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HomeMy WebLinkAboutRES 181 Draft 01 1996-1998 ------~----~---~----~--~--- ----- ---- -------~---- s ~ . . COUNTY OF HAWAII STATE OF HAWAII RESOLUTION NO. 1 S 1 97 A RESOLUTION AUTHORIZING THE COUNCIL'S PROCESS FOR PROCURING AN INDEPENDENT AUDITOR(S), PURSUANT TO SECTION 10-13, HAWAII COUNTY CHARTER, AND AUTHORIZING THE PAYMENT OF FUNDS IN FUTURE FISCAL YEARS TO COVER A FOUR-YEAR CONTRACT. WHEREAS, Section 10-13 of the Hawaii County Charter requires the County Council to provide for an annual independent audit of the accounts and other evidences of financial transactions of the County and of every county agency and executive agency; and WHEREAS, Section 10-11 of the Hawaii County Charter requires that any contract, lease or other obligation requiring payment of funds from appropriations of a later fiscal year or of more than one fiscal year be approved by resolution of the Council; and ' WHEREAS, the Council finds that for economic and consistency reasons it is in the best interest of the County that the external audit contract be for four consecutive years, commencing with the audit year ending June 30, 1998. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE COUNTY OF HA WAIl that it authorizes the Chair of the Council to proceed with the procurement of the independent auditor(s) in the following manner: 1. An Evaluation Committee will be established and will be composed of a Council Member appointed by the Chair, the Legislative Auditor, the Fiscal/Program Review Auditor, and a representative from the State Auditor's Office. 2. The Request .for Proposal (RFP) as set forth in concept in Exhibit A will be finalized. 3. The RFP will be published and invitation letters will be mailed to Certified Public Accountants (CPA) and CPA firms. 4. Proposals will be received and registered. 5. The Evaluation Committee will evaluate and rank the proposals and will make its recommendation to the Council. 6. The Council will discuss the recommendations of the Evaluation Committee in Executive Session and will proceed to authorize awarding of the contract. 7. Contract will be finalized, routed, and executed. ~. ~. . . BE IT FURTHER RESOLVED that the external audit comract cover the requirements for the four consecutive years commencing with the audit period ending June 30, 1998. BE IT FURTHER RESOLVED that sufficient funds be budgeted in future fiscal years to cover the obligation of the County under said contract agreement. Dated at Hilo, Hawaii, this day of , 1997. INTRODUCED BY: UkI,[l;-u COUNCIL ~ER, T OF HAWAII COUNTY COUNCIL County of Hawaii Hilo, Hawaii ROLL CALL VOTE I hereby certify that the foregoing RESOLUTION was by the vote indicated to the right hereof adopted by the COUNCIL of the County of Hawaii on AYES NOES ADS EX ARAKAKI CHUNG LEITBEAD-TODD RAY REYNOLDS SANTANGELO SMITH TYLER YAGONG A TrEST: - Reference C~568.. COUNTY CLERK' ,', tBAnUfAi~r & PRESIDING OFFICER RESOLUTION NO. ' . , ~ ; . l\-' l, " ~" /1 '!! '; , . I , ,t ~ t ~ ~ , ] , , ~ . ' t . '" ' A 1 COUNTY OF HAWAII REQUEST FOR PROPOSALS FOR PROFESSIONAL FINANCIAL AUDITING SERVICES FOR EACH OF THE FOUR CONSECUTIVE YEARS COMMENCING WITH FISCAL YEAR ENDING JUNE 30, 1998 THROUGH JUNE 30, 2001 HAWAII COUNTY COUNCIL OFFICE OF THE COUNTY CLERK LEGISLATIVE AUDITOR'S OFFICE, ROOM 208 25 AUPUNI STREET HILO, HI 96720 (808) 961-8386 FAX: (808) 961-8572 EXHIBIT A 4 • HAWAII COUNTY COUNCIL REQUEST FOR PROPOSALS TABLE OF CONTENTS I. INTRODUCTION A. General Information B. Contract Engagement: Term, Execution, Right to Suspend or Terminate C. Rights, Reservations and Considerations D. Contact Person; Clarifications and Questions, RFP Deadline II. SPECIFICATIONS FOR THE FINANCIAL AUDIT A. Audit Objectives B. Audit Scope C. Standards for Audit and Audit Reports D. Reports to be Issued E. Audit Activities III. CONSULTATION ON REPORT FINDINGS AND RECOMMENDATIONS IV. BUDGET LIMITATIONS AND TIME REQUIREMENTS A. Budget Limitations B. Time Requirements V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department Assistance B. Electronic Data Processing (EDP) Assistance C. Work Area, Telephone, Photocopying and FAX Machines VI. PROPOSAL REQUIREMENTS A. Minimum Requirements B. Proposer's Background, Size, Work Experience and Qualifications C. Resources to be Used and Staff Qualifications D. Audit Approach and Methodology E. Timetable and Compensation Schedule F. Address Where the Audit Will Be Conducted G. Submittal of Proposal H. No Proposal Security is Required VII. EVALUATION PROCEDURES A. Evaluation Committee and Final Selection B. Method of Evaluation C. Final Selection TABLE I: EVALUATION OF PROPOSALS APPENDIX A: FINANCIAL AUDIT REPORT FOR FISCAL YEAR ENDED JUNE 30, 1996 APPENDIX B: SINGLE AUDIT REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1996 APPENDIX C: FINANCIAL AUDIT REPORT FOR THE DEPARTMENT OF WATER SUPPLY FOR THE FISCAL YEAR ENDED JUNE 30, 1996 APPENDIX D: REPORT FOR LANDFILL FINANCIAL ASSURANCE -i- 4 HAWAII COUNTY COUNCIL REQUEST FOR INDEPENDENT FINANCIAL AUDIT PROPOSALS INTRODUCTION A. General Information The Hawaii County Council, pursuant to Section 10-13 of the Hawaii County Charter, is requesting proposals from qualified certified public accountants or firms of certified public accountants (hereinafter referred to as "Contract Auditor") to audit the County of Hawaii's financial statements for each of the four fiscal years commencing with the fiscal year ending June 30, 1998 through June 30, 2001 . The Contract Auditor shall also conduct a Single Audit of all County programs in receipt of federal financial assistance. These audits are to be performed in accordance with generally accepted auditing standards of the American Institute of Certified Public Accountants (AICPA); the standards set forth for financial audits in the U.S. General Accounting Office's (GAO) Government Auditing Standards (1994); the provisions of the federal Single Audit Act of 1984, Public Law 98-502; the Single Audit Act Amendments of 1996, Public Law 104-156; and U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Non-Profit Organizations.. B. Contract Engagement: Term, Tax Clearance, Execution, Right to Suspend or Terminate A four-year contract will be entered into, as authorized by Council resolution. The Contract shall not be binding or of any force until said contract has been fully and properly signed by all of the parties thereto and approved by the Director of Finance as to availability of funds and the Corporation Counsel as to form and legality. C. Rights, Reservations and Considerations The County Council reserves the right to investigate the financial status, experience, and records of each proposer, and to require further information from any proposer. The County Council shall be the sole judge of the facts as to the reliability of the proposer. Should a proposer fail to meet the qualifications stated herein or fail to submit additional information requested by the Council, the Council may refuse to receive or consider any proposal submitted by such proposer. There is no expressed or implied obligation for the County of Hawaii to reimburse responding firms for any expenses incurred in preparing proposals in response to this request. Such costs should not be included in the proposal. -1- .. 