GM-12-09-05-039BROCKWAY
GERSBACH
FRANKLIN &
NIEMEIER,P.C.
CERTIFIED PUBLIC ACCOUNTANTS
July 18,2012
Brushy Creek Regional Utility Authority, Inc.
221 E Main St
Round Rock, Texas 78664
We are pleased to confinn our understanding of the services we are to provide Brushy Creek Regional Utility
Authority, Inc. (the BCRUA) for the year ended September 30,2012. We will audit the financial statements of the
business-type activities which comprise the basic financial statements of BCRUA as of and for the year ended
September 30,2012. Accounting standards generally accepted in the United States of America provide for certain
required supplementary information (RSI), such as management's discussion and analysis (MD&A), to
supplement BCRUA'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
historical context. As part of our engagement, we will apply certain limited procedures to BCRUA's RSI in
accordance with 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) Budgetary Comparison Schedules
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly
presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report
on the fairness of the supplementary information referred to in the first paragraph when considered in relation to
the financial statements taken as a whole. Our audit will be conducted in accordance with auditing standards
generally accepted in the United States of America and the standards for financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the
accounting records of BCRUA and other procedures we consider necessary to enable us to express such opinions.
If our opinions on the financial statements are other than unqualified (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.,
3520 SW H.K. DODGEN LOOP. TEMPLE, TEXAS 76504 .254.773.9907 • FAX 254.773.1570
WWW TEMPLECPA COM
Brushy Creek Regional Utility Authority, Inc.
Page Two
We will also provide a report (that does not include an opinion) on internal control related to the financial
statements and compliance with the provisions of laws, regulations, contracts and grant agreements,
noncompliance with which ,could have a material effect on the financial statements as required by Government
Auditing Standards. The report on internal control and compliance will include a statement that the report is
intended solely for the information and use of management, the body or individuals charged with governance,
others within the entity, and specific legislative or regulatory bodies and is not intended to be and should not be
used by anyone other than these specified parties. If during our audit we become aware that BCRUA is subject to
an audit requirement that is not. encompassed in the terms of this engagement, we will communicate to
management and those charged with governance that an ~udit in accordance with U.S. generally accepted auditing
standards and the standards for financial audits contained in Government Auditing Standards may not satisfy the
relevant legal, regulatory, or contractual requirements.
Management Responsibilities
Management is responsible for the basic financial statements and all accompanying information as well as all
representations contained therein. As part of the audit, we will assist with preparation of your financial statements
and related notes. You are responsible for making all management decisions and performing all management
functions relating to the financial statements and related notes and for accepting full responsibility for such
decisions. You will be required to acknowledge in the written representation letter our assistance with preparation
of the financial statements and that you have reviewed and approved the financial statements 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.
Management is responsible for establishing and maintaining effective internal controls, including evaluating and
monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; for the selection and
appiication of accounting principles; and for the fair presentation in the financial statements of the respective
financial position of the business-type activities of the BCRUA and the respective changes in financial position
and cash flows, where applicable, in conformity with U.S. generaI1y accepted accounting principles.
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 it
necessary to obtain audit evidence.
Your responsibilities include adjusting the financial statements to correct material misstatements and for
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, ooth individually
and in the aggregate, to the financial statements taken as a whole.
Brushy Creek Regional Utility Authority, Inc.
Page Three
You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and
for infonning us about all known or suspected fraud affecting the government involving (I) 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 infonning us of your knowledge of any
allegations of fraud or suspected fraud affecting the government received in communications from employees,
fonner 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 for taking timely and
appropriate steps to remedy any fraud, illegal acts, violations of contracts or grant agreements, or abuse that we
may report.
You are responsible for the preparation of the supplementary infonnation in confonnity with U.S. generally
accepted accounting principles. You agree to include our report on the supplementary infonnation in any
document that cont~ins and indicates that we have reported on the supplementary infonnation. You also agree to
present the supplementary infonnation with the audited financial statements. Your responsibilities include
acknowledging to us in the written representation letter that (1) you are responsible for presentation of the
supplementary infonnation in accordance with GAAP; (2) that you believe the supplementary infonnation,
including its fonn and content, is fairly presented in accordance with GAAP; (3) that the methods of measurement
or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for
such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the
measurement or presentation of the supplementary infonnation.
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, perfonnance 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
fmdings and recommendations resulting from those audits, attestation engagements, perfonnance audits, or other
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 fonnat for
providing that infonnation.
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 significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements. We will plan and perfonn the audit to obtain reasonable rather than
absolute assurance about whether the financial statements are free of material misstatement, whether from (I)
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 detennination of abuse is subjective, Government Auditing Standards do not expect auditors to
provide reasonable assurance of detecting abuse.
Brushy Creek Regional Utility Authority, Inc.
Page Four
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
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. However, we will inform the appropriate level of
management of any material errors or any fraudulent financial reporting or misappropriation of assets that come to
our attention. We will also inform the appropriate level of management of any violations of laws or governmental
regulations that come to our attention, unless clearly inconsequential. 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 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 fmancial 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.
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 and Government Auditing
Standards.
Audit Procedures-Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,
we will perform tests of BCRUA's compliance with the provisions of applicable laws, regulations, contracts,
agreements, and grants. However, the objective of our audit 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.
Brushy Creek Regional Utility Authority, Inc.
