HomeMy WebLinkAboutCC Resolution 12205 (Auditing Services; Maze & Associates)RESOLUTION NO. 12205
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN
RAFAEL APPROVING AND AUTHORIZING THE CITY MANAGER TO
EXECUTE AN AGREEMENT WITH MAZE AND ASSOCIATES, TO
PROVIDE AUDITING SERVICES FOR THE FISCAL YEARS ENDING
JUNE 30, 2007 THROUGH JUNE 30, 2010, WITH OPTIONS FOR THE
FISCAL YEARS ENDING JUNE 30, 2011 AND JUNE 30, 2012.
The City Council of the City of San Rafael resolves as follows:
The City Manager is authorized to execute, on behalf of the City of San Rafael,
an agreement with Maze and Associates, a copy of which is hereby attached and by
this reference made a part hereof.
I, JEANNE M. LEONCINI, Clerk of the City of San Rafael, hereby certify that the
foregoing resolution was duly and regularly introduced and adopted at a regular meeting
of the City Council of said City held on Monday, the 5th day of March, 2007, by the
following vote, to wit:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS:
Cohen, Heller, Miller, Phillips & Mayor Boro
None
None
JLANNE M. LEONCINI, City Clerk
AGREEMENT
FOR: Professional Auditing Services
This Agreement is made and entered into this 5th day of March. 2007, by and between
the CITY OF SAN RAFAEL (hereinafter "CITY"), and Maze and Associates ("Maze") hereinafter
("CONTRACTOR").
1. PROJECT COORDINATION
A. CITY. The City Manager shall be the representative of the CITY for all
purposes under this Agreement. The Finance Director, Cindy Mosser, is hereby designated the
PROJECT MANAGER for the CITY, and said PROJECT MANAGER shall supervise all aspects
of the progress and execution of this Agreement.
B. CONTRACTOR. CONTRACTOR shall assign a single PROJECT
DIRECTOR to have overall responsibility for the progress and execution of this Agreement for
CONTRACTOR. Katherine Yuen, Shareholder, is hereby designated as the PROJECT
DIRECTOR for CONTRACTOR. Should circumstances or conditions subsequent to the
execution of this Agreement require a substitute PROJECT DIRECTOR for any reason, the
CONTRACTOR shall notify the CITY within ten (10) business days of the substitution.
2. DUTIES OF CONTRACTOR
CONTRACTOR shall perform the duties and/or provide services as described in
the Request for Proposal for Audit Services (attached Exhibit A) and pursuant to the
CONTRACTOR'S Proposal dated February 2, 2007 (attached Exhibit B) and incorporated
herein.
3. DUTIES OF CITY
CITY shall cooperate with CONTRACTOR in his performance under this
agreement and shall compensate CONTRACTOR as provided herein.
4. COMPENSATION
For the full performance of the services described herein by CONTRACTOR, CITY
shall pay CONTRACTOR pursuant to the Schedule of Fees and Expenses reflected in the
CONTRACTOR'S Pricing Proposal (attached Exhibit C), dated February 2, 2007, including the
cost of local business license taxes.
Payment will be made monthly upon receipt by PROJECT MANAGER of itemized
invoices submitted by CONTRACTOR.
5. TERM OF AGREEMENT
The term of this Agreement shall be for four consecutive years for auditing fiscal
years ending June 30, 2007 through June 30, 2010. Upon mutual agreement of the parties, and
subject to the approval of the City Council, the term of this Agreement shall be extended for an
additional period of two years for auditing fiscal years ending June 30, 2011 and June 30, 2012.
6. TERMINATION
A. Discretionary. Either party may terminate this Agreement without cause
upon thirty (30) days written notice mailed or personally delivered to the other party.
B. Cause. Either party may terminate this Agreement for cause upon ten (10)
days written notice mailed or personally delivered to the other party, and the notified party's
failure to cure or correct the cause of the termination notice, to the reasonable satisfaction of the
party giving such notice, within thirty (30) days of the receipt of said notice.
C. Effect of Termination. Upon receipt of notice of termination, neither party
shall incur additional obligations under any provision of this Agreement without the prior written
consent of the other.
D. Return of Documents. Upon termination, any and all CITY documents or
materials provided to CONTRACTOR and any and all of CONTRACTOR's documents
described in paragraph 7 below, shall be delivered to CITY as soon as possible, but not later
than thirty (30) days after termination.
7. OWNERSHIP OF DOCUMENTS
The written documents and materials prepared by the CONTRACTOR in
connection with the performance of its duties under this Agreement, shall be the sole property of
CITY. CITY may use said property for any purpose, including projects not contemplated by this
Agreement.
8. INSPECTION AND AUDIT
Upon reasonable notice, CONTRACTOR shall make available to CITY, or its
agent, for inspection and audit, all documents directly related to CONTRACTOR'S performance
of its duties under this Agreement. CONTRACTOR shall fully cooperate with CITY or its agent in
any such audit or inspection.
9. ASSIGNABILITY
The parties agree that they shall not assign or transfer any interest in this
Agreement nor the performance of any of their respective obligations hereunder, without the
prior written consent of the other party, and any attempt to so assign this Agreement or any
rights, duties or obligations arising hereunder shall be void and of no effect.
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10. INSURANCE
A. During the term of this Agreement, CONTRACTOR shall maintain, at no
expense to CITY, the following insurance policies:
1. A comprehensive general liability insurance policy in the minimum
amount of one million ($1,000,000) dollars per occurrence for death, bodily injury, personal
injury, or property damage;
2. An automobile liability (owned, non -owned, and hired vehicles)
insurance policy in the minimum amount of one million ($1,000,000) dollars per occurrence;
3. If any licensed professional performs any of the services required to
be performed under this Agreement, a professional liability insurance policy in the minimum
amount of one million ($1,000,000) dollars to cover any claims arising out of the
CONTRACTOR's performance of services under this Agreement.
B. The insurance coverage required of the CONTRACTOR by section 11. A.,
shall also meet the following requirements:
1. The insurance shall be primary with respect to any insurance or
coverage maintained by CITY and shall not call upon CITY's insurance or coverage for any
contribution;
2. Except for professional liability insurance, the insurance policies shall
be endorsed for contractual liability and personal injury;
3. Except for professional liability insurance, the insurance policies shall
be specifically endorsed to include the CITY, and other entities in the Franchisors' Group, their
officers, agents, employees and volunteers as additionally named insureds under the policies;
4. CONTRACTOR shall provide to PROJECT MANAGER, (a)
Certificates of Insurance evidencing the insurance coverage required herein, and (b) specific
endorsements naming CITY, and other entities in the Franchisors' Group, their officers, agents,
employees and volunteers as additional insureds under the policies;
5. The insurance policies shall provide that the insurance carrier shall
not cancel, terminate or otherwise modify the terms and conditions of said insurance policies
except upon thirty (30) days written notice to CITY's PROJECT MANAGER;
6. If the insurance is written on a Claims Made Form, then, following
termination of this Agreement, said insurance coverage shall survive for a period of not less than
five years;
7. The insurance policies shall provide for a retroactive date of
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placement coinciding with the effective date of this Agreement;
8. PROJECT MANAGER and the City Attorney shall approve the
insurance as to form and sufficiency.
C. If it employs any person, CONTRACTOR shall maintain worker's
compensation and employer's liability insurance, as required by the State Labor Code and other
applicable laws and regulations, and as necessary to protect both CONTRACTOR and CITY
against all liability for injuries to CONTRACTOR's officers and employees.
D. Any deductibles or self-insured retentions in CONTRACTOR's insurance
policies must be declared to and approved by the PROJECT MANAGER and the City Attorney.
At CITY's option, the deductibles or self-insured retentions with respect to CITY shall be reduced
or eliminated to CITY's satisfaction, or CONTRACTOR shall procure a bond guaranteeing
payment of losses and related investigations, claims administration, attorney's fees and defense
expenses.
11. INDEMNIFICATION
CONTRACTOR shall indemnify, release, defend and hold harmless CITY, and
other entities in the Franchisors' Group, their officers, agents, employees and volunteers, against
any claim, demand, suit, judgment, loss, liability or expense of any kind, including attorney's
fees, arising out of or resulting in any way, in whole or in part, from any acts or omissions,
intentional or negligent, of CONTRACTOR or CONTRACTOR's officers, agents and employees
in the performance of their duties and obligations under this Agreement.
12. NONDISCRIMINATION
CONTRACTOR shall not discriminate, in any way, against any person on the basis
of age, sex, race, color, religion, ancestry, national origin or disability in connection with or
related to the performance of its duties and obligations under this Agreement.
13. COMPLIANCE WITH ALL LAWS
CONTRACTOR shall observe and comply with all applicable federal, state and
local laws, ordinances, codes and regulations, in the performance of its duties and obligations
under this Agreement. CONTRACTOR shall perform all services under this Agreement in
accordance with these laws, ordinances, codes and regulations. CONTRACTOR shall release,
defend, indemnify and hold harmless CITY, and other entities in the Franchisors' Group, their
officers, agents and employees from any and all damages, liabilities, penalties, fines and all
other consequences from any noncompliance or violation of any laws, ordinances, codes or
regulations.
14. NO THIRD PARTY BENEFICIARIES
CITY and CONTRACTOR do not intend, by any provision of this Agreement, to
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create in any third party, any benefit or right owed by one party, under the terms and conditions
of this Agreement, to the other party.
15. NOTICES
All notices and other communications required or permitted to be given under this
Agreement, including any notice of change of address, shall be in writing and given by personal
delivery, or deposited with the United States Postal Service, postage prepaid, addressed to the
parties intended to be notified. Notice shall be deemed given as of the date of personal delivery,
or if mailed, upon the date of deposit with the United States Postal Service. Notice shall be
given as follows:
TO CITY: Ms. Cindy Mosser, Finance Manager
City of San Rafael
1400 Fifth Avenue
P.O. Box 151560
San Rafael CA 94915-1560
TO CONTRACTOR: Ms. Katherine Yuen
Maze & Associates
3478 Buskirk Avenue, Suite 215
Pleasant Hill, CA 94523
16. INDEPENDENT CONTRACTOR
For the purposes, and for the duration, of this Agreement, CONTRACTOR, its
officers, agents and employees shall act in the capacity of an Independent Contractor, and not
as employees of the CITY. CONTRACTOR and CITY expressly intend and agree that the status
of CONTRACTOR, its officers, agents and employees be that of an Independent Contractor and
not that of an employee of CITY.
17. ENTIRE AGREEMENT -- AMENDMENTS
A. The terms and conditions of this Agreement, all exhibits attached, and all
documents expressly incorporated by reference, represent the entire Agreement of the parties
with respect to the subject matter of this Agreement.
B. This written Agreement shall supersede any and all prior agreements, oral
or written, regarding the subject matter between the CONTRACTOR and the CITY.
C. No other agreement, promise or statement, written or oral, relating to the
subject matter of this Agreement, shall be valid or binding, except by way of a written
amendment to this Agreement.
D. The terms and conditions of this Agreement shall not be altered or modified
except by a written amendment to this Agreement signed by the CONTRACTOR and the CITY.
E. If any conflicts arise between the terms and conditions of this Agreement,
and the terms and conditions of the attached exhibits or the documents expressly incorporated
by reference, the terms and conditions of this Agreement shall control.
18. WAIVERS
The waiver by either party of any breach or violation of any term, covenant or
condition of this Agreement, or of any ordinance, law or regulation, shall not be deemed to be a
waiver of any other term, covenant, condition, ordinance, law or regulation, or of any subsequent
breach or violation of the same or other term, covenant, condition, ordinance, law or regulation.
The subsequent acceptance by either party of any fee, performance, or other consideration
which may become due or owing under this Agreement, shall not be deemed to be a waiver of
any preceding breach or violation by the other party of any term, condition, covenant of this
Agreement or any applicable law, ordinance or regulation.
19. COSTS AND ATTORNEY'S FEES
The prevailing party in any action brought to enforce the terms and conditions of
this Agreement, or arising out of the performance of this Agreement, may recover its reasonable
costs (including claims administration) and attorney's fees expended in connection with such
action.
20. CITY BUSINESS LICENSE/OTHER TAXES
CONTRACTOR shall obtain and maintain during the duration of this Agreement, a
CITY business license as required by the San Rafael Municipal Code. CONTRACTOR shall pay
any and all state and federal taxes and any other applicable taxes. CONTRACTOR's taxpayer
identification number is 94-2590179, and CONTRACTOR certifies under penalty of perjury that
said taxpayer identification number is correct.
21. APPLICABLE LAW
The laws of the State of California shall govern this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day, month
and year first above written.
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services agreement.doc
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EXHIBIT A
CITY OF SAN RAFAEL, CALIFORNIA
AUDIT SERVICES
DUE DATE:
FEBRUARY 29 20079 5:00 P.M.
JANUARY 249 2007,9:00 A.M.
CITY OF SAN RAFAEL
REQUEST FOR PROPOSAL
FOR AUDIT SERVICES
A. INTRODUCTION
The City of San Rafael (City) and its Redevelopment Agency are requesting proposals from
qualified firms for audit services for the fiscal years ending June 30, 2007 through June 30, 2010,
with the option of extending the engagement for an additional two years. These audits are to be
performed in accordance with generally accepted auditing standards, the standards set forth for
financial audits in the U.S. General Accounting Office's (GAO) Government Auditing Standards,
the provisions of the Federal Single Audit Act and the U.S. Office of Management and Budget
(OMB) Circular A-133, Audits of State and Local Governments.
The City believes that it is important for all proposing firms to attend a mandatory pre -
proposal conference to obtain a proper understanding of the engagement and to demonstrate the
proposing firm's interest in the audit. Failure to attend the pre -proposal conference will result in
disqualifying any submitted bid. The mandatory pre -proposal conference for all firms interested
in submitting a proposal will be held to answer questions about the engagement.
Mandatory pre -proposal conference:
Wednesday, January 24, 2007
9 a.m. at the San Rafael City Hall,
City Manager's Conference Room
1400 5h Avenue,
San Rafael CA 94901.
Proposals due by:
Friday, February 2, 2007
5 p.m. at San Rafael City Hall, hand delivered
Attn: Cindy Mosser, Finance Director
City of San Rafael
1400 5th Avenue, Room 204
San Rafael, CA 94901-1943
Or
Friday, February 2, 2007
5 p.m. at San Rafael City Hall, U.S. Mail
Attn: Cindy Mosser, Finance Director
City of San Rafael
P.O. Box 151560
San Rafael, CA 94915-1560
Page 2
711
11111-R �111 NMI]
The City desires the external auditor to express an opinion on the fair presentation of its general
purpose financial statements in conformity with generally accepted accounting principles.
The City combining and individual fund and account group financial statements and schedules in
conformity with generally accepted accounting principles. The auditor is not required to audit
the supporting schedules contained in the comprehensive annual financial report. However, the
auditor is to provide an "in -relation to" report on the supporting schedules based on auditing
procedures applied during the audit of general-purpose financial statements and the combining
and individual fund financial statements schedules.
The City of San Rafael for the past several years has participated in and has been a recipient of
the CSMFO and GFOA Financial Reporting Awards. The auditor will be required to prepare the
general purpose financial statements and combining statements for the City's Comprehensive
Annual Financial Report (CAFR). It is anticipated that the auditor will provide assistance in
meeting the requirements of these programs. The City will be responsible for preparing the
introductory and statistical sections.
The respondent will also be responsible for performing certain limited procedures involving
required supplementary information required by the Governmental Accounting Standards Board
as mandated by generally accepted auditing standards.
The respondent will provide opinions as to the compliance with the Federal Single Audit Act and
OMB Circular A-133. The respondent is not required to audit the Schedule of Expenditures of
Federal Awards. However, the respondent is to provide an "in -relation -to" report on the
schedule based on the auditing procedures applied during the audit of the financial statements.
C. AUDITING STANDARDS TO BE FOLLOWED
To meet the requirements of this request for proposal, the audit shall be performed in accordance
with:
• Generally accepted auditing standards as set forth by the American Institute of Certified
Public Accountants (AICPA),
• Standards for financial audits set forth in the U.S. Government Accountability Office's
Government Auditing Standards ("Yellow Book"),
* Provisions of the Single Audit Act,
• Provisions of U.S. Office of Management and Budget Circular A-133, Audits of States,
Local Governments, and Non -Profit Organizations, and
0 Applicable State of California audit guidelines.
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D. REQUIRED REPORTING
« Comprehensive Annual Financial Report is to be prepared by the auditing firm, to be
issued on the fair presentation of the financial statements in conformity with generally
accepted accounting principles. The issuance of the CAFR will be no later than
December 15th following the end of each fiscal year. The audit firm will provide 60
bound copies.
Single Audit Report will include a City prepared Schedule of Expenditures of Federal
Awards. The issuance of the Single Audit will be no later than December 15th
following the end of each fiscal year. The audit firm will provide 10 bound copies of the
Single Audit report with independent opinions as to the compliance with the Federal
Single Audit Act and OMB Circular A-133. When applicable, the respondents will
provide independent opinions as to the compliance with State granting agencies.
• Basic Financial Statements of the Redevelopment Agency is to be prepared by the
auditing firm. The auditing firm will be responsible for reviewing and expressing an
opinion on the basic financial statements for the City of San Rafael Redevelopment
Agency. The issuance of the Redevelopment Audit will be no later than December Stn
the last business day of each calendar year following the fiscal year. The audit firm will
provide 20 bound copies.
Audit Report for the Child Development and Nutrition Programs in accordance with
the Audit Guide issued for financial and compliance audits by the State of California
Department of Education. The issuance of the Child Development Report will be no
later than November 151h following the end of each fiscal year. The audit firm will
provide 10 bound copies of the report.
Agreed-upon Procedures Applied to the Appropriations Limitation prescribed by
Article XIII -B of the California Constitution. The Independent Accountant's Report on
Agreed-upon procedures will follow the League of California Cities publication entitled
Article ,WHB Appropriation Limitation Uniform Guidelines and the recommendations of
the California Committee on Municipal Accounting White Paper covering the same
subject matter. The audit firm will provide 10 copies of the report by December 15th
following the end of the each fiscal year.
« Management Letter will be prepared by the audit firm that communicates any
observations for improvements in the City's financial operations and any deficiencies in
internal controls that need to be addressed by the City. The audit firm will provide 10
copies of the letter by December 15th following the end of each fiscal year.
In addition to the number of bound reports noted above, the audit firm will provide one unbound
version of each report to the City.
E. AUDIT ASSISTANCE
The Finance Department staff and responsible management personnel will be available during
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the audit to assist the auditors by providing information, documentation and explanations. The
auditors will be expected to coordinate their services with the Finance Director and should
endeavor to accomplish the audit on a phased basis throughout the year to reduce the year-end
workload on the City's staff.
F. INFORMATION REQUESTED FROM THE PROPOSING FIRMS
The City will accept proposals from firms in a two step process. Proposing firms are asked to
submit their proposals in two separate sealed envelopes: the main proposal highlighting their
technical and qualitative abilities and the second envelope with their pricing for the deliverables
and hourly rates for additional work. The City will screen the "technical proposals" for the
purpose of inviting two or three firms to proposal interviews. The City will only open the
pricing of the top three rated firms from the proposal screening (the City may choose to
interview fewer than three firms). Proposals and unopened pricing envelopes will be kept by the
City until a contract is signed with the selected firm.
G. TECHNICAL PROPOSAL
To achieve a uniform review process and obtain the maximum degree of comparability, it is
required that proposals be organized in the manner specified below:
1. Title Page
Show the RFP subject, the name of the proposing firm, local address, telephone number,
name of contact person and date.
2. Table of Contents
Clearly identify the material by section and page number.
3. Letter of Transmittal (limit to one page)
a. Briefly state the understanding of the work to be done and make a positive
commitment to perform the work within the time period.
b. Give the names of the persons who will be authorized to make representations for the
proposing firm, their titles, addresses and telephone numbers.
4. Profiles of the Proposing firm
a. Give the location of the office from which the work is to be done and the number of
partners, managers, supervisors, seniors and other staff employed at the office.
b. Describe the range of activities performed by the local office such as: audit,
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accounting, tax service or management services.
c. Describe the local office's technical and computer capability.
d. Describe the firm's participation in the "Peer Review" program. Provide the date and
extent of the local office's last participation. Please provide a copy of opinion of Peer
Review inspection.
5. Summary of Proposal's Qualifications (in addition to minimum qualifications).
a. Identify the partners, managers, super -visors and seniors who may work on the audit,
including staff from other offices.
b. Please specify whether anyone listed is licensed as a CPA with the ability to
attest an opinion on an audit.
c. For each person at the supervisory level or higher, please include their resumes as an
appendix.
d. Describe recent auditing experience similar to the type of audit requested.
Specifically, address experience related to the audit of-
• Municipalities complying with OMB Circular A-133.
• Describe the engagement team experience and capabilities to assist
government bond reporting requirements.
• Describe the professional activities of your firm or of the staff
members who support your commitment to governmental accounting.
• Describe any regulatory action taken against your firm, local office, or
any partners at the submitting office.
6. List of references
a. Give names, addresses and telephone numbers of five current municipal audit clients
served by your local office.
b. Include the type of services performed, dates and length of service for each.
7. Schedule of audit hours needed to accomplish the reports indicated in this RFP.
a. Clearly describe the position and hours of each participating member of the team to
accomplish the first year of the services and the second year of the services.
b. We understand the number of hours for a first year audit firm will be significant
higher than the hours for subsequent years.
c. The second year of hours should be indicative of the amount of time to be dedicated
exclusive of the accumulation of the systems and permanent audit files.
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F. PRICING PROPOSAL
The Pricing Proposal must be submitted in a separate envelope. Only one copy is necessary.
The Pricing Proposal will be comprised of three components:
Cover or transmittal page specifying that the proposing firm will honor the prices
for 90 days from the submittal deadline and who at the firm is authorized to
negotiate the prices and contract provisions on behalf of the firm.
2. A pricing schedule as formatted similar to the one noted below indicating the
prices for each component of the service by year.
Schedule of hourly rates for all firm positions for services extra ordinary to the
scope of the proposal. Rates should be specified by position and by year. The
City does not contemplate any additional services at this time, but such services
may include tax research and fraud investigations.
Pricing schedule will include all other expenses, including travel, typing, clerical and printing
costs as the total audit fee. The proposal must be on a fixed fee basis inclusive of all expenses
and allocated as follows:
Option Option
Year Year
Fiscal Year ending: 2007 2008 2009 2010 2011 2012
City CAFR
Redevelopment Agency
Component Unit Financials
Single Audit
Assuming one major program
Child Development Report
Appropriations Limitation
Agreed -Upon Procedures Report
Total by Year
Include a schedule of hourly rates for all positions including support staff to be used as a basis
for costs that are extra ordinary to the scope of the proposal. Hourly rates beyond the first year
may be indicated by the use of a fixed escalator (i.e. 3% or 4% per year). Please do not use
escalators that are not known at this time.
Right to re -negotiate prices:
The City maintains the right to re -negotiate the prices with the selected firm before entering into
a contract for services. If submitted prices are comparable to the other pricing envelopes opened
from the top three firms, the prices submitted will most likely be used for the contract.
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G. EVALUATION OF PROPOSALS
Proposals will be evaluated by the Audit Proposal Committee to ascertain which proposing firm
best meets the need of the City. Factors to be considered are:
1. The proposal's responsiveness in clearly stating the understanding of the work to be
performed.
2. The firm's indication of its ability to meet the timeframes for completing the
indicated reports.
3. The reasonableness of hours and level of staff dedicated to complete the audit
services as indicated by the schedule of audit hours.
4. The firms' technical support, firm size and structure.
5. The audit team's experience and professional activities and independence.
All proposals will be evaluated by first using the criteria of factors I through 5. After the top
firms have been selected using this criteria, the City may invite up to three firms for proposal
interviews. Oral interviews may be arranged anytime during the selection process to assist in
making the final decision.
After inviting the top firms to proposal interviews, the City will set up an evaluation panel to
conduct the interviews. The City will also open the pricing envelopes of the top three screened
technical proposals. The pricing will be summarized for the evaluation panel. Copies of the
proposals of the firms to be interviewed will be provided to the evaluation panel along with the
results of the screenings.
The City reserves the right to select a firm on any combination of price, experience in auditing
governmental agencies, references and other features that are deemed to be in the best interests
of the City. All factors will be considered in the selection process.
H. ADDITIONAL INFORMATION AND CONTACT
1. The submission of a proposal shall be prima face evidence that the proposing firm has
full knowledge of the scope, nature, quantity and quality of work to be performed.
