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HomeMy WebLinkAboutResolution - 2005-R0395 - Contract - BKD LLP - Audit Of Annual Financial Statements - 08_25_2005Resolution No. 2005-RO395 August 25, 2005 Item 42 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock, a Contract for an audit of annual financial statements, by and between the City of Lubbock and BKD, LLP of Little Rock, Arkansas, and related documents. Said Contract is attached hereto and incorporated in this resolution as if fully set forth herein and shall be included in the minutes of the City Council. Passed by the City Council this 25th day of August, 2005. MCDOUGAL, MAYOR ATTEST: Rebe&a Garza, City Secretary APPROVED AS TO CONTENT: I Jeff 10r, D ctor of Fiscal Operations APPROVED AS TO FORM: J M. Knight, Ass` ant Cit Attorney gslccdocs/res-Contract-MD, LLP August 15, 2005 Co! i QLL F September 19, 2005 City of Lubbock, Texas Ms. Lee Ann Dumbauld, City Manager 1625 131h Street P. O. Box 2000 Lubbock, Texas 79457 Dear Lee Ann: We have signed the enclosed amendment to our Engagement Letter dated August 22, 2005, that you requested. However, we want to make you aware that we have written a few words on it to try and make it clear what is included in the fixed fee offering arrangement. If you accept our modification, please initial it, sign and return one copy of the amendment for our records. Additionally, we want to clarify that the fixed fee arrangement, as stated, is intended to apply only to your standard debt issuances. Any issues that require us to perform additional procedures such as review of stub period financial statements, issuance of a comfort letter, or multiple readings and or corrections, etc. will need to be discussed and an agreement reached as soon as such matters are identified. We look forward to working with you during the upcoming audit and other projects for the City of Lubbock as they arise. If you have any questions or need additional information, please call me at (501) 372-1040. Sincerely, Kevin Kemp Partner kk/vls 2005ADM 1N/LTRL1891 5000 Rogers Avenue, Suite 700 Fart Smith, AR 72903.2079 479 452-1040 Fax 479 452.5542 400 W. Capitol Avenue, Suite 2500 P.O. Box 3667 Little Rock, AR 72203-3667 501 372-1040 Fax 501 372-1250 �CEIVED Sip 2 0 2005 F3Y:_ 200 E. 1Ith Avenue P.O. Box 8306 Pine Bluff, AR 71611-8306 870 534-9172 Fax 870 534-2146 M.com Beyond Your Numbers r , " ;, P.O. Box 2000 + 1625 13th Street - Lubbock, TX 79457 (806) 775-3002 • Fax: (806) 775-2051 September 15, 2005 BKD, LLP 400 W. Capitol Avenue Suite 2500 P.O. Box 3667 Little Rock, AR 72203-3667 Re: Engagement Letter with City of Lubbock, Texas dated August 22, 2005 Dear Sirs: This letter is to amend your Engagement Letter with the City of Lubbock dated August 22, 2005. On page 7, paragraph 4, the Engagement Letter states: "If you intend to include these financial statements and our report in a bond or other similar offering document at some future date, you agree to seek our permission to do so at that time. You agree to provide reasonable notice to allow sufficient time for us to perform certain additional procedures. Any time you intend to publish or otherwise reproduce these financial statements and our report and make reference to our firm name in any manner in connection therewith, you agree to provide us with printers' proofs or masters of the offering document for our review and approval before printing or other reproduction. You will also provide us with a copy of the final reproduced offering document for our approval before it is distributed. Our fees for such services are in addition to those discussed elsewhere in this letter. We understand that these financial statements will become a matter of public record." The City of Lubbock would like to add the following language prior to the last sentence in the above paragraph: "The fees associated with each General Obligation Bond, Revenue Bond, or Certificate of Obligation shall be actual cost to BKD, but shall not exceed $4000.00 per issue. "Actual cost" shall be defined as hours worked times the applicable hourly rate. BKD acknowledges that time is z pius woes G-- tenavel, 1� yYdj'5 `& tQIePA,;44 , C-,-PcF5/ G� of the essence for each offering and will make every effort to review and approve documents in a timely manner." If you are in agreement with this amendment to the Engagement Letter, please sign both copies of this letter, return one copy to the City of Lubbock, and keep one copy for your files. We look forward to working with you. CITY OF LUBBOCK BY Lee Ann Dumbauld City Manager The amendment proposed above to the Engagement Letter dated August 22, 2005, is acceptable to BKD, LLP. , V, N UPI val�, , "(104 �v, 0 De�2 yes & cow (Printed name) yk,/ (date) August 22, 2005 Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457 We are pleased to confirm the arrangements of our engagement and the nature of the services we will provide to the City of Lubbock, Texas. ENGAGEMENT OBJECTIVES We will audit the financial statements of the City of Lubbock, Texas as of and for the year ended September 30, 2005, in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Nonprofit Organizations. The objectives of our audit are: ✓ Expression of an opinion on the conformity of your financial statements, in all material respects, with accounting principles generally accepted in the United States of America. ✓ Issuance of a report on your compliance based on the audit of your financial statements. ✓ Issuance of a report on your internal control over financial reporting based on the audit of your financial statements. ✓ Expression of an opinion on your compliance, in all material respects, with the types of compliance requirements described in the U. S. Ojffice of Management and Budget Circular A- 133 Compliance Supplement that are applicable to each of your major federal award programs. 