April 11, 2006

SUBJECT: Extension of Existing Contract for Financial Auditing Services (F0503-59)

REPORT IN BRIEF

Approval is requested for a one-year extension of an existing contract with Caporicci & Larson CPAs of Oakland for financial auditing services for the Department of Finance.

BACKGROUND

The City’s year-end financial reports are intended to provide relevant financial information to citizens, Council, City staff, creditors, investors and other concerned readers.  Responsibility for the accuracy of the data and the fairness of the presentation rests with the City.  The City Charter and certain government grants require an annual audit of the financial transactions and records of the City by an independent Certified Public Accountant (CPA).

The City has contracted with Caporicci & Larson for financial auditing services since May 2001.  This contract was originally issued to Caporicci, Cropper & Larson as the result of an extensive competitive proposal process and awarded by Council on May 15, 2001 (RTC 01-160).  The original contract award was for five years with two optional one-year extensions.  In 2002, the partnership changed to Caporicci & Larson.  Total cost of the five-year contract was $385,695 which can be broken down, as follows:

DISCUSSION

Over the past five years, Caporicci & Larson has developed an understanding of the City’s operation that has aided it in providing quality audit services in a timely manner.  Based upon this experience, there are advantages to retaining this firm beyond the term of the original contract; and staff requests Council approval to extend the existing contract for an additional one-year period. 

Caporicci & Larson has agreed to this one-year contract extension, during which they will perform the financial statement audit for the fiscal year, ending June 30, 2006, at the same price as the 2005 audit.

The Government Finance Officers Association (GFOA) has a series of Recommended Practices for State and Local Governments.  The Recommended Practice regarding audit procurement states, in part:

“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.  Multiyear agreements can also help to reduce audit costs by allowing auditors to recover certain ‘start-up’ costs over several years, rather than over a single year.”

The GFOA Recommended Practice goes on to say:

“Governmental entities should undertake a full-scale competitive process for the selection of independent auditors at the end of the term of each audit contract.”

Based upon these Recommended Practices, staff suggests that the City exercise the two one-year contract extensions for FY 2005/2006 and FY 2006/2007 and initiate a competitive proposal process thereafter.

FISCAL IMPACT

Total cost to the City for the one-year contract extension will not exceed $77,975.  Funds are available as follows:

RECOMMENDATION

It is recommended that Council approve a one-year extension, in substantially the same form as the attached Second Amendment to Service Agreement and in an amount not to exceed $77,975, of an existing contract with Caporicci & Larsen CPAs for financial auditing services, making a total six-year contract amount of $463,670.  Upon successful completion of this one-year extension, staff will return to Council for one final one-year extension.

Prepared by:

Elaine Wesely

Purchasing Officer

Reviewed by:

Mary J. Bradley

Director, Finance

Approved by:

Amy Chan

City Manager

Attachments

A. Draft Second Amendment to Service Agreement(pdf)
B. Amendment to Service Agreement(pdf)
C. Service Agreement(pdf)