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Report regarding a resolution to amend the Professional Services Agreement with Maze and Associates Authorizing a Two-Year Contract Extension for Professional Audit Services for Fiscal Years 2020-21 and 2021-22 (Paul Harris, Financial Services Manager)
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RECOMMENDATION
Recommendation
It is recommended that the City Council adopt a Resolution approving a second amendment to the Consulting Services Agreement with Maze & Associates (“Maze”) authorizing a two-year contract extension for professional audit services for Fiscal Year (“FY”) 2020-21 and FY 2021-22.
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BACKGROUND/DISCUSSION
In February of 2016, the City Council approved Resolution 31-2016 for a three-year Consulting Services Agreement (plus an option to renew for two additional fiscal years) with Maze for independent auditing services for FYs 2015-16, 2016-17 and 2017-18 in the amount of $79,285 per year. The original agreement expired upon the completion of the FY 2017-18 financial audits. In June 2018, an amendment exercising the option to renew for two years through the financial audit of FY 2019-20 was signed. This amendment expires with the FY 2019-20 financial audit and related services.
The Government Finance Officers Association (“GFOA”) recommends that all governmental agencies enter into multi-year audit services agreements of at least five years in duration. Multi-year agreements allow for greater continuity and helps minimize the potential for disruption in connection with the independent audit. In addition, multi-year agreements can also help to reduce audit costs by allowing auditors to recover certain “start-up” costs over several years, rather than over a single year.
Under normal circumstances, staff would have sought new bids from audit firms in the first quarter of this year as the original contract (three years plus two-year exercised option) approached expiration. However, due to the COVID-19 emergency and several vacancies within the Finance department, the process was delayed. In an effort to ensure continuity of service, Maze offered to extend the agreement for the same services at the FY2019-20 rate for the next two years (see Attachment 1). By keeping the fees at the same rate, it would help the City keep expenses consistent during these uncertain times. If the City were to issue a Request for Proposal (“RFP”) for new bids and a new firm was selected, the costs could be considerably higher for the first year as firms typically charge for initial “start-up” costs. If this second amendment is approved, staff plans to issue an RFP towards the end of this additional term.
Given GFOA’s recommendation, coupled with Maze’s continuing ability to perform a quality and detailed audit while remaining committed to accepted government audit practices, staff recommends an additional two-year contract extension. The normal annual audit process requires significant time and effort from staff in corresponding with auditors, providing financial data and samples for testing, and organizing onsite visits for auditor fieldwork. Development of the working relationship with Maze has allowed Maze to thoroughly learn and understand the City’s processes and ways of working that results in more time focused on auditing the data and less time building required background knowledge, and has allowed staff to achieve efficiencies in the audit process thereby reducing the time commitment involved. An extension will allow the efficiencies to continue and maintain focus on the financial data.
In addition, in light of the novel coronavirus (COVID-19) pandemic, the Government Accounting Standards Board (“GASB”) has postponed the effective dates of certain GASB authoritative guidance statements by one year to help provide relief to governments. Some of these affect the City, such as GASB 84 - Fiduciary Activities, and GASB 87 - Leases, and are due to come into effect for FY2020-21 and FY2021-22 reporting, respectively. Maze has performed some preliminary work with the City on implementation of the new guidance and staff believes it prudent and beneficial to maintain continuity in this work through extension of this contract. Since implementation of this guidance into the City’s accounting and reporting procedures will require additional work outside the usual contracted audit scope, it will be chargeable at the applicable hourly rates. The extent of work required, if any, will be known once further discussions with staff have occurred.
Therefore, staff recommends amending the Maze agreement approving a two-year contract extension (Attachment 2) to keep the consistency through the financial audits of FY 2020-21 and FY 2021-22.
FISCAL IMPACT
Annual fees for continued audit services will be $79,285 per year for a total of $158,570 for the two-year extended term. Additional fees, charged at Maze’s standard hourly rates may be incurred for implementation of the new GASB accounting standards depending on the degree of applicability to the City and only upon mutual agreement by both parties. Fees for all City’s services provided by Maze will be included in the operating budget and no additional appropriations are needed at this time.
Attachment
1. Maze & Associates Engagement Letter