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HomeMy WebLinkAbout2000 09 28 Proposed Annual Budget - City of Friendswood Professional Audit Services 7 CITY OF FRIENDS WOOD, TEXAS PROPOSAL FOR PROFESSIONAL AUDIT SERVICES SEPTEMBER 28, 2000 PATTILLO, BROWN &HILL, L.L.P. 401 WEST HIGHWAY 6 WACO, TEXAS 76712 TELEPHONE NUMBER: 254/772-4901 CONTACT: JAMES C. CURRY COPY TABLE OF CONTENTS Page Number Letter of Transmittal 1 —2 Required Data 3 Finn Qualifications and Experience 4— 15 Specific Audit Approach 16— 19 Sample Reports 20—22 Concluding Remarks 23 Peer Review Report 24 APPENDICES Appendix B—Proposer Guarantees 25 Appendix C—Proposer Warranties 26 Firm PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS September 28,2000 City of Friendswood,Texas Attention: Deloris A. McKenzie, City Secretary 910 South Friendswood Drive Friendswood,Texas 77546 Gentlemen: We are pleased to have the opportunity to submit the accompanying proposal to serve the City of Friendswood, Texas as independent auditors for the fiscal years ending September 30, 2000 through 2005. Our audit will be performed in accordance with generally accepted auditing standards as set forth by the American Institute of Certified Public Accountants, Governmental Accounting Standards Board, the U. S. General Accounting Office's standards, the provisions of U. S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Nonprofit Organizations, the Single Audit Act Amendments of 1996, and the State of Texas Single Audit Circular. 1. All persons assigned to your audit, including staff, will have experience in auditing j city governments. 2. We have extensive experience in governmental audits as indicated in our list of references. Members of our Firm (and your audit team) are members of the (1) Association of Government Accountants, (2) Government Finance Officers Association of Texas, and (3)the Texas Society of CPAs Government Accounting Standards Committee. In addition to the personnel listed in the attached resumes, the Firm also has available approximately fifty(50) additional personnel in its local office. 3. We have been a member of the AICPA for over 40 years and are a member of the AICPA SECPS as well as the PCPS Peer Review quality control sections. We have completed our latest review and received the highest rating available for our audit quality controls and are subject to these reviews every three years. 4. We conform to all requirements of the "Yellow Book" on Government Auditing Standards published by the Comptroller General of the United States (1994). -1- 401 WEST HWY.6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 •FAX:(254)772-4920•www.pbhcpa.com OFFICES:BROWNSVILLE,TX(956)544-7778•HILLSBORO,TX(254)582-2583■ALBUQUERQUE,NM(505)266-5904■RIO RANCHO,NM(505)898-3516 5. We are independent in regard to the City of Friendswood, Texas as defined by generally accepted auditing standards as well as the U. S. General. Accounting Office's Government Auditing Standards (1994). 6. All work will be completed in accordance with the performance specifications outlined in your request for proposal and on the timetable included in your RFP. A tentative and preliminary copy of our report will be made available for your review prior to our production of the final report. At the time of presentation, we will discuss the final audit report and management letter with the members of the City Council. We commit to the City of Friendswood to provide the flexibility and manpower to meet your needs for staffing on a timely basis. The following person is authorized to conduct contract negotiations for Pattillo, Brown &Hill, L.L.P. He maybe reached by telephone at(254) 772-4901: James C. Curry,Partner—Governmental Practice We appreciate your consideration of our Firm as your auditors in the coming years and look forward to discussing our merits further with you. This proposal is a firm offer for ninety days. Yours truly, PATTILLO,BROWN&HILL,L.L.P. Zw2/77. ames C. Curry, CPA, CGFM JCC/dw If this proposal is acceptable,please indicate your acceptance below. ACCEPTED BY: Signature Title Date i -2- REQUIRED DATA REQUIRED DATA • INDEPENDENCE �' We are independent in regard to Friendswood, Texas as defined by generally accepted auditing standards as well as the U. S. General Accounting Officer's Government Auditing Standards (1994). • CONFLICT OF INTEREST We have had no professional relations involving Friendswood, Texas, or its subcontractors during the past five(5)years. • LICENSE TO PRACTICE IN TEXAS All assigned personnel in key positions are licensed to practice accounting in the State of Texas. We also confirm, we, as a Firm, and individually, have had no disciplinary action taken against us during the past three years with state regulatory bodies or professional organizations. • AFFIRMATIVE ACTION POLICY The Firm does not, and will not, discriminate for or against any employee or applicant for employment or promotion because of age as specified by state and federal regulation, sex, race, religion, creed, color national origin, ancestry, handicaps, or status as a special disabled veteran or, a Vietnam Era Veteran. This policy applies to all aspects of employment. In all its activities, the Firm will continue its policy of equal employment opportunity. To this end, the Firm invites the active and constructive help of all Firm employees. The Firm is prepared to submit reports and details of,its employment practices as may be required by appropriate agencies of the federal and state government. Management is responsible for ensuring proper and consistent implementation of employment I policies. The Managing Partner oversees employment practices throughout the Firm to ensure compliance with both the letter and the spirit of this policy. • ASSURANCE TO MEET REQUIREMENTS OF REQUEST FOR PROPOSAL We will work with the City representative and meet all time and sequencing requirements as outlined in the request for proposal. -3- _-I FIRM QUALIFICATIONS AND EXPERIENCE FIRM QUALIFICATIONS AND EXPERIENCE We appreciate the opportunity to present our proposal to the City of Frie o to provide professional auditing services. We believe that our Firm possesses certain uni e chara eristics and qualifications that are well matched to the City of Friendswood's needs. We ar a 75 pe son regional accounting Firm with a broad client base,with a particular concentration in gove en auditing. We have prepared the following proposal for the City of Friendswood, which discusses our expertise and our ability to serve you. As mentioned previously, we believe that Pattillo, Brown &Hill, L.L.P. is well suited to serve your needs. The reasons are as follows: • EXPERIENCE We have in-depth experience, presently serving over 100 governmental clients, including many cities. Approximately 35 of our clients were required to have single audits performed in accordance with OMB Circular A-133 for fiscal year 1999. Members of our Firm (and your audit team) are members of the Association of Government Accountants, Government Finance Officers Association of Texas, the Texas Society of CPAs Government Accounting Standards Committee, and the Special Review Committee of the GFOA. Many of our clients have elected to pursue the Certificate of Achievement for Excellence in Financial Reporting on a regular basis. In all instances where we have been associated with this pursuit, the GFOA has awarded our client the certificate. Government audits continue to be the fastest growing segment of our client base. We are committed to serving this segment, and continue to expand our department and the scope of services offered to governmental organizations. Our government audit department in the Waco office, from which this engagement would be performed, consists of one partner, two managers and approximately twenty other professionals. IBecause of this commitment, we are able to assign experienced government auditors to serve the City of Friendswood on a continuing basis and still rotate staff for audit team members during a multi-year contract, if desired. -4- • A REPUTATION FOR QUALITY Pattillo, Brown & Hill, L.L.P. is one of the oldest and most well-respected accounting firms in Texas. As an indication of our commitment to quality, we are a member of the AICPA SECPS as well as the PCPS Peer Review quality control sections. As such, we are required to undergo peer reviews every three (3) years. These sections have the highest evaluating criteria of all AICPA member groups and include reviews of governmental entities. We completed our most recent review in 1998 and received an unqualified report. In addition, we also received no "letter of comments," and therefore achieved the highest possible rating, obtained by only approximately 5% of accounting firms across the nation. Because of our high quality standards, we have been approved by the AICPA to perform numerous peer reviews of other CPA firms across the nation. • APPROPRIATE SIZE Pattillo,Brown&Hill, L.L.P. was founded in Waco in 1923 and has been in continuous existence since that time. We are a regional certified public accounting Firm with offices in Waco, Brownsville and Hillsboro, Texas, and Albuquerque and Rio Rancho, New Mexico. It is our goal to provide personalized services of the highest quality to our clients. We have earned a reputation for professional excellence through our demonstration of quality work and sound financial advice. Our personnel have devoted many years developing knowledge in auditing, accounting and consulting services. Our unyielding commitment to client service has resulted in the growth of our client base, positioning Pattillo, Brown & Hill, L.L.P. between the very large national accounting firms and smaller, locally-oriented firms. We are large enough to have the resources and personnel to resolve even the most complex accounting issue, but small enough to give you the personalized service that our clients deserve. The City of Friendswood will be a significant and valued client at our Firm. We maintain a regional Firm atmosphere without the levels of bureaucracy, which can sometimes be frustrating to a client. • COMPETENT, EXPERIENCED PERSONNEL We consider well-trained and experienced professionals to be the single most important element necessary to providing the highest level of service to a client. We believe that we offer our clients a unique blend of technical expertise and responsiveness that is sometimes unavailable from larger firms who may be focused or more sizable engagements. We have identified for the City of Friendswood an experienced and proven audit team. As you can see from the resumes included in this proposal, your audit team will have significant experience serving governmental clients, including cities, and are actively involved in professional organizations that allow us to keep abreast of issues facing governmental organizations. -5- Our commitment to professional qualifications is evidenced by the following: > One former member served on the Texas State Board of Public Accountancy. > One former member is past president of the Texas Society of CPAs. > Several members are past chairmen and several are current chairmen or members of Committees of the Texas Society of CPAs including the Society's Government Accounting Standards Committee. > Members are heavily involved in continuing professional education programs sharpening technical skills. > Our Firm includes members of the Association of Government Accountants and the Government Finance Officers Association of Texas. ➢ Three members of our Firm are members of the GFOA Special Review Committee. / . • TIMELINESS AND RESPONSIVENESS We regard timelines-. d re ponsiveness to be critical elements to providing quality service to our clien . e are committed to delivering reports in advance of established deadlines. With o er 60 pro'essional personnel available, we are able to complete our work according to \ our timetable. Additionally, we are solidly committed to promptly responding to quests s a 'hey arise. We encourage our clients to contact us during the year to discuss accounting or regulatory issues. • VALUE AND EFFICIENCY We recognize that clients expect the services rendered by their professional accounting firm to go beyond the financial statements. We understand the expectations of our clients'and welcome the opportunity to serve not only as auditors, but also as advisors. Our approach places substantial emphasis on the need to thoroughly understand your operations. This audit approach allows us to contribute constructive suggestions regarding your internal controls, operating and accounting procedures, and other matters worthy of management's attention. In addition, our clients want professionals who perform their work in an efficient manner with a minimum disruption to the City's staff Our professionals possess these capabilities. -6- Profile of Pattillo, Brown &Hill, L.L.P. Pattillo, Brown & Hill, L.L.P. was founded in Waco in 1923 and has been in continuous ) existence since that time. We are a regional certified public accounting Firm with offices in Waco, Brownsville and Hillsboro, Texas, and Albuquerque and Rio Rancho,New Mexico. We currently have six partners and approximately 55 additional professional personnel. It is our goal to provide personalized services of the highest quality to our clients. We have earned a reputation for professional excellence through our demonstration of quality work and sound financial advice. Our personnel have devoted many years developing knowledge in auditing, accounting and consulting services. We have a Firm concentration area in governmental auditing and take pride in our technical expertise, client relations and our performance reputation. We are committed to serving this area, and continue to expand our department and the scope of services offered to governmental organizations. Our government audit department in the Waco office, from which this audit would be performed,consists of one partner,two managers and approximately twenty other professionals. Summary of Technical Qualifications Our clients include many governmental organizations, as is evidenced by the partial listing included in this proposal. It is noteworthy that our workpapers have been examined in connection with several of these "Single Audits" by representatives of grantor agencies. In all circumstances, our supporting workpapers have earned excellent reviews and, in one case, our programs were photocopied by the reviewing auditors to be used as a guide for other auditors. Additionally, many of our clients have elected to pursue the Certificate of Achievement for Excellence in Financial Reporting. In all instances where we have been associated with this pursuit, the' GFOA has awarded the entity the certificate. Two members of your proposed audit team are active members of the Special Revenue Committee of the GFOA. Personnel Qualifications and Experience Pattillo, Brown & Hill, L.L.P. includes members with excellent professional qualifications, as evidenced by the following: • One former member currently serves on the Texas State Board of Public Accountancy • One former member is past president of the Texas Society of CPAs • Several members are past chairmen and several are current chairmen or members of Committees of the Texas Society of CPAs, including the Society's Government Accounting Standards Committee -7- • Members are heavily involved in continuing professional education programs sharpening technical skills • Our Firm includes members of the Association of Government Accountants, the Government Finance Officers Association of Texas, and the Special Review Committee of the GFOA In keeping with our obligation for quality