0 The County Council reserves the right without prejudice to cancel or reject any or all proposals and to waive any defects in the proposals or Notification, in the best interest of the County. Unless otherwise expressly provided in the contract, all provisions of these specifications and instructions shall be considered to be part of the contract entered into by the County and the Contract Auditor. Additionally, the County's standard General Terms and Conditions for contracts will be included in the contract. During the duration of the contract, the County reserves the right to terminate the contract at will. Should this right be exercised, the County shall pay to the Contract Auditor, a sum equal to the professional fees of the prior fiscal year. The County shall have the right to suspend performance of the services under the contract or terminate the contract in whole or in part at any time by written notice to the Contract Auditor with good cause. The successful proposer must apply to the Hawaii State Tax office and the Internal Revenue Service in conformance with HRS, 103-53, for a tax clearance prior to a contract being issued and again before final annual payment can be made. In the event an apparent successful proposer is unable to furnish appropriate certificates within ten (10) calendar days of being requested to do so, the County will proceed to award the contract to the next most acceptable proposer who shall furnish said certificates. It is not required, but strongly suggested, that proposers furnish tax clearances with their proposals. In conducting the Single Audit of Federal assisted programs, small business concerns and business concerns owned and controlled by socially and economically disadvantaged individuals are encouraged to participate in the performance of the contract awarded to fulfill the audit requirements of Chapter 75, Title 31, United States Code. D. Contact Person; Questions and Clarifications Deadline; RFP Deadline Questions or clarifications about the request for proposals may be directed in writing to Connie Kiriu, Legislative Auditor, 25 Aupuni Street, Hilo, HI 96720 at (808) 961-8388 (FAX: (808) 961-8572) prior to December 15. 1997. The original proposal and 12 copies shall be mailed or delivered to Council Chair James Y. Arakaki, c/o Purchasing Division, Room 118, 25 Aupuni Street, Hilo, Hawaii 96720. The proposal must be received by the Purchasing Division 4:00 p.m. on Monday, January 5, 1998. Requirements are set forth in Section VI of this RFP. -2- a II.• SPECIFICATIONS FOR THE FINANCIAL AUDIT A. Audit Objectives 1 . To provide a basis for an opinion by the Contract Auditor of the reasonable accuracy of the financial statements of the County of Hawaii and all its agencies, including the Department of Water Supply (DWS), and of operations for which the County is responsible. 2. To ascertain whether or not expenditures and other disbursements have been made, and all revenues, receipts and receivables to which the County is entitled or is responsible for having collected and accounted for in accordance with the laws, rules and regulations, and policies and procedures of the County, the State of Hawaii and the federal government (where applicable) have been satisfied. 3. To evaluate the adequacy, effectiveness, and efficiency of the systems and procedures for financial accounting, internal and operational controls of the County and of operations for which the County is responsible. 4. To ensure that: (1) the funds appropriated to the agencies are being expended in accordance with the purposes for which they were appropriated and in accordance with applicable laws, ordinances and regulations; (2) adequate accounting systems and procedures have been established to safeguard the public funds and property; (3) accurate and reliable fiscal records are being maintained; and (4) there is efficiency in operations. 5. To test, study, examine, evaluate and report on financial statements, internal accounting and other control systems, and other compliance requirements for federal assistance programs in accordance with the provisions of the Single Audit Act of 1984, the Single Audit Act Amendments of 1996, as may be amended, and OMB Circular No. A-133. 6. As appropriate, to recommend improvements to the internal control, reporting and accounting systems and procedures of the County agencies. It is recognized that ordinarily, an audit is not primarily designed to detect loss, fraud or waste of funds, if such exists. However, the Contract Auditor shall be mindful of and be alert to such possibility during the course of this audit and to report such irregularities. B. Audit Scope 1 . Generally -3- a The Contract Auditor shall conduct a financial audit of all fund types and groups in the County and in its Department of Water Supply for each of the four consecutive fiscal years commencing with the fiscal year ending June 30, 1998 through June 30, 2001 (July 1, 1997 to June 30, 2001). Each financial audit shall include the following: a. Except as otherwise provided herein, a limited general audit of the financial transactions and accounting records of the County funds and account groups and of operations for which the County is responsible. The term "limited general audit" means a test audit of the receipt and expenditures for the period(s) specified; the Contract Auditor is not expected to verify every transaction and record for the audited fiscal year. "Limited general audit" shall