City Council Agenda Report
Meeting Date: May 5, 2026
From: Alice Hui, Director of Finance/City Treasurer
Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Amendment No. 1 to the Professional Services Agreement with The Pun Group LLP Recommendation
A. Pursuant to Vernon Municipal Code Sections 3.32.220(B) and 3.32.110(B)(3), find that it is commercially unreasonable to rebid the agreement for professional auditing services given the transition time and resources required to onboard a new audit firm; and B. Approve and authorize the City Administrator to execute Amendment No. 1 to the Professional Services Agreement with The Pun Group LLP for Professional Auditing Services, in substantially the same form as submitted, to extend the Agreement for an additional two (2) years for a total amount not-to-exceed $270,004.
Background
City of Vernon Charter Chapter 8.11 requires 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." In addition, 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. Properly performed audits play a vital role in the public sector by helping to preserve the integrity of the public finance functions, and by maintaining citizens’ confidence in their elected leaders.
On March 20, 2023, the City issued a Request for Proposals (RFP) for Professional Auditing Services in accordance with Vernon Municipal Code Section (VMC) 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. Proposals received 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.
VMC Section 3.32.220 (B) requires that all professional service contracts be rebid every three years unless it is found commercially unreasonable to do so. Rebidding the contract within the next two years would be commercially unreasonable given the transition required to onboard a new auditing firm. A new firm would require substantial time and City staff resources to gain an understanding of the City’s financial systems, internal controls, reporting structure, and compliance requirements. The loss of institutional knowledge built over prior audit cycles could delay audit completion, potentially impacting financial reporting timelines and regulatory compliance.
Extending the agreement an additional two years would also adhere to recommended best practices. According to the Government Finance Officers Association (GFOA), “governmental entities should enter into multiyear agreements of at least five years in duration when obtaining the services of independent auditors. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit.” Audit firms require time to develop a thorough understanding of an agency’s processes and functions; therefore, frequent changes in audit firms may increase audit risk rather than reduce it.
The proposed fees for these services would be $126,199 for the 2025-2026 Fiscal Year (FY) audit billed in FY 2026-2027, and $123,805 for the FY 2026-2027 audit billed in FY 2027- 2028. These amounts include Single Audit fees for only one major program. However, $10,000 per year has been added to the annual amounts to cover two additional major programs should the need arise, bringing the total for Amendment No. 1 to $270,004 and the total contract amount to $655,003 over a term of five years.
For contracts exceeding $100,000, Section 3.32.110(B)(3) of the VMC dictates that the authority to make the finding that it is commercially unreasonable to rebid a contract every three years rests with the City Council. Thus, the proposed amendment requires City Council approval pursuant to VMC Sections 3.32.110(B)(3) and 3.32.030(A) as the total value over the lifetime of the contract exceeds $100,000.
Amendment No. 1 has been reviewed and approved as to form by the City Attorney.
Fiscal Impact
The fiscal impact for Amendment No. 1 is not to exceed $270,004. Sufficient funds are available in General Fund, Finance Department, Professional Services-Technical Account No.011-010- 130-529225 for the current fiscal year and will be budgeted in subsequent years.
Attachments
1. Amendment No. 1 - The Pun Group LLP