R-09-06-25-11D2 - 6/25/2009RESOLUTION NO. R -09-06-25-11D2
WHEREAS, it is necessary for the City of Round Rock to conduct
an annual audit, and
WHEREAS, the accounting firm of Brockway, Gersbach, Franklin &
Niemeier, P.C. has submitted an engagement letter to provide said
audit for the fiscal year ending September 30, 2009, and
WHEREAS, the City Council wishes to enter into said engagement
letter, Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK,
TEXAS,
That the Mayor is hereby authorized and directed to execute on
behalf of the City an engagement letter with Brockway, Gersbach,
Franklin & Niemeier, P.C. to conduct said audit, a copy of said
engagement letter being attached hereto as Exhibit "A" and
incorporated herein for all purposes.
The City Council hereby finds and declares that written notice
of the date, hour, place and subject of the meeting at which this
Resolution was adopted was posted and that such meeting was open to
the public as required by law at all times during which this
Resolution and the subject matter hereof were discussed, considered
and formally acted upon, all as required by the Open Meetings Act,
Chapter 551, Texas Government Code, as amended.
RESOLVED this 25th day of June, 2009.
ATTEST:
SARA L. WHITE, City Secretary
0:\wdox\SCC1nts\0112\0905\MUNICIPAL\R90625D2.DOC/rmc
ALAN MCGRAW, Mayor
City of Round Rock
Texas
BROCKWAY
GERSBACH
FRANKLIN &
NIEMEIER,P.C.
CERTIFIED PUBLIC ACCOUNTANTS
May 14, 2009
City of Round Rock, Texas
221 E. Main Street
Round Rock, Texas 78664-5299
We are pleased to confirm our understanding of the services we are to provide the City of Round Rock,
Texas for the year ended September 30, 2009. We will audit the financial statements of the governmental
activities, the business -type activities, each major fund, and the aggregate remaining fund information,
which collectively comprise the basic financial statements of the City of Round Rock, Texas as of and for
the year ended September 30, 2009. 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 accompany the City of Round Rock, Texas' basic financial statements. As part of
our engagement, we will apply certain limited procedures to City of Round Rock, Texas' RSI. These
limited procedures will consist principally of inquiries of management regarding the methods of
measurement and presentation, which management is responsible for affirming to us in its representation
letter. Unless we encounter problems with the presentation of the RSI or with procedures relating to it,
we will disclaim an opinion on it. 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. Budgetary Comparison Schedules
Supplementary information other than RSI, such as combining and individual fund financial statements,
also accompanies City of Round Rock, Texas' basic financial statements. We will subject the following
supplementary information to the auditing procedures applied in our audit of the basic financial
statements and will provide an opinion on it in relation to the basic financial statements:
1. Combining and Individual Fund Statements and Schedules.
2. Schedule of Expenditures of Federal Awards.
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 disclaim an opinion.
1. Introductory Section
2. Statistical Data
EXHIBIT
POST OFFICE BOX 4083 • TEMPLE, TEXAS 76505-4083 • 254.773.9907 • FAX 254.773.1570
WWW.TEMPLECPA.COM
City of Round Rock, Texas
Page Two
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 additional information referred to in the
first paragraph when considered in relation to the basic 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.
The reports on internal control and compliance will each include a statement that the report is intended
solely for the information and use of the management, the body or individuals charged with governance,
others within the entity, specific legislative or regulatory bodies, federal awarding agencies, and if
applicable, pass-through entities and 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 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 OMB Circular A-133, and will include tests of accounting records, 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. If our opinions on the financial
statements or the Single Audit compliance opinions are other than unqualified, we will fully 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 and all accompanying information as well as
all representations contained therein. Management is also responsible for the 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 are responsible for making all 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. You will be
required to acknowledge in the management representation letter our assistance with the preparation of
the financial statements and the 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. Further, you are required to designate an
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.
City of Round Rock, Texas
Page Three
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. You are 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, each major fund, and the aggregate remaining fund information of
the City of Round Rock, 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, including 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 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, 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
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 and 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.
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. 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 management or employees acting-
on
ctingon 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.
City of Round Rock, Texas
Page Four
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 conies to our
attention. We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. 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, 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 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 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 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 CircularA-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 Round Rock, Texas' compliance with applicable laws
and regulations and the provisions of 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.
City of Round Rock, Texas
Page Five
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 tests 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 City of Round Rock, Texas' major programs. The purpose of those procedures will be to express an
opinion on the City, of Round Rock, Texas' 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 internal policies, procedures, and safeguards to protect the confidentiality of your personal
information. 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 are 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 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 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 Brockway, Gersbach, Franklin &
Niemeier, P. C. and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to 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 Brockway, Gersbach, Franklin & Niemeier, P. C. 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.
City of Round Rock, Texas
Page Six
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 City. 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 our audit on approximately July 2009 and to issue our reports no later than March
2010. Steve Niemeier is the engagement partner and is responsible for supervising the engagement and
signing the reports or authorizing another individual to sign them. Our fee for these services will be at
our standard hourly rates, we agree that our gross fee, including expenses, will not exceed $ 95,000. Our
standard hourly rates vary according to the degree of responsibility involved and the experience level of
the personnel assigned to your audit. 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 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 2006 peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City of Round Rock, Texas 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 the enclosed
copy and return it to us.
Sincerely,
67,...(„0*k
Brockway, Gersbach, Franklin & Niemeier, P. C.
RESPONSE:
This letter correctly sets forth the understanding of the City of Round Rock, Texas
By:
Title:
Date:
Robert M. McAdams, CPA
Robert L. Lewis, CPA
Franklin W. Burk, CPA
Paul Roth-Roffy, CPA
July 11, 2006
Carneiro,Chumney&Co., L.C.
CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Brockway, Gersbach, McKinnon & Niemeier, P.C.
J. Lowell Goode, CPA
Julia C. Norton, CPA
Allen E. Robertson, Jr., CPA
We have reviewed the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. (the firm) in effect for the year ended
April 30, 2006. A system of quality control encompasses the firm's organizational structure,
the policies adopted and procedures established to provide it with reasonable assurance of
conforming with professional standards. The elements of quality control are described in the
Statements on Quality Control Standards issued by the American Institute of CPAs (AICPA).
The firm is responsible for designing a system of quality control and complying with it to
provide the firm reasonable assurance of conforming with 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 with its system of quality control based on our review.
Our review was conducted in accordance with standards established by the Peer Review
Board of the AICPA. During our review, we read required representations from the firm,
interviewed firm personnel and obtained an understanding of the nature of the firm's
accounting and auditing practice, and the design of the firm's system of quality control
sufficient to assess the risks implicit in its practice. Based on our assessments, we selected
engagements and administrative files to test for conformity with professional standards and
compliance with the firm's system of quality control. The engagements selected represented a
reasonable cross-section of the firm's accounting and auditing practice with emphasis on
higher -risk engagements. Th e engagements selected included among others, audits of
Employee Benefit Plans and engagements performed under Govemment Auditing Standards.
Prior to concluding the review, we reassessed the adequacy of the scope of the peer review
procedures and met with firm management to discuss the results of our review. We believe
that the procedures we performed provide a reasonable basis for our opinion.
In performing our review, we obtained an understanding of the system of quality control for
the firm's accounting and auditing practice. In addition, we tested compliance with the firm's
quality control policies and procedures to the extent we considered appropriate. These tests
covered the application of the firms policies and procedures on selected engagements. Our
review was based on selected tests therefore it would not necessarily detect all weaknesses
in the system of quality control or all instances of noncompliance with it. There are inherent
limitations in the effectiveness of any system of quality control and therefore noncompliance
with the system of quality control may occur and not be detected. Projection of any evaluation
of a system of quality control to future periods is subject to the risk that the system of quality
control may become inadequate because of changes in conditions, or because the degree of
compliance with the policies or procedures may deteriorate.
'Helping Clients Succeed for more than 75 Years'
40 N.E. Loop 410. Suite 200 • San Antonio, Texas 78216-5876
210) 342-8000 • Fax (210) 342-0866
E-mail: carneiro4carneiro.com • w'wr.carneiro.com
An Independent Member of the BDO Seidman Alliance
To the Shareholders 2 - July 11, 2006
Brockway, Gersbach, McKinnon &
Niemeier, P.C.
In our opinion, the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. in effect for the year ended April 30, 2006,
has been designed to meet the requirements of the quality control standards for an accounting
and auditing practice established by the AICPA and was complied with during the year then
ended to provide the firm with reasonable assurance of conforming with professional
standards.
C,_.,0_,14 ---6-f ,o‘Cc.
