Los Angeles County O n e Gateway Plaza 213.922.2000 Tel Metropolitan Transportation Authority Los Angeies, CA 90012-2952 met ro .net

Metro EXECUTIVE MANAGEMENT AND AUDlT COMMITTEE

JUNE 16,2011

SUBJECT: CONSOLlDATED AUDIT FOR FISCAL YEARS 201 1-15

ACTION: AWARD CONTRACT TO SIMPSON & SIMPSON AND VASQUEZ & COMPANY

RECOMMENDATION

Authorize the Chief Executive Officer to award:

A. a one-year, firm fixed price contract, Contract PS2510-2731A, to Simpson & Simpson to perform Package A of the fiscal year (FY) 201 1 Consolidated Financial and Compliance Audit of the programs, jurisdictions and agencies listed in Attachment B inclusive of Option 6 to perform audits of Transit System Operators Transit Funds for an amount not to exceed $2,374,375, inclusive of four one-year options for fiscal years 201 2 through 201 5, effective July 1, 201 1 ; and

B. a one-year, firm fixed price contract, Contract PS2510-2731 B, to Vasquez & Company to perform Package B of the FY 201 1 Consolidated Financial and Compliance Audit of the programs, jurisdictions and agencies listed in Attachment C inclusive of Option 5 to perform Los Angeles Department of Transportation (LADOT) National Transit Database Audits and Option 6 to perform audits of City of Los Angeles Transit System Funds for an amount not to exceed $2,137,000, inclusive of four one-year options for fiscal years 201 2 through 201 5, effective July 1, 201 1.

As the Regional Transportation Planner for Los Angeles County, we are responsible for planning, programming and allocating transportation funding to Los Angeles County jurisdictions, transit operators and other transportation programs. We have the fiduciary responsibility to help ensure jurisdictions; operators and program administrators receiving funds for transportation related projects are in compliance with the applicable rules, regulations, policies and guidelines.

The Consolidated Audit process includes financial and compliance audits of the following programs:

Measure R Local Return Program; Proposition 1 B funds; Transportation Development Act (TDA) Article 3 and Article 8 Programs; Proposition A and Proposition C Local Return Programs;

0 Proposition A Discretionary Incentive Program; 0 Regional Transit Systems Operating funds and Measure R Operating and Clean

Fuel Bus funds for the cities of Commerce, Redondo Beach and Torrance; 0 Metrolink Program;

EZ Transit Pass Program; Immediate Needs Transportation Program (INTP); Riders Relief Transportation Program (RRTP); and

0 Support for Homeless on Re-Entry Program (SHORE).

We allocate over $420 million annually to these programs and distribute them to 88 cities in Los Angeles County, the County of Los Angeles and other agencies. Audits of these programs are needed to ensure that the agencies comply with the applicable rules, regulations, policies, guidelines and executed Memorandums of Understanding (MOU). The audits also serve as a program management tool for effectively managing and administering these programs.

Simpson & Simpson and Vasquez & Company, the independent CPA Firms, will perform financial and compliance audits to assure management that recipients of subsidies included in the Consolidated Audit are adhering to the statutes of each applicable funding source and that operations data used to allocate funds is fair and in accordance with Federal Transportation Administration (FTA) guidelines. The audits will be conducted in accordance with generally accepted government auditing standards and will meet the American Institute of Certified Public Accountants' Standards. In performing these audits, Simpson & Simpson and Vasquez & Company will report on management deficiencies where noted and on findings that may result in funds being returned to Metro based on trades or exchange of funds, unused and lapsed funds, and disallowable expenditures.

DISCUSSION

This year the Consolidated Audit Project was divided into two separate packages (package A and B) based primarily on their District geographic location. This change was necessary to develop a more efficient audit process by streamlining the amount of audits required from one firm. In addition, this new process provides firms with increased contracting opportunities.

Option 5 is a priced option in the contract to conduct financial and compliance audits of LADOT annual operating data, ridership data and operating expenditures as required by the FTA. LADOT currently operates the second largest fleet in Los Angeles County consisting of nearly 400 vehicles, which operate over 800,000 revenue hours and serve

FY 20 1 1 - 15 Consolidated Audits 2

approximately 30 million boardings per year. LADOT is allocated Proposition A Discretionary funds based on pre-determined ridership and operating data formula.

Option 6 serves to conduct financial and compliance audits of various Transit System Operators' operating data and Measure R funds.

Exercising each year of Option 5 and/or 6 will be at the discretion of the Project Manager.

FINANCIAL IMPACT

Funds of $600,000 for year one of these contracts are included in the FYI2 budget in Cost Center 251 0, Management Audit under projects 40551 0 and 100055, account 50316 Services Professional and Technical. Cost of EZ Pass audit is included in FYI2 budget under Cost Center 051 1, project 30001 5. FY 12 budget will be amended accordingly if additional funds are needed to exercise any or all options. Since this is a multi-year contract, the Project Manager and cost center managers will be responsible for ensuring that funds are budgeted in subsequent years.

Impacts to Bus and Rail Enterprise Fund Operating and Capital Budgets

Since the source of funds for the $600,000 referenced above is Proposition A and C administration and Measure R administration funds, there is no impact.

ALTERNATIVES CONSIDERED

The Board of Directors may choose not to award the contracts to Simpson & Simpson and Vasquez & Company however, this is not recommended since Proposition A and Proposition C Guidelines, Measure R Guidelines, state laws and federal provisions require that audits be conducted on funds allocated. The Consolidated Audit process addresses these requirements and plays a major part in the continued implementation, management and administration of the covered funding programs.

NEXT STEPS

With Board approval, we will award the contracts to Simpson & Simpson and Vasquez & Company. In addition, Simpson & Simpson and Vasquez & Company will conduct Consolidated Audit kickoff workshops with the auditees to provide insight into the audit process, documentation requirements and audit due dates. The CPA firms will also conduct an Entrance Conference with our program managers and audit staff to discuss the audit process, timetable and documentation requirements.

FY 20 1 1 - 15 Consolidated Audits

ATTACHMENTS

A. Procurement Summary B. FY 201 1 List of Funded Projects and Programs to be audited for Package A C. FY 201 1 List of Funded Projects and Programs to be audited for Package B

Prepared by: Kathy Knox, Director of Audit

FY 20 1 1 - 15 Consolidated Audits

Chief Auditor

Arthur T. Leahy Chief Executive Officer

FY 20 1 1 - 15 Consolidated Audits

ATTACHMENT A

PROCUREMENT SUMMARY

CONSOLIDATED AUDIT PROGRAMS - FY2011 THRU FY2015

A. Procurement Background

1. 2.

3.

4.

5.

6.

7.

The purpose of this Request for Proposal (RFP) is to select two (2) Certified Public Accounting firms to conduct audit services for the Consolidated Audit Program FY2011 through FY2015. The scope of services required under this contract is divided into two separate packages (Package A and B). These packages were constructed primarily based on the geographical locations of the agencies to be audited and to assist each of the firms in meeting strict audit schedules; and to streamline the audit processes for each of these projects. This is a standard negotiated competitive procurement. Firm-Fixed Price contracts will be issued to each firm selected.

Seven proposals were received on May 11,201 1, (4 for Package A and 3 for package B). The solicitation was issued in accordance with the Procurement Policy Manual.

Contract Number: PS2510-2731 - Package A & Package B Recommended Vendor: Simpson and Simpson CPA - Package A

Vasquez and Company, LLP - Package B Type of Procurement (check one) : IFB RFP RFP - A&E

Non-Competitive Modification Task Order Procurement Dates: A. Issued: 04-08-201 1 B. AdvertisedIPublicized: 04-08-201 1 C. Pre-proposal1Pre-Bid Conference: 04-1 8-201 1 D. ProposalsIBids Due: 05-1 1-201 1 E. Pre-Qualification Completed: In Process F. Conflict of Interest Form Submitted to Ethics: In Process G. Protest Period End Date: 06-20-201 1

Six amendments were issued during the solicitation phase of this RFP. Amendment No. 1 issued on April 12, 201 1, added and deleted cities to be audited under the program. Amendment No. 2 issued on April 15, 201 1, added and deleted cities scheduled for audit under the program, identified all transit agencies that receive funds from Metro under the Consolidated audit program, added a pricing sheet

Solicitations Picked up1Downloaded: 26

Contract Administrator: Barbara A. Gatewood Project Manager: Kathy Knox

FY 20 1 1 - 15 Collsolidated Audits 6

Bids/Proposals Received: Package A - 4 Proposals Package B - 3 Proposals Telephone Number: (2 1 3) 922-731 7 Telephone Number: (21 3) 922-3663

breakdown, and changed the evaluation criteria. Amendment No. 3 issued on April 19, 201 1, revised the statement of work (SOW) issued matrices identifying funding sources for the transit agencies, and revised the pricing sheets. Amendment No. 4 issued on April 29, 201 1, revised the proposal due date, revised Option 6 of the SOW which added more transit city operators, and included draft guidelines (dated April 28, 201 I ) for auditing Municipal Operators' Transit System Funds. Amendment No. 5 issued on May 3, 201 1, provided copies of five audit reports from the current on- going 2009-2010 Consolidated Audit program. Finally, amendment No. 6 issued on May 5, 201 1, extended the proposal due date again in order for us to forward a CD of various audit reports by May 9, 201 1 to all proposers listed on the April 29, 201 1 Planholders list for this solicitation; forwarded a copy of the task order for the on- going current consolidated audit (FY2009 thru FY2010); and the task order for the City of Bell audit under the current on-going consolidated audit (FY2009 thru FY2010).

Package A: Simpson & Simpson CPA is the recommended firm to receive the award of Package A for a firm fixed price amount of $2,374,375. Package A includes fiscal year FY2011 Consolidated Financial and Compliance Audit of programs, jurisdictions and agencies listed in SOW, inclusive of Option 6, to conduct audits of the Transit System Operators Transit Funds. The period of performance is for one year. The Contract also includes four one-year options for fiscal years 2012 through 2015 that can be exercised at the discretion of the Project Manager. The effective date of the Contract is July 1, 201 1.

Packaae B: Vasquez and Company, LLP is the firm recommended to receive the award of Package B for a firm-fixed price of $2,137,000. Under Package B, Vasquez and Company LLP is responsible for conducting compliance audits for the jurisdictions and agencies listed in the SOW including Option 5 to perform LADOT National Transit Database Audits and Option 6 to perform audits of the City of Los Angeles Transit System Funds. The period of performance is for one year. The Contract includes four one-year options for FY2012 through FY2015 that can be exercised at the discretion of the Project Manager. The effective date of the Contract is July 1, 201 1.

B. Background on Recommended Contractor

Simpson & Simpson, based in Los Angeles, CAI has been in business since 1976. They operate as a partnership and firm of Certified Public Accountants. The firm ranks among the top minoritylsmall business public accounting firms in the United States. Simpson and Simpson is an experienced audit and consulting firm in the government audit arena and has performed professional services for local, state and federal government agencies as well as private business. Simpson & Simpson has performed work for the Los Angeles County Metropolitan Transportation Authority, Los Angeles Unified School District, City of Los Angeles, County of Los Angeles and their various programs. Simpson and Simpson has provided professional audit

FY 20 1 1 - 15 Consolidated Audits

services of grants, contract pre-awards, information services and has been a firm on the CPA Bench pool for a number of years. The firm has also provided services on our Consolidated Audits programs during fiscal years FY2004 through FY2007. The firm's overall past performance has been satisfactory as demonstrated by their extensive working relationship with us.

