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RPVCCA_CC_SR_2015_03_03_F_2014_Employee_Compensation_and_Benefits_AnalysisCITY OF MEMORANDUM RANCHO PALOS VERDES TO: HONORABLE MAYOR & CITY COUNCIL MEMBERS FROM: KATHRYN DOWNS, ACTING FINANCE DIRECTOR DATE: MARCH 3, 2015 SUBJECT: 2014 EMPLOYEE COMPENSATION AND BENEFITS ANALYSIS REVIEWED: CAROLYNN PETRU, DEPUTY CITY MANAGER® RECOMMENDATION Authorize Vavrinek, Trine, Day & Co., LLP (VTD), the City's independent financial statement auditor, to complete Agreed Upon Procedures (AUP) for the calendar year 2014 Employee Compensation and Benefits Analysis ("Analysis"), for a fee of $5,000. BACKGROUND AND DISCUSSION At the direction of City Council, Finance Staff prepared a 2013 Analysis, and VTD performed AUP upon it. The AUP included tracing employee compensation and benefits to Internal Revenue Service filings, published policies and procedures, City personnel records, contracts and other supporting documentation. The results of the 2013 AUP were "No exceptions were noted." Staff has prepared a 2014 Analysis (see Attachment A). At the request of Staff, VTD has prepared a proposal to perform AUP for the 2014 Analysis (see Attachment B). The AUP would be performed for a fee of $5,000, and would include a sampling of 20 employees. Staff and VTD have tentatively scheduled the AUP to be performed the week of March 9, 2015. The report from VTD would likely be ready during April 2015. As a reminder, the 2014 Analysis is not comparable to employee compensation information reported to the California State Controller on an annual basis. The State Controller requires Medicare taxable income to be reported (box 5 of employee W-2). The 2014 Analysis includes gross income (as opposed to taxable income). F-1 2014 Employee Compensation and Benefits Analysis March 3, 2015 Page 2 of 2 FISCAL IMPACT The Finance budget program within the General Fund has a sufficient appropriation to provide for the $5,000 professional services expenditure. Therefore, Staff does not recommend a budget adjustment at this time. Attachments A — 2014 Employee Compensation and Benefits Analysis B — Vavrinek, Trine, Day & Co., LLP Proposal for Agreed Upon Procedures dated February 17, 2015 F-2 r -.3 4 m! M N d M 01 00 W O j 10 ' V l; tD n n Op 00 N OS n. CO i� I d W m I. O N' N V1 WI 01 O ut I� O N m m O V/ � V l N N MIN dd NIM N W H N N N 1 n w i m 00 01 N M m n m M N did M O V I Vl W N N Ol Ol V 1 N 0p N n n Q1 N W! d d m d' N! N 0) N Vl 0 W n - p W m Ot.� In M M Ol f1i N N n Nid N NiN N 0 tiI N m oo O'. d!N, lfl N, N N nl00 V1 N N d 01 M Ol l0 d V,M1'1 N N:d l/1IN N miM N!l- dId N N fD d db N Mj O 0I4n a fo Mi NI-T n;N r/1 N jM 01 to•d N w MI NIN o0 O Vl N W 01 N:.a NjH M m a -zl r-1 O m N N n n N n DJ N Nl N Ni n LD nl lD{Vt NIN 01 M to ti Ot r NiN M dII, fO ml hE d M NiN NI N NI 7tid ! • d r r I r r � r r r r I , r r i t N r � I r r I r ! � � r : I C-� y d N N N N N N i N m NM Ot m N M NN M m + I N N m m i N N CI. 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F�. ilm Attachment B Vaurinek, Trine, Day & Co,, LLP U"dswo ri Certified Public Accountants February 17, 2015 City Council City of Rancho Palos Verdes, California We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for the City of Rancho Palos Verdes (the City). We will apply the agreed-upon procedures which the City Council has specified, listed in the attached schedule, to the City's payroll records and benefit documentation. This engagement is solely to assist the City in determining that payroll, paid benefits and earned benefits agree, for the sample noted, to the underlying supporting documentation. Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose. If, for any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. Because the agreed-upon procedures listed in the attached schedule do not constitute an examination, we will not express an opinion on the balance, amounts, or on compliance with applicable policies, regulations, requirements or statues. In addition, we have no obligation to perform any procedures beyond those listed in the attached schedule. We will submit a report listing the procedures performed and our findings. This report is intended solely for the use of the City Council, and should not be used by anyone other than these specified parties. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. The City is responsible for compliance with all policies, regulations, requirements, and statues and is responsible for selecting the criteria for testing and for determining that such criteria are appropriate for your purposes. Phillip White is the engagement partner and is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. We plan to begin our procedures in February 2015 and, unless unforeseeable problems are encountered, the engagement should be completed by March 31, 2015. At the conclusion of our engagement, we will require a representation letter from management that, among other things, will confirm management's responsibility for the compliance with all applicable policies and statues in accordance with those standards. We estimate that our fees for these services will be $5,000. The fee estimate is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the engagement. These fees are also based upon the assumption that the City will have all of the detail ready for each sample selected for the specified procedures noted in the Scope of Work for the team upon arrival (a prepared by client listing (PBC) will be provided). If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. 8270 Aspen Street Rancho Cucamonga, CA 91730 Tel: 909.466.4410 Fax: 909.466.4431 www.vtdcpa.com FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • RIVERSIDE • SACRAMENTO F-9 Attachment B City Council City of Rancho Palos Verdes, California 2014 Payroll AUP February 17, 2015 Page 2 of 3 We appreciate the opportunity to assist you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. If the need for additional procedures arises, our agreement with you will need to be revised. It is customary for us to enumerate these revisions in an addendum to this letter. If additional specified parties of the report are added, we will require that they acknowledge in writing their responsibility for the sufficiency of procedures. Very truly yours, fj* " Phillip White, Partner Vavrinek, Trine, Day & Co., LLP PMW:gbl 150041 Attachment RESPONSE: This letter correctly sets forth the understanding of the City of Rancho Palos Verdes. Title: Date: F-10 Attachment B City Council City of Rancho Palos Verdes, California 2014 Payroll AUP February 17, 2015 Page 3 of 3 Scope of Work Perform an agreed upon procedures engagement (AUP) to assist the City in determining that the payroll, paid benefits and earned benefits agree, for the sample noted, to the underlying supporting documentation. The work will be performed as noted below: Procedures: 1. Trace applicable information on the attached worksheet (prepared by the City) to applicable Internal Revenue Service and Franchise Tax Board flings. 2. Select a sample of the following for a total sample of twenty (20); a. five (5) management personnel - selected haphazardly, b. five (5) part-time personnel including one (1) City Council member - selected haphazardly c. ten (10) full-time non -management personnel For the selected sample, trace the following to City personnel records, contracts if applicable, policies, and other supporting documentation: 1. Payroll: a. Annual salary b. Overtime c. Auto allowance d. Bonus e. Vacation buyout f. Health insurance in -lieu 2. City Paid Benefit Costs: a. Pension benefits b. Insurance — including but not limited to: Medical, Vision, Dental c. Medicare d. Retirement Health Savings Account Contribution e. Deferred Comp 3. Benefits — Earned Hours Only: a. Wellness b. Admin Leave c. Sick Leave d. Holidays e. Vacation f. Comp Time F-11