Loading...
Ordinance No. 14,172ORDINANCE NO. 14,172 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS, AUTHORIZING AND DIRECTING THE CITY MANAGER TO EXECUTE AND THE CITY CLERK TO ATTEST TO AN AGREEMENT FOR AUDITING SERVICES WITH BELT HARRIS PECHACEK, LLLP; AUTHORIZING PAYMENT IN AN AMOUNT NOT TO EXCEED NINETY-THREE THOUSAND NINE HUNDRED FIFTEEN AND NO. 100 DOLLARS ($93,915.00); MAKING OTHER PROVISIONS RELATED THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF. ********************************************************************************************* BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS: Section 1: That the City Council of the City of Baytown, Texas, hereby authorizes and directs the City Manager to execute and the City Clerk to attest to an Agreement for Auditing Services with Belt Harris Pechacek, LLLP. A copy of said Agreement is attached hereto, marked Exhibit "A," and made a part hereof for all intents and purposes. Section 2: That the City Council of the City of Baytown hereby authorizes payment to Belt Harris Pechacek, LLLP, for the first year of the contract in an amount not to exceed NINETY-THREE THOUSAND NINE HUNDRED FIFTEEN AND NO; 100 DOLLARS ($93,915.00) pursuant to the agreement authorized in Section 1 hereof. Section 3: That the City Manager is hereby granted general authority to approve a decrease or an increase in costs by FIFTY THOUSAND AND NO 100 DOLLARS ($50,000.00) or less, provided that the amount authorized in Section 2 hereof may not be increased by more than twenty-five percent (250.0). Section 4: This ordinance shall take effect immediately from and after its passage by the City Council of the City of Baytown. INTRODUCED, READ, and PASSED by the affirmative vote of the City Council of the City of Baytown, this the 12"' day of September, 2019. DON CAPETILLO, Mayor ATT L TICIA BRYSCH City APPROVED AS TO FORM: ACIO RAMIREZ, SR., C• y Attorney ` •COBFSOI"LegahKarenTiles City Council Ordinances\2019.September 12WuthorizeAuditingContract.doc Exhibit "A" AGREEMENT FOR FINANCIAL AUDITING SERVICES STATE OF TEXAS COUNTY OF HARRIS WHEREAS, the City of Baytown, hereinafter referred to as the "City," desires Belt Harris Pechacek, LLLP, a Texas limited partnership, hereinafter referred to as the "Auditor," to perform the audit of the financial statements of the governmental activities, the business -type activities, each major fund, component units, and the aggregate remaining fund information, which collectively comprise the basic financial statements of the City of Baytown, Texas, the Baytown Area Water Authority (`BAWA") and all related entities, for the fiscal years ending September 30, 2019, 2020, and 2021, hereinafter the "Agreement"; and WHEREAS, the Auditor desires to perform such services under the terms and conditions specified herein; NOW THEREFORE, for and in consideration of the foregoing premises and the mutual covenants and agreements herein contained, the Parties hereto do hereby mutually agree as follows: I. Auditor's Obligations The Auditor shall diligently perform all services specified in Exhibit "A," which is attached hereto and incorporated herein for all intents and purposes. These services shall be for the fiscal years ending September 30, 2019, 2020, and 2021, and are expressly subject to the contingency specified in Article IX. It is expressly understood and agreed that should there be a conflict between the terms contained in Exhibit "A" and those contained in this Agreement, the terms of this Agreement shall control. The Auditor's services shall include the application of the standards issued by the AICPA Auditing Standards Board (ASB), Statement on Auditing Standards (SAS). The Auditor and the City understand and agree that this Agreement includes an option to renew for an additional three years after the expiration of this Agreement on terms and conditions acceptable to the parties at the time of the renewal. II. Fees The Auditor hereby commits to performing the financial auditing services required herein by the City's Director of Finance at a fee not to exceed the amount stated below for each audit, based upon the actual time spent at the Auditor's standard hourly rate specified, plus travel and other out- of-pocket costs: Agreement for Financial Auditing Services, Page 1 Base Services " r "" Y'] ° �.2019.' "2020 Financial Statement Audit CAFR) 1 $49,995 $51,370 $52,783 Preparation of Citys CAFR $11,639 $11,959 $12,288 Federal Single Audit _; Base Fee . $3,850 $3,956 $4 065 Federal Single Audit - Per Major Program $5,451 $5,601 $5,755 BAWA $11,798 $12,122 $12,455 Preparation of BAWA's AFR $4,869 $5,003 $5,141 TIRZ # 1 Baytown Redevelopment Authority $6,313 $6,487 $6,665 Total j $9311915 ' $96,498 $99,152 The Auditor will invoice the City no more than once a month for services rendered. Generally, 40 percent will be billed and payable upon completion of interim audit procedures (normally one to four months before year end) and 60 percent after a draft of the financial statements is issued. Accordingly, the fee will be split 40/60 between budget years. III. Indemnity THE AUDITOR AGREES TO AND SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND THE CITY, ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, CAUSES OF ACTION, SUITS, AND LIABILITY OF EVERY KIND, INCLUDING ALL EXPENSES OF LITIGATION, COURT