TO: AC Transit Board of Directors
FROM: Jill A. Sprague, General Counsel
SUBJECT: Auditor Rotation
BRIEFING ITEM
RECOMMENDED ACTION(S):
Title
Consider receiving a report regarding the legality of precluding an audit firm from competing for a new contract based on the firm's immediate prior role as auditor for the District (Requested by Director Peeples - 8/11/21).
Body
STRATEGIC IMPORTANCE:
There is no strategic importance associated with this report.
BUDGETARY/FISCAL IMPACT:
There is no budgetary or fiscal impact associated with this report.
BACKGROUND/RATIONALE:
California Government Code Section 12410.6(b) requires the rotation of lead audit partners and coordinating audit partners if an audit firm continues to provide audit services to a public agency for greater than six fiscal years. In compliance with this requirement, Board Policies 340 (Accounting Policy) and 465 (Procurement Policy) have each been revised. Reference to Section 12410.6(b) was included in Board Policy 465 in June 2020, while Board Policy 465 section IV.B.1(g) specifies that audit contracts shall be competitively bid at least every five years and that firms must specifically identify how they will address the requirements under Section 12410.6(b) in their Request for Proposal response to the District. In addition, Board Policy 340 requires that the District issue an RFP for audit services every five years. Neither the statute nor Board Policies require that the District use a different audit firm or preclude the incumbent audit firm from submitting a proposal, so long as a new lead audit partner and coordinating audit partner submit the proposal and perform the work.
The Board at various times has inquired whether the District should exclude the entire incumbent audit firm (as opposed to the specific audit partners) from the procurement and selection process. At the Board meeting on August 11, 2021, the General Counsel advised that this is not required by law or Boa...
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