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HomeMy WebLinkAboutResolution - 2007-R0463 - Agreement - BKD LLC - Audit Of Annual Financial Statements - 10_11_2007Resolution No. 2007—RO463 October 11, 2007 Item No. 5.1 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock is hereby authorized and directed to execute a for and on behalf of the City of Lubbock an Agreement for an audit of annual financial statements by and between the City of Lubbock and BKD, LLC, of Little Rock, Arkansas, which Agreement and any associated documents are attached hereto as Exhibit A and made a part hereof for all intents and purposes. In addition thereto, the City Manager or a designated representative may execute engagement letters or other associated documents as required during the term of the Agreement. Passed by the City Council this I lthday of October , 2007. DAVID A. MiLLER, MAYOR ATTEST. Reb cca Garza, City Secretary APPROVED AS TO CONTENT: J e rey A at ief inane Officer APPROVED AS TO FORM: on andiver, Attorney orcounsel DDresBKDauditConO7Res October 5, 2007 Resolution No, 2007-RO463 CONTRACT This professional services contract is executed this �_ day of 06 0o r-/ , 2007 by and between the City of Lubbock, Texas, hereinafter called "the City", and BKD, LLP. WHEREAS, the City has issued a Request for Proposal for Independent Audit; and WHEREAS, BKD, LLP has submitted a proposal to provide such professional services; WITNESSETH: IN CONSIDERATION of mutual promises of the parties contained herein and other good and valuable consideration, the parties agree as follows: 1. BKD, LLP shall provide the City with the necessary professional services to audit all funds including those which are covered under the provisions of the Single Audit Act. 2. The term of the contract shall run from the date of execution and shall automatically renew each year, subject to budget approval by the governing body of the City, for such terms as are required to perform the contracted professional auditing services for the fiscal years ending September 30, 2005, through September 30, 2010. 3. The professional accounting services shall be provided in accordance with the terms and conditions set forth in the Request for Proposal, attached hereto and marked Exhibit "A", and the Proposal to Provide Services, attached hereto and marked Exhibit "B". Each of these Exhibits is hereby incorporated by reference as if set forth word for word in their entirety. An engagement letter will be executed each year by authorized representatives of both parties. 4. BKD, LLP shall be compensated for services rendered under this contract in accordance with the terms and conditions set forth in the Exhibits. No work shall be performed beyond the present scope of this contract without express prior approval by the governing body of the City. 5. The City or BKD, LLP shall have the right to terminate the contract upon 30 days written notice. 6. In the event of a conflict between any terms and conditions of this contract and the Exhibits, the terms and conditions of the Exhibits shall take precedence in the following order: this Contract, the engagement letter, Exhibit "B" and Exhibit "A". 7. Neither party may assign any of its rights or delegate any of its obligations under this agreement, without the express written consent of the other. 8. It is agreed that the failure of any party to invoke any of the available remedies under this agreement or under law in the event of one or more breaches or defaults by any party under the agreement shall not be construed as a waiver of such provisions and conditions and shall not prevent the parties from invoking such remedies in the event of any future breach or default. 9. Each paragraph of this agreement is severable from all other paragraphs. In the event any court of competent jurisdiction determines that any paragraph or subparagraph is invalid or unenforceable for any reason, all remaining paragraphs and subparagraphs shall remain in full force and effect. 10. This agreement shall be interpreted according to and enforced under the laws of the State of Texas. 11. This agreement contains the entire agreement of both parties hereto, and no other oral or written agreement shall be binding on the parties hereto. This agreement supersedes all prior agreements, contracts and understandings of any kind between the parties relating to the subject matter hereof. This agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this professional services contract on or as of the date first written above. CITY OF LUBBOCK BKD,LLP David A. Mi ler, Mayor Kevin Kemp ATTEST: Re cca Garza, City Sec re APPROVED AS TO CONTENT: Je /e,o/,Chogharicia fficer APPROVED AS FORM: �iA -;;7 4 �V cr� 1A Vandi`ver',Assistant Cr Attorney Resolution No. 2007—RO463 September 12, 2007 Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeff 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, 2007, in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Governrnent 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. Governrn.ents 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. 5000 Rogers Avenue, Su'le 700 Fort Smith, AR 72903-2079 479.452.1040 Fax 479.452.550 bkd,com 400 W. Capitol Avenue, suite 2500 P.O. Box 3667 Little Rock, AR 72203-3667 501.372.1040 Fax 501,372.1250 Beyond Your Numbers 200 E. 11 th Avenue P.O. Box 8306 Pine Bluff, AR 71611-M 870.534.9172 Fax 870.534.2146 Praxity�: MEMEIEA GLOBAL ALLIANCE OF INDEPENDENT FIRMS Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page 2 ✓ Expression of an opinion on your compliance, in all material respects, with the types of compliance requirements described in the U. S. Qjfice of Management and Budget Circular A- 133 Compliance Supplement that are applicable to each of your major federal award programs. ✓ 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 nusstatement, 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. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 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 material weaknesses or significant deficiencies. However, we will communicate to you any matter that comes to our attention that we consider a material weakness or significant deficiency. 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. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 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 $200,000 (which includes the audit of Lubbock Power and Light). 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 Durnbauld, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page 5 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 he billed separately. Our fees may also increase if our duties or responsibilities are increased by rulemaking of any regulatory body or any additional new accounting or auditing standards. We will consult with you in the event any other regulations or standards are issued that may impact our fees. If our invoices for this or any other engagement you may have with BKD are not paid within 30 days, 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. 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. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page 5 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. 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. We may from time to time use third -party service providers in serving your account. We may share confidential information about you with these service providers, but remain comnutted to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures and safeguards to protect the confidentiality of your information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information. In the event that we are unable to secure an appropriate confidentiality agreement, you will he asked to provide your consent prior to the sharing of your confidential information with the third -party service provider. We will, at our discretion or upon your request, deliver financial statements or similar documents to you electronically via floppy disk, CD-ROM, email or other mechanism. You recognize and accept the risk involved, particularly in email 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. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page 7 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 material 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 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 gencral 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. HIPAA BUSINESS ASSOCIATE AGREEMENT We agree not to use or disclose Protected Health Information of your employees (hereinafter referred to as "PHI") obtained or produced in any form of media during the course of our work, other than for purposes of (a) performing our engagement, (b) management and administration of BKD, or (c) carrying out legal responsibilities of BKD. We represent to you that we have implemented what we consider to be appropriate administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of that PHI. With respect to your PHI, we will report to you any material security incident or use or disclosure not authorized by this agreement and, to the extent practical, assist you in mitigating any harmful effects caused by material security incidents or unauthorized uses or disclosures of which we have knowledge. We agree that any material violation of these confidentiality provisions entitles you to terminate this engagement. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauld, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page & BKD agrees to: 1. Upon their request, make available to the Secretary of Health and Human Services our internal practices and books and records relating to the use and disclosure of PHI for purposes of determining your compliance with the Security and Privacy Rule, subject to any applicable legal privileges. 2. To the extent we maintain information that is part of a Designated Record Set, make available information necessary for you to make an accounting of disclosures of PHI about an individual. 3. To the extent we maintain information that is part of a Designated Record Set, make available information necessary for you to respond to requests by individuals for access to PHI that is not in your possession but is considered part of a Designated Record Set. 4. Upon receipt of a written request from you, incorporate any amendments or corrections to PHI contained in our workpapers in accordance with the Security and Privacy Rule to the extent such PHI is considered part of a Designated Record Set. For purposes of this agreement, the term "Security and Privacy Rule" refers to the final rules published to implement the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996, specifically 45 CFR Parts 160 and 164. The terms "Protected Health Information" and "Designated Record Set" have the same meaning as defined in the Security and Privacy Rule. At the conclusion or termination of this engagement, any PHI retained by us will be subject to the same safeguards as for active engagements. We will obtain from any agents, including subcontractors, to whom we provide PHI received from you, or created or received by us on behalf of you, an agreement to the same restrictions and conditions that apply to us with respect to such PHI. To the extent that any relevant provision of 141PAA is eliminated or held to be invalid by a court of competent jurisdiction, the corresponding portion of this agreement shall be deemed of no force and effect for any purpose. To the extent that any relevant provision of HIPAA is materially amended in a manner that changes the obligations of business associates or covered entities that are embodied in term(s) of this engagement, the Parties agree to negotiate in good faith appropriate amendment(s) to this engagement to give effect to such revised obligations. In addition, the terms of this engagement should be construed in light of any interpretation and/or guidance on HIPAA issued by HHS from time to time. Members of City Council Honorable David Miller, Mayor Ms. Lee Ann Dumbauid, City Manager Mr. Jeff Yates, Chief Financial Officer City of Lubbock, Texas September 12, 2007 Page 9 If the above arrangements are acceptable to you, please sign the enclosed copy of this letter and return it to us. BKD, LLP g1b j LL The services and arrangements described in this letter are in accordance with our understanding and are acceptable to us. CITY OF LUBBOCK, TEXAS B David Mil] r, Mayor DATE October 11, 2007 Attest: �Rx"e�� 5�� z--- ebecca Garza, City Secretary Approved as to 1"o - r '� V r + Anit Burgess, Attorney r Enclosure Approved as to Content: V ' Lee Ann Dumhauld, City Manager 2UU7CL.IFNT/7 144$/ENG L 139R CITY OF LUBBOCK Resolution No. 2007-R0463 EXHIBIT REQUEST FOR QUALIFICATIONS RFQ - #05-082-VK To Provide Professional Services For Audit of Annual Financial Statements Due Date: July 22, 2005 at 3:00 PM (CST) ISSUED BY: City of Lubbock Purchasing and Contract Management Department 1625 131h Street, Room 204 Lubbock, Texas 79401 RFQ ##05.082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS REQUEST FOR QUALIFICATIONS RFQ #05-082-VK 1 INTENT a) The City of Lubbock (hereinafter called "City") is soliciting Statements of Qualifications and Price Proposals from interested firms (hereinafter called "Offeror") to provide Professional Audit Services. b) The information contained within this document is intended to provide interested firms with the requirements and criteria that will be used to make the selection. 