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HomeMy WebLinkAboutCC RESO 11,485RESOLUTION NO. 11,485 RESOLUTION RETAINING CARROLL & BRANTLEY, ASSOCIATES AS AUDITORS FOR THE CITY OF NATIONAL CITY BE IT RESOLVED by the City Council of the City of National City that Carroll & Brantley, Associates is employed as auditors for the City of National City under the terms and conditions outlined in their letter of employment dated March 28, 1974, of copy of which is attached hereto and incorporated herein as though set forth in full. PASSED AND ADOPTED this 14th day of May, 1974. ATTEST: Office of CLEO O58URN Ciry. Manager MEMORANDUM (A / THE CITY OF NATIONAL CITY 1243 NATIONAL AVENUE NATIONAL CITY, CALIFORNIA 92050 - Telephone: 477-1181 Aron Code: 714 May 1, 1974. TO The Honorable Mayor and City Council FROM : C. Osburn, City Manager RECEIVED MAY 61Q74 TREASURER'S OFFICE SUBJECT : Auditing of the Financial Records of the City of National City by Private Accounting Firm. On Tuesday, March 19, 1974, the City Council authorized the City Manager to initiate action to secure a new auditing firm for the City of National City. This action was taken due to the fact that one of the partners in the firm of Rigney & Hill, a private accounting company -in Los Angeles, had recently died and -the remain-_-:- ing member of the firm was.ill. - Informal bids were received from two recognized and _ reputable accounting firms. The first bid was -received -from the"-- firm of Carroll & Brantley, Associates, who are ,certif;ied: public-.� „- accountants from Costa Mesa, California,:- At the present time, this --- firm functions as the auditor for the cities of El Cajon, La Mesa, Chula Vista, Imperial Beach", Coronado and Escondido.' This firm has indicated that their audit would be made on a selective test basis in accordance with professionally recognized and nationally accepted principles of municipal auditing standards. In addition, they will be available for consultation at any time during the audit, and their fee contemplates recommendations for improvement of the City's financial records, if necessary. - The second hid received was from the firm of Ernst & Ernst, a nationwide accounting and management auditing company. This company's proposal emphasizes an approach to the financial audit that is designed to provide auditing services at reasonable costs and to develop meaningful and constructive financial management recommendations to the City Treasurer. In addition, the firm will provide consultation on governmental accounting problems through a branch office --San Diego. Due to the fact that the City has not had a financial audit by an outside auditing firm since June 30, 1971, it will be necessary for the auditing firm selected by the City Council to perform an The Honorable Mayor and City Council -2- May 1, 1974 audit for the City covering the fiscal years 1971-72 and 1972-73, well as to eventually conduct the audit of the City's financial ansactions for the current 1973-74 fiscal year. The firm of Lrroll & Brantley, Associates, of Costa Mesa has submitted. the. Mowing maximum fees for this work: Fiscal year ended June 30, 1972 $ 4,500 Fiscal year ended June 30, 19.73 4,200 Fiscal year ended June 30, 1974 ' 4,200 Total $12,900 The firm of Ernst & Ernst of Los Angeles has submitted the following range of fees, subject to possible revision in the event the nature of the engagement were to change, for this work: Fiscal year ended June 30, 1972 $ 4,500 - $ 5,500 Fiscal year ended June 30, 1973 4,500_---5,500 Fiscal year ended June 30, 1974 5,000.- 6,000 -- Total $14,000 - $17,000 Good business and accounting practices require the performance of.a financial'audit by an outside, independent and qualified accounting firm. This practice is followed, by both -cities and priyate- - companies and is recognized as a valuable asset to both management and the City Council. Therefore, it is recommended that the City Council make a determination as to which of these two accounting firms they wish to hire, 'and that minute action be taken designating the name of this firm at the next regular Council meeting_on.Tuesday,- May 7, 1974. Thereafter, at. the following Council meeting on May 14, a resolution will be available for adoption approving a con- tract for this work. CO:STS:jbf Attachments CflRROL1 & B12fl11TLEy, flSSOCIfl7ES c ERT11-1EO PUBLIC ACCOUNTANTS W. T. CAR ROLLI C. P. A. H.W. BRANTLEY, C.P.A.. March 28, 1974 Mr. Cleo Osburn, City Manager. City of National City 1243 National Avenue National City, California 92050 Dear Sir: RECEIVED MAR 2 9 1974 CITY MANAGER TY NATIONAL'CI 1756 ORANGE AVENUE COSTA mEsn. CflLIFORnIa 92627 AREA CODE 714 64S•4429 MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS MEMBERS CALIFORNIA • SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS • We' met with Mr. Stenberg yesterday and also spent several hours with Mrs. Kerr going over the City's records, The prior auditors excluded fixed assets from their opinion and we presume we will be required to eliminate that category also until some future date when an appraisal or physical inventory can be taken. In other respects the records appear, on the surface at least, to be well kept and documentation appears to be readily accessible. We anticipate some difficulty in obtaining confirmations from the state and county and perhaps banks and others in prior years, but we believe we can work around this problem, if it indeed arises, using alternative measures. Accordingly, we propose to audit the records for the three years ended June 30, 1974, for the following maximum fees: June 30, 1972 June 30, 1973 June 30, 1974 $4,500 4,200 4,200 iur audit will be made on a selective test basis in accordance with professionally ecognized and nationally accepted principles of municipal auditing standards. ,e will be available for consultation at any time during the audit, and our fee .ontemplates •recommendations for improvement of the records (if indicated). Separate audit reports will be issued for each year and barring presently unfore- seen new projects or irregularities, our fees will not exceed the maximum quoted. We would appreciate permission to bill the City as each year is completed and the audit report delivered. Mr. Cleo Osburn March 28, '1974 Page 2 Normally, our audit report would be delivered before September 30th immediately following the close of the fiscal year, but we don't believe this can be accom- plished, realistically in our first engagement. For reference, we are at the present time auditors for six cities in the San Diego area including Chula Vista, El Cajon and La Mesa. Very truly yours, CARROLL & BRANTLEY, ASSOCIATES By dma ERNST & ERNST Mr, Cleo Osburn City Manager City of National City 1243 National Avenue National City, California Dear Mr. Osburn, SUITE ISIS, U. S. NATIONAL BANK BLDG. 1010 SECOND AVENUE SAN DIEGO, CALIF. 