include tests of the financial data to provide the Contract Auditor with a basis to report on the fairness of the financial statements, on the legality and propriety of the expenditures and other disbursements, and on the accounting of all revenues, receipts and receivables. b. An examination of the existing systems and procedures of accounting, reporting, operational, and internal controls of the County and of all operations for which the County is responsible. The evaluation of the system of internal control shall include an assessment of the extent to which the system can be relied upon to ensure accurate information, to ensure compliance with laws and regulations, to provide for efficient and effective operations, and to ensure integrity in the County's receipt and expenditure of public funds. The Contract Auditor shall identify the deficiencies and weaknesses in the systems and procedure, and make appropriate recommendations for improvements, including, but not limited to, the management information system and the accounting and operating procedures. c. An examination to enable the Contract Auditor to opine on all the objectives specified in Section II.A. above. d. The Contract Auditor is not required to audit the supporting schedules contained in the comprehensive annual financial report. However, the Contract Auditor is to provide an "in-relation-to" opinion on the supporting schedules based on the auditing procedures applied during the audit. Further, the Contract Auditor is not required to audit the statistical section of the report. -4- 2. Federal Assistance Programs In examining the County's federal assistance programs in accordance with the provisions of the Single Audit Act of 1984, the Single Audit Act Amendments of 1996, and OMB Circular No. A-133, the Contract Auditor shall: a. Perform an audit of the financial statement(s) for the federal program in accordance with general standards specified in generally accepted government auditing standards (GAGAS); b. Obtain an understanding of internal control and perform tests of internal control over the Federal Program consistent with the requirements of Section .500(c), OMB Circular No. A-133, for a major program; c. Perform procedures to determine whether the auditee has complied with laws, regulations and the provisions of contracts or grant agreements that could have a direct and material effect on the Federal program consistent with the requirements of Section .500(d), OMB Circular No. A-133, for a major program; and d. Follow up on prior audit findings, perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee, and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding in accordance with the requirements of Section .500(e), OMB Circular No. A-133. 3. Other Areas of Concern a. An examination of the progress made in the implementation of the recommendations contained in the financial audits of the County for the preceding fiscal year. b. Other specific areas of concern as agreed upon between the Council through its Legislative Auditor and the Contract Auditor, provided that if additional funds are required, this contract may be amended pursuant to the provisions of this Agreement. C. Standards for Audit and Audit Reports 1 . The audit examination shall adhere to the generally accepted auditing standards adopted by the membership of the American Institute of -5- Certified Public Accountants and the standards for financial and compliance audits contained in the U.S. General Accounting Office's Government Auditing Standards (1994), as may be further amended. 2. Standards for Reporting on Audit of Financial Statements a. The report shall: State whether the financial statements are presented in accordance with generally accepted accounting principles; ii. State whether such principles have been consistently observed in the current period in relation to the preceding period and if any material change has occurred to explain its effect(s) on the financial reports; iii. Contain the following financial statements: (a) General Purpose Financial Statements: Combined Balance Sheet - All Fund Types and Account Groups Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types and Expendable Trust Funds Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Non-GAAP Budgetary Basis - General and Special Revenues Fund Types Combined Statement of Revenues, Expenses and Changes in Retained Earnings - Proprietary Fund Type Combined Statement of Cash Flows - Increase (Decrease) in Cash and Cash Equivalents - Proprietary Fund Type Notes to the Combined Financial Statements (b) Individual or Combining Financial statements for each fund which provide further analysis of the statements indicated in (a) above. (c) Other financial statements, schedules, statistical data and comments that would contribute to an understanding of the financial operations of the -6- s t various funds. An example of such a schedule is the schedule of capital improvement projects-- appropriations, allotments, expenditures and encumbrances. Additional financial statements or schedules which are determined to be necessary by the County Legislative Auditor shall also be prepared. Those financial statements delineated under Item II.C.2.a.iii shall be prepared by the Department of Finance. iv. Note any inadequacies in the information disclosures contained in the financial statements; and v. Contain an expression of opinion regarding the financial statements, taken as a whole, or an assertion to the effect that an opinion cannot be expressed. When an overall opinion cannot be expressed, the reason therefor shall be stated. In all cases where the Contract Auditor's name is associated with the financial statements, the report should contain a definite indication of the character of the Contract Auditor's examination, if any, and the degree of responsibility being taken. 