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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 ~--.