Audit Committee Special Meeting. Wednesday, December 28, 2016 at 9:00 a.m. - PDF

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Audit Committee Special Meeting Wednesday, December 28, 2016 at 9:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan GLWater.org AGENDA 1. CALL TO ORDER 2.
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Audit Committee Special Meeting Wednesday, December 28, 2016 at 9:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan GLWater.org AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES A. None 5. PUBLIC PARTICIPATION 6. OLD BUSINESS None 7. NEW BUSINESS A. External Audit Firm Interviews B. Next Steps: External Audit Firm Selection Process and Board Report 8. REPORTS A. None 9. LOOK AHEAD Next Audit Committee Meeting January 13, 2017 at 3 pm Special Meeting January 20, 2017 at 8 am - Regular Meeting 10. INFORMATION A. None 11. OTHER MATTERS 12. ADJOURNMENT Audit Committee External Auditor Interviews Wednesday, December 28, 2016 at 9:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan GLWater.org DOCUMENTS 1. Interview Agenda (Page 1) 2. Pre-Proposal Procurement Process A. Request for Proposal (RFP) for Audit Services issued November 21, 2016 (Page 3) B. RFP Bulletin 1 Bidders Conference Location (Page 26) C. RFP Bulletin 2 Pre-Proposal Meeting Notes (Page 27) D. Pre-Proposal Sign-In Sheet (Page 35) 3. Proposal Responses A. Clark Schaefer Hackett (Page 36) B. KPMG LLP (attached separately) C. Rehmann Robson (Page 62) 4. Fee and Hours Summary A. Pre-Interview Detailed Hours Review (Page 94) B. Post-Interview Detailed Hours and Fees Review (Page 95) 5. Post Interview Documents Distributed Follow-up Questions & Answers A. Clark Schaefer Hackett (Page 96) B. KPMG LLP (Page 100) C. Rehmann Robson (Page 110) 1) Interview Agenda GLWA-CS-132 External Auditing Services (Oral Interviews) Wednesday, December 28, 9:00 A.M. 5th Floor Board Room Water Board Building 735 Randolph Street, Detroit, Michigan Agenda 8:45 a.m. 9:00 a.m. Preparation for discussion with firms areas of concern, topics to discuss with firms (optional) The following timelines will be allotted for each interview: Welcome, introductions, sign in sheet and meeting guidelines 10 minutes (Joan Byrne, Procurement) Overview of proposing firm 10 minutes (Proposing firm) Questions and clarifications 25 minutes (Evaluators and Proposing firm) 9:00 a.m. 9:45 a.m. CLARK SCHAEFER HACKETT Kerry Roe, Shareholder, Larry Weeks, Shareholder Conference Call (Dial-In) None 9:45 a.m. 10:00 a.m. Break 10:00 a.m. 10:45 a.m. KPMG Joe Kowalski Conference Call (Dial-In) Shawn Warren / Chris Ray / Jack Mason 10:45 a.m. 11:00 a.m. Break 11:00 a.m. 11:45 a.m. REHMAN-ROBSON - Mark Kettner, Principal, Ken Melvin, Audit Supervisor, Mark Tschirhart Conference Call (Dial-In) Stephen Blann, Principal Page 1 11:45 a.m. 12:00 p.m. Procurement wrap up Evaluator instruction for Oral Interviews 1. Evaluators are not to imply or comment on other firm s proposals or the scores of other proposer s firms. 2. Evaluators are not to imply or comment on scores or ranking of the firm being interviewed. 3. Should Evaluators deem that additional information is beyond what is contained in the proposal and what is learned in the Oral interview, Evaluators are welcome to request it and Procurement will distribute it upon receipt of the requested information. Page 2 2A) Pre-Proposal Procurement Process: Request for Proposal (RFP) for Audit Services issued November 21, 2016 Request for Proposal External Audit Services GLWA-CS-132 The Great Lakes Water Authority (GLWA) is issuing this Request for Proposal (RFP) for qualified, independent, certified public accounting (CPA) firms, licensed to practice in Michigan to perform an audit of its basic financial statements included within the Comprehensive Annual Financial Report (CAFR), a Single Audit of its Federal and State Grants, a separate audited financial statement for the Water Fund and a separate audited financial statement for the Sewage Disposal Fund. Anticipated Project Schedule: Contract Term: Three (3) Years Start Work Date: February 1, 2017 Minimum Requirements: 1. A minimum of three (3) Single Audit engagements within the last five (5) years demonstrating experience comparable to the scope of services described for this project including the name, scope of work, location, services provided, and the length of time the respondent s services were provided. 2. A minimum of two (2) audit engagements within the last five (5) years demonstrating experience with municipal water and sewer enterprise accounting including the name, scope of work, location, services provided, and the length of time the respondent s services were provided for clients with annual revenue greater than $500 million and more than 500 employees 3. A minimum of two (2) audit engagements within the last five (5) years demonstrating experience with municipal water and sewer enterprise accounting including the name, scope of work, location, services provided, and the length of time the respondent s services were provided for clients with annual revenue greater than $500 million and more than 500 employees. 4. A minimum of two (2) audit engagements within the last five (5) years providing consent letters for inclusion in revenue bond official statements for debt issuances greater than $100 million demonstrating experience with the needs of large public debt issuers. 5. A minimum of two (2) audit engagements within the last eight (8) years demonstrating experience on initial audits or beginning balance audits including the name, scope of work, location, services provided, the length of time the respondent s services were provided, a demonstration of project time tables and deliverables that were adjusted to client s needs and unique circumstances. 6. The assigned partner must have at least ten (10) years of recent experience auditing similar engagements, including Single Audits. 7. The firm must have undergone a peer review in the last three (3) years and did not receive a peer review rating of a fail during the last peer review. A pass with deficiency rating requires an explanation on the findings and recommendations made including the remediation efforts to correct the deficiencies noted in the peer review report. 8. All assigned partners and managers must be licensed to practice public accounting in the State of Michigan. The qualifications of those licensed in the State of Michigan will be considered during the evaluations of the proposal. However, the qualifications of those not currently licensed in the State of Michigan will not be considered during the evaluation process. Page 3 Additional Documents: Attachment 1 Contract with Insurance Requirements Attachment 2 Fee Proposal Form Advertisement Date: Tuesday, November 22, 2016 Pre-Proposal Meeting: Optional Questions and Inquiries: Date: Wednesday, November 30, 2016 Time: 11:00 a.m. (Eastern Time Zone) Location: 735 Randolph Street, (5 th Floor Board Room) Detroit, Michigan All questions and inquires must be directed by to Joan Byrne at Due Date: Monday, December 5, 2016 Time: 12:00 p.m. (Eastern Time Zone) Proposal Due: Date: Tuesday, December 20, 2016 Time: 12:00 p.m. (Eastern Time Zone) Late Proposals Will Not Be Accepted Page 4 Instructions to Proposers Section I Advertisement A. Proposers interested in submitting a response to this RFP are required to be registered with the Michigan Intergovernmental Trade Network (MITN) at (found under the Great Lakes Water Authority name). Only registered vendors can obtain proposal documents and submit a response. Registration is FREE. This RFP will also be made available on the GLWA website, however, GLWA only accepts proposals submitted through MITN. B. By responding to this RFP, proposers are agreeing to comply with GLWA s Procurement Policy made available on the GLWA website, C. All communications pertaining to this project are to be directed ONLY to the GLWA Procurement Professional listed on the advertisement. Proposers are prohibited from contact or discussion with any GLWA staff member, Agent, Board Member, or Committee Member in relation to this project. Violation of this requirement may result in proposal disqualification. Section II Bulletins, Questions, and Inquiries A. It is the responsibility of the proposer to check for any bulletins and/or notices posted on MITN and the GLWA website and to make inquiry as to the changes or notices issued. Only written notices or bulletins duly issued by GLWA shall constitute revisions to this RFP. Proposers are advised that no oral interpretation, information or instruction by any officer or employee of the GLWA shall be binding upon GLWA. B. Each interpretation or correction, as well as any additional RFP provision that GLWA may decide to include, will be made only as a bulletin, which will be available on MITN. C. Should proposers be in doubt as to the true meaning of any portion of this RFP, find any ambiguity, inconsistency, or omission herein, or intend to take exception to any requirement of the RFP, the proposer must make a written request for an official interpretation or correction by the questions and inquiries date established in the advertisement. D. Any bulletin issued by GLWA shall become part of this RFP and shall be taken into account by each proposer in preparation of its proposal. Proposers shall submit the latest revision of any form(s) or attachment(s) issued by a bulletin. Section III Preparation and Submission of Proposal A. GLWA does not assume any responsibility and will not reimburse any proposer for any costs incurred, however caused, in preparing and submitting its proposal, withdrawing its proposal, in objecting to the award or to being disqualified for the award. B. Proposers are cautioned that the Scope of Work ( Scope or Work ) is intended to define the minimum standard of quality. The Scope of Work represents a sample of GLWA s desires and vision for the project, and is furnished to proposers as a guideline for developing the scope of their proposals. Although the completed Work must function as intended by the scope, and must meet the standards and capacity specified, project delivery, design innovation, and creativity are encouraged. C. By submitting a proposal in response to this RFP, the proposer affirms that it accepts responsibility for the Work, and except for assumptions and exceptions explicitly stated in the proposal, the proposer considers the proposing documents accurate and sufficient to complete the Work. The proposer will meet all of GLWA s needs and objectives stated in the RFP and commits that the Work will be consistent with best modern practices. Available Documents Available documents are provided for the proposer s information and convenience only and do not relieve the successful proposer from its responsibility and obligation to develop its own comprehensive 1 RFP-General v Page 5 Instructions to Proposers project-specific information, obtain any additional examinations, explorations and conducting all other necessary activities that are reasonably necessary to prepare correct and complete contract deliverables as specified in this RFP. Proposers requiring any additional information beyond what is contained in this RFP and/or communicated in pre-proposal/oral interview meetings may be required, in GLWA s sole discretion, to provide evidence of a security clearance from the U.S. Department of Homeland Security for each person that would have access to the information. Providing evidence of the security clearance does not guarantee any firm or person access to any or all of requested information. Following receipt of evidence of the security clearance, additional information may be made available to proposers. Reference GLWA s website: Subcontractors If GLWA objects to any subcontractor nominated by a proposer, before awarding the contract, GLWA may request their removal or replacement. In such event, the proposer under consideration for award shall promptly nominate a qualified substitute, or self-perform work involved, if qualified to do so. If the proposer declines, GLWA may in its sole discretion, elect not to recommend proposer for the award. Proposer s shall not replace or add a subcontractor, at any time, unless proposer gives written notice to GLWA with all required documentation in sufficient time to allow GLWA to conduct an evaluation of the new subcontractor. This provision is not to be construed to create or impose on GLWA any duty or liability under any legal theory to exercise such authority for the benefit of any proposer, subcontractor or any other party. D. Costing Proposals must be uploaded to MITN in a separate file by or before the proposal date and time. Technical proposals that contain or reference cost/fee information are subject to immediate rejection. E. Proposals submitted remain valid for six (6) months after the advertisement opening date and time. Section IV Proposal Withdrawal and Modification After the time for receiving proposals has expired, no modification, alteration or revision to any proposer's proposal form or proposal form attachment(s) will be accepted, nor will a proposer be allowed to withdraw its proposal and submit another proposal for the Work. All proposals become the property of GLWA upon opening and are subject to public record laws. Section V Proposal Evaluation GLWA uses a structured qualifications based selection process to evaluate proposals. Each proposal will be evaluated on its responsiveness to the technical and administrative criteria identified in this RFP. Following the technical proposal evaluation and oral interviews (if applicable) cost proposals will be reviewed. GLWA will enter into negotiations with a qualified proposer with the objective of reaching an agreement to enter into a contract for the Work. A. In reviewing technical proposals, GLWA reserves the right to request from any proposer written proposal clarifications or request additional information, reject any or all proposals, waive any non-conformance, defect or informality in any proposal, and/or determine which proposal best serves its needs. B. Negotiations will be memorialized in a written Work statement which will define the contract scope of Work and be included in the contract document. C. Should GLWA determine, in its sole judgment, that contract negotiations are unproductive, GLWA reserves the right to cease negotiations with proposer and initiate negotiations with another proposer. 