CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
6/10/2024
1 SUBJECT:
Resolution to Approve a Five-Year Agreement with Badawi & Associates for Financial Audit Services
RECOMMENDED ACTION:
Adopt the attached resolution to authorize the City Manager to execute a five-year agreement with Badawi & Associates to provide financial audit services for the fiscal years ending June 30, 2024, through June 30, 2028.
STAFF CONTACT:
Yulia Carter, Assistant City Manager
(650) 501-6004
[email protected]
Lucy Xie, Deputy Finance Director
(650) 501-6014
[email protected]
BACKGROUND/DISCUSSION:
The City is required to contract with an independent auditor to review the City's financials and reporting. The objective of conducting an external audit is to conduct an independent examination of the City’s financial records, accounts, financial transactions, accounting practices, and internal control and ensure that the city’s year-end financial statements are presented in accordance with provisions established by the Governmental Accounting Standards Board.
Municipal auditing best practices recommend that governmental entities rotate auditing firms or engagement partners every five to six years to ensure the independence and objectivity of the auditing process. The City has been in a contract with Maze & Associates for auditing services for nearly a decade since 2015, prompting staff to seek a new qualified public accounting firm to provide the auditing services.
The Government Finance Officers Association (GFOA) also recommends audit contracts be awarded for a term of at least five years. “Governmental entities should enter into multi-year agreements of at least five years in duration when obtaining the services of independent auditors. Such multi-year agreements can take a variety of different forms (e.g., a series of single-year contracts), consistent with applicable legal requirements. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit. Multi-year agreements can also help to reduce audit costs by allowing auditors to recover certain "startup" costs over several years rather than over a single year.
In April 2024, the City published a Request for Proposals (RFP) to solicit a new external auditor Pacifica City Council 2
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firm. The City received one proposal, and Badawi & Associates was selected as fully meeting the following selection criteria:
1. Quality of proposal and responses to specific questions included in RFP
2. Experience of the Proposer conducting similar work in California
3. Relevant qualifications of key personnel assigned to the project
4. Understanding of the City’s objectives
5. Reasonableness of fees and cost proposal
The total cost of the new proposal for the FY 2023-24 audit services is $71,935, which is a reduction of approximately $15,000 per year from last year’s cost. The total cost over the five years is $381,918. As per the schedule of fees, the auditors have granted the City a discount of over $90,000 for a longer-term (five-year) agreement.
Badawi and Associates is a licensed Public Accounting Firm based in Berkeley, CA. The firm has focused its practice on municipalities since its inception serving a variety of cities and towns throughout California as well as conducting financial services for numerous special districts and authorities. The firm is reputed to be one of the industry's leaders in the San Francisco Bay Area and is an expert in municipal finances and GASB requirements with over sixty municipal clients.
The firm offers an in-depth understanding of the complex economic and political environment, exercising philosophy to build a proactive, client-focused culture from the ground up without the bureaucratic culture and intrinsic limitations of the big audit firms.
The firm will be engaged to perform the following services for the City of Pacifica:
• Annual Comprehensive Financial Report and audit
• Single Audit
• Gann Limited Agreed-upon Procedures
• Measure A
• Measure W
• Childcare Program audit
• State Controller's report- City’s Financial Transaction Report • State Controller's report- Annual Street Report
• State Controller's report- Financing Authority Transactions Report. • Transportation Development Act (TDA) report
In addition to the traditional annual audit work, Badawi & Associates provides deep accounting expertise, internal quality assurance, and a team approach to supporting their clients throughout the year. This includes annual client training on new pronouncements issued by the Governmental Accounting Standards Board or refresher courses on internal control, financial systems, and cyber security.
Therefore, staff recommends approving the five-year contract for auditing services with Badawi & Associates.
ALTERNATIVE ACTION:
There is no reasonable alternative as the City is required to conduct the annual audit, and the interim audit fieldwork needs to be scheduled for the summer. However, the Council may choose to approve a shorter-term engagement.
FISCAL IMPACT:
Pacifica City Council 3
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There is no additional fiscal impact on the FY 2024-25 Budget, as the cost of the contract is already included in the base budget. As mentioned above, the City will incur some savings annually due to the longer term of the contract.
ORIGINATED BY:
Finance Department
ATTACHMENT LIST:
Attachment A: Consultant Services Agreement - Badawi and Associates (PDF) Pacifica City Council 4
June 10, 2024
RESOLUTION NO. ________
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA AUTHORIZING
THE CITY MANAGER TO EXECUTE A FIVE-YEAR CONTRACT WITH BADAWI &
ASSOCIATES FOR THE AUDIT AND MANDATED FINANCIAL REPORTING WHEREAS, the City has been in contract with Maze & Associates for annual financial audit services and preparation of the Comprehensive Annual Financial Report in compliance with Governmental Accounting Standards since 2015; and
WHEREAS, the City of Pacifica has continued utilizing audit services provided by Maze & Associates for nine consecutive years, while municipal auditing best practices and the Government Finance Officers Association (GFOA) recommends changing auditors or engagement partners every five to six years; and
WHEREAS, in April 2024, staff released a Request for Proposal for audit services and found the Badawi & Associates, a certified public accounting firm with an extensive list of Bay Area municipal clients, meeting all City requirements and being a highly qualified to be the City’s next new independent auditor;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pacifica, California, to authorize the City Manager to execute a five-year contract with Badawi & Associates for the FY2023-24 to FY2027-28 audit cycles with the terms and pricing as indicated in the contract. • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held the 10th day of June, 2024,, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Vaterlaus, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney