PURPOSE    

To authorize staff to enter into a professional services agreement for the purpose of providing annual audit services for the fiscal years 2004-05 through 2008-09.

BACKGROUND     

During the 2000-01 fiscal year, the City Council retained KPMG LLP, Certified Public Accountants, to provide annual audit services to the City, and related entities.  The annual cost for the annual audit services rendered for the 2003-04 fiscal year was $84,900. 

At the Audit Committee meeting of July 20, 2004, staff was given direction to RFP for annual and internal audit services for 5 year agreements.  Additionally, direction was sought and received from the committee to allow the current auditors to participate in the RFP process.  Previous audit committee policy was to have a mandatory rotation of audit firms, but in doing so, eliminated the current firm�s participation in the process.

In September 2004, an Auditor Selection Committee (ASC) was formed, and issued a Request for Proposal (RFP) for audit services as directed by the Audit Committee. The ASC is comprised of the City Treasurer, the Assistant Financial Services Director, the BWP Assistant General Manager�Finance, and the Redevelopment and Enterprise Fund Senior Accountant.  The RFP�s were distributed to 11 different CPA firms.

The RFP for the annual audit requested an audit for the City, the Redevelopment Agency, the Water and Electric Utility, and all other related entities of the City, plus 100 hours of management consultation. Prior audit services provided to the City of Burbank have traditionally included management consulting time to assist the City in researching various financial areas such as redevelopment, employee benefit issues, and other accounting issues as they arise. 

ANALYSIS

The annual RFP was mailed to 11 different independent certified public accounting firms. Six responses were received for the annual audit, and were subsequently evaluated by the ASC.  The proposals were evaluated in three phases.  The first phase was to rate the CPA firms based on technical qualifications.  The top four scores were then rated on price component.  The technical qualifications comprised 70% of the final score.  This was combined with the second phase of the evaluation, which was based on the proposed fee, which was weighted at 30% of the total score.

Below is a recap of the final composite scores as rated by the ASC for the annual audit:

          1.  McGladrey and Pullen                    362

          2.  KPMG                                              344

          3.  Conrad & Associates                    328

          4.  Macias Gini & Company               258

The ASC dropped Macias Gini & Company from consideration as their fee quote was more than double the next highest firm�s fees.  Interviews were then set up with the top three firms and the ASC.  This process was used to meet the partners and managers of each firm, discuss their approach to performing the audit, and judge what value their firm can bring to the City of Burbank.  After the interview process, KPMG was then dropped from consideration.  Even though the ASC rated them the highest in the technical portion, their proposed fee increase of 79% over their current contract was deemed unacceptable. 

Subsequent to the interviews, numerous City and Utility references given by the two remaining firms were reviewed by the ASC.  The ASC met again and discussed all the pros and cons, and based on the scoring, the interviews, and the reference checks, came to a conclusion and recommendation.  At the January 25, 2005 meeting of the City Council Audit Committee, the ASC recommended that the City engage Conrad and Associates, LLP, to provide annual audit services.  The audit committee approved the recommendation.

FISCAL IMPACT

Fees for the annual audit are not to exceed $81,279 for FY 2004-05, $83,312 for FY2005-06, $85,394 for FY 2006-07, $87,529 for FY 2007-08 and $89,718 for FY 2008-09. The cost of the proposed agreement between the City of Burbank and Conrad and Associates, LLP will be budgeted within the Financial Services Department budget.  The contract is proposed to commence April 15, 2005. 

RECOMMENDATION

Approve a resolution of the Council of the City of Burbank approving the professional services agreement between the City of Burbank and Conrad and Associates, LLP.

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