ORDINANCE No. 176669 As Amended

*  Approve contract with KPMG, LLP for financial audit and other professional services for FY 2001-02, and provide for payment (Ordinance).

The City of Portland ordains:

Section 1. The Council finds:

1.  Ordinance No. 170217, passed by Council on June 5, 1996 authorized KPMG [Peat Marwick] LLP, Certified Public Accountants, to provide independent audit services to the City of Portland including the Hydroelectric Power Fund, Portland Development Commission, and Fire and Police Disability and Retirement Funds. These services were to be provided under a consolidated contract which, subject to satisfactory performance, was renewed annually for a period of five years ending with fiscal year 1999-2000.

2.  KPMG LLP provided audit services for those five years to the satisfaction of the City Auditor and the governing boards of the Portland Development Commission, and Fire and Police Disability and Retirement Funds and Hospital Authority of Portland, Oregon.

3.  Rebidding the audits was considered by the City Auditor and Auditee representatives; however, there was agreement that extending the contract period with KPMG for two more years would be more cost effective for the City because:

   a.  Governmental Accounting Standards Board (GASB) Statement 34 requires the City to implement a new reporting model for FY 2001-02, and

   b.    A new auditor would, under Generally Accepted Auditing Standards, be required to gain an understanding of the City’s internal control structure and accounting systems which, during the transition to GASB 34, would be more time consuming and therefore more costly to the City.

4.  Ordinance No. 175726, passed by Council on June 27, 2001, extended the contract period with KPMG for audit and other accounting services through FY 2002-03 for a two-year period ending with fiscal year 2001-02. These services are provided under a consolidated contract and, subject to satisfactory performance, is renewable annually during the two-year period.

5.  KPMG LLP provided audit services to the satisfaction of the City Auditor and the governing boards of the Hospital Authority of Portland, the Portland Development Commission, and Fire and Police Disability and Retirement Funds for FY 2000-01.

6.  For fiscal year 2001-02, the total contract price of $333,000 includes the audits of the City’s CAFR, Hydroelectric Power Fund, and Fire & Police Disability & Retirement Fund financial statements, and an estimate for additional audit effort related to the Water Bureau’s billing system. The total cost assumes the City will not be reclassified as a “high risk” auditee by the City’s cognizant federal agency as a result of the material weakness reported by KPMG last year.

7.  Auditee Project Managers require authority to approve amendments to the contract increasing or decreasing the contract price within the scope of the original approved contract without further approval from the City Council, limited to ten percent (25%) of the total contract price for each Auditee. All such amendments would require the written concurrence of the City Auditor.

8.  This authority is necessary to ensure that the audits will be completed on time and that the City's Comprehensive Annual Financial Report can be filed timely with the Secretary of State as required by law, and with the Government Finance Officers Association (GFOA) for receipt of the GFOA Certificate of Achievement for Excellence in Financial Reporting.

9.  The City Auditor shall report to Council on all material changes in the scope and/or compensation made to the contract prior to final acceptance of the contract by City Council.

NOW, THEREFORE, the Council directs:

a.  The Mayor and City Auditor are hereby authorized to execute a contract with KPMG LLP for audit services for FY 2001-02 as described in the Agreement, in a form substantially similar to that attached hereto as Exhibit A (attached to the original ordinance only).

b.  Auditee Project Managers, with the written concurrence of the City Auditor, shall have the authority to approve amendments increasing or decreasing the contract price, within the scope of the original approved contract, without further approval from the City Council, limited to ten (10%) percent of the contract price for each Auditee.

d.  The Mayor and Auditor are hereby authorized to draw and deliver warrants chargeable to the FY 2002-2003 budget appropriations of the entities listed below and limited to the maximum amounts indicated, which include out-of-pocket costs as applicable:

City of Portland (including the Single

Audit  247,200

Hydroelectric Power Fund)  8,400

       Water Bureau – additional audit work  63,000

Fire & Police Disability and Retirement Funds   14,400

Total Contract Price  $333,000

Section 2. The Council declares that an emergency exists because a delay in implementation of the action herein could result in delays in conducting the FY 2001-02 audit and additional costs to the City; therefore, this ordinance shall be in force and effect from and after its passage by the Council.

Passed by Council:  JUL 03 2002   GARY BLACKMER

City Auditor, Gary Blackmer  Auditor of the City of Portland

Eric Hofeld, CPA     By /S/ Susan Parsons

June 21, 2001

Deputy        

BACKING SHEET INFORMATION

AGENDA NO. 798-2002

ORDINANCE/RESOLUTION/COUNCIL DOCUMENT NO. 176669 AS AMENDED