HomeMy WebLinkAboutO-2007-3008
REQUEST FOR CITY COUNCIL AGENDA ITEM
Appropriation
Requested By: Michael G. Dolb
Source of Funds: 001 and 016
Department: Finance
Account Number: 5001-Audit
Report: _Resolution: _Ordinance: ~
Amount Budgeted: $66.000
Exhibits: Ordinance
Amount Requested: $59.500
Exhibits: Enl!al!ement Letter
Budgeted Item:
(YES)
NO
Exhibits:
SUMMARY & RECOMMENDATION
A Request for Proposal (RFP) for Professional Auditing Services was issued on June 20, 2007. In addition to
advertising in the Bayshore Sun, notice was sent to six Certified Public Accounting Firms.
On July 23, 2007, proposals were received from three firms, Pattillo, Brown and Hill, Sanderson, Knox and Belt,
and Null-Lairson. Reference checks were made, and the Fiscal Affairs Committee conducted interviews of the firms
on August 8, 2007. Based upon the interviews, the review of the qualifications and the reference checks, a
recommendation was made by the Committee to accept the proposal from Pattillo, Brown and Hill.
With this recommendation we would like to point out several items. Pattillo, Brown and Hill was founded in Waco
in 1923. They have offices throughout the state. The Waco office from which our audit will be conducted has seven
partners, ten managers and fifty-five other professionals. The governmental audit office in Waco has four partners
and twenty five other professionals.
The City appreciates the size of the firm, and the qualifications and availability of professional personnel assigned to
our audit. Their reference checks verified our interpretation of their abilities and provided a record of quality audit
work. Staff believes the firm is well qualified to perform the financial audit of the City, and the Financial Services
Committee is receptive to our recommendation.
The audit fee proposed by Pattillo, Brown and Hill is $59,500 for 2007, $61,500 for 2008 and $63,500 for 2009.
This amount is very similar to the amount we have paid in past years. There is $66,000 budgeted in the 2007-08
Budget for Auditing Services.
At this time, staff recommends we proceed with a one-year engagement with Pattillo, Brown and Hill to provide
financial auditing services to the City of La Porte, with a renewable option by the city for each of the two
succeeding fiscal years of2008 and 2009.
Action ReQuired bv Council:
Approve Ordinance authorizing agreement with Pattillo, Brown and Hill for auditing services for a one year period
(September 30, 2007).
A
$J, t 7
Date' I
ORDINANCE NO. 3 00 ~
AN ORDINANCE APPROVING AND AUTHORIZING AN AGREEMENT BETWEEN THE CITY
OF LA PORTE AND PATTILLO, BROWN AND HILL, L. L. P., CERTIFIED PUBLIC
ACCOUNTANTS, TO AUDIT THE CITY'S GENERAL-PURPOSE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDING SEPTEMBER 30,2007; MAKING VARIOUS FINDINGS
AND PROVISIONS RELATING TO THE SUBJECT; FINDING COMPLIANCE WITH THE
OPEN MEETINGS LAW; AND PROVIDING AN EFFECTIVE DATE HEREOF.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE:
Section 1. The City Council hereby approves and authorizes
the contract, agreement, or other undertaking described in the
title of this ordinance, in substantially the form as shown in the
document which is attached hereto and incorporated herein by this
reference. The Interim City Manager is hereby authorized to
execute such document and all related documents on behalf of the
City of La Porte. The City Secretary is hereby authorized to
attest to all such signatures and to affix the seal of the City to
all such documents.
Sec tion 2.
The City Council officially finds, determines,
recites and declares that a sufficient written notice of the date,
hour, place and subject of this meeting of the City Council was
posted at a place convenient to the public at the City Hall of the
City for the time required by law preceding this meeting, as
required by the Open Meetings Law, Chapter 551, Texas Government
Code; and that this meeting has been open to the public as
required by law at all times during which this ordinance and the
subject matter thereof has been discussed, considered and formally
acted upon. The City Council further ratifies, approves and
confirms such written notice and the content and posting thereof.
Section 3. This Ordinance shall be effective from and after
its passage and approval, and it is so ordered.
PASSED AND APPROVED, this ~ day Of~' 2007.
CITY OF LA PORTE
By:
~ iP..dT-
Alton E. Porter
Mayor
ATTEST:
Martha A. Gillett
City Secretary
APPROVED:
~~.. ~.
Clark T. Askins
Assistant City Attorney
PH~
PAT T ILL 0, B ROW N & HI L L, LLP.
CERTIFIED PUBLIC ACCOUNTANTS _ BUSINESS CONSULTANTS
August 9,2007
City of LaPorte
Attention: Phyllis Rinehart, Controller
604 West Fairmont Parkway
LaPorte, Texas 77571
Ladies and Gentlemen:
Weare pleased to confirm our understanding of the services we are to provide the City of
LaPorte for the year ended September 30, 2007. We will audit the fInancial statements of the
governmental activities, the business-type activities, each major fund, and the aggregate remaining
fund information, which collectively comprise the basic financial statements, of the City of LaPorte
as of and for the year ended September 30, 2007. Accounting standards generally accepted in the
United States provide for certain required supplementary infornlation (RSI), such as management's
discussion and analysis (MD&A), to accompany the City of LaPorte"s basic fInancial statements. As
pmi of our engagement, we will apply certain limited procedures to the City of LaPOlie"s RSI. These
limited procedures will consist principally of inquiries of management regarding the methods of
measurement and presentation, which management is responsible for affinning to us in its
representation letter. Unless we encounter problems with the presentation of the RSI or with
procedures relating to it, we will disclaim an opinion on it. The following RSI is required by generally
accepted accounting principles and will be subjected to certain limited procedures, but will not be
audited:
1. Management's Discussion and Analysis.
2. TMRS Schedule of Funding Progress.
3. Budgetary Comparison Schedules.
Supplementary information other than RSI, such as combining and individual fund financial
statements, also accompanies the City of LaPorte's basic financial statements. We will subject the
following supplementary information to the auditing procedures applied in our audit of the basic
financial statements and will provide an opinion on it in relation to the basic financial statements:
Schedule of expenditures of federal awards.
1. Combining and individual non major fund financial statements.
2. Schedule of Expenditures of Federal Awards.
401 WEST HIGHWAY 6 - P O. BOX 20725 - WACO. TX 76702-0725 - (254) 772-4901- FAX: (254) 772-4920 _ www.pbhcpa.co1l1
AFFILIATE OFFICES BROWNSVILLE. TX (956) 544-7778 -HILLSBORO. TX (254) 582-2583
TEMPLE. TX (254) 791-3460 - WHITNEY. TX (254) 694-4600 - ALBUOUEROUE. NM (505) 266-5904
City of LaPorte
August 9, 2007
Page 2
The following additional information accompanying the basic financial statements will not be
subjected to the auditing procedures applied in our audit of the financial statements, and for which
our auditor's report will disclaim an opinion.
1. Introductory section.
2. Statistical section.
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial
statements are fairly presented, in all material respects, in conformity with U.S. generally accepted
accounting principles and to report on the fairness of the additional infonnation referred to in the first
paragraph when considered in relation to the basic financial statements taken as a whole. The
objective also includes reporting on-
· Internal control related to the financial statements and compliance with the provisions
of applicable laws, regulations, contracts, agreements, and grants, noncompliance with
which could have a material effect on the financial statements in accordance with
Government Auditing Standards.
· Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations, and the provisions of contracts or grant agreements
that could have a direct and material effect on each major program in accordance with
the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits o.lStates.
Local Governments, and Non-Pro.lit Organizations.
The reports on internal control and compliance will each include a statement that the report is
intended for the information and use of the audit committee, management, specific legislative or
regulatory bodies, federal awarding agencies, and if applicable, pass-through entities and is not
intended to be and should not be used by anyone other than these specified parties.
Our audit will be conducted in accordance with U.S. generally accepted auditing standards;
the standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the
provisions of OMB Circular A-133, and will include tests of accounting records, a detennination of
major program(s) in accordance with Circular A-133, and other procedures we consider necessary to
enable us to express such opinions and to render the required reports. If our opinions on the financial
statements or the Single Audit compliance opinions are other than unqualified, we will fully discuss
the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable
to fonn or have not formed opinions, we may decline to express opinions or to issue a repOli as a
result of this engagement.
City of LaPorte
August 9, 2007
Page 3
Management Responsibilities
Management is responsible for establishing and maintaInIng internal controls, including
monitoring ongoing activities; for the selection and application of accounting principles; for the fair
presentation in the financial statements of the respective financial position of the governmental
activities, the business-type activities, each major fund, and the aggregate remaining fund information
of the City of LaPorte and the respective changes in financial position and, where applicable, cash
flows in conformity with U.S. generally accepted accounting principles; and for federal award
program compliance with applicable laws and regulations and the provisions of contracts and grant
agreements. Management is responsible for the basic financial statements and all accompanying
information as well as all representations contained therein.
You are responsible for management decisions and functions. As part of the audit, we will
prepare a draft of your financial statements, schedule of expenditures of federal awards, and related
notes. In accordance with Government Auditing Standards, you will be required to review and
approve those financial statements prior to their issuance and have a responsibility to be in a position
in fact and appearance to make an informed judgment on those fInancial statements. Further, you are
required to designate a qualified management-level individual to be responsible and accountable for
. .
overseeIng our servIces.
Management is responsible for making all financial records and related .information available
to us, including identifying signifIcant vendor relationships in which the vendor has the responsibility
for program compliance and for the accuracy and completeness of that information. Management's
responsibilities include adjusting the fInancial statements to correct material misstatements and for
confirming to us in the representation letter that the effects of any uncorrected misstatements
aggregated by us during the current engagement and pertaining to the latest period presented are
immaterial, both individually and in the aggregate, to the financial statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent
and detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the
government involving (1) management, (2) employees who have significant roles in internal control,
and (3) others where the fraud or illegal acts could have a material effect on the financial statements.
Your responsibilities include infonlling us of your knowledge of any allegations of fraud or suspected
fraud affecting the government received in communications from employees, former employees,
grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the
entity complies with applicable laws, regulations, contracts, agreements, and grants. Additionally, as
required by OMB Circular A-I33, it is management's responsibility to follow up and take corrective
action on reported audit findings and to prepare a summary schedule of prior audit fIndings and a
corrective action plan.
City of LaPorte
August 9, 2007
Page 4
Management is responsible for establishment and maintenance of a process for tracking the
status of audit findings and recommendations. Management is also responsible for identifying for us
previous audits or other engagements or studies related to the objectives discussed in the Audit
Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to
address significant findings and recommendations resulting from those audits or other engagements
or studies. You are also responsible for providing management's views on our current findings,
conclusions, and recommendations, as well as your planned corrective actions, and the timing and
format related thereto.
Audit Procedures-General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements; therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. We will plan and perfonn the audit to obtain
reasonable rather than absolute assurance about whether the financial statements are free of material
misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of
assets, or (4) violations of laws or govemmental regulations that are attributable to the entity or to
acts by management or employees acting on behalf of the entity. Because the detennination of abuse
is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance
of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because
we will not perform a detailed examination of all transactions, there is a risk that material
misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not
designed to detect immaterial misstatements or violations of laws or govemmental regulations that do
not have a direct and material effect on the financial statements or major programs. However, we will
inform you of any material errors and any fraudulent financial reporting or misappropriation of assets
that corne to our attention. We will also inform you of any violations of laws or govemmental
regulations that corne to our attention, unless clearly inconsequential. We will include such matters in
the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered
by our audit and does not extend to any later periods for which we are not engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions
recorded in the accounts, and may include tests of the physical existence of inventories, and direct
confirmation of receivables and certain other assets and liabilities by correspondence with selected
individuals, creditors, and financial institutions. We will request written representations from your
attomeys as part of the engagement, and they may bill you for responding to this inquiry. At the
conclusion of our audit, we will also require certain written representations from you about the
financial statements and related matters.
City of LaPorte
August 9, 2007
Page 5
Audit Procedures-Internal Controls
Our audit will include obtaining an understanding of the entity and its environment, including
internal control, sufficient to assess the risks of material misstatement of the financial statements and
to design the nature, timing, and extent of further audit procedures. Tests of controls may be
performed to test the effectiveness of certain controls that we consider relevant to preventing and
detecting errors and fraud that are material to the financial statements and to preventing and detecting
misstatements resulting from illegal acts and other noncompliance matters that have a direct and
material effect on the financial statements. Our tests, if perfonned, will be less in scope than would be
necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in
our report on internal control issued pursuant to Government Auditing Standards.
