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HomeMy WebLinkAboutPR 17771: GAYLE BOTLEY City of Port Arthur Memorandum To: Floyd T. Johnson, City Manager V From: Deborah Echols, Director of Finance Date: August 22, 2013 Re: PR 17771 Recommendation I recommend that the City Council adopt Proposed Resolution which authorizes a contract for the services of Gayle W. Botley, Certified Public Accountant, as independent auditor for the City of Port Arthur for the year ending September 30, 2013. 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. Gayle Botley, CPA served as independent auditor for the City for fiscal year 2012. His firm was selected through a competitive RFP process. This firm's personnel are experienced in governmental audits, including the City of Port Arthur where they performed the audits from 2001- 2005, and meet all continuing education and quality review requirements. While the original bid was $64,950, the firm is proposing a fee increase to $70,000 because of our stimulus grants (See attached letter). It is customary for the City to retain the same auditors for five consecutive years, the maximum the charter allows. We find this allows us to keep costs consistent and improve efficiency. Budgetary Effect This contract calls for interim billings, not to exceed a maximum of $70,000. Funding is provided in the 2013 -2014 proposed budget for the Finance Department for this annual expense. Z: \Finance \Resolutions\ Gayle Botley2.doc e wdl �� 'I p Ali,, gay1 W. cBot(ey, CPA ..: .... : �...I, Certified Public Accountant Jilem6er ofAICPA 'Supporting 'Your Financial Growth" July 26, 2013 City of Port Arthur Attn: Mr. Floyd Johnson, City Manager Ms. Deborah Echols, Director of Finance PO Box 1089 Port Arthur, Texas 77641 Re: 2013 Engagement Fee Increased to $70,000 from Original 2011 Proposed Fee of $64,950 (Net Increase = $5,050) Please note in the attached engagement letter we are estimating a fee of $70,000 for the audit of the City's financial statements for the fiscal year ending September 30, 2013. This estimated increase of $5,050 is due to the City receiving and /or accounting for two additional multi - million - dollars stimulus grants. The stimulus grants require" specific audit procedures that will increase our audit hours. This information was unknown and therefore not disclose by the City to us in 2011. If you have any questions or comments, please give me a call. Sincerely, 2) —= .7 Gayle W. Botley, Y Y� Community Tower (409) 962 -1040 4749 Twin City 7fwy, Suite 280 fax (409) 962 -0668 Port Arthur, ?X 77642 (800) 416 -8757 g6ot(ey@s6cgfo6aLnet P.R. 17771 ask 8/22/13 RESOLUTION NO. A RESOLUTION AUTHORIZING A CONTRACT FOR THE SERVICES OF GAYLE W. BOTLEY, CERTIFIED PUBLIC ACCOUNTANT, AS INDEPENDENT AUDITOR FOR THE CITY OF PORT ARTHUR IN AN AMOUNT NOT TO EXCEED $70,000 FOR THE YEAR ENDING SEPTEMBER 30, 2013. ACCOUNT #001 - 1031 - 515.54 -00 BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PORT ARTHUR: THAT the City Manager of the City of Port Arthur is hereby authorized and directed to execute on behalf of the City of Port Arthur a contract between the City of Port Arthur and Gayle W. Botley, Certified Public Accountant, for an independent audit of all accounts of the City and the Port Arthur Economic Development Corporation for the fiscal year ending September 30, 2013, 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 September, 2013, 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: Deloris Prince, Mayor ATTEST: Sherri Bellard, City Secretary APPROVED AS TO FORM: Tod_ 4•P _ Val Tizeno, ity Attorn- APPROVED FOR ADMINISTRATION: Floyd T. Johnson, City Manager APPROVED AS TO AVAILABILITY OF FUNDS: alk2t4r Deborah Echols, Director of Finance EXHIBIT "A" STATE OF TEXAS COUNTY OF JEFFERSON * PROFESSIONAL SERVICES CONTRACT This instrument is a contract between Gayle W. Botley, Certified Public Accountant, 4749 Twin City Highway, Suite 280, Port Arthur, Texas telephone number 962 -1040, 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 $70,000 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 Management Professional shall designate Gayle W. Botley 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 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 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 Worker's Compensation Statutory for Worker's Compensation Employer's Liability Bodily Injury by Accident $1,000,000 (Each Accident) Bodily Injury by Disease $1,000,000 (Policy Limit) Bodily Injury by Disease $1,000,000 (Each Employee) 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 of sub - 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 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. CONTRACT Page4of7 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 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 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 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: Assistant City Manager /Administration P. O. Box 1089 Port Arthur, Texas 77641 PROFESSIONAL: Gayle W. Botley, Certified Public Accountant 4749 Twin City Highway, Suite 280 Port Arthur, Texas 77642 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 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 , 2013. BY: Gayle W. Botley Attest: SIGNED ON THE day of , 2013. CITY OF PORT ARTHUR, TEXAS BY: Floyd T. Johnson, City Manager Attest: Sherri Bellard City Secretary EXHIBIT "A -1" cayre Bottey, CPA. ._ i dlCw�Ii a , Certified (Public Mfernber of, .ICTA "Supporting Tour Financiaf growth" July 26, 2013 To the Honorable Mayor and Members of the City Council City of 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 fiscal year ending September 30, 2013. We will audit the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements, of the City as of and for the period ending September 30, 2013. 