2 RFP-General v Page 6 Instructions to Proposers Section VI Contract Award Upon successful completion of negotiations, GLWA will provide the proposer with a contract for its review and execution. No later than fifteen (15) days after receipt, the proposer shall sign and return the contract, and provide any other documents required for the completion of an executed contract including, without limitations, insurance, executed performance bond, and any payment bond, each in the full amount of the contract price, and accompanied by a certified power of attorney. Section V Post Award GLWA's contractor performance evaluation program will be implemented under this contract, whereby performance of the contractor will be evaluated periodically at any time during this contract as determined by GLWA. The evaluation will be conducted during a meeting with the contractor, where the evaluation elements will be discussed and the contractor will be afforded the opportunity to review the scores and provide input to GLWA. The contractor performance evaluation information may be used by GLWA to help evaluate the contractor's capabilities to perform other work for GLWA in the future. END OF INSTRUCTIONS TO PROPOSER 3 RFP-General v Page 7 Proposal Format, Proposal Evaluation Criteria and Cost Proposal Submittal Section I Proposal Format Proposers shall use complete sets of RFP documents in preparing proposals; GLWA shall not assume any responsibility for errors or misinterpretations resulting from the use of incomplete sets of RFP documents. Accuracy and completeness are essential. Omissions and ambiguous or equivocal statements will be viewed unfavorably, and will be considered in the evaluation of the proposal. Since all or a portion of the successful proposal may be incorporated into an ensuing contract, proposers are cautioned not to make any claim or statement that cannot subsequently be included in a legally binding agreement. A. Proposals must be limited to fifteen (15) pages. B. All pages must be numbered. Section II Mandatory Items The following mandatory items will not be scored, however, the proposer s failure to meet or provide any of the mandatory items, may result in elimination of the proposal from further consideration in GLWA s sole discretion: A. Letter of Transmittal Provide a letter, two (2) pages maximum, signed by an authorized agent of the proposer who has the authority to bind the proposer to the proposal price, and all term and conditions of the RFP, including the terms and conditions of the sample contract. The letter must define the proposer s project team, acknowledge the receipt of any bulletins, state the required bid hold period, and state the proposer can start work. B. Minimum Qualifications - Provide information to substantiate that the proposer s team meets the minimum qualifications stated in the advertisement. Other requirements as follows: C. Statement of Financial Capability The proposing firm is to provide a D & B (Dun & Bradstreet) number. If not a member of D & B, the proposing firm may provide a signed letter of financial capability. D. Covenant of Equal Opportunity (see appendix A) Submit signed and notarized. E. Non-Collusion Affidavit (see appendix B) Submit signed and notarized. F. Contract Terms and Conditions Compliance Checklist (see appendix C) Submit signed. G. References - Provide the name, address, and telephone number of at least three (3) persons representing clients from the lists of engagements cited in proposing firm s experience who may be contacted as references. Preferably, these references should include entities similar to GLWA, an explanation of why they are considered to be similar to GLWA, and must include recent projects cited above. H. Disclosures - State whether any past contract of proposer has been terminated for default or convenience, the circumstances surrounding the termination, and the name and telephone number of your client s representative for any such contract. Describe any legal proceeding, lawsuit, or claim that has been filed on any contract within the past five (5) years by or against any firm on the proposing team or any of the firm s past or present employees, including the nature and reason for the legal action, the result of the legal action including any binding arbitration or alternative dispute resolution process, and a description of each circumstance where the proposer or principal sub-contractor paid a part or all of a claim or change order brought by a client or third party. I. Statement of No Conflict of Interest - Provide a statement of avoidance of conflicts of interest on the proposer s letterhead. 4 RFP-General v Page 8 Proposal Format, Proposal Evaluation Criteria and Cost Proposal Submittal Section III Evaluation Criteria Each proposal will be evaluated on its responsiveness to the technical and administrative criteria identified below. A. Experience and Qualifications 1. Describe a minimum of two (2) audit engagements within the last eight (8) years demonstrating experience over municipal enterprise accounting including the name, scope of work, location, services provided, and the length of time the respondent s services were provided. 2. Describe a minimum of two (2) audit engagements within the last five (5) years providing consent letters for inclusion in revenue bond official statements for debt issuances greater than $100 million demonstrating experience with the needs of large public debt issuers. 3. Describe a minimum of three (3) Single Audit engagements within the last five (5) years demonstrating experience comparable to the scope of services described for this project including the name,
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