400 W, Capitol Avenue, Suite 2500 200 E. 11th Avenue 5000 Rogers Avenue, Suite 700 P.O. Box 3667 P.O. Box 8306 Fort Smith, AR 72903-2079 Little Rock. AR 72203-3667 Pine Bluff, AR 71611-8306 479 452-1040 Fax 479 452-5542 501 372.1040 Fax 501 372-1250 870 534-9172 Fax 870 534-2146 bkd.eom Beyond your Numbers Mc ,RaWaridl�f ucrra m, Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 2 ✓ Issuance of a report on your internal control over compliance based on the audit of your compliance with the types of compliance requirements that are applicable to each of your major federal award programs. ✓ Issuance of a report on your schedule of expenditures of federal awards. OUR RESPONSIBILITIES Auditing standards generally accepted in the United States of America, Government Auditing Standards and OMB Circular A-133 require that we plan and perform: ✓ The audit of the financial statements to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. ✓ The audit of compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement applicable to each major federal award program to obtain reasonable rather than absolute assurance about whether noncompliance having a direct and material effect on a major federal award program occurred. Accordingly, a material misstatement or noncompliance having a direct and material effect may remain undetected. Our audit of the financial statements is designed to detect misstatements and noncompliance that, in our judgment, could have a material effect on the financial statements taken as a whole. Consequently, our audit will not necessarily detect errors or fraud resulting in an immaterial misstatement of the financial statements. Likewise, our audit of compliance with the types of compliance requirements applicable to each major federal award program is designed to detect noncompliance having a direct and material effect on a major program. Consequently, our audit will not necessarily detect noncompliance having an indirect and material or an immaterial effect on any program. Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 3 An audit also includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to be performed. An audit is not designed to provide assurance on internal control over financial reporting or on internal control over compliance or to identify reportable conditions. However, we will communicate to you any matter that comes to our attention that we consider a reportable condition. Because of the limits in any internal control structure, errors, fraud, illegal acts or instances of noncompliance may occur and not be detected. Also, in the future, procedures could become inadequate because of changes in conditions or deterioration in design or operation. Two or more people may also circumvent controls, or management may override the system. We are available to perform additional procedures with regard to fraud detection and prevention at your request, subject to completion of our normal engagement acceptance procedures. The actual terms and fees of such an engagement would be documented in a separate letter to be signed by you and BKD. If, for any reason, we are unable to complete our audit of the financial statements or our audit of compliance with the types of compliance requirements applicable to each major federal award program or are unable to form or have not formed an opinion, we may decline to express an opinion or decline to issue a report as a result of this engagement. If we discover conditions that may prohibit us from issuing a standard report, we will notify you as well. In such circumstances, further arrangements may be necessary to continue our engagement. YOUR RESPONSIBILITIES To facilitate our audit, management is responsible for making all financial records documentation and other financial and compliance related information available to us. At the conclusion of our engagement, management will provide to us a letter acknowledging certain responsibilities outlined in this engagement letter and confirming: • The availability of this information • Certain representations made during the audits for all periods presented • The effects of any uncorrected misstatements, if any, resulting from errors or fraud 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 Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 4 Management is responsible for fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, for adjusting the financial statements to correct matenial misstatements and for identifying and ensuring compliance with the laws, regulations, contracts and grants applicable to your activities including your federal award programs. Management is also responsible for establishing and maintaining effective internal control over financial reporting and compliance and setting the proper tone; creating and maintaining a culture of honesty and high ethical standards; and establishing appropriate controls to prevent, deter and detect fraud, illegal acts and instances of noncompliance. The results of our tests of compliance and internal control over financial reporting performed in connection with our audit of the financial statements may not fully meet the reasonable needs of report users. Management is responsible for obtaining audits, examinations, agreed -upon procedures or other engagements that satisfy relevant legal, regulatory or contractual requirements or fully meet other reasonable user needs. OTHER SERVICES We may perform other services for you not covered by this engagement letter. You agree to assume full responsibility for the substantive outcomes of those services, including any findings that may result. You also acknowledge that those services are adequate for your purposes and that you will establish and monitor the performance of those services to ensure that they meet management's objectives. Any and all decisions involving management functions related to those services will be made by you, and you accept full responsibility for such decisions. We understand that you will designate a management -level individual to be responsible and accountable for overseeing the performance of those services, and that you will have determined this individual is qualified to conduct such oversight. ENGAGEMENT FEES Our fees will be based on time expended plus charges for travel, long-distance telephone, copies, etc. and will be in accordance with our proposal dated July 21, 2005. We will issue progress billings during the course of our engagement and our statements are due when received. Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 5 Our fees are based upon the understanding that your personnel will be available to assist us. Assistance from your personnel is expected to include: • preparing audit schedules to support all significant balance sheet and certain other accounts, • preparation of the comprehensive annual financial report, • responding to auditor inquiries, • preparing confirmation and other letters, • pulling selected invoices and other documents from files, and • helping to resolve any differences or exceptions noted. We will provide you with a detailed list of assistance needed before the audit begins. Our timely completion of the audit depends on your timely and accurate schedule and analyses preparation and on the availability of your personnel to provide other assistance. If there are inaccuracies or delays in preparing this material, or if we experience other assistance difficulties that add a significant amount of time to our work, our fees will increase. If these circumstances occur, we will promptly notify you to discuss alternative solutions and the impact on our fees. Our engagement fee does not include any time for post -engagement consultation with your personnel or third parties, consent letters and related procedures for the use of our reports in offering documents, inquiries from regulators or testimony or deposition regarding any subpoena. Charges for such services will be billed separately. Our fees may increase if our duties or responsibilities are increased by rule making of any regulatory body or new accounting or auditing standards. We will consult with you in the event any regulations or standards are issued that may impact our fees. Our invoices are due within 30 days. If our invoices for this or any other engagement you may have with BKD are not paid when due, we may suspend or terminate our services for this or any other engagement. In the event our work is suspended or terminated as a result of nonpayment, you agree we will not be responsible for any consequences to you. Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 6 OTHER ENGAGEMENT MATTERS AND LIMITATIONS The working papers for this engagement are the property of BKD. BKD will be required to make working papers available to the City upon request and to respond to reasonable inquiries of successor auditors and to allow successor to review working papers relating to matters of continuing audit significance. City also acknowledges and grants assent that representatives of the cognizant or oversight agency or their designee, other government staffs and the U.S. General Accounting Office shall have access to the working papers upon their request; and that BKD shall maintain the working papers for a period of at least three years after the date of the report, or for a longer period if BKD is requested to do so by the cognizant or oversight agency. You agree that we have no legal responsibility to you in the event we provide such documents or information. During the course of BKD's engagement, BKD may accumulate records containing data, which should be reflected in the City's books and records. City will determine that all such data, if necessary, will be so reflected. Accordingly, City will not expect BKD to maintain copies of such records in BKD's possession. You agree to indemnify and hold harmless BKD and its personnel from any claims, liabilities, costs, and expenses relating to our services under this agreement attributable to false or incomplete representations by management, except to the extent determined to have resulted from the intentional or deliberate misconduct of BKD personnel. You agree that any dispute regarding this engagement will, prior to resorting to litigation, be submitted to mediation upon written request by either party. Both parties agree to try in good faith to settle the dispute in mediation. The American Arbitration Association, or another mutually agreeable mediator, will administer any such mediation in accordance with its Commercial Mediation Rules. The results of the mediation proceeding shall be binding only if each of us agrees to be bound. We will share any costs of mediation proceedings equally. No amendment, modification, or alteration of the terms of this agreement shall be binding unless such amendment, modification, or alteration is in writing, dated subsequent to this agreement, and duly executed by BKD and the City. If any provision of this agreement is declared invalid or unenforceable, no other provision of this agreement is affected and all other provisions remain in full force and effect. Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer/Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 7 This engagement letter represents the entire agreement regarding the services described herein and supersedes all prior negotiations, proposals, representations or agreements, written or oral, regarding these services. It shall be binding on heirs, successors and assigns of you and BKD. You agree that we will, at our discretion or upon your request, deliver financial statements or similar documents to you electronically via floppy disk, CD-ROM, e-mail or other mechanism. You recognize and accept the risk involved, particularly in e-mail delivery as the Internet is not necessarily a secure medium of communication as messages can be intercepted and read by those determined to do so. You agree you will not modify these documents for internal use or for distribution to third parties. You also understand that we may on occasion send you documents marked as draft and understand that those are for your review purpose only, should not be distributed in any way and should be destroyed as soon as possible. If you intend to include these financial statements and our report in a bond or other similar offering document at some future date, you agree to seep our permission to do so at that time. You agree to provide reasonable notice to allow sufficient time for us to perform certain additional procedures. Any time you intend to publish or otherwise reproduce these financial statements and our report and make reference to our firm name in any manner in connection therewith, you agree to provide us with printers' proofs or masters of the offering document for our review and approval before printing or other reproduction. You will also provide us with a copy of the final reproduced offering document for our approval before it is distributed. Our fees for such services are in addition to those discussed elsewhere in this letter. We understand that these financial statements will become a matter of public record. We understand that you will place these financial statements or our report thereon on an electronic site, such as the World Wide Web. You recognize that we have no responsibility as auditors to review information