2. The City will not be liable for any costs not included in the proposal and subsequent
contracted -for costs.
3. The City reserves the right to conduct personal interviews of any or all proposing firms
prior to the award of contract.
4. The City reserves the right to negotiate the final prices for the services with the top
selected firm and the right to negotiate with any firm that submits a proposal that meets
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the requirements of the City and is submitted within the prescribed deadlines.
5. The City reserves the right to reject any and all proposals, the right in its sole discretion
to accept the proposal it considers most favorable to the City's interest and the right to
waive minor irregularities in the procedures.
6. The contracting firm shall make itself available to the City Council and management to
answer questions related to audit findings.
7. Compensation for the conduct of audit service will be paid upon submission of progress
billings and of a final billing, along with the required reports.
8. The successful proposing firm will be required to sign the standard City Professional
Services Agreement, including meeting the City's minimum insurance requirements of:
a. Comprehensive general liability insurance policy in the amount of $1,040,000 per
occurrence for death, bodily injury, personal injury or property damage.
b. Automobile liability (owned, non -owned and hired vehicles) insurance policy in
the amount of $1,000,000 per occurrence.
c. Professional liability insurance policy in the amount of $1,000,000 to cover any
claims arising out of the audit firm's performance of services.
9. City staff requests that, once proposals have been submitted, no unsolicited contact
and/or discussions concerning these proposals be made prior to the evaluation of all
proposals.
10. The total audit staffing should be at a level sufficient to complete the audit in the time
scheduled and specified in the RFP. In addition, the audit staff should remain constant
through each year's audit process. At least one staff member from the prior year's audit is
to be a member of the subsequent year's audit team.
The City contact person for additional information and requests must be sent to Cindy Mosser
via email only Cindy. Mosser(rki.san-rafael.ca.us. Please no phone calls for questions regarding
the City or the RFP. Copies of emails requesting additional information and responses to those
inquiries will be provided to all firms attending the mandatory pre -bidders conference.
Simple phone requests for copies of the City's CAFR or budget document are acceptable by
calling finance staff -member Van Bach at (415) 458-5001.
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EXHIBIT B
PROPOSAL
To Provide
Professional Auditing Services
For The
CITY OF SAN RAFAEL
Submitted By
MAZE & ASSOCIATES
3478 Buskirk Avenue, Suite 215
Pleasant Hill, CA 94523
(925)930-0902
Contact Persons
Cory Biggs — e-mail address—coryb0mazeassaciates.com
Katherine Yuen — e-mail address—katherinevna,mazeassociates.com
February 2, 2007
CITY OF SAN RAFAEL
AUDIT PROPOSAL
TABLE OF CONTENTS,
Tab/Paae
Tableof Contents.............................................................................................................................. TAB/PAGE
PROPOSAL SUMMARY
Transmittal................................................................................................................................................... l
PROFILE.................................................................................................................................................. Profile
Overview...................................................................................................................................................... 2
Capacityand Resources............................................................................................................................... 2
AuditQuality................................................................................................................................................ 3
OurMunicipal Focus................................................................................................................................... 3
NationalRecognition................................................................................................................................... 4
CityClients................................................................................................................................................... 5
Grant and Compliance Audit Experience.................................................................................................... 6
Redevelopment Agency Experience............................................................................................................ 7
TransportationGrant Programs................................................................................................................... 7
Public Financing Authorities and Mello -Roos Experience........................................................................ 7
Joint Powers Authorities Experience........................................................................................................... 7
Proposition 111 Appropriations Limit Experience..................................................................................... 7
OtherPertinent Experience.......................................................................................................................... 8
Independence................................................................................................................................................ 8
Licenseto Practice in California.................................»................................,...............,............................... 8
PeerReview.................................................................................................................................................. 9
PeerReview Letter.....................................................................................................................................10
SUMMARY OF PROPOSAL'S QUALIFICATIONS...........................................................Qualifications
AuditTeam.................................................................................................................................................11
Qualifications and Continuity.................................................................................................................... 11
Honoringour Commitments.......................»..............................................................................................12
ProfessionalActivity..................................................................................................................................12
Books, Periodicals, News Letters, and Professional Standards................................................................13
ClientAlerts.......................................................................................„.....................................,................13
Litigation....................................................................................................................................................13
NoDisciplinary Action..............................................................................................................................13
REFERENCES................................................................................................................................. References
CITY OF SAN RAFAEL
AUDIT PROPOSAL
TABLE OF CONTENTS
Tab/PaLre
SPECIFIC AUDIT STRATEGY.........................................................................................................Strategy
Overview....................................................................................................................................................16
SpecificAudit Strategy—Interim..............................................................................................................16
AccessingRisks ..........................................................................................................................................18
RiskAssessment SASs..............................................................................................................................18
Special Emphasis Areas and SAS #99......................................................................................................19
SpecificAudit Strategy—Year End..........................................................................................................
20
InformationSystems Reviews...................................................................................................................
21
Technologies That Save Your Staff Time.................................................................................................
21
On -Site EDP Hardware and Software.......................................................................................................
22
FinancialStatements..................................................................................................................................
22
Laws, Regulations and Compliance..........................................................................................................
23
PromptService and Delivery of Reports...................................................................................................
23
Communicationand Coordination.............................................................................................................
24
AuditTiming..............................................................................................................................................
24
Proposed Engagement Segmentation........................................................................................................
24
Proposed Engagement Segments and Budget...........................................................................................
25
APPENDIX.......................................................................................................................................... Appendix
Resumes of Staff Assigned to your audit.................................................................................................. 26
StaffTraining............................................................................................................................................. 29
MAZE &
ASSOCIATES
February 2, 2007
Cindy Mosser
Finance Director
City of San Rafael
1400 5'h Avenue, Room 204
San Rafael, CA 94901
Dear Cindy:
ACCOUNTANCY CORPORATION
3473 Buskirk Ave. - Suite 215
Pleasant Hill, California 94523
(925) 930-0902 - FAX (925) 930-0135
maze@mazeassociates.com
www.mazeassociates.com
We appreciate this opportunity to submit our proposal to the City of San Rafael. We understand we will assist with the
preparation of the Comprehensive Annual Financial Report and that the City requires an audit of its basic financial statements
and footnotes as well as separate audits of the Redevelopment Agency and Child Development Programs. Our work will also
include performance of a Single Audit and Gann Limit Agreed Upon Procedures. We remain committed to providing timely,
quality work to our clients. We will complete our work within the time period proposed by the City.
We are quite certain we continue to be the most qualified firm to be your independent accountants. We've summarized the
reasons below:
• We are the best-known regional municipal audit firm in Northern California. We are now in our twentieth year.
Over that period, we have achieved national recognition with the consistently high quality of our work and with our
leadership on issues such as GASB Statement 45, GASB Statement 34, Y2K, and municipal investment losses.
• We have a long term track record of client retention beyond our client's original contract terms because of the quality
of our service. Please pay special attention to the client start dates on page 5.
• Our Partners are actively involved in planning, conducting and completing the audit in our client's offices and
our Partners are available when you need them. We resolve issues on the spot while the audit is going on.
• We integrate the financial statement preparation with the audit so that you remain in control of the process.
Our strategy has consistently allowed us to provide review drafts of your reports at the conclusion of our audit
fieldwork. This strategy has reduced the impact of the audit on your staff by allowing them to review drafts as our
work progresses.
• Everyone on our audit staff averages approximately 100 hours of training in municipal auditing and accounting
and 1500 hours of municipal audit experience each year.
• Our references—indeed, any of our clients will confirm we are your best choice.
Most important, we are in business to help our clients succeed. We use our professional skills to help you avoid the
pitfalls and problems that await the uninformed. As your independent auditors, we are not part of your management team,
but we will help you achieve your goal of clear, accurate financial reporting and full disclosure of all material facts and
transactions.
We have no doubt that we are the firm best qualified to perform this engagement. After you have analyzed our proposal
and - most important - talked with our references, we are quite confident you will agree.
Cory Biggs, President and Katherine Yuen, Vice President are authorized to represent, sign for and contractually obligate
Maze & Associates, a Professional Corporation, located at 3478 Buskirk Avenue, Suite 215, Pleasant Hill, CA, 94523,
(925)930-0902.
We look forward to working with you!
Yours very truly,
�n
Cory A. Bigg Pr ident
1
A Professional Corporation
PROFILE
Overview
We are a professional services corporation located in Pleasant Hill, California. We presently have a total
of thirty-seven people, including eight Partners, two Managers, seven Supervisors, two Senior
Associates, twelve Associates and six Office Staff. Nine of our professional staff are California Certified
Public Accountants. Consistent with past practice, we will hire several additional professional staff by
mid 2007. All of our professional staff comprise our governmental audit staff, as our firm's emphasis is
on governmental auditing and accounting. Several of our professional staff have national accounting firm
experience, which we have blended with the more personal approach of a smaller firm. We have eleven
certified public accountants on staff all of which are certified in the attest function.
Most of our clients are cities or other municipal entities and we do this work twelve months of the year.
We limit our practice in other areas and focus on being the best municipal audit firm in Northern California.
Our clients include several cities similar to the City of San Rafael in size. Our audit strategy is tailored to
municipalities and is quite different from the traditional approach adapted from commercial clients by
general practice accounting firms.
We have focused on municipalities since our inception in 1986. We are active in GFOA, CSMFO and
CMTA, and our Partners have been speakers at many GFOA, CSMFO and CMTA functions.
We are in business to help our clients succeed. We help you use the ever-growing tangle of accounting
rules properly, but to your best advantage, by helping you keep out of trouble and helping you do the right
thing. We stay in touch throughout the year to keep you abreast of municipal accounting developments and
to help you avoid problems, instead of coming in afterwards to assess the damage. We rotate our audit
emphasis based on our planning meetings with you so areas that concern you can be addressed as a normal
part of the audit at no extra cost.
Capacity and Resources
We have consistently demonstrated the ability of our capacity and resources to meet the demands of our
clients. We have never missed a reporting deadline for any of our clients.
Over the past six years, we have made substantial additional investments in our people and our
systems. We have continued our policy of at least doubling the required amount of Continuing Education
we provide our people. We routinely provide an average of one hundred hours of Continuing Education
each year the State requirement is forty hours. We routinely ensure that at least eighty of those hours are
specific to municipal audit and accounting—the State and government auditing standard requirements are
twenty-four hours.
We have more than doubled the number of people on our staff in the past six years, and most of these
new people are professional audit staff members. More people and more continuity combine to mean that
our people capacity and resources have more than doubled.
Hand-in-hand with our continuing investment in our people has been our increased investment in systems
and hardware support. Eight years ago our systems work was handled by an outside consultant. Today, we
have a full-time staff of three people who maintain our state-of-the-art systems capabilities and
provide increasing levels of such service to our clients. Every person on our staff is now armed with a
late model PC that communicates with all our other PCs, printers, servers, etc., via our own wireless
network establish in each client's office at the start of each audit. Most of our work papers are now
prepared on these PCs as we continue to move toward paperless audit and paperless files.
PROFILE (Continued)
We have moved most of our clients from a manual input of their general ledger data to a fully mechanized
computer dump of that data direct to our Excel -based financial statement formats. At the same time, we
have added significant numbers of internal data controls to financial statement formats. This new strategy
has virtually eliminated input errors, increased efficiency, and allowed our client's to spend less time
reviewing and approving the financial statements. Not only does our new direct dump produce fund -basis
financial statements, it produces the new City-wide financial statements. Our programs now accumulate the
data required to calculate Major Funds, they produce a complete reconciliations between fund basis and
City-wide formats, and they produce ancillary reconciliations and supporting schedules, all for your files.
And these improvements have been made without a hiccup-- we consistently deliver final draft financial
statements and reports to our clients the last day of our field -work in our client's offices.
We are not relying on the capabilities or resources of any other firms in our proposal.
Audit Quality
Never has audit quality been the focus of more attention than now. With names like Orange County, San
Diego and King City in the news, municipal audits can no longer be relegated to a consent item. Ensuring
quality audits is a necessity. Our commitment to quality remains our top priority.
Our Municipal Focus
Our practice includes thirty-five city clients and thirty-six city and special CAFR district award
winners—more city clients and more award winners than any other Northern California accounting
firm or international firm branch office. Included in those totals are four award-winning Special District
CAFRs. Eighty percent of our practice is municipal auditing, accounting and consulting, continuing
throughout the entire year. Our growth can be seen in the graph below, which shows the growth in the
number of our total municipal entity clients in blue, City audit clients in green and CAFR award winners in
red.
