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HomeMy WebLinkAboutAgenda - 05-04-2021; 8-g - Contract Award for Financial and Compliance Audit Services 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: May 4, 2021 Action Agenda Item No. 8-g SUBJECT: Contract Award for Financial and Compliance Audit Services DEPARTMENT: Finance and Administrative Services ATTACHMENT(S): INFORMATION CONTACT: Attachment 1. Local Government Gary Donaldson, (919) 245-2453 Commission Audit Paul Laughton, (919) 245-2152 Contract (LGC) Template PURPOSE: To: • Award Request for Proposals (RFP) 367-OC 5314 Audit Services to Cherry Bekaert, LLP to conduct auditing services for Orange County in the amount of $83,000 (first year), $85,500 (second year), and $88,000 (third year); and • Authorize the Chair to sign the Local Government Commission (LGC) contract on behalf of the BOCC pending staff and attorney review. BACKGROUND: For the past five years, Mauldin and Jenkins, LLC has provided audit services for the County. The County's best practice is to review audit services every five years for potential audit rotation consistent with industry standards. RFP 367-OC-5314 was issued on March 15, 2021 by the Department of Finance and Administrative Services detailing the County's requirements. Four RFP responses were received on April 12, 2021: Cherry Bekaert, LLP Elliott Davis, PLLC Mauldin and Jenkins, LLC Thompson, Price Scott and Adams, PA The County's evaluation committee unanimously determined that Cherry Bekaert, LLP submitted the best overall proposal. Cherry Bekaert, LLP has estimated 721 hours for the financial audit, four Federal Major programs and two State Single Audit programs, with the audit conducted from its Raleigh, NC office. Cherry Bekaert, LLP clients include the following government entities: City and County of Durham, City of Raleigh, Guilford County, Mecklenburg County and Go Triangle Public Transportation Authority. The audit services will encompass financial and compliance examinations and completion of the Annual Financial Report (AFR) and Single Audit. The financial and compliance audit will cover federal, state and local funding sources in accordance with the Federal and State Single Audit Acts; applicable laws and regulations; and generally accepted auditing standards. 2 The County audit service is for a three-year period. Following the initial three-year period; an annual extension may be granted by the County for three one-year renewal extensions. FINANCIAL IMPACT: FY 2021-22 funds are within budget for this annual contract. The cost to conduct the audit services the first year is $83,000. Firms were requested to provide the costs for the next two years. The cost for years two and three are $85,500 and $88,000 respectively SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable to this item: • GOAL: FOSTER A COMMUNITY CULTURE THAT REJECTS OPPRESSION AND INEQUITY The fair treatment and meaningful involvement of all people regardless of race or color; religious or philosophical beliefs; sex, gender or sexual orientation; national origin or ethnic background; age; military service; disability; and familial, residential or economic status. • GOAL: CREATE A SAFE COMMUNITY The reduction of risks from vehicle/traffic accidents, childhood and senior injuries, gang activity, substance abuse and domestic violence. • GOAL: ENABLE FULL CIVIC PARTICIPATION Ensure that Orange County residents are able to engage government through voting and volunteering by eliminating disparities in participation and barriers to participation. ENVIRONMENTAL IMPACT: The following Orange County Environmental Responsibility Goal impacts are applicable to this item: • ENERGY EFFICIENCY AND WASTE REDUCTION Initiate policies and programs that: 1) conserve energy; 2) reduce resource consumption; 3) increase the use of recycled and renewable resources; and 4) minimize waste stream impacts on the environment. • RESULTANT IMPACT ON NATURAL RESOURCES AND AIR QUALITY Assess and where possible mitigate adverse impacts created to the natural resources of the site and adjoining area. Minimize production of greenhouse gases. RECOMMENDATION(S): The Manager recommends the Board: • Award RFP 367-OC 5314 to Cherry Bekaert LLP to conduct auditing services for the County in the amount of $83,000 for the first year; and • Authorize the Chair and Finance Officer to sign the LGC contract on behalf of the BOCC pending staff and attorney review. Attachment 1 3 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 The Governing Board of Primary Government Unit(or charter holder) and Discretely Presented Component Unit(DPCU)(if applicable) Primary Government Unit, together with DPCU(if applicable), hereinafter referred to as Governmental Unit(s) and Auditor Name Auditor Address Hereinafter referred to as Auditor for Fiscal Year Ending Audit Report Due Date Must be within four months of FYE hereby agree as follows: 1. The Auditor shall audit all statements and disclosures required by U.S. generally accepted auditing standards (GAAS) and additional required legal statements and disclosures of all funds and/or divisions of the Governmental Unit(s). The non-major combining, and individual fund statements and schedules shall be subjected to the auditing procedures applied in the audit of the basic financial statements and an opinion shall be rendered in relation to (as applicable) the governmental activities, the business- type activities, the aggregate DPCUs, each major governmental and enterprise fund, and the aggregate remaining fund information (non-major government and enterprise funds, the internal service fund type, and the fiduciary fund types). 2. At a minimum, the Auditor shall conduct his/her audit and render his/her report in accordance with GAAS. The Auditor shall perform the audit in accordance with Government Auditing Standards if required by the State Single Audit Implementation Act, as codified in G.S. 159-34. If required by OMB Uniform Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the State Single Audit Implementation Act, the Auditor shall perform a Single Audit. This audit and all associated audit documentation may be subject to review by Federal and State agencies in accordance with Federal and State laws, including the staffs of the Office of State Auditor (OSA) and the Local Government Commission (LGC). If the audit requires a federal single audit performed under the requirements found in Subpart F of the Uniform Guidance (§200.501), it is recommended that the Auditor and Governmental Unit(s) jointly agree, in advance of the execution of this contract, which party is responsible for submission of the audit and the accompanying data collection form to the Federal Audit Clearinghouse as required under the Uniform Guidance (§200.512). If the audit and Auditor communication are found in this review to be substandard, the results of the review may be forwarded to the North Carolina State Board of CPA Examiners (NC State Board). Page 1 4 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 3. If an entity is determined to be a component of another government as defined by the group audit standards, the entity's auditor shall make a good faith effort to comply in a timely manner with the requests of the group auditor in accordance with AU-6 §600.41 - §600.42. 4. This contract contemplates an unmodified opinion being rendered. If during the process of conducting the audit, the Auditor determines that it will not be possible to render an unmodified opinion on the financial statements of the unit, the Auditor shall contact the LGC Staff to discuss the circumstances leading to that conclusion as soon as is practical and before the final report is issued. The audit shall include such tests of the accounting records and such other auditing procedures as are considered by the Auditor to be necessary in the circumstances. Any limitations or restrictions in scope which would lead to a qualification should be fully explained in an attachment to this contract. 5. If this audit engagement is subject to the standards for audit as defined in Government Auditing Standards, 2018 revision, issued by the Comptroller General of the United States, then by accepting this engagement, the Auditor warrants that he/she has met the requirements for a peer review and continuing education as specified in Government Auditing Standards. The Auditor agrees to provide a copy of the most recent peer review report to the Governmental Unit(s) and the Secretary of the LGC prior to the execution of an audit contract. Subsequent submissions of the report are required only upon report expiration or upon auditor's receipt of an updated peer review report. If the audit firm received a peer review rating other than pass, the Auditor shall not contract with the Governmental Unit(s)without first contacting the Secretary of the LGC for a peer review analysis that may result in additional contractual requirements. If the audit engagement is not subject to Government Accounting Standards or if financial statements are not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and fail to include all disclosures required by GAAP, the Auditor shall provide an explanation as to why in an attachment to this contract or in an amendment. 6. It is agreed that time is of the essence in this contract. All audits are to be performed and the report of audit submitted to LGC Staff within four months of fiscal year end. If it becomes necessary to amend this due date or the audit fee, an amended contract along with a written explanation of the delay shall be submitted to the Secretary of the LGC for approval. 