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MIDWAY CITY SANITARY DISTRICT

REQUEST FOR PROPOSAL

INDEPENDENT AUDIT SERVICES

MIDWAY CITY SANITARY DISTRICT

14451 CEDARWOOD AVENUE

WESTMINSTER, CA 92683

PROPOSALS DUE BY 4:00 PM, MARCH 6, 2009

MIDWAY CITY SANITARY DISTRICT

REQUEST FOR PROPOSAL

INDEPENDENT AUDIT SERVICES

SUMMARY STATEMENT

The Midway City Sanitary District (MCSD) Board of Directors seeks proposals from highly qualified and experienced independent certified public accountants with proven records of accomplishments for a three-year contract, with an option to extend the engagement for a fourth and fifth year provided that both parties mutually agree in writing at least 90 days prior to the end of the applicable fiscal year 2010-2011, to perform the annual audit of MCSD’s financial statements. This audit is for the purpose of rendering an auditor's opinion regarding applicable legal provisions and to perform an audit in conformity with Section 26909 of the Government Code. The examination shall be made in accordance with generally accepted governmental auditing procedures as prescribed in the AICPA Industry Audit Guide, Audits of State and Local Governments (GASB 34 Edition). The first audit under the three year contract would be for the fiscal year ending June 30, 2009.

GENERAL INSTRUCTIONS

A. Inquiries and proposals should be directed to:

Midway City Sanitary District Board of Directors

c/o Robert Housley, Director of Finance

Midway City Sanitary District

14451 Cedarwood Avenue

Westminster, CA 92683

(714) 893-3553

B. Qualified firms are invited to submit one unbound original proposal plus eight (8) bound copies along with one (1) electronic copy (PDF on CD) that meet the requirements described in this Request for Proposal (RFP). The deadline for submitting proposals is:

4:00 p.m., Friday, March 6, 2009

Proposals arriving after the specified date and time will not be considered. Each firm assumes responsibility for timely submission of is proposal.

Withdrawal or Modifications of Proposals: Any proposal may be withdrawn or modified by a written request signed by the firm and received by MCSD prior to the final time and date for the receipt of proposals. Once the deadline is past, firms are obligated to fulfill the terms of their proposal.

C. MCSD is not liable for any cost incurred by proposers prior to the issuance of a contract. MCSD reserves the right to accept all or part of any proposal or to cancel in part or in its entirety this Request for Proposal. MCSD further reserves the right to accept the proposal that it considers to be in the best interest of MCSD.

ABOUT THE DISTRICT

The Midway City Sanitary District (MCSD) serves an area of 10.25 square miles with a population of approximately 100,000, which provides solid waste and sewer services to approximately 18,650 residences.

The Midway City Sanitary District is an independent special district, formed in 1939 under the Sanitary District Act of 1923. MCSD services areas in the City of Westminster and the unincorporated area of the County of Orange known as Midway City. MCSD is operated by a Board of Directors, manager, administrative staff and field personnel.

The general manager is hired by a five member Board of Directors. The Board Directors are elected by the public and serve staggered four-year terms. The Board of Directors meets on the first and third Tuesdays of each month.

MCSD provides wastewater collection, cleaning of sewage lines, approval of plans, and the inspection of the construction of sewer built within MCSD boundaries by developers, and solid waste disposal services to the residents and businesses (via a third party franchisee) of the District.

MCSD owns and operates vehicles for the above purposes and also owns property on which the MCSD office and truck facilities are located including a garage and other buildings for the purpose of servicing and maintaining trucks and sewer lines. MCSD has contracted with a third party for the collection of commercial solid waste collected in bins.

MCSD recovers the cost of its services through rates imposed on users of the service. Total actual expenditures for all funds in fiscal year 2007-2008 amounted to $ 5,223,385 and total actual revenues were $ 6,800,881. The MCSD’s budget for the fiscal year 2008-2009 is

$ 9,946,000.

The most recent audit of MCSD’s financial statements was performed in 2008 for the period July 1, 2007 to June 30, 2008.

ACCOUNTING POLICIES

The accounting policies of MCSD do conform to generally accepted accounting principles (GAAP) as applicable to governments. MCSD's accounting records are maintained on a full accrual basis of accounting. The governmental fund types include the General Fund, and Fixed Assets.

SCOPE OF THE INDEPENDENT AUDIT REQUIREMENTS

The following specifications cover the key areas of interest to the Board of Directors of the Midway City Sanitary District.

1. The audit shall be in compliance with Section 26909 of the Governmental Code and the related State Controller Guidelines.

2. MCSD desires the independent auditor to express an opinion on the fair presentation of its general purpose financial statements in conformity with generally accepted accounting principles.

The audit shall be a full-scope financial and compliance review of all funds and account groups of MCSD. The auditor shall issue an opinion letter on MCSD’s financial statements, in compliance with applicable legal provisions, the auditor's report on the study and evaluation of internal control system and the auditor's report on compliance.

