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HomeMy WebLinkAboutPR 24866 APPROVAL OF AUDIT CONTRACT WITH BROOKSWATSON & COMPANY City of ort rthur 7c rus www.PortArthurTx.gov INTEROFFICE MEMORANDUM Date: 03/23/2026 To: The Honorable Mayor and City Council Through: Ron Burton, City Manager From: Lynda Boswell, Director of Finance RE: PR No. 24866 Approval of Audit Contract With BrooksWatson & Company Introduction: Approval is requested for the City Manager to execute a letter of engagement with BrooksWatson&Company,Certified Public Accountants,to perform independent auditing services for the City of Port Arthur for the fiscal year ending September 30,2026,with the option to renew for up to four(4) additional one-year terms. Background: Article XII, Section 17 of the City Charter requires the City to engage a certified public accounting firm annually to conduct an independent audit of all City accounts. This audit includes the examination of the City's financial statements as presented in the Annual Comprehensive Financial Report (ACFR) and the performance of a Single Audit in accordance with applicable federal requirements. The scope of services also includes the Port Arthur Economic Development Corporation's accounts. BrooksWatson & Company was selected through a competitive Request for Qualifications (RFQ) process. The firm has extensive experience in governmental auditing and meets all required professional standards, including continuing education and peer-review requirements. The proposed engagement is for one (1) year, with the option to renew annually for up to four (4) additional years. Retaining the same audit firm for a multi-year period, consistent with Charter limitations, promotes continuity, operational efficiency, and cost stability. Budget Impact: The contract has a projected budgetary impact of$92,215, and funds are available in the Finance Department professional services account no. 001-09-015-5420-00- 10-000. Recommendation: The attached Proposed Resolution No. 24866 authorizes the City Manager to execute a letter of engagement with BrooksWatson & Company to perform auditing services for the City of Port Arthur for the fiscal year ending 2026. 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 7764 1-1 089 X 409.983.8101 X FAX 409.982.6743 P. R. NO. 24866 LB-TNR: 03/23/2026 RESOLUTION NO. A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A LETTER OF ENGAGEMENT WITH BROOKSWATSON & COMPANY, CERTIFIED PUBLIC ACCOUNTANTS,TO SERVE AS INDEPENDENT AUDITOR FOR THE CITY OF PORT ARTHUR FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2026, WITH FOUR (4) OPTIONAL ONE-YEAR RENEWALS; PROVIDING FOR A PROJECTED BUDGETARY IMPACT OF $92,215.00 FINANCE DEPARTMENT PROFESSIONAL SERVICES ACCOUNT #001-007-015-5420-00-10-000 WHEREAS, Article XII, Section 17 of the Charter of the City of Port Arthur requires the annual engagement of a certified public accounting firm to conduct an independent audit of all accounts of the City; and WHEREAS, the required audit includes, but is not limited to, the examination of the City's general-purpose financial statements as presented in the Annual Comprehensive Financial Report, as well as the performance of a Single Audit in accordance with applicable federal requirements, including review of the accounts of the Port Arthur Economic Development Corporation; and WHEREAS, the RFQ number P26-018 was provided to interested parties, published in the newspaper on February 7th and 14th of 2026, and on the City of Port Arthur website with a due date of February 25th; shortly thereafter, an independent committee rated each of the bid applicants, as there were six applicants; and WHEREAS,BrooksWatson&Company,Certified Public Accountants,was selected through a competitive Request for Qualifications (RFQ) process and has demonstrated the requisite qualifications, experience in governmental auditing, and compliance with all applicable continuing education and peer review standards, as delineated in Exhibit "A" and WHEREAS, based on the results, the City desires to enter into a letter of engagement with BrooksWatson&Company for the performance of audit services for the fiscal year ending September 30, 2026, with the option to renew the engagement for up to four (4) additional one-year terms, consistent with Charter limitations and past City practice to promote continuity, efficiency, and cost stability; and WHEREAS, the proposed engagement will result in a projected budgetary impact in the amount of $92,215.00 for Fiscal Year 2025-2026, with funding available in the Finance Department Professional Services Account No. 001-007-015-5420-00-10-000; and WHEREAS, the letter of engagement is attached hereto as Exhibit "B" and incorporated herein for all purposes. P. R. NO. 24866 LB-TNR: 03/23/2026 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR, TEXAS: SECTION 1. That the facts and opinions in this preamble are true and correct. SECTION 2. The City Manager is hereby authorized and directed to execute, for and on behalf of the City of Port Arthur, a letter of engagement with BrooksWatson & Company, Certified Public Accountants, to perform an independent audit of all accounts of the City of Port Arthur, including the Port Arthur Economic Development Corporation, for the fiscal year ending September 30, 2026, as set forth in Exhibit "B." SECTION 3. That any further authorization up to four(4) optional one-year renewals of the engagement is subject to council approval, the availability of funds, and continued satisfactory performance, in accordance with the terms of the engagement letter and applicable law. SECTION 4.The projected budgetary impact for Fiscal Year 2025-2026 is $92,215.00, with funds available in the Finance Department Professional Services Account No. 001-007-015-5420-00- 10-000. SECTION 5. That a copy of the caption of this Resolution shall be spread upon the Minutes of the City Council. READ, ADOPTED, AND APPROVED, this day of April, 2026, 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: Charlotte M. Moses, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED A • Roxann Pais Cotroneo, City Attorney APPR D FOR AVAILABILITY OF FUNDS: Lyn Boswell, Director of Finance APPROVED, ADMINISTRATION: Ron Burton, City ager EXHIBIT "A" 0 ' o o = 7 , / ; m ■ » 2 C § et = 7 7 a ■ o q t et 2 t /. 7 §§ 7 o o k m -\ ( o / / % o % % o ro SID Cr c = o ] Crq tM / k L4.) w E �. ® ~ Lot m m 0 ;7 \ CI cn - z CD- R %k / / . ® w o 44. $ co® ® ® ? k tai y h 7 n k 2 § q $Z © k Z G \ f f f f f z % 5 ft A' ` 5. 