7. It is agreed that GAAS include a review of the Governmental Unit's (Units') systems of internal control and accounting as same relate to accountability of funds and adherence to budget and law requirements applicable thereto; that the Auditor shall make a written report, which may or may not be a part of the written report of audit, to the Governing Board setting forth his/her findings, together with his recommendations for improvement. That written report shall include all matters defined as "significant deficiencies and material weaknesses" in AU-C 265 of the AICPA Professional Standards (Clarified). The Auditor shall file a copy of that report with the Secretary of the LGC. 8. All local government and public authority contracts for audit or audit-related work require the approval of the Secretary of the LGC. This includes annual or special audits, agreed upon procedures related to internal controls, bookkeeping or other assistance necessary to prepare the Governmental Unit's (Units') records for audit, financial statement preparation, any finance-related investigations, or any other audit- related work in the State of North Carolina. Approval is not required on contracts and invoices for system improvements and similar services of a non-auditing nature. 9. Invoices for services rendered under these contracts shall not be paid by the Governmental Unit(s) until the invoice has been approved by the Secretary of the LGC. (This also includes any progress billings.)[G.S. 159-34 and 115C-447] All invoices for Audit work shall be submitted in PDF format to the Secretary of the LGC for approval. The invoice marked `approved 'with approval date shall be returned to Page 2 5 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 the Auditor to present to the Governmental Unit(s) for payment. This paragraph is not applicable to contracts for audits of hospitals. 10. In consideration of the satisfactory performance of the provisions of this contract, the Governmental Unit(s) shall pay to the Auditor, upon approval by the Secretary of the LGC if required, the fee, which includes any costs the Auditor may incur from work paper or peer reviews or any other quality assurance program required by third parties (federal and state grantor and oversight agencies or other organizations) as required under the Federal and State Single Audit Acts. This does not include fees for any pre-issuance reviews that may be required by the NC Association of CPAs (NCACPA) Peer Review Committee or NC State Board of CPA Examiners (see Item 13). 11. If the Governmental Unit(s) has/have outstanding revenue bonds, the Auditor shall submit to LGC Staff, either in the notes to the audited financial statements or as a separate report, a calculation demonstrating compliance with the revenue bond rate covenant. Additionally, the Auditor shall submit to LGC Staff simultaneously with the Governmental Unit's (Units') audited financial statements any other bond compliance statements or additional reports required by the authorizing bond documents, unless otherwise specified in the bond documents. 12. After completing the audit, the Auditor shall submit to the Governing Board a written report of audit. This report shall include, but not be limited to, the following information: (a) Management's Discussion and Analysis, (b) the financial statements and notes of the Governmental Unit(s) and all of its component units prepared in accordance with GAAP, (c) supplementary information requested by the Governmental Unit(s) or required for full disclosure under the law, and (d) the Auditor's opinion on the material presented. The Auditor shall furnish the required number of copies of the report of audit to the Governing Board upon completion. 13. If the audit firm is required by the NC State Board, the NCACPA Peer Review Committee, or the Secretary of the LGC to have a pre-issuance review of its audit work, there shall be a statement in the engagement letter indicating the pre-issuance review requirement. There also shall be a statement that the Governmental Unit(s) shall not be billed for the pre-issuance review. The pre-issuance review shall be performed prior to the completed audit being submitted to LGC Staff. The pre-issuance review report shall accompany the audit report upon submission to LGC Staff. 