3. Standards for Reporting on Compliance and on Internal and Operational Controls, Accounting Systems and Procedures, etc. With respect to compliance and internal and operational controls and accounting systems and procedures, the report shall include: a. Statements of the scope and objectives of the compliance testing and systems and procedures examination; b. An explanation of any violation of Federal, State and County statues, regulations or requirements, including details of the instances of noncompliance, and any expenditure not in accordance with the purposes for which they were appropriated; c. An evaluation of the adequacy and effectiveness of the systems of internal and operational records, forms, policies and procedures, financial reporting and budgetary controls; d. All significant findings of weaknesses and inadequacies in the internal operating controls, accounting and reporting systems and procedures disclosed as a result of the audit; -7- e. A disclosure of any significant loss, waste, fraudulent use, improper or unauthorized expenditure of funds, or any failure to account for revenues, receipt and receivables; f. A disclosure of any significant lack of efficiency or economy in the operations of the agency; and g. Recommendations for improvements. 4. Standards for Reporting on Federal Assistance Programs The Contract Auditor's report shall state that the audit was conducted in accordance with the provisions of the Single Audit Act of 1984, the Single Audit Act Amendments of 1996, and OMB Circular No. A-133, and shall include the following: a. An opinion as to whether the financial statements of the Federal program is presented fairly in all material respects in conformity with the stated accounting policies; b. A report on internal control related to the major Federal program, which shall describe the scope of testing of internal control and the results of the tests; c. A report on compliance which includes an opinion as to whether the auditee complied with laws, regulations, and the provisions of contacts or grant agreements which could have a direct and material effect on the Federal program; and d. A schedule of findings and questioned costs for the Federal program that includes a summary of the auditor's results relative to the Federal program in a format consistent with Section .505(d)(1), OMB Circular No. A-133, and findings and questioned costs consistent with the requirements of Section .505(d)(3), OMB Circular No. A-133. 5. Standards for Reporting on Specific Areas of Concern With respect to reporting on specific areas of concern, sufficient detail shall be included to enable the Council to understand the underlying causes of problems reported and to assist in implementing or devising corrective action. At a minimum, the report shall contain a statement of the examination objectives and approach; a descriptive statement and an evaluation of each problem revealed by the examination; and findings and recommendations. -8- r $ 6. The Government Finance Officers Association (GFOA) Certificate of Achievement Program The Contract Auditor shall assist the County in preparing its Comprehensive Annual Financial Report to ensure that it goes beyond the minimum reporting requirements of generally accepted accounting principles to achieve the expanded reporting requirement of the Government Finance Officers Association Certificate of Achievement Program. D. Reports To Be Issued 1 . Preliminary Draft Report. The Contract Auditor shall prepare a preliminary draft report, which shall be submitted to the County Legislative Auditor for review and discussion. The audit work papers referred to below shall be made available at that time. After the preliminary draft report has been reviewed by and discussed with the County Legislative Auditor and changes, if any, have been made to the draft report, the report will be transmitted by the County Legislative Auditor to officials of the agencies affected by the audit. A written response regarding the audit findings and recommendations shall be secured from the officials of the agencies affected by the audit, and such comments shall be incorporated as part of the final audit report. The number of copies submitted will be determined by the County Legislative Auditor. 2. Final Report shall be submitted to the County Legislative Auditor. The audit work required by these specifications shall be considered to have been completed only upon delivery of the final report acceptable to the County. The Financial Audit Report for the Fiscal Year Ended June 30, 1996, is included as Appendix A. a. Form, Content and Distribution of Final Report Each report shall be addressed to the "Chair and Members of the County Council, County of Hawaii, Hilo, Hawaii," and shall contain the following parts: Title of report. The title of the report shall be as follows: County of Hawaii Auditor's Report For the Year Ended June 30, ii. A foreward iii. A table of contents -9- $ iv. An introduction consisting of an explanation or statement of the purpose of the report; a brief description of the scope of the audit; and an outline of the organization of the material in the report v. A report on compliance and on internal control and accounting systems and procedures consisting of a table of contents; a statement of the Contract Auditor's scope and description of the contents of the report; a summary of findings; a statement and description of deficiencies and weaknesses in the internal control and accounting systems and procedures including recommendations for corrective action. Reportable conditions that are also material weaknesses shall be identified as such in the report. Unresolved findings and other weaknesses from the County of Hawaii's most recent financial statement audit shall be reviewed and updated. vi. A report on financial statements consisting of a table of contents; a statement of the Contract Auditor's scope and opinion; financial statements; and supplementary statements and schedules. b. Distribution. The Contract Auditor shall deliver 2 camera-ready masters of the financial statement section, the introductory section and the statistical section of the auditor's report to the County Finance Director for inclusion in the comprehensive annual financial report. The Contract Auditor shall deliver 50 copies of the final audit report to the County Council and 2 copies to the State Legislative Auditor. Distribution of the reports to the officials of the agencies audited and to other state and county officials shall be made by the County Council. 3. Report on Single Audit. The Contract Auditor shall prepare copies of the Single Audit on the programs in receipt of Federal financial assistance for each of the four consecutive years commencing with the fiscal year ending June 30, 1998. 