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HomeMy WebLinkAbout1981-06-16; City Council; 6639; Calavera Hills sewer plant construction audit... CITY OF CARLSBAD -- Initial: Dep t .Hd. C. Atty. AGERDA BILL ?!(I. dddq DATE: June 16, 1981 - _I_ - - -- C- Mgr. 3 DEPARTbENT : Fi nance -_.__ - ~- - Subject: Audit of Calavera Hills Sewer Plant Construction Costs Statement of Matter The city is about to undertake a verification of the construction costs of the Calavera Hills Sewer Plant built to Lake Calavera Hills Associates. The Finance Director has contacted the city's audit firm, Conrad and Associates, in connection with this review. for the audit services. According to the Conrad pronosal , all costs of the nlant construction, including land, design, construction and any associated costs will be reviewed by the Conrad staff. July 31, 1981. Conrad and Associates has indicated a good understanding of the problem and in the opinion of the Finance Director should be able to prepare a very usable report. Proposals have not been solicited from other firms in connection with this particular audit. on the City of Carlsbad audit. was competitive with the other firms. Conrad and Associates has responded with the attached proposal The audit of these records will be comnleted and presented by The cost of this review will be between $4,500 and $4,800. However, five CPA firms were recently asked to submit proposals Conrad's hourly rate for snecial audit services Financial Impact If this audit is apnroved, funds will have to be approriated to cover these costs. The sewer construction fund could be used as a possible source of funds and the cost of this audit included in the city's cost of acquisition for this sewer plant. The proSected fund balance at 6/30/81 in the sewer construction fund is $419,394. If $4,800 is appropriated for this project, the balance will drop to $414,594. Exhibits Resolution No. LS9/ appropriating necessary funds. , Accepting.the proposal of Conrad and Associates and Reccmmenda ti on Adopt Resoultion No. dFq/ . APPROVED - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 21 25 26 27 28 - * A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACCEPTING THE PROPOSAL OF CONRAD AND ASSOCIATES FOR THE AUDIT OF THE .CONSTRUCTION COSTS OF THE LAKE CAL4VERA HILLS SEWAGE TREATMENT PLANT AND APPROPRI AT1 NG FUNDS. WHEREAS, Conrad and Associates has been selected as the city's audit firm for this fiscal year, and WHEREAS, the city desires to perform an audit of the construction costs of the Lake Calavera Hills Sewage Treatment Plant, and . from Conrad and Associates, and WHEREAS, the,scope of said audit is described in the attached proposal - WHEREAS, the cost of this audit can and shall be funded by an appropriation from the fund balance of the sewer construction fund. NOW,. THEREFORE, BE IT RESOLVED that the City Council of the City of Carlsbad does hereby accept the proposal of Conrad and Associates for the audit of the construction costs of the Lake Calavera Hills Sewage Treatment Plant which is Exhibit A attached hereto, and the City Council does hereby appropriate the sum of $4,800.00 from the fund balance of the sewer construction fund for the cost of this audit. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council on the 16th day of -~ June , 1987, by the following vote to wit: ' , AYES: Council Wers Packard, Casler, Anear, Lewis and Kddhin NOES: None ABSENT:None RONALD C. PACKARD, MAYOR ./ % ALEWA L. RAUTHMRANZ, CITY CLERK KAJllN R. SMS, Deputy City Clerk (SEAL) Attachment A * CERTIFIED PUBLIC ACCOUNTANTS FOURTtEN COKPORAlt PLALA OKlVk NEWPORT BEACH, CALIFORNIA 92660 7141759-0511 June 11, 1981 - Mr. Frank' Aleshire City of Carlsbad . Carlsbad, Ca. 92008 ' City Manager e 1200 Elm Avenue, .... .Dear Mr. Aleshire: This letter is to confirm the arrangements for our services to conduct an audit examination of the actual costs for construc- age treatment facility by Lake Calavera Hills Associates under an agreement between the City of Carlsbad and Lake Calavera . Hills Associates, dated December 26, 1979. The following para- graphs present our understanding OK the engagement (including the objectives and scope of our work), timing and staffing of the engagement; expected format of report and estimated time and expense of the examination. ' tion (as described below) of a 1;2 million gallon capacity sew- Our Understanding of the Engagement Our understanding of the engagement is based upon my discussion with you and meetings with the representatives of Lake Calavera Hills Associates on June 8, 1981. Our examination will be con- ducted in accordance with generally accepted auditing standards and will include tests of the accounting records and other audit- ing procedures we consider necessary in the 'circumstances. We will evaluate internal accounting controls, particularly in the area of purchasing and bidding practices, disbursements to con- . tractors and vendors and payroll and other fringe benefits <* charged to the project. Our auditing procedures will include, but not be limited to, analysis of the contract, site observa- tions of the project, examination of supporting documentation of expenditures, confirmation with'contractors where considered *, necessary, procedures and inquires re>latincJ to the existence of related parties, injury claims, disputed items, etc. * . Thc specific costs of the project which you have asked us to examine will include. the design, land costs, plant construction Mr. Frank Aleshire Page Two costs, cost of the reversable force main from the plant to El Camino Real, cost of the effluent direct line from the plant to E1 Camino Real, cost of the tie-in to the Daon line and con- structj-on period interest. We understand that you are not re- questing us to examine the estimates of the cost of the efflu- ent direct line from Tamarack to Palomar Airport Road nor es- timates relating to reclamation. Timing 'and Staffing * Richard Freese, CPA and a partner in our firm, will be respon- sible for the engAgement. Dick has sixteen years experience in public accounting and in chief financial officer positions . in private industry. I will act as a liason to city. Should it be appropriate, one of our professional staff on the City of Carlsbad audit engagement may be used to assist Mr. Freese in this examination. Mr. Freese will commence the examination .on June 29, 1981. Our committment to the city is that our re- not later than July 31, 1981. .. .. . . port-will be presented in final.form as soon as possible and Expected Format of Report -. We expect to render an opinion on the statement of Costs In- curred, Accepted and Questioned for the period December 29, . 1979 to June 30, 1981. Costs which we might question will Se questioned due to definitions as set forth in the contract of December 29, 1979 (Pg.16-17) or due to lack of proper docu- mentation. The details of questioned costs will be set forth in the final report. Our report will be qualified subject to the effects of the ultimate resolution of the questionable ex- penditures, made by negotiation between the Cj.ty Councilofthe City of Carlsbad and the General Partner of Lake Calaveras Hills As- sociates. ' The ultimate resolution of those costs will be Estimate Time and Expense We estimate that the engagement will .entail approximately 110-125 hours based upon the level of assistance and audit tr8.i.l to be provided by the Lake Calaveras Hills Associates controller, Mr. Konecny. The billing rates for our services are in our May 5, 1981 proposal to the city. The principal portion of time will be 'spent by Mr. Frcese. We estimate the . fee, including travel expense, to be between $4,500 and $4,800. I . . .. c .. Mr. Frank Aleshire Page Three If the above is acceptable, please sign and return the enclosed' ,copy to our office. Very truly yours, CONRAD ti ASSOCIATES - Michael A. Harrison, CPA Partner . .. .... Accepted: . BY - Date Title .. . . .. ..- . 'I