CITY OF BELMONT
AUDIT COMMITTEE MINUTES
November 27, 2007

Committee Members Present:  Mayor Lieberman, Treasurer Violet, Councilmember Dickenson
Committee Members Absent:  None.
Staff Present:  City Manager Crist (arrived 2:45), Accountant Tu (arrived 2:21), Finance Director Fil, and Temporary Administrative Assistant Shiels

1.  The meeting was called to order at 2:09 PM. 

2.  There was no oral communication/public comment, as no members of the public were present.

3.  There were no agenda amendments. 

4.  Moved by Committee Member Dickenson, seconded by Committee Member Violet, by unanimous voice vote, the October 18, 2007 minutes were approved with the following change to item 6.a. on page 3: “Committee Member asked…” was changed to “The Committee asked…”

5.  Moving on to the next topic of auditor selection, Director Fil gave an overview of the Request for Proposals (RFP) process.  He explained how staff contacted references for all firms and looked at a variety of issues, the results of which were recorded in a spreadsheet, included in the Committee’s agenda packet. 

Director Fil described what staff identified as the strengths and weaknesses of each firm, beginning with Caporicci & Larson (C&L).  He explained that staff was concerned with C&L’s proposed timing, although it is a big firm with lots of experience in Northern California. He also pointed out that Moreland had a solid proposal, good staffing, the lowest costs, and good references, but did not have a great deal of Northern California experience, other than the City of Half Moon Bay.  Director Fil confirmed for Committee Member Lieberman that Moreland’s costs did include travel.  Vavrinek, Trine, Day & Co.’s (VTD) proposal included the highest costs, and most of their experience has mainly been with school districts. Director Fil stated that Maze & Associates had a highly qualified staff, very good references, and, after careful analysis, was rated as the strongest firm with the highest scoring proposal.  However, that being said, Director Fil made it clear that Maze & Associates, C&L, or Moreland would make fine audit firms for the City, and recommended any one of the three firms for the Committee’s choosing.

Committee Member Lieberman asked if there would be any risks staying with Maze, such as the firm becoming too comfortable with staff and the organization.  Director Fil responded that there would be no conflict of interest.  Committee Member Lieberman pointed out that there would be a $3K to $10K difference if they went with Maze.  He brought up two questions pertaining to the product: 1) when would they produce the results and, 2) what would be delivered?  In addressing the second question, Director Fil explained that the difference would manifest itself in the audit firm’s communication with the Audit Committee.  Continuing with the discussion about auditor selection, Director Fil restated that he would be willing to work with any of the three top firms, and found them all competent and qualified.  Committee Member Lieberman returned to his question about what product would be delivered.  Director Fil re-emphasized that the quality of the product would show up in the auditor’s communication documents, which would be presented to the Audit Committee.  

Committee Member Dickenson suggested that the Committee recall that it was established to perform due diligence by going out to market in an attempt to search for alternative audit firms.  Committee Member Violet agreed, and added that the political risk lied with not going out to market at all, rather than whether or not they chose to stay with the City’s current audit firm. 

Committee Member Lieberman referred to page 8 of Maze’s proposal – a chart listing numerous cities served by Maze, many since before 1998.  He asked whether this indicated that the cities listed had no need to change firms, to which Director Fil responded yes.  Committee Member Violet explained that, in his opinion, there was no compelling reason for change.  Director Fil reiterated that while Maze’s qualifications and references were among the most desirable, the differences were subtle in comparison to the other top 2 firms, and staff would be happy to work with any of the top three.  

Committee Member Lieberman presented a preliminary motion that the Committee select Maze & Associates for a five-year term, including the option that if the Committee and staff are not happy with the work, they can opt out at any time.  Committee Member Lieberman accepted Director Fil’s clarification that Maze would be hired for a one-year engagement with four option periods.  Committee Member Violet amended the motion to add that Maze would continue the process of staff rotation each year so that the three areas are not covered by the same group every year.  

The Committee resumed its discussion and Committee Member Violet said that in working with Director Fil on bond issues, he has observed that the consistent reports and quality of staff provided by Maze has helped the City’s marketability a great deal.  Committee Member Lieberman asked what the difference in quality would be between Maze and Moreland.  The Committee discussed this further, focusing on the proposed rates and their meaning.   

Moved by Committee Member Lieberman, seconded by Committee Member Violet, by unanimous voice vote the previously stated motion was passed.  Committee Member Violet summarized the motion and Director Fil requested that it be simplified by omitting Committee Member Violet’s statement about the process of staff rotation.  The Committee unanimously agreed to this amendment.  Director Fil explained that the Audit Committee will speak with Principal Biggs at the next meeting, and take up the topic of staff rotation at that time.   

Committee Member Dickenson suggested that page 8 of the Maze proposal be included in the City Council staff report on audit firm selection.  The Committee discussed best practices for choosing an audit firm and agreed that it is best to send out an RFP every five years.  Committee Member Lieberman said that he would like to see a chart like the one on page 8 each year so that the Committee can track changes. 

6.  The Committee next discussed the meeting calendar for 2008 and Director Fil explained the proposed meeting themes.  He clarified for City Manager Crist that the audit review would take place during the October meeting.  The Committee agreed that there might be a conflict in July, but it could be a placeholder for now.  The Committee concurred that their next meeting would take place on January 9, 2008. 

7.  Moved by Committee Member Violet, seconded by Committee Member Lieberman, by unanimous voice vote the meeting was adjourned at 2:59 PM.

Sincerely,

Thomas Fil
Finance Director

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