450 San Rafael Avenue Belvedere, CA Tel: (415)

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1 450 San Rafael Avenue Belvedere, CA Tel: (415) REQUEST FOR PROPOSALS: Professional Auditing Services ADDENDUM #1: QUESTIONS AND ANSWERS Addendum Issued: April 5, 2018 Proposals Due: April 16, 2018 at 4:00 p.m. The following is an addendum to the Request for Proposal for Professional Auditing Services. This addendum includes answers to questions received by the City of Belvedere before the deadline for questions on April 2, The RFP, together with this Addendum #1, constitutes the entire understanding between each of the participating proposers and the City of Belvedere. Please acknowledge receipt of this addendum in your cover letter. 1. What were the total audit fee s in conjunction with your last contract with your current independent auditor. Please provide a breakdown by fiscal year, and please provide a breakdown of amendments issued with its associated costs, if any, and the reasons for those amendments. Fiscal Year Contract Price Addition Reason 2015 $26,500 $ $26,500 $ $26,500 $1,000 Assistance with financial statement preparation 2. What were the total hours incurred/billed by your current auditors for the Fiscal Year 2017 audit? Please provide us with a breakdown by audit section (Financial, Single Audit, Other). Our contract was fixed price, hours were not provided by the auditor. 3. Has your board communicated to management their desire to change auditor?

2 4. Is your current auditor invited to participate in the RFP? Yes, but see question Can you please provide us with a copy of your latest Audit Report, Management Letter, and all other report deliverables as of the June 30, 2017 audit period. The latest Audit Report and Management Letter are presented in the City s CAFR document, which is posted on the City s website ( There were no deficiencies in internal control or material weaknesses reported. Other report deliverables (SAS 114 letter and Gann Limit AUP) are attached to this document. 6. Has your board or management communicated a desire towards utilizing a local firm over utilizing a firm which is out of town? Our board or management have not expressed this desire. 7. How many auditors and how long were the auditors on site for both interim and year end fieldwork? Two auditors were on site for fieldwork. In addition, one partner was on site for a couple of partial days. 8. What were your prior year audit fees for each service? See question Was there a management letter in the prior year? If so, what was the nature of the items? The prior year management letter did not report deficiencies in internal control or material weaknesses. None. Yes, six. 10. How many journal entries were proposed by the auditors? 11. Were there any journal entries provided to the auditors by City staff in the prior audit after the year end trial balances were provided to the auditors? If so, how many? 12. Were there any significant deficiencies or material weaknesses reported in the previous year? If so, what was the nature of the items? (See question 9.) 13. Did the prior year auditor provide any services other than those listed in the RFP?

3 14. Did the Auditor s calculate the GASB 68 Pension Liability? The auditor assisted the finance officer with this calculation. 15. Is the City involved in any significant litigation other than the typical actions a City is involved in? 16. Does the City expect to have a Single Audit for the 2018 fiscal year? 17. What is the reason for the Audit RFP this year? Our prior audit firm decided to discontinue supporting governmental audits. 18. Will the prior audit firm be given the opportunity to bid on the 2018 audit? Yes, but see question Has there been any misappropriation of assets or fraudulent financial reporting in the past five years? 20. Approximately how many (if any) journal entries, did the prior year audit firm propose? See question What was the total prior year audit fee? $27, What is the breakdown of that fee, for example: a. audit fee of the city prepared CAFR: $26,500 b. preparation fee of the draft CAFR, fin stmt notes, and RSI (audit firm prepares CAFR): $1,000. c. preparation of the GANN limit report/agreed upon procedures: included in a. d. preparation of the city's SCO report/agreed upon procedures: N/A e. single audit fee, and how many major programs: N/A

4 23. Since fiscal year is the first year of governments to report their GASB 75 OPEB over/under funded net liability, how has the city prepared for this new reporting requirement? For example, many cities outsource the preparation of that actuary report. The City has engaged Bartel & Associates to perform an actuarial analysis of the OPEB plan under GASB 75 requirements, and to assist with implementation. 24. How does the city determine its GASB 68 net pension liability each year? For example, many cities outsource those calculations to pension consultants such as Bartel Associates out of San Mateo. This has historically been calculated by the finance officer with assistance from the auditor. 25. Why is the City of Belvedere considering changing the auditor? See question Who was your prior Auditor? Will they be invited to bid? Odenberg, Ullakko, Muranishi & Co. LLP ( OUM ). Yes, but see question How long has your prior auditor been performing the audit? Sixteen years. 28. For both interim and year end, how many staff did the audit team consist of in the past and how many weeks did the auditor spend in the field? The audit team consisted of two auditors on site each day, plus one partner on site for a couple of partial days. Fieldwork lasted a week and a half at year-end. No interim work was performed. 29. Is the scope of the service requested the same as last year? The same core scope of services is being requested. Additional services are being requested as possible options. These additional services are: Financial Statement preparation and State Controller Report preparation (both the Cities Financial Report and the Annual Street Report). 30. Have there been any changes in your accounting system or software since last year? Staff is implementing an accounting system conversion on July 1, Do you expect to have any retirement or replacement of key employees in Finance? 32. What were the prior year audit fees and can you provide the break down by components? See questions 1, 21 & 22.

5 33. Is there anything specific that you are looking for with the successor auditors? Municipal auditing experience with an emphasis on experience with GASB Statements 68 and What are the things you liked and didn t like about your current auditors? We liked their familiarity with the City of Belvedere as our long-time auditor, however, we are looking forward to a fresh perspective that a new audit firm will bring. 35. Were there any material weaknesses or significant deficiencies in the prior year? (See question 9.) 36. How much were the total federal expenditures in prior years and can you provide a copy of your last single audit if you had one? The most recent federal expenditures by the City took place in fiscal year 2000, which is not readily accessible in our archives. 37. How many major programs are usually tested each year for the single audit? The City does not typically require a single audit. None. 38. How many audit adjusting journal entries did you have in the prior fiscal year? 39. Any litigation not included in the 2017 Financial Statements? 40. Will there be any significant events in FY ? Implementation of GASB 75 and issuance of 2017 Lease Revenue Bonds. 41. Are there any significant changes in operations expected for FY ? 42. What is the reason that you are considering changing the auditor? See question Will your prior auditors be invited to bid? See question How many staff did the audit team consist of in the past? See question 28.

6 45. Is the scope of the service requested the same as last year? See question Have there been any changes in your accounting system or software since last year? See question Do you expect to have any retirement or replacement of key employees? 48. How many weeks did your prior auditors encounter for your last audit? How many weeks/hours were spent by the prior auditors in the field? See question What were the prior year audit fees and can you please breakdown by components? What is the current year budget for auditing services? See question 1 for prior year audit fees. The FY18-19 expenditure budget is currently under development. 50. When will a closed trial balance be available for the audit with all closing entries recorded? Target date for closed trial balance is September 1, Is there anything specific that you are looking for with the successor auditors? See question What are the things you liked and didn t like about your current auditors? See question What are the things you liked and didn t like in the audit process followed by your current auditors? The former auditor did not perform any interim work and we would prefer to begin the audit process at interim. 54. How many adjusting entries you had last year? See questions 10 and Do you expect to have a single audit this year?

7 None. None. 56. How many major programs you had last year? 57. How much were the total federal expenditures last year? 58. Were your GASB 68 pension balances calculated by an actuary or other third party, internally or with help from your prior auditor. Internally, using the CalPERS actuary report and with help from the prior auditor. 59. If you have an other postemployment benefit plan (retiree medical benefits), have you had an actuary complete a valuation as required by GASB 75? See question 23. Unsure. 60. When was the last inventory of your depreciable property completed? 61. Have you had or do you anticipate any management turnover? The current City Manager was hired in May The current Administrative Services Manager was hired in July Have you had or do you anticipate any council member turnover? 63. Do you plan to issue any debt or have you issued any debt since your last audit? On August 30, 2017 the City refinanced a portion of the City s unfunded actuarial liability with respect to CalPERS obligations. The amount of $2.6 million was financed through lease financing effected by a lease and lease back of the City s Corporation Yard and adjacent property. 64. What was the all-inclusive cost of your audit by service component? See questions 21 & Please provide a copy of any management letters related to your audit report. See question How many auditors and how many weeks were the prior auditors on site, for interim and year-end field work? See question 28.

8 67. What were the prior year fees for all the services provided? See questions 21 & Does the City prepare its CAFR or is the auditor responsible for preparation? In the past, the City prepared the CAFR with assistance from the auditor. 69. If auditor prepares CAFR, please expand on how the City provides the auditor the information for preparation of the CAFR? Does the City prepare the rolled up funds or would the auditor obtain a trial balance to develop the funds from scratch? In the past, the City prepared excel spreadsheets with schedules of the rolled up funds, and the auditor ensured the accuracy of the roll ups. 70. Are there any new audit services requested in this RFP that were not included in the prior year fees? See question How many journal entries were proposed by the prior auditor and how many findings did they issue? No journal entries proposed; no findings issued. 72. What is the reason you are considering changing the auditor? See question Have there been any changes in your accounting system or software since last year? See question Have there been any major changes in staff turnaround in the past year? See question Do you expect to have any retirement or replacement of key employees? 76. Please list the staff members in finance and their years of experience with the organization at that position. There is one staff member in finance: Amber Johnson, Administrative Services Manager. This position was recently appointed in July 2017 after the prior Administrative Services Director retired. 77. How many adjusting entries did you did you have last year? See questions 10 and 11.

9 78. Is the City Planning to issue any new debt? See question About how much time did the prior year auditors spend onsite to conduct their audit? About a week and a half. 80. Are the prior year auditors being invited to bid? See question What were the prior year fees? Did these fees include travel? $27,500 fixed fee was inclusive of travel or any other out of pocket costs. 82. Are there any new services in this RFP that were not included in the prior year? See question How did you hear about us? The City distributed the Audit Services RFP to a list of auditors compiled by members of CSMFO. The RFP was also advertised on the City s website and the CSMFO website.

10 November 27, 2017 To the Honorable Mayor, Member of the City Council, The City Manager of the City of Belvedere, California We have substantially completed our audit the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Belvedere (City) for the year ended June 30, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated August 29, Professional standards also require that we communicate to you the following information related to our audit. We look forward to discussing these matters with you on November 30, Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during We noted no transactions entered into by 2017 during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City s financial statements were: Management s estimate of the depreciable lives for fixed asset as described in Note 4 to the financial statements. We evaluated the key factors and assumptions used to develop the estimated useful lives of the capital assets in determining that it is reasonable in relation to the financial statements taken as a whole. Management s estimate (based on PERS and PARS reports) of the net pension liability as described in Note 9 to the financial statements. We reviewed the PERS and PARS reports and reconciled the estimated net pension liability recorded in the financial statements to the PERS and PARS reports, respectively. Management s estimate of the postemployment benefit obligation as described in Note 10 to the financial statements. We evaluated the key factors and assumptions used to develop the estimated postemployment benefit obligations in determining that it is reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit s financial statements taken as a whole.

11 The Honorable Mayor, Member of the City Council, The City Manager of the City of Belvedere, California November 27, 2017 Page 2 Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to City s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as City s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Internal Control over Financial Reporting In planning and performing our audit of the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City, we considered the City s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control. Accordingly, we do not express an opinion on the effectiveness of the City s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Other Matters We applied certain limited procedures to Management s Discussion and Analysis, Budgetary Comparison schedules, Miscellaneous and Safety Cost-Sharing Multiple-Employer Defined Pension Plans, and PARS Retirement Enhancement Plan (REP) Defined Benefit Pension Plan, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on Combining Other Governmental Funds Financial Information, Combining Fiduciary Funds Financial Information, Non-Major Fund Budgetary Comparison Schedules, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the

12 The Honorable Mayor, Member of the City Council, The City Manager of the City of Belvedere, California November 27, 2017 Page 3 information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on Introduction and Statistical Sections of the Comprehensive Annual Financial Report, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the information and use of Honorable Mayor, Members of the City Council, and management of City and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, San Francisco, CA

13 CITY OF BELVEDERE INDEPENDENT ACCOUNTANT S REPORT ON APPLYING AGREED-UPON PROCEDURES * * * * * JUNE 30, 2017

14 To The Honorable Mayor and Members of the City Council City of Belvedere, California INDEPENDENT ACCOUNTANT S REPORT ON APPLYING AGREED-UPON PROCEDURES We have performed the procedures enumerated below to the accompanying Appropriations Limit worksheet 6 of the City of Belvedere, California for the fiscal year ended June 30, These procedures, which were agreed to by the City of Belvedere, California and the League of California Cities (as presented in the League publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution), were performed solely to assist the City of Belvedere, California in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. The City of Belvedere, California management is responsible for the Appropriations Limit worksheet 6. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings were as follows: 1. We obtained the completed worksheets Nos. 1 through 7 and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the City Council. Finding: No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit worksheet 6, we multiplied line A, last year s limit, by line B, adjustment factor, added line D, voter approved additional amount, and compared the resulting amount to line E, this year s limit. Finding: We noted that total adjustment amount was not calculated correctly based upon the population percentage. The adjustment was calculated to be for the population, but should have been The City corrected the error and the new appropriations limits were adopted by the Trustees, as verified by our procedures. 3. We compared the current year information presented in the accompanying Appropriations Limit worksheet 6 to the other worksheets described in 1 above. Finding: No exceptions were noted as a result of our procedures. 4. We compared the prior year appropriations limit presented in the accompanying Appropriations Limit worksheet 6 to the prior year appropriations limit adopted by the City Council for the prior year. Finding: We noted that the prior year appropriations limit on worksheet number 6 did not agree to the prior year s appropriations limit as adopted by the Trustees. The prior year appropriations limit were calculated as $2,606,239 for the City but the prior year appropriations limit should have been $2,725,550. The City corrected the error and the new appropriation limit was adopted by the Trustees, as verified by our procedures.

15 We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the accompanying Appropriations Limit worksheet 6. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by Article XIII-B of the California Constitution. This report is intended solely for the information and use of the City Council and management of the City of Belvedere, California and is not intended to be and should not be used by anyone other than these specified parties. San Francisco, California December 6, 2017

16 CITY OF BELVEDERE APPROPRIATIONS WORKSHEET NO. 6 FISCAL YEAR END JUNE 30, 2017 A Fiscal 2016 Appropriations Limit $ 2,725,550 B Inflation Factor Population Factor Adjustment Factor C Fiscal 2017 Appropriations Limit 2,881,389 D Voter approved additional amount 823,776 E Fiscal 2017 Appropriations Limit - Revised $ 3,705,165