Request for Proposals (RFP) to Provide Auditing Services

March 2016 Request for Proposals (RFP) to Provide Auditing Services Proposals due no later than 5:00 p.m. on April 7, 2016 Monte Vista Water District 10575 Central Avenue Montclair, California 91763 1

1.0 PURPOSE The Monte Vista Water District (District) is requesting proposals from qualified certified public accounting firms to audit its financial statements for the fiscal years ending June 30, 2016 through 2018, with the option of auditing its financial statements for subsequent years (Project). These audits are to be performed in accordance with generally accepted auditing standards and the standards set for financial audits contained in Governmental Auditing Standards (2011) issued by the Comptroller General of the United States, the provisions of the Federal Single Audit Act as amended in 1996, and U.S. Office of Management and Budget (OMB) Circular A-133 Audits of States, Local Governments, and Non-Profit Organizations. This RFP describes the Project, the required scope of services, the minimum information that must be included in the Proposal, and the selection process. 2.0 BACKGROUND INFORMATION The District, a county water district formed in 1927, provides retail and wholesale water supply services to more than 133,000 individuals residing within the communities of Montclair, Chino, and Chino Hills in western San Bernardino County, California. We are proud of our role in providing high quality, reliable, and cost-effective drinking water and non-potable irrigation water to the communities we serve. The District is governed by a Board of Directors comprised of five members elected at large within the District s retail service territory. The District currently has 33 full-time employees who work in the areas of engineering, operations, maintenance, field service, customer service, billing, finance, human resources, public affairs, and administration. More information about the District can be found on our website, www.mvwd.org. The District has three blended component units with a June 30 year-end. Accordingly, the Monte Vista Water District, the Monte Vista County Water Facilities Corporation (Water Facilities Corporation), and the Monte Vista Irrigation Company (Irrigation Company) are presented as blended component units of the District. 2.1 BASIS OF ACCOUNTING AND FUND STRUCTURE The reporting entity of the District includes the Irrigation Company and the Water Facilities Corporation because the District s Board of Directors sits as the Board of Directors for both of these entities and both are dependent on District staff for record keeping and financial reporting activities. The District uses the following fund types and account groups in its financial reporting: 2

Proprietary Fund Types Enterprise Funds (1 fund) The District may make additions to and/or deletions from this list and to the component units included in the reporting entity as deemed necessary. 2.2 AVAILABILITY OF PRIOR REPORTS AND WORK PAPERS Fedak & Brown, LLP in Cypress, California conducted the District s most recent audit. The work papers of the previous audits are the property of the previous auditor and can be reviewed by the successful proposer. The following financial statements were prepared by Fedak & Brown, LLP for the fiscal year ending June 30, 2015: 1) The District Comprehensive Annual Financial Report 2) A Single Audit Report 3) Financial Statements for the Irrigation Company 4) Financial Statements for the District and the Water Facilities Corporation 5) The California State Controller s Report for both the District and the Water Facilities Corporation 6) Federal Form 990 and California Form 199 for both the District and the Water Facilities Corporation 3.0 BUDGET Funds have been and will continue to be budgeted for this Project. 4.0 SCOPE OF WORK The District s goal is to provide the public and our constituents with a financial statement that gives complete, accurate and understandable information about the District s financial condition. The selected independent auditor will be required to perform the following tasks: 1) Assistance in the creation and audit of the General Purpose Financial Statements of the District in conformity with generally accepted accounting principles and issue an opinion thereon. Further assistance in the completion of the District s Comprehensive Annual Financial Report. 3

2) Assistance in the creation and audit of the Component Unit Financial Statements of the Irrigation Company and the Water Facilities Corporation. 3) Test compliance with the Single Audit Act as amended in 1996, and applicable laws and regulations. 4) Prepare a Report on Internal Control Structure and Management Letter. 5) Test compliance with Proposition 111, Article XIII.B Review of Appropriation Limit Calculations. 6) Completion of the State Controller s Report for the District and the Water Facility Corporation. 7) Completion of the Federal Form 990, Return of Organization Exempt from Income Tax for the District, the Water Facilities Corporation, and the Irrigation Company. 8) Completion of the State of California Form 199, California Exempt Organization Annual Information Return for the District, the Water Facilities Corporation, and the Irrigation Company. 9) The firm selected may also be asked to examine other reports or perform other services as required. 4.1 AUDITING STANDARDS TO BE FOLLOWED To meet the requirements of this request for proposal, the audit shall be performed in accordance with: 1) Generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants 2) The standards applicable to financial audits contained in Government Auditing Standards (2011 Revision), issued by the Comptroller General of the United States 3) The provisions of the Single Audit Act as amended in 1996 4) The provisions of the U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. 4

4.2 REPORTS TO BE ISSUED Following completion of the audit and preparation of the fiscal year s financial statements, the auditor shall issue: 1) Reports on the fair presentation of the financial statements in accordance with auditing standards generally accepted in the United States of America as listed below: a. General Purpose Financial Statements for the District b. Component Unit Financial Statements for the Irrigation Company c. Component Unit Financial Statements for the Water Facility Corporation These reports shall include Required Supplemental Information (RSI) as required by GASB #34. 2) A report based on the auditor s understanding of the internal control structure and assessment of control risk. In this report, the auditor will also communicate any reportable conditions found during the audit and indicate whether they are also material weaknesses (see #4 below for related item). 3) A Management Letter addressed to the Board of Directors of the District setting forth recommendations (as applicable) for improvements in the District s accounting systems. 4) The auditor shall communicate in a letter to the General Manager and the Manager of Finance and Administration any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization s ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Non-reportable conditions discovered by the auditor shall be communicated in the Management Letter. 5) A report on the District s compliance with Proposition 111, Article XIII.B of the California State Constitution and Government Code 7900 (et seq.) in its calculation of the Gann Limit. 6) Auditors shall be required to make immediate, written notification to the General Manager and the Manager of Finance and Administration of all irregularities and illegal acts or indications of illegal acts of which they become aware. 5

4.3 OTHER COMMUNICATIONS The independent auditor shall make all communications to the Finance Committee required by the audit standards under which the engagement is performed. Those communications include, but are not limited to: 1) The auditor s responsibility under generally accepted auditing standards 2) Significant accounting policies 3) Management judgment and accounting estimates 4) Significant audit adjustments 5) Other information in documents containing audited financial statements 6) Disagreements with management 7) Management consultation with other accountants 8) Major issues discussed with management prior to retention 9) Difficulties encountered in performing the audit 10) Errors, irregularities and illegal acts The independent auditor must be available to present the audit plan prior to beginning fieldwork. In addition, the independent auditor must be available to present all final reports to District management and the Board of Directors as requested. 4.4 WORKING PAPER RETENTION AND ACCESS TO WORKING PAPERS All work papers and reports must be retained, at the auditor s expense, for the minimum of five years (or the retention timeframe established by the professional standards, whichever is longer) unless the firm is notified in writing by the District of the need to extend the retention period. The work papers are subject to review by federal and state agencies and other individuals designated by the District. Accordingly, the work papers shall be made available upon request. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review work papers. 6

4.5 JOURNAL ENTRIES All adjusting journal entries made by the independent auditors must be discussed and explained to the designated Finance Department personnel prior to recording. They should be in a format that shows the lowest level of posting detail needed for data entry in the general ledger systems. 4.6 DATE AUDIT MAY COMMENCE The District will have all prior records ready for review and management personnel available to meet with the firm s personnel after May 1, 2016. The District anticipates that the selected firm will perform preliminary audit work and internal control review prior to June 30, 2016. Accounting records will be ready for final audit by or before September 15, 2016. Changes in time requirements for commencement of work to completion of final reports must be approved by the District in advance. 4.7 DATE REPORT IS DUE The final reports are due by October 31, 2016. The due date for subsequent years is also October 31 st (4 months following the fiscal year end). 4.8 ASSISTANCE TO BE PROVIDED TO THE AUDITOR The finance department staff and responsible management personnel will be available during the audit to assist the firm by providing information, documentation, and explanations. Ray L. Harton, Manager of Finance & Administration, will be responsible for acting as the liaison between the audit firm and the accounting personnel. Consideration must be given to the ongoing tasks of the Finance Department. The District will provide the auditor with a reasonable workspace, access to telephone lines, photocopying facilities and a fax machine. 4.9 REPORT PREPARATION The District s auditor is responsible for compiling the number portion of the financial statements and electronically providing this information to the District. The auditor is also responsible for preparing the accompanying footnotes, the final check of the number presentation and printing the final reports, including the District s Comprehensive Annual Financial Report. 7