7 k A a "t ¥ S a a to q• % 7 N » o 41. I.. / 7 ® Q Pe w ® m z List m .cz t NI 7 ) ~ A \ 2) .4 ( o k R / Lk) LAJ tat w .. S \ k : \ % 0 2 \ o § A A ;. 44. CZ COI Z / I. 2 • % Exhibit "B" BROOKS Y Y 1 lrl O1 CO. CLRTILILD PUBLIC ACCOUNTANTS March 25, 2026 City of Port Arthur,Texas 444 4th Street Port Arthur TX 77640 The following represents our understanding of the services we will provide the City of Port Arthur,Texas. You have requested that we audit the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Port Arthur, Texas, as of September 30, 2026, and for the year then ended and the related notes to the financial statements, which collectively comprise the City of Port Arthur, Texas's basic financial statements as listed in the table of contents. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on each opinion unit. In addition, we will audit the entity's compliance over major federal award programs for the periods ended September 30, 2026. We are pleased to confirm our acceptance and our understanding of this audit engagement by means of this letter. Our audits will be conducted with the objectives of our expressing an opinion on each opinion unit and an opinion on compliance regarding the entity's major federal award programs. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, pension information, and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by Governmental Accounting Standards Board, 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. 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 accounting 14950 Heathrow Forest Pkwy I Suite 530 I Houston,TX 77032 I Tel: 281.907.8788 I Fax: 888.875.0587 I www.BrooksWatsonCo.com City of Port Arthur, Texas Engagement Letter Page 2 of 12 principles generally accepted in the United States of America. This RSI will be subjected to certain limited procedures but will not be audited: 1) Management's discussion and analysis 2) Budgetary Comparison Information 3) Pension and OPEB schedules Supplementary information other than RSI will accompany the City of Port Arthur, Texas'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 perform certain additional procedures, including comparing and reconciling the supplementary information to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole: 1) Individual nonmajor fund financial statements and schedules 2) Combining statements Also, the document we submit to you will include the following other additional information that will not be subject to the auditing procedures applied in our audit of the financial statements: 1) Introductory section 2) Statistical section Schedule of Expenditures of Federal Awards We will subject the schedule of expenditures of federal awards to the auditing procedures applied in our audit of the basic financial statements and certain additional procedures, including comparing and reconciling the schedule to the underlying accounting and other records used to prepare the financial statements or to the 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 whether the schedule of expenditures of federal awards is presented fairly in all material respects in relation to the financial statements as a whole. Data Collection Form Prior to the completion of our engagement, we will complete the sections of the Data Collection Form that are our responsibility. The form will summarize our audit findings, amounts and conclusions. It is management's responsibility to submit a reporting package including financial statements, schedule of expenditure of federal awards, summary schedule of prior audit 2 City of Port Arthur, Texas Engagement Letter Page 3 of 12 findings and corrective action plan along with the Data Collection Form to the federal audit clearinghouse. The financial reporting package must be text searchable, unencrypted, and unlocked. Otherwise, the reporting package will not be accepted by the federal audit clearinghouse. We will assist you in the electronic submission and certification. You may request from us copies of our report for you to include with the reporting package submitted to pass-through entities. The Data Collection Form is required to be submitted within the earlier of 30 days after receipt of our auditors' reports or nine months after the end of the audit period, unless specifically waived by a federal cognizant or oversight agency for audits. Data Collection Forms submitted untimely are one of the factors in assessing programs at a higher risk. The Objective of an Audit The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in accordance with generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole.Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America (GAAS), the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America; the audit requirements of 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 will include tests of the accounting records and other procedures we consider necessary to enable us to express such opinions. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions on the financial statements 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 to issue a report as a result of this engagement. General Audit Procedures We will conduct our audit in accordance with auditing standards generally accepted in the United States of America (GAAS), the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America; the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 financial statements. The procedures 3 City of Port Arthur, Texas Engagement Letter Page 4 of 12 selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the 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 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 inventories, 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 will 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 financial statements and related matters. Internal Control Audit Procedures 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, detected abuse, 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 Government Auditing Standards of the Comptroller General of the United States of America. Please note that the determination of abuse is subjective and Government Auditing Standards does not require auditors to detect abuse. In making our risk assessments,we consider internal control relevant to the entity's preparation and fair presentation of the 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 entity'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 financial statements that we have identified during the audit. Our responsibility as auditors