93940
Agency Address
Chief Business Officer
Contact Title
[email protected]
Contact Email Address
$26,750
Contract Amount
Audit, GANN, Measure S, Police AUP, Management Letters
Description of services performed including costs.
I hereby certify that the Proposer performed the work listed above.
Sheldon Chavan 10/8/2021
Signature of Proposer Name Date
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration is executed on 10/8/21 [date], at Morgan Hill [city], _CA [state].
By:
Name:
Title:
Sheldon Chavan
Managing Partner
ITEM NO. 10.
DocuSign Envelope ID: 2529C044-9E24-4 732-8959-482B8D58876E
ATTACHMENT G - STATEMENT REGARDING INSURANCE COVERAGE AND WORKER'S COMPENSATION INSURANCE ACKNOWLEDGMENT CERTI Fl CATE
THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE PROPOSAL
PROFESSIONAL AUDITING SERVICES
PROPOSER HEREBY CERTIFIES that the Proposer has reviewed and understands the insurance coverage requirements specified in the RFP. Should the Proposer be awarded a contract for Services, Proposer further certifies that the Proposer can meet the specified requirements for insurance, including insurance coverage of any subcontractors, and agrees to name the Town as additional insured for the Services specified.
By certifying this form, the Proposer also understands the Worker's Compensation insurance requirement per the California Labor Code, Sections 1860 and 1861:
I am aware of the provisions of Section 3700 of the Labor Code, which require every employer to be insured against liability for worker's compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the work of this contract.
Chavan & Associates, LLP
Name of Proposer (Person, Firm, or Corporation)
Signature of Proposer's Authorized Representative
Sheldon Chavan, Managing Partner
Name & Title of Authorized Representative
10/8/2021
Date of Signing
ITEM NO. 10.
PREPARED BY: Katy Nomura
Assistant Town Manager
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 02/18/2025
ITEM NO: 11
DATE: February 12, 2025
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Approve the 2025-2027 Strategic Priorities
RECOMMENDATION:
Approve the 2025-2027 Strategic Priorities (Attachment 1).
REMARKS:
Every year, the Town Council considers its Strategic Priorities for the next two years. On February 11, 2025, the Town Council discussed and refined the Strategic Priorities as found in Attachment 1. Approving these Strategic Priorities will inform the upcoming budget process as well as align Town efforts with what is most important for the Town Council. Staff will focus on how best to make significant progress on the Top Priorities, while still moving forward the Additional Priorities as opportunities present themselves and bandwidth allows.
Once approved, staff will determine actionable items that can be taken to advance the priorities.
FISCAL IMPACT:
While there is no fiscal impact associated with adopting the Strategic Priorities, the budget development process will prioritize these areas and may include budget proposals to further these efforts.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
ITEM NO. 11.
PAGE 2 OF 2
SUBJECT: Adopt 2025-2027 Strategic Priorities
DATE: February 12, 2025
Attachments:
1. Proposed 2025-2027 Strategic Priorities
ITEM NO. 11.
Strategic Priorities
2025 - 2027
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COREGOALS: COMMUNiTYCharacter GOOD GOVERNANCE FISCALSTABILITY QUALITYPUBLICINFrASTRUCTURE CIVICEngagement PUBLICSAFety Further the Town’s emergency preparedness, resiliency, and response capabilities, particularly in the area of wildfire risk. (Goal: Public Safety) Ensure prudent financial management to result in structurally balanced five-year forecasts and fully funded five-year Capital Improvement Plans, managing liabilities such as pension costs and leveraging the Town’s assets, efficiencies, partnerships, and revenue streams. Define and implement a cohesive deferred capital improvement program for Town facilities and lifecycle assets. (Goal:
Fiscal Stability)
Preserve the Town’s small-town charm and provide a range of housing opportunities and historic neighborhoods, while diligently maintaining and implementing the Housing Element. (Goal: Community Character) Develop structure to ensure accountability of how funding resources move forward the Town’s core goals and priorities. (Goal: Fiscal Stability) Implement transportation demand management and traffic calming efforts to mitigate traffic congestion where possible, while ensuring safety for all users and making bicycle and pedestrian improvements. (Goal: Quality Public Infrastructure)
Manage downtown parking that is easy to access and locate for residents and visitors. (Goal: Quality Public Infrastructure)
Promote sustainability practices and protect and conserve the natural environment for present and future generations. (Goal: Community Character) Foster the economic vitality of businesses in Town. (Goal: Community Character) Ensure all residents and visitors feel a sense of belonging in Los Gatos, maintaining and enhancing the Town as a welcoming, family-oriented, safe, and inclusive community. (Goal: Civic Engagement)
Continue to engage community service providers to meet the needs of older adults. (Goal: Civic Engagement)
Continue to engage community service providers to meet the needs of unhoused residents. (Goal: Civic Engagement)
ITEM NO. 11.
PREPARED BY: Nicolle Burnham
Parks and Public Works Director
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, and Finance Director 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 02/18/2025
ITEM NO: 12
DATE: February 13, 2025
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Approve the 2025 Work Plan Recommended by the Parks and Sustainability Commission
RECOMMENDATION:
Approve the 2025 Work Plan recommended by the Town’s Parks and Sustainability Commission.
BACKGROUND:
In order to provide Town Commissions/Committees/Boards (Commissions) clarity from the Town Council regarding their work, staff recommends the Town Council review and approve each Commission’s work plan for the year. This will ensure Council support, efficient use of Commissioners’ time, and sufficient staff resources for the Commission’s projects in 2025.
Certain Commissions are exempt from this process due to their specific functions. The exempt Commissions have items presented to them for consideration rather than the Commissions creating their own work plans. These exempt Commissions include the Planning Commission, General Plan Committee, Historic Preservation Committee, and Personnel Board.
DISCUSSION:
The attached work plan was drafted by the Parks and Public Works staff liaison, taking workload, time commitment, changes in legislation, and alignment with Council priorities into consideration.
The Parks and Sustainability Commission work plan was discussed at that Commission’s February 3, 2025 regular meeting. The Commission discussed the draft work plan presented by staff and made two slight modifications. These were to add “and motorized conveyances” to
ITEM NO. 12.
PAGE 2 OF 2
SUBJECT: Parks and Sustainability Commission Work Plan
DATE: February 13, 2025
work plan item 4 and to add “and trails” to work plan item 5, suggesting the Town invest in a Parks and Trails Master Plan, rather than just a parks master plan. Staff agrees with both of these recommended changes. The resulting work plan (Attachment 1) was adopted by the Commission by a vote of 6-0-1, with Chair Gleason absent.
FISCAL IMPACT:
No fiscal impact is associated with this item.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. 2025 Parks and Sustainability Commission Work Plan
ITEM NO. 12.
ATTACHMENT 1
2025 Parks and Sustainability Commission Work Plan
1. Commission will review Field Use policies and provide recommendations for staff consideration.
2. Commission will review Adopt-A-Bench Program policies and procedures and provide recommendations for staff consideration.
3. Commission will review Adopt-A-Planter Program policies and procedures and provide recommendations for staff consideration.
4. Commission to review staff recommendations regarding policy and ordinance updates regarding the use of e-bikes and motorized conveyances in parks and on trails and provide recommendations for staff consideration.
5. In the case the master plan is funded in the Capital Improvement Program for 2025/26, the Commission will support staff outreach efforts as they pertain to parks and trails master planning.
ITEM NO. 12.