The District is open to discussions regarding the division of these activities in order to produce the most cost-effective product for both the District and the auditor. In order for the District to properly evaluate the cost of the report preparation process, your cost proposal should include report preparation as if the auditor prepares the financial statements in their entirety. 5.0 SUBMITTAL REQUIREMENTS 5.1 QUESTIONS Any questions regarding this proposal or additional information required by the respondents should be directed to: Ray L. Harton Manager of Finance and Administration Monte Vista Water District 10575 Central Avenue Montclair, CA 91763 rharton@mvwd.org (preferred method) Phone: (909) 267-2110 Fax: (909) 267-2110 5.2 ACCEPTANCE OF SUBMITTALS The proposer must submit three (3) hard copies of the Proposal to: Ray L. Harton Monte Vista Water District 10575 Central Avenue Montclair, CA 91763 The Proposal must be submitted in two distinct and separate parts: Submission of Technical Proposal. An original and three (3) copies of the Technical Proposal shall be received by 5:00 p.m. on Thursday April 7, 2016 for a Proposal to be considered. The requirements of the Technical Proposal are described below. Submission of Cost Proposal. An original and three (3) copies of the Cost Proposal shall be received by 5:00 p.m. on Thursday April 7, 2016 under separate cover in a sealed envelope to be considered. The requirements of the Cost Proposal are described below. 8

Proposals received after the Proposals Due date and time listed above and on the first page of this RFP will not be considered. Postmarks will not validate proposals which arrive after the cut-off time listed above. It is the proposer s sole responsibility to ensure that their proposal is received at the proper place and at the proper time. 5.3 PROPOSAL CALENDAR The following is a list of key dates in the review and approval process for submissions: March 10, 2016 RFP issued April 7, 2016 Due date for Technical and Cost Proposals (due by 5:00 p.m.) April 19, 2016 Finance Committee Review April 27, 2016 Firm Selection to Board for Approval April 28, 2016 Contract awarded 5.4 FORMAT FOR TECHNICAL PROPOSAL The format of the Technical Proposal shall be as follows: 1) Title Page Show the RFP subject, name of the audit firm, local address, telephone number, name and title of contact person, and date of submission. 2) Table of Contents Include a clear and complete identification of the materials submitted by section and page number. Cross-referencing to section and page number in the RFP would be helpful. 3) Transmittal Letter General introduction briefly stating the proposer s understanding of the audit services to be performed; a positive commitment to perform the service within the time period specified; and the name(s) of the person(s) authorized to represent the proposer, title, address, and telephone number. 9

4) Detailed Proposal The detailed Technical Proposal should follow the format set out below. 5.5 CONTENTS OF TECHNICAL PROPOSAL The purpose of the Technical Proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of the District in conformity with the requirements of this RFP. As such, the substance of Proposals will carry more weight than their form or manner of presentation. The Technical Proposal should demonstrate the qualifications of the firm and of the particular staff to be assigned to this engagement. It should also specify an audit approach that will meet the RFP requirements. THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE TECHNICAL PROPOSAL DOCUMENT. The Technical Proposal should address all the points outlined in the RFP (excluding any cost information which should only be included in the sealed dollar cost bid). The proposal should be prepared simply and economically, providing a straightforward, concise description of the proposer s capabilities to satisfy the requirements of the RFP. While additional data may be presented, the areas detailed below must be included. They represent the criteria against which the Proposal will be evaluated. 1) License to Practice in California. An affirmative statement should be included that the firm and all assigned key professional staff are properly licensed to practice in California. 2) Independence The firm should provide an affirmative statement that it is independent of the District as defined by generally accepted auditing standards/the U.S. General Accounting Office s Government Auditing Standards. 3) Insurance Attached to the RFP is a draft copy of the District s Professional Services Agreement (Agreement) that contains District insurance requirements. The selected firm will maintain the minimum insurance requirements during the entire term of their engagement. 10

To confirm this requirement, within 15 days from the execution of the Agreement the selected firm shall furnish the District satisfactory evidence of the insurance requirement and evidence that each carrier is required to give at least 30 days prior written notice of the cancellation of any policy during the effective period of the Agreement. The District shall be named as an additional named insured under the selected firm s policies as noted in the Agreement. 4) Firm Qualifications and Experience a) To qualify the firm must have extensive experience in audits of local governments. The proposer should state the size of the firm, the size of the firm s governmental audit staff, the location of the office from which the work on this engagement is to be performed, the number and nature of the professional staff to be employed in this engagement on a full-time basis, and the number and nature of the staff to be so employed on a part-time basis. If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. If the proposer will be subcontracting any portion of the audit to another individual or firm, the proposal must include a list of all subcontractors to be used. No substitutions of subcontractors may be made without prior written consent of the District. b) The proposer is also required to submit a copy of the report on its most recent external quality control (peer) review, with a statement whether that quality control review included a review of specific government engagements (required by Government Audit Standards (2011)). The proposer shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the proposer shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations. 11

5) Partner, Supervisory and Staff Qualifications and Experience a) Identify the principal supervisory and management staff, including engagement partners, managers, and other supervisors and specialists, who would be assigned to the engagement and indicate whether each such person is licensed to practice as a certified public accountant in California. Also, provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. b) Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. Indicate how the quality of staff will be assured over the term of the Agreement. c) Principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists may be changed during the course of the agreement; however, the District reserves the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience. 6) Similar Engagements with Other Government Entities For the firm s office that will be assigned responsibility for the audit, list the most significant engagements (maximum 3) performed in the last three years that are similar to the engagement described in this request for proposal. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. Also, please indicate whether the audit was part of a Comprehensive Annual Financial Report. Please provide a list of not less than three client references for which services similar to those outlined in this RFP are currently being provided. For each reference listed provide the name of the organization, approximate gross cost of the contract, dates for which the service(s) are being provided, type of service(s) being provided and the name, address and telephone number of the responsible person within the reference s organization. The District reserves the right to contact any or all of the listed references regarding the audit services performed by the proposer. 12

7) Specific Audit Approach The Proposal should set forth a work plan, including an explanation of the audit methodology to be followed to perform the services required in Scope of Work section of this RFP. Proposers will be required to provide the following information on their audit approach: a) Proposed segmentation of the engagement b) Level of staff and number of hours to be assigned to each segment c) Sample sizes and extent of the use of statistical sampling techniques d) Extent of use of EDP in the engagement e) Type and extent of analytical procedures to be used in the engagement f) Approach to be taken in determining laws and regulations that will be subject to audit test work g) Approach to be taken to gain and document an understanding of the District s internal control structure h) Approach to be taken in drawing audit samples for purposes of tests of compliance 8) Identification of Anticipated Potential Audit Problems The proposer should identify and describe any anticipated potential audit problems, the firm s approach to resolving these problems, and any special assistance that will be requested from the District. 9) Report Format The proposer should include sample formats for required reports. NO DOLLAR AMOUNTS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL 5.6 CONTENTS OF COST PROPOSAL 1) Total All-Inclusive Maximum Price The sealed Cost Proposal should contain all pricing information relative to performing the audit engagement as described in the request for proposal. 13

The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of-pocket expenses. The District will not be responsible for expenses incurred in preparing and submitting the Technical Proposal or the sealed Cost Proposal. Such costs should not be included in the Proposal. The first page of the sealed dollar cost bid should include the following information: (a) name of firm; (b) certification that the person signing the proposal is authorized to represent the firm, empowered to submit the bid, and authorized to sign a contract with the District; and (c) a total all-inclusive maximum price for each year of the engagement (5-year total proposal). 2) Rates by Partner, Supervisory and Staff The Cost Proposal should include detailed information regarding the estimated number of hours to be dedicated to the District s engagement, delineated by staffing level. 3) Manner of Payment Progress payments will be made on the basis of pro-rated audit work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm s proposal. 6.0 INTERVIEW AND EVALUATION PROCESS 6.1 INTERVIEWS/PRESENTATIONS During the evaluation process the Finance Committee and/or the District Manager reserve the right where it may serve in the District s best interests, to request additional information or clarifications from the proposers. At the discretion of the District, firms submitting proposals may be requested to make oral presentations as part of the evaluation process. 6.2 EVALUATION PROCESS 1) Audit Committee An audit committee will evaluate proposals submitted. 14