is, of course, limited to the period covered by our audit and does not extend to any other periods. Compliance with Laws and Regulations Audit of Major Program Compliance Our audit of the City of Port Arthur, Texas's major federal award program(s) compliance will be conducted in accordance with the requirements of the Single Audit Act, as amended;and the Uniform Guidance, and will include tests of accounting records, a determination of major programs in accordance with the Uniform Guidance and other procedures we consider necessary to enable us to express such an opinion on major federal award program compliance 4 City of Port Arthur,Texas Engagement Letter Page 5 of 12 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 requires that we also plan and perform the audit to obtain reasonable assurance about whether the entity has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major federal award programs. Our procedures will consist of determining major federal programs and performing the applicable procedures described in the U.S.Office of Management and Budget OMB Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the entity's major programs. The purpose of those procedures will be to express an opinion on the entity's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance. Also, as required by the Uniform Guidance, 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 entity's major federal 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 will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the entity's major federal 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. Management Responsibilities Our audit will be conducted on the basis that management and those charged with governance acknowledge and understand that they have responsibility: 1. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; 2. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error; 3. For identifying, in its accounts, all federal awards received and expended during the period and the federal programs under which they were received, including federal awards and funding increments received prior to December 26, 2014 (if any), and those received in accordance with the Uniform Guidance (generally received after December 26,2014); 4. For maintaining records that adequately identify the source and application of funds for federally funded activities; 5 City of Port Arthur,Texas Engagement Letter Page 6 of 12 5. For preparing the schedule of expenditures of federal awards (including notes and noncash assistance received)in accordance with the Uniform Guidance; 6. For the design, implementation, and maintenance of internal control over federal awards; 7. For establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards; 8. For identifying and ensuring that the entity complies with federal statutes, regulations, and the terms and conditions of federal award programs and implementing systems designed to achieve compliance with applicable federal statutes, regulations, and the terms and conditions of federal award programs; 9. For disclosing accurately, currently, and completely the financial results of each federal award in accordance with the requirements of the award; 10. For identifying and providing report copies of previous audits, attestation engagements, or other studies that directly relate to the objectives of the audit, including whether related recommendations have been implemented; 11. For taking prompt action when instances of noncompliance are identified; 12. For addressing the findings and recommendations of auditors, for establishing and maintaining a process to track the status of such findings and recommendations and taking corrective action on reported audit findings from prior periods and preparing a summary schedule of prior audit findings; 13. For following up and taking corrective action on current year audit findings and preparing a corrective action plan for such findings; 14. For submitting the reporting package and data collection form to the appropriate parties; 15. For making the auditor aware of any significant contractor relationships where the contractor is responsible for program compliance; 16. To provide us with: a. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, and relevant to federal award programs, such as records, documentation, and other matters; b. Additional information that we may request from management for the purpose of the audit; c. Unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence. 17. For adjusting the 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 period(s) under audit are immaterial, both individually and in the aggregate, to the financial statements as a whole; 18. For acceptance of nonattest services, including identifying the proper party to oversee nonattest work; 6 City of Port Arthur,Texas Engagement Letter Page 7 of 12 19. For maintaining adequate records, selecting and applying accounting principles, and safeguarding assets; 20. For informing us of any known or suspected fraud affecting the entity involving management, employees with significant role in internal control and others where fraud could have a material effect on compliance; 21. For the accuracy and completeness of all information provided; 22. For taking reasonable measures to safeguard protected personally identifiable and other sensitive information;and 23. For confirming your understanding of your responsibilities as defined in this letter to us in your management representation letter. With regard to the supplementary information and schedule of expenditures of federal awards referred to above, you acknowledge and understand your responsibility (a) for the preparation of the supplementary information and schedule of expenditures of federal awards in accordance with the Uniform Guidance, (b) to provide us with the appropriate written representations regarding the supplementary information and schedule of expenditures of federal awards, (c) to include our report on the schedule of expenditures of federal awards in any document that contains the schedule of expenditures of federal awards and that indicates that we have reported on such schedule, and (d) to present the supplementary information and schedule of expenditures of federal awards with the audited financial statements, or if the schedule will not be presented with the audited financial statements, to make the audited financial statements readily available to the intended users of the supplementary information and schedule of expenditures of federal awards no later than the date of issuance by you of the schedule and our report thereon. As part of our audit process, we will request from management and, when appropriate, those charged with governance, written confirmation concerning representations made to us in connection with the audit. We understand that your employees will prepare all confirmations we request and will locate any documents or invoices selected by us for testing. If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers' proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed. We will assist the City with the preparation of the comprehensive annual financial report, and propose adjusting or correcting journal entries to be reviewed and approved by the City's management, which is considered to be a nonattest service. We will not assume management responsibilities on behalf of the City of Port Arthur, Texas. However, we will provide advice 7 City of Port Arthur,Texas Engagement Letter Page 8 of 12 and recommendations to assist management of the City of Port Arthur, Texas in performing its responsibilities. With respect to this and any other nonattest services we perform, the City of Port Arthur, Texas's management is responsible for (a) making all management decisions and performing all management functions; (b) assigning a competent individual 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. Reporting We will issue a written report upon completion of our audit of the City of Port Arthur, Texas's basic financial statements. Our report will be addressed to the governing body of the City of Port Arthur, Texas. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions, add an emphasis-of-matter or other-matter paragraph(s),or withdraw from the engagement. In accordance with the requirements of Government Auditing Standards, 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. Other 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. If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers' proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed. Provisions of Engagement Administration,Timing and Fees 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. 8 City of Port Arthur, Texas Engagement Letter Page 9 of 12 The timing of our audit will be scheduled for performance and completion as follows: Begin Complete July 31st Document internal control and preliminary tests Observe physical inventories(if necessary) n/a October 1st Mail confirmations Perform year-end audit procedures January/February March Issue audit report Mike Brooks is the engagement partner for the audit services specified in this letter. His responsibilities include supervising BrooksWatson & Co., PLLC's services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report. Our fees for the financial statement audit is as follows: Financial Statement Audit Fiscal Year City 2026 $92,215 Our fees for the uniform guidance and Texas Grant Management Standards(TxGMS) audits are $5,500 each, including one major program (>$1,000,000) and $1,850 for each additional major program, for each year. We will notify you immediately of any circumstances we encounter that could significantly affect this initial fee estimate.Whenever possible,we will attempt to use the City of Port Arthur, Texas's personnel to assist in the preparation of schedules and analyses of accounts. This effort could substantially reduce our time requirements and facilitate the timely conclusion of the audit. The invoice shall be rendered monthly based upon actual hours billed during the invoice period. We will notify you immediately of any circumstances we encounter that could significantly affect this initial fee estimate. 9 City of Port Arthur,Texas Engagement Letter Page 10 of 12 Other Matters 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. Regarding the electronic dissemination of audited financial statements, including financial statements published electronically on your Internet website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. Professional standards prohibit us from being the sole host and/or the sole storage for your financial and non-financial data. As such, it is your responsibility to maintain your original data and records and we cannot be responsible to maintain such original information.By signing this engagement letter, you affirm that you have all the data and records required to make your books and records complete. The audit documentation for this engagement is the property of BrooksWatson & Company, PLLC, 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 BrooksWatson & Company, PLLC'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. Further, we will be available during the year to consult with you on financial management and accounting matters of a routine nature. 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. We agree to retain our audit documentation or work papers for a period of at least five years from the date of our report. 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. 10 City of Port Arthur, Texas Engagement Letter Page 11 of 12 At the conclusion of our audit engagement, we will communicate to City Council the following significant findings from the audit: • Our view about the qualitative aspects of the entity's significant accounting practices; • Significant difficulties,if any,encountered during the audit; • Uncorrected misstatements, other than those we believe are trivial, if any; • Disagreements with management,if any; • Other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to those charged with governance regarding their oversight of the financial reporting process; • Material, corrected misstatements that were brought to the attention of management as a result of our audit procedures; • Representations we requested from management; • Management's consultations with other accountants,if any;and • Significant issues, if any, arising from the audit that were discussed, or the subject of correspondence, with management. In accordance with the requirements of Government Auditing Standards, 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 financial statements 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. Respectfully, l''refk.AA/4,f216-14,4. C . BrooksWatson&Co. 14950 Heathrow Forest Pkwy I Ste 530 Houston,TX 77032 11 City of Port Arthur,Texas Engagement Letter Page 12 of 12 RESPONSE: This letter correctly sets forth our understanding. The City of Port Arthur,Texas Acknowledged and agreed on behalf of the City of Port Arthur,Texas by: Management Name: Title: Date: 12