Ordinance No. 11,618ORDINANCE' NO. 11,618
AN ORDINANCE OF T14E CITY COUNCIL OF THE CITY OF BAYTOWN, TFXAS,
AtJ'ITIORIZiNG AND DIRECTING HE CITNMANAGERTO EXECUTE AND THIECITY
CLERK TO ATTEST TO AN AGREEMENT FOR AUDITING SERVICES WITH BELT
HA RRIS P11CI-IACEK, LI-I.P; AUTFICRIZING PAYM F NTIN AN AMOUNT NOT TO EXCEED
NINF"TY-SIX 1TIOUSAND TWO HUNDRED THIRTY-FIGHT AND NO1100 DOI-LARS
($96,238.00); MAKING OTHER PROVISIONS RELATLD'1111,RETO; AND PROVIDING 17OIZ
THE I" FF EC TIVE DATE THEREOF.
BE IT ORDAINED BY THE CITY COUNCIL CAF '1111-'CITY OFBAYTOWN,TEXAS:
Section 1: That the City Council ofthe City ofBaylown,Texas, hereby authorizes and directs the City
Manager to execute and the City Clerk to attest to an Agreement Im Auditing Services with Belt Harris Pechaeck,
A copy of said Agreement is attached hereto, marked 1,`xhibit "A," and made a part hereof for all intents and
purposes,
Section 2: That the City Council of` the City of Baytown hereby aLithari7es payment to Bell Harris
Pechacek, LLLP, for the first year of the contract in an aniount not to exceed NINETY-SIXTHOUSANDTWO
HUNDRED Tf ]IRTY-EIGHT AND NO/100 DOLLARS ($96,238.00) pursuant to the agreement authorized in
Section I hereof.
Section 3: That the City Manager is hereby granted general authority to approve a decrease or ail
increase in costs by'FWENTY-FIVE THOUSAND AND NO/I00 DOLT. ARS ($25,000,00) or less, provided that the
amount authorized in Section 2 hereof may not be increased by more than twenty' -five percent (25%).
Section 4: This ordinance sliall take effiect fininediately from and after its passage by the City Council of
the City of Baytown..
INTRODUCED, READ, and PASSED by the allirmative vote of the City QZncil of the City ofBaylown,
this the 14"' day of April, 2011. 11 �/ r !
FIEN H. DONCARLOS, Mayor
A1-17:
BkYSCl-L-'Cifv C
APPROVI".1D, AS TO FORM:
. . . ... ....... .
4 CIO RAMIREZ, SR., Ci , ttorney
RAaren'Xiles'40ty Couricil\Ordinances�201 1"April 14't,NtitliorizeAti(liting(,'oiitrict.(Ioc
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 Hands
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 and all related entities, for the fiscal years ending September 30, 2010, 2011, and 2012,
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, 2010, 2011, and 2012, 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) Nos. 104 -111, commonly
referred to as the Risk Assessment Standards, which:
expands the quality and depth of the auditor's required understanding of the entity and
its environment, including its internal control;
D requires the auditor to assess the risks of material misstatements at the financial
statement level and at the assertion level on all audits based on the understanding
obtained;
➢ eliminates the "default to maximum" for control risk, which should encourage testing
of controls;
➢ emphasizes importance of the entity's risk assessment process;
➢ strengthens the linkage between assessed risks and the auditor's responses to those
risks;
Aw=ent for Financial Auditing Services. Page 1
D clarifies the auditor's ability to rely on audit evidence gathered in prior audits;
strengthens guidance for testing disclosures;
➢ clarifies and expands guidance on evaluating audit findings; and
expands documentation requirements.
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.
Q.
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, plus travel and other out -of- pocket
costs:
Base Services
i 2010
2011 2012 I
Financial Audit (9/3o)
S 45,460
S 45,460 S 45,460
Single Audit ase moo)
i __. 2 741
_ 2,741 i 2,741 f
!Sin IcAudit–MajorProgram 1 9n( o)
_
51451
5,451 5,451
Single Audit – Major Program 20 (9/3o)
S,4S1 ;
5,451 ! 5,451
__Sin_ lg a Audit_ Ma or Program 3! (9r3o). _ _�
_ 5,451 !
v5,451 ! S,4S 1
-2,836
MDD (9r3o)
I 2,836 ;
2,936 -
BAWA (9130)
I 6.989 i
6,989 i 6,989 '
Six -month Audit (Agm ed upon ProcW=)
I 8,376 i
8,376 8,376
! _ (3/31)
I Total
S $2,755
S 82,755 S M755
*Major Grant Programs, which are generally programs in which over $300,000
is expended during the fiscal
year, are required to be tested as major programs. Auditor's fees are based on the number of major programs.
The number of programs is not known at this time, but three programs have been listed for illustrative purposes.
Oetioeal Services 2010 2011 1 2012 !
I PrVa_raUonofCity'sCAFR•• _8x989 8,989 8,989
' PreparationofBAWA'sAFR ; _ _ 4494
Total _ — _ _ 513 f183 i _ 813 483 $13,483
**Includes basic preparation of report (MD&A and transmittal narrative to be provided by the City, as well as
specific data). Optional continuing disclosure section not included.
The Auditor shall invoice the City each month as work progresses. The City shall, in turn,
pay the Auditor for its services actually performed within 30 days after receipt of an invoice or
receipt of services, whichever is later.
ASMM aft for Financial Auditing Services. Page 2
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 JOINT OR 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 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 ofany 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 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.
ASreement for Financial Auditing Services Page 3
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 ofthis 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 ofaction ofevery kind
and character, including the cost of defense thereof, for any injury to or death ofany 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.
Vl.
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
anyone directly or indirectly employed by any of them, or by anyone for whose acts any ofthem 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:
1. Commercial General Liability
■ General Aggregate: $1,000,000
■ Per Occurrence: $500,000
• Coverage shall be at least as broad as ISO CO 00 01 10 93
• No coverage shall be deleted from standard policy without notification of
individual exclusions being attached for review and acceptance.
Aamment for Financial Auditing Services Page 4
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"
3. 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.
The following are general requirements applicable to all policies:
AM Best Rating of A -; Vll or better.
D 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.
Agreement for Financial Auditing Services, Page 5
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:
1. 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,
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.
Agreement for Financial Auditing 5`etvi_ces. Page 6
IX.
Contingency
It is expressly understood and agreed by both the Auditor and the City that this Agreement for
fiscal years 2011 and 2012 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 ofthe 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 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
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
Agreement for Financial Auditing Services. Page 7
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.
Severabiiity
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 ofthe parties relating to the subject matter hereof
and is the full and final expression of the agreement between the parties.
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.
Aaiee_ement for Financial Auditing Services, Page 8
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 , 2011.
CITY OF BAYTOWN, TEXAS
ROBERT D. LEIPER, City Manager
ATTEST:
LETICIA BRYSCH, City Clerk
APPROVED AS TO FORM:
IGNACIO RAMIREZ, SR., City Attorney
BELT HARRIS PECHACEK, LLLP, a
Texas Limited Partnership
B gt—ru RLL--
ROBERT BELT, CPA
General Partner
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 lim ited 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 , 2011.
CAI--'�. 8:53V'Q.
Notary Public in and for the State of Texas
Ll uax3 uoi l
SM.L10 Blois N •;
S ol7m sm
*'�vQ* CHARLES WDUPH FLMIES
R :�katenNFiles�Contmcts`Auditing Sen iccstiBch Harris Auditing Services Agrccmcnt 2011- 12.doc H No Public. State of TOM
� commission Expires 10-25 -2012
Aercement for Financial Auditing Semices. Page 9
Exhibit "A"
The Auditor shall provide the following auditing services for the years ended September 2010, 2011
and 2012. Specifically, the Auditor shall audit the financial statements of the governmental
activities, the business -type activities, each major fund, component units (MDD, CCPD, TIRZ,
FCPEMSD, and BAWA), and the aggregate remaining fund information, which collectively
comprise the basic financial statements, of the City as of and for the years ended September 30,
2010, 2011, and 2012. The Auditor will also audit separately issued financial statements for BAWA
in conformity with TCEQ reporting guidelines.
The Auditor shall ensure that the required supplementary information ("RSI"), such as management's
discussion and analysis ( "MD &A'l accompanies the City s basic financial statements. The Auditor
will apply certain limited procedures to the City's RSI, including Management's discussion and
analysis ( "MD &A'J. These limited procedures will consist principally of inquiries of Management,
which as used herein shall mean the City /General Manager and his designees, regarding the methods
of measurement and presentation, which the Management is responsible for affirming in its
representation letter. The following RSI is required by generally accepted accounting principles and
will be subjected to certain limited procedures, but will not be audited:
I. Management's Discussion and Analysis
2. Budgetary Comparison Schedules
The Auditor shall subject the following supplementary information to the auditing procedures
applied in its audit of the basic finance statements and will provide an opinion on it in relation to the
basic financial statements.
