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HomeMy WebLinkAboutRes2020-012 Sponsored by: Meszaros CITY OF SEWARD,ALASKA RESOLUTION 2020-012 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, APPROVING A CONTRACT FOR EXTERNAL AUDIT SERVICES WITH ALTMAN, ROGERS & CO. FOR THE YEARS 2019, 2020, AND 2021, AND EXTENDING THE DEADLINE FOR COMPLETION WHEREAS, the City of Seward issued a Request for Proposals (RFP) for external audit services and advertised in newspapers of local circulation in Seward and Anchorage in accordance with competitive sealed bid procedures; and WHEREAS, in addition to newspaper advertising, the RFP was sent to four prospective auditing firms doing business in Alaska; and WHEREAS, three qualified and responsive proposals were received in response to the request for proposals; and WHEREAS, proposals were scored on the basis of four criteria with a total available points of 100, including: 1) firm's expertise, qualifications, and technical proposal; 2) organization experience and audit approach; 3) engagement personnel experience and qualifications; and 4)bid price; and WHEREAS, of the three proposals, Altman, Rogers & Co. received the highest overall score, scoring 100 out of 100 available points; and WHEREAS,the overall bid to conduct the City's audit was lower by Altman, Rogers & Co. (three-year average cost of$96,078 vs. $142,733 for BDO and $112,044 for Elgee Rehfeld), the hourly cost by Altman, Rogers & Co. was lower ($119/hour Altman, Rogers & Co. vs. $164/hour BDO and $144/hour Elgee Rehfeld), and Altman, Rogers & Co. estimated 720 annual hours, BDO estimated 1,377 annual hours and Elgee Rehfeld estimated 645 annual hours; and WHEREAS, the finance department has experienced a significant number of vacant positions during the five months,hindering the ability of City staff to prepare for the annual audit in the usual timeframe. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA that: Section 1. The City Manager is hereby authorized and directed to execute an agreement with Altman, Rogers &Co. in substantially the form as attached hereto, to provide external audit services to the City of Seward for 2019, 2020 and 2021, with options to extend for up to two additional years at the discretion of the city manager. • CITY OF SEWARD, ALASKA RESOLUTION 2020-012 Section 2. Altman, Rogers & Co. three-year fee is $288,235 ($93,325 for 2019, $96,025 for 2020, and $98,885 for 2021). Section 3. The council waives the requirement for the completion of the audit within 120 days following the close of the first year, with the understanding it will be completed within 160 days following the close of the first year end, and shall be presented to the council at a public meeting within thirty(30) days after completion of the audit. Section 4. The amount of$115,000 was previously appropriated for the audit of 2019 and no further appropriation is required to audit services line item no. 01000-1110-7000. Section 5. This resolution shall take effect immediately upon adoption. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 10`1' day of February, 2020. T E I 0 EW 'sty Terry May AYES: Butts, Baclaan, McClure, Osenga, Crites, Terry NOES: None ABSENT: Seese ABSTAIN: None ATTEST: Brenda J. Baljp ■➢mic City Cl a .�•l OF SFsy'• (Cit};Sea ���'� rFa O • • SEAL ' ti•. F OF AV`S••°• '••••......... Council Agenda Statement Meeting Date: February 10, 2020 Through: Scott Meszaros, City Manager From: Tammy Stromberg, Finance Director 1 Agenda Item: External Audit Contract BACKGROUND & JUSTIFICATION: The City of Seward received three proposals for external audit services for years 2019,2020,and 2021 with options for up to two additional years. Proposals were received from Altman, Rogers & Co. ("Altman"), BDO and Elgee Rehfeld, and all proposals were found to be responsive. A review committee of three members separately evaluated proposals based on criteria provided to the City Council in advance of the solicitation of requests for proposal: 1)Firm Expertise,Qualifications and Technical Proposal (25%); 2) Organization Experience and Audit Approach (25%); 3) Personnel Experience and Qualifications (25°o); and 4)Fee Proposal (25%). The reviewers scored each criteria for a total possible points of 100. The firm of Altman,Rogers&Co.received the highest overall score of 100 points;BDO received 62.7 points and Elgee Rehfeld received 35.6 points. The scores below indicate Altman, Rogers & Co. received the highest overall score on all criteria, BDO rated lowest on the fee. ALTMAN Boo ELGEE REHFELD Firm Expertise,Qualifications,Technical Proposal 25.0 16.7 2.5 Organization Experience,Audit Approach 25.0 16.7 1 2.5 Personnel Experience/Qualifications 25.0 1 12.5 9.2 Fee 25.0 16.8 21.4 Total Score: 100.0 62.7 35.6 BDO is the incumbent firm, having provided auditing services to the City for