PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #9.K
SUBJECT/TITLE:
AUTHORIZE THE CITY MANAGER TO ENTER INTO AN AGREEMENT WITH
BADAWI & ASSOCIATES TO PROVIDE PROFESSIONAL FINANCIAL AUDITING SERVICES IN THE AMOUNT OF $123,568 FOR THE CITY OF PISMO BEACH FOR FISCAL YEARS 2022 THROUGH 2024
RECOMMENDATION:
Adopt a Resolution authorizing the City Manager to enter into an agreement with Badawi & Associates to provide professional financial auditing services in the amount of $123,568 for the City of Pismo Beach for Fiscal Years 2022 through 2024.
EXECUTIVE SUMMARY:
The City of Pismo Beach hires a professional financial auditing firm to audit and prepare the City’s financial statements and assist staff with various accounting issues throughout the year. In accordance with Government Code 12410.6(b) it is best practice to rotate auditors every six years to maintain independence of the auditor and the client. The City was in its fifth year with its financial auditing firm, but due to restructuring of the auditing firm including shifting away from auditing government entities, the City was forced to select a new auditing firm a year earlier than anticipated. Staff released a Request for Proposals for professional financial auditing services and from that process has selected Badawi & Associates as the City’s financial auditors. Staff recommends that the Council adopt a Resolution (Attachment 1) to authorize the City Manager to enter into an agreement with Badawi & Associates to provide professional financial auditing services for the City of Pismo Beach for Fiscal Years (FY) 2022 through 2024.
Background
The City contracted with the auditing firm Teaman, Ramirez and Smith Inc (TRS) for financial auditing services from FY 2018 through FY 2021. TRS has performed well for the City in the four years that it has been the City’s financial auditor. With the efforts of City leadership including the City Council and key staff, the City has continued to receive the prestigious Government Finance Officers Association (GFOA) Award for Excellence in Financial Reporting.
Effective January 1, 2013, during FY 2014, Government Code Section 12410.6 (California Assembly Bill 1345) was enacted to limit a local agency from contracting with public accounting firm and audit partner having primary responsibility for more than six consecutive fiscal years. This Government Code requirement helps to maintain independence between the auditor and the client relationship. The City is under the six- year time frame by two years due to TRS’s restructuring, including TRS’s shifting away from auditing government entities. Consequently, the City was forced to select a new auditing firm a year earlier than anticipated and go through the Request for Proposal (RFP) process a year earlier.
9.K-1Council Agenda 6-7-2022
Request for Proposal Process
On March 3, 2022, City staff released an RFP for professional financial auditing services with a deadline to submit proposals by April 15, 2022. This proposal was advertised in the New Times on March 3, 2022 and March 10, 2022. In addition, the proposal was posted on the California Municipal Finance Officer’s (CSMFO) website for over four weeks, along with the City’s website for Bid Postings and RFPs from March 3, 2022 through April 15, 2022. Although the City received questions about the RFP from multiple firms, only one proposal was ultimately submitted. The proposal was reviewed by a committee consisting of the Administrative Services Director, Finance Manager, and Senior Management Analyst. The proposal was rated according to the specifications identified in the Request for Proposals. The firm was interviewed, references were obtained, and a final selection was made on May 20, 2022. The firm of Badawi & Associates was selected.
Badawi & Associates
The firm of Badawi & Associates is located in Berkeley, California. The firm specializes in government audits with 70-75% focused on municipal clients. Mr. Ahmed Badawi has performed financial and compliance nonprofit and governmental audits for almost 25 years. The audit for the City will be conducted by the following full-time audit staff: 1 – Municipal Partner, 1 – Audit Manager, 1 – Senior Accountant, and 2 – Professional Audit Staff members and 1 – Engagement Quality Reviewer.
Badawi & Associates has numerous current and prior municipal clients, with the closest to Pismo Beach including the Cities of San Luis Obispo, Solvang, Guadalupe, Berkeley, Oakland, and San Mateo.
Additional Services
In addition to auditing services, Badawi & Associates can also provide the City with the preparation of two of the most time-consuming required annual reports to the State Controller's Office, as the reports use information from the audit. Based on the quote, the time saved by staff to prepare these two reports (on fiscal activity relating to streets, and on overall financial transaction activity), and the available budget, staff recommends including these additional services in the City’s agreement.
Conclusion and Recommendation
Staff recommends that the Council adopt a Resolution (Attachment 1) to authorize the City Manager to enter into an agreement with Badawi & Associates to provide professional financial auditing services in the amount of $123,568 for the City of Pismo Beach for Fiscal Years (FY) 2022 through 2024.
FISCAL IMPACT:
The fiscal impact of approving the attached Resolution and contract with Badawi & Associates is an annual cost ranging from $39,985 to $42,413 for a total contract amount of $123,568 over the three-year term of the contract. The proposed contract would be effective from July 1, 2022 through June 30, 2025, and includes the option to renew for two additional one-year terms through June 30, 2027. This total contract amount includes
9.K-2Council Agenda 6-7-2022
the auditing services and the additional services to prepare the State Controller’s reports.
The annual costs by the fiscal year audited are listed below:
Table 1: Service Costs by Fiscal Year
Fiscal Year Audited Annual
Cost
Additional
Reporting
Total Cost
FY 2022 $35,985 $4,000 $39,985
FY 2023 37,050 4,120 41,170
FY 2024 38,170 4,243 42,413
Three-Year Total $111,205 $12,363 $123,568
FY 2025 (optional year) 38,170 4,243 42,413
FY 2026 (optional year) 38,170 4,243 42,413
The City’s General Fund, Local Transportation Fund, Lodging Business Improvement District Fund; and Water, Wastewater, and Parking Enterprise Funds includes sufficient budget authority in FY 2023 to support the first year of the contract.
Note that the cost of the audit occurs in the following fiscal year that is being audited. For example, the cost of the first-year audit occurs in FY 2023 while the audit being performed is for FY 2022.
ALTERNATIVES:
1. Do not approve the agreement.
2. Provide alternative direction to staff.
ATTACHMENTS:
1. Resolution
1.A. Exhibit A to Resolution – Badawi & Associates Proposal
1.B. Exhibit B to Resolution – Fee Schedule
2. Auditor Agreement
Prepared by: Vanessa Garris, Finance Manager Meeting Date: June 7, 2022 Submitted by: Nadia Feeser, Administrative Services Director City Manager Approval:
9.K-3Council Agenda 6-7-2022
RESOLUTION NO. R-2022-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA AUTHORIZING THE CITY MANAGER TO ENTER INTO AN
AGREEMENT WITH BADAWI & ASSOCIATES TO PROVIDE PROFESSIONAL FINANCIAL AUDITING SERVICES IN THE AMOUNT OF $123,568 FOR FISCAL YEARS 2022 THROUGH 2024
WHEREAS, the City of Pismo Beach hires a professional financial auditing firm to audit and prepare the City’s financial statements and assist staff with various accounting issues throughout the year; and
WHEREAS, Government Code 12410.6(b) requires municipalities to rotate auditors every six years to maintain independence of the auditor and the client; and WHEREAS, staff released a Request for Proposal (RFP) for professional financial auditing services on March 3, 2022; and
WHEREAS, staff received and a committee reviewed and evaluated the proposal in accordance with the evaluation criteria outlined in the RFP, including interviewing the firm and checking references; and
WHEREAS, staff selected Badawi & Associates as the City’s new professional auditing firm based on the firm’s extensive experience in the field and feedback received from its municipal client references; and
WHEREAS, the new contract is effective from July 1, 2022 through June 30, 2025, and has options to renew for two additional one-year terms; and WHEREAS, the FY 2023 City budget has sufficient funds in the various funds to support the first year of the contract for these services.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby authorizes the City Manager to enter into an agreement with Badawi & Associates, to provide professional auditing services for the total contract amount of $123,568 from July 1, 2022 to June 30, 2025, with options to renew for two additional one-year terms, in accordance with the proposal attached as Exhibit A.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 7th day of June 2022, by the following vote:
AYES:
NOES:
ABSENT:
Attachment 1
9.K-4Council Agenda 6-7-2022
ABSTAIN:
RECUSED:
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
Attachment 1
9.K-5Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
21 The City desires an audit of the financial records for the City and an expression of an opinion in accordance with generally accepted accounting principles on the fairness of presentation of financial statements for the fiscal years ending June 30, 2022 through 2024, with the option of extending the contract for each of the two (2) subsequent fiscal years.
The Firm will:
x Express an opinion on the fair presentation of its basic financial statements which includes but is not limited to the financial statements of governmental activities, the business-type activities, each major fund and all aggregate remaining fund information in conformity with generally accepted accounting principles in the United States of America.
x Express an "in-relation-to" opinion on the fair presentation of its combining and individual non-major and fiduciary fund financial statements and schedules in conformity with generally accepted accounting principles. The Firm will provide an “in-relation-to” report on the supporting schedules contained in the Annual Comprehensive Financial Report based on the auditing procedures applied during the audit of the basic financial statements and schedules.
x Provide an “in-relation-to” report on the schedule of expenditures of federal awards based on the auditing procedures applied during the audit of the financial statements. x Perform the audit in accordance with generally accepted auditing standards accepted in the United States of America, applicable to the financial audit contained in the Government Auditing Standards issued by the Comptroller General of the United States and the provisions of the Uniform Guidance, Audits of States, Local Governments and Non-Profit Organizations.
x Perform limited procedures on supplementary information required by the Government Accounting Standards Board.
x Issue the following reports, following the completion of the audit of the fiscal year’s financial statements:
¾ Independent Auditor’s Report on Financial Statements and Schedule of Expenditure of Federal Awards
¾ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
¾ Independent Auditor’s Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with the Uniform Guidance
¾ Schedule of Findings and Questioned Costs
¾ Auditor’s Communication with Those Charged with Governance ¾ Annual Comprehensive Financial Report following the requirements and guidelines of the GFOA award program
¾ GANN Limit Agreed-upon Procedures
¾ Transportation Development Act (TDA) Compliance Report x Provide special assistance to the City as needed.
x Retain all working papers and reports at the audit firm’s expense for a minimum of 7 years. In addition, make working papers available to the City and/or any government agency as appropriate.
Should any conditions be discovered requiring corrective action, the Firm will provide a detailed description of the findings and recommended actions as to their resolution.
Understanding
of Services to be
Provided
Attachment 1A
9.K-6Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
22 The Firm will submit a report to the City’s Council and management detailing auditor’s responsibility under generally accepted auditing standards, significant accounting policies, management judgments and accounting statements, significant audit adjustments, other information in documents containing audited financial statements, disagreements with management, management consultations with other accountants, major issues discussed with management prior to retention, difficulties encountered during the audit, and any significant deficiencies or material weaknesses found during the audit. Non-material instances of noncompliance will be reported in a separate management letter, if appropriate, along with any other observations or recommendations determined to be informative to City Management.
The Firm will be available to provide advice and counsel regarding significant matters during the year.
The Firm’s Partner and Staff welcome the opportunity to make presentations to the City Council and will be ready to respond to questions from the Council and citizens of the City.
Objectives of Our Services
The basic objective of our audit of the City is to conduct an examination of the financial statements in accordance with generally accepted auditing standards and to express our opinion on the fairness of presentation of such financial statements in conformity with generally accepted accounting principles.
Additionally, we believe that another real value of our audit lies in meeting other objectives at no additional cost. The following are other objectives of our services that have important benefits to the City:
x To offer substantive observations and recommendations relating to accounting and operating control policies and procedures.
x To identify opportunities for operating efficiencies and isolate candidate activities for cost reduction opportunities.
x To perform a professional audit in an efficient and effective way to minimize disruption to the office operations.
x To offer ongoing advisory services to assist in the running of the operation and implementation of improved operating procedures.
The engagement will be conducted within the framework of the Firm's quality control program which includes the use of audit programs, careful planning, use of computerized audit software and internal control evaluation and documentation software, and objective review procedures.
On-site staff will use Firm supplied portable computers and printers.
Audit Approach
The specific audit approach has been designed to efficiently and effectively address the audit requirements of the City, to perform the audit of the City’s financial records in a timely manner with minimal disruptions to office operations, and to meet the City’s timeline.
The audit will be conducted in accordance with:
1) Generally accepted auditing standards established by the AICPA. 2) The standards contained in Government Auditing Standards issued by the GAO. 3) Provisions of the Single Audit Act and the Uniform Guidance. 4) Requirements issued by the California State Controller’s office. 5) Other requirements as required.
Specific Audit
Approach
Attachment 1A
9.K-7Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
23 We will conduct the necessary audit steps to perform:
x Planning of the engagement
x Evaluation of the existing internal control environment to determine degree of risk of material misstatement
x Determination of degree of compliance with laws, regulations, grant provisions, and City approved policies
x Assessment of potential fraudulent issues
x Validation of account balances
x Verification of reasonableness of management estimates Technical Approach
We use an industry specific audit approach tailored to governmental entities. Our governmental audit approach addresses the special risks and circumstances of local governments. As a result, the audit is conducted efficiently and effectively with minimal disruption to your staff.
The core of our governmental technical audit approach can be summarized as follows:
1. Planning, Understanding and Communication:
Based on our previous audit experience, using the budget, organizational charts, manuals and other financial information systems and our knowledge of how governments work, we will obtain an insight to the specific concerns and sensitivities of the City. Our understanding is updated continuously through our year-round contact and communication efforts. We will agree on common audit objectives and expectations with management before audit work begins and, throughout the audit, will meet regularly with management to discuss audit issues and to gather feedback.
2. In-Depth Review of Systems and Controls:
We have developed diagnostic reviews which enable us to evaluate your systems and controls, and to provide management with constructive feedback. Combined with our knowledge of the City and understanding and experience with the City’s accounting software, our control review will form the basis of our audit risk assessment. We will utilize the COSO approach in our evaluation of the City’s internal processes to identify potential control deficiencies. In future years, we will update our understanding through similar procedures.
3. Risk-Based Customized Testing Program:
Our audit approach is tailored to governmental applications. We will use audit programs specifically designed to address the operational environment of governmental entities. Our approach will identify potential control risks and the opportunities for risk of material misstatements and fraud. We will evaluate the various risk assessments and identify the potential risks relating to the:
x Balance Sheets / Statement of Net Position
x Statement of Revenues and Expenditures / Statement of Activities x Presentation
x Disclosure
Our audit procedures will then be developed to address these risk areas.
4. Expanded Interim Fieldwork:
Timeliness and audit efficiency is enhanced by performing extensive interim work.
Partners, managers and senior staff work with City staff to identify and resolve potential audit issues early. Accordingly, the amount of audit work to perform at year end is minimized. Because our audit staff is familiar with the operations before year-end fieldwork begins, disruption of accounting staff is minimized.
Attachment 1A
9.K-8Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
24 5. Smooth Transition:
Our testing program focuses on audit risks identified by our understanding of the City’s operations. We will work with the accounting staff to identify the most effective ways to address our objectives. Communication between the members of the audit engagement team and City staff will be fluid and continuous.
6. Sample Size and Sampling Techniques:
Our audit approach will include sampling activities. Population size and the level of assurance to be derived from a particular test will dictate the sample size. We use sampling in our audit approach to compliment skilled judgment and knowledge of the particular situation. Our sample size will range normally from 25 to 60 items.
7. Automated Systems:
We will evaluate controls over the IT functions to assess control risk. We intend to test controls for purposes of reliance. Our review procedures will evaluate controls over:
x Security Management
x Logical and Physical Access
x Configuration Management
x Segregation of Duties
x Contingency Planning
In addition, we will review controls over:
x Input, processing, output, master data
x Application interface
x Data management system interface
8. Analytical Procedures:
We use analytical procedures in several aspects of our audit. Extensive knowledge and industry background are required for effective analytics, and our staff possesses the appropriate experience and knowledge for the City to benefit from these procedures.
9. Approach to be Taken in Determining Laws and Regulations Subject to Audit Test Work:
We continuously refer to specific regulations, compliance supplements, state guidelines and contracts currently in force. We perform the procedures required related to laws and regulations, using inquiries, observations and sampling techniques. Some of the laws and regulations that we believe may be applicable to the City are the requirements of the California Public Utilities Commission, Single Audit Act and other applicable laws and regulations, including the California Government Code, provisions of applicable Grant guidelines, California Constitution GANN Limit requirements, requirements of local measures, Child Care Program compliance requirements, etc.
10. Report Format:
We will meet with City Management to review report formats. Any report format changes will be made in conjunction with approval from City Management.
11. Work Plans:
The detailed work plans will be designed to efficiently and effectively address the audit requirements of the City in accordance with generally accepted auditing standards, to perform the audit of the City’s financial records in a timely manner with minimal disruptions to office operations, and to meet the City’s timeline.
Attachment 1A
9.K-9Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
25 12. Adjusting Journal Entries:
We will discuss and explain proposed audit adjusting entries with the City’s designated Finance Department personnel prior to recording. Audit adjusting entries will be provided in a format showing the lowest level of posting detail needed for data entry on the City’s general ledger system.
13. Listing of Schedules and Tables (anticipated to be prepared by the City):
Based on preliminary inquiries made with management and City staff and review of documents, we will tailor a list of schedules, tables, and other reconciliations required for the audit. We will take into account as much as possible reconciliations already prepared by the City for day to day operations and reporting, as well as any reports that are system generated to limit the need for additional City staff hours.
The following is a listing of some of the significant reconciliations and schedules that we would normally expect the City to provide to us in assisting us in conducting our fieldwork. x Trial Balance
x Annual Comprehensive Financial
Report Account Roll Up
Schedules
x Budget to Actual Reports
x Bank Reconciliations
x Listing of manually prepared
journal entries posted
x Summary of Investments held by
the City
x Capital Asset Schedules
x Long Term Debt Schedules
x Debt amortization schedules &
Calculations of deferred amounts
x Calculations of any debt
covenants amounts or
percentages
x Schedule of Leases
x Schedule of Expenditures of
Federal Awards
x Analysis of Deferred Inflows of
Resources an Deferred Outflows
of Resources
x Reconciliation of Receivables to
subsidiary ledgers
x Calculations for estimate of
allowance for uncollectible
accounts
x Loans Receivable Schedules
x Reconciliation of Significant
Revenue Accounts
x Utility billing Registers and Fee
schedules
x Compensated Absences
Schedules and Copies of Related
Policies
x Claims Payable Schedules
x Pension and OPEB Roll Forward &
Supporting Schedules
x GASB 54 Fund Balance Roll
Forward Schedule
x Interfund Transaction Schedules
Attachment 1A
9.K-10Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
26 The Firm maintains a variety of specialized software packages during the audit that enable us to perform an efficient, thorough, and timely audit and keeping time demands on City staff to a minimum.
Trial Balance Management and Financial Statement Preparation ProSystem Fx Engagement allows us to import and manage multiple years of trial balance data including budgetary information, create multiple account groupings, generate reports, post journal entries proposed during the audit (including GASB 34 conversion entries), and link information directly to the financial statements. This gives us the ability to:
¾ Generate immediate trend and other comparative analysis of trial balance and budget data prior to the start of the audit. This allows us to identify potential issues and make inquiries early in the audit
¾ Link the financial statements and footnotes prior to the start of the audit allowing us to have majority of the financial statements (including budgetary comparison schedules and other supplementary information) prepared at the time the trial balance is uploaded
¾ Audit adjustments or City adjustments provided during the audit are automatically reflected in the financial statements
Audit Request Management and Document Exchange
CCH Engagement Organizer (“Organizer”) is a virtual “Prepared by Client (PBC) List” that streamlines the process of requesting, receiving, and keeping track of documents. The Organizer is an integrated cloud-based request list that helps to facilitate the engagement through more seamless collaboration between the Firm and our clients. By utilizing the Organizer, the City can do all of the following in one secure virtual environment:
¾ Attach files of any type to document requests
¾ Easily track the status of document requests that are either pending, completed by the City, accepted by us, or rejected by us
¾ Access templates and documents from us that require completion ¾ Have multiple City staff get involved and assist in the audit process ¾ Participate in a dialog with us for questions and notes Especially with having to perform a large part of the audit remotely in 2020, and anticipated for the upcoming year, we have found that the use of the Organizer has helped our clients be always informed as to the status of their audit, and not be surprised with new requests or follow up on outstanding requests previously provided.
Computer Aided Audit Tools (CAATs)
The Firm’s data analytics software enables our Engagement Team to perform more than 150 Computer Aided Audit Tools (or “CAATs”). CCH Teammate Analytics gives us the ability to perform advanced data analysis and increase efficiency. By utilizing this software, we can:
¾ Immediately visualize and analyze 100% of account populations with graphs, charts and statistics to identify anomalies
¾ Make fewer sample selections that are targeted to problematic areas ¾ Quickly analyze transactional data for:
o Duplicate records
o Missing transactions
o Transaction sequence
o Unusual items
¾ Compare excel worksheets for changes or differences
¾ Generate immediate testing samples
¾ Perform regression analysis
¾ Filter and extract data from City reports
Use of
Technology in
the Audit
Attachment 1A
9.K-11Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
27 Audit Planning, Risk Assessment, and Audit Programs
Our firm utilizes CCH Knowledge Coach, which is an expert system that adapts and customizes our audit approach specifically based on the City’s structure, operating environment, specific transactions, and identified risks or matters to be addressed in the audit.
The software is frequently updated for new industry trends and audit requirements. Included in the software is a continuous diagnosis of audit forms that identifies missing information, procedures, or any conflicts that need to be addressed prior to issuance of the audit report.
We have found that this audit tool greatly benefits our audit clients in the following ways:
¾ Removal of standardized audit steps and procedures that do not add value to the audit ¾ Targeted audit procedures focusing on risks and accounts specific to the City’s operations
¾ Audit is always performed in accordance with audit standards especially the risk assessment standards
¾ Maximizing audit efficiency having less City staff time dedicated to gathering information or responding to inquiries by focusing on material issues ¾ Automatic self-diagnostics ensure no audit steps are missed, guaranteeing a quality audit
Research Tools
We maintain multiple research software packages that are always kept up to date to ensure compliance with accounting and auditing standards, and are also a resources for us to provide guidance to our clients. In addition to accounting and audit literature, we have access to interactive disclosure checklists that include sample footnote disclosures and financial statements.
Attachment 1A
9.K-12Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
28 Due to the COVID-19 pandemic, we have had to adapt to a new environment that had brought on challenges for both our clients and our firm, which we were able to overcome successfully and continue to discuss with our clients on improvements we can make for addressing any concerns. Remote auditing has not been new to our firm, as we had already implemented remote auditing procedures for a few of our distant clients. Below are the policies and methods we used to address limitations created by the pandemic, which we plan to continue to incorporate partially or completely in future contract periods, if these are preferred to the traditional audit process:
¾ Staff Interviews and Meetings are conducted via video conferencing software (either Zoom or other software used by the City).
¾ Earlier transmission of documents needed for the audit – We have always provided our request list for the audit timely, however we have found that additional time may be needed by City staff in gathering documents necessary for the audit; so we plan on providing the City with a complete list of documents for all phases of the audit no later than one month prior to the start of the interim fieldwork. ¾ More frequent and timelier communication – We have found that due to not having on- site presence, communication for the audit needs to be more intentional:
o We request that certain documents that will be used to make samples (expenditure reports, census data, revenue detail, journal entry listings, other) be provided one week prior to our fieldwork start date. This allows more time for testing selections that we will need to be provided to us during our fieldwork time. o The CCH Organizer that we use for exchanging files described in detail on page 26, is updated frequently and displays the status of all requests during the audit.
Documents will either be classified as pending, completed, accepted, or rejected. o As needed status meetings by video conference
o Phone calls and/or emails can be made anytime to the audit team o After the end of interim and year end fieldwork, we will conduct an exit meeting to discuss the status of the audit, audit findings, new accounting pronouncements and any other topic significant to the audit to keep you informed as to what was accomplished and what are the pending matters.
¾ We understand that every agency operates differently and being flexible is important.
With regard to reviewing documents for testing, we can review documents electronically if they can be scanned and uploaded, alternatively we can schedule a day visit to review them on-site provided there are mandates restricting a site visit and safety precautions are followed. If a site visit is needed, we would request documents be gathered for our review in advance to minimize our time needed to mitigate transmission risk.
If possible, we have found that being provided read-only access to the financial system and any other financial system used to store information relevant to the audit reducing City staff time needs, as the audit team is able to run reports and obtain information independently.
Firm’s
Capability to
Work
Remotely
Attachment 1A
9.K-13Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
29 2022
Period
Audit Tasks
June
- Planning and Administration
f Review and obtain copies of key work papers of prior audit firm. f The entrance conference shall be held with City staff. The purpose of this meeting will be to discuss prior audits and the interim work to be performed. This meeting will also be used to establish overall liaison for the audits and to make arrangements for work space and other needs
f Review and evaluate the City's accounting and financial reporting.
Prepare an overall memo of recommendations, potential issues, and suggestions for improvements
f Prepare overall memo to the City confirming audit procedures, timing, and assistance
f Prepare detailed audit work plan and audit programs, audit budget and staffing schedule, and list of schedules to be prepared by the City staff
f Send the Organizer to the City that will include all request items considered to be necessary for the audit
July
- Internal Control Evaluation
f Meeting with City Manager and Department Heads of other departments with large operating budgets or which have significant federal grant expenditures
f Attending City Council meetings
f Meeting with off-site locations
f Meeting with key Finance Department personnel
f Obtain and document understanding of key internal control systems through walk-throughs, interviews of staff, and review of supporting documentation
o General ledger system
o Budgeting system
o Revenue, utility billing, accounts receivable, and cash collections
o Purchasing, expenditures, accounts payable, and cash
disbursements
o Payroll
o Federal Financial Assistance
o Other systems
f Identify control risks
f Evaluate IT control environment
f Perform testing of the internal control system and evaluate the effectiveness of the City’s systems. Select large dollar and random samples of transactions in key operating systems. Sample size to meet required level for determined degree of risk. Review supporting documentation of selected transactions, evaluate adequacy of support and approvals, and conclude on degree of adherence to accuracy and compliance with City policies f Conduct fraud assessment procedures
f Assess degree of risk for material misstatement
f Provide to the City’s management a memo concerning
management letter points and identify issues, if any
Audit
Schedule
Attachment 1A
9.K-14Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
30 2022
Period
Audit Tasks
July - Other Tasks
f Review minutes of City Council meetings and other key committees f Perform preliminary substantive procedures, which would include tests of:
o Vendor and contractor payments
o Payroll expense
o Utility billing
o Pension and OPEB testing
o Capital asset acquisitions
o Journal entries
o Retrospective review of accounting estimates
f Financial statement database management and other setup, in addition to drafting of all necessary report templates
f Preliminary Single Audit and other compliance testing f Coordinate with City staff and prepare of all appropriate confirmation requests including:
o Bank accounts
o Investment pool accounts
o Accounts receivable
o Federal grants
o Revenue from governmental agencies
o Bond and other debts
o Pension plan
o Attorney letters
o Others, as required
f Update the Organizer with any additional requests that will be needed for the City's audit
f Provide the City with audit plan and list of year-end audit schedules f Hold progress conference with City Management
f Hold exit conference with City Management
October
- Final Fieldwork
f Entrance conference with City Management
f Follow-up on all outstanding confirmations
f Verify and validate account balances by reviewing supporting documentation including invoices, vouchers, council resolutions, minutes, and other documents, as required
f Perform analytical review of revenue and expenditures. Determine reason for material differences between budget and actual f Perform a search for unrecorded liabilities by reviewing disbursements subsequent to June 30, testing terms of contractual obligations, and interviewing City staff
f Perform review of subsequent events by discussions with City Management and update all minutes of City Council and key committees
Attachment 1A
9.K-15Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
31 2022
Period
Audit Tasks
- Single Audit Compliance
f Entrance conference with City Management
f Obtain Federal Financial Assistance Schedule
f Determine grants to be considered as major programs including clusters
f Perform audit tests of major grant programs and compliance with Federal Law and Regulations
f Review grant documents, select sufficient number of transactions to test for compliance of Federal Requirements
f Coordinate Single Audit efforts with the Financial Audit efforts f Communicate findings to City Management
f Other Compliance
November
- Audit Reports
f Complete drafts of City’s Annual Comprehensive Financial Report f Prepare draft of Single Audit Reports concerning internal control structure, compliance with laws and regulations, and administering of federal financial assistance programs
f Prepare other reports as required
f Provide revised final drafts of all required reports to the City for approval no later than November 18, 2022
December
- Final City Audit Reports, Financial Statements, and other reports delivered by no later than December 9, 2022
- Final Single Audit Reports delivered
- Audit Presentation to Council
January 2023
- Single Audit Report package submitted to Federal Audit Clearinghouse
Estimated Hours by Audit Phase
Position Planning
Interim
Fieldwork
Year End
Fieldwork Reporting Total
Partner 7 17 12 3 39 Audit Manager 6 28 30 4 68 Audit Senior 12 45 48 6 111 Professional Audit Staff - 75 69 8 152 Administrative Assistant 4 7 - 8 19 Total 29 172 159 29 389 Attachment 1A
9.K-16Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
32 Identification of Anticipated Potential Audit Problems We do not anticipate that there will be any audit problems at the City. However, the following are some areas that we will carefully investigate and monitor during our audit procedures:
x Financial Reporting:
¾ Review and evaluate that the City’s Annual Comprehensive Financial Report are in compliance with current reporting and disclosures requirements issued by the GASB and GFOA.
¾ Review Annual Comprehensive Financial Report for financial reporting conformance awards issued by CSMFO and GFOA.
¾ Review and evaluate degree of compliance with the various GASBs in effect. ¾ Review degree of compliance with infrastructure obligations and regulatory provisions.
x Internal Control Structure:
¾ Review and evaluate the City’s internal control functions and ascertain compliance with proper internal control philosophies.
¾ Review computer system processes and controls and evaluate adequacy of the control environment.
Several new GASB pronouncements will become effective over the time period of this proposal. As such, specific attention will be provided to determine the proper implementation of these new pronouncements. A list of known new pronouncements with implementation dates that fall within this proposal period are as follows:
2022
x Statement 87 – Leases
x Statement 89 – Construction-period Interest
x Statement 92 – Omnibus (multiple effective date)
x Statement 93 – LIBOR Removal and Lease Modifications
x Statement 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans
2023
x Statement 91 – Conduit Debt
x Statement 94 – Public-private Partnerships
x Statement 96 – Subscription-Based Information Technology Arrangements
Discussion of
Relevant
Accounting
Issues
Attachment 1A
9.K-17Council Agenda 6-7-2022
City of Pismo Beach Technical Proposal
33 A client relationship with the City will be of great value to our Firm and we welcome the opportunity to develop a long-term relationship with the City. We are committed to:
x Rendering the highest standard of service
x Developing a long-term working relationship dedicated to meeting the needs of the City x Assisting the City in operational issues
x Producing a quality end-product
We have the technical qualifications and experience to provide the level of service desired and expected by the City and stand ready to provide our knowledge and experience for the benefit of your organization.
We would like to express our appreciation to the City and to its Staff for allowing us the opportunity to submit a proposal to perform professional auditing services. We are available, at your convenience, to discuss any aspects of our proposal.
Thank you for allowing us to present our Firm to you.
* * * * * * * * * * * * * * * * *
Conclusion
Attachment 1A
9.K-18Council Agenda 6-7-2022
City of Pismo Beach Cost Proposal
2 SUMMARY SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
2024-25 2025-26
Financial Statements Audit 27,135$ 27,890$ 28,465$ 28,465$ 28,465$ Single Audit 3,620 3,690 3,910 3,910 3,910 GANN Limit Agreed-upon Procedures 665 735 780 780 780 TDA Financial Statements 4,565 4,735 5,015 5,015 5,015 Total 35,985$ 37,050$ 38,170$ 38,170$ 38,170$
Optional Years
2023-242022-232021-22Service
City's Financial Statements Audit Hourly Rates Total Hours Total Partner 150$ 29 4,350$ Audit Manager 120 51 6,120 Audit Senior 85 84 7,140 Professional Audit Staff 75 115 8,625 Administrative Assistant 60 15 900 Subtotal 294 27,135$
Meals and Lodging -
Transportation -
Report Preparation, Word Processing, and Printing
(if requested by the City)-
Total 27,135$
Single Audit
Quoted
Hourly
Rates Hours
Quoted
Fee
Partner 150$ 4 600$ Audit Manager 120 7 840 Audit Senior 85 11 935 Professional Audit Staff 75 15 1,125 Administrative Assistant 60 2 120 Total all inclusive maximum price for 2022 audit 39 3,620$ Meals and Lodging -
Transportation -
Report Preparation, Word Processing, and Printing
(if requested by the City)-
Total 3,620$
DETAIL SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR FISCAL YEAR 2021-22 ONLY
Attachment 1B
9.K-19Council Agenda 6-7-2022
City of Pismo Beach Cost Proposal
3 GANN Limit Agreed-upon Procedures
Quoted
Hourly
Rates Hours
Quoted
Fee
Partner 150$ 1 150$ Audit Manager 120 1 120 Audit Senior 85 2 170 Professional Audit Staff 75 3 225 Administrative Assistant 60 - - Total all inclusive maximum price for 2022 audit 7 665$ Meals and Lodging -
Transportation -
Report Preparation, Word Processing, and Printing
(if requested by the City)-
Total 665$
TDA Financial Statements
Quoted
Hourly
Rates Hours
Quoted
Fee
Partner 150$ 5 750$ Audit Manager 120 9 1,080 Audit Senior 85 14 1,190 Professional Audit Staff 75 19 1,425 Administrative Assistant 60 2 120 Total all inclusive maximum price for 2022 audit 49 4,565$ Meals and Lodging -
Transportation -
Report Preparation, Word Processing, and Printing
(if requested by the City)-
Total 4,565$
Grand Total 35,985$
DETAIL SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR FISCAL YEAR 2021-22 ONLY (Continued)
Attachment 1B
9.K-20Council Agenda 6-7-2022
City of Pismo Beach Cost Proposal
4 Manner of Payment:
Each Engagement Team member maintains detailed time sheets describing work performed, date of work, and amount of time spent on each task for the Engagement. The Firm will bill the City after completion of each phase of the audit and bill the City up to a maximum of 90%. The remaining 10% of the proposal amount will not be due until all final reports are delivered and accepted by the City. The City can anticipate three billings as follows:
Work Performed
% of Proposal
Amount
For interim work 45%
For year-end work 45%
At presentation and acceptance of final reports 10%
Total 100%
Rates for Additional Professional Services:
Any services outside the scope of our engagement will be promptly identified before the services are rendered.
Upon mutual agreement, the out-of-scope services will be separately billed at our standard hourly rates. While it can be difficult to simply state hourly rates, as often times the needs of the client and the specific tasks directly impact the billing rates for our services, we want to provide the following information regarding our published billing rates:
Position Hourly Rate
Partner $ 200
EQR 200
Manager 150
Senior 125
Staff 100
Admin. 75
Our Standard Hourly Rates are adjusted annually by 3% for Cost of Living and Inflation Adjustments
Conclusion:
A client relationship with the City will be of great value to our Firm and we welcome the opportunity to develop a long-term relationship with the City. We are committed to:
* Rendering the highest standard of service.
* Developing a long-term working relationship dedicated to meeting the needs of the City. * Assisting the City in operational issues.
* Producing a quality end-product.
We have the technical qualifications and experience to provide the level of service desired and expected by the City and stand ready to provide our knowledge and experience for the benefit of your organization.
We would like to express our appreciation to the City and to its Staff for allowing us the opportunity to submit a proposal to perform professional auditing services. We are available, at your convenience, to discuss any aspects of our proposal.
Thank you for allowing us to present our Firm to you.
* * * * * * * * * * * * * * * * *
Attachment 1B
9.K-21Council Agenda 6-7-2022
May 24, 2022
Ms. Nadia Feeser, Administrative Services Director
City of Pismo Beach
760 Mattie Road
Pismo Beach, CA 93449
We are pleased to present this proposal to prepare the financial statements of the City of Pismo Beach (City) and its street related activities, respectively, to be included in the prescribed forms developed by the State of California State Controller’s Office (prescribed forms) for the fiscal years ending June 30, 2022 through 2024, with the option of extending the contract for each of the subsequent two (2) fiscal years.
The objective of our engagements is to compile financial statements in accordance with the prescribed forms’ basis of accounting based on information provided by you, and to apply accounting and financial reporting expertise to assist you in the preparation of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements in order for them to be in accordance with the prescribed forms’ basis of accounting.
We will conduct our compilation engagements in accordance with Statements on Standards for Accounting and Review Services (SSARs) promulgated by the Accounting and Review Services Committee of the AICPA and comply with the AICPA’s Code of Professional Conduct.
Our fees will be as follow:
Optional Years
Audit Year 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 City SCO Report $2,500 $2,575 $2,652 $2,652 $2,652 Street Report 1,500 1,545 1,591 1,591 1,591
Total $4,000 $4,120 $4,243 $4,243 $4,243
If you have any questions, please feel free to call me at (510) 768-8244.
Sincerely,
Ahmed Badawi, President
Badawi & Associates, CPAs
Berkeley, California
RESPONSE:
This letter correctly sets forth the understanding of the City.
By:
Title:
Date:
Attachment 1B
9.K-22Council Agenda 6-7-2022
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Vendor Agreement (Rev. 2/2/2018)
CITY OF PISMO BEACH
VENDOR AGREEMENT FOR PROFESSIONAL SERVICES
This Vendor Agreement for Professional Services (“AGREEMENT”) is made and entered into as of the date the AGREEMENT is fully executed by all parties (the “Effective Date”), by and between the City of Pismo Beach, a municipal corporation (“CITY”), and Badawi & Associates (“VENDOR”). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows:
RECITALS:
CITY wishes to retain the services of an experienced and qualified VENDOR to provide the following services:
Professional financial auditing services, single audit, Gann limit, Transportation Development Act Compliance, State Controllers’ Office reporting
VENDOR represents and warrants that it is qualified to perform those services.
AGREEMENT:
I. SERVICES TO BE PERFORMED BY VENDOR
VENDOR will provide the services listed in the Scope of Services attached hereto as Exhibit A.
VENDOR warrants that all work and services set forth in the Scope of Services will be performed in a competent, professional and satisfactory manner. Extra work beyond that described in the Scope of Services is not authorized without the express written approval of CITY. VENDOR shall request and receive written approval prior to performing any extra work. Any work beyond that reflected in the approved Scope of Services shall not be compensated by CITY unless prior written approval was provided under this paragraph. CITY’s City Manager may approve additional work not to exceed thirty thousand dollars ($30,000.00). Any additional work in excess of this amount shall be approved by the City Council. To the extent that Exhibit A is a proposal from VENDOR, such proposal is incorporated only for the description of the Scope of Services and no other terms and conditions from any such proposal shall apply to this AGREEMENT unless specifically agreed to by CITY in writing.
II. TERM
Unless earlier terminated in accordance with Section IV below, or unless the Scope of Services are substantially completed, the AGREEMENT will continue in full force and effect from the Effective Date through June 30, 2025. Upon mutual written agreement, the term of this AGREEMENT can be extended annually under the same terms for an additional one (1) year period, up to two years, ending June 30, 2027.
III. COMPENSATION
A. VENDOR’s Fee
For services rendered pursuant to this AGREEMENT, VENDOR will be paid in accordance with the Compensation Schedule attached hereto as Exhibit B. However, in no event will the total amount of money paid VENDOR, for services initially contemplated by this AGREEMENT and associated expenses, exceed the sum of one hundred twenty-three thousand five hundred sixty-eight dollars ($123,568.00) over three years, unless otherwise first approved in writing by CITY. Should this AGREEMENT be extended pursuant to Section II, VENDOR’s 2 of 12
Vendor Agreement (Rev. 2/2/2018)
fee may be adjusted upon the written agreement of the parties, in the form of an amendment to this AGREEMENT.
B. Schedule of Payment
VENDOR will submit invoices monthly for actual services performed and associated expenses.
Invoices shall be submitted on or about the first business day of each month, or as soon thereafter as practical, for services provided in the previous month. Payment shall be made within thirty (30) days of receipt of each invoice as to all non-disputed fees. If CITY disputes any of VENDOR’s fees it shall give written notice to VENDOR within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice. Any final payment under this AGREEMENT shall be made within forty-five (45) days of receipt of an invoice therefor.
IV. TERMINATION OF AGREEMENT
A. CITY may at any time, for any reason, with or without cause, suspend or terminate this AGREEMENT, or any portion hereof, by serving upon VENDOR at least ten (10) days' prior written notice. Upon receipt of said notice, VENDOR shall immediately cease all work under this AGREEMENT, unless the notice provides otherwise. If CITY suspends or terminates a portion of this AGREEMENT, such suspension or termination shall not make void or invalidate the remainder of this AGREEMENT.
B. In the event this AGREEMENT is terminated pursuant to this Section, CITY shall pay to VENDOR the actual value of the work performed up to the time of termination, provided that the work performed is of value to CITY. Upon termination of the AGREEMENT pursuant to this Section, VENDOR will submit an invoice to CITY pursuant to Section III.
V. FORCE MAJEURE
If any party fails to perform its obligations because of strikes, lockouts, labor disputes, embargoes, "acts of God," inability to obtain labor or materials or reasonable substitutes for labor or materials, governmental restrictions, governmental regulations, governmental control, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform, then that party’s performance shall be excused for a period equal to the period of such cause for failure to perform.
VI. RETENTION OF FUNDS
VENDOR authorizes CITY to deduct from any amount payable to VENDOR (whether or not arising out of this AGREEMENT) any amounts the payment of which may be in dispute or that are necessary to compensate CITY for any losses, costs, liabilities, or damages suffered by CITY, and all amounts for which CITY may be liable to third parties, by reason of VENDOR’s acts or omissions in performing or failing to perform VENDOR’s obligations under this AGREEMENT. In the event that any claim is made by a third party, the amount or validity of which is disputed by VENDOR, or any indebtedness exists that appears to be the basis for a claim of lien, CITY may withhold from any payment due, without liability for interest because of the withholding, an amount sufficient to cover the claim. The failure of CITY to exercise the right to deduct or to withhold will not, however, affect the obligations of VENDOR to insure, indemnify, and protect CITY as elsewhere provided in this AGREEMENT.
Attachment 2
9.K-23Council Agenda 6-7-2022
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Vendor Agreement (Rev. 2/2/2018)
VII. CITY REPRESENTATIVE
The Administrative Services Director is designated as the “City Representative,” authorized to act in its behalf with respect to the work and services specified in this AGREEMENT and to make all decisions in connection with this AGREEMENT. Whenever approval, directions, or other actions are required by CITY under this AGREEMENT, those actions will be taken by CITY Representative, unless otherwise stated. CITY’s City Manager has the right to designate another CITY Representative at any time, by providing notice to VENDOR.
VIII. VENDOR REPRESENTATIVE(S)
The person(s) employed by VENDOR whose name(s) are set forth immediately following the signatures of the parties executing this AGREEMENT are designated as being the representative(s) of VENDOR authorized to act on its behalf with respect to the work specified in this AGREEMENT and make all decisions in connection with this AGREEMENT.
IX. INDEPENDENT CONTRACTOR
VENDOR is, and at all times will remain as to CITY, a wholly independent contractor. Neither CITY nor any of its elected officials, officers, employees or agents will have control over the conduct of VENDOR or any of VENDOR’s employees, except as otherwise set forth in this AGREEMENT and then only as to the results to be accomplished and not the method by which VENDOR provides the Scope of Services. VENDOR may not, at any time or in any manner, represent that it or any of its agents or employees are in any manner agents or employees of CITY.
X. BUSINESS LICENSE
VENDOR must obtain a CITY business license prior to the start of work under this AGREEMENT, unless VENDOR is qualified for an exemption.
XI. OTHER LICENSES AND PERMITS
VENDOR warrants that it has all professional, contracting and other permits and licenses required to undertake the work contemplated by this AGREEMENT.
XII. VENDOR’S ACCOUNTING RECORDS; OTHER PROJECT RECORDS
A. VENDOR shall maintain complete and accurate records with respect to sales, costs, expenses, receipts, and other such information required by CITY that relate to the performance of services under this AGREEMENT. VENDOR shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services.
B. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. VENDOR shall provide free access to the representatives of CITY or its designees at reasonable times to such books and records; shall give CITY the right to examine and audit said books and records; shall permit CITY to make transcripts or copies therefrom as necessary; and shall allow inspection of all work, data, documents, proceedings, and activities related to this AGREEMENT. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment. Upon completion of, or in the event of termination or suspension of this AGREEMENT, all original documents, designs, drawings, maps, models, computer files, surveys, notes, and other documents prepared in the course of providing the
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Vendor Agreement (Rev. 2/2/2018)
services to be performed pursuant to this AGREEMENT shall become the sole property of CITY and may be used, reused, or otherwise disposed of by CITY without the permission of VENDOR. With respect to computer files, VENDOR shall make available to CITY, at VENDOR's office and upon reasonable written request by CITY, the necessary computer software and hardware for purposes of accessing, compiling, transferring, copying and/or printing computer files. Notwithstanding the foregoing sentence, VENDOR’s working audit documentation that contains VENDOR’s materiality calculations, risk assessments and testing thresholds, or other documentation that reveals VENDOR’s audit strategy, shall not become the property of CITY and shall remain the property of VENDOR. VENDOR hereby grants to CITY all right, title, and interest, including any copyright, in and to the documents, designs, drawings, maps, models, computer files, surveys, notes, and other documents prepared by VENDOR in the course of providing the services under this AGREEMENT.
C. All plans, studies, sketches, drawings, reports, and specifications as herein required are the property of CITY, whether the work for which they are made be executed or not. In the event this AGREEMENT is terminated, and at the end of the term of this AGREEMENT, all such plans, studies, sketches, drawings, electronic documentation, reports, and specifications shall be delivered immediately to CITY. VENDOR may retain one copy of each document for VENDOR’S records, but shall have no proprietary rights to them. CITY agrees to indemnify VENDOR against any damages caused by the unauthorized re-use of said documents.
XIII. INDEMNIFICATION
A. Non-design, non-construction Professional Services:
To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8), VENDOR shall indemnify, defend, and hold harmless CITY, and its elected officials, officers, employees, volunteers, and agents (“CITY Indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of VENDOR’s performance or VENDOR’s failure to perform its obligations under this AGREEMENT or out of the operations conducted by VENDOR, including CITY’s active or passive negligence, except for such loss or damage arising from the sole negligence or willful misconduct of CITY. In the event CITY Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from VENDOR’s performance of this AGREEMENT, VENDOR shall provide a defense to CITY Indemnitees or at CITY’s option, reimburse CITY Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims.
B. Non-design, construction Professional Services:
To the extent the Scope of Services involve a “construction contract” as that phrase is used in Civil Code Section 2783, this paragraph shall apply in place of paragraph A. To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8), VENDOR shall indemnify, defend, and hold harmless the CITY, and its elected officials, officers, employees, volunteers, and agents (“CITY Indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of VENDOR’s performance or VENDOR’s failure to perform its obligations under this AGREEMENT or out of the operations conducted by VENDOR, except for such loss or damage arising from the active negligence, sole negligence or willful misconduct of CITY. In the event CITY Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from VENDOR’s performance of this AGREEMENT, VENDOR shall provide a defense to CITY Indemnitees or Attachment 2
9.K-24Council Agenda 6-7-2022
5 of 12
Vendor Agreement (Rev. 2/2/2018)
at CITY’s option, reimburse CITY Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims.
C. Design Professional Services:
In the event VENDOR is a "design professional," and the Scope of Services require VENDOR to provide “design professional services” as those phrases are used in Civil Code Section 2782.8, this paragraph shall apply in place of paragraphs A or B. To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8) VENDOR shall indemnify, defend and hold harmless CITY and its elected officials, officers, employees, volunteers and agents (“City Indemnitees”), from and against all claims, damages, injuries, losses, and expenses including costs, attorney fees, expert consultant and expert witness fees arising out of, pertaining to or relating to, the negligence, recklessness or willful misconduct of VENDOR, except to the extent caused by the sole negligence, active negligence or willful misconduct of CITY. Negligence, recklessness or willful misconduct of any subcontractor employed by VENDOR shall be conclusively deemed to be the negligence, recklessness or willful misconduct of VENDOR unless adequately corrected by VENDOR. In the event CITY Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from VENDOR’s performance of this AGREEMENT, VENDOR shall provide a defense to CITY Indemnitees or at CITY’s option, reimburse CITY Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims. In no event shall the cost to defend charged to VENDOR under this paragraph exceed VENDOR’s proportionate percentage of fault. However, notwithstanding the previous sentence, in the event one or more defendants is unable to pay its share of defense costs due to bankruptcy or dissolution of the business, VENDOR shall meet and confer with other parties regarding unpaid defense costs.
D. Payment by CITY is not a condition precedent to enforcement of the indemnities in paragraph A, B, or C. In the event of any dispute between VENDOR and CITY, as to whether liability arises from the active negligence, sole negligence or willful misconduct of CITY or its officers, employees, or agents, VENDOR will be obligated to pay for CITY’s defense until such time as a final judgment has been entered adjudicating CITY as having been actively negligent, solely negligent or as having engaged in willful misconduct. Except as otherwise required by Civil Code Section 2782.8, VENDOR will not be entitled in the absence of such a determination to any reimbursement of defense costs including but not limited to attorney’s fees, expert fees and costs of litigation. The provisions of this Section 13 shall survive completion of VENDOR’s services or the termination of this AGREEMENT.
XIV. NON-LIABILITY OF CITY OFFICERS AND EMPLOYEES
No elected official, officer, employee, or agent of CITY will be personally liable to VENDOR, in the event of any default or breach by CITY or for any amount that may become due to VENDOR.
XV. INSURANCE
A. Without limiting VENDOR’s indemnification of CITY, and prior to commencement of the Scope of Services, VENDOR shall obtain, provide and maintain at its own expense during the term of this AGREEMENT, policies of insurance of the type and amounts described below and in a form that is satisfactory to CITY.
1. General liability insurance. VENDOR shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office (ISO) form CG 00 01, in an amount not less than $1,000,000 per occurrence, $2,000,000 general
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Vendor Agreement (Rev. 2/2/2018)
aggregate, for bodily injury, personal injury, and property damage. The policy must include contractual liability that has not been amended. Any endorsement restricting standard ISO “insured contract” language will not be accepted.
2. Automobile liability insurance. If VENDOR owns vehicles used in performing the Scope of Services in any manner, VENDOR shall maintain automobile insurance at least as broad as Insurance Services Office (ISO) form CA 00 01 covering bodily injury and property damage for all activities of VENDOR arising out of or in connection with any work to be performed under this AGREEMENT, including coverage for any owned, hired, non-owned or rented vehicles, in an amount not less than $1,000,000 combined single limit for each accident.
3. Workers’ compensation insurance. VENDOR shall maintain Workers’ Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance (with limits of at least $1,000,000), as required by law.
4. VENDOR shall submit to CITY, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of CITY, its officers, agents, employees, and volunteers.
5. Errors and Omissions/Professional Liability. VENDOR shall maintain a policy of professional liability insurance written on a claims-made basis in an amount not less than $1,000,000. VENDOR shall also procure and pay for appropriate tail coverage for a minimum of three years following completion of the Scope of Services to cover any errors or omissions occurring during the Term. In the alternative, VENDOR may elect to obtain equivalent coverage on an occurrence basis. CITY’s Risk Manager or City Attorney may waive the requirement of professional liability insurance if he/she determines that such a policy is not commercially available to VENDOR. If such a policy is commercially available, additional cost to VENDOR in obtaining such a policy shall not be a basis upon which the insurance requirement will be waived.
B. Other provisions or requirements:
1. Proof of insurance. VENDOR shall provide certificates of insurance to CITY as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers’ compensation. Insurance certificates and endorsements must be approved by CITY’s Risk Manager prior to commencement of performance.
Current certification of insurance shall be kept on file with CITY at all times during the term of this contract. CITY reserves the right to require complete, certified copies of all required insurance policies, including endorsements to such policies, at any time.
2. Duration of coverage. VENDOR shall procure and maintain for the duration of the AGREEMENT insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the work hereunder by VENDOR, its agents, representatives, employees, or subconsultants.
3. Primary/noncontributing. Coverage provided by VENDOR shall be primary and any insurance or self-insurance procured or maintained by CITY shall not be required to contribute with it. The limits of insurance required herein may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis for the benefit of CITY before CITY’s own insurance or self-insurance shall be called upon to protect it as a named insured.
Attachment 2
9.K-25Council Agenda 6-7-2022
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Vendor Agreement (Rev. 2/2/2018)
4. CITY’s rights of enforcement. In the event any policy of insurance required under this AGREEMENT does not comply with these specifications or is canceled and not replaced, CITY has the right but not the duty to obtain the insurance it deems necessary and any premium paid by CITY will be promptly reimbursed by VENDOR or CITY will withhold amounts sufficient to pay premium from VENDOR payments. In the alternative, CITY may terminate this AGREEMENT as provided in paragraph IV.
5. Acceptable insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance or is on the List of Approved Surplus Line Insurers in the State of California, with an assigned policyholders’ Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide, unless otherwise approved by CITY’s Risk Manager.
6. Waiver of subrogation. All insurance coverage maintained or procured pursuant to this AGREEMENT shall be endorsed to waive subrogation against CITY, its elected or appointed officials, agents, officers, employees, and volunteers or shall specifically allow VENDOR or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. VENDOR hereby waives its own right of recovery against CITY, and shall require similar written express waivers and insurance clauses from each of its subconsultants.
7. Enforcement of contract provisions (non-estoppel). VENDOR acknowledges and agrees that any actual or alleged failure on the part of CITY to inform VENDOR of non- compliance with any requirement imposes no additional obligations on CITY nor does it waive any rights hereunder.
8. Requirements not limiting. Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance.
Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. If VENDOR maintains higher limits than the minimums shown above, CITY requires and shall be entitled to coverage for the higher limits maintained by VENDOR. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to CITY.
9. Notice of cancellation. VENDOR agrees to oblige its insurance agent or broker and insurers to provide to CITY with a thirty (30) day notice of cancellation (except for nonpayment for which a ten (10) day notice is required) or nonrenewal of coverage for each required coverage. In the event VENDOR’s policy of insurance cannot be endorsed to provide this notice of cancellation, VENDOR shall provide CITY notice of such cancellation, in writing, not later than 24 hours following the effective time of such cancellation.
10. Additional insured status. General liability policies shall provide or be endorsed to provide that CITY and its officers, officials, employees, and agents shall be additional insureds under such policies. This provision shall also apply to any excess/umbrella liability policies. Each such insurance policy shall contain language substantially similar to the following clause:
"The City of Pismo Beach, its elected and appointed officials, officers, employees, and agents are named as additional insureds as respects operations of the named insured performed under contract with the City of Pismo Beach."
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Vendor Agreement (Rev. 2/2/2018)
CITY need not be named as an additional insured on professional liability insurance policies.
11. Prohibition of undisclosed coverage limitations. None of the coverages required herein will be in compliance with these requirements if they include any limiting endorsement of any kind that has not been first submitted to CITY and approved of in writing by CITY’s Risk Manager or City Attorney.
12. Separation of insureds. A severability of interests provision must apply for all additional insureds ensuring that VENDOR’s insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the insurer’s limits of liability. The policy(ies) shall not contain any cross-liability exclusions.
13. Pass-through clause. VENDOR agrees to ensure that its sub-consultants, sub- contractors, and any other party providing any work under the Scope of Services under the direction of VENDOR, provide the same minimum insurance coverage and endorsements required of VENDOR. VENDOR agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this section. VENDOR agrees that upon request, all AGREEMENTS with consultants, subcontractors, and others engaged in performing work under the Scope of Services will be submitted to CITY for review.
14. CITY’s right to revise specifications. CITY reserves the right at any time during the term of the contract to change the amounts and types of insurance required by giving VENDOR ninety (90) days' advance written notice of such change. If such change results in substantial additional cost to VENDOR, CITY and VENDOR may renegotiate VENDOR’s compensation.
15. Self-insured retentions. Any self-insured retentions must be declared to and approved by CITY. CITY reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible. Self-insurance will not be considered to comply with these specifications unless approved by CITY.
16. Timely notice of claims. VENDOR shall give CITY prompt and timely notice of claims made or suits instituted that arise out of or result from VENDOR’s performance under this AGREEMENT, and that involve or may involve coverage under any of the required liability policies.
17. Additional insurance. VENDOR shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the Scope of Services.
XVI. SUBCONTRACTORS
Before VENDOR retains or hires a subcontractor to provide any work, labor, or services relative to this AGREEMENT, VENDOR must:
A. Present the name and identifying information of the subcontractor that will provide any work, labor, or services to CITY;
B. Present to CITY the form of subcontract that will be used with the subcontractor for CITY’s approval, which approval will not be unreasonably withheld. Such subcontract agreement must include an indemnity agreement that is generally in accord with the indemnity obligations contained in paragraph XII of this AGREEMENT and must specifically name CITY as an indemnified party; and
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C. Secure from the subcontractor evidence of insurance coverage that meets with this AGREEMENT including naming CITY as an additional insured as required by this AGREEMENT, unless such requirement is waived in writing by CITY's Risk Manager as provided in paragraph XXV below.
XVII. CONFLICT OF INTEREST
No officer or employee of CITY may have any financial interest, direct or indirect, in this AGREEMENT, nor may any officer or employee participate in any decision relating to the AGREEMENT that affects the officer or employee’s financial interest or the financial interest of any corporation, partnership, or association in which the officer or employee is directly or indirectly interested, in violation of any law, rule or regulation.
No person may offer, give, or agree to give any officer or employee or former officer or employee, nor may any officer or employee solicit, demand, accept, or agree to accept from another person, a gratuity or an offer of employment in connection with any decision, approval, disapproval, recommendation, preparation or any part of a program requirement or a purchase request, influencing the content of any specification or procurement standard, rendering of advice, investigation, auditing, or in any other advisory capacity in any way pertaining to any program requirement, contract or subcontract, or to any solicitation or proposal.
XVIII. NOTICE
All notices, requests, demands, or other communications under this AGREEMENT will be in writing.
Notice will be sufficiently given for all purposes as follows:
A. Personal delivery. When personally delivered to the recipient; notice is effective on delivery.
B. First Class mail. When mailed first class to the last address of the recipient known to the party giving notice; notice is effective three mail delivery days after deposit in a United States Postal Service office or mailbox.
C. Certified mail. When mailed certified mail, return receipt requested; notice is effective on receipt, if delivery is confirmed by a return receipt.
D. Overnight delivery. When delivered by an overnight delivery service, charges prepaid or charged to the sender’s account; notice is effective on delivery, if delivery is confirmed by the delivery service.
E. Facsimile transmission. When sent by fax to the last fax number of the recipient known to the party giving notice; notice is effective on receipt. Any notice given by fax will be deemed received on the next business day if it is received after 5:00 p.m. (recipient’s time) or on a non- business day.
Addresses for purpose of giving notice are as set forth immediately following the signatures of the parties executing this AGREEMENT.
F. Any correctly addressed notice that is refused, unclaimed, or undeliverable because of an act or omission of the party to be notified, will be deemed effective as of the first date the notice was refused, unclaimed or deemed undeliverable by the postal authorities, messenger or overnight delivery service.
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G. Either party may change its address or fax number by giving the other party notice of the change in any manner permitted by this AGREEMENT. Any change in address or fax number that is not provided to the other party will not void delivery of any notice under this AGREEMENT, and delivery to the last known address or fax number shall be deemed sufficient for notice under this AGREEMENT.
XIX. PROHIBITION AGAINST ASSIGNMENT AND SUBCONTRACTING
This AGREEMENT and all exhibits are binding on the heirs, successors, and assigns of the parties.
The AGREEMENT may not be assigned or subcontracted by either CITY or VENDOR without the prior written consent of the other.
XX. INTERPRETATION
The terms of this AGREEMENT shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of this AGREEMENT or any other rule of construction that might otherwise apply.
XXI. SEVERABILITY
If any part of this AGREEMENT is found to be in conflict with applicable laws, that part will be inoperative, null and void insofar as it is in conflict with any applicable laws, but the remainder of the AGREEMENT will remain in full force and effect.
XXII. TIME OF ESSENCE
Time is of the essence in the performance of this AGREEMENT.
XXIII. GOVERNING LAW; JURISDICTION
This AGREEMENT will be administered and interpreted under the laws of the State of California.
Jurisdiction of and venue for any litigation arising from the AGREEMENT will be in the Superior Court of the San Luis Obispo County, or in the United States District Court for the Central District of California.
XXIV. COMPLIANCE WITH STATUTES AND REGULATIONS
VENDOR will be knowledgeable of and will comply with all applicable federal, state, county and city statutes, rules, regulations, ordinances and orders. VENDOR and its subcontractor(s) shall not discriminate against any person in the performance of this AGREEMENT on the basis of race, religion, national origin, color, age, sex, sexual orientation, AIDS, HIV status, disability, or any other basis protected by state or federal law, and shall comply with applicable federal and state equal employment opportunity laws, ordinances, rules and regulations.
XXV. WAIVER OF BREACH
No delay or omission in the exercise of any right or remedy by a nondefaulting party on any default will impair the right or remedy or be construed as a waiver. A party’s consent or approval of any act by the other party requiring the party’s consent or approval will not be deemed to waive or render unnecessary the other party’s consent to or approval of any subsequent act. Any waiver by either party of any default must be in writing and will not be a waiver of any other default concerning the same or any other provision of this AGREEMENT.
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XXVI. ATTORNEY’S FEES
Except as provided for in paragraph XV, in any dispute, litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this AGREEMENT (whether in contract, tort or both) or seeks a declaration of any rights or obligations under this AGREEMENT, the prevailing party will be awarded reasonable attorney’s fees, together with any costs and expenses, to resolve the dispute and to enforce any judgment, including post judgment attorney’s fees costs and expenses and any attorneys’ fees or costs incurred on appeal of any judgment.
XXVII. EXHIBITS
All exhibits identified in this AGREEMENT are incorporated into the AGREEMENT by this reference.
In the event of any conflict between the terms of this AGREEMENT and the terms of an exhibit, the terms of this AGREEMENT shall control. Notwithstanding the foregoing sentence, the provisions of Section XIII of this AGREEMENT shall not be altered, amended, limited or otherwise affected in any manner by any language included in an exhibit to this AGREEMENT, even if such exhibit purports to affect the provisions of Section XIII.
XXVIII. VENDOR’S AUTHORITY TO EXECUTE
The persons executing this AGREEMENT on behalf of the VENDOR warrant that:
A. the VENDOR is duly organized and existing under the appropriate State laws; B. they are duly authorized to execute this AGREEMENT on behalf of the VENDOR; C. by so executing this AGREEMENT, the VENDOR is formally bound to the provisions of this AGREEMENT; and
D. entering into this AGREEMENT does not violate any provision of any other AGREEMENT to which the VENDOR is bound.
XXIX. INTEGRATION; AMENDMENT
This AGREEMENT represents the entire understanding of CITY and VENDOR as to those matters contained in it. No prior oral or written understanding will be of any force or effect with respect to the terms of this AGREEMENT. The AGREEMENT may not be modified or altered except in writing signed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT to be executed the day and year last written below.
Signatures begin on next page.
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CITY:
City of Pismo Beach, a Municipal Corporation
Signed:
Name: Nadia Feeser
Title: Administrative Services Director
Dated: ________________________________
Signed:
Name: James R. Lewis
Title: City Manager
Dated: ________________________________
Address for giving notice (See Section XVIII):
760 Mattie Road, Pismo Beach, CA 93449
ATTEST:
Signed:
Name: Erica Inderlied
Title: City Clerk
APPROVED AS TO FORM:
Signed:
Name: David M. Fleishman
Title: City Attorney
VENDOR:
Badawi & Associates
Signed:
Name: Ahmed Badawi
Title: Partner
Dated: ________________________________
Address for giving notice (See Section XVIII):
Badawi & Associates
2855 Telegraph Avenue, Suite 312
Berkeley, CA 94705
Email address for official communications:
[email protected]
Vendor Representative (See Section VIII):
Name/Title: Mr. Ahmed Badawi, CPA
Partner
Attachments:
Exhibit A: Scope of Service
Exhibit B: Compensation Schedule
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