City Council Agenda Report
Meeting Date: May 16, 2023
From: Scott Williams, Director of Finance
Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Professional Services Agreement with The Pun Group LLC for Professional Auditing Services Recommendation
Approve and authorize the City Administrator to execute a Professional Services Agreement with The Pun Group LLC, in substantially the same form as submitted, for Professional Auditing Services for a total amount not-to-exceed $384,999, for a three-year term.
Background
City of Vernon Charter Chapter 8.11requires the City Council to “appoint a California certified public accountant or firm of certified public accountants to provide an independent, annual audit of all City accounts, including the accounts of all departments, officers, and employees who receive, handle or disburse public funds.” The audits are to be conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller of the United States. It is a best practice for organizations to change auditors every three to four years as new audit firms bring original perspectives on existing accounting judgments and knowledge gained through their individual public sector experience.
On March 20, 2023, the City issued a Request for Proposals (RFP) for Professional Auditing Services in accordance with Municipal Code Section 3.32.080. The RFP was provided to five professional accounting firms specializing in government auditing and placed on Planet Bids for other interested firms to participate. On April 3, 2023, a total of two responses were received from The Pun Group LLC and Badawi & Associates. Both firms were deemed to be responsive to the RFP and evaluated through a competitive selection process, including qualifications, cost and fees, responsiveness, and comparable references. Based on the internal panel’s evaluation, The Pun Group LLC was recommended for selection due to their level of organization and use of technology to expedite document collection and analysis during the audit, among other factors.
The Pun Group LLC is a full-service, small national firm that provides auditing, accounting, and advisory services. It was named one of the “Top Accounting Firms” by the Orange County Business Journal and is on the list of CalCPA Top 150 firms. What really sets the firm apart is its use of technology. The Pun Group LLC has made key investments in technology to enhance security and promote audit efficiency. Their secure data file transfer system, Suralink, houses all the documents for the engagement eliminating loss and duplication.
The agreement includes several tasks as part of the engagement:
• Annual Comprehensive Financial Report
• Standalone Annual Financial Reports for Vernon Public Utilities, Electric Utility, and Water Utility
• Single Audit Report
• Appropriation Limit Calculations (GANN)
• Auditors Communication Letter (SAS No. 112)
• A separate Management Letter (SAS No. 114)
• State Controller’s Office Annual Financial Transaction Report • State Controller’s Office Annual Streets Report
• Assistance implementing applicable GASB pronouncements not yet in effect.
The proposed fees for these services would be $110,000 for the audit Fiscal Year (FY) 2022-23 billed in FY 2023-24, $113,300 for FY 2023-24 billed in FY 2024-25, and $116,699 for FY 2024- 25 billed in FY 2025-26. These amounts include Single Audit fees for one (1) major program, as described by the Office of Management and Budget’s (OMB) Uniform Guidance. Moreover, $15,000 per year has been added to the annual amounts to cover three additional major programs, bringing the three-year total to $384,999. These fees will not be incurred if there are fewer major programs or if the City has less than $750,000 in Federal awards expenditures during the fiscal year and does not require the Single Audit.
The proposed agreement has been reviewed and approved as to form by the City Attorney’s Office.
Fiscal Impact
The fiscal impact is not-to-exceed $384,999 for a 3-year term. Funds will be budgeted in FY 2023-24 and subsequent years in General Fund, Finance Department, Professional Services – Other Account No. 011-010-130-529225.
Attachments
1. Services Agreement – The Pun Group LLC