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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