PREPARED BY: James Watson
Senior Civil Engineer – Land Development
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Finance Director, Parks and Public Works Director, Town Engineer
110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 02/18/2025
ITEM NO: 13
DATE: February 13, 2025
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Authorize the Town Manager to Execute a Pass-Through Agreement with CSG, Inc. for the Review of Land Development Entitlement Applications and Subsequent Construction Plan Review and Inspection Services in an Amount Not to Exceed $500,000; and Authorize Revenue and Expenditure Budget Adjustments in the Amount of $150,000 to Recognize Deposits (Program 5999) and Permit Revenue (Program 5202) and Associated Expenditures for CSG Services
RECOMMENDATION:
Authorize the Town Manager to execute a pass-through agreement with CSG Consultants, Inc. (“CSG”) (Attachment 1) for the review of land development entitlement applications and subsequent construction plan review and inspection services in an amount not to exceed $500,000; and authorize revenue and expenditure budget adjustments in the amount of $150,000 to recognize deposits (Program 5999) and permit revenue (Program 5202) and associated expenditures for CSG services.
BACKGROUND:
The Town has experienced an increase in land development applications beyond its current staffing level capacity. The Town issued a Request for Qualifications for various professional services firms and a list of on-call firms was approved by the Town Council on February 15, 2024. Staff requested proposals from firms on the approved on-call list to augment Parks and Public Works (“PPW”) staff with regard to land use application reviews. Staff requested proposals from six firms on the on-call list to request staff augmentation services. Only one firm, CSG, indicated they had staff available to provide this service.
ITEM NO. 13.
PAGE 2 OF 2
SUBJECT: Authorize the Town Manager to Execute a Pass-Through Agreement with CSG, Inc. and Authorize Revenue and Expenditure Budget Adjustments in the Amount of $500,000 to Recognize Future Deposits and Expenditures DATE: February 13, 2025
DISCUSSION:
The number of permit applications received by Parks and Public Works has been consistently increasing year over year and staffing has remained stable at two engineers. To maintain the quality of reviews necessary to ensure responsible development within the Town, staff augmentation is needed. The cost to augment PPW land development staff will be paid by the developers submitting applications, with deposits collected at the time of application and subsequent invoices sent to cover all costs.
CONCLUSION:
If approved, the requested action will provide support to PPW to meet mandated review timelines while maintaining the high quality of reviews.
FISCAL IMPACT:
Staff recommends authorization of the proposed agreement with CSG to provide review services related to permit applications. The proposed revenue and expenditure budget adjustments in the amount of $150,000 will recognize the deposit and permit revenue and authorize expending for the third-party permit review services. The proposed contract will be a pass-through contract with a not-to-exceed amount of $500,000. Projects larger than 10 units would be funded through deposits collected. Projects less than 10 units would be funded through regular permit fees collected. The current hourly billing rates for CSG will be included in the contract and include inflationary increases annually (Exhibit A). The remainder agreement capacity will be budgeted in future fiscal years.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. Agreement for Consultant Services with Exhibit A - CSG Proposal with 2025 Billing Rates
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
AGREEMENT FOR CONSULTANT SERVICES
PREAMBLE
THIS AGREEMENT is dated for identification on February 18, 2025 by and between TOWN OF LOS GATOS, a California municipal corporation, (“Town”) CSG Consultants, Inc., (“Consultant”), identified as an C Corporation and whose address is 550 Pilgrim Dr, Foster City, CA 94404. This Agreement is made with reference to the following facts.
I. RECITALS
1.1 The Town desires to engage Consultant to provide plan review and inspection services.
1.2 The Consultant represents and affirms that it is willing to perform the desired work pursuant to this Agreement.
1.3 Consultant warrants it possesses the distinct professional skills, qualifications, experience, and resources necessary to timely perform the services described in this Agreement. Consultant acknowledges Town has relied upon these warranties to retain Consultant.
II. AGREEMENTS
2.1 Scope of Services. Consultant shall provide services as described in that certain Proposal sent to the Town on June 26, 2024, which is hereby incorporated by reference and attached as Exhibit A.
2.2 Term and Time of Performance. This contract will remain in effect February 18, 2025 through June 30, 2028.
2.3 Compliance with Laws. The Consultant shall comply with all applicable laws, codes, ordinances, and regulations of governing federal, state and local laws. Consultant represents and warrants to Town that it has all licenses, permits, qualifications and approvals of whatsoever nature which are legally required for Consultant to practice its profession. Consultant shall maintain a Town of Los Gatos business license pursuant to Chapter 14 of the Code of the Town of Los Gatos.
2.4 Sole Responsibility. Consultant shall be responsible for employing or engaging all persons necessary to perform the services under this Agreement.
2.5 Information/Report Handling. All documents furnished to Consultant by the Town and all reports and supportive data prepared by the Consultant under this Agreement are the Town’s property and shall be delivered to the Town upon the completion of Consultant's services or at the Town's written request. All reports, information, data, and exhibits prepared or assembled by Consultant in connection with the performance of its services pursuant to this Agreement are confidential until released by the Town to the public, and the Consultant shall
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
not make any of the these documents or information available to any individual or organization not employed by the Consultant or the Town without the written consent of the Town before such release. The Town acknowledges that the reports to be prepared by the Consultant pursuant to this Agreement are for the purpose of evaluating a defined project, and Town's use of the information contained in the reports prepared by the Consultant in connection with other projects shall be solely at Town's risk, unless Consultant expressly consents to such use in writing. Town further agrees that it will not appropriate any methodology or technique of Consultant which is and has been confirmed in writing by Consultant to be a trade secret of Consultant.
2.6 Compensation. Compensation for the Consultant’s professional services shall be paid at the established hourly rates, as set forth in the Fee Schedule, which is attached hereto.
Payment shall be based upon Town approval of the Scope and Fee for each task and payment of fees by individual applicants. The total amount for this agreement shall not exceed $500,000.
2.7 Billing. Billing shall be monthly by invoice within thirty (30) days of the rendering of the service and shall be accompanied by a detailed explanation of the work performed by whom at what rate and on what date. Also, plans, specifications, documents or other pertinent materials shall be submitted for Town review, even if only in partial or draft form.
Payment shall be net thirty (30) days. All invoices and statements to the Town shall be addressed as follows:
Invoices:
Town of Los Gatos
Attn: Accounts Payable
P.O. Box 655
Los Gatos, CA 95031-0655
Email (preferred): [email protected]
2.8 Availability of Records. Consultant shall maintain the records supporting this billing for not less than three years following completion of the work under this Agreement. Consultant shall make these records available to authorized personnel of the Town at the Consultant's offices during business hours upon written request of the Town.
2.9 Assignability and Subcontracting. The services to be performed under this Agreement are unique and personal to the Consultant. No portion of these services shall be assigned or subcontracted without the written consent of the Town.
2.10 Independent Contractor. It is understood that the Consultant, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and not an agent or employee of the Town. As an independent contractor he/she shall not obtain any rights to retirement benefits or other benefits which accrue to Town employee(s). With
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
prior written consent, the Consultant may perform some obligations under this Agreement by subcontracting but may not delegate ultimate responsibility for performance or assign or transfer interests under this Agreement. Consultant agrees to testify in any litigation brought regarding the subject of the work to be performed under this Agreement. Consultant shall be compensated for its costs and expenses in preparing for, traveling to, and testifying in such matters at its then current hourly rates of compensation, unless such litigation is brought by Consultant or is based on allegations of Consultant's negligent performance or wrongdoing.
2.11 Conflict of Interest. Consultant understands that its professional responsibilities are solely to the Town. The Consultant has and shall not obtain any holding or interest within the Town of Los Gatos. Consultant has no business holdings or agreements with any individual member of the Staff or management of the Town or its representatives nor shall it enter into any such holdings or agreements. In addition, Consultant warrants that it does not presently and shall not acquire any direct or indirect interest adverse to those of the Town in the subject of this Agreement, and it shall immediately disassociate itself from such an interest, should it discover it has done so and shall, at the Town's sole discretion, divest itself of such interest. Consultant shall not knowingly and shall take reasonable steps to ensure that it does not employ a person having such an interest in this performance of this Agreement. If after employment of a person, Consultant discovers it has employed a person with a direct or indirect interest that would conflict with its performance of this Agreement, Consultant shall promptly notify Town of this employment relationship, and shall, at the Town's sole discretion, sever any such employment relationship.
