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CM-04-09-0490r7 b ? OV9 ?o't Request for Council Action/Finance Approval Resolutions Please submit this form when placing items on the council agenda or when submitting an item to the City Manager for approval. Department: Contact Person: Project Name: Finance Department Noelle Jones Audit of Procurement Card ContractorNendor Name: Maxwell Locke & Ritter, LLP Amount: up to $11,500 Agenda Wording: Finance Approval Is Funding Required? Yes If Yes, is the Amount over $5,000? Yes x x ❑ Initial Construction Contract • Construction Contract Amendment ▪ Change Order n Change in Quantity Unforeseen Circumstances ▪ Initial Professional Services Agreement No No Project Manager/Resource Noelle Jones Council Meeting Date: 23 -Sep -04 Funding Source: Assigned Attorney: General and Utility Funds (contract, agreement,amendment, q17 `.( • Supplemental Professional Svcs. Agr. Purchasing/Service Agreement Purchase Order Item(s) to be purchased: x❑ Other (Please clearly identify action on lines below) Audit services of Procurement Services Comments: Amount e order, purchase order,etc.) S4 Council Agenda Item xlSubmission to City Manager -see required signatures below before submission to the City Manager. x❑ Finance -Date and Signature: N Jones 9/13/2004 ElPurchasing -Date and Signature: For Submissions to City Manager Only Project Mgr. Signature: Dept. Director Signature: Legal Approval Signature: " Please note that Legal Approval is required on change orders submitted to the City Manager that are $10,000 and above. g/lynn/finAprvIform.xls BLUE SHEET FORMAT DATE: September 13, 2004 SUBJECT: City Manager's Meeting -September 17, 2004 ITEM: Consider a resolution authorizing the City Manager to execute an agreement with Maxwell, Locke, & Ritter, L.L.P. for an independent review of the policies, procedures and internal controls for the procurement card transactions ending May 31, 2004. Department: Finance Staff Person: Cindy Demers, Finance Director Justification: The City has had the procurement card program since FY 1995-1996. In January 2004, the City began using the state's procurement card program with Bank One. Currently, the City processes approximately 1200 transactions totaling $125,000 to $130,000 per month. Since the program is a vital part of our purchasing area, an independent review of the policies and procedures is needed. The review will consist of an examination of internal controls, approval processes, purchasing policies, and payment procedures. Funding: Cost: Up to $11,500 Source of funds: General and Utility Operating Budgets Outside Resources: N/A Background Information: Public Comment: N/A Blue Sheet Format Updated 01/20/04 Agree for procard Audit of FY04.doc MAXWELL Q.LOCI<E RITTER September 9, 2004 Noelle Y. Jones, CPA City of Round Rock Financial Programs Manager 221 East Main Street Round Rock, TX 78664 Dear Ms. Jones: MAXWELL LOCKE & RIFLER liP We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for the City of Round Rock (the "City"). We will apply the agreed-upon procedures which the City has specified, listed in the attached schedule, to assess compliance with established policies and related internal controls of the procurement card ("Pro -Card") program of the City as of and for the three months ended May 31, 2004. This engagement is solely to assist the City in assesing internal control over the Pro -Card program. Our engagement to apply agreed-upon procedures will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in the attached schedule either for the purpose for which this report has been requested or for any other purpose. If, for any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. Because the agreed-upon procedures listed in the attached schedule do not constitute an examination, we will not express an opinion on any internal controls or reports associated with the Pro -Card program. In addition, we have no obligation to perform any procedures beyond those listed in the attached schedule. ML&R PERSONNEI. SOLUTIONS ML&R WEALTH MANAGFMFNI Tic We will submit a report listing the procedures performed and our findings. This report is intended solely for the use of City management, and should not be used by anyone other than this specified party. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. We plan to begin our procedures in September 2004 and, unless unforeseeable problems are encountered, the engagement should be completed in October 2004. We understand that your employees will be available to prepare reconciliations, obtain and provide selected supporting documents and produce other items selected by us for testing. For items requested and not prepared or located by your employees, we will bill you for the preparation or location of these items by our staff at our standard hourly rates. We agree that our fees for these services will range from $10,000 to $11,500 but not to exceed $11,500. The fee estimate 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. You will also be billed for out-of-pocket costs and expenses incurred in servicing your engagement, including postage, telephone, facsimile transmissions, photocopying, and charges for on- line research services. Our invoices for these fees will be rendered as work progresses but not less than monthly and are payable within 30 days of receipt. You may request that we perform additional services not contemplated by this engagement letter. If this occurs, we will communicate with you regarding the scope and estimated fees for those additional services. Engagements for additional services may necessitate that we issue a separate engagement letter to reflect the obligations of both parties. In the absence of any other written communications from us documenting such additional services, our services will be governed by the terms of this engagement letter. Parties to this engagement agree that any dispute that may arise regarding the meaning, performance or enforcement of this engagement will, prior to resorting to litigation, be submitted to mediation upon the written request of any party to the engagement. Any mediation initiated as a result of this engagement shall be administered by the American Arbitration Association. The results of this mediation shall be binding only upon agreement of each party to be bound. Costs of any mediation proceeding shall be shared equally by all parties. We appreciate the opportunity to be of service to you 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, and this letter will continue in effect until canceled by either party. Schedule of Agreed Upon Procedures 1. Obtain and review all Pro -Card policy, procedure and related internal control documentation maintained by the City. 2. Assess, based on our professional opinion, the adequacy of such policy, procedure and internal control. Identify, based on our professional opinion, inadequacies in and or opportunities to improve such policy, procedure and internal control. 3. Obtain and review a reconciliation of Pro -Cards issued per Bank One to Pro -Card accounts per the City. Identify any cards not accounted for. 4. Obtain and review a reconciliation of payments on Pro -Card account to Pro -Card expense reports. Identify any payments not accounted for. 5. Select on a judgmental basis from the listing of cards issued per Bank One, 20 Pro -Card accounts and vouch all purchase activity of the review period as follows: a. Agree purchases to completed expense report. b. Vouch purchases to appropriate third party receipt or comparable source document and timely general ledger recording. c. Identify exceptions with respect to Vendor used, type of purchase, or purchase amount. d. Inquiry of individual users of the card and or individuals who approve purchases regarding knowledge of and compliance with applicable policies and internal controls and potential exceptions if any. 6. Select on a judgmental basis from the listings of monthly activity, a total of 15 to 25 Pro -Card purchases and vouch as follows: a. Agree purchases to completed expense report. b. Vouch purchases to appropriate third party receipt or comparable source document. c. Identify exceptions with respect to Vendor used, type of purchase, or purchase amount. d. Inquiry of individual purchasers and or individuals who approve purchases regarding potential exceptions if any. Sincerely, '1'nck4Akreg { 160, L LP Maxwell Locke & Ritter LLP This letter correctly sets forth the understanding of the City of Round Rock: Signature: Title: Date: STEPH N L SHEETS, CITY ATTORNEY