120 copies of the report shall be submitted to the Finance Department no later than December 31. A County's Single Audit Report for the Fiscal Year Ended June 30, 1996, is included as Appendix B. 4. Report on the Department of Water Supply. The Contract Auditor shall prepare 24 copies of an annual audit report on the financial statements of the Department of Water Supply, County of Hawaii, commencing with the fiscal year ending June 30, 1998. Any findings and recommendations concerning internal and operational control matters of the department shall be included as part of the independent general audit report on the -10- s County's financial statement. The Report on the Department of Water Supply shall be completed no later than November 30. The Department of Water Supply's Audit Report for Fiscal Year Ended June 30, 1996, is included as Appendix C. 5. Report for Landfill Financial Assurance. The Contract Auditor shall furnish 5 copies of the letter report required by 40 Code of Federal Regulations, Part 258 that enables the County to be self insured for closure, postclosure care, and remedial action for the Hilo and Kealakehe landfills. An example of such a report is attached as Appendix D. 6. The County of Hawaii anticipates it will prepare one or more official statements in connection with the sale of debt securities which will contain the general purpose financial statements and the auditor's report thereon. The Contract Auditor shall be required, if requested by the fiscal advisor and/or the underwriter, to issue a "consent and citation of expertise" as the auditor and any necessary "comfort letters." E. Audit Activities 1. Legal Authority. In ascertaining whether or not the financial transactions of the agency are in compliance with applicable laws, ordinances, regulations and administrative procedures, the Contract Auditor shall be sufficiently knowledgeable with the applicable sections of the following documents: • Constitution of the State of Hawaii • Hawaii Revised Statutes • Hawaii County Charter • Hawaii County Code 1983 (1995 Edition) • Single Audit Act of 1984, the Single Audit Act Amendments of 1996, and OMB Circular No. A-133. • Applicable rules, regulations and administrative procedures of the state, county, and federal governments relating to the financial transactions, accounting systems and controls and operating procedures • Ordinances of the County of Hawaii • Resolutions adopted by the County Council • Collective bargaining agreements affecting employees of the agency. 2. Contract Administration. The provisions of the contract and of these instructions shall be administered in behalf of the County by the Legislative Auditor and the Chair of the County Council. -11- 3. Audit Work Papers. The Contract Auditor shall, at any time during and subsequent to the audit, make available to the Legislative Auditors' and federal audit agencies as may be required by the terms and conditions under which federal funds are received by the County, for their inspection and review, the working papers developed during the audit including, among others, the following: a. The audit program and internal control questionnaire b. The working trial balance c. Schedules, recommendations, computations, analyses, audit notes, confirmation letters and replies, and other data representing a record of work done in support of account transactions and balances, and systems analysis. d. Documents obtained and other working paper relating to the examination. All working papers and reports must be retained, at the Contract Auditor's expense, for a minimum of three years, unless the firm is notified in writing by the County of Hawaii of the need to extend the retention period. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance. 4. Significant Deficiencies in Internal Control or Unusual Financial Transactions. The Contract Auditor shall notify the County Council and the County Legislative Auditor in writing of any significant deficiency in internal control or unusual financial transactions discovered during the course of the audit. If the circumstances call for a significant amount of additional investigation, the Contract Auditor shall submit to the Council and the County Legislative Auditor the estimated additional time and cost required to perform the investigation. Contract Auditor shall proceed with the special work only upon written authorization from the County Council. Significant deficiencies in the internal control, unusual transactions or noncompliance discovered during the course of any Single Audit shall be reported by the Contract Auditor to the County Council, County Legislative Auditor and the cognizant agency for the County of Hawaii. "Legislative Auditors" refers to the County Legislative Auditor and the State of Hawaii Legislative Auditor -12- s 5. Non-reportable conditions discovered by the Contract Auditor shall be reported in a separate letter to management, which shall be referred to in the report on internal controls. 6. Reportable conditions encountered by the Contract Auditor during the course of the audit examinations shall be reported in a separate letter to the County Legislative Auditor. Such conditions would include disagreement with management or difficulties encountered in performing the audit. III. CONSULTATION ON REPORT FINDINGS AND RECOMMENDATION Subsequent to the completion of the work required, the Contract Auditor shall, as part of the audit contract, be available for attendance at Council and Committee hearings as may be necessary to testify on or discuss the findings and recommendations contained in the audit report. IV. BUDGET LIMITATIONS AND TIME REQUIREMENTS A. Budget Limitations 1 . The total sum to be allocated for conducting the audit shall be limited to the extent of funds appropriated for this purpose and the continued availability of such funds during the course of the project. 