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HomeMy WebLinkAboutPR 11796: CPA-AUDITOR SERVICECity of Port Arthur Memorandum To: From: Date: Re: Steve Fitzgibb (~nCfi~y.~m~ager Rebecca Under~i~Y~Fqffar(qe Director May 23, 2002 ~ '" PR 11796 Recommendation I recommend that the City Council adopt Proposed Resolution 11796 which authorizes a contract for the services of Gayle W. Botley & Associates, Certified Public Accountants, as independent auditors for the City of Port Arthur for the year ending September 30, 2002. Background According to Article XII, Section 17 of the Charter of the City of Port Arthur, a CPA firm must be engaged annually to perform an audit of all accounts of the City. The scope of services includes auditing the accounts of the Economic Development Corporation. The term of the contract is one year, and will provide for the audit of the general purpose financial statements as presented in the Comprehensive Annual Financial Report and the Single Audit reports in accordance with Federal requirements. Fiscal year 2001 was the first year for the City to engage Gayle W. Botley as independent auditor. It is customary for the city to retain the same auditors for five consecutive years, the maximum the charter' allows. We find that this allows us to keep costs consistent and improve efficiency. Budgetary Effect This contract calls for interim billings, not to exceed a maximum of $55,000. Funding is provided in the 2002-2003 proposed budget for the Finance Department for this annual expense. The fee for the 2001 audit was $51,700. The fee increase of $3,300 is related to increased hours that are required due to the dissolution of the Park Central Municipal Utility District. The fiscal year 2003 audit will be more costly due to changing requirements dictated by Government Accounting Standards Board Statement 34. GASB 34 requires expanded reporting which will require additional audit work. The standard is effective for the 2003 fiscal year. P.R. 11796 5/22/02 JJA RESOLUTION NO. A RESOLUTION AUTHORIZING A CONTRACT FOR THE SERVICES OF GAYLE W. BOTLEY & ASSOCIATES, CERTIFIED PUBLIC ACCOUNTANTS, AS INDEPENDENT AUDITORS FOR THE CITY OF PORT ARTHUR FOR THE YEAR ENDING SEPTEMBER 30, 2002 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: THAT the City Manager of the City of Port Arthur is hereby authorized and directed to execute on behalf of the City of Port Arthur a contract between the City and Gayle W. Botley & Associates, Certified Public Accountants, for an independent audit of all City accounts and the Port Arthur Economic Development Corporation for the fiscal year ending September 30, 2002, as described in Exhibit "A"; and THAT a copy of said contract is attached hereto and made a part hereof as Exhibit "A"; and, THAT a copy o£the caption of this resolution be spread upon the Minutes of the City Council. READ, ADOPTED, AND APPROVED, this day of May , 2002, A.D., at a Regular Meeting of the City Council of the City of Port Arthur, Texas by the following vote: AYES: Mayor: Councilmembers: NOES: Mayor ATTEST: Jan Stroder, Acting City Secretary APPROVED AS TO FORM: Mark Sokolow, City Attomey APPROVED FOR ADMINISTRATION: Stephen Fitzgibbons, City Manager PROVED AS TO AVAILABILITY OF FUNDS: Rebecca Underhill, Finance Director STATE OF TEXAS * * COUNTY OF JEFFERSON * EXHIBIT "A" PROFESSIONAL SERVICES CONTRACT This instrument is a contract between Gayle W. Botley & Associates, 4749 Twin City Highway, Suite 280, Port Arthur, Texas telephone number 962-1040, whose primary business is to practice Public Accountancy in the State of Texas, hereinafter denoted as "Professional", and the City of Port Arthur, hereinafter denoted as "City". SCOPE OF SERVICES/PRICE: This contract authorizes Professional to perform professional services as described in Exhibit "A- l''. The compensation for the Professional shall not exceed the estimated costs $55,000 without further authorization of the City Council. TERM: The maximum term of this agreement shall be the lesser of (a) one year, (b) when the project described in Exhibit "A-I" is completed or (c) when the professional is terminated under the "Termination of Professional" clause. PROGRESS REPORTS: The professional shall provide progress reports as reasonably requested by the City's Representative. PERSONNEL OF PROFESSIONAL: a. Audit Manager/Senior Management Professional shall designate Gayle W. Botley as Audit Manager. Any change of Audit Manager shall require thirty (30) days advance written approval of the City's Representative. CONTRACT Page 1 of 7 b. Licensed/Registered Professional Professional shall keep a full time person who is duly licensed or certified to perform the services as described in Exhibit "A-l" on staff for this audit. c. Data on Professional's Employees The Professional has provided the City a detailed resume of the senior or key personnel that will be assigned to the audit. d. Rejection of Professional's Employees The City reserves the right to approve or reject from the audit any employees of the Professional. DESIGNATION OF OWNER (CITY'S) REPRESENTATIVE AND DUTIES THEREOF: a. The City Manager or his designee shall act as City's Representative. The City's Representative shall use his best efforts to provide City records for Professional's usage on this audit. STANDARDS OF PERFORMANCE: The Professional shall perform all services under this Agreement in accordance with the standards of the profession specializing in the scope of services as described in Exhibit "A-1 ". b. Codes and Standards (1) Professional agrees the services it provides as an experienced and qualified provider will reflect the professional standards, procedures, and performances common in the industry. (2) Professional agrees to and shall indemnify and hold harmless City, its 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 attorney's fees, for injury to or death of any person, or for damage to any property, arising out of or in connection with the work done