Loading...
Audit Contract Award, Years 2015-2017MEIWIORANDUM Y oj' TO: Mayor& City Council Members ii i'C FROM: Greg Sticha, Finance Director 7700 Market Boulevard Po Box 147 DATE: June 8, 2015 '', Chanhasscn.MN 55317 SUBJ: Award of Bid Audit Contract Administration Phone 952.227I100 Fax:952.227.1110 PROPOSED MOTION Building Inspections Staff recoinmends that the City Council award the bid for the 2015-2017 auditPhone:952.227.11 fi0 Fax 95222.1190 services contract to HLB Tautges Redpath,per the attached engagement letter." Enyineeriny Approval of this resolution requires a simple majority vote of the City C uncil. Phone:9522271160 Fax 952.2 Z11/0 BACKGROUND Finance Phone 952 22/.1140 Fax:2 227.1110 Approximately every three years staff accepts bids for a professional services contract for auditing services. The city has contracted with HLB Tautges Redpath far a warlc t t ecrEation number of years to perfoi7n these services. Phonc 952.227.1120 Fax:952.227.1110 Attached are the bids received from five finns that specialize in local govermnent audits. Staff also i•equested that the proposals include a bid to provide audit seivices Recreation Cenfer 2310 Cou ter Bou eva,d for the Chanhassen Fire Relief Association. none 95z.zzzi400 x 9 222 04 There are new GASB (Government Accounting Standards Board) requireinents that directly impact the Fire Relief Association for audit years beginning in 2015. Based i 9 in pat t on these new requirements, and the efficiency of having the same firm perfonnNaturalResources Phone:952.227.11 o the city and fire relief audit, staff had a significant interest in selecting the same firm Fax:952.227i 110 for both seivices. Public Wor•E The city has had a longstanding and respected working relationship with HLB 901 Park P r ce Tautges and staff feels the lcr owledge the firm has in ter7ns of city operations is a Phone:952.227.130o tremendous benefit Therefore, staff believed that unless the bid from Tautges was Fax:952.22zi:3 o not competitive, it is in the city's best interest to continue the professional services with theu•fii7n. Senior CenteF Phone 952?_27.i i>', jy ,-i- After reviewing the bids for both the City and Fire Relief Association, it is staff s opinion that the proposals were all relatively close in terms of cost. Staff is vu h i recommending that the city engage the finn of HLB Tautges Redpath for audit years f,cl.cr a<1ss;n.r>>n s 2015-2017. We have already met with the Fire Relief Association to discuss engaging Tautges for their audit services and they will be meeting on May 13 to awaz•d the contract to HLB Tautges Redpath. Chanhassen is a Com nunity for Life-I'roviding ior loday and Nlanni ig for lon orro d Mayor& City Council June 8, 2015 Page 2 RECOMMENDATION I Staff recominends that the City Council award the bid foi•the audit services contract in years 2015-2017 with HLB Tautges Redpath,per the attached engagement. ATTACHMENTS 1. Audit Service Bid Results 2. Audit Engagement (Contract) Letter f:\gregs\rfp's 2015 audit bids 2015 award of audit contract.docx City of Chanhassen 2015 City & Fire Relief Audit Bids City Current Rate Firm 2014 2015 2016 2017 HLB Tautges 39,675 $ 36,500 $ 37,500 $ 38,500 KDV 35,150 36,270 37,390 MMKR 38,500 38,500 Abdo Eick & Meyers 34,000 35,000 Clifton Larson Allen 36,650 37,100 37,750 Fire Relief Firm 2015 2016 2017 HLB Tautges 5,000 $ 5,200 $ 5,400 KDV 5,210 5,379 5,548 MMKR 5,500 5,500 Abdo Eick & Meyers 5,000 5,150 Clifton Larson Allen 4,500 4,500 4,500 Gary Brakke 3,800 3,100 3,100 CLIENT COPY A N D C O M P A N Y May 22, 2015 City of Chanhassen 7700 Market Blvd. P.O. Box 147 Chanhassen, MN 55317 We are pleased to confirm our understanding of ihe services we are to provide the City of Chanhassen (the City) for the years ending December 31, 2015, 2016 and 2017. The scope of services includes the following: Audit and Related Services We will audit the financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information including the related notes to the financial statements, which collectively comprise the basic financial statements of the City as of and for the years ending December 31, 2015, 2016 and 2017. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD&A), to supplement the City's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Boai•d who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the City's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: o Management's discussion and analysis o Budgetary comparison schedules presented as RSI o Schedule of funding progress - OPEB 310 Whlt C3car Pa l<way, S i:, Paul, MN, 5 7 :10 6!:>1..6.7000 www.redpa thcpas.con i City of Chanhassen Contract for Auditing Services Page 2 We have also been engaged to report on supplementary information other than RSI that accompanies City's financial statements. We will subject the following supplementary information to the auditing procedures applied in oui• audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly I to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedui•es in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole: o Combining and individual fund statements and schedules o Supplementary financial information The following other information accompanying the financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements and for which our auditor's report will not provide an opinion or assurance: Inti•oductory section Statistical section The following other reports will be issued in conjunction with the financial audit: State Legal Compliance Audit Audit Management Letter Nonaudit Services Preparation of draft financial statements (CAFR) document(City to provide introductory section, MD&A, footnote information and statistical section). Processing the final CAFR. Audit Obiectives 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 U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements taken as a whole. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America, and the standards for financial audits contained in Govej•nment Auditing Standa ds, issued by the Comptroller General of the United States, and will include tests of the accounting records of the City and other procedures we consider necessary to enable us to express such opinions. We will issue a written report upon the completion of our audit of the City's financial statements. Our report will be addressed to the City Council. We cannot provide assurance that unmodified 2253010 City of Chanhassen Contract for Auditing Services Page 3 opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of-mattei•or other-mattei•paragraphs. If our opinions on the financial statements are other than unmodified, we will 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. We will also provide a report (that does not include an opinion) on internal control related to the financial statements and compliance with the provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. The report on internal control and on compliance and other matters will include a paragraph that states (1) that the purpose of the report is solely to describe the scope of testing of internal control and compliance, and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing StandaNds in considering the entity's internal control and compliance. The paragraph will also state that the report is not suitable for any other purpose. If during our audit we become aware that the City is subject to an audit requirement that is not encompassed in the terms of this engagement, we will communicate to management and those charged with governance that an audit in accordance with U.S. generally accepted auditing standards and the standards for financial audits contained in Government Audit ing Standards may not satisfy the relevant legal, regulatory, or contractual requirements. 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. An audit also includes evaluating the appropriateness of accounting policies use and the reasonableness of significant accounting estimates made by management, as well as evaluating the presentation of the financial statements. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are fi•ee of material misstatement, whether from (1) en ors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or govei•nmental 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. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us, even though 2253010 City of Chanhassen Contract foi•Auditing Services Page 4 the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and GoveNnment Auditing Standar ds. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a dii•ect and material effect on the financial statements. However, we will inform the appropriate level of management of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to 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, funding sources, creditors, and financial institutions. We will r•equest 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 require certain written representations from you about your responsibilities for the financial statements; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. Audit Procedures — Internal Controls Our audit will include obtaining an understanding of the government and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain conti•ols that we consider relevant to preventing and detecting errors and fraud that are matei•ial 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. 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 GoveNnrnent Auditing Standards. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards and Government Auditing Standards. 2253010 City of Chanhassen Contract for Auditing Services Page 5 Audit Procedures — Compliance II As part of obtaining reasonable assurance about whether the financial statements are free I of inaterial misstatement, we will perform tests of the City's compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. However, the objective of our audit 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 GoveNnment Auditing Standard.s. The Minnesota Legal Compliance Audit Guide for Local Government requires that we test whether the auditee has complied with certain provisions of Minnesota Statutes. Our audit will include such test of the accounting records and other procedures as we consider necessary in the circumstances. Manaqement Responsibilities Management is responsible for establishing and maintaining effective internal controls, including evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; following laws and regulations; and ensuring that management and tinancial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles, for the fair presentation of the financial statements and all accompanying information in conformity with U.S. generally accepted accounting principles, and for compliance with applicable laws and regulations and the provisions of contracts and grants agr•eements. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional information that we may request for the puipose of the audit, and (3) unrestricted access to persons within the government frotn whom we determine it necessary to obtain audit evidence. Your responsibilities include adjusting the financial statements to correct material misstatements and for confirming to us in the written representation letter that the effects of any uncorrected misstatements aggregated by us during the cun-ent engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. 2253010 City of Chanhassen Contract for Auditing Services Page 6 Y II ou are r•esponsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud 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 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 government complies with applicable laws, regulations, contracts, agreements, and grants, 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. You are responsible for the preparation of the supplementary information in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementaiy information in any document that contains and indicates that we have reported on the supplementary information. You also agree to present the supplementary information with the audited financial statements. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thei•eon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of ineasurement or presentation have not changed from those used in the prior period (or if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretation underlying the measurement or presentation of the supplementary information. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for and providing report copies of previous financial audits, attestation engagements, performance audits or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or other studies. You are also responsible for providing management's views on our cur•rent findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. You agree to assume all management responsibilities relating to the financial statements and related notes and any other nonaudit services we provide. You will be required to acknowledge in the management representation letter our assistance with preparation of the 2253010 City of Chanhassen Contract for Auditing Services Page 7 financial statements and related notes and that you have reviewed and approved the financial statements and related notes prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an individual,preferably from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document. Enqaqement Administration, Fees and Other We may from time to time, and depending on the circumstances, use third-party service providers in serving your account. We may share confidential information about you with these service providers, but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures, and safeguards to protect the confidentiality of your personal information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have appropz•iate procedures in place to prevent the unauthorized release of your confidential information to others. In the event that we are unable to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the sharing of your confidential information with the third-party service provider. Furthermore, we will remain responsible for the work provided by any such third-party service providers. The assistance to be provided by your personnel, including the preparation of schedules and analysis of accounts, typing all cash and other confirmations we request, and locating any documents selected by us for testing, will be discussed and coordinated with you. We will provide copies of our reports to the City, however, management is responsible foi• distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of Redpath and Company, Ltd. 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 Redpath and Company, 2253010 JI City of Chanhassen Contract for Auditing Services Page 8 Ltd. 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 will be retained for a minimum of five years after the report release date or for any additional period requested by the federal agency. If we are aware that a federal awarding agency or auditee is contesting a finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. David J. Mol, CPA is the engagement partner and is responsible for supervising the engagement and signing the report. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. Unless additional I, work is requested, or circumstances require additional work, we estimate the basic audit fees will be as follows: I 2015 2016 2017 I Financial and State Legal Compliance Audits, and CAFR preparation and 36,500 37,500 38,500 processing Other accounting assistance, ifrequested i i> Additional Fire Relief Fee 950 1,050 1,150 Fees for these services, if requested, will be based on hours incurred at our I standard hourly rates. The above fee is based on the anticipated scope of services. An increase in the scope of service will necessitate an addendum (change order) to this agreement. Examples of an increase in the scope of service include additional audit procedures resulting from certain accounting issues or events, new contractual agreements, new accounting and auditing standards, legal requirements for new bond issues, new funds, major capital projects, new tax increment districts, if there is an indication of misappropriation or misuse of public funds, or difficulties encountered due to lack of accounting records, incomplete records, inaccurate records or turnover in the City's staff. GoveNnment Auditing StandaNds requires that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer 2253010 City of Chanhassen Contract for Auditing Services Page 9 review reports or letters of comment received during the period of contract. Our 2013 peer review report accompanies this letter as Appendix A. We are pleased to report that we did not receive a letter of comment. 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. Sincerely, REDPATH AND COMPANY, LTD. David J. Mol, CPA DJM:aer Response This letter correctly sets forth the understanding of the City of Chanhassen: By: Title: /C -"?ewe Date: zlp'' r 15— C Title1,'16 Date: Nonaudit Services The employee(s) assigned to oversee the nonaudit services is as follows: Finance Director Assistant Finance Director ❑ Other employee (name and title) 2253010 Appendix A p i fi s , i a . ;: =1.il a I I;.af# ;':c;ui.ir t-, d;-.^w rc _r r y.,r} ii i ._.. , _ ii . I.. I ... .. L`St tTl L'L'lblti'L}ttCi e t;iT e.r 25,?t 1 t t ie `h<r'nc-i r,c L I I..I3"'ut z Tt ci lt,T.t i. ancl tll Pe.ca R k?ie°i'canlnl:i.t['th Mata te t it vzicTt°c f f':s 1 1 4i= g°;i a°e.i tlae =te; ,9'al t c.trr l tr t t c: ac;c u ti rr ru:i<u itin,r i:tic;e c:11L,I3 Tattt;c.s .t c th. L:c. t ae,tii-r rTl,f c:t x r tll v.r eri i d h t g l, °?i i:. C ir cr rc i; t n t ir t z 4 t'-t r. 'it tl t t,c3 r; I«r l'•tnr r=3 t, air€ tira; l r .e i .t i ii h i i. t. 1'cr l e I3,Uri c,f` the ,.ricr.g Ii:i12'tlTe U: 5.;7'tf l ty, 'il}33. f.C 7 731.te1t t+, :'15 z i rt E}1't7U: L.r ic'ic:t:, 4 c:CSi'S1t e1'C3 r ti ic-s `t; rt;,i atc r. ntizi:,s, if:-s it aE,1, ifi i ts.rz ii ir tt r tur r n e tez-t €'uu pr,:iri:. "1'h fii r is tespr z wik le t yicsi il r3 < ;,.;c;at i+E c ia it• c n.rc l ;7 cG,rn lyir, .ith °t ic prc:: t;; irrsi ,7ttt r ti4 r h3e 4s,u nce r,t' :crtc r.i n ;7 I'C>74`t lIl. 1T'i C(7?1 C7L'I"111tL' "t'11] 1)"j l'+'£i"J?t. 5I't7.C4 1{7?lcti 'i:T7(li'i ti i] al. Fllil i:1'lE l YC;«g7CGt`r, i r r n,ihilitg i; t} ex r w i a inic n ,1 ihe ie.ai;r f tE3e sy,;tttx f',.alit" c a,izre,l tnij 1» la i c tr;ia lc.e t a vitl b c c a +uLL•r,.i:«. I jatur., c hj.c tir,°s, ;c:u e.. linti tsitic n: ct9, anc tk t: rc7:eciur; ert'c-r t1 i 4 y'ste:zn 4=ie' r ii^scrb;a i31 the st ir ci;rc Kt.i-t.a.ic:.rv rwt nrt sr;;. r 1.'s YE't lIiI't'4 h4` T,']C tiT 771C{Flt":ti, °—,*'I?li:.C71a tiL'Ltt.C fC Y Il'4'[4 1Ll t>ic c't T7;<IE?.rt'?1".S p rt•t ec i[er Jta,:r rtrrair7t=-r<lttr s;.`ttarr;2 ea•cf f nc3 r clits 4ji`rY atc 7e it p:1:. Ir c iar c,ai i i a if c s4 st 6r E f et i.ilit:° cc l.tr,l i.tk c a«;c,unti.T ur ci ,ati liticl, pa=;cc +f F-ILF lat t es c:tf ath, Ltr, i i e xGc:t tc r ihc:;,_r ct c.scu' 'l,.e ,l.'}t)1;, h6 ecT zrg4l? sig ie t < ci r li cl-it1 tc ar i ic tii 3 rf a it r:;c,»zih:t a5,zt•lcc: i,t-rsi i s i t°-tii, i i ce ic rr,it ,itki .l c lc s r,f.s i at{I ;e r€t rsa5 ;r: 1 i-t-i l rc:cc,t, I`i n: c;a> recc;i.c a r tin, t'.crr.c, ,rr s,ir1 f:#z-c r c rae.;j 5s y i. IICuL3 I,rt.:s [;,at}i,Lz i ..s r et v;;,r r+icd r tir3;c T 7Rr.4.s. E ,.,..:i t:„, i ..,, ,r_t; I.qd„,:,t:,r_' i t 7 i3O.Fµ tY_.,... Fi..l+ll i! rt... ,::Yf'.:'1ri.",:.'I`I znin