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HomeMy WebLinkAbout2 - Proposal - Lake Elsinore - Rogers, Anderson, Malody & Scott LLP ©o ROGERS, ANDERSON, MALODY& SCOTT, LLP mmCERTIFIED PUBLIC ACCOUNTANTS,SINCE 1948 FEBRUARY 20, 2023 CITY OF LAKE ELSINORE TECHNICAL PROPOSAL PROFESSIONAL AUDITING SERVICES FOR THE FISCAL YEARS ENDING DUNE 30, 2023, 2024 AND 2025 (WITH THE OPTION OF TWO ADDITIONAL FISCAL YEARS CONTACT PERSONS: PREPARED BY SCOTT MANNO, CPA ROGERS ANDERSON MALODY & SCOTT, LLP smanno@ramscpa.net 735 E Carnegie Drive, Suite 100 BRIANNA SCHULTZ, CPA San Bernardino, CA 92408 bschultz@ramscpa.net LICENSE#2596 FEIN 95-2662063 909.889.0871 CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Table of Contents Paqe Transmittalletter ..................................................................................................................................i Technical Proposal Independence.............................................................................................................................1 License to practice in California ................................................................................................1 Firm qualifications and experience ............................................................................................1 About our firm Range of services Governmental Audit Quality Center Housing Authority and Successor Agency experience Single Audit experience ACFR preparation Engagement quality control Equal Opportunity Employer External quality control review Disciplinary action Partner, supervisory and staff qualifications and experience ....................................................5 Partner and supervisory staff involvement Staff continuity Continuing professional education Assigned personnel Engagement team resumes Similar engagements with other governmental entities ............................................................14 Specificaudit approach..............................................................................................................15 Services to be provided Engagement approach Level of staff and approximate number of hours assigned to each segment Sample sizes (including for compliance testing) Intelligent audit technology Analytical procedures Understanding of internal control over financial reporting Approach in determining applicable laws and regulations Effect of COVID-19 on our audits Auditing in a remote environment Proposed audit timing Identification of anticipated potential audit problems ................................................................24 GASBS implementation Covid-19 considerations Condition of records Attachment A: Government clients served Attachment B: Prepared by Clients omROGERS,ANDERSON, MALODY&SCOTT, LLP MECERTIFIED PUBLIC ACCOUNTANTS,SINCE 1948 February 20, 2023 735 E.Carnegie Dr.Suite 100 San Bernardino,CA 92408 City of Lake Elsinore 909 889 0871 T 130 South Main Street 909 889 5361 F Lake Elsinore, CA 92530 ramscpa.net PARTNERS Dear Evaluation Committee: Terry P.Shea,CPA Scott W. Manno,CPA,CGMA We are pleased to respond, on behalf of Rogers, Anderson, Malody & Scott, Leena Shanbhag,CPA,MST,CGMA LLP, (RAMS) to your request for a proposal regarding professional auditing Bradferd A.Welebir.CPA,MBA.CGMA services.As a recognized industry leader and innovator, our goal for the past Jenny W.Liu,CPA,MST 74 years has been to provide honest, objective and high-quality results to all Brenda L.Odle,CPA.MST(Partner Emeritus) our clients, including governmental organizations such as yours. Our success in these efforts is witnessed by the continued organic growth of our firm and our list of long-term clients, some we have served for over 20 years. MANAGERS/STAFF Gardenya Duran,CPA,CGMA At RAMS, we are committed to achieving the highest quality audit possible. Brianna Schultz.CPA,CGMA We understand the complexity of performing governmental audits and that is Seong-Hyea Lee,CPA,MBA why we have a dedicated team of auditors that possess the specialized Evelyn Morentin-Barcena,CPA knowledge and experience to help ensure our audits are planned and Veronica Hernandez,CPA Leronica Heaura ,CPA executed in a way that maximizes audit efficiency and effectiveness and Xin1u Zoe Zhang,CPA,MSA provides you the highest quality services. John Maldonado,CPA,MSA Julia Rodriguez Fuentes,CPA,MSA We are aware that the City of Example (the City) will be reviewing other Deml Hite,CPA proposals during this process, but we believe that RAMS would be an Jeffrey McKennan,CPA exceptional choice for the audit for the following reasons. Our firm: • Utilizes Teammate Analytics, a suite of more than 200 Computer Aided Audit Tools(CAATs). This software empowers our audit teams with the ability to perform powerful, meaningful data analysis which builds upon our other robust, substantive audit procedures. This value-added service also helps to identify specific transactions or amounts which may be indicative of fraud. MEMBERS Performs an intelligent, risk-based au (using our American Institute of � f tikb d audit g ( g CAAT) which Certified Public Accountants enables us to focus on key audit areas allowing us to become more PCPS The AICPA Alliance efficient resulting in a higher quality audit at a reasonable fee. for CPA Firms 0 Currently provides auditing services to over 70 governmental Governmen tat Audit agencies and not-for-profit organizations, including over 30 cities, Quality Center most of which have enterprise activities and over 35 special districts. California Society of Developed a comprehensive remote working environment for our Certified Public Accountants audits. All our staff currently have the tools for working remotely in an effective and efficient manner allowing us to still provide a quality audit. Our ultimate goal is to continue to meet your needs, but in a safe environment. • Has an established reputation in the governmental and not-for-profit accounting and auditing community for providing excellent, timely Proud Member of service with high quality reporting to our clients.31a IRW AlliottGloba1Alliance' • Is committed to helping you meet all reporting/auditing deadlines, resolving any issues encountered during your audit(e.g., accounting or auditing, new pronouncements, etc.), and providing you with quality audit services. -i- STABILITY. ACCURACY. TRUST. • Understands the audit process can be a stressful experience for you and your staff; we understand that you will have other commitments and your regular workloads during the audit. We make every effort to ensure the audit process, from the interim fieldwork to the preparation of any required financial reports, will be as trouble-free as possible for you and your staff.We accomplish this by comprehensively planning the audit and utilizing our staff and audit technologies in the most efficient and effective manner while keeping disruptions and miscommunications to a minimum. • Has audit team members that are personable and easy to work with, yet still focused on the audit.Through open and responsive communication with all parties involved in the audit process, we work to have the most efficient audit possible by minimizing operational distractions of your staff, while maximizing quality service. • Has an extensive internal quality control review process to ensure your financial reports meet the highest standards. In addition to the preparation of financial reports by the engagement team and reviewed by the engagement manager, each report is also examined by 2 partners and at least 1 professional proofreader. • Has assisted many of our clients with the preparation of their Annual Comprehensive Financial Reports, and all our clients that have submitted their reports for the Government Finance Officers Association (GFOA) or California Society of Municipal Finance Officers (CSMFO) awards have received the awards. Our participation as a GFOA reviewer also indirectly benefits our clients in the quality review process. • Believes that our fee estimate provides a fair and reasonable investment, commensurate with level of service provided and the experience of the audit team members. While we may not be the lowest bidder, that is not our objective. We focus on delivering the best value and price our prospective engagements accordingly. • Is a local Southern California firm. All our employees live, work, and shop in the region, allowing our local cities to benefit from our sales and property taxes. As you will see from our proposal, it was prepared in a clear, concise, and simple manner in accordance with the request for proposal. We feel our firm, staff, and reputation as a leader in governmental auditing exceeds the need for the excess information you may see in other proposals. Rogers, Anderson, Malody & Scott, LLP is properly licensed to practice in California, including all the assigned professional staff to the engagement. Mr. Manno, Partner, and Ms. Schultz, Partner, are authorized to represent the firm, are empowered to submit the bid, and authorized to sign a contract with the City. We understand the work to be done as listed in the section of this proposal titled Services to be provided. In addition, we will be committed to meeting any agreed upon time frames. This proposal is a firm and irrevocable offer for sixty (60) days. We can be reached at: 735 E. Carnegie Drive, Suite 100, San Bernardino, CA 92408, (909) 889-0871, bshultz@ramscpa.net or smanno@ramscpa.net. Thank you for the opportunity to present our proposal to the City. We will be committed to exceeding your expectations of an auditor and believe this proposal provides you with information about our firm,the service team members and our customized audit approach. We look forward to having a long and mutually beneficial relationship with the City. Please feel free to contact us if you have any questions regarding this proposal. Respectfully yours, ROGERS,ANDERSON,MALODY&SCOTT, LLP Scott Manno, CPA, CGMA Partner AICPA GAQC Member -ii- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Independence Rogers, Anderson, Malody & Scott, LLP is independent of the City and any component units, as defined by general standard number two of the generally accepted auditing standards, and by the second general standard for government auditing in the U.S. Government Accountability Office's Government Auditing Standards. We have not had any professional relationships with the City within the past five (5)years. License to practice Rogers, Anderson, Malody&Scott, LLP is licensed to practice in the State of California. Our key professional staff, which includes the partners, managers, and supervisors, are all certified public accountants licensed to practice in the State of California and follow all applicable Board of Accountancy standards. Firm qualifications and experience About our firm We are a local firm founded in 1948 and located at 735 E. Carnegie Drive, Suite 100, San Bernardino, California. We provide a full range of services as expected of a full-service accounting firm. We are one of the oldest, most trusted and respected CPA firms in Southern California, with over 74 years of public practice experience, specializing in governmental agency and not-for-profit organization auditing, accounting, and management advisory �► services. Over sixteen thousand hours per year are devoted to this area of our practice, which includes cities, redevelopment successor agencies,water districts, other special districts, not- for-profit corporations, and joint power authorities. We do not use our government accounting and auditing practice as "fill work"for the firm, it is one of our primary focuses thus allowing us to provide quality services to local governments. We understand your desire to engage auditors that have a thorough understanding of the ever-changing complex accounting and compliance issues confronting governments today. Our firm has an extensive history of governmental accounting and auditing. During that time, we have gained valuable experience, acquired an in-depth knowledge of, and obtained the technical expertise needed to perform high quality governmental audits. This expertise has enabled us to provide exceptional, high quality service and to provide solutions at fees we feel represent our value to our clients. In addition, we use our participation in various industry associations to continuously update our knowledge with respect to issues relating to governmental accounting, auditing, and operations. Any insight we gain is immediately passed on to our clients if we feel they will benefit from it. Our firm has a total staff of thirty-nine people, which includes fifteen certified public accountants. The staff consists of seven partners,four managers,ten supervisors/senior accountants, sixteen staff accountants, and five support staff. The audit staff consists of twenty-one members who devote over 80% of their time to municipal engagements.The engagement team assigned to the City's engagement will consist of the following full-time staff: one audit partner, one audit manager, one audit supervisor, and two to three senior/staff auditors. All personnel are out of our San Bernardino office. AICPA ©© _ GAQC Member -1- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) Range of services Our firm provides various other services in addition to auditing services to governmental entities, including: • SB 341 compliance (Successor Agencies) • Internal control agreed upon procedures • Finance director and accounting support services • Study and evaluation of financial condition and fiscal policies • Transient Occupancy Tax agreed upon procedures • Franchise (refuse, cable)agreed upon procedures • Accounting policies and procedures • Cash management studies • Financing and public bond offering assistance • Franchise agreement assistance (ambulance, cable, television, refuse, etc.) In addition,the firm provides accounting, auditing, attest, and consulting services to for profit and not-for-profit entities. We also provide tax preparation and tax consulting services to individuals, corporations, and partnerships. We provide our municipal audit clients tax consultation at no extra charge. Governmental Audit Quality Center As a member of the American Institute of CPAs Governmental Audit Quality Center (Center), we are committed to adhering to the highest quality standards by voluntarily agreeing to the Center membership requirements, which include designating a partner responsible for the quality of our governmental audit practice, establishing quality control programs, performing annual internal inspection procedures, and making our peer review report findings publicly available. At RAMS, our goal is to continue to enhance our quality initiatives within our governmental audit practice to deliver the highest quality audit services possible. In addition, the Governmental Audit Quality Center provides access to comprehensive resources that will assist us in further enhancing the quality of your audit. The Center membership provides us with timely information on a variety of technical, legislative, and regulatory subjects that we can in turn apply to your audit to help ensure compliance with the appropriate standards and changes in regulations which we pass on to our clients. Housing Authority and Successor Agency experience Over the past five fiscal years, the firm has audited the Housing Authorities and Successor Agencies for the following entities: City of South Pasadena City of San Bernardino City of Thousand Oaks City of La Verne City of San Marcos City of San Jacinto City of San Dimas City of Twentynine Palms City of Lawndale City of La Mesa City of Sierra Madre City of Imperial Beach City of El Cajon City of Hawthorne Town of Yucca Valley City of Beaumont City of Loma Linda City of Claremont AICPA GAQC Member -2- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) Single audit experience Most of our municipal clients,and some of our other governmental and not-for-profit clients, have been subject to an audit in accordance with Uniform Guidance. We recently performed single audits for the following entities: Elsinore Valley Muni. Water District City of San Bernardino City of El Cajon City of La Mesa City of San Marcos City of Thousand Oaks City of Beaumont City of Twentynine Palms City of Menifee City of Woodlake City of Exeter City of Live Oak City of La Verne City of Hawthorne Our specialized Single Audits Team is led by Managers and Supervisors with Intermediate and Advanced Single Audit Certifications issued by the AICPA guaranteeing a successful and thorough engagement. ACFR preparation We have extensive experience in the preparation of Annual Comprehensive Financial Reports (ACFR). For the fiscal years ended June 30, 2020 and 2021, our staff prepared over 20 ACFR's,with each entity receiving the Certificate of Achievement for Excellence in Financial Reporting from the GFOA. For the fiscal year ended June 30, 2022, again, our staff prepared 29 ACFR's for our clients for submittal to the GFOA. In addition, we have helped many cities and special districts develop their first year's report for submittal. Two of our audit partners and four of our supervisory staff are technical reviewers for the GFOA award program. In addition, we review all the ACFR's for compliance with the GFOA certificate program checklist, as well as addressing any prior year comments, if applicable, to insure they have been addressed. Engagement quality control We have an extensive internal quality control review process to ensure your audit meets the highest standards. In addition to the preparation of financial reports by a senior member of the engagement team, each report is reviewed by the engagement manager/supervisor and then is examined by the engagement partner. Subsequently, a technical review is then performed by the engagement Quality Control partner along with being proofread by at least one professional staff. In addition, all audit workpapers are reviewed by the in-charge auditor and the partner in-charge of the engagement. Equal Opportunity Employer Our firm is an equal opportunity employer and is committed to providing employment opportunities to all qualified persons regardless of race, color, sex, religion, national origin or handicap. Our staff represents a wide range of cultures and ethnic backgrounds. We provide opportunities for advancement for all staff based on ability, skill and desire to advance. AICPA ©© ° GAQC Member -3- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Firm qualifications and experience (continued) External quality control review As a member of the AICPA Private Companies Practice Section, our firm Grant Bennett Associates has participated in the "Peer Review" A"°"—t°"`° TioN program since 1993 and has been examined every three years since that Report on the Firm System of Quality Control date by an outside, independent firm of certified public accountants. 'UOe'.2o2, Participation in this program ensures To the Partners of Rogers.Anderson,Malody&Scott LLP.and the Peer Review Committee of the California that our engagements, firm policies, Society of CPAs and audit procedures meet the we have reviewed the system of quality control for the accounting and auditing practice of Rogers,Anderson. Malady&Stott,LLP(the firm)in effect for the year ended November 30.2020.Our peer review was conducted standards of the AICPA, the Yellow in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Book, and the California State Board Board of the American Institute of Certified Public Accountants(Standards). of Accountancy. Throughout our A summary of the nature,objectives,scope,limitations of,and the procedures performed in a System Review as described in the Standards may be found at www a,cpa.org/prsummary.The summary also includes an participation in this program, the firm explanation of how engagements identified as not performed or reported in conformity with applicable has only received pass ratings from professional standards,if any,are evaluated by a peer reviewer to determine a peer review rating. Finnthe peer reviewers. The s Responsibility p The lion a responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.The firm is also responsible for evaluating actions to promptly remediate engagements During each review, an independent deemed as not performed or reported in conformity with professional standards,when appropriate,and for remediaGru weakre„es in its system of quality control,if any. firm reviews our policies and procedures and then inspects a Peer Reviewer's Responsibility Oar responsibility is to express an opinion on the design of the system of quality control and the firm's representative sample of engagement compliance therewith based on our review. workpapers and reports, including Required Selections and considerations Engagements selected tot review included engagements performed under Government Auditing Standards, governmental entities and including a compliance audit under the Single Audit Act,and an audit of an employee benefit plan. engagements subject to the Uniform As a part of our peer review,we considered reviews by regulatory entities as communicated by the firm,if Guidance. For the year ended applicable,in determining the nature and extent of our procedures. November 30, 2020, our firm received Op1nron In our opinion,the system of quality control for the accounting and auditing practice of Rogers.Anderson, a rating of pass which indicates our Malady&Scott,LLP in effect for the year ended November 3Q 2020,has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable auditing practice is suitably designed professional standards in all material respects.Firms can receive a rating of pass,pass with de(ciency(ies)or fait and complied with to provide Rogers,Anderson.Malody&Scott LLP has received a peer review rating of pass. reasonable assurance of performing yt L.-all and reporting in conformity with Xl� applicable standards. The results GRANT BENNETT ASSOCIATES provide confirmation that the custom A PROFESSIONAL CORPORATION Certified Public Accountants audit approach and procedures we 10850 Gold Center Drive. Suite 260 use are technically sound and In Rancho Cordova, CA95670 Princeville,HI96722 compliance with applicable standards. 916/922-5109 FAX 916/641-5200 988/769-7323 Disciplinary action The firm has never had any disciplinary action taken or pending against it with state regulatory bodies or professional organizations, nor has it ever had any pending or settled litigation, civil or criminal investigations. In addition, we are not aware of any federal or state desk reviews or field reviews of its audits during the last three years. Our firm does not have a record of substandard work. In addition to the external quality control review, our firm performs in-house monitoring procedures, which mirror the outside peer review procedures, over our audit and attest engagements annually. �``AICPA ©0 RrFEoo a A«o N1A�rs.s�E III 9xa GAQC Member -4- ©© CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience The quality of service you receive is dependent on the capabilities of the individuals assigned to the engagement, and the manner in which those personnel resources are organized to efficiently focus their abilities on providing you with the requested audit services. These professionals are highly trained and knowledgeable and have a thorough understanding of the environment in which governmental and not-for- profit entities operate. This experience is a critical component in providing the City with an effective and efficient audit. Our engagement team will provide significant experience coupled with an extensive, practical understanding of governmental accounting and auditing along with a broad business perspective. Each member will have access to a wide range of technical resources and knowledge bases which will enable them to provide the City with practical observations and effective solutions. Below is our proposed organizational chart for the audit: City of • City Counciluality Control Reviewel Engagement Partner Concurring Partner Brad A. Welebir, CPA, � . Scott • P• :' •' Manager Veronica Hernandez, CP Senior Jeffrey McKennan, CPA • • needed 44��A I C PA ©© Rr F Eo o a A«o N1Ars.s E 94a GAQC Member -5- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Partner and supervisory staff involvement All partners and supervisory staff are working professionals and are actively and continually involved in all aspects of their engagements. We believe that partner and supervisory staff involvement in all areas of the audit is a key aspect of the overall audit process. This involvement includes being on-site for interim and year- end fieldwork, thus facilitating a proper, efficient, and effective audit, with minimal disruption of your staff. In addition, the time spent on-site by the partners and supervisory staff ensures they gain an understanding of the entire City's accounting processes and procedures. This understanding will enable them to evaluate and develop opportunities for efficiency, as well as offer practical and functional advice for improving your accounting processes and procedures. All professionals on this engagement have worked on audits similar in nature to the City's, therefore, the City will not have to train our engagement team. Staff continuity Continuity of audit staff is a principal concern with our firm. In order to retain our staff, we offer extremely competitive wages, opportunities for advancement, generous medical packages, a retirement plan, bonus opportunities, as well as educational benefits. Even with the benefits we provide,we realize we may lose staff at any given time. Knowing this, we plan to provide staff continuity from year to year, which is in the best interest of the City and our firm. Continuity ensures an orderly, efficient, and less disruptive audit experience. Since we cannot guarantee staff will remain with us, principal supervisory and management staff, including engagement partners, managers, other supervisory staff, and specialists, may be changed if those personnel leave the firm or are promoted. However, the City reserves the right to accept or reject replacements. We believe that due to the significant involvement of the partners on all our engagements, any staff transition would have a minimal effect on the audit efficiency and effectiveness of subsequent years. Continuing professional education Our team of auditor specialists stays current in this highly technical practice area by adhering to, and typically exceeding, the continuing professional education requirements of Government Auditing Standards as well as the State Board of Accountancy guidelines. All professionals at our firm participate in continuing professional education (CPE) programs,which are sponsored by various organizations including the Government Finance Officers Association, the American Institute of Certified Public Accountants, the California State Society of Certified Public Accountants, the California Society of Municipal Finance Officers and the Association of Government Accountants. Participation in these programs helps us to ensure that our clients are serviced with the best trained and most proficient government auditors and accountants available. In addition, we periodically provide in-house training taught by our partners and senior level staff using published resources. All staff are required to attend fraud and ethics training. It is our goal to provide our professional staff continuing education which exceeds the minimum standard of 80 hours over two years. In accordance with our firm's Quality Control document and Government Auditing Standards (GAS), all staff members who work on audits subject to GAS are required to complete CPE in accordance with GAS standards which require 24 hours directly related to governmental accounting and auditing. In addition to the required CPE, we also use the following to increase our technical knowledge: view the Governmental Audit Quality Center Annual Webcast Update and other relevant seminars and review monthly publications from the AICPA, the GFOA, and various other resources. We also attend conferences and seminars sponsored by the GFOA, California Society of Municipal Finance Officers, California State Society of Certified Public Accountants and the California Special Districts Association. AICPA GAQC Member -6- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Assigned personnel It is our goal to provide you with capable, competent, and personable individuals who offer an extensive background, not only in governmental accounting and auditing, but also in general business practices. By doing so, it allows us to offer practical solutions, as well as provide technical support.This enables you to stay at the forefront of governmental accounting and provides you with the support you need in dealing with the complex issues confronting entities such as yours. In addition, our engagement team has the managerial and supervisory experience to provide the City with a comprehensive audit of the highest quality, while still focusing on personal service. The resumes of the key engagement personnel assigned to the audit are presented below. The following individuals will be assigned to the engagement for the entire contract period (see staff Continuity section of this proposal): Scott W. Manno, CPA, CGMA -Partner, Engagement Partner Scott is also a municipal audit partner with the firm. He is licensed to practice as a certified public accountant in the State of California. Scott has over 25 years of public accounting experience and has provided accounting, auditing, and consulting services for municipalities,special districts,water agencies, and various not-for-profit organizations. As the concurring partner, Scott will work directly with Terry in planning and performing the engagement. In addition, he will provide technical consultation for the engagement team. Brianna Schultz, CPA, CGMA -Partner, Concurring Partner Brianna is a municipal audit partner with the firm and will be the engagement partner. She is licensed to practice as a certified public accountant in the State of California. She has been in public accounting for over 13 years specializing in serving local governments such as yours. As the engagement partner, she will be responsible for overall engagement quality, as well as ensuring that the engagement is performed in the most effective and efficient manner. Brianna will directly oversee all engagement staff while assisting in planning and performing the engagement, as well as reviewing all work-papers prepared during the engagement, in addition to all required reports. Brianna is a working partner and will be actively and continually involved in all aspects of the engagement. Brad A. Welebir, CPA, CGMA, MBA -Partner, Quality Control Reviewer Brad will be the Quality Control Reviewer. He is licensed to practice as a certified public accountant in the State of California. He has over 18 years of practical, governmental accounting and auditing experience. Brad will be responsible for the final quality control review of all released opinions and related reports. Veronica Hernandez, CPA —Engagement Manager Veronica is a manager with the firm. She is licensed to practice as a certified public accountant in the State of California. Veronica has over 7 years' experience in providing accounting and auditing services for municipalities, special districts, and various not-for-profit organizations. As the engagement manager, she will work directly with the audit in-charge and partner,while supervising the engagement team during all phases of the engagement. In conjunction with the audit in-charge, she will also oversee the preparation of any required reports. AICPA ©© ° GAQC Member -7- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Jeffrey McKennan, CPA—Audit Senior Mr. McKennan joined Rogers,Anderson, Malody&Scott, LLP in May 2021, primarily providing accounting and auditing services for municipalities, special districts, and various nonprofit organizations. As an audit senior, he will work closely with the engagement partner and manager and be responsible for planning the audit, supervising the staff assigned to the engagement, and performing reviews of all workpapers prepared for the engagement. In addition, he will also be responsible for the preparation of any required reports. Staff level accountants All staff accountants employed by us and working on governmental audits are qualified to perform such audits. Prior to"audit season", our staff are subject to a rigorous training regimen in which we go over all aspects of our audit process and audit programs ensuring staff members have a solid foundation prior to starting fieldwork. Each staff member is encouraged to take on increased responsibility