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R-89-1326 - 8/31/1989WHEREAS, it is necessary for the City of Round Rock, to conduct an annual audit, and WHEREAS, the accounting firm of Pena Swayze & Co., has submitted a proposal to provide said audit, and, WHEREAS, the City Council wishes to approve the Pena Swayze & Co. proposal, 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 agreement with Pena Swayze & Co., to conduct said audit, a copy of said agreement being attached hereto and incorporated herein??for�� all purposes. RESOLVED THIS J 1 day of August, 1989. ATTEST: C- RESAUDIT City Secretary RESOLUTION NO. l:lo g- „id iL MIKE ROBINSON, Mayor City of Round Rock, Texas Gentlemen: PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS Hon. Mike Robinson, Mayor Mr. Robert L. Bennett, City Manager Mr. David Kautz, Finance Director City of Round Rock Round Rock, Texas August 22, 1989 We are pleased to have the opportunity to serve the City of Round Rock as independent auditors for the year ending September 30, 1989. The purpose of this letter is to confirm our understanding of the scope of our audit. We will audit the City's general purpose financial statements as of and for the year ending September 30, 1989. In addition to the general purpose financial statements, we will: Assist in the preparation of the City's Comprehensive Annual Financial Report for submission to the Government Finance Officers Association under its voluntary program for a Certificate of Achievement for Excellence in Financial Reporting. Report on compliance with laws and regulations. Report on internal control. Our audit will be a Single Audit made in accordance with generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act of 1984; and the provisions of OMB Circular A -128, Audits of State and Local Governments, and will include tests of the accounting records of the City and other procedures we consider necessary to enable us to express an unqualified opinion that the financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles and to report on the City's compliance with laws and regulations and its internal controls as required for a Single Audit. If our opinion is other than unqualified, we will fully discuss the reasons with you in advance. MEMBER AMERICAN INSTITUTE AND TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS P.O. BOX 250 ROUND ROCK, TEXAS 78680 512/255.2165 City of Round Rock Page 2 August 22, 1989 Our procedures will include tests of documentary evidence supporting the transactions 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, creditors and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for respond- ing to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. 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. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. As required by the Single Audit Act of 1984, our audit will include tests of transactions related to federal assistance programs for compliance with applicable laws and regulations. However, because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts, including fraud or defalcations, may exist and not be detected by us. We will advise you, however, of any matters of that nature that come to our attention, and 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 matters that might arise during any later periods for which we are not engaged as auditors. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the prepara- tion of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the maintenance of adequate records and related internal control structure policies and procedures, the selection and application of accounting principles, and the safeguarding of assets. Our audit is not specifically designed and cannot be relied on to disclose reportable conditions, that is, significant deficiencies in the design or operation of the internal control structure. However, during the audit, if we become aware of such reportable conditions or ways that we believe management practices can be improved, we will communicate them to you in a separate letter. PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS City of Round Rock Page 3 August 22, 1989 Additionally, we will study the City's operations in order to make recommendations regarding the economy and efficiency with which you conduct your affairs. In order for our firm to complete our work in a timely manner and to maintain the level of fees we propose, our firm and the City must closely coordinate the audit work so that City staff disruption is minimized, and we receive timely City prepared reports, information and support. We feel that an efficient audit and timely report can be accomplished with the following schedule. I. Interim field work II. Confirmations III. Year -end field work IV. Review of report draft V. Printing of report VI. Report delivery PROPOSED AUDIT SCHEDULE PHASE OF WORK TIMING Mid September Mid September Late October Early December Mid December Mid January The City is to furnish the necessary and customary clerical staff to assist us in preparing detail trial balances and supporting schedules. We also understand that City staff will assist us by locating and submitting to us invoices, cancelled checks and other documents and records which we request. Prior to beginning each phase of the audit process, we would utilize City staff in the preparation of certain detailed audit schedules which we would format. In order for us to complete our work efficiently within the proposed time schedule and to stay within the proposed range of audit fees, all City prepared schedules must be completed at the start of each phase. In conjunction with all phases of our examination, we will review the City's system of internal accounting controls. If we observe any material weaknesses, we will report them to you with recommendations for correcting those weaknesses. We will try to initiate ideas or observations that we believe will help achieve the objectives of the City. We will also be pleased to respond to inquiries you might have about financial or other business matters. r PEIVA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS City of Round Rock Page 4 August 22, 1989 Our fees are based on the time our personnel require to complete the engagement plus direct expenses. Individual hourly rates vary in accordance with the degree of responsibility and skill of those assigned to the audit. Our estimated fee for this examination is $24,000 for the general purpose financial statements. We anticipate that preparation of the comprehensive annual financial report would cost $4,000 - $6,000, inclusive of typing. We estimate our examination will take approximately 900 manhours to complete. If unforeseen complications arise during the audit making it likely that the fee will exceed this amount, we will discuss the increase before proceeding. If you intend to publish or otherwise reproduce the financial statements and make reference to our firm name, you agree to provide us with printers' proofs or masters for our review and approval before printing. You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed. We appreciate the opportunity to be of service to the City 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. CONFIRMED BY; Mike Rober David Kautz, Finance 'irector Date j1 ty m anager PENA SWAYZE & CO. Sincerely, PENA SWAYZE O. DATE: August 28, 1989 SUBJECT: Council Agenda, August 31, 1989 ITEM: 3A. Consider a resolution retaining Pena Swayze for the 1988 -89 audit. STAFF RESOURCE PERSON: David Kautz STAFF RECOMMENDATION: To retain Pena Swayze and Company to perform the annual audit for the City of Round Rock. This will be the fifth year this firm has performed the audit. A representative from the firm will be on hand to address any questions. ECONOMIC IMPACT: As indicated by the attached agreement, the fee for the audit service will be $30,000.