more than 10 years. However, auditor independence may be diminished by extending the term of audit services by another 3-5 years. Their proposal was strong, comprehensive, and demonstrates considerable experience auditing governmental entities similar in size and scope to the City of Seward. Comparables include cities of Cordova and Sitka (both have city-owned hospital and clinic), Kenai (city and borough), Palmer, Homer, and more complex entities such as the Municipality of Anchorage. BDO leads in the utility and healthcare industries in Alaska.Altman's proposal was also strong with comparables such as City of Kodiak and Kodiak Island Borough, the cities of Nome and Kotzebue as well as Metlakatla Power and Light.Altman's experience with health entities includes Metlakatla Indian Community and Tanana Chiefs Conference. Experience with hospitals is less of factor at this time because the Seward Community Health Center has awarded their audit to Elgee Rehfeld. Elgee Rehfeld also submitted a proposal. It has audited the City and Borough of Juneau for 20 years,audits the Haines Borough, some state agencies and has deeper health-oriented experience than Altman but lacks a breadth of experience with municipalities.Elgee Rehfeld also states it is their policy not to include their estimated initial audit learning time in the proposal as they consider the hours incurred learning about the client's operations 22 and controls as an investment in the future relationship. All firms prepare comprehensive annual financial reports for their clients. The BDO and Altman proposals detailed a more thorough understanding of the scope of work, especially as it relates to the challenges associated with the City's use of multiple electronic systems as well as the migration of data across systems. Both BDO and Altman have more experience with large enterprise funds such as the harbor and utilities. Following is a brief description of each frm's proposal: Altman. Roizers & Co. This firm is an Alaskan based Certified Public Accounting (CPA) firm which provides auditing and accounting services to more than 70 governmental entities in Alaska.The firm employs 7 principals and over 45 staff with branch offices in Anchorage, Soldotna and Juneau. The firm has been in practice in Alaska for 29 years. Their clients include not-for-profit organizations, schools, and cities (Nome, Kotzebue, Kodiak City and Borough, Bethel and Lake and Peninsula Borough). The principals in the firm have experience auditing governmental entities.They have assisted clients in preparing their annual CAFR and receiving their Certificate of Achievement in Excellence in Financial Reporting, and are qualified to perform the City's audit. Altman's three-year fee is$288,235 ($93,325 for 20I9; $96,025 for 2020; and $98,885 for 2021). Their team raw average rate is $119 per hour. BDO This firm is a CPA firm with 40 years of local Alaska experience. It has 6 partners, 80 staff and is the largest CPA firm in the State. BDO also has access to personnel and technical resources of the 5' largest firm in the U.S. BDO serves more Alaska government entities than any other firm in Alaska.It also serves 20 of Alaska's "Top 49ers", including auditing more than 50 government entities and conducting roughly 75 single audits each year. Their clients include cities, boroughs,utilities,school districts, state agencies, public utilities, health care organizations, and communities such as the Municipality of Anchorage,Matanuska Borough, Kenai Peninsula Borough,City of Soldotna,Homer, Palmer, and the City and Borough of Sitka, Wrangell and Yakutat. They have assisted clients in preparing their annual CAFR and receiving their Certificate of Achievement in Excellence in Financial Reporting, and are qualified to perform the City's audit. BDO's three-year fee is$428,200 ($139,500 for 2019,$143,200 for 2020,and$145,500 for 2021). Their team raw average rate is$164.20 per hour. Elgee Rehfeld This firm is the largest firm in Southeast Alaska. It has 5 partners, over 17 staff. It has over 900 clients including non-profits,state agencies,local governments,small and mid-size businesses and individuals in wide-ranging industries. Since 1992 their audit and other attestation service department has grown over 1,100%. They have audited the City and Borough of Juneau for over 20 years. In addition, they audit regional and local healthcare organizations such as Norton Sound Health Corporation and Southeast Alaska Regional Health Corporation.Elgee Rehfeld also states it is their policy not to include their estimated initial audit learning time in the proposal as they consider the hours incurred in learning about client's operations and controls as an investment in the future relationship. They have assisted clients in preparing their annual CAFR and receiving their Certificate of Achievement in Excellence in Financial Reporting. They are qualified to perform the City's audit. Elgee Rehfeld's three-year fee is $336,134($111,153 for 2019,$I 1 I,022 for 2020,and$113,959 for 2021). Their team raw average rate is $144.00 per hour. 23 It is our opinion that Altman, Rogers &Co. should perform the City's audit. Based on the outcome of the RFP process,their experience with similar governmental clients and ability to audit the City from a fresh perspective will be of benefit to the Council, staff and other readers of the report. BDO and Elgee Rehfeld are also qualified to perform the audit. However, BDO's hourly rate is the highest of the three proposals and Elgee Rehfeld's smaller staff size and Iimited breadth of experience with cities of our size is concerning. The auditors work for the city council rather than management.There are advantages to retaining a firm for a significant period of time. There are also advantages to gaining a fresh perspective and ensuring auditor independence. Management believes that we can work well with all firms that submitted proposals. INTENT: To award a contract for independent audit services for a three-year period,with options to extend for up to two additional years. CONSISTENCY CHECKLIST: Yes No NA 1. Comprehensive Plan docunzent source here): 2. Strategic Plan document source here): 3. 1 Other flist : X ATTORNEY REVIEW: Yes No FISCAL NOTE: The 2020 Budget includes $115,000 for the annual audit. No additional appropriation is required. Approved by Finance Department: RECOMMENDATION: Council approve Resolution 2020-012awarding a contract for external audit services to the firm of Altman, Rogers & Co. for the 2019, 2020 and 2021 annual audits, with an option to extend for an additional two years at the discretion of the city manager. 24 THIS AGREEMENT is made and entered into this February 11,2020 between the CITY OF SEWARD(hereinafter called "CITY")and Altman, Rogers&Co. (hereinafter called "CONTRACTOR"): WITNESSETH: WHEREAS,pursuant to the provisions of Seward City Code Chapter 6,the CITY may contract for such professional services as may be required; and WHEREAS, the City Charter requires an independent audit of all accounts of the CITY at least annually, and the audit is required to be made by certified public accountants; and WHEREAS, CONTRACTOR works for the Seward City Council and their services will be of benefit to the citizens of the City of Seward. NOW,THEREFORE,the CITY and CONTRACTOR mutually agree as follows: A. Employment of Contractor: The CITY agrees to engage the CONTRACTOR and the CONTRACTOR hereby agrees to perform external audit services for the calendar years ending December 2019,December 2020,and December,2021. This Agreement may be extended for one two-year period upon mutual agreement of terms,and approval of the City Council. B. Scope of services: The CONTRACTOR shall do,perform,and carry out in a professional manner, the services described in the City of Seward's Audit RFP No. 2020-001. C. Time of Performance: The services to be performed hereunder by the CONTRACTOR shall be undertaken and completed in such sequence as to assure their expeditious completion to best carry out the purposes of this Agreement. The CITY requires that the external auditors coordinate their work with CITY personnel as follows: 1. All work will be coordinated with the Finance Director, who is primarily responsible for working with the external field auditors. Further coordination as necessary with the Accounting Supervisor,who monitors the day-to-day workflow of the department. 2. The Finance Director will work with the auditors to coordinate scheduling and identify the work required to complete the audit. 3. Verbal progress reports will be provided to the Finance Director on a weekly basis during the conduct of the audit. All adjusting journal entries suggested by the auditors are to be discussed with the CITY Finance Director. D. Compensation: Compensation is to be computed separately for each year for which audit services are provided. The total compensation due to the CONTRACTOR during each year of this contract is as follows: 1) 2019 audit= $93,325; 2) 2020 audit— $96,025; 3) 2021 audit = $98,885, where compensation includes professional fees and actual out-of-pocket expenses, such as airfare, lodging,per diem and report production. The total compensation due the CONTRACTOR for any 25 Professional Scr%,ices Agi-eemcnl For Ilxternal Indcpciident Audit Seniors extensions of this contract will be mutually negotiated prior to commencement of additional audit work beyond the initial three-year contract term. E. Payment to Contractor: The CONTRACTOR will bill the CITY monthly for services rendered. The CITY agrees to make payment to the CONTRACTOR within 30 days of receipt and agreement with the CONTRACTOR's bill. Final