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Home My WebLink About2025-12-10 Council Appointed Officers Committee Agenda PacketCOUNCIL APPOINTED OFFICER COMMITTEE Special Meeting Wednesday, December 10, 2025 Council Chambers & Hybrid 4:30 PM All Council Committee meetings will be held as “hybrid” meetings with the option to attend by teleconference/video conference or in person. To maximize public safety while still maintaining transparency and public access, members of the public can choose to participate from home or attend in person. Information on how the public may observe and participate in the meeting is located at the end of the agenda. Masks are strongly encouraged if attending in person. The meeting will be broadcast live on Zoom and on YouTube at https://www.youtube.com/c/cityofpaloalto. VIRTUAL PARTICIPATION CLICK HERE TO JOIN (https://cityofpaloalto.zoom.us/j/89296018574 ) Meeting ID: 892 9601 8574 Phone: 1(669)900-6833 PUBLIC COMMENTS General Public Comment for items not on the agenda will be accepted in person for up to three minutes or an amount of time determined by the Chair. General public comment will be heard for 30 minutes. Additional public comments, if any, will be heard at the end of the agenda. Public comments for agendized items will be accepted both in person and via Zoom for up to three minutes or an amount of time determined by the Chair. Requests to speak will be taken until 5 minutes after the staff’s presentation or as determined by the Chair. Written public comments can be submitted in advance to city.council@PaloAlto.gov and will be provided to the Council and available for inspection on the City’s website. Please clearly indicate which agenda item you are referencing in your subject line. PowerPoints, videos, or other media to be presented during public comment are accepted only by email to city.clerk@PaloAlto.gov at least 24 hours prior to the meeting. Once received, the Clerk will have them shared at public comment for the specified item. To uphold strong cybersecurity management practices, USB’s or other physical electronic storage devices are not accepted. Signs and symbolic materials less than 2 feet by 3 feet are permitted provided that: (1) sticks, posts, poles or similar/other type of handle objects are strictly prohibited; (2) the items do not create a facility, fire, or safety hazard; and (3) persons with such items remain seated when displaying them and must not raise the items above shoulder level, obstruct the view or passage of other attendees, or otherwise disturb the business of the meeting. 1 December 10, 2025 Materials submitted after distribution of the agenda packet are available for public inspection at www.paloalto.gov/agendas. CALL TO ORDER PUBLIC COMMENTS Members of the public may speak in-person ONLY to any item NOT on the agenda. 1-3 minutes depending on number of speakers. Public Comment is limited to 30 minutes. Additional public comments, if any, will be heard at the end of the agenda. ACTION ITEM 1.Discussion, Debrief and Recommendation to the City Council Regarding the Council Appointed Officer (CAO) Performance Evaluation Process; CEQA status – not a project 2.Discussion and Recommendation to the City Council on Next Steps for the Internal Audit Services Contract with Baker Tilly that ends June 2026; CEQA Status – Not a Project FUTURE AGENDA ITEMS Members of the public may not speak to the item(s) ADJOURNMENT 2 December 10, 2025 Materials submitted after distribution of the agenda packet are available for public inspection at www.paloalto.gov/agendas. PUBLIC COMMENT INSTRUCTIONS Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. 1.Written public comments may be submitted by email to city.council@PaloAlto.gov. 2.For in person public comments please complete a speaker request card located on the table at the entrance to the Council Chambers and deliver it to the Clerk prior to discussion of the item. 3.Spoken public comments for agendized items using a computer or smart phone will be accepted through the teleconference meeting. To address the Council, click on the link below to access a Zoom-based meeting. Please read the following instructions carefully. ◦You may download the Zoom client or connect to the meeting in- browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30 , Firefox 27 , Microsoft Edge 12 , Safari 7 . Certain functionality may be disabled in older browsers including Internet Explorer. Or download the Zoom application onto your smart phone from the Apple App Store or Google Play Store and enter in the Meeting ID below. ◦You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. ◦When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. ◦When called, please limit your remarks to the time limit allotted. A timer will be shown on the computer to help keep track of your comments. 4.Spoken public comments for agendized items using a phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. CLICK HERE TO JOIN Meeting ID: 892 9601 8574 Phone: 1(669)900-6833 Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public programs, services and meetings in a manner that is readily accessible to all. Persons with disabilities who require materials in an appropriate alternative format or who require auxiliary aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at (650) 329-2550 (voice) or by emailing ada@paloalto.gov. Requests for assistance or accommodations must be submitted at least 24 hours in advance of the meeting, program, or service. 3 December 10, 2025 Materials submitted after distribution of the agenda packet are available for public inspection at www.paloalto.gov/agendas. California Government Code §84308, commonly referred to as the "Levine Act," prohibits an elected official of a local government agency from participating in a proceeding involving a license, permit, or other entitlement for use if the official received a campaign contribution exceeding $500 from a party or participant, including their agents, to the proceeding within the last 12 months. A “license, permit, or other entitlement for use” includes most land use and planning approvals and the approval of contracts that are not subject to lowest responsible bid procedures and have a value over $50,000. A “party” is a person who files an application for, or is the subject of, a proceeding involving a license, permit, or other entitlement for use. A “participant” is a person who actively supports or opposes a particular decision in a proceeding involving a license, permit, or other entitlement for use, and has a financial interest in the decision. The Levine Act incorporates the definition of “financial interest” in the Political Reform Act, which encompasses interests in business entities, real property, sources of income, sources of gifts, and personal finances that may be affected by the Council’s actions. If you qualify as a “party” or “participant” to a proceeding, and you have made a campaign contribution to a Council Member exceeding $500 made within the last 12 months, you must disclose the campaign contribution before making your comments. 4 December 10, 2025 Materials submitted after distribution of the agenda packet are available for public inspection at www.paloalto.gov/agendas. Council Appointed Officers Committee Staff Report Report Type: ACTION ITEM Lead Department: Human Resources Meeting Date: December 10, 2025 Report #:2511-5566 TITLE Discussion, Debrief and Recommendation to the City Council Regarding the Council Appointed Officer (CAO) Performance Evaluation Process; CEQA status – not a project RECOMMENDATION Review and debrief on the CAO performance evaluation process during FY 2025 and potential recommendation to the City Council regarding changes prospectively. DISCUSSION The CAO Committee kicked off the FY25 annual performance evaluation process with an overview and goal setting discussion on May 12, 2025. The City Council has now completed the FY25 annual performance evaluation process to ensure that the Council Appointed Officers (CAO) are meeting City Council objectives and priorities. The purpose of this agenda item is to debrief on the process so that any desired adjustments for next year can be discussed and if needed, incorporated into next year’s CAO performance evaluation process. A summary of the 24-25 CAO evaluation performance process was prepared by Daniel Rich, the Municipal Resources Group consultant who facilitated this year’s process. The summary memo and timeline are attached (Attachment A). FISCAL/RESOURCE IMPACT Funding for annual CAO performance evaluation facilitation services is budgeted in the Office of the City Clerk operating budget. Depending on the Committee’s recommendation, additional resources may be needed to support the process. STAKEHOLDER ENGAGEMENT This discussion item has been coordinated with the CAO Committee Chair, the professional services consultant and internal stakeholders. Public comment will be available during the Committee deliberations. Item 1 Item 1 Staff Report Item 1: Staff Report Pg. 1 Packet Pg. 5 of 26 ENVIRONMENTAL REVIEW ATTACHMENTS APPROVED BY: Item 1 Item 1 Staff Report Item 1: Staff Report Pg. 2 Packet Pg. 6 of 26 P. O. Box 561, Wilton, CA 95693 916-261-7547 www.Solutions-MRG.com November 21, 2025 To: Palo Alto CAO Committee From: Dan Rich, MRG Consultant Re: Summary of 24-25 Performance Evaluation Process It has been my pleasure to once again work with the CAO Committee, the full Council and the four CAO’s to facilitate the performance evaluation process this year. The purpose of this agenda item is to debrief on the process so that any desired adjustments for next year can be captured while still fresh. As a reminder, attached is the final schedule for this year’s process, which changed somewhat from the original one shared with the Committee back in May. The process was more or less the same as the previous year, but included the Auditor this year. Similar to last year, the Committee developed specific “prompts” for each CAO to respond to in their self-evaluations (fine-tuned from the previous year). There were also changes to the questions posed to Council as part of the 1:1 interviews to better align with the prompts this year. At the closed sessions