R-06-06-08-10E1 - 6/8/2006RESOLUTION NO. R -06-06-08-10E1
WHEREAS, it is necessary for the City of Round Rock to conduct an
annual audit, and
WHEREAS, the accounting firm of Brockway, Gersbach, McKinnon &
Niemeier, P.C. has submitted an engagement letter to provide said audit
for the fiscal year ending September 30, 2006, and
WHEREAS, the City Council wishes to enter into said engagement
letter, 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 Brockway, Gersbach,
McKinnon & Niemeier, P.C. to conduct said audit, a copy of said
engagement letter being attached hereto as Exhibit "A" and incorporated
herein for all purposes.
The City Council hereby finds and declares that written notice of
the date, hour, place and subject of the meeting at which this
Resolution was adopted was posted and that such meeting was open to the
public as required by law at all times during which this Resolution and
the subject matter hereof were discussed, considered and formally acted
upon, all as required by the Open Meetings Act, Chapter 551, Texas
Government Code, as amended.
RESOLVED thi s 8th day of June, 2006
ST:
NYLE yor
Cit ` Round Rock, Texas
CHRISTINE R. MARTINEZ, City Secreta
@PFDesktop\::ODMA/WORLDOX/O:/WDOX/RESOLDTI/R60608E1. WPD/rmc
(BGMN)
BROCKWAA GERSBACH, MCKINNON & NIEMEIER, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
May 19, 2006
City of Round Rock, Texas
221 E. Main Street
Round Rock, Texas 78664-5299
We are pleased to confirm our understanding of the services we are to provide the City of Round Rock,
Texas for the year ended September 30, 2006. We will audit the financial statements of the governmental
activities, the business -type activities, the aggregate discretely presented component units, each major
fund, and the aggregate remaining fund information, which collectively comprise the basic financial
statements of the City of Round Rock, Texas as of and for the year ended September 30, 2006. The
following supplementary information accompanying the basic financial statements 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.
Also, the document we submit to you will be a Comprehensive Annual Financial Report (CAFR) and will
include the following additional information that will be subjected to the auditing procedures applied in
our audit of the financial statements upon which we will provide an opinion in relation to the basic
financial statements:
1) Combining and Individual Fund Statements and Schedules.
2) Schedule of Expenditures of Federal Awards.
The Comprehensive Annual Financial Report will also include the following additional information that
will not be subject to the auditing procedures applied in our audit of the financial statements.
1) Introductory Section
2) Statistical Data
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 accounting principles generally accepted in
the United States of America and to report on the fairness of the additional information referred to in the
first paragraph when considered in relation to the basic financial statements taken as a whole. The
objective also includes reporting on—
• Internal control related to the financial statements and compliance with the provisions of
applicable laws, regulations, contracts, agreements and grants, noncompliance with which could
have a material effect on the financial statements in accordance with Government Auditing
Standards.
a
s
EXHIBIT
Post Office Box 4083 • Temple, Texas 76505-4083 • 254 773-9907 • Fax 254 773-1570 • wwwtemplecpa.com
City of Round Rock, Texas
Page Two
• Internal control related to major programs and an opinion on compliance with laws, regulations,
and the provisions of contracts or grant agreements that could have a direct and material effect on
each major program in accordance with the Single Audit Act Amendments of 1996 and OMB
Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations.
The reports on internal control and compliance will each include a statement that the report is intended for
the information and use of the audit committee, management, specific legislative or regulatory bodies,
federal awarding agencies, and if applicable, pass-through entities and is not intended to be and should
not be used by anyone other than these specified parties.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America; the standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions
of OMB Circular A-133, and will include tests of accounting records, a determination of major
program(s) in accordance with Circular A-133, and other procedures we consider necessary to enable us
to express such an opinion and to render the required reports. If our opinions on the financial statements
or the Single Audit compliance opinions are other than unqualified, we will fully 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.
Management Responsibilities
Management is responsible for establishing and maintaining effective internal control and for compliance
with the provisions of applicable laws, regulations, contracts, agreements, and grants. In fulfilling this
responsibility, estimates and judgments by management are required to assess the expected benefits and
related costs of the controls. The objectives of internal control are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or
disposition, that transactions are executed in accordance with management's authorizations and recorded
properly to permit the preparation of financial statements in accordance with generally accepted
accounting principles, and that federal award programs are managed in compliance with applicable laws
and regulations and the provisions of contracts and grant agreements.
Management is responsible for making all financial records and related information available to us,
including any significant vendor relationships in which the vendor has the responsibility for program
compliance. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. Management's
responsibilities include adjusting the financial statements to correct material misstatements and for
confirming to us in the 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, both
individually and in the aggregate, to the financial statements taken as a whole.
You are responsible for establishing and maintaining internal controls, including monitoring ongoing
activities; for the selection and application of accounting principles; and for the fair presentation in the
financial statements of the respective financial position of the governmental activities, the business -type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Round Rock, Texas and the respective changes in financial
position and, where applicable, cash flows in conformity with accounting principles generally accepted in
the United States of America.
City of Round Rock, Texas
Page Three
You are responsible for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud, or illegal acts affecting the government
involving (1) 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 informing us of your knowledge of any allegations of fraud or suspected fraud or
illegal acts affecting the government received in communications from employees, former employees,
grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity
complies with applicable laws and regulations and for taking timely and appropriate steps to remedy any
fraud, illegal acts, violations of contracts or grant agreements, or abuse that we may report. Additionally,
as required by OMB Circular A-133, it is management's 'responsibility to follow up and take corrective
action on reported audit findings and to prepare a summary schedule of prior audit findings and a
corrective action plan.
As part of the audit, we will prepare a draft of your financial statements, schedule of expenditures of
federal awards, and related notes. In accordance with Government Auditing Standards, you will be
required to review and approve those financial statements prior to their issuance and have a responsibility
to be in a position in fact and appearance to make an informed judgment on those financial statements.
Further, you are required to designate a qualified management -level individual to be responsible and
accountable for overseeing our services.
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. We will plan and perform the audit to obtain reasonable rather than
absolute assurance about whether the financial statements are free of material misstatement, whether from
(1) 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 determination of abuse is subjective, Government Auditing Standards
do not expect auditors to provide reasonable assurance of detecting abuse. As required by the Single
Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions
related to major federal award programs for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements.
Because an audit is designed to provide reasonable, but not absolute assurance and because we will not
perform a detailed examination of all transactions, there is a risk that material misstatements or
noncompliance may exist and not be detected by us. 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 or major programs. However, we will inform you of any
material errors and any fraudulent financial reporting or misappropriation of assets that comes to our
attention. We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. We 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.
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, 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
also require certain written representations from you about the financial statements and related matters.
City of Round Rock, Texas
Page Four
Audit Procedures—Internal Controls
In planning and performing our audit, we will consider the internal control sufficient to plan the audit in
order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing
our opinions on the City of Round Rock, Texas' financial statements and on its compliance with
requirements applicable to major programs.
We will obtain an understanding of the design of the relevant controls and whether they have been placed
in operation, and we will assess control risk. 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 financial statements. Tests of
controls relative to the financial statements are required only if control risk is assessed below the
maximum level. 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.
As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the
effectiveness of the design and operation of controls that we consider relevant to preventing or detecting
material noncompliance with compliance requirements applicable to each major federal award program.
However, our tests will be less in scope than would be necessary to render an opinion on those controls
and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB
Circular A-133.
An audit is not designed to provide assurance on internal control or to identify reportable conditions.
However, we will inform the governing body or audit committee of any matters involving internal control
and its operation that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation of the internal control that, in our
judgment, could adversely affect the entity's ability to record, process, summarize, and report financial
data consistent with the assertions of management in the financial statements. We will also inform you of
any nonreportable conditions or other matters involving internal control, if any, as required by
Government Auditing Standards and OMB Circular A-133.
Audit Procedures—Compliance
Our audit will be conducted in accordance with the standards referred to in the section titled Audit
Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, we will perform tests of the City of Round Rock, Texas' compliance with
applicable laws and regulations and the provisions of contracts and agreements, including grant
agreements. However, the objective of those procedures 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.
0M13 Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance
about whether the auditee has complied with applicable laws and regulations and the provisions of
contracts and grant agreements applicable to major programs. Our procedures will consist of the
applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of
compliance requirements that could have a direct and material effect on each of the City of Round Rock,
Texas' major programs. The purpose of those procedures will be to express an opinion on the City of
Round Rock, Texas' compliance with requirements applicable to each of its major programs in our report
on compliance issued pursuant to OMB Circular A-133.
City of Round Rock, Texas
Page Five
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other confirmations we
request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data
Collection Form that summarizes our audit findings. It is management's responsibility to submit the
reporting package (including financial statements, schedule of expenditures of federal awards, summary
schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data
Collection Form to the designated federal clearinghouse and, if appropriate, to pass-through entities. The
Data Collection Form and the reporting package must be submitted within the earlier of 30 days after
receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is
agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the
engagement, we will provide information to management as to where the reporting packages should be
submitted and the number to submit.
The audit documentation for this engagement is the property of Brockway, Gersbach, McKinnon &
Niemeier, P. C. and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to a 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, McKinnon & Niemeier, P. C. personnel. Furthermore, 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 information 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 date
the auditors' report is issued or for any additional period requested by the City. If we are aware that a
federal awarding agency, pass-through entity, 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.
We expect to begin our audit on approximately July 10, 2006 and to issue our reports no later than March,
2007. Our fee for these services will be at our quoted rate, we agree that our gross fee, including
expenses, will not exceed $ 73,750. 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, our engagement will be deemed to have been
completed upon written notification of termination, even if we have not completed our report(s). 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. The above fee 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.
Government Auditing Standards require that we provide you with a copy of our most recent external peer
review report and any letter of comment, and any subsequent peer review reports and letters of comment
received during the period of the contract. Our 2003 peer review report accompanies this letter.
City of Round Rock, Texas
Page Six
We appreciate the opportunity to be of service to the City of Round Rock, Texas 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.
Very truly yours,
(
Brockway, Gersbach, McKinnon & Niemeier, P. C.
RESPONSE:
This letter correctly sets forth the understanding of the City of Round Rock, Texas
By:
Title:
Date:
Robert M. McAdams, CPA
Robert L. Lewis, CPA
Franklin W. Burk, CPA
Paul Roth-Roffy, CPA
July 8, 2003
Carneiro,Chumney&Co., L.C.
CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Brockway, Gersbach, McKinnon & Niemeier, P.C.
J. Lowell Goode, CPA
Julia C. Norton, CPA
Sandra J. Geppert, CPA
Allen E. Robertson, Jr.. CPA
We have reviewed the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. (the firm) in effect for the year ended April 30,
2003. A system of quality review encompasses the firm's organizational structure and the
policies adopted and procedures established to provide it with reasonable assurance of
conforming with professional standards. The elements of quality control are described in the
Statements on Quality Control Standards issued by the American Institute of Certified Public
Accountants (AICPA). The design of the system and compliance with it are the responsibility of
the firm. Our responsibility is to express an opinion on the design of the system, and the firm's
compliance with the system based on our review.
Our review was conducted in conformity with standards established by the Peer Review Board
of the AICPA. In performing our review, we obtained an understanding of the system of quality
control for the firm's accounting and auditing practice. In addition, ve tested compliance with
the firm's quality control policies and procedures to the extent we considered appropriate.
These tests covered the application of the firm's policies and procedures on selected
engagements. Because our review was based on selective tests, it would not necessarily
disclose all weaknesses in the system of quality control or all instances of lack of compliance
with it.
Because there are inherent limitations in the effectiveness of any system of quality control,
departures from the system may occur and not be detected. Also, projection of any evaluation
of a system of quality control to future periods is subject to the risk that the system of quality
control may become inadequate because of changes in conditions, or because the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. in effect for the year ended April 30, 2003,
has been designed to meet the requirements of the quality control standards for an accounting
and auditing practice established by the AICPA and was complied with during the year then
ended to provide the firm with reasonable assurance of conforming with professional standards.
e_cLA1114'`'``' e ae_c.
"Helping Clients Succeed for 73 Years"
40 NE 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 BDO Seidman Alliance
DATE: June 1, 2006
SUBJECT: City Council Meeting - June 8, 2006
ITEM: 10.E1. Consider a resolution authorizing the Mayor to execute an
engagement letter with Brockway, Gersbach, McKinnon & Niemeier,
P.C. for the annual audit for the fiscal year ending September 30,
2006.
Department: Finance Department
Staff Person: Cindy Demers, Finance Director
Justification:
The audit provides an independent examination of financial records, activities and operations
to assess internal control practices, compliance with regulations, grant terms, bond covenants,
contractual requirements and fairness of presentation of financial information.
The recommended firm will also provide valuable ideas and observations intended to help
achieve the City's objectives in maintaining adequate financial controls, policies and
procedures.
Funding:
Cost:
Source of funds:
$73,750.00
General and Utility Operating Budgets
Outside Resources: N/A
Background Information:
The City's Charter requires an annual audit of the financial records to be performed by an
independent certified public accountant. The objective of the audit is the expression of an
opinion as to whether the City's financial statements are fairly presented in conformity with
generally accepted accounting principles. Other objectives include reporting on internal
controls related to the financial statements and compliance with laws, regulations, and the
provisions of contracts or grant agreements in accordance with Government Auditing
Standards and Single Audit Act requirements.
Public Comment: N/A
EXECUTED
DOCUMENT
FOLLOWS
(BGMN)
BROCKWAA GERSBACH, MCKINNON & NIEMEIER, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
May 19, 2006
City of Round Rock, Texas
221 E. Main Street
Round Rock, Texas 78664-5299
We are pleased to confirm our understanding of the services we are to provide the City of Round Rock,
Texas for the year ended September 30, 2006. We will audit the financial statements of the governmental
activities, the business -type activities, the aggregate discretely presented component units, each major
fund, and the aggregate remaining fund information, which collectively comprise the basic financial
statements of the City of Round Rock, Texas as of and for the year ended September 30, 2006. The
following supplementary information accompanying the basic financial statements 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.
Also, the document we submit to you will be a Comprehensive Annual Financial Report (CAFR) and will
include the following additional information that will be subjected to the auditing procedures applied in
our audit of the financial statements upon which we will provide an opinion in relation to the basic
financial statements:
1) Combining and Individual Fund Statements and Schedules.
2) Schedule of Expenditures of Federal Awards.
The Comprehensive Annual Financial Report will also include the following additional information that
will not be subject to the auditing procedures applied in our audit of the financial statements.
1) Introductory Section
2) Statistical Data
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 accounting principles generally accepted in
the United States of America and to report on the fairness of the additional information referred to in the
first paragraph when considered in relation to the basic financial statements taken as a whole. The
objective also includes reporting on—
• Internal control related to the financial statements and compliance with the provisions of
applicable laws, regulations, contracts, agreements and grants, noncompliance with which could
have a material effect on the financial statements in accordance with Government Auditing
Standards.
Post Office Box 4083 • Temple, Texas 76505-4083 • 254 773-9907 • Fax 254 773-1570 • wwwtemplecpa.com
City of Round Rock, Texas
Page Two
• Internal control related to major programs and an opinion on compliance with laws, regulations,
and the provisions of contracts or grant agreements that could have a direct and material effect on
each major program in accordance with the Single Audit Act Amendments of 1996 and OMB
Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations.
The reports on internal control and compliance will each include a statement that the report is intended for
the information and use of the audit committee, management, specific legislative or regulatory bodies,
federal awarding agencies, and if applicable, pass-through entities and is not intended to be and should
not be used by anyone other than these specified parties.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America; the standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions
of OMB Circular A-133, and will include tests of accounting records, a determination of major
program(s) in accordance with Circular A-133, and other procedures we consider necessary to enable us
to express such an opinion and to render the required reports. If our opinions on the financial statements
or the Single Audit compliance opinions are other than unqualified, we will fully 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.
Management Responsibilities
Management is responsible for establishing and maintaining effective internal control and for compliance
with the provisions of applicable laws, regulations, contracts, agreements, and grants. In fulfilling this
responsibility, estimates and judgments by management are required to assess the expected benefits and
related costs of the controls. The objectives of internal control are to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or
disposition, that transactions are executed in accordance with management's authorizations and recorded
properly to permit the preparation of financial statements in accordance with generally accepted
accounting principles, and that federal award programs are managed in compliance with applicable laws
and regulations and the provisions of contracts and grant agreements.
Management is responsible for making all financial records and related information available to us,
including any significant vendor relationships in which the vendor has the responsibility for program
compliance. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. Management's
responsibilities include adjusting the financial statements to correct material misstatements and for
confirming to us in the 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, both
individually and in the aggregate, to the financial statements taken as a whole.
You are responsible for establishing and maintaining internal controls, including monitoring ongoing
activities; for the selection and application of accounting principles; and for the fair presentation in the
financial statements of the respective financial position of the governmental activities, the business -type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City of Round Rock, Texas and the respective changes in financial
position and, where applicable, cash flows in conformity with accounting principles generally accepted in
the United States of America.
City of Round Rock, Texas
Page Three
You are responsible for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud, or illegal acts affecting the government
involving (1) 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 informing us of your knowledge of any allegations of fraud or suspected fraud or
illegal acts affecting the government received in communications from employees, former employees,
grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity
complies with applicable laws and regulations and for taking timely and appropriate steps to remedy any
fraud, illegal acts, violations of contracts or grant agreements, or abuse that we may report. Additionally,
as required by OMB Circular A-133, it is management's responsibility to follow up and take corrective
action on reported audit findings and to prepare a summary schedule of prior audit findings and a
corrective action plan.
As part of the audit, we will prepare a draft of your financial statements, schedule of expenditures of
federal awards, and related notes. In accordance with Government Auditing Standards, you will be
required to review and approve those financial statements prior to their issuance and have a responsibility
to be in a position in fact and appearance to make an informed judgment on those financial statements.
Further, you are required to designate a qualified management -level individual to be responsible and
accountable for overseeing our services.
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. We will plan and perform the audit to obtain reasonable rather than
absolute assurance about whether the financial statements are free of material misstatement, whether from
(1) 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 determination of abuse is subjective, Government Auditing Standards
do not expect auditors to provide reasonable assurance of detecting abuse. As required by the Single
Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions
related to major federal award programs for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements.
Because an audit is designed to provide reasonable, but not absolute assurance and because we will not
perform a detailed examination of all transactions, there is a risk that material misstatements or
noncompliance may exist and not be detected by us. 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 or major programs. However, we will inform you of any
material errors and any fraudulent financial reporting or misappropriation of assets that comes to our
attention. We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. We 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.
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, creditors,
and fmancial 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
also require certain written representations from you about the financial statements and related matters.
City of Round Rock, Texas
Page Four
Audit Procedures—Internal Controls
In planning and performing our audit, we will consider the internal control sufficient to plan the audit in
order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing
our opinions on the City of Round Rock, Texas' financial statements and on its compliance with
requirements applicable to major programs.
We will obtain an understanding of the design of the relevant controls and whether they have been placed
in operation, and we will assess control risk. 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 financial statements. Tests of
controls relative to the financial statements are required only if control risk is assessed below the
maximum level. 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.
As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the
effectiveness of the design and operation of controls that we consider relevant to preventing or detecting
material noncompliance with compliance requirements applicable to each major federal award program.
However, our tests will be less in scope than would be necessary to render an opinion on those controls
and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB
Circular A-133.
An audit is not designed to provide assurance on internal control or to identify reportable conditions.
However, we will inform the governing body or audit committee of any matters involving internal control
and its operation that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation of the internal control that, in our
judgment, could adversely affect the entity's ability to record, process, summarize, and report financial
data consistent with the assertions of management in the financial statements. We will also inform you of
any nonreportable conditions or other matters involving internal control, if any, as required by
Government Auditing Standards and OMB Circular A-133.
Audit Procedures—Compliance
Our audit will be conducted in accordance with the standards referred to in the section titled Audit
Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, we will perform tests of the City of Round Rock, Texas' compliance with
applicable laws and regulations and the provisions of contracts and agreements, including grant
agreements. However, the objective of those procedures 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.
OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance
about whether the auditee has complied with applicable laws and regulations and the provisions of
contracts and grant agreements applicable to major programs. Our procedures will consist of the
applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of
compliance requirements that could have a direct and material effect on each of the City of Round Rock,
Texas' major programs. The purpose of those procedures will be to express an opinion on the City of
Round Rock, Texas' compliance with requirements applicable to each of its major programs in our report
on compliance issued pursuant to OMB Circular A-133.
City of Round Rock, Texas
Page Five
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other confirmations we
request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data
Collection Form that summarizes our audit findings. It is management's responsibility to submit the
reporting package (including financial statements, schedule of expenditures of federal awards, summary
schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data
Collection Form to the designated federal clearinghouse and, if appropriate, to pass-through entities. The
Data Collection Form and the reporting package must be submitted within the earlier of 30 days after
receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is
agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the
engagement, we will provide information to management as to where the reporting packages should be
submitted and the number to submit.
The audit documentation for this engagement is the property of Brockway, Gersbach, McKinnon &
Niemeier, P. C. and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to a 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, McKinnon & Niemeier, P. C. personnel. Furthermore, 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 information 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 date
the auditors' report is issued or for any additional period requested by the City. If we are aware that a
federal awarding agency, pass-through entity, 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.
We expect to begin our audit on approximately July 10, 2006 and to issue our reports no later than March,
2007. Our fee for these services will be at our quoted rate, we agree that our gross fee, including
expenses, will not exceed $ 73,750. 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, our engagement will be deemed to have been
completed upon written notification of termination, even if we have not completed our report(s). 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. The above fee 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.
Government Auditing Standards require that we provide you with a copy of our most recent external peer
review report and any letter of comment, and any subsequent peer review reports and letters of comment
received during the period of the contract. Our 2003 peer review report accompanies this letter.
City of Round Rock, Texas
Page Six
We appreciate the opportunity to be of service to the City of Round Rock, Texas 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.
Very truly yours,
Brockway, Gersbach, McKinnon & Niemeier, P. C.
RESPONSE:
This letter correctly sets forth the und nding f the City of Round Rock, Texas
By:
Title:
Date:
m q yo2
0(0- 08.-0&
Robert M. McAdams, CPA
Robert L. Lewis, CPA
Franklin W. Burk, CPA
Paul Roth-Roffy, CPA
July 8, 2003
Carneiro,Chumney&Co., L.C.
CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Brockway, Gersbach, McKinnon & Niemeier, P.C.
J. Lowell Goode, CPA
Julia C. Norton, CPA
Sandra J. Geppert, CPA
Allen E. Robertson, Jr., CPA
We have reviewed the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. (the firm) in effect for the year ended April 30,
2003. A system of quality review encompasses the firm's organizational structure and the
policies adopted and procedures established to provide it with reasonable assurance of
conforming with professional standards. The elements of quality control are described in the
Statements on Quality Control Standards issued by the American Institute of Certified Public
Accountants (AICPA). The design of the system and compliance with it are the responsibility of
the firm. Our responsibility is to express an opinion on the design of the system, and the firm's
compliance with the system based on our review.
Our review was conducted in conformity with standards established by the Peer Review Board
of the AICPA. In performing our review, we obtained an understanding of the system of quality
control for the firm's accounting and auditing practice. In addition, we tested compliance with
the firm's quality control policies and procedures to the extent we considered appropriate.
These tests covered the application of the firm's policies and procedures on selected
engagements. Because our review was based on selective tests, it would not necessarily
disclose all weaknesses in the system of quality control or all instances of lack of compliance
with it.
Because there are inherent limitations in the effectiveness of any system of quality control,
departures from the system may occur and not be detected. Also, projection of any evaluation
of a system of quality control to future periods is subject to the risk that the system of quality
control may become inadequate because of changes in conditions, or because the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of
Brockway, Gersbach, McKinnon & Niemeier, P.C. in effect for the year ended April 30, 2003,
has been designed to meet the requirements of the quality control standards for an accounting
and auditing practice established by the AICPA and was complied with during the year then
ended to provide the firm with reasonable assurance of conforming with professional standards.
"Helping Clients Succeed for 73 Years"
40 NE 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 BDO Seidman Alliance