92101 April 1, 1974 92050 We wish to thank. the City of National City for inviting Ernst & Ernst to submit a proposal to perform the annual audit for the City. Also, we appreci- ated the opportunity you provided Messrs. Gardner and Lightfoot to review certain aspects of your accounting operations prior to the preparation of our proposal. Based on our preliminary review, we feel confident that we can satisfy the requirements of the City to perform the annual audit. Our proposal emphasizes an approach to the audit that is designed to prl:vide auditing services at reasonable costs and to develop meaningful and con- structive financial management recommendations to the City Treasurer. There are several reasons why Ernst & Ernst is well qualified to serve as the City's independent accountants. Our San Diego office is sufficiently large to staff the engagement, thus assuring a continuity of audit staff who are familiar with the City's operations. In addition, Mr. Gardner, Partner in Charge of the office, will personally act as executive in charge of this engage- ment, as his previous experience in the Los Angeles office included audits of city governments. If special reporting or accounting problems arise, we can draw upon the experience of our other offices in California and elsewhere in the country, which audit annually over 350 municipalities, counties, special districts and publicly owned utilities. In fact, we plan to use a senior accoun- tant from the Los Angeles office who has recently been involved in city audits in the Los Angeles area as well as Mr. Lightfoot, who will provide consultation on governmental accounting problems and recommendations. Our firm has been quite active in municipal accounting and auditing in California, both as independent accountants to local governments and within the accounting profession. We have a good understanding of California and local regulations and laws that affect the City's financial operations. -2- We have a partner in Washington, D.C. who serves 'as a liaison between federal agencies and our officesserving state and local governments. We have found that the increasingly large role of the federal government in municipal operations requires the independent accountant to be able to obtain for munici- pal clients answers to financial management questions about such matters as revenue sharing, wage controls, IRS regulations regarding municipal debt refi- nancing, federal grants in aid, audit requirements for federally funded programs, and allowable costs under federal grant programs. We propose the following range of fees, subject to possible revision- - in the event the nature of the engagement were to change (any revision would be mutually agreed upon in advance): Fiscal year ended June 30, 1972 $4,500 - $5,500 Fiscal year ended June 30, 1973 - - 4,500 -- 5,500 --- Fiscal year ended June 30, 1974 5,000 - 6,000 The estimates are based on fees normally charged to our municipal clients and include out-of-pocket expenses. We would plan to perform the audits for the years ended June 30, 1972 and 1973 simultaneously, beginning in May; 1974. The audit for the fiscal year ended June 30, 1974 will be performed during - August, 1974, although certain work could be performed at an earlier date. If -there is any additional information you desire, please contact Mr. Hal Gardner at (213) 977-4298. Very truly yours, SCOPE AND APPROACH TO THE AUDIT In response to your invitation to submit a proposal for the annual audit of the City of National City, we propose the following: We will perform an examination of the financial statements of the City of National City and issue our report thereon in accor- dance with generally accepted auditing standards approved by the. American Institute of Certified Public Accountants. These standards contemplate, among other things, that we will make a study and evaluation of the system of internal control as a basis for reliance on the accounting records and for determining the extent of our audit tests, and that we will be able to obtain sufficient evidential matter respecting the accounts to afford a reasonable basis for our opinion regarding the financial statements. In the performance of the audit, we will follow the "check list for the Audit of Financial n:.cords of a California City", published by the League of California Cities and the California Society of Certified Public Accountants. As our examination including sampling irregularities, if larities which our you promptly. would be performed generally on a test basis, techniques, it would not necessarily disclose any, that might exist. However, any irregu- examination did disclose would be reported to 2. In addition to the examination and our report thereon, as described above, we would contemplate preparing and issuing a separate manage- ment letter which would set forth our observations and findings related to internal controls and procedures, would discuss potential weaknesses noted, if any, and would suggest possible actions which might be considered by the City in order to improve internal con- trols and procedures. 3. The scope. of our audit excludes a special audit and certification of revenue sharing funds satisfying Office of Revenue Sharing require- ments, a review of performance, efficiency and -economy of City departments as specified in the U.S. General Accounting Office, "Standards for Audit of Governmental Organizations, Programs, Activities and Functions," and an audit of -the City Redevelopment Agency. Although the Redevelopment Agency hasnot been included in previous City audits, the City should give consideration to its inclusion assuming it exists as part of the City organization. -1-