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HomeMy WebLinkAboutPR 21124: APPROVAL OF LETTE OF ENGAGEMENT WITH WEAVER AND TIDWELL, LLP City of `` ttiort rthu�~ Texas www.PortArthurTx.gov INTEROFFICE MEMORANDUM Date: October 15, 2019 To: The Honorable Mayor and City Council Through: Ron Burton, Interim City Manager From: Kandy Daniel, Interim Finance Director RE: P.R. 21124—Approval of Letter of Engagement with Weaver and Tidwell, LLP Introduction: Request approval for the City Manager to execute a letter of engagement with Weaver and Tidwell, LLP to perform auditing services for the City of Port Arthur for the fiscal year ending 2019. Background: Article XII, Section 17 of the Charter of the City of Port Arthur requires that a CPA firm be engaged annually to perform an independent audit of all accounts of the City. The scope includes the accounts of the Economic Development Corporation. The term of the letter of engagement is one year with the option to renew for four(4) additional years 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. Weaver and Tidwell, LLP was selected through a competitive RFQ process. This firm's personnel are experienced in governmental audits, and meet all continuing education and quality review requirements. Budget Impact: The contract has a projected budgetary impact of$132,000 and funds are available in the Finance Department professional services account no. 001-1031-515-54-00. Recommendation: The attached Proposed Resolution No. 21124 authorizes the City Manager to execute a letter of engagement with Weaver and Tidwell, LLP to perform auditing services for the City of Port Arthur for the fiscal year ending 2019. We recommend that the City Council approve it as presented. "Remember,we are here to serve the Citizens of Port Arthur" P.O.Box 1089 X Port Arthur,Texas 77641-1089 X 409.983.8101 X FAX 409.982.6743 P.R. 21124 KD 10/15/19 RESOLUTION NO. A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A LETTER OF ENGAGEMENT WITH WEAVER AND TIDWELL, LLP, AS INDEPENDENT AUDITOR FOR THE CITY OF PORT ARTHUR WITH A PROJECTED BUDGETARY IMPACT OF $132,000 FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2019. FUNDING IS AVAILABLE IN THE FINANCE DEPARTMENT PROFESSIONAL SERVICES ACCOUNT #001-1031-515.54-00. 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 an engagement letter between the City of Port Arthur and Weaver and Tidwell, LLP, for an independent audit of all accounts of the City and the Port Arthur Economic Development Corporation for the fiscal year ending September 30, 2019, 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 of the caption of this resolution be spread upon the Minutes of the City Council. READ,ADOPTED,AND APPROVED, this day of October,2019, 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: Thurman"Bill" Bartie, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED AS TO FORM: / AV al Tizeno, Cit Attorne, APPROVED FOR ADMINISTRATION: Ron Burton, Interim City Manager APPROVED AS TO AVAILABILITY OF FUNDS: k CALF 6._,,,_ D C Kandy Dan , Interim Finance irector EXHIBIT "A" eve aver Austin I Conroe I Dallas I Fort Worth I Houston Los Angeles I Midland I New York City I San Antonio Assurance•Tax•Advisory October 10, 2019 The Honorable Mayor and Members of City Council and Management City of Port Arthur,Texas 444 4th Street Port Arthur, Texas 77640 Dear Honorable Mayor and Members of City Council and Management: You have requested that we audit the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Port Arthur, Texas (the City), as of September 30, 2019 and for the fiscal year then ended, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. In addition, we will audit the City's compliance over major federal and state award programs for the period ended September 30, 2019. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Accounting principles generally accepted in the United States of America (U.S. GAAP), as promulgated by the Governmental Accounting Standards Board (GASB) require that management's discussion and analysis and budgetary comparison information, among other items, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the required supplementary information (RSI) in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS). These limited procedures will consist primarily of inquiries of management regarding their methods of measurement and presentation, and comparing the information for consistency with management's responses to our inquiries. We will not express an opinion or provide any form of assurance on the RSI.The following RSI is required by U.S. GAAP. This RSI will be subjected to certain limited procedures but will not be audited: 1. Management's Discussion and Analysis 2. Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual-General Fund 3. Schedule of Changes in the Net Pension Liabilities and Related Ratios-Texas Municipal Retirement System 4. Schedule of Contributions-Texas Municipal Retirement System 5. Schedule of Changes in the Net Pension Liabilities and Related Ratios- Fireman's Retirement and Relief Fund 6. Schedule of Contributions-Fireman's Retirement and Relief Fund 7. Schedule of Changes in Total OPEB Liability and Related Ratios - Texas Municipal Retirement System Supplemental Death Benefit Fund 8. Schedule of Changes in Net OPEB Liability and Related Ratios- Retiree Health Care Plan Weaver and Tidwell, L.L.P. 1406 Wilson Road,Suite 100 I Conroe, Texas 77304 Main:936.756.8127 I Fax:936.756.8132 CPAs AND ADVISORS I WEAVER.COM City of Port Arthur,Texas October 10, 2019 Page 2 Supplementary information other than RSI will accompany the City's basic financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the basic financial statements and certain additional procedures, including comparing and reconciling the supplementary information to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and additional procedures in accordance with auditing standards generally accepted in the United States of America. We intend to provide an opinion on the following supplementary information in relation to the basic financial statements as a whole: 1. Schedule of Expenditures of Federal and State Awards 2. Combining and Individual Fund Financial Statements and Schedules 3. Discretely Presented Component Unit Fund Statements Also, the document we submit to you will include the following other additional information that will not be subjected to the auditing procedures applied in our audit of the basic financial statements: 1. Introductory Section 