2.12 Equal Employment Opportunity. Consultant warrants that it is an equal opportunity employer and shall comply with applicable regulations governing equal employment opportunity. Neither Consultant nor its subcontractors do and neither shall discriminate against persons employed or seeking employment with them on the basis of age, sex, color, race, marital status, sexual orientation, ancestry, physical or mental disability, national origin, religion, or medical condition, unless based upon a bona fide occupational qualification pursuant to the California Fair Employment & Housing Act.
III. INSURANCE AND INDEMNIFICATION
3.1 Minimum Scope of Insurance:
i. Consultant agrees to have and maintain, for the duration of the contract, General Liability insurance policies insuring him/her and his/her firm to an amount not less than: two million dollars ($2,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. ii. Consultant agrees to have and maintain for the duration of the contract, an Automobile Liability insurance policy ensuring him/her and his/her staff to an
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
amount not less than one million dollars ($1,000,000) combined single limit per accident for bodily injury and property damage.
iii. Consultant shall provide to the Town all certificates of insurance, with original endorsements effecting coverage. Consultant agrees that all certificates and endorsements are to be received and approved by the Town before work commences.
iv. Consultant agrees to have and maintain, for the duration of the contract, professional liability insurance in amounts not less than $1,000,000 which is sufficient to insure Consultant for professional errors or omissions in the performance of the particular scope of work under this agreement.
General Liability:
i. The Town, its elected and appointed officials, employees, and, agents are to be covered as insured as respects: liability arising out of activities performed by or on behalf of the Consultant; products and completed operations of Consultant, premises owned or used by the Consultant. This requirement does not apply to the professional liability insurance required for professional errors and omissions. ii. The Consultant's insurance coverage shall be primary insurance as respects the Town, its elected and appointed officials, employees, and agents. Any insurance or self-insurances maintained by the Town, its officers, officials, employees or volunteers shall be excess of the Consultant's insurance and shall not contribute with it.
iii. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the Town, its officers, officials, employees or volunteers.
iv. The Consultant's insurance shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability.
3.2 All Coverages. Each insurance policy required in this item shall be endorsed to state that coverage shall not be suspended, voided, cancelled, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the Town. Current certification of such insurance shall be kept on file at all times during the term of this agreement with the Town Clerk.
3.3 Workers’ Compensation. In addition to these policies, Consultant shall have and maintain Workers' Compensation insurance as required by California law and shall provide evidence of such policy to the Town before beginning services under this Agreement. Further, Consultant shall ensure that all subcontractors employed by Consultant provide the required
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
Workers' Compensation insurance for their respective employees. As required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limit of no less than one million dollars ($1,000,000) per accident for bodily injury or disease.
3.4 Indemnification. The Consultant shall save, keep, hold harmless and indemnify and defend the Town its elected and appointed officials, agents, employees and volunteers from all damages, liabilities, penalties, costs, or expenses in law or equity that may at any time arise or be set up because of damages to property or personal injury received by reason of, or in the course of performing work which may be occasioned by a willful or negligent act or omissions of the Consultant, or any of the Consultant's officers, employees, or agents or any subconsultant.
IV. GENERAL TERMS
4.1 Waiver. No failure on the part of either party to exercise any right or remedy hereunder shall operate as a waiver of any other right or remedy that party may have hereunder, nor does waiver of a breach or default under this Agreement constitute a continuing waiver of a subsequent breach of the same or any other provision of this Agreement.
4.2 Governing Law. This Agreement, regardless of where executed, shall be governed by and construed to the laws of the State of California. Venue for any action regarding this Agreement shall be in the Superior Court of the County of Santa Clara.
4.3 Termination of Agreement. The Town and the Consultant shall have the right to terminate this agreement with or without cause by giving not less than fifteen days (15) written notice of termination. In the event of termination, the Consultant shall deliver to the Town all plans, files, documents, reports, performed to date by the Consultant. In the event of such termination, Town shall pay Consultant an amount that bears the same ratio to the maximum contract price as the work delivered to the Town bears to completed services contemplated under this Agreement, unless such termination is made for cause, in which event, compensation, if any, shall be adjusted in light of the particular facts and circumstances involved in such termination.
4.4 Amendment. No modification, waiver, mutual termination, or amendment of this Agreement is effective unless made in writing and signed by the Town and the Consultant.
4.5 Disputes. In any dispute over any aspect of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, including costs of appeal.
4.6 Notices. Any notice required to be given shall be deemed to be duly and properly given if mailed postage prepaid, and addressed to:
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
Town of Los Gatos
Attn: Town Clerk
110 E. Main Street
Los Gatos, CA 95030
CSG Consultants, Inc.
550 Pilgrim Dr
Foster City, CA 94404
or personally delivered to Consultant to such address or such other address as Consultant designates in writing to Town.
4.7 Order of Precedence. In the event of any conflict, contradiction, or ambiguity between the terms and conditions of this Agreement in respect of the Products or Services and any attachments to this Agreement, then the terms and conditions of this Agreement shall prevail over attachments or other writings.
4.8 Entire Agreement. This Agreement, including all Exhibits, constitutes the complete and exclusive statement of the Agreement between the Town and Consultant. No terms, conditions, understandings or agreements purporting to modify or vary this Agreement, unless hereafter made in writing and signed by the party to be bound, shall be binding on either party.
ITEM NO. 13.
Agreement for Consultant Services ATTACHMENT 1
CSG Consultants, Inc.
IN WITNESS WHEREOF, the Town and Consultant have executed this Agreement.
Town of Los Gatos by:
________________________________________
Chris Constantin, Town Manager
CSG Consultants, Inc. by:
________________________________________
Cyrus Kianpour, President
Recommended by:
________________________________________
Nicolle Burnham,
Director of Parks and Public Works
Approved as to Form:
________________________________________
Gabrielle Whelan, Town Attorney
Attest:
________________________________________
Wendy Wood, CMC, Town Clerk
ITEM NO. 13.
550 Pilgrim Drive
Foster City, CA 94404
Phone: 650.522.2500
Fax: 650.522.2599
www.csgengr.com
FOSTER CITY | PLEASANTON | SAN JOSE | SACRAMENTO | NEWMAN | FRESNO | PASO ROBLES | ORANGE June 26, 2024
James Watson, PE
Senior Civil Engineer – Land Development
Town of Los Gatos
41 Miles Avenue
Los Gatos, CA 95030
Re: Town of Los Gatos Parks and Public Works Staff Augmentation Assistance Dear Mr. Watson,
CSG Consultants, Inc. (CSG) is pleased to present this proposal to the Town of Los Gatos (Town) to provide part-time staff augmentation services for its land development team. CSG understands that the candidate would be working one or two days a week at the Town’s Engineering office for collaboration of weekly work assignments and review of the work items listed below:
Review and provide comments on encroachment permit plans/applications for public improvements.
Review and provide comments on grading permit plans/applications. Review and provide comments on building permit plans/applications related to public works. Other duties as assigned.
CSG is pleased to offer Mehdi Sharifi, PE, LEED AP, for this assignment. Mehdi is a Senior Engineer and is available to start assisting the Town as of September 18th, 2024, for the next two to three years, the duration of this assignment. CSG understands that the Town needs assistance prior to September 18th, 2024; therefore, CSG is very pleased to offer Jen Chen, EIT, PACP, to start this assignment immediately until Mehdi is available on September 18th or earlier. CSG is unwavering in its commitment to a seamless transition between Mehdi and Jen and will bear all costs for the transition between them. CSG understands that the task will likely involve both on-site and off-site and the assignment will require 16 to 24 hours a week. Both Mehdi and Jen are committed to the weekly required time commitment for the duration of this assignment.