2 GENERAL INFORMATION a) The City is seeking the services of a qualified firm of certified public accountants to audit the City's financial statements, perform the federal and state Single Audits, perform the Passenger Facilitates Charge audit and prepare the accompanying reports for the fiscal years ending September 30, 2005 through 2010. b) The City is a municipal corporation governed by a Mayor -Council form of government. There is a City Manager, Deputy City Manager, Chief Financial Officer and an Assistant City Manager as well as various divisional directors and department heads. c) The City's fiscal year begins on October 1 and ends on September 30. d) The City provides the following services to its citizens: public safety (police and fire), public works, parks and recreation, public health, electric, water, sewer, solid waste, stormwater utilities, airport, and general administrative services. e) More detailed information on the government can be found in the 2004 City of Lubbock Comprehensive Annual Financial Report at http://finance.cl.lubbock.tx.us and in the 2005 City of Lubbock Annual Operating Budget at http://budget.ci.lubbock.tx.us. f) Contract initiation date: Upon acceptance by the City Council, for the fiscal year ending September 30, 2005, 3 SCOPE OF SERVICES REQUESTED The following Scope of Work is to be provided by the successful offeror: a) The City's general purpose financial statements will be audited in accordance with generally accepted auditing standards and Government Anditing Standards issued by the Comptroller General of the United States, the provisions of the federal Single REQUEST FOR QUALIFICATIONS Page 1 of 15 05-082.doc RFQ#05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS Audit Act Amendments of 1996 and the provisions of U.S. Office of Management and Budget (OMB) Circular A-133 Audits of States, Local Governments, and Non - Profit Organizations. The auditor will express an opinion concerning whether the general purpose financial statements present fairly, in all material respects, the financial position of the City of Lubbock, Texas and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles. b) In accordance with Government Auditing Standards, the auditor will consider the City's internal control structure over financial reporting and assess control risk. It is recognized that the management of the City is responsible for establishing and maintaining an internal control structure. c) Reports to be Issued Following the completion of the audit of the fiscal year's financial statements the auditor shall file in the office of the City Secretary within 120 days after the last day of the City's fiscal year: — A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles. — A report on the fair presentation of the stand alone financial statements of Lubbock Power & Light, the City's electric utility fund. — A report on the internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards. — A report on compliance with requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards. — A report on the internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards and the State of Texas Uniform Grants Management Standard. — A report on compliance with requirements applicable to each major program and on internal control over compliance in accordance with Uniform Grants Management Standards and on the Schedule of Expenditures of State Awards. — A report on the Federal Passenger Facility Charge (PFC) and related Federal Requirements. REQUEST FOR QUALIFICATIONS Page 2 of 15 05-082.doc RFQ ##05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS — A report to the Texas Commission on Environmental Quality pursuant to Subchapter C of Title 30 Texas Administrative Code §37.271. -- A report on adherence to the City's investment policies as required by the Public Funds Investment, Act Chapter 2256 of the Texas Government Code. In the required reports on internal controls, the auditor shall communicate any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure, which could adversely affect the organization's ability to record, process, summarize, and report financial data consistent with the assertion of management in the financial statements. Non -reportable conditions discovered by the auditors shall be reviewed with management as an exit interview. The reports on compliance shall include all material instances of noncompliance. Irregularities and illegal acts. Auditors shall be required to make an immediate written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the Chief Financial Officer and the Audit Committee. d) Special Considerations — The City will send its comprehensive annual financial report to the Government Finance Officers Association of the United States and Canada for review in its Certificate of Achievement for Excellence in Financial Reporting program. The auditor is required to provide special assistance to the City to meet the requirements of that program. — The City currently anticipates it will prepare one or more official statements in connection with the sale of debt securities that will contain the general purpose financial statements and the auditor's report thereon. The auditor may be asked to supply a confirmation letter as to debt service coverages or necessary "comfort letters," — The City may require the auditor's assistance to comply with new reporting requirements mandated by GASB. 4 SELECTION AND AWARD PROCESS Statements of Qualifications and Price Proposals will be reviewed by an evaluation committee, which may include senior management representatives, a financial officer, and/or an independent consultant. A short list of firms will be identified and may be interviewed by the evaluation committee. REQUEST FOR QUALIFICATIONS Page 3 of 15 05-062..doc RFQ!#05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS Initial selection shall be based on the following mandatory criteria: a) The auditor is independent and licensed to practice in Texas. b) The firm has no conflict of interest with regard to any other work performed by the firm for the City. c) The firm must have the ability to conduct the audit in the timeframe required. d) The firm must have a continuing professional education program in state and local government accounting, auditing, and financial reporting. After the evaluation committee makes its initial selection of firms meeting the mandatory criteria, Statements of Qualifications will be evaluated and scored for both technical qualifications and price. If the City is unable to negotiate a satisfactory contract with the highest ranked person or firm, the City shall formally end negotiations with that person or firm and begin negotiations with the second most highly ranked person or firm. Negotiations shall be undertaken in this sequence until a contract is made. The contract will be subject to approval by the City Council. NO INDIVIDUAL OF ANY USING DEPARTMENT HAS THE AUTHORITY TO LEGALLY AND/OR FINANCIALLY COMMIT THE CITY TO ANY CONTRACT, AGREEMENT OR PURCHASE ORDER FOR GOODS OR SERVICES, UNLESS SPECIFICALLY SANCTIONED BY THE REQUIREMENTS OF THIS REQUEST FOR QUALIFICATIONS. 5. 1 SUBMISSION PROCESS, DUE DATE, AND REQUIRED DOCUMENTS One reproducible original and three bound copies of the response, including all required forms and applicable supporting documentation, are required. Responses must be submitted not later than 3:00 p.m. Central Standard Time on July22, 2005. The responses must be bound and sealed when submitted. The response material must be addressed and delivered to: City of Lubbock Victor Kilman, Purchasing and Contract Manager Purchasing and Contract Management, Room 204 1625 13`h Street Lubbock, Texas 79401 REQUEST FOR QUALIFICATIONS Page 4 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS The outside of the envelope or container must state: RFQ #05-082-VK RESPONSE — Audit of Annual Financial Statements Proposals received later than the above date and time may be rejected and returned unopened. 6. PROPOSAL FORMAT & CONTENTS: Proposals should be presented on 8.5-inch x 11-inch paper, pages sequentially numbered, and single-spaced with an easily legible font size. Proposals should be prepared as simply as possible and provide a straightforward, concise description of the Proposer's capabilities to satisfy the requirements of the RFQ. Expensive bindings, color display, promotional material, etc., are not necessary. EMPHASIS SHOULD BE CONCENTRATED ON ACCURACY, COMPLETENESS, AND CLARITY OF CONTENT. All parts, pages, figures, and tables should be numbered and labeled clearly. 7. CLARIFICATION OF REQUIREMENTS ALL REQUESTS FOR ADDITIONAL INFORMATION OR CLARIFICATION CONCERNING THIS REQUEST FOR QUALIFICATUINS (RFQ) MUST BE SUBMITTED IN WRITING NO LATER THAN FIVE (5) BUSINESS DAYS PRIOR TO THE DUE DATE AND ADDRESSED TO: Victor Kilman, Purchasing and Contract Manager City of Lubbock 1625 131h Street, Room 204 Lubbock, Texas 79401 Fax: (806) 775-2164 RFPDepot: http://www.RFPdel)ot.com It is the intent and purpose of the City of Lubbock that this request permits competitive proposals. It is the Proposer's responsibility to advise the City of Lubbock Purchasing and Contract Manager if any language, requirements, etc., or any combinations thereof, inadvertently restricts or limits the requirements stated in this RFO to a single source. Such notification must be submitted in writing and must be received by the Purchasing and Contract Manager no later than five (5) business days prior to the due date. A review of such notifications will be made. Any changes, additions, or clarifications to the ITB are made by ADDENDA information available over the Internet at http://www.RFPdeyot.com. We strongly suggest that you check for any addenda a minimum of forty-eight hours in advance of the response deadline. BUSINESSES WITHOUT INTERNET ACCESS may use computers available at most public libraries. 8. RIGHT OF CITY TO REQUEST FURTHER DOCUMENTATION REQUEST FOR QUALIFICATIONS Page 5 of 15 05-082.doc RFQ N05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS The City reserves the right to request any further documentation that it deems appropriate and necessary for the review and award process, including financial statements, during both the initial review process and the negotiation/award/appointment phase. Right of City to Cancel Request for Qualifications, to Elect Not to Award, to Reject Proposals, and to Waive Informalities or Irregularities The City expressly reserves the right to cancel this RFQ at any time, to elect not to award any or all of the contracts cited in this RFQ, to reject any or all Proposals, to waive any informality or irregularity in any Proposal received, and to he the sole judge of the merits of the respective Proposals received. 