2. Statistical Section Audit Objectives The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material aspects, in conformity with U.S. GAAP and to report on the fairness of the supplementary information referred to above when considered in relation to the basic financial statements as a whole. The objective also includes reporting on internal control related to the basic financial statements and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the basic financial statements in accordance with Government Auditing Standards issued by the Comptroller General of the United States of America (GAGAS); and internal control over compliance related to major programs and an opinion (or disclaimer of opinion) on compliance with federal and state statutes, regulations, and the terms and conditions of federal and state awards that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and Texas Uniform Grant Management Standards. We cannot provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions, add emphasis-of-matter, or other-matter paragraphs. If our opinions on the basic financial statements or compliance are other than unmodified,we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or withdraw from this engagement. City of Port Arthur,Texas October 10, 2019 Page 3 Auditor Responsibilities We will conduct our audit in accordance with U.S. GAAS, the standards applicable to financial audits contained in GAGAS;and the provisions of the Uniform Guidance and Texas Uniform Grant Management Standards.Those standards and the Uniform Guidance and Texas Grant Management Standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the basic financial statements.The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the basic financial statements,whether due to error,fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the basic financial statements. If appropriate,our procedures will therefore include tests of documentary evidence that support the transactions recorded in the accounts, tests of the physical existence of assets, and direct confirmation of cash, investments, and certain other assets and liabilities by correspondence with creditors and financial institutions. As part of our audit process,we may request written representations from your attorneys, and they may bill you for responding. At the conclusion of our audit, we will also request certain written representations from you about the basic financial statements and related matters. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements or noncompliance (whether caused by errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations) may not be detected exists, even though the audit is properly planned and performed in accordance with U.S. GAAS and GAGAS. 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 basic financial statements. However,we will inform the appropriate level of management of any material errors, fraudulent financial reporting, or misappropriation of assets that comes to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. In making our risk assessments, we consider internal control relevant to the City's preparation and fair presentation of the basic financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the basic financial statements that we have identified during the audit. As part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we will perform tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants that could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions is not an objective of our audit, and accordingly,we will not express such an opinion. City of Port Arthur, Texas October 10, 2019 Page 4 Our audit of the City's major federal and state award program(s) compliance will be conducted in accordance with the requirements of the Single Audit Act,as amended;and the provisions of the Uniform Guidance and Texas Uniform Grant Management Standards;and will include tests of accounting records, a determination of major programs in accordance with the Uniform Guidance and Texas Uniform Grant Management Standards, and other procedures we consider necessary to enable us to express such an opinion on major federal award program compliance and to render the required reports. We cannot provide assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion or withdraw from the engagement. The Uniform Guidance and Texas Uniform Grant Management Standards requires that we also plan and perform the audit to obtain reasonable assurance about whether the City has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major federal and state award programs. Our procedures will consist of determining major federal and state programs and performing the applicable procedures described in the U.S.Office of Management and Budget OMB Compliance Supplement and Texas Uniform Grant Management Standards for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. The purpose of those procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance and Texas Uniform Grant Management Standards. Also, as required by the Uniform Guidance and Texas Uniform Grant Management Standards, we will perform tests of controls 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's major federal and state award programs. However, 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 in our report. We may from time to time, and depending on the circumstances, use third-party service providers in serving your account.We may share confidential information about you with these service providers, but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures, and safeguards to protect the confidentiality of your personal information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. In the event that we are unable to secure an appropriate confidentiality agreement,you will be asked to provide your consent prior to the sharing of your confidential information with the third-party service provider. Furthermore,we will remain responsible for the work provided by any such third-party service provider. Management's Responsibilities Our audit will be conducted on the basis that management and City Council acknowledge and understand that they have responsibility: a. For the preparation and fair presentation of the basic financial statements in accordance with accounting principles generally accepted in the United States of America; b. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of basic financial statements that are free from material misstatement, whether due to error fraudulent financial reporting,misappropriation of assets,or violations of laws, governmental regulations, grant agreements, or contractual agreements; c. For safeguarding assets; City of Port Arthur, Texas October 10, 2019 Page 5 d. For identifying all federal and state awards expended during the period including federal and state awards and funding increments received prior to December 26, 2014, and those received in accordance with the Uniform Guidance and Texas Uniform Grant Management Standards generally received after December 26, 2014; e. For preparing the schedule of expenses of federal and state awards (including notes and noncash assistance received) in accordance with the Uniform Guidance and Texas Uniform Grant Management Standards; f. For the design, implementation, and maintenance of internal control over compliance; g. For identifying and ensuring that the City complies with laws, regulations, grants, and contracts applicable to its activities and its federal and state award programs; h. For following up and taking corrective action on reported audit findings from prior periods and preparing a summary schedule of prior audit findings; i. For following up and taking corrective action on current year audit findings and preparing a corrective action plan for such findings; j. For submitting the reporting package and data collection form to the appropriate parties; k. For making the auditor aware of any significant vendor relationships where the vendor is responsible for program compliance; I. To provide us with: i. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the basic financial statements, and relevant to federal and state award programs, such as records, documentation, and other matters; ii. Additional information that we may request from management for the purpose of the audit; and iii. Unrestricted access to persons within the City from whom we determine it necessary to obtain audit evidence. m. For including the auditor's report in any document containing basic financial statements that indicates that such basic financial statements have been audited by the City's auditor; n. For adjusting the basic financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the current year under audit are immaterial, both individually and in the aggregate, to the basic financial statements as a whole; o. For confirming your understanding of your responsibilities as defined in this letter to us in your management representation letter; and p. With respect to any nonaudit/nonattest services we perform, for (a) making all management decisions and performing all management functions; (b) assigning an individual with suitable skills, knowledge, and experience, preferably within senior management, to oversee the services; (c) evaluating the adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the services performed;and (e) establishing and maintaining internal controls, including monitoring ongoing activities. These nonaudit/nonattest services do not constitute an audit under GAGAS and such services will not be conducted in accordance with GAGAS. The entity has designated Mrs. Kandy Daniel, Interim Finance Director, to oversee these services. Nonaudit services are: i. Preparation of the financial statements and related notes ii. Assisting with entries to convert to accrual accounting iii. Preparation of the data collection form City of Port Arthur, Texas October 10, 2019 Page 6 q. With regard to the supplementary information referred to above: (a) for the preparation of the supplementary information in accordance with the applicable criteria; (b) to provide us with the appropriate written representations regarding supplementary information; (c) to include our report on the supplementary information in any document that contains the supplementary information and that indicates that we have reported on such supplementary information; and (d) to present the supplementary information with the audited basic financial statements, or if the supplementary information will not be presented with the audited basic financial statements, to make the audited basic financial statements readily available to the intended users of the supplementary information no later than the date of issuance by you of the supplementary information and our report thereon. During the course of our engagement, we will request information and explanations from management regarding the City's operations, internal controls, future plans, specific transactions and accounting systems and procedures. At the conclusion of our engagement, we will require, as a precondition to the issuance of our report, that management provide certain representations in a written representation letter.The City agrees that as a condition of our engagement to perform an audit that management will, to the best of its knowledge and belief, be truthful, accurate and complete in all representations made to us during the course of the audit and in the written representation letter. The procedures we perform in our engagement and the conclusions we reach as a basis for our report will be heavily influenced by the written and oral representations that we receive from management. False or misleading representations could cause us to expend unnecessary efforts in the audit; or, worse, could cause a material error or a fraud to go undetected by our procedures. Reporting We will issue a written report upon completion of our audit of the City's basic financial statements. Our report will be addressed to the governing body of the City. In accordance with the requirements of GAGAS, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance over financial reporting will not be an objective of the audit and, therefore, no such opinion will be expressed. We will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the City's major federal and state award programs, and a report on internal controls over compliance that will report any significant deficiencies and material weaknesses identified; however, such report will not express an opinion on internal control. Engagement Fees We estimate that the fee for our audit will be $132,000. The fee estimate is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. We understand that your employees will prepare all confirmations we request and will locate any documents or support for any other transactions we select for testing. Our engagement fees do not include any time for post-engagement consultation with your personnel or third parties, inquiries from regulators or testimony or deposition regarding any subpoena. Charges for such services will be billed separately. City of Port Arthur, Texas October 10, 2019 Page 7 Our engagement fees do not include consulting on the adoption of new accounting standards and any increased duties because of any future regulatory body, auditing standard or an unknown or unplanned significant transaction. We will consult with you in the event any of these take place that may affect our fees. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. Our fee is based upon the complexity of the work to be performed and the tasks required. Payments are due in compliance with the Texas Local Government Code. Other In the unlikely event that circumstances occur which we in our sole discretion believe could create a conflict with either the ethical standards of our firm or the ethical standards of our profession in continuing our engagement,we may suspend our services until a satisfactory resolution can be achieved or we may resign from the engagement. We will notify you of such conflict as soon as practicable, and will discuss with you any possible means of resolving them prior to suspending our services. The hiring of or potential employment discussions with any of our personnel could impair our independence. Accordingly, you agree to inform the engagement partner prior to any such potential employment discussions taking place. Both of us agree that any dispute between you and Weaver and Tidwell, L.L.P., arising from the engagement, this agreement, or the breach of it, may, if negotiations and other discussions fail, be first submitted to mediation in accordance with the provisions of the Commercial Mediation Rules of the American Arbitration Association (AAA) then in effect. Both of us agree to conduct any mediation in good faith and make reasonable efforts to resolve any dispute by mediation. We agree to conduct the mediation in Houston, Texas or another mutually agreed upon location. If any term of this engagement letter is declared illegal, unenforceable, or unconscionable, that term shall be severed and the remaining terms of the engagement letter shall remain in force. Both of us agree that the Court should modify any term declared to be illegal, unenforceable, or unconscionable in a manner that will retain the intended term as closely as possible. If a dispute arising from the engagement or from this agreement or any term of it or any alleged breach of it is submitted to a Court for interpretation or adjudication, both of us irrevocably waive right to trial by jury and agree that the provisions of this engagement letter regarding damages,attorneys' fees, and expenses shall be applied and enforced by the Court. You agree to inform us of facts that may affect the financial statements of which you may become aware during the period from the date of the auditor's report to the date the financial statements are issued. During the course of the engagement, we may communicate with you or your personnel via fax or e-mail, and you should be aware that communication in those mediums contains a risk of misdirected or intercepted communications. Greg Peterson is the engagement partner for the audit services specified in this letter. His responsibilities include supervising our services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report. We expect to begin our audit procedures in November 2019, and issue our report in March 2020. City of Port Arthur, Texas October 10, 2019 Page 8 The audit documentation for this engagement is the property of Weaver and Tidwell, L.L.P.and constitutes confidential information. However, we may be requested to make certain audit documentation available to regulators and federal agencies and the U.S. Government Accountability Office pursuant to authority given to it by law or regulation, or to peer reviewers. If requested, access to such audit documentation will be provided under the supervision of Weaver and Tidwell, L.L.P.'s personnel. Furthermore, upon request, we may provide copies of selected audit documentation to these agencies and regulators.The regulators and agencies may intend,or decide,to distribute the copies of information contained therein to others, including other governmental agencies. We agree to retain our audit documentation or work papers for a period of at least five years from the date of our report. It is expected that prior to the conclusion of the engagement, sections of the Data Collection Form will be completed by our firm. The sections that we will complete summarize our audit findings by federal grant or contract. Management is responsible to submit the reporting package (defined as including basic financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditor's reports, and corrective action plan) along with the Data Collection Form to the federal audit clearinghouse. The instructions to the Data Collection Form require that the reporting package be an unlocked, unencrypted, text searchable portable document file (PDF) or else it will be rejected by the Federal Audit Clearinghouse. We will be available to assist management in creating the PDF if needed. We will coordinate with you the electronic submission and certification upon the reporting package completion. If applicable, we will provide copies of our report for you to include with the reporting package if there is a need to submit the package to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of our reports or nine months after the end of the audit period. During the course of the audit, we may observe opportunities for economy in, or improved controls over, your operations. We will bring such matters to the attention of the appropriate level of management, either orally or in writing. In accordance with the requirements of GAGAS, we have attached a copy of our latest external peer review report of our firm for your consideration and files. Please sign and return the attached copy of this letter to indicate your acknowledgment of, and agreement with, the arrangements for our audit of the basic financial statements and compliance over major federal award programs including our respective responsibilities. We appreciate the opportunity to be your financial statement auditors and look forward to working with you and your staff. WEAVER AND TIDWELL, L.L.P. City of Port Arthur,Texas October 10, 2019 Page 9 RESPONSE: This letter correctly sets forth the understanding. Acknowledged and agreed on behalf of the City of Port Arthur,Texas by: Signature: Title: Date: Signature: Title: Date: