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HomeMy WebLinkAboutPR 15809: J. R. EDWARDS & ASSOCIATES, LLC INDEPENDENT AUDITORS CONTRACTJ City of Port Arthur Memorandum To: Steve Fitzgibbons, From: Rebecca Underhill, Date: March 24, 2010 Re: PR 15809 Recommendation I recommend that the City Council adopt Proposed Resolution 15809 which authorizes a contract for the services of J. R. Edwards & Associates, LLC, Certified Public Accountants, as independent auditors for the City of Port Arthur for the year ending September 30, 2010. 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 includes 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. Edwards firm was awarded the contract for fiscal 2006. (Since that time, the firm has reorganized from Edwards, Tate & Fontenote, to J. R. Edwards & Associates). The firm has agreed to a contract not to exceed $61,000, this year. It is customary for the City to retain the same auditors for five consecutive years; the maximum the charter allows. We find that this allows irs to keep costs consistent and improve efficiency. Budgetary Effect This contract calls for interim billings, not to exceed a maximum of $ 61,000. Funding is provided in the 2010-2011 proposed budget for the Finance Department for this annual expense. City Manager Assistant City Irage F ,.- P:R. 15809 03/24/10 JJA RESOLUTION NO. A RESOLUTION AUTHORIZING A CONTRACT FOR THE SERVICES OF J. R. EDWARDS _ & ASSOCIATES, LLC, CERTIFIED PUBLIC ACCOUNTANTS, AS INDEPENDENT AUDITORS FOR THE- CITY OF PORT ARTHUR FOR THE YEAR. ENDING SEPTEMBER 30, 2010 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 a contract between the City and J. R. Edwards & Associates, LLC, 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, 2010, 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 , 2010, A.D., at a Regulaz Meeting of the City Council ofthe City of Port Arthur, Texas by the following vote: AYES: Mayor: Councilmembers: Mayor ~, ATTEST: - Terri Hanks, City Secretary - APPROVED AS TO FORIVI: ' Val Tizeno, City ttorney ~ APPROVED FOR ADMINISTRATION: Stephen Fitzgibbons, City Manager , APPROVED AS TO AVAILABILITY OF FUNDS: Deborah Echols, Finance Director r+ .. Z:1Finance\ResolutionsUtesolutions~Audi[or.doc - ' .. EXHIBIT "A" STATE OF TEXAS COUNTY OF JEFFERSON PROFESSIONAL SERVICES CONTRACT• This instrument is a contract between J R Edwards & Associates LLC 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 Citybf Port Arthur, hereinafter denoted as "City". SCOPE OF SERVICES/PRICE: This contract authorizes Professional to perfoim professional services as described in Exhibit "A- 1". The compensation for the Professional shall not exceed the estimated costs $61,000 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 completed 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 Managemenf Professional shall designate James Edwards, CPA as Audit Manager. Any change of Audit Manager shall require thirty (30) .days advance written approval of the City's Representative. CONTRACT , Page i of 7 s {~ ., 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 Ciry 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 reject from the audit any employees of the Professional. DESIGNATION OF OWNER (CITY'S) 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 Standards (1) Professional agrees the services it provides as an experienced and qualified provider will reflect the professional standards, 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, arising 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 is provided by the City's representative. The audit schedule wiltcommence 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 peisonal, 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 ofLiability Worker's Compensation 'Statutory for Worker's Compensation Employer's Liability Bodily Injury by Accident $1,000,000 (Each Accident) Bodily Injury by Disease ' $1,OOQ000 (Policy Limit) Bodily Injury by Disease $1,000,000 (Each Employee) u Commercial General: Bodily Injury and Including Broad Form Property Damage, Combined Coverage, Contractual Limits of $500,000 each Liability, Bodily and Occurrence and $1,000,000 Personal Injury, and aggregate (defense costs Completed Operations 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 and sub-consultant's and subcontractor's costs that were provided for and/or that were committed to acid 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 TIIE COMMUNITY: The Professional shall retain a high reputation in the Community for providing professional services. The Professional shall forward a wpy 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. 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 yeazs 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 be 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 sepazable 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 sepazable 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 necessazy 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 restrictioris, (viii) strikes, (ix) freight embargoes, (x) unusually severe weather, or (xi) delays of subcontractors o`r 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, iri 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 laws 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:. ` f. James R. Edwards J. R. Edwazds and Associates, LLC 4349 Crow Road, Suite B Beaumont, Texas 77706 CONTRACT - Page 6 of 7 - 4 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 amended 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 , 2010. BY: James Edwards, LLP Attest: SIGNED ON THE day of , 2010. 'CITY OF PORT ARTHUR, TEXAS BY: Steve Fitzgibbons, City Manager Attest: Terri Hanks City Secretary CONTRACT Page 7 of 7 ' EXHIBIT "A-1" V .~. IZ. Ec~w~zrc~s ~ 1~ssoci~ztes, L.LC Certified Public Accountants Mazch 22, 2010 Honorable Mayor and City Council City of Port 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, 2010. We will audit the financial statements of the govenunental activities,-the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information, which collectively comprse the entity's basic financial statements, of the City of Port Arthur as of and for the yeaz:ended September 30, 2010. Accounting standazds generally accepted in the United States provide for certain. required supplementary, information (RSI), such as management's discussion and analysis (MD&A), to supplement the City's basic financial statements. Such- information, although not a part of the basic financial statements, is required by the Governmental Accounting Standazds Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operation; economic, or historical context. As apart of our engagement, we will apply certain limited procedures to the. City's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist .principally of inquiries of management regarding the methods of preparing the information and comparing the information -for consistency with management's responses to our inquiries, .the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide-any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 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 City's basic financial statements. We will subject the following supplementazy information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including compazing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole: 1. Schedule of Expenditures of Federal Awazds 2. Combining and Individual Fund Information _ " 3. Other Supplementary Information " .4349 Crow Road • Beaumont, Texas 77706. Phone (409) 924-9100 • Fax (409) 924-0990 Honorable Mayor and City Council City of Port Arthur Page 2 March 22, 2010 The following additional information accompanying the basic financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements, and for which our auditor's report will not provide ari opinion or any assurance. 