COSTS, AND ATTORNEYS' FEES, FOR DAMAGE TO ANY PROPERTY, LOSS OF REVENUE, OR ANY OTHER INJURIES OR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE SERVICES PERFORMED BY THE AUDITOR PURSUANT TO THIS AGREEMENT, THE CONDUCT OR MANAGEMENT OF THE AUDITOR'S ACTIVITIES, OR FROM ANY ACT OR OMISSION BY THE AUDITOR, ITS AGENTS, EMPLOYEES, OR SUBCONTRACTORS, WHERE SUCH DAMAGES, LOSSES OR INJURIES ARE CAUSED BY THE SOLE NEGLIGENCE OF THE AUDITOR. IT IS THE EXPRESSED INTENTION OF THE PARTIES HERETO, BOTH THE AUDITOR AND THE CITY, THAT THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH IS INDEMNITY BY THE AUDITOR TO INDEMNIFY AND PROTECT THE CITY FROM THE CONSEQUENCES OF THE AUDITOR'S SOLE NEGLIGENCE. FURTHERMORE, THE INDEMNITY PROVIDED FOR IN THIS PARAGRAPH SHALL HAVE NO APPLICATION TO THE CITY FOR ANY CLAIM, LOSS, DAMAGE, CAUSE OF ACTION, SUIT AND LIABILITY WHERE THE INJURY, LOSS OR DAMAGE Agreement for Financial Auditing Services, Page 2 RESULTS FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE CITY, UNMIXED WITH THE FAULT OF ANY OTHER PERSON OR ENTITY. In the event that any action or proceeding is brought against the City by reason of any matter from which the City is indemnified herein, the Auditor further agrees and covenants to defend the action or proceeding by legal counsel acceptable to the City. This article shall survive the expiration or termination of this Agreement. IV. Payment The Auditor shall invoice the City each month as work progresses. The City shall pay the Auditor only for services actually performed and accepted. Such payment shall be within thirty (30) days after the City's receipt of an invoice for such services or upon receipt and acceptance of the services, whichever is later. Any payment terms provided for in Exhibit "A" are superseded by this Article, regardless of any conflict. V. Release By this Agreement, the City does not consent to litigation or suit, and the City hereby expressly revokes any consent to litigation that it may have granted by the terms of this Agreement or any other contract or agreement, any charter, or applicable state law. Nothing herein shall be construed so as to limit or waive the City's sovereign immunity. The Auditor assumes full responsibility for its work performed hereunder and hereby releases, relinquishes and discharges the City, its officers, agents, and employees from all claims, demands, and causes of action of every kind and character, including the cost of defense thereof, for any injury to or death of any person (whether they be either of the parties hereto, their employees, or other third parties) and any loss of or damage to property (whether the property be that of either of the parties hereto, their employees, or other third parties) that is caused by or alleged to be caused by, arising out of, or in connection with the Auditor's work to be performed hereunder. This release shall apply with respect to the Auditor's work regardless of whether said claims, demands, and causes of action are covered in whole or in part by insurance. VI. Insurance Throughout the term of this Agreement, the Auditor at its own expense shall purchase, maintain and keep in force and effect insurance against claims for injuries to or death of persons or damages to property which may arise out of or result from the Auditor's services, whether such services be by the Auditor, its agents, representatives, volunteers, employees or subcontractors or by Agreement for Financial Auditing Services, Page 3 anyone directly or indirectly employed by any of them, or by anyone for whose acts any of them may be liable. The Auditor's insurance coverage shall be primary insurance with respect to the City, its officers, agents and employees. Any insurance or self-insurance maintained by the City, its officials, agents and employees shall be considered in excess of the Auditor's insurance and shall not contribute to it. All coverage for subcontractors shall be subject to all of the requirements stated herein. The following insurance shall be required under this Agreement and shall meet or exceed the minimum requirements set forth herein: Commercial General Liability ■ General Aggregate: $2,000,000 ■ Per Occurrence: $1,000,000 ■ Coverage shall be broad form. ■ Waiver of subrogation required. ■ No coverage shall be deleted from standard policy without notification of individual exclusions being attached for review and acceptance. 2. Business Automobile Policy ■ This coverage shall be required only if the Auditor provides vehicles for its employees. ■ Combined Single Limits: $1,000,000 ■ Coverage for "Any Auto" ■ Waiver of subrogation required. Errors and Omissions ■ Limit $1,000,000 ■ Claims -made form is acceptable. Coverage will be in force for two years after services are completed and accepted by the City 4. Workers' Compensation ■ Statutory Limits ■ Employer's Liability $500,000 ■ Waiver of Subrogation required. Prior to any services being performed, the Auditor shall file with the City valid Certificates of Insurance and endorsements acceptable to the City. Such Certificates shall contain a provision that coverage afforded under the policies will not be canceled, suspended, voided, or reduced until at least thirty (30) days' prior written notice has been given to the City via certified mail, return receipt requested. The Auditor shall also file with the City valid Certificates of Insurance covering all subcontractors. Agreement for Financial Auditing Services, Page 4 The following are general requirements applicable to all policies: ➢ AM Best Rating of A-; VII or better. ➢ Insurance carriers licensed and admitted to do business in State of Texas will be accepted. ➢ Upon request of and without cost to City of Baytown, certified copies of all insurance policies and/or certificates of insurance shall be furnished to City of Baytown's representative. Certificates of insurance showing evidence of insurance coverage shall be provided to City of Baytown's representative prior to any work being performed at the site. ➢ Liability policies must be on occurrence form. ➢ Each insurance policy shall be endorsed to state that coverage shall not be suspended, voided, canceled or reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt requested, has been given to the City. ➢ The City, its officers, agents and employees are to be added as Additional Insureds to all liability policies. ➢ Upon request and without cost to the City, certified copies of all insurance polices and/or certificates of insurance shall be furnished to the City. ➢ Upon request of and without cost to City of Baytown, loss runs (claims listing) of any and/or all insurance coverage shall be furnished to City of Baytown's representative. VII. No Assignment The Auditor shall not sell, assign, or transfer any of its rights or obligations under this Contract, in whole or in part, without prior written consent of the City. VIII. Termination The City, besides all other rights or remedies it may have, shall have the right to terminate this Agreement with or without cause upon ten (10) days' written notice from the City Manager to the Auditor of the City's election to do so. Furthermore, the City may immediately terminate this Agreement if the Auditor breaches the terms hereof. A breach of this Agreement shall include, but not be limited to, the following: failing to pay insurance premiums, claims or other charges; 2. failing to pay any payments due the City, State or Federal Government from the Auditor or its principals, including, but not limited to, any taxes, fees, assessments, liens, or any payments identified in this Agreement; 3. the institution of voluntary or involuntary bankruptcy proceeding against the Auditor; Agreement for Financial Auditing Services, Page 5 4. the dissolution of the Auditor; 5. the violation of any provision of this Agreement; and/or 6. the abandonment of the Agreement or any portion thereof and discontinuance of the Auditor's services or any portion thereof, as determined by the City Manager. Upon delivery of any notice of termination required herein, the Auditor shall discontinue all services in connection with the performance of the Agreement. Within ten (10) days after receipt of the notice of termination, the Auditor shall submit a final statement showing in detail the services satisfactorily performed and accepted and all other appropriate documentation required herein for payment of services. IX. Contingency It is expressly understood and agreed by both the Auditor and the City that this Agreement for fiscal years 2020 and 2021 are contingent upon funds being appropriated by the City Council of the City of Baytown for financial auditing services. Should funds not be appropriated, this Agreement shall become null and void and both parties shall be relieved of any and all obligations hereunder without liability to the other party or to any other person or entity, with the exception of the liabilities assumed by the Auditor pursuant to Articles III and V hereof. X. Notice Unless otherwise provided in this Contract, any notice provided for or permitted to be given must be in writing and delivered in person or by depositing same in the Unites States mail, postpaid and registered or certified, and addressed to the party to be notified, with return receipt requested, or by delivering the same to an officer of such party. Notice deposited in the mail as described above shall be conclusively deemed to be effective, unless otherwise stated in this Agreement, from and after the expiration of three (3) days after it is so deposited. For the purpose of notice, the addresses of the parties shall be as follows unless properly changed as provided for hereinbelow: CITY OF BAYTOWN Attn: City Manager P. O. Box 424 Baytown, Texas 77522-0424 Agreement for Financial Auditing Services, Page 6 BELT HARRIS PECHACEK, LLLP Attn: Robert Belt, CPA 3210 Bingle Road, Suite 300 Houston, TX 77055 Each party shall have the right from time to time at any time to change its respective address and each shall have the right to specify a new address, provided that at least fifteen (15) days' written notice is given of such new address to the other party. XI. Non -waiver Failure of either party hereto to insist on the strict performance of any of the agreements herein or to exercise any rights or remedies accruing thereunder upon default or failure of performance shall not be considered a waiver of the right to insist on and to enforce by an appropriate remedy, strict compliance with any other obligation hereunder to exercise any right or remedy occurring as a result of any future default or failure of performance. XII. Choice of Law and Venue This Agreement shall in