HomeMy WebLinkAbout- CC-8 - Award Contract for Annual Transient Occ. - 7/15/2014CITY COUNCIL AGENDA REPORT
MEETING DATE: JULY 15, 2014
ITEM NUMBER:
SUBJECT: AWARD CONTRACT FOR ANNUAL TRANSIENT OCCUPANCY TAX AUDIT SERVICES
DATE: JUNE 27, 2014
FROM: FINANCE DEPARTMENT
PRESENTATION BY: COLLEEN O'DONOGHUE, ASSISTANT FINANCE DIRECTOR
FOR FURTHER INFORMATION CONTACT: COLLEEN O'DONOGHUE, ASSISTANT FINANCE
DIRECTOR (714) 754-5219
RECOMMENDATION
1. Award contract for annual transient occupancy tax audit services for fiscal years 2014,
2015 and 2016 to Mayer Hoffman McCann, P.C., in the total amount of $58,500 with an
option to extend the contract in one-year periods, for a minimum of two fiscal years.
2. Authorize City Chief Executive Officer to sign and execute a professional services
agreement with the selected audit firm.
BACKGROUND
The City currently has 30 hotels with transient occupancy taxes (TOT) totaled $7.2 million
in fiscal year 2012-2013. In previous years, TOT compliance audits were performed by
an internal staff member, who reviewed four to six hotels per year on a rotating basis.
Due to reduction in staff and reorganization of departmental functions, performing TOT
internal audits on a continuing basis is no longer feasible. In an effort to maintain level of
compliance with the City's TOT ordinance and ensure proper collection of TOT revenues,
staff recommended outsourcing TOT compliance audit functions. On April 4, 2014, a
Request For Proposal (RFP) was released for TOT audit services (see Attachment 1)
with the following schedule:
• Release of RFP April 4, 2014
• Proposals Due May 9, 2014
In response to the City's RFP, proposals were received from seven vendors. A five -
person evaluation committee which was comprised of two Financial Advisory Committee
members, independently evaluated the seven proposals.
The proposals were evaluated using the following criteria:
➢ Qualifications of entity and key personnel
➢ Approach to providing the requested scope of services
➢ Price proposal
➢ Result of reference checks
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In the evaluation team's cumulative evaluation score summary, Mayer Hoffman McCann
P.C., ranked first with a score of 2,240 and White Nelson Diehl Evans, LLP placed
second with a score of 2,060 and MuniServices, LLC place third with a score of 1,905.
On June 24, 2014, the Finance Advisory Committee unanimously approved the selection
of Mayer Hoffman McCann, P.C. as the TOT audit services contractor. A copy of the
cumulative evaluation score sheet can be seen on Attachment 2.
ANAI YSIS
The top three firms under consideration offer exceptional TOT audit services. The
evaluation committee, however, found that the TOT audit proposal offered by Mayer
Hoffman McCann, P.0 was superior - most notably in these areas: (1) quality of auditors
that are assigned to the Costa Mesa TOT audit; (2) exceptional references from other
governmental agencies with similar TOT audits; (3) reasonable field audit hours budgeted
for this engagement; and (4) low annual audit fees,
The following list summarizes the advantages to the City for selecting the firm of Mayer
Hoffman McCann P.C.
The firm specializes in local government auditing, including TOT compliance
audits. Over the last three years, the firm has performed over 120 TOT audits for
various municipalities.
➢ The firm takes a proactive leadership role in local government accounting and
auditing issues, and is the expert in issues of governmental accounting and
auditing.
➢ Based on the City's past experience working with the firm, they have demonstrated
a high level of responsiveness to staff's inquiries and do not bill for non -TOT
compliance audit consultation and advisory services.
➢ The firm will provide feedback to the City regarding the language in the ordinance
and the forms used to report and collect TOT.
ALTERNATIVES CONSIDERED
If City Council wishes to change the TOT audit firm recommended by the review
committee, the review committee would recommend awarding the TOT audit services
contract to White Nelson Diehl Evans, LLP, which proposed a total TOT audit fees of
$78,000 for a 3 year contract ($26,000 per year on average). It should be noted, that the
fiscal year 2013-14 budget includes $25,000 for TOT audit services and the same
amount is approved in the fiscal year 2014-15 budget. While the average cost per year
proposed by White Nelson Diehl Evans is slightly higher than the approved budget for
TOT audits, the overage can be covered by budget savings from other areas.
City Council also may choose to expand the scope of the services, however those
additional services may revise original prices proposed.
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FISCAL REVIEW
An amount of $25,000 per year is currently included as part of fiscal years 2013-14 and
2014-15 budgets for TOT audit services. As proposed, the cost of a three year contract
with Mayer Hoffman McCann, P.C. would be $58,500, with first year pricing of $21,150
and second year $19,800. The City would realize a total budget savings of $9,050 in the
first two years of contract. The audit fees are proposed to decrease to $17,550 in 2015-
16 as auditors become more familiar with the scope of TOT audits and City's
requirements.
Should City Council choose White Nelson Diehl Evans, LLP as the alternative, first year
pricing would be $28,300 and second year $26,000. Amounts in excess of approved
budget for TOT audits can be covered by budget savings from other areas.
LEGAL REVIEW
The professional service agreement (Attachment 4) has been reviewed and approved as
to form.
RECOMMENDATION
We are recommending Mayer Hoffman McCann, P.C. be awarded the TOT audit
services contract based on the TOT audit services committee's review, recommendation
and the subsequent approval of the Finance Advisory Committee. The firm has a solid
understanding of the scope of the project; and has extensive TOT auditing experience
with other municipal governments.
Stephen Dunivent
Interim Finance Director
Attachments:
1. RFP for Financial Audit Services
2. Cumulative Evaluation Score Sheet
3. Proposal
4. Professional Services Agreement
THOMAS DUARTE
City Attorney
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