Page Five
Engagement 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 infonnation 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 infonnation. In addition, we will secure
confidentiality agreements with all service providers to maintain the confidentiality of your infonnation and we
will take reasonable precautions to detennine that they have appropriate procedures in place to prevent the
unauthorized release of your confidential infonnation 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 infonnation with the third-party service provider. Furthennore, we will remain responsible for the
work provided by any such third-party service providers.
We understand that your employees will prepare all cash or other confinnations we request and will locate any
documents selected by us for testing.
We will provide copies of our reports to BCRUA; however, management is responsible for distribution of the
reports and the financial statements. Unless restricted by law or regulation, or containing privileged and
confidential infonnation, copies of our reports are to be made available for public inspection.
The audit documentation for this engagement is the property of Brockway, Gersbach, Franklin & Niemeier, P.C.
and constitutes confidential infonnation. However, pursuant to authority given by law or regulation, we may be
requested to make certain audit documentation available to a state or 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.e. personnel. Furthennore, 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 infonnation 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
date. If we are aware that a federal awarding agency 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.
Brushy Creek Regional Utility Authority, Inc.
Page Six
We expect to begin our audit the first of November 2012 and to issue our reports in January 2013 based on being
provided the items listed in the attached "List of Requested Items for Audit" on the dates promised as provided to
us by Olivia Riley. Steve Niemeier is the engagement partner and is responsible for supervising the engagement
and signing the reports or authorizing another individual to sign them. Steve will review all audit work papers
and he will specifically review all major construction transactions and the related capitalization thereof.
Our fee for these services will be at our standard hourly rates plus out-of-pocket costs (such as report reproduction,
typing, postage, travel, copies, telephone, etc.) 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, 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. Based on our preliminary estimates, the fees should not exceed $ 23,S~0 plus out-of-pocket expense.
The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected
circumstances will not be encountered during the audit. Specifically, this fee is contingent upon your personnel
meeting the timeline which they have provided us and as documented in the attachment. Please review the
attachment carefully, since this time line is imperative to meeting the reporting deadlines of your participating
cities and will result in additional audit fees. 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 Jetter of comment, and any subsequent peer review reports and letters of comment received during
the period of the contract. Our 2009 peer review accompanies this Jetter.
We appreciate the opportunity to be of service to BCRUA 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,
<-'il.~f(1/~ lku Brockw~':Ch,FrL~ & Niemeier, P.C.
RESPONSE:
This Jetter correctly sets forth the understanding of Brushy Creek Regional Utility Authority, Inc.
1Name
C;~V1-e ('.s: ( Ma. V1~y:e
Title Date
,
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BCRUA
List of Requested Items for Audit
For the Year Ended September 30, 2012
Requested
Engagement letter
Signed bank &debt confirmations
Draft compiled financial statements as of 9.30.12
Final compiled financial statements as of9.30.12
Promised by
08.01.2012
10.15.2012
11.05.2012
11.16.2012
QuickBooks file 11.09.2012
Access to Share Point site (use rna me &password)
List of any new bank/investment accounts with account numbers
Bilnk/investment account reconciliations as of9.30.12
Bank/investment account statements (with images of cleared items)
for October 2011 -September 2012
Original and final amended budget for FY12
Capitalized interest schedule
Bond interest accrual schedule
09.01.2012
10.01.2012
11.05.2012
11.16.2012
11.09.2012
11.09.2012
11.09.2012
Master schedule of final cost allocation percentages by phase and
project line item in effect for FY 2012
Due to cities schedule
Depreciation schedules for new assets or assets moved out of CIP, if
applicable
Schedule of any additional equity contributions made by cities, if
applicable
Copies of any minutes, new resolutions, contracts, contract
amendments, leases, policies, etc. not available through Share Point
or website
11.05.2012
11.09.2012
11.09.2012
11.09.2012
11.09.2012
Copies of release of funds requests for TWDB funds with backup
documentation #6-? 11.09.2012
Detail accounts payable/receivable listing 11.09.2012
Bank/investment account statements (with images of cleared items)
for October 2011 11.23.2012
MD&A revisions/additions 12.21.2012
Bank/investment account statements (with images of cleared items)
for November 2011 12.21.2012
Carneiro, Chumney&"'Co., L.c.
Robert M. McAdams, CPA CERTIFIED PUBLIC ACCOUNTANTS Allen E. Robertson, Jr., CPA
Paul Roth-Roffy, CPA Edward H. Guerra, CPA
Julia C. Norton, CPA Michael J. Schaub, CPA
System Review Report
September 22,2009
To the Shareholders of Brockway Gersbach Franklin &Niemeier PC
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
Brockway Gersbach Franklin & Niemeier PC (the firm) in effect for the year ended April 30,
2009. 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. 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 the Government Auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice of Brockway
Gersbach Franklin &Niemeier PC, in effect for the year ended April 30, 2009, 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. Brockway Gersbach Franklin &
Niemeier PC has received a peer review rating of pass.
"Helping Clients Succeed for more than 75 Years"
40 N.L Loop 410, SUite 200' San Antonio, Texas 78216-5876
(210) 342-8000 • Fax (210) 342-0866
E.-mail: carneiro@carneiro.com • www.carneiro.com
An Independent Member of the BOO Seidman Alliance