REPORT TO COUNCIL
SUBJECT
Title
Action on an Agreement with Baker Tilly US, LLP for Citywide Risk Assessment, Annual Work Plan, and Internal Audit Work
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
The City Auditor’s Office submits an annual audit work plan to the City Council for approval. The audit work plan is developed based on the results of a citywide risk assessment. The objective of the risk assessment is to identify departments, offices, areas, units, or processes that pose the greatest risk to the City and then align internal audit resources, where appropriate, to best help the City achieve its objectives in mitigating these risks. It also guides the City Auditor to prioritize the City’s potential audit subjects. The audit work plan does not, nor is it intended to, address or provide complete coverage of every City department, division, or system risks. However, over time, with the implementation of audit recommendations, it is expected that risks across City departments and systems will be sufficiently mitigated.
Due to limited staffing in the City Auditor’s Office and to assist with audit work under a “co-sourced” model, staff recommends engaging an outside consulting firm to assist in performing the citywide risk assessment and developing the annual audit work plan. It would be of great benefit to the City to have an experienced firm that has in-depth knowledge of internal auditing standards and requirements, years of experience in the field and sharing of best practices, and an understanding of audit approaches and risk-based auditing objectives. Additionally, this allows the City to practice a co-sourced, hybrid model where internal audit work can be outsourced or done in-house with assistance from a consultant.
DISCUSSION
Pursuant to City Code Section 2.105.330, a formal Request for Proposal (RFP) was conducted for this procurement, with the award recommendation based on “best value.” The factors considered in the award were quality and completeness of proposal, experience of firm and key personnel, approach and methodology in performing the work, and cost.
In 2021, the City published a RFP for a consultant to perform Citywide Risk Assessment, Annual Work Plan, and Internal Audit Work. Four proposals were received from the following firms:
• Baker Tilly US, LLP
• Eide Bailly LLP
• MGT of America Consulting, LLC
• Weaver and Tidwell, L.L.P.
The proposals were independently evaluated by a three-member evaluation team with representation from the Risk Manager and City Auditor’s Offices. The proposals were evaluated and ranked against the criteria published in the RFP. Baker Tilly US, LLP and Eide Bailly LLP were invited to oral interviews to demonstrate their knowledge and understanding of the City’s requirements and provide detailed information on how they would support the City Auditor’s Office.
Based on receiving the highest overall score, staff recommends award of contract to Baker Tilly US, LLP. Baker Tilly US, LLP’s proposal met or exceeded all the RFP requirements, and their proposal was rated superior in the following key areas:
• Baker Tilly US, LLP is one of the few comprehensive professional services firms in this field with a group dedicated to state and local governmental clients. They have performed hundreds of co-sourced and outsourced internal audit engagements to help a wide range of public sector organizations enhance internal controls, improve operations, and offer independent and objective insights into a variety of business and municipal functions.
• Baker Tilly US, LLP offers the City deep subject-matter expertise in various audit areas, including accounting, forensic audit and internal investigations, operational auditing, information technology and information security auditing, contract compliance and cost recovery auditing, audit planning and other advisory services.
• Baker Tilly, US LLP also has years of experience as internal auditor for many utility districts in the State of California and will be an effective subject matter expert for audit issues related to Silicon Valley Power.
• Baker Tilly US, LLP’s members are active participants in key industry organizations, including American Institute of Certified Public Accountants (AICPA), the Association of Local Government Auditors (ALGA), and Institute of Internal Auditors (IIA).
The maximum compensation under the proposed agreement with Baker Tilly US, LLP is $446,750 for term of five years, which includes a not-to-exceed amount of $196,750 for the risk assessment and annual work plan and a not-to-exceed amount of $250,000 for internal audit work. Staff will prioritize the items from the work plan and consider if the work can be performed by internal audit staff, assigned to Baker Tilly US, LLP, or performed in a co-sourced model.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
Funds for this contract is included in the FY 2021/22 Adopted Operating Budget. Funding in future years is subject to future appropriation by the City Council.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
1. Authorize the Audit Manager to execute an agreement with Baker Tilly US, LLP for Citywide Risk Assessment, Annual Work Plan, and Internal Audit Work, for a five-year term starting on April 1, 2022 and ending on March 31, 2027, with maximum compensation not-to-exceed $446,750 and subject to the appropriation of funds; and
2. Authorize the Audit Manager to execute amendments to the Agreement for additional risk assessment and audit services that may be required during the five-year term, subject to the appropriation of funds.
Staff
Approved by: David Noce, Audit Manager
Approved by: City Manager’s Office
ATTACHMENTS
1. Agreement with Baker Tilly US, LLP