HomeMy WebLinkAbout12 - Award of Contract to Moss Adams LLP for Internal Audit ServicesQ �EwPpRT
CITY OF
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z NEWPORT BEACH
<,FORN'P City Council Staff Report
April 13, 2021
Agenda Item No. 12
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Scott Catlett, Finance Director/City Treasurer - 949-644-3123,
scatlett@newportbeachca.gov
PREPARED BY: Steve Montano, Deputy Finance Director,
smontano@newportbeachca.gov
PHONE: 949-644-3240
TITLE: Award of Contract to Moss Adams LLP for Internal Audit Services
ABSTRACT:
The City of Newport Beach (City) retained Moss Adams LLP (Moss Adams) in December
2019 to serve as its internal auditor to develop and execute an internal audit program.
The purpose of the internal audit program is to assist the City in achieving its objectives
of enhancing operational performance and improving the effectiveness of risk
management, internal controls, and governance processes. By September of 2020, Moss
Adams completed an enterprise risk assessment and enterprise internal controls review
and leveraged the results from these two bodies of work to prepare and recommend a
first-year internal audit program. Priority areas for improvement, and the focus for the
first-year internal audit program, include -
1 .
nclude:
1. Procurement & Contracting Operational Review and Internal Controls Testing
2. Information Technology (IT) Operational Review and Internal Controls Testing
3. Cash Handling Internal Controls Testing
4. Fiscal Policy Inventory and Implementation
The professional fees and expenses are estimated at $120,000 to undertake detailed
study of items two through four listed above and are in addition to the costs previously
incurred for the development of the Enterprise Risk Assessment and Internal Controls
Review. A contract for the Procurement & Contracting Operational Review and Internal
Controls Testing portion has been separately awarded as more fully described later in
this report.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Authorize the Mayor and City Clerk to sign a one-year term contract for $120,000 with
Moss Adams LLP to perform internal control audit work.
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Award of Contract to Moss Adams LLP for Internal Audit Services
April 13, 2021
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DISCUSSION:
The enterprise risk assessment and enterprise internal controls review prepared by Moss
Adams were reviewed in detail by City management and the Finance Committee. An
overview of each document is provided below.
Enterprise Risk Assessment
Moss Adams conducted an enterprise risk assessment to provide the City's leadership
with a means to identify and assess key risks to the City's ability to achieve its defined
objectives and operate effectively. As part of the assessment, Moss Adams conducted
planning activities, completed fieldwork and data collection, analyzed the results of its
fieldwork, and prepared the results of its analysis in a report.
The process involved the assessment of risks related to 18 categories such as strategy,
governance, staffing, finance and systems, and operations. Moss Adams assigned an
overall risk level for each category. Risk levels reflect an evaluation of the likelihood of a
negative event, impact of a negative event, risk trajectory, and risk preparedness. In
addition, mitigating actions were identified to reduce risks, and these actions translate
directly into recommended internal audit activities.
Internal Controls Review
Moss Adams conducted an enterprise internal controls review to determine the general
adequacy of internal controls and identify areas warranting more in-depth review in the
future. As part of the assessment, Moss Adams conducted planning activities, completed
fieldwork and data collection, analyzed the results of its fieldwork, and prepared the
results of its analysis in a report.
Moss Adams reviewed the City's fiscal internal controls for design and performed limited
testing in key areas to determine if the controls were designed effectively. Specific areas
of focus included:
• Purchasing and Contract Management
• Cash Receipts, Billing and Collections, and Accounts Receivable
• Accounts Payable and Disbursements
• Fixed Assets Management
• Inventory Management
• Financial Reporting
• Budgeting
• Payroll
• Information Technology
• Overall Control Environment
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Award of Contract to Moss Adams LLP for Internal Audit Services
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To gain an understanding of the processes and controls in place in various departments,
Moss Adams performed interviews with key personnel and performed procedures that
included:
• Identifying control objectives
• Reviewing policies and procedures
• Performing control walk-throughs and/or testing limited samples
• Assessing whether controls would prevent/detect errors or asset
misappropriation
• Comparing the current environment to best practices
• Providing recommendations regarding opportunities for improvement
In addition, for each improvement opportunity, Moss Adams assessed risk levels of the
likelihood and impact of occurrence of a negative event.
First Year Internal Audit Program
Moss Adams translated the results of the enterprise risk assessment and internal controls
review into an internal audit program. The goals of internal audit programs are to reduce
risks, strengthen controls and compliance, and enhance performance. Working in
collaboration with City management, Moss Adams prepared a recommended first year
internal audit program. The program focuses on addressing priorities from the risk
assessment and internal controls review and includes the following projects:
• Procurement & Contracting Operational Review and Internal Controls Testing
• Information Technology (IT) Operational Review and Internal Controls Testing
• Cash Handling Internal Controls Testing
• Fiscal Policy Inventory and Implementation
The Internal Audit Program will operate on a continuous basis, much like the annual
financial audit process, and will be coordinated and managed by the City Manager's
Office. The Finance Department will participate in a supporting role to help when
necessary.