all respects be interpreted and construed in accordance with and governed by the laws of the State of Texas, regardless of the place of its execution or performance. The place of making and the place of performance for all purposes shall be Baytown, Harris County, Texas. XIII. Severability All parties agree that should any provision of this Agreement be determined to be invalid or unenforceable, such determination shall not affect any other term of this Agreement, which shall continue in full force and effect. XIV. No Third -Party Beneficiaries This Agreement shall not bestow any rights upon any third party, but rather, shall bind and benefit the Auditor and the City only. XV. Entire Agreement This Agreement contains all the agreements of the parties relating to the subject matter hereof and is the full and final expression of the agreement between the parties. Agreement for Financial Auditing Services, Page 7 XVI. Ambiguity In the event of any ambiguity in any of the terms of this Agreement, it shall not be construed for or against any party hereto on the basis that such party did or did not author the same. XVII. Authority The officers executing this Agreement on behalf of the parties hereby represent that such officers have full authority to execute this Agreement and to bind the party he represents. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple copies, each of which shall be deemed to be an original, but all of which shall constitute but one and the same agreement, this day of 12019. CITY OF BAYTOWN, TEXAS ........................................................... RICHARD L. DAVIS, City Manager ATTEST: LETICIA BRYSCH, City Clerk APPROVED AS TO FORM: IGNACIO RAMIREZ, SR., City Attorney BELT HARRIS PECHACEK, LLLP, a Texas Limited Partnership By: ROBERT BELT, CPA General Partner Agreement for Financial Auditing Services. Page 8 STATE OF TEXAS COUNTY OF HARRIS Before me on this day personally appeared Robert Belt, in his capacity as the General Partner of Belt Harris Pechacek, LLLP, on behalf of such limited partnership, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed. SUBSCRIBED AND SWORN before me this day of , 2019. Notary Public in and for the State of Texas R:UCaren Files Contracts\Auditing Services Belt Hams Auditing Services Agreement 2019-22.doc Agreement for Financial Auditing Services, Page 9 EXHIBIT "A" Audit Services The Auditor will audit the financial statements of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements of the City as of and for the years ended September 30, 2019, 2020, and 2021, with the option of renewing for each three subsequent fiscal years. The component units will be audited as part of the audit of the financial statements of the City as noted below: 1. Baytown Area Water Authority: Discretely Presented, Separate Financial Statements 2. Baytown Municipal Development District: Discretely Presented, No Separate Financial Statements 3. Baytown Crime Control and Prevention District: Blended, No Separate Financial Statements 4. Baytown Fire Control, Prevention, and Emergency Medical Services District: Blended, No Separate Financial Statements S. Baytown Redevelopment Authority/Tax Increment Reinvestment Zone No. 1: Blended, No Separate Financial Statements Limited Procedures Accounting standards generally accepted in the United States of America provide for certain Required Supplementary Information (RSI), such as Management's Discussion and Analysis (MD&A), to supplement the City's basic financial statements. Such information, although not apart of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of the services herein, the Auditor will apply certain limited procedures to the City's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to the Auditor's inquiries, the basic financial statements, and other knowledge the Auditor obtains during its audit of the basic financial statements. The Auditor will not express an opinion or provide any assurance on the information because the limited procedures do not provide sufficient evidence to express an opinion or provide any assurance. The following RSI is required by U.S. generally accepted accounting principles (GAAP) and will be subjected to certain limited procedures, but will not be audited: 1. Management's Discussion and Analysis 2. Budgetary Comparison Schedule(s) 3. Pension Liability and Contribution Schedule(s) 4. OPEB Liability and Contribution Schedule(s) Exhibit "A," Page 1 In Relation opinion The Auditor shall report on supplementary information other than RSI that accompanies the City's financial statements. The Auditor will subject the following supplementary information to the auditing procedures applied in its audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, and the Auditor shall provide an opinion on it in relation to the financial statements as a whole in a report combined with its report on the financial statements: 1. Budgetary Comparison Schedule(s) 2. Combuung Statement(s) and Schedule(s) 3. Schedule of Expenditures of Federal Awards Unaudited Information The following other information accompanying the financial statements will not be subj ected to the auditing procedures applied in the audit of the financial statements, and the report will not provide an opinion or any assurance on that other information: 1. Introductory Section 2. Statistical Section Nonaudit Services In connection with the engagement, the Auditor will perform services unrelated to its attest function. The additional services The Auditor will provide include: 1. Preparation of Documents The Auditor shall assist in preparing the financial statements and related notes of the City in conformity with GAAP based on information provided by the City. 2. Advisory Services The Auditor will provide routine advisory services through phone calls, conferences, or otherwise, in connection with incidental matters arising during the year. The Auditor encourages open lines of communication throughout the year as part of the Auditor's services. 