130-
120-
110-
100-
90-
80-
70,
60-
W
40
30
20
10
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
PROFILE (Continued)
Every one of the above CAFRs, including every initial submission, won awards from both GFOA and
CSMFO.
National Recognition
We first achieved national recognition among accountants when we identified problems with municipal
investments in April of 1994, months before the same problem drove Orange County into
bankruptcy. While others dithered, we prepared our clients for the inevitable questions by alerting them
immediately to the problem, working with GASB to address the accounting issues involved, and increasing
our clients' financial statement disclosures so that the questions which came later were already answered in
the financial statements. We were pleasantly surprised to see that a key disclosure element of GASB 40
is investment maturity data. Some of our client's have included maturity data in their CAFRs since
1994, when we recommended it as a way of reporting liquidity to financial statement users.
In early 1999, when most accounting firms were saying that Y2K uncertainties would affect their
audit opinions, we took a different stance. We said full disclosure of the steps taken to prepare for Y2K
was sufficient for us to issue an unqualified opinion. By this time our national reputation was such that
GASB used our refusal to follow the majority as leverage in negotiating a compromise on the Y2K issue
with the American Institute of CPAs.
In the years before the issuance of GASB 34, we developed a fall -blown alternative to GASB's heavily
criticized Dual Perspective proposal. Our alternative received favorable written comment from over
one hundred and twenty-five cities and prompted many of the major changes made by GASB before
they issued GASB 34. We received national recognition for this effort and one of our Partners was named
to the GASB 34 Implementation Guide Task Force.
Our work quality and financial statement clarity have gained us a national reputation with
underwriters, bond counsel, financial advisors and others involved with debt issuance Our clients have
been involved with a broad variety of debt issues and refundings over the years, and the quality of our work
has never been an issue. Underwriters have praised our financial statements for being very clear and easy to
understand.
I PROFILE (Continued) I
City Clients
The graph below summarizes our most recent experience with audits of cities. We are responsible for all
phases of the work on these clients. All of this work represents recurring annual audit and related
work; all this work and that presented in the next graph was completed on or before the deadline
from the first year listed for each client.
F1
Basic
Retire
Trans -
Client
Finmici.11
Single
-ment
portation
Financing
City
Since
CAFR
Stint s
RDA
Audit
TDA
Plan
Measure
Corp.
Alameda
1990
X
X
X
X
X
x
X
Belmont
1993
X
\
X
x
Benicia
1995
x
X
x
X
Campbell
2003
X
X
X
X
X
Concord
1992
X
X
X
X
X
X
X
X
Cupertino
2000
x
X
X
Daly City
1992
X
X
X
X
X
X
Davis
1997
x
X
X
X
El Cerrito
2005
X
X
X
X
X
X
X
Hayward
1996
X
X
X
X
X
X
X
X
Larkspur
1991
X
X
Livermore
1988
X
X
X
X
X
X
X
Manteca
1986
X
X
X
x
x
Martinez
2001
X
X
x
Millbrae
I998
x
X
X
Milpitas
1995
X
.X
X
X
X
Modesto
2003
X
X
X
X
X
Mountain View
2001
X
X
X
X
Napa
2000
x
X
X
X
x
X
X
Newark
1998
X
X
X
X
Oakley
2000
X
X
Palo Alto
1998
X
X
X
X
X
X
X
Pittsburg
2004
X
X
X
X
X
Pleasant Hill
1996
X
X
X
X
x
Portola Valley
2005
X
X
x
Richmond
2005
X
X
X
X
x
Rio Vista
2004
X
X
X
Roseville
1998
X
X
X
San Carlos
2005
X
X
X
x
San Pablo
1995
x
X
X
X
X
X
South San Francisco
2004
X
X
X
X
South Lake Tahoe
2003
X
X
X
X
X
Vallejo
2004
x
X
X
X
X
x
Waterford
2004
X
X
X
X
X
Woodside
1997
X
X
X
X
F1
PROFILE (Continued)
As you can see from the client list above, we have a winning combination that has resulted in strong client
loyalty and retention. Several clients who left have returned after seeing the difference between our
firm and our competitors, most recently Livermore, Pleasant Hill, South Lake Tahoe, and Campbell.
Others have remained our clients after completing a full-blown proposal process, most recently Palo
Alto, Concord, Martinez and Oakley.
Several of the cities above present very difficult auditing and accounting challenges. We have dealt with
both blended and discretely presented component units, a variety of proprietary funds, redevelopment
agencies with all manner of disposition and development agreements. Many of these cities are full-service,
some are contract cities. Most are still growing, some are fairly well built out.
Grant and Compliance Audit Experience
Our pertinent Single Audit Act and State Transportation Development Act experience is graphed below.
Client CDBG
Alameda
O
Belmont
Traffic
Benicia
O
Concord
O
Cupertino
O
Daly City
O
Davis
O
Hayward
O
Larkspur
O O
Livermore
O
LAVTA
Manteca
O
Martinez
O
Millbrae
Milpitas
O
Modesto
O
Mountain View
Napa
O
Newark
Oakley
O
Palo Alto
O
Pleasant Hill
O
Roseville
O
San Pablo
O
Woodside
Federal Single Audits
.'7
Highway
Planning &
Construction
0
W
Office of
Airport
Traffic
Grants
Safety
Trans-
O
Transit/ Bicycle/
O
O
Para- Pedestrian/
O
O
O
O
.'7
Highway
Planning &
Construction
0
W
State Transportation
Local
State
Development Act
Trans-
SLPP/
Transit/ Bicycle/
portation
SLTPP/
Para- Pedestrian/
Measure
TSM
Transit Trail
O
O
O O
O
0
O
O
O
O
O
O
O
O
O
0
O
O
O O
O
O
O
0
O
O
O
O
O O
O
O O
O
0
0
O
O
O
O
O
0
O
0
PROFIU (Continued)
Redevelopment Agency Experience
Over 80% of our City clients have Redevelopment Agencies and we have substantial experience auditing
these Agencies' financial statements and performing tests of their compliance with Guidelines for
Compliance Audits of California Redevelopment Agencies.
Our Redevelopment Agency clients range from start up Agencies with no adopted plan or project areas to
mature multiple project area Agencies with complex development agreements and significant amounts of
debt.
Our financial statement disclosure of Redevelopment Agency activities can go well beyond the minimums
required by GAAP. We understand the importance and political impact of Redevelopment Agency
activities and our disclosures are designed to enable the reader to understand the economics and
benefits of the entire project or transaction, not just the amount of the Agency's contribution.
Transportation Grant Programs
Our State Transportation Development Act Program experience includes audits of transit, paratransit and
ferry transit operations funded by State Transit Assistance, Federal Transit Assistance, County voter
approved transportation grants and Transportation Development Act grants received under Articles 3.0, 4.0,
4.5 and 8.0. We have also audited Article 3.0 projects such as bike paths, wheelchair ramps and trails.
Public Financing Authorities and Mello Roos Experience
We have performed audits of Public Facilities Financing Agencies and Mello -Roos districts and designed
financial statements that went beyond required disclosures to include Inception -to -Date information about
capital projects. These disclosures can allow the reader to see and understand the entire scope and cost of
capital projects, even though they may not remain on the Agency's books after completion.
We are familiar with public financing authorities and the accounting and auditing problems that can arise
with their use. We have several clients that use financing authorities in issuing debt. We have considerable
experience with the "blending" of financing authority funds with other City funds.
Joint Powers Authorities Experience
We have considerable experience with JPAs and with the practical difficulties of applying GASB Statement
#14 in accounting for an entity's interest in a JPA. We are familiar with the information gathering process,
the problems associated with accounting for an enterprise fund's interest in a JPA as opposed to a
governmental fund's interest, and the related disclosure requirements.
Proposition III Appropriations Limit Experience
We review appropriations limit increment computations for municipal clients covered by Proposition 111,
and we have assisted many of our clients in revising and refining their calculations.
PROFILE (Continued)
Other Pertinent Experience
We have a variety of experience dealing with specific client needs, including:
♦ Tax Services - we have assisted most of our city clients with payroll tax and related questions
regarding deferred compensation plans, independent contractor status, 1099 reporting, etc.
♦ Other Services - we perform audits, reviews and compilations for a number of private corporations as
well as preparing corporate, partnership and individual income tax returns.
Independence
As independent auditors, our most valuable asset is our independence. Unlike many firms, we have
never allowed our independent audit function to be used to promote consulting or other work. In fact,
consulting and related work have never amounted to more than a few percent of our total revenues, while
our independent audit work has amounted to over eighty percent of our revenues.
Our firm and all our partners and employees are independent of the City of San Rafael and its component
units as that term is defined by the General Accountability Office's Standards for Audit of Governmental
Organizations. Programs. Activities and Functions, the American Institute of Certified Public Accountants,
the California Society of Certified Public Accountants and the California State Board of Accountancy. We
have no present or past professional relationships with the City or any of its Council members or
employees that would compromise our independence.
We will discuss in advance with the City any professional relationships being contemplated during the
period of engagement that may present a potential conflict of interest. If the City and we believe any such
relationship presents a conflict of interest, we will not enter into it.
License to Practice in California
We are properly licensed California Certified Public Accountants. We are members of the Government
Finance Officers Association (GFOA) and the California Society of Municipal Finance Officers (CSMFO)
as well as the American Institute of Certified Public Accountants and the California Society of Certified
Public Accountants.
All assigned key professional staff are properly licensed to practice in California. Those staff that are
certified public accountants have current California CPA licenses in the attest function, and have received
more than twice the required level of continuing education, including the credits specifically required in
the area of governmental audit.
Even though not required, non -certified audit staff all receive the same level of training
PROFILE (Continued)
Peer Review
We are members of the Quality Review Program of the AICPA, which means we subject ourselves to a peer
review of our workpapers and quality control procedures every three years by independent accountants
specializing in such work. Our most recent peer review was completed in 2005; we again received an
unqualified opinion, the highest level of assurance possible. This peer review included a review of four
governmental audit engagements. A copy of our most recent peer review opinion is located at the end of
this section.
Our municipal audit reports are subject to annual reviews by various branches of the Office of the State
Controller, City audit reports, Single Audit Act reports and Redevelopment Agency reports receive
particular scrutiny. During the past five years every one of these reports has been accepted as submitted. Of
course, all of our clients' CAFRs are also reviewed by CSWO and GFOA for award consideration; every
report submitted has won an award from one of these organizations.
16360 Monterey Rd., Suite 170
Morgan Mill, CA 95037
Tel: (40B) 779-3313
Fax: (408) 776-1555
July 28, 2005
To the Shareholders
Maze & Associates Accountancy Corporation
Walnut Creek, California -
CERTIFIED PUBLIC ACCOUNTANTS
4040 Moorpark Ave., Suite 100
San Jose., Ca 95117
Tel: (408) 557-9890
Fax: (408) 557-9893
We have reviewed the system of quality control for the accounting and auditing practice of Maze & Associates
Accountancy Corporation (the firm) in effect for the year ended May 31, 2005. A system of quality control
encompasses the firm's organizational structure, the policies adopted and procedures established to provide it with
reasonable assurance of conforming with professional standards. The elements of quality control are described in
the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants
(AICPA). The firm is responsible for designing a system of quality control and complying with it to provide the
firm reasonable assurance of conforming with professional standards in all material respects. Our responsibility is
to express an opinion on the design of the system of quality control and the firm's compliance with its system of
quality control based on our review.
Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA
During our review, we read required representations from the firm, interviewed firm personnel and obtained an
understanding of the nature of the firm's accounting and auditing practice, and the design of the firm's system of
quality control sufficient to assess the risks implicit in its practice. Based on our assessments, we selected
engagements and administrative files to test for conformity with professional standards and compliance with the
firm's system of quality control. The engagements selected represented a reasonable cross-section of the firm's
accounting and auditing practice with emphasis on'higher-risk engagements. The engagements selected included,
among others, engagements performed under GovernmentAuditing.Standards. Prior to concluding the review, we
reassessed the adequacy of the scope of the peer review procedures and met with firm management to discuss the
results of our review. We believe the procedures we performed provide a reasonable basis for our opinion.
In performing our review, we obtained an understanding of the system of quality control for the firm's accounting
and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to
the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on
selected engagements. Our review was based on selected tests therefore it would not necessarily detect all
weaknesses in the system of quality control or all instances of noncompliance with it. There are inherent
limitations in the effectiveness of any system of quality control and therefore noncompliance with the system of
quality control may occur and not be detected. Projection of any evaluation of a system of quality control to future
periods is subject to the risk that the system of quality control may become inadequate because of changes in
conditions, or because the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Maze & Associates
Accountancy Corporation in effect for the year ended May 31, 2005, has been designed to meet the requirements of
the quality control standards for an accounting and auditing practice established by the AICPA and was complied
with during the year then ended to provide the firm with reasonable assurance of conforming with professional
standards.
As is customary in a system review, we have issued a letter under this date that sets forth comments that were not
considered to be of sufficient significance to affect the opinion expressed in this report.
/V/
Nichols, Rick & Company
www.lQhoisrick.com
SUMMARY OF PROPOSAL'S QUALIFICATIONS
Audit Team
We are proposing to assign Katherine Yuen as Engagement Partner, Christine Paras as Supervisor, Julie
Bumanlag and Ella Pascua as Senior Associates and Cory Biggs as Alternate/Quality Assurance Review
Partner to your audits. We will also have Donald Hester, our Information Technology Manager, perform a
review of your information technology as it relates to our work.
All of our audit staff are experienced with Comprehensive Annual Financial Reports, Redevelopment
Agency audits and related compliance, Single Audits, capital assets and infrastructure, long term debt and
related compliance including continuing disclosures, and all other aspects of municipal accounting and
financial reporting.
A brief introduction of our proposed team members follows:
Katherine Yuen, CPA is a shareholder and audit partner. She has been with us for over ten years,
starting as an Associate and progressing through to shareholder. Katherine has worked consistently on
municipalities gaining significant amounts of experience on well over one hundred individual audits and
has been an instructor on a wide range of continuing education topics. In 2006, she was responsible for
overseeing our engagements with Alameda, Davis, Manteca and many others.
Cory Biggs, CPA is a shareholder and audit partner. Cory has been with the company for over nineteen
years. He is our company's President and our most experienced municipal auditor. He will ensure the
work is completed in accordance with our firm's quality standards and will act as a back up or alternate
partner in the event Katherine is unavailable.
Christine Paras, CPA is an audit Supervisor and is thoroughly familiar with the details of municipal
accounting, auditing and financial reporting. She has experience on over two dozen municipalities
including Alameda, Palo Alto, Belmont, and Mountain View. She understands all facets of municipal
accounting, auditing and financial reporting and has been with us since 2002.
Julie Bumaulag and Ella Pascua are Senior Associates and have been with us since 2005. They have
worked almost exclusively on municipalities since joining our firm each having gained experience on
over eighteen municipal engagements. Ella's experience working on Roseville's Child Development
Programs will be essential to a smooth audit of that unique program.
Don Hester, IT Manager is well trained in IT and information security functions. He will ensure our
information systems review of the City's system will be thoroughly and timely completed.
Resumes for these individuals may be found in the Appendix to this proposal.
Qualifications and Continuity
Our people accumulate over 1500 hours of purely municipal audit and accounting experience
annually, far more than in any general service accounting firm. And we keep the same people on the
job, normally for at least three years.
11
SUMMARY OF PROPOSAL'S QUALIFICATIONS (Continued)
We give our clients continuity while introducing enough new people to keep our perspective fresh and
provide you with the benefits of rotation. We intend to retain all the people assigned to your audit
throughout this year's entire engagement. In future years we plan to rotate no more than one
person, whom we will replace with someone of equal experience. If we continue with the City, that
process would continue unless the City wished otherwise. We can rotate the entire staff assigned to your
audit if the City wishes, and we have assembled that team for your review below.
We do everything we can to ensure continuity because it helps you, it helps our staff and it helps us. We
schedule the entire year in advance to avoid conflicts, and we give priority to clients who are able to
accurately predict the date their books will be closed, so that the staff on their audit will not be affected if
another client's closing or audit is delayed. We attempt to match personalities as well as skills -and
abilities so that our staff and yours will get along well.
Honoring Our Commitments
The concepts that we must meet deadlines and stay within budgets are integrated into everything we do. So
much of our work is performed for our municipal clients that we instinctively understand that our clients'
deadlines must be met and we must flourish within the constraints of agreed-upon fees. We have a long
track record of meeting our deadlines and staying within negotiated fees. Please ask our other clients for
their views on the subject and their experience with us.
Professional Activity
We are active members of the Government Finance Officers Association and the California Society of
Municipal Finance Officers as well as the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants. We are also members of the California Association of
water Agencies (ACWA), the California Association of Sanitation Agencies (CASA) and the California
Association of special Districts (CASD). We are frequent speakers at CSMFO, GFOA and CMTA events;
some of our pertinent recent presentations are listed below:
In August 2006, Cory Biggs, our firm's President made two presentations at a Symposium on the
Implementation of GASB #45, sponsored by ABAG. One presentation was a summary of the Statement
and its impacts on municipalities and the other presentation explored funding options and ramifications of
the Statement.
In February 2006, Cory Biggs presented "Cost Impacts from Implementing GASB 45, Accountine of
Financial RenortinR by Emnlovers for Post-emplovment Benefits Other then Pensions, to the San Mateo
Finance Officers Group. He was also a speaker at the 2005 CSMFO Annual Conference, on "flow to Stay
Out of Trouble".
We attend CSMFO Northern California chapter meetings on a regular basis, and we have served as
speakers on various occasions. We all attend the CSMFO Annual Conference, at which our partners have
been speakers. We also attend the League of California Cities' annual Financial Management Seminars
each year.
12
SUMMARY OF PROPOSAL'S QUALIFICATIONS (Continued)
Books, Periodicals, News Letters, and Professional Standards
We provide our staff with all of the resources they need to complete their work efficiently and effectively.
Our resources include all AICPA Professional Standards, AICPA Audit and Accounting Guides, FASBs,
ARBs, APBs, GASB statements, interpretations, implementation guides and concept statements on CD,
Generally Accepted Government Audit Standards (The "YellowBook"), Single Audit Regulations and
website links including OMB Circulars, Form SF -Sac, Data Collection Form and instructions, Website links
for CFDA numbers, CFRs, GAO, OMB. We also provide our staff with the CFOA Checklist. We also
have a complete library of all CSMFO CAFRs for 2005.
Client Alerts
Our heavy emphasis on early identification of audit problems as part of our interim audits has lead us to
issue Client Alerts to all our clients.
Litigation
We have not been sued over poor work quality, nor have we paid any such claims out of court in the past
five years.
But we are proud to say we have been sued! This was an action by a third -party contractor who filed
suit to prevent us from issuing a report critical of their operation and their method of determining the
amount of revenue they should share with our client. This action was not settled out of court; but went to
judgment. In that case the Superior Court of the State of California held in our favor and dismissed us
from the proceedings without prejudice. In other words, the Court decided our report should be issued
without any change.
In the words of our CAMICO insurance representative, "You are the only accounting firm we know
of that has been sued for doing their work RIGHT!"
No Disciplinary Action
We have no record of substandard or unsatisfactory performance, nor have any claims ever been filed with
any State Board of Accountancy against our firm or any employees.
13
REFERENCES
References
We have selected the clients below because they are similar in some respect to the City of San Rafael or
the staff assigned to your audit have worked on these clients. Please contact these clients for further
information if you wish, or call any of our clients for a reference!
City of Palo Alto - a client since 1998, (client retained us in 2005 for a second term after going through a
complete proposal process)
Former auditors—Deloitte & Touche
Principal contact—Sharon Erickson, appointed City Auditor (650) 329-2629 or Trudy Eikenberry,
Accounting Manager (650) 617-3176
Staff in common – Cory Biggs, Christine Paras
Work scope and reports:
Comprehensive Annual Financial Report (Consistent GFOA and CSMFO award winner)
(includes significant electrical and gas operations)
Recommendations for Improvements in Internal Control
Redevelopment Agency Audit and Compliance Reports
Single Audit Act Report
Proposition 111 Agreed Upon Procedures Opinion
Transportation Development Act Audit Report
Regional Wastewater Control Facility Report
Cable Co-op Franchise Report
Palo Alto Public Improvement Corporation
Annual Street Report
Annual Report of Financial Transactions
City ofAlameda – a client since 1990
Principal contact – Julle Ann Boyer, Finance Director (510) 747-7400 or Kevin Kearney, City Auditor
(elected) (510) 748- 4500
Staff in common- Katherine Yuen
Workscope and reports:
Comprehensive Annual Financial Report
Community Improvement Corporation
Single Audit Act Reports
Employee Retirement System
Recommendations in Internal Control
Parking Citation
Transportation Development Authority
Measure B
14
REFERENCES (Continued)
City of Belmont- a client since 1998
Former auditors --Coopers & Lybrand
Principal contact—Eric Chueng, Assistant Finance Director 650-595-7434 or Thomas Fil, Finance Director
(650)595-7435
Staff in common --Cory Biggs, Christine Paras
Workscope and reports:
Comprehensive Annual Financial Report (Consistent GFOA and CSMFO award winner)
Recommendations for Improvements in Internal Control
Redevelopment Agency Audit and Compliance Reports
Single Audit Act Report
Proposition 111 Agreed Upon Procedures Opinion
Transportation Development Act Audit Report
South County Fire Authority Financial Statements
Net Six Financial Statements
South San Mateo Police JPA Financial Statements
Ralston/Holly/Harbor Projects Financial Statements
Annual Street Report
Annual Report of Financial Transactions for the City
City of Martinez a client since 2001 (client retained us in 2004 for a second term after completing an RFP
process)
Former auditors – Grant Thornton
Principal contact – Cathy Heater – (925) 372-3579
Staff in common – Katherine Yuen, Cory Biggs
Workscope and reports
Comprehensive Annual Financial Report (Consistent GFOA and CSMFO award winner)
Recommendations for Improvements in Internal Control
Redevelopment Agency Audit and Compliance Reports
Single Audit Act Report
Proposition 111 Agreed Upon Procedures Opinion
Transportation Development Audit
Marina System
Water System
City of South Lake Tahoe – a client since 2003
Former Auditors – Moss Levy & Hartzhiem
Principal Contact – David Jenkins, City Manager (530) 542-6045 or Christine M. Vuletich, Director of
Finance (530)542-6054
Staff in common – Katherine Yuen, Cory Biggs, Christine Paras
Workscope and Reports:
Basic Financial Statements
Agreed Upon Procedures Report
Recommendations for Improvements in Internal Control
Redevelopment Agency
Single Audit Act Report
South Tahoe Area Ground Express (STAGE) Enterprise Fund
15
SPECIFIC AUDIT STRATEGY
Overview
Our audit strategy is designed specifically for municipalities. Our people are highly trained, very
knowledgeable, armed with PCs, printers and our custom municipal financial statement and audit
programs. We perform half our audit well before year-end so we can identify problems early. Our
strategy maximizes our efficiency and lessens the load on our clients. We prepare drafts of the financial
statements and notes for your review well before year-end and we give you detail checklists of all the
items we will need from you months in advance. We have integrated GASB 34 requirements into our
strategy so that there is a seamless transition to the entity wide statements.
As you can see from the illustration below, our strategy significantly reduces our impact during the
crucial year-end crunch.
Hours of
Impact
— -P Uct Nov Dee
Specific Audit Strategy—Interim
NO INTERIM AUDIT
TRADITIONAL AUDIT APPROACH
OUR APPROACH
Unlike older -style firms, we perform most of our important work at interim, well before the end of the
fiscal year. We use our interim work to identify and solve problems and plan the year-end closing and
audit in detail. A month before we begin our interim work we'll send you a list of the items we need, so
you will have time to prepare.
We start our work in your offices by evaluating your internal control structure, interviewing you and
your staff and, in the first year, meeting with City department heads as needed. As part of our evaluations
we may prepare narrative memoranda outlining the duties of each pertinent person as well as our GRID
evaluation of the nexus important control points. The GRID is our own design; it is a two -axis chart we
use to identify weak points in your controls.
Ir.
SPECIFIC AUDIT STRATEGY (Continued)
We begin to apply our preliminary analytical procedures at interim, when we analyze year-to-date
results and balances and compare them with budget and prior year actuals. We forecast many year-end
amounts at interim, so that we can limit the amount of work required at year-end and concentrate instead
on areas of concern. For example, we normally perform all our cash and investment testing at interim,
including sending confirmation letters to depositories and determining financial statement categorizations.