9. EQUAL OPPORTUNITY IN CITY BUSINESS CONTRACTING Race, religion, sex, color, ethnicity, and national origin will not be used as criteria in the City's business contracting practices. Every effort will be made to ensure that all persons regardless of race, religion, sex, color, ethnicity and national origin have equal access to contracts and other business opportunities with the City. REQUEST FOR QUALIFICATIONS Page 6 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS CITY OF LUBBOCK RFQ #05-082-VK Audit of Annual Financial Statements Candidates must complete each of the following items in order to be considered. I . FIRM NAME: 2. BUSINESS ADDRESS: 3. TELEPHONE, WITH AREA CODE: FAX, WITH AREA CODE: E MAIL ADDRESS: INTERNET URL ADDRESS: 4. TYPE OF ORGANIZATION: (CHECK ONE) a. SOLE PROPRIETORSHIP ( } b. PARTNERSHIP ( } c. CORPORATION ( } d. JOINT VENTURE ( } 5. PRINCIPALS OF FIRM: DEGREE OR NAME CERTIFICATE INSTITUTION c e. REQUEST FOR QUALIFICATIONS Page 7 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS SUBMITTED BY: Signature: Printed N Date: Title: Firm Name: Tel #: Address: State: Z PRIVACY NOTIFICATION The principal purpose for requesting the information on this form is for use in the selection process for professionals commissioned by the City of Lubbock. Furnishing all information requested on this form is mandatory. Failure to provide such information will delay or may even prevent completion of the action for which the form is being filled out. Information on this form will be used by the City of Lubbock and its Management Team in the consideration of commissions to professionals. If you consider any portion of your Proposal to be privileged or confidential by statute or judicial decision, including trade secrets and commercial or financial information, clearly identify those portions. Proposals will be opened in a manner that avoids disclosure of the contents to competing offerors and keeps the Proposals secret during negotiations. All Proposals are open for public inspection after the contract is awarded, but trade secrets and confidential information in the Proposals are not open for inspection. The City of Lubbock will honor your notations of trade secrets and confidential information and decline to release such information initially, but please note that the final determination of whether a particular portion of your Proposal is in fact a trade secret or commercial or financial information that may be withheld from public inspection will be made by the Texas Attorney General or a court of competent jurisdiction. In the event a public information request is received for a portion of your Proposal that you have marked as being confidential information, you will be notified of such request and you will be required to justify your legal position in writing to the Texas Attorney General pursuant to Section 552.305 of the Government Code. In the event that it is determined by opinion or order of the Texas Attorney General or a court of competent jurisdiction that such information is in fact not privileged and confidential under Section 552.110 of the Government Code and Section 252.049 of the Local Government Code, then such information will be made available to the requester. Marking your entire Proposal CONFIDENTIAL/PROPRIETARY is not in conformance with the Texas Open Records Act. REQUEST FOR QUALIFICATIONS Page 8 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS DESCRIPTION OF SELECTION CRITERIA A committee will evaluate Statements of Qualifications and Proposals using three sets of criteria: 1) mandatory elements, 2) technical qualifications, and 3) price. Firms meeting the mandatory criteria will have their Statements of Qualifications evaluated and scored for both technical qualifications and price. The following represent the principal selection criteria that will be considered during the evaluation process. 1) Mandatory Elements a) The auditor is independent and licensed to practice in Texas. b) The firm has no conflict of interest with regard to any other work performed by the firm for the City. b) The firm must have the ability to conduct the audit in the timeframe required. c) The firm must have a continuing professional education program in state and local government accounting, auditing, and financial reporting. 2) Technical Qualifications (maximum Percent = 75) a) Experience and Expertise (maximum Percent = 50) — The firm's past experience and performance on comparable government engagements — The firm's past experience and performance on engagements involving the GFOA Certificate of Achievement for Excellence in Financial Reporting program — The quality of the firm's professional personnel to be assigned to the engagement and the quality of the firm's management support personnel to be available for technical consultation — The firm's past experience and performance auditing similar federal or state financial assistance programs — Computer expertise with similar hardware and/or software b) Audit Approach (maximum Percent = 25) — Adequacy of proposed staffing plan for various segments of the engagement — Adequacy of analytical procedures — Adequacy of approach to internal control structure understanding — Adequacy of sampling techniques 3) Price (maximum Percent = 25) Price will not be the primary factor in the selection of an audit firm. REQUEST FOR QUALIFICATIONS Page 9 of 15 05-082.doe RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS SUBMITALLS Proposals must be submitted in the format provided below, with each of the referenced sections addressed in full. Each of the sections described below must begin on a separate page, and each page must clearly state the name of the Proposer. City reserves the right to eliminate from further consideration any proposal deemed to be substantially or materially unresponsive to the requests for information contained herein. Candidates must respond in writing to the following in order to be considered. Each category represents criteria that will be used to select the successful respondent. The completeness and accuracy of the information provided by each firm will be considered in the selection process, in addition to the content of the data. Additional data and/or material related to the qualification of a firm may also be submitted; however, such data and/or material may or may not be given value when considering the qualification of a firm. MANDATORY ELEMENTS Independence (Pass or Fail) The firm shall provide an affinnative statement that it is independent of the City and all component units of the City as defined by generally accepted auditing standards of the U.S. General Accounting Office's Government Auditing Standards (1994). The firm shall also list and describe the firm's professional relationships involving the City or any of its component units for the past 5 years and provide a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. License to Practice in Texas (Pass or Fail) An affirmative statement shall be included indicating that the firm and all assigned key professional staff are properly licensed to practice in the State of Texas. 3. Required Timeframe (Pass or Fail) An affirmative statement that the firm has the ability to complete the audit and submit the financial statements and auditor's reports to the office of the City of Lubbock City Secretary within 120 days after the last day of the City's fiscal year. 4. Professional Education Program (Pass or Fail) A brief description of your frm's professional development program, including: a) Approximate number of days of continuing professional education provided to members of your firm annually. REQUEST FOR QUALIFICATIONS Page 10 of 15 05-082.doc 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 firm's open litigation describing the nature and the amount of each lawsuit for which your farm is a named defendant. Provide proof of insurance coverage for the following: Business Automobile Liabilitv: 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: f 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 RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS education of the specific staff to be assigned to this engagement. The firm also shall indicate how the quality of staff over the term of the agreement will be assured. 7. Thorough knowledge of a full -service municipal corporation, (10 Percent) The firm shall list all municipal engagements within the last 5 years. For each engagement, the firm shall indicate the scope of the work, date, the type of engagement, engagement partners, total hours, the location of the firm's office from which the engagement was performed, and the name and telephone number of the principal client contact. Provide at least one sample report of a municipal audit performed with the last three years by your firm. The firm shall demonstrate their active participation that led to the successful achievement in the GFOA Certificate of Achievement for Excellence in Financial Reporting program. The firm shall list experience with electric utilities. 8. Similar Engagements with Other Government Entities (10 Percent) For the firm's office that will be assigned responsibility for the audit, list the most significant engagements performed in the last 5 years that are similar to the engagement described in this Request for Qualifications. Indicate the scope of work, engagement partners, total hours, and the name and telephone number of the principal client contact. 9. Equal Opportunity (5 Percent) The commitment of the City to equal opportunity applies to the selection of professional services. Show evidence of an Equal Employment Opportunity Policy and of compliance with applicable Federal Law pertaining to Equal Employment Opportunity. It is also the desire of the City that the City of Lubbock program serve, as much as practicable, to stimulate growth in all sectors of the business community. Prospective applicants are strongly encouraged to explore and implement methods for the utilization of local resources. 10. Specific Audit Approach (25 Percent) Set forth a work plan including an explanation of the audit methodology to be followed to perform the services required in this Request for Qualifications. Offerors are required to provide the following information on their audit approach: a) Proposed segmentation of the engagement b) Level of staff and number of hours to be assigned to each proposed segment of the engagement c) Sample sizes and the extent to which statistical sampling is to be used in the engagement REQUEST FOR QUALIFICATIONS Page 13 of 15 05-082.doc RFQ #05-082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS d) Extent of use of audit software in the engagement e) Type and extent of analytical procedures to be used in the engagement f) Approach to be taken in determining laws and regulations that will be subject to audit test work g) Approach to be taken in drawing audit samples for purposes of test compliance Some items for the auditor to consider in developing an audit approach are as follows: — The City prepares the Comprehensive Annual Financial Report and Single Audit including statements, footnotes, transmittal letter, covers, dividers, etc. — The City generates lead schedules from the financial system. — The City provides supporting schedules such as debt, lease, investment, and fixed asset roil -forwards, payroll data, inventory counts, receivable confirmations, etc. h) Sample PBC list and required timeline for completion PRICE PROPOSAL INFORMATION (25 Percent) Once the Statements of Qualifications have been evaluated and rated as technically acceptable, the Price Proposal in the City's best interest will be determined. 2. Response should include the following information on anticipated fees for EACH of the audit years: a) Maximum number of professional hours, by staff classification, to complete this engagement. b) State the hourly rate to be charged for the audit as well as the total anticipated cost of the audit based on the estimated time to complete the audit. c) A Not to Exceed fixed annual fee. d) Anticipated, and Not to Exceed, expenses to be billed to the City. e) The firm shall also disclose all expected additional costs if any to be charged to the City. Include anticipated terms of payment that would be acceptable to the offeror, although monthly progress billings are preferred both for the audit fee and out-of-pocket expenses. REQUEST FOR QUALIFICATIONS Page 14 of 15 05-082.doc RFQ #05.082-VK, AUDIT OF ANNUAL FINANCIAL STATEMENTS SUSPENSION AND DEBARMENT CERTIFICATION Federal Law (A-102 Common Rule and OMB Circular A-110) prohibits non -Federal entities from contracting with or making sub -awards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred. Covered transactions include procurement contracts for goods or services equal to or in excess of $25,000 and all non - procurement transactions (e.g., sub -awards to sub -recipients). Firms receiving individual awards of $25,000 or more and all sub -recipients must certify that their organization and its principals are not suspended or debarred by a Federal agency. Before an award of $25,000 or more can be made to your firm, you must certify that your organization and its principals are not suspended or debarred by a Federal agency. I, the undersigned agent for the firm named below, certify that neither this firm nor its principals are suspended or debarred by a Federal agency. COMPANY NAME: Signature of Company Official: Date Signed: Printed name of company official signing above: THIS FORM MUST BE RETURNED WITH YOUR RESPONSE TO THE RFQ. REQUEST FOR QUALIFICATIONS Page 15 of 15 05-082.doc EXHIBIT Resolution No. 2007-RO463 City of Lubbock, Texas A Proposal for Professional Services July 21, 2005 City of Lubbock, Texas Contents Your Needs 1 Mandatory Elements 3 Our Solutions 4 BKD Qualifications 4 The BKD Team 9 Why BKD 13 Our Audit Approach 16 Engagement Acceptance 22 Fee Estimates 23 Appendices BKD Profile A Client References B Our Values C Our Integrity, Quality and Stability D Peer Review Letter E Proof of Insurance F Prepared by Client List G A Proposal for Professional Services From City of Lubbock, Texas Your Needs Thank you for the opportunity to be considered as a profes- sional services advisor to the City of Lubbock, Texas. We believe you will find BKD has the resources and technical expertise to meet your needs and deadlines. Equally important, you will find that our client service standards and guidelines, detailed in our book, The BKD Experience: Unmatched Client Service, distinguish us from other professional services providers. We are committed to delivering results with integrity: solutions that are unquestionably ethical while also practical, timely and affordable. You have identified the following needs and invited us to propose on providing services to meet them. This proposal presents our solutions to your needs, explains why we believe BKD is the best choice of advisor, introduces the engagement team and includes our fee. The appendices include additional information related to this proposal or of potential interest to you. We are confident you will find the BKD Experience delivers the high -quality solutions you seek at a fair price in the time frame you require. Here is what you requested we propose on. ✓ Audit of the City's general purpose financial statements in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States, the provisions of the federal Single Audit Act amendments of 1996 and the provisions of U.S. Office of Management and Budget (OMB) Circular A-133 Audits of States, Local Governments, and Non -Profit Organizations. ✓ Consideration of the City's internal control structure over financial reporting and assess control risk. A Proposal for Professional Services FrornCBM City of Lubbock, Texas ✓ Issue and file the following reports in the office of the City Secretary within l20 days after the last day of the City's fiscal year: — A report on the fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. — A report on the fair presentation of the stand alone financial statements of Lubbock Power & Light, the City's electric utility fund. — A report on the internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards. — A report on compliance with requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133 and on the Schedule of Expenditures of Federal Awards. — A report on the internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards and the State of Texas Uniform Grants Management Standard. — A report on compliance with requirements applicable to each major program and on internal control over compliance in accordance with Uniform Grants Management Standards and on the Schedule of Expenditures of State Awards. — A report on the Federal Passenger Facility Charge (PFC) and related Federal Requirements. — A report to the Texas Commission on Environmental Quality pursuant to Subchapter C of Title 30 Texas Administrative Code §37.271. — A report on adherence to the city's investment policies as required by the Public Funds Investment, Act chapter 2256 of the Texas Government Code. A Proposal for Professional Services FromCBKO W 2 City of Lubbock, Texas Mandatory Elements ✓ A relationship with a CPA and advisory firm with expertise and other clients in your industry The following is in direct response to the City's request for qualifications. ✓ BKD and all key professional staff assigned to your engagement will be licensed to practice in the State of Texas when they practice there. ✓ BKD is independent of the City of Lubbock under the independence standards of the General Accounting Office Standards.for Audits of Governmental Organizations, Programs, Activities and Functions and the American Institute of Certified Public Accountants Code of Professional Conduct. We are currently engaged by the City to perform agreed -upon procedures related to franchise fee contracts. ✓ BKD has the ability to complete the audit procedures and report findings to the City within the time frame given in the RFQ ( 120 days after year end). Continuing Professional Education and Communication ✓ BKD provides internally presented continuing professional education core course levels one through four which range in length from two to five days. These courses are attended on an annual basis by staff during their first four to five years with BKD. ✓ In addition, BKD presents an annual two day Governmental and Not -for -Profit Accounting and Auditing Update to experienced staff specializing in serving governments and not -for -profit entities and a one day government in -charge course for new senior accountants. Further specialized training is obtained outside the firm, as needed. Communication of new developments, new standards and other updates is accomplished through the firm's Accounting and Auditing Memos, Accounting and Auditing Director Bulletins, A&A Early Edition and BKD Updates, which are issued as needed by the firm's Quality Control Group. This goup is headed up by a Partner who has no direct client responsibilities. A Proposal for Professional Services From City of Lubbock, Texas ✓ Our training programs provide substantially more training than required by professional standards. All BKD senior accountants, and above, assigned to government audit engagements attend a continuing professional education governmental accounting and auditing update course annually and have reviewed specialized training on GASB 34. Our Solutions We believe our firm can deliver the services required by the City with a combination of quality and price that matches the value you seek. BKD Qualifications This proposal is designed to answer your questions about BKD and the services we intend to deliver. Please do not hesitate to contact us for more information or further clarification. The.following items address speegic qualifications: ✓ Qualifications of BKD, and its Arkansas and Houston Practice Units to service governments BKD, t_t_P is one of the 10 largest CPA and advisory firms in the United States, with revenues of over S250 million. The firm's 1,500 personnel, including nearly 200 partners, are located in 27 offices in Arkansas, Colorado, Illinois, Indiana, Kansas, Kentucky, Missouri, Nebraska, Ohio, Oklahoma and Texas. BKD is headquartered in Springfield, Missouri, where William E. Fingland Jr., is based. The team selected to serve the City of Lubbock will include accountants and consultants who know your industry. BKD Not -For -Profit & Government Group, a division of BKD, works with approximately 1,300 not -for -profit and government organizations of which more than 250 are served through the Houston office and over 100 are served through the Arkansas offices. These organizations include transportation systems, airport authorities, municipalities, state agencies, utilities and convention and tourism organizations. Proposal for Professional Services From E City of Lubbock, Texas The Arkansas offices are currently providing assurance services to five municipalities, (Little Rock, Fayetteville, Fort Smith and Bentonville, Arkansas and Stillwater, Oklahoma) three state agencies and ten public and cooperative utilities providing primarily electric services to their customers. Three of the municipalities are current recipients of the Government Finance Officers' Association Certificate of Excellence in Financial Reporting. The Houston office is currently providing assurance services to two municipalities and 210 municipal utility districts. BKD strengths, philosophy, and strategy for the future BKD is positioned as a firm with the resources to deliver quality services to clients such as the City of Lubbock. Our geographic reach is matched by a breadth of expertise and a quality control system that can only be supported by firms of a certain size. The City of Lubbock is precisely the type of client we are well suited to serve. While larger firms focus on large organizations and smaller firms focus on small entities, our firm thrives in the middle. Our regional presence and focus brings the personal attention that middle -market entities desire, while our investment in developing a large, regional firm provides the expertise and resources to handle virtually any business issue. Our partners and managers have hands-on involvement in providing solutions for your needs. Our frm's low partner - to -staff ratio of one to six reflects our philosophy of leveraging work to younger staff appropriately but not excessively. A hallmark of our service is our availability to you on demand. Whether it is a quick phone call to answer a specific question or routine advice on an on -going basis, our engagement team is available. A Proposal for Professional Services From 5 City of Lubbock, Texas Your BKD service team has a mix of skills and resources applicable to your needs. Whenever possible, we keep a consistent client service team working on your job. This reduces the learning curve and saves you the time, frustration and disruption of dealing with CPAs unfamiliar with your entity. You will find your client service team well informed and readily accessible. Our goal and philosophy is to provide, within our code of ethics and the law: • Solutions to help you reach your goals • Excellence in service in a prompt, courteous and responsive manner Awareness of the risks and opportunities created by accelerated change • Knowledge of governmental entities and the issues that affect them • Value for our fee ✓ BKD clientele BKD serves clients in a wide variety of industries. We have established four distinct groups/divisions within the firm under the direction of firmwide committees. These groups are as follows: • Not -for -profit and Government • Healthcare • Financial Institutions • Manufacturing and Distribution Additionally, the firm serves a substantial number of entities in retail, construction, insurance and technology as well as wealth advisory services to individuals. A Proposal for Professional Services From on City of Lubbock, Texas As indicated in other sections of this proposal, the Houston and Arkansas practice units are currently providing assurance services to three municipalities and a special district that receive the GFOA Certificate of Excellence in Financial Reporting, as well as many other state and local government entities. With regard to the Certificate of Excellence in Financial Reporting, assistance ranges from writing the CAFR to reviewing the CAFR prepared by the individual cities for completeness and accuracy using the GFOA's customized checklist as a guide. We also provide services to public and cooperative utilities within Texas and Arkansas. ✓ BKD nationally recognized professionals in government accounting Jim Brown, CPA, Partner, located in Springfield, Missouri, is designated by BKD to be responsible for tirmwide consultation with other offices on accounting and auditing matters involving government accounting and auditing issues. He coordinates the tirm's quality control with respect to such clients and maintains liaison with the Governmental Accounting Standards Board and the General Accounting Office. Jim is a graduate of Missouri Southern State College, Joplin, Missouri. In 1991, he completed seven years of involvement with the preparation and grading of the Uniform CPA Examination, including chairing the Auditing Examination and Grading Subcommittee. Jim was a member of the Auditing Standards Board of the AICPA from 1992 through 1995. He served on its Audit Issues, Compliance Attestation, Quality Control Standards, Agreed -upon Procedures Engagements, Electronic Evidence and Auditor Communications Task Forces. He also served on the GASB Task Force on Accounting and Reporting by Business Type Enterprises and the GASB Task Force on the Financial Reporting Model resulting in the issuance of GASB 34 and 35. Two other BKD partners have served as President of the AICPA. Numerous others have served on the Accounting Standards Executive Committee, Financial Accounting Standards Board's Emerging Issues Task Force (serving currently), AICPA Government Technical Standards Committee, and many State CPA Society Committees. A Proposal for Professional Services From 7 City of Lubbock, Texas ✓ BKD affirmative action plan BKD prohibits discrimination in employment on the basis of an individual's race, creed, color, sex, sexual orientation, age, religion, disability or national origin. This policy is designed to ensure equal employment opportunities, including but not limited to employee selection, promotion, training and development, compensation, termination and disciplinary action. Our affirmative action/equal employment opportunity (AA/EEO) policy is posted on office bulletin boards or in break rooms. We monitor this program to make sure it complies with federal, state and local regulations and guidelines and develops employment programs at all levels. All management and supervisory personnel are responsible for enforcing the firm's AA/EEO policies and practices and being knowledgeable of current legal and regulatory developments in this area. ✓ Experience, competence, and capacity for performance of BKD and the coordinating office in serving government related services BKD has professional staff of over 50 in Houston and over 80 in Arkansas to serve you. We have core teams in Arkansas and Houston that are committed to serving government and government funded not -for -profit entities on a full time basis. As a result of the number of clients served in your industry, our staff has extensive experience in providing services to government. Several current client references are provided in Appendix B. ✓ Partners, managers, supervisors and staff located in the offices: Arkansas Houston Partners 17 9 Managers 13 11 Supervisors 7 9 Seniors 10 4 Staff Accountants 36 19 A Proposal for Professional Services FromCRKn 0 City of Lubbock, Texas The BKD Team ✓ Organization of the engagement team The organization of the team to service municipalities is as follows: Each engagement is assigned to a partner responsible for the services. The partner is assisted by a senior manager or manager responsible for supervision of the engagement team. The remainder of the team will consist of a supervisor and staff necessary to perform the audit, prepare required workpapers, and draft the accountants' reports on the financial statements, internal control over financial reporting, compliance with major federal program requirements, etc. The workpapers and reports are reviewed by the engagement manager or partner with a concurring review by an independent partner not involved in the engagement. Your audit will be staffed and managed from our Arkansas and Houston, Texas offices. Our engagement team will consist of the following: Full -Time Kevin Kemp, CPA, Partner Greg Sissel, CPA, Partner Andy Richards, CPA, Manager John Butler, CPA, Supervisor David Coleman, CPA, Senior Part -Time Jim Brown, CPA, Technical Assistance Partner Additional staff as needed. Profiles of the above individuals are as follows: A Proposal for Professional Services FromCBKO w 0 City of Lubbock, Texas Kevin joined BKD in 1993 upon graduation from the University of Central Arkansas and has been with the firm continuously since that date. He was assigned immediately to the not-for-profit/government service team and has over I l years of experience in providing audit and management consulting services to a client base that includes municipalities and their component units, utilities, state agencies and numerous service related entities that receive government assistance. Kevin has been a speaker at the Government Finance Officers' Association of Arkansas conference on GASB 34 implementation issues and/or the accounting challenges faced by small municipalities. He has assisted various clients in obtaining tax-exempt, U.S. Department of Housing and Urban Development and Farmers' Home Administration financing. He has responsibility for the not -for -profit and government entities served by the Arkansas Practice Unit. In this role, he has served as primary contact for numerous clients, provided review services for audits subject to OMB Circular A-133 and maintained contacts with regulatory agencies. Additionally, he has staff recruitment and training responsibilities. His professional affiliations include membership in the Government Finance Officers Association in Arkansas and Texas, the American Institute of Certified Public Accountants and the Arkansas Society of Certified Public Accountants. He is licensed to practice in Arkansas and Texas. Greg has 18 years of experience in providing audit services in the government, not -for -profit and real estate industries. During that time he has had extensive experience in the supervision and performance of Texas cities, counties, school districts as well as numerous other special districts. As a partner, he has audit review and training responsibilities for our staff. A Proposal for Professional Services From Y lull City of Lubbock, Texas He is a member of the American Institute of Certified Public Accountants, Texas Society of Certified Public Accountants, Houston Chapter, and National Conference of CPA Practitioners, Houston Chapter, formerly serving as Vice President. He is a 1984 graduate of the University of North Dakota, Grand Forks, with a BBA degree in accounting and is licensed to practice in Texas. .lames Brown, CPA, Technical Assistance Partner Jim will serve as technical assistance partner relative to issues encountered during our engagement. He will also perform, or delegate, the independent report review function for the City of Lubbock, Texas engagement. He is a partner located in BKD's Central Administration office. He has more than 20 years of public accounting experience and is widely known for his expertise in the areas of auditing standards and accounting and auditing for governmental and nonprofit organizations. He is a certified public accountant in Missouri, Kansas and Oklahoma. Firm -wide, he is responsible for consulting on accounting and auditing matters involving nonprofit and governmental clients. He coordinates the firm's quality control with respect to such clients and maintains liaison with the Governmental Accounting Standards Board and GAO. In addition, he is responsible for concurring review of many audit and attestation engagements. Jim is in frequent demand as a speaker on auditing and accounting matters, and has served as a consultant to various governmental agencies on these subjects. He has addressed numerous national and state conferences on the subjects of auditing standards and auditing federal assistance programs. He has co-authored articles on various auditing topics published in the Journal of Accountancy and The Practical Accountant. A Proposal for Professional Services From City of Lubbock, Texas Andy, a manager, is a member of BKD's Arkansas Practice Unit. With over eight years' experience with the firm, he provides audit services to employee benefit plans, not -for - profit and governmental entities. He is the manager over the audits of the Cities of Fort Smith, Fayetteville and Bentonville, Arkansas and Stillwater, Oklahoma. He has been trained in the complex laws and regulations of the Governmental Accounting Standards Board including GASB 34 and related pronouncements. He is a 1996 graduate of the University of Arkansas where he earned a Bachelor of Science degree in business administration and accounting. His professional memberships include the American Institute of Certified Public Accountants and the Arkansas Society of Certified Public Accountants. John has more than seven years of experience providing audit, review and compilation services. He primarily practices in health care and governmental audits and serves as the in -charge accountant on numerous health care and governmental audits and has experience in single audit services. John is a CPA, a member of the American institute of Certified Public Accountants and Texas Society of Certified Public Accountants, Houston Chapter. He is a 1996 graduate of Southwest Texas State University, with a Bachelor's in Business Administration with a major in accounting and is licensed to practice in Texas. A Proposal for Professional Services From CMW 12 City of Lubbock, Texas Why BKD David specializes in providing audit and management consulting services to non-profit entities, municipalities, grain cooperatives, manufacturing entities and other businesses. He has over four years experience serving these entities and has been the "in -charge" on numerous engagements. He served in a key role in the recent completion of the City of Little Rock's December, 31, 2004, CAFR and is coordinating the agreed - upon procedures currently under way for the City of Lubbock. David holds a B.B.A. degree in accounting from Henderson State University, Arkadelphia, Arkansas. His professional memberships include the American Institute of Certified Public Accountants and the Arkansas Society of Certified Public Accountants. ✓ Commitment of Resources BKD's audit engagements are scheduled well in advance of fieldwork. This means that the senior manager/manager, the supervisor or senior accountant and required staff are assigned to the engagement for the estimated period of time required to complete the engagement. These individuals see the job through to completion. If additional personnel are needed to meet the due dates established under the agreement, they will be assigned. ✓ Availability of Staff BKD partners, managers and staff are available on an as needed basis throughout the year for consultation. Generally, telephone inquiries not requiring research will not generate a separate billing. In the situations where additional work is required and a separate billing will be required, BKD will discuss the time and anticipated billing with you prior to commencing work. A Proposal for Professional Services From CBY" W 13 City of Lubbock, Texas ✓ GASB Experience and Training The engagement partner and manager assigned to the City engagement have served as moderators for Government Accounting education courses regarding GASB 34. They also have practical experience in the implementation process as well as financial statement presentation and disclosure experience. All BKD senior accountants and above assigned to government audit engagements have attended a continuing professional education Government Accounting and Auditing Update course containing specific training on GASB 34. Description of the BKD's Internal Quality Control Procedures BKD works hard to maintain high standards of professional practice, including a strong system of quality control that emphasizes independence and objectivity and includes many control features that exceed our profession's requirements. Following are some of the features of our quality control system: ✓ All professional personnel are required to confirm their independence with respect to the firm's assurance clients annually. ✓ The director of accounting and auditing, a partner independent of client duties, is responsible for overseeing this process and making any judgements on application of the independence rules. ✓ We have rigid standards for acceptance of new engagements. Unusually large or complex new engagements require the approval of the operations partner. ✓ All assurance engagements are reviewed