2) Evaluation Methodology The audit committee will use a point formula during the review process to score proposals. Each member of the audit committee will first score each technical proposal by each of the criteria described below. The full audit committee will then convene to review and discuss their evaluations and to combine the individual scores to arrive at a composite technical score for each firm. At this point, firms with an unacceptably low technical score will be eliminated from further consideration. 3) Evaluation Criteria Proposals will be evaluated using three sets of criteria. Firms meeting the mandatory criteria will have their proposal evaluated and scored for both technical qualifications and price. The following represent the principal selection criteria that will be considered during the evaluation process. a. Mandatory Elements i. The audit firm is independent and licensed to practice in California ii. The firm has no conflict of interest with the District iii. The firm follows the instructions set forth in the RFP iv. The firm submits a copy of its last external quality (peer) review report and the firm has a record of quality audit work b. Technical Quality Point Range i. Responsiveness of the proposal is clearly stating and understanding of the work to be performed 0-15 ii. iii. Technical experience of the firm and references responses Qualification of staff; education to include continuing education courses taken over the past three years, position in the firm and years of experience will be considered (include staff résumés) 0-35 0-35 iv. Size and structure of firm and other considerations 0-15 TOTAL MAXIMUM POINTS 100 15

6.3 SELECTION OF FIRM The District will select a firm based upon the recommendation of the audit committee. It is anticipated that a firm will be selected by April 27, 2016. Following notification of the firm selected, it is expected a contract will be executed between both parties within 15 days from notification. 7.0 GENERAL TERMS AND CONDITIONS 7.1 TERM OF ENGAGEMENT It is the intent of the District to contract for the services presented herein for a term of three (3) years. The District reserves the right to extend the term of this contract for additional one-year terms subject to the annual review and recommendation of the Finance Committee, the satisfactory negotiation of terms (including a price acceptable to both the District and the selected firm), and the concurrence of the Board of Directors of the District. 7.2 REJECTION OF PROPOSALS The District reserves the right to reject any and all Proposals received in response to this RFP and to waive any informality in any Proposal if it is determined to be in the best interest of the District to do so. The District shall not be responsible for any proposer s costs incurred in preparation and submittal of their Proposals nor in the selection process. 7.3 PROPOSAL VALIDITY PERIOD Submission of a Proposal will signify the proposer s agreement that the Proposal, and contents thereof, are valid for at least ninety (90) days following the submission of the Proposal and shall become part of the Professional Services Agreement that is negotiated with the successful proposer. 7.4 SUBSTITUTION OF KEY PERSONNEL Should one or more of the key personnel represented in the Proposal become unavailable during the course of the Project, the proposer may substitute other personnel of at least equal competence upon written approval of the District. In the event that the District and proposer cannot agree as to the substitution of key personnel, the District shall be entitled to terminate the Professional Services Agreement with the proposer. 16

7.5 REVIEW OF RELATED DOCUMENTS Proposers are urged to become thoroughly familiar with related document and background information affecting their Proposal. Failure to make such investigations will not constitute grounds for additional claims or for extension of time under the Professional Services Agreement and will not relieve the proposer of the responsibility for meeting all requirements of the RFP. 7.6 DOCUMENTS TO BE CONSTRUED TOGETHER The RFP and all documents incorporated by reference in a Professional Services Agreement entered into between the proposer and the District, and all modifications of said documents, shall be construed together as one document. 7.7 MINIMUM INSURANCE REQUIREMENTS The proposer shall maintain, at a minimum, the insurance requirements specified in the District s standard Professional Services Agreement (attached). 7.8 EXTRA WORK OR MATERIALS The District shall have the right to make alterations, eliminations and additions in the work. Exercise of such right shall in no way void the Professional Services Agreement. The District and the proposer shall agree upon the value of such extra work. 7.9 RETENTION OF PROPOSALS The District reserves the right to retain all Proposals submitted and to use any ideas in a proposal regardless of whether the Proposal was selected. Submission of a Proposal indicates acceptance by the firm of the conditions contained in this RFP, unless clearly and specifically noted in the Proposal submitted and confirmed in the Agreement between the District and the firm selected. 17