14. The Auditor shall submit the report of audit in PDF format to LGC Staff. For audits of units other than hospitals, the audit report should be submitted when (or prior to) submitting the final invoice for services rendered. The report of audit, as filed with the Secretary of the LGC, becomes a matter of public record for inspection, review and copy in the offices of the LGC by any interested parties. Any subsequent revisions to these reports shall be sent to the Secretary of the LGC along with an Audit Report Reissued Form (available on the Department of State Treasurer website). These audited financial statements, excluding the Auditors' opinion, may be used in the preparation of official statements for debt offerings by municipal bond rating services to fulfill secondary market disclosure requirements of the Securities and Exchange Commission and for other lawful purposes of the Governmental Unit(s) without requiring consent of the Auditor. If the LGC Staff determines that corrections need to be made to the Governmental Unit's (Units') financial statements, those corrections shall be provided within three business days of notification unless another deadline is agreed to by LGC Staff. 15. Should circumstances disclosed by the audit call for a more detailed investigation by the Auditor than necessary under ordinary circumstances, the Auditor shall inform the Governing Board in writing of the need for such additional investigation and the additional compensation required therefore. Upon approval bythe Page 3 6 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 Secretary of the LGC, this contract may be modified or amended to include the increased time, compensation, or both as may be agreed upon by the Governing Board and the Auditor. 16. If an approved contract needs to be modified or amended for any reason, the change shall be made in writing and pre-audited if the change includes a change in audit fee (pre-audit requirement does not apply to charter schools or hospitals). This amended contract shall be completed in full, including a written explanation of the change, signed and dated by all original parties to the contract. It shall then be submitted to the Secretary of the LGC for approval. No change to the audit contract shall be effective unless approved by the Secretary of the LGC, the Governing Board, and the Auditor. 17. A copy of the engagement letter, issued by the Auditor and signed by both the Auditor and the Governmental Unit(s), shall be attached to this contract, and except for fees, work, and terms not related to audit services, shall be incorporated by reference as if fully set forth herein as part of this contract. In case of conflict between the terms of the engagement letter and the terms of this contract, the terms of this contract shall take precedence. Engagement letter terms that conflict with the contract are deemed to be void unless the conflicting terms of this contract are specifically deleted in Item 28 of this contract. Engagement letters containing indemnification clauses shall not be accepted by LGC Staff. 18. Special provisions should be limited. Please list any special provisions in an attachment. 19. A separate contract should not be made for each division to be audited or report to be submitted. If a DPCU is subject to the audit requirements detailed in the Local Government Budget and Fiscal Control Act and a separate audit report is issued, a separate audit contract is required. If a separate report is not to be issued and the DPCU is included in the primary government audit, the DPCU shall be named along with the primary government on this audit contract. DPCU Board approval date, signatures from the DPCU Board chairman and finance officer also shall be included on this contract. 20. The contract shall be executed, pre-audited (pre-audit requirement does not apply to charter schools or hospitals), and physically signed by all parties including Governmental Unit(s) and the Auditor, then submitted in PDF format to the Secretary of the LGC. 21. The contract is not valid until it is approved by the Secretary of the LGC. The staff of the LGC shall notify the Governmental Unit and Auditor of contract approval by email. The audit should not be started before the contract is approved. 22. Retention of Client Records: Auditors are subject to the NC State Board of CPA Examiners' Retention of Client Records Rule 21 NCAC 08N .0305 as it relates to the provision of audit and other attest services, as well as non-attest services. Clients and former clients should be familiar with the requirements of this rule prior to requesting the return of records. 23. This contract may be terminated at any time by mutual consent and agreement of the Governmental Unit(s) and the Auditor, provided that (a) the consent to terminate is in writing and signed by both parties, (b) the parties have agreed on the fee amount which shall be paid to the Auditor (if applicable), and (c) no termination shall be effective until approved in writing by the Secretary of the LGC. 24. The Governmental Unit's (Units')failure or forbearance to enforce, or waiver of, any right or an event of breach or default on one occasion or instance shall not constitute the waiver of such right, breach or default on any subsequent occasion or instance. 