payment will be made after presentation of the audit report to the City Council, and in the case of the "conversion period," within 30 days of receipt and agreement with the CONTRACTOR's bill. F. Changes: The City may, from time to time, require changes to the scope of services of the CONTRACTOR to be performed hereunder. Such changes, which are mutually agreed upon by and between the CITY and the CONTRACTOR, shall be incorporated by written amendment to the Agreement, subject to approval of the Finance Director. For any additional fee/costs so authorized, the CITY requires that the fees for additional financial work be expressed as a fixed hourly rate for each period subject to audit, quoted for each staff category (e.g. partner,manager, senior), and that the detail of the costs be disclosed. G. Services and Materials to be Furnished by the CITY: The City shall provide assistance in the accumulation of data and records to facilitate the audit for the City of Seward. H. Termination of Agreement: If,through any cause,the CONTRACTOR shall fail to fulfill in timely and proper manner its obligation under this Agreement,the CITY shall thereupon have the right to terminate this Agreement by giving written notice to the CONTRACTOR of such termination at least ten (10) business days before the effective date of such termination, and specifying the effective date of termination. 1. Information and Reports: The CONTRACTOR shall, at such time and in such form as the CITY may require, furnish periodic reports concerning the status of the project. The CONTRACTOR shall furnish the CITY, upon request, copies of all documents and other materials prepared or developed in relation to,or as part of,the project,including copies of all year-end work papers. J. Records and Inspections:The CONTRACTOR shall maintain full and accurate records with respect to all matters covered under this Agreement. The CITY shall have free access at all reasonable times to such records, and the right to examine and audit the same and to make transcripts therefrom, and to inspect all program data, documents,proceedings,and activities. K. Accomplishment of Project: The CONTRACTOR shall commence, carry on, and complete the project with all practicable dispatch, in a sound, economical, and efficient manner, in accordance with the provisions of this Agreement and all applicable laws. In accomplishing the project, the CONTRACTOR shall take such steps as are appropriate to ensure that the work is properly coordinated with related work being carried out by the CITY. L. Matters to be Disre ar The titles of the several sections, subsections,and paragraphs set forth in this Agreement are inserted for convenience of reference only and shall be disregarded in construing or interpreting any of the provisions of the Agreement. M. Completeness of Agreement: This Agreement and any additional or supplementary document or documents incorporated herein by specific reference contain all the terms and conditions agreed upon by the parties hereto,and no other agreements,oral or otherwise,regarding the subject matter of this agreement or any part thereof shall have any validity or bind any of the parties hereto. Page 2 of 5 26 Professional SciAliccs Agreement For External Independent Audit Services N. City Not Obligated to Third Parties: The CITY shall not be obligated or liable hereunder to any party other than the CONTRACTOR. O. When Rights and Remedies Not Waived: In no event shall the making by the CITY of any payment to the CONTRACTOR constitute or be construed as a waiver by the CITY of any breach of covenant, or any default which may then exist on the part of the CONTRACTOR,and the making of any such payment by the CITY while any such breach or default shall exist, shall in no way impair or prejudice any right or remedy available to the CITY with respect to such breach or default. P. Personnel: The CONTRACTOR represents that it has, or will, secure at its own expense, all personnel required to perform the services under this Agreement. All of the services required hereunder will be performed by the CONTRACTOR or under its supervision, and all personnel engaged in work shall be fully qualified to perform such services. The personnel assigned to the CITY shall be mutually agreed upon by the CONTRACTOR and Finance Director. All subsequent staffing changes will be reviewed with, and agreed to,by the Finance Director prior to assigning personnel. The CONTRACTOR shall make every effort practicable to ensure continuity of personnel from year to year with respect to performance of the audit. Q. Independent Contractor: The parties intend that the CONTRACTOR, in performing the services specified in the Agreement,shall act as an independent contractor and shall have full control of the work and the manner in which it is performed. The CONTRACTOR and