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HomeMy WebLinkAboutR-2011-008 Awarding Bid for Auditing Services and Authorizing Contract with McGladrey and Pullen LLPResolution R-2011-008 A RESOLUTION AWARDING THE BID FOR AUDITING SERVICES AND AUTHORIZING THE CITY OF RIVERSIDE TO ENTER INTO A CONTRACT WITH MCGLADREY AND PULLEN LLP FOR SUCH PURPOSES WHEREAS, the City issued a request for the submission of proposals for the purpose of auditing services for the city finances; and WHEREAS, the City received three responses to its request for proposals and the services proposed by McGladrey and Pullen, LLP has been evaluated and recommended as the most advantageous proposal for performance of such services; and WHEREAS, the Board of Aldermen find it in the best interest of the City to enter into a contract with McGladrey and Pullen, LLP to perform such services, NOW, THEREFORE, BE IT RESOLVED, by the Board of Aldermen of the City of Riverside, Missouri, as follows: THAT the proposal of McGladrey and Pullen, LLP for auditing services in substantially the same form attached hereto as Exhibit "A", is hereby authorized and approved; FURTHER THAT the City Administrator, Mayor and/or Finance Director are hereby authorized to execute all documents and agreements necessary or incidental to carry out the terms and conditions of such bid award and the City Clerk is authorized to attest thereto. y PASSED AND ADOPTEby the Boar of Aldermenrmenand APPROVED by the Mayor of the Cit of Riverside, Missouri, the 3rd day of February 2011. /s/ Kathleen L. Rose Mayor Kathleen L. Rose ATTEST: /s/ Robin Littrell Robin Littrell, City Clerk Approved as to Form: /s/ Nancy Thompson Nancy Thompson, City Attorney CITY OF RIVERSIDE MISSOURI Upstream from ordinary. 2950 NW Vivion Road Riverside, Missouri 64150 AGENDA DATE: 2011-02-01 TO: Mayor and Board of Aldermen FROM: Donna Resz, Finance Director RE: Audit Contract for 2011, 2012 & 2013 audits with option for 2 additional years BACKGROUND: In November 2010, a request for proposals to conduct the City's annual audit for 3 years was sent to 18 accounting firms. In December 2010, the City received proposals from the following firms. Cochran & Head McGladrey BKD A committee consisting of Alderman Cope, Alderman Thatcher, the Finance Director, the City Administrator, a law intern reviewed the proposals received. It was the unanimous recommendation of the committee to award the contract to McGladrey. BUDGETARY IMPACT: The contract with McGladrey for the fiscal year end 2011 audit is as follows: City Audit $24,000 Single Audit of Federal Programs 4,500 (required due to receipt of CDBG funds) Total $28,500 McGladrey [logo] McGladrey & Pullen, LLP Certified Public Accountants 4801 Main St., Ste.400 Kansas City, MO 64112-2543 e 816.753.3000 F 816.751.1890 www.mcgladrey.com January 27, 2011 City of Riverside, Missouri City Hall 2950 N.W. Vivion Road Riverside, Missouri 64150 Attention: Donna Resz, Finance Officer This letter is to explain our understanding of the arrangements for the services we are to perform for the City of Riverside, Missouri for the year ending June 30, 2011. We ask that you either confirm or amend this understanding. Audit Services We will perform an audit of the City of Riverside, Missouri's governmental activities, each major fund, and aggregate remaining fund information as of and for the year ended June 30, 2011 which collectively comprise the City's basic financial statements. We understand that the financial statements will be prepared In accordance with accounting principles generally accepted in the United States of America. The objective of an audit of financial statements is to express an opinion on those statements. We are responsible for forming and expressing an opinion about whether the financial statements that have been prepared by management with the oversight of the Board of Aldermen are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. We will also perform the audit of the City of Riverside, Missouri as of June 30, 2011 so as to satisfy the audit requirements imposed by the Single Audit Act and the U.S. Office of Management and Budget (OMB) Circular No. A-133. We will conduct the audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards Issued by the Comptroller General of the United States; and the provisions of the Single Audit Act, OMB Circular A-133, and OMB's Compliance Supplement. Those standards, circulars, supplements, or guides require that we plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement whether caused by error or fraud. Accordingly, a material misstatement, may remain undetected. Also, an audit is not designed to detect errors or fraud that are immaterial to the financial statements. The determination of abuse is subjective; therefore, Government Auditing Standards do not expect us to provide reasonable assurance of detecting abuse. An audit of financial statements also includes obtaining an understanding of the City and its environment, including its internal control, sufficient to assess the risks of material misstatement of the financial statements, and to design the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance on Internal control or to identify significant deficiencies or material McGladrey Is the brand under which AM McGladrey, Inc. and McGladrey &Pullen, LLP serve (Penn' business needs. Member