3. The audits performed under the Request for Proposal shall cover the following periods:

a. July 1, 2008 - June 30, 2009

b. July 1, 2009 - June 30, 2010

c. July 1, 2010 - June 30, 2011

d. an option to extend for fourth & fifth year

4. MCSD will provide the auditor with trial balance and general ledger for all of the funds. The auditor will be responsible for preparing the financial statements, footnotes and supplementary information of the individual funds.

5. The auditor must provide MCSD with draft copies of the financial statements, including journal entries and explanations to support the changes to the trial balance. Any results prepared by the auditor which alter MCSD’s books must be reviewed by MCSD’s personnel.

6. Final copies of the financial statements, including the opinion letter, footnotes, and supplemental data for individual funds, must be available for review by the Board of Directors during a regular Board meeting. Regular Board of Director meetings are scheduled on the first and third Tuesday of every month.

7. The auditor shall submit a written management letter to the Board of Directors that communicates any observations for improvements in MCSD’s financial operations, and any deficiencies in internal controls that need to be addressed by MCSD.

8. The partners in charge shall be available to attend up to at least three MCSD management and/or public meetings at which the audit report may be discussed.

9. The auditor shall assist MCSD personnel in applying generally accepted accounting principles and provide support necessary to maintain sound financial management procedures. The auditor shall provide financial advice and counsel on significant matters occurring throughout the year that would affect the annual reports and sound accounting practices.

10. MCSD finance personnel will assist the auditor in preparing all required schedules for the annual audit, assist in locating information, and answer questions as they arise. MCSD will provide work space for auditor personnel.

11. The auditor shall perform as part of the annual audit the review of the calculation of the appropriations limit under Article XIIIB of the California Constitution (Gann Limitation) as required by Proposition 111 passed in 1990.

12. The auditor shall perform as part of the annual audit a report on Applying Agreed-Upon Procedures in relation to an Installment Purchase Contract Dated November 1, 2005, which financed the construction and design of certain sanitary sewer facilities (Certificate of Participation – COP’s).

13. The auditor shall perform as part of the annual audit the preparation and

transmittal of the Special Districts Financial Transactions Report to the State

Controller’s Office as required under California Government Code section

53891.

14. The auditor must provide (15) bound copies and (1) unbound copy and one (1) electronic copy (PDF) of the complete financial statements to the District.

OPTIONAL SERVICE – AUDIT OF FRANCHISE AGREEMENT

Refer to number eleven of guidelines for proposal on page seven RFP.

GUIDELINES FOR PROPOSAL

The purpose of the proposal is to demonstrate the qualifications, competence, and capacity of the firms seeking to undertake an independent audit of MCSD in conformity with the requirements of this request for proposal. The proposal should demonstrate the qualifications of the firm and of the particular staff to be assigned to this engagement. It should also specify an audit approach that will meet the request for proposals requirements.

Proposals shall be organized, tabbed and numbered in the following order

1. Executive Summary

2. Statement of Independence

3. License to Practice in California

4. Firm Qualifications and Experience

5. Partner, Supervisory and Staff Qualifications and Experience

6. References - Similar Engagements With Other Government Entities

7. Specific Audit Approach

8. Cost Proposal

9. External Quality Control Review Report

10. Professional Insurance

11. Optional Service – Audit of Franchise Agreements

1. Executive Summary

The Executive Summary should be addressed to:

Board of Directors

Midway City Sanitary District

14451 Cedarwood Avenue

Westminster, CA 92683

The summary should state the prime firm and include the firm’s name submitting the proposal, their mailing address, telephone number, and contact name. The letter shall address the firm’s understanding of the project based on this RFP and any other information the firm has gathered. Include a statement discussing the firm’s interest and qualifications for this type of work. Certify that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with MCSD.

2. Statement of Independence

The firm should provide an affirmative statement that it is independent of MCSD as defined by generally accepted auditing standards and/or U.S. General Accounting Office's Government Auditing Standards. The firm also should provide an affirmative statement that it is independent of all of the component units of MCSD as defined by those same standards.

3. License to Practice in California

An affirmative statement should be included that the firm and all assigned key professional staff are properly registered / licensed to practice in California.

4. Firm Qualifications and Experience

The proposer should state the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed, the number and nature of the professional staff to be employed in this engagement on a full-time basis, and the number and nature of the staff to be so employed on a part-time basis.

The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations.

5. Partner, Supervisory, and Staff Qualifications and Experience:

Identify the principal supervisory and management staff, including engagement partner, managers, other supervisors, and specialists who would be assigned to the engagement. Indicate whether each person is an active licensed certified public accountant in California. Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. Indicate how the quality of staff over the term of the agreement will be assured.

