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BACKGROUND The City has contracted with Caporicci & Larson for financial auditing services beginning with the 2003 fiscal year after an open and competitive process. The audit currently underway for FY 2007 is the final year under the current five year agreement. DISCUSSION Over the past five years, Caporicci & Larson, CPA's has developed an understanding of the City's operation and internal control structure that has aided it in providing quality audit services in a timely manner. Based upon this experience, there are advantages to retaining this firm for a longer period of time and staff requests Council approval to continue with the current audit firm for a three year period. The City Purchasing Procedures Manual requires that three written proposals be obtained for consultant services contracts in excess of $20,000. As an alternative, a department may recommend selection of a consultant from a Managed Qualified Bid List (MQBL) provided the consultant was prescreened and was determined to be qualified to meet the project scope of work. Notwithstanding these two options, the policy also allows an extension of an existing consultant or service provider contract if it is determined that this action is in the best interest of the City. Further, this action must be approved at a City Council meeting so that any interested party has an opportunity to comment. Staff is recommending athree-year extension to the Caporicci & Larson contract based upon the following factors: The Government Finance Officers Association (GFOA) has issued a series of Recommended Practices for State and Local Governments. The Recommended Practice regarding audit procurement states: "Governmental entities should enter into multiyear agreements of at least five years in duration when obtaining the services of an independent auditor. Such multiyear agreements can take a variety of different forms (e.g., a series of single-year contracts) consistent with applicable legal requirements. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit. Multiyear agreements can also help to reduce audit costs by allowing auditors to recover certain `start up' costs over several years, rather than over a single year." These `start up' costs typically include an extensive documentation of internal controls and can significantly add to the cost of the annual required audit. Also, during any type of staff turnover it is especially important to have continuity in order to produce financial statements in a timely manner. In addition, new auditor standards recently issued severely restrict the ability of auditors to provide assistance in preparing financial statements on which they issue opinions. Page 2 of 3