1. Schedule of Federal Expenditures and Awards
In addition to these services and included in the fees specified in Article If of the Agreement,
the Auditor shall:
a. Provide routine advisory services through phone calls, conferences or otherwise in
connection with incidental matters arising during the year;
b. Draft the financial statements, including the Management's decision and Analysis with
input from Management;
c. Print and bind the financial reports and provide an electronic pdf copy via e-mail and/or
CD of all reports;
d. Handle correspondence from grantor, regulatory or oversight agencies related to the
audit; and
Exhibit "A." Page t
e. Make the annual financial report conveniently accessible on the Auditor's website for
affiliated organizations to view; provided such organizations accept a standard legal
disclaimer notification.
2. Audit Objectives
The objective of the audit is the expression of an opinion as to whether the financial
statements are fairly presented in all material respects, in conformity with U.S. generally
accepted accounting principles and to report on the fairness of the additional information
referred to in the first paragraph when considered in relation to the financial statements taken
as a whole. The objective also includes reporting on the following:
a. Internal control related to the financial statements and compliance with laws, regulations,
and the provisions of contracts or grant agreements, noncompliance with which could
have a material effect on the financial statements in accordance with Government
Auditing Standards; and
b. Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations, and the provisions of contracts or grant agreements
that could have a direct and material effect on each major program in accordance with the
Single Audit Act Amendments of 1996 and OMB Circular A- I33,Audits ofStates, Local
Governments and Non -Profit Organizations.
The reports on internal control and compliance will each include a statement that the report is
intended for the information and use of the audit committee, Management, specific
legislative or regulatory bodies, federal awarding agencies, and, if applicable, pass - through
entities and is not intended to be and should not be used by anyone other than these specified
parties.
The Auditor's audit will be conducted in accordance with U.S. generally accepted auditing
standards; the standards for financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States; the Single Audit Act Amendments of
1996; and the provision of OMB Circular A -133, and will include tests of accounting
records, a determination of major program(s) in accordance with Circular A -133, and other
procedures the Auditor considers necessary to enable it to express such an opinion and to
render the required reports. If the Auditor's opinion on the financial statements or the Single
Audit compliance opinion is other than unqualified, the Auditor willfully discuss the reasons
with the City or the appropriate component unit 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 an opinion or to issue a report as a result of this contract.
3. Management Responsibilities
Management is responsible for establishing and maintaining internal controls, including
monitoring ongoing activities for the selection and application of accounting principles; for
Exhibit "A," Page 2
the fair presentation in the financial statements of the respective financial positions of the
governmental activities, the business -type activities, the aggregate discretely presented
component units, each major fund and the aggregate remaining fund information of the City
and the respective changes in financial position and, where applicable, cash flows in
conformity with the U.S. generally accepted accounting principles; and for federal award
program compliance with applicable laws and regulations and the provision of contracts and
grant agreements. Management is responsible for the basic financial statements and all
accompanying information as well as all representations contained therein.
Management is responsible for its decisions and functions. As part of the audit, the Auditor
will prepare a draft of the financial statements, schedule of expenditures of federal award and
related notes. In accordance with Government Auditing Standards, the City will be required
to review and approve those financial statements prior to their issuance and shall have the
responsibility to be in a position in fact and appearance to make informed judgment on those
financial statements. Further, the City is required to designate a qualified management -level
individual to be responsible and accountable for overseeing the Auditor's services.
The City shall be responsible for the design and implementation at of programs and controls
to prevent and detect fraud and for informing the Auditor about all known or suspected fraud
or illegal acts affecting the government involving (1) management, (2) employees who have
significant roles in internal control, and (3) others where the fraud or illegal acts could have a
material effect on the financial statements. The City's responsibilities include informingthe
Auditor of its knowledge of any allegations of fraud or suspected fraud affecting the
government received in communications from employees, former employees, grantors,
regulators or others. In addition, the City is responsible for identifying and ensuring that the
entity complies with applicable laws, regulations, contracts, agreements and grants.
Additionally, as required by OMB circular A -133, it is Management's responsibility to
follow up and take corrective action on reported audit findings and to prepare a summary
schedule of prior audit findings and a corrective action plan. The summary schedule of prior
audit findings should be available for the Auditor's review prior to the beginning of the
Auditor's fieldwork.
Management is responsible for establishment and maintenance of a process for tracking the
status of audit findings and recommendations. Management is also responsible for
identifying previous audits of other engagements or studies related to the audit objectives
identified hereinabove. This responsibility includes relaying to the Auditor corrective actions
taken to address significant findings and recommendations resulting from those audits or
other engagements or studies. The City is also responsible for providing Management's
views on the Auditor's comments findings, conclusions and recommendations as well as its
planned corrective actions, and the timing and format related thereto.