Performing these last two steps at interim allows plenty of time to follow up on confirmations or resolve
questions about the proper categorization of an investment without delaying the audit. As another
example, we test long-term debt at interim and forecast year-end balances and transactions for each debt
issue.
All our transaction samples will be drawn and tested during the interim portion of our work. Each
sample will run from thirty to fifty transactions in size. We generally sample payroll, disbursements,
receipts, loan receivables, investments and budget transactions. We use judgment sampling techniques
because our experience with statistical sampling is that accounting populations are too small and
too skewed to yield reliable, cost-effective statistical samples.
To the extent possible, we also begin our tests of compliance with laws and regulations at interim,
including use of the Guidelines for Compliance Audits of California Redevelopment Agencies, OMB
Circular A-133 Compliance Supplement and any other applicable compliance guidelines. Even if the work
cannot begin until year-end we determine the applicable laws and regulations for our compliance testing so
that we may incorporate the necessary information in our year-end closing checklist. Our audit samples for
purposes of compliance vary based on the grant or compliance guidelines and are usually project -specific.
We use remote inquiry as much as possible at interim, in order to increase our efficiency and reduce our
impact on your staff. We can download Council Minutes and other documents from your Website for
review, and we will select transactions for test and analyze accounts using remote inquiry and read-only
features of your system. Combining these abilities with our Annual Closing Checklist has allowed us to
perform larger portions of the audit in our own offices and reduce our questions to writing so that you
have more time to deal with them.
At interim, we review and proforma your financial statements in detail and suggest revisions where
necessary to account for new transactions and provide for new disclosures and accounting
pronouncements. Completing this process at interim is particularly important because it forces all of us to
address these issues before we enter the year end crunch. You and other interested parties will have time
to review the effects of proposed accounting treatments and disclosures without the pressures of
impending issuance deadlines.
We will plan the year-end closing in detail with you using our Annual Closing Checklist which
details all the information we will need from you to complete our year-end audit, along with the person
responsible for preparing it and the date they will have it ready. We will tailor it to refer directly to the
schedules you already prepare.
We do not require special reports or reconciliations just for our audit. We have found that getting
everyone involved in the planning works very well because it helps minimize the impact on your staff at
year end. This way the Checklist includes everything we will need from you at year-end, so you and your
staff can plan and schedule your work accordingly.
SPECIFIC AUDIT STRATEGY (Continued)
We also review last year's audit adjustments and reclassifications with you to find ways to avoid
repeating them. Our goal is to help you eliminate post -closing entries and audit adjustments of any kind;
we have helped many of our clients achieve that goal. In short, we will help you use our interim audit to
set the stage for a smooth, well-planned year-end closing and audit.
Assessing Risks
We may reduce the scope of our audit tests provided we conclude there are effective specific controls in
place which would detect and correct misstatements due to errors or fraud. Our strategy to assessing
control risk begins with our Partner level review of your financial statements and operations, during
which we identify unusual areas needing special emphasis. We use this review along with custom audit
procedures designed by our Partners and Staff to identify controls needed to detect errors in the financial
statements. We then test to see that the controls are operating effectively, using sampling, documentation
reviews, and comparisons with other audit data. We may also compare unusual transactions and
estimates to those used by other municipalities or to current trends and issues. After this has been
completed, we reevaluate our audit plan to ensure we obtain sufficient evidence about the financial
statements and disclosures.
Risk Assessment Ws
Beginning with fiscal 2007-2008 audits, a new set of Statements of Auditing Standards (SAS's) will
become effective and will require that most auditors change the way they audit. The primary objective of
these Statements is to enhance auditors' application of an audit risk model. The concept is that a set of
financial statements should be evaluated for the underlying risks of material misstatement. Then a
customized audit should be tailored to test for misstatements and test that controls are designed and in
place to prevent and detect misstatements. A general audit approach is not responsive to this concept.
Much of this new guidance is coming out of the aftermath of highly publicized audit failures such as
Enron, Global Crossings and the like. The Statements make it clear a generalized one -size -fits all audit
approach will not be permitted. Commencing with fiscal 2007-2008 an audit must be based on a unique
audit strategy customized to fit each client and its industry.
We have consistently employed this concept from our firm's beginning in 1986. Our current audit
checklists and programs were originated by reference to Audits of Local Governments published by the
Practioners' Publishing Company (PPC), a third party vendor specializing in producing audits guides for
unique industries. PPC has employed the risk model concept since we began using their guide as a
resource. But, we have not simply used their guide as our approach. We customized it further for the
simple reason that California municipalities have many unique risks not faced by municipalities in other
states. As you know, California state law and applicable regulations cover a wide variety of areas such as
cash and investment management, redevelopment compliance, transportation development act programs,
and child development programs. Indeed even revenues of California municipalities are complex -
Remember Triple Flip?
18
SPECIFIC AUDIT STRATEGY (Continued)
We came to the conclusion years ago that custom audits were the most effective way to achieve
consistently high quality audit assurance. While we do not believe there will be massive impacts from
the new Standards to our firm's approach (termed "strategy" under the new standards) we are in the
process of updating our programs and audit checklists. For example, we expect the following impacts
from the new requirements:
• Swap out of some immaterial areas traditionally tested with enhanced testing of larger transactions;
• Additional documentation by audit staff of the audit process and evaluations;
• Enhanced planning and brainstorming by audit staff.
As we said, we do not believe these new requirements will have a substantial impact on you and your
staff during the audit.
Special Emphasis Areas and SAS #99
Beginning with our 2004 audits, we employed additional audit steps required by Statement on Audit
Standards #99, Consideration of Fraud in a Financial Statement Audit. SAS 999 requires auditors to
consider risk areas that may be susceptible to fraud and to then modify their audit strategy. We have been
employing a variation of the SAS #99 concept since the early 1990's. For example, in prior years for
many of our recurring clients, we visited all of their sites which have cash on hand. We performed cash
counts and reviewed cash handling practices and procedures, including security measures employed to
limit access to cash. This and our planning meetings with our clients staff have resulted in the inclusion
of a variety of Special Emphasis Areas in our audits, at no additional cost.
Even before SAS #99, we structured our work this way to achieve a rotating coverage of sensitive areas in
our audits and to provide for broader coverage than that achieved based solely on materiality. Some of
the significant Special Emphasis Areas we have performed for our clients are summarized below:
• Reviews of cash collection point controls in all areas of the City
• Investment management and controls
• Disbursement check - stock safety feature reviews to reduce the risk of fraud
• Observation of controls and cash counts at major public events
• Loan file reviews for rehab loan documentation sufficiency
• Fund structure analysis and simplification
• Police department asset seizure controls
• Golf course Pro shop and restaurant investigations and observations
• Bus fare cash collection and GFI integration controls including closed vault technology observations
• Marina revenue tests and contract reviews
• Review and recommendations on all forms used in a Finance Department to reduce and streamline
paper work
• Review of computer system module access after conversion, to check for conflicts of duties
• Contract change order reviews to check for bid splitting and excessive contract change orders
• Observations of utility inventory physical counts
• Capital asset system review
• Special assessment analysis to determine whether excess funds have been collected
• Grant compliance training
W
SPECIFIC AUDIT STRATEGY (Continued)
• DDA\OPA accounting and disclosures
• Transient Occupancy Tax Audits
• Lease agreement audits
• Claims reserve audits
Specific Audit Strategj— Year End
At year-end we do not repeat any of the work we performed at interim. Instead, we focus on the items on
your Checklist and on the Basic Financial Statements. We will ask you to have all the items on the
Checklist ready for us no less than one week before we are scheduled to begin our year-end audit in
your offices. We will visit your offices to review this information with you before bringing it back to our
offices. Then you will have a clear week while we begin our audit in our own offices.
Our year-end audit field -work actually starts in our office, so that when we do arrive in your offices
we are fully prepared and we minimize our impact on your operations.
In our offices, we cross-reference or reconcile your Checklist information, reports and schedules.
Katherine performs our detailed Analytical Review and emails our questions to you in advance of
our arrival in your offices. Our experience is that this Analytical Review identifies any issues remaining
after our interim work, as well as most potential audit adjustments. This gives all of us time to address
these items in person while the audit field -work is proceeding, instead of by telephone, fax and mail
afterward.
When we start work in your offices, we will need you to help us complete our Analytical Review, but we
will not need much of your time and we will not ask for more schedules or reports. Katherine will meet
with you on the first day of the year-end audit to review the draft financial statements with you and to
discuss any remaining unanswered Analytical Review questions. This meeting sets the stage for the year-
end audit; by this time the format and content of the financial statements is pretty well set and most audit
adjustments have been identified. If we find any material adjustments, we will discuss them with you
immediately and provide you with the journal entries required; we do not propose adjustments that are not
material.
Before we begin the second part of our final year end work, we will update our Analytical Review based
on your draft financial statements and email you any additional questions or comments we develop. At
the conclusion of our final year end field -work, Katherine and Christine will review the final financial
statement drafts with you and your staff as part of our exit conference. The following week, Cory will
perform a "quality assurance review" of the financial statements and workpapers so that we will be ready
to sign the financial statements as soon as the City approves them.
We designed this strategy specifically to fit cities and the complications introduced by GASB 34. It
requires our Partners to be fully and actively involved in the planning and performance of the work and it
allows us to issue final financial statements and reports immediately after we finish our field -work in your
offices.
You will find our strategy allows you to control the audit process, enables you to spread the work over the
year as you wish and greatly reduces the pressure at year end.
M
SPECIFIC AUDIT STRATEGY (Continued)
Information System Reviews
With every audit we employ the knowledge of our Information Technology staff to perform an
Information Systems Review of our client's systems and procedures. Our Information Technology staff
have the specialized knowledge and skills needed to properly evaluate our client's systems. Our reviews
include procedures to determine that your systems are adequately protected from unauthorized internal
access, provide for reasonable measures to ensure continuation of service, provide for security of data
from physical or network access and have internet access defenses including hacker prevention, detection
and deterrent systems. Our IT staff hold a variety of information technology certifications from ISACA,
Microsoft and other organizations; including: CISA, CISSP, CWNA, MCSE, MCSA, MCDST, MCT,
CGT+, Security. Our Information Systems Reviews are based on our understanding of generally accepted
audit standards, generally accepted government audit standards and the following guidelines:
• ISO (International Standards Organization) 17799 — Information Technology Code of Practice for
Information Security Management
• COBIT — Control Objectives for Information and Related Technology (IT Governance Institute &
Information Systems Audit and Control Association)
• IST Guidelines —National Institute of Standards and Technology
• AICPA / CCIA Trust Services Principles and Criteria (SysTrust and WebTrust)
• OECD (Organization for Economic Co-operation and Development) Guidelines for Securing
Information Systems
• Information Security Management Handbook, Auerbach Publications
• GASSP — Generally Accepted System Security Principles
• RFC 2196 Site Security Handbook
• ITIL — Information Technology Infrastructure Library (IT Process Institute)
• IATF — Information Assurance Technical Framework (IATF)
• FIPS — Federal Information Processing Standards
Technologies That Save Your Staff Time
We "dump" your general ledger data directly into the financial statements for you and save your
staff input time. With the conversion to GASB 34, we helped the many clients, export their general
ledger data into comma -delimited files which are then converted and imported into our client's financial
statements. This strategy eliminates the time consuming manual labor formerly expended to prepare the
financial statements and uses the power of the computer to assemble the data for our auditors and client
staff to analyze and refine. We understand most other firms still employ manual input of data as the
primary technique for financial statement preparation. We will employ this direct dump strategy for
you if you wish for no additional cost.
We also employ Excel file linking to use the power of Excel for tables of data included in footnote
disclosures. This active linking ensures tables consistently foot, crossfoot and tie to general ledger
balances without your staff having to manually retotal and recheck each and every number on each
and every draft. This also saves your staff time.
21
SPECIFIC AUDIT STRATEGY (Continued)
On -Site EDP Hardware and Software
Every one of our staff use Laptop computers running Windows 200OW/2003 operating systems. We use
Word 2000 as our word processor and Excel 2000 for preparation of financial statements and schedules.
Each of our auditors has a laptop PC along with portable laser printers and will bring an extra laptop
running as a server and a wireless access point. We will also need some type of connection to the
internet.