for engagements previously worked on. This enables our staff to grow on each engagement and allows them to continue to gain the skills and knowledge required to perform the audits. In summary,we want to emphasize the credentials of the above professionals who will be directly responsible for the quality of service that you will receive. Additionally, our audit team has another attribute that is very important, even though it is intangible -- the professionals assigned to the audits have previously worked together as a multi-disciplined team, thus ensuring a smooth, efficient, and effective audit. We are committed to allocating the necessary resources to ensure that we provide continuity of personnel throughout the term of our relationship with the City. Full engagement team resumes are provided as follows. AICPA ©© ° GAQC Member -8- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Scott W. Manno, CPA, CGMA ` Engagement Partner Professional experience Mr. Manno began his career with Thomas, Bigbie and Smith in 1995 after serving in the United States Army. He spent six years with the firm primarily working on audits of municipalities, special districts and redevelopment agencies as well as various not-for-profit organizations. He joined Rogers,Anderson, Malody&Scott, LLP in July 2001. Currently, Mr. Manno serves as a technical reviewer for the GFOA ACFR Award program. Since 2010, Mr. Manno has been serving as a technical volunteer on the California Special Districts Association Audit Committee and is also on the Association's fiscal committee providing accounting and fiscal program guidance.Also, Mr. Manno has done presentations on fraud. In addition, he is part of the California State Society of Certified Public Accountants Governmental Accounting and Auditing Committee which meets periodically to discuss current events, pronouncements, etc. Education/licenses Bachelor of Science, Business Administration—California State University, San Bernardino Certified Public Accountant—State of California Chartered Global Management Accountant—American Institute of Certified Public Accountants Related professional experience Partial listing of relevant governmental agencies served (*includes enterprise fund accounting): City of El Cajon* Town of Yucca Valley City of La Mesa* City of La Verne City of Sierra Madre* City of Fillmore* City of Chino* City of 29 Palms City of Moreno Valley* City of Beaumont* City of San Marcos* City of Loma Linda* City of Claremont City of Perris* City of Exeter* City of Woodlake* City of San Jacinto* City of Menifee City of Rolling Hills Est. City of Poway* Mr. Manno has completed over 170 hours of continuing professional education courses over the past three years of which the following select courses are relevant to this engagement: ♦ Audits of State and Local Governments ♦ Government Accounting and Auditing Update ♦ OMB Supplement Addendum and Latest Covid-19 Professional affiliations Mr. Manno is a member of the following organizations: ♦ American Institute of Certified Public Accountants (AICPA) ♦ California Society of Certified Public Accountants (CaICPA) ♦ Association of Government Accountants (AGA) ♦ Association of Certified Fraud Examiners (ACFE) ♦ Government Finance Officers Association (GFOA) ♦ California Special Districts Association (CSDA) ♦ California Society of Municipal Finance Officers(CSMFO) AICPA RrFEoo a A-111TA"rs.s�EIII GAQC Member -9- ©© CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Brianna Schultz, CPA, CGMA Concurring Partner Professional Experience Ms. Schultz began her career with Rogers,Anderson, Malody&Scott, LLP in July 2014, and had over three years' experience with another public accounting firm serving the same industry. During her time with the firm, she has worked primarily on audits of municipalities, special districts and redevelopment agencies, as well as various non-profit organizations. Education Bachelor of Science—California State University, San Bernardino Certified Public Accountant—State of California Chartered Global Management Accountant—American Institute of Certified Public Accountants Related Professional Experience Partial listing of relevant governmental agencies served (*includes enterprise fund accounting): City of Menifee City of Aliso Viejo City of Claremont* City of Chino* City of Glendora* City of Rolling Hills Est. City of San Bernardino City of Sierra Madre* City of La Verne* City of Loma Linda* City of South Pasadena* City of West Covina* City of La Mesa* City of Baldwin Park City of El Cajon* City of Hawthorne* Ms. Schultz obtained the AICPA's Advanced Single Audit Certificate in 2019 and the Intermediate Single Audit Certificate in 2017. She served as the contract Interim Accounting Manager for the City of Glendora in 2016 and the Senior Accountant for the City of Rancho Cucamonga in 2015. Additionally, she is a reviewer for the GFOA ACFR Program. Continuing Professional Education Ms. Schultz has completed over 100 hours of continuing professional education courses over the past two years of which the following select courses are relevant to this engagement: ♦ COVID-19 Impact on Payroll and Payroll Fraud ♦ Uniform Guidance Update 2021 ♦ What You Need to Know About the Changes to Yellow Book Professional Affiliations Ms. Schultz is a member of the following organizations: ♦ American Institute of Certified Public Accountants (AICPA) ♦ California Society of Certified Public Accountants (CaICPA) ♦ Government Finance Officers Association (GFOA) ♦ California Society of Municipal Finance Officers(CSMFO) AICPA RrFEoo a A«o1N1—rs.s�EIII GAQC Member -10- ©© CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Brad A.Welebir, CPA, CGMA, MBA Quality Control Partner Professional experience Mr. Welebir joined Rogers, Anderson, Malody & Scott, LLP in 2004. He primarily provides audits and advisory services to governmental agencies, small to mid-sized businesses, and not-for-profit organizations. Mr. Welebir serves as a technical reviewer for the GFOA ACFR Award program. He also serves as the CaICPA Inland Empire chapter chair of the governmental accounting and auditing committee and as the representative for the chapter at the state committee. Education/licenses Master of Business Administration, Accounting Emphasis—California State University, Fullerton -Alp Bachelor of Arts in Business Administration—La Sierra University Certified Public Accountant—State of California Chartered Global Management Accountant—American Institute of Certified Public Accountants Related professional experience Partial listing of relevant governmental agencies served (*includes enterprise fund accounting): City of Twentynine Palms City of Loma Linda* City of San Bernardino City of La Verne City of Sierra Madre* City of Fillmore* City of Poway* City of Poway City of Moorpark* City of Rosemead City of Redondo Beach* City of San Marcos* City of Claremont Town of Yucca Valley City of Aliso Viejo City of San Jacinto* Continuing professional education Mr.Welebir has completed over 120 hours of continuing professional education courses in the past three years of which the following select courses are relevant to this engagement: ♦ Governmental Accounting and Auditing Update ♦ Single Audit Update ♦ Auditing Fraud Risk in the Current Environment ♦ Annual Conference Sessions ♦ GAAP Update Professional affiliations Mr. Welebir is a member of the following professional organizations: ♦ American Institute of Certified Public Accountants (AICPA) ♦ California Society of Certified Public Accountants (CaICPA) ♦ Government Finance Officers Association (GFOA) ♦ California Society of Municipal Finance Officers(CSMFO) ♦ California Special Districts Association (CSDA) AICPA RrFEoo a A«1111A"rs.s�EIII GAQC Member CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Veronica Hernandez, CPA Audit Manager Professional Experience Ms. Hernandez is an Audit Manager with the firm. She has over 7 years' experience in providing accounting and auditing services for municipalities, special districts and various nonprofit organizations.As an audit supervisor,she will work closely with the engagement partner and manager and be responsible for planning the audit, supervising the staff assigned to the engagement, and ' performing reviews of all workpapers prepared for the engagement. In addition, she will also be responsible for the preparation of any required reports. Currently, Veronica serves as a technical reviewer for the GFOA ACFR Award Program. Education Bachelor of Science degree from California State University, San Bernardino Certified Public Accountant—State of California Related professional experience Partial listing of relevant governmental agencies served (*includes enterprise fund accounting): City of Santa Paula* City of Santee City of Beaumont* City of Moreno Valley* City of San Marcos* City of La Verne* City of Loma Linda* City of Fillmore* City of El Cajon* City of West Covina* City of Redondo Beach* Town of Yucca Valley City of Aliso Viejo City of Moorpark* City of San Jacinto* City of La Mesa* City of Claremont City of Hawthorne City of Poway* Continuing Professional Education Ms. Hernandez has completed over 100 hours of continuing professional education courses over the past two years of which the following select courses are relevant to this engagement: ♦ Governmental Accounting and Auditing Update: GASB 87 Leases ♦ Promises and Pitfalls of American Rescue Plan Grants &Others ♦ A 360 view of OPEB Trust ♦ Critical Concepts of Accounting for Capital Assets ♦ Discover GFOA Best Practices Professional affiliations Ms. Hernandez is a member of the following professional organizations: ♦ American Institute of Certified Public Accountants (AICPA) ♦ California Society of Certified Public Accountants (CaICPA) ♦ California Society of Municipal Finance Officers(CSMFO) AICPA ©© ° GAQC Member -12- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Partner, supervisory, and staff qualifications and experience (continued) Jeffrey McKennan, CPA Audit Senior Professional Experience Mr. McKennan joined Rogers, Anderson, Malody & Scott, LLP in May 2021, primarily providing accounting and auditing services for municipalities, special 4.- districts, and various nonprofit organizations. As an audit senior, he will work closely with the engagement partner and manager and be responsible for planning the audit, supervising the staff assigned to the engagement, and performing reviews of all workpapers prepared for the engagement. In addition, / he will also be responsible for the preparation of any required reports. Education Master of Science in Accountancy—California State University, San Bernardino Bachelor of Arts in Business Administration -California State University, San Bernardino Certified Public Accountant—State of California Related professional experience Partial listing of relevant governmental agencies served (*includes enterprise fund accounting): City of San Marcos* City of Menifee City of Hawthorne* City of Thousand Oaks* City of Calabasas* City of Moreno Valley* City of Loma Linda City of San Jacinto Continuing Professional Education Mr. McKennan has completed the following select courses that are relevant to this engagement: ♦ Intermediate Governmental Accounting ♦ 2022 Single Audit Update ♦ Audits of State and Local Governments Professional affiliations Mr. McKennan is a member of the following professional organizations: ♦ American Institute of Certified Public Accountants (AICPA) ♦ California Society of Certified Public Accountants (CaICPA) ♦ California Society of Municipal Finance Officers(CSMFO) AICPA ©© ° GAQC Member -13- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Similar engagements with other governmental entities Entity: City of Moreno Valley Scope of work: Financial Audit/Successor Agency/Single Audit/ACFR* Date: Years ending June 30, 2021 - present Engagement partner: Mr. Scott Manno Total hours: Approximately 500 hours each year Contact person: Ms. Dena Heald, Deputy Finance Director, (951)413-3063 Address: 6136 Adobe Road, Twentynine Palms, CA 92277 ThousandEntity: City of Oaks Scope of work: Financial Audit/ACFR*/Successor Agency/Single Audit Date: Years ending June 30, 2018 - present Engagement partner: Mr. Terry Shea Total hours: Approximately 420 hours each year Contact person: Ms. Elisa Magana, Accounting Manager, (805)449-2216 Address: 2100 Thousand Oaks Blvd., Thousand Oaks, CA 91362 Entity. City of Beaumont Scope of work: Financial Audit/Single Audit Date: Year ending June 30, 2020 Engagement partner: Mr. Scott Manno Total hours: Approximately 400 hours each year Contact person: Mr. Jennifer Ustation, Finance Director, (951)572-3236 Address: 550 E. 6th Street, Beaumont, CA 92223 Entity: City of Menifee Scope of work: Financial Audit/Single Audit/ACFR* Date: Years ending June 30, 2014 - present Engagement partner Mr. Scott Manno/Mr. Terry Shea Total hours: Approximately 350 hours each year Contact person: Ms. Ann-Marie Etienne, Finance Manager, (951) 672-6777 Address: 29844 Haun Road, Menifee, CA 92586 Entity: City of San Jacinto Scope of work: Financial Audit/ Single Audit/Successor Agency Date: Years ending June 30, 2011 - present Engagement partner: Mr. Scott Manno/Mr. Terry Shea Total hours: Approximately 300 hours each year Contact Person: Mr. Tom Prill, Deputy City Manager, (951)487-7330 Address: 595 S. San Jacinto Avenue, San Jacinto, CA 92583 *= received GFOA award. See Attachment A for a listing of current and recent government clients served. v``A I C PA ©� Rr F Eo o a A«o N1Ars.s E III 94a GAQC Member -14- ©© CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach Services to be provided The City desires the auditor to express an opinion(s) on the fair presentation of the financial statements for the following: the City of Lake Elsinore in accordance with generally accepted accounting principles. In addition, the Successor Agency of the City of Lake Elsinore, Lake Elsinore Public Financing Authority, Lake Elsinore Recreation Authority and the Facilities Financing Authority. In addition, we shall: • Provide opinions as to the compliance with the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (OMB Uniform Guidance). RAMS is to provide an "in- relation-to" report on the Schedule of Expenditures of Federal Awards based on the auditing procedures applied during the audit of the financial statements, (Single Audit). • Test compliance with Article XIIIB pertaining to the City's appropriation limit and prepare an Agreed- Upon Procedures report to the City Council regarding compliance. Our audit(s)will be in accordance with: • Generally Accepted Auditing Standards as promulgated by the American Institute of Certified Public Accountants, including requirements found in the most recent AICPA audit guide Audits of State and Local Governments. • Government Auditing Standards issued by the Comptroller of the United States of America. • Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (OMB Uniform Guidance). (Single Audit) • Any other applicable standards for other items outlined in the Scope of Work to be performed and/or reports to be issued. Reports to be issued: • A report on the fair presentation of the financial statements in conformity with GAAP. • A report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards (material weaknesses or significant deficiencies). • A report in compliance with requirements applicable to each major federal program and internal control over compliance in accordance with the Uniform Guidance. • Prepare Management Letter that includes significant and less significant (i.e., reportable and non- reportable) recommendations for improvements to internal control. • We will issue reports to those charged with governance (SAS 114 letters) as required by auditing standards. RAMS will also perform the following: • Make an immediate, written notification of all irregularities and illegal acts or indication of illegal acts of which we become aware to the following: City Council, City Manager, Assistant City Manager and Finance Manager. • Retain all working papers (at our expense) for a minimum of seven (7) years, unless we are notified by the City of the need to extend that period. In addition, we will make working papers available to the City and/or any government agency as appropriate, in addition to successor auditors. AICPA OB ©© ° GAQC Member -15- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach Engagement approach Our engagement approach for your audit will be developed, in part, by using established goals which will enable measurement of the audits progress by the engagement partner and lead auditor. This involves frequent communication between the partner and the engagement team to ensure that all audit objectives are achieved in accordance with our goals and that any issues which may arise are communicated and dealt with on a timely basis. In addition, our in-depth knowledge and expertise in governmental accounting and auditing has allowed us to identify key audit and accounting risks in the government environment. More importantly, the approach provides for a complete reassessment of the control environment in each year's audit and thus enables us to respond to any needed risk assessment changes. Our engagement approach has been developed and refined over many years.The foundation of our approach revolves around the following: • Knowledge and experience. We have been auditing governmental entities like the City, both large and small, for over 74 years. This experience has allowed us to gain in-depth knowledge of the governmental environment which in turn allows us to perform a more efficient and effective audit. It also enables us to perform detailed risk assessment procedures allowing us to identify significant audit risk areas within the City and its control environment. • Intelligent design. As discussed later in our proposal, all our audits are designed to be intelligent using our powerful audit software/data analytic tools (Engagement and Teammate Analytics). This allows us to analyze large amounts of data in seconds increasing both the efficiency and, more importantly, the effectiveness of all our audit engagements. • Oversight. Professional judgment is not developed overnight. Our partners, managers and supervisors have been deeply involved in governmental audits on a continuous basis for most of their professional careers. By having direct partner and manager oversight, we can design audit strategies that result in effective and efficient audits. • Timeliness. Deadlines are not just "dates" to us, they are professional commitments. All required deadlines will be met. • Open communication. Open lines of communication with all parties (the engagement team members and City Management and staff) throughout the audit process helps to eliminate "surprises." Proper planning and proper use of experienced engagement personnel tend to provide for an effective and efficient audit process. Consequently, inefficiencies, disruptions, and lack of understanding are kept to a minimum. • Availability. All engagement team members are available throughout the year for any questions or additional consultation. City staff will have direct access to the partner, manager, and other supervisory staff at all times during the engagement, as well as after. • Cost effectiveness. Our customized audit approach and procedures and our experienced auditors help to reduce your overall audit costs while still providing an effective audit and high-quality reports. • Risk based approach. Our detailed risk assessment procedures will consist of activities performed to obtain an understanding of the City and its environment, including its internal control. Evidence from these activities will provide the basis for our assessment of risks of material misstatement at the financial statement and relevant assertion levels. While performing our risk assessment procedures and we may choose to perform further audit procedures concurrently with risk assessment procedures as deemed necessary. In addition, risk assessment procedures will provide some of the necessary evidence about the relevant assertions related to classes of transactions, account balances, or disclosures and about the operating effectiveness of controls. AICPA GAQC Member -1 6- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) As indicated in the previous section of the proposal, the overall objective of the engagement with the City is to conduct an audit of the financial statements in accordance with required auditing standards and the expression of an opinion(s) on those financial statements. Beyond that initial objective, we believe that our engagement approach provides certain other value-added characteristics, at no additional cost, that will benefit the City over the long-term: • All our audits are designed to be performed in an efficient and effective way to minimize disruption to the office operations. • We offer practical observations and recommendations relating to internal control issues, implementation of accounting standards and the policies and procedures regarding both. • We identify opportunities for operating efficiencies which can be used to decrease operating costs of the City. Audit approach and proposed audit segmentation The following is a summary of the audit team's audit approach for the engagement. The audit will be divided into the following segments: Segment 1 - Interim testing-planning, pre-audit administration, and internal control testing During this phase of the audit, our principal objectives will be to gather information about the City and its environment, including its internal control over financial reporting. In order to achieve the desired objectives of this phase of the audit, we will: • Meet with the City's staff in order to determine convenient dates in which we can begin our audit and to discuss the assistance to be provided by the City's staff. • Hold brainstorming sessions with engagement team members to discuss the susceptibility of the City's financial statements to material misstatement and fraud. • Review and evaluate the City's accounting and reporting processes by reviewing the prior year's audit workpapers, any City-prepared documents such as budgets, in-house financial reports, policies and procedures manuals, minutes of governance meetings, etc., and by using various analytical procedures. Analytical procedures will enhance our understanding of the City and will help us identify areas that may need further assessment and additional testing. • Review and retain copies of any pertinent local, state and federal statutes, regulations, or charters that apply to the City. • Evaluate the design of controls that are relevant to the audit by obtaining a thorough understanding of the City's internal controls over financial reporting and compliance by documenting key internal control components, utilizing questionnaires, walkthroughs, inquiring of the City's personnel, and observing and reviewing key supporting documentation (a more thorough explanation of this process is discussed later in the technical proposal). • Test controls, if control risk is to be assessed below maximum, by selecting a sample of transactions within the audit area being tested and reviewing supporting documentation to determine whether the relevant controls are in place and functioning properly. • Document and review with management, any findings noted during the testing of internal controls and provide a preliminary management letter that will include our recommendations for improving any weaknesses in operations. The letter will also include suggestions for improving the efficiency of the City's operations. AICPA GAQC Member -1 7- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) • Utilize our powerful audit data analytic software allowing us to analyze large amounts of data in seconds and focusing on areas/transactions that are red flagged. In addition, we will perform the following procedures related to IT General Controls that"touch"financial data: • Security access (including physical) controls: Evaluate the general system security settings and password parameters; evaluate the process for adding, deleting, and changing security access; evaluate the access capabilities of various types of users; evaluate access controls to networks and financial applications; evaluate access controls related to data files; and evaluate physical access to networks, servers, etc. • Computer operations: Evaluate backup and recovery processes and review processes of identifying and handling operational problems. • System development and system changes: Evaluate processes related to system development and system changes (if applicable). • Application testing: We will determine if the testing of application controls is deemed necessary based on our professional judgment in the planning stages of the engagement. This phase of the engagement for the audit will be performed by the audit supervisor and two/three staff accountants with direct supervision by the audit manager and partner. Segment 2- Year-end testing-substantive testing During this phase of the audit, our principal objectives will be to assess the risk of material misstatement at the financial statement level and specific assertions, design overall responses to assessed risks and further audit procedures, perform substantive tests, and complete the audit and evaluate audit findings, if applicable. In order to achieve the desired objectives of this phase of the audit, we will: • Identify significant risks and develop a detailed audit plan using the results in Segment 1. • Design substantive tests of account balances designed and modified specifically for the City's operations and assessed level of risk. Substantive procedures will consist of testing material balance sheet accounts, material revenue and expenditure/expense accounts along with various analytical procedures as deemed necessary. In addition, various accounts may be confirmed with outside parties (cash, investments, etc.). • Determine whether our testing supports the assessed level of risk initially assigned at the financial statement level and at the assertion level. This phase of the engagement for the audit will be performed by the supervisor accountant and two/three staff accountants with direct supervision by the audit manager and partner. If any proposed audit adjustments are noted during this phase, we will discuss and explain them, in detail, with the appropriate level of management prior to posting. AICPA GAQC Member -18- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Segment 3-Reoortinq-report preparation/audit conclusion (workpaper review) During this phase of the audit, our principal objectives will be to evaluate whether the financial statements, taken as a whole, are free from material misstatement and form an opinion(s) and issue our report. In order to achieve the desired objectives of this phase of the audit, we will: • Determine whether, based on our substantive testing and other procedures,the financial statements, taken as a whole, are free of material misstatement. This will provide the basis for our opinion(s). • Review all audit workpapers to ensure that the audit was performed in accordance with the required standards (GAAS, GAGAS, etc.)and prepare drafts of all required reports by the agreed-upon dates. • Conduct an independent review of the financial statement draft by the engagement's quality control partner and issue all reports by the agreed-upon dates. This phase of the engagement will be performed by the audit supervisor and one staff accountant with direct supervision by the audit manager and partner. In addition, the engagement's quality control partner will perform a detailed quality control review of the financial statements. The above procedures are a general list of procedures to be performed. After our initial review of the City and our detailed risk assessment, we will customize the engagement and gear it towards the needs of the City and the audit itself. In doing so,we will determine which procedures to perform relative to our risk assessment. All our audits are customized to each entity, helping to ensure a complete, effective, and efficient audit. The foundation of the above approach is based on open communication coupled with a strong knowledge of the City's operations and detailed planning at the initial stages of the audit. Our firm is dedicated to performing a timely audit engagement. Prior to the start of the audit, we will meet with City staff and decide on adequate timeframes, agreed upon by both the City and us, for the performance of the audit and the release of the financial statements. We will dedicate the necessary resources to meet any agreed upon time frames. Level of staff and approximate number of hours assigned to each segment 5 7 38 78 128 -• - 8 12 60 100 180 -• - 11 11 53 24 99 • . 24 30 151 202 407 Sample sizes (including for compliance testing) Our sample sizes will be determined in accordance with the AICPA's Audit and Accounting Guide, Audit Sampling, and will be selected using professional judgment or our Teaml Analytics software, depending upon circumstance, as permitted by Statement on Auditing Standards. Our methods are designed to provide the most audit coverage without expending excess time. Our sample sizes will depend upon our preliminary assessment of control risk, our planned substantive testing and analytical procedures as well as our professional judgement. AICPA ©© ° GAQC Member -19- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) We utilize our Computer Aided Audit Tools(CAAT)software, Teammate Analytics,to draw our audit samples. The software allows us to generate random samples, systematic samples, stratified samples, attributes samples as well as monetary unit samples (also called probability-proportional-to-size or dollar unit sampling). Intelligent audit technology Our audits are designed to be intelligent using our powerful audit software tools (Engagement and Teammate Analytics). In addition, all audit team members are linked to each other using wireless connections which enables them to share information at an almost real-time speed. Below are some of the benefits of our audit technologies: • We utilize Teammate Analytics, a suite of more than 200 dynamic Computer Aided Audit Tools (CAATs). This allows us to analyze large amounts of data in seconds. Using data received directly from the City, we can perform the following: search for duplicate checks, detect transactions occurring on holidays/weekends or during unusual hours, perform Benford's Law analysis, and identify instances when a vendor has issued multiple invoices with sequential references along with many other tests. The software empowers our audit teams with the ability to perform powerful, meaningful data analysis which will build upon our other value-added services. • We can create our own analytical schedules allowing for easy analysis of current balances to prior year balance, current vs budget balance, thus reducing significant City staff time. • Once your trial balances and financial statements are entered into our software, we can observe your financial statements in the field allowing us to notice any variances and address them immediately. • We link the financial statement schedules directly to our audit software trial balances, and as a result, we can provide the City with fund financial statements almost immediately after importing the trial balances. • We can provide the City with our audited trial balances which show the coding of the financial statement schedules for ease of review for City staff. These reports show each account coded to a specific financial statement line item/function as well as journal entries posted during the audit. • We have the capability to perform effective and efficient audits remotely as well. Analytical procedures In order to properly utilize analytical procedures, industry background and knowledge are needed. With our firm's long history and qualified staff, we believe we have the necessary knowledge and experience to effectively apply analytical procedures. We will utilize analytical review procedures throughout our audit of the City. • During the interim phase of our audit, we will compare current and prior year unadjusted balances to determine which areas may need additional analysis; we will also compare current year actual amounts to the City's annual budget (both original and adopted). • During the final phase of our audit, we will perform procedures like those mentioned above, as well as compare certain financial ratios for current and prior years. We will also conduct certain "reasonableness" tests. Any significant variances are investigated further through inquiry and other substantive testing as deemed necessary until resolved to our satisfaction. • Finally, after we have completed our fieldwork, we will compare current and prior year audited balances, keeping in mind expected relationships obtained from our knowledge of the City, similar entities and the general economic environment. In addition, we may choose to use various other analytical techniques such as trend analysis, etc. Unlike other audit firms, we use analytical procedures to supplement our substantive testing, not supplant them. AICPA MIN -k_ Mora_o r GAQC Member -20- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Understanding of internal control over financial reporting Our approach to obtaining an understanding of the City's internal control over financial reporting will be performed in accordance with professional standards as promulgated by the American Institute of Certified Public Accountants -- our understanding will include the Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. We will use customized procedures which we have developed internally to evaluate your internal control systems. By combining our customized procedures and our detailed knowledge of the City and its environment, we will be able to provide constructive feedback in areas we feel need improvement. In addition to our customized procedures, we will also perform the following: Control Environment. Through inquiry of the City's personnel, prompted by questionnaires, personal knowledge, and review of the minutes of the governing body meetings, we will obtain an understanding of management's and the governing body's attitudes, awareness, and actions concerning the control environment, focusing on the substance of the controls rather than their form. Risk Assessment. Through inquiry of the City's personnel and the use of questionnaires, we will obtain sufficient knowledge of the City's risk assessment process to understand how management considers risks relevant to financial reporting objectives and decides upon actions to address those risks. This will include understanding how management identifies risks, estimates the significance of these risks, assesses the likelihood of their occurrence, and relates them to financial reporting. Control Activities. Certain control procedures will be documented during our analysis of the control environment and the accounting system. However, many specific control procedures will still need to be documented that will focus primarily on the City's major transaction cycles. As mentioned above, we will test the City's control procedures on which we intend to rely on for safeguarding assets from unauthorized use or disposition and detecting/preventing unauthorized transactions. Any flow charts, organizational charts and any other manuals, programs, and financial and management information systems will be analyzed during this process. Information and Communication.Through inquiry of the City's personnel, we will identify the major types of transactions engaged in by the City.We will become familiar with the treatment of those transactions, including how the transactions are initiated, the related accounting records, and the manner of processing the transactions. Finally, we will obtain an understanding of the City's financial reporting process used to prepare financial reports, including the approaches used in making accounting estimates and disclosures. Monitoring. Through inquiry of the City's personnel and the use of questionnaires, we will obtain sufficient knowledge of the major types of activities the City uses to monitor internal control over financial reporting. We will also determine how those activities are used to initiate corrective actions. AICPA ©© ° GAQC Member -21- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Approach in determining applicable laws and regulations We understand the importance of laws and regulations in planning an audit of a local governmental entity and design all our audits to ensure we test transactions for compliance. As part of our audit process, our audit team will obtain an understanding of the laws and regulations that will have a direct and material effect on the City's financial statements. In determining which laws and regulations are applicable to the City's financial statement audit, we will consult the following sources: • AICPA Audit and Accounting Guide, Audits of State and Local Governments • California Government Code (investments, GANN limit requirements, etc.) • Applicable State of California laws • U.S. Government Accountability Office's Government Auditing Standards (The Yellow Book), latest revision • Applicable contracts/grants of the City • Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (OMB Uniform Guidance) After consulting the applicable sources, we will design our audit to provide reasonable assurance of detecting material instances of noncompliance while continuing to refer to the applicable compliance guideline to ensure changes in compliance are not missed. Effect of COVID-19 on our audits The COVID-19 pandemic led to most of our audits being performed remotely in 2022. We were highly flexible with our clients and were able to perform almost all our audits remotely unless the clients requested a limited staff presence on-site. No matter how the pandemic continues to develop in California, we are prepared and able to continue serving our clients remotely, and even on-site with the appropriate precautions. Auditing in a remote environment The availability and use of technology has had a significant impact on the accounting and auditing profession, allowing us to provide professional services across longer distances and more timely than ever before. We have continued to evolve our ability to serve our clients remotely throughout the COVID-19 pandemic and have experienced new efficiencies for both auditor and auditee. We anticipate continuing to perform substantially all our audit work remotely and will work with the City to maximize the remote efficiencies using technology. If the City would like members of the audit team on-site, we will work with City management on determining an acceptable staffing level. We maintain regular and routine contact with our clients throughout the audit planning, fieldwork, and conclusion phases of the audit with the use of email, phone calls, secure portals, video conferencing, project tracking schedules, and any other means necessary to ensure the timely completion of the audit by any agreed-upon deadlines. Our audit team is very responsive to our clients and we encourage our clients to connect with us throughout the year for any matters that may affect the audit or of a general accounting nature. We have found this to be mutually beneficial for both our clients and the annual audit work. Remote auditing has many benefits some tangible, as listed above, others intangible. In performing remote audits, we are bettering our employee's quality of life by reducing unnecessary travel time, reducing traffic congestion on our local freeways while also helping to improve Southern California's air quality. AICPA GAQC Member -22- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Specific audit approach (continued) Proposed audit timing Auditplanning • Auditor Segment transition: '• Segment Report Meet with Planninghnt6.,rnalSubstantive prior auditor • • • preparation/work to review paper workpapers. Entrance Anticipated timing of each segment • conference June October November/December to meet with • Obtain an understanding of • Perform substantive audit • Determine whether, based management systems, internal controls, fieldwork, including on our substantive testing for pre-audit and current-year issues. substantive analytical and other procedures,the planning. • Assess and evaluate design procedures. financial statements,taken • Preliminary and implementation of key • Consider whether audit as a whole, are free of risk internal controls(including evidence is sufficient to material misstatement. assessment IT related). form an opinion. • Review all workpapers. procedures. • Perform tests of internal • Conduct exit conference • Evaluate financial controls as needed. with management to statements and note • Identify control deficiencies discuss proposed entries, disclosures. • Perform detailed risk internal control issues, etc. . Perform final analytical assessment procedures. procedures. • Draft internal control • Draft required reports. comment letter. • Issue final required reports • Develop detailed audit plan by or before agreed upon -provide management with date. a detailed listing of items • Present to governing body needed to perform the audit, as needed. including the timing of when items are needed. AICPA © Rr'11E1111LICA«oUNrANr=.=110E1111 GAQC Member -23- CITY OF LAKE ELSINORE PROPOSAL FOR PROFESSIONAL AUDITING SERVICES Identification of anticipated potential audit problems Governmental Accounting Standards Board Statements (GASBS) implementation One potential problem could be the implementation of any future GASBS. With our deep understanding of governmental accounting and auditing, constant training, and broad resources, we do not anticipate any issues during a GASB implementation. Our approach to any GASB statement implementation would be as follows:gain a thorough understanding of the pronouncement; determine applicability to the City; if applicable, discuss the statement and how it will affect the City with City staff; and provide guidance to City staff on the accounting and financial reporting implications. Covid-19 considerations In addition, we will consider the following items related to the pandemic: • Any changes in internal control procedures due to District staff working remotely, staff reductions, including related IT changes. • Pandemic related grant funding (FEMA grants and CARES act funding received directly from the Federal government and amounts passed through from the State and/or counties). Condition of records Our proposed fee assumes the following: the City will be adequately prepared for the audit and the City's financial operations and working trial balance will be consistent from year to year. If, after we receive the working trial balances, we notice there are excessive new accounts over the prior year; or if there are excessive subsequent journal entries; prepared by client workpapers do not agree to the working trial balances, there are new funds/functions within the City, etc., or other changes that necessitate a significant amount of time to address, we will need to come to an agreed upon change order to address any possible additional costs incurred by the firm. If the need for additional work comes to our attention,we will immediately notify City staff. If you choose to have us perform the additional work, then such work will be performed at the same hourly rates applicable to the audit and set forth in an addendum to the contract between the City and our firm. Management is also responsible for the implementation of new