Ordinance No. 9,231ORDINANCE NQ'. ,9,31.
® AN ORDINANCE AUTHORIZING AND DIRECTING THE CITY MANAGER AND THE
CITY CLERK OF THE CITY OF BAYTOWN TO EXECUTE AND ATTEST TO AN
AGREEMENT WITH TILLER AND COMPANY, P.C., FOR FINANCIAL AUDITING
SERVICES; AUTHORIZING PAYMENT BY THE CITY OF BAYTOWN, THE SUM OF
SIXTY -NINE THOUSAND ONE HUNDRED THIRTY AND NO /100 DOLLARS
($69,130.00); 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 and the City Clerk of the City of Baytown to execute and attest to an agreement with Tiller and
Company, P.C., for financial auditing services. 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 authorizes payment to Tiller and
Company, P.C., for financial auditing services the sum of SIXTY -NINE THOUSAND ONE HUNDRED
THIRTY AND NO 1100 DOLLARS ($69,130.00), pursuant to the Agreement.
Section 3: That the City Manager is hereby granted general authority to approve any change
order involving a decrease or an increase in costs of TWENTY -FIVE THOUSAND AND NO/ 100 DOLLARS
($25,000.00) or less; however, the original contract price may not be increased by more than twenty-five
percent (25 %) or decreased by more than twenty-five percent (25 %) without the consent of the contractor to
such decrease.
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 13t day of September, 2001.
PETE C. ALFARO, Nfayor
ATTES
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APPRO v'UD %S TO FORM:
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® ACIO RAMIREZ, SR., ity ttorney
d:1MyDocuments\ Counci1\00 -01\ September\ FinancialAuditingServicesAgreementWithTiller
® AGREEMENT FOR FINANCIAL AUDITING SERVICES
STATE OF TEXAS §
COUNTY OF HARRIS §
WHEREAS, on the 11 `" day of July, 2001, the City of Baytown, hereinafter referred to as the
"City," received the proposal from Tiller and Company, P.C., a Texas corporation, hereinafter
referred to as the "Company," for the performance of the audit of the general purpose financial
statements of the City of Baytown, Texas, and related entities, for the fiscal years ending September
30, 2001, 2002 and 2003, hereinafter the "Agreement";
WHEREAS, based upon such proposal, the Company and the City desire to enter into an
agreement specifying the terms and conditions of such audits; and
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.
Company's Obligations
The Company shall diligently perform all services specified in its proposal for the financial
audits of the City of Baytown, Texas, dated July 11, 2001, which proposal is attached hereto as
Exhibit "A" and incorporated herein by this reference for all intents and purposes. These services
shall be for the fiscal years ending September 30, 2001, 2002 and 2003 and are expressly subject to
the contingency specified in Article 1X.
II.
Fees
The Company hereby commits to performing the financial auditing services required by the
City's Director of Finance at the fees stated below for each audit:
2001 $ 39,425.00 1 $ 6,090.00 $ 8,060.00 $ 8,535.00 $ 7,020.00 $ 69,130.00
2002 $ 39,425.00 $ 6,090.00 $ 8,060.00 $ 8,535.00 $ 7,020.00 $ 69,130.00
2003 $ 50,225.00 $ 6,090.00 $ 8,060.00 $ 8,535.00 $ 7,020.00 $ 79,930.00
$218,190.00.
Agreement for Financial Auditing Services, Page 1
EXHIBIT A
III.
Indemnity
THE COMPANY 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 HIND, 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 COMPANY PURSUANT
TO THIS AGREEMENT, 'THE CONDUCT OR MANAGEMENT OF THE COMPANY'S
ACTIVITIES, OR FROM ANY ACT OR OMISSION BY THE COMPANY, ITS AGENTS,
EMPLOYEES, OR SUBCONTRACTORS, WHERE SUCH DAMAGES, LOSSES OR
INJURIES ARE CAUSED BY (I) THE JOINT NEGLIGENCE OF THE CITY AND ANY
OTHER PERSON OR ENTITY OR (II) THE JOINT OR SOLE NEGLIGENCE OF THE
COMPANY. IT IS THE EXPRESSED INTENTION OF THE PARTIES HERETO, BOTH
THE COMPANY AND THE CITY, THAT THE INDEMNITY PROVIDED FOR IN THIS
PARAGRAPH IS INDEMNITY BY THE COMPANY TO INDEMNIFY AND PROTECT
THE CITY FROM (I) THE CONSEQUENCES OF THE CITY'S OWN NEGLIGENCE,
WHERE THAT NEGLIGENCE IS A CONCURRING CAUSE OF THE RESULTING
INJURY, DEATH OR DAMAGE AND /OR (II) THE CONSEQUENCES OF THE
COMPANY'S SOLE OR JOINT 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 RESULTS FROM THE SOLE 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 Company 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 City shall pay the Company 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.
Agreement for Financial Auditing Services, Page 2
V.
Release
The Company hereby assumes all liability and responsibility for injuries, claims or suits for
damages to person or property, of whatever kind or character, whether real or asserted, occurring
during the term of this Agreement, arising out of or by reason of the services to be provided by the
Company. This article shall survive the expiration or termination of this Agreement.
