HomeMy WebLinkAboutResolutions - 2011.07.06 - 18633FINANCE COMMITTEE
MISCELLANEOUS RESOLUTION #11134 July 6, 2011
BY: Finance Committee, Tom Middleton, Chairperson
IN RE: BOARD OF COMMISSIONERS - AWARD OF CONTRACT FOR FISCAL YEAR 2011 THROUGH
FISCAL YEAR 2013 INDEPENDENT ANNUAL AUDIT
To the Oakland County Board of Commissioners
Chairperson, Ladies and Gentlemen:
WHEREAS the County is required to hire an independent party to conduct annual audits of the
County's financial statements; and
WHEREAS the contract with the current independent auditor, Plante & Moran, PLLC, expires on June
30, 2011; and
WHEREAS on March 2, 2011, the County issued RFP #001736 to conduct to the annual independent
audit of the County's financial statements; and
WHEREAS RFP #001736 specified a Review Committee to evaluate the proposals received and
recommend a vendor to the Audit Subcommittee; and
WHEREAS the Audit Subcommittee has reviewed the Review Committee's recommendation and
concurs in recommending contracting with Plante and Moran, PLLP to conduct the annual independent audit
of the County's financial statements for the fiscal year ending September 30, 2011 through the fiscal year
ending September 30, 2013 with an option to include Fiscal Year 2014 and Fiscal Year 2015; and
WHEREAS Plante & Moran's proposal includes audit fees of $227,000 for the first year, with
inflationary adjustments each succeeding year; and
WHEREAS the County Executive's FY 2012- FY 2014 Budget recommendation includes sufficient
funding, under the Board of Commissioners, to cover the cost of this agreement.
NOW THEREFORE BE IT RESOLVED that the Board of Commissioners awards a contract to Plante
& Moran, PLLP to conduct the annual independent audit of the County's financial statements for the fiscal year
ending September 30, 2011 through the fiscal year ending September 30, 2013, with an option to include
Fiscal Year 2014 and Fiscal Year 2015.
BE IT FURTHER RESOLVED that the continuation of this agreement to include the annual
independent audit of the County's financial statements for the fiscal year ending September 30, 2014 and the
fiscal year ending September 30, 2015 requires the approval of the Audit Subcommittee.
Chairperson, on behalf of the Finance Committee, I move adoption of the foregoing resolution.
FINANCE COMMITTEE
Motion carried on a roll call vote with Woodward voting no.
May 31, 2011
Commissioner Shelley Taub
Chairperson, Audit Subcommittee
Oakland County Board of Commissioners
In Re: REVIEW COMMITTEE RECOMMENDATION FOR INDEPENDENT AUDITING FIRM
Commissioner Taub and Members of the Audit Subcommittee:
On March 2, 2011 Oakland County issued a Request for Proposal (RFP) #001736, for independent
auditing services covering fiscal years 2011-2013 with an option to extend the services to fiscal years
2014 and 2015. In response to this RFP, four professional accounting firms submitted proposals:
KPMG, LLP
Rehmann
Baker Tilly Virchow Krause, LLP
Plante & Moran, PLLC (current vendor)
These proposals were reviewed by the following individuals who comprise the Audit RFP Review
Committee (Review Committee):
Harvey Wedell, Board of Commissioners
Pam Weipert, Auditing Division
Scott Guzzy, Purchasing Division
Penny Cremer, Fiscal Services
Tim Soave, Fiscal Services
Using the criteria listed in the RFP, the Review Committee recommends that the Board of
Commissioners contract with Plante & Moran, PLLC to conduct the required independent audit of
Oakland County's financial report for fiscal years 2011, 2012, 2013 with the option of to continue the
engagement for fiscal years 2014 and 2015.
The attached documents provide the scoring summary and brief explanation of the issues with each
proposal. The Review Committee is available to meet with the Audit Subcommittee to more thoroughly
discuss this recommendation.
The Review Committee requests the Audit Subcommittee review and approve this recommendation,
and submit a resolution to the Finance Committee approving a professional services contract with
Plante & Moran, PLLC, to conduct the required independent audit of Oakland County's financial report
for the fiscal years stated in the RFP.