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 supplement the City's basic financial statements. Such information, although not a part of the basic financial statements, is required by the 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 historic context. As part of our engagement, we will apply certain limited procedures to the City's RSI in accordance with the auditing standards generally accepted in the United States of America. These limited procedures will consist 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) Schedule of Revenues and Expenditures and Changes in Fund Balances - Budget and Actual - GAAP - General Fund. 3) Notes to Required Supplementary Information. Community Tower (409) 9624040 4749 Twin City.7fwy, Suite 280 fax (409) 962 -0668 Tort Arthur, TX 77642 (800) 416 -8757 g6otfey @s6cgfo6aLnet City of Port Arthur Page 2 Engagement Letter We have also been engaged to report on supplementary information other than RSI that accompanies the City's basic financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the basic financial statements and certain additional procedures, including comparing and reconciling 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 basic financial statements as a whole: 1) Schedule of Expenditures of Federal Awards. 2) Combining and Individual Fund Financial Statements. 3) Other Supplementary Information. 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 an 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 accounting principles generally accepted in the United States of America and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements taken as a whole. The objective also includes reporting on: • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • 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. City of Port Arthur Page 3 Engagement Letter The reports on internal control and compliance will each include a paragraph that states that the purpose of the report is solely to describe (1) the scope of testing of internal control over financial reporting and compliance and the result of that testing and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance (2) the scope of testing internal control over compliance for major programs and major program compliance and the result of that testing and to provide an opinion on compliance but not to provide an opinion on the effectiveness of internal control over compliance, and (3) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering internal control over financial reporting and OMB Circular A -133 in considering internal control over compliance and major program compliance. The paragraph will also state that the report is not suitable for any other purpose. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; 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 of the OMB Circular A -133, and will include tests of the accounting records of the City, a determination of major program(s) in accordance with OMB Circular A -133, and other procedures we consider necessary to enable us to express such opinions and to render the required reports. We cannot provide assurance that unmodified opinions will be expressed. If our opinions on the financial statements or the Single Audit compliance opinions 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. Management Responsibilities Management is responsible for the basic financial statements, schedule of expenditures of federal awards, and all accompanying information as well as all representations contained therein. Management is also responsible for identifying government award programs and understanding and complying with the compliance requirements, and for preparation of the schedule of expenditures of federal awards in accordance with the requirements of OMB Circular A -133. As part of the audit, we will assist with preparation of your financial statements, schedule of expenditures of federal awards, and related notes. You will be required to acknowledge in the written representation letter our assistance with preparation of the financial statements and schedule of expenditures of federal awards and that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance and have accepted responsibility for them. You agree to assume all management responsibilities for any nonaudit services we provide; oversee the services by designating an individual, preferably from senior management, who possesses suitable skill, knowledge, or experience; evaluated the adequacy and results of the services; and accept responsibility for them. City of Port Arthur Page 4 Engagement Letter Management is responsible for establishing and maintaining effective internal controls, including internal controls over compliance, and for evaluating and monitoring ongoing activities, to help insure that appropriate goals and objectives are met and that there is reasonable assurance that government programs are administered in compliance with compliance requirements. You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements 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 is reliable and financial information is reliable and properly recorded. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional information that we may request for the purpose of the audit, and (3) unrestricted access to persons within the government from whom we determine is necessary to obtain audit evidence. Your responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the written 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 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 affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud 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 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 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 findings and a corrective action plan. The summary schedule of prior audit findings should be available for our review as soon as practicable and prior to us submitting our audit reports. You are responsible for the preparation of the schedule of expenditures of federal awards in conformity with OMB Circular A -133. You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards. You also agree to include the audited financial statements with any presentation of the schedule of expenditures of federal City of Port Arthur Page 5 Engagement Letter awards that include our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for the presentation of the schedule of expenditures of federal awards in accordance with OMB Circular A -133; (2) that you believe the schedule of expenditures of federal awards, including its form and content, is fairly presented in accordance with OMB Circular A -133; (3) that the methods of measurement or presentation have not changed from those used in the prior period; and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. You are also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for the presentation of the supplementary information in accordance with GAPP; (2) that you believe the supplementary information, including its form and content, is fairly presented in accordance with GAPP; (3) that the methods of measurement or presentation have not changed from those used in the prior period; and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. 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 are also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your 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 areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significance accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 are attributable to the entity or to acts by City of Port Arthur Page 6 Engagement Letter 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 of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, 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, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. 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, 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 clearly 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 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, funding sources, 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 request 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 material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. 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, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A -133, we will perform tests of controls over compliance 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 major federal award program. However, our tests will be less in scope than would be City of Port Arthur Page 7 Engagement Letter 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 AICPA professional standards, Government Auditing 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's compliance with provisions of applicable laws, regulations, 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 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 test of transactions and other 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's major programs. The purpose of these procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A -133. Audit Engagement Administration, Fees and Other 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 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, summary schedule of prior audit findings, auditors' reports, and corrective action plan) along with the Data Collection Form to the federal audit 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 auditor's 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. City of Port Arthur Page 8 Engagement Letter The audit documentation for this engagement is the property of Gayle W. Botley, CPA and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to the cognizant or oversight agency 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 out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of Gayle W. Botley, CPA 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 for this engagement will be retained for a minimum of five years after the report release or for any additional period requested by the cognizant, oversight agency, or pass - through entity. If we are aware that a federal awarding agency, pass - through entity, or auditee is contesting an audit finding, we will contact the party (ies) contesting the audit finding for guidance prior to destroying the audit documentation. We expect to begin the audit as soon as practical and to issue our reports on or before the time requirements specified in the request for proposal. Gayle W. Botley is the engagement principal and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. We estimate our fee for these services to be $70,000. 