R-01-06-28-12D1 - 6/28/2001 RESOLUTION NO. R-01-06-28-12D1
WHEREAS, it is necessary for the City of Round Rock to conduct an
annual audit, and
WHEREAS, the accounting firm of Pena Swayze & Company has
submitted an agreement to provide said audit for the fiscal year ending
September 30, 2001, and
WHEREAS, the City Council wishes to enter into said agreement,
Now Therefore
BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS,
That the Mayor is hereby authorized and directed to execute on
behalf of the City an agreement with Pena Swayze & Company to conduct
said audit, a copy of said agreement being attached hereto 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, and the Act .
RESOLVED this 28th day of Jun
Q19
ROTA. STLUKA, Mayor
AT ST: City of Round Rock, Texas
M
J E LAND, City Secretary
0:\WPDOCS\RESOLUTI\R1062BD1.WPD/sc
Steve D.Pena,C.P.A.
R.Michael Swayze,C.P.A.
PENA SWAYZE & CO. L.L.P. Mary H.Bott,C.P.A.
Connie B.Mikulencak,C.P.A.
CERTIFIED PUBLIC ACCOUNTANTS Stacie A.Carter,C.P.A.
Pam Oakes,C.P.A.
Shelly L.Humphries,C.P.A.
June 6, 2001
Honorable Robert Stluka, Mayor
Mr. Robert L. Bennett, City Manager
Mr. David Kautz, Finance Director
City of Round Rock
Round Rock, Texas
Gentlemen:
We are pleased to confirm our understanding of the services we are to provide the
City of Round Rock for the year ending September 30, 2001. We will audit the City's
general purpose financial statements as of and for the year ending September 30, 2001.
We understand that financial statements will be presented in accordance with the
financial reporting model in effect prior to that described in GASB Statement No. 34.
Also, the document we submit to you will include the following additional information
that will be subjected to the audit procedures applied in our audit of the general purpose
financial statements.
1. General Fund Statement of Revenues, Expenditures and Changes in
Fund Balance -Budget and Actual.
2. Combining Statements for Special Revenue, Capital Projects,
Enterprise, and Trust and Agency Funds.
3. Statements of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Special Revenue Funds.
4. Account Group Statements for General Fixed Asset and General
Long-Term Debt Account Groups.
5. Project-Length Schedule of Construction Projects - Capital Projects
Funds.
6. Schedule of Expenditures of Federal Awards.
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 E-MAILaccountant@psco-cpa.com
City of Round Rock
Page 2
June 6, 2001
The document we submit to you will include a "Statistical Section" that will not be
subjected to the audit procedures applied in our audit of the general purpose financial
statements, and for which our accountant's report will disclaim an opinion.
In addition to the general purpose financial statements, we will:
- Assist in the preparation of the City's Comprehensive Annual Financial Report for
submission to the Government Finance Officers Association under its voluntary
program for a Certificate of Achievement for Excellence in Financial Reporting.
Audit Objectives
The objective of our audit is the expression of an opinion as to whether your general
purpose financial statements are fairly presented, in all material respects, in conformity with
accounting principals 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 general purpose financial statements taken as a whole. The objectives also
include reporting on—
• Internal control related to the financial statements and compliance with laws,
regulations, and the provisions of contracts or grant agreements, noncompliance
with which could have a material effect on the financial statements in accordance
with Government Auditing Standards.
• Internal control related to major programs and an opinion(or disclaimer of
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 management, specific legislative or
regulatory bodies, federal awarding agencies, and if applicable, pass-through entities.
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 to express such an
opinion and to render the required reports. If our opinion on the general purpose financial
City of Round Rock
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June 6, 2001
statements or the Single Audit compliance opinion is 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 an opinion, we may decline to express an
opinion or to issue a report as a result of this engagement.
Management Responsibilities
The management of the City is responsible for establishing and maintaining internal
control and for compliance with the provisions of 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 general purpose 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. 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.
We will advise you about appropriate accounting principles and their application and will
assist in the preparation of your financial statements, including the schedule of expenditures
of federal awards, but the responsibility for the financial statements remains with you. This
responsibility includes the establishment and maintenance of adequate records and effective
internal control over financial reporting and compliance, the selection and application of
accounting principles, and the safeguarding of assets. Management is responsible for
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.
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.
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 caused by error or fraud. 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
City of Round Rock
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June 6, 2001
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
errors, fraud, other illegal acts, or noncompliance may exist and not be detected by us. In
addition, an audit is not designed to detect immaterial errors, fraud, or other illegal acts or
illegal acts that do not have a direct affect on the general purpose financial statements or to
major programs. However, we will inform you of any material errors and any fraud that
comes to our attention. We will also inform you of any other illegal acts 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
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.
Auditing 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's general purpose 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 general purpose financial statements
and to preventing and detecting misstatements resulting from illegal acts and other
noncompliance matters that have a direct effect and material effect on the general purpose
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 issued pursuant to
Government Auditing Standards.
As required by OMB Circular A-133, we will perform tests of controls 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
City of Round Rock
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June 6, 2001
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 you 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 City's
ability to record, process, summarize, and report financial data consistent with the assertions
of management in the general purpose financial statements. We will also inform you of any
nonreportable conditions or other matters involving the internal control structure, if any, as
required by 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 general
purpose financial statements are free of material misstatement, we will perform tests of the
City's 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 City 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's major programs. The purpose of those
procedures will be to express an opinion on the City's compliance with requirements
applicable to major programs in our report on compliance issued pursuant to OMB Circular
A-133.
Audit Administration, Fees and Other
At the conclusion of the engagement, we will complete the appropriate sections of and
sign the Data Collection Form that summarizes our audit findings. We will provide copies of
our reports to the City; however, it is the City'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
City of Round Rock
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June 6, 2001
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.
The workpapers for this engagement are the property of Pena Swayze & Co., L.L.P.
and constitute confidential information. However, we may be requested to make certain
workpapers available to the City's Cognizant Agent or Grantor Agencies pursuant to
authority given to them by law or regulation. If requested, access to such workpapers will be
provided under the supervision of Pena Swayze & Co., L.L.P. personnel. Furthermore, upon
request, we may provide photocopies of selected workpapers to the City's Cognizant Agent
or Grantor Agencies. Those Agencies may intend, or decide, to distribute the photocopies or
information contained therein to others, including other governmental agencies.
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.
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. We will utilize City staff in the preparation of
certain detailed audit schedules which we would format.
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.
Our fees are based on the time our personnel require to complete the engagement plus
direct expenses. Individual hourly rates vary in accordance with the degree of responsibility
and skill of those assigned to the audit. Our estimated fee for this engagement is as follows:
- Audit of general purpose financial statements $41,500
- Preparation of the draft of the comprehensive
annual financial report $12,000
- Compliance with the audit requirements as directed
by the Single Audit Act $ 7,000
City staff will be responsible for the completion of the report after delivery of the first
draft. We will make our typist available to City staff. Our fee estimate includes all typing.
We estimate our examination will take approximately 900 staff hours 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.
City of Round Rock
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June 6, 2001
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.
Government Auditing Standards require that we provide you with a copy of our most
recent quality control review report. Our 2000 peer review accompanies this letter.
We appreciate the opportunity to be of service to the City of Round Rock 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.
Sincerely,
c
PENA SWZE & CO., L.L.P.
Attachment
RESPONSE:
This letter correctly sets forth the understanding of the City of Round Rock.
ttStluka, ayor
R e e ett, City Manager
David leautz, Financ Director
Date
LOTT, VERNON & COMPANY, P.C. 109 EAST AVENUE B 254/526/0571
POST OFFICE BOX 935 800/460/0571
CERTIFIED PUBLIC ACCOUNTANTS KILLEEN,TEXAS 76540 FAX 254/526/7667
meml,"I of
KILLEEN • COPPERAS COVE • TEMPLE Anwricn❑lnstihrh,&Texas Soc ictt/of
Ccrtificd P0411-A[COflnhlnt<
September 20, 2000
To the Partners
Pena Swayze& Co., L.L.P.
We have reviewed the system of quality control for the accounting and auditing practice of Pena
Swayze & Co., L.L.P. in effect for the year ended April 30, 2000. A system of quality control
encompasses the firm's organizational structure and the policies adopted and procedures established
to provide it with reasonable assurance of complying 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 accordance 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 Pena Swayze
& Co., L.L.P. in effect for the year ended April 30, 2000, 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 complying with professional standards.
"AI .
ott, Vernon& Company, P.C.
DATE: June 22, 2001
SUBJECT: City Council Meeting—June 28, 2001
ITEM: 12.D.1. Consider a resolution authorizing the Mayor to execute an
agreement with Pena Swayze and Company for the annual audit
for the fiscal year ended September 30, 2001.
Resource: David Kautz, Finance Director
History: 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.
The audit objectives also include reporting by the auditors on internal control
related to the financial statements and compliance with laws, regulations and the
provisions of contracts or grant agreements.
Because of the firm's outstanding audit quality, as evidenced by the attached peer
review document, and continued professional standards, staff recommends
retaining Pena Swayze and Company for the annual audit.
Funding:
Cost: $60,500
Source of Funds: Funding is provided as part of the operating budget.
Outside Resources: N/A
Impact/Benefit: An audit provides an independent review and examination of records and
activities to assess the adequacy of system controls, to ensure compliance
with regulations,bond covenants, contractual requirements, established
policies and operational procedures, and to recommend necessary changes
in controls, policies, or procedures.
Public Comment: N/A
Sponsor: N/A