Selection Process
After a thorough request for qualifications (RFP) process, the Finance Department
selected the audit firm Moss Adams LLP to start the development of the City's internal
audit program. Moss Adams completed the contractual engagement using less than the
anticipated number of hours, billing the City $101,575 versus the original project budget
of $115,500. Given that a new RFP process to award the first year's internal audit projects
would likely yield the same proposers, staff is recommending that Moss Adams be
retained to perform the majority of the first year's reviews. The following projects would
be awarded to Moss Adams:
• Information Technology (IT) Operational Review and Internal Controls Testing
• Cash Handling Internal Controls Testing
• Fiscal Policy Inventory and Implementation
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Award of Contract to Moss Adams LLP for Internal Audit Services
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The review of Procurement and Contracting has been separately awarded
administratively by staff to another firm, Macias, Gini, and O'Connell LLP (MGO), and will
proceed on a parallel track. That project was carved out because of the broader nature
of procurement and contracting, including the City's warehouse operation. MGO was
nearly identically scored to Moss Adams in the City's RFP process, and has the capacity
to complete this complex review on a parallel track to the other three projects assigned
to Moss Adams, thus ensuring that all four audits are completed within the first year of
the program. The MGO contract is for a not -to -exceed cost of $24,955.
FISCAL IMPACT:
The costs under the proposed Moss Adams contract are identified in the table below.
The contract amount proposed for award would typically be approved under the signature
authority of the City Manager. However, because the proposed contract and the previous
contract with Moss Adams would be awarded based on a single procurement process,
the City is treating these two contracts as a single and continuing engagement. As the
first contract has exhausted the City Manager's signature authority of $120,000, this
contract is being presented to the City Council for approval.
The current adopted budget includes sufficient funding for this contract. It will be
expensed to the Financial Administration — Professional Services account in the Finance
Department, 01030005-811008.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENT -
Attachment A — Professional Services Agreement
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ATTACHMENT A
Professional Services Agreement with Moss Adams LLP for Internal Control Audit
Services
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PROFESSIONAL SERVICES AGREEMENT
WITH MOSS ADAMS LLP FOR
INTERNAL CONTROL ASSESSMENT, PERFORMANCE AUDITS AND
MANAGEMENT CONSULTING SERVICES
THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and
entered into as of this 13th day of April, 2021 ("Effective Date"), by and between the CITY
OF NEWPORT BEACH, a California municipal corporation and charter city ("City"), and
MOSS ADAMS LLP, a Washington limited liability partnership ("Consultant"), whose
address is 10960 Wilshire Blvd., Suite 1100, Los Angeles, California 90024, and is made
with reference to the following:
RECITALS
A. City is a municipal corporation duly organized and validly existing under the laws
of the State of California with the power to carry on its business as it is now being
conducted under the statutes of the State of California and the Charter of City.
B. City desires to engage Consultant to provide Internal Control Assessment,
Performance Audits and Management Consulting Services ("Project").
C. Consultant possesses the skill, experience, ability, background, certification and
knowledge to provide the professional services described in this Agreement.
D. City has solicited and received a proposal from Consultant, has reviewed the
previous experience and evaluated the expertise of Consultant, and desires to
retain Consultant to render professional services under the terms and conditions
set forth in this Agreement. ---
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. TERM
The term of this Agreement shall commence on the Effective Date, and shall
terminate on March 31, 2022, unless terminated earlier as set forth herein.
2. SERVICES TO BE PERFORMED
Consultant shall diligently perform all the services described in the Scope of
Services attached hereto as Exhibit A and incorporated herein by reference ("Services"
or "Work"). City may elect to delete certain Services within the Scope of Services at its
sole discretion.
3. TIME OF PERFORMANCE
3.1 Time is of the essence in the performance of Services under this Agreement
and Consultant shall perform the Services in accordance with the schedule included in
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Exhibit A. In the absence of a specific schedule, the Services shall be performed to
completion in a diligent and timely manner. The failure by Consultant to strictly adhere to
the schedule set forth in Exhibit A, if any, or perform the Services in a diligent and timely
manner may result in termination of this Agreement by City.
3.2 Notwithstanding the foregoing, Consultant shall not be responsible for
delays due to causes beyond Consultant's reasonable control. However, in the case of
any such delay in the Services to be provided for the Project, each party hereby agrees
to provide notice within two (2) calendar days of the occurrence causing the delay to the
other party so that all delays can be addressed.
3.3 Consultant shall submit all requests for extensions of time for performance
in writing to the Project Administrator as defined herein not later than ten (10) calendar
days after the start of the condition that purportedly causes a delay. The Project
Administrator shall review all such requests and may grant reasonable time extensions
for unforeseeable delays that are beyond Consultant's control.
3.4 For all time periods not specifically set forth herein, Consultant shall
respond in the most expedient and appropriate manner under the circumstances, by
hand -delivery or mail.
4. COMPENSATION TO CONSULTANT
4.1 City shall pay Consultant for the Services on a time and expense not -to -
exceed basis in accordance with the provisions of this Section and the Schedule of Billing
Rates attached hereto as Exhibit B and incorporated herein by reference. Consultant's
compensation for all Work performed in accordance with this Agreement, including all
reimbursable items and subconsultant fees, shall not exceed One Hundred Twenty
Thousand Dollars and 00/100 ($120,000.00), without prior written authorization from
City. No billing rate changes shall be made during the term of this Agreement without the
prior written approval of City.
4.2 Consultant shall submit monthly invoices to City describing the Work
performed the preceding month. Consultant's bills shall include the name of the person
who performed the Work, a brief description of the Services performed and/or the specific
task in the Scope of Services to which it relates, the date the Services were performed,
the number of hours spent on all Work billed on an hourly basis, and a description of any
reimbursable expenditures. City shall pay Consultant no later than thirty (30) calendar
days after approval of the monthly invoice by City staff.
4.3 City shall reimburse Consultant only for those costs or expenses specifically
identified in Exhibit B to this Agreement or specifically approved in writing in advance by
City.
4.4 Consultant shall not receive any compensation for Extra Work performed
without the prior written authorization of City. As used herein, "Extra Work" means any
Work that is determined by City to be necessary for the proper completion of the Project,
but which is not included within the Scope of Services and which the parties did not
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reasonably anticipate would be necessary at the execution of this Agreement.
Compensation for any authorized Extra Work shall be paid in accordance with the
Schedule of Billing Rates as set forth in Exhibit B.
5. PROJECT MANAGER
5.1 Consultant shall designate a Project Manager, who shall coordinate all
phases of the Project. This Project Manager shall be available to City at all reasonable
times during the Agreement term. Consultant has designated Mark Steranka to be its
Project Manager. Consultant shall not remove or reassign the Project Manager or any
personnel listed in Exhibit A or assign any new or replacement personnel to the Project
without the prior written consent of City. City's approval shall not be unreasonably
withheld with respect to the removal or assignment of non -key personnel.
5.2 Consultant, at the sole discretion of City, shall remove from the Project any
of its personnel assigned to the performance of Services upon written request of City.
Consultant warrants that it will continuously furnish the necessary personnel to complete
the Project on a timely basis as contemplated by this Agreement.
5.3 If Consultant is performing inspection services for City, the Project Manager
and any other assigned staff shall be equipped with a cellular phone to communicate with
City staff. The Project Manager's cellular phone number shall be provided to City.
6. ADMINISTRATION
This Agreement will be administered by the Finance Department. City's Finance
Director or designee shall be the Project Administrator and shall have the authority to act
for City under this Agreement. The Project Administrator shall represent City in all matters
pertaining to the Services to be rendered pursuant to this Agreement.
7. CITY'S RESPONSIBILITIES
To assist Consultant in the execution of its responsibilities under this Agreement,
City agrees to provide access to and upon request of Consultant, one copy of all existing
relevant information on file at City. City will provide all such materials in a timely manner
so as not to cause delays in Consultant's Work schedule.
8. STANDARD OF CARE
8.1 All of the Services shall be performed by Consultant or under Consultant's
supervision. Consultant represents that it possesses the professional and technical
personnel required to perform the Services required by this Agreement, and that it will
perform all Services in a manner commensurate with community professional standards
and with the ordinary degree of skill and care that would be used by other reasonably
competent practitioners of the same discipline under similar circumstances. All Services
shall be performed by qualified and experienced personnel who are not employed by City.
By delivery of completed Work, Consultant certifies that the Work conforms to the
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requirements of this Agreement, all applicable federal, state and local laws, and legally
recognized professional standards.
8.2 Consultant represents and warrants to City that it has, shall obtain, and shall
keep in full force and effect during the term hereof, at its sole cost and expense, all
licenses, permits, qualifications, insurance and approvals of whatsoever nature that is
legally required of Consultant to practice its profession. Consultant shall maintain a City
of Newport Beach business license during the term of this Agreement.
8.3 Consultant shall not be responsible for delay, nor shall Consultant be
responsible for damages or be in default or deemed to be in default by reason of strikes,
lockouts, accidents, acts of God, or the failure of City to furnish timely information or to
approve or disapprove Consultant's Work promptly, or delay or faulty performance by
City, contractors, or governmental agencies.
9. HOLD HARMLESS
9.1 To the fullest extent permitted by law, Consultant shall indemnify, defend
and hold harmless City, its City Council, boards and commissions, officers, agents,
volunteers, employees and any person or entity owning or otherwise in legal control of
the property upon which Consultant performs the Project and/or Services contemplated
by this Agreement (collectively, the "Indemnified Parties") from and against any and all
claims (including, without limitation, claims for bodily injury, death or damage to property),
demands, obligations, damages, actions, causes of action, suits, losses, judgments,
fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys'
fees, disbursements and court costs) of every kind and nature whatsoever (individually,
a Claim, collectively, "Claims"), which may arise from or in any manner relate (directly or
indirectly) to any breach of the terms and conditions of this Agreement, any Work
performed or Services provided under this Agreement including, without limitation,
defects in workmanship or materials or Consultant's presence or activities conducted on
the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions
of Consultant, its principals, officers, agents, employees, vendors, suppliers, consultants,
subcontractors, anyone employed directly or indirectly by any of them or for whose acts
they may be liable, or any or all of them).
9.2 Notwithstanding the foregoing, nothing herein shall be construed to require
Consultant to indemnify the Indemnified Parties from any Claim arising from the sole
negligence or willful misconduct of the Indemnified Parties. Nothing in this indemnity shall
be construed as authorizing any award of attorneys' fees in any action on or to enforce
the terms of this Agreement. This indemnity shall apply to all claims and liability
regardless of whether any insurance policies are applicable. The policy limits do not act
as a limitation upon the amount of indemnification to be provided by Consultant.
