Loading...
R-93-06-24-9D - 6/24/1993RESOLUTION NO. /f - 93 -06 7,24-9D WHEREAS, it'ls 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 24th day of June, 1993. ATTEST: ,011 J E LAND, City Secretary KSIRPSOLUTTON/RS06243D / CHARLES CULPF, , Mayor City of Round ock, Texas Honorable Charles C. Culpepper, Mayor Mr. Robert L. Bennett, City Manager Mr. David Kautz, Finance Director City of Round Rock Round Rock, Texas Gentlemen: PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS June 18, 1993 We are pleased to have the opportunity to serve the City of Round Rock as independent auditors for the year ending September 30, 1993. 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, 1993. In addition to the general purpose financial statements, we will: - Assist in the preparation of the City's Comprehensive Annual Financial Report for submission ssion 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 Calptroller 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 formity 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 Round Rock Page 2 June 18, 1993 Our procedures will include tests of dccsentary evidence supporting the transactions in the accounts, and may include tests of the physical existence a of inventories, and direct coaifirmatioai 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 may bill you for responding 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 maanining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the nunber 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 misstatemsut. 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, arxi 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 ccepleteness 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 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. PE1VA SWAYZE & CO. C RIUM:I PUBLIC ACCOUNTANTS City of Round Rock Page 3 June 18, 1993 Additionally, we will study the City's operations in order to make recam err ations 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 accaplished with the following schedule I. Interim field work Mid Septaiber II. Caefirueticszs Mid September III. Year -end field work Late O IV. First report draft Early JJivary V. Printing of report late Jarivazy 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 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 e aryl 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 than 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. PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS s PROPOSED AUDIT SCHEDULE PRASE OF WORK TIMING City of Pound Rock Page 4 7u ne 18, 1993 Our fees are based on the time our personnel require to complete the engagement plus direct expenses. Indiv'iiial 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 $28,100 for the general pine financial statements We anticipate that preparation of the first draft of the cOrehensive annual financial report would be $5,700. 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 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. r PENA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANIS DATE: June 22, 1993 SUBJECT: City Council Meeting, June 24, 1993 ITEM: 9.D. Consider a resolution authorizing the Mayor to enter into an audit agreement with Pena, Swayze and Company for the fiscal year ended 1993. 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. Cost of the audit will be approximately $34,000 and is included in the proposed operating budget. Staff believes that this firm has the capability and experience to properly perform the audit function. Additionally, the firm has illustrated a continuing improvement in audit quality. If retained, this would be the ninth audit conducted by the firm for the City. Mayor Charles Culpepper Mayor Pro -tem Robert Sttuka Council Members Rod Morgan . Rick Stewart Fart Palmer Martha Chavez Jimmy Joseph City Manager Robert L. Bennett, Jr. City Attorney Stephan L. Sheets July 14, 1993 Pena, Swayze & Co. P.O. Box 250 Round Rock, TX 78680 Dear MWayze: Resolution No.R- 93- 06 -24 -9D was approved by the Round Rock City Council on June 24, 1993. Enclosed is a copy of the resolution and the original agreement for your files. If you have any questions, please do not hesitate to call. Sincerely, g ri/ni)ti2j Joanne Land, Assistant City Manager/ City Secretary JL:tb 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) r CITY OF ROUND ROCK, TEXAS MANAGEMENT REPORT - SEPTEMBER 30, 1993 PEIiTA SWAYZE & CO. CERTIFIED PUBLIC ACCOUNTANTS r PENA SWAYZE & CO., L.L.P. CERTIFIED PUBLIC ACCOUN ANTS CITY OF BOUND BOCK, TEXAS MANAGEMENT REPORT SEPTEMBER 30, 1993 PE SWAYG� & CO., L.L. 0 CERTIFIED PUBLIC ACCOUNTAN Honorable Mayor, MeMbers of the City Council, City Manager and Finance Director City of Round Rock, Texas January 24, 1994 Steve D. Pena, C.P.A. R. M,chael Swayze, C.P.A. Mary H. Bott, C.P.A. Terry L. Hutchens, C.P.A. Steve McKay, C.P.A. We have audited the general purpose financial statements of the City of Round Rock, Teams, for the year ended September 30, 1993, and have issued our report thereon dated January 24, 1994. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and perforating our audit of the general purpose financial statements of the City of Round Rock, Texas, for the year ended September 30, 1993, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of certain matters that provide opportunities for strengthening internal controls and operating efficiency. CASH WLLEC IONS Observation: The City has procedures in place for the pLvin deposit of monies collected. In visits to various City Departments, we noted instances of non compliance with established procedures. Recommendation: We reammaerxi the City review its current policies for collection and deposit of monies. The policies should then be clearly cammulicated to all City Departments. 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 Round Rock, Texas Page 2 January 24, 1994 INPERNAL AUDIT ITECITON Observation: The City presently does not have staff whose responsibilities include internal audit functions. Recommendation: We recommend the City consider the establishment of an internal audit function. Examples of some duties that could be assigned include: - Review of franchise receipts from outside parties. - Review of department's compliance with established City policies. - Special projects as directed by the Council. - Review of compliance with grant requirements. - Preparation and maintenance of accounting procedures manuals. * r, PEIVA SWAYZE & CO., L.L.P. CUM. ftl&JO AMOUMLAMS We will review the status of these comments during our next engagement. We have already discussed these carmYents and suggestions with City management and note that scene are in the implementation stage. We will be pleased to discuss these comments in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the reommrendations. si R cerel M[37 & W., L.L.P. STEPHAN L SHEETS KEVIN HENDERSON CHARLES D. CROSSFIELD CHERYL RAYNER Pena Swayze & Co P.O. Bo Rock, Texas 78680 Gentlemen: STEPHAN L. SHEETS & ASSOCIATES, P.C. ATTORNEYS AT LAW 309 E MAIN STREET ROUND ROCK, TEXAS 78664 -5246 November 17, 1993 TELEPHONE 15121 255-9877 FAX (5121 256 -8986 Re: City of Round Rock Audit for Year Ending September 30, 1993. By letter dated October 1, 1993, 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 1. Litigation threatened by the parents of Tami Voss. a. Nature of threatened litigation: In the summer of 1992, a temporary employee of the City was charged with sexually molesting Tami Voss and at least one other young girl. The alleged molestation occurred at the City's day camp at Kenningham Park. On October 14, 1993, the City received a notice of claim from an attorney representing Tami Voss alleging that the molestation was the result of negligence on the part of the City. The notice of claim asked for damages in the amount of $250,000.00. Pena Swayze & Company November 17, 1993 Page 2 b. The progress of case to date: The City received the notice of claim approximately one month ago, and it is still being investigated and evaluated. c. How management is responding or intends to respond to the litigation: The level of response will depend on the outcome of the legal evaluation of the claim. d. Evaluation of the likely outcome: This claim is too new to be fully evaluated with respect to a likely outcome. However, the City has a number of potential defenses which could totally defeat the claim. 2. Litigation threatened by the parents of Marissa Rasmussen. a. Nature of threatened litigation: In the summer of 1992, a temporary employee of the City was charged with sexually molesting Marissa Rasmussen and at least one other young girl. The alleged molestation occurred at the City's day camp at Kenningham Park. On October 12, 1993, the City received a notice of claim from an attorney representing Marissa Rasmussen alleging that the molestation was the result of negligence on the part of the City. The notice of claim asked for damages in the amount of $250,000.00. b. The progress of case to date: The City received the notice of claim approximately one month ago, and it is still being investigated and evaluated. c. How management is responding or intends to respond to the litigation: The level of response will depend on the outcome of the legal evaluation of the claim. d. Evaluation of the likely outcome: This claim is too new to be fully evaluated with respect to a likely outcome. However, the City has a number of potential defenses which could totally defeat the claim. 