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REQUEST FOR COUNCIL ACTION Date: 10/21/2�02 Item No: VIII. $, Department ApprovaL Manager Approved: Agenda Section: Reports & Recommendations Item Description: Consideration of Extending the Professional Services Contract for the City's Annual Financial Audit Background Under the City's current Professional Services Policy, contracts for professional services, including the annual financial audit, are awarded on a three (3) year basis. With the completion of this year's financial audit, the audit flrm of Kern, DeWenter, Viere, Ltd. (KDV) has fulfilled its 3-ye�' contract. To comply with State Statutes, professional services for next year's audit must be obtained. Over the past several weeks, Staff has been reviewing the audit needs of the City, as well as the process for obtaining audit services. The following is a summary of Staffs review, along with a recommendation on how to proceed. Discussion Items To determine the best course of action for obtaining financial audit services Staff evaluated a number of considerations. They included: 0 Size and scope of the City's operations ❑ Fiicial complexities 0 Accounting and financial reporting practices ❑ Continuity and integrity of the financial audit 0 Shill and expertise of the Audit Profession ❑ Cost of conducting the audit In each of the last three years, the City's finance and accounting operations have undergone a substantial amount of change. These changes have included nearly 100% turnover in finance and accounting personnel, and a conversion of all financial recordkeeping to a new accounting software system. In addition, the City recently adopted a new industry standard that completely overhauled the City's accounting and financial reporting practices. Given the size and scope of the City's operations as well as its financial complexities, Staff estimates that approximately six or seven CPA firms will have the necessary staffing and expertise to provide audit services to the City. However, as noted above, a new industry standard is being implemented at all levels of government. The vast majority of governments has not yet adopted the new standard, but will be required to do so over the next few years.