4. 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 oftransactions to be examined and the areas to be tested. The Auditor will plan and
Exhibit "A." Page 3
perform the audit to obtain reasonable rather than absolute assurance about whether the
financial statements are free of material misstatements, whether from (i) errors, (ii)
fraudulent financial reporting, (iii) misappropriation of assets, or (iv) violations of laws or
government regulations that are attributable to the entity or to acts by Management or
employees acting on behalf of the entity. Because the determination of abuse is subjective,
Government Auditing Standards do not expect auditors to provide reasonable assurance of
detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because
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. 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 City and /or its
component units of any material errors and any fraudulent financial reporting or
misappropriation of assets that comes to the Auditor's attention. The Auditor will also
inform the City and/or its component units of any violations of laws or governmental
regulations that come to the Auditor's attention, unless clearly inconsequential. The Auditor
will include such matters in the reports required for a Single Audit. The Auditor's
responsibility is limited to the period covered by the audit and does not extend to any later
periods for which the Auditors are not engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions
recorded in the accounts, and may include tests of the physical existence of inventories, and
direct confirmation of receivables and certain other assets and liabilities by correspondence
with selected individuals, creditors, and financial institutions. The Auditor will request
written representations from the City's attorneys as part of the engagement through the City
Attorney. At the conclusion of the audit, the Auditor will also require certain written
representations about the financial statements and related matters from the City and/or its
component units.
S. Audit Procedures - Internal Controls
The audit will include obtaining an understanding of the entity and its environment,
including internal control, sufficient to assess the risks of material misstatement of the
financial statements and to design the nature, timing, and extent of further audit procedures.
Tests of controls may be performed to test the effectiveness of certain controls that 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 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 OMB Circular A -133, the Auditor will perform tests of controls to evaluate
the effectiveness of the design and operation of controls that the Auditor considers relevant
Exhibit "A.- Page 4
to preventing or detecting material noncompliance with compliance requirements applicable
to each major federal award program. However, the Auditor's tests will be less in scope that
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 OMB Circular A-
133.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. 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 professional standards -- Government Auditioning Standards and OMB
Circular A -133.
6. Audit Procedures — Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, the Auditor will perform tests ofthe City's and its component unit's
compliance with applicable laws and regulations and the provisions of contracts and
agreements, including grant agreements. However, the objective of those procedures will not
be to provide an opinion on overall compliance, and the Auditor will express no such opinion
in our report on compliance issued pursuant to Government Auditing Standards.
Pursuant to OMB Circular A -133, the Auditor shall plan and perform the audit to obtain
reasonable assurance about whether the City and its component units have complied with
applicable laws and regulations and the provisions of contracts and grant agreements
applicable to major programs. The Auditor's procedures will consist of test of transactions
and other applicable procedures described in OMB Circular A -133 Compliance Supplement
for the types of compliance requirements that could have a direct and material effect on each
ofthe City's major programs. The purpose ofthese procedures will be to express an opinion
on the City's compliance with the requirements applicable to each of its major programs in
the report on compliance issued pursuant to OMB Circular A -133.
7. Audit Administration.
The Auditor will complete the appropriate sections of and sign the Data Collection Form that
summarizes its audit findings. The Auditor will provide copies of the report to the City;
however, it is Management's responsibility to submit the reporting package along with the
Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass -
through entities. The Data Collection Form and the reporting package must be submitted
within the earlier of 30 days after receipt of the Auditor's report or nine months after the end
of the audit period, unless a longer period is agreed to in advance by the cognizant or
oversight agency for audits. The Auditor will provide information to Management as to
where the reporting packages should be submitted and the number to submit.
The audit documentation which the Auditor generates for the audits to be performed pursuant
to this Agreement shall be the property of the Auditor. Workpapers generated by the City
and/or its component units in conjunction with the audit shall remain property of the City
and/or it component units.
Exhibit "A;' Page 3
The audit documentation for the audits to be performed pursuant to this Agreement shall
constitute confidential information. However, pursuant to applicable laws and/or regulations
the Auditor may be required to make certain audit documentation available to Oversight
Agency for Audit 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 must notify the
City of any request for audit documentation. If required, access to audit documentation will
be provided under the supervision of Robert Belt. Furthermore, the Auditor may, ifrequired
by law or regulation, provide copies of selected audit documentation to the aforementioned
parties.
The Auditor shall retain audit documentation for the audits performed under this Agreement
for a minimum of five years after the report release or for any additional period requested by
the Oversight Agency for Audit. If a federal awarding agency, pass - through entity, or auditee
is contesting an audit finding, the Auditor will contact the parties contesting the finding for
guidance prior to destroying the audit documentation.
Exhibit "A." Page 6