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HomeMy WebLinkAboutResolution - 4908 - Agreement-Robinson Burdette Martin & Cowan LLP-Audit Of GP Finacial Statements - 07/27/1995Resolution No. 4908 July 27, 1995 Item #17 RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock an Agreement with Robinson Burdette Martin & Cowan, L.L.P., for the audit of the City of Lubbock's general purpose financial statements, attached hereto, which shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail. Passed by the City Council this 27th � day of '.\ Jul , 1995. VID R. LANGSTON, MA ATTEST: Betty M. Mhtfson, 1 ecretary APPROVED AS TO CONTENT: Mark Hindman, Director of Support Services APPROVED AS TO FORM: C. Ross, Jr., City Attorney JCR:js/AG-RBM&C.RES ccdocs/July 19, 1995 Resolution No. 4908 THE STATE OF TEXAS § AGREEMENT COUNTY OF LUBBOCK § THIS AGREEMENT made and entered in this 27th day of July, 1995, between the CITY OF LUBBOCK, Lubbock County, Texas, hereinafter referred to as "CITY", and ROBINSON BURDETTE MARTIN & COWAN, L.L.P., Lubbock, Texas, hereinafter referred to as "RBM&C". WITNESSETH: THAT for and in consideration of the mutual covenants and promises hereinafter contained, it is agreed between the parties hereto as follows: ro RBM&C will audit the CITY'S general purpose financial statements in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act of 1984 and the provisions of OMB Circular A-128, Audits of State and Local Governments. The objective of an audit is the expression of an opinion concerning whether the financial statements present fairly, in all material respects, the financial position of the CITY, and the results of its operations and cash flows of its Proprietary Funds in conformity with generally accepted accounting principles. II. Said examination shall cover the fiscal year period from October 1, 1994 to September 30, 1995 with the exception of the Lubbock Firemen's Relief and Retirement Fund, which will cover the twelve (12) month period from January 1, 1995 to December 31, 1995. The auditing services shall be extended for an additional two (2) periods, as stated above, unless canceled by either party hereto. Fees for such services will be mutually agreed to annually. In the event of cancellation, notice shall be given to the other party on or before May 15th of the year cancellation is to be effective. As a part of their audit, RBM&C will consider the CITY'S internal control structure over financial transactions and assess control risk, as required by generally accepted auditing standards, for the purpose of establishing a basis for determining the nature, timing and extent of auditing procedures necessary for expressing RBM&C'S opinion concerning the financial statements and not to provide assurance on the internal control structure. RBM&C will also, as discussed later, consider and test the CITY'S internal control structure policies and procedures used in administering federal financial assistance programs. The management of the CITY is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs for internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of the inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. AGREEMENT RBM&C, L.L.P ---- PAGE 2 IV. As required by government auditing standards, RBM&C will prepare a separate written report on RBM&C'S understanding of the CITY'S internal control structure and the assessment of control risk made as part of the financial statement audit. The report will include: (1) the scope of RBM&C'S work in obtaining an understanding of the internal control structure and in assessing the control risk; (2) the CITY'S significant internal controls or control structure including the controls established to insure compliance with laws and regulations that have a material impact on the general purpose financial statements; and (3) the reportable conditions, including the identification of material weaknesses, identified as a result of RBM&C'S work in understanding and assessing control risk. V. RBM&C'S audit will include procedures designed to provide reasonable assurance of detecting errors and irregularities that are material to the general purpose financial statements. As CITY management is aware, however, there are inherent limitations in the auditing process. For example, audits are based on the concept of selective testing of the data being examined and are, therefore, subject to the limitation that such matters, if they exist, may not be detected. Also, because of the characteristics of irregularities, including attempts at concealment through collusion and forgery, a properly designed and executed audit may not detect a material irregularity. Similarly, in performing their audit RBM&C will be aware of the possibility that illegal acts may have occurred. However, it should be recognized that RBM&C'S audit provides no assurance that illegal acts generally will be detected, and only reasonable assurance that illegal acts having a direct and material effect on the determination of general purpose financial AGREEMENT RBM&C, L.L.P ---- PAGE 3 statement amounts will be detected. RBM&C will inform the CITY with respect to illegal acts or material errors that come to RBM&C' S attention during the course of their audit. VI. Compliance with laws, regulations, contracts, and grants applicable to the CITY is the responsibility of the CITY'S management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, RBM&C will perform tests of the CITY'S compliance with certain provisions of laws, regulations, contracts, and grants. However, except for major federal financial assistance programs, RBM&C'S objective is not to provide an opinion on overall