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 respects, in conformity with U.S. generally accepted accounting .principles and to report on the fairness of the supplementazy information referred to in the second .pazagraph when considered in relation to the basic financial statements taken as a whole. The objective-also includes .reporting om- 1. Internal control related to the financial statements and' compliance with-the provisions of applicable laws,.regulations, contracts or grant agreements, and grants, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. 2. Internal 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 solely for the information and use management, the body or individuals charged with governance, other within the entity specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass- through entities acid 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 auditing standards generally accepted in the United States of America; the standazds 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 of OMB Circulaz A-133, and will include tests of accounting records, a determination of major program(s) in accordance with Circulaz 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 opirions aze other than unqualified, we willfully 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. Management $esponsibilities_ Management is responsible for the financial statements and all accompanying information as well as all representations contained therein. Management is also responsible identifying government award programs and understanding and complying with the compliance requirements, and for the preparation of the schedule of expenditures of fedeial awazds in accordance with the requirements of OMB Circular A-133. Honorable Mayor and City Council City of Port Arthur Page 3 Mazch 22, 2010 Management Responsibilities (Continued) You are responsible for management decisions and performing all management functions relating to the financial statements, schedule of expenditures of federal awards,, and related notes and for accepting full responsibility for such decisions. Further, you are required to designate a qualified individual with suitable skill, knowledge, or experience to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is responsible for establishing and maintaining effective internal controls, including internal controls over compliance, and for monitoring ongoing activities, to help ensure that appropriate goals and objectives are met and that there is .reasonable assurance that government programs are administered in compliance with compliance requirements. You aze also responsible for the selection and application of accounting principles; for the fair presentation in the financial statements of the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Port Arthur, Texas and the respective changes in financial position and, where applicable, cash flows -in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us and for ensuring that management and financial information is reliable and properly recorded. Your responsibilities also include, identifying any significant vendor relationships in which. the vendor has the responsibility for program compliance and the accuracy and completeness of that information. Your responsibilities include adjusting the .financial statements to correct material misstatements and for confirming to us in the representation letter that the effects ofany-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 financial 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 financial' 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, regulations; contracts, agreements, and grants. Additionally, as required by OMB Circulaz A-133, it is management's responsibility to follow up and take cortective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. You aze responsible for the preparation of the supplementary information in conformity with U.S: generally accepted accounting principles. You agree to include our report on the supplementary information iri any document that contains and indicates that we have reported on the supplementary information. You also agree to present the supplementary information with the audited financial statements or make the audited financial statements readily available to users of the supplementary information no later than. the date the supplementary information is issued with our report thereon. Honorable Mayor and City Council City of Port Arthur Page 4 Mazch 22, 2010 Management Responsibilities (Continued) Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous financial audits, attestation engagements, performance audits, or other 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, attestation engagements, performance audits, or studies. You aze also responsible for providing management's views on our current findings, conclusions, and recommendations, aswell asyour planned corrective actions, for the report, and for the timing and format for providing that information. 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 azeas 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 financial reporting, (3) misappropriation of assets, or (4) violations of-laws or governmental regulations that aze 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 seasonable assurance of detecting 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 of any violations of laws or governmental regulations that come to our attention, unless cleazly inconsequential, and of any material abuse that comes to our attention. 