CSG’s proposed staff will perform such work as described below, but not limited to:
1.0 – Staff Augmentation
Provide customer service addressing inquiries related to the Public Works Department for applications and engineering requirements.
Review encroachment permits.
Inspect grading, drainage, sewer, sidewalks, curbs and roadway improvements, as needed. Assist Public Works related code enforcement issues, as needed. Respond to citizen complaints regarding construction impacts and regulations. Perform off-site review and approval of applications for new development including grading permits compliance with City codes and NPDES requirements. Perform other duties as assigned.
As a token of appreciation to the Town as a long-term client, CSG is pleased to offer this service at the Associate Engineer rate of $200 per hour, based on our 2024 Standard Fees. Please see the hourly rate attachment, along with the resumes for Mehdi and Jen, for your reference.
EXHIBIT A
ITEM NO. 13.
FOSTER CITY | PLEASANTON | SAN JOSE | SACRAMENTO | NEWMAN | FRESNO | PASO ROBLES | ORANGE CSG looks forward to working with the Town to continue providing engineering services to meet the Town’s needs. Should you have any questions, please feel free to contact me at (650) 522-2511 or by email at [email protected].
Sincerely,
Hatem Ahmed, PE, PMP
Senior Principal Engineer
Attachments:
2024 Standard Fees
Resumes of Mehdi Sharifi, PE, LEEP AP and Jen Chen, EIT, PACP Cc: Sophie Truong, PE, PLS, QSD/P – Senior Principal Engineer Mario Camorongan, PE, CFM, QSD/P – Principal Engineer
ITEM NO. 13.
CSG Engineering Services Fee Schedule
CSG Consultants’ fee schedule for proposed services is provided below.
PERSONNEL / ROLE HOURLY RATE
Administrative Assistant $115
Engineering Intern $145
Assistant Engineer $180
Associate Engineer $220
Structural Engineer $270
Associate Surveyor $210
Senior Engineer $245
Senior Land Surveyor $245
Senior Structural Engineer $295
Principal Engineer $295
Senior Principal Engineer $315
Two-Person Survey Crew $440
Assistant Project Manager $180
Project Manager $240
Senior Project Manager $260
Office Engineer $180
Construction Inspector $190
Senior Construction Inspector $210
Assistant Resident Engineer $210
Resident Engineer / Construction Manager $265
Structural Representative $265
Senior Construction Manager $315
T E R M S
All hourly rates include overhead costs including but not limited to salaries, benefits, workers’ compensation insurance, local travel, and miscellaneous office expenses.
Overtime services and services provided outside of normal business hours will be billed at 1.5x the applicable hourly rate. On July 1 of each year following the contract start year, CSG will initiate an hourly rate increase based on change in CPI for the applicable region.
CSG will mail/email an invoice every month for services rendered during the previous month. Unless otherwise agreed, payment terms are 30 days from receipt of invoice.
This fee proposal is valid for a period of 90 days from date of submittal.
ITEM NO. 13.
Mehdi
LICENSES &
CERTIFICATIONS
Professional Civil Engineer, State of
California | 62646
LEED Accredited Professional
EDUCATION
Bachelor of Science, Civil Engineering
University of Texas | Austin, TX
PROFESSIONAL
AFFILIATIONS
Toastmasters International
Club: 4840673
Sharifi PE, LEED AP
Senior Engineer
Mr. Sharifi has over 25 years of civil engineering experience with a focus on land development reviews. He has provided land development review on a variety of projects ranging from single family residential homes to expansive subdivisions and commercial improvements. Prior to joining CSG, Mr. Sharifi has worked with another consulting engineering firm gaining experience in the design and production aspects of improvement plans from schematic design to design development to construction documents and construction support.
RELEVANT EXPERIENCE
Land Development Staff Augmentation | City of San Mateo, CA Mr. Sharifi has performed an onsite land development review for the City’s development projects. His general duties included providing plan check review of all minor private development including but not limited to grading plans, public improvement plans, utility improvement plans, tenant map improvement plans, and plot plans.
Land Development Staff Augmentation | Town of Woodside, CA Mr. Sharifi performed an onsite plan review for reviewing and approving site permits, building permits, and encroachment permits.
Land Development Staff Augmentation | City of Gilroy, CA Mr. Sharifi performed an onsite land development review for the City’s development projects. His general duties included providing plan check review of all major and minor private development (residential and commercial) including but not limited to grading plans, public improvement plans, utility improvement plans, tenant map improvement plans, and plot plans.
Glen Loma Ranch – Phase 1A | City of Gilroy, CA
Mr. Sharifi serves as one of the primary plan review engineers for this land development project involving three residential subdivision improvement plans (Vista Bella, Petite Sirah and Motaro) with a total of 274 units. He provided review of rough grading and backbone infrastructure improvements including street design, utilities, signing & striping plans, construction phasing plans, erosion control plans, two roundabout designs (Luchessa/10th Street and Santa Teresa/Miller), Storm Water Management Plan, Hydraulics & Hydrology reports, geotechnical reports and joint trench plans.
Hecker Pass East Cluster | City of Gilroy, CA
The land development project consisted of the review of backbone infrastructure improvements including street design, utilities, signing & striping plans, construction phasing plans, erosion control plans, Review of residential subdivision improvement plans with a total of 186 units; including onsite street improvements, utilities, joint trench, several roundabout designs, final maps, Storm Water Management Plan, Hydraulics & Hydrology reports and geotechnical reports.
Hollywood Park Casino | City of Inglewood, CA
Mr. Sharifi served as the primary plan review engineer for the review of civil improvement plans (grading, drainage, utilities, storm management, etc.) for the relocation of a casino into a newly created structure.
Dublin Ranch Subarea 3 | City of Dublin, CA
Mr. Sharifi conducted land development review of onsite and office landscape plans for this project. This 64-acre development includes 437 single-family units and townhomes within six neighborhoods.
ITEM NO. 13.
Jen
LICENSES &
CERTIFICATIONS
Engineer-in-Training
State of California
XE 105230
NASSCO PACP Certified
EDUCATION
Bachelor of Science, Civil and
Environmental Engineering
University of California Irvine
Irvine, CA
MEMBERSHIP
American Society of Civil
Engineering (ASCE)
Chen EIT, PACP
Associate Engineer
Ms. Chen has been working with CSG for the past 21 years. Her experience includes performing engineering plan reviews and inspections of private development projects, encroachment permit applications, entitlement reviews, civil and stormwater reviews, and lot line adjustments. Additionally, she is experienced with CentralSquare, including TRAKiT and Lucity, which she uses to track all permits, plan checks, and utility management.
RELEVANT EXPERIENCE
Land Development Staff Augmentation | City of Foster City, CA Ms. Chen served as a Land Development Engineer on commercial and residential land development projects. She provided project management services, including plan review, inspection, coordination, customer report MRP C.6 inspection and compliance report preparation, and closeout. Commercial projects have included a research center, fitness center, and emergency generator.
Engineering Services | City of Monte Sereno, CA
Ms. Chen served as an Associate Engineer on the project and has provided engineering services, including review and inspection of land development plans, encroachment permit review and inspection, customer report MRP C.6 inspection and compliance report preparation, and coordination for various Public Works projects.
Engineering Staff Augmentation and Construction Management | Town of Los Altos Hills, CA Ms. Chen served as Associate Engineer on various projects and has provided engineering staff augmentation services in the Town of Los Altos Hills, where she performed engineering plan checks for new and redevelopment projects, including residential houses, lot line adjustment, and encroachment permits. Addition responsibilities included the management of sanitary sewer program which included sewer plan review and inspection, operation and maintenance (O&M) contract administration, CIWQS reporting, assistance in capital improvement project (CIP) planning, and construction management of 2016 – 2019 Sanitary Sewer Repair and Replacement Project.
Land Development Staff Augmentation | Town of Woodside, CA Ms. Chen served as a Land Development Engineer for the Town of Woodside. Her duties included performing plan reviews and inspections for site development and encroachment permit applications, assisting the public works department in the P-TAP17 project application and project management, and conducting technical reviews for the 2016 Sanitary Sewer Management Plan (SSMP).
Engineering Staff Augmentation | Town of Hillsborough, CA Ms. Chen has provided engineering staff augmentation services in the Town of Hillsborough, where she also performed engineering plan checks for new and redevelopment projects, including residential houses, lot line adjustment, subdivision, and supervising grading and encroachment permits. Additional various tasks included:
• Prepared construction plans, specifications, and engineering estimates (PS&E) for various sewer, street, water, storm drain, and open space management projects. • Performed project management including bid and contract award administration. • Performed construction management including submittal review, inspections, scheduling, project coordination, conflict resolution, and state/federal regulations compliance. • Reviewed, inspected, and managed utility encroachment permits, revocable encroachment permits, and wireless communications facilities permits. • Prepared Engineering & Traffic Survey reports.
• Represented the Town at the monthly NPDES TAC meeting and oversees NPDES permit compliance including construction site inspections, illicit discharge control, and annual deliverables preparation.
ITEM NO. 13.
PREPARED BY: Gitta Ungvari
Finance Director
Reviewed by: Town Manager, Town Attorney, and Assistant Town Manager 110 E. Main Street Los Gatos, CA 95030 ● (408) 354-6832 www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 02/18/2025
ITEM NO: 14
DATE: February 11, 2025
TO: Mayor and Town Council
FROM: Chris Constantin, Town Manager
SUBJECT: Mid-Year Budget Report - July 1 - December 31, 2024:
a. Receive the FY2024-25 Mid-Year Budget Report, including the FY 2024-25 Year End Projections
b. Authorize Budget Adjustments as Recommended in the Mid-Year Budget Report
c. Receive the Town Five Year Financial Projection from FY 2025-26 to FY 2029-30
RECOMMENDATION:
Staff recommends that the Town Council take the following actions regarding the Mid-Year Budget Performance Report - July 1 - December 31, 2024:
a. Receive the FY 2023-24 Mid-Year Budget Report including the FY 2024-25 Year End Projections (Attachment 1)
b. Authorize budget adjustments as recommended in the Mid-Year Budget Report c. Receive the Town Five Year Financial Projection from FY 2025-26 to FY 2029-30 (Attachment 2)
BACKGROUND:
The purposes of the Mid-Year Report (Attachment 1) are to provide the Town Council with the status of the adopted Fiscal Year (FY) 2024-25 Operating Budget after the first six months and to make any adjustments to ensure the continuity of municipal services and operations for the remainder of the fiscal year. The Report is one of several periodic updates to the Town Council on the status of the current year’s revenues and expenditures and the projected financial condition of all Town funds compared with the Adopted Operating Budget. The updates primarily focus on the Town’s General Fund. An update to the Town’s five-year financial
ITEM NO. 14.
PAGE 2 OF 5
SUBJECT: Mid-Year Budget Performance Report and Five Year Forecast projections from FY 2025-26 to FY 2029-30 (Attachment 2) gives context for the FY 2025-26 budget development process and recommended budget approach.
Finance Commission Review
On February 10, 2025, the Finance Commission received the Mid-Year and Forecast Reports.
The Commission discussed both items, and the staff answered the commissioners’ questions.
The Commission recommended that the Town Council receive the mid-year report, the fiveyear forecast, and its assumptions. The Commission recommended removing the terms “Greater” and “Base” from the UAL Town Contribution Table (Page 13 of Attachment 2) and identified typographical errors in the CalPERS Compound Annual Rates of Return Table (Page 14 of Attachment 2). The updates are redlined in Attachment 2. The Finance Commission further recommended including the financial condition analysis study results in future forecasts. The financial condition analysis study will not be completed in FY 2024-25, but when the information is available, it will be included in the forecast. There were additional questions regarding the impact of future development on the Town Finances. The Town usually starts estimating the potential property tax amount and timing of collection for bigger development projects when the developer‘s building permit applications are submitted. According to the Santa Clara Accessor Office's most recent report, a $5,000,000 property tax roll growth generates $12,696 annual property tax for the Town.
In addition, further staff review after the Finance Commission meeting identified footing errors in two tables on page 4 and page 9 of Attachment 1. The correct percentages and amount are displayed in red in the tables affected.
DISCUSSION:
FY 2024-25 Mid-Year Budget:
The FY 2024-25 Mid-Year Budget Report focuses on the General Fund and provides analyses of key revenues and expenditures, including historical data by Town Department/Service Area. It contains descriptions of recommended revenue and expenditure budget adjustments and financial summaries of other funds.
For Fiscal Year 2024-25, the budget was balanced by incorporating a 4.6% vacancy factor along with an additional use of $0.6 million in reserve funds. Furthermore, through December 31, 2025, the Council has pre-authorized an extra $1.7 million in reserve funds to cover salaries, benefits (for both represented and non-represented employees), and other Town needs.
Current year-end projections, including proposed mid-year adjustments, show an anticipated surplus of $0.8 million when combining operating revenues and $3.6 million in planned reserve usage against expenditures and reserve allocations. Of the $3.6 million in reserve funds that will be used, $1.1 million will be transferred to capital projects, $2.3 million will provide one-time
ITEM NO. 14.
PAGE 3 OF 5
SUBJECT: Mid-Year Budget Performance Report and Five Year Forecast support for ongoing operating expenditures, and a $300,000 additional pension trust contribution is proposed as a mid-year adjustment per the General Fund Policy.
General Fund expenditure totals are trending in accordance with the Adjusted Budget, with total operational expenditures at the end of the second quarter at or about 44% of the Adjusted Budget.
In addition, departments are requesting $662,078 General Fund revenue budget adjustments, and $1,065,724 expenditure budget adjustments. The expenditure requests exceed the revenue adjustments by $403,646. It is anticipated that year-end savings will be sufficient to cover these costs. As discussed in greater detail in Attachment 1, the primary drivers of the projected deficit are the decreased revenue projection for property tax, sales tax, and franchise fee combined with increases in retiree health care expenditures, legal services related to Builder’s Remedy, insurance premiums, and various contractually obligated services.
Refer to Attachment 1 for additional details.
Five-Year Forecast:
The forecast provides summaries and analyses of the Town’s major revenues, including property tax, sales tax, business license tax, and transient occupancy tax (TOT). The Town highly depends on these four economically sensitive revenues, comprising 65% of the General Fund forecasted revenues.
Updated growth assumptions are provided for each revenue source and the resultant projected revenues for the new Forecast period. The revenue assumptions provided are informed by the County Tax Assessor, the Town’s sales tax consultant, and direct communication with the Town’s hospitality industry. In addition, alternative forecast scenarios for these four revenue streams are discussed in the forecast report. Please see Exhibit C to Attachment 2 for a description of all revenue categories with a comprehensive listing of revenue forecast assumptions.
Forecasts of future operating expenditures consider two key factors: cost escalation and new operating expenditures. New operating expenditures refer to costs created by new or enhanced service programs approved during the annual budget process. Cost escalation refers to largely unavoidable increases in the cost of doing business. It includes inflation, multi-year contract costs, health care costs, and unfunded State mandates. Cost escalation also includes other unavoidable cost increases to a government organization, such as a rise in wages consistent with collective bargaining agreements and annual pension payments mandated by CalPERS.
The expenditure assumptions are contained in Exhibit D to Attachment 2.
