City Council
Report
City Council Meeting: December 12, 2023
Agenda Item: 5.C
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Financial Operations Subject: Award RFP and enter into Agreement with Lance Soll & Lunghard LLP for Professional Auditing Services
Recommended Action
Staff recommends that the City Council:
1. Award RFP# 377 to Lance Soll & Lunghard LLP, a California-based company for professional external auditing services; and
2. Authorize the City Manager to negotiate and execute a three-year agreement with a two-year option with Lance Soll & Lunghard LLP, for a total amount not to exceed $958,936 over a five-year period, with future year funding contingent on Council budget approval. Costs for the first year of the agreement will not exceed $180,620; each year thereafter contains an annual increase of 3%.
Summary
The City is beginning the final year of a 3-year contract extension with independent external auditors Lance, Soll & Lunghard (LSL) CPAs. In August 2023, staff issued a Request for Proposals for professional auditing services for fiscal years 2023-24 through 2027-28. Following an evaluation process that included staff and a member of the Audit Subcommittee (Subcommittee), staff is recommending that Council enter into a contract with Lance Soll & Lunghard LLP (LSL) for a three-year agreement with a twoyear option. The Subcommittee approved the recommendation with a 4-0 vote.
Discussion
The City engages an independent auditing firm to perform an examination of the City’s basic financial statements, Big Blue Bus Fund financial statements, Air Quality 2 of 5
Improvement Program, and the City’s Schedule of Expenditures of Federal Awards (Single Audit). The independent auditor also performs agreed-upon procedures to test and report on the City’s GANN appropriation limit calculation.
On March 31, 2016, the City entered into a 5-year contract with independent audit firm Lance, Soll & Lunghard (LSL) CPAs. On October 6, 2020, the contract was extended for an additional 3 years. Fiscal year 2022-23 is the final year of the three-year extension.
As required by the City Charter, financial statements are prepared by the City and audited by its independent auditors. The City selected its current independent auditor through a competitive procurement process that included a member of the Audit Subcommittee as part of the selection committee. On August 30, 2023, the City issued a Request for Proposals for Professional Auditing Services on the City’s OpenGov system for fiscal years 2023-24 through 2027-28. Eleven prospective vendors downloaded the RFP, and eight auditing firms responded. LSL was selected by the evaluation committee based on technical knowledge, emphasis on time management and deadlines, and the ability to provide valuable insight related to best practices.
Established in 1929, LSL is a California-based certified public accounting firm that specializes in government audits and is known as an industry expert at the local, state and federal level.
Staff recommends awarding an agreement with LSL for auditing services. The first year cost is anticipated at $180,620, with a 3% increase each year thereafter. The agreement is for a not-to-exceed amount of $958,936 for five years, including a twoyear option. Costs will be allocated to various funds, where an audit is required. 3 of 5
Vendor Selection
On August 30, 2023, staff issued a Request for Proposal (RFP) to seek qualified certified public accounting (CPA) firms to audit its financial statements for the fiscal years 2023-24 through 2027-28. The RFP was posted on the City’s on-line bidding site, and it was posted on the California State Municipal Finance Officers portal. Eleven prospective vendors downloaded the RFP, and eight firms submitted proposals.
Bidder Recommendation
Best Qualified Firm Lance Soll & Lunghard LLP
Evaluation Criteria Interview, ability to meet project work plan / timelines, Experience, Value added – breadth of service, Stability / references, Quality control, Cost of services and cost control.
Municipal Code SMMC 2.24.190
RFPs Received
Badawi and Associates Clifton Larson Allen,
LLP
Eide Bailly, LLP Lance, Soll, &
Lunghard, LLP
Macias, Gini, &
O’Connell, LLP
The Pun Group, LLP Singer Lewak, LLP Vasquez & Company, LLP
RFP Data
Posted On Posted On
Advertised In
(City Charter & SMMC)
Vendors
Downloaded
Date Publicly
Opened
8/30/2023 City's Online
Bidding Site Santa Monica Daily Press 23 10/3/2023
Justification to Award
Based on the initial review of proposals informed by the evaluation criteria described above and criteria in SMMC 2.24.190, the evaluation committee selected three auditing firms that were unfamiliar to the City as well as our current auditor, LSL, to interview in October 2023. As a result of this process, the evaluation committee recommended to the Audit Subcommittee Lance Soll & Lunghard, LLP (LSL), the current auditor, as the best bidder to be retained to provide auditing services for the City of Santa Monica.
Because LSL has already been performing this service for the City for eight years, the selection team was concerned about not rotating auditors at this juncture. During their presentation, LSL proposed changing the entire audit team except for the partner to give them a new perspective on the City’s audit. The current partner would be replaced by a different partner after three years due to the firm’s policy of rotating partners for client 4 of 5
agencies every five years and the concurring partner would take their place.
The selection committee looked at best practices regarding the rotation of auditing firms.
Agencies contacted by staff noted that they rotated their auditors every 5 to 10 years.
Additionally, Assembly Bill 1345 requires the audit partner of a firm to rotate every 6 years. Finally, staff consulted the City’s internal auditor, Moss Adams, for its view on awarding the contract to LSL. Moss Adams was comfortable with the retention of LSL considering the change in audit personnel.
The selection committee suggested that a set of performance guidelines be issued by the City for LSL and that an evaluation of the performance of the auditors be conducted annually upon completion of the audit and feedback provided to LSL.
Environmental Review
The agreement is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (Common Sense Exemption) of the CEQA Guidelines. The award agreement is covered by the commonsense exemption which states that CEQA does not apply, “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The award agreement will provide audit services to the City. Therefore, it can be seen with certainty that the agreement would not result in adverse physical impacts on the environment, and as such, is exempt from CEQA.
Financial Impacts and Budget Actions
Staff seeks authority to approve available funding from various funds to award an agreement with Lance Soll & Lunghard LLP for professional auditing services.
Agreement Request
FY 2023-24
Request Amount
Amount for
Future Years
FY 2023-24 Budget
Department Accounts #
Total Contract
Amount
$180,620 $778,316 Various accounts $958,936
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Future year funding is subject to Council budget approval.
Prepared By: Randy Chow, Financial Reporting Supervisor Approved Forwarded to Council
Attachments:
A. OAKS Initiative Form
B. Staff Report #7199 - February 23, 2016 Council Meeting