3. Highland Management, Inc., et al., vs. The City of Round Rock and Brushy Creek Municipal Utility District; Cause No. 91-257 - C26; 26th Judicial District Court of Williamson County, Texas. a. Nature of pending litigation: This suit involves an action for declaratory judgment originally brought by Highland Management, Inc. ( "Highland ") asking the District Judge to declare that a water ordinance adopted by the City should be enforced. The City responded by pleading that if the ordinance is in fact valid, then a water supply contract between the City and Brushy Creek Pena Swayze & Company November 17, 1993 Page 3 Municipal Utility District ( "BCMUD ") should be declared null and void. BCMUD responded by filing a pleading alleging that if the contract is declared null and void that it has suffered damages in the amount of $2,000,000.00. b. Progress of case to date: Discovery is still underway. The case is presently set for a trial before a jury in May of 1994. c. How management is responding to the litigation: Management has instructed this office to vigorously defend the City against BCMUD's claim for damages. d. Evaluation of the outcome: It is not possible to evaluate the likelihood of the Judge declaring the contract null and void. However, in the event that the contract is declared null and void, it is not likely that BCMUD would be entitled to a judgment for damages. 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. 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, 1993, the City was indebted to me for services and expenses in the amount of $22,238.30. 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.) Pena Swayze & Company November 17, 1993 Page 4 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 221 East Main Street Round Rock, Texas 78664 Sin -r -ly, Steph n L. Sheets CITY OF ROUND ROCK, TEXAS OVERHEAD ALIDCATION STUDY PERIOD (FY 1993) 1 ( PENA SWAYZE & CO. Steve D. Pena, C.P.A. R. Michael Swayze, C.P.A. CERTIFIED PUBLIC ACCOUNTANTS Mary H. Bott, C.P.A. Terry L. Hutchens, C.P.A. Steve McKay, C.P.A. 1 May 24, 1993 1 Mr. Robert L. Bennett, Jr. 1 City of Round Rock 221 East Main Street Round Rock, Texas 78664 Dear Mr. Bennett: We have applied certain agreed -upon procedures to the accounting I records of the City of Round Rock, Terms to assist you in determining the reasonableness of the funds transfer from the City's Utility Fund to the General Fund for the study period (FY 1993). Our review was made solely to I assist you in determining the reasonableness of such transfer, and our report is not to be used for any other purpose. The procedures we performed are summarized as follows: ' a. We examine] the City's schedules of services provided by the General Fund for the Utility Fund. Those schedules show by department and function services performed by I General Fund employees for the benefit of the Utility FUnd. I b. We compared the above schedules to all services performed by each of the departhnents to determine the proportionate amount of services provided by the General Fund for the Utility Fund. I c. We made inquiries of certain department heads of the City who have responsibility for administering department I services as to whether the above schedules reasonably outline the allocation of their departments's services between the General and Utility Funds. I d. We discussed with certain management officials the basis for their assumptions in preparing the above schedules. 1 e. We calculated, by department, the cost of services provided for the Utility Fund's benefit. The calculation was made by taking the percentage of services provided for I the Utility Fund to total budgeted services provided times the actual costs incurred. (See attached Schedule A). 1 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 Mr. Robert L. Bennett, Jr. City of Pound Rock Page 2 May 24, 1993 Based solely on the foregoing procedures, we found that the overall percentage of allocation (16.34% - See Schedule A) fell within an acceptable range for the study period (FY 1993) Because the procedures dp rribed above do not constitute an audit made in accordance with generally accepted auditing standards, we do not express an opinion on the overall allocation percentage or on Schedule A. In connection with those procedures, no matters came to our attention that caused us to believe that the schedule should be adjusted. Had we performed additional procedures or had we made an audit of Schedule A in accordance with generally accepted auditing standards, other matters might have come to our attention that would have been reported to you. This report relates only to the transfers from the Utility Fund to the General Fund and does not extend to any of the financial statements of the City of Pound Rock, Texas for the study period (FY 1993). PEA SWAYZE & CO. CERTIFIED ACCOUNTANTS PROGRAMS CITY OF ROUND ROCK OVERHEAD AL1ACATION STUDY PERIOD (FY 1993) SCHEDULE E "A" AMOUNT BUDZETFD PERCENT ALLOCATED 10 AMOUNT WATER/SEWER WATER/SEWER Council/Mgr. $ 310,117 14 $ 43,416 Legal 147,600 40 59,040 Planning 305,293 35 106,853 Data Processing 56,701 75 42,526 Building Inspection 135,876 5 6,794 Finance 318,478 50 159,239 Purchasing 67,490 40 26,996 General Services 630,939 35 220,829 Library 426,370 0 0 Public Safety 2,648,969 5 132,448 Fire Department 1,672,685 5 83,634 Parks & Recreation 1,098,387 0 0 Personnel 83,980 25 20,995 Public Works 563,827 50 281,914 Streets 1,170,283 12 140,434 City Shop 235,847 35 82,546 Municipal Court 219,532 0 0 $10,092,374 $1,407,664 Total allocation per above Budgeted Utility Fund Revenues Percentage of allocation OOMHIT'ATION OF OVERALL PERCENTAGE OF ALLOCATION $ 1,407,664 8,613,242 16.14%