CITY COUNCIL STAFF REPORT
Meeting Date:June 2, 2025
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: ADOPT RESOLUTION NO. ___-25 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) hasserved asthe City of Pleasant Hill’s (City) independent auditor for the past 14 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 still at the infancy of several projects, including 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 and its familiarity with the City’s operations is critical to minimize uncertainties and continue building upon the initial transition to the new financial system. Staff is forwarding a recommendation to the City Council to extend the contract for an additional three years of audit services with MGO to perform the audits of the City’s FY 2024/25, FY 2025/26, and FY 2026/27 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 June 2023, a resolution was passed authorizing an extension for two years covering FY 2022/23 and FY 2023/24 in order to audit the City’s activities. The City’s contract with the firm has now expired.
Analysis
The Finance Division (Division) continues to work on significant financial system projects including transitioning to a new permitting and business license software and migrating the City to a new financial software system. Additionally, the Division continues to experience substantial changes in staffing due to retirements and departures. Given the additional workload of migrating the City’s financial system to a new vendor, in conjunction with working with MGO during this conversion, as well as staff transitions, the Division believes that it would be prudent for the City to engage the firm for an additional three years.
Staff believes an extension is merited, given the excellent customer service and technical expertise that MGO has provided over the years.
MGO is highly qualified to continue providing both independent audit services to the City and to implement new GASB pronouncements given the firm’s 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’s lead partner on the engagement with the City has been David Bullock, and he would be required to rotate after FY 24/25 as State law requires partner rotation every six years. In FY 25/26, Benjamin Lau would be the new partner assigned, but he has worked with the City in the past and we will still have continuity with Jon Waller continuing as Senior Manager. Mr.
Waller has been on this engagement since FY 2019/20, and MGO’s expertise and knowledge of governmental accounting and familiarity with the City is helpful and reduces impact to staff. This is essential to complete the audit timely, since MGO was present for the system conversion process in the prior year such that the work will not need to be repeated, which should expedite the audit process in the coming year.
FISCAL IMPACT
MGO is proposing no increase from their FY 2023/24 fees of $99,800 for FY 2025/26; this is possible due to the knowledge of our City and is favorable due to CPI increases in the Bay Area. The contract would have a modest CPI increase of 2% annually for the following two fiscal years. The amount for audit services would be $101,800 and $103,800 for fiscal reporting periods FY 2025/26 and FY 2026/27, respectively. The total contract amount would not exceed $305,400 for the proposed three-year term.
PUBLIC CONTACT
Public Contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the 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 three-year agreement for independent auditing services with Macias Gini & O’Connell, LLP
ALTERNATIVES TO RECOMMENDED 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
ATTACHMENT(S)
Proposed Resolution
Exhibit 1 - Agreement for Professional Services
Exhibit A – Proposed Fee Schedule
Prepared by: Erick Cheung, Chief Financial Officer
Approved by: Ethan Bindernagel, City Manager