HomeMy WebLinkAbout11 - Award of Contract to Davis Farr LLP for Audit ServicesQ �EwPpRT
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<,FORN'P City Council Staff Report
May 11, 2021
Agenda Item No. 11
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Scott Catlett, Finance Director/Treasurer - 949-644-3123,
scatlett@newportbeachca.gov
PREPARED BY: Trevor Power, Accounting Manager, tpower@newportbeachca.gov
PHONE: 949-644-3125
TITLE: Award of Contract to Davis Farr LLP for Audit Services
ABSTRACT -
Per City Council Policy F-15, External Financial and Compliance Reporting, Disclosure,
and Annual Audits, the City of Newport Beach (City) issued a Request for Proposals
(RFP) to audit its financial statements for the five-year period beginning with the fiscal
year ending June 30, 2021.
The City received 12 proposals by the RFP due date of March 19, 2021. A three-person
Audit Selection Committee comprised of the Finance Director, the Deputy Finance
Director and the Accounting Manager reviewed and scored the proposals narrowing the
list down to two firms for virtual interviews. Following the virtual interviews, the Audit
Selection Committee unanimously selected Davis Farr LLP.
The Finance Committee concurred with staff's recommendation to award the contract to
Davis Farr during the Committee's April 15, 2021, meeting.
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 execute a three-year contract, with two optional
one-year extensions with Davis Farr LLP in a not to exceed amount of $270,000 to
perform the City's annual financial statement audit.
DISCUSSION:
Finance Department staff developed a formal RFP containing a detailed scope of services
for professional audit services. The solicitation was posted on the City's electronic bidding
platform, PlanetBids, and distributed directly to known auditing firms. The RFP yielded
12 proposals, which were then evaluated by a panel consisting of Finance Department
staff. Proposals were submitted in two parts, including a written technical proposal and a
separate, sealed, dollar cost bid. Of the 12 proposals received, two were found to be
non-responsive and therefore were immediately removed from consideration for award.
The remaining 10 proposals were evaluated by the panel based on the following criteria:
Award of Contract to Davis Farr LLP for Audit Services
May 11, 2021
Page 2
• Experience in providing consulting services related to auditing, with an emphasis
on government accounting and auditing of entities with at least the size and
complexity of Newport Beach.
• Quality, background, reputation, credibility, and experience of the firm.
• Quality of the staff with emphasis placed on educational background, time spent
in the field, and valid certifications possessed by the project team members.
• Practices and procedures used to carry out the requested services and provide
deliverables according to the City's expectations.
The results of the panel's technical analysis are found in the table below:
Proposer...
Davis Farr LLP
94.00
Lance, Soll & Lunghard, LLP (LSL)
92.00
Eide Bailly
92.00
Macias, Gini & O'Connell, LLP (MGO)
90.67
Rogers, Anderson, Malody & Scott
84.00
Pun Group, LLC
79.33
Teaman, Ramirez & Smith, Inc.
77.33
Badawi & Associates
75.00
Eadie Payne
74.67
Moss, Levy & Hartzheim, LLP
73.33
Although all 10 proposals were compliant with minimum qualifications and demonstrated
the ability to perform the requested audit services to varying degrees, the panel identified
the four highest ranked proposers (Davis Farr LLP, LSL, Eide Bailly and MGO) as the
best suited for this project. All other proposals were removed from further award
consideration.
Sealed costs from the four finalists were opened and distributed to the panel. Costs were
provided on the basis of an annual price for the provision of a Financial Statement Audit,
a Single Audit, as well as a Gann Limit Report. The City's Purchasing staff analyzed these
costs over a five-year term, commensurate with the proposed contract length with the
selected auditor. The table below shows the comparison of costs for the four finalists. The
five-year total includes any annual contract pricing increases requested by each proposer,
if applicable.
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Award of Contract to Davis Farr LLP for Audit Services
May 11, 2021
Page 3
Proposer...
Davis Farr LLP
94.00
$243,365
LSL
92.00
$255,624
Eide Bailly
92.00
$241,039
MGO
90.67
$399,900
After review of the technical scores and pricing, staff narrowed their selection
consideration to two firms, Davis Farr LLP and Eide Bailly, based on both firms' technical
score and competitive costs. Staff conducted virtual interviews with both firm's proposed
audit teams. While either team would make a great choice, staff selected Davis Farr
because they had the highest technical score while providing a very competitive cost
proposal. They currently provide similar audit services to over 20 cities in Southern
California, including Huntington Beach, Mission Viejo, Costa Mesa, Fountain Valley, and
Garden Grove.
Davis Farr's proposed audit team is well-qualified and emphasized a very organized,
methodical approach to the audit, including the expressed intent of having frequent
communication throughout the year instead of only during the audit. They utilize a "hands-
on" approach in which the audit engagement partner is involved in all aspects of the audit
including regular review of working papers to ensure proper documentation rather than
relying heavily on lower level staff and only reviewing working papers near the end of the
audit. With the partner actively involved throughout the process and regular
communication, staff is confident that Davis Farr will be able to expedite the completion
of the audit and review of the City's Comprehensive Annual Financial Report in a capable
and timely manner.
In addition to a well-qualified audit team, Davis Farr has provided other services to the
City, such as Tax Auditing Services, Real Property Audit Services, Annual Infrastructure
Update, and preparation of the State Controller Report. The proposed team also
impressed the Audit Selection Committee with its understanding of the City and its
operations, which can enhance the quality of the audit as the team will be able to identify
and focus on specific risk areas while reducing audit costs. Staff will also not have to
spend as much time orienting the firm on City operations, given Davis Farr's prior work
with the City, as is typically required when switching to a new audit firm.
The Government Finance Officers' Association (GFOA) best practices recommend that
governmental entities should enter into multiyear agreements of at least five years in
duration when obtaining the services of independent auditors. Such agreements allow for
greater continuity and help to minimize the potential for disruption in connection with the
independent audit. Multiyear agreements can also help to reduce audit costs by allowing
auditors to recover certain "startup" costs over several years, rather than over a single
year. Therefore, staff is recommending a contract structure that has a three-year initial
term with two optional one-year extensions.
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Award of Contract to Davis Farr LLP for Audit Services
May 11, 2021
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FISCAL IMPACT:
The costs for the full term of the contract, including the two optional years, are shown in
the table below. The total not -to -exceed cost of $270,000 includes additional items that
may not be needed during the term of the contract such as the cost of expanding the
Single Audit by two additional major programs (one major program is included in the base
Single Audit cost); and, $5,185 for miscellaneous costs that may arise.
Base Costs:
Financial Statement Audit $39,980 $39,980 $40,780 $41,595 $42,425 $204,760
Single Audit (One Major Program) 6,970 6,970 7,110 7,250 7,395 35,695
GANN Limit Report 570 570 570 570 570 2,850
As Needed Costs:
Single Audit (Two Additional Major Programs) $ 4,200 $ 4,200 $ 4,280 $ 4,370 $ 4,460 $ 21,510
Miscellaneous - - - - - 5.185
The proposed budget includes sufficient funding for the first year of this contract in the
Financial Reporting — Audit Services account (01030302-811007) and the Financial
Reporting —Accounting Services account (01030302-811008). Funds will be included in
subsequent year budgets to fund the costs associated with the future years of this
contract, including the two optional years, if exercised.
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 with Davis Farr LLP
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ATTACHMENT A
PROFESSIONAL SERVICES AGREEMENT
WITH DAVIS FARR LLP FOR
PROFESSIONAL AUDIT SERVICES
THIS PROFESSIONAL SERVICES AGREEMENT ("Agreement") is made and
entered into as of this 11th day of May, 2021 ("Effective Date"), by and between the
CITY OF NEWPORT BEACH, a California municipal corporation and charter city
("City"), and DAVIS FARR LLP, a California limited liability partnership ("Consultant'),
whose address is 18201 Von Karman Ave, Suite 1100, Irvine, California 92612, 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 professional audit 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 May 10, 2024 ("Initial Term"), unless terminated earlier as set forth herein.
City shall have the right to exercise two (2) additional one-year consecutive term
extensions. Should City wish to exercise its option to extend, City shall notify Consultant
in writing of such extension no less than 10 calendar days of the prior term end date.
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.
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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 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
Forty Three Thousand Five Hundred Ten Dollars and 001100 ($143,510.00) for the
Initial Term, 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. If
the City exercises the option(s) to extend the Initial Term, the total additional first one-
year extension shall not exceed Forty Nine Thousand Four Hundred Thirty Five
Dollars and 001100 ($49,435.00) and the total additional second one-year extension
shall not exceed Fifty Thousand Four Hundred Twenty Dollars and 001100
($50,420.00), as outlined in Exhibit B attached hereto and incorporated herein.
4.2 Consultant's compensation shall in no event exceed the total amount of
the Initial Term plus the two optional term extensions, if exercised by City, plus any
additional financial and audit -related services, as outlined in Exhibit B attached hereto
and incorporated herein, for a total not to exceed amount of Two Hundred Seventy
Thousand Dollars and 001100 ($270,000.00).
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4.3 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.