3. Correspondence The Auditor shall handle all normal correspondence from grantor, regulatory, or oversight agencies related to the audit. . 4. Professional Proofing To ensure documents issued in connection with the audit engagement are professional in appearance, the Auditor will submit both client -prepared information, as well as documents created entirely by the Auditor, to an independent professional proofreader for a cover -to - cover inspection. This review will include consistent formatting, grammar, logic, and any Exhibit "A," Page 2 other items that may detract from the document. This process is over and above technical reviews performed. 5. Printing and Binding All final hard copy documents will be printed on a 1200 dpi or better resolution copier and bright white report paper. Reports will be bound with GBC-brand plastic combs with 30 mil oversized covers. The Auditor will manually inspect each page from one document and spot check remaining reports for printing errors. The Auditor's reports will be centered, properly aligned, and free of smudges and other detracting elements. 6. Electronic Adobe Searchable PDF In addition to providing hard copy documents, the Auditor will also provide all final documents in electronic image files in Adobe PDF format, suitable for posting in electronic agenda packages, posting on websites, or transmitting by email to regulatory agencies. 7. Client Portal - AuditBox The Auditor will provide the City access to the Auditor's proprietary AuditBox online site to provide a central repository where both the City's personnel and audit team members can see documents being exchanged during the process to eliminate duplicate requests from audit team members. Both the City's documents, as well as final audit documents, will be hosted on the site providing an archive of information that new personnel may access in subsequent p g p Y q years, if information is needed regarding what was provided for a prior year audit or a copy of audit documents issued. Other Services The Auditor will assist in the preparation of the financial statements, schedule of expenditures of federal awards, and related notes of the City in conformity with GAAP and the Uniform Guidance based on information provided by the City. These non -audit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. The Auditor will perform the services in accordance with applicable professional standards. The other services are limited to the financial statements, schedule of expenditures of federal awards, and related notes services previously defined. The Auditor, in its sole professional judgment, reserves the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. City Responsibilities The City is responsible for: 1. designing, implementing, and maintaining effective internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, including internal controls over federal awards; 2. evaluating and monitoring ongoing activities to help ensure that appropriate goals and objectives are met; 3. following laws and regulations; 4. ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements; Exhibit "A," Page 3 5. ensuring that the management is reliable and financial information is reliable and properly reported; 6. implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements; 7. selecting and applying accounting principles; 8. preparing and fairly presenting the financial statements, schedule of expenditures of federal awards, and all accompanying information in conformity with GAAP; 9. complying with applicable laws and regulations (including federal statutes) and the provisions of contracts and grant agreements (including award agreements); 10. identifying significant contractor relationships in which the contractor has responsibility for program compliance and for the accuracy and completeness of that information; 11. making all financial records and related information available to the Auditor and for the accuracy and completeness of that information; 12. providing the Auditor with: a. access to all information of which the Auditor is aware that is relevant to the preparation and fair presentation of the financial statements; b. access to personnel, accounts, books, records, supporting documentation, and other information as needed to perform an audit under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the "Uniform Guidance"); c. additional information that the Auditor may request for the purpose of the audit; and d. unrestricted access to persons within the government from whom the Auditor determines it necessary to obtain audit evidence; 13. adjusting the financial statements to correct material misstatements and confirming to the Auditor