contained in electronic sites. BKD is a registered limited liability partnership under Missouri law. Under applicable professional standards, partners of BKD, LLP have the same responsibilities as do partners in a general accounting and consulting partnership with respect to conformance by themselves and other professionals in BKD with their professional and ethical obligations. However, unlike the partners in a general partnership, the partners in a registered limited liability partnership do not have individual civil liability, directly or indirectly, including by way of indemnification, contribution, assessment or otherwise, for any debts, obligations or liabilities of or chargeable to the registered limited liability partnership or each other, whether arising in tort, contract or otherwise. Members of City Council Honorable Marc McDougal, Mayor Mr. Lou Fox, City Manager Ms. Lee Ann Dumbauld, Chief Financial Officer, Assistant City Manager Mr. Jeffery Snyder, Director of Fiscal Operations City of Lubbock, Texas August 22, 2005 Page 8 If the above arrangements are acceptable to you, please sign the enclosed copy of this letter and return it to us. BKD, UP BY Kevin Kem , Partner The services and arrangements described in this letter are in accordance with our understanding and are acceptable to us. CITY OF L BY 7� Marc DATE CK, TEXAS Mayor APPR VED S TO CONTENT: V � Jeffer der Director of Fiscal Operations dc/kk/rsp 2005CLIENT/724WENGLi 695 ATTEST: City ecretary APPROVED AS TO FORM: , =Attorney f Cn GundersonLLP Certified Public Accountants & Consullanls October 4, 2002 To the Partners of BKD LLP and the SEC Practice Section Peer Review Committee We have reviewed the system of quality control for the accounting and auditing practice of BKD LLP (the firm) in effect for the year ended May 31, 2002, 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 (the AICPA). The design of the system, and compliance with it, are the responsibilities of the firm. In addition, the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on the design of the system, and the firni's compliance with that system and the Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section and included procedures to plan and perform the review that are summarized in (lie attached description of the peer review process. Our review would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance ,vith it or v,-ith the membership requirements of the Section since it was based on selective tests_ 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 that 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 BKD LLP in effect for the year ended May 31, 2002, 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. Also, in our opinion, the (irni complied during that vear with the membership requirements of the Section in all material respects. Attachment to the Peer Review Report of BKD LLP Description of the Peer Review Process Overview Member firms of the AICPA SEC Practice Section (the Section) must have their system of duality control periodically reviewed by independent peers. These reviews are system and compliance oriented with the objective of evaluating whether: The reviewed firm's system of quality control for its accounting and auditing practice has been designed to meet the requirements of the Quality Control Standards established by the AICPA. The reviewed firm's quality control policies and procedures were being complied with to provide the firm with reasonable assurance of complying with professional standards. The reviewed firm was complying with the membership requirements of the SECPS in all material respects. The Section's Peer Review Committee (PRC) establishes and maintains review standards. At regular meetings and through report evaluation task forces, the PRC considers each peer review, evaluates the reviewer's competence and performance, and examines every report, letter of comments, and accompanying response from the reviewed firm that states its corrective action plan before the peer review is finalized_ The Transition Oversight Staff (fornierly the staff of the Public Oversight Board), an independent oversight body, plays a key role in overseeing the performance of peer reviews working closely with the peer review teams and the PRC. Once the PRC accepts the peer review reports, letters of comments, and reviewed firms' responses, they are maintained in a file available to the public. In some situations, the public file also includes a signed undertaking by the firm agreeing to specific follow-up action requested by the PRC. That file also includes the firrn's annual report which contains information regarding the number of firm offices, firm professionals, and SEC clients for which the firm is principal auditor -of -record. Planning the Review To plan the review of BKD LLP, we obtained an understanding of (1) the nature and extent of the firm's aCounlin,0 and auditing practice, and (2) the design of the f nii's system of -quality control sufficient to assess the inherent and control risks implicit in its practice. Inherent risks were assessed by obtaining an understanding of the firm's practice, such as the industries of its clients and other factors of complexity in serving those clients, and the organization of the firm's personnel into practice units. Control risks were assessed by obtaining an understanding of the design of the firm's system of quality control, including its audit methodology, and monitoring procedures. Assessing control risk is the process of evaluating the effectiveness of the reviewed firm's quality control system in preventing the performance of engagements that do not comply with professional standards. Performing the Review Based on our assessment of the combined level of inherent and control risks, we identified practice units and selected engagements within those units to test for compliance with the firm's quality control system. The engagements selected for review included audits of clients that are SEC registrants, audits performed under the Government Auditing Standards, an audit performed under FDICIA, a multi -office audit and audits of Employee Benefit Plans. The engagements selected for review represented a cross-section of the firm's accounting and auditing practice with emphasis on higher- nsk engagements. The engagement reviews included examining working paper files and reports and interviewing engagement