Title
Chief Administrative Office, with concurrence of the Audit Committee, recommending the Board:
1) Make findings in accordance with Section 3.13.030 (F) that contracting out is necessary to protect against a conflict of interest or to ensure independent and unbiased findings where there is a need for an outside perspective;
2) Award Request for Proposal 24-0058 to the successful proposer, Lance, Soll & Lunghard, LLP of Brea, CA for the provisions of independent professional audit services related to the examination of annual financial statements countywide;
3) Approve and authorize the Purchasing Agent to sign Agreement for Services 8966 with Lance, Soll & Lunghard, LLP for audit services related to the examination of annual financial statements countywide, with an amount not to exceed $440,300, for a term of three (3) years, commencing upon the execution of the agreement, with the option to extend by one (1) additional two (2) year period;
4) Authorize the Purchasing Agent to execute any necessary amendments to said agreement, excluding term extensions and increases to the not-to-exceed amount, contingent upon approval by County Counsel and Risk Management;
5) Make findings that a competitive bidding process for financial audit services related to the County’s ambulance service providers would produce no economic benefit to the County, and therefore is exempt from competitive bidding in accordance with Section 3.4.3 of Procurement Policy C-17; and
6) Authorize the Purchasing Agent to negotiate a contract with Lance, Soll & Lunghard, LLP for audit services related to the County’s ambulance service providers,
FUNDING: General Fund.
Body
DISCUSSION / BACKGROUND
County-Wide Audit Services
The County adheres to the accounting principles, standards, and procedures prescribed by the State Controller’s Office as set forth in its manual Accounting Standards and Procedures for Counties, which conforms to Generally Accepted Accounting Principles (GAAP).
Pursuant to Government Code section 25250, the Board of Supervisors is required by law to at least biennially “examine and audit, or cause to be audited, the financial accounts and records of all officers having responsibility for the care, management, collection or disbursement of money belonging to the county or money received or disbursed by them under the authority of law.” The Board may employ the services of an independent certified public accountant or licensed public accountant to perform this examination in accordance with generally accepted auditing principles.
Section 925 of the California Penal Code provides that the “Grand Jury shall investigate and report on the operations, accounts and records of the officers, departments, or functions of the county” however, they may not duplicate any examination of financial statements that has been performed by or for the Board of Supervisors. In recognition of the Grand Jury’s role in reviewing the financial statements of the county, the Board of Supervisors adopted Policy B-9, Annual Audit Contract - Grand Jury Participation, which provides that the County Grand Jury shall be given an opportunity to participate in the selection of a contracted auditor for the annual audit.
On September 29, 2015, the Board adopted Resolution 151-2015 to create a standing Annual Audit Committee responsible for:
1) Establishing the method for selecting a public accounting firm to conduct the annual audit of the County’s financial statements;
2) Making a recommendation to the Board for the award of the contract for the Annual Audit; and
3) Reviewing the Annual Audit findings and responses and make recommendations to the Board, if appropriate.
The County contracted with the firm CliftonLarsonAllen LLP to perform the annual audits for fiscal years ending June 30, 2019 through 2023. On June 13, 2022, the Audit Committee directed staff to conduct a solicitation for annual audit services for the next agreement.
The Procurement and Contracts Division released Request for Proposal (RFP) 24-0058 to solicit proposals for Independent Audit Services and proposals were received from four (4) qualified firms. The Audit Committee evaluated the proposals considering the criteria outlined in the RFP (organization size, structure and resources of firm; prior auditing experience; qualifications of staff; audit coverage and approach; and cost), and recommends awarding the RFP to Lance, Soll & Lunghard, LLP.
A Notice of Intent to Award letter for RFP 24-0058 was issued on July 24, 2024, and the Chief Administrative Office has negotiated Agreement 8966 for audit services for the examination of annual financial statements with Lance, Soll & Lunghard, LLP.
Audit Services for Ambulance Service Providers
The County currently contracts with two Joint Powers Authorities (JPAs) for the provision of ambulance services within the County. The El Dorado County Emergency Services Authority (EDCESA) provides services in County Service Area (CSA) 7 on the West Slope, and the California Tahoe Emergency Services Operations Authority (Cal Tahoe) provides services in CSA 3 in the Tahoe Basin, excluding the West Shore area.
The County has historically contracted with auditing firms to perform the annual financial audits of the JPAs. In 2017, a Request for Proposals (17-918-022) was completed to select an audit provider, and Agreement 059-S1811 was executed with Richardson & Company, LLP for services through Fiscal Year 2017-18, which expired June 30, 2020. In 2020, Agreement 4583 was executed with Richardson & Company, LLP to provide auditing services for Cal Tahoe through Fiscal Year 2019-20 and for EDCESA through Fiscal Year 2022-23. Auditing services were provided to Cal Tahoe by another contractor for Fiscal Years 2020-21 through 2022-23.
A best practice approach for auditing services involves periodically changing auditors to avoid any potential conflicts of interest or complacency that may arise from long-term relationships, to strengthen audit quality, enhance public confidence and to ensure the integrity of financial reporting. In 2024, the Procurement and Contracts Division initiated a competitive RFP 24-0030 for the CSA 3 and CSA 7 Auditing Services however, Richardson & Company, LLP was the only qualified respondent. As Richardson & Company, LLP have been contracted to performed CSA 3 and CSA 7 Auditing Services for the last 7 years, the Chief Administrative Office is requesting that audit services for ambulance service providers be exempt from the competitive bidding process in this instance. The County’s Procurement Policy, C-17, states that services can be exempt from competitive bidding when competitive bidding would produce no economic benefit to the County. Lance, Soll & Lunghard, LLP have provided a reasonable quote for the services and the Chief Administrative Office does not believe there will be any economic benefit to the County by going through another lengthy RFP process. This would further delay the completion of the FY 2022-23 audit, which should have been completed by Richardson and Company in February of 2024.
Based on the finding in the County-wide audit services RFP (24-0058), the firm Lance, Soll & Lunghard, LLP have the qualifications to perform the CSA 3 and CSA 7 auditing services. If the Board agrees to find these services exempt from competitive bidding, the Chief Administrative Office requests that the Board authorize the Purchasing Agent to negotiate a separate agreement with Lance, Soll & Lunghard, LLP for these services. Any such agreement shall be presented to the Board for approval at a later date.
ALTERNATIVES
County-wide audit services - there are no notable alternatives consistent with prior Board direction.
Audit services for ambulance service providers - the Board could direct staff to initiate a second RFP however, this would delay the completion of the audits as this is a lengthy process and a separate competitive process resulted in a qualified firm to provide the services.
PRIOR BOARD ACTION
May 14, 2019 - Legistar file 19-0748 - Agreement 4103 with CliftonLarsonAllen LLP
June 21, 2022 - Legistar file 22-0788 - Amendment I of agreement 4103 with CliftonLarsonAllen LLP
April 18, 2017 - Legistar file 17-0363 - Agreement 059-S1811 with Richardson & Company, LLP
April 7, 2020 - Legistar file 20-0383 - Agreement 4583 with Richardson & Company, LLP
OTHER DEPARTMENT / AGENCY INVOLVEMENT
Procurement and Contracts
County Counsel
Auditor-Controller
CAO: EMS Preparedness & Response
CAO RECOMMENDATION / COMMENTS
Approve as recommended.
FINANCIAL IMPACT
Funding for independent audit services is included in the FY 2024-25 Recommended Budget and will be included in future year budgets.
CLERK OF THE BOARD FOLLOW UP ACTIONS
N/A
STRATEGIC PLAN COMPONENT
N/A
CONTACT
Alison Winter, Principal Management Analyst