HomeMy WebLinkAboutPR 14633: EDWARDS & FONTENOTE - AUDIT CONTRACTCity of POYt A~th u~
Memorandum
To: Steve Fitzgibbons, City Manag~
From: Rebecca Underhill, Finance Dir$cysr
Date: March 28, 2008 ~°
Re: PR 14633
Recommendation
I recommend that the City Council adopt Proposed Resolution 14633 which authorizes a contract
for the services of Edwards and Fontenote, LLP, Certified Public Accountants, as independent
auditors for the City of Port Arthur for the year ending September 30, 2008.
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 iricludes
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: ,
In 2006 the City requested proposals from qualified accounting firms and Edwards and Fontenote
were awarded the contract for fiscal 2006. The firm has agreed to a contract not to exceed
$57,000, again this year. It is customazy 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 $ 57,000. Funding is provided
in the 2008-2009 proposed budget for the Finance Department for this annual expense.
P.R. 14633
3/28/08 JJA
RESOLUTION NO.
A RESOLUTION AUTHORIZING A CONTRACT FOR THE _
SERVICES OF EDWARDS AND FONTENOTE, LLP,
CERTIFIED PUBLIC ACCOUNTANTS, AS INDEPENDENT
AUDITORS FOR THE CITY OF PORT ARTHUR FOR THE
YEAR ENDING SEPTEMBER 30, 2008
BE IT RESOLVED BY THE CITY COUNCIL OFTHE 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 Edwards and
Fontenote LLP, 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,
2008, 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 April. , 2008, 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:
Terri Hanks, Acting City Secretary
APPROVED AS TO FORM:
~~ ~~~_
Mark Sokolov, City Attorney
APPROVED FOR ADMINISTRATION:
Stephen Fitzgibbons, City Manager
APPROVED AS TO AVAILABILITY OF FUNDS:
_ ~
Rebecca Underhill, Finance Director
7:\Finance\Resolu[ionsSResol utionsW uditocdoc
EXHIBIT "A"
STATE OF TEXAS
COUNTY OF JEFFERSON
PROFESSIONAL SERVICES CONTRACT
This instrument is a contract betveen Edwards and Fontenote, LLP, 4349 Crow Road Suite B
Beaumont. Texas telephone number 924-9100,. 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-
1". The compensation for the Professional shall not exceed the estimated costs $57,000 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-1" is complefed 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 Mitchell F. Fontenote, CPA 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-1" 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 ieject from the audit any
employeesaf the Professional.
DESIGNATION OF OWNER (CITY'Sl REPRESENTATIVE AND DUTIES THEREOF•
a. The City Manager or his designee shall act as City's Representative.
b. The City's Representative shall use his best efforts to provide City
records for Professional's usage on this audit.
STANDARDS OF PERFORMANCE:
a. ' 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 Standazds
(1) Professional agrees the services it provides as an experienced
and qualified provider will reflect the professional standazds,
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, azising 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 isprovided 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
Workei 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)
Commercial General:
Including Broad Form
Coverage, Contractual
Liability, Bodily and
Personal Injury, and
Completed Operations
Bodily Injury by Disease
$1,000,000 (Each Employee)
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 of $1,000,000. 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
ofsub-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 ahd sub=consultant'sand 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.
P
CONTRACT
Page 4 of_7
PAYROLLS AND BASIC RECORDS:
a. The Professional 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.
b. The records to be maintained under paragraph (a) of this clause shall 6e 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:
a. 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,
(1) ~ 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.
c. 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 laces 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: Finance Director
P. O. Box 1089
Port Arthur, Texas 77641
PROFESSIONAL:
James R. Edwards
Edwazds and Fontenote, LLP
4349 Crow Road, Suite B
Beaumont, Texas 77706
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 and supersedes all prior negotiations, representations or agreements, either written or
oral. This agreement may only be amerided 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 , 2008.
BY: .~~~~G.ty
Mitc Fontenote
Attest:
SIGNED ON THE -day of , 2008.
CITY OF PORT ARTHUR, TEXAS
BY:
Steve Fitzgibbons, City Manager
Attest:
Terri Hanks
Acting City Secretary
CONTRACT
Page 7 of 7
EXHIBIT "A-1"
Ec.~warc.~s ~ Font~not~, LLP
C~Yt~f~~~ PL>;b1~~ A~~ou~~t~~zts
4
March 18, 2008
Honorable Mayor and City Council
City ofPort Arthur -
Port Arthur, Texas
We are pleased to confirm our understanding of the services we are to provide the City of Port
Arthur (the City) for the year ended September 30, 2008. We will audit the fmancial statements
of the governmental activities, the business-type activities, the aggregate discretely presented
component units, each major fund,. and the aggregate remaining fund information, which
collectively comprise the entity's basic fmancial statements, of the City of Port Arthur as of and
for the year ended September 30, 2008. Accounting standards generally accepted in the United
States provide for certain 'required supplementary information (RSI), such as management's
discussion and analysis (MD&A), to accompany the Commission's basic fmancial statements.
As a part of our engagement, we will apply certain limited procedures to the Commission's RSI.
These limited procedures will consist principally of inquiries of management regarding the
methods of measurement and presentation, which management is responsible for affirming to us -
in its representation letter. Unless we encounterproblems with the presentation of the RSI or
with procedures relating to it, we will disclaim an opinion on it. The following RSI is required
by generally accepted accounting principles and will be subjected to certain limited procedures,
but will not be audited:
1. Management's Discussion and Analysis
2. Statement of Revenues and Expenditures -Budget and Actual (GAAP) -General Fund
Supplementary information other than RSI, such as combining and individual fund financial
statements; also accompanies The Commission's basic financial statements. We will subjectahe
following supplementary information to the auditing procedures applied in ouraudit ofthe..basic
fmancial statements and we will provide an opinion in relation to the basicfinancial statements:
1. Schedule of Expenditures of Federal Awards
2. :Combining and Individual Fund Information
3. Other Supplementary Information
The following additional information accompanying the basic fmancial statements will not be
subjected 20 the auditing procedures applied in our audit of the fmancial statements,-and .for
.which ourauditor's report will disclaim an opinion.
L .Introductory Section
2.. "Statistical Section
4349 Crow Road, Suite B • Beaumont, Texas, 77706
Phone (409) 924-9100 • Fax (409) 924-0990 -.
Honorable. Mayor and City Council
City of Port Arthur
Page 2
March 18, 2008
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic fmancial
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 basic fmancial statements taken as a
whole. The objective also includes reporting on:
1. Internal control related to the financial statements and compliance with the provisions of
applicable laws, regulations, contracts, agreements, and grants, noncompliance with
which could have a material effect on the financial statements in accordance with
Government Auditing Standards.
2. Intemal 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-133, Audits of States, 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 awazding 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. -
Our 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
provisions ofOMB CircularA-133, and will include tests ofaccounting records, a determination
of major program(s) in accordance with Circular A-133, and other procedures considered
necessary to enable us to express such opinions and to render the required reports. If our
opinions on the financial statements or the Single Audit compliance opinions are other than
unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we aze
unable to complete the audit or are unable to form or have not formed opinions, we may decline
to express opinions or to issue a report as a result of this engagement.
Management Responsibilities
Management is responsible for establishing and maintaining internal controls, including.
monitoring ongoing activities; for the selection and application of accounting principles; for the
fair presentation in the fmancial statements of the respective financial position of the
governmental activities, the business-type activities, each major fund, and the aggregate
remaining fund information of the Commission and the respective changes in financial position.
and, where applicable, cash flows in conformity with U.S. generally-accepted accounting.
principles; and for federal awazd program compliance with applicable laws and regulations. and
the. provisions of contracts and grant agreements. Management is responsible for the. basic
fmancial statements and all accompanying information as well as all representations contained
thereiri.