10. INDEPENDENT CONTRACTOR
It is understood that City retains Consultant on an independent contractor basis
and Consultant is not an agent or employee of City. The manner and means of
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conducting the Work are under the control of Consultant, except to the extent they are
limited by statute, rule or regulation and the expressed terms of this Agreement. No civil
service status or other right of employment shall accrue to Consultant or its employees.
Nothing in this Agreement shall be deemed to constitute approval for Consultant or any
of Consultant's employees or agents, to be the agents or employees of City. Consultant
shall have the responsibility for and control over the means of performing the Work,
provided that Consultant is in compliance with the terms of this Agreement. Anything in
this Agreement that may appear to give City the right to direct Consultant as to the details
of the performance of the Work or to exercise a measure of control over Consultant shall
mean only that Consultant shall follow the desires of City with respect to the results of the
Services.
11. COOPERATION
Consultant agrees to work closely and cooperate fully with City's designated
Project Administrator and any other agencies that may have jurisdiction or interest in the
Work to be performed. City agrees to cooperate with the Consultant on the Project.
12. CITY POLICY
Consultant shall discuss and review all matters relating to policy and Project
direction with City's Project Administrator in advance of all critical decision points in order
to ensure the Project proceeds in a manner consistent with City goals and policies.
13. PROGRESS
Consultant is responsible for keeping the Project Administrator informed on a
regular basis regarding the status and progress of the Project, activities performed and
planned, and any meetings that have been scheduled or are desired.
14. INSURANCE
Without limiting Consultant's indemnification of City, and prior to commencement
of Work, Consultant shall obtain, provide and maintain at its own expense during the term
of this Agreement or for other periods as specified in this Agreement, policies of insurance
of the type, amounts, terms and conditions described in the Insurance Requirements
attached hereto as Exhibit C, and incorporated herein by reference.
15. PROHIBITION AGAINST ASSIGNMENTS AND TRANSFERS
Except as specifically authorized under this Agreement, the Services to be
provided under this Agreement shall not be assigned, transferred contracted or
subcontracted out without the prior written approval of City. Any of the following shall be
construed as an assignment: The sale, assignment, transfer or other disposition of any
of the issued and outstanding capital stock of Consultant, or of the interest of any general
partner or joint venturer or syndicate member or cotenant if Consultant is a partnership or
joint -venture or syndicate or co -tenancy, which shall result in changing the control of
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Consultant. Control means fifty percent (50%) or more of the voting power or twenty-five
percent (25%) or more of the assets of the corporation, partnership or joint -venture.
16. SUBCONTRACTING
The subcontractors authorized by City, if any, to perform Work on this Project are
identified in Exhibit A. Consultant shall be fully responsible to City for all acts and
omissions of any subcontractor. Nothing in this Agreement shall create any contractual
relationship between City and any subcontractor nor shall it create any obligation on the
part of City to pay or to see to the payment of any monies due to any such subcontractor
other than as otherwise required by law. City is an intended beneficiary of any Work
performed by the subcontractor for purposes of establishing a duty of care between the
subcontractor and City. Except as specifically authorized herein, the Services to be
provided under this Agreement shall not be otherwise assigned, transferred, contracted
or subcontracted out without the prior written approval of City.
17. OWNERSHIP OF DOCUMENTS
17.1 Each and every final and other report and other completed deliverables,
prepared or caused to be prepared by Consultant, its officers, employees, agents and
subcontractors, in the course of implementing this Agreement and delivered to City,
excluding any Consultant Material (defined below) contained or embodied therein
(hereinafter "Deliverables"), shall become the exclusive property of City, and City shall
have the sole right to use such materials in its discretion without further compensation to
Consultant or any other party. Consultant shall, at Consultant's expense, provide such
Deliverables, including all logins and password information to City upon prior written
request. Consultant may retain a copy of Deliverables for archival purposes. Consultant
shall own: (i) its working papers and any engagement documentation; and (ii) any general
skills, know-how, expertise, ideas, concepts, methods, techniques, processes, software,
materials, or other intellectual property which may have been discovered, created,
received, or developed by Consultant either prior to or as a result of providing services
under the Agreement (collectively, "Consultant Materials"). City shall have a non-
exclusive, non -transferable license to use Consultant Materials for its own internal use
and only for the purposes for which they are delivered to the extent they form part of a
Deliverable. Notwithstanding anything to the contrary in this Agreement, Consultant and
its personnel are free to use and employ their general skills, know-how, and expertise,
and to use, disclose, and employ any generalized ideas, concepts, know-how, methods,
techniques or skills gained or learned during the course of this Agreement so long as they
acquire and apply such information without any unauthorized use or disclosure of
confidential or proprietary information of City.
17.2 Deliverables, including drawings and specifications, prepared by Consultant
pursuant to this Agreement are not intended or represented to be suitable for reuse by
City or others on any other project. Any use of completed Deliverables for other projects
and any use of incomplete Deliverables without specific written authorization from
Consultant will be at City's sole risk and without liability to Consultant. Further, any and
all liability arising out of changes made to Consultant's deliverables under this Agreement
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by City or persons other than Consultant is waived against Consultant, and City assumes
full responsibility for such changes unless City has given Consultant prior notice and has
received from Consultant written consent for such changes.
