Exh 8HAGENDA ITEM 8H
FEBRUARY 11, 2002
CITY OF ATLANTIC BEACH
CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: .Appointment of a City Commissioner to an Audit Selection
Committee
SUBMITTED BY: Nelson Van Liere, Finance Direct
DATE: February 4, 2002
BACKGROUND:: The City Commission adopted an audit rotation policy on May 1,
2001 that requires the rotation of independent audit firms so that
no firm performs this service for more than six consecutive years.
The current auditing firm Purvis Gray and Co.'s contract expires
with the presentation of the fiscal year ended September 30, 2001
financial statements: The selection of the new firm should proceed
as rapidly as possible in order to allow time for interim fieldwork
to begin.
As part of the selection process required, the City must form an
Audit Selection Committee whose task will be to review proposals
from qualified accounting firms and make a recommendation to
the City Commission. Three firms will be selected to give
presentations to the City Commission. If fewer than three firms
desire to perform the services, the Audit Selection Committee shall
recommend to the City Commission such firms as it determines to
be qualified.
The City Commission will then rank the selected qualified firms
and authorize the City to negotiate with the top ranked firm. The.
process assures us that the selection process focuses on quality
rather than price as a determining factor.
BUDGET: No budget impact.
RECOMMENDATION: To select one City Commissioner to reside on the Audit
Selection Committee for the purpose of contracting with an
accounting firm to perform the City's Annual Audit services.
REVIEWED BY CITY MANA6~R•
AGENDA ITEM 8H
FEBRUARY 11,.2002
City of Atlantic Beach
Atlantic Beach City Commission
Staff Report
Agenda Item: Audit Procurement Policy
Date: May 1, 200.1
Submitted By: Nelson Van Liere, Finance Director
Backgmnnd:
The issue to rotate or not rotate has come up from time to time and the discussions have led to
the desire to adopt some sort of rotation policy. Upon looking deeper into the issue of rotation
policies, I have found that the mandatory rotation of auditors is uncommon. Most cities simply
require that a Request for Proposals for multi-yeaz services be performed every four to six yeazs.
Auditor rotation helps to preserve the auditor independence and provides the benefit of a fresh
perspective. On the other hand, there aze some drawbacks. These drawbacks typically include
an increase in cost, retaining auditors unfamiliaz with the City's background and a dramatic
increase in stafftime devoted to the audit. Because there aze a limited number of qualified firms
in the azea willing to do governmental audits, the reduction in competition caused by mandatory
rotation may also drive the price up.
An alternative to the rotation of firms for the purpose of gaining a fresh perspective is to require
in the contract that senior members of the audit team -be rotated .This gives the fresh perspective
without loosing the continuity of the audit process.
I believe that the City Commission should not restrict the City with a mandatory rotation po&cy.
Excluding a firm, which has done an excellent job for the City over the years, may not be in the
best interest of the City. It would be wise to look at the competition before deciding to rotate. If
after heazing the presentations from the qualified firms, the City Commission does not believe
that retaining the incumbent firm is in the best interest of the City, they can simply exercise their
voting rights at that time and vote fora new, firm .
Budget: _
There will be no impact to the current yeaz's budget.
Recommendations:
1.) Delete the fourth paragraph of the proposed Audit Procuremem Politcy; "No accounting
firm or public accountant shall perform the audit for more than six (6) consecutive yeazs".
2.) Adopt the attached proposed Audit Procurement Policy with the change above, requiring
the City to undertake a fiili-scale competitive process for the procurement of independent
auditors, consistent with legal requirements.
Attachments:
Proposed Audit Procurement Policy
Governmental Finance Officer's Association Recommended Practice oa Audit Procuremenrt
AGENDA ITEM 8H
FEBRUARY 11, 2002
Audit Procurement Policy
The City of Atlantic Beach will periodically undertake afull-scale competitive process for the
selection of independent auditors, consistent with applicable legal requirements. The
competitive auditor selection process will be similar to that which is described in FL Statutes sec
11.45.