This section may include graphs, charts, photos, resumes, references, etc in support of the firm’s qualifications.

6. Similar Engagements with other Government Entities

Please provide a list of not less than five client references for which services similar to those outlined in the RFP are currently being provided. For each reference listed provide the name of the organization, dates for which the services(s) are being provided, type of services(s) being provided and the name, address, telephone and email address of the responsible person within the reference’s organization. MCSD reserves the right to contact any or all of the listed references regarding the audit services performed by the Proposer

7. Specific Audit Approach

The audit approach should indicate the firm’s ability to meet each specification as outlined in this document. The work plan should address the items of work as described in this RFP. The plan should be simple, easy to read and follow, and addresses and satisfies the objectives and specifications as listed in the Scope of Work in this RFP.

8. Cost Proposal

The proposal should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all-inclusive maximum price to be proposed is to contain all direct and indirect costs including all out-of-pocket expenses for each of the three years. This information is required to be shown for each year to be audited and in total. MCSD will not be responsible for expenses incurred in preparing and submitting the proposal.

No cost increases shall be passed onto MCSD after the proposal has been submitted.

• The proposal shall include a separate optional fee (not related to the financial year end audit) that the bidding firm would charge to conduct an bi-annual audit of MCSD’s franchise agreements, beginning with fiscal year ending June 30, 2009 (see number eleven page seven).

9. External Quality Control Review Report

The firm is also required to submit a copy of the report on its most recent External Quality Control Review Report, with a statement whether that quality control review included a review of specific government engagements.

10. Insurance

The proposal shall include a copy of the firm’s most current certificate of insurance and endorsements for professional liability and worker’s compensation insurance.

11. Optional Service – Audit of Franchise Agreement

The bidding firm shall also include as a stand-alone component (option) for the cost to do a bi-annual audit of the fees Midway City Sanitary District receives as per our franchise agreement with Rainbow. This additional option will be considered separately.

The scope of work:

a. Read and summarize the franchise agreement to obtain an understanding of its requirements. Provide a summary of the business points of the agreement.

b. Inspect billing and receipt records used to substantiate franchise payments to MCSD. Summarize the franchise fee information for the past two calendar years and note any inconsistencies.

c. Note whether Rainbow has substantively fulfilled its financial obligations in regards to its franchise agreement with MCSD and determine that they adhere to the general parameters of the franchise agreement in delivering commercial refuse hauling services.

d. Inspect the trash hauler’s compiled financial reports and source records that substantiate their operations as they pertain to serving the customers of the District.

e. Prepare a report noting findings, recommendations and conclusions.

AUDITOR SELECTION PROCESS AND PROPOSAL EVALUATION

Under the terms of this RFP, MCSD is not obligated to contract with the applicant lowest in cost. The evaluation and review will consider all aspects of the proposals. The Midway City Sanitary District Board of Directors may negotiate additional terms and conditions, and will award the contract to the applicant most responsive to the needs of MCSD and most capable of providing the services to meet those needs. The Midway City Sanitary District Board of Directors will be the sole judge concerning responsiveness and capabilities of applicants.

ADDITIONAL INFORMATION

MCSD reserves the right to expand or diminish the scope of the work subject to negotiation with the successful firm.

The submission of a proposal shall be prima fascia evidence that the proposer has full knowledge of the scope, nature, quantity and quality of work to be performed.

MCSD reserves the right to conduct personal interviews of any or all proposers prior to selection. MCSD will not be liable for any costs incurred by the proposer in connection with such interview (i.e. travel, accommodations, etc.)

The successful firm shall not transfer the responsibility for any part of its contractual obligations without prior written approval of the MCSD Board of Directors.

The successful firm shall not provide requested information from the public or any person without the approval of the MCSD Board of Directors.

MCSD reserves the right to terminate the agreement upon giving the successful firm 15 days written notice of termination.

In the event it becomes necessary to revise any part of this Request for Proposal, addenda will be provided in writing to all firms receiving the Request for Proposal from MCSD.

Working Paper Retention and Access to Working Papers: All working papers and reports must be retained, at the auditor's expense, for a minimum of three (3) years, unless the firm is notified in writing by MCSD of the need to extend the retention period.

ASSISTANCE TO BE PROVIDED TO THE AUDITOR

The Finance Department and responsible management personnel will be available during the audit to assist the firm by providing information, documentation, and explanations. The preparation of confirmations will be the responsibility of MCSD.

MCSD personnel will be available to provide systems documentation and explanations.

The staff of MCSD will be available to prepare statements and schedules for the auditor, as necessary.

MCSD will provide the auditor with reasonable work space, desks and chairs. The auditor will also be provided with access to telephone lines, photocopying facilities, and a fax machine

QUESTIONS AND COMMENTS

Contact the Finance Director, Robert Housley (714)893-3553 extension 228 for questions and clarifications regarding this request for proposal.

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