25. There are no other agreements between the parties hereto and no other agreements relative hereto that shall be enforceable unless entered into in accordance with the procedure set out herein and approved by the Secretary of the LGC. Page 4 7 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 26. E-Verify. Auditor shall comply with the requirements of NCGS Chapter 64 Article 2. Further, if Auditor utilizes any subcontractor(s), Auditor shall require such subcontractor(s) to comply with the requirements of NCGS Chapter 64, Article 2. 27. Applicable to audits with fiscal year ends of June 30, 2020 and later. For all non-attest services, the Auditor shall adhere to the independence rules of the AICPA Professional Code of Conduct and Governmental Auditing Standards, 2018 Revision (as applicable). Financial statement preparation assistance shall be deemed a "significant threat" requiring the Auditor to apply safeguards sufficient to reduce the threat to an acceptable level. If the Auditor cannot reduce the threats to an acceptable level, the Auditor cannot complete the audit. If the Auditor is able to reduce the threats to an acceptable level, the documentation of this determination, including the safeguards applied, must be included in the audit workpapers. All non-attest service(s) being performed by the Auditor that are necessary to perform the audit must be identified and included in this contract. The Governmental Unit shall designate an individual with the suitable skills, knowledge, and/or experience (SKE) necessary to oversee the services and accept responsibility for the results of the services performed. If the Auditor is able to identify an individual with the appropriate SKE, s/he must document and include in the audit workpapers how he/she reached that conclusion. If the Auditor determines that an individual with the appropriate SKE cannot be identified, the Auditor cannot perform both the non-attest service(s) and the audit. See "Fees for Audit Services" page of this contract to disclose the person identified as having the appropriate SKE for the Governmental Unit. 28. Applicable to audits with fiscal year ends of June 30, 2021 and later. The auditor shall present the audited financial statements including any compliance reports to the government unit's governing body or audit committee in an official meeting in open session as soon as the audited financial statements are available but not later than 45 days after the submission of the audit report to the Secretary. The auditor's presentation to the government unit's governing body or audit committee shall include: a) the description of each finding, including all material weaknesses and significant deficiencies, as found by the auditor, and any other issues related to the internal controls or fiscal health of the government unit as disclosed in the management letter, the Single Audit or Yellow Book reports, or any other communications from the auditor regarding internal controls as required by current auditing standards set by the Accounting Standards Board or its successor; b) the status of the prior year audit findings; c) the values of Financial Performance Indicators based on information presented in the audited financial statements; and d) notification to the governing body that the governing body shall develop a "Response to the Auditor's Findings, Recommendations, and Fiscal Matters," if required under 20 NCAC 03 .0508. 29. Information based on the audited financial statements shall be submitted to the Secretary for the purpose of identifying Financial Performance Indicators and Financial Performance Indicators of Concern. Page 5 8 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 30. Applicable to charter school contracts only: No indebtedness of any kind incurred or created by the charter school shall constitute an indebtedness of the State or its political subdivisions, and no indebtedness of the charter school shall involve or be secured by the faith, credit, or taxing power of the State or its political subdivisions. 31. All of the above paragraphs are understood and shall apply to this contract, except the following numbered paragraphs shall be deleted (See Item 16 for clarification). 32. The process for submitting contracts, audit reports and invoices is subject to change. Auditors and units should use the submission process and instructions in effect at the time of submission. Refer to the N.C. Department of State Treasurer website at https://www.nctreasurer.com/state-and-local-government- finance-division/local-government-commission/submitting-your-audit 33. All communications regarding audit contract requests for modification or official approvals will be sent to the email addresses provided on the signature pages that follow. 