Audit committee recommends Macias Gini & O'Connell as San Francisco's independent auditors

The Government Audit and Oversight Committee recommended on June 25 that the Board of Supervisors select the firm Macias Gini & O'Connell to serve as the city's independent external auditors under a proposed two-year contract with five one-year renewal options.

Comptroller's Office representative Ben Rosenfield, speaking for the office, said the recommendation followed a six-month selection process that evaluated price, governmental auditing experience and the firms' capacity to carry out large-year-end audits. "There is a 5% reduction in cost versus the current year contract," Rosenfield said of the proposal before the committee.

The recommended firm will serve as principal auditor for the city's consolidated financial statements and will rely on departmental auditors for enterprise-component work, Carolyn Walsh, the engagement partner for the firm, told the committee. "We are required by our professional standards to do that," Walsh said, describing the firm's responsibilities to report material fraud or illegal acts if they arise.

Walsh said the firm will perform the single audit of federal grant programs and related compliance work, but noted auditors are awaiting definitive OMB guidance tied to Economic Recovery Act (ARRA) funds that could affect audit procedures next year. She described the office's planned risk-based approach: identify critical audit areas, test internal controls and use statistical or judgmental sampling to select items for substantive testing.

Committee members pressed for details about selection criteria and subcontracting. Supervisor Sophie Maxwell asked for the major criteria used in the selection; Rosenfield cited price, governmental auditing experience and capacity. Maxwell also asked whether the firm would use subcontractors; Walsh said about 10% of the contract would go to local business enterprises and named Louie Wong and Associates and Lamorina and Cheng.

The committee also discussed the audit coverage of enterprise departments that feed into the city's Comprehensive Annual Financial Report (CAFR), including the Port, airports, hospitals, the public utilities commission and the retirement system. Rosenfield confirmed those enterprise audits feed into the consolidated financial statement review.

Two members of the public urged more transparency and targeted audits. Public commenter "Mister Yep" said San Francisco General Hospital is "one of the agencies that will be audited by the independent auditor" and argued a hospital audit is overdue given prior unsatisfactory findings. Francisco DeCosta urged clearer review mechanisms for large projects in the Bayview and publication of audit/adjudication results online, warning that stimulus-funded programs involve large sums needing oversight.

Supervisor Maxwell moved to approve the recommendation; with no objection the committee approved forwarding the item to the full Board of Supervisors as a committee report for final action.

The committee record lists the proposed contract term, the firm's prior municipal and transportation agency work, the firm's planned coordination with other departmental auditors on enterprise funds, and the committee's review schedule: the firm and the Comptroller's Office plan to return to the committee in July to present a detailed audit plan and timeline. The recommendation will go to the full Board for consideration on the listed upcoming agenda.