COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager/Clerk of the Board

DATE:

March 18, 2004

BOARD MEETING DATE:

April 6, 2004

TO:

Honorable Board of Supervisors

FROM:

John L. Maltbie, County Manager

SUBJECT:

Amendment to Contract for Audit Services

Recommendation

Adopt a resolution authorizing the President of the Board to:

1) Amend the three-year agreement with Macias, Gini and Company LLP, increasing the amount by $40,000, from $925,995 to $965,995 for additional costs incurred over original scope in connection with the San Mateo Medical Center financial audit and the audit of two additional major programs for the fiscal year ended June 30, 2003; and

2) Approve an Appropriation Transfer Request (ATR) increasing unanticipated Interfund Revenue by $25,000, increasing Services and Supplies by $25,000, and transferring $15,000 within various Services and Supplies accounts of the Grand Jury budget unit.

Background

On March 11, 2003, the County entered into an agreement with Macias, Gini and Company LLP to provide auditing services of the County's financial transactions and records. The agreement covers audits for the fiscal years ending June 30, 2003, 2004 and 2005. Macias, Gini and Company LLP was selected through a Request for Proposal process conducted in the Fall of 2002.

Discussion

The existing agreement with Macias, Gini and Company LLP is for conducting a Single Audit for the County, as well as separate audits for the San Mateo Medical Center (SMMC) and the Joint Powers Financing Authority. The $40,000 amendment to the agreement is required for the following reasons:

1. The Single Audit includes the annual review of major programs based on reporting requirements and assessment of risk. These programs require more intensive audit procedures. The current agreement with Macias, Gini and Company LLP covers five major programs (Foster Care, TANF, Substance Abuse Program, Community Development Block Grant (CDBG) and Food Stamps). After further assessment, two other major programs were identified (Highway Planning and Construction and Special Programs for the Aging, Title III). Work on these additional programs requires a $15,000 increase to the agreement.

2. The fiscal year ending June 30, 2003 was the first year that the County requested a separate financial audit for the San Mateo Medical Center (SMMC). This required SMMC staff to prepare draft financial statements in compliance with Government Auditing Standards for review by Macias, Gini and Company. The SMMC audit exceeded the contract amount due to changes in scope of work, including 1) development of procedures to reconcile net asset balances, 2) preparation procedures to determine the proper and consistent classification of prior year and current year balances reported in the financial statements to facilitate the preparation of the Management Discussion and Analysis (MD&A), 3) preparation of the SMMC financial statements, MD&A and footnotes to assist County Controller's Office in meetings its Comprehensive Annual Financial Report (CAFR) deadline; 4) assistance with preparing the cash flow statement, 5) additional time incurred related to testing of compensated absences balances and the related prior period, 6) assistance with accounting for interfund loans between SMMC and other County departments and 7) assistance with accounting for capital assets related to the previous hospital building. SMMC has agreed to cover the $25,000 in costs associated with these changes to the original scope.

Vision Alignment

Independent post-audit of the County's financial transactions and records furthers the commitment of a responsive, effective and collaborative government and Goal #22: County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County.

Fiscal Impact

This amendment increases the contract amount by $40,000 for the fiscal year ended June 30, 2003. This increases the entire three-year agreement from $925,995 to $965,995. Audit costs for the single fiscal year ending June 30, 2003 will increase from $293,410 to $333,410. Coverage of the $40,000 increase will come from the SMMC Enterprise Fund ($25,000) and existing one-time appropriations in the Grand Jury Budget ($15,000) generated from prior fiscal year savings. There will be no impact to Net County Cost.