Honorable Mayor and City Council
City ofPort Arthur
Page 3
March 18, 2008
Management Responsibilities (Continued)
You are responsible for management decisions and functions. You will prepare your financial
statements, schedule of expenditures of federal awards, and related notes. In accordance with
Government Auditing Standazds, you will be required to review and approve those fmancial
statements prior to their issuance and have a responsibility to be in a position in fact and
appearance to make an informed judgment on those financial statements.' Further, you are
required to designate a qualified management-level individual. to be responsible and accountable
for overseeing our services.
Management is responsible for making all fmancial records and related information available to
us, including any significant vendor relationships in which the vendor has the responsibility for
program compliance and the accuracy and completeness of that information. Management's
responsibilities include 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 individually and in the aggregate, to the fmancial statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent and
detect fraud, and for informing us 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 fmancial
statements. Your responsibilities include informing us of your knowledge of any allegations of
fraud or suspected fraud or illegal acts- affecting the government received in communications
from employees, former employees,. grantors, regulators, or others. In addition, you are
responsible for identifying and ensuring that the entity complies with applicable laws and
regulations and for taking timely and appropriate steps to remedy any fraud, illegal acts, _
violations of contracts or grant agreements, or abuse that we may report. 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
fmdings and a corrective action plan.
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
for us previous audits or other engagements or studies related to the objectives discussed in the
Audit Objectives section of this letter. This responsibility includes relaying to us corrective
actions taken to address significant findings and recommendations resulting from those audits or
other engagements or studies. You are also responsible for providing management's views on
our current findings, conclusions, and recommendations, as well as your planned corrective
actions and the timing and format related thereto.
Honorable Mayor and City Council
City of Port Arthur
Page 4
March 18, 2008
Audit Procedures -General
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 from (1) errors, (2) fraudulent fmancial reporting, (3)
misappropriation of assets, or (4) violations of laws or governmental 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 ofdetecting abuse. -
Because an audit is designed to provide reasonable, but not absolute assurance and because we
will not perform ~ a detailed examination: of all transactions, there is a risk that material
misstatements or noncompliance may exist and not be detected by us. 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;. we will inform you of any material errors and any fraudulent financial reporting or
misappropriation of assets that come to our attention. We will also inform you ofany violations
of laws or governmental regulations that -come to our attention, unless clearly inconsequential:.
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 any laterperiods for'
which we are. riot 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 fmancial 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 ofour audit, we will also require certain written representations from
you about the financial statements and related matters.
Audit Procedures -Internal Controls
Our audit will include obtaining an understanding of internal conttol sufficient to plan the audit
in order to determine the nature, timing, and extent ofour auditing procedures to be performed:
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, ifperformed, will be less in scope that would be necessary to render an opinion on internal
control-and, accordingly,. no opinion. will be expressed in our report on intemal control issued
pursuant to Government Audit Standards.
Honorable Mayor and City Council
City of Port Arthur
Page-5
March 18, 2008
Audit Procedures -Internal Controls (Continued)
As required by OMB Circular A-t33, we will perform tests of controls over compliance to
evaluate the effectiveness of the design and operation of controls that we consider relevant to
major federal award program. However our tests will be less in scope than would. be necessary
to render an opinion on those controls and; accordingly, no opinion will be expressed in our
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, we will communicate to management and those charged
with governance internal control related matters that are required to be communicated under
professional standards, GovernmentAuditing Standards, and OMB Circular A-133.
Audit Procedures -Compliance
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 grant
agreements. However; the objective of those procedures will not be to provide an opinion on
overall compliance and we will not express such an opinion in our report on compliance issued -
pursuant to Government Auditing Standards. -
OMB Circulaz.A-133 requires that we also plan and perform the audit to obtain reasonable
assurance about whether the auditee has complied with applicable laws and regulations and the
provisions ofcontracts and grant agreements applicable to majorprograms. Our procedures will
consist of the applicable .procedures described in the OMB Circular A-133 Compliance
Supplement for the types of compliance requirements that could have a direct and material effect
on each ofthe City ofPort Arthur's major programs. The purpose ofthose procedures will be to
express an opinion on the City of Port Arthur's compliance with requirements applicable to each
of its major programs in our report on compliance issued pursuant to OMB Circular A-133.
Audit Administration, Fees, and Other
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 ofyour information and we
will take reasonable precautions to determine that they have appropriate procedures in place to
prevent. the unauthorized release ofyour 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 confideritiat information with the third-party service
provider. Furthermore, we will remain responsible for the work provided by any such third-party
service providers.
0
1
Honorable Mayor and City Council
City of Port Arthur
Page 6 _
March 18, 2008
Audit Administration, Fees, and Other (Continued)
We understand. that your employees will prepare all cash, accounts receivable, or other
confirmations we request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the
Data Collection Form that summarizes our audit findings. We will provide copies of our reports -
to the City of Port Arthur; however, it is management's responsibility to submit the reporting
package (including financial statements, schedule of expenditures of federal awards, summary
schedule of prior audit findings, auditors' reports, and a corrective action plan) 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 auditors' reports 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. At the conclusion of the engagement, we will provide information to management as to
where the reporting packages should be submitted and the number to submit.
The audit documentation for this engagement is the property of Edwards &Fontenote, LLP and
constitutes confidential information. However, pursuant to authority given by law or regulation,
we may be requested to make certain audit documentation available to state and federal agencies
or its designee, a federal agency providing direct or induect funding, or the U.S.
Government Accountability Office for purposes of a quality review of the audit, to resolve audit
findings, or to carry our oversight responsibilities. We will notify you ofany such request. If
requested, access to such audit documentation will be provided under the supervision of Edwards
& Fontenote, LLP's personnel. Furthermore, upon request, we may provide copies of selected
audit documentation to the aforementioned parties. These parties may intend, or decide, to
distribute the copies or information contained therein to others, including other governmental
agencies.
The audit documentation far this engagement will be retained for a minimum of five years after
the report release or for any additional period requested by the state or federal agency, or its
designee. If we are aware that a federal awarding agency, pass-through entity, or auditee is
contesting an audit finding, we will contact the party contesting the audit finding for guidance
prior to destroying the audit documentation.
t
Honorable Mayor and City Council
City of Port Arthur
Page 7
March 18, 2008
Audit Administration, Fees, and Other (Continued)
We expect to begin our audit approximately August, 2008 and to issue our reports no later than
Januazy 31, 2009. This date is contingent upon .having the information available in a timely
manner in order to complete our audit: Our fee for these services will be at our standard hourly
rates plus out-of-pocket costs (such as report reproduction, word processing; postage, travel,
copies, telephone, etc.) except that we agree that our gross fee, including expenses, will not
exceed $57;000. Our standard hourly rates vary according to the degree of responsibility
involved and-the experience level ofthe 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, our engagement will be deemed to have been completed upon
written notification of termination, even if we have not completed our'report(s). -You will be
obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs
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.
Government Auditing Standards require that we provide you with a copy of our most recent _ .
external peer review report and any letter of comment, and any subsequent peer review reports
and letters of comment received during the period of the contract. Our 2005 peer review report
accompanies this 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 the enclosed copy and reiurn it to us.
Very truly~y~ours~,/~~~ y/~~
~~ J~~LLtiL~U-~-~/ ~ G~c~
Edwards & Fontenote, LP
Certified Public Accountants
RESPONSE:
This letter correctly sets forth the understanding of the City of Port Arthur.
By:
Title:.
Date:
:Robert D. Goldstein, CPA
26113 :',ugusla Dricc • Suite I IOII • Houston. TX 77057-5639
(.13) 78i-4927 • Fay f7131 789-i082 • c-mail RDGTc,yas(Caul.cum
?icmbcr of the TSCI'A antl the :UCP:\ Center for Public Cnmparn' :\udii Firnt.
August 12. 2(Hh
To the Partners
Gde~ards. Tate R Fontenote. LLP
I have reviewed the system of yuality control for the accounting and aztdi[ing practice of lidwards, Tate fi Fontenote.
LLP (the lime) in effect for the year ended April 30, 200. A system of quality control encompasses Ute firm's
orgattizational stmaure, the jwlicies adopted-and procedures established to provide. it with reasonable assurance of
complying ++'ith professional standards The elements of yuality control arc described in the Statements on Quality
convol Standards issued by the American Institute ul Certified Public Accountants (AICP.41. The Ilmt a responsible
fbr designing a system of yuality control and cumph•ing +vith it to provide the fimr reasonable assurance of conlitmting
+cith professional standards in all material respects. My responsibility is to express an opinion on the design nt the
stem of quality control and the fimr s compliance with its s5tem ofyuality' convol based on nn• review.
My review was conducted in accordance with standards established by the Peer Review l3oard of the AICPA. During
ma rericu•, I read required «presentations from [he fimr. inten•icrecd lion personnel and obtained an undemandin ~ of
the nature of the fimr s accounting and auditing practice, and the design ol'the limfs system of yuality control su0icient
to assess the rills implicit in its practice. E3ased on my assessments. I selected engagements and administrative tiles to
test for conformity with professional standards, and with the fiinrs system-of quality' control. the engagements selected
represented a reasonable cross-section of the firm's accounting and auditing practice with emphasis on higher-risk
engagements. The engagements selected included among other, an audit of an Employee l3enefit Plan and
engagements. perfomteil under Gn•rrnmrnr :auditing SrondurLv. Prior to concluding the review, I rcassesscd the
adequacy of the scope of the peer review proxedures and met with fimr management to discuss the results of my review.
I believe that the procedures I perforated provide a reasonable basis for my opinion.
In perfiirming. my review. I obtained an understanding of the system of quality control Ibr the (inn's accounting and
auditing practice. In addition. I tested compliance with the fimt's quality control policies and procedures to the extent I
considered appropriate. Ihese tests covered [he application of the firm's policies and procedures on xlected
engagements. My review was based on selected eels and therefore it would not necessarily detect all weaknesses in the
system of qualih~ control or all instances of noncompliance with it. There are inherent limitations in the effectiveness of
any system of quality control and therefore noncompliance with the system of quality convol may occur and not be
detected. Projection of any evaluation of a system of quality control to future periods is subject to the risk that the
system of quality control may become inadequate because of changes in conditions, or because the degree of compliance
with [he policies or prcxedures may deteriorate.
In my opinion, the systemof quality control for the accounting and auditing practice of Edwards. Tate &Fontenote, LLP
in effect for the year ended April 30, 2005, has been designed to meet the requirements of the quality convol standards
for an accounting and auditing practice established by the AICPA and was complied with during theyear then ended to
provide the firm with reasonable assurance of conforming with professional standards.
As is customary in a system review, I have issued a letter under this date that secs forth comments that were not
considered to be of sufficient significance to affect the opinion expressed in this report.
r1,~,F o. ~,.1~ ; ~Pa
"Exhibit A-2"
-Time Requirements
A. Schedule for 2008 Fiscal Year Audit.
Each of the following should be completed by the auditor no later than the dates indicated.
Interim Work
The auditor shall complete interim work by September i, 2008.
Detailed Audit Work Plan
The auditor shall provide City by September 1 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 30, 2008.
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 31, 2008.
B. Entrance Conferences, Progress Reporting and Exit Conferences.
At a minimum, the following conferences should be held by the dates indicated on the
schedule.
Weekof
Entrance Conference with the Director of Finance and June 23, 2008
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.
Progress conference with the Director of Finance
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.
C.
Progress conference with the Director of Finance
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
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
August 25, 2008
September 22, 2008
January 19, 2009
The Director of Finance shall prepare draft financial statement, notes and all required
supplementary schedules and statistical date by December 31, 2008. The auditor shall
provide all recommendations, revisions and suggestions for improvement to the Director of
Finance by December 31, 2008. A revised report, including a draft auditor's report shall be
delivered to the Director of Finance by January 12, 2009. 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 22, 2009.
D. 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 5, 2009.
Schedule of Professional Rates
Rates/hour
Partners/Principal 80
Managers 50
Staff 40