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R-92-1734 - 7/21/1992WHEREAS, 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 engagement letter with Pena Swayze & Co., to conduct said audit, a copy of said letter being attached hereto and incorporated herein for all purposes. RESOLVED this 21st day of July, 1992. ATTEST: JO J NE LAND, City Secretary RS07212B RESOLUTION NO. f 11 31 MIKE ROBINSON, Mayor City of Round Rock, Texas - PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS Honorable Mike Robinson, Mayor Mr. Robert L. Bennett, City Manager Mr. David Kautz, Finance Director City of Rand Rock Round Rock, Texas Gentlemen: July 15, 1992 We are pleased to have the opportunity to serve the City of Round Rock as independent auditors for the year ending September 30, 1992. 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, 1992. In addition to the general purpose financial statenents, we will: - Assist in the preparation of the City's Comprehensive Annual Financial Report for sutnnission to the Government Finance Officers Association under its voluntary program for a Certificate of Achievement for FSccellence 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 sta lards; 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 iocai Governments, and will include tests of the accounting records of the City and other procedures we consirier 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 FAX 512 255 2466 City of Rand Rock Page 2 July 15, 1992 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 representa- tions from your attorneys as part of the engagement, and they nay bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations faun you about the financial statements and related matters. An audit includes examining, on a test basis, evidence supporting the amounts and diGc osures 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 Imuytalub. 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 ccatpleteness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This re2.ponsibility 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 became aware of such reportable conditions or ways that we believe management practices can be improved, we will oatatunicate them to you in a separate letter. PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS City of Round Rock Page 3 July 15, 1992 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 fine and the City nest 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. PROPOSED AUDIT SCHEDULE PHASE OF WORK TIMING I. Interim field work Mid September 17. Confirmations Mid September III. Year -end field work Late October IV. First report draft Early January V. Printing of report Late January VI. Report delivery Early February 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 world 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 theme to you with recommendations for correcting those weaknesses. We will try to initiate ideAc or observations that we believe will help achieve the objectives of the City. We will also be pleased to L>=spond to inquiries you might have about financial or other business matters. r PENA SWAYZE Sr CO. CERTIFIED PUBLIC ACCOUNTANTS City of Round Rock Page 4 July 15, 1992 Our fees are based on the time our personnel require to complete the engagement plus direct expenses. Individual hourly rate, vary in accordance with the degree of responsibility and skill of those assigned to the audit. Our estimated fee for this examination is $27,300 for the general purpose financial statements. We anticipate that preparation of the first draft of the catprehensive annual financial report would be $5, 500. City staff would be responsible for the completion of the report after delivery of the first draft. We would make our typist available to City staff. Our fee estimate includes all typing. We estimate our examination will take approximately 800 manhaurs 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 priming. 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 rasters 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, plea 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. Date PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS Sincerely, O � PENA DATE: July 16, 1992 SUBJECT: City Council Meeting, July 21, 1992 ITEM: 9.B. Consider a resolution authorizing the Mayor to sign an engagement letter with Pena Swayze & Company for audit services. STAFF RESOURCE PERSON: David Kautz STAFF RECOMMENDATION: The City's charter requires an annual audit of the financial records to be performed by an independent certified public accountant. Staff recommends that Pena Swayze and Company be retained for this purpose. The cost will be approximately $33,000 and is included in the proposed operating budget.. The fee has been between $30,000 and $32,000 for the past 5 years. .j STEPHAN L. SHEETS KEVIN HENDERSON CHARLES D. CROSSFIELD Pena Swayze & Com P.O. Bo Rock, Texas 78680 Gentlemen: STEPHAN L. SHEETS & ASSOCIATES. P.C. ' ATTORNEYS AT LAW 309 E. MAIN STREET ROUND ROCK. TEXAS 78664 November 30, 1992 Re: City of Round Rock Audit for Year Ending September 30, 1992. TELEPHONE (512) 255.8877 FAX (512) 255.6986 By letter dated October 2, 1992, David Kautz, Finance Director for the City of Round Rock ( "City") has requested that I furnish you certain information in connection with your examination of the accounts of the City as of September 30, 1992, and for the period from that date to the date of my response. I have been retained as the City Attorney to generally represent the City in legal matters. As part of my responsibilities as City Attorney, I represent the City in specific litigation matters. In such capacity I have reviewed the litigation and claims threatened or asserted against the City for which I have been retained. Subject to the foregoing and to the last paragraph of this letter, I have not been engaged to give substantial attention to, or represent the City in connection with, material loss contingencies coming within the scope of clause (a) of paragraph 5 of the Statement of Policy referred to in the last paragraph of this letter, except as follows: PENDING OR THREATENED LITIGATION I am aware of no pending or threatened litigation that must be disclosed in accordance with Statement of Financial Accounting Standards No. 5. UNASSERTED CLAIMS AND ASSESSMENTS I am aware of no unasserted possible claims or assessments that must be disclosed in accordance with Statement of Financial Accounting Standards No. 5. Pena Swayze & Company November 30, 1992 Page 2 I emphasize that any evaluation given as to the merit of a claim or defense or the likelihood of litigation is based on my present understanding of the facts of a particular case, which is subject to change virtually on a day -to -day basis. My present opinion should therefore not be taken in any way as a warranty of the actual outcome of litigation. The information set forth herein is as of the date of this letter and I disclaim any undertaking to advise you of changes which hereafter may be brought to my attention. As of September 30, 1992, the City was indebted to me for services and expenses in the amount of $14,879.43. This amount has since been paid in full. This response is limited by, and in accordance with, the ABA Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information (December 1975); without limiting the generality of the foregoing, the limitations set forth in such Statement on the scope and use of this response (Paragraphs 2 and 7) are specifically incorporated herein by reference, and any description herein of any "loss contingencies" is qualified in its entirety by paragraph 5 of the Statement and the accompanying Commentary (which is an integral part of the Statement.) Consistent with the last sentence of paragraph 6 of the ABA Statement of Policy and pursuant to the City's request, this will confirm as correct the City's understanding as set forth in its audit inquiry letter to us that whenever, in the course of performing legal services for the City with respect to a matter recognized to involve an unasserted possible claim or assessment that may call for financial statement disclosure, I have formed a professional conclusion that the City must disclose or consider disclosure concerning such possible claim or assessment, I, as a matter of professional responsibility to the City, will so advise the City and will consult with the City concerning the question of such disclosure and the applicable requirements of Statement of Financial Accounting Standards No. 5. SLS /ks cc: David Kautz City of Round Rock 221 East Main Street Round Rock, Texas 78664 Robert L. Bennett V 221 East Main Street Round Rock, Texas 78664 Sinc =r ly, -1 C' Stephan L. Sheets Mayor Mike Robinson Mayor Pro -tem Charles Culpepper Council Members Robert Stluka Rod Morgan Rick Stewart Bari Palmer JimmyJoseph City Manager Robert L. Bennett, Jr. City Attorney Stephan L. Sheets August 4, 1992 Pena Swayze & Co. P.O. Box 250 Round Rock, Texas 78680 Dear Sirs: Resolution No. 1734R was approved by the Round Rock City Council on July 21, 1992. Enclosed is a copy of the resolution and an original engagement letter for your files. If you have any questions, please give us a call. Sincerely, Joanne Land Assistant City Manager/ City Secretary JL:km Enclosures THE CITY OF ROUND ROCK 221 East Main Street Round Rock, Texas 78664 512 - 255 -3612 Fax 512 -255 -6676 1- 800- 735 -2989 (TDD) 1- 800 - 735 -2988 (Voice)