4.4 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.
4.5 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 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 Marc Davis 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
Accounting Manager 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.
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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 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 and employees (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,
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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
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.
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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 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 report, draft, map, record, plan, document and other
writing produced, including but not limited to, websites, blogs, social media accounts
and applications (hereinafter "Documents"), prepared or caused to be prepared by
Consultant, its officers, employees, agents and subcontractors, in the course of
implementing this Agreement, 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. Additionally, all material posted in
cyberspace by Consultant, its officers, employees, agents and subcontractors, in the
course of implementing this Agreement, 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
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expense, provide such Documents, including all logins and password information to City
upon prior written request.
17.2 Documents, 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 Documents for
other projects and any use of incomplete Documents 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 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 infringement or alleged
infringement of any United States' letters patent, trademark, or copyright, including
costs, contained in Consultant's Documents provided under this Agreement.
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.
Consultant shall allow inspection of all Work, data, Documents, proceedings and
activities related to the 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
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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.
22. ERRORS AND OMISSIONS
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, the additional design, construction and/or restoration expense shall be
borne by Consultant. Nothing in this Section is intended to limit City's rights under the
law or any other sections of 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 seg., 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.
25.1 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.
25.2 All notices, demands, requests or approvals from Consultant to City shall
be addressed to City at:
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Attn: Accounting Manager
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: Marc Davis
Davis Farr LLP
18201 Von Karman Ave, Suite 1100
Irvine, CA 92612
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 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 Consultant has not been previously paid. On the effective date of termination,
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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 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: if 2 dl2%
By.
ron C.
'City Attorne
ATTEST:
Date:
By:
Leilani I. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
By:
Brad Avery
Mayor
CONSULTANT: Davis Farr LLP, a
California limited liability partnership
Date:
By:
Marc Davis
General Partner
Date:
By:
Jennifer Farr
General 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
A. General
Consultant shall audit City's financial statements for the fiscal years ending: June
30, 2021; June 30, 2022; and June 30 2023; with the option to audit the City of
Newport Beach's financial statements for each of the two subsequent fiscal
years. These audits are to be performed in accordance with auditing standards
generally accepted in the United States of America, the standards set forth for
financial audits contained in the Generally Accepted Government Auditing
Standards issued by the Comptroller General of the United States, and the U.S.
Office of Management and Budget (OMB) Uniform Grant Guidance/Super
Circular Audits of State and Local Governments and Non -Profit Organizations as
well as other applicable laws, regulations and rules.
B. Scope of Work to be Performed
Consultant shall perform an examination of the City's basic financial statements
of the governmental activities, the business -type activities, each major fund,
budgetary comparison of major governmental funds, the aggregate remaining
fund information, and the related notes which collectively comprise the basic
financial statements of the City. They will also examine the required
supplementary information (RSI) and supplementary information (SI) in
accordance with the auditing standards outlined in Section C.
The City desires Consultant to express an opinion on the fair presentation of its
basic financial statements, and an "in -relation -to" opinion on the combining and
individual non -major fund financial statements, including budgetary comparison
schedules in conformity with auditing standards generally accepted in the United
states of America and Governmental Auditing Standards issued by the
Comptroller of the United States of America.
Consultant shall perform the following tasks:
1. Review City's financial records and various funds of the city in
accordance with auditing standards outlined in Section C below, with
the objective of expressing an opinion on the basic financial
statements and supplementary information.
2. Perform a single audit on the expenditures of federal awards in
accordance with auditing standards outlined in Section C below. The
City will prepare the Schedule of Expenditures of Federal Awards.
3. Perform agreed-upon procedures to test the GANN appropriation limit
calculation.
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C. Auditing Standards to be Followed
The audit shall be performed in accordance with generally accepting auditing
standards including, but not limited to, the following:
1. Generally accepted auditing standards as set forth by the American
Institute of Certified Public Accountants;
2. The standards applicable to financial audits contained in the most
current version of the Generally Accepted Government Auditing
Standards (Yellow Book), issued by the Comptroller General of the
United States;
3. The provisions of the Single Audit Act as amended in 1996;
4. The provisions of U.S. Office of Management and Budget (OMB)
Uniform Grant Guidance/Super Circular Audits of State and Local
Governments and Non -Profit Organizations. Note — The City does not
contemplate using a cost allocation plan for the purpose charging
indirect costs to Federal programs.
