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HomeMy WebLinkAboutPR 19645: ADDITIONAL FUNDING FOR INDEPENDENT AUDIT Memorandum City of Port Arthur, Texas Finance Department To: Brian McDougal, City Manager From: Jerry W. Dale, Director of Finance Date: December 19, 2016 Subject: Proposed Resolution No. 19645 BACKGROUND Resolution No. 15-133 authorized a contract with Whitley Penn, LLP to perform the annual audit of the 2015 financial statements of the City of Port Arthur, including the Port Arthur Economic Development Corporation. This contract had a not to exceed fee of$88,700 without further authorization from the City Council. Due to various factors, the audit time required increased. The audit firm experienced additional delays and the final funding to complete this process is $35,000. This proposed resolution authorizes this final contract of$123,700. BUDGETARY/FISCAL EFFECT The audit contract is funded through the Finance Department Budget. Funds in the amount of$100,000 were appropriated for this purpose. This change, totaling $35,000 has exceeded the budget for this contract. I will have to return to Council for a Budget Amendment to complete this year. P.R. NO. 19645 JWD: 12/19/16 RESOLUTION NO. A RESOLUTION AUTHORIZING ADDITIONAL FUNDING FOR THE INDEPENDENT AUDIT FOR FISCAL YEAR ENDING SEPTEMBER 30, 2015 FOR THE CITY OF PORT ARTHUR PERFORMED BY WHITLEY PENN, LLP, IN AN AMOUNT OF $35,000.00. FUNDING AVAILABLE IN FINANCE DEPARTMENT PROFESSIONAL SERVICE ACCOUNT NO. 001-1031-515.54-00 WHEREAS, pursuant to Res. 16-001, the City of Port Arthur executed a Letter of Engagement with Whitley Penn, LLP for an independent audit of all accounts of the City and the Port Arthur Economic Development Corporation; and, WHEREAS, the contract states: "The compensation for the Professional shall not exceed the estimated cost of$88,700 without further authorization from the City Council"; and, WHEREAS, due to unexpected circumstances as denoted in Mr. Breaux's letter attached as Exhibit "A", an additional $35,000.00 is needed to cover the cost of the audit. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: Section 1. That the facts and opinions in the preamble are true and correct. Section 2. That the City Manager of the City of Port Arthur is hereby authorized and directed to execute letter of understanding December 19, 2016. (attached hereto as Exhibit "A") for the additional funding at $35,000.00 for the independent audit of the City and Section 3. That the Director of Finance and the City Manager shall take such steps as to amend the budget or to obtain reimbursement of the excess costs from the City of Port Arthur Section 4A Economic Development Corporation. Section 4. That the City Manager is herein authorized to execute the Whitley Penn, LLP letter of understanding dated December 19, 2016. Section 5. That a copy of the caption of this Resolution be spread upon the Minutes of the City Council. READ, ADOPTED, AND APPROVED, this day of ,2016, AD, at a Regular Meeting of the City Council of the City of Port Arthur, Texas by the following vote: AYES: Mayor: Councilmembers: NOES: Derrick.Ford Freeman, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED AS TO FORM: Val Tizeno, City torney APPROVED FOR ADMINISTRATION: Brian McDougal, City Manager Jerry W. Dale, CPA/CGFO Finance Director AGREED TO: Whitley Penn, LLP ** Funding contingent on a budget amendment or funds to be reimbursed from EDC. O® Houston Office ▪® 3411 Richmond Avenue whitleypenn Suite 500 Houston,Texas 77046 713.621.1515 Main whitleypenn.com December 19,2016 Mr.Jerry Dale Interim Director of Finance City of Port Arthur, Texas The purpose of this letter is to request an extension of fees for the 2015 financial statement audit project of$35,000. Although we have worked hard to remain within our original estimated fees,certain circumstances have led to delays of the audit process and have caused us to go over budget. Reasons for this overage are primarily due to the staffing levels of the City's finance department and the distribution of labor when it comes to producing the ending product of audited financial statements. While the City finance department,under your leadership,has made great strides in upgrading positions, establishing sound operating procedures and ferreting out some past accounting practices that made little sense,there is still a ways to go to get the City of Port Arthur into a position of being able to produce timely reliable financial statements.While positions are being filled and distractions have been removed, your staff need to have the time to focus on their primary function of keeping the books and records of the City up to date. While your staff and your consultants have been trained and have been diligently working at producing financial statements using the current external reporting software,the software is not a package that either group(nor my group for that matter)use on a regular basis.This unfamiliarity with the software and the tremendous changes that are occurring in the governmental accounting world in association with the new standards for pension reporting as well as upcoming changes in the accounting for other post-employment benefits(retiree health care),reporting of investments,tax abatements and the like, have put the staff at a disadvantage when trying to maintain internal financial records and assemble/produce external financial reports.Ultimately,this should be the City's goal,and should develop a plan to achieve that goal in the coming years. These two factors have delayed the issuance of financial statements and have caused a series of starts and stops throughout the summer and fall.In turn,both your staff,consultants and our staff to put in more time than was originally intended. For the 2016 audit project,we recommend we assist in the preparation of the financial statements which will allow your staff to focus on their primary task at hand to prepare and maintain internal financial records. We have enjoyed working with you and your staff,and although there is a long way to go,we are impressed with how far you have come to rebuild the trust in the City's financial information. Sincerely, Chri opher L.Breaux,CPA Audit Partner An Independent Member of Dallas Fort Worth Houston NEXIA INTERNATIONAL