in the management representation letter that the effects of any uncorrected misstatements aggregated by the Auditor during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements as a whole; 14. designing and implementing programs and controls to prevent and detect fraud; 15. informing the Auditor about all known or suspected fraud affecting the government involving: a. the City, b. employees who have significant roles in internal control, and c. others :where the fraud could have a material effect on the financial statements; 16. informing the Auditor of the City's knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others; 17. identifying and ensuring that the government complies with applicable laws, regulations, contracts, agreements, and grants; 18. taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, or abuse that the Auditor reports; 19. evaluating and monitoring any noncompliance with federal statutes, regulations, and the terms and conditions of federal awards; 20. taking prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings; Exhibit "A," Page 4 21. promptly following up and taking corrective action on reported audit findings; 22. preparing a summary schedule of prior audit findings and a separate corrective action plan; 23. making available to the Auditor the summary schedule of prior audit findings prior to the beginning of the Auditor's audit fieldwork; 24. identifying all federal awards received and understanding and complying with the compliance requirements and for the preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received) in conformity with the Uniform Guidance; 25. including the Auditor's report on the schedule of expenditures of federal awards in any document that contains and indicates that the Auditor has reported on the schedule of expenditures of federal awards; 26. making the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards is issued with the Auditor's report thereon; 27. acknowledging to the Auditor in the written representation letter that: a. the City is responsible for presentation of the schedule of expenditures of federal awards in accordance with the Uniform Guidance; b. the City believes the schedule of expenditures of federal awards, including its form and content, is stated fairly in accordance with the Uniform Guidance; c. the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and d. the City has disclosed to the Auditor any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards; 28. preparing other supplementary information, on which the Auditor has been engaged to report, in conformity with GAAP; 29. including the Auditor's report on the supplementary information in any document that contains and indicates that the Auditor has reported on the supplementary information; 30. including the audited financial statements with any presentation of the supplementary information that includes the Auditor's report thereon; 31. acknowledging to the Auditor in the representation letter that: a. the City is responsible for presentation of the supplementary information in accordance with GAAP; b. the City believes the supplementary information, including its form and content, is fairly presented in accordance with GAAP; c. the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and d. the City has disclosed to the Auditor any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information; 32. establishing and maintaining a process for tracking the status of audit findings and recommendations; 33. identifying and providing report copies of previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this exhibit; Exhibit "A," Page 5 34. relaying to the Auditor corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies; 35. providing the City's views on our current findings, conclusions, and recommendations, as well as the City's planned corrective actions, for the report, and for the timing and format for providing that information; 36. assuming the City's responsibilities relating to the financial statements, schedule of expenditures of federal awards, related notes, and any other nonaudit services the Auditor provides; 37. acknowledging in the management representation letter: a. the Auditor's assistance with the preparation of the financial statements, schedule of expenditures of federal awards, and related notes; b. the City's review and approval of the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance; and c. the City's acceptance of responsibility for the financial statements, schedule of expenditures of federal awards, and related notes; 38. overseeing the nonaudit services by designating an individual, preferably from senior management with suitable skill, knowledge, or experience; 39. evaluating the adequacy and results of those nonaudit services; and 40. accepting responsibility for the nonaudit services. Audit Objectives The objective of the audit is the expression of opinions as to whether the financial statements are fairly presented, in all material respects, in conformity with GAAP and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on--- 1. Internal control over financial reporting and compliance with the provisions of laws, regulations, contracts, and award agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. 2. Internal control over compliance related to major programs and an opinion (or disclaimer of opinion) on compliance with federal statutes, regulations, and the terms and conditions of federal awards that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and the Uniform Guidance. The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states that (1) the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance, and (2) the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. The Uniform Guidance report on internal control over compliance will include a paragraph that states that Exhibit "A," Page 6 the purpose of the report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the. results of that testing based on the requirements of the Uniform Guidance. Both reports will state that the report is not suitable for any other purpose . The Auditor's audit will be conducted in accordance with auditing standards generally accepted in the United States of America; 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 the Uniform Guidance, and will include tests of accounting records, a determination of major program(s) in accordance with the Uniform Guidance, and other procedures the Auditor considers necessary to enable it to express such an opinion. The Auditor will issue written reports upon completion of its Single Audit. The Auditor's reports will be addressed to management and members of the governing body of the City. The Auditor cannot provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for the Auditor to modify its opinion or add an emphasis -of -matter or other - matter paragraph. If the Auditor's opinions are other than unmodified, the Auditor will discuss the reasons with the City in advance. If, for any reason, the Auditor is unable to complete the audit or is unable to form or has not formed an opinion, the Auditor may decline to express opinions or issue reports, or may withdraw from this engagement. Audit Procedures -General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, the Auditor's audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. The Auditor will plan and perform the audit to obtain reasonable 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 governmental regulations that are attributable to the government or to acts by management or employees acting on behalf of the government. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because the Auditor 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 the Auditor, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, the Auditor will inform the appropriate level of management of any material errors, any fraudulent financial reporting, or misappropriation of assets that come to its attention. The Auditor will also inform the appropriate level of management of any violations of laws or governmental regulations that come to its attention, unless clearly inconsequential, and of any material abuse that comes to its attention. The Auditor will include such matters in the reports required for a Single Audit. The Auditor's Exhibit "A," Page 7 responsibility as auditors is limited to the period covered by its audit and does not extend to any later periods for which the Auditor is not engaged as auditor. The Auditor's 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, funding sources, creditors, and financial institutions. The Auditor will request written representations from The City's attorneys as part of the engagement, and they may bill the City for responding to this inquiry. At the conclusion of the Auditor's audit, the Auditor will also require certain written representations from the City about its responsibilities for the financial statements; schedule of expenditures of federal awards; federal award programs; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. Audit Procedures -Internal Control The audit will include obtaining an understanding of the government 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 the Auditor considers 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. The Auditor's tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in the Auditor's report on internal control issued pursuant to Government Auditing Standards. As required by the Uniform Guidance, the Auditor will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that the Auditor considers relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, the 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 the Auditor's report on internal control issued pursuant to the Uniform Guidance. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. Accordingly, the Auditor will express no such opinion. However, during the audit, the Auditor will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and the Uniform Guidance. Audit Procedures -Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, the Auditor will perform tests of the City's compliance with provisions of applicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance, and the Auditor will not Exhibit "A�" Page 8 express such an opinion in the Auditor's report on compliance issued pursuant to Government Auditing Standards. The Uniform Guidance requires that the Auditor also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with federal statutes, regulations, and the terms and conditions of federal awards applicable to major programs. The Auditor's procedures will consist of tests of transactions and other applicable