standards issued by the Governmental Accounting Standards Board. We will provide reasonable assistance in the preparation of the items, but any significant time needed to complete the financial statements will be billed separately. Our proposed fee is also dependent on all items requested being completed in the format requested or in a mutually agreed upon format and uploaded to the Engagement Organizer hosted by our firm in a timely manner in accordance with the agree-upon audit timeline. AICPA GAQC Member -24- Attachment A GOVERNMENT CLIENTS SERVED CSM FO/ GFOA Successor Housing Government Client Years Served Awards Agency Authority City of El Cajon 06/30/07 to 06/30/22 Yes Yes Yes City of Exeter 06/30/17 to 06/30/22 City of Woodlake 06/30/17 to 06/30/22 Town of Yucca Valley 06/30/08 to 06/30/22 Yes Yes Yes City of La Verne 06/30/11 to 06/30/22 Yes Yes Yes City of San Jacinto 06/30/11 to 06/30/22 Yes Yes City of Twentynine Palms 06/30/11 to 06/30/22 Yes Yes Yes City of La Mesa 06/30/11 to 06/30/22 Yes Yes City of Menifee 06/30/14 to 06/30/22 Yes City of San Marcos 06/30/14 to 06/30/22 Yes Yes Yes City of Loma Linda 06/30/13 to 06/30/22 Yes Yes Yes City of Sierra Madre 06/30/12 to 06/30/22 Yes Yes Yes City of Hawthorne 06/30/16 to 06/30/22 Yes Yes Yes City of West Covina 06/30/16 to 06/30/21 Yes Yes Yes City of Aliso Viejo 06/30/16 to 06/30/22 Yes No No City of Claremont 06/30/16 to 06/30/22 Yes Yes Yes City of Thousand Oaks 06/30/18 to 06/30/22 Yes Yes Yes City of South Pasadena 06/30/18 to 06/30/22 Yes Yes City of Rolling Hills Estates 06/30/19 to 06/30/22 Yes City of Calabasas 06/30/20 to 06/30/22 Yes City of San Bernardino 06/30/20 to 06/30/22 Yes City of Ojai 06/30/20 to 06/30/22 City of Beaumont 06/30/20 to 06/30/22 Yes City of Moreno Valley 06/30/20 to 06/30/22 Yes City of Lawndale 06/30/20 to 06/30/22 Town of Windsor 06/30/19 to 06/30/22 City of San Dimas 06/30/21 to 06/30/22 City of Imperial Beach 06/30/21 to 06/30/22 City of Brawley 06/30/22 City of Live Oak 06/30/22 City of Perris 06/30/22 Yes Yes Yes City of Coachella Agreed upon procedures City of Canyon Lake Accounting support City of Rolling Hills Accounting support City of Yucaipa Accounting support City of Angels Camp Accounting support City of Grand Terrace Accounting support Crestline Village Water District 04/30/96 to 04/30/22 Crestline-Lake Arrowhead Water 06/30/98 to 06/30/22 San Bernardino Valley Muni Water District 06/30/04 to 06/30/22 Elsinore Valley Municipal Water District 06/30/15 to 06/30/22 Yes Pine Cove Water District 06/30/10 to 06/30/22 Idyllwild Water District 06/30/11 to 06/30/22 Big Bear Area Regional Wastewater 06/30/12 to 06/30/22 Yes Mojave Water Agency 06/30/19 to 06/30/22 Yes Beaumont Cherry Valley Water District 12/31/17 to 12/31/21 Yes Rosamond Community Services District 06/30/15 to 06/30/22 Rossmoor Community Services District 06/30/05 to 06/30/22 GOVERNMENT CLIENTS SERVED (continued) CSMFO/ GFOA Successor Housing Government Client Years Served Awards Agency Authority Rim of the World Park & Rec. District 06/30/06 to 06/30/22 Heartlands Communications Fac Auth 06/30/07 to 06/30/22 Heartlands Fire Training Authority 06/30/07 to 06/30/22 Consolidated Fire Agencies 06/30/14 to 06/30/22 Successor Agency to the County of SB 06/30/14 to 06/30/22 Riverside County Habitat Con. Agency 06/30/15 to 06/30/22 Santa Ana Watershed Association 12/31/09 to 12/31/20 Capistrano Bay Community Services District 06/30/13 to 06/30/22 Ventura County Public Fin Authority 06/30/12 to 06/30/22 Nipomo Community Services District 06/30/16 to 06/30/22 Yes SBIAA 06/30/17 to 06/30/21 WRCOG 06/30/17 to 06/30/21 Yes San Diego Workforce Partnership 06/30/16 to 06/30/22 Rubidoux Community Services District 06/30/16 to 06/30/22 Conejo Recreation and Park District 06/30/19 to 06/30/22 Upper San Gabriel Valley MWD 06/30/19 to 06/30/22 Yes March Joint Powers Authority 06/30/19 to 06/30/22 Chino Basin Desalter Authority 06/30/19 to 06/30/22 Yes Mountains Recreation and Conservation 06/30/19 to 06/30/22 Palos Verdes Peninsula Transit Authority 06/30/19 to 06/30/22 Yucca Valley Airport District 06/30/20 to 06/30/21 West Basin Municipal Water District 06/30/20 to 06/30/22 Yes Crestline Sanitation District Accounting support Running Springs Water District Accounting support Phelan Pinon Hills Community Services District Accounting support Attachment B Sample Provided By Client (PBC) Lists City prepared schedule request (electronic versions, if possible) Below is a standard list of prepared by client schedules. It is a broad, general list which will be specifically tailored to both the needs of the City and our firm. Interim request list 1. General items: a. Preliminary trial balances with current year budget and actual and prior year actual (preferably in Excel) b. Copy of the current budget c. Access to payroll related files and reports d. Copy of any significant employee contracts (city manager, department heads, etc) e. Non-payroll cash disbursements register (including checks and wire transfers) from 7/1/XX—current so that we can pick our sample for testing f. List of credit cards with names of those assigned g. Access to invoices and bank statements h. Access to cash receipts and supporting reports i. Access to minutes up to the date of our interim procedures j. Report showing top ten vendors and amount of annual purchases with each of these vendors k. Schedule of legal expenditures, also include attorney name, address and contact I. Both the accounting and funding PERS Actuarial Reports applicable for the current fiscal year m. Copies of any programmatic audits done throughout year(i.e.,gas tax audit, Measure A/I, etc.) 2. Perm file: a. Chart of accounts, if updated b. Employee listing c. Council member listing (include any finance type committees) d. Copy of bank signature cards/bank documents— if updated during the current year. e. Copy of insurance/bonding documents f. Copy of revenue agreements g. Personnel policies and procedures h. Accounting policies and procedures i. Copies of official statements of any newly issued or previously issued outstanding debt. 3. Cash and investments a. Copy of annually adopted investment policy b. The Treasurer's Reports from July 1 of the year under audit through the most current month c. Bank reconciliations through the end of the month of most current month d. Interest apportionment schedules, including journal entries e. Copy of bank signature cards/bank documents—if updated during the current year. 4. Single audit: a. Copies of notifications from agencies regarding previous year's single audit reports, if applicable b. Preliminary schedule of federal expenditures c. Grant documents and documentation (FEMA, CDBG, etc.). Attachment B (continued) Year end request list 1. Trial balances (all funds): a. Working trial balance—by fund and account b. Revenue and expenditure/expense summary reports (budget vs. actual)—by fund 2. General items: a. Updated list of current employees b. Copy of budget adjustments, preferably in excel, by fund c. List of credit cards with names d. Copy of prior year GFOA/CSMFO award comments, if applicable e. GANN limit calculation and approving resolution f. Schedule of vendors, including year to date payments g. Schedule of approved, posted journal entries, including closing entries and access to them h. Access to council meeting minutes 3. Cash and investments: a. Reconciliation of cash and investments lead schedule to bank reconciliation b. Detailed supporting schedules for cash and investments for footnote disclosure, including year-end credit ratings, etc c. June bank reconciliation for all bank and investment accounts, including a supporting list of outstanding checks and deposits in transit d. June investment report 4. Receivables: a. Lead schedule of accounts receivable b. Supporting documents for any allowance for doubtful accounts, if applicable c. Lead schedule for due from other governments with analysis of subsequent cash receipts d. Supporting schedule of accounts receivable with reconciliation to subsidiary ledger e. Aging report for accounts receivable f. Supporting schedule for interest receivable 5. Deferred inflows and outflows of resources: a. Lead schedule and supporting documents for deferred inflows and outflows of resources 6. Capital assets: a. Lead schedule of changes in capital assets and accumulated depreciation — by type b. Combining schedules of changes in capital assets and accumulated depreciation — by type (land, CIP, WIP, building, etc)with reconciliations to capital outlay and other supporting detail for additions and deletions c. Calculation of gain/loss on disposal of capital and other assets d. Depreciation schedules/detailed listings of capital assets at year-end (including original costs, useful lives, current and accumulated depreciation) 7. Fiduciary fund activity: a. Schedule of changes in funds 8. Prepaid costs and other assets: a. Lead schedule of prepaid costs— by fund Attachment B (continued) 9. Inter-fund activities: a. Lead schedule of due to/from other funds (with reasons for significant balances) b. Lead schedule of inter-fund transfers (with reasons for significant transfers) 10. Accounts payable: a. Lead schedule of accounts payable—by fund and account b. Supporting schedule of accounts payable with reconciliation to subsidiary ledger (detailed list by vendor) c. Supporting schedule of retentions payable— by fund and vendor d. Current OPEB information 11. Accrued liabilities: a. Lead schedule of accrued liabilities— by fund and account b. Supporting schedule of accrued payroll c. Analytical review of payroll accrual with reconciliation to subsequent payroll register 12. Long-term liabilities: a. Lead schedule of changes in long-term liabilities (including amounts due within one year) b. Supporting schedules of principal, interest and proceeds of debt—by fund c. Premium/discount amortization schedules d. Supporting schedule of master leases e. Supporting schedule of changes in comp. absences—by type and employee f. Supporting schedule of workers compensation/self insurance claims payable and fund balance designation g. Supporting schedule of interest payable 13. Lease commitments, if applicable: a. Schedule of lease commitments b. Schedule of leased assets, showing cost and accumulated depreciation c. Copy of lease agreement(s) 14. Analytical review: a. Preliminary analytical review of revenues and expenditures 15. Revenues and expenditures/expenses: a. Lead schedule of all significant revenues (property taxes, sales tax, etc) — by fund and accounts b. Lead schedule of interest revenue c. Interest allocation schedule 16. Budget and fund balance: a. Schedule of changes in budgeted revenues and expenditures— by fund b. Schedule of changes in budgeted transfers c. Fund balance reconciliation 17. Single audit, if required: a. Schedule of federal financial assistance b. Copies of grant agreements c. Schedule of all revenues recognized and deferred