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 later periods for which we are not 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 financial 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 of our 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 the entity and its environment, including internal control; sufficient to assess the risks of a material misstatement of the financial statements and to design the nature, timing, and extent of further auditing procedures. Tests of controls may, be performed to test the Honorable Mayor and City Council ' - City of Port Arthur Page 5 - March 22, 2010 , Audit Procedures -Internal Controls, continued effectiveness of certain controls that we consider relevant to preventing and detecting errors-and fraud that aze 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, if performed, 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 internal contro4 issued pursuant to Government Audit Standards. As required by OMB Circular A-133, ive -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 intemal control or to identify significant deficiencies. However, during the audit; we will communicate to management and those .charged with governance intemal control related matters that are required to be communicated under professional standards, GovernmenlAuditingStandards, and OMB Circulaz"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 an_ d agreements, including grant- agreements. However, the objective of those procedures will not be to provide ari opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB'Circular 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 of contracts and grant agreements applicable to major programs. 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 of the City of Port Arthur's major programs. The purpose of those 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 intemal policies, procedures,. and safeguards to protect the confidentiality,ofyoun personal information. Honorable Mayor and City Council City of Port Arthur Page 6 March 22, 2010 . 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 aze 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 providers. 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. It is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summazy schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Form .to the designated federal clearinghouse. We will coordinate with you the electronic submission and certification. If applicable, we will provide copies of our report for you to include with the reporting package you will submit 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. The audit documentation for this engagement is the property of J.R. Edwards- & Associates, LLC 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 indirect 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 of any such request. If requested, access to such audit documentation will be provided under the supervision of J.R. Edwazds & Associates, LLC'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 thereinto others, including other governmental agencies. The audit documentation for 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. We expect to begin our audit on a date agreed upon by both parties and to issue our reports by the proper deadline. This is contingent upon having the information available in a timely manner in ordei to complete our audit. Our fee far 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 $61,000. Our standazd hourly rates vary according to the degree of responsibility involved and the experience level of the personnel. assigned to-your audit. Honorable Mayor and City Council City of Port Arthur - Page 7 Mazch 22, 2010 Audit Administration, Fees, and Other (Continued) Our invoices for these fees will be rendered each month as work progresses and aze 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 necess2t~y, 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 2008 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 tenns 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 return it to us. Very truly yours; - James R. Edwards ' .'~ J.R. Edwards & Associates, LLC ified Public Accountants ~ . RESPONSE:. This letter correctly sets forth the understanding of the City of Port Arthur. By: , Title: Date: Il~bert ~o ~t~~~s~;~~1r~9 ~~A 2603 Augusta IDrive ®Suite I1t70 m Iloustc+n, T% 77057-5639 (713) 787-9927 ®Fax {7l3) 789-i08? a e-mail ~RDGTexas@aaLcotn i1'lember of the TSCPA anal ffie .41CPe4 Censer for Aadit Quality System Review Report May 15, 2009 To the Partners of Edwazds &Fontenote, L.L.P. and the Peer Review Committee of the Texas Society of Certified Public Accountants I have reviewed the system of quality control for the accounting and auditing practice of Edwards &Fontenote, L.L.P. (the firm) in effect for the yeaz ended April 30, 2008. My peer review was conducted in accordance- with the Standards for Performirtg and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. The firm is responsible for designing a system of quality control and complying with it to provide the fiml with reasonable assurance of performing and reporting in confomnty.with applicable-professional standazds in all • material respects. My responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on my. review. The nature, objectives, scope, limitations of, and the procedures perforned in a System Review aze described in the standazds at wev~v.aicpa.orc~rsumsnarv. '~ x As required by the standazds, engagements selected for review included engagements performed under the Government Auditing Standards and an audit of an employee benefit plan.. , In my opinion, the system of quality control for the accounting and auditing practice of Edwazds &Fontenote, L.L.P. in effect for the yaaz ended'April 30, 2008, has been suitably designed and complied with to provide the firm .with reasonable assurance of performing and reporting in conformity. with applicable professional standazds in all material respects: `Firms can receive a rating of pass, pass with deftciency(ies) or fail. Edwazds &Fontenote, L.L.P. has received a peer review rating of pass. Robert D. Goldstein, CPA P E f "Exhibit A-2" Time Requirements A. Schedule for 2010 Fiscal Year-Audit .~ Each of the following should be completed by the auditor no later than the dates indicated. 1. ,Interim Work , The auditor shall complete interim work by September 3Q, 2010. - 2. Detailed Audit Work Plan; The auditor shall provide City by September 25`h 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, 2010. 4. 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, 2010. B. Entrance Conferences, Progress Reporting and Exit Conferences. At a minimum, the following conferences should be held by the dates indicated on the schedule. , Week of Entrance Conference .with the Director of Finance and August 1, 2010 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: 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. C. 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 September 15, 2010 October 30, 2010 January 17, 2011 The Director of Finance shall prepare draft financial statement, notes and all required supplementary schedules and statistical date by December 31, 2010. The auditor shall provide all,recommendations, revisions and suggestions for improvement to the Director of Finance by January 20, 2011. A revised report,, including a draft auditor's report shall be delivered to the Director of Finance by January 25, 2011.. The final report and 125 signed copies should be delivered to the Director of Finance at City Hall; 444 Fourth Street, Port Arthur, Texas by January. 28, 2011. 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 4, 2011. Schedule of Professional Rates `Rates/hour Partners/Principal 80 Managers ,.; ~ 50 Staff ~ ~ 40 s _ , ~.