with each Appointee, the meetings were designed to be longer and have more dialogue. At the December 10 meeting, the Committee can discuss what worked well this year and what changes might be appropriate for next year. Some possible topics to consider include: Can the timeline be compressed more Should the prompts for the CAOs be reduced or changed Should the questions posed of Council be reduced or changed Should the structure of the closed session with the appointees be altered Should the Auditor be handled differently given the unique nature of the position Is there a way to better align calendar year Council priorities with FY CAO goals The CAOs will be at the meeting and might have thoughts on these or other topics. Attachment - final process timeline cc: CAOs HR Director Item 1 Attachment A - MRG memo and timeline Item 1: Staff Report Pg. 3 Packet Pg. 7 of 26 P. O. Box 561, Wilton, CA 95693 916-261-7547 www.Solutions-MRG.com PALO ALTO 24-25 CAO EVALUATIONS – FINAL TIMELINE Date Action 5/12 CAO Committee meeting to review/finalize process (timeline and questions for CAO’s and Council to respond to) 5/16 MRG (Dan) send CAO’s brief update on the tentative 2025 Evaluation process. June Consent Item to CC on process/timeline 6/6 Process, timeline and self-evaluation prompts distributed to CAOs. Sandra sends to Council. 7/17 CAO’s to provide Dan with self-evaluation. 7/21 Dan sends Mayor & City Council self-evaluations and interview questions in advance of individual meetings, along with most recent Citizen Survey, City Values, and current Council priorities. 7/28 – 8/19 Dan to conduct interviews with Mayor and Council Members in a manner that meets their time and location requirements to gather their input and experiences with the three appointees. 9/4 Dan distributes draft performance evaluations, goals, salary information to City Council (including CAOs salary “requests”). 9/12 Council comments on draft performance evaluation, goals, salary information due back to Dan. 9/18 Updated evaluations distributed to Council. 10/1 Final evaluations distributed to CAO’s (after first closed session). Item 1 Attachment A - MRG memo and timeline Item 1: Staff Report Pg. 4 Packet Pg. 8 of 26 P. O. Box 561, Wilton, CA 95693 916-261-7547 www.Solutions-MRG.com Date Action Sept. – Nov. Closed Sessions: 9/29 – Review of draft evaluations 11/3 – City Manager 11/10 – City Attorney, City Clerk, City Auditor and compensation Late Nov.Following approval from the CAO’s, MRG routes final docs via DocuSign for Mayor. Late Nov.Schedule 30 min debrief conversation for MRG and CAO’s Council approval of Employment Agreements for CAOs Dec 10 CAO Committee to meet and debrief on the process Item 1 Attachment A - MRG memo and timeline Item 1: Staff Report Pg. 5 Packet Pg. 9 of 26 Council Appointed Officers Committee Staff Report Report Type: ACTION ITEM Lead Department: Human Resources Meeting Date: December 10, 2025 Report #:2511-5567 TITLE Discussion and Recommendation to the City Council on Next Steps for the Internal Audit Services Contract with Baker Tilly that ends June 2026; CEQA Status – Not a Project RECOMMENDATION Recommend to the City Council next steps for internal audit services with the current contract ending June 2026. EXECUTIVE SUMMARY The CAO Committee will review and discuss next steps regarding the current contract ending June 20, 2026 and provide a recommendation to City Council. This report outlines the options available to the City Council in determining the future direction for these services. Next steps for consideration include extending the contract, renegotiating terms, and/or conduct a Request for Proposal (RFP) to explore alternative service providers. These are not mutually exclusive options. BACKGROUND The City Charter defines the City Auditor's role and furthers the City Council’s commitment to internal auditing, transparency, and accountability in government. The City Auditor is a City Council Appointee, meaning the City Council appoints this position. Per City Council direction on February 10, 2020 to consider outsourcing the Auditor function, the Council Appointed Officers (CAO) Committee, led by an independent procurement expert team, completed a request for proposals (RFP) process for outsourced internal auditing services, led a procurement process aligned with Council direction, and engaged in a transparent review of scope of work services, RFP evaluation, and a public interview process as part of the overall effort. Through the procurement process, the Council selected Baker Tilly to lead the City’s internal audit services and the City’s contract with Baker Tilly specifies the designation of a City Auditor. On May 6, 2024, the City Council formally appointed Kate Murdock as City Auditor. Item 2 Item 2 Staff Report Item 2: Staff Report Pg. 1 Packet Pg. 10 of 26 ANALYSIS On June 2, 20251, the City Council approved Contract Amendment No. 2 to the Baker Tilly US, LLP contract #C21179340 in the Amount of $2,126,250 and to extend the term of the contract to June 30, 2026, with an option to extend for two years. The revised total not to exceed