Counting Your Dollars:
Contracting for the Services of an Independent Auditor
of County Finances
Synopsis
“The purpose of an independent audit is to protect the equity
of the entity audited with tests that determine if the assets are properly
protected.”[1]
This report covers the bid process for securing the services of an independent
auditor for the
Background
The Grand Jury, as required by law, is responsible for performing
an independent audit of county offices and investigating spending by city and
county governments. The investigations may be conducted on a
selective basis each year but shall not duplicate examination or financial
statements that have been performed, by or for, the Board of Supervisors.[2]
In earlier years, the Grand Jury budget included funds to employ an outside
independent auditor to fulfill these duties. Subsequently, while retaining
oversight of this task, the Grand Jury transferred to the
Scope
The
Sources
Meetings:
·
·
·
·
Bidders’ Conference,
Analysis of Bids,
Entrance Conference,
Reviewed:
Bidders’ List.
Comprehensive Annual Financial Report, Fiscal Year 2003.
Government Code § 25250.
Grand Jury Reports:
· 1990-1991.
· 1997-1998.
· 1999-2000.
· 2000-2001.
· 2001-2002.
Management Letter, Fiscal Year 2003.
Management Letter, Fiscal Year 2004.
Penal Code § 925.
Request for Proposal.
Single Audit Report, Fiscal Year 2003.
Findings
1. It has been the practice of the county to request proposals for independent audit services every three or four years.
Response:
2. The current independent audit firm has provided services for seven years.
Response:
The current audit firm, Vargas and Company, served as the county’s auditor for six years; from fiscal year 1998-99 to fiscal year 2003-04.
3. The 2001-2002 Santa Cruz County Grand Jury Final Report recommended that retention of an independent auditor should be reviewed every three years and changed at least every six years.
Response:
Response:
Response: On behalf of the
4.
This Request for Proposal process was to select an
independent auditor to prepare an annual audit for the
5. The independent audit firm provides various reports to the Santa Cruz County Audit Committee throughout the year. These reports require County Audit Committee review.
6. The Request for Proposal process began with preparation of the bid documents that:
· outlined the requirements of the county;
· described the basis on which the bids would be judged; and
· requested the qualifications of the bidders.
Invitations to Bid were sent to 44 qualifying accounting
firms, locally and throughout northern and central
7. Two members of the Santa Cruz County Grand Jury are active members of the County Audit Committee.
Response: On behalf of the
Conclusions
1.
Response to
2. The County Audit Committee did not follow the recommendation of the 2001-2002 Santa Cruz County Grand Jury stating that independent audit services should be reviewed every three years with no one firm providing services for more than two consecutive three-year contracts. Good accounting practices and procedures dictate a change of auditing firms.
3. Criteria used to evaluate bids were comprehensive.
4. Grand Jury membership on Santa Cruz County Audit Committee fulfills the Grand Jury’s mandated responsibilities as outlined in Penal Code § 925. The County Audit Committee met four times during fiscal year 2004-2005.
Recommendations
1.
The
Response:
This recommendation has
been implemented. The Auditor-Controller’s Office continuously adds qualified
CPA firms to the bidder list. Staff members attend professional meetings and
conferences and maintain contact with other
Response:
This recommendation has been implemented. The
Auditor-Controller’s Office continuously adds qualified CPA firms to the bidder
list. Staff members attend professional meetings and conferences and maintain
contact with other
2. Review of the contract for independent audit services or invitation to bid should be scheduled every three years with no one firm providing services for more than two consecutive three-year contracts.
Response:
This recommendation has
been implemented. Review of the contract for independent audit services or
invitation to bid is scheduled every three years. Although there is a definite
benefit to changing auditing firms at least every six years, it may not always
be in the county’s best interest to prohibit a firm from submitting a bid for a
third term. After reviewing the proposals for audit services with the
Auditor-Controller, the
Response:
This recommendation has been implemented. Review of the
contract for independent audit services or invitation to bid is scheduled every
three years. There is a definite benefit to changing auditing firms at least
every six years. However, it may not be in the county’s best interest to
prohibit a firm submitting a bid for a third term. That firm may clearly be the
best qualified and most cost effective. For example, during the most recent
audit selection process, the county was fortunate to have a well-qualified firm
submit a competing bid that was comparable to the bid submitted by the
incumbent firm. Only two other firms submitted bids; one firm was clearly
unqualified and the other firm was $40,000 (62%) higher each year. If a
competitive bid had not been received from a challenging firm, the county could
have been faced with some difficult choices.
Response: On behalf of the
This recommendation has been implemented. Review of the
contract for independent audit services or invitation to bid is scheduled every
three years. There is a definite benefit to changing auditing firms at least
every six years. After reviewing the proposals for audit services with the
Auditor-Controller, the
3.
The
Response: Santa Cruz County Auditor-Controller
AGREES.
This recommendation has been implemented. The
Auditor-Controller considers the Grand Jury an essential component of the audit
process and the County Audit Committee.
4. The County Audit Committee should continue to meet at least twice each year, more frequently if needed.
Response: Santa
Cruz County Board of Supervisors AGREES.
This recommendation has
been implemented. The County Audit Committee meets at least twice annually. The
Comprehensive Annual Financial Report and the related Management Letter
comments and responses are reviewed at one meeting, and the kick-off of the
annual county audit is conducted at another meeting. The County Audit Committee
holds additional meetings to review the request for proposal for audit services
during years in which one is being prepared.
Response: Santa Cruz County Auditor-Controller AGREES.
This recommendation has been implemented. The County Audit
Committee meets at least twice annually. The Comprehensive Annual Financial
Report and the related Management Letter comments and responses are reviewed at
one meeting, and the kick-off of the annual county audit is conducted at
another meeting. The County Audit Committee holds additional meetings to review
the request for proposal for audit services during years in which one is being
prepared.
Response: On behalf of the Santa Cruz County Audit
Committee, the Auditor-Controller AGREES.
This recommendation has been implemented. The County Audit
Committee meets at least twice annually. The Comprehensive Annual Financial
Report and the related Management Letter comments and responses are reviewed at
one meeting, and the kick-off of the annual county audit is conducted at
another meeting. The County Audit Committee holds additional meetings to review
the request for proposal for audit services during years in which one is being
prepared.
Responses Required
Entity |
Findings |
Recommendations |
Respond Within |
|
Santa Cruz County |
1, 2, 3 |
1, 2, 4 |
60 Days August 30, 2005 |
|
Santa Cruz County Auditor-Controller |
3 |
1, 2, 3, 4 |
90 Days September 30, 2005 |
|
Santa Cruz County Audit Committee |
3, 7 |
2, 4 |
90 Days September 30, 2005 |
