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Home My WebLink AboutPR 11974:EDC COMPLIANCE AUDITinteroffice MEMORANDUM To: Mayor, City Council, City Manager From: Mark T. Sokolow, City Attorney /~ ~ / Date: October 10, 2002 Subject: P. R. No. 11974; Council Meeting of October 15, 2002 Attached is P. R. No. 11974 approving a compliance audit to be performed by Gayle W. Botley & Associates. JSR/jb Attachment cc: Director of Finance Economic Development Corporation Jim wimberly z.prl 1974.merao P. R. No. 11974 lO/lO/02 jb RESOLUTION NO. A RESOLUTION APPROVING A COMPLIANCE AUDIT TO BE PERFORMED BY GAYLE W. BOTLEY & ASSOCIATES AND AUTHORIZING THE CITY MANAGER TO EXECUTE AN ADDENDUM WHEREAS, the City and Gayle W. Botley & Associates entered into a Professional Services Contract for an audit, signed on June 7, 2002 and approved per Resolution No. 02-162, WHEREAS, Gayle W. Botley & Associates submitted a letter attached as Exhibit ~A" delineating a need for an addendum as to address comments on possible conflict of interest and possible non- compliance by companies who received loans or grants from the Port Arthur Section 4A Economic Development Corporation; and WHEREAS, the City Council deems it in the public's best interest to authorize an addendum to address these issues. NOW THEREFORE, OF PORT ARTHUR: Section 1. true and correct. Section 2. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY That the facts and opinions in the preamble are Gayle W. Botley & Associates will do a compliance audit on the following: (1) Compliance by companies who received loans or grants from the'Section 4A Economic Development Corporation with (1) purchases of equipment, land, supplies and construction of improvements as delineated in z.pr11974 grant/loan agreements, and (2) hiring of employees per the schedules in the contracts. This review shall include but not be limited to a ~elineation of the total amount of payroll expended by the company for employees hired under the economic incentive contracts as well as the number of Port Arthur residents hired; (2) Review of the bills submitted to the Port Arthur Section 4A Economic Development Corporation by the companies to see if they comply with the grant/loan agreements and to determine if the bills were paid in compliance with the terms of the agreements as well as the terms of the approving resolutions; (3) Review the names and affiliates of investors in the companies as to denote if there are any conflicts of interest as to either the approval process of the loans/grants or as to the performance of the contracts; and (4) To do such other tasks as are deemed necessary by Gayle w. Botley & Associates to address his concerns in Exhibit ~A". Section 3 Gayle W. Botley is herein authorized to consult with the City Attorney and is further authorized to consult with the Auditor's attorney Richard M. Forrest, Attorney at Law at a cost to be paid by the City as further delineated in Exhibit "B". Use of said attorneys will not waive the attorney client privilege. z.prl 1974 Section 4. The hourly rates of Gayle W. Botley & Associates will be as delineated in Exhibit ~B" with an estimated additional cost not to exceed $ 45,000, before returning to Council for additional authorization if needed. Section 5. Gayle W. Botley & Associates will endeavor in good faith to complete this compliance audit by January 6, 2003 Section 6. Gayle W. Botley & Associates will sign this Resolution agreeing to the terms thereof. Section 7. The Economic Development Corporation is herein requested to immediately pay or reimburse the costs of the audit as they are approved by the Director of Finance. Section 8. The City Manager will send a copy of this Resolution to the companies that have signed economic incentive agreements with the Section 4A Economic Development Corporation. Said notice shall include a request that the company produce the documents and respond to the requests of Gayle W. Botley so that a determination can be made as to whether they are in compliance with the terms of their agreements. Section 9 Gayle W. Botley & Associates has also indicated that if he discovers illegalities or irregularities that materially and directly impact the financial statements of the City, he will not issue an unqualified opinion on the financial statements. This is due to the fact that the Economic Development Corporation is considered a component part of the City for accounting purposes as it pertains to the audit. z,prl 1974 Section 10. The City Manager is herein authorized to execute an addendum to incorporate the terms of this Resolution, such addendum to be approved as to form by the City Attorney. Section 11. be spread upon the Minutes of the City Council. READ, ADOPTED AND APPROVED on this __ day of , A.D., 2002, at a Regular Meeting of the City Council of the City of Port Arthur, Texas, by the following vote: AYES: Mayor , City Council , That a copy of the caption of this Resolution NOES: ATTEST: OSCAR ORTIZ, MAYOR EVANGELINE GREEN, CITY SECRETARY APPROVED AS TO FORM: ~K V. SOKOLOW, CfTY' ATTOR/~EY APPROVED FOR ADMINISTRATION: STEVE FITZGIBBONS, CITY MANAGER z.prl 1974 APPROVED AS REBECCA UNDERHILL DIRECTOR OF FINANCE Interim Account # 001-1031-515.54-00 Proposed EDC Account ~120-1429-582.54-00 TO THE AVAILABILITY OF AGREED TO: z.prl 1974 EXHIBIT '"A" Gayle W. Botley Associates Certified Public Accountants Member of AICPA September'27, 2002 'Supporting Your Fina.z~al Growth~ TO the Honorable Mayor, City Council Members And City Manager City of Port Arthur, Texas This letter is to alert you that it is a strong possibility that we may need to add an addendum to our original audit engagement letter dated May 21, 2002. · As I discussed recently in a meeting with Mr. Stephen Fitzgibbons, the recent comments and accusations stirring in the media about conflict of interest and non-compliance of the Port Arthur Economic Development Corporation's (EDC) grants may cause us to extend our scope and procedures. I am of the opinion that further testing and reviewing of the EDC's records is needed as soon as possible. I/anderstand there is an agenda item for the Council meeting on Tuesday, October 1, 2002 to consider hiring a CPA firm to conduct'a compliance audit of the EDC's past and current practices and procedures. This includes the eligibility to receive grants, awarding of grants and monitoring of grants. If these issues are not included in this current proposal, I highly recommend these issues be addressed immediately. I believe it is urgent for Council to decide on an approach to have tk, a EDC records undergo a compliance audit. Also, I recommend council refrain from approving the disbursement of additional EDC grant funds until the EDC compliance audit is complete. I want to be very clear on this matter with the Council. Regardless of the additional work performed by another firm or consultants, we may still need to add significant time to our audit based on our professional judgement. Additionally, if wrongdoing is discovered, due to the nature of auditors' ethical and legal obligations we may need to consult with our legal counsel. Our legal counsel charges would be billed to the City of Port Arthur. Again, this is an alert letter to inform you about the strong possibility of additional time and cost may need to be added to our engagement due to the controversy surrounding the EDC. Our additional costs would be billed to you at our current hourly billing rates. Please notify me as soon as possible in writing about the approach Council intends to take in handling this matter. Sincerely, ~7'~. Botley & ~ssociates-'~''''~'~ 4749 Twin Oity Hwy, suite 280 Port Arthur, rIX. 77642 (4o9) 962-1o4o fax(409)962-0668 [800) 416-8757 EXHIBIT "B" CITY OF PORT ARTHUR SCHEDULE OF PROFESSIONAL HOURLY PATES EDC COMPLIANCE AUDIT Partners/Principal $125 Managers $ 85 Staff $ 75 Clerical $ 25 Auditor's Attorney $225