2. The method of payment for services provided by the Contract Auditor, whether in lump sum or in increments, shall be agreed to mutually by the Contract Auditor and the County Council. Should progress or incremental payments be agreed upon as the method of payment, the following conditions shall apply: a. The amount of each progress payment shall be subject to agreement. b. Each request for progress payment shall be accompanied by a certified statement of the costs actually incurred for staff and other technical services, including the fee rates and amounts of staff classification. c. In no event shall the annual final payment be made except upon the delivery of the final report acceptable to the County Council and upon compliance by the Contract Auditor with the requirements of Section 103-53, Hawaii Revised Statutes, relating to tax clearance. -13- r d. The County Council reserves the right to determine and prescribe such other conditions as are appropriate under which progress payments shall be allowed. B. Time Requirements 1. The timetable set forth below shall be followed to the closest extent possible. This timetable, however, may be modified by the County Council upon justifiable reasons submitted in writing by the Contract Auditor and upon finding that such modifications would not jeopardize the successful completion of the audit. RFP Advertised on November 30, 1997 Written questions submitted by December 15, 1997 Proposal due at Purchasing Division January 5, 1998 Approximate Award February 1998 Approximate Contract Execution March 1, 1998 Commencement of First Audit June 1998 Submittal of Preliminary Draft (FY98, 99, 2000, 2001) . . . . October 31 Submittal of Final Report (including DWS) And Report for Landfill Financial Assurance (FY98, 99, 2000, 2001) . . . November 30 Submittal of Single Audit Rept (FY98, 99, 2000, 2001) . by December 31 2. Schedule For the Fiscal Year's Audit Each of the following should be completed by the Contract Auditor no later than the dates indicated. a. Detailed Audit Plan The auditor shall provide the County of Hawaii by July 15, both a detailed audit plan and a list of all schedules to be prepared by the County of Hawaii. b. At a minimum, the following conferences should be held by the dates indicated on the schedule: Entrance conference with all key finance department personnel and department heads of key offices or programs no later than June 1 The purpose of this meeting will be to discuss prior audit problems and the interim work to be performed. This meeting will also be used to establish overall liaison for the audit and to make arrangements for work space and other needs of the auditor. -14- , Progress conference. if necessary, with County Legislative Auditor, Finance Director and department heads of key offices or programs . . no later than October 15 The purpose of this meeting will be to summarize the results of the preliminary review and to identify the key internal controls or other matters to be tested. Exit conference with County Legislative Auditor no later than November 1 The purpose of this meeting is to summarize the results of field work and to review significant findings. V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department Assistance The finance department staff and responsible management personnel will be available during the audit to assist the firm by providing information, documentation and explanations. In addition, the finance department will prepare the financial statements, notes to the financial statements, the statistical tables and transmittal letter. B. Electronic Data Processing (EDP) Assistance EDP personnel will be available to provide systems documentation and explanations. C. Work Area, Telephones, Photocopying and FAX Machines The County of Hawaii will provide the auditor with reasonable work space, desks and chairs. The auditor will also be provided with access to telephone lines, photocopying facilities and FAX machines. VI. PROPOSAL REQUIREMENTS A. Minimum Requirements 1 . General. The purpose of the proposal is to demonstrate the qualifications, competence and capacity of the proposer seeking to undertake an independent audit of the County of Hawaii in conformity with the requirements of this request for proposals. As such, the substance of the proposal will carry more weight than the form or manner of presentation. -15- • The proposal should address all the points outlined in the request for proposals. The proposal should be prepared simply and economically, providing a straight forward, concise description of the proposer's capabilities to satisfy the requirements of the request for proposals. They represent the criteria against which the proposal will be evaluated. 2. Independence. The proposer should provide an affirmative statement that it is independent of the County of Hawaii as defined by generally accepted auditing standards, the U.S. General Accounting Office's Government Auditing Standards (1994). The proposer should also provide an affirmative statement that it is independent of all of the component units of the County of Hawaii as defined by those same standards. The proposer should also list and describe its (or proposed subcontractor's) professional relationships involving the County of Hawaii or any of its agencies or component units/agencies, for the past five years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the audit. 3. License; Permit to Practice in Hawaii. An affirmative statement should be included that the proposer and all assigned key professional staff are properly licensed to practice in Hawaii. Additionally, a photocopy of a current CPA permit to practice of the person to be directly in charge of the audit shall be attached to the proposal. 4. Experience. The proposer shall have at least three years of experience performing governmental audits and shall have performed at least two audits within the past five years of a governmental agency which has budget of more than $50 million. The proposer shall submit information verifying these minimum experience requirements. B. Proposer's Background, Size, Work Experience and Qualifications 1. The proposer should described its work experience in the last five years, with special attention to work performed by the local office with respect to financial audits conducted that are similar to those described herein: a. Limited general financial audits of governments and governmental units in the State of Hawaii and/or of cities, municipalities and counties having population sizes similar to that of the County of Hawaii. b. Audits of federal assistance programs according to the provisions of the Single Audit Act of 1984 and OMB Circular No. A-128. -16- s • 2. Describe any work experience in assisting governmental entities to meet the financial reporting requirements of the Certificate of Achievement Program of the Government Finance Officers Association. 3. Aside from the audit work performed in VI.B.1.a, indicate previous audit work performed (maximum 5) in the last five years for the State of Hawaii or the counties of Hawaii. Indicate scope of work, total staff hours, and name and telephone number of the principal client contact. 4. Provide samples of previous reports and/or publications by the proposer relating to the work experience described in 1, 2, or 3 above. The name and telephone number of the principal client contact shall be given. 5. Provide the number of total full-time staff currently employed by the proposer, including joint venturers and subcontractors in Hawaii by categories (services, professional and other classification). 6. If the proposer is a joint venture or intends to subcontract a portion of the audit, the qualifications of each firm comprising the joint venture or subcontractor should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. 7. The proposer shall submit a copy of the report on its most recent external quality control review, if any, with a statement whether that quality control included a review of specific government engagements. If the proposer has not conducted an external quality review, the proposal should so state. 8. The proposer shall provide information on the circumstances and status of any disciplinary action taken or pending against it during the past three years with state regulatory bodies or professional organizations. C. Resources to be Used and Staff Qualifications 1 . Identify the principal supervisory and management staff, including engagement partners, principals, managers, other supervisors and specialists, who would be assigned to the engagement. 2. Indicate whether each such person is registered or licensed to practice as a certified public accountant in Hawaii. 3. Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three years and membership in professional organizations relevant to the performance of this audit. -17- • 4. Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. 5. Indicate how the quality of staff over the term of the agreement will be assured. 6. Consultants and subcontractors mentioned in this request for proposal can only be changed with the express prior written permission of the County Council, which retains the right to approve or reject replacements. D. Audit Approach and Methodology The proposal shall set forth a plan and approach, including an explanation of the audit methodology to be followed, to perform the services required in Section II of this request for proposal. In addition, the proposed phases and steps to be followed and the tests and standards to be used in performing the work shall be outlined. E. Timetable and Compensation Schedule. 1. The proposal shall set forth a timetable of the dates for the delivery of the reports to be issued. 2. The proposal shall, to the extent possible, show the cost schedule of the audit project by fiscal year based on the time allocation of the staffing classifications (i.e. partner, principal, manager, supervisory staff and staff), their rate of pay, and estimated out-of-pocket expenses. For each year, a distinction should be made between the time and cost of conducting the County's External Audit, the Federal Single Audit, the Department of Water Supply Audit and the Report for Landfill Financial Assurance. 3. If it should become necessary for the County of Hawaii to request the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between the County of Hawaii and the firm. 4. Any such additional work agreed to between the County of Hawaii and the Contract Auditor shall be performed at the same rates set forth in the schedule of fees and expenses included in the proposal. -18- F. Address Where the Audit will be Conducted The proposal shall specify the address of the office where the Contract Auditor shall conduct and coordinates its activities. The proposal shall specify any facilities, equipment, etc., which the proposer requires the County to provide. G. Submittal of Proposal. 1 . The original and 12 copies of the proposal shall be received by Council Chair James Arakaki, c/o Purchasing Division, Room 118, 25 Aupuni Street, Hilo, Hawaii 96720, by 4:00 p.m. on Monday, January 5, 1998. Proposals should include the following: a. Title Page Title page showing the request for proposal's subject; the proposer's name; the name, address and telephone number of the contact person; and the date of the proposal. b. Table of Contents c. Transmittal Letter A signed letter of transmittal briefly stating the proposer's understanding of the work to be done, the commitment to perform the work within the time period, a statement why it believes itself to be best qualified to perform the engagement and a statement that the proposal is a firm and irrevocable offer for 60 days. d. Detailed Proposal The detailed proposal should follow the order set forth in Section VI of this request for proposals. The County Council shall have the right to hold all proposals received for a period of sixty calendar days from the deadline date in this RFP. H. No Proposal Security is Required. VII. EVALUATION PROCEDURES AND METHODOLOGY A. Evaluation Committee Proposals submitted will be reviewed and evaluated by an Evaluation Committee. During the evaluation process, the Evaluation Committee may, at its discretion, -19- 1 conduct discussions with proposers in accordance with Title 3, Subtitle 11, Chapter 122, Subchapter 6, Hawaii Administrative Rules relating to procurement. All proposals become public record, except proposal sections containing proprietary information and other information not appropriate for public perusal which shall be sealed by the proposer in a separate envelope marked "Proprietary Information". Proposal information that is considered by the proposer to be proprietary should be identified as such, and sealed in a separate envelope. If the information is not identified as proprietary, the County reserves the right to use any or all ideas presented in any of the replies to the RFP. Selection or rejection of the proposal does not affect this right. In evaluating proposals, any pages marked "Proprietary", "Confidential" or otherwise clearly intended not to be made public will not be considered, except those dealing with financial resources and condition or references, existing customers and the like. Thus, if all pages of a proposal are marked as not public information or a cover document indicates the entire proposal is proprietary or otherwise restricted, the proposal may be rejected. The County shall have the option of requesting that sections improperly marked as proprietary be amended or rejecting the proposal without further action. B. Method of Evaluation 1 . The Council reserves the right to reject a proposal that does not meet the minimum qualifications set forth above in Section VI.A. 2. The proposals will be evaluated using the scoring values and weights for the factors shown on Table I. C. Final Selection The Evaluation Committee will evaluate the proposal and make its recommendation to the County Council. When the Council makes its decision, it is anticipated that an award letter will be transmitted promptly thereafter. Any protest regarding procurement law or procedure shall strictly follow the procedure described in chapter 126, Hawaii Administrative Rules, Department of Accounting and General Services, Subtitle 11, Procurement Policy Board. Upon notification of any award, it shall be the responsibility of any protester to review all public documents relating to this RFP and any other proposer's contract award within five days and fill all protests within that period. No court action or proceeding involving this contract shall be commenced by either party except in the Circuit or District Courts of the Third Circuit, County of Hawaii, State of Hawaii; nor shall any action commenced in such court be removed or transferred to any other state or federal court. -20- TABLE I EVALUATION OF PROPOSALS INDEPENDENT FINANCIAL AUDIT Proposals will be awarded a maximum of 200 technical points based upon evaluation of proposal content. A maximum of 30 additional points will be awarded based upon cost and added to the proposal's technical points average. Cost Points: The total cost for four years will be awarded the maximum number of points assigned to cost. The following formula will be used to assign the cost points for each proposal: Price of Lowest Cost Proposal X Maximum Points for Cost 130) = Points Price of Proposal Being Rated Scale: 0-10 (Unacceptable to Outstanding) Maximum Score = 200 Factor Value X Weight = Score 1 Previous experience in performing X 3 = comparable governmental auditing 2 Demonstrates qualifications to conduct audit in accordance with the X 3 = specifications 3 Allocates sufficient resources to the audit to meet the timetables set out in the specifications X 3 = 4 Demonstrates a clear understanding of & fully responds to specifications & instructions X 3 = 5 Methodology presented evidences that audit will be conducted in a systematic and sound manner X 2 = 6 Adheres to the scope & guidelines listed in the specifications X 2 = 7 Demonstrates a commitment to be accessible during audit & throughout X 2 = the fiscal year 8 Quality of writing of the proposal is indicative of the quality of reports X 2 = Subtotal Score 9 Cost Points TOTAL SCORE -21- 1--- , 111 . -T1 cr) -r, 0 c-) 7:--, = ".• e- in 1-ri - N, —, ) I C" . IT $ c I CD .17) C) -,, sie 1111 COUNTY OF HAWAII II", 10116•11h%lii%is, ,...*".. IIIIk i• s II i ...# 11 OF kid, 111P AI% 4, • 0....• 0 ..."1 V • 47 0 0.. l I 1 IP •he. 1 IIto g Os• L>,-- .4' • 40,Ap • i • 4r '• 111 0; • _a /n l• ', %:4111111b • ile a • • _ ,„.. "! • 41 ; • - 1111 i ; * • • , ipp_t_,•-_,. ; • * 5 s'4\ 1/#14VS4. A ' _ _ - • ; • .,..:..-- -.-:_.--,- - - -._-- --,'-i,-- • ; • • .1 0, _ --:-.-.„-...- ----- -- -,• - --• -------_—. --...---. 111 .1. • --....____ _,_ . 1.0-----------,,_-_-,„. ÷..).• ,-- • 4 —14'0 • It. w). • • NA • AO" 47 0 4, ...,,,.E• • • •,.. ;‘,.........- 4aqi• %1% ....% II Financial Audit Report for the Fiscal Year Ended . II June 30, 1996 I II 0 APPENDIX A - N (To be provided with RFP) II\ I I . I COUNTY OF HAWAII STATE OF HAWAII ! • .* 1111111,101. to • I • tr►'i' •* to , S•G.4 MA M;iJ Q`• ` e•OF•HPJt SINGLE AUDIT REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1996 I r I I APPENDIX B - (To be provided with RFP) Deloitte & • Touche LIP DEPARTMENT OF WATER SUPPLY, COUNTY OF HAWAII Financial Statements for the Years Ended June 30, 1996 and 1995 and Independent Auditors' Report Deloitte Touche APPENDIX C - Tohmatsu International (To be provided with RFP) 1 • Deloitte & 40.11 Touche LLP /\ Suite 1200 Telephone: (808) 543-0700 1132 Bishop Street Facsimile: (808) 526-0225 Honolulu, Hawaii 96813-2870 INDEPENDENT ACCOUNTANTS' REPORT Countyof Hawaii 25 Aupuni Street Hilo, Hawaii 96720-4252 We have audited the general purpose financial statements of the County of Hawaii, State of Hawaii (County) as of and for the years ended June 30, 1996 and 1995 and have issued our reports thereon dated October 25, 1996 and October 27, 1995, respectively. We have examined management's assertions about the County's compliance with the following requirements of 40 CFR Part 258, Section 258.70(f)(1)(ii) and Section 258.70(f)(1)(iii)(C) and(D) related to municipal solid waste landfills operated by the County: • That the financial statements of the County of Hawaii as of June 30, 1996 and 1995 were prepared in conformity with generally accepted accounting principles for governments, and that they have been audited by Deloitte & Touche LLP, independent certified public accountants. • That the County of Hawaii has not operated at a deficit equal to five percent or more of total annual revenue in each of the fiscal years ended June 30, 1996 and 1995. • That the County of Hawaii has not received an adverse opinion, disclaimer of opinion, or other qualified opinion from Deloitte&Touche LLP, independent certified public accountants, in each of the fiscal years ended June 30, 1996 and 1995. Management's assertions are included in the County's letter regarding financial assurance for municipal solid waste landfills, dated March 31, 1997. Management is responsible for the County's compliance with those requirements. Our responsibility is to express an opinion on management's assertions about the County's compliance based on our examination. Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis,evidence about the County's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the County's compliance with specified requirements. In our opinion, management's assertions that the County complied with the aforementioned requirements for the years ended June 30, 1996 and 1995 are fairly stated, in all material respects. De.-4 ma, March 31, 1997 DeloitteTouche Tohmatsu APPENDIX D International