34. Modifications to the language and terms contained in this contract form (LGC-205) are not allowed. Page 6 9 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 FEES FOR AUDIT SERVICES 1. For all non-attest services, the Auditor shall adhere to the independence rules of the AICPA Professional Code of Conduct (as applicable) and Governmental Auditing Standards,2018 Revision. Refer to Item 27 of this contract for specific requirements. The following information must be provided by the Auditor; contracts presented to the LGC without this information will be not be approved. Financial statements were prepared by: ❑Auditor ❑Governmental Unit ❑Third Party If applicable: Individual at Governmental Unit designated to have the suitable skills, knowledge, and/or experience (SKE) necessary to oversee the non-attest services and accept responsibility for the results of these services: Name: Title and Unit/Company: Email Address: OR Not Applicable ❑ (Identification of SKE Individual not applicable for GAAS-only audit or audits with FYEs prior to June 30, 2020.) 2. Fees may not be included in this contract for work performed on Annual Financial Information Reports (AFIRs), Form 990s, or other services not associated with audit fees and costs. Such fees may be included in the engagement letter but may not be included in this contract or in any invoices requiring approval of the LGC. See Items 8 and 13 for details on other allowable and excluded fees. 3. Prior to submission of the completed audited financial report, applicable compliance reports and amended contract (if required) the Auditor may submit invoices for approval for services rendered, not to exceed 75% of the billings for the last annual audit of the unit submitted to the Secretary of the LGC. Should the 75% cap provided below conflict with the cap calculated by LGC Staff based on the billings on file with the LGC, the LGC calculation prevails. All invoices for services rendered in an audit engagement as defined in 20 NCAC .0503 shall be submitted to the Commission for approval before any payment is made. Payment before approval is a violation of law. (This paragraph not applicable to contracts and invoices associated with audits of hospitals). PRIMARY GOVERNMENT FEES Primary Government Unit Audit Fee $ Additional Fees Not Included in Audit Fee: Fee per Major Program $ Writing Financial Statements $ All Other Non-Attest Services $ 75% Cap for Interim Invoice Approval $ (not applicable to hospital contracts) DPCU FEES (if applicable) Discretely Presented Component Unit Audit Fee $ Additional Fees Not Included in Audit Fee: Fee per Major Program $ Writing Financial Statements $ All Other Non-Attest Services $ 75%Cap for Interim Invoice Approval $ (not applicable to hospital contracts) Page 7 10 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 SIGNATURE PAGE AUDIT FIRM Audit Firm* Authorized Firm Representative (typed or printed)* Signature* Date* Email Address* GOVERNMENTAL UNIT Governmental Unit* Date Primary Government Unit Governing Board Approved Audit Contract* (G.S.159-34(a)or G.S.115C-447(a)) Mayor/Chairperson (typed or printed)* Signature* Date Email Address Chair of Audit Committee (typed or printed, or"NA") Signature Date Email Address GOVERNMENTAL UNIT— PRE-AUDIT CERTIFICATE Required by G.S. 159-28(a1) or G.S. 115C-441(al). Not applicable to hospital contracts. This instrument has been pre-audited in the manner required by The Local Government Budget and Fiscal Control Act or by the School Budget and Fiscal Control Act. Primary Governmental Unit Finance Officer* (typed or printed Signature* Date of Pre-Audit Certificate* Email Address* Page 8 11 LGC-205 CONTRACT TO AUDIT ACCOUNTS Rev. 11/2020 SIGNATURE PAGE — DPCU (complete only if applicable) DISCRETELY PRESENTED COMPONENT UNIT DPCU* Date DPCU Governing Board Approved Audit Contract* (Ref: G.S. 159-34(a) or G.S. 115C-447(a)) DPCU Chairperson (typed or printed)* Signature* Date* Email Address* Chair of Audit Committee (typed or printed, or"NA") Signature Date Email Address DPCU — PRE-AUDIT CERTIFICATE Required by G.S. 159-28(al) or G.S. 11 5C-441(al). Not applicable to hospital contracts. This instrument has been pre-audited in the manner required by The Local Government Budget and Fiscal Control Act or by the School Budget and Fiscal Control Act. DPCU Finance Officer (typed or printed)* Signature* Date of Pre-Audit Certificate* Email Address* Remember to print this form, and obtain all required signatures prior to submission. PRINT Page 9