contract authority was $5.55 million for the eight-year term should the additional two years of extension be authorized. As a result of this approval, audit services were authorized to continue through the scheduled review of the City Auditor through the annual CAO evaluation process prior to authorization of further extension beyond June 2026. As an appointed role, this item is before the Committee for review and a recommendation to the City Council on next steps in light of the current contract term. The CAO Committee and City Council has the opportunity to direct staff to exercise the option to extend the contract up to two years; alternatively, the Committee could recommend to renegotiate terms, and/or seek to explore alternative service providers. These are not mutually exclusive options and staff as well as representative(s) from Baker Tilly will be available to address questions on options the committee may wish to explore during the discussion. Extend the Contract: Continue the current service arrangement with Baker Tilly. Some considerations may include: the performance of Baker Tilly and the effectiveness of the current contract terms; continuity of service; price and length of time for the renewed contract. Renegotiate the Contract: If the CAO Committee has a desire to modify the terms and conditions of the existing contract, the contract would require renegotiation. Some considerations may include: potential impact on service delivery, assessing the feasibility of renegotiation and timeframe for this step; price; and, addressing any concerns or issues with current contract. Explore Alternative Service Providers: Issue a Request for Proposals (RFP) to solicit bids from industry providers. Some considerations may include: the time and resources required for the procurement process, potential disruptions in service, access to new service options, and potential increase in cost. This step will require several CAO Committee meetings to complete the procurement process. Funding for annual internal audit services is budgeted in the Office of the City Auditor in the operating budget. The option to extend reflects a contract amount of $708,750 annually, consistent with the current year contract compensation limit. Depending on the Committee’s recommendation, additional resources may be needed to support the process. Public comment will be available during the Committee deliberations. 1 City Council, June 2, 2025, Item #8, Staff Report #2410-3733: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16122 Item 2 Item 2 Staff Report Item 2: Staff Report Pg. 2 Packet Pg. 11 of 26 ENVIRONMENTAL REVIEW Committee action on this item is not a project as defined by CEQA because direction on the City Auditor contract and alternative options is a continuing administrative or maintenance activity. CEQA Guidelines section 15378(b)(2). ATTACHMENTS Attachment A: Baker Tilly US LLP Contract #C21179340 APPROVED BY: Sandra Blanch, Human Resources Director Item 2 Item 2 Staff Report Item 2: Staff Report Pg. 3 Packet Pg. 12 of 26 Vers.: Aug. 5, 2019 Page 1 of 12 AMENDMENT NO. 2 TO CONTRACT NO. C21179340 BETWEEN THE CITY OF PALO ALTO AND BAKER TILLY US, LLP This Amendment No. 2 (this “Amendment”) to Contract No. C21179340 (the “Contract” as defined below) is entered into as May 12, 2025, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and BAKER TILLY ADVISORY GROUP, LP, a Illinois Limited Liability Partnership, located at 205 Michigan Avenue, Suite 2800, Chicago, IL 60601 (“CONSULTANT”). CITY and CONSULTANT are referred to collectively as the “Parties” in this Amendment. R E C I T A L S A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of performing internal auditor services in accordance with City Charter and Municipal Code requirements, as detailed therein. B. The Parties now wish to amend the Contract in order to extend by an additional One (1) year with an option to extend for an additional Two (2) years of the Contract term in which Services will be provided and, therefore, increase compensation by Two Million One Hundred Twenty Six Thousand Two Hundred Fifty Dollars ($2,126,250), from an amended not- to-exceed amount of Three Million Four Hundred Twenty Six Thousand Two Hundred Fifty Dollars ($3,426,250) to a new not-to-exceed amount of Five Million Five Hundred Fifty Two Thousand Five Hundred Dollars ($5,552,500), as detailed herein. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: a. Contract. The term “Contract” shall mean Contract No. C21179340 between CONSULTANT and CITY, dated October 1, 2020, as amended by: Amendment No.1, dated April 18, 2022 b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section 2, “TERM” of the Contract is hereby amended to read as follows: Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 4 Packet Pg. 13 of 26 Vers.: Aug. 5, 2019 Page 2 of 12 “The term of this Agreement shall be from October 1, 2020 through June 30, 2026 with the option to renew for an additional two (2) year extension, unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 3. Section 4, “NOT TO EXCEED COMPENSATION” of the Contract is hereby amended to read as follows: “The total compensation to be paid to CONSULTANT for performance of the Services, including As Required Services (per Section 1) and any reimbursable expenses, shall not exceed Five Million Five Hundred Fifty-Two Thousand Five Hundred Dollars ($5,552,500), as detailed in Exhibit B (Compensation). CONSULTANT agrees to complete all Services, including As Required Services and any reimbursable expenses, within this amount. The applicable rate schedule is set out at Exhibit “B-1”, entitled “SCHEDULE OF RATES,” which is attached to and made a part of this Agreement. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY.” SECTION 4. Section 13, “PROJECT MANAGEMENT” of the Contract is hereby amended to read as follows: “CONSULTANT will assign Chris Kalafatis, Email: Chris.Kalafatis@bakertilly.com, as the Project Manager to have supervisory responsibility for the performance, progress, and execution of the services and Kate Murdock, Email: Kate.Murdock@bakertilly.com, as the assigned City Auditor to represent CONSULTANT during day-to-day work on the Project. If circumstances cause the substitution of the Project Manager as designated City Auditor or any other key personnel for any reason the appointment of a substitute beyond a period of 90 days will be subject to the prior written approval of the CITY’s Project Manager. Further, the City Council will interview and approve by resolution the appointment of any substitute City Auditor as specified here in Exhibit A (Scope of Services). CONSULTANT at the CITY’s request shall promptly remove personnel who CITY finds does not perform the Services in acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property CITY’s Project Manager is the Chair of the City Council's Policy and Services Committee or other City Council designee as identified to CONSULTANT in writing, The CITY’s Project Manager will be CONSULTANT’s point of contact with respect to performance, progress Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 5 Packet Pg. 14 of 26 Vers.: Aug. 5, 2019 Page 3 of 12 and execution of Services under this Agreement. City Council may designate an alternative CITY Project Manager upon approval of the Annual Audit Plan described in Exhibit A (Scope of Services), approval of City Council appointments, or any other time it is so acted upon by City Council.” SECTION 5. The following exhibit(s) to the Contract is/are hereby amended or added, as indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are hereby incorporated in full into this Amendment and into the Contract by this reference: a. Exhibit “A” entitled “SCOPE OF SERVICES, AMENDED, REPLACES PREVIOUS. b. Exhibit “B” entitled “COMPENSATION”, AMENDED, REPLACES PREVIOUS. c. Exhibit “B-1” entitled “SCHEDULE OF RATES”, AMENDED, REPLACES PREVIOUS. SECTION6. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION7. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 6 Packet Pg. 15 of 26 Vers.: Aug. 5, 2019 Page 4 of 12 SIGNATURES OF THE PARTIES IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO _____________________________________ City Manager APPROVED AS TO FORM: _____________________________________ City Attorney or Designee BAKER TILLY US, LLP Officer 1 By: ____________________________ Name: _________________________ Title: __________________________ Officer 2 (Required for Corp. or LLC) By: ____________________________ Name: _________________________ Title: __________________________ Attachments: - EXHIBIT A: SCOPE OF SERVICES, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) - EXHIBIT B: COMPENSATION, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) - EXHIBIT B-1: SCHEDULE OF RATES, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Ashley Deihr Principal Risk Advisory Public Sector Leader Chris Kalafatis Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 7 Packet Pg. 16 of 26 Vers.: Aug. 5, 2019 Page 5 of 12 EXHIBIT “A” SCOPE OF SERVICES, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) Background In accordance with City Charter and Municipal Code requirements, the Palo Alto City Council must appoint a City Auditor who serves at the will of the Council, and who executes annual Council-approved internal audit plans through the Office of the City Auditor. Mission of the Office of the City Auditor The mission of the office of the city auditor is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. This mission is fulfilled by conducting annual performance audits and financial/operational analyses of city departments, programs, services or activities. These audits are intended to ensure that city management is using its financial, physical, and informational resources effectively, efficiently, economically, ethically, and equitably, and in compliance with laws, regulations, contract and grant requirements, and city policies and procedures. Internal Auditor Scope of Services This section contains the scope of internal audit services to be performed by CONSULTANT as required by the City Charter and Municipal Code, including the required duties of, and audit tasks performed by, the CONSULTANT’S City Auditor. Service