As required by OMB Circular A-133, we will perfonn tests of controls over compliance to
evaluate the effectiveness of the design and operation of controls that we consider relevant to
preventing or detecting material noncompliance with compliance requirements applicable to each
major federal award program. However, our tests will be less in scope than would be necessary to
render an opinion on those controls and, accordingly, no opinion will be expressed in our rep011 on
internal control issued pursuant to OMB Circular A-133.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, during the audit, we will communicate to management and those charged with
governance internal control related matters that are required to be communicated under professional
standards, Government Auditing Standards, and OMB Circular A-133.
Audit Procedures-Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, we will perfonn tests of the City of LaPorte's compliance with applicable laws
and regulations and the provisions of contracts and agreements, including grant agreements.
However, the objective of those procedures will not be to provide an opinion on overall compliance
and we will not express such an opinion in our report on compliance issued pursuant to Government
Auditing Standards.
OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable
assurance about whether the auditee has complied with applicable laws and regulations and the
provisions of contracts and grant agreements applicable to major programs. Our procedures will
consist of test of transactions and other applicable procedures described in the OMB Circular A-133
Compliance Supplement for the types of compliance requirements that could have a direct and
material effect on each ofthe City of LaPorte's major programs. The purpose of those procedures will
be to express an opinion on the City of LaPorte's compliance with requirements applicable to each of
its major programs in our report on compliance issued pursuant to OMB Circular A-133.
City of LaPorte
August 9, 2007
Page (j
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other
confirmations we request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign
the Data Collection Form that summarizes our audit findings. We will provide copies of our reports
to the City; however, it is management's responsibility to submit the reporting package (including
financial statements, schedule of expenditures of federal awards, summary schedule of prior audit
findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the
designated federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection
Form and the reporting package must be submitted within the earlier of 30 days after receipt of the
auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in
advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we
will provide information to management as to where the reporting packages should be submitted and
the number to submit.
The audit documentation for this engagement is the property of Pattillo, Brown & Hill, L.L.P.
and constitutes confidential information. However, pursuant to authority given by law or regulation,
we may be requested to make celiain audit documentation available to a federal agency providing
direct or indirect funding, or the U.S. Govemmcnt Accountability Office for purposes of a quality
review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify
you of any such request. If requested, access to such audit documentation will be provided under the
supervision of Pattillo, Brown & Hill, L.L.P. personnel. Furthennore, upon request, we may provide
copies of selected audit documentation to the aforementioned parties. These parties may intend, or
decide, to distribute the copies or information contained therein to others, including other
govemmental agencies.
The audit documentation for this engagement will be retained for a minimum of five years
after the report release or for any additional period requested. If we are aware that a federal awarding
agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies)
contesting the audit finding for guidance prior to destroying the audit documentation.
Our fee for these services will be at our standard hourly rates plus out-of-pocket costs (such as
report reproduction, word processing, postage, travel, copies, telephone, etc.) except that we agree
that our gross fee, including expenses, will not exceed $59,500. Additionally, the City has a
renewable option for each of the two succeeding fiscal years of 2008 and 2009 with a not to exceed
gross fee of $61,500 and $63,500, respectively. Our invoices for these fees will be rendered each
month as work progresses and are payable on presentation. In accordance with our firm policies,
work may be suspended if your account becomes overdue and may not be resumed until your account
is paid in full. If we elect to terminate our services for nonpayment, our engagement will be deemed
to have been completed upon written notification of termination, even if we have not completed our
report(s). You will be obligated to compensate us for all time expended and to reimburse us for all
out-of-pocket costs through the date oftennination. The above fee is based on anticipated cooperation
from your personnel and the assumption that unexpected circumstances will not be encountered
during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a
new fee estimate before we incur the additional costs.
City of LaPorte
August 9, 2007
Page 7
Government Auditing Standards require that we provide you with a copy of our most recent
external peer review report and any letter of comment, and any subsequent peer review reports and
letters of comment received during the period of the contract. Our 2004 peer review letter of
comment accompanies this letter.
We appreciate the opportunity to be of service to the City of LaPorte and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please let
us know. If you agree with the terms of our engagement as described in this letter, please sign the
enclosed copy and return it to us.
Very truly yours,
Pattillo, Brown & Hill, L.L.P.
f?1;gel:.~~cU(
PS/ar
Enclosure
RESPONSE:
This letter correctly sets forth the understanding of the City of LaPorte.
By:
Date:
<g-~"-DI
~~ tQLt~r
Title: