EXECUTIVE MANAGEMENT COMMITTEE

MARCH 21, 2002

SUBJECT:            CPA AUDIT POOL CONTRACT

ACTION:               RECOMMENDATION FOR AWARD OF CPA AUDIT POOL CONTRACT

RECOMMENDATION

A.     Authorize the Chief Executive Officer to award fifteen fully burdened unit labor rate multiple award contracts with:

to provide audit services for a period of five years, inclusive of two one-year options, effective April 2, 2002.

B.     Authorize the Chief Executive Officer to execute Task Orders under these contracts for audit services for the first year of the contracts, in a total amount not to exceed $5,156,000.  Some Task Orders may exceed $200,000 each.

RATIONALE

The Metro uses certified public accounting (CPA) firms’ to meet federal, state, local, and Metro audit requirements that call for certification of financial statements, independent opinions, and audits based on agreed-upon procedures.  Such services include audits for Call-for-Projects closeout audits and interim audits of cost reimbursement contracts, change orders, work orders and Metro internal audits.  The audit pool assists the Management Audit Services Department (MASD) in meeting Metro’s audit needs, providing specialized expertise for certain engagements, and providing independent audits of sensitive issues. In addition, the CPA firms may be tasked to provide auditors in order to meet audit workload demands exceeding the capacity of MASD’s internal audit resources.  

The recommended not-to-exceed amount of $5,156,000 is an estimate of the cost of audit  services for the first year of the contract.  This amount includes $3,644,000 to cover the audit services needed to complete a large number of contract audits required to close out contracts and to support anticipated and existing litigation. 

The services are needed for approximately 500 construction and contract audits, including approximately 300 audits related to the $400 million plus Engineering Management Consultants’ (EMC) contract.  Completion of the EMC audits is time sensitive to adequately support litigation related to the close out.  The services are also needed for Project Audit to complete approximately 150 project audits, which need to be conducted; and also for ad-hoc audits performed by Internal Audit at the request of management, the Metro Board, and/or required by new legislation.    

FINANCIAL IMPACT

Funding of $1,290,000 for this service in the remainder of FY02 is included in the FY 02 budget.  Since this is a multi-year contract, the Chief Financial Officer and the MASD Managing Director will be accountable for budgeting the cost in future years, including any option exercised.  To March, 2002 in FY’02, $2,363,331 was expended for this service, with an additional $2.1 million encumbered, but not yet spent.  Funding for the remaining years of the five-year contract will be requested prior to each of the years.     

The estimated cost for the first contract year is shown below by cost center name, number, and amount.

ALTERNATIVES CONSIDERED

The alternative would be to hire additional full-time staff to perform the audits.  However, this alternative is not considered cost effective.  Additionally, some of the audits call for certification of financial statements and independent opinions, which can only be provided by CPA firms.

 Attachment:

A. Procurement Summary

Prepared by:                         Gene Cooper, Project Audit Manager, MASD