compliance with such provisions. As required by government auditing standards, RBM&C will prepare a separate written report on their test of compliance with applicable laws and regulations. This report will contain a statement of positive assurance on those items which were tested for compliance, negative assurance on those items not tested, and a description of all material instances of noncompliance. VIII. As required by OMB Circular A-128 RBM&C will consider and test the CITY'S internal control structure policies and procedures used in administering federal financial assistance programs. Based on this consideration and these tests, RBM&C will assess risk and determine the nature, timing, and extent of testing compliance with requirements that, if not complied with, could have a material effect on a major federal financial assistance programs. Also, in connection with RBM&C' S audit of the general purpose financial statements or RBM&C' S consideration of the internal control structure over federal financial assistance programs, if AGREEMENT RBM&C, L.L.P ---- PAGE 4 RBM&C selects a transaction for testing that is applicable to a nonmajor program, RBM&C will also test it generally for compliance with laws and regulations. In accordance with OMB Circular A-128, RBM&C will prepare the following separate written reports: • Report on Supplementary Information - Schedule of Federal Financial Assistance; • Report on compliance based on an audit of general purpose financial statements performed in accordance with Government Auditing Standards; • Report on compliance with specific requirements applicable to major Federal Financial Assistance Programs; • Report on compliance with the general requirements applicable to Federal Financial Assistance Programs; • Report on compliance with the specific requirements applicable to nonmajor Federal Financial Assistance program transactions; • Report on the internal control structure based on an audit of general purpose financial statements performed in accordance with Government Auditing Standards; and • Report on the internal control structure used in administering Federal Financial Assistance Programs. RBM&C will also issue separate reports on Civic Lubbock, Inc., Lubbock Firemen's Relief and Retirement Fund, and the CITY'S Electric Enterprise Fund. X. At the conclusion of the engagement, the CITY' S management will provide to RBM&C a representation letter that, among other things, will confirm management's responsibility for the preparation of the financial statements in conformity with generally accepted accounting principles, the availability of financial records and related data, the completeness and availability AGREEMENT RBM&C, L.L.P ---- PAGE 5 of all minutes of the CITY meetings, and absence of irregularities involving management or those employees who have significant roles in the control structure. XI. RBM&C understands that their reports on the internal control structure as part of the financial audit and on compliance with laws and regulations are intended for the information of the management and others within the organization. This restriction is not intended to limit the distribution of this report which is a matter of public record. on RBM&C, as well as all other major accounting firms, participates in a "peer view" program, covering their auditing and accounting practices. This program requires that once every three (3) years RBM&C subjects their quality assurance practices to an examination by another accounting firm. As part of the process, the other firm will review a sample of RBM&C'S work. It is possible that the work RBM&C performs for the CITY may be selected by the other firm for their review. If it is, they are bound by professional standards to keep all information confidential. If the CITY objects to having the work done for the CITY reviewed by the peer reviewer, the CITY will notify RBM&C in writing. XIII. RBM&C' S fee, including out-of-pocket expenses, will be billed at the hourly rate of $60.00 for the 1994-95 audit of the CITY'S general purpose financial statements and for performance of the Single Audit of Federal Financial Assistance Programs, as illustrated in Exhibit "A", for the period specified in Paragraph II above. Monthly progress billings will be generated on the basis of hours of worked completed. Audit fees for years 1995-96 and 1996-97 shall be billed at the hourly rate of $62.00 and $64.00 per hour, respectively. RBM&C and AGREEMENT RBM&C, L.L.P ---- PAGE 6 CITY shall agree in advance to the total costs of the audit for 1995-96 and 1996-97, based on the aforementioned hourly fees. In the event that the parties are unable to agree prior to May 15th of each audit year on the total fee to be paid, then in such event, the Agreement shall be canceled as provided for in paragraph II of this Agreement. 1 AVA It is further agreed between the parties that for the purposes of determining the place of the Agreement and the law governing the same, that this Agreement is entered into the City and State of Texas, and shall be governed by the laws of the State of Texas. ROBINSON BURDETTE MARTIN & COWAN L.L.P. R. LANGS N, MAY JOHN W. BURDETTE, PARTNER ATTEST: 4"t, j etty A Johnso , City Secretary APPROVED AS TO CONTENT: ly\-1I4 Mark Hindman, Director of Support Services AS TO FORM: a] JCR.js/AG-RBM&C.DOC CityAtt/July 18, 1995 WITNESSED BY: Ben F. Robinson, Partner AGREEMENT RBM&C, L.L.P ---- PAGE 7 EXHIBIT A 1994-95 AUDIT PLAN Budgeted hours Hourly rate Cost Less: Reduction - if tasks assumed by City Staff Single Audit Lead Schedules/CAFR Miscellaneous Hourly rate Reduction Adjusted Cost 1,577 $60 $94,620 50 20 10 80 $60 ($4,800) $89,820