Vasquez and Company is a full service Certified Public Accounting firm, founded in 1967. Vasquez and Company has experience in performing financial compliance audits for a variety of not-for-profit organizations, profit organizations, public agencies and publicly traded companies. Vasquez and Company has performed professional audit services for the Los Angeles County Metropolitan Transportation Authority, its predecessors and the Los Angeles Unified School District. Vasquez and Company is an independent Member of the BDO Seidman Alliance, and as part of this alliance they are able to access this nationwide association of 200 independently owned local and regional accounting, consulting, business and technology firms who share Vasquez and Company's dedication to exemplary client service. Types of audits conducted are cost and closeout audits, overhead rate, change order, pre-award audits in accordance with auditing standards generally accepted in the U.S. Generally Accepted Government Auditing Standards, and the criteria prescribed by Subpart 31.2 of the Federal Acquisition Regulation (FAR) and in conformance with the Cost Accounting Standards Board Procurements.

C. Evaluation of Pro~osalsIBids

A Source Selection Committee convened and conducted a comprehensive technical evaluation of the proposals received. In addition, negotiations were held with Simpson & Simpson CPA (package A) and Vasquez and Company LLP (package B).

Package A: Proposals were first evaluated to determine if the proposers met the minimum qualifications for this RFP as identified in the RFP entitled "Evaluation Criteria". The apparent lowest priced proposers, proposer No. 1, Ma and Associates, of San Dimas, CA and proposer No. 2, Mayer Hoffman McCann, of Irvine, CA were evaluated and based on MTA's technical analysis and historical pricing for this project, it was determined that each proposer's response lacked technical content and comprehensive price reasonableness. For example, each proposer did not clearly demonstrate an understanding of the magnitude of the statement of work. The two proposers did not meet the specific requirements of the RFP in that one of the two proposers did not submit a current Peer Review completed within the last 3 years as required Generally Accepted Government Auditing Standards (GAGAS) and State of California Controller's Office found that one of the proposers was not meeting government audit standards.

Package B: The proposals were first evaluated to determine if the proposers met the minimum qualifications for this RFP as identified in the RFP section entitled

FY 201 1-1 5 Consolidated Audits

"Evaluation Criteria". The lowest priced proposer, Mayer Hoffman McCann, Irvine, CA is considered non-responsive for the reasons expressed in Package A.

PACKAGE A

Amount Amount

1. I Lin Ma and 1 1,574,000 1 nla Associates, CPA

2. Mayer Hoffman 1,584,213 nla

I

3 1 Simpson and 1 $2,985,800 1 $2,374,375

disqualified as explained above:

4.

Non-responsive to RFP

requirements

PACKAGE B

Simpson, CPA Vasquez and

D. CostlPrice Analysis Explanation of Variances

$3,320,719

1.

2.

3.

The fair and reasonable price determination for this competitive RFP will be established after a price analysis has been completed. An independent cost estimate, fact-finding, and negotiations have been completed. Included as part of the consolidated audit program statement of work, is a provision for the EZ pass program. In the event it is determined that the EZ pass program or any other program is no longer part of the statement of work audit requirements, negotiated prices will be adjusted accordingly for both firms.

$2,878,160

FY 20 1 1 - 15 Consolidated Audits

BidderlProposer Name

Mayer Hoffman McCann, CPA Vasquez and Company, LLP Simpson and Simpson, CPA

BidIProposal Amount

$1,584,213

$ 3,320,719

$3,358,300

Negotiated Amount

nla

$2,137,000

$2,985,800

Note those that were disqualified as

explained above:

Non-responsive to RFP requirements

E. Small Business Participation

The Diversity and Economic Opportunity Department (DEOD) recommended a Small Business Enterprise goal of 30% for this procurement.

Simpson & Simpson made a 30% SBE commitment on Package A and part of Option 5.

Small Business GOAL

Total Commitment I 30.00% 1

Small Business Commitment

1.

Vasquez & Company made a 30% SBE commitment on Package B, part of Options 5, and Option 6.

Subcontractor

/ Business I I Business I I

% Committed

1 small

1 GOAL I Commitment I

Qiu Accountancy Corporation 30.00%

I Small

FY 20 1 1 - 15 Consolidated Audits

% Committed 30.00% 30.00%

1. Subcontractor

KNL Support Services Total Commitment

Attachment B PACKAGE A

PACKAGE B