DATE: June 18, 2009
SUBJECT: City Council Meeting—June 25, 2009
ITEM: 11D2. Consider a resolution authorizing the Mayor to execute an engagement letter
with Brockway, Gersbach, McKinnon & Neimeier, P.C., Certified Public
Accountants, for the City's 2009 audit.
Department:
Staff Person:
Justification
Finance
Cheryl Delaney, Finance Director
The audit provides and independent examination of financial records, activities and operations to access
internal control practices, compliance with regulations, grant terms, bond covenants, contractual
requirements and fairness of presentation of financial information.
The recommended firm will also provide valuable ideas and observations intended to help achieve the
City's objectives in maintaining adequate financial controls, policies and procedures.
Funding:
Cost: $ 95, 000.00
Source of funds: General and Utility operating budgets
Outside Resources: N/A
Background Information:
The City's charter requires an annual audit of the financial records to be performed by an independent
certified public accountant. The objective of the audit is the expression of an opinion as to whether the
City's financial statements are fairly presented in conformity with generally accepted accounting
principles. Other objective include reporting on internal controls related to the financial statements and
compliance with laws, regulations, and the provisions of contracts or grant agreements in accordance
with Government Auditing Standards and Single Audit Act requirements.
Public Comment: N/A
EXECUTED
DOCUMENT
FOLLOWS
r1BROCKWAY
GERSBACH
LaFRANKLIN &
NIEMEIER,P.C.
CERTIFIED PUBLIC ACCOUNTANTS
May 14, 2009
City of Round Rock, Texas
221 E. Main Street
Round Rock, Texas 78664-5299
We are pleased to confirm our understanding of the services we are to provide the City of Round Rock,
Texas for the year ended September 30, 2009. We will audit the financial statements of the governmental
activities, the business -type activities, each major fund, and the aggregate remaining fund information,
which collectively comprise the basic financial statements of the City of Round Rock, Texas as of and for
the year ended September 30, 2009. 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 accompany the City of Round Rock, Texas' basic financial statements. As part of
our engagement, we will apply certain limited procedures to City of Round Rock, Texas' RSI. These
limited procedures will consist principally of inquiries of management regarding the methods of
measurement and presentation, which management is responsible for affirming to us in its representation
letter. Unless we encounter problems with the presentation of the RSI or with procedures relating to it,
we will disclaim an opinion on it. 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. Budgetary Comparison Schedules
Supplementary information other than RSI, such as combining and individual fund financial statements,
also accompanies City of Round Rock, Texas' basic financial statements. We will subject the following
supplementary information to the auditing procedures applied in our audit of the basic financial
statements and will provide an opinion on it in relation to the basic financial statements:
1. Combining and Individual Fund Statements and Schedules.
2. Schedule of Expenditures of Federal Awards.
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 disclaim an opinion.
1. Introductory Section
2. Statistical Data
POST OFFICE BOX 4083 • TEMPLE, TEXAS 76505-4083 • 254.773.9907 • FAX 254.773.1570
t�-- 061,-0 VZ -' 1/11)?__
WWW.TEMPLECPA.COM
Ct Z
WWW.TEMPLECPA.COM
City of Round Rock, Texas
Page Two
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 additional information referred to in the
first paragraph when considered in relation to the basic 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.
The reports on internal control and compliance will each include a statement that the report is intended
solely for the information and use of the management, the body or individuals charged with governance,
others within the entity, specific legislative or regulatory bodies, federal awarding agencies, and if
applicable, pass-through entities and 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 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 OMB Circular A-133, and will include tests of accounting records, 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. If our opinions on the financial
statements or the Single Audit compliance opinions are other than unqualified, we will fully 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 and all accompanying information as well as
all representations contained therein. Management is also responsible for the 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 are responsible for making all 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. You will be
required to acknowledge in the management representation letter our assistance with the preparation of
the financial statements and the 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. Further, you are required to designate an
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.
City of Round Rock, Texas
Page Three
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. You are 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, each major fund, and the aggregate remaining fund information of
the City of Round Rock, 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, including 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 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, 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
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 and 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.
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. 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 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.
City of Round Rock, Texas
Page Four
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 comes to our
attention. We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. 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, 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 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 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 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 of Round Rock, Texas' compliance with applicable laws
and regulations and the provisions of 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.
