HomeMy WebLinkAboutItem 08 Contract Award for FY07 Audit Services
AGENDA ITEM SUMMARY
SPRINGFIELD
CITY COUNCIL
Meeting Date: May 07, 2007
Meeting Type: Regular
Department: Finance
Staff Contact: Bob Duey 'B 1>
Staff Phone No: 726-3740
Estimated Time: Consent
ITEM TITLE:
CONTRACT AWARD FOR FY07 AUDIT SERVICES
ACTION REQUESTED: I) Authorize/not authorize City Manager to sign an extension of the current
audit services contraCt for FY07 with the ftrm of Grove, Mueller & Swank,
P.C.
ISSUE STATEMENT:
State law requires the City to have conducted an annual audit of its ftnancial
statements. The City's initial3-year contract with Grove, Mueller & Swank,
P.C. has ended but allows for a I-year extension upon agreement by both
parties. Staff is recommending that the City Council agree to a I-year
extension.
ATTACHMENTS:
A. Grove, Mueller & Swank, P.C. FY07 Audit Engagement Letter dated
April 23, 2007
DISCUSSION/FINANCIAL IMPACT:
Section 4 titled Term of The Independent Contractor Agreement of June 23, 2004 between the City of
Springfteld and Grove, Mueller, Swank, P.C.states: "This Agreement is effective as of the date ftrst set
forth above and shall continue until 28 February 2007, unless earlier terminated in accordance with the
provisions of this Agreement or by mutual consent of the parties. Upon written consent by both parties,
this Agreement may be extended through 28 Feb. 2008".
The Government Finance Officers Association recommends that a city remain with an auditing ftrm for a
minimum of 5-years in order to take advantage of the work, relationship and knowledge that it takes to
conduct efficient and effective audits. In an internal evaluation, the Finance Department believes that the
ftrm has conducted themselves in a professional manner, has met all of the requirements of the current
arrangement and has done so at a fair cost to the City. The cost comparison of the current and the
proposed years are:
Entitv
City
MWMC
SEDA
TOTAL
FY06
$26,730
6,270
1.500
$34,500
FY07
$27,540
6,460
1.500
$35,500.
In addition, with the Finance Department in the process of hiring a new Accounting & Audit Manager, it
will help tremendously to have an auditing ftrm this year that is familiar with the practices and procedures
of the services and programs.
4ld/_llllllli '
GROVE, MUELLER & SWANK, P.c.
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
April 23, 2007
City Council
City of Springfield
Springfield, Oregon 97477
This letter and contract dated June 30, 2004 explain our understanding of the arrangements for the services we
are to perform for the City of Springfield, the Metropolitan Wastewater Management Commission, the
Springfield Economic Development Agency and Regional Fiber Consortium for the year ending June 30, 2007
as detailed in the Request for Proposal for Professional Audit Services dated March 26, 2004 and our proposal
dated April 26, 2004. We ask that you either confirm or amend this understanding.
We will perform an audit of City of Springfield's governmental activities, business-type activities, aggregate
discretely presented component units, each major fund, and aggregate remaining fund information as of and
for the year ending June 30, 2006 which collectively comprise the basic financial statements. We understand
that these financial statements will be prepared in accordance with accounting principles generally accepted in
the United States of America. The objective of an audit of financial statements is to express an opinion on
those statements.
We will also perform the audit of the City of Springfield as of June 30, 2006 so as to satisfy the audit
requirements imposed by the Single Audit Act and the U.S. Office of Management and Budget COMB)
Circular No. A-l33.
We will conduct the audit in accordance with auditing standards generally accepted in the United States of
America; The Minimum Standards for Audits of Oregon Municipal Corporations; "Government Auditing
Standards" issued by the Comptroller General of the United States; and the provisions of the Single Audit Act,
OMB Circular A-133 and OMB's Compliance Supplement. Those standards, circulars, supplements or guides
require that we plan and perform the audit to obtain reasonable rather than absolute, assurance about whether
the financial statements are free of material misstatement whether caused by error, fraudulent financial
reporting, or misappropriation of assets. Accordingly, a material misstatement, whether caused by error,
fraudulent financial reporting, or misappropriation of assets, may remain undetected. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. As a
result, an audit is not designed to detect errors or fraud that are immaterial to the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit will provide a
reasonable basis for our reports.
In addition to our report on the City's financial statements, we will also issue the following reports or types of
reports:
Attachment A-l
www.gmscpa.com
Mailing Address · P.O. Box 2122 · Salem. Oregon 97308-2122
Salem · 475 Cottage Street NE. Suite 200 · Salem, Oregon 97301-3814 · (503) 581-7788 . FAX (503) 581-0152
Albany · P.O. Box 663 · 519 S. ':Yon Street · Albany. Oregon 97321-0570 . (541) 967-2315 · FAX (541) 926-5926
ME,vlBERS OF THE McGU\OREY NETWORK' WORLDWIOt SERVICES THROUGH RSM INTERNATIONAL
A report on the fairness of the presentation of the City's schedule of expenditures of Federal awards
for the year ending June 30, 2007.
Reports on internal control related to the financial statements, and major programs. These reports win
describe the scope of testing ofin~ernal control and the results of our tests of internal controls.
Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We
will report on any noncompliance which could have a material effect on the financial statements and
any noncompliance which could have a direct and material effect on each major program.
A schedule of findings and questioned costs.
Our report on internal control will include any significant deficiencies and material weaknesses in the system
of which we become aware as a result of obtaining an understanding of internal control and performing tests of
internal control consistent with requirements of the standards and circular identified above. Our report(s) on
compliance will address material errors, fraud; violations of compliance requirements, and other
responsibilities imposed by state and Federal statutes and regulations and assumed by contracts; and any state
or Federal grant, entitlement of loan program questioned costs of which we become aware, consistent with
requirements of the standards and circulars identified above.
If circumstances arise relating to the conditions of your records, the availability of sufficient, competent
evidential matter, or indications of a significant risk of material misstatement of the financial statements
because of error, fraudulent financial reporting, misappropriation of assets, or noncompliance which in our
professional judgment prevent us from completing the audit or forming an opinion, we retain th~ unilateral
right to take any course of action permitted by professional standards, including declining to express an
opinion or issue a report, or withdrawal from the engagement.
As you know, management is responsible for 1) the preparation of City of Springfield's financial statements
and the schedule of federal awards, 2) establishing and maintaining effective internal control over financial
reporting and safeguarding assets and internal control over compliance, and for informing us of all significant
deficiencies in the design or operation of such controls of which it has knowledge, 3) properly recording
transactions in the records, 4) identifying and ensuring that City of Springfield complies with the laws and
regulations applicable to its activities, and for informing us about all known material violations of such laws or
regulations, 5) 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 entity involving management, employees who
have significant roles in internal control and others where the fraud could have a material effect on the
financial statements, 6) informing us of its knowledge of any allegations of fraud or suspected fraud affecting
the entity received in communications from employees, regulators, or others, 7) making all financial records
and related information available to us, 8) for adjusting the financial statements to correct material
misstatements, 9) following up and taking corrective action on audit findings, including the preparation of a
summary schedule of prior audit findings, and a corrective action plan, and lO) submitting" the reporting
package. At the conclusion of our audit, we will request certain written representations from management
about the financial statements and matters related thereto. We will also require that you affirm to us 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.
Attachment A-2
The City is responsible for informing us of its views about the risks of fraud within the entity, and its
knowledge of any fraud or suspected fraud affecting the entity. We will also determine that certain matters
related to the conduct of the audit are communicated to the City Council including I) fraud involving senior
management and fraud (whether caused by senior management or other employees) that causes a material
misstatement of the financial statements, 2) illegal acts that come to our attention (unless they are clearly
inconsequential), 3) disagreements with management and other serious difficulties encountered in performing
the audit, and 4) various matters related to the entity's accounting policies and financial statements.
You have informed us that you intend to prepare a comprehensive annual financial report (CAFR) and submit
it for evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence
in Fi:z:.ancial Reporting.
The working papers for this engagement are the property of Grove, Mueller & Swank, P.C. However, you
acknowledge and grant your assent that representatives of the cognizant or oversight agency or their designee,
other government audit staffs, and the U.S. General Accounting Office shall have access to the audit working
papers upon their request; and that we shall maintain the working papers for a period of at least three years
after the date of the report, or for a longer period if we are requested to do so by the cognizant or oversight
agency. Access to requested workpapers will be provided under the supervision of Grove, Mueller & Swank,
P.C. audit personnel and at a location designated by our Firm.
During the course of our engagement, we may accumulate records containing data which should be reflected
in your books and records. You will determine that all such data, if necessary, will be so reflected.
Accordingly, you will not expect us to maintain copies of such records in our possession.
Our fees are based on the time required by the individuals assigned to the engagement, plus direct expenses.
Interim billings will be submitted as work progresses and as expenses are incurred. Billings are due upon
submission. Our fee for the services described in this letter are $35,500.
In the event we are requested or authorized by City of Springfield or are required by government regulation,
subpoena, or other legal process to produce our documents or our personnel as witnesses with respect to our
engagements for City of Springfield, City of Springfield will, so long as we are not a party to the proceeding in
which the information is sought, reimburse us for our professional time and expenses, as well as the fees and
expenses of our counsel, incurred in responding to such requests.
You agree to inform us before our report on the financial statements is included as part of an official statement
or other document involved with the sale of debt instruments and before you reproduce the financial
statements and/or make reference to us or our audit. Our fees, if any, for additional services that may be
required under our quality assurance system as a result of the above will be established with you at the time
such services are determined to be necessary.
It is agreed by City of Springfield and Grove, Mueller & Swank, P.C. or any successors in interest that no
claim arising out of services rendered pursuant to this agreement by or on behalf of City of Springfield shall be
asserted more than two years after the date of the last audit report issued by Grove, Mueller & Swank, P.C.
In accordance with "Government Auditing Standards," a copy of our most recent peer review report was
provided to you last year.
Attachl!lent A-3
If this letter defines the arrangements as you understand them, please sign and date the enclosed copy, and
return it to us. We appreciate your business.
91::m~t~L
Confirmed on behalf of the addressee:
-'
~ ~ ,"", ~ l-;.A\-'
<; I 2 I ~-:J______.
, ,. 'jjTY ATTORNEY
Attachment A-4