by a second partner or manager who is not involved in providing services to the client. ✓ We require mandatory consultation with accountants well versed in difficult accounting or auditing issues. A Proposal for Professional Services From V 14 City of Lubbock, Texas ✓ An independent CPA firm regularly reviews our work, and we have always received a "clean" opinion in these reviews. These reviews include government engagements. BKD, in fact, was represented on the original AICPA quality review committee that developed the national peer review program in the mid-1970s, and our own quality control program dates from 1974. ✓ We conduct our own internal peer reviews on a regular basis. ✓ Our training programs provide substantially more training than required by professional standards. Our professionals average more than 60 hours of training annually. BKD has had no disciplinary action imposed by the AICPA, State Boards of Public Accountancy, State Societies of CPA's or the Securities and Exchange Commission during the past three years. We are among the 10 largest CPA and consulting firms in the United States. As such, we have been involved in litigation. Our firm has managed risk in a manner to minimize litigation, and we have few instances pending at this time. As mentioned in the proposal, instances of litigation against BKD are low. See Appendix F for proof of insurance coverage. Center for BKD is a member of the American Institute of Certified Public Public Company Accountants' Center for Public Company Audit Firms. The Audit Firms Center's member firms have demonstrated a commitment to twwwtedraArdrtQrm* public company audit quality. As a member, BKD makes the tirtn's peer review report findings publicly available. BKD is a member of the American Institute of Certified Public Accountants' Governmental Audit Quality Center. The Center's member firms have demonstrated a commitment to governmental audit quality and to raising awareness about the importance of such audits. As a member, BKD has designated a partner responsible for overseeing its governmental audit practice, has established firmwide quality control programs, performs annual internal inspection procedures and makes the firm's peer review report findings publicly available. A Proposal for Professional Services FromCBKO 15 City of Lubbock, Texas Our Audit Approach As CPAs and advisors to thousands of clients nationwide, BKD has a wealth of experience, expertise and best practices to draw on. Here are our proposed solutions to your particular needs. Financial Statement Audit Our audit focuses on the likelihood of a material misstatement in the financial statements. We direct our audit emphasis to the areas of higher risk, focusing on the unique characteristics of the operating environment, the effectiveness of your internal control and your financial statement amounts and disclosures. Our AWit Approach We assess the City's inherent risk, its internal control over financial reporting and the likelihood a material misstatement may occur. We direct our audit emphasis to the areas of higher risk, focusing on the unique characteristics of the operating environment, the effectiveness of your internal control and your financial statement amounts and disclosures. In addition to the importance of compliance with professional standards, BKD's approach to auditing emphasizes the need to be practical. It is important to realize that financial information is most valuable when it is accurate, timely and obtainable at a reasonable cost. ✓ Assess Your Internal Control Our audit approach begins with an assessment of your internal control activities in an effort to determine the extent to which they can be relied on when designing our audit tests. That process is managed either through a series of internal control questionnaires on their own or in combination with internal control documentation that you may already have in place. Depending on the complexity of the internal control and the extent to which we intend to rely upon it, various tests or walkthroughs will generally be performed to provide us evidence regarding the operating effectiveness of your internal control activities. Further evaluation may be performed as part of the primary audit tests. A Proposal for Professional Services From In City of Lubbock, Texas ✓ Develop Audit Plan and Preliminary Procedures Based on our understanding of your entity and our assessment of your internal control, we plan our audit to achieve the appropriate level of assurance regarding material misstatements. As part of our preliminary work, we will perform certain procedures, including conducting interviews of certain personnel, to identify risks of material misstatement due to fraud within your entity. The planning process includes preliminary analytical procedures on current and prior years' financial data combined with assessing other risks facing your entity in order to establish a planned level of materiality. The planning process also includes the design of the specific audit tests and a determination of the extent that analytical procedures can efficiently and effectively replace or supplement other substantive procedures. We provide clients with a checklist of items needed to complete the audit, thus facilitating its timely completion. ✓ Perform Audit Tests, Including Analytics and Sampling Based on our preliminary analysis and audit plan, we will design audit tests that take advantage of strengths in your internal control system. In most cases, we would not need to examine 100% of your activity in order to issue our opinion. Typically, a BKD audit would encompass various strategy alternatives, including: • Key item testing • Sampling • Analytical procedures • A combination of the strategy alternatives Some items within an account may be large enough by themselves to involve significant risk of material misstatement separately or when added to other known misstatements. These key items are audited individually. Proposal for Professional Services From 17 City of Lubbock, Texas Sampling is a detailed auditing of representative individual items selected from a population. Because the results can be extended to untested items, there is more benefit for the cost incurred. Our sampling approach is not typically designed around rigid computations but instead allows for auditor judgment in designing an appropriate sampling approach for each circumstance. Analytical procedures involve auditing a material population by investigating the relationship of the population balance or distribution to an expectation such as other accounts, historical trends or other related measures. ✓ More About Analytical Procedures BKD recognizes that stronger analytical procedures can reduce or eliminate other substantive procedures that are usually more time consuming. We would typically consider analysis such as: Ratio analysis — comparing relationships among account balances, ratios, nonfinancial data, budgets or industry averages. Reasonableness tests — using financial and/or nonfinancial data to develop an expectation of an account balance. Successfully using analytical procedures requires auditors to ask the questions: a What is the risk of material misstatement? • How would we find those misstatements? • Have I gathered enough audit evidence? When analytical procedures provide sufficient evidence, other substantive audit procedures should not be necessary. If analytical procedures are not sufficient, some combination of analytical and substantive procedures is likely to be the preferred approach. A Proposal for Professional Services FromCBKO City of Lubbock, Texas ✓ Complete the Audit A cornerstone of the quality of our audits is the use of a concurring reviewer before the issuance of any reports. We bring greater value and quality to our audits by asking another member of our assurance group who has otherwise not been involved in the engagement to review the financial statements and workpapers before issuing in order to challenge the judgments of all parties involved. As needed, our firmwide technical resources also provide highly specialized expertise to deal with particularly challenging or unique situations that may arise in the course of your audit. ✓ General Logistics We work with your people to avoid unnecessary disruptions to normal operations. We also strive to make good use of your internal resources, including existing schedules, reconciliations, management reports and other accounting records. ✓ Use of Electronic Audit Tools BKD has found significant added value and increased efficiency in the use of computer -assisted auditing techniques (CHAT), including an automated audit program system, a variety of electronic templates and ACL. ACL is a powerful product that allows us to import electronic information from clients in a variety of formats and perform sophisticated analyses. ACL is the worldwide industry leader in CAAT software. We have trained more than 60 individuals throughout our firm to become software champions who can apply this special expertise on your audit, if appropriate. There are significant opportunities to use this software, particularly on inventory and receivables, and the software can provide useful information and reduce audit costs. We anticipate your entity would be a candidate for this approach. A Proposal for Professional Services From ` B a Is City of Lubbock, Texas ✓ Benefits of a BKD Audit The benefits of a BKD Audited financial statements —the centerpiece of BKD's audit extend far beyond assurance services —have added benefits for clients far compliance requirements. beyond their immediate compliance function. A BKD audit will: • Provide assurance on the fairness of your financial statements for creditors, vendors, regulators and grantors • Evaluate consistency of application of your accounting principles and procedures from period to period In addition, with the knowledge of your business gained through the performance of the audit coupled with our experience in your industry, BKD may: • Provide insights to help you improve your business • Suggest ways you might strengthen your internal control over financial reporting, including safeguarding of assets Our team also provides `� Communicate the Results of Our Audit comments that are operational in nature. Management letters were originally required to communicate to managers and the board of directors any internal control features the auditors considered a material weakness or reportable condition. This is an important feature. We also may include comments on other aspects of your operations that come to our attention. We prepare management letters for many of the audits we undertake and review drafts with management before finalizing. ✓ Our Expectations of You Your staff can help In working with entities similar to the City of Lubbock, we improve the audit's have developed an efficient approach that avoids wasted efficiency and reduce effort. We also plan our work to facilitate client costs, participation to help control costs and meet deadlines. A Proposal for Professional Services FromCBKO 20 City of Lubbock, Texas The City of Lubbock can play a major role in timely completion of the audit. We will need your staff to maintain records in good condition, provide the necessary schedules and cooperate with our audit team. Most entities routinely prepare many of these records and schedules in their normal monthly or annual closing process. We will provide a list of the needed schedules well in advance of any deadlines as well as spreadsheet templates for many of these schedules. An example of our"want list" is included at Appendix G. We also will meet with your staff as needed to help ensure they clearly understand what we need. ✓ Other Assurance Services You also may benefit from our other assurance services, including: • Performance of agreed -upon procedures • Other regulatory filings and government reports • Due diligence/special investigations • Projected and forecasted financial statements We propose the following schedule for the audit of your September 30, 2005 financial statements: ✓ Preliminary Fieldwork — August 2005 To complete the planning for the primary fieldwork and to obtain some preliminary information from you and your staff, we plan to be on -site at your offices for one or two weeks. During our visit, we will complete our assessment of internal control, perform our A-133 compliance testing and visit with you about events that may have occurred during the year affecting your audit. A Proposal for Professional Services From 21 City of Lubbock, Texas ✓ Final Fieldwork — Late November 2005 "Client testimonial about The bulk of the audit work will be performed during an this solution" approximate three-week visit to your offices. Our staff, including an experienced senior/supervisor and one or two staff, will be on -site to examine your records and inquire about issues that will support our audit opinion. The engagement partner/manager will be on -site at the end of final fieldwork to assist in resolving particularly difficult matters, review the work of the staff and meet with you about any reporting or other audit matters as needed. ✓ Report Delivery — January 2006 After completing our fieldwork, we generally deliver your audit report and our opinion within four weeks. The process involves completing the documentation of our files, following up on pending matters and submitting the work of the engagement team to our quality control professionals who further challenge the work performed. We find delays in delivery of the final report are often the result of not receiving timely information from third parties. We will be proactive in keeping you informed about issues remaining and may ask for your assistance in receiving information from third parties to avoid delays in issuing our report. ✓ Presentation to the Board For many clients, a presentation of the financial statements and audit results to the board is the culmination of our effort. We are happy to spend time with your board, owners and management to help them understand the financial statements and identified opportunities for improvement. Engagement Our acceptance of this engagement is subject to completion of Acceptance our normal client acceptance procedures. The actual terms of our engagement will be documented in a separate letter to be signed by you and BKD. A Proposal for Professional Services From w 22 City of Lubbock, Texas Fee Estimates BKD consistently provides qualify services at reasonable rates. You will find our rates competitive and fairly priced for the level of service provided. Our fees are based primarily on the complexity of the work undertaken and the amount of time required. Our estimate of the time required for these services includes some time for routine consultations on matters that will inevitably arise. Any additional work beyond that will be based on our hourly rates. Current Hourly Rates Staff $ 104 to $ 125 Senior $ 120 to $ 135 Supervisor $ 140 to $ 160 Manager $ 170 to $ 195 Senior Manager $ 180 to $ 255 Partner $ 245 to $ 290 We have found over the years that our clients do not like fee surprises. Neither do we. We strive to be truthful, straightforward and up front in our fee discussions and to avoid surprises. Our tee quote is not an artificially low "teaser quote" to lure you into engaging BKD. We pride ourselves on hard work and low overhead, which allows us to keep our standard hourly rates competitive. Special provisions which would affect the proposed maximum not -to -exceed cost per year are as follows: ✓ Significant change in the size of the City and the number of funds it maintains ✓ Changes in accounting principles or auditing standards ✓ Increase in the number of federal/state major programs A Proposal for Professional Services Fromcvj 23 City of Lubbock, Texas Estimated hours are as follows: 2005 2006 2007 2008 2009 2010 Total Hours: 1,350 1,350 1,350 1,350 1,350 1,350 Partners 130 130 130 130 130 130 Engagement Manager 260 260 260 260 260 260 Supervisor/Senior 350 350 350 350 350 350 Staff Accountants 610 610 610 610 610 610 Total not to exceed fees are as follows: 2005 2006 2007 2008 2009 2010 Audit of City's general purpose financial statements $160,000 $ 165,000 $ l 72,000 $ l 77,000 $1 <s3,000 $190,000 Audit of Lubbock Power and Light 12,000 12,500 13.000 13,500 14,000 15,000 71_ ? $QQ $.1QOQ $M4" $197.5240 $25920 These fees do not include charges for copying, postage, travel, etc. which we estimate to be approximately $12,000 to $15,000 annually. Any additional fee requirements will be discussed well in advance of performing the related work. We will bill you monthly during the course of our engagement. Payment of our billings is due within 30 days. A Proposal for Professional Services From B 24 Resolution No. 2007-RO463 Appendices City of Lubbock, Texas Appendix A Our Profile BKD, LLP is one of 10 largest CPA and consulting firm in the United States, with revenues of over $250 million. The firm's 1,500 personnel, including nearly 200 partners, are located in 27 offices in Arkansas, Colorado, Illinois, Indiana, Kansas, Kentucky, Missouri, Nebraska, Ohio, Oklahoma and Texas. BKD is headquartered in Springfield, Missouri, where William E. Fingland Jr., the managing partner, is based. BKD provides solutions for success to thousands of individuals; closely held and publicly traded businesses in the health care, manufacturing, distribution, financial institutions, construction, real estate, retail and other industries; not -for - profit organizations; and governmental entities. The firm also has service niches in: ✓ Wealth management (WealthPlan) ✓ Business succession planning ✓ Information technology ✓ Forensic and dispute consulting ✓ Real estate cost segregation ✓ International tax ✓ Research and innovation tax credits ✓ State tax and incentives ✓ Human resources consulting ✓ Employee benefit plans Our wholly owned subsidiaries are: BKD Financial, LLC assists companies with corporate finance services, including mergers, acquisitions, sales, management buyouts, ESOPs, financing and initial public offering advisory services. Member NASD and SIPC. BKD Wealth Advisors, LLC is an investment advisory firm registered with the SEC, providing the WealthPlan services of portfolio management, investment management consulting, financial planning and insurance solutions. Mazars Central, LLC, our liaison with the Mazars Group, provides tax, assurance and consulting services for multinational companies with business interests in the U.S. Heartland. A Proposal for Professional Services From ' City of Lubbock, Texas BKD Foundation helps enrich BKD communities with financial support and a commitment of time. BKD is the largest member firm of Moores Rowland International (MR[), the loth largest group of leading independent accounting firms in the world. Our association with MRI enhances our ability to assist clients both nationally and internationally. As a member of the SEC Practice Section of the American Institute of Certified Public Accountants (AICPA), BKD has successfully completed all peer reviews of our quality control program. BKD also is a member of the AICPA's Private Companies Practice Section, which represents the views of medium- and small -sized CPA firms on technical issues. Various BKD partners represent the firm on AICPA committees. The mission of BKD is to always strive for excellence in providing services to clients, create rewarding career opportunities and maintain sound professional, business and financial standards. A Proposal for Professional Services From City of Lubbock, Texas Appendix B Client References Entity Contact City of Little Rock * Bob Biles Little Rock, AR ** 501-371-6806 Client Since 1999 Total Hours - 1800 City of Pine Bluff Ed Bogy Pine Bluff, AR ** 870-543-1835 Client Since 1986 Total Hours - 700 City of Fayetteville * Marsha Farthing Fayetteville, AR ** 479-521-7700 Client Since 2002 Total Hours - 700 City of Ft. Smith * Kara Bushkuhl Fort Smith, AR ** 479-784-2286 Client Since 2004 Total Hours - 900 City of Bentonville ** Stewart Smith Bentonville, AR 479-271-31 11 Client Since 2002 Total Hours - 500 Security Depannent Bryan Hicks Arkansas Employment 501-682-3108 Little Rock, AR Total Hours - 750 Client Since 1992 Arkansas Development Patrick Patton Finance Authority 501-682-5900 Little Rock, AR Total Hours - 1100 Client Since 2003 City of Hedwig Village ** Beth Staton Houston, TX 713-465-6009 City of Piney Point ** Graciela Zepeda Houston, TX 713-782-0271 *GFOA Certificate of Excellence in Financial Reporting recipient. **Audit Services including A-133 when applicable. All entities above are served by the Arkansas and Houston Practice Offices. Other local firm wide references will be provided upon request. A Proposal for Professional Services From City of Lubbock, Texas Appendix C Clients like you care about what we stand for as a firm. BKD's most valuable asset is our people, and their collective values of Our Values passion, respect, integrity, discipline and excellence have become the firm's values of PRIDE. You see our partners and employees "living the PRIDE" everyday as they provide solutions to your business and financial needs. We believe our people and their PRIDE values are a significant factor in the positive "BKD difference" you experience when you engage us as your accountant or consultant. Following are the five BKD PRIDE values and what they mean for you. ✓ Passion • Passion for service to others • Passion for making tomorrow better than today BKD's mission is to first "strive for excellence in providing services to clients." This commitment drives our practice and accounts for the dedication of our partners and staff to meeting your deadlines and needs. Consistent with our values, we are enthusiastically committed to making tomorrow better than today by helping you make informed decisions to improve business and financial outcomes. ✓ Respect • Respect for the differences that make our team strong • Respect for our legacy and the benefits of change BKD respects diversity. You benefit from our diverse client service teams, which bring a broad mix of skills and approaches to bear on your needs. We treat our clients with respect and proactively embrace change. While respecting the lessons of our legacy and yours, we seek the opportunities change inevitably offers. ✓ Integrity • Integrity to do the right thing • Integrity to be objective and independent "Do the right thing" has been the tone from the top of BKD since our founding in 1923. You and your stakeholders and customers rely on our integrity and objectivity to help you make smart —but right —business decisions. We are committed to telling you what you need to know vs. what you want to hear. That's what you expect from one of the 10 largest CPA and advisory firms in the United States. A Proposal for Professional Services From City of Lubbock, Texas ✓ Discipline ✓ Excellence • Discipline in process and innovation • Discipline to balance professional and personal commitments Discipline is a hallmark of BKD, and as a client, you benefit from our well -established and successful protocols, standards and processes. In addition, by maintaining an appropriate balance in our professional and personal commitments, we are fresh and energized when engaged in helping you resolve issues and advance your goals. Excellence in skills and competencies Excellence in our quest to be the best We are committed to lifelong learning to continually improve the technical and analytical skills we apply to your needs. Our aggressive ambition to "be the best" means we seem to consistently surpass your expectations. Proposal for Professional Services From M City of Lubbock, Texas Appendix D BKD: Our Integrity, Quality & Stability With the enactment of the Sarbanes-Oxley Act of 2002 and related regulations, both public and nonpublic entities are asking more questions to qualify their current or prospective auditors. The following information addresses questions boards of directors and audit committees are asking related to financial stability, insurance, corporate governance issues and independence. Financial Stability ✓ Our Financial House BKD's capital structure is 100% partner financed. Our partnership agreement requires partners to maintain capital accounts, which are reviewed annually to ensure the firm has sufficient capital to finance operations, capital expenditures, expansion, etc. BKD is debt free. Our pension plan is a defined contribution plan, funded as benefits are earned. Retirement payments to partners are Fixed, limited under our partnership agreement to