by Professional under this contract, such indemnity shall only apply where the claims, losses, damages, causes of action, suits or liability arise from the negligence of Professional. CONTRACT Page 2 of 7 SCHEDULE: The Professional shall not proceed with the audit or any stage thereof until written notice to proceed is provided by the City's representative. The audit schedule will commence as detailed in Exhibit "A-2". INSURANCE: A. The Professional shall procure and maintain insurance in the amounts listed below for protection from claims under Worker's Compensation, claims for damages because of bodily injury, including personal injury, and from claims or damages because of injury to or destruction of property including loss of use resulting therefrom. The Professional shall provide a copy of the insurance certificate to the City. Coverage Limit of Liability Worker's Compensation Statutory for Worker's Compensation Employer's Liability Bodily Injury by Accident $1,000,000 (Each Accident) Bodily Injury by Disease $1,000,000 (Policy Limit) Bodily Injury by Disease $1,000,000 (Each Employee) Commercial General: Including Broad Form Coverage, Contractual Liability, Bodily and Personal Injury, and Completed Operations Bodily Injury and Property Damage, Combined Limits of $500,000 each Occurrence and $1,000,000 aggregate (defense costs excluded from face amount of policy) CONTRACT Page 3 of 7 b. The Professional shall maintain professional liability (errors and omissions/malpractice) insurance in the amount orS1,000,000. The Professional shall provide a copy of his insurance policy to the City within 10 days of contract execution or this contract shall be null and void. A deductible is acceptable for professional liability insurance and the deductible limits shall not exceed $250,000. c. The Professional shall give the City thirty (30) days notice prior to any change or cancellation of these insurance policies. LIABILITY: The Professional shall be liable only for the services performed by the Professional and shall be responsible for only the negligent acts or omissions that the Professional has direct control over. SUB-CONSULTANTS AND SUB-CONTRACTORS: The Professional shall receive written approval of the City's Representative prior to the use of sub-consultants and/or sub-contractors. TERMINATION OF PROFESSIONAL: The City retains the right to terminate the contract "at will" and to pay only for the professional services and sub-consultant's and subcontractor's costs that were provided for and/or that were committed to and that were City approved prior to the termination. RECORDS: At the City's request, the City will be entitled to review and receive a copy of all documents that indicate work on the project. BILLINGS: The City will process interim progress billings and shall have up to thirty (30) days to pay bills. All bills must demonstrate in detail the services completed. REPUTATION IN THE COMMUNITY: The Professional shall retain a high reputation in the Community for providing professional services. The Professional shall forward a copy of any current petition or complaint which (a) asserts more than $50,000 for errors or omissions in providing professional services and/or ((b) seeks to deny the Professional from practicing in Texas. CONTRACT Page 4 of 7 PAYROLLS AND BASIC RECORDS: The Professiona} shall maintain payrolls and basic payroll records during the course of the contract work and shall preserve them for a period of three years from the completion of the contract for all personnel working on the contract. Such records shall contain the name and address of each such employee, social security number, correct classification, hourly rates of wages paid, daily and weekly number of hours worked, deductions made, and actual wages paid. The records to be maintained under paragraph (a) of this clause shall be made available by the Professional for inspection, copying, or transcription by the City or their authorized representatives. The Professional shall permit such representatives to interview employees during working hours on the job. DEFAULT OF PROFESSIONAL: If the Professional refuses or fails to prosecute the work or any separable part, with the diligence that will insure its completion within the time specified in this contract, or fails to complete the work within this time, the City may, by written notice to the Professional, terminate the right to proceed with the work (or the separable part of the work) that has been delayed. In this event, the City may take over the work and complete it by contract or otherwise, and may take possession of and use any records necessary for completing the work. The Professional shall be liable for any damage to the City resulting from the Professional's refusal or failure to complete the work within the specified time, whether or not the Professional's right to proceed with the work is terminated. This liability includes any increased costs incurred by the City in completing the Professional's work. b. The Professional shall not be charged with damages under this clause if, O) The delay in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the Professional. Examples of such causes include (i) acts of God or of the public enemy, (ii) acts of the Government in either its sovereign or contractual capacity, (iii) acts of another contractor or Professional in the performance of a contract with the Government, and/or extended review or approvals by government agencies out of the control of the Professional, (iv) acts of fire, (v) floods, (vi) epidemics, (vii) quarantine restrictions, (viii) strikes, (ix) freight embargoes, (x) unusually severe weather, or (xi) delays of subcontractors or suppliers at any tier arising from unforeseeable causes beyond the control and without the fault or negligence of the Professional; and CONTRACT Page 5 of 7 (2) The Professional, within 10 days from the beginning of any delay (unless extended by the City's Representative), notifies