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HomeMy WebLinkAboutItem 14 - Audit Services MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: BRUNO RUMBELOW, CITY MANAGER MEETING DATE: JULY 21, 2026 SUBJECT: APPROVAL OF CONTRACT FOR OUTSIDE AUDIT SERVICES FOR BAKER TILLY US, LLP RECOMMENDATION: City Council to consider approval of a contract with Baker Tilly US, LLP to conduct an independent audit of the City's impact fee program funds. FUNDING SOURCE: Funds are available in Utility Enterprise Fund for an estimated amount of $22,000. BACKGROUND: This action is to consider approval of a contract with Baker Tilly US, LLP, for independent audit services related to the City's impact fee accounts. During the 89th Legislative Session, the State of Texas enacted SB 1883, requiring cities to obtain an independent financial audit of impact fees prior to considering any potential increase. The legislation also stipulates that the selected auditor must not have performed work for the City within the previous 12 months. To comply with these requirements, staff solicited informal quotes in accordance with the City's Purchasing Policy. Formal bids and public advertisement are not required because the anticipated cost of the engagement is under$100,000, consistent with SB 1173. 4 t i bakertUy,,,o� 't CityGrapevine :of Fee AUP Services Justin Hoagland, CPA, Principal +1 (608) 240 2497 1 ,ustin.hoagland@bakertilIV.com Contents INTRODUCTION...............................................................................................................1 YOUR NEEDS, OUR RESOURCES.................................................................................2 INDUSTRY SPECIALIZATION.........................................................................................4 TEAM, RELEVANT EXPERIENCE, AND REFERENCES...............................................5 SERVICEAPPROACH.....................................................................................................6 11 C bakertitty The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity.In specific circumstances,the services of a professional should be sought.©2025 Baker Tilly US,LLP. Baker Tilly US,LLP and Baker Tilly Advisory Group,LP and its subsidiary entities provide professional services through an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws,regulations and professional standards.Baker Tilly US,LLP is a licensed independent CPA firm that provides attest services to clients.Baker Tilly Advisory Group,LP and its subsidiary entities provide tax and business advisory services to their clients.Baker Tilly Advisory Group,LP and its subsidiary entities are not licensed CPA firms. Baker Tilly Advisory Group,LP and Baker Tilly US,LLP,trading as Baker Tilly,are independent members of Baker Tilly International.Baker Tilly International Limited is an English company.Baker Tilly International provides no professional services to clients.Each member firm is a separate and independent legal entity, and each describes itself as such.Baker Tilly Advisory Group,LP and Baker Tilly US,LLP are not Baker Tilly International's agent and do not have the authority to bind Baker Tilly International or act on Baker Tilly International's behalf.None of Baker Tilly International,Baker Tilly Advisory Group,LP,Baker Tilly US,LLP nor any of the other member firms of Baker Tilly International has any liability for each other's acts or omissions.The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited. As of June 3,2025,Baker Tilly and Moss Adams have merged.Combined statistics are based on data currently available.Actual counts may vary slightly and will be finalized during the integration process. Introduction Gain peace of mind knowing your impact fee decisions are fully compliant and transparent, backed by Baker Tilly's government impact fee expertise and deep understanding of Texas requirements. Navigating new Texas impact fee requirements with confidence Recent changes to Texas impact fee legislation, specifically Senate Bill 1883, require municipalities to conduct independent financial audits before increasing or adopting new impact fees in service areas with existing fees. These audits must be performed by a certified public accountant who has not provided other services to the municipality in the prior 12 months. Selecting a firm that understands both the legislative requirements and the complexities of impact fees is critical. It's about more than checking boxes. It's innovative thinking and deep collaboration and our passionate, dedicated public sector accountants understand this. Baker Tilly is well-positioned positioned to help municipalities navigate these changes, ensure compliance and deliver actionable insights. Here are the highlights: MMMMRW -mm pw� Baker Tilly has nearly 350 government-focused professionals serving more than 3,500 government clients across the country. 19— TEXAS PRESENCE Baker Tilly has a strong local presence in Texas, serving over 9,700 clients in the state. We have nine offices across Texas, with more than 1,100 professionals dedicated to serving area clients. Our firm has been supporting clients in Texas for over 50 years. I w IMPACT FEE EXPERTISE Baker Tilly has a long history of assisting municipalities with impact fees. Our team has extensive experience assisting municipalities with impact fees, is proficient in the Texas Local Government Code Title 12 Chapter 395, has performed similar engagements in other states with comparable legislative requirements, and has begun to perform these specific procedures for a number of entities in Texas. Most importantly, since these new requirements became effective last September, we have been engaged by ten other municipalities in Texas to perform this work, which is more than any other firm. We will bring our lessons learned from these engagements to yours. 1 Your needs, our resources Ready to help you meet the challenges of today and embrace what's next, with deep resources, industry reputation and local reach across Texas. Guiding you with our resources, reputation and reach Our size isn't just Baker Tilly at a glance a number At Baker Tilly, we bring a legacy and commitment to helping our clients It's a testament to our embrace what's next. resilience and ability to lead you into the future, no matter With more than 11,000 professionals from coast to coast, our the climate. With nearly a resources fuel our ability to offer clients deep industry insights, bold century of experience, we've thinking and holistic solutions. Our ranking as the sixth-largest advisory honed our skills and adapted CPA firm means we're actively shaping the industry landscape across to evolving markets. markets. 0 • • B 0 %V 0- ( 6th- 111000+ 90+ —39400 $313+ 100+ 300+ largest U.S. team members, years in Certified Public firm revenue worldwide office workplace and accounting firm 1,000+principals business Accountants in FY2025 locations culture awards GIVING YOU THE TOOLS YOU NEED TO NAVIGATE THE FUTURE Baker Tilly guides clients through changing landscapes with skills, stability and strength as one of the oldest and largest advisory, tax and assurance firms in the United States. What does our size mean? It's about having a powerhouse team of passionate professionals unafraid to roll up their sleeves and provide hands-on support for our clients. It's about team members brimming with thoughtful ideas, backed by the scale of a firm genuinely dedicated to our clients' success. Bringing greater value, relationships and resources to our clients: Baker Tilly and Moss Adams have joined forces On June 3, 2025, Baker Tilly and Moss Adams combined to redefine bakertilty advisory and accounting services for our clients. The merger, which makes Baker Tilly the sixth-largest advisory CPA firm in the United �/V States, brings deeper industry specialization, broader geographic M O S S A D A M S reach and expanded capabilities. 2 Investing our resources in Texas Texas has the ninth-largest economy on the planet. It is one of the fastest-growing, most diverse economies in the United States. We're proud to be expanding our firm's presence in Texas to include more than 1,100 professionals across nine offices committed to helping clients in a wide range of industries and sectors. For our clients, that means local presence and knowledge backed by our firm's broad national resources. Texas local presence IF 91700+ Frisco Texas clients Fort Worth Dallas (two locations) Nine offices Waco in the state of Texas Houston Austin (two locations) 50+ years of experience serving area clients Pearland 1,100+ professionals in Texas OBaker Tilly office locations Working with local governments in Texas Baker Tilly provides an array of assurance and consulting services to governments across the state, including: • Abilene, City of 0 El Paso, City of 0 North Texas Tollway • Amarillo, City of 0 Electric Reliability Council of Authority • Anna, City of Texas, Inc 0 Paris, City of • Arlington, City of 0 Ennis, City of 0 Port Arthur, City of • Beeville, City of 0 Fulshear City of 0 Prosper, City of • Brazos River Authority 0 Green Valley Special Utility 0 Rockwall County • Brookshire, City of District • Sachse, City of • Brownsville Public Utilities 0 Houston, City of • Saginaw, City of Board 0 Huntsville, City of • San Antonio Housing • Brownsville, City of • Irving, City of Authority • Bryan, City of 0 Lewisville, City of • San Antonio River Authority • Burnet County 0 Lower Colorado River • San Antonio Water System • Capital Metropolitan Authority • SH130 MMD 1 Management Transportation Authority 0 Lower Valley Water District District No.1 • Celina, City of 0 Lubbock Power& Light • Strategic Housing Finance • Comal County 0 Mansfield, City of Corporation (Harris County) • Corpus Christi, City of 0 Medina County • Trinity River Authority • Dallas, City of 0 Midland, City of • VIA Metropolitan Transit • Denton, City of 0 New Braunfels Utilities 0 Westlake, City of • El Paso Water Utility 0 New Braunfels, City of 0 Wichita Falls, City of 3 Industry specialization Baker Tilly has served state and local governments since our establishment nearly a century ago. We are one of the few advisory, tax and assurance firms with a practice dedicated entirely to serving governmental clients. uellvering specialized expertise to our public sector client. State and local government is a complex, unique environment shaped by fiscal, regulatory and operational considerations not found in other sectors. Recognizing this complexity and eager to serve as a true valued advisor to the public sector, nearly 350 Baker Tilly professionals focus directly on serving governments. Nationwide, our public sector practice serves more than 3,500 state and local governmental entities, including municipalities, counties, school districts, utilities, transit organizations, airports and special authorities. Several of these client groups are now served by dedicated specialists in distinct sub- practices. Public • r: Experience that matters 00 0 . O 911T7,1 We help governments find solutions to overcome the obstacles and identify opportunities. • • I' E • • - b • • Accounting services and assurance Housing and economic development Arbitrage/rebate regulatory compliance Human capital services Attestation services Investment services** Capital planning Organizational management advisory Cybersecurity consulting Post-issuance compliance Economic development Public finance/bond issuance* Efficiency studies Process improvement Federal funding advisory Rate and user fee studies Financial management services Risk advisory and internal audit