We have working experience with a broad range of accounting software and systems. We have reviewed
and tested controls over these systems. We have used and tested reports produced by these systems. The
newer systems allow on-line inquiry or query and custom report writing, and we use these functions
whenever possible.
The systems presently used by our client cities include the following:
Accounting Software Svstem:
gfty—.
Sunguard (Bitech)
Davis
Manteca
Benicia
Daly City
Palo Alto
Mt. View
Vallejo
Municipal Operations Manager (MOMS)
Pleasant Hill
San Pablo
Woodside
Pentarnation Accounting Software
Alameda
Livermore
Woodland
Creative Computer Solutions (now Harris)
Millbrae
Newark
Lawson Associates Financial Software Package
Concord
People Soft
Santa Clara
ACS
Larkspur
Cayenta
Belmont
Milpitas
Financial Statements
Our GASB 34 financial statements are known for their clarity and readability. We understand that
financial statements are intended for non -accountants and we focus on making the statements readable and
understandable while fully disclosing all the pertinent facts and circumstances.
N
SPECIFIC AUDIT STRATEGY (Continued)
We use our proprietary computerized design of the GASB 34 format for the Governmental, Proprietary
and Fiduciary Fund statements as well as the Statement of Net Assets and Statement of Activities. Major
funds are determined by a formula driven Excel worksheet so that no manual calculations are required.
Those major funds are inserted into the Fund statements along with any others designated by the City; all
other funds are included in the combining all other funds statements. For the General Fund and any major
budgeted Special Revenue Funds, budget/actual statements are set up in the format that best meets your
presentation requirements.
Our design includes the format for the required reconciliation worksheets, which are interlinked and
crosschecked as well. We have developed additional worksheets to help track and properly categorize the
reconciling items, before they are summarized and included in the reconciliation work sheets. This
information is also linked to the Entity -wide report formats for the Statement of Net Assets and the
Statement of Activities. Our set up ensures us that the numbers flow properly from one statement to
another and there are no discrepancies in amounts.
We provide you with print-outs and electronic version of all our statements, reconciliations and
calculations so that you have a full record of how amounts now from your books into the financial
statements,
Lmvs, Regulations and Compliance
Our audits are designed to ensure that we test transactions for compliance with the Single Audit Act and
other applicable laws and regulations, including the California Government Code, provisions of
applicable Grant guidelines, California Constitution Gann Limit requirements, requirements of local
measures, Transportation Development Act requirements, etc. We identify applicable laws and
regulations as part of our audit planning each year.
The Single Audit Act, for example, requires a calculation to determine which grants will be included in
our audit scope, and the selection of transactions from those grants for detail test. These tests are in
addition to the transactions tests we have already performed as part of our interim procedures testing, and
cannot be performed until after year-end, when the determination can be made as to which grants must be
tested.
The California Government Code has many provisions and underlying regulations relating to investments
and investment policy, all of which are tested as part of our audit of cash and investments. That Code and
the underlying regulations also form the basis of our compliance audit tests of Redevelopment Agencies,
Child Development Programs, debt and other areas.
Prompt Service and Delivery of Reports
Financial information, like fish, must be as fresh as possible and this is an important part of our service.
We have always focused on reducing financial statement turn -around time and we have never missed a
deadline. We normally complete the final draft of the financial statements on the last day of our field-
work in our clients' offices or within two weeks thereafter.
23
SPECIFIC AUDIT STRATEGY (Continued)
Our audit strategy emphasizes detail planning and coordination of our staff and client staff to complete
the audit as efficiently as possible. We have found that completing all our work and our reports as part of
our field -work dramatically reduces the time required to issue final reports to our clients.
Our strategy allows our clients ample time to review all report drafts before issuance, while ensuring that
all reports are issued timely. Many clients have been able to advance the date on which their reports
are presented to Council.
Communication and Coordination
Two key objectives for a well run audit are to ensure timely communication of the audit results and to
provide for seamless coordination of the external auditors with City staff. We use our Accounting Issues
Memorandum, detailed Closing Checklists and wrap-up Exit Conferences to satisfy these objectives.
Because we rely so heavily on technology, we consistently and easily produce draft reports and our
management comments and review them with you at the exit conference on the last day of field work. On
that day, we provide you with paper and electronic versions of the drafts to provide for the efficient
review, editing and completion of the reports. This strategy coupled with our on-site partner
involvement means you never have to wait for us to get back to you on important issues or
decisions.
The Accounting Issues Memorandum concept was originated by one of our staff over a decade ago to
function as a partner's brief of an engagement's status. It worked so well we expanded it to all our audits
and share it with our clients. It has proven to be an indispensable communication and coordination tool
ever since. This informal memo condenses and summarizes the audit status and issues as of the end of
our interim work. It includes housekeeping matters, minor audit findings, scheduled audit fieldwork start
and finish dates, etc. We produce this memo right in your office before the conclusion of our interim
work, so you have an idea of what we've found so far and whether there are areas that need work.
Our Memorandum on Internal Control is drafted at year-end and may include significant issues raised
with our interim phase Accounting Issues Memorandum as well as issues arising from our year-end work.
We review a draft with you on the last day of field -work, so that you will have plenty of time to review
and discuss our findings before we present our audit results to the Council.
Audit Timing
We have timed our audit to complete all or your reports so they are ready to print by your
deadlines. Of course, our timetable may be adjusted to fit your needs. We will start our work as soon as
you appoint us your auditors, with an entrance conference as soon as possible.
Proposed Engagement Segmentation
Our proposed segmentation of the audit, including staff level and the number of hours to be assigned to
each segment of the audit is included on the next page. This proposed segmentation is based on our
actual experience with San Rafael and cities similar to San Rafael.
4
CITY OF SAN RAFAEL
Proposed Engagement Segments and Budget
Budgeted Hours
Partners Staff
I Audit Activities
Engagement
Alternate
Supervisor
Associates I
Office
Total
(Planning & budget/Confirm/Checklists
I 2.00
4.00
6.00
ISAS 499 Fraud Assessment
I 2.00
2.00
4.00 I
8.00
IMioutes-resolutions
I I,
8.00 I
I
I
8.00
jlRepart
I 12.00 I
2.00
16.00 I
I
16.00 I
46.00
ISupervision/review
I 12.00 I
I
24.00 I
I
I
36.00
(Conferences & meetings
I 6.00 I
I
8.00 I
I
I
14.00
(Management letter
I 2.00 I
I
4.00 I
I
1.00 I
7.00
IMD&A
I 2.00 I
I
3.00 I
I
I
5.00
IAccauntine Issues Memo
I 2.00 I
I
4.00 I
I
I
6.00
(Analytical review
I 4.00 I
I
8.00 I
I
]2.00
(Adjustments
I I
I
2.00 I
I
I
2.00
IGRID-InternalContra[Evaluation
I
I
I
8.00 I
I
8.00
lrnformation Systems Review
I
I
4.00 I
i
I
4.00
(Cash & Investments
I I
I
I
20.00 I
I
20.00
IRevenue/Receivables
I I
I
20.001
I
20.00
IInterfunds
I I
I
I
8.00 I
I
8.00
INotes/loam receivables
I I
I
I
6.00 I
I
6.00
Capital Asset3
I I
I
I
20.00 I
I
20.00
IAccounb Payable
I I
I
I
20.00 I
I
20.00
IPayrall/Accruedliabilities
I I,
I
I
24.00 (
I
24.00
ILang Term Debt
I I
I
I
16.00 I
I
16.00
(PERS
I I
I
I
4.00 I
I
4.00
(Fund balance & net assets
I
I
I
6.00 I
I
6.00
(Self insurancefdaim
I I
I
I
6.00 I
I
6.00
(Discrete Component unit
I I
I
I
6.00 I
I
6.Oo
(Budget
I I
I
I
6.00 I
I
6.00
Subtotal - Comprehensive Annual Financial Report
I 44.00
2.00 I
87.00 I
174.00 I
17.00 I
324.00
Audit of Financial Statements far:
Redevelopment Agency
I 2.00
1.00 I
8.00 I
30.00 I
4.00 I
45.00
Single Audit (1 Program)
I 2.00 I
1.00 I
6.00 i
40.00 I
6.00 I
55.00
Audit of Financial Statements for:
Child Development Program Report
I 2.00 !
1.00
6.00
34.00 !
4.00 I
47.00
(Gann Limit Agreed Upon Procedures
I 1.00 I
0.25 I
+!
1.00 I
6.00 I
1.00 I
9.25
!GRAND TOTAL
I 51.00 I
5.25 !
108.00 !
284.00 !
32.001
480.25
APPENDIX
Resumes of StaffAssigned to YourAudit
KATHERINE YUEN, Engagement Partner --Katherine has her Bachelor of Science degree in Business
Administration from the University of California, Berkeley. She is currently pursuing a Master's Degree in
Financial Planning from the Golden Gate University. She is a California CPA and a member of the AICPA.
She is presently in charge of the audits of the cities Alameda, Benicia Campbell, Davis, Manteca, Martinez,
and Newark, among others. Katherine has received over eight hundred hours of training in the past
eight years. She has participated in the following audits:
Alameda Power and Telecom
Alameda Mayors' Conference
City of Benicia
Alameda Reuse and Redevelopment Authority
City of Alameda
Association of Bay Area Governments
Town of Atherton
City of Belmont
City of Campbell
Central Contra Costa County Solid Waste Authority
City of Davis
City of Daly City
East Bay Recreation and Park District
El Dorado Irrigation District
City of Emeryville
City of Half Moon Bay
City of Hayward
Hindu Culture and Community Center
Town of Larkspur
Las Trampas, Inc.
Livermore Area Recreation and Park District
City of Los Altos
Town of Los Gatos
City of Manteca
City of Martinez
City of Millbrae
City of Milpitas
City of Monterey
City of Newark
City of Oxnard
City of Palo Alto
City of Pinole
City of Pleasant Hill
City of Roseville
City of San Carlos
City of San Mateo
City of San Ramon
San Ramon Valley Fire Protection Agency
City of South Lake Tahoe
City of Tracy
City of Walnut Creek
City of Woodland
Town of Woodside
CORY BIGGS, -Alternate/Quality Assurance Partner Cory is a graduate of CSU Hayward with a B.S.
in Business, emphasis in Accounting. He is a California CPA with over twenty six years experience,
three with Deloitte, Haskins & Sells, three with Seiler & Company, a large Bay Area local firm, and the
rest with us. He is a member of the AICPA and California Society of CPA's. Cory's experience includes
cities, school districts, and a variety of high-tech and commercial for-profit organizations. He is a CAFR
reviewer for both CSMFO and the GFOA and is a member of the Professional and Technical Standards
Committee which summarizes and makes the final determination for CSMFO awards for Cities. Cory is
an instructor of our GASB 34 Implementation training courses and is responsible for coordinating and
reviewing most Single Audits of our clients' federal awards programs. He oversees the completion of all
our client childcare grant audits prepared in accordance with State guidelines. Cory has accumulated
three hundred twenty hours of continuing education in the past three years as an in-house
instructor and participant. His relevant municipal experience includes:
APPENDIX (Continued)
Cory Biggs (Continued)
City of Alameda
City of American Canyon
Town of Atherton
City of Belmont
City of Capitola
Coastside County Water District
Contra Costa County Bond Funds
Contra Costa Transportation Authority
City of Cupertino
City of Daly City
City of Dublin
East Bay Municipal Utility District
City of El Cerrito
City of Emeryville
City of Hayward
Town of Hillsborough
City of Livermore
Livermore-Amador Valley Transit Authority
Livermore Area Recreation and Park District
City of Los Altos
Town of Los Altos Hills
Town of Los Gatos
City of Manteca
City of Martinez
City of Millbrae
City of Milpitas
City of Modesto
City of Mountain View
City of Napa
City of Palo Alto
City of Pleasant Hill
Town of Portola Valley
City of San Carlos
Santa Clara Valley Water District
City of Saratoga
City of South Lake Tahoe
San Ramon Valley Fire Protection District
City of Vallejo
CHRISTINE PARAS, Supervisor —graduated from Saint Mary's College with a Bachelors of Science in
Economics and Business Administration with an emphasis in Accounting. She is a California CPA with
five years of experience, all with Maze & Associates. She is member of the AICPA and California
Society of CPA's. Christine has hands on experience includes accounts payable, billing and budget
preparation. Christine has received 400 hours of continuing education in the past five years and has
provided audit and accounting services as follows:
Audits:
City of Belmont
City of Concord
City of Cupertino
City of Daly City
City of Half Moon Bay
City of Hayward
City of Livermore
Town of Los Gatos
City of Milpitas
City of Napa
City of Oxnard
City of Roseville
City of San Carlos
City of Santa Clara
City of Sausalito
City of South Lake Tahoe
City of South San Francisco
City of Vallejo
City of Visalia
Town of Woodside
27
Christine Paras (continued)
City of Palo Alto
City of Pinole
City of Pleasant Hill
City of Redwood City
Accounting Services:
City of Half Moon Bay
APPENDIX (Continued)
Alameda County Mayor's Conference
Alameda Power & Telecom
Charitable Fed Groups
Contra Costa Food Bank
San Ramon Valley Fire Protection District
Silicon Valley Animal Control Authority
Union Sanitary District
JULIE BUMANLAG, Senior Associate graduated from CSU Hayward, in June 2005 with a Bachelors
Degree in Business Administration with an option in Accounting. Julie has received 101 hours of
continuing education since joining Maze & Associates. Julie has participated in the following audits.
City of Alameda
Alameda, Power & Telecom
City of Benicia
Charitable Federated Group
Contra Costa Transportation Authority
City of Davis
Fairfield Suisun Sanitation District
City of Hayward
Livermore Area Recreation & Park District
City of Manteca
City of Martinez
City of Millbrae
Nhat Hong Foundation
City of Oakley
City of Pleasant Hill
City of Rio Vista
City of San Pablo
City of Roseville
Santa Clara Valley Water District
City of Vallejo
ELLA PASCUA, Senior Associate graduated from California State University, Sacramento with a
Bachelor of Science in Business Administration with a Concentration in Accountancy. Ella has received
120 hours of continuing education since joining Maze & Associates. Ella has experience working with
the State Controller's Office Division of Audits in Sacramento.
City of Alameda
City of Napa
City of Concord
City of Newark
Contra Costa Transportation Authority
City of Oakley
Contra Costa Water District
City of Patterson
City of Daly City
City of Roseville
City of El Cerrito
City of San Pablo
City of Larkspur
City of Vallejo
Livermore Amador Transit Authority
City of Waterford
City of Modesto
28
APPENDIX (Continued)
DONALD HESTER is the Information Systems Security Manager and Security Consultant at Maze &
Associates. Donald graduated from Los Medanos College where he is also an adjunct instructor in the
Computer Networking Technologies Department, teaching Microsoft and Security classes. Donald
attended Communications and Electronic school in the U.S. Marine Corps, Donald is currently pursuing
his master's degree in Executive Security Management at American Military University.
Donald has also obtained his post graduate CISSP (Certified Information System Security Professional),
CISA (Certified Information Systems Auditor), MCSE (Microsoft Certified Systems Engineer), MCT
(Microsoft Certified Trainer) along with CompTIA Security+ & Certified Technical Trainer CTT+
certifications.
Donald currently performs the Information Systems Security Reviews for our clients, including cities,
special districts, non-profit organizations and corporations. Donald also gives seminars to local
businesses on paperless office and information systems security issues.
Donald's memberships include, American Society of Industrial Security (ASIS), Information Systems
Audit and Control Association (ISACA), Computer Security Institute (CSI), American Management
Association (AMA), Think Security First!, the Marine Corps Association and the Marine Corps League.
Staff Training
We believe the level of training we provide is unmatched by any other accounting firm. Our audit staff
receive an average of 100 hours of continuing education annually (the State requirement is 40 hours),
including an average of over 80 hours of municipal audit and accounting training (the State and
Government Audit Standard requirement is 24 hours).
Our program places heavy emphasis on governmental accounting and auditing classes conducted by our
own staff, the California Society of Certified Public Accountants, the American Institute of Certified Public
Accountants and the Government Finance Officers Association.
We accomplish this task by reserving a solid week in January or February and another week in July
solely for staff training. Our training is very specific and very participatory; lectures are almost non-
existent as people are all involved in a continuing give-and-take designed to educate while it helps us
improve our services. We deal with specific clients and situations, we solve problems and do case studies,
and we train people for real-life situations through role-play exercises. Everyone is equal in these exercises
and everyone contributes their own experience in the field and the ideas they have formulated from that
experience.
Suggestions coming out of staff training sessions are the source of most of the service improvements
and refinements we make each year.
29
t
M
EXHIBIT C
PRICING PROPOSAL
Portion of Our Proposal
To Provide Professional Auditing Services
for the
CITY OF SAN RAFAEL
Submitted By
MAZE & ASSOCIATES
3478 Buskirk Avenue, Suite 215
Pleasant Hill, CA 94523
(925) 930-0902
Contact Persons
Cory Biggs — e-mail address —corvb(dlmazeassociates.com
Katherine Yuen — e-mail address —katherinev4mazeassociates.com
February 2, 2007
0
E
Certification
Cory Biggs and Katherine Yuen are authorized to submit this proposal and negotiate and sign a contract
with the City of San Rafael. Our offer is firm and irrevocable for a period of 90 days from the date of
1W this proposal.
Total Cost of Audit
Our Estimated All-inclusive Maximum Prices for the services specified in the Request Form Proposal for
the fiscal years ending June 30, 2007 through 2012, are detailed at the end of this section. Our Total All-
inclusive Maximum Prices for the services specified in the RFP are firm fixed fees.
Our policy is to attempt to keep our clients fees constant after inflation. Therefore, the fees for years
subsequent to 2007 have been adjusted for the estimated 2006 CPI increase for the Services Sector of the
U.S. Department of Labor, Bureau of Labor Statistics for the San Francisco -Oakland Area.
What Our Price Includes
Our price includes all the basic audit work and reports, statements and other deliverables specified in
your request for proposal. Our price also includes the items below at no additional cost:
1) year-round support and telephone consultation on pertinent issues affecting your City,
2) copies of our journal entries and our leadsheets used to support the amounts in your financial
statements,
3) a Study Session for the Council to discuss the audit process, financial statements and
recommendations,
4) periodic CIient Alert letters, but only when needed,
5) active on-site Partner involvement in your work every year,
6) our typed Interim Audit Checklist,
7) our typed Annual Closing Checklist,
8) our typed interim Accounting Issues Memorandum,
9) preliminary proforma financial statement formats at interim,
10) answers to most municipal payroll tax questions,
11) reference library of California CAFR award -winners.
12) GASB 34 consolidation, major fund determination, reconciliations,
13) Pivot table analysis tools for the current and prior years
14) Rotating Areas of Special Emphasis
Additional Services
Any additional services will be performed and billed only on the City's prior authorization at our
standard billing rates.
PRICING PROPOSAL (Continued)
Fees and Billings
Our fees are firm fixed prices. In determining our fees, we understand that the City's records will be in
condition to be audited; that is, transactions will be properly recorded in the general ledger and subsidiary
records, these accounting records and the original source documents will be readily available to use, we will
be furnished with copies of bank reconciliations and other reconciliations and analyses prepared by the City
and City personnel will be reasonably available to explain procedures, prepare audit correspondence and
obtain files and records.
We do not post separate rate structures for municipal audit work. We view this work as being every
j bit as important and valuable as the work we perform for other clients and we put our best people on
it. Any consulting work you request will be performed at the same rates as our audit work.
Cost Rationale
We are quite confident we will complete the work in the time budgeted. But we thought you should know
the rationale we used to arrive at our budget. You should know that we finish what we start, regardless of
the accuracy of our budgets.
Since municipal auditing is our principal business, we have no need to assign staff and add hours simply
because our people are available and need experience, as is the case with most firms. At the same time, we
do not need to discount our work, since we do not need to offset the inefficiencies of inexperienced staff
people. And we keep the City's "hidden costs"—time spent with auditors—to a minimum.
We do more work in less time because our people are much better trained and we use a much more efficient
audit approach. All our people receive two or three times as much training as their contemporaries in other
firms. This training is very intense, very inter -active, very practical and is nearly 104% municipal audit
related. Since nearly all our work is municipal audit, our people average 1,500 hours of municipal
experience annually as they quickly gain experience to match their training, which makes them much more
efficient at municipal auditing than their contemporaries. Not only do they understand your problems, they
have seen how your peers are solving them.
Since so much of our practice is fixed-price municipal work, we have been under constant pressure for years
to increase our efficiency without simply shifting work to clients. We have responded with some real
innovations. Performing our Analytical Review of financial statements before we begin our year-end audit
forces the Partners to get actively involved early and give Directors, Supervisors and Associates the
direction they need. Computerizing the entire financial statement and trial balance preparation cut out a
huge number of hours while it increased accuracy, as did the mini -networks of computers and printers we
bring to your office. Our Closing Checklist forces us and our clients to plan the year-end and identify
closing problems at interim, months in advance. And our heavy emphasis on accomplishing major segments
of the work at interim brings audit problems to light much earlier and takes much of the pressure off your
staff at year end.
F Basically, we have disproved the assumption that the quality of the audit is a direct function of the
iL number of hours expended. Instead we have proved there are much more efficient ways to audit and we
have used much of those time savings to increase the thoroughness and depth of the audit.
FF
Ai
Schedule of Hourly Rates by Position By Year
Rates per Hout{4}
Position 2007 2008 2009 2010
Partners $275 5289 $303 5318
IT Manager $130 5137 $144 $151
Supervisor 5110 $116 $122 5128
u
Associates S85 $89 $93 S98
Office S75 S79 S83 $87
NOTES:
(1) Out-of-pocket expenses are included in our standard hourly rate.
(2) Our policy is to attempt to keep our clients fees constant after inflation. Therefore, the fees for years subsequent
to 2007 have been adjusted for the estimated 2006 CPl increase of 3.5% for the Services Sector of the U.S. Department of Labor,
Bureau of Labor Statistics for the San Francisco -Oakland Area The resulting data are firm fixed fees.
(3) Estimated hours are expected to remain constant, except for 2008, which includes $2,677 in GASB 45 implementation costs.
(4) Rates are annually adjusted for a 5% cost of living adjustment.
O.
t.,
2011
2012
$334
$351
$159
$167
SI34
$141
$103
$108
$91
S96
CITY OF SAN RAFAEL
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDITS OF THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30:
Hourly
Totals (2)
Hours (3)
Rates 2007
2008
2009
2010
2011
2012
Comprehensive Annual Financial Report
& Management Letter:
Partners
46.00
$275 $12,650
$13,093
$13,551
$14,025
$14,516
$15,024
Supervisor
87.00
110 9,570
9,905
10,252
10,611
10,982
11,366
Associates
174.00
85 14,790
17,985
15,937
16,495
17,072
17,670
Office
17.00
75 1,275
1,320
1,366
1,414
1,463
1,514
Total Comprehensive Annual Financial Report
324.00
38,285
42,303
41,106
42,545
44,033
45,574
Additional Reports:
Redevelopment Agency
45.00
4,555
4,715
4,880
5,051
5,228
5,410
Single Audit (I Program)
55.00
5,335
5,522
5,715
5,915
6,122
6,337
Child Development Program Report
47.00
4,675
4,839
5,009
5,184
5,366
5,554
Gann Limit Agreed Upon Procedures
9.25
1,039
1,076
1,113
1,152
1,192
1,233
Out-of-pocket expenses (1)
Total firm fixed fees
480.25
$53,889
$58,455
$57,823
$59,847
$61,941
$64,108
Schedule of Hourly Rates by Position By Year
Rates per Hout{4}
Position 2007 2008 2009 2010
Partners $275 5289 $303 5318
IT Manager $130 5137 $144 $151
Supervisor 5110 $116 $122 5128
u
Associates S85 $89 $93 S98
Office S75 S79 S83 $87
NOTES:
(1) Out-of-pocket expenses are included in our standard hourly rate.
(2) Our policy is to attempt to keep our clients fees constant after inflation. Therefore, the fees for years subsequent
to 2007 have been adjusted for the estimated 2006 CPl increase of 3.5% for the Services Sector of the U.S. Department of Labor,
Bureau of Labor Statistics for the San Francisco -Oakland Area The resulting data are firm fixed fees.
(3) Estimated hours are expected to remain constant, except for 2008, which includes $2,677 in GASB 45 implementation costs.
(4) Rates are annually adjusted for a 5% cost of living adjustment.
O.
t.,
2011
2012
$334
$351
$159
$167
SI34
$141
$103
$108
$91
S96