DATE: June 18, 2024
TO: Board of Supervisors
SUBMITTED BY: Paul Nerland, County Administrative Officer
SUBJECT: Agreements for Independent Auditor Services
RECOMMENDED ACTION(S):
TITLE
1. Approve and authorize the Chairman to execute an agreement with Brown Armstrong Accountancy Corporation to provide audit services in connection with the County’s financial statements and treasury for Fiscal Year 2023-24 through Fiscal Year 2025-26 and two optional one-year extensions, total not to exceed $617,200; and
2. Approve and authorize the Chairman to execute an agreement with CliftonLarsonAllen, LLP, to provide audit services in connection with several grants, several disposal sites, the County’s appropriations limit, the In-Home Supportive Services Public Authority, the Fresno County Zoo Authority, the Fresno County Tobacco Funding Corporation, Fresno County Service Areas, Waterworks Districts, Maintenance Districts, Highway Lighting Districts, and Solid Waste Commissions, and the Community Corrections Partnership Executive Committee for Fiscal Year 2023-24 through Fiscal Year 2025-26 and two optional one-year extension, total not to exceed $917,089.
REPORT
Approval of the first recommended action will allow the County to continue to file timely Annual Comprehensive Financial Reports (ACFR) with the Government Finance Officers Association, with the California State Controller, and as part of the County’s annual reporting to the secondary bond market in connection with its outstanding bonds. The audited ACFRs demonstrate compliance with generally accepted accounting principles (GAAP) and allow the County to apply for grants and external debt financing. Approval of the second recommended actions will provide independent auditing services for various component units that provide specific services countywide or to distinct geographic areas within the County. The item is countywide.
ALTERNATIVE ACTION(S):
There is no other viable option. Failure to approve the external auditor contracts would result in in unaudited financial statements that would impair the County’s ability to file timely financial statements, obtain grant funding, and obtain external financing.
FISCAL IMPACT:
The annual cost of the agreement with Brown Armstrong is $123,440. Total compensation for the three-year base and two one-year optional periods may not exceed $617,200. There is no increase to Net County Cost (NCC) associated with the first recommended action, and the recommended Fiscal Year 2024-25 budget will include sufficient appropriations in the Interest and Miscellaneous Org 2540 to fund the costs associated with the audits performed under the agreement. A portion of these costs will be recovered through the Countywide Cost Allocation Plan via billing to federal and state agencies and County related entities.
The annual cost of the agreement with CliftonLarsonAllen (CLA) is $165,969 for audit services for FY 2023-24 with an annual increase of approximately 5% for each of the subsequent years. The total compensation for the three-year base and two one-year optional period may not exceed $917,089, $10,588 of which is NCC. There is no increase to NCC for FY 2023-24 associated with this action. The recommended Fiscal Year 2024-25 budget will include additional appropriations in the Interest and Miscellaneous Org 2540 to fund the costs associated with the audits performed under the agreement. There will be cost recovery from the entities to be audited by CLA under the agreement.
DISCUSSION:
On March 21, 2024, the Fresno County Administrative Office issued a Request for Proposal (RFP) through the Purchasing Division of the Internal Services Department to qualified firms to provide external audit services for various audits and agreed-upon procedures within the County of Fresno for Fiscal Year (FY) 2023-24 through FY 2025-26, with the option of two (2) additional extensions through FY 2027-28.
The RFP sought proposals on two engagements. These engagements include two separate scopes of work to be performed by two separate contractors. Scope of Work A includes the County's Annual Comprehensive Financial Report (ACFR), the Single Audit, County Treasury Counts, and the County Treasury Pool and Investment Policy audits. Scope of Work B includes the Cal EMA and Fresno County Transportation Authority Measure C audits, Financial Assurance Letters for the Coalinga and Southeast Regional Disposal Sites, the annual report on the County's Appropriation Limit, In-Home Supportive Service Public Authority audit, the Fresno County Zoo Authority audit, the Fresno County Tobacco Funding Corporation audit, Countywide Service Areas, Waterworks Districts, Maintenance Districts, Highway Lighting Districts and Solid Waste audits, and a report on the Fresno County Community Corrections Partnership Executive Committee.
Proposers were allowed to propose for both engagements but were informed in the RFP that a proposer could only be awarded one of the two engagements.
The County received proposals from four audit firms that were evaluated by a three-member review committee. All firms proposed for both scopes of work. The four audit firms are as follows:
1. Brown Armstrong Accountancy Corporation
2. Clifton Larson Allen, LLC
3. Eide Bailly
4. Price Paige & Company
The review committee consisted of three (3) representatives as noted below:
1. Fresno County Probation Department (1)
2. Fresno County Auditor-Controller's Office (1)
3. Fresno County Department Public Works and Planning (1)
The evaluation was facilitated by a member of the County Administrative Office. On April 29, 2024, the review committee members reviewed and ranked the proposals and rendered recommendations for both Scope of Work A and Scope of Work B.
The Review Committee determined that Brown Armstrong demonstrated the mandatory and technical requirements and relevant experience needed for both Scope A and Scope B services; however, firm’s proposal for Scope A provided was most suited to the County’s needs. The firm’s pricing for services under Scope A was the lowest among all bidders by a significant margin. Based on the overall review of the proposal for Scope of Work A, the Review Committee recommends engaging Brown Armstrong for the requested services in Scope of Work A. Although Brown Armstrong is the County’s current auditor this was not a factor considered in the review. It should be noted that in order to comply with Government Code section 12410.6, subdivision (b), which states that a local agency shall not employ a public accounting firm to provide audit services to a local agency if the lead audit partner or coordinating audit partner having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local agency for six consecutive fiscal years, Brown Armstrong will be assigning a different engagement partner beginning with audit for FY 2024-25.
The Review Committee determined that Clifton Larson Allen, LLP, demonstrated the mandatory and technical requirements and relevant experience needed for both Scope A and Scope B services. CLA provided a thorough and comprehensive proposal; however, their pricing for Scope A was significantly higher than that Brown Armstrong. Although the firm’s pricing for Scope B is the second highest, the CLA’s overall proposal demonstrated a firm understanding of the needs and desired outcomes of the County. Based on the overall review for the proposal for Scope of Work B, the Review Committee recommends engaging Clifton Larson Allen, LLP, for the requested services in Scope of Work B. As a result of negotiation on the final version of the proposed agreement with Clifton Larson Allen includes two differences from the usual contractual language that the County uses. First, section 8.3 provides that either party, instead of just the County, may terminate the agreement without cause upon 30 days’ advance written notice. Second, section 11.1, limits the contractor’s indemnity of the County to losses that are directly caused by the Contractor’s negligence or willful misconduct. The County’s agreements usually provide indemnity more broadly for any losses that “arise from or relate to the performance or failure to perform by the Contractor.” The Administrative Office believes that these differences do not present unreasonable risks to the County.
These recommendations were presented to and approved by the Fresno County Audit Committee on May 23, 2024.
Both recommended agreements provide that the County Administrative Officer is authorized to sign written approvals to extend the audit agreements for up to two consecutive additional one-year periods.
OTHER REVIEWING AGENCIES:
Fresno County Audit Committee
ATTACHMENTS INCLUDED AND/OR ON FILE:
On file with Clerk - Agreement with Brown Armstrong for Scope of Work A
On file with Clerk - Agreement with CliftonLarsonAllen for Scope of Work B
CAO ANALYST:
Paige Benavides