of 1SM International network, a network of The two firms operate as separate legal entities In an alternative practice structure. Independent accounting. tax and consulting firms. City of Riverside, Missouri January 27, 2011 Page 2 of 6 weaknesses. However, we will communicate to management and the Board of Aldermen any significant deficiencies or material weaknesses that become known to us during the course of the audit. We will also communicate to the Board of Aldermen (a) any fraud involving senior management and fraud (whether caused by senior management or other employees) that causes a material misstatement of the financial statements, (b) any illegal acts, violations of provisions of contracts or grant agreements, and abuse that come to our attentiom(unless they are clearly inconsequential), (c) should any arise, any disagreements with management and other serious difficulties encountered in performing the audit, and (d) various matters related to the City's accounting policies and financial statements. In addition to our reports on the City's financial statements, we will also issue the following reports or types of reports: • A report on the fairness of the presentation of the City's schedule of expenditures of federal awards for the year ending June 30, 2011. • Reports on Internal control related to the financial statements and major programs. These reports will describe the scope of testing of internal control and the results of our tests of internal controls. • Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We will report on any noncompliance which could have a material effect on the financial statements and any noncompliance which could have a direct and material effect on each major program. • A schedule of findings and questioned costs. The funds that you have told us are maintained by the City and that are to be included as part of our audit are listed in the 2010 Comprehensive Annual Financial Report (CAFR). The blended component units whose financial statements you have told us are to be included as part of the City's basic financial statements are the Tax Increment Financing Commission and the Riverside Industrial Development Authority. The federal financial assistance programs that you have told us that the City participates in and that are to be included as part of the single audit are the U.S. Department of Housing and Urban Development Community Development Block Grant Program. Our reports on internal control will include any significant deficiencies and material weaknesses in controls of which we become aware as a result of obtaining an understanding of internal control and performing tests of Internal control consistent with requirements of the standards and circulars identified above. Our reports on compliance will address material errors, fraud, abuse, violations of compliance requirements, and other responsibilities Imposed by state and federal statutes and regulations and assumed by contracts; and any state or federal grant, entitlement of loan program questioned costs of which we become aware, consistent with requirements of the standards and circulars identified above. City of Riverside, Missouri's Responsibilities Management Is responsible for the financial statements, including the selection and application of accounting policies, adjusting the financial statements to correct material misstatements, and for making all financial records and related information available to us. Management is responsible for providing us with a written management representation letter confirming certain representations made during the course of our audit of the financial statements and affirming to us that It believes the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest City of Riverside, Missouri January 27, 2011 Page 3 of 6 period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole and to the opinion units of the financial statements. Management is responsible for establishing and maintaining effective internal control over financial reporting and for Informing us of all significant deficiencies and material weaknesses in the design or operation of such controls of which it has knowledge. Management Is responsible for Identifying and ensuring that the City complies with the laws and regulations applicable to its activities, and for informing us about all known material violations of such laws or regulations. In addition, management is responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the City involving management, employees who have significant roles in internal control, and others where the fraud could have a material effect on the financial statements. Management is also responsible for Informing us of its knowledge of any allegations of fraud or suspected fraud affecting the City received In communications from employees, former employees, analysts, regulators, or others. Management is also responsible for (a) making us aware of significant vendor relationships where the vendor Is responsible for program compliance, (b) following up and taking corrective action on audit findings, Including the preparation of a summary schedule of prior audit findings, and a corrective action plan, and (c) report distribution including submitting the reporting packages. The Board of Aldermen is responsible for informing us of Its views about the risks of fraud