City of Round Rock, Texas
Page Five
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 tests 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 City of Round Rock, Texas' major programs. The purpose of those procedures will be to express an
opinion on the City of Round Rock, Texas' 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 internal policies, procedures, and safeguards to protect the confidentiality of your personal
information. 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 are 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 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 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 Brockway, Gersbach, Franklin &
Niemeier, P. C. and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to 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 Brockway, Gersbach, Franklin & Niemeier, P. C. 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.
City of Round Rock, Texas
Page Six
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 City. 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 our audit on approximately July 2009 and to issue our reports no later than March
2010. Steve Niemeier is the engagement partner and is responsible for supervising the engagement and
signing the reports or authorizing another individual to sign them. Our fee for these services will be at
our standard hourly rates, we agree that our gross fee, including expenses, will not exceed $ 95,000. Our
standard hourly rates vary according to the degree of responsibility involved and the experience level of
the personnel assigned to your audit. 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 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 2006 peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City of Round Rock, Texas 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 the enclosed
copy and return it to us.
Sincerely,
Brockway, Gersbach, Franklin & Niemeier, P. C.
RESPONSE:
This letter correctly sets forth the understanding of the City of Round Rock, Texas
By:
Title: NAM( &v—
Date: h2z3.t)&/
Robert M. McAdams, CPA
Robert L. Lewis, CPA
Franklin W. Burk, CPA
Paul Roth-Roffy, CPA
July 11, 2006
Carneiro,Chumney&Co., L.C.
CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Brockway, Gersbach, McKinnon & Niemeier, P.C.
J. Lowell Goode, CPA
Julia C. Norton, CPA
Allen 1 Robertson, Jr., CPA
We have reviewed the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. (the firm) in effect for the year ended
April 30, 2006. A system of quality control encompasses the firm's organizational structure,
the policies adopted and procedures established to provide it with reasonable assurance of
conforming with professional standards. The elements of quality control are described in the
Statements on Quality Control Standards issued by the American Institute of CPAs (AICPA).
The firm is responsible for designing a system of quality control and complying with it to
provide the firm reasonable assurance of conforming with 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 with its system of quality control based on our review.
Our review was conducted in accordance with standards established by the Peer Review
Board of the AICPA. During our review, we read required representations from the firm,
interviewed firm personnel and obtained an understanding of the nature of the firm's
accounting and auditing practice, and the design of the firm's system of quality control
sufficient to assess the risks implicit in its practice. Based on our assessments, we selected
engagements and administrative files to test for conformity with professional standards and
compliance with the firm's system of quality control. The engagements selected represented a
reasonable cross-section of the firm's accounting and auditing practice with emphasis on
higher -risk engagements. Th e engagements selected included among others, audits of
Employee Benefit Plans and engagements performed under Govemment Auditing Standards.
Prior to concluding the review, we reassessed the adequacy of the scope of the peer review
procedures and met with firm management to discuss the results of our review. We believe
that the procedures we performed provide a reasonable basis for our opinion.
In performing our review, we obtained an understanding of the system of quality control for
the firm's accounting and auditing practice. In addition, we tested compliance with the firm's
quality control policies and procedures to the extent we considered appropriate. These tests
covered the application of the firms policies and procedures on selected engagements. Our
review was based on selected tests therefore it would not necessarily detect all weaknesses
in the system of quality control or all instances of noncompliance with it. There are inherent
limitations in the effectiveness of any system of quality control and therefore noncompliance
with the system of quality control may occur and not be detected. Projection of any evaluation
of a system of quality control to future periods is subject to the risk that the system of quality
control may become inadequate because of changes in conditions, or because the degree of
compliance with the policies or procedures may deteriorate.
Helping talents Succeed for more than 75 Years"
40 N.E. Loop 410. Suite 200 • San Antonio. Texas 78216-3876
'210) 342-8000 • Fax (210) 342-0866
E-mail: carneiro4lcarneiro.com • www.carneiro.com
An Independent Member of the i3D0 .Seidman Alliance
To the Shareholders - 2 July 11, 2006
Brockway, Gersbach, McKinnon &
Niemeier, P.C.
In our opinion, the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. in effect for the year ended April 30, 2006,
has been designed to meet the requirements of the quality control standards for an accounting
and auditing practice established by the AICPA and was complied with during the year then
ended to provide the firm with reasonable assurance of conforming with professional
standards.
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