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HomeMy WebLinkAbout03.c. Authorize the General Manager to execute a contract in an amount not to exceed $171,600 with Maze & Associates, Certified Professional Accountants to perform financial audit services for Fiscal Years 2022-23 through 2024-25Page 1 of 3 Item 3.c. MEETING DATE: SUBJECT SUBMITTED BY: BOARD OF DIRECTORS POSITION PAPER APRIL 25, 2023 REVIEW DRAFT POSITION PAPER TO AUTHORIZE THE GENERAL MANAGER TO EXECUTE A CONTRACT I N AN AMOUNT NOT TO EXCEED $171,600 WITH MAZE &ASSOCIATES, CERTIFIED PROFESSIONAL ACCOUNTANTS TO PERFORM FINANCIALAUDIT SERVICES FOR FISCAL YEARS 2022-23 THROUGH 2O24-25 WITH THE OPTION TO EXTEND FOR TWO ADDITIONAL YEARS INITIATING DEPARTMENT: KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION -FINANCE REVIEWED BY: PHIL LEIBER, DIRECTOR OF FINANCE &ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER ISSUE The Board of Directors is required to appoint the independent auditor to provide professional auditing services necessary to meet Central San's current and long-term financial reporting needs. With the expiration of Central San's incumbent contract for professional auditing services on February 28, 2023, staff has conducted competitive solicitation and evaluation procedures, and proposes the Board approve a new three-year contract with the option to extend for two additional years. BACKGROUND Central San is required by California state law to have an independent audit of the financial statements completed annually. For the past 10 fiscal years, the firm of Maze & Associates has been Central San's independent auditors and has worked with staff to achieve the Government Finance Officers Association (GFOA) award for Excellence in Financial Reporting. The GFOA has recently published articles and guidelines on best practices which encourage local municipal entities to complete a thorough and competitive bidding process and strive for the highest quality service, even if it is with the same audit firm. Since most audit firms do not specialize in the government sector, mandatory rotation of firms could prevent agencies from obtaining the best services. I n order to maintain independence, it is required by the state that the leading audit partner be rotated after every six years. Request for Proposal (RFP) and Selection Process I n March 2023, Central San released an RFP for professional auditing services. Consistent with Central San's policies, the RFP instructed bidders to submit their proposals in two parts: (1) a technical proposal and (2) a cost proposal. The purpose of the technical proposal is to demonstrate the qualifications, April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 94 of 160 Page 2 of 3 competence and capacity of the firm seeking to provide services in accordance with the requirements of the RFP. The purpose of the cost proposal is to include all of the pricing information relative to performing the services described in the RFP, which is both submitted and evaluated separately from the technical proposal. I n total, four firms responded to the RFP: (1) C. J. Brown & Company CPAs; (2) Cropper Accountancy Corporation; (3) Mann, Urrutia, Nelson, CPAs & Associates LLP; and (4) Maze & Associates. A panel of five Central San staff evaluated the proposals against three separate criteria specified in the RFP. Services requested in the RFP were consistent with those outlined previously. The three selection criteria specified in the RFP to be included in the technical proposal were based on the following: 1. Firm Qualifications, Experience and References 40% 2. Proposed Staffing and Project Organization 30% 3. Proposed Approach and Work Plan 30% Total: 100% The proposal that scored highest by staff was from Maze & Associates (Maze). Maze is a highly regarded national firm that provides all the needed auditing services specified in the RFP to a multitude of public agencies, many of which are located in California and similar to Central San. I n their proposal, Maze committed to retaining the same auditing partner (Mr. Alvey), with whom Central San has worked effectively with over the past few years, for the first year of the new contract. Thereafter, commencing with the FY 2023-24 audit, Maze has proposed an audit partner that is similarly qualified to Mr. Alvey, with extensive audit experience in the public sector including over sewer districts. Term The RFP requested, and the contract provides for a total five-year term, consisting of an initial three-year term, with an option to extend an additional two years. Services can be terminated by Central San at any time. Costs are discussed in the Financial Impact section of this paper. ALTERNATIVES/CONSIDERATIONS The Board could extend the current contract with Maze for another year and issue another RFP later. This is not recommended as it is best practice to execute services contracts with a maximum term of 5 years and to solicit proposals thereafter to ensure competitive pricing and continued quality of services. FINANCIAL IMPACTS Maze has proposed a fee of $31,600 for the FY 2022-23 audit, which is essentially held flat compared to the prior year audit fee. The total for the three-year contract with the optional two-year extension shall not exceed $171,600. Additional fees are charged for work requested by the District which is outside the scope of the annual audit. Staff recommends entering into a three-year contract with two optional one-year extensions. COMMITTEE RECOMMENDATION The Finance Committee reviewed this matter at its special meeting on April 25, 2023 and recommended approval. RECOMMENDED BOARD ACTION April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 95 of 160 Page 3 of 3 Authorize the General Manager to execute a contract with Maze & Associates, Certified Public Accountants in an amount not to exceed $171,600 to provide professional auditing services for Fiscal Years 2022-23 through 2024-25 with the option to extend for two additional years Strategic Plan Tie -In GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 3 - Maintain financial stability and sustainability April 25, 2023 Special FINANCE Committee Meeting Agenda Packet - Page 96 of 160