Finance Director Michael Vivrette presented the audit results to the council, which included a State Transportation Improvement Project fund audit for the city's major road project last year.
Vivrette said the audit – completed by Smith & Newell, CPAs, the same firm that has auditing the city for about 15 years – was clean and unqualified.
Vice Mayor Judy Thein noted that she had asked for the audits to be postponed from the May 28 meeting so she and fellow council members could have more time to go through the voluminous reports.
She said she and Councilman Curt Giambruno spent considerable time going through the reports with staff, and she thanked staffers for taking the time to explain and review the audits.
Thein moved to accept the audits, with Council member Joyce Overton seconding. The council approved the audits 5-0.
Vivrette also asked the council to approve his recommendation to select a new auditing firm, Lance, Soll & Lunghard LLP, for fiscal years 2009-10, 2010-11 and 2011-12.
He said that he issued a request for proposals (RFPs) at the council's instruction.
In recent years, the costs for audits have risen sharply, from about $16,000 to $30,000 this year, Vivrette said.
“Much of that is due to the fact that auditing services have become much more complex in the post-Enron period,” he said, with auditors taking on more responsibilities.
Vivrette said he identified 10 auditing firms that have done audits in Northern California for similar-sized cities. He sent RFPs to the 10 firms, spoke with seven and received written proposals from four large- and medium-sized firms.
In summarizing the firms, he said he wanted more than just audit service, but also sought out auditors who would be able to offer perspective on how other cities the same size as Clearlake handle their finances.
Vivrette said the cost estimates the firms submitted to audit the city are similar to what it's already paying. Three came in at a slightly lower price than the city is currently paying.
He offered the council the following summaries:
– Lance, Soll & Lunghard LLP, based in Brea, proposed completing the audit in 273 work hours. Costs for the three fiscal years were $27,500, $28,325 and $29,175, respectively, for both the city and redevelopment agency, with their audit also covering state reports. The firm also audits Malibu, Temecula, Canyon Lake, Big Bear Lake and Emeryville.
– Moss, Levy & Hartzheim LLP, with offices in Beverly Hills and Santa Maria, audit Pacifica, Eureka, Yuba City, Tracy and Winters. The total audit work hours would be 348, and would cost $27,360, $28,180 and $29,030 for the city and redevelopment agencies for audit years 2009-10 through 2011-12, respectively. State reports are not included, and the firm would charge as much as $3,170 for a single audit fee.
– Mann, Urrutia, Nelson, CPAs & Associates LLP of Sacramento audit the towns of Windsor and Moraga, and the cities of Pinole, Dixon and Hollister. The total estimated work hours would be 220, with the audits for the three years costing $34,000, $32,200 and $32,200, respectively, for both the city and redevelopment agency. State reports would not be included, and an additional $1,800 single audit fee would be charged.
– The only local firm to submit a proposal, Sturges, Pehling & Associates of Kelseyville, audits Lake County Vector Control, Kelseyville Cemetery District, Buckingham Water, Esparto Community Service District and Habitat for Humanity. The firm estimated the audit work would take three to five days, and the final cost would include a single audit but no state reports. Total charges for the three years for the city and agency would be $32,000, $33,000 and $34,000, respectively.
In reviewing the firms, Vivrette said he looked at their auditing teams, all of which were well-qualified. He said one firm proposed completely the audit in a very short amount of time, which he didn't believe was realistic, so he downgraded that firm. The last time the city was audited the auditors only spent two days at the city.
Although Smith & Newell has done a good job for the city, Vivrette believed the city will get better service from a firm that doesn't know them quite as well.
He said that Lance, Soll & Lunghard, LLP is anxious to get the city's business. The firm's price was the lowest, “but that's not the reason I recommended them,” he said.
Community member Estella Creel asked who compiled the list of firms to approach. Vivrette said he did by doing a Web search for similar-sized cities. Some of the cities had their online financial statements online, which helped him locate the firms.
Thein moved to approve the choice, with Overton seconding. The council approved the selection 5-0.
The council then moved to set up budget study sessions for the 2009-10 fiscal year budget.
City Administrator Dale Neiman said they had just finalized the draft budget that day and needed to set up the workshops in anticipating of a public hearing that will take place at the first meeting in July. Neiman said if the council isn't ready to accept the budget at that time, they can wait.
The council set the workshops for 8 a.m. Thursday, June 18, and 8 a.m. Friday, June 26, in the council chambers at city hall.
Neiman also updated the council on the city's insurance rating.
He said the city is required to send representatives to an annual meeting of its insurance group, PARSAC, where they were updated on significant changes.
Neiman said PARSAC has made two recent policy decisions. The first will be adjusting rates for liability and workers compensation insurance based on an “ex mod factor” as a way of keeping cities that aren't doing a good job at reducing liability from being subsidized by others.
The news about the city's liability rating wasn't good.
“We had the fifth worst record out of 37 cities,” Neiman said. “Our rates are being increased to reflect that.”
Another major change involves changing deductible unilaterally. Neiman said the city previously had a $0 deductible for workers compensation; it's since been changed to a $50,000 deductible to reduce the city's rates. He said the city's ex mod factor for workers compensation is good.
Based on its poor risk management record, Neiman said the city could be looking at those deductibles rising to between $75,000 to $100,000.
In other business, the council gave Neiman direction to begin negotiating a contract with the county to provide sewer collection system improvements in the system and approved several property abatements.
E-mail Elizabeth Larson at
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