personnel. The scope of the peer review also included examining selected administrative and personnel files to determine compliance with the firm's policies and procedures for the elements of quality control pertaining to independence, integrity, and objectivity; personnel management; and acceptance and continuance of clients and engagements. In addition, we tested compliance with the membership requirements of the Section, including those pertaining to independence quality controls and concurring partner review. Prior to concluding the review, we reassessed the adequacy of scope and conducted an exit conference with firm management to discuss our findings and recommendations. RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS b) The number of days of specialized training in governmental auditing and accounting received during the last three (3) years by the personnel who will be assigned to the City, c) Whether the continuing professional education program of your firm is of an internal or external nature. TECHNICAL QUALIFICATIONS 5. Statement of Qualifications (15 Percent) Include in this section a "Statement of Qualifications" with the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in the engagement on a full-time basis and the number and nature of the staff to be so employed on a part-time basis. The firm shall list the entities for which they provided assistance, and the nature of that assistance, that led to the successful achievement of the Certificate of Achievement for Excellence in Financial Reporting offered by the Government Finance Officer's Association. The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements. The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past 3 years. The firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past 3 years with state regulatory bodies or professional organizations. Provide a list of your firrn's open litigation describing the nature and the amount of each lawsuit for which your firm is a named defendant. Provide proof of insurance coverage for the following: Business Automobile Liability: Contractor's insurance shall contain a combined single limit of at least $300,000 per occurrence, and include coverage for but not limited to the following: • Bodily injury and property damage • Any and all vehicles owned, used or hired Professional Liability: REQUEST FOR QUALIFICATIONS Page 11 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS Contractor's insurance shall contain a combined single limit of a minimum of $1,000,000 per occurrence and in the aggregate. Workers' Compensation and Employers Liability Insurance: Contractor shall elect to obtain workers' compensation coverage pursuant to Section 406.002 of the Texas Labor Code. Further, Contractor shall maintain said coverage throughout the term of this contract and shall comply with all provision of Title 5 of the Texas Labor Code to ensure that the Contractor maintains said coverage. Any termination of workers' compensation insurance coverage by Contractor or any cancellation or non - renewal of workers' compensation insurance coverage for the Contractor shall be a material breach of this contract. The Contractor may maintain Occupational Accident and Disability Insurance in lieu of Workers' Compensation. In either event, once the Contract is awarded, the policy must be endorsed to include a waiver of subrogation in favor of the City of Lubbock. Employer's Liability with limits of at least $500,000 each accident, $500,000 by disease policy limit, and $500,000 by disease each employee shall also be obtained and maintained throughout the term of this contract. 6. Partner, Supervisory and Staff Qualifications and Experience (10 Percent) The firm shall identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement. The firm also shall provide information on their government auditing experience, general audit experience, and membership in professional organizations relevant to the performance of this audit. Provide brief resumes of the personnel to be assigned to the engagement. At a minimum, detailed information should be provided for: ■ The partner in charge of the audit team ■ The manager in charge of the on site field work ■ The senior in charge of the on site field work Also include their educational and professional experience, with particular emphasis on experience in auditing governmental units. Indicate whether these individuals are certified public accountants or independent public accountants licensed to practice in the State of Texas. Also, indicate whether these individuals are members of the American Institute Of Certified Public Accountants (AICPA) and/or the Texas Society of Certified Public Accountants. The firm shall provide as much information as possible regarding the number, qualifications, experience and training including relevant continuing professional REQUEST FOR QUALIFICATIONS Page 12 of 15 05.082.doc ACORD, CERTIFICATE OF LIABILITY INSURANCE GATE pligpofyYYY} �DpucaeL na CERTIFICATE IS ISSUED AS A (MATTER OF WFORNM'1 N Schwartz Broftars ft*Urarrm One South Wadctt Drive ONLY AND OONFERS NO RIGHTS UPON THE CERTFFICATE CE5rf*WATE DOIE3 NOT AMEND. EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. ALTER 36th Hoot Chicago, IL 60606 msuRERS AFFORDING COVERAGE IiW 0 INSURM v*LxwRA-. Federal Insurance Company CHUBB BI(D. LLP ham"Tans Tower. 901 St. Lnuis Street; P.O. Box 1900 Springfield, MO 65601-1900 a: ROURER c INSURER D: Gomm rb7a-w,,-Zf THE POLICIES OF NSiAJCE LIS'T5o BELDW HAVE l3v TO THE 04SURED HALU D ABOVE FM THE POLICY PERIOD IN NC.ATED_ NOTVKTHS*rMD1NG ANY fMKl M4W TOM OR COND(TON OF AW CONTRAC'.T OR OTHER DOCUMENT VVFrH RESPECT TO V* ICH THIS CEi2TPF1CATE YAY BE ISSN OR IAAY PERTAK TmE WIWRANC9 AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO Alt THE TERIWS, EKCLUS:ONS AND CaND1TKINS OF SUCH POLK3E . 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LL 96CH AO=EW $500 000 E. eWAM _ EA ELF $500,000 Ei.. ame_at - PBLCY tjW 3500,000 once pBf7 WIM N OF OPMrOgS A LOCAXKM 1 YEHMES I ECC1.l,1dtON5 ALOM BY ftDORSENEXT I SPECIAL PRWWOMS I SHOULD ANY OFTW ABOYE DF-SCMM POi-SC= M CANC i i J.'JI ISEPORE PPE EXPIRATION DATE TH TM MSWW aiSUMM %%-L. VUWAVM TO AME_ Q_ DAYS WRff TEN NO'1}C£ To TW carmim E mxnm KMIEC To TXE i. pm ear FM INE TO no &O SMALL YsrDSE NOOrLfBAT10N OR LiAstlTlY Of AK! IOf 0 U!'Q11 *nA M6UVWJI, r" ^arm" GR AGOM 25 (2001* 1 of 2 #SW0,1/(M84789 - - CXS 0 ACORD CORPORATION 1988 06/24/05 FRI 12:49 1TX/RX NO 57831 'I' .. -... y-..� .., . -, ... ,-. -— w., jsarM MU I L, rd IBC J/J IMPORTANT If the certificate holder is an ADDITIONAL INSURED, the policy(tes) must be endorsed. A statement on this certificate does not confer rights In the certificate holder in lieu of suCh endorsement(s). If SUBROGATION IS WANED, subject to the terms and conditions of the poGry, certain policies may require an endorsement A statetnerlt on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s)- DISCLAIMER The Certificate of Insurance on the reverse side of #* form does not constitute a contract between the issuing irmrer(s). authored representative or producer, and the certificate holder, nor does it a€firmtivdy or rsegadv+ely amend, eadend or alter the coverage afforded by the policies fisted thereon. ACOM 25-3 (20(KMM 2 of 2 M4801iM847os 06/24/05 FRI 12:49 (TX/RX NO 57831 Appendix F CERTIFICATE OF INSURANCE 1DM004 -1Od'O= Aon IYlSmanct SCtV:GCs 159 East CouvAy Line Rd. THn CERTIMATE IS VISUER As A MATTER of WFORMATiON ONLY ANO CONFERS NO RIGHTS UPON THE. CERTIFICATE HOLMR. THIS CERWICATE OCIES NOT "ENID. FDCMN0 M ALTER TILE COVERAGF, Hatboro PA 19040-1218 AFFCKWED BY Tr[E POUCgES BELOW. COMIPANIESAMORO(NG QOWEFUU E tr>su ea: SKID, UP BM Financial, LLC RKD Wealth Advisors, LLC C_ A. CQTIa,Te9Tw Casa) colr�Iwr mazars Central. LLC B BKD klsurarwel LLC OarAnY 901 E St. Louis Shve4 Suite 1800 C PO Box 1900 S~Iiew. Mo 65801-1900 COVERAGES Ti4! IS TC1 [TClIi TI TFNT 1iTE FpUCJ55 Of llSiMwJi E Lt5TE0 BTELf?M! IIAYE OfHI tSSLIEp TO THE MOMM A9011E FORME POLICY PM*O *X CATT_O. I0TYK"WA11DI4ANY 9111221.01%61Of1, TaW OR 00lOff" OF 1WY OONTRALT OR MM OOGIMFM VXH FAA W>GT TO V W*DK TM CGRTIM.ATE MAY 6E GSUW OR MAY FMTAW, THE MUM0 FICA AFFOR" sY TM POLTC IM 02SOPAM HCAEIN 6 SLXUWT TO ALL TW TOWk GWOUMCM AM CONAMOW OF GLICH POLICES. LwrS SHowH MAY HAVE BEEN "fiou EO 6Y .An n A1l4 co LTA TmewM41JRANCe /OLJ"MlsAt" POL3r1yvvw41AIH GATE POLICYEIW4*00N T)IAT� LMTS GENEAAI.I IAa1LtTY G91MI :IAL 0099m 1 immu" cL^w s MADE ❑ O=VR OWNU COW. PROT. GEJIEAAL AO4R£C,ATE _ Rio- CT+S.C,OMmr A m j PERSONAL. a A-W. RZKY S 04H S FIRE DM V►GE JMV om 6.) S AUTOM OLEUASIUTY ANr.uTa ALL Ov"40 AUTOS SC*dWMEO AUT03 MIRED At;TOS NOW-OWNEO AUTOS MED EXP_ (Mrs P.-sIo Cp1�INE0sIIlaFLJFJT S S 9004T RvA. w (Par mmoonl S BODILY *AJURY (Par acuria,q S PROPERTY DAhW -C S GARAGELiABILM ANY AtI TO AUTO OVAY -EAACCIOEW 5 OTHER THAN AUTO ONLY £ACI I AC C"NT S AGGAEGATE S alCIss u annr UMW FORM OiIfER 7itlW t1MMB.IJ�FOAiI EACHOGex NCV $ AGC,REOATE S X wlclal�L�AP[9�+4TrTN RNLI E'MPLay"mUABILl" rkGPAOrMYOWARTNEfW ING IMCVTIVEPOFFICE"SARE Oc Pf0feSsiOF%W Liability ABF128572014 10101/2004 i=1/2005 STA7Tri0RY L1MfTS GACH ACACKSW S 015EAGE-POLICY mW $ -EAflrFJAFIOYf& S SIO,t)00,OWper occumca ce I0.QOP.000 Annasl aremgaw oeia>otion d Ilene CERTIftCATE HOLDER CANCELLATION )E.%Wmce of SHOO" ANY OF THE ADOW DESCRIGE0 POLICIES I* CANCEU.EO BEFORE TIIE ln=m,ce; O WRAMN DATE T#CEREOF. TW- -54 MG COMPANY "XL FJIUFAVOR TO WW ;e DAYS WPUMN NOTICE TO THC CEATIFI:aTE HOLMIR KAMED TO THE LEFT, BUT FALURV TO MAIL ELICM NOTICE 54ALl HAPOW IIO OaLIGATION OR L"11,frV OF ANY WM UPON THE COMPANY, {TS AGENTS OR REPRESENTAT W£5. ALI7?'6 RWRfSEcnfYATTJE 03/09/05 WEI) 18:26 4TX/RX NO 79821 Resolution No. 2005-RO395 September 13, 2006 Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas P.O. Box 2000 Lubbock, Texas 79457 We are pleased to confirm the arrangements of our engagement and the nature of the services we will provide to the City of Lubbock, Texas. ENGAGEMENT OBJECTIVES We will audit the financial statements of the City of Lubbock, Texas as of and for the year ended September 30, 2006, in accordance with auditing standards generally accepted , in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Nonprofit Organizations. The objectives of our audit are: ✓ Expression of an opinion on the conformity of your financial statements, in all material respects, with accounting principles generally accepted in the United States of America. ✓ Issuance of a report on your compliance based on the audit of your financial statements. ✓ Issuance of a report on your internal control over financial reporting based on the audit of your financial statements. ✓ Expression of an opinion on your compliance, in all material respects, with the types of compliance requirements described in the U. S. Office of Management and Budget Circular A- 133 Compliance Supplement that are applicable to each of your major federal award programs. 400 W. Capitol Avenue, Suite 2500 200 E. 111h Avenue 5000 Rogers Avenue. Suite 700 P.O. Box 3667 P.C. Box 8306 Fort Smith, AR 72903.2079 Little Rock, AR 72203-3667 Pine Bluff, AR 71611-8306 479 452-1040 Fax 479 452.5542 501 372-1040 Fax 5C1 372-1250 870 534.9172 Fax 870 534-2146 bkd.com Beyond Your Numbers 5R° Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 2 ✓ Issuance of a report on your internal control over compliance based on the audit of your compliance with the types of compliance requirements that are applicable to each of your major federal award programs. ✓ Issuance of a report on your schedule of expenditures of federal awards. OUR RESPONSIBILITIES Auditing standards generally accepted in the United States of America, Government Auditing Standards and OMB Circular A-133 require that we plan and perform: ✓ The audit of the financial statements to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. ✓ The audit of compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement applicable to each major federal award program to obtain reasonable rather than absolute assurance about whether noncompliance having a direct and material effect on a major federal award program occurred. Accordingly, a material misstatement or noncompliance having a direct and material effect may remain undetected. Our audit of the financial statements is designed to detect misstatements and noncompliance that, in our judgment, could have a material effect on the financial statements taken as a whole. Consequently, our audit will not necessarily detect errors or fraud resulting in an immaterial misstatement of the financial statements. Likewise, our audit of compliance with the types of compliance requirements applicable to each major federal award program is designed to detect noncompliance having a direct and material effect on a major program. Consequently, our audit will not necessarily detect noncompliance having an indirect and material or an immaterial effect on any program. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 3 An audit also includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to be performed. An audit is not designed to provide assurance on internal control over financial reporting or on internal control over compliance or to identify reportable conditions. However, we will communicate to you any matter that comes to our attention that we consider a reportable condition. Because of the limits in any internal control structure, errors, fraud, illegal acts or instances of noncompliance may occur and not be detected. Also, in the future, procedures could become inadequate because of changes in conditions or deterioration in design or operation. Two or more people may also circumvent controls, or management may override the system. We are available to perform additional procedures with regard to fraud detection and prevention at your request, subject to completion of our normal engagement acceptance procedures. The actual terms and fees of such an engagement would be documented in a separate letter to be signed by you and BKD. If, for any reason„ we are unable to complete our audit of the financial statements or our audit of compliance with the types of compliance requirements applicable to each major federal award program or are unable to form or have not formed an opinion, we may decline to express an opinion or decline to issue a report as a result of this engagement. If we discover conditions that may prohibit us from issuing a standard report, we will notify you as well. In such circumstances, further arrangements may be necessary to continue our engagement. YOUR RESPONSIBILITIES To facilitate our audit, management is responsible for making all financial records documentation and other financial and compliance related information available to us. At the conclusion of our engagement, management will provide to us a letter acknowledging certain responsibilities outlined in this engagement letter and confirming: • The availability of this information • Certain representations made during the audits for all periods presented • The effects of any uncorrected misstatements, if any, resulting from errors or fraud 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 Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 4 Management is responsible for fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, for adjusting the financial statements to correct material misstatements and for identifying and ensuring compliance with the laws, regulations, contracts and grants applicable to your activities including your federal award programs. Management is also responsible for establishing and maintaining effective internal control over financial reporting and compliance and setting the proper tone; creating and maintaining a culture of honesty and high ethical standards; and establishing appropriate controls to prevent, deter and detect fraud, illegal acts and instances of noncompliance. The results of our tests of compliance and internal control over financial reporting performed in connection with our audit of the financial statements may not fully meet the reasonable needs of report users. Management is responsible for obtaining audits, examinations, agreed -upon procedures or other engagements that satisfy relevant legal, regulatory or contractual requirements or fully meet other reasonable user needs. OTHER SERVICES We may perform other services for you not covered by this engagement letter. You agree to assume full responsibility for the substantive outcomes of those services, including any findings that may result. You also acknowledge that those services are adequate for your purposes and that you will establish and monitor the performance of those services to ensure that they meet management's objectives. Any and all decisions involving management functions related to those services will be made by you, and you accept full responsibility for such decisions. We understand that you will designate a management -level individual to be responsible and accountable for overseeing the performance of those services, and that you will have determined this individual is qualified to conduct such oversight. ENGAGEMENT FEES Our fees will be based on time expended plus charges for travel, long-distance telephone, copies, etc. and will be in accordance with our proposal dated July 21, 2005. We will issue progress billings during the course of our engagement and our statements are due when received. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page S Our fees are based upon the understanding that your personnel will be available to assist us. Assistance from your personnel is expected to include: • preparing audit schedules to support all significant balance sheet and certain other accounts, • preparation of the comprehensive annual financial report, • responding to auditor inquiries, • preparing confirmation and other letters, • pulling selected invoices and other documents from files, and • helping to resolve any differences or exceptions noted. We will provide you with a detailed list of assistance needed before the audit begins. Our timely completion of the audit depends on your timely and accurate schedule and analyses preparation and on the availability of your personnel to provide other assistance. If there are inaccuracies or delays in preparing this material, or if we experience other assistance difficulties that add a significant amount of time to our work, our fees will increase. If these circumstances occur, we will promptly notify you to discuss alternative solutions and the impact on our fees. Our engagement fee does not include any time for post -engagement consultation with your personnel or third parties, consent letters and related procedures for the use of our reports in offering documents, inquiries from regulators or testimony or deposition regarding any subpoena. Charges for such services will be billed separately. Our fees may increase if our duties or responsibilities are increased by rule making of any regulatory body or new accounting or auditing standards. We will consult with you in the event any regulations or standards are issued that may impact our fees. Our invoices are due within 30 days. If our invoices for this or any other engagement you may have with BKD are not paid when due, we may suspend or terminate our services for this or any other engagement. In the event our work is suspended or terminated as a result of nonpayment, you agree we will not be responsible for any consequences to you. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 6 OTHER ENGAGEMENT MATTERS AND LIMITATIONS The working papers for this engagement are the property of BKD. BKD will be required to make working papers available to the City upon request and to respond to reasonable inquiries of successor auditors and to allow successor to review working papers relating to matters of continuing audit significance. City also acknowledges and grants assent that representatives of the cognizant or oversight agency or their designee, other government staffs and the U.S. General Accounting Office shall have access to the working papers upon their request; and that BKD shall maintain the working papers for a period of at least three years after the date of the report, or for a longer period if BKD is requested to do so by the cognizant or oversight agency. You agree that we have no legal responsibility to you in the event we provide such documents or information. During the course of BKD's engagement, BKD may accumulate records containing data, which should be reflected in the City's books and records. City will determine that all such data, if necessary, will be so reflected. Accordingly, City will not expect BKD to maintain copies of such records in BKD's possession. You agree to indemnify and hold harmless BKD and its personnel from any claims, liabilities, costs, and expenses relating to our services under this agreement attributable to false or incomplete representations by management, except to the extent determined to have resulted from the intentional or deliberate misconduct of BKD personnel. You agree that any dispute regarding this engagement will, prior to resorting to litigation, be submitted to mediation upon written request by either party. Both parties agree to try in good faith to settle the dispute in mediation. The American Arbitration Association, or another mutually agreeable mediator, will administer any such mediation in accordance with its Commercial Mediation Rules. The results of the mediation proceeding shall be binding only if each of us agrees to be bound. We will share any costs of mediation proceedings equally. No amendment, modification, or alteration of the terms of this agreement shall be binding unless such amendment, modification, or alteration is in writing, dated subsequent to this agreement, and duly executed by BKD and the City. If any provision of this agreement is declared invalid or unenforceable, no other provision of this agreement is affected and all other provisions remain in full force and effect. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 7 This engagement letter represents the entire agreement regarding the services described herein and supersedes all prior negotiations, proposals, representations or agreements, written or oral, regarding these services. It shall be binding on heirs, successors and assigns of you and BKD. You agree that we will, at our discretion or upon your request, deliver financial statements or similar documents to you electronically via floppy disk, CD-ROM, e-mail or other mechanism. You recognize and accept the risk involved, particularly in e-mail delivery as the Internet is not necessarily a secure medium of communication as messages can be intercepted and read by those determined to do so. You agree you will not modify these documents for internal use or for distribution to third parties. You also understand that we may on occasion send you documents marked as draft and understand that those are for your review purpose only, should not be distributed in any way and should be destroyed as soon as possible. If you intend to include these financial statements and our report in a bond or other similar offering document at some future date, you agree to seek our permission to do so at that time. You agree to provide reasonable notice to allow sufficient time for us to perform certain additional procedures. Any time you intend to publish or otherwise reproduce these financial statements and our report and make reference to our firm name in any manner in connection therewith, you agree to provide us with printers' proofs or masters of the offering document for our review and approval before printing or other reproduction. You will also provide us with a copy of the final reproduced offering document for our approval before it is distributed. Our fees for such services are in addition to those discussed elsewhere in this letter. We understand that these financial statements will become a matter of public record. We understand that you will place these financial statements or our report thereon on an electronic site, such as the World Wide Web. You recognize that we have no responsibility as auditors to review information contained in electronic sites. BKD is a registered limited liability partnership under Missouri law. Under applicable professional standards, partners of BKD, LLP have the same responsibilities as do partners in a general accounting and consulting partnership with respect to conformance by themselves and other professionals in BKD with their professional and ethical obligations. However, unlike the partners in a general partnership, the partners in a registered limited liability partnership do not have individual civil liability, directly or indirectly, including by way of indemnification, contribution, assessment or otherwise, for any debts, obligations or liabilities of or chargeable to the registered limited liability partnership or each other, whether arising in tort, contract or otherwise. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeffrey Yates, Chief Financial Officer City of Lubbock, Texas September 13, 2006 Page 8 If the above arrangements are acceptable to you, please sign the enclosed copy of this letter and return it to us. BKD, LLP M'Lo BY Kevin Kemp, lyartner The services and arrangements described in this letter are in accordance with our understanding and are acceptable to us. CITY OF LUBBOCK, TEXAS IL B �'12 David Miller, Mayor v DATE November 2, 2006 APPROVED AS TO CONTENT: Le Ann -Du mbauld City Manager dc/kk/rsp 2006CL1ENT/72448/ENC L 1488 ATTEST: City ecretary APPROVED AS TO FORM: orney