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PROPOSAL SCORE SHEET
REQUEST FOR PROFESSIONAL AUDITING SERVICES
Before Scoring Proposal
A vendor's proposal MUST meet the following criteria before they are evaluated and
scored. Unless the following minimums are met, the proposal must be rejected:
a. The contractor is independent and licensed to practice in Michigan.
b. The contractor's professional personnel have received adequate continuing
professional education within the preceding two years.
c. The contractor has no conflict of interest with the County in regard to any other
work currently being performed.
d. The contractor submits a copy of its most recent external quality control review
report and the contractor has a record of quality audit work.
Proposal Score
Expertise and Experience (11/faximum Points — 45)
a. The contractor's past experience and performance on comparable
government engagements.
b. The quality of the contractor's professional personnel to be assigned to the
engagement and the quality of the contractor's management support
personnel to be available for technical consultation.
Score
Audit Approach (Maximum Points — 30)
a. Adequacy and availability of proposed staffing plan for various segments
of the engagement
b. Adequacy of sampling techniques
c. Adequacy of analytical procedures
Score
3. Price: (Maximum Points — 25)
Score
TOTAL SCORE
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Oakland County - Request for Proposal - Independent Auditing Services
Ranking of Proposals
Plante & Baker
Criteria Moran Tilley Rehmann KPMG
Expertise & Experience (45 max) 43 40 40 40
Audit Approach (30 max) 27 26 15 20
Price (25 max) 20 15 20 10
Total Score 90 • 81 75 70
Price
Year #1 $ 227,000 $ 225,750 $ 183,825 $ 337,500
Year #2 233,500 237,020 187,025 345,900
Year #3 240,500 248,290 190,200 354,600
Year #4 248,000 • 259,560 192,850 363,500
Year #5 255,500 270,830 196,050 372,500
Total All Five Years $ 1,204,500 $ 1,241,450 $ 949,950 $ 1,774,000
Add-on Cost NO YES YES YES
Total Hours
Year #1 2,100 2,250 1,755 1,120
Year #2 2,100 2,250 1,665 1,120
Year #3 2,100 2,250 1,630 1,120
Year #4 2,100 2,250 1,570 1,120
Year #5 2,100 2,250 1,540 1,120
Request for Proposal for Independent Audit Services — Summary of Issues
KPMG
Experience and Expertise —This firm exhibits substantial nationwide experience, particularly with larger
clients; however there is limited large client experience in Michigan (Detroit and Wayne). In general, the
firm appears to have a large number of professional personnel to draw from as resources on this
engagement, with a variety of expertise. However, specific lower level staff was not clearly identified.
Finally, there is a concern regarding an unfavorable SEC finding. This finding was not related to audit
work.
Audit Approach - The approach included with the proposal did not provide a lot of detail. It appears to
be a very general approach which does not take into account the County's specific situation. The firm's
process is heavily dependent upon technology using their own proprietary system, but little reference is
given on how it works. There is concern that use of this proprietary system may not be able to meld
with County operations. Although the approach appears generally adequate, the ability to successfully
implement the approach for the County's purposes is a concern.
Price — The highest of all the firms (47% higher than the recommended firm). Far too high to be seriously
considered. Extremely high partner cost and reduced number of hours.
Rehmann
Expertise and Expertise —This firm provides auditing services to many Michigan counties and cities. They
also appear to have extensive experience in producing CAFRs or working with units of government that
receive the CAFR award. The proposal identified key staff and discussed the firm's emphasis on
organizational development. However, there are concerns that the firm does not appear to have
completed an audit of a governmental unit of our size — this is evidenced in their approach (see below).
Further, the latest peer review reported some internal control issues. Although these issues were minor
and deal with their internal record keeping, the report is troubling. They did not receive a clean peer
review as the other firms did.
Audit Approach - There are major concerns regarding the audit approach that was submitted with this
firm's proposal. First, it appears that the approach submitted is a basic, vanilla discussion of how this
firm does business. All the correct "terms" are included; however there is no tailoring of their approach
to Oakland County's situation. Evidence is an offer to produce the financial statements and CAFR.
