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REQUEST FOR <br />COUNCIL ACTION <br />CITY COUNCIL MEETING DATE: <br />JUNE 2, 2008 <br />TITLE: <br />AMEND AGREEMENT WITH MACIAS GINI & <br />O'CONNELL LLP, FOR ADDITIONAL <br />COMPREHENSIVE FINANCIAL AUDIT <br />SERVICES <br />CITY MANAGER <br />RECOMMENDED ACTION <br />CLERK OF COUNCIL USE ONLY: <br />APPROVED <br />^ As Recommended <br />^ As Amended <br />^ Ordinance on 15f Reading <br />^ Ordinance on 2nd Reading <br />^ Implementing Resolution <br />^ Set Public Hearing For <br />CONTINUED TO <br />FILE NUMBER <br />Authorize the City Manager and Clerk of the Council to execute an <br />amendment to the agreement with Macias Gini & O'Connell LLP, for <br />additional comprehensive financial audit services increasing the total <br />amount $70,000 to an aggregate amount not to exceed $565,500, subject to <br />non-substantive changes approved by the City Manager and City Attorney. <br />DISCUSSION <br />The City of Santa Ana retained the services of Macias Gini & O'Connell <br />LLP, formerly known as Moreland & Associates, Inc. to conduct the annual <br />audit of the City's financial statements for fiscal years ending June 30, <br />2006 through June 30, 2009. Since the inception of the contract, new <br />auditing standards were adopted (Statement of Auditing Standards Nos. <br />104-111, 114). The new standards require changes in how audits are to be <br />conducted and results communicated to the client. The new audit rules <br />will align governmental reporting into closer alignment with the <br />standards imposed on audits of publicly traded companies under Sarbanes <br />Oxley. Sarbanes Oxley, a United States federal law enacted July 2002, <br />established new and enhanced standards for all U.S. public company <br />boards, management, and public accounting firms in response to major <br />corporate and accounting scandals including those that effected Enron, <br />Tyco International, WorldCom and Adelphia. <br />The new auditing requirements are intended to provide a more in-depth <br />understanding by the auditor of the organization including its internal <br />controls; a more thorough assessment of the risks of where and how the <br />financial statements could be materially misstated; and improve <br />communication between the auditor and the governing body. As such, the <br />implementation of the new auditing standards requires more of the <br />auditors' time and effort in order to comply. In addition, the auditors <br />will assist City staff in the completion of the annual financial <br />statements during implementation of the financial system. It is estimated <br />the additional services will total $70,000 over the next two years. <br />25F-1 <br />