Financial reporting and GAAP services Strategic planning "Services provided by Baker Tilly Municipal Advisors,LLC,a registered municipal advisor and controlled subsidiary of Baker Tilly Advisory Group, LP, a tax and advisory firm. "Services provided by Baker Tilly Investment Services, a division of Baker Tilly Wealth Management, LLC, which is a registered investment advisor and controlled by Baker Tilly Advisory Group, LP. 4 Team, Relevant Experience, and References Aligning key engagement team members with the City's goals Meet the service team we've assembled to achieve everything you envision. Selected intentionally for your goals and backed by our specialized resources, these individuals are collaborative and multidisciplinary. Their passion for the public sector will make them an unstoppable force on your behalf. You'll find their bios below and complete resumes in Appendix A. INTENTIONALLY • - PILOT POINT PrincipalJustin Hoagland, CPA— . „ Justin will oversee the entire engagement process to ensure that every step is well- planned and implemented and that the final deliverables are technically accurate and contain meaningful insights and recommendations. Justin will lead the development of our client service plan, through which we will develop expectations and a timeline with you, execute the services as agreed upon and ensure the City receives a high level of satisfaction. Steven Kelly, CPA—Senior Associate Steven, who works out of our Austin office, specializes in providing auditing and other services to municipalities and utility clients. He will be the individual performing a majority of the detailed work and has worked on a number of the firms projects related to Section 395.059 of the Code. Relevant experience Although this new legislative requirement just became effective as of September 1, 2025, we already have experience performing these specific services and have either completed, or are in the process of completing, this work for ten other entities in Texas. See the references below for some of the entities where we are performing this work. References ITown of Flower Mound, TX — Name Leandro Rodriguez Title CIP-TIRZ Manager Phone +1 (972)874 6374 Email leandro.rodriguez@flowermound.gov City of Dayton, TX — Name Leslie Herrera Title Finance Director Phone +1 (936)258 2642 Email LHerrera@daytontx.org 5 Benbrook Water Authority, TX Name Saranya Title Finance Manager Sundaramani Phone +1 (817)249 1250 Email ssundaramani@benbrookwater.com City of Manvel, TX I Name Rosie Donaire Title Finance Director Phone +1 (713) 936 0282 Email rosa.donaire@cityofmanvel.com City of Frisco, TX Name Jason Grimm Title Engineering Development Manager Phone +1 (972)292 5432 Email jgrimm@friscotexas.org Service approach You deserve clarity and confidence in your impact fee compliance services. Our thorough, collaborative approach is designed to meet every legislative requirement and deliver actionable results for your municipality. Baker Tilly's scope will include performing procedures to satisfy the 10 requirements listed in Sec. 395.059, which include: (1) the amount of funds collected from any impact fee imposed by the political subdivision in the service area; (2) the amount of interest accumulated under Section on impact fees collected by the political subdivision in the service area; (3) any proposed capital improvements or facility expansions to be financed from an impact fee collected by the political subdivision in the service area that were not constructed, as described by Section , including the categories of each improvement and expansion; (4) the amount of funds collected from impact fees by the political subdivision in the service area that have not been spent, (5) each impact fee collected by the political subdivision in the service area; (6) the allocation of each impact fee made to the political subdivision in the service area; (7) any waived impact fees in the service area under Section (g); (8) any requested refunds of impact fees in the service area under Section ; (9) any impact fees in the service area refunded under Section 395.025;and (10) any errors or omissions of credits in impact fee calculations for impact fees in the service area. 6 Agreed-upon procedures (AUP) It is important to note that these services will be performed as an AUP engagement, not an audit. It is our understanding that while the legislation uses the word "audit" an AUP better fits the intent of the legislation. This is similar to what the environment is like in Arizona where municipalities are required per legislation to conduct biennial "audits" of their impact fees, but firms complete these as AUP's instead. The City will need to agree to provide us with written agreement and acknowledgment that the procedures performed are appropriate for its intended purpose. Cost Proposal and Period of Performance We estimate that our professional fees for these services will be $20,000. Additional charges will apply if we are requested to present the information onsite at a public meeting (no additional charge for a remote presentation). In addition, our invoices will include our standard technology charge which is 5% of billings. Our procedures will cover the period of the fiscal years ending September 30, 2021 through September 30, 2025. Sample project timeline The following is a high-level timeline of the project activities. Note that the timeline below is highly dependent on the responsiveness of the City to our questions and requests. 1. Planning and kick-off��- 2. Completing procedures ----- 3. Reporting --� Deliverables will include: 1) A final written report suitable for public posting and Council adoption. 2) A slide presentation summarizing the procedures/findings for the public hearing (a public hearing is required per the legislation). 7