Memorandum

City of Lawrence

Finance Department

TO:	Dave Corliss,  City Manager
FROM:	Ed Mullins, Finance Director Brian Watson, Assistant Director Danelle Dresslar, CD Manager
Date:	November 27, 2013
RE:	Audit Proposals

BACKGROUND

On November 1, 2013, the Finance Department sent a Request for Proposals (RFP) to audit firms.  The RFP was based upon the model RFP developed by the Government Finance Officers Association (GFOA) and included the scope of services for independent auditing services for the City of Lawrence.   The City of Lawrence has utilized the local office of Mize Houser since 1999.

PROPOSALS

The Finance Department received a total of four responses.  Responses were received from Mize Houser, Cochran Head Vick & Co., Rubin Brown, and Allen Gibbs & Houlik (AGH).  The Finance Department believes all four firms are qualified to perform the annual financial audit and have checked the firm’s references.

The GFOA’s recommended practice on Audit Procurement states, “Unfortunately, the frequent lack of competition among audit firms fully qualified to perform public-sector audits could make a policy of mandatory auditor rotation counterproductive.”   The recommended practice also recommends a multi-year agreement of at least five years in duration.  The RFP asked for a five year agreement and requested costs for each of the five years. 

The cost of providing the auditing services varied significantly among the firms.  The following table summarizes the annual cost of the engagement assuming the audit of one major grant program and the anticipated hours to be worked for each of the three firms.

Firm	Hours	2013 Cost	Clients
Mize Houser	400	$43,100	Lawrence, Shawnee, Mission Salina, Junction City
Cochran & Head	450	$49,790	Topeka, Grandview, Mo., Joplin, Mo., Shawnee County
Rubin Brown	500	$66,900	Lenexa, KDOT, Leawood  Lee’s Summit, Mo.
AGH	570	$48,080	Wichita, Douglas Co., Johnson Co., Unified Gov’t.

EVALUATION

The Finance Department is satisfied with the quality of services provided by Mize Houser.  In addition to audit services, the firm has reviewed our cash management practices and assisted in revenue bond issuance. 

Each proposer increased their annual costs from the 2013 amount, with the exception of Mize Houser. Mize Houser’s annual cost will drop to $33,750 in 2014 and increase by approximately $700 per year annually.  The higher amount for 2013 is the result of additional auditing procedures to review the controls associated with the new accounting and billing software.  The annual increase in costs for the other firms was considerably higher.  The Finance Department expected a reduction in costs in the second year from the other firms since they would become more knowledgeable of our internal controls and operations.

The need to rotate auditors is also a function of the size and complexity of the entity being audited.  In the case of the City of Lawrence, our financial structure and activities are not of a complex nature.  In addition, we have the benefit of a local firm that has grown its governmental accounting business.  

RECOMMENDATION

The Finance Department recommends engaging the firm of Mize Houser to conduct the 2013 annual financial audit and up to four additional years.  The firm has provided very good service to the City.  In addition, their five year total cost is significantly less than the next lowest proposal.  Copies of the RFP responses are available for review.