D. Reports to be Issued
Following the completion of the audit of the fiscal year's financial statements,
Consultant shall issue the following reports in accordance with auditing standards
outlined above in a form conforming to current generally accepted standards
including the current equivalent reports or as amended by standard setting
authorities:
1. An independent auditors' report with an opinion on the fair presentation
of the basic financial statements, and an "in -relation -to" opinion on the
combining and individual non -major fund financial statements,
including budgetary comparison schedules in conformity with auditing
standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Generally
Accepted Governmental Auditing Standards issued by the Comptroller
of the United States of America. Consultant will provide an electronic
copy of the independent opinion letter in PDF format and one hard
copy.
2. Consultant shall prepare the single audit report and render an opinion
on the schedule of expenditures of federal awards in relation to the
basic financial statements taken as a whole. The single audit report
should include an appropriate schedule of expenditures of federal
awards, footnotes, findings and questioned costs, including any
deficiencies identified during the audit and a follow up on prior audit
findings, where required. Consultant will complete the data collection
Davis Farr LLP Page A-2 11-18
form and required filing with the Federal Audit Clearing House and
provide the City with one electronic copy in PDF format and five bound
copies.
3. A report on compliance and internal control over financial reporting and
on compliance and other matters based on an audit of the financial
statements. The report should be addressed to the City Council and
provided to the City in an electronic form in a PDF format.
4. A report on compliance for each major program and on internal control
over compliance. The report should be addressed to the City Council
and provided to the City in an electronic form in a PDF format.
In the required reports on compliance and internal controls, Consultant
shall communicate any deficiencies in internal control found during the
audit to the Finance Committee and the City Council, in electronic form
in PDF format. Deficiencies of lesser significance discovered by
Consultant shall be reported in a separate letter to City, provided in
electronic form in PDF format.
5. When applicable, Consultant shall issue a separate "management
letter" that includes recommendations for improvements in internal
control. Management letter should be addressed to the City Council.
Consultant will provide one electronic copy in PDF format and one
hard copy.
6. Consultant will issue a separate letter, SAS 122, (communication to
those charged with governance) at the conclusion of the audit that
include significant findings and other matters. This should also be
addressed to the City Council and provided in electronic form in PDF
format.
7. California Constitution Article XIIIB Appropriations Limit procedures
letter. Consultant shall provide the City an electronic copy in PDF
format and one hard copy.
Other Compliance Reports and Agreed Upon Procedures:
Occasionally, it may be necessary for the City to contract with Consultant for
additional services and compliance reports. The City will solicit fee proposals
from Consultant as needed but reserves the right to utilize other accounting firms
if necessary.
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Irregularities and illegal acts:
Consultant shall make an immediate, written report of all irregularities and illegal
acts or indications of illegal acts of which they become aware to the following
parties:
City Manager, Grace Leung
City Attorney, Aaron Harp
Finance Director and City Treasurer, Scott Catlett
E. Working Paper Retention and Access to Working Papers
All working papers and reports must be retained, at the Consultant's expense, for
a minimum of three years, unless Consultant is notified in writing by the City of
Newport Beach of the need to extend the retention period. Consultant will be
required to make working papers available, upon request, to the City of Newport
Beach or its designees.
In addition, Consultant shall respond to the reasonable inquiries of successor
auditors and allow successor auditors to review working papers relating to
matters of continuing accounting significance.
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EXHIBIT B
SCHEDULE OF BILLING RATES
Consultant shall provide professional auditing services to the City of Newport Beach
for the following fixed fees by fiscal year.
Service
Financial Audit
i
$39,980
i2023-24
1 $39,980
$40,780
$41,595
2024-25
$42,425
Total
$204,760
Single Audit
6,970
6,970
7,110
7,250
7,395
35,695
Gann Limit
570
570
580
590
600
2,910
Expenses
0
0
0
0
0
0
Total fixed fee
$47,520
$47,520
$48,470
$49,435
$50,420
$243,365
The above fixed fee for the Single Audit includes one (1) major program. Should
additional major programs be required to be audited in any given year, the cost for each
additional major program to be audited is as follows. -
Fiscal
2020-21
EachAdditional
ProgramYear Major
$2,100
2021-22
$2,100
2022-23
$2,140
2023-24
$2,185
2024-25
$2,230
Should the City of Newport Beach require additional financial and audit -related
services, Consultant shall provide these additional services at the following standard hourly
rates.
Classification
Partner
Hourly Rate
$250
Senior Manager
$180
Manager
$150
Supervisor
$130
Senior Auditor
$110
Staff Auditor
$90
Assistant Auditor
$75
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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 and employees.
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
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.
Davis Farr LLP Page C-1 11-22
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 and employees 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 and employees 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 Aqreements Between the Parties. The parties hereby agree to the
following:
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.
Davis Farr LLP Page C-2 11-23
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 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.
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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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