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Resolution No. 2012-216RESOLUTION NO. 2012-216 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND AUTHORIZING THE EXECUTION OF AN AGREEMENT BY AND BETWEEN THE CITY OF VERNON AND MACIAS, GINI & O'CONNELL, LLP FOR PROFESSIONAL AUDITING SERVICES WHEREAS, the City of Vernon (the "City") desires to retain the services of a reputable auditing firm to perform the audit for the fiscal year ending June 30, 2012; and WHEREAS, Macias, Gini & O'Connell, LLP ("Macias") is qualified to provide the City with the professional auditing services it desires; and WHEREAS, by memo dated October 11, 2012, the Finance Director has recommended that an agreement with Macias be approved for professional auditing services for the year ending June 30, 2012, for the City, in a sum not to exceed $225,000.00; and WHEREAS, the City Council has determined that, pursuant to the provisions of Section 2.27(a) of the Vernon City Code, it is in the public interest and necessity to enter into an agreement for professional auditing services with Macias. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct SECTION 2: The City Council of the City of Vernon hereby approves the Agreement with Macias, Gini & O'Connell, LLP, a copy of which is attached hereto as Exhibit A. SECTION 3: The City Council of the City of Vernon hereby authorizes the Mayor or Mayor Pro-Tem to execute the Agreement, for and on behalf of the City; and the Interim City Clerk, or Deputy City Clerk, is hereby authorized to attest thereto. SECTION 4: The City Council of the City of Vernon hereby instructs the City Administrator, or his designee, to take whatever actions are deemed necessary or desirable for the purpose of implementing and carrying out the purposes of this Resolution and the transactions herein approved or authorized, including but not limited to, any non -substantive changes to the Agreement attached herein. SECTION 5: The City Council of the City of Vernon hereby directs the Interim City Clerk, or the Interim City Clerk's designee, to send one executed Agreement to Macias, Gini & O'Connell, LLP. SECTION 6: The City Council of the City of Vernon finds that this action is exempt under the California Environmental Quality Act (CEQA), in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. - 2 - SECTION 7: The Interim City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the Interim City Clerk of the City of Vernon shall cause this resolution and the Interim City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 6th day of November, 2012. Name: William J. Davis Title: Mayor /IirP�Tm I Da Reed, Interim City Clerk _3_ STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Dana Reed, Interim City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2012-216, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, November 6 2012, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this day of November, 2012, at Vernon, California. Da Reed, Interim City Clerk (SEAL) - 4 - EXHIBIT A Sacmmmnta A Vlatr,utCwGk • 0a1,14rd - Ws, A09c-irs/Ctfntury City - Newport Beach • fan r)iege) - ingocp .t`i3m October 11, 2012 Honorable City Council City Administrator City of Vernon, California 4305 Santa Fe Avenue Vernon, CA 90058 Attention: Rory Burnett, City Finance Director We are pleased to confirm our understanding of the services we are to provide the City of Vernon, California (Vernon) for the year ended June 30, 2012. We will audit the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the basic financial statements, of Vernon; as of and for the year ended June 30, 2012. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD&A), to supplement Vernon's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to Vernon's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1) Management's Discussion and Analysis 2) Budgetary Comparison Schedule - General Fund 3) Schedule of Funding Progress (Pension and OPEB) We have also been engaged to report on supplementary information other than RSI that accompanies Vernon's financial statements.. We will subject the following supplementary information to the auditing. procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole: 1) Schedule of expenditures of federal awards We will also audit and provide a separate opinion on Vernon's Light and Power Department Fund financial statements as of and for the year ended June 30, 2012. KKK S su"'ut- - '� g I N. C'rlifvw n (IN't 505 LAh street 2029 Cantur2 Park k.5,t 1675 folaoc ,tins Ct 225 8,oadrray t f2e� 3.0 S me 750 StI, Pluur Suitt 5W Saito 6W Suite 1750 irrarr 7�;o walnut E:.leek oaklond Ltza.Atz ales tdcrip r5 Fiugel5 nsn (^iiDi74 t, A 95Pl 6 CA 9 596 CA 9,V, Q, CA 9000 CA 92660 CA 12101 Audit Objectives The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, inconformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on - Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or.grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and NonProfit Organizations. The reports on internal control and compliance will each include a statement that the report is intended solely for the information and use of management, the body or individuals charged with governance, others within the entity specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass -through entities and is not intended to be and should not be used by anyone other than these specified parties. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major program(s) in accordance with OMB Circular A-133, and other procedures we consider necessary to enable us to express such opinions and to render the required reports. If our opinions on the financial statements or the Single Audit compliance opinions are other than unqualified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to forin or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement. Management Responsibilities Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. Management is also responsible for identifying government award programs and understanding and complying with the compliance requirements, and for preparation of the schedule of expenditures of federal awards in accordance with the requirements of OMB Circular A-133. You are responsible for making all management decisions and performing all management functions relating to the financial statements, schedule of expenditures of federal awards, and related notes and for accepting full responsibility for such decisions. Further, you are required to designate an individual with suitable skill, knowledge, or experience to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is responsible for establishing and maintaining effective internal controls, including internal controls over compliance, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met and that there is reasonable assurance that government programs are administered in compliance with compliance requirements. You are also responsible for the selection and application of accounting principles; for the fair presentation in the financial statements of the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Vernon and the respective changes in financial position and, where applicable, cash flows in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us and for ensuring that management and financial information is reliable and properly recorded. Your responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws, regulations, contracts, agreements, and grants. Additionally, as required by OMB Circular A-133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan, if applicable. You are responsible for the preparation of the supplementary information in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon OR make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. You are also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. Audit Procedures -General An audit includes examining, ,on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about the financial statements and related matters. Audit Procedures -Internal Controls Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. An audit is not designed to provide assurance on internal control or to identify significant deficiencies. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A-133. Audit Procedures -Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of Vernon's compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures will not. be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of tests of transactions and other applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of Vernon's major programs. The purpose of these procedures will be to express an opinion on Vernon's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB CircularA-133. Engagement Administration, Fees, and Other We may from time to time, and depending on the circumstances, use third -party service providers in serving your account. We may share confidential information about you with these service providers, but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain, internal policies, procedures, and safeguards to protect the confidentiality of your personal information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. In the event that we are unable to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the sharing of your confidential information with the third -party service provider. Furthermore, we will remain responsible for the work provided by any such third -party service providers. We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any documents selected by us for testing. At the conclusion of the engagement, we will complete the appropriate sections of the Data Collection Form that summarizes our audit findings. It is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and corrective action plan) along with the Data Collection Form to the federal audit clearinghouse. We will coordinate with you the electronic submission and certification. If applicable, we will provide copies of our report for you to include with the reporting package you will submit to pass -through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. The audit documentation for this engagement is the property of Macias Gini & O'Connell LLP and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to Vernon's Federal Oversight Agency for Audit or its designee; a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of Macias Gini & O'Connell LLP personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of seven years after the report release or for any additional period requested by Vernon's Federal Oversight Agency for Audit, or Pass -through Entity. If we are aware that a federal awarding agency, pass -through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. We expect to begin our audit on approximately October 1, 2012 and to issue our reports no later than December 31, 2011 and March 31, 2012 for the Schedule of Expenditures of Federal Awards. Jim Godsey is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. Our current maximum fee for these services will not exceed $240,000. See hourly rates by engagement team member below. Classification Rate Partner $ 380.00 Technical Reviewer 350.00 Director 305.00 Manager 185.00 Senior Auditor 125.00 Semi -Senior/ Staff Auditor 115.00 Administrative 100.00 Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes 45 days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report(s). You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our 2009 peer review accompanies this letter. We appreciate the opportunity to be of service to the City of Vernon, California and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, MACIAS GINI & O'CONNELL LLP :• t James V. Godsey, CPA Partner RESPONSE: This letter correctly sets forth the understanding of the City of Vernon, California B ti, M"( �I�✓p ,, L f William Davis Title: Mayor Date: 11;08-12 ATT T: Dan ee , nterim-City Clerk APPROZS O FORM: Nicholas Rodriguez, City Attorney 7 SYSTEM REVIEW REPORT DAVTS MONK & May 14, 2009 Coinpany To the Partners of Certified Public Accountants Macias, Gini & O'Connell, LLP Business Consultants and the Peer Review Committee of the American Institute of Certified A Partner.yhip Consisting t� Public Accountants Prf?lessional ; issociatibns Gainesville We have reviewed the system of quality control for the accounting and 4010 NAM 25au Place auditing practice of Macias, Giro & O'Connell, LLP (the "firm") P:o. Box 13494 (32604) applicable to non -SEC issuers in effect for the year ended Gainesville, Flo) 37 -6300 March 31, 2009. Our peer review was conducted in accordance with the Phone: (352) 37z-5034 Standards for Performing and Reporting on Peer Reviews established by Fax: (352) 375-1583 the Peer Review Board of the American Institute of Certified Public Accountants. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable Palatka assurance of performing and reporting in conformity with applicable 900 South St.tte Road-1`1 professional standards- in all material respects. Our responsibility is to Palatka.. Florida 3? 177 express an opinion on the design of the system of quality control and the llhone: (386) 325-4561 Fax: (386) 328-1014 firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards. at www.aiepa.org%orsumnaM. St. Augustine 1301 Plantation Island Dr, As required by the standards, engagements selected for review included Suite 205A St. Augustine, Florida 32080 engagements performed under the Government Auditing Standards and audits Phone: (9(4)471-3.445 of employee benefit plans. Fax: (90 4) 471-3825 In our opinion, the system of quality control for the accounting and ltiebsite: auditing practice of Macias, Gini & O'Connell, LLP applicable to www.davisnionk.com non -SEC issuers in effect for the year ended March 31, 2009, has been suitably designed and complied with to provide the firm with reasonable assurance of performing - and reporting with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Macias, Gini & O'Connell, LLP has received a peer review rating ofpass. �Q DAVIS MONK & v COMPANY Members: CERTIFIED PUBLIC ACCOUNTANTS C'I?anuerica International F1ot-ida Institute of Certified Public Accountants American Institute of Certified Public accountants Flolivath International RECEIVED OCT 2 2 2012 CITY CLERK'S OFFICE STAFF R'E PO ITT FINANCE DEPARTMENT DATE: October 11, 2012 'C'�PPcEsv E n OCT 11 2012 CITY ADMINISTRATION TO: Honorable City Council , FROM: Rory Burnett, Finance Director �J/I RE: Macias Gini & O'Connell, LLP Agreement to engage Certified Public Accountants to audit the financial statements and federal grant awards of the City of Vernon Attached is the agreement between the City of Vernon and Macias Gini & O'Connell, LLP ("MGO") for professional audit services for the year ended June 30, 2012. MGO has been the City's auditor since 1999. MGO is a highly competent and well -respected public accounting firm specializing in auditing California municipalities and other government -related agencies. The proposed fee for this year's audit has been capped by MGO not to exceed $240,000. Recommendation: I recommend the City Council approve the attached audit engagement agreement with MGO.