Although such an offer may be appropriate for a smaller governmental unit; it is something that a unit
the size of Oakland County would never consider. Further, their sampling and analytical approach is
based heavily on using their technology system, regardless of the needs of the County. A portion of the
approach includes the production of draft financial statements at the beginning of the process—
something our system would have difficulty providing. Finally the number of hours cited for the work to
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be performed appear inadequate — far less then what has ever been used by this County, even when
Internal Audit performed work for the external auditors (which they are no longer staffed to do). In
general it appears that this firm does not understand the effort it takes to produce an audit of this size
of government.
Price — This firm submitted the lowest cost of all the firms; however that lower cost is based upon an
inadequate number of hours committed to the project. Although the proposed price is low, the chance
of additional costs being added as the audit progresses is high. Further, the proposal for the single audit
includes only two major programs; additional major programs will experience additional cost. The
number and the size of the grants received by the County means that there are far more than two major
programs. Finally, the proposal states that the firm will accept the mileage and lodging reimbursement
received by County employees. Via past practice, the County does not contemplate paying mileage and
lodging.
Baker Tilley
Experience and Expertise —The firm appears to have substantial experience in the Midwest, primarily
Wisconsin. In addition, the proposal includes a number of experienced and well trained professional
personnel including "specialists" for various areas such as pensions. However these individuals
demonstrate no previous experience in Michigan and have had practically no presence in Michigan. Two
of the least experienced individuals will support an office in Southfield; all other expertise will come in
from out-of-state.
Audit Approach - Very detailed approach to the project. Well documented, clear and workable. Full
discussion of time frames, etc. Primary concern is that the project will be managed in Milwaukee,
Wisconsin. Further, most staff will travel in from out-of-state. This approach would be disruptive to the
County operations.
Price — Second lowest of all cost, however, there are several "add-ons" that the committee found
disturbing. In particular there was a proposed charge for issuing a "comfort letter" (no idea what that is).
Further, there will be charges for travel; particular concerns since most of the principals are from out of
state. This contract contemplates a total price, without add-ons — this is an issue.
Plante and Moran
Experience and Expertise —The firm provides auditing services for many Michigan counties, cities and
townships, including several larger units of government. Further, this firm has successfully produced
Oakland County's audit for the last five years. The resume and background of key staff are included in
the proposal; many of these individuals have demonstrated expertise in Michigan issues and have
provided training to professional financial associations throughout the state. The firm has also
demonstrated expertise in consulting services.
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Audit Approach — The proposal contains a well spelled out staffing plan to accomplish the audit;
including the identification of staff with specific expertise in certain areas. An appendix of the proposal
provides a good discussion of the specifics of both the sampling and analytical techniques to be used
during the audit, all of which appears workable within the County's resource limitations.
Price - The proposed price is in the middle of the four proposals (along with Baker Tilley) however it
includes an adequate number of hours to complete the audit and is full price. There are no add-on
charges included. Further, the firm proposes to cover the cost of lost Internal Audit support within their
base price.
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July 6 2011 Resolution #11134
Moved by Middleton supported by McGillivray the resolution be adopted.
Moved by Woodward supported by Covey the resolution be amended as follows:
BE IT FURTHER RESOLVED that the continuation of this agreement to include the annual
independent audit of the County's financial statements for the fiscal year ending September 30, 2014
and the fiscal year ending September 30, 2015 requires the approval of the Audit-S-u-bcom-mittee
Board of Commissioners.
Discussion followed.
Chairperson Michael Gingell declared a brief recess.
A sufficient majority having not voted in favor, the amendment failed.
Discussion followed.
Vote on resolution:
AYES: Gershenson, Gingell, Gosselin, Greimel, Hatchett, Hoffman, Jackson, Long, Matis,
McGillivray, Middleton, Nash, Nuccio, Potts, Quarles, Scott, Taub, Weipert, Zack, Bosnic, Covey,
Crawford, Dwyer. (23)
NAYS: Woodward. (1)
A sufficient majority having voted in favor, the resolution was adopted,
I HEREBY APPROVE THE FOREGE')),AOLII
STATE OF MICHIGAN) Z7/ s-/
COUNTY OF OAKLAND)
I, Bill Bullard Jr., Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and
accurate copy of a resolution adopted by the Oakland County Board of Commissioners on July 6, 2011, with
the original record thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at Pontiac,
Michigan this 6th day of July, 2011.
R.do
Bill Bullard Jr, Oakland County