Staff Report
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 05/16/2017
ITEM NO: 4
DATE: MAY 10, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: AUDITING SERVICES
A. AUTHORIZE TOWN MANAGER TO EXECUTE AGREEMENT WITH BADAWI
AND ASSOCIATES, CERTIFIED PUBLIC ACCOUNTANTS TO PROVIDE
AUDITING SERVICES FOR THE TOWN OF LOS GATOS WITH ANNUAL AUDIT
FEES NOT TO EXCEED $29,870 FOR FISCAL YEAR ENDING 2016/17, $30,760
FOR FISCAL YEAR ENDING 2017/18, AND $31,665 FOR FISCAL YEAR
ENDING 2018/19.
B. AUTHORIZE TOWN MANAGER TO EXECUTE AGREEMENT WITH BADAWI
AND ASSOCIATES FOR OPTIONAL SERVICES NOT TO EXCEED $2,145 FOR
FISCAL YEAR ENDING 2016/17, $2,415 FOR FISCAL YEAR ENDING 2017/18,
AND $2,600 FOR FISCAL YEAR ENDING 2018/19.
RECOMMENDATION:
Staff recommends that the Town Council:
1. Authorize Town Manager to execute agreement with Badawi and Associates, Certified
Public Accountants to provide auditing services for the Town of Los Gatos with annual
audit fees not to exceed $29,870 for fiscal year ending 2016/17, $30,760 for fiscal year
ending 2017/18, and $31,665 for fiscal year ending 2018/19;
2. Authorize Town Manager to execute agreement with Badawi and Associates for
optional services not to exceed $2,145 for fiscal year ending 2016/17, $2,415 for fiscal
year ending 2017/18, and $2,600 for fiscal year ending 2018/19.
PAGE 3 OF 3
SUBJECT: AUTHORIZE TOWN MANAGER TO EXECUTE AGREEMENT WITH BADAWI AND
ASSOCIATES, CERTIFIED PUBLIC ACCOUNTANTS TO PROVIDE AUDITING
SERVICES FOR THE TOWN OF LOS GATOS
DATE: MAY 10, 2017
S:\COUNCIL REPORTS\2017\05-16-17\Auditor Contract\Staff Report FINAL.docx 5/11/2017 1:09 PM SLL
BACKGROUND:
For the past five years, the Town’s annual audits were completed by Chavan and Associates,
LLP. Consistent with Governmental Accounting Standards Board best practices and State law, it
is the Town’s practice to solicit audit proposals every five years to ensure audit independence
and competitive prices. If the Town is satisfied with the current audit firm’s work, then that
firm may submit a proposal but must propose with an alternate audit engagement partner.
DISCUSSION:
The Town of Los Gatos sent Requests for Proposals (RFP) to qualified independent certified
public accounting firms to audit its financial statement for three fiscal years (FY 2016/17,
2017/18, and 2018/19), with an option to extend the agreement an additional two fiscal years
with Town Council approval. The RFP was sent to eleven qualified firms known to provide local
government auditing services to Bay Area cities. Six firms responded with proposals: Maze and
Associates; Vavrinek, Trine and Day; Chavan and Associates; Moss Levy; R.J. Riccardi, Inc; and
Badawi and Associates.
A review panel consisting of the Town’s Finance Director, Finance and Budget Manager,
Accountant, and Interim Assistant Town Manager scored the six proposals. The firms were
evaluated based on their technical expertise with local government audits, qualified personnel,
and responsiveness to the RFP. These qualities were weighted at seventy percent and fees
weighted at thirty percent. The cost for audit services were submitted in sealed envelopes and
not opened until after the proposals were scored on the basis of technical expertise, local
government experience, and responsiveness. Based on this analysis, three firms (Varinek, Trine
and Day, Maze and Associates, and Badawi and Associates) were selected to participate in an
interview.
Based upon the proposals, interviews and reference checks, Town staff has selected the firm of
Badawi and Associates. The engagement partner is Mr. Ahmed Badawi, who has twenty years
of municipal auditing and accounting experience. He is an instructor for the California Society
of Municipal Finance Officers and a member of the California Certified Public Accountant (CPA)
Government Accounting and Auditing Committee, Accounting Principles and Auditing Standards
Committee and the Technology Committee. The firm’s current audit client list includes City of
Berkeley, City of Millbrae, City of San Mateo, City of Redwood City, and City of Menlo Park
amongst a list of 24 California cities that are audited by Badawi and Associates.
PAGE 3 OF 3
SUBJECT: AUTHORIZE TOWN MANAGER TO EXECUTE AGREEMENT WITH BADAWI AND
ASSOCIATES, CERTIFIED PUBLIC ACCOUNTANTS TO PROVIDE AUDITING
SERVICES FOR THE TOWN OF LOS GATOS
DATE: MAY 10, 2017
S:\COUNCIL REPORTS\2017\05-16-17\Auditor Contract\Staff Report FINAL.docx 5/11/2017 1:09 PM SLL
DISCUSSION (cont’d):
The firm will provide the following services for the Town:
The annual audit of the basic financial statements in accordance with Governmental
Accounting Standards and preparation of the Town’s Comprehensive Annual Financial
Report;
A report communicating information related to the audit to those in charge of
governance (Town Council) at the conclusion of the audit;
A management letter containing any comments or recommendations resulting from
the review of systems of internal controls in connection with the financial audit;
A Single Audit for grant funding if required under the Title 2 U.S. Code of Federal
Regulations;
Optional services including the preparation of the annual report of financial
transactions to the State Controller.
FISCAL IMPACT
Sufficient funds for audit services are included in the Town’s proposed FY 2017/18 Operating
and Capital Budget.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachments:
1. Agreement to provide auditing and optional services with Badawi and Associates.