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 the appropriate management and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards requires 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 most recent peer review is attached and there was no letter of comment issued. City of Port Arthur Page 9 Engagement Letter As always, 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 both originals and return one original to us. Sincerely, r , COX Gayle W. Botley, CPA RESPONSE: This letter correctly sets forth the understanding of the City of Port Arthur. Only one signature required. By: Title: Date: By: Title: Date: (AICPA) AlICPA Peer Review Program and TSCPA Peer Review Program 410, CPA Administered by the Texas Society of CPAs Texas Society • of Certified Public Accountants • July 16, 2013 Gayle W Botley; CPA �ECE0 v ED Gayle W Botley, CPA WAW 1 D 4749 N Twin City Hwy Ste 280 Port Arthur, TX 77642 Dear Mr. Botley: It is my pleasure to notify you that on July 15, 2013 the Texas Society of CPAs 2013 -14 Peer Review Committee accepted the report on the most recent system peer review of your firm. The due date for your next review is April 30, 2016. This is the date by which all review documents should be completed and submitted to the administering entity. If your due date falls between January and April, you can arrange to have your review a few months earlier to avoid having a review during tax season. As you know, the report had a peer review rating of pass. The Committee asked me to convey its congratulations to the firm. Sincerely, 9.f7 &' Jerry L. Cross, CPA Director, Peer Review jcross @tscpa.net 800 428 -0272 cc: Mark Johnson, CPA Finn Number: 10122063 Review Number: 343588 14651 Dallas Parkway, Suite 700, Dallas, TX 75254 -7408 • (972) 687 -8500 • (800) 428 -0272 • Fax (972) 687 -8575 F FITTSROBERTS Po: CO Certified Public Accountants & Consultants System Review Report May 23, 2013 To Gayle W. Botley, CPA and the Peer Review Committee of the Texas Society of CPAs We have reviewed the system of quality control for the accounting and auditing practice of Gayle W. Botley, CPA (the firm) in effect for the year ended October 31, 2012. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. As a part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prsummary. As required by the standards, engagements selected for review included engagements performed under Government Auditing Standards. In our opinion, the system of quality control for the accounting and auditing practice of Gayle W. Botley, CPA in effect for the year ended October 31, 2012, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Gayle W. Botley, CPA has received a peer review rating of pass. Fitts, Roberts & Co., P.C. Mark K. Johnson, CPA HOUSTON OFFICE FORT BEND OFFICE Anindependendy Owned Member 5718 Westheimer I Suite 800 Four Sugar Grove Building MCGLADREY ALLIANCE _ M eG I a d rey Houston. Texas 77057 4800 Sugar Grove Blvd. I Suite 100 Phone 17132 260 5230 Stafford. Texas 77477 Mcc Ii0vuliance r s,.pre,n:mae n: at:onot ac, endtnrao„ nonga:ucuni.:;::ng;.::sto_5a_.. Fax 1 713. 260.5240 Phone 1 281.494.5151 Man cl:tN let ananKYne:,li. Oel:verY of se, u d:`.t: n :ntenan_t of client rel3;olt.r,:`i. '.1_i:r., :,:. 510an5e is a i05:ness 01 McGla■ey LLP •.v::cli;•Perates anle, Ibe AliGlattre, '_ a as •• U S. rnlarJtr OI as :ra',Ce. lax. and CUnitllt:ng s 'S. MCG:a.nrer. t!,t lri%G:a,:,er 000 .. . - www. FITTSR0BERTS.COm McGialnvP:Lano'AY,r : alure ustrl ,:nnm leensfuvtAltl.'Bau,evLLF "Exhibit A -2" Time Requirements A. Schedule for 2013 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 1, 2013 2. 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, 2013. 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 30, 2013. 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 all key Finance Department personnel. September 9, 2013 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 Finance September 23, 2013 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 and prepare for the year -end close Progress conference with the Director of Finance November 11, 2013 The purpose of this meeting will be to discuss the Progression of fieldwork and discuss any concerns or potential findings. Exit conference with the Director of Finance January 13, 2014 and City Manager The purpose of this meeting will be to summarize the results of the field work and to review significant findings. C. Date Final Report is due December 2, 2013 The Director of Finance shall prepare draft financial statement, notes and all required supplementary schedules and statistical date by December 2, 2013. The auditor shall provide all recommendations, revisions and suggestions for improvement to the City by December 16, 2013. A revised report, including a draft auditor's report, shall be delivered to the City by December 30, 2013. The final report and 100 signed copies should be delivered to the Director of Finance at City Hall, 444 Fourth Street, Port Arthur, Texas by January 27, 2014. 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 3, 2014.