HomeMy WebLinkAboutR2014-031 Extending Contract for Auditing Services McGladrey and Pullen LLP RESOLUTION NO. R-2014- 031
A RESOLUTION EXTENDING THE CONTRACT FOR AUDITING SERVICES BETWEEN THE
CITY AND MCGLADREY AND PULLEN LLP
WHEREAS, the City issued a request for the submission of proposals for the purpose of
auditing services for the City finances for fiscal year ending in 2011, 2012 and 2013; and
WHEREAS, pursuant to Resolution 2013-077 the City approved a contract with McGladrey
and Pullen, LLP for auditing services; and
WHEREAS, such contract provides for the ability to extend such contract for two (2)
additional one (1) year periods; and
WHEREAS, the Board of Aldermen find it is in the best interest of the City to extend such
contract for 2014 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 Mayor, the City Administrator, the Finance Director, and other
appropriate City officials are hereby authorized to take any and all actions as may be deemed
necessary or convenient to carry out and comply with the intent of this Resolution and to
execute and deliver for and on behalf of the City all certificates, instruments, agreements and
other documents, as may be necessary or convenient to perform all matters herein authorized.
PASSED AND ADOPTED by the Board of Aldermen and APPROVED by the Mayor of
the City of Riverside, Missouri, theday of , 2014.
Kathleen L. Rose, Mayor
ATTEST:
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Robin Littrell, City.- Jerk'
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McGladrey LLP
4801 Main St.,Suite 400
Kansas City, MO 64112-2543
McGladrey 0816.753.3000 F816.751.1890
r_ www.mcgladrey.com
May 6, 2014
City of Riverside, Missouri
City Hall
2950 N.W. Vivion Road
Riverside, Missouri 64150
Attention: Greg Mills, City Administrator
Donna Resz, Finance Officer
The Objective and Scope of the Audit of the Financial Statements
You have requested that we audit the financial statements of the City of Riverside, Missouri's ("the City')
governmental activities, each major fund, aggregate remaining fund information and budgetary
comparison as of and for the year-ended June 30, 2014 which collectively comprise the basic financial
statements. We are pleased to confirm our acceptance and our understanding of this audit engagement
by means of this letter.
Our audit will be conducted with the objective of our expressing an opinion on the financial statements.
We will also report on whether certain supplemental information (combining nonmajor fund financial
statements and the City's schedule of expenditures of federal awards) is fairly stated in all material
respects in relation to the financial statements as a whole. The accounting principles generally accepted
in the United States of America require that the management's discussion and analysis and certain
pension and other postemployment benefit information be presented to supplement the basic financial
statements. We will apply certain limited procedures to this required supplementary information but will
not express an opinion or provide any assurance on this information. In addition, you have informed us
that you intend to prepare a Comprehensive Annual Financial Report (CAFR) and submit it for evaluation
by the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial
Reporting. Our association with the CAFR is to consist of a technical review. The accompanying
introductory and statistical sections of the CAFR are presented for the purpose of additional analysis and
are not a required part of the basic financial statements. Accordingly, we will not express an opinion on
this supplemental information.
We will also perform the audit of the City as of June 30, 2014, 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.
Member of the RSM kdematlonal network of Indwerdem aaounang,tax and mmutung firms.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 2
The Responsibilities of the Auditor
We will conduct our audit in accordance with auditing standards generally accepted in the United States
of America (GAAS); Government Auditing Standards issued by the Comptroller General of the United
States; 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 assurance about whether the financial statements are free from material misstatement. An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an
unavoidable risk that some material misstatements may not be detected exists, even though the audit is
properly planned and performed in accordance with GAAS. 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.
In making our risk assessments, we consider internal control relevant to the City's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. However, we will communicate to you in writing concerning any significant deficiencies or material
weaknesses in internal control relevant to the audit of the financial statements that we have identified
during the audit.
We will also communicate to the Board of Alderman (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 that becomes known to us during the audit, and (b)any instances of noncompliance
with laws and regulations that we become aware of during the audit (unless they are clearly
inconsequential).
The funds that you have told us are maintained by the City and that are to be included as part of our audit
are significantly the same as those listed in the City's June 30, 2013 basic financial statements. Any
additional funds or deleted funds will be communicated by you upon commencement of fieldwork.
The federal financial assistance programs and awards that you have told us that the City participates in
and that are to be included as part of the single audit are significantly the same as those with programs
reported for the year ended June 30, 2013 in the City's Compliance Report. Any changes to federal
programs will be communicated by you upon commencement of fieldwork.
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 Authority.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 3
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 matters will address material errors, fraud, abuse, violations of
compliance obligations, and other responsibilities imposed by state and federal statutes and regulations
or assumed by contracts, and any state or federal grant, entitlement, or loan program questioned costs of
which we become aware, consistent with requirements of the standards and circulars identified above.
Our firm maintains comprehensive insurance with regard to general liability, automotive liability, workers'
compensation, employers' liability, and professional liability. Amounts of coverage will be at least
$1,000,000 and will meet or exceed the requirements specified by the City. Such insurance will be
maintained for the statutory period for which the professional may be exposed to liability.We have
provided the City with a certificate of insurance evidencing such coverage.
The Responsibilities of Management and Identification of the Applicable Financial Reporting
Framework
Our audit will be conducted on the basis that management and when appropriate, those charged with
governance, acknowledge and understand that they have responsibility:
a. For the preparation and fair presentation of the financial statements in accordance with accounting
principles generally accepted in the United States of America;
b. For the design, implementation, and maintenance of internal control relevant to the preparation and
fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error;
c. 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;
d 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; and
e. To provide us with:
(1) Access to all information of which management is aware that is relevant to the preparation and
fair presentation of the financial statements such as records, documentation, and other matters;
(2) Additional information that we may request from management for the purpose of the audit;
(3) Unrestricted access to persons within the entity from whom we determine it necessary to obtain
audit evidence;
(4) When applicable, a summary schedule of prior audit findings for inclusion in the single audit
reporting package; and
(5) If applicable, responses to any findings reported on the schedule of findings and questioned
costs.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 4
As part of our audit process, we will request from management and when appropriate,those charged with
governance, written confirmation concerning representations made to us in connection with the audit
including among other items:
a. That management has fulfilled its responsibilities as set out in the terms of this letter; and
b. That it believes the effects of any uncorrected misstatements 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.
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 or abuse, and for informing us about all known or
suspected fraud or abuse affecting the entity involving management, employees who have significant
roles in internal control, and others where the fraud or abuse could have a material effect on the financial
statements or compliance. Management is also responsible for informing us of its knowledge of any
allegations of fraud or abuse or suspected fraud or abuse affecting the entity received in communications
from employees, former employees, analysts, regulators, or others.
Management is responsible for the preparation of the required supplementary information (RSI) and
supplementary information (SI) presented in relation to the financial statements as a whole in accordance
with accounting principles generally accepted in the United States of America. Management agrees to
include the auditor's report on the RSI and SI in any document that contains the SI and that indicates that
the auditor has reported on such RSI and SI. Management also agrees to present the SI with the audited
financial statements or, if the SI will not be presented with audited financial statements,to make the
audited financial statements readily available to the intended users of the SI no later than the date of
issuance of the SI and the auditor's report thereon.
The governing board is responsible for informing us of its views about the risks of fraud or abuse within
the City, and its knowledge of any fraud or abuse or suspected fraud or abuse affecting the City.
You have informed us that you may issue public debt in the future and that you may include our report on
your financial statements in the offering statement. You have further informed us that you do not intend
that we be associated with the proposed offering.
We agree that our association with any proposed offering is not necessary, providing the City agrees to
clearly indicate that we are not associated with the contents of any such official statement or
memorandum.The City agrees that the following disclosure will be prominently displayed in any such
official statement or memorandum:
McGladrey 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 LLP also has not performed any procedures relating to this official statement.
Because McGladrey LLP will rely on the City and its management and Board of Alderman to discharge
the foregoing responsibilities, the City holds harmless and releases McGladrey 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's management which has caused, in any respect,
McGladrey LLP's breach of contract or negligence. This provision shall survive the termination of this
arrangement for services.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 5
The City's Records and Assistance
If circumstances arise relating to the condition of the City's 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, issue a
report, or withdraw 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 Donna Resz, Finance Officer. The timely and
accurate completion of this work is an essential condition to our completion of the audit and issuance of
our audit report.
In connection with our audit, you have requested us to perform certain non-audit services necessary for
the preparation of the financial statements, including the proposal of adjusting journal entries. The
independence standards of Government Auditing Standards issued by the Comptroller General of the
United States GAS require that the auditor maintain independence so that opinions, findings, conclusions,
judgments, and recommendations will be impartial and viewed as impartial by reasonable and informed
third parties. Before we agree to provide a non-audit service to the City, we determine whether providing
such a service would create a significant threat to our independence for GAS audit purposes, either by
itself or in aggregate with other non-audit services provided. A critical component of our determination is
consideration of management's ability to effectively oversee the non-audit service to be performed. The
City has agreed that Donna Resz, Finance Officer possesses suitable skill, knowledge, or experience and
that the individual understands the proposal of adjusting journal entries and the services to be performed
sufficiently to oversee them. Accordingly, the management of the City agrees to the following:
1. The City has designated Donna Resz, Finance Officer, a senior member of management, who
possesses suitable skill, knowledge, and experience to oversee the services.
2. Donna Resz, Finance Officer will assume all management responsibilities for subject matter and
scope of the proposal of journal entries, the draft of the CAFR, and GASB standard implementations.
3. The City will evaluate the adequacy and results of the services performed.
4. The City accepts responsibility for the results and ultimate use of the services.
GAS further requires we establish an understanding with the management and those charged with
governance of the City of the objectives of the non-audit service, the services to be performed, the entity's
acceptance of its responsibilities, the auditor's responsibilities, and any limitations of the non-audit
service. We believe this letter documents that understanding.
Other Relevant Information
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.
In accordance with Government Auditing Standards, a copy of our most recent peer review report is
enclosed, for your information.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 6
Fees, Costs,and Access to Workpapers
Our fees for the audit and accounting services described above are based upon the value of the services
performed and the time required by the individuals assigned to the engagement, including direct
expenses. Our fees for the services described in the letter will not exceed $26,450 for the financial
statement audit and $4,950 per major program tested under the Single Audit Act. Our fee estimate and
completion of our work is based upon the following criteria:
a. Anticipated cooperation from City personnel.
b. Timely responses to our inquiries.
c. Timely completion and delivery of client assistance requests.
d. Timely communication of all significant accounting and financial reporting matters.
e. The assumption that unexpected circumstances will not be encountered during the engagement.
If any of the aforementioned criteria are not met, then fees may increase. Interim billings will be submitted
as work progresses and as expenses are incurred. Billings are due upon submission.
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 in a key position. Accordingly, the City agrees it will
compensate McGladrey LLP for any additional costs incurred as a result of the City's employment of a
partner or professional employee of McGladrey LLP.
In the event we are requested or authorized by the City or are required by government regulation,
subpoena, or other legal process to produce our documents or our personnel as witnesses with respect to
our engagement for the City, the City 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.
The documentation for this engagement is the property of McGladrey 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
documentation upon their request and that we shall maintain the audit documentation 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 documentation will be provided under the supervision
of McGladrey LLP audit personnel and at a location designated by our Firm.
Claim Resolution
The City and McGladrey 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 LLP
or the date of this arrangement letter if no report has been issued. The City waives any claim for punitive
damages. McGladrey LLP's liability for all claims,damages and costs of the City arising from this
engagement is limited to the amount of fees paid by the City to McGladrey LLP for the services rendered
under this arrangement letter.
If any term or provision of this Agreement is determined to be invalid or unenforceable, such term or
provision will be deemed stricken, and all other terms and provisions will remain in full force and effect.
Donna Resz, Finance Officer
City of Riverside, Missouri
May 6, 2014
Page 7
Reporting
We will issue a written report upon completion of our audit of the City's financial statements. Our report
will be addressed to the Honorable Mayor and Members of the Board of Aldermen of the City. We cannot
provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is
necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraphs, or
withdraw from the engagement.
In addition to our report on the City's financial statements, we will also issue the following 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, 2014.
• 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 provisions 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 material jffect, as defined by OMB Circular No. A-133,
on each major program.
• A schedule of findings and questioned costs.
This letter constitutes the complete and exclusive statement of agreement between McGladrey LLP and
the City, superseding all proposals, oral or written, and all other communications, with respect to the
terms of the engagement between the parties.
Please sign and return the attached copy of this letter to indicate your acknowledgment of, and
agreement with, the arrangements for our audit of the financial statements including our respective
responsibilities.
McGladrey LLP 4 n n
Kristen Hughes, Director
Confirmed on behalf of the City of Riverside, Missouri:
9T9 y AdWini for Date
Donna Resz, Finance Offic Date