procedures described in the OMB Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. The purpose of these procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in the Auditor's report on compliance issued pursuant to the Uniform Guidance. Engagement Administration, Fees, and Other The Auditor understands that the City's employees will prepare all cash, accounts receivable, or other confirmations the Auditor requests and will locate any documents selected by the Auditor for testing. At the conclusion of the engagement, the Auditor will complete the appropriate sections of the Data Collection Form that summarizes its audit findings. The Auditor will coordinate with the City in the electronic submission and certification. The Data Collection Form and the reporting package must be submitted within the earlier of 30 calendar days after receipt of the Auditor's reports or nine months after the end of the audit period. The Auditor will provide copies of its reports to the City; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of the Auditor's reports are to be made available for public inspection. The audit documentation for this engagement is the property of the Auditor and shall not be disclosed except in accordance with law. Subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to any oversight agency or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. The Auditor will notify the City of any such request. If requested, access to such audit documentation will be provided under the supervision of the Auditor's personnel. Furthermore, upon request, the Auditor 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 governmental agencies. The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by the oversight agency. If the Auditor is aware that a federal awarding agency, pass -through entity, or auditee is contesting an audit finding, the Auditor will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. Exhibit "A," Page 9 Federal Single Audit Engagement A federal single audit is required by the OMB's Uniform Guidance when federal funds over $750,000 are expended. Federal single audit fees vary based on the number of major programs as defined by OMB. Accordingly, the federal single audit fee consists of a "Federal Single Audit -Base Fee" to cover basic fixed amounts and the "Federal Single Audit -Per Major Program Fee," which is the scalable portion dependent on the actual number of major programs. The number of major programs is established by OMB criteria. If a federal single audit is required, there will be at least one maj or program. Prior year federal single audit reports will help plan for the number of major programs, but they will vary from year to year based on the level of federal funding. Should The City not exceed OMB's federal single audit threshold, a federal single audit will not be required. If the City anticipates exceeding the federal single audit threshold, the City should contact the Auditor as far in advance as possible so that the Auditor can begin doing preliminary federal single audit work. Non -State Single Audit Engagement A state single audit is required when grant funds that originated from the State of Texas (this does not include federal monies passed through the State) over $750,000 are expended. State single audit fees vary based on the number of major programs as defined by the State of Texas Single Audit Circular. The additional technical verbiage that is necessary when a state single audit is required is not included within this Agreement, nor does the proposed engagement fee include additional fees related to a state single audit. Should the City exceed the state single audit threshold, a new agreement will be required. Foreign Terrorists Organizations Pursuant to Chapter 2252, Texas Government Code, the Auditor represents and certify that, at the time of execution of this Agreement, neither the Auditor nor any wholly owned subsidiary, majority - owned subsidiary, parent company, or affiliate of the same (i) engages in business with Iran, Sudan, or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code or Subchapter F of Chapter 2252 of the Texas Government Code or (ii) is a company listed by the Texas Comptroller of Public Accounts under Sections 806.051, 807.051, or 2252 .153 of the Texas Government Code. The term "foreign terrorist organization" in this paragraph has the meaning assigned to such term in Section 2252.151 of the Texas Government Code. Vendor Representation Regarding Israel Pursuant to Chapter 2270, Texas Government Code, The Auditor represents that the Auditor does not boycott Israel and will not boycott Israel during the term of the Agreement. The term "boycott Israel" shall have the meaning ascribed to this term in Section 808.001 of the Texas Government Code. Authorization of CPA's Disclosure Any certified public accountant of the City involved with assisting the Auditor shall not be prohibited from disclosure of information required to be made available by the standards of the public accounting profession in reporting on the examination of financial statements. Management understands and provides permission to staff certificate or registration holders as required under the Rules of Professional Conduct, Texas Administrative Code, Title 22, Part 22, Chapter 501, Subchapter C, Section 501.75. Exhibit "A," Page 10