Requirements of the City Auditor The City Auditor shall: • Ensure that city departments and officers responsible for accounting and financial management activities comply with statutory requirements and accounting standards. • Perform internal audits of all the fiscal transactions and operations of the City, in accordance with annual audit plans approved and directed by the City Council, that include: • Conducting performance audits of city departments, programs, services or activities, • Examination and analysis of fiscal procedures and expenditures, • Provision of other analyses of financial and operational data, and • Periodic unscheduled audits. As Required Internal Audit Tasks The following 6 tasks represent the core services to be provided by CONSULTANT. These As Required Services must be authorized by CITY’s representative through the approval of Task Orders prepared by CONSULTANT, in further accordance with Section 4 of this Agreement (Not To Exceed Compensation) and Exhibit A-1 thereto (Professional Services Task Order). Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 8 Packet Pg. 17 of 26 Vers.: Aug. 5, 2019 Page 6 of 12 Task 1. Citywide Risk Assessment: Beginning with year 1 and continuing at a minimum every other year thereafter, prepare a citywide risk assessment following the same review and approval requirements described in Task 2. The risk assessment process will be the primary determinant of subsequent audit activity. Task 2. Preparation of Annual Audit Plan: Prepare an annual audit plan for review by the City Manager and appropriate City Council committee(s), and approval by the City Council, that identifies preliminary objectives of each audit to be performed, the schedule for each audit, and the estimated not to exceed resources and costs for each audit. The City Auditor shall consult with the City Attorney as necessary when developing audit plans. The annual audit plan will be largely based on the risk assessment required in Task 1. Task 3. Selection of External Financial Auditor and Annual Audit Coordination (Amendment No.2): Coordinate the annual external financial audit in each year of the contract term. Pursuant to the City Charter, the City Auditor shall oversee the selection process for the annual external financial auditor. The City anticipates conducting a Request for Proposals for this purpose in 2026 (during contract year FY 2027). Task 4. Execute Annual Audit Plan: Conduct a minimum number of internal audits in accordance with each approved annual audit plan based on the risk assessments. Each internal audit will commence only upon the City’s approval of a Task Order (which may be at the task or sub-task level) as required by this Agreement. Each internal audit requires the preparation of a written report for review by the City Manager, City Attorney and appropriate Council committee, and review/approval by the City Council as required. Task 5. Preparation of Quarterly Reports, Annual Status Report, Provision of City Hotline, and Other Ongoing Office Administrative Functions: Prepare and issue quarterly reports describing the status and progress toward audit completion, to be provided as information reports to the City Council and reviewed by the appropriate committee, unless other reporting methods are directed by Council. Prepare and issue an annual report in the first quarter of each fiscal year on the status of recommendations made in completed audits, to be provided as an information report to the City Council and reviewed by the appropriate committee, unless other reporting methods are directed by Council. Maintain and respond to the City’s employee “hotline” function provided through voicemail, email or written submissions. Coordinate referrals as appropriate to other City offices, Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 9 Packet Pg. 18 of 26 Vers.: Aug. 5, 2019 Page 7 of 12 departments or divisions and incorporate relevant referrals into future risk assessments, audit plans or audit activity as appropriate. Task 6. Evaluation and Benchmarking (Amendment No.2) Undergo a peer evaluation following the guidelines of the Association of Local Government Auditors or the Institute of Internal Auditors (IIA) every three years (i.e., at the beginning of the initial contract term, then every three years thereafter throughout the contract term), or as required by the City Council, so that performance of the internal audit function can be objectively assessed. Prepare a cost per audit analysis following the first completed fiscal year, to be submitted at the beginning of the second fiscal year and every other year thereafter throughout the contract term. The cost per audit analysis will be used to evaluate the cost effectiveness of services provided by the CONSULTANT. This evaluation will be incorporated into ongoing performance assessments as required and will help ensure that fees for service provision throughout the duration of the Agreement are objectively determined and mutually agreed upon. Last, the City Council will perform periodic Closed Session performance evaluations with the designated City Auditor as allowed by law and performed with the other City Council appointees (the City Manager, City Attorney and City Clerk). The appointed City Auditor will have a 6-month evaluation, and then annually thereafter throughout the initial contract term and any extensions granted by the City Council. Internal Auditor Services – Designation of City Auditor, Minimum Experience Requirements and Auditing Standards Consistent with City Charter and Municipal Code provisions, the City Council must appoint a City Auditor who serves at the will of the Council, and who executes annual Council-approved internal audit plans through the Office of the City auditor. Designation of City Auditor The CONSULTANT has designated Kyle O’Rourke to fulfil the role of City Auditor, whose designation received City Council approval and appointment, and whose appointment is subject to at-will modification by the Council. In accepting this appointment and its associated responsibilities and requirements, the CONSULTANT agrees to the following stipulations and reserved rights of the CITY in the event the City Auditor vacates the appointment for whatever reason: • CONSULTANT must designate a temporary replacement not to exceed 3 months if the City Auditor vacates the appointment without enough time for Council to appoint a replacement. Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 10 Packet Pg. 19 of 26 Vers.: Aug. 5, 2019 Page 8 of 12 • Any subsequent appointment of a City Auditor be conducted in the manner specified by the City Council, subject to applicable laws. • Continued appointment of the City Auditor is based on and subject to acceptable performance. During the term of this Agreement, CONSULTANT may propose an alternative City Auditor for Council consideration should it become necessary to do so. Minimum Experience Requirements The CONSULTANT and City Auditor must have at least 5 years of experience performing internal audit services to local, state, federal or quasi-public entities, with a focus on performance auditing. Auditing Standards The appointed City Auditor must be a Certified Public Accountant (CPA) or Certified Internal Auditor (CIA) in good standing and must maintain such certification at all time during the term of the Agreement. All staff members of CONSULTANT assigned to internal auditor services under this Agreement must be able to conduct or assist in conducting internal audits in accordance with Government Accounting Standards, as established by the Comptroller General of the United States, Governmental Accountability Office. Maintenance of Independent Contractor Status Proposers must maintain independent contractor status at all times during the Agreement term. Best Value Service Provision The City Council has awarded this contract to the CONSULTANT based on its ability to deliver cost effective and efficient internal auditor services that represent the best possible value in exchange for public funds. Continued service provision is dependent on a number of evaluative factors to help determine that the CITY receives the best possible value for internal audit services during the term of this Agreement. These include, but are not limited to, acceptable pricing; cost effective and service provision provided by the City Auditor and CONSULTANT; and favorable City Auditor performance evaluations. Additionally, budget constraints and economic conditions are factors that shall be considered in determining acceptable pricing and funding. Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 11 Packet Pg. 20 of 26 Vers.: Aug. 5, 2019 Page 9 of 12 EXHIBIT “B” COMPENSATION, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) The CITY agrees to compensate the CONSULTANT for the Services (including As Required Services) performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as Exhibit B-1 up to the not to exceed budget amount for each task set forth below. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Services, including As Required Services and any reimbursable expenses do not exceed the amounts set forth in Section 4 of this Agreement. Budget Schedule for FY 2021 and FY 2022 Task FY 2021 FY 2022 Subtotal - Task 3: Selection of External Financial Task 5: Preparation of Quarterly Reports, Annual Status Report, Provision of City Hotline, and Other Ongoing Office Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 12 Packet Pg. 21 of 26 Vers.: Aug. 5, 2019 Page 10 of 12 Budget Schedule for FY 2023, FY 2024 and FY 2025, Amendment No.1 Task FY 2023 FY 2024 FY 2025 Subtotal - Financial Auditor and Annual Audit Reports, Annual Status Report, Provision of City Hotline, and Other Ongoing Office Administrative Budget Schedule for FY 2026, FY 2027 and FY 2028, Amendment No.2 Task FY 2026 FY 2027 FY 2028 Subtotal - Financial Auditor and Annual Audit Reports, Annual Status Report, Provision of City Hotline, and Other Ongoing Office Administrative Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 13 Packet Pg. 22 of 26 Vers.: Aug. 5, 2019 Page 11 of 12 Total Not-to-Exceed Amount Across All Fiscal Years Task Subtotal - Subtotal - Subtotal - Financial Auditor and Annual Audit Reports, Annual Status Report, Provision of City Hotline, and Other Ongoing Office Administrative REIMBURSEABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, computing, telecommunications, insurance other ordinary business expenses are included within the scope of payment for Services and are not reimbursable expenses. CITY shall reimburse CONSULTANT at cost for travel to or from the San Francisco Bay Area and shall be identified by CONSULTANT as separate line items on the applicable Task Order. CONSULTANT travel and meal expenses are subject to the City’s Travel Policy. CONSULTANT shall identify a fixed “not to exceed” figure for anticipated reimbursable expenses, subject to the City of Palo Alto’s approval of such Task Order. All requests for reimbursement of expenses, if any are specified as reimbursable under this section, shall be accompanied by appropriate supporting documentation and information for mileage, airfare, and lodging. Should CONSULTANT’s actual incurred expense exceed the “not-to-exceed” figure, CONSULTANT and the CITY shall meet in good faith to determine the extent to which CONSULTANT shall be reimbursed by the CITY for the excess. Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 14 Packet Pg. 23 of 26 Vers.: Aug. 5, 2019 Page 12 of 12 EXHIBIT “B-1” SCHEDULE OF RATES, AMENDMENT NO.2 (AMENDED, REPLACES PREVIOUS) Compensation for services rendered under this agreement shall be calculated based on the following hourly rate schedule for the fiscal year in which the services are rendered, which shall remain fixed during the applicable period of fiscal years specified below. Hourly rates for any subsequent renewal term or terms shall be negotiated to the mutual agreement of the parties. Schedule of Rates (Hourly): Staff Level FY 2021 & FY 2023, FY 2024, & Docusign Envelope ID: 761E5809-FF99-491D-9517-C5AE74986A46 Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 15 Packet Pg. 24 of 26 Certificate Of Completion Envelope Id: 761E5809-FF99-491D-9517-C5AE74986A46 Status: Completed Subject: Docusign: C21179340 Baker Tilly Amendment No. 2_FINAL.pdf Source Envelope: Document Pages: 12 Signatures: 4 Envelope Originator: Certificate Pages: 2 Initials: 0 Mai, Philip AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 Philip.Mai@PaloAlto.gov IP Address: 165.225.242.85 Record Tracking Status: Original 5/8/2025 4:44:14 PM Holder: Mai, Philip Philip.Mai@PaloAlto.gov Location: DocuSign Security Appliance Status: Connected Pool: StateLocal Storage Appliance Status: Connected Pool: City of Palo Alto Location: Docusign Signer Events Signature Timestamp Ashley Deihr Ashley.Deihr@bakertilly.com Principal Security Level: Email, Account Authentication (None)Signature Adoption: Pre-selected Style Using IP Address: 73.87.238.232 Sent: 5/8/2025 5:00:51 PM Viewed: 5/12/2025 7:20:35 AM Signed: 5/12/2025 7:21:14 AM Electronic Record and Signature Disclosure: Not Offered via Docusign Chris Kalafatis Chris.Kalafatis@bakertilly.com Risk Advisory Public Sector Leader Baker Tilly Advisory Group, LP Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 99.196.128.113 Sent: 5/12/2025 7:21:15 AM Viewed: 5/13/2025 7:26:53 AM Signed: 5/13/2025 7:28:36 AM Electronic Record and Signature Disclosure: Not Offered via Docusign Mark Vanni Mark.Vanni@paloalto.gov Assistant City Attorney COPA Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 73.231.240.255 Sent: 5/13/2025 7:28:37 AM Resent: 6/3/2025 5:23:55 PM Viewed: 6/4/2025 4:43:08 PM Signed: 6/4/2025 4:43:16 PM Electronic Record and Signature Disclosure: Not Offered via Docusign Ed Shikada Ed.Shikada@PaloAlto.gov Ed Shikada City of Palo Alto Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 199.33.32.254 Sent: 6/4/2025 4:43:18 PM Viewed: 6/4/2025 11:54:50 PM Signed: 6/4/2025 11:54:59 PM Electronic Record and Signature Disclosure: Not Offered via Docusign In Person Signer Events Signature Timestamp Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 16 Packet Pg. 25 of 26 Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Clerks's Office of Palo Alto ClerksOffice@paloalto.gov Security Level: Email, Account Authentication (None) Sent: 6/4/2025 11:55:00 PM Electronic Record and Signature Disclosure: Not Offered via Docusign Christine Paras Christine.Paras@PaloAlto.gov Security Level: Email, Account Authentication (None) Sent: 6/4/2025 11:55:01 PM Electronic Record and Signature Disclosure: Not Offered via Docusign Josh Martinez Josh.Martinez@CityofPaloAlto.org Security Level: Email, Account Authentication (None) Sent: 6/4/2025 11:55:02 PM Electronic Record and Signature Disclosure: Not Offered via Docusign Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 5/8/2025 5:00:51 PM Envelope Updated Security Checked 6/3/2025 5:23:54 PM Envelope Updated Security Checked 6/3/2025 5:23:54 PM Certified Delivered Security Checked 6/4/2025 11:54:50 PM Signing Complete Security Checked 6/4/2025 11:54:59 PM Completed Security Checked 6/4/2025 11:55:02 PM Payment Events Status Timestamps Item 2 Attachment A - Baker Tilly US LLP Contract #C21179340A Item 2: Staff Report Pg. 17 Packet Pg. 26 of 26