a low percentage of firm net income and partially pre -funded by significant investments in life insurance. Our system of financial and budgetary controls provides for timely monthly financial statements. Each month management compares actual financial data to the current year's budget and to the previous year's figures. On a daily basis, management can monitor the firm's financial performance and adopt appropriate strategies to meet changing conditions. We are confident our financial house is in order, and our partners are committed to keeping it that way. ✓ Insurance Coverage BKD maintains professional liability insurance coverage to protect us in the unlikely event substantial litigation would ever threaten our financial stability. The firm's management committee determines the appropriate amount of coverage, giving consideration to the nature of our clientele, the services we perform and other factors. Our coverage exceeds $40 million, and we believe it is Proposal for Professional Services From �' City of Lubbock, Texas comparable to other firms our size and what you would expect of a firm of our size and nature. We also maintain adequate commercial insurance coverage, which includes general liability, excess general liability, auto liability and worker's compensation. Litigation History BKD's emphasis on quality has rewarded the firm with an excellent track record regarding claims related to professional services. Underwriters of professional liability insurance for accounting firms have informed us that we have one of the best litigation histories in the accounting profession. To avoid litigation, BKD maintains an extensive risk management program addressing a multitude of issues ranging from client acceptance to final working paper and financial statement review. Regulatory Sanctions & Investigations BKD has no sanctions or restrictions imposed by professional organizations, regulatory authorities or other government institutions. Large Client Dependency BKD's revenues are made up of assurance services 42%, tax 36% and consulting 22%. No single client comprises even 1 % of BKD's revenues. As such, none of our clients are large enough to even imply our judgment could be impaired by the threat of lost revenues. Nevertheless, BKD has implemented a policy to ensure objectivity in the review of certain larger engagements, both private and public. For these engagements, the firm's director of accounting and auditing services and the managing partner assi& ► a partner in a different office from the engagement partner to review the engagement and advise quality control personnel of any concerns or potential problems. Independence & Objectivity Independence and objectivity are serious issues for any public accounting firm. BKD takes special care in Proposal for Professional Services From City of Lubbock, Texas addressing these and other important quality control issues with policies that exceed the requirements of professional standards. For example: • All professional personnel are required to confirm their independence with respect to the firm's clients annually. • Independence issues are resolved by the firm's highest level quality control personnel. • The director of accounting and auditing services is independent of any client duties. This director and other quality control personnel are responsible for overseeing quality control procedures and resolving difficult accounting and auditing issues. • We have rigid standards for acceptance of new engagements. New engagements that are unusually large or complex require the approval of the firm's professional practices partner. • All assurance engagements are reviewed by a second partner or manager who is not otherwise involved in providing services to the client. • BKD's Public Interest Council, an independent advisory body, provides additional ethics oversight of our professional and business practices. A Proposal for Professional Services From Appendix E Clifton Gunderson LLP Certified Pub i< Accountants d Consullants 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 firm'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 the 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 with it or with the membership requirements of the Section since it «vas 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 firm complied during that year with the membership requirements of the Section in all material respects. t lflirra in l i ome%:uul 11�:�diinf!pm, IX A1t2cl1rncnt to the Peer Review Report of BKD LLP Descrip ion of the Peer Review Process Overview Member firms of the A1CPA SEC Practice Section (the Section) must have their system of quality 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 duality 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 (formerly 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 firm'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 accounting and auditing practice, and (2) the design of the firm'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 practicc 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 tlic 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 - risk 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 duality controls and concurring partner review. Prior to concluding the review, we reassessed (lie adequacy of scope and conducted an exit conference with firm management to discuss our findings and recommendations. Appendix G CITY OF LUBBOCK, TEXAS ILLUSTRATIVE PBC LIST REQUEST FOR SCHEDULES AND DOCUMENTS (The following schedules are requested for the year ended September 30, 2005. All schedules should agree with the general ledger trial balance.) Workpaper Date No. Area Description Name Date Due Received 1. Cash A list of checks prepared but held at September 30, 2005. 2. Cash Copies of all year end bank account B&B-1 reconciliations, including copies of outstanding check lists and lists of deposits in transit. 3. Cash Schedule of interfund and interbank B-3 transfers, listing all transfers within 5 business days before and after the end of the fiscal year. 4. Investments For certificates of deposit, a schedule B-2 showing for each certificate, beginning balance, additions, redemptions, ending balance; and for accrued interest, for each certificate, beginning balance, interest earned, interest received, and ending balance. 5. Investments For other securities, a schedule C-1 showing for each certificate, beginning balance, additions, redemptions, ending balance; and for accrued interest, for each certificate, beginning balance, income earned, income received, and ending balance. b. Receivables A listing of credit memos exceeding D-3 $5,000 issued after year end showing customer name, date, amount and the reason for the credit. Workpaper No. Area Description Name 7. Receivables A schedule showing the details of D-4 activity in the allowance for doubtful accounts general ledger account for the year. 8. Receivables A listing of "other" accounts receivable H showing debtor, reason for receivable, amount, and date paid if paid subsequent to year end. 9. Receivables A detail listing of aged accounts receivable at September 30. 10. Receivables A listing of individual accounts receivable collected from September 30 to November 30. 11. Receivables Information about collection efforts D-2 applied to accounts greater than $5,000 and 90 days past due (including subsequent collections) and management's assessment of the need for an allowance for each such account. Management should also address the need for a general reserve against other accounts for which collection problems have not been addressed on an individual account basis. 12. Inventory A listing of inventory, by category. 13. Inventory A listing of obsolete or slow moving inventory showing description, quantity, price, extended value and estimated net realizable value. 14. Inventory A copy of the detail inventory listing showing quantity, price and extended value. 15. Capital A lead schedule showing a summary of G Assets activity in capital asset accounts during the year. Date Date Due Received No. Area 16. Capital Assets 17, Capital Assets 18. Capital Assets 19. Other Assets 20 Description A detail listing of capital asset additions showing vendor, description, designation of new or used, date placed in service, cost and date acquired. A detail listing of capital asset deletions showing description, date of disposal, original cost, accumulated depreciation at date of disposal, proceeds from disposition and the gain/loss on the disposition. A schedule of repair and maintenance expense for each such general ledger account showing vendor, date, amount and a description of the repair. A schedule of deposits and other miscellaneous assets showing description and amount. Other Assets A schedule of prepaid insurance showing, for each policy, the beginning prepaid balance, term of coverage, premiums paid during the year, expense for the year and ending prepaid balance. 21. Other Assets 22. Other Assets 23. Other Assets 24. Accounts Payable Copies of insurance binders showing nature and limits of coverage. A schedule of other prepaid expenses showing description/payee, period covered, beginning balance, payments, expense and ending balance. Schedules and source documents supporting any other material prepaid assets. A detail listing of accounts payable at the year end. Workpaper Date Name Date Due Received G-1 G-2 X-2 H-1 I-1 H-2 No. 25, 26. 27 FX 29 all 31 32. 33 Workpaper Area Description Name Accounts For unpaid accounts not included in the J Payable detail accounts payable listing, a schedule showing vendor, check number (if paid), description, account charges and amount. Notes For bonds, notes and capitalized leases, K Payable and a schedule showing for each bond, note Long -Terra or lease; payee, date originated, Debt maturity date, description of general terms, and separately for the principal and interest balance: • Beginning balance • Additions • Payment 0 Ending balance Notes A schedule showing the principal and K-1 Payable and interest payments required during the Long -Term next five years and five-year Debt increments after and for each bond, note and lease individually and in total. Accrued A schedule of accrued payroll taxes L-2 Expenses payable at year end. Accrued Year end payroll tax returns should be Expenses pulled for inspection. Accrued A schedule of accrued sales tax L-3 Expenses payable at year end. Accrued A schedule showing the calculation of L Expenses accrued salaries and wages at year end. Accrued A detail schedule showing the L-1 Expenses computation of accrued vacation and sick leave showing employee, hours earned but not paid, hourly rate and accrued balance. Accrued A reconciliation of accrued pension Expenses expense. Date Date Due Received Workpaper No. Area Description Name 34. Income and A detail schedule of legal fees incurred X-3 Expense showing payee, date, amount and a description of the matter for which service was provided. 35. Income and A schedule of rent expense and X-1 Expense operating lease commitments showing property leased, term of lease, current year expense, annual rental and required payments for each of the next five years and thereafter. 36. Income and A schedule of miscellaneous expense X-5 Expense showing vendor, date, amount and a description of the nature of the expense. 37. Income and A schedule of miscellaneous income X-6 Expense showing payer, date, amount and a description of the nature of the income. 38. Other A reconciliation of interfund accounts showing the individual account balance on each fund's books (the net balance of all account balances should be zero). 39. Other A copy of last year's management letter and schedule of findings and questioned costs indicating next to each point any changes made in the City's policies or procedures. 40. Other Copies of signed minutes of meetings of the board of directors held during the past fiscal year and through the current date. 41. Other A completed internal control questionnaire. Date Date Due Received No. Area 42. Other Description Copies of agreements or contracts (or amendments of existing documents): • Lease agreements • Employee benefit plans • Bonds, notes payable or receivable • Employee handbook • Personnel policies and procedures manuals Workpaper Date Name Date Due Received