Attachment B - OCA - FY2026 Annual Audit Plan — Palo Alto City Council, June 17, 2025

1 May 15, 2025
City of Palo Alto
Office of the City Auditor
FY2026 Annual Audit Plan
Contents
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.

INTRODUCTION ...............................................................................................................1 RISK ASSESSMENT RESULTS ......................................................................................3 PROPOSED AUDIT PROJECTS FOR FY2024................................................................4 APPENDICES ...................................................................................................................6

1 Introduction
Introduction
The purpose of the audit activities performed by Baker Tilly Advisory Group, LP (Baker Tilly) as the outsourced Office of the City Auditor (OCA) for the City of Palo Alto (the City) is “to ensure that city management is using its financial, physical, and informational resources effectively, efficiently, economically, ethically, and equitably, and in compliance with laws, regulations, contract and grant requirements, and city policies and procedures”, according to the Palo Alto Municipal Code (Section 2.08.130). It requires the City Auditor to prepare an annual audit plan for the City Council’s approval.

Conformance with Local Ordinances and Standards
Section 2.08.130 of the Palo Alto Municipal Code defines that the mission of the OCA is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. Audits are conducted and non-audit services provided in accordance with Government Auditing Standards, as established by the Comptroller General of the United States, Governmental Accountability Office.

The following duties of the City Auditor exist regarding the plan and scope of internal audits.

Palo Alto City Charter
Article IV Sec. 12 requires the City Auditor to perform the following:
– Conduct audits in accordance with a schedule approved by the City Council and may conduct unscheduled audits from time to time.
– Conducts internal audits of all the fiscal transactions of the City.

Title 2 Administrative Code
Section 2.08.130 requires the City Auditor to perform the following:
– Prepare an annual audit plan for City Council approval. – Identify the preliminary objectives of each audit to be performed, reflecting the purpose of the engagement and a preliminary description of the areas that may be addressed. – Conduct performance audits and perform non-audit services of any City department, program, service, or activity as approved by the City Council.

California Government Code
Section 1236 requires all cities that conduct audit activities to conduct their work under the general and specified standards prescribed by the Institute of Internal Auditors (IIA) or the Government Auditing Standards (GAO) issued by the Comptroller General of the United States, as appropriate.

Audit Activity Type
The OCA will conduct performance audits and perform financial/operational analyses of any City department, program, service, or activity as approved by the City Council in accordance with the Baker Tilly agreement.

Performance Audits
According to the Government Auditing Standards (GAO-18-568G, Section 1.21 and 1.22, page 10-12), performance audits provide objective analysis, findings, and conclusions to assist management and those charged with governance and oversight with, among other things, improving program performance and operations, reducing costs, facilitating decision making by parties responsible for overseeing or initiating corrective action, and contributing to public accountability. Performance audits may include the following four (4) audit objectives:
– Program effectiveness and results
2 INTRODUCTION
– Internal control design and effectiveness
– Compliance with laws, regulations, and policies
– Prospective analysis
Audit Planning Considerations
While maintaining its independence and objectivity in accordance with standards, the City Auditor considers a variety of matters when developing the Annual Audit Plan, including but not limited to:
– Risk Assessment – the OCA performed a risk assessment and summarized the results in a separate report (Task #1). Generally speaking, audit activities target high(er) risk areas. The results are shown on the following page.
– Ability to Add Value – audit seeks to add value through independent and objective analysis. – City Council – the City Auditor reports to the City Council and seeks input on audit priorities. – Coverage and Prior Audits – the City Auditor considers prior audits conducted by the OCA, the financial audit, and other audit and consulting reports recently issued. – “Ripeness” and On-Going Initiatives – certain risk areas may be addressed through operational activities, which could mean they are not ripe for audit to add value. – Scheduling – the City Auditor takes into consideration the timing of an audit and other on-going initiatives that directly relate. Putting an undue burden on City staff may exacerbate the risk at hand or other interrelated risks.
3 Risk Assessment Results
The OCA performed a citywide risk assessment to plan for FY2026 audit activities and documented the methodology and the detailed results in a separate Risk Assessment Report. In summary, we identified the following areas rated as High or Moderate risks. In determining the audit activities to be performed in FY2026, we further reviewed these risks and functional areas and considered the matters listed in the previous page.