VI.
Insurance
The Company'shall provide the City with Certificates of Insurance evidencing the coverages
required in Exhibit `B," which is attached hereto and incorporated herein for all intents and
purposes.
VII.
No Assignment
The Company 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 Company of the City's election to do so. Furthermore, the City may immediately terminate this
Agreement if the Company 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
Company 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.
Company;
4. the dissolution of the Company;
® 5. the violation of any provision of this Agreement; and/or
Aereement for Financial Auditing Services, Page 3
6. the abandonment of the Agreement or any portion thereof and discontinuance of the
Company's services! or any portion thereof, as determined by the City Manager.
Upon delivery of any notice of termination required herein, the Company shall discontinue all
services in connection with the performance of the Agreement. Within ten (10) days after receipt of
the notice of termination, the Company 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 Company and the City that this Agreement
for fiscal years 2002 and 2003 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 Company 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 Contract, 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
TILLER AND COMPANY, P.C.
Attn: Mark R. Tiller, CPA
1300 Rollingbrook, Suite 507
Baytown, TX 77522 -0563
Agreement for financial Auditing Services, Page 4
I El
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 fature, 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 Company 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 5
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.
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 September, 2001.
ATTEST:
GARY W. SMITH, City Clerk
APPROVED AS TO FORM:
4ACIO RAMIREZ, R. City Attorney
CITY OF BAYTOWN, TEXAS
MONTE MERCER, City Manager
TILLER AND COMPANY, P.C.
MARK R. TILLER, CPA
® Managing Shareholder
Azreement for Financial Auditing Services, Page 6
STATE OF TEXAS
COUNTY OF HARRIS
Before me on this day personally appeared Mark R. Tiller, in his capacity as Managing
Shareholder of Tiller and Company, P.C., on behalf of such corporation, 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 September, 2001.
Notary Public in and for the State of Texas
® c: ldh277\Financel FnancialAuditingContract \TilerAgreement
Agreement for Financial Auditing Services, Page 7
0'..
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PROPOSAL FOR
THE FINANCIAL AUDITS OF
THE CITY OF BAYTOWN, TEXAS
TILLER AND COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
1300 ROLLINGBROOK, SUITE 507
P.O. BOX 563
BAYTOWN, TEXAS 77522 -0563
(281) 427. -7517
CONTACT PERSON: MARK R. TILLER, CPA
JULY 11, 2001
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TABLE OF CONTENTS
0
DESCRIPTION SECTION PAGE
TITLE PAGE
TABLE OF CONTENTS
LETTER OF TRANSMITTAL AND EXECUTIVE SUMMARY
QUALIFICATIONS AND EXPERIENCE OF FIRM
.... ............................... E & F 4
QUALIFICATIONS AND EXPERIENCE
OF PARTNER AND AUDITING STAFF
SIMILAR ENGAGEMENTS .............. ............................... H & R 8
APPROACH AND STRATEGY TO THE EXAMINATION I 9
. ... ...............................
MISCELLANEOUS AND ADDITIONAL DATA _ .. _ _ . _ . .
COST OF SERVICES
INCLUDING HOURS AND RATES ........................................................ N O P Q & S 15
REQUEST FOR PROPOSALS
KI
HIM ANd COMPANY C & D
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
LETTER OF TRANSMITTAL AND EXECUTIVE SUMMARY
July 11, 2001
To the Honorable Mayor and City Council,
City of Baytown, Texas
Gentlemen:
We are pleased to have been asked to submit a proposal for the audit of the general
purpose financial statements of the City of Baytown, Texas (the City) for the years ending
September 30, 2001, 2002 and 2003. We will examine the City's Comprehensive Annual
Financial Report for each of the years noted above and will express an opinion as to the fair
presentation of the data contained therein. We will audit the general purpose . financial
statements in accordance with generally accepted auditing standards, as adopted by the
memberships of the American Institution of Certified Public Accountants and the Governmental
Accounting Standards Board, the standards for the financial audits set forth in the U.S. General
Accounting Office's (GAO) Government Auditing Standards (1994), the provisions of the
federal Single Audit Act of 1996 and the provisions of U.S. Office of Management and Budget
(OMB) Circular A -133, Audits of State and Local Governments as well as the following
additional requirements: examination for compliance with procedures established by City
Charter, City Ordinance or, where applicable, State and Federal Laws, or Regulations. The
combining, individual fund and account group statements containing all funds and account
groups maintained by the City will be subjected to the auditing procedures applied in the audit of
the general purpose financial statements. The accompanying statistical information provided for
the purpose of additional analysis shall be examined to the degree necessary. for an opinion
satisfactory for the City to apply for the Certificate of Achievement for Excellence in Financial
Reporting.
• As part of the audit of the general purpose financial statements, transactions and records
pertaining to federal programs will be tested for material compliance with federal laws, rules,
and regulations, and all instances of noncompliance will be reported to the City.
A management letter detailing any improvements that can be made in internal controls,
the accounting system and the financial reports as noted during the audit will be reported to the
City.
A separate report will be issued for the Baytown Area Water Authority.
1300 ROLLING BROOK / POST OFFICE BOX 563 I BAYTOWN, TEXAS 77522 -05631 (281) 427 -7517 / FAX •(281) 422 -5013
MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBUC ACCOUNTANTS - THE TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
A separate report will be issued on the Harris County Organized Crime and Narcotics
®� Task Force which, from an accounting perspective, is a special revenue fund of the City.
Currently the Task Force grant year ends May 3151 of each year.
A separate report will be submitted after the first six months of each year (2002, 2003,
2004) based upon Council's direction. This report will be an audit of a particular distinct. area
for compliance, economy of efficiency or an investigation of specific matters.
At the completion of the audits, we will meet with the Finance Committee of the City
Council, the City Manager and City finance staff to discuss audit findings and to answer any
concerns of the Council Finance Committee. In addition, we will meet with the Baytown Area
Water Authority (BAWA) staff and the BAWA Board to answer any concerns they might have.
A Shareholder will be present at the City Council meeting when the Comprehensive
Annual Financial Report is presented to the full City Council.
We will expect to begin final field work during the second week in November and shall
present the Comprehensive Annual Financial Report to the full City Council on the second
Thursday in January of the year following the year on which our opinion is being expressed.
We understand that the Comprehensive Annual Financial Report will be prepared by City
staff. However, we will be available for assistance as requested. Prior to submission of the
completed financial report, we will review a draft of the proposed report and management letter
with the Finance Director.
The fees for the annual audits for the fiscal years ending September 30 and other periods
outlined in the request for proposal, are as follows (See detail .in requested format later in this
proposal):
September 30, 2001 $ 69,130
September 30, 2002 69,130
September 30, 2003 69,130
10,800 (GASB #34)
These fees include all services contemplated by the request for proposal (RFP 0105 -02)
issued by the City of Baytown, Texas.
The person authorized to make representations for our firm concerning this proposal is:
Mark R. Tiller, CPA
Managing Shareholder
1300 Rollingbrook, Suite 507
Post Office Box 563
Baytown, Texas 77522 -0563
® 281 -427 -7517
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The person signing this letter is authorized to bind Tiller and Company, P.C. to the terms
of this proposal. Tiller and.Company, P.C. is licensed to practice in the state of Texas and this
proposal shall be valid and irrevocable for a minimum period of 60 days subsequent to the RFP
closing date. Tiller and Company, P.C. is independent of the City of Baytown, Texas and any
component units as defined by the U.S. General Accounting Office's Government Auditing
Standards (1994) .
We appreciate very much this opportunity to submit this proposal and you can be assured
of our desire to render a high standard of service. If selected, we are committed to performing
the services covered in this proposal in a timely, professional manner and as specified by the
request for proposal. We would be most pleased to be the independent certified public
accountants retained by the City of Baytown, Texas.
- Very truly yours,
Mark R. Tiller, CPA
Tiller and Company
A Professional Corporation of
Certified Public Accountants
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v
E & F
QUALIFICATIONS AND EXPERIENCE OF FIRM
Tiller and Company, P.C. is a local public accounting firm of certified public
accountants. The Firm maintains an office on the fifth floor of the Southwest Bank of Texas
(Rollingbrook Branch), 1300 Rollingbrook, Baytown, Texas, and conducts all of its audit
practice from that office. The current breakdown of our professional and support staff is as
follows:
2 Shareholders
2 Managers
2 Seniors
1 Staff
2 Para professionals
3 Support staff
- CPA's
- CPA's
- CPA's
- Degreed
- Non- degreed
Our Firm provides a wide range of auditing, accounting, tax and management consulting
services to our existing clients. The Firm is committed in its efforts to provide quality service
based on client needs. Great emphasis is placed on continuing education. The key staff members
indicated in this proposal have completed continuing education courses offered by The Texas
Society of Certified Public Accountants and the American Institute of Certified Public
Accountants, specifically related to the audits of local governmental units. Tiller and Company,
P.C.has an extensive audit practice and has performed annual audits and special service
engagements for a number of local governmental units, school districts, and for -profit clients for
over 30 years. All engagements have been properly completed on time and in full compliance
with related regulatory guidelines and reauirements.
Our Firm believes that all professional and para professional personnel should possess
skills and knowledge in the area of computer science. Therefore, all Firm personnel working on
the City audit would be skilled in areas related to computer science and application. Our Firm
currently audits a number of companies /entities with varied, sophisticated computer systems and
therefore, our personnel have the capability of auditing computerized information and accounting
systems.
Our Firm is a member of the Texas Society of Certified Public Accountants, The
American Institute of Certified Public Accountants and the Private Companies Practice Section,
Division for Certified Public Accounting Firms of the American Institute of 'Certified Public
Accountants. In 1998, we successfully completed our most recent peer review which included
review of selected government engagements and are currently preparing for our next review
scheduled for September of 2001.
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EI
HENRY PETERS PC
CERTIFIED PUBLIC ACCOUNTANTS
November 17, 1998
To Mr. Mark Tiller, CPA
Tiller and Company, P.C.