17.3 All written documents shall be transmitted to City in formats compatible with
Microsoft Office and/or viewable with Adobe Acrobat.
18. CONFIDENTIALITY
All Documents, including drafts, preliminary drawings or plans, notes and
communications that result from the Services in this Agreement, shall be kept confidential
unless City expressly authorizes in writing the release of information.
19. INTELLECTUAL PROPERTY INDEMNITY
Consultant shall defend and indemnify City, its agents, officers, representatives
and employees against any and all liability, including costs, for claims that Deliverables
infringe or allegedly infringe any third party United States' letters patent, trademark, or
copyright.
20. RECORDS
Consultant shall keep records and invoices in connection with the Services to be
performed under this Agreement. Consultant shall maintain complete and accurate
records with respect to the costs incurred under this Agreement and any Services,
expenditures and disbursements charged to City, for a minimum period of three (3) years,
or for any longer period required by law, from the date of final payment to Consultant
under this Agreement. All such records and invoices shall be clearly identifiable.
Consultant shall allow a representative of City to examine, audit and make transcripts or
copies of such records and invoices during regular business hours. Upon request of City,
Consultant shall provide a copy of any Deliverables provided under this Agreement for a
period of three (3) years from the date of final payment to Consultant under this
Agreement.
21. WITHHOLDINGS
City may withhold payment to Consultant of any disputed sums until satisfaction of
the dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement. Consultant shall not
discontinue Work as a result of such withholding. Consultant shall have an immediate
right to appeal to the City Manager or designee with respect to such disputed sums.
Consultant shall be entitled to receive interest on any withheld sums at the rate of return
that City earned on its investments during the time period, from the date of withholding of
any amounts found to have been improperly withheld.
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22. ERRORS AND OMISSIONS & LIMITATION OF LIABILITY
22.1 In the event of errors or omissions that are due to the negligence or
professional inexperience of Consultant which result in expense to City greater than what
would have resulted if there were not errors or omissions in the Work accomplished by
Consultant, Consultant shall re -perform services. Nothing in this Section is intended to
limit City's rights under the law or any other sections of this Agreement.
22.2 EACH PARTY'S TOTAL LIABILITY FOR ANY AND ALL DAMAGES
WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT
FROM ANY CAUSE, INCLUDING BUT NOT LIMITED TO CONTRACT LIABILITY OR
NEGLIGENCE, ERRORS, OMISSIONS, STRICT LIABILITY, BREACH OF CONTRACT
OR BREACH OF WARRANTY SHALL NOT, IN THE AGGREGATE, EXCEED TWO (2)
TIMES THE FEES PAID TO CONSULTANT UNDER THIS AGREEMENT.
22.3 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR
ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES IN
CONNECTION WITH OR OTHERWISE ARISING OUT OF THIS AGREEMENT, EVEN
IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR EXEMPLARY OR PUNITIVE DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT.
23. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
City reserves the right to employ other Consultants in connection with the Project.
24. CONFLICTS OF INTEREST
24.1 Consultant or its employees may be subject to the provisions of the
California Political Reform Act of 1974 (the "Act") and/or Government Code §§ 1090 et
seq., which (1) require such persons to disclose any financial interest that may
foreseeably be materially affected by the Work performed under this Agreement, and (2)
prohibit such persons from making, or participating in making, decisions that will
foreseeably financially affect such interest.
24.2 If subject to the Act and/or Government Code §§ 1090 et seq., Consultant
shall conform to all requirements therein. Failure to do so constitutes a material breach
and is grounds for immediate termination of this Agreement by City. Consultant shall
indemnify and hold harmless City for any and all claims for damages resulting from
Consultant's violation of this Section.
25. NOTICES
25.1 All notices, demands, requests or approvals, including any change in
mailing address, to be given under the terms of this Agreement shall be given in writing,
and conclusively shall be deemed served when delivered personally, or on the third
business day after the deposit thereof in the United States mail, postage prepaid, first-
class mail, addressed as hereinafter provided.
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25.2 All notices, demands, requests or approvals from Consultant to City shall
be addressed to City at-
Attn: Finance Director
Finance Department
City of Newport Beach
100 Civic Center Drive
PO Box 1768
Newport Beach, CA 92658
25.3 All notices, demands, requests or approvals from City to Consultant shall
be addressed to Consultant at:
Attn: Mark Steranka
Moss Adams LLP
10960 Wilshire Blvd., Suite 1100
Los Angeles, CA 90024
26. CLAIMS
Unless a shorter time is specified elsewhere in this Agreement, before making its
final request for payment under this Agreement, Consultant shall submit to City, in writing,
all claims for compensation under or arising out of this Agreement. Consultant's
acceptance of the full and final payment shall constitute a waiver of all claims for
compensation under or arising out of this Agreement except those previously made in
writing and identified by Consultant in writing as unsettled at the time of its final request
for payment. Consultant and City expressly agree that in addition to any claims filing
requirements set forth in the Agreement, Consultant shall be required to file any claim
Consultant may have against City in strict conformance with the Government Claims Act
(Government Code sections 900 et seq.).
27. TERMINATION
27.1 In the event that either party fails or refuses to perform any of the provisions
of this Agreement at the time and in the manner required, that party shall be deemed in
default in the performance of this Agreement. If such default is not cured within a period
of two (2) calendar days, or if more than two (2) calendar days are reasonably required
to cure the default and the defaulting party fails to give adequate assurance of due
performance within two (2) calendar days after receipt of written notice of default,
specifying the nature of such default and the steps necessary to cure such default, and
thereafter diligently take steps to cure the default, the non -defaulting party may terminate
the Agreement forthwith by giving to the defaulting party written notice thereof.
27.2 Notwithstanding the above provisions, City shall have the right, at its sole
and absolute discretion and without cause, of terminating this Agreement at any time by
giving no less than seven (7) calendar days' prior written notice to Consultant. In the
event of termination under this Section, City shall pay Consultant for Services
satisfactorily performed and costs incurred up to the effective date of termination for which
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Consultant has not been previously paid. On the effective date of termination, Consultant
shall deliver to City all reports, Documents and other information developed or
accumulated in the performance of this Agreement, whether in draft or final form.
28. STANDARD PROVISIONS
28.1 Recitals. City and Consultant acknowledge that the above Recitals are true
and correct and are hereby incorporated by reference into this Agreement.
28.2 Compliance with all Laws. Consultant shall, at its own cost and expense,
comply with all statutes, ordinances, regulations and requirements of all governmental
entities, including federal, state, county or municipal, whether now in force or hereinafter
enacted. In addition, all Work prepared by Consultant shall conform to applicable City,
county, state and federal laws, rules, regulations and permit requirements and be subject
to approval of the Project Administrator and City.
28.3 Waiver. A waiver by either party of any breach, of any term, covenant or
condition contained herein shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant or condition contained herein, whether of the
same or a different character.
28.4 Integrated Contract. This Agreement represents the full and complete
understanding of every kind or nature whatsoever between the parties hereto, and all
preliminary negotiations and agreements of whatsoever kind or nature are merged herein.
No verbal agreement or implied covenant shall be held to vary the provisions herein.
28.5 Conflicts or Inconsistencies. In the event there are any conflicts or
inconsistencies between this Agreement and the Scope of Services or any other
attachments attached hereto, the terms of this Agreement shall govern.
28.6 Interpretation. The terms of this Agreement shall be construed in
accordance with the meaning of the language used and shall not be construed for or
against either party by reason of the authorship of the Agreement or any other rule of
construction which might otherwise apply.
28.7 Amendments. This Agreement may be modified or amended only by a
written document executed by both Consultant and City and approved as to form by the
City Attorney.
28.8 Severability. If any term or portion of this Agreement is held to be invalid,
illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall continue in full force and effect.
28.9 Controlling Law and Venue. The laws of the State of California shall govern
this Agreement and all matters relating to it and any action brought relating to this
Agreement shall be adjudicated in a court of competent jurisdiction in the County of
Orange, State of California.
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28.10 Equal Opportunity Employment. Consultant represents that it is an equal
opportunity employer and it shall not discriminate against any subcontractor, employee
or applicant for employment because race, religious creed, color, national origin,
ancestry, physical handicap, medical condition, marital status, sex, sexual orientation,
age or any other impermissible basis under law.
28.11 No Attorneys' Fees. In the event of any dispute or legal action arising under
this Agreement, the prevailing party shall not be entitled to attorneys' fees.
28.12 No Third Party Beneficiary. City and Consultant are the only parties to this
contract and are the only parties entitled to enforce its terms. Nothing in this contract
gives, is intended to give, or shall be construed to give or provide any benefit or right,
whether directly, indirectly or otherwise, to third persons.
28.12 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which together shall
constitute one (1) and the same instrument.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the dates written below.
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Date: ? 41 /2vZ.t
By:! .6-& o -' {Ur
Aaron C. Harp
City Attorney
ATTEST:
Date:
Leilani I. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
Date.-
BV:
ate:
By:
Brad Avery
Mayor
CONSULTANT: MOSS ADAMS LLP, a
Washington limited liability partnership
Date:
By:
Mark Steranka
Partner
[END OF SIGNATURES]
Attachments: Exhibit A — Scope of Services
Exhibit B — Schedule of Billing Rates
Exhibit C — Insurance Requirements
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EXHIBIT A
SCOPE OF SERVICES
As directed by the City, Consultant shall provide the City with professional services
related to Internal Control Assessment, Performance Audits and Management Consulting
services. In particular, Consultant shall perform the following services:
Internal Control Auditing and Consulting Processes
1. Participate in the assessment of the internal control environment and related
internal control risks as requested.
2. Provide an outline or audit plan for the project. Conduct interviews of key
personnel and supervisors in the Finance and other departments to determine
if existing policies and procedures are being followed and identify internal
control deficiencies.
3. Review and evaluate the policy and procedures and cooperatively develop
agreed upon procedures to test internal control effectiveness and weaknesses.
Review and evaluate controls performed directly by Senior Staff or
Management or detect Senior Staff or Management override of controls.
4. Identify inconsistences in internal controls and recommend changes to
enhance consistency citywide.
5. Perform an analysis of selected electronic data on a limited basis for anomalies
or unusual transactions.
6. Test accounting documentation for any identified areas of concern or potential
areas of vulnerability.
7. Test organization compliance with Council and or administrative policies and
or operational procedures.
8. Examine the practices of a department or program to determine if it is achieving
economy, efficiency and effectiveness in the employment of available
resources.
9. Create a report identifying internal control weaknesses, potential risks and
recommendations to improve internal controls, management practices, and
efficiency.
10. The Consultant will also provide recommendations on new, or changes to
existing, financial policies and procedures, risk management methods, and
ideas to support organizational efficiency and effectiveness.
Moss Adams LLP Page A-1 12-18
Audit Plan
Consultant shall review the following business processes:
1. Information Technology Operational Review and Internal Controls Testing
• Consultant shall perform an operational review and testing of internal
controls established as they relate to the City's Information Technology
operations. Where applicable and appropriate, the processes identified
above shall be utilized.
2. Cash Handling Internal Controls Testing
• Consultant shall perform a testing of internal controls established as they
relate to the City's cash handling operations. Where applicable and
appropriate, the processes identified above shall be utilized.
3. Fiscal Policy Inventory and Implementation
• Consultant shall review current fiscal policies and administrative policies
related to the Finance Department and/or fiscal operations.
• Consultant shall make recommendations to the City regarding amending
current policies and where applicable, assist the City in developing and
implementing new policies.
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EXHIBIT B
SCHEDULE OF BILLING RATES
Consultant shall provide services as indicated in Exhibit A in accordance with the
following Schedule of Billing Rates:
PROJECT
COST
NOT TO EXCEED
Fiscal Policy Inventory and Implementation Plan
$30,000
IT Operational Review and Internal Controls Testing
$40,000
Cash Handling Internal Controls Testing
$40,000
Misc. Management and Administrative Functions (i.e.
Status Reports, Finance Committee Meetings, Annual
Audit Plan Preparation, etc.)
$10,000
TOTAL CONTRACT COST (NOT TO EXCEED)
$120,000
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EXHIBIT C
INSURANCE REQUIREMENTS — PROFESSIONAL SERVICES
1. Provision of Insurance. Without limiting Consultant's indemnification of City, and
prior to commencement of Work, Consultant shall obtain, provide and maintain at
its own expense during the term of this Agreement, policies of insurance of the
type and amounts described below and in a form satisfactory to City. Consultant
agrees to provide insurance in accordance with requirements set forth here. If
Consultant uses existing coverage to comply and that coverage does not meet
these requirements, Consultant agrees to amend, supplement or endorse the
existing coverage.
2. Acceptable Insurers. All insurance policies shall be issued by an insurance
company currently authorized by the Insurance Commissioner to transact
business of insurance in the State of California, with an assigned policyholders'
Rating of A- (or higher) and Financial Size Category Class VII (or larger) in
accordance with the latest edition of Best's Key Rating Guide, unless otherwise
approved by the City's Risk Manager.
3. Coverage Requirements.
A. Workers' Compensation Insurance. Consultant shall maintain Workers'
Compensation Insurance, statutory limits, and Employer's Liability
Insurance with limits of at least one million dollars ($1,000,000) each
accident for bodily injury by accident and each employee for bodily injury by
disease in accordance with the laws of the State of California, Section 3700
of the Labor Code.
Consultant shall submit to City, along with the certificate of insurance, a
Waiver of Subrogation endorsement in favor of City, its City Council, boards
and commissions, officers, agents, volunteers, employees and any person
or entity owning or otherwise in legal control of the property upon which
Consultant performs the Project and/or Services contemplated by this
Agreement.
B. General Liability Insurance. Consultant shall maintain commercial general
liability insurance, and if necessary umbrella liability insurance, with
coverage at least as broad as provided by Insurance Services Office form
CG 00 01, in an amount not less than one million dollars ($1,000,000) per
occurrence, two million dollars ($2,000,000) general aggregate. The policy
shall cover liability arising from premises, operations, personal and
advertising injury, and liability assumed under an insured contract (including
the tort liability of another assumed in a business contract).
C. Automobile Liability Insurance. Consultant shall maintain automobile
insurance at least as broad as Insurance Services Office form CA 00 01
covering bodily injury and property damage for all activities of Consultant
arising out of or in connection with Work to be performed under this
Moss Adams LLP Page C-1 12-21
Agreement, including coverage for any owned, hired, non -owned or rented
vehicles, in an amount not less than one million dollars ($1,000,000)
combined single limit each accident.
D. Professional Liability (Errors & Omissions) Insurance. Consultant shall
maintain professional liability insurance that covers the Services to be
performed in connection with this Agreement, in the minimum amount of
one million dollars ($1,000,000) per claim and two million dollars
($2,000,000) in the aggregate. Any policy inception date, continuity date,
or retroactive date must be before the Effective Date of this Agreement and
Consultant agrees to maintain continuous coverage through a period no
less than three years after completion of the Services required by this
Agreement.