CONTRACTOR's employees are not to be considered agents or employees of the CITY for any purpose. R. Insurance: Without limiting the Contractor's indemnification,the CONTRACTOR shall provide at its own expense, and maintain at all times, the following insurance with insurance companies licensed in the State of Alaska and shall provide evidence of such insurance to the CITY as may be required. The policies or certificates thereof shall provide that,thirty(30)days prior to cancellation or material changes in the policy,notices of same shall be given to the CITY for all of the following stated insurance policies: 1. Worker's Compensation—in compliance with the statutes of the State of Alaska 2. Comprehensive General Liability—insurance in the amount of$300,000 combined single limit to include: a. Premises Operations b. Products/Completed Operations c. Blanket Contractual d. Broad Form Property Damage e. Independent Contractors f. Personal Injury 3. Comprehensive Automobile Liability — insurance with a minimum limit of liability per occurrence of $300,000 combined single limit per occurrence to include owned. automobiles,hired and non-owned automobiles. 4. Professional Liability—insurance in the amount of$300,000. If at any time, any of said policies shall be unsatisfactory to the CITY, as to form or substance, or if a company issuing such policy shall be unsatisfactory to the CITY, the CONTRACTOR shall promptly obtain a new policy and a certificate thereof as herein Page 3 of 5 27 I Prolesslolal Servims Agreement For Extcrnal Independent Audit Sci-%,iccs above provided. Upon failure of the CONTRACTOR to furnish, deliver or maintain such insurance and certificates as above provided, the Agreement, at the election of the CITY, may be forthwith declared suspended, or terminated. Failure of the CONTRACTOR to obtain and/or maintain any required insurance shall not relieve the CONTRACTOR from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the CONTRACTOR concerning indemnification. The CITY, its officials, agents and employees shall be named as additional insured on all insurance policies required herein. The CONTRACTOR's insurance policies shall include a provision that the coverage is primary as respects to the CITY; shall include no special limitations to coverage provided to additional insured; and, shall be placed with the insurer(s)with acceptable Best's rating of A:VII or with approval of the Finance Director, S. Ownership of Work Products: Work products produced under this Agreement,except items which have preexisting copyrights, are the property of the CITY. Payments to the CONTRACTOR for services hereunder include full compensation for all work products and other materials produced by the CONTRACTOR pertaining to this Agreement. T. Claims and Disputes: If the CONTRACTOR becomes aware of any act or occurrence which may form the basis of a claim, the CONTRACTOR shall immediately inform the Finance Director. If the matter cannot be resolved within seven (7) days, the CONTRACTOR shall, within the next fourteen(14)days,submit written notice of the facts which may form the basis of the claim. In presenting any claims, the CONTRACTOR shall specifically include the provisions of this Agreement which apply, the specific relief requested, including any additional compensation claimed, and the basis upon which it was calculated and/or the additional time requested and the basis upon which it was calculated. U. Governing Laws: This Agreement is governed by the laws of the State of Alaska and such federal and local laws and ordinances as applicable to the work performed. CONTRACTOR is required to have a current City business license prior to commencement of Agreement. V. Hold Harmless: The CONTRACTOR shall hold the CITY, its agents, officers, employees and volunteers,harmless from,save,defend and indemnify the same against,any and all claims,losses, and damages for every cause, including but not limited to injury to person or property, and related costs and expenses,including reasonable attorney fees,arising directly or indirectly out of any act or omission of CONTRACTOR, its agents, officers, employees, or volunteers, during the performance of its obligations under this Agreement. W. Notices:Any notices,bills,invoices,or reports required by the Agreement shall be sufficient if sent by the parties in the United States mail,postage paid, to the addresses noted below: Tammy Stromberg Finance Director City of Seward P.O. Box 167 Seward,Alaska 99664-0167 Page 4 of 5 28 Professional Ser 6ces Agrecancnt For Eternal Independent Audit Senices IN WITNESS WHEREOF,the CITY and the CONTRACTOR have executed this Agreement as of the date first written above. Altman,Rogers&Co. CITY OF SEWARD Grant R.Todd,CPA Scott Meszaros Principal City Manager ATTEST: Brenda Ballou City Clerk (City Seal) Page 5 of 5 29