We have reviewed the system of quality control for the accounting and auditing practice of Tiller and Company,
P.C. (the firm) in effect for the year ended March 31, 1998. Our review was conducted in conformity with
standards established by the Peer Review Board of the American Institute of Certified Public Accountants
( AICPA). We tested compliance with the firm's system of quality control to the extent we considered appropriate'
These tests included a review of selected accounting and auditing engagements.
In performing our review, we have given consideration to the quality control standards for an accounting and
auditing practice issued by the AICPA. Those standards indicate that a firm's quality control policies and
procedures should be appropriately comprehensive and suitably designed in relation to the firm's size,
organizational ational sr*ucture, operating policies, and the nature of its practice. They state that variance in an
individual's performance and understanding of professional requirements or the firm's quality control policies and
procedures can'affect the degree of compliance with a firm's prescribed quality control policies and procedures and,
therefore, the effectiveness of the system.
In our opinion, the system of quality control for the accounting and auditing practice of Tiller and Company, P.C.
in effect for the year ended March 31, 1998, has been designed in accordance with the quality control standards for
an accounting and auditing practice established by the AICPA and was being complied with for the year then
ended to provide the firm with reasonable assurance of conforming with professional standards in the conduct of
that practice.
Tiller and Company, P.C. is a member of the Private Companies Practice Section of the AICPA Division for CPA
Firms (the section) and has agreed to comply with the membership requirements of the section. In connection with
our review, we tested the firm's compliance with those requirements to the extent we considered appropriate. In
our opinion, the firm was in conformity with the membership requirements of the section for the year ended
March 31, 1998, in all material respects.
�pju Y r.
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HENRY TERS, P.C.
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3310 S. Broadway, Suite 100 - Tyler, Texas 75701 -7851 -903 -597 -6311 - Fax 903 =597 -0343
1127 Judson Road, Suite 233 - Longview, Texas 75601 -5157 - 903 -758 -0648 - Fax 903 - 758 -0409
www.henrypcters.com - E -mad: info@henryperers.com
® G
QUALIFICATIONS AND EXPERIENCE OF PARTNER AND AUDITING STAFF
n
Key employees who will perform substantially all of the planning and field work on the
engagement are:
Mark Tiller CPA - Partner
Mark Goodin CPA - Manager
Consultant engaged by Tiller and Company, P.C. to assist in quality assurance related to
the engagement:
David Holt CPA - Governmental Financial and Accounting
Consultant and Instructor
Resumes for these individuals are as follows (all are licensed to practice as a Certified
Public Accountants in Texas):
Mark R. Tiller, CPA - Partner
Mr. Tiller will be the shareholder responsible for the timely completion and delivery of
this engagement if selected. He will be in daily contact with staff working on the
engagement and will be heavily involved in the planning process and field. supervision.
Mr. Tiller will be easily and actively accessible to Mrs. Sams and her staff during all
phases of the engagement. Mr. Tiller has over 30 years of experience in evaluating
accounting systems and related controls in public accounting. Mr. Tiller holds a BBA in
accounting from Texas A &M University.
Mark D. Goodin, CPA - Manager
Mr. Goodin is a 1980 graduate of the University of Houston - Clear Lake with
over 15 years experience in audits of Local Governmental Units and School Districts. He
has experience with City, School District and Not - for -Profit audits. Mr. Goodin has
fulfilled the continuing professional education requirements of the AICPA, the Texas
State Board of Public Accountancy and Governmental Auditing Standards. Mr. Goodin
has been the lead auditor on the City of Baytown engagement under the terms of our
prior contracts.
David W. Holt, CPA, MBA
Received an Outstanding Instructor Award from the AICPA for CPE courses
taught during 1993 - 94. He is a frequent discussion leader for numerous continuing
education sponsors and a contributing author of the PPC "Guide to Preparing
Governmental Financial Statements". David is also the author of CPE courses entitled:
- Governmental Accounting and Auditing Update
- Nonprofit Accounting and Auditing Update
- Accounting and Auditing Update and Review
His professional experience includes more than fifteen years in public accounting
with "Big 6" and local CPA firms, and as a sole practitioner. He has provided
consulting accounting and auditing services for diverse client base. He is an honors
graduate (BBA in accounting) from the University of Houston and received his MBA
from the University of St. Thomas (Houston, Texas).
The following is a list of the continuing professional education courses that were
attended by Tiller and Company, P. C. employees within the last several years which would
relate directly or indirectly to the audit of the City:
Course Description
Audits of State and Local Governments
Governmental Accounting
Texas School District Auditing
Analysis of School District Accounting
Auditing and. Accounting Update
Advanced Texas School District Auditing
Compliance Auditing - Risk Assessment
Nonprofit Organizations
Advanced Financial Reporting for
Governments
Audits of State and Local Governments
L.J
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Sponsor
TSCPA
AICPA
TSCPA
TSCPA
AICPA
TSCPA
TSCPA
TSCPA
TSCPA
AICPA
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SIMILAR ENGAGEMENTS
The following is a representative list of Tiller and Company, P.C.'s audit
clients and references:
Client
Contact Person
Telephone
San Augustine Independent School District
-
Patti McCleran
(936) 275 -2301
High School Drive
San Augustine, Texas 75972
Citizens Bank and Trust Company /Southwest Bank of TX
Connie Magouirk
(281) 427 -5771
1300 Rollingbrook Drive
Baytown, Texas 77521
Houston Distributing Company, Inc.
P
(281) 880 -2701
7100 High Life Drive
Houston, Texas 77066
San Augustine City — County Hospital District
Terry Wall
(9a&T,27�
P.O. Box 671
San Augustine, Texas 75972
City of Baytown
Donna Sams
(281) 420 -6501
2401 Market Street
Baytown, Texas 77522
C
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APPROACH AND STRATEGY TO THE EXAMINATION
Audit Approach
Tiller and Company., P.C.'s anticipated approach to the examination is outlined in the
proposed draft audit budget (see attached this section). The budget is on first hand knowledge of
the City's specific circumstances of prior years. However, we anticipate amendments to the
budgets during the formal planning process. This first draft budget is presented as an outline
and general indication of the audit approach. Regardless of the required audit hours necessary
to complete the audit's of the City's general purpose financial statements accurately and on time,
Tiller and Company P.C. will commit itself to the feq quoted in this proposal. We view this
pledge as our investment in a long term relation -W,, based on our knowledge that the City
continues to strive for quality performance in its accounting function.
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. The primary purpose of the
examination will be to express an opinion on the general purpose financial statements.
Therefore, we will plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. However, because of the concept of
reasonable assurance and because we will not perform a detailed examination of all transactions,
there is a risk that material errors, irregularities, or illegal acts, including fraud or defalcations,
may exist and not be detected by us. We will promptly advise you, however, of any matters of
that nature that come to our attention. Our responsibility as auditors is limited to the period
covered by our audit and does not extend to matters that might arise during any later periods for
which we are not engaged as auditors.
No extended services will be performed unless they are authorized in the contractual
agreement or in an amendment to the agreement. Whenever services not contemplated by our
fee estimate are requested, we will meet with you in advance of undertaking such work and
provide you with an estimate of the costs involved.
KIM
Audit Strategy
One characteristic of governmental units that has an overriding influence on audit
approach is the lack of a profit motive and the corresponding expected relationship between
revenues and expenditures. Other characteristics of governmental units that have an important
effect on audit approach are as follows:
Fund -type balance sheet account balances are relatively small dollar
amounts in comparison to the level of revenues and expenditures
that flow through the fund types in an annual period.
There is a high public interest and reaction to fraud, waste, and
abuse involving governmental resources.
The Single Audit requires the auditor to obtain an understanding of
the internal control structure policies and procedures established to
ensure compliance with laws and regulations affecting expenditures
of federal grant funds and perform tests of controls of those policies
and procedures.
These characteristics of governmental units mean that a governmental audit will have a
more focused consideration of compliance with laws and regulations, a greater emphasis on
transaction testing, and more concern with internal control structure.
In considering assertions, objectives, and procedures for a governmental engagement, it
Js useful to consider audit approach by the following broad categories of fund types or account
groups:
Governmental and aeencv funds
Proprietary Funds
General fixed assets and long -term debt account groups
-10-
Important overall aspects of d
® relate to substantive tests of transa
engagement, transaction testing is rel
categories of transactions that should
of transactions within the revenue ca
Generally, it is necessary to specify au
those objectives for each major class
transactions also need to be identified.
personnel services (salaries, wages,
expenditures. In specific circumstanc
category may be important, e.g., in
services.
igning audit programs for a governmental engagement
ions and analytical procedures. In a governmental
vely more important. Generally, there are two broad
tested - revenues and expenditures. The major classes
gory need to be identified to plan the audit process.
t objectives and select appropriate procedures to achieve
revenue transaction. The major classes of expenditure
..or most governmental units, major classes will include
nd benefits), goods and other services, and capital
, other major classes of transactions in the expenditure
rect cost allocations or encumbrances for goods and
Because .of the relative importance of transaction testing in a governmental engagement,
we will use some audit programs that are directed primarily to a transaction class rather than the
related balance sheet account balances The common areas in a governmental engagement
where the focus is primarily on transactions are as follows:
Revenue,
Expenditures for
Payroll (salaries,
Also, there are other areas in
balance sheet account balances and tra
Property,
Debt and debt
Tiller and Company uses a p,
Practitioners Publishing Company, wl
specialized audit programs and workpa.,
generated materials have been approv
conforming with professional standards
complete several other extensive plann
Form, Planning Materiality Workshe(
which will help us ensure that the enga
the assigned staff will incorporate the u
audit objectives as defined by the Practi
developed for local governmental units.
and receipts
and services and accounts payable
, and benefits) and related liabilities
rental engagements that are concerned with both
classes. The primary examples are as. follows:
and capital expenditures
expenditures
age (software and printed materials), developed by
1 provides the ability to tailor design and produce
's for local governmental units. These programs and
by the AICPA as reliable aids to assist users in
ding with audits of local governmental units. We will
documents such as a Governmental Audit Planning
and Governmental Engagement Budget Projection
ment is properly planned and executed. In addition,
of personal computers to assist them in achieving the
ners Publishing Company audit programs specifically
- 11 -
_ The workpapers and related reports for this engagement would be subjected to a three
® tier quality control review and reporting compliance review by our firm before issuance of our
reports. The audit manager assigned to this engagement would have the primary responsibility
of ensuring that the staff has properly completed their assigned segments of the engagement.