4. Other Insurance Requirements. The policies are to contain, or be endorsed to
contain, the following provisions:
A. Waiver of Subrogation. All insurance coverage maintained or procured
pursuant to this Agreement shall be endorsed to waive subrogation against
City, its City Council, boards and commissions, officers, agents, volunteers,
employees and any person or entity owning or otherwise in legal control of
the property upon which Consultant performs the Project and/or Services
contemplated by this Agreement or shall specifically allow Consultant or
others providing insurance evidence in compliance with these requirements
to waive their right of recovery prior to a loss. Consultant hereby waives its
own right of recovery against City, and shall require similar written express
waivers from each of its subconsultants.
B. Additional Insured Status. All liability policies including general liability,
excess liability, pollution liability, and automobile liability, if required, but not
including professional liability, shall provide or be endorsed to provide that
City, its City Council, boards and commissions, officers, agents, volunteers,
employees and any person or entity owning or otherwise in legal control of
the property upon which Consultant performs the Project and/or Services
contemplated by this Agreement shall be included as insureds under such
policies.
C. Primary and Non Contributory. All liability coverage shall apply on a primary
basis and shall not require contribution from any insurance or self-insurance
maintained by City.
D. Notice of Cancellation. All policies shall provide City with thirty (30)
calendar days' notice of cancellation (except for nonpayment for which ten
(10) calendar days' notice is required) or nonrenewal of coverage for each
required coverage.
5. Additional Agreements Between the Parties. The parties hereby agree to the
following:
Moss Adams LLP Page C-2 12-22
A. Evidence of Insurance. Consultant shall provide certificates of insurance to
City as evidence of the insurance coverage required herein, along with a
waiver of subrogation endorsement for workers' compensation and other
endorsements as specified herein for each coverage. Insurance certificates
and endorsement must be approved by City's Risk Manager prior to
commencement of performance. Current certification of insurance shall be
kept on file with City at all times during the term of this Agreement. The
certificates and endorsements for each insurance policy shall be signed by
a person authorized by that insurer to bind coverage on its behalf. At least
fifteen (15) days prior to the expiration of any such policy, evidence of
insurance showing that such insurance coverage has been renewed or
extended shall be filed with the City. If such coverage is cancelled or
reduced, Consultant shall, within ten (10) days after receipt of written notice
of such cancellation or reduction of coverage, file with the City evidence of
insurance showing that the required insurance has been reinstated or has
been provided through another insurance company or companies. City
reserves the right to require complete, certified copies of all required
insurance policies, at any time.
B. City's Right to Revise Requirements. City reserves the right at any time
during the term of the Agreement to change the amounts and types of
insurance required by giving Consultant sixty (60) calendar days' advance
written notice of such change. If such change results in substantial
additional cost to Consultant, City and Consultant may renegotiate
Consultant's compensation.
C. Right to Review Subcontracts. Consultant agrees that upon request, all
agreements with subcontractors or others with whom Consultant enters into
contracts with on behalf of City will be submitted to City for review. Failure
of City to request copies of such agreements will not impose any liability on
City, or its employees. Consultant shall require and verify that all
subcontractors maintain insurance meeting all the requirements stated
herein, and Consultant shall ensure that City is an additional insured on
insurance required from subcontractors. For CGL coverage,
subcontractors shall provide coverage with a format at least as broad as CG
20 38 04 13.
D. Enforcement of Agreement Provisions. Consultant acknowledges and
agrees that any actual or alleged failure on the part of City to inform
Consultant of non-compliance with any requirement imposes no additional
obligations on City nor does it waive any rights hereunder.
E. Requirements not Limiting. Requirements of specific coverage features or
limits contained in this Section are not intended as a limitation on coverage,
limits or other requirements, or a waiver of any coverage normally provided
by any insurance. Specific reference to a given coverage feature is for
purposes of clarification only as it pertains to a given issue and is not
intended by any party or insured to be all inclusive, or to the exclusion of
other coverage, or a waiver of any type. If the Consultant maintains higher
Moss Adams LLP Page C-3 12-23
limits than the minimums shown above, the City requires and shall be
entitled to coverage for higher limits maintained by the Consultant. Any
available insurance proceeds in excess of the specified minimum limits of
insurance and coverage shall be available to the City.
F. Self-insured Retentions. Any self-insured retentions must be declared to
and approved by City. City reserves the right to require that self-insured
retentions be eliminated, lowered, or replaced by a deductible. Self-
insurance will not be considered to comply with these requirements unless
approved by City.
G. City Remedies for Non -Compliance. If Consultant or any subconsultant fails
to provide and maintain insurance as required herein, then City shall have
the right but not the obligation, to purchase such insurance, to terminate this
Agreement, or to suspend Consultant's right to proceed until proper
evidence of insurance is provided. Any amounts paid by City shall, at City's
sole option, be deducted from amounts payable to Consultant or reimbursed
by Consultant upon demand.
H. Timely Notice of Claims. Consultant shall give City prompt and timely notice
of claims made or suits instituted that arise out of or result from Consultant's
performance under this Agreement, and that involve or may involve
coverage under any of the required liability policies. City assumes no
obligation or liability by such notice, but has the right (but not the duty) to
monitor the handling of any such claim or claims if they are likely to involve
City.
Consultant's Insurance. Consultant shall also procure and maintain, at its
own cost and expense, any additional kinds of insurance, which in its own
judgment may be necessary for its proper protection and prosecution of the
Work.
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