service, we require our professional employees to complete a minimum of qualifying continuing professional education credits annually. We also encourage our personnel to pursue their certification as accountants and then to become actively involved in local and state professional organization activities. Included, as supporting information,is a schedule of résumés covering the qualifications of proposed staff, which can be rotated each year to meet your needs, including partners, managers, and senior auditors who are expected to be used in the performance of this engagement. Each of the résumés indicates the individual's position in our Firm, including the education, years and experience. All assigned personnel in key positions are licensed to practice accounting in the State of Texas. We also confirm, we, as a Firm, and individually, have had no disciplinary action taken against us during the past three years with state regulatory bodies or professional organizations. Quality Control Review Pattillo, Brown & Hill, L.L.P. has been a member of the AICPA for over 40 years and is a member of the AICPA SECPS as well as the PCPS Peer Review quality control sections. As such,we are required to undergo peer reviews every three (3) years. This section has the highest evaluating criteria of all AICPA member groups and includes reviews of governmental entities. We completed our most recent review in 1998 and received an unqualified report. In addition, we also received no "letter of comments," and therefore achieved the highest possible rating, obtained by only approximately 5% of accounting firms across the nation. Because of our high quality standards, we have been approved by the AICPA to perform numerous peer reviews of other CPA firms across the nation. A copy of our report is attached. -8- Detail Of Specific Assignments Within The Proposed Audit Team The following descriptions detail the specific responsibilities of each member of your audit team. Partner Engagement Partner: James C. Curry, CPA, CGFM The partner assigned to your audit team is responsible for the overall administration of the audit and final review and approval of all reports and workpapers. In addition, the partner oversees the manager who is directly responsible for your engagement. Manager Engagement Manager: Todd Pruitt, CPA The manager has primary responsibility for your engagement. All scheduling of fieldwork and presentations are made by the manager. The manager is also responsible for staff assignments and budget control. Senior Auditor Senior Auditor—in-charge: Cathy Sefcik, CPA The senior auditor is directly responsible for planning and directing the fieldwork during the engagement. In addition, the senior auditor is responsible for supervising all staff auditors assigned to your engagement. Staff Auditors Staff auditors work under close supervision of the senior-in-charge. All staff auditors will have significant experience working on audits of cities. A determination of the number of staff auditors necessary will be made during the planning phase of the engagement. -9- JAMES C. CURRY, CPA, CGFM Audit Partner Sample of Governmental Experience City of Waco City of DeSoto City of Eagle Pass City of Wylie City of Forest Hill Alamo Area Council of Governments Town of Flower Mound City of Luling Denton County Williamson County McLennan County City of Del Rio City of Live Oak City of Belton Educational Background BA Business Administration Baylor University Certified Government Finance Manager(1995) Certificate of Educational Achievement in Governmental Accounting and Auditing— 1993 Sample of Continuing Professional Education 2000 GFOAT Spring Institute 2000 Forty-second County Auditors' Conference 1999 GFOAT Fall Institute 1999 GFOAT Spring Institute 1998 Summer Audit Training 1998 Fortieth County Auditors' Conference 1998 GFOAT Fall Institute 1998 Summer Audit Training 1997 Tenth Annual Local Government Seminar 1997 Thirty-ninth County Auditors' Conference 1997 Government Finance Officers Association of Texas Spring Institute Professional Organizations American Institute of Certified Public Accountants Texas Society of Certified Public Accountants Institute of Management Accountants Government Finance Officers Association of Texas Government Finance Officers Association of the United States and Canada(GFOA) Special Review Committee of GFOA TSCPA Governmental Accounting and Auditing Standard Committee -10- TODD PRUITT, CPA Audit Manager Sample of Governmental Experience Alamo Area Council of Governments City of Waco City of New Braunfels City of Kerrville City of DeSoto City of Wylie City of Forest Hill City of Woodway City of Belton Williamson County Town of Flower Mound Denton County Tarrant County MHMR Services City of Eagle Pass Educational Background BBA in Accounting University of Texas at Austin Sample of Continuing Professional Education 2000 GFOAT Spring Institute 2000 Forty-second County Auditors' Conference 2000 The New Financial Reporting Model: GASB 34 1999 GFOAT Fall Institute 1999 Semi-Annual TARC Conference 1999 GFOAT Spring Institute 1998 GFOAT Fall Institute 1998 GFOAT Spring Institute 1998 Fortieth County Auditors'Institute 1997 Thirty-ninth County Auditors' Conference 1997 Governmental