Once his review is completed and the reports drafted, the assigned shareholder would review the
workpapers, reports and various compliance review checklists. In addition, we have engaged a
third party governmental reporting specialist to review the reports and workpapers (David Holt).
All three reviews would incorporate the use of specialized documents such as:
Governmental Fund Structure and Accounting Checklists
Auditing Standards for Governmental Audits Checklists
Governmental Audit Engagement Checklists
The shareholder to be assigned to this engagement would be:
Mark Tiller, CPA
A 1976 graduate of Texas A &M University. Before joining the Firm in 1980,
Mr. Tiller obtained five years of extensive audit experience with the national accounting
firm of Coopers & Lybrand. Managing shareholder since 1983, Mr. Tiller is currently
responsible for the Firm's overall audit practice. His annual continuing education hours
average in excess of 40 hours and they include annual participation in courses offered on
the audits of local governmental units.
-12-
J,K,L & M
MISCELLANEOUS AND ADDITIONAL DATA
i
Tiller & Company, P.C. has been the most recent independent outside accounting firm
for the City of Baytown. There have been no other professional relationships involving the City.
A conflict of interest relative to performing the proposed audits does not exist.
As a result of our prior involvement with the City as independent auditors we understand
the level of technical assistance and advice concerning accounting and auditing issues that may
arise during the course of the audit and are prepared and qualified to provide those needs. As
outlined in our audit approach we have the necessary capabilities to audit computerized systems
and can provide the needed support to assist the City in successfully participating in the
Certificate of Achievement Program of the Government Financial Officers' Association. We do
not anticipate a need for any increase in City staff support over the prior three years to complete
the proposed audit. We agree with and can meet the time line as outlined in the RFP and would
anticipate that information as provided by the City in prior years will be adequate to meet
reporting deadlines.
Based on information provided by city financial staff we are to anticipate the "6 Month
Report" to require approximately', 70 to 125 hours and our fee proposals are based on that
expectation. We would anticipate working closely with council and city staff in defining that
engagement each year.
In our industry we generally refer to these types of engagements as "Agreed Upon
Procedures" engagements. Before', beginning this type of engagement we, with city staff, would
define in detail the scope of the work to be performed. We would anticipate our report for the "6
Month Report" to generally read as follows:
i
To the Mayor and City Council,
City of Baytown, Texas
At your request, we ',have applied the procedures enumerated below
with respect.to the accounting records of The City of Baytown, Texas
for the period ended (agreed upon date). Our procedures and findings
are as follows:
(Describe procedures and findings).
Because the procedures noted above do not constitute an audit made in
accordance with generally accepted auditing standards, we do not
express an opinion on any of the accounts or items referred to above.
-13-
I—]
LL
In connection with the procedures referrdd to above, no matters came
to our attention that caused us to believe that the specified accounts or
items should be adjusted. Had we performed additional procedures or
had we made an audit of the financial statements in accordance with
generally accepted auditing standards, matters might have come to our
attention that would have been reported to you. This report relates
only to the accounts and items specified above and does not extend to
any financial statements of The City of Baytown, Texas taken as a
whole.
There is no further additional data we wish to present at this time.
MEE
N,O,P,Q & S
COST OF SERVICES SCHEDULES INCLUDING HOURS AND RATES
The total hours and hourly rates required by staff classification are as outlined in the attached
schedules (pages 16 - 24). We anticipate the use of data processing during our examination, but do not
anticipate the need for an unusual amount of time from the City's data processing staff based on our
current knowledge of the City's accounting system. However, in our detail planning of the audit, we
will define any significant segment of City staff time needed in this area, if any. If selected, we
understand that payments will be made on the basis of hours of work completed during the course of the
engagement in accordance with the dollar cost bid proposal.
Our maximum fee estimates for the audits of the City, as more fully described below, are:
Total Detail
Financial Single Six
Audit Audit BAWA HCOCNTF Months
2001 $ 69,130 $39,425 $6,090 $8,060 $8,535 $7,020
2002 $ 69,130 $39,425 $6,090 $8,060 $8,535 $7,020
2003 $ 69,130 $50,225 $6,090 $8,060 $8,535 $7,020
$10,800 (GASB #34)
OPTION PERIOD FEE ESTIMATES
The two elements that have the greatest potential for influencing the option period audit costs
are the unknown recurring impact of GASB #34 on the audit process and inflation driven by the
general economy. But for these two elements, and the impact they might have on the audit hour
budget and the cost of maintaining qualified personnel, we do not anticipate adjustments to the audit
cost for the option period. However, considering the ever changing nature of reporting requirements
and thus audit requirements we believe presenting detail cost numbers for the option period would at
this time, be impracticable.
- 15 -
TILLER AND COMPANY, P.C.