within the City and its knowledge of any fraud or suspected fraud affecting the City. The City agrees that it will not associate us with any public or private securities offering without first obtaining our consent. Therefore, the City agrees to contact us before it includes our reports or otherwise makes reference to us, in any public or private securities offering. We may conclude that we are not otherwise associated with the proposed offering and that our association with the proposed offering is not necessary, providing the City agrees to clearly indicate that we are not associated with the contents of the official statement. The City agrees that the following disclosure will be prominently displayed in the official statement: McGladrey & Pullen, LLP, our independent auditor, has not been engaged to perform, and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. McGladrey & Pullen, LLP, also has not performed any procedures relating to this official statement Our association with an official statement is a matter for which separate arrangements will be necessary. The City agrees to provide us with printer's proofs or masters of such offering documents for our review and approval before printing, and with a copy of the final reproduced material for our approval before it is distributed. Because McGladrey & Pullen, LLP will rely on the City of Riverside, Missouri and its management and governing body to discharge the forgoing responsibilities, the City of Riverside, Missouri holds harmless and releases McGladrey & Pullen, LLP, its partners, and employees from all claims, liabilities, losses, and costs arising in circumstances where there has been a knowing misrepresentation by a member of the City of Riverside, Missouri's management which has caused, in any respect, McGladrey & Pullen, LLP's breach of contract or negligence. This provision shall survive the termination of this arrangement for services. City of Riverside, Missouri January 27, 2011 Page 4 of 6 City of Riverside, Missouri's Records and Assistance If circumstances arise relating to the condition of your records, the availability of appropriate audit evidence, or Indications of a significant risk of material misstatement of the financial statements because of error, fraudulent financial reporting, or misappropriation of assets which in our professional Judgment prevent us from completing the audit or forming an opinion, we retain the unilateral right to take any course of action permitted by professional standards, including declining to express an opinion or issue a report, or withdrawal from the engagement. During the course of our engagement, we may accumulate records containing data that should be reflected in the City's books and records. The City will determine that all such data, If necessary, will be so reflected. Accordingly, the City will not expect us to maintain copies of such records in our possession. The assistance to be supplied by City personnel, including the preparation of schedules and analyses of accounts, has been discussed and coordinated with you. The timely and accurate completion of this work is an essential condition to our completion of the audit and issuance of our audit report. If, in connection with our audit, you request us to perform accounting services necessary for the preparation of the financial statements (such as maintaining depreciation schedules, drafting the financial statements, etc.) you agree to designate an appropriate Individual to oversee the services, make all management decisions Involved in those services, evaluate the adequacy and results of the services, and accept responsibility for the results of the services. From time to time and depending upon the circumstances, we may use third -party service providers to assist us in providing professional services to you. In such circumstances, It may be necessary for us to disclose confidential client Information to them. We enter Into confidentiality agreements with all third - party service providers and we are satisfied that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. Other Terms of our Engagement Our fees for the audit and accounting services described above are based upon the time required by the individuals assigned to the engagement, plus direct expenses. Interim billings will be submitted as work progresses and as expenses are incurred. Billings are due upon submission. Our fee for the services described in the letter will not exceed $24,000 for the financial statement audit and $4,500 per major program tested under the Single Audit Act. This fee estimate will be subject to adjustments based on unanticipated changes in the scope of our work and/or the incomplete or untimely receipt by us of the information on the client participation list, In which case we will discuss the situation with you before proceeding. All other provisions of this letter will survive any fee adjustment. Our professional standards require that we perform certain additional procedures, on current and previous years' engagements, whenever a partner or professional employee leaves the firm and is subsequently employed by or associated with a client. Accordingly, the City agrees it will compensate McGladrey & Pullen, LLP for any additional costs Incurred as a result of the City's employment of a partner or professional employee of McGladrey & Pullen, LLP. In the event we are requested or authorized by the City of Riverside, Missouri or are required by government regulation, subpoena, or other legal process to produce our documents or our personnel as witnesses with respect to our engagements for the City of Riverside, Missouri, the City of Riverside, Missouri will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel, incurred In responding to such requests. City of Riverside, Missouri January 27, 2011 Page 5 of 6 The working papers for this engagement are the property of McGladrey & Pullen, LLP. However, you acknowledge and grant your assent that representatives of the cognizant or oversight agency or their designee, other government audit staffs, and the U.S. Government Accountability Office shall have access to the audit working papers upon their request; and that we 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 we are requested to do so by the cognizant or oversight agency. Access to requested workpapers will be provided under the supervision of McGladrey & Pullen, LLP audit personnel and at a location designated by our Firm. You have informed us that you intend to prepare a CAFR and submit It for evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial Reporting Program. Our participation in the preparation of the CAFR is to consist of technical assistance. We will propose adjusting journal entries. The two overarching principles of the independence standards of the Government Auditing Standards issued by the Comptroller General of the United States provide that management is responsible for the substantive outcomes of the works, and therefore, has a responsibility and is able to make any Informed judgment on the results of the services described above. Accordingly, the City of Riverside, Missouri agrees to the following: • Donna Resz, Finance Officer will be accountable and responsible for overseeing the proposal of journal entries. • The City of Riverside, Missouri will establish and monitor the performance of the proposal of journal entries to ensure that they meet management's objectives. • The City of Riverside, Missouri will make any decisions that involve management functions related to the proposal of journal entries and accepts full responsibility for such decisions. • The City of Riverside, Missouri will evaluate the adequacy of services performed and any findings that result. Claim Resolution The City of Riverside, Missouri and McGladrey & Pullen, LLP agree that no claim arising out of services rendered pursuant to this agreement shall be filed more than two years after the date of the audit report Issued by McGladrey & Pullen, LLP or the date of this arrangement letter if no report has been issued. The City of Riverside, Missouri waives any claim for punitive damages. McGladrey & Pullen, LLP's liability for all claims, damages and costs of the City of Riverside, Missouri arising from this engagement is limited to the amount of fees paid by the City of Riverside, Missouri to McGladrey & Pullen, LLP for the services rendered under this arrangement letter. This letter constitutes the complete and exclusive statement of agreement between McGladrey & Pullen, LLP and the City of Riverside, Missouri, superseding all proposals, oral or written, and all other communications, with respect to the terms of the engagement between the parties. In accordance with Government Auditing Standards, a copy of our most recent peer review report is enclosed, for your Information. City of Riverside, Missouri January 27, 2011 Page 6 of 6 If this letter defines the arrangements as the City understands them, please sign and date the enclosed copy and return it to us. McGladrey & Pullen, LLP /s/ Kevin Smith Kevin Smith, Director Confirmed on behalf of the City of Riverside, Missouri: /s/ David L. Blackburn David Blackburn - City Administrator Feb. 3rd, 2011 BKC CPAs & Advisers [logo] 910 E. St. Louis Sheet, Suite 200 P.O. Box 119D Spikgfieid, MO65801-1190 417.865.8701 Fax 417.865.0682 www.bkd.com System Review Report To the Partners of McGladrey & Pullen, LLP and the National Peer Review Committee of the American Institute of Certified Public Accountants Peer Review Board We have reviewed the system of quality control for the accounting and auditing practice of Mcdladrey & Pullen, LLP (the firm) applicable to non -SEC issuers in effect for the year ended April 30, 2010. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American institute of Certified Public Accountants. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all materiel respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of and the procedures performed in a System Review are described in the standards at www,aicpa.org/prsummary. As required by the standards, engagements selected for review included engagements performed under Government Auditing Standards, audits of employee benefit plans and audits performed under FDICIA. In our opinion, the system of quality control for the accounting and auditing practice of McGladrey & Pullen, LLP applicable to non -SEC issures in effect for the year ended April 30, 2010, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pan, pass with deflciency(les) or fait McGladrey & Pullen, LLP has received a pear review rating of pass. December 2, 2010 BKD, LLP experience BKD Praxity TM MEMBER GLOBAL ALLIANCE OF INDEPENDENT FIRMS