The procedures to be followed will promote competition among qualified firms taking into
account their capabilities, adequacy of available personnel, past record, and experience with
governmental audits.
The City of Atlantic Beach will award amulti-yeaz contract of 4 years with two one-yeaz options
to extend. The City Commission will be required to approve each extension. The multi-yeaz
contract will enable audit firms to spread the initial start up costs over a longer period thus
helping to reduce fees and provide continuity of the audit process for both the audit firm and the
City.
No accounting firm or public accountant shall perform the audit for more than six (6)
consecutive years.
The City will appoint an Audit Selection Committee to make a selection of the top three
qualified audit firms using a competitive selection process.
The Audit Selection Committee shall adopt procedures for evaluating the various firms; they
shall have discussions with those firms, and may require public presentations to the City
Commission by no fewer than three firms regazding the qualifications, approach. to the audit and
the abilityto furnish the required services.
)f fewer than three Sans desire to perform the services, the Audit Selection Committee shall
recommend to the City Commission such Sans as it determines to be qualified.
If the City Commission receives mole than one proposal for the engagement from the committee,
the City Commission may rank, in order of preference, the Sans to perform the engagement.
The firm ranked first may then negotiate a contract with the City Commission giving, among
other things, a basis of its fees for the engagement.
Lf negotiations with the firm ranked first fail, negotiations with that Srm shall be formally
terminated and the City Commission shall then undertake negotiations with the second ranked
firm This process shall continue until a contract is negotiated. The City may not conduct
negotiations with more than one firm. at a time,
If the City Commission is unable to negotiate a successful contract with any of the selected
firms, the Audit Selection Committee shall select additional firms, and the City Commission
shall continue negotiations in accordance with the preceding process until an agreement is
reached,
AGENDA ITEM 8FT
FEBRUARX 11, 2002
GFOA Recommended Practice
Audit Procuremen~1996)
Baclrground. The Government Finance Officers Association (GFOA) has long recommended that
state and local governmental entities obtain independent audits of their financial statements
performed in accordance with the appropriate professional auditing standards. Properly performed
audits play a vital role in the public sector by helping to preserve the integrity of the public finance
functions and by maintaining citizens' confidence in their elected leaders.
Recommendation. GFOA makes the following recommendations regarding the selection of
auditing services:
1. The. scope of the independent audit should encompass not only the fair presentation of the
general purpose (i.e., combined) financial statements, but also the fair presentation of the
financial statements of individual funds and account groups. The cost of extending full audit
coverage to the financial statements of individual funds and account groups can be justified
by the additional degee of assurance providecL Nevertheless, the selection of the appropriate
scope of the independent audit ultimately rP**+~;n~ a matter of professional judgment.
Accordingly, those responsible for securing independent audits should make their decision
concerning the appropriate scope of the audit engagement. based upon their particular
government's specific needs and circumstances, consistent with applicable legal
requirements.
2. Governmental entities should enter into multiyeaz agreements when obtaining the services
of independent auditors. Such multiyear agreements can take a variety of different forms
(e.g., a series of single-yeaz contracts), consistent with applicable legal requirements. Such
agreements allow for greater continuity and help to m;,,;mize the potential for disruption in
connection with the independent audit. Multiyeaz agreements can also help to reduce audit
costs by allowing auditors to recovez certain "start-up" costs over several yeazs, rather than
over a single yeaz.
3. Governmental entities should periodically undeitake a full-scale competitive process for the
selection of independent auditors, consistent with applicable legal requirements. This
process should actively seek the participation of all qualified firms, including the current
auditors, assuming that the past performance of the current auditors bas proven satisfactory.
4. The audit procurement process should be structured so that the principal factor in the
selection of an independent auditor is the auditor's ability to perform a quality audit. In no
case should price be allowed to serve as the sole criterion for the selection of an independent
auditor. _
Ii
AGENDA ITEM 8H
FEBRUARY 11, 2002
Ch.