BUDGETED AUDIT ENGAGEMENT TIME
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2002
STAFF BUDGETED HOURLY
DESCRIPTION LEVEL HOURS RATE
FINANCIAL AUDIT
PLANNING
PARTNER
MANAGER
GENERAL PROCEDURES
PARTNER
MANAGER
STAFF
MINUTES, CONTRACTS,
MANAGER
ORDINANCES AND LAWS
STAFF
CASH
MANAGER
STAFF
INVESTMENTS
MANAGER
STAFF
REVENUE, RECEIVABLES
AND RECEIPTS -
MANAGER
GOVERNMENTAL FUNDS
STAFF
SERVICE REVENUE AND
RECEIVABLES -
MANAGER
PROPRIETARY FUND TYPES
STAFF
EXPENDITURES FOR GOODS
AND SERVICES AND
MANAGER
ACCOUNTS PAYABLE
STAFF
PAYROLL AND RELATED
MANAGER
LIABILITIES
STAFF
INVENTORIES
MANAGER
STAFF
PROPERTY, EQUIPMENT AND
MANAGER
CAPITAL EXPENDITURES
STAFF
DEBT AND DEBT SERVICE
MANAGER
EXPENDITURES
STAFF
TRUST AND AGENCY FUNDS
MANAGER
STAFF
FUND EQUITIES
MANAGER
STAFF
GRANT AND SIMILAR
MANAGER
PROGRAMS
STAFF
-16-
16 $
25
8
21
16
8
5
8
16
8
10
15
30
15
40
10
30
5
8
2
3
10
15
10
15
10
16
3
5
25
25
140 $
95
140
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
95
75
FEE
ESTIMATE
ATSTANDARD
2,240
2,375
1,120
1,995
1,200
760
375
760
1,200
760
750
1,425
2,250
1,425
3,000
950
2,250
475
600
190
225
950
1,125
950
1,125
950
1,200
285
375.
2,375
1,875
-17-
TILLER AND COMPANY, P.C.
®
BUDGETED AUDIT ENGAGEMENT TIME
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2002
FEE
STAFF BUDGETED HOURLY
ESTIMATE
DESCRIPTION
LEVEL HOURS RATE
ATSTANDARD
INSURANCE AND SELF-
MANAGER 2
95
190
INSURANCE
STAFF 3
75
225
CAFR REVIEW
PARTNER 20
140
2,800
MANAGER 30
95
2,850
MANAGER'S REVIEW
MANAGER 25
95
2,375
PARTNER'S REVIEW
PARTNER 30
140
4,200
" TOTAL FINANCIAL AUDIT
li
543
50,175
SINGLE AUDIT
PARTNER 6
140
840
MANAGER 45
95
4,275'
STAFF 13
75
975
TOTAL SINGLE AUDIT
64
6090
BAWA AUDIT
PARTNER 9
140
1,260
MANAGER 40
95
.3,800
STAFF 40
75
3,000
TOTAL BAWA AUDIT
89
8,060
HCOCNTF AUDIT
PARTNER 9
140
1,260
MANAGER 45
95
4,275
STAFF 40
75
3,000
TOTAL HCOCNTF AUDIT
94
8535
SIX -MONTH AUDIT
PARTNER 13
140
1,820
MANAGER 35
95
3,325
STAFF 25
75
1,875
TOTAL SIX -MONTH AUDIT
73
7020
TOTAL AUDITS
863
79,880
LESS DISCOUNTED FEE FROM
STANDARD
(10,750)
MAXIMUM FEE ESTIMATE ($80 PER HOUR AVERAGE ACTUAL)
$
69,130
-17-
EXHIBIT A
CITY OF BAYTOWN
SCHEDULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
SUMMARY
Item
Quantity
Total
1.
a. 9/30/2001 Financial Audit
1 each
$
39,425
b. 9/30/2001 Single Audit
1 each
$
6,090
C. 9/30/2001 Baytown Area Water Authority Financial Audit
1 each
$
8,060
d. 5/31/2002 Harris County Organized Crime and Narcotics
Task Force
1 each
$
8,535
e. 3/31/2002 Six -Month Audit
l each
$
7,020
Total Item #1
$
69,130
2.
a. 9/30/2002 Financial Audit
1 each
$
39,425
b. 9/30/2002 Single Audit
I each
$
6,090
c. 9/30/2002 Baytown Area Water Authority Financial Audit
1 each
$
8,060
d. 5/31/2003 Harris County Organized Crime and Narcotics
Task Force
1 each
$
8,535
e. 3/31/2003 Six -Month Audit
1 each
$
7,020
Total Item #2
$
69,130
3.
" a. 9/30/2003 Financial Audit
1 each
$
50,225
b. 9/30/2003 Single Audit
1 each
$
6,090
c. 9/30/2003 Baytown Area Water Authority Financial Audit
1 each
$
8,060
d. 5/31/2004 Harris County Organized Crime and Narcotics
Task Force
1 each
$
8,535
e. 3/31/2004 Six -Month Audit
1 each
$
7,020
Total Item #3
$
79,930
Grand Total
$
218,190
C
® EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
FINANCIAL AUDIT FOR THE YEARS ENDING SEPTEMBER 30, 2001 AND 2002
HOURS HOURLY RATE TOTAL
PARTNERS 74 $ 140 $ 10,360
MANAGERS 232 95 22,040
STAFF 237 75 17,775
OTHER (specify)
Out -of Pocket expenses _
Meals and lodging _
Transportaion _
Total
Less discounted fee
Maximum fee estimate
KI I
543 .
_19-
50,175
(10,750)
$ 39,425
EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
FINANCIAL AUDIT FOR THE YEAR ENDED SEPTEMBER 30,
2003
HOURS HOURLY RATE
TOTAL
NORMAL ANNUAL BUDGET
PARTNERS
—74–S— 140 $
10,360
MANAGERS
232 95
22,040
STAFF
237 75
17,775
TOTAL. NORMAL ANNUAL
BUDGET
543 310
50,175
ADDITIONAL GASB 34
IMPLEMENTATION COST
PARTNERS
60 $ 140
8,400
MANAGERS
90 95
8,550
STAFF
- 75
-
TOTAL ADDITIONAL GASB 34
IMPLEMENTATION COST
150 310
16,950
OTHER (specify)
.Out -of Pocket expenses
_
Meals and lodging
_
Transportaion
_
Total budget
693
67,125
Less discounted fee
(16,900)
Maximum fee estimate
$
50,225
-20-
EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
SINGLE AUDIT FOR THE YEARS ENDING SEPTEMBER 30,2001, 2002 AND 2003
HOURS HOURLY RATE TOTAL
PARTNERS 6 $ 140 $ 840
MANAGERS 45 95 4,275
STAFF 13 75 975
OTHER (specify)
Out -of Pocket expenses _
Meals and lodging _
Transportaion
1w
Total
-21-
64 . $ 6,090
LJ
EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
BAYTOWN AREA WATER AUTHORITY FOR THE YEARS ENDED
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2002 AND 2003
HOURS HOURLY RATE TOTAL
PARTNERS 9 $ 140 $ 1,260
MANAGERS 40 95 3,800
STAFF 40 75 3,000
OTHER (specify)
Out -of Pocket expenses _
Meals and lodging
Transportaion _
Total 89 $ 8,060
-22-
EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
HARRIS COUNTY ORGANIZED CRIME
AND NARCOTICS TASK FORCE
FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2002 AND 2003
HOURS HOURLY RATE TOTAL
PARTNERS 9 $ 140 $ 1,260
MANAGERS 45 95 4,275
STAFF 40 75 3,000
OTHER (specify)
Out -of Pocket expenses
Meals and lodging
Transportaion
Total
-23-
94 $ 8,535
EXHIBIT B
CITY OF BAYTOWN
SCHDEULE OF PROFESSIONAL FEES, EXPENSES
FOR PROFESSIONAL AUDITING SERVICES
SIX -MONTH AUDIT FOR THE YEARS ENDING SEPTEMBER 30, 2001, 2002 AND 2003
HOURS HOURLY RATE TOTAL
PARTNERS 13-$ 140 $ 1,820
MANAGERS 35 95 3,325
STAFF 25 75 1,875
OTHER (specify)
Out -of Pocket expenses -
Meals and lodging -
Transportaion -
Total 73 $ 7,020
Rate for hours in excess of those above or for services outside the specified scope:
$80 per hour
-24-
Exhibit B: Minimum Insurance Requirements
Throughout the term of this Agreement and any extension thereof, the Company 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
Company's operations and/or performance of the work under this Agreement, whether such
operations and/or performance be by the company, its agents, representatives, volunteers,
employees or subconsultants or by anyone directly or indirectly employed by any of them, or by
anyone for whose acts any of them may be liable.
The Company's insurance coverage shall be primary insurance with respect to the City, its
officers, agents and employees, including the City. Any insurance or self - insurance maintained
by the City, its officials, agents and employees shall be considered in excess of the Company's
insurance and shall not contribute to it. Further, the Company, shall include all subconsultants as
additional insureds under its commercial general liability policies or shall furnish separate
certificates and endorsements for each subconsultant. All coverage for subconsultants shall be
subject to all of the requirements stated herein.
The following is a list of standard insurance policies along with their respective minimum
coverage amounts required in this Agreement:
Commercial General Liability (CGL)
General Aggregate: $1,000,000
Per Occurrence: $500,000
Fire Damage: $50,000
a. Coverage shall be at least as broad as ISO CG 00 01 10 93
b. No coverage shall be excluded from standard policy without notification of
individual exclusions being attached for review and acceptance.
Errors & Omissions (E &O)
Limit: $250,000
a. Claims -made form is acceptable. Coverage will be in force for two years after
services are completed and accepted by the City.
Workers' Compensation: Statutory Limits
Employer's Liability: $500,000
a. Waiver of Subrogation required
Upon execution of the Agreement, the Company 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 sixty (60) days' prior written notice has been given to the City via certified mail,
return receipt requested.
The Company shall also file with the City valid Certificates of Insurance covering all
subcontractors.
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.
➢ Liability policies will be on occurrence form.
➢ The City, its officials and employees are to be added as Additional Insured to liability
policies.
➢ 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..
➢ 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.
18 c: klh277\ HumanResources\ InsuranceRequirements \Tillerinsurance
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