The base case Five-Year Forecast (FY2025-26 – 2029-30) (Exhibit B to Attachment 2) identifies deficits for all future years, using already negotiated salary cost increases (FY 2025-26 and FY 2026-27) and 2% salary increase assumption (beyond FY 2027-28), 4.6% vacancy saving factor and other assumptions (see Exhibits C and D for Attachment 2). The projected deficits start at
ITEM NO. 14.
PAGE 4 OF 5
SUBJECT: Mid-Year Budget Performance Report and Five Year Forecast $5.6M in FY 2025-26 and can be mitigated in the short term by expenditure controls and using one-time funds. Revenue projections are not keeping pace with rising costs. Future discussions of revenue capacity to match expenditures and service levels will need to occur to address increasing pressure on Town finances.
Refer to Attachment 2 for additional details.
COORDINATION:
All Town Departments participated in the data collection and analysis that informed the preparation of the Mid-Year Report, proposed budget adjustments, and forecast development.
CONCLUSION AND NEXT STEPS:
Staff is continuing to monitor all revenues and expenditures during the preparation of the Proposed Operating and Capital Budgets for FY 2025-26. Should any additional budget adjustments be necessary to balance operating revenue and expenditures prior to the FY 2024- 25 close, Council would be asked to consider appropriate actions.
The preparation of the FY 2025-26 Operating and Capital Budgets is taking into account the Town’s current economic reality and long term fiscal picture, as well as maintaining the Town’s high level of municipal services. Key budget principles include:
Develop and recommend a balanced budget that maintains service levels; Address projected deficits;
Continue to make progress on Strategic Priorities identified by the Town Council; and Identify opportunities to maintain or enhance service delivery through new revenue sources and technology.
The Draft FY 2025-26 Operating and Capital Budgets will be available on April 22, 2025 with the Council’s budget hearing tentatively scheduled for May 21, 2025.
Staff recommends that the Town Council approve the proposed revenue and expenditure budget adjustments, as described in Attachment 1. Staff also looks forward to answering the Town Council’s questions.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
ITEM NO. 14.
PAGE 5 OF 5
SUBJECT: Mid-Year Budget Performance Report and Five Year Forecast Attachments:
1. Mid-Year Budget Report - July 1 - December 31, 2024
2. FY 2025-26 – FY-2029 – 30 Forecast
Exhibits to Attachment 2:
A. Annual Budget Process
B. Base Case Five-Year Forecast
C. Forecast Revenue Assumptions
D. Forecast Expense Assumptions
ITEM NO. 14.
1 ATTACHMENT 1
TOWN OF LOS GATOS
MID-YEAR BUDGET REPORT
JULY 1 - DECEMBER 31, 2024
February 6, 2025
FINANCIAL OVERVIEW AND EXECUTIVE SUMMARY: STATUS OF FY 2024-25
ADOPTED BUDGET
The purposes of the Mid-Year Report are to provide the Town Council with a status of the Adopted Fiscal Year (FY) 2024-25 Operating Budget after the first six months and to make any adjustments to ensure the continuity of municipal services and operations for the remainder of the fiscal year. The Report is one of several periodic updates to the Town Council on the status of the current year’s revenues and expenditures and the projected financial condition of all Town funds compared with the Adopted Operating Budget. The updates typically focus on the Town’s General Fund.
In February 2024, the Town Council established the 2024-26 Strategic Priorities. The Council’s Core Goals of Quality Public Infrastructure, Public Safety, Good Governance, Fiscal Stability, Community Character, and Civic Enrichment together with its Strategic Priorities guide the preparation of both the Capital and Operating Budgets. Several Strategic Priorities are not one-time projects, but rather are ongoing commitments due to their critical significance to ensure the Town’s fiscal and infrastructure stability and the safety and quality of life for Los Gatos residents, businesses, and visitors. These commitments include continuing to address the Town’s fiscal challenges, implementing the Comprehensive Parking Study, and fostering emergency preparedness and community wildfire resilience. Other Strategic Priorities will position the Town for the future. Such Priorities include continuing to enhance economic and community vitality, focusing on traffic safety for all users and investing in key wildfire mitigation.
Town Council will review its strategic priorities at its February 11, 2025 Special Meeting.
Staff has started budget development work for the next fiscal year, including updating the Five-Year Financial Forecast, identifying critical Town needs, contractual obligations, unfunded mandates, potential adjustments to the Fee and Fine Schedule, and other analyses. Staff is actively engaged in the FY 2025-26 budget process with the primary focus of ensuring that the available Town resources are allocated to meet the priority service needs of the community. The Town Council is tentatively scheduled to hold a public hearing on the Proposed FY 2025-26 Budget on May 20, 2025.
During FY 2023-24, the General Fund had an excess of revenues over expenditures of $4.0 million, excluding transfers. Transfers out exceeded transfers in by $3.2 million. The principal purpose of the Town’s interfund transfers were contributions toward capital projects ($3.1 million) and general liability ($0.43 million). The General Fund Balance increased by $1.5 million to $31 million at the close at the prior fiscal year.
ITEM NO. 14.
2 ATTACHMENT 1
For Fiscal Year 2024-25, the budget was balanced by incorporating a 4.6% vacancy factor along with an additional use of $0.6 million in reserve funds. Furthermore, through December 31, 2025, the Council has pre-authorized an extra $1.7 million in reserve funds to cover salaries, benefits (for both represented and non-represented employees), and other Town needs. Current year-end projections show an anticipated surplus of $0.8 million when combining operating revenues and planned reserve usage against expenditures and reserve allocations. In total, $3.6 million in reserve funds will be used— $1.1 million will be transferred to capital projects, and $2.3 million will provide one-time support for ongoing operating expenditures.
In addition, departments are requesting $662,078 General Fund revenue budget adjustments and $1,065,724 expenditure budget adjustments result in a total deficit of $403,646. As discussed in greater detail later in this Report, the primary drivers of the projected deficit are the decreased revenue projection for property tax, sales tax, and franchise fee combined with increases in retiree health care expenditures, legal services, insurance premiums, and various contractually obligated services.
As mentioned earlier, the Town Council balanced the budget with a 4.6% vacancy factor. Staff continues to monitor each Department's budget because while overall Townwide General Fund savings are predicted due to vacancies, the individual Departments’ current personnel expenditure budgets may not be sufficient for the remainder of the year. Staff will recommend the necessary expenditure budget adjustments as needed.
Providing services to the community in this and future fiscal years will require a strong revenue performance of the Town’s economically sensitive revenues to offset continued projected cost increases. The FY 2025-26 budget development process will endeavor to maintain essential public services while controlling operational costs in light of the five-year fiscal forecast, which predicts operating revenue shortfalls in subsequent fiscal years with certain assumptions.
ITEM NO. 14.
3 ATTACHMENT 1
CONTENT OVERVIEW
The remainder of this Report focuses on the General Fund and provides analyses of key revenues and expenditures, including historical data by Town Department/Service Area. The next section contains descriptions of recommended revenue and expenditure budget adjustments. The Report also includes financial summaries of other funds as well as a table of General Fund Operating Revenues Versus Operating Expenditures through the second quarter of FY 2024-25, which includes comparison information from the prior year.
GENERAL FUND FINANCIAL SUMMARIES AND ESTIMATES
The following table is the Schedule of General Fund Operating Revenues Versus Operating Expenditures for the second quarter of FY 2024-25 which includes comparison information from the prior year.
The FY 2024-25 Adopted Budget represents the original adopted budget.
The FY 2024-25 Adjusted Budget as of 12/31/2024 column includes the adopted budget and items that the Council approved during the first two quarters of the fiscal year, such as additional funding for salaries and benefits, janitorial services, road closures related to special events, and miscellaneous carryover grants from the prior fiscal year.
The FY 2024-25 Estimated column contains projections of final balances for the current fiscal year based upon staff analysis, the early trends observed through the second quarter in sales tax and property tax projections, and the proposed mid-year adjustments as listed in this report. The FY 2024-25 Estimated figures also include an analysis of potential salary and other expenditure savings; however, budget adjustments are only recommended as identified in this Report.
Staff continues to fine-tune the detailed analysis of the FY 2024-25 year-end estimated revenue and expenditure numbers, and an update will be provided with the presentation of the Proposed Fiscal Year 2025-26 Operating Budget.
The table on the next page provides details of the General Fund Revenues, Reserve Use, total Expenditures, and Reserve Allocations.
ITEM NO. 14.
4 ATTACHMENT 1
FY 2023-24 FY 2023-24
2Q % of
FY 2023-24
2Q % of
FY 2024-25 FY 2024-25 FY 2024-25 FY 2024-25 FY 2024-25
Actuals Q2 Actuals Adjusted
Budget
as of
12/31/2024
Q2 Adopted
Budget
Adjusted
Budget
as of
12/31/2024
Year End
Estimates
Including
Proposed
Mid-Year
Adjustments
Revenues
Property Tax $ 19,321,147 $ 6,446,869 33.4% 33.1% $ 6,687,895 $ 20,225,761 $ 20,225,761 $ 19,993,070 VLF Backfill Property Tax 4,906,019 - 0.0% 0.0% - 4,978,930 4,978,930 5,109,000 Sales & Use Tax 6,795,037 2,250,056 33.1% 31.6% 2,082,120 6,597,351 6,597,351 6,418,412 Measure G Sales & Use Tax 1,276,698 415,004 32.5% 33.3% 428,741 1,288,166 1,288,166 1,243,852 Franchise Fees 2,547,012 1,079,717 42.4% 10.9% 113,842 1,041,330 1,041,330 1,013,330 Transient Occupancy Tax 2,367,653 819,683 34.6% 40.4% 941,711 2,332,419 2,332,419 2,332,419 Business License Tax 1,519,960 352,611 23.2% 6.3% 153,569 2,421,000 2,421,000 2,839,985 Licenses & Permits 3,993,247 1,777,085 44.5% 50.4% 2,940,729 5,867,564 5,832,140 5,789,497 Intergovernmental 1,157,225 735,280 63.5% 67.4% 796,630 1,015,439 1,182,351 1,096,157 Town Services 5,913,520 3,934,979 66.5% 92.9% 4,371,480 4,665,260 4,705,658 4,996,598 Fines & Forfeitures 480,634 226,280 47.1% 59.6% 187,733 315,200 315,200 330,800 Interest 986,489 1,809,893 183.5% 12.5% 220,695 1,764,425 1,764,425 1,427,333 GASB 31 to Market 1,712,246 - 0.0% - - - -
Use of Property 34,722 - 0.0% - - - -
Miscellanious Other 516,081 828,976 160.6% 24.0% 521,056 1,693,904 2,170,057 2,640,919 Park Construction Tax 5,520 - 1,770 7,000 7,000 7,000
Subscription 706,713 - - - - -
Debt Service - Entry Eliminated for ACFR 1,894,550 - 0.0% 0.0% - 1,902,300 1,902,300 1,902,300 Unrestricted Fund Tracking - Entry Eliminated for ACFR 458,000 - - - - - Pension Trust Income - Entry Eliminated for ACFR 690,000 - - - - - Measure G for Operations - Entry Eliminated for ACFR 620,044 - - - - - Proceeds for Sales of Assets 223 - 0.0% - - - -
Fund Transfer In 564,910 114,499 20.3% 0.0% - 562,411 562,411 562,411 Total Revenues & Transfers In $ 58,467,650 $ 20,790,932 36% 34% $ 19,447,971 $ 56,678,460 $ 57,326,499 $ 57,703,083 Use of Other Funding Sources:
Use of Reserves - Capital/Special Projects - Capital $ 1,615,000 $ - $ - $ 1,110,000 $ 1,110,000 $ 1,110,000 Use of Reserves - Capital/Special Projects - other - - - 33,000 1,683,569 1,683,569 Use of Reserves - Pension/OPEB 300,000 - - - - 300,000
Use of Reserves - Accumulated Measure G - - - 568,051 568,051 568,051 Use of Reserves - ERAF Risk Reserve - - - - - -
Use of Reserves - Carry Forward Encumbrances - - - - 85,861 - Council Priorities - Economic Recovery 1,535,930 - - 11,333 - - Total Other Funding Sources $ 3,450,930 $ - 0% 0% $ - $ 1,722,384 $ 3,447,481 $ 3,661,620 Total Revenues and Use of Reserves $ 61,918,580 $ 20,790,932 34% 32% $ 19,447,971 $ 58,400,844 $ 60,773,980 $ 61,364,703 Expenditures
Town Council $ 196,366 $ 98,255 50.0% 49.6% 104,604 $ 206,236 $ 210,994 $ 219,937 Attorney 751,616 336,063 44.7% 40.8% 398,950 943,589 978,732 1,071,653 Administrative Services 5,877,880 3,144,181 53.5% 46.1% 3,163,903 6,397,312 6,861,627 6,739,059 Non- Departmental 2,747,161 2,759,556 100.5% 31.1% 1,617,207 5,118,380 5,203,999 5,453,907 Community Development 5,246,730 2,559,684 48.8% 42.7% 2,632,401 5,577,309 6,161,824 6,491,635 Police 20,718,777 9,732,572 47.0% 44.8% 10,268,293 22,021,478 22,895,849 21,300,796 Parks & Public Works 9,789,656 4,589,535 46.9% 46.2% 4,927,283 10,394,394 10,653,984 11,127,851 Library 3,253,386 1,669,629 51.3% 49.7% 1,719,732 3,398,712 3,458,657 3,542,183 Capital Outlay 708,302 - - - - -
Principal 225,370 - 39,008 156,034 156,034 156,034
Interest and Fees 3,716 - - - - -
Total Department Expenditures $ 49,518,960 $ 24,889,475 50% 44% $ 24,832,373 $ 54,213,444 $ 56,581,700 $ 56,103,055 Debt Service - Entry Eliminated for ACFR $ 1,894,550 $ - 0.0% 0.0% $ - $ 1,902,300 $ 1,902,300 $ 1,902,300 Unrestricted Fund Tracking - Entry Eliminated for ACFR 458,000 - - - - - Transfer to Pension Trust Fund - Entry Eliminated for ACFR 690,000 - - - - - Measure G Transfer - Entry Eliminated for ACFR 620,044 - - - - - Transfers Out 3,752,325 - 0.0% 0.0% - 1,110,000 1,110,000 1,110,000 Total Additional Non-Departmental Expenditures $ 7,414,919 $ - 0% 0% $ - $ 3,012,300 $ 3,012,300 $ 3,012,300 Total Operating Expenditures $ 56,933,879 $ 24,889,475 44% 42% $ 24,832,373 $ 57,225,744 $ 59,594,000 $ 59,115,355 Allocate to Budget Stabilization/Catastrophic Reserve - - - - - - Allocate to Market Fluctuation 1,712,246 - - - - -
Allocate to ERAF Risk Reserve 740,446 - - 785,100 785,100 785,100 Allocate to Carryover Encumbrances 48,163 - - - - -
Allocate to Pension/OPEB Reserve 300,000 - - - - -
Allocate to Restricted Pension Trust 690,000 - - 390,000 390,000 690,000 Excess (Deficiency) of Revenues Over Expenditures after Reserve Allocation $ 1,493,846 ** $ (4,098,543) * $ (5,384,402) * $ - $ 4,880 $ 774,248 S&B
SUMMARY OF REVENUES AND EXPENDITURES
GENERAL FUND
*FY 2023-24 and FY 2024-25 2Q Net Operating Revenues are negative because some revenues budgeted for the entire fiscal year are received in the third or fourth quarters and fund expended in the first or second quarters.
** This schedule includes fund balance uses. Total Revenues and Transfers In ($58,467,650) minus Total Operating Expenditures ($56,933,879) equals $1,533,770 with rounding.
ITEM NO. 14.
5 ATTACHMENT 1
GENERAL FUND - KEY REVENUE ANALYSIS FY 2024-25
The following information provides a recap of the General Fund budgeted significant revenue sources, including estimated year end collection as of the second quarter ending December 31, 2024. Staff is monitoring developments in each major revenue source closely for potential adjustments to budgeted revenues as recommended in this Report.
Property Tax and Motor Vehicle in Lieu Fee (VLF)
Property tax and VLF are the single largest revenue sources for the Town and comprise approximately
44.1% of total Town General Fund estimated revenues for FY 2024-25. Property tax is levied by the Santa Clara County Assessor’s Office at 1% of a property’s assessed value, of which the Town receives approximately 9.3 cents per dollar paid on property located within the municipal limits of Los Gatos. In compliance with Proposition 13, the assessed value of real property is based on the 1975/76 assessment roll value, adjusted by a 2% inflation factor annually thereafter. However, when property changes hands or new construction occurs, the property is then reassessed at its current market value.
The County of Santa Clara provides property tax collection updates and projections throughout the year.
The current County estimate indicates $102,621 decrease in estimated collection than the Adopted Budget. The decrease is a combined effect of lower-than-expected secured property tax estimates combined with the increase with the Motor Vehicle in Lieu (VLF) Property tax collection.
Property Tax & VLF
44%
Sales & Use Tax
13%
Franchise Fees
2%
Transient Occupancy Tax
4%
Business License Tax
5%
Licenses & Permits
10%
Intergovernmental
2%
Town Services
9%
Fines & Forfeitures
1%
Interest
2%
Miscellaneous Other
4%
Debt Service
3%
Fund Transfer In
1%
ITEM NO. 14.
6 ATTACHMENT 1
The Town has been monitoring ongoing developments regarding the distribution of excess ERAF funds.
A portion of property tax revenue goes to the ERAF to support local school districts. When the amount contributed to ERAF is more than the minimum cost of funding local schools, excess funds have traditionally been returned to the counties, cities, and special districts. During the last couple of years, the Santa Clara County redistribution formula was contested by the State, and additional risk raised from State Controller’s audit findings for Marin County. The Town received the full amount since FY 2021-22; however, the Santa Clara County Assessor’s Office recommended reserving certain percentage based on the risk. According to the most recent (January 2025) communication from the Santa Clara State Controller Office the risk remains for the State Controller Office Audit findings that varies from 20% to 22% for the Town. Estimated at risk amounts and the Town Actual and Estimates ERAF Risk Reserves are presented below. The Town Estimated ERAF Risk Reserve is $1,215,154 as of June 30, 2025. With the FY 2024-25 budget adoption Council action $1,000,000 of the ERAF Risk Reserve was transferred to the Pension/OPEB Reserve. The total reserve amount of $2,215,154 is still below the Town’s estimated risk amount of $2,558,139, therefore, staff recommends continuing to reserve 30% of the anticipated FY 2024-25 ERAF proceeds.
Property tax distributions are largely received in the third and fourth quarters. Second quarter receipts are trending similar to those received during the second quarter of the previous fiscal year and are at 27% of budgeted totals. Based on current County projections, staff recommends a $102,621 decrease in estimated General Property Tax and Motor Vehicle in Lieu Fee collections.
FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 Total $ Actual Actual Actual Actual Estimated
Excess ERAF $ 2,043,321 $ 2,371,984 $ 2,298,692 $ 2,534,820 $ 2,617,000 According to Santa Clara County State Controller Office January 2025 Communication State Controller Audit Finding Risk % 22% 22% 22% 22% 20% State Controller Audit Finding Risk ($) $ 449,531 $ 521,836 $ 505,712 $ 557,660 $ 523,400 $ 2,558,139 Town ERAF Risk Reserve as of 6/30/2024 $ 1,430,054
Estimated Addition to the Reserve - 30% of the FY 2024-25 proceeds $ 785,100.00 Allocation of the ERAF Risk Reserve to Pension/OPEB Reserve per June 4, 2024 Council Action $ (1,000,000.00) Town Estimates ERAF Risk Reserve as of 6/30/2025 $ 1,215,154.00 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
2nd Quarter Actual Revenues $ 5,481,928 $ 5,761,081 $ 6,155,317 $ 6,446,869 $ 6,687,895 Fiscal Year Total Actual Revenues $ 19,878,834 $ 21,129,080 $ 22,743,088 $ 24,227,166 Fiscal Year Total Estimated Revenues $ 25,102,070
Fiscal Year Budgeted Revenues $ 18,705,325 $ 20,138,320 $ 22,484,118 $ 23,938,717 $ 25,204,691 2nd Quarter Percent of Total 28% 27% 27% 27% 27%
Recommended Budget Revision $ (102,621)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
$22,000,000
$24,000,000
$26,000,000
FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Property Tax and VLF - Quarterly and Annual Revenues
5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues
ITEM NO. 14.
7 ATTACHMENT 1
Sales Tax
Sales tax is the second largest revenue source for the Town’s General Fund, accounting for 13.5% of budgeted General Fund projected revenues for FY 2024-25. The Town currently receives 1.125 cents for every 9.125 cents of sales tax paid per dollar on retail sales and taxable services transacted within Los Gatos, including the Town of Los Gatos residents’ approved ballot Measure G in 2018 enacting a oneeighth cent (0.125%) district sales tax for 20 years.
Sales tax estimates are based on actual sales tax data and annual sales tax estimates for five years provided by the Town’s consultant, MuniServices. In addition to brick-and-mortar sales tax generation, the MuniServices estimates include several online sales tax projections. The 2018 Wayfair Decision resulted in e-commerce vendors utilizing the Amazon platform to collect sales tax based on destination; however, items shipped directly from Amazon fulfillment centers are collecting sales tax based on the point of distribution. Regular sales tax collected through online transactions are distributed through the Santa Clara County pool for which the Town receives a pro rata share of the sales tax generated in Santa Clara County for that particular quarter. The Town directly receives the one-eighth district tax portion of the sales tax generated by the residents of Los Gatos. Current total sales tax estimates include $6,418,412 (a $178,939 decrease from the Adopted Budget) in proceeds from regular sales tax and $1,243,852 (a $44,314 decrease) in proceeds from the Measure G one-eighth cent district tax. Actual receipts net of administrative fees collected by the State will be confirmed at the close of the fiscal year and per prior Council direction, the Measure G funds are allocated at 50% for capital improvement projects and 50% for operating expenses.
While FY 2024-25 second quarter receipts are trending lower than in the same period last fiscal year, staff recommends a $223,253 budget decrease to reflect the MuniServices current estimates.
FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
2nd Quarter Actual Revenues $ 2,813,652 $ 2,556,341 $ 2,825,421 $ 2,665,060 $ 2,510,861 Fiscal Year Total Actual Revenues $ 7,933,604 $ 8,483,673 $ 8,806,477 $ 8,071,735 Fiscal Year Total Estimated Revenues $ 7,662,264
Fiscal Year Budgeted Revenues $ 7,301,869 $ 8,671,606 $ 8,959,134 $ 7,881,069 $ 7,885,517 2nd Quarter Percent of Total 35% 30% 32% 33% 32%
Recommended Budget Revision $ (223,253)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25
Sales Tax & Measure G Tax - Quarterly and Annual Revenues 5-Year History
2nd Quarter Actual Revenues Fiscal Year Total Actual Revenues Fiscal Year Budgeted Revenues Fiscal Year Total Estimated Revenues