(9) Each charter school and charter technical
career center must file a copy of its audit report with the
sponsoring entity; the local district school board, if not
the sponsoring entity; the Auditor General; and with the
Department of Education.
(10) This section does not apply to housing authori-
ties created under chapter 421.
(11 } Notwithstandinglhe provisions of any local law,
the provisions of this secliort shall govern,
218.391 Auditor refection procedures-
(1} Each local govemmenta! entity, disiriIX school
board, charter school, or charter technical canter cen-
ter shall use auditor selecckion procedures when select-
ing anauditor to cenducf the annual financial audit
required in s. 218.39.
(2) The goveming body of a charter county, munici-
paliiy, special district, charter school, or charter techni-
cal career center shalt establish art auditor selection
committee and auditor selection procedures or use the
procedures outlined in subsection (3). The purpose of
-the committee and the procedures is to contract with an
auditor to conduct the annual financial audit required in
s. 218.39,
(3) The goveming body of a noncharter county or
district school board that retains a certified public
accountant shalt establish'ari auditor selectioncommit-
Yee and select an auditor according.to the following pro-
cedure:
,, : {a)~ For each noncharter county, the auditor selec-
'p;ji' lion committee shall consist of the county 'officers
elected pursuant to s.1(d), Art VIII of the State Consti-
„ tution; and one member of the board of county cromrnis-
I stoners or its designee. .
(b) The committee shall publicty announce, ih a
unrfortn and consistent manner, each occasion when
audtng services are` required to be purchased Public
notice must include a general description of the audrt
;; and must indicate haw interested certified public
accountants can apply for consideration.
(c) The committee shalt encourege.firtru engaged
th the Lawful practice of publio accounting who desire to
`„'~ provide professional services to submit annually a
statement of qualifications and pertortnance data.
(d) Any certified public accountant desiring io pro-
vide auditing services shall first be qualified pursuant fo
law. The committee shall make a fmding that the fine or
ihdivitlual to be employed. is fulty qualified to render the
required services, Among the factors to be considered
in making this finding are the capabitdies, adequacy of
personnel, past record, and expedence of.the firtn,or
individual.
(e) The committee shalt adopt' procedures for the
evaluation of professional services,.ineluding, but. not
limited to; caparbil""Mies, adequacy of personnel, past
record, experience, results of recent external quality
control reviews, and such other factors as may bs
determined by the committee to be appNcable to its par-
fiCUlar fegnlrementr. ..
(f) The public shall not be excluded from the. pro-
., ceedings under this subsec0on..
(g) The. committee shall evaluate current sta
menu of qualifica0ons and performance data on
with the committee, .together with those that may
submitted by other firms regarding the proposed au,
and shall conduct discussions wdh, and may ro9u
public presentations by, no fewer fhan three fin
regarding their qualifications, approach to the aw
.and ability to furnish the required services.
(h) The committee shall select in order of pref
ence no fewer fhan three firms deemed to be the m~
highy qualified to perform the required services of
wnsidering the following factors: the ability of profi
sional personnel; past performance; willingness
meet tune requirements; location; and recent, curre
and projected workloads of the fines. However, su
distnbution shay not violate the principle of selection
the most highly qualified firms. If,fewerthan three fin
desire to perform the services, the committee shatl n
ommend such firms as it detemunes to be qualified
(i} -The committee may request, accept, and cc
sider proposals for the compensation to be paid of
during competitive negotiations under paragraph (
The firm ranked first may then negotiate a contract w
the board giving, among other things, a basis of ifs.1
for that engagement If the board is unable to negofia
a satisfactory contract with that firth, negotiations w
that fine shalt be fortnalty terminated, and the boa
shall then undertake negotiations with the secor
ranked fine. Failing accord wdh the secartd-rank
firth, negotiations shall then be tertrfinated with that fi
and undertaken with the third-ranked fine. Negotiatic
with the other ranked fimts shall be undertaken in t
same manner, The board, in negotiating with fim
may reopen formal negotiations with any one of t
three top-ranked firths, but it may not negc8ate w
more than one firm at a time. The board shah al
negoliate on the scope and quality of services. In m:
ing. such detertninaition, the board shall conduct
detailed analysis of the cost. of the professionaE e
vices required in addition to considering their sco
and complexity. For contracts over $50,1100, the bo#
shalt require the firm receiving the award to executi
truth-in-negotiations certificate stating that the rates
compensation and other factual unit costs supporll
the compensation are accurate, complete, and cure
at the time of contracting. Such certificate shat! al
contain a description amd disclosure of arty understa!
ing that places a limit on current or future years' ail
contract fees, including any arrangements under whi
fixed limits on fees will not be subject to reconsideratl
if unexpected accounting or auditing issues.8
encountered. Such certificate shall also contain
description of any services rendered by the cerlil(
public accountant or firm of certified public accountau
at rates or terms that aze not customary.. Arty audi~
service contract under which such a certificat®'
required must cormain a provision that the original c4
tract price and any additions thereto shall ba aryusl
to exclude any signifrcanY, sums by which the boE
determines the contract price was increased dolt
inaccurate or incomplete factual unit costs. Atl se
contract adjustments shall be made within 1 yes ~l
lowing the end of the. contract,
712
AGENDA ITEM 8H
FEBRUARY 11, 2002
F.5.2001 FINANCfAL MATTERS pERTA1NING TO POf_ITICAL SU6DIVISIONS Ch. 278
,. ~) If the board is unable to negotiate a satisfactory
cohuact with any of the selected firms., the committee
shatl select additional fimrs, and the board shall con-
tinue negotiations in accordance with this subsection
nntil~an agreement is reached.
-.y9syxy-s. 85. G1.2W1.288. '.
PART IV
INVESTMENT OF LOCAL GOVERNMENT
SURPLUS FUNDS
218.40 Short title.
218.401 Purpose..
218.403 Definitions.
218.405 Local Government Surplus Funds Trust
Fund; creation.
218.407 Local govemmem investment authority.
2t8.409 Administration of the toast fund.
218.477 Authorization for state technical and advi-
sory assistance,
218.442 Rulemaking authority.
218.475 Local govemment investment policies.
218.40 Short title.-This pan shag be known, and
may be cRed, as the "(nvestment of Local Govemment
Surplus Funds Act"
xwo°a-s i, cn, rtaea.
218.401 Purpose.-1t is the intent of this part to pro-
mote, through state assistance, the maximization of net
interest earnings on invested surplus funds of Iocai
units of govemment, thereby reducing the need for
imposing additional taxes. - -
wuar.-a ~. d,. na%
218.403 Definitions.-The following words or
terms, when used in this part, shall have the following
meanings:
(1) "Chief financial officer" means the mayor, man-
tiger, administrator, clerk, comptroller, treasurer, direc-
tor offinance, or other local govemment official, regard-
less of me title of his or her office, cfiarged with admin-
istering the fiscal affairs of a unft of local govemment
(2) "Currem expenses" means expenses to meet
known cash needs and anticipated cash-flow require-
ments torthe short term.
(3) °Goveming body" means the body or board in
which the legislative power of a unit of local govem-
ment is vested,
(4) °Short tens" means a maximum of 6 months of
operation.
(S) - °Surplus furads° means any funds in any general
or special account or fund of a unit of local govemment,
or funds held by an independent trustee on behalf of a
unit of local govemment, which in reasonab{e comem-
plationwill not be immediatety needed for the purposes
intended.
(8) "Trust fund' means the pooled investment fund
created by s. 218.405 and known as the Local Govern-
ment Surplus Funds Toast Fund.
(~ "Unit of bcat govemment" means arty govem-
mental entity within the state not part of state govem-
ment and shall include, but not be limited to, the follaw-
ing acid the officers thereof. any county, municipality,
school district, special district, clerk of the circuit court,
sheriff, property appraiser, tax collector, supervisor of
elections, authority, board, public corporations, or any
other.poltbcal subdivision of the state.
Hisiery~-s.1. rtL n~39a: a A rr.8r-299: 6.1778, ch.9Sisr, s s. M.9Sf%:
a'/, tll. 975.
218.405 Local Government Surphrs Funds Trust
Fund; creation.-There is hereby created a Local Gov-
emment Surplus Funds Trust Fund to be administered
by the State Board of Administration and to be com-
posed of Iccal govemmem surplus funds deposited
therein by units of local govemment under the proce-
dures established in this part The board may adopt
rules to administer the provisions of this section.
w~n•-a 1, m. nose; _. 3, cn. 9s12a. .
218.407 Local govemment investment authority.
(1) Upon determination by the goveming body that
it is in the interest of the unit of local govemment to
deposit surplus funds in the trust fund, a resolution by
the goveming body shall be flied with the State Board
of Administration authorizing investment of its surplus
funds in the trust fund established by this pan. The res-
olution shalt name;
(a) The local govemment official, who may 6e the
chief financial oc administrative officer of the local gov-
emment, or .
(b) , An independent trustee holding funds on behalf
of the unit of local govemment,
responsible for deposit and withdrawal of such funds,
(2) The State Board of Administration shall, upon
the filing of the resofuticn, invest the moneys in the tnasY
fund in the. same manner and subject to the same
restrictions as are set forth in s. 215.47. F~ccept when
authorized by the board, alt units of local govemment
which qualify to 6a participants in the L..ocal Govern-
ment Surplus Funds Tmst Fund after January 1, 1982,
wilt normally have surplus funds deposited- into a
pooled investment accoum.
{3) The provisions of this pan shall not impair the
power of a unit of local govemment to hold funds in
deposit accounts with banking or savings. institutions or
to invest funds.as otherwise authorized by law.
xiriory.-e, t, ch, 77ti"%; a & d~ 82.15; A 3, af. 81-137; A 5, d4 87-99; s
9. Ci. 98dT, s 4, cM1 98•'120.
173
21.8.409 Administration of the trust fund.-
(1) Upon receipt of the resolution from the Iocai
goveming body, the State Board of Administration shall
axept all wire transfers of hands into the trust fund. The
State Board of Administration shall also wire-transfer
invested local govemment funds to the local govem-
ment upon request of the local govemment official
named in the resolution.
(2) The State Boani of Administraton shat) admin-
istecthe investment trust funds on behalf of the partici-
pants and shall' have the power to invest such funds. A
fee may be charged on any transaction that is not in
accord with the close of business as set Iry the board.
(8) The State Board of Administration may pur-
chasesuch surety or other bonds as may be necessary
for its officials in order to protect the fund. A reserve
fund may be established to fulfill this purpose.
AGENDA ITEM 8H
FEBRUARY 11,.2002
RESOLUTION N0.97-21
A RESOLUTION OF THE CTT'Y OF ATLANTIC BEAC13
ESTABLLSHING AN AUDIT SELECTION COI4INIITTEE, AND
PROVIDING AN EFFECTIVE DATE
WHEREAS, the City of Atlamic Beach has requested proposals for audit services; and
WHEREAS, Florida Statutes 11.x5 required ~raicipatities to establish an audit selection
committee.
NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Atlantic
Beach asfollows: -
Section 1. Ia compliance with Florida Statutes 11.45, the City Commission hereby
establishes an audit selection committee consisting of Commissioner John Mesecve, City Manager
James Jarboe, and Finance Director Ann Meuse.
Section 2. The City Commission also tierce to toIlow the competitive auditor selection
process as described in Florida Statutes 11.45.
Section 3. This Resohrtion shag take affect irunsediatdy upon its passage and adoption.
Passed by the City Comimission of the City of Atlantic Bear h day of Iune, 1997.
L T.FLETCHER
Mayor/Presiding Officer
ATTEST:
N~ G
Certified Mutncipai Clerk
Ap oved as ~ form and Correctness:
c. s>~nl, ESQUIRE
city
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