the City's Representative in writing of the causes of delay. The City's Representative shall ascertain the facts and the extent of delay. If, in the judgment of the City's Representative the findings of fact warrant such action, the time for completing the work shall be extended. The findings of the City's Representative shall be final and conclusive on the parties, but subject to appeal to City Council. The rights and remedies of the City in this clause are in addition to any other rights and remedies provided by law or under this contract. APPLICABLE LAW: This contract has been made under and shall be governed by the laws of the State of Texas. The parties agree that performance and all matters related thereto shall be in Jefferson County, Texas. NOTICES: Notices shall be mailed to the addresses designated herein or as may be designated in writing by the parties from time to time and shall be deemed received when sent postage prepaid U.S. Mail to the following addresses: CITY: City of Port Arthur Attention: City Manager 444 4th Street Port Arthur, Texas PROFESSIONAL: Gayle W. Botley & Associates 4749 Twin City Highway, Suite 280 Port Arthur, Texas 77642 CONTRACT Page 6 of 7 WAIVER: No waiver by either party hereto of any term or condition of this agreement shall be deemed or construed to be a waiver of any.other term or condition or subsequent waiver of the same term or condition. This Agreement represents the entire and integrated agreement between City and Professional mad supersedes all prior negotiations, represcntations or agreements, either written or oral. This agreement may only be amended by written instrument approved and executed by the parties. The City of Port Arthur and Professional, accept and agree to these terms. SIGNED ON THE day of ,2002. Attest: BY: Gayle W. Botley SIGNED ON THE day of ., 2002. CITY OF PORT ARTHUR, TEXAS Attest: BY: Steve Fitzgibbons, City Manager Acting City Secretary Jan Stroder CONTRACT Page 7 of 7 c/word/resolutions/Botley Contract Gay W. Bot y & Assoc tes Certified Publ~ A~countants Member of AICPA May21,2002 EXHIBIT "A-l" 'Supporting your Finar~ial Growth To the Honorable Mayor and Members of the City Council City of Port Arthur, Texas We are pleased to confirm our understanding of the services we are to provide for the City of Port Arthur for the year ended September 30, 2002. We will audit the City of Port Arthur, Texas' combined financial statements, and its combining and individual fund financial statements for the year ended September 30, 2002. Also, the document we submit to you will include the following: · Schedule of expenditures of federal awards · Park Central Municipal Utility District as part of the City of Port Arthur as an additional Water Fund These will be subjected to the auditing procedures applied in our audit of the financial statements. We will assist the City in ensuring that the CAFR meets the requirements of the Certificate of Achievement for Excellence in Financial Reporting Award Program sponsored by the Government Finance Officers Associations (GFOA). The objective of our audit is the expression of an opinion as to whether the financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. The objective also includes reporting on the City of Port Arthur's compliance with laws and regulations and the provisions of contracts and grant agreements and its internal controls as required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Our 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 OMB Circular A-133, and will include tests of the accounting records of the City of Port Arthur and other procedures we consider necessary to enable us to express such an opinion and to render the required Single Audit reports. If our opinion on the financial statements or the Single Audit compliance opinion is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or unable to express an opinion, we may decline to express an opinion or may not issue a report as a result of this engagement. 4749 Turn oty H~oy, Suite 280 Port Arthur, ~ 77642 gbo~~et (409) 962-1040 (800) 416-8757 City of Port Arthur Engagement Letter Page 2 The management of the City of Port Arthur is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that federal awards programs are managed in compliance with applicable laws and regulations and the provisions of contracts and grant agreements. In planning and performing our audits for the year ended September 30, 2002, we will consider the internal control sufficient to plan the audit in order to determine the nature, timing and extent of our auditing procedures for the purpose of expressing our opinions on the City of Port Arthur's financial statements and on its compliance with requirements applicable to major programs. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on the internal control and, accordingly, no opinion will be expressed. We will perform tests of controls, as required by OMB Circular A-133, to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each of the City of Port Arthur's major federal awards programs. Our tests will be less in scope than would be necessary to render an opinion on these controls and, accordingly, no opinion will be expressed. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we u(ill inform the governing body or audit committee of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by OMB Circular A- 133. City of Port Arthur Engagement Letter Page 3 Identifying and ensuring that the City of Port Arthur complies with laws, regulations, contracts and agreements, including grant agreements, is the responsibility of the City of Port Arthur's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City of Port Arthur's compliance with applicable laws and regulations and the provisions of contracts and agreements, including contract agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion. Our audit will be conducted in accordance with the standards referred to in the second paragraph. OMB Circular A-133 requires that we plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB's compliance supplement. The purpose of these procedures will be to express an opinion on the City of Port Arthur's compliance with requirements applicable to major programs. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions related to federal award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that a material misstatement may exist and not be detected by us. In addition, an audit is not designed to detect errors, fraud, or other illegal acts that are immaterial to the financial statements or to major programs. However, we will inform the appropriate level of management and governing body of any material errors and any fraud that comes to our.attention. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. City of Port Arthur Engagement Letter Page 4 Management is responsible for making ail financial records and related information available to us. We understand that you will provide us with such information required for our audit and that you are responsible, for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individuaily and in the aggregate, to the financial statements taken as a whole. 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 finding should be available for our review prior to December 20, 2002. We understand that your employees will assist us with the tasks outlined in our proposal. The workpapers for this engagement are the property of Gayle W. Botley & Associates and constitute confidential information. However, we may be requested to make certain workpapers available to various federal and state funding agencies providing grants or contracts pursuant to authority given to it by law or regulation. If requested, access to such workpapers will be provided under the supervision of Gayle W. Botley & Associates' personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to various federal and state 'funding agencies providing grants or contracts. These various federal and state funding agencies may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. We expect to begin our audit with interim work in August, 2002 and to issue our reports prior to January l0t 2003. Our fee for these services will be at our standard hourly rates except that we agree that our gross fee, including expenses, will not exceed $55~000. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. In accordance with our firm policies, work may be suspended if your account becomes 30 days or more overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for nonpayment, you will be obligated to compensate us for all time expended through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. City of Port Arthur Page 5 Engagement Letter Government Auditing Standards requires that we provide you with a copy of our most recent quality control review report, which is attached to this engagement letter. We appreciate the opportunity to be of service to the City of Port Arthur and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign both enclosed originals and return one to us. Very truly yours, ~ Botley & Associates RESPONSE: This letter correctly sets forth the understanding of the City of Port Arthur. Only one signature required. By: Title: Date: By: Title: Date: City of Port Arthur, Texas Schedule of Professional Hourly Rates 2001-2002 Financial Statement Audit Partners/Principal $9O Managers 65 Staff 55 Clerical 25 "Exhibit A-2" Time Requirements Schedule for 2002 Fiscal Year Audit. Each of the following should be completed by the auditor no later than the dates indicated. 1. Interim Work The auditor shall complete interim work by September 3, 2002. 2. Detailed Audit Work Plan The auditor shall provide City by September 3 both a detailed audit plan and a list of all schedules to be prepared by the City. 3. Fieldwork The auditor shall complete all fieldwork by November 27, 2002. 4. Draft Reports The auditor shall have drafts of the audit report and recommendations to management available for review by the City Manager and the Director of Finance by December 20, 2002. Entrance Conferences, Progress Reporting and Exit Conferences. At a minimum, the following conferences should be held by the dates indicated on the schedule. Entrance Conference with the Director of Finance and all key Finance Department personnel The purpose of this conference will be to discuss prior audit problems and the interim work to be performed. This meeting will also be used to establish overall liaison for the audit and to make arrangements for work space and other needs of the auditor. Week of July 29, 2002 Progress conference with the Director of Finance August 2, 2002 The purpose of this meeting will be to summarize the results of the preliminary review and to identify the key internal controls or other matters to be tested. Progress conference with the Director of Finance September 3, 2002 The purpose of this meeting will be to summarize the results of interim fieldwork, and prepare for the year end close. Exit conference with Director of Finance and City Manager January 6, 2003 The purpose of this meeting will be to summarize the results of the field work and to review significant findings. Date Final Report is due The Director of Finance shall prepare draft financial statement, notes and all required supplementary schedules and statistical date by November 15, 2002. The auditor shall provide all recommendations, revisions and suggestions for improvement to the Director of Finance by December 6, 2002. A revised report, including a draft auditor's report shall be delivered to the Director of Finance by December 20, 2002. The final report and 150 signed copies should be delivered to the Director of Finance at City Hall, 444 Fourth Street, Port Arthur, Texas by January 10, 2003. Single Audit Reports The reports required by the Single Audit Act Amendments of 1996 and OMB Circular A-133 will be delivered to the Director of Finance no later than March 7, 2003.