Proposed Projects for FY2026
Summary
The proposed audits, special advisory projects and follow-up project for FY2026 are listed on the next page. The projects were selected from the auditable units that were rated as High or Moderate in the results of our risk assessment and selected based on some factors such as risk rating, the pervasiveness of the processes or

4 PROPOSED PROJECTS FOR FY2026
controls, the audit coverage, the timing of projects, and the value-adding activities that help the City enhance the ability to manage risks, strengthen accountability, and improve efficiency and effectiveness.

The preliminary audit objectives are described for each audit listed. These objectives and scope will be further defined based on the result of the engagement level risk assessment performed at the beginning of each audit.

Amendments to this audit plan may be proposed during FY2026 in response to changes in the City’s environment such as organizational structure, operations, risks, systems, and controls.

For each audit, a task order is submitted to the City Council for approval before an audit commences. We prepared seven task orders which are included in the Appendix. The OCA is seeking approval from the City Council to begin all seven projects over the course of the first quarter of FY2026. In addition, the OCA is leaving a larger “ad hoc” budget this year to account for projects that may be requested later in the year. 5 Proposed Audit Plan for FY2026

6 Appendix A: Resumes
Appendices
7 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.35 Below Market Housing Rate Program
Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK O RDER NO.: FY25-4.29

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: July 1, 2025 COMPLETION: May 31, 2026

4. TOTAL TASK ORDER PRICE: $97,575

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

7. DESCRIPTION OF SCOPE OF SERVICES (Attachment A)
MUST INCLUDE:
▪SERVICES AND DELIVERABLES TO BE PROVIDED
▪SCHEDULE OF PERFORMANCE
▪MAXIMUM COMPENSATION AMOUNT AND RATE SCHEDULE (as applicable) ▪REIMBURSABLE EXPENSES, if any (with “not to exceed” amount)

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

CITY OF PALO ALTO
BY:____________________________________
Name __________________________________
Title___________________________________
Date ___________________________________
I hereby acknowledge receipt and acceptance of
this Task Order and warrant that I have authority
to sign on behalf of Consultant.

APPROVED:

COMPANY NAME: Baker Tilly Advisory Group,
LP
BY:____________________________________
Name __________________________________
Title___________________________________
Date ___________________________________
8 Attachment A

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an internal audit of the Below Market Rate Housing Program involves three (3) primary steps:
•Step 1: Audit Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Audit Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall audit objective and to solidify mutual understanding of the audit scope, objectives, audit process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Assess the audit risk
•Prepare an audit planning memo and audit program
oRefine audit objectives and scope
oIdentify the audit procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the audit and kick-off meeting with key stakeholders oDiscuss audit objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the audit objectives. The preliminary audit objective is to determine (1) if the Below Market Rate Housing Program maximizes the creation and retention of affordable housing stock in comparison to similar programs, and (2) determining whether services are provided to low- and moderate-income households in a timely manner that meets the needs of the community. Finally, the audit will evaluate the administration of the Below Market Rate Housing Program for adequate internal controls to safeguard the City from fraud, waste, and abuse. Procedures include, but are not limited to:
•Interviewing the appropriate individuals to gain an understanding of the organizational structure, processes, and controls related to the Program
9 •Analyze policies and procedures as well as the legislative and regulatory requirements to identify the criteria to be used for evaluation of control design and effectiveness •Select samples of applications and projects to determine if in compliance with rules and regulations
•Compare processes and controls against best practices
Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize audit working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing findings, conclusions, and recommendations based on the supporting evidence gathered
•Validating findings with appropriate individuals and discuss the root cause of the identified findings
•Complete supervisory review of working papers and a draft audit report •Distribute a draft audit report and conduct a closing meeting with key stakeholders oDiscuss the audit results, findings, conclusions, and recommendations oDiscuss management responses
•Obtain written management responses and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The following deliverables will be prepared as part of this engagement:
•Audit Report
•Policy & Services Committee Audit Report Presentation
Schedule of Performance
Anticipated Start Date: July 1, 2025
Anticipated End Date: May 31, 2026
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $97,575.

The not-to-exceed budget is based on an estimate of 475 total project hours, of which a minimum of 70 are estimated to be completed by the City Auditor.

Reimbursable Expenses
We plan to complete all work remote including all interviews and documentation review. However, during the planning and fieldwork phases of this audit, the City and Baker Tilly may mutually determine it will be beneficial to perform a portion of the work on-site. Given this possibility, Baker Tilly could incur expenses for this Task.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
10 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.36 Fleet Resources & Sustainability / Climate Action Plan Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.30

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: July 1, 2025 COMPLETION: May 31, 2026

4. TOTAL TASK ORDER PRICE: $90,255

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an internal audit of the Building Permit and Inspection Fees involves three (3) primary steps:
•Step 1: Audit Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Audit Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall audit objective and to solidify mutual understanding of the audit scope, objectives, audit process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Assess the audit risk
•Prepare an audit planning memo and audit program
oRefine audit objectives and scope
oIdentify the audit procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the audit and kick-off meeting with key stakeholders oDiscuss audit objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the audit objectives. The preliminary audit objective is to determine (1) if the City is effectively and efficiently managing fleet resources; and (2) if the City is on track to achieve City Fleet Sustainability and Climate Action Plan goals established for 2030. Procedures include, but are not limited to:
•Interviewing the appropriate individuals to gain an understanding of the organizational structure, processes, and controls related to the Fleet & S/CAP Programs •Analyze policies and procedures as well as the legislative and regulatory requirements to identify the criteria to be used for evaluation of control design and effectiveness •Gather data on fleet vehicles, including maintenance, disposal, driver training and safety programs •Analyze fleet utilization to identify underused or overused vehicles 12 •Analyze maintenance and repair records
•Assess progress in achieving S/CAP goals
•Other steps as identified during planning
•Compare processes and controls against best practices
Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize audit working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing findings, conclusions, and recommendations based on the supporting evidence gathered
•Validating findings with appropriate individuals and discuss the root cause of the identified findings
•Complete supervisory review of working papers and a draft audit report •Distribute a draft audit report and conduct a closing meeting with key stakeholders oDiscuss the audit results, findings, conclusions, and recommendations oDiscuss management responses
•Obtain written management responses and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The not-to-exceed budget is based on an estimate of 440 total project hours, of which a minimum of 60 are estimated to be completed by the City Auditor.

Reimbursable Expenses
We plan to complete some fieldwork steps for this audit on-site if the City and Baker Tilly mutually determine it will be beneficial to perform a portion of the work on-site. Given this possibility, Baker Tilly could incur expenses for this Task.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
13 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.37 Traffic Safety Improvements
Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.30

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: July 1, 2025 COMPLETION: April 30, 2026

4. TOTAL TASK ORDER PRICE: $97,575

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an internal audit of the Building Permit and Inspection Fees involves three (3) primary steps:
•Step 1: Audit Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Audit Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall audit objective and to solidify mutual understanding of the audit scope, objectives, audit process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Assess the audit risk
•Prepare an audit planning memo and audit program
oRefine audit objectives and scope
oIdentify the audit procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the audit and kick-off meeting with key stakeholders oDiscuss audit objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the audit objectives. The preliminary audit objective is to determine if the City is effectively and efficiently designing and implementing improvements to ensure traffic safety for residents. Procedures include, but are not limited to:
•Interviewing the appropriate individuals to gain an understanding of the organizational structure, processes, and controls related to the Office of Transportation and Public Works Departments as they relate to the design and implementation of traffic safety improvements •Analyze policies and procedures as well as the legislative and regulatory requirements to identify the criteria to be used for evaluation of control design and effectiveness •Gather data on traffic safety programs and initiatives including calming measures, engineering design and implementation, data collection, performance measurement and public education 15 •Analyze project plans and justification and evaluate design criteria •Analyze cost estimates and budgeting
•Assess stakeholder input and engagement
•Assess installation/implementation of traffic safety features •Assess performance data
•Compare processes and controls against best practices
Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize audit working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing findings, conclusions, and recommendations based on the supporting evidence gathered
•Validating findings with appropriate individuals and discuss the root cause of the identified findings
•Complete supervisory review of working papers and a draft audit report •Distribute a draft audit report and conduct a closing meeting with key stakeholders oDiscuss the audit results, findings, conclusions, and recommendations oDiscuss management responses
•Obtain written management responses and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The following deliverables will be prepared as part of this engagement:
•Audit Report
•Policy & Services Committee Audit Report Presentation
Schedule of Performance
Anticipated Start Date: July 1, 2025
Anticipated End Date: April 30, 2026
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $97,575.

The not-to-exceed budget is based on an estimate of 475 total project hours, of which a minimum of 70 are estimated to be completed by the City Auditor.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
16 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.38 City of Palo Alto Utilities Reserves Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.32

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: July 1, 2025 COMPLETION: December 31, 2025

4. TOTAL TASK ORDER PRICE: $70,815

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an assessment of the City of Palo Alto Utilities Reserves (3) primary steps:
•Step 1: Assessment Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Assessment Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall audit objective and to solidify mutual understanding of the assessment scope, objectives, process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Prepare an assessment program
oRefine assessment objectives and scope
oIdentify the procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the assessment and kick-off meeting with key stakeholders oDiscuss assessment objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the assessment program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the assessment objectives. The preliminary objective is to assess the City of Palo Alto Utilities supply, operating, and capital expenditure reserve policies and provide related benchmarking and best practices information:
•Interviewing the appropriate individuals to gain an understanding of current procedures including how the Utility projects peak demand, calculates reserve margins, models demand growth, etc. •Analyze policies and procedures related to reserves
•Assess compliance with regulatory reserve margin requirements and other relevant standards •Compare processes and controls against best practices
18 Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize assessment working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing observations and recommendations based on the supporting evidence gathered •Validating observations with appropriate individuals
•Complete supervisory review of working papers and a draft audit report •Distribute a draft assessment report and conduct a closing meeting with key stakeholders oDiscuss the observations and recommendations
oDiscuss management responses
•Obtain written management responses if appropriate and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The following deliverables will be prepared as part of this engagement:
•Assessment Report
•Policy & Services Committee Assessment Report Presentation Schedule of Performance
Anticipated Start Date: July 1, 2025
Anticipated End Date: December 31, 2025
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $70,815.

The not-to-exceed budget is based on an estimate of 345 total project hours, of which a minimum of 40 are estimated to be completed by the City Auditor.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
19 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.39 Consultant Management Practices
Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.33

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: August 1, 2025 COMPLETION: March 31, 2026

4. TOTAL TASK ORDER PRICE: $57,165

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an assessment of the City Consultant Management Practices includes three (3) primary steps:
•Step 1: Audit Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Assessment Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall assessment objective and to solidify mutual understanding of the assessment scope, objectives, process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Prepare an assessment program
oRefine assessment objectives and scope
oIdentify the procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the assessment and kick-off meeting with key stakeholders oDiscuss assessment objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the assessment objectives. The preliminary objective is to assess and provide best practice frameworks for when to engage consulting services and how to best project manage consulting engagements to optimize results and deliverables. Steps include:
•Interviewing the appropriate individuals to gain an understanding of the organizational structures, processes, and controls related to soliciting consulting services and understand outcomes •Assess challenges the City has experienced with consulting services •Review best practices and provide recommendation frameworks related to determining when to engage consulting services vs. keeping services “in house” and project management practices to optimize consulting project deliverables and results.
21 Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize assessment working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing observations and recommendations based on the supporting evidence gathered •Validating observations with appropriate individuals
•Complete supervisory review of working papers and a draft audit report •Distribute a draft assessment report and conduct a closing meeting with key stakeholders oDiscuss the observations and recommendations
oDiscuss management responses
•Obtain written management responses if appropriate and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The following deliverables will be prepared as part of this engagement:
•Assessment Report
•Policy & Services Committee Assessment Report Presentation Schedule of Performance
Anticipated Start Date: August 1, 2025
Anticipated End Date: March 31, 2026
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $29,440.

The not-to-exceed budget is based on an estimate of 345 total project hours, of which a minimum of 20 are estimated to be completed by the City Auditor.

Reimbursable Expenses
We plan to complete all work remotely including all interviews and documentation review. However, during the planning and fieldwork phases of this audit, the City and Baker Tilly may mutually determine it will be beneficial to perform a portion of the work on-site. Given this possibility, Baker Tilly could incur expenses for this Task.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
22 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.40 Contract Solicitation & Authority Levels Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.33

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: August 1, 2025 COMPLETION: February 28, 2026

4. TOTAL TASK ORDER PRICE: $54,165

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

DESCRIPTION OF SCOPE OF SERVICES
Introduction
Attachment A, the Description of Scope of Services, contains the following four (4) elements:
•Services and Deliverables To Be Provided
•Schedule of Performance
•Maximum Compensation Amount and Rate Schedule (As Applicable) •Reimbursable Expenses, if any (With “Not To Exceed” Amount) Services & Deliverables
Baker Tilly’s approach to conducting an assessment of the City Consultant Management Practices includes three (3) primary steps:
•Step 1: Audit Planning
•Step 2: Fieldwork and Testing
•Step 3: Reporting
Step 1 – Assessment Planning
This step consists of the tasks performed to adequately plan the work necessary to address the overall assessment objective and to solidify mutual understanding of the assessment scope, objectives, process, and timing between stakeholders and auditors. Tasks include:
•Gather information to understand the environment under review oUnderstand the environment under assessment
oAssess the City code, regulations, and other standards and expectations oAssess prior audit results, as applicable
oAssess additional documentation and conduct interviews as necessary •Prepare an assessment program
oRefine assessment objectives and scope
oIdentify the procedures to be performed and the evidence to be obtained and examined •Announce the initiation of the assessment and kick-off meeting with key stakeholders oDiscuss assessment objectives, scope, audit process, timing, resources, and expectations oDiscuss documentation and interview requests for the audit Step 2 – Fieldwork and Testing
The step involves executing the procedures in the audit program to gather information, interview individuals, and analyze the data and information to obtain sufficient evidence to address the assessment objectives. The preliminary objective is to assess and benchmark the City’s current solicitation and authority thresholds. Steps include:
•Interviewing the appropriate individuals to gain an understanding of current thresholds and authority levels
•Conduct a benchmarking study to determine thresholds in similar sized cities •Assess best practices in establishing thresholds
24 Step 3 – Reporting
In Step 3, the project team will perform tasks necessary to finalize assessment working papers, prepare and review a draft report with stakeholders, and submit a final report for management response. Tasks include:
•Developing observations and recommendations based on the supporting evidence gathered •Validating observations with appropriate individuals
•Complete supervisory review of working papers and a draft audit report •Distribute a draft assessment report and conduct a closing meeting with key stakeholders oDiscuss the observations and recommendations
oDiscuss management responses
•Obtain written management responses if appropriate and finalize a report •Review report with members of City Council and/or the appropriate Council Committee Deliverables:

The following deliverables will be prepared as part of this engagement:
•Assessment Report
•Policy & Services Committee Assessment Report Presentation Schedule of Performance
Anticipated Start Date: August 1, 2025
Anticipated End Date: March 31, 2026
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $54,165.

The not-to-exceed budget is based on an estimate of 285 total project hours, of which a minimum of 30 are estimated to be completed by the City Auditor.

The not-to-exceed maximum for reimbursable expenses for this Task is $6,500.

The following summarizes anticipated reimbursable expenses:
•Round-trip Airfare – $2,000 (1 round trip flight x 2 auditors) •Ground transportation – $800 (car rental or Uber/taxi) •Hotel accommodation – $3,000 (2 rooms x 4 nights)
•Food & Incidentals – $2,100
25 PROFESSIONAL SERVICES TASK ORDER
TASK ORDER FY25-4.41 Follow-Up Audit Activities
Consultant shall perform the Services detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 below are incorporated into this Task Order by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below.

CONTRACT NO. C21179340
OR PURCHASE ORDER REQUISITION NO. (AS APPLICABLE)
1A. MASTER AGREEMENT NO. (MAY BE SAME AS CONTRACT / P.O. NO. ABOVE): C21179340 1B. TASK ORDER NO.: FY25-4.34

2. CONSULTANT NAME: Baker Tilly Advisory Group, LP

3. PERIOD OF PERFORMANCE: START: July 1, 2025 COMPLETION: June 30, 2026

4. TOTAL TASK ORDER PRICE: $59,390

BALANCE REMAINING IN MASTER AGREEMENT/CONTRACT TBD

5. BUDGET CODE_______________ COST CENTER________________ COST ELEMENT______________ WBS/CIP__________ PHASE__________

6. CITY PROJECT MANAGER’S NAME & DEPARTMENT:

Lydia Kou, Chair of the City Council’s Policy and Services Committee

8. ATTACHMENTS: A: Task Order Scope of Services B (if any): N/A I hereby authorize the performance of the work
described in this Task Order.

APPROVED:

The following deliverables will be prepared as part of this engagement:
•Annual Status of Audit Recommendations Report
•Policy & Services Committee Report Presentation
Schedule of Performance
Anticipated Start Date: July 1, 2025
Anticipated End Date: June 30, 2026
Maximum Compensation Amount and Rate Schedule
The not-to-exceed maximum, inclusive of reimbursable expenses (as summarized below) for this Task is $18,255.

The not-to-exceed budget is based on an estimate of 90 total project hours, of which a minimum of 10 are estimated to be completed by the City Auditor.

Palo Alto City CouncilJune 17, 2025

Palo Alto City Council
June 17, 2025