CITY COUNCIL STAFF REPORT
Meeting Date: June 26, 2023
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-23 AUTHORIZING THE CITY
MANAGER TO EXECUTE A THREE-YEAR AGREEMENT FOR
INDEPENDENT AUDITING SERVICES WITH MACIAS, GINI &
O'CONNELL, LLP
SYNOPSIS
Macias Gini & O’Connell, LLP (“MGO”) has served as the City of Pleasant Hill’s (“City”) independent auditor for the past 12 years. The firm has audited the City’s internal controls and financial statements for fiscal years (“FY”) 2010/11 through FY 2021/22; the City’s contract with the firm has now expired. The Finance Division is in the midst of several special projects, including the implementation of the new permitting and business license software and the migration of the City’s financial operations to a new financial software system. MGO has provided excellent service to the City and its familiarity with the City’s operations is critical to minimize uncertainties during this transitional period. At its meeting of June 14, 2023, the Budget Committee approved a forwarding a recommendation to the City Council to extend the contract for an additional two years of audit services with MGO to perform the audits of the City’s FY 2022/23 and FY 2023/24 internal controls and financial statements to City Council.
DISCUSSION
Background
The City arranges for an annual audit of its financial statements by independent auditors. The auditors play a critical role in evaluating the City’s system of internal controls and overall financial condition and management and condition. They also assist in the preparation of the Annual Comprehensive Financial Report (“ACFR”) and provide assistance with the implementation of new Governmental Accounting Standard Board (“GASB”) pronouncements.
In May 2011, the City entered into the original contract for auditing services with MGO. In August 2020, a resolution was passed authorizing an extension for three years covering FY 2019/20, FY 2020/21, and FY 2021/22 in order to audit the City’s activities. The City’s contract with the firm has now expired.
Analysis
The Finance Division (Division) is working on significant special projects (Cost Allocation Plan/User Fees Study), finalizing the transition to the new permitting and business license software, and migrating the City to a new financial software system. Additionally, the Division continues to see substantial changes in staffing due to retirements and departures. Given the additional workload of migrating the City’s financial system to a new vendor, the planned upcoming projects, as well as staff transition, the Division believes that it would be prudent for the City to engage the firm for an additional two years. This is also due to the excellent customer service and technical expertise that MGO has provided over the years.
MGO is highly qualified to continue to provide both independent audit services to the City and to implement new GASB pronouncements due to their experience, qualifications, and demonstrated ability. They meet the independence standards of the U.S. General Accounting Office, Government Auditing Standards. Their local government specialists serve over 100 cities in California and their governmental practice is one of the largest in the U.S.
MGO lead partner on the engagement has been David Bullock and he will continue along with Jon Waller as Senior Manager. Both have been on this engagement since FY 2019/20, and their expertise and knowledge of governmental accounting and the City is helpful and reduces impact to staff.
FISCAL IMPACT
MGO is proposing a 3% increase from their FY 2021/22 fees of $93,361, which is very reasonable based on CPI increases in the Bay Area. The contract amount for audit services would be $96,162 and $99,047 for fiscal reporting periods FY 2022/23 and FY 2023/24, respectively. The total contract amount would not exceed $195,209.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Approve the proposed resolution authorizing the City Manager to execute a two-year agreement for independent auditing services with Macias Gini & O’Connell, LLP as recommended by the Budget Committee.
ALTERNATIVES TO RECOMMENDED ACTION
Do not approve the attached resolution authorizing the City Manager to execute a two-year agreement for independent auditing services with Macias Gini & O’Connell, LLP and provide guidance to City staff.
ATTACHMENT(S):
Proposed Resolution
Exhibit 1 - Agreement for Professional Services
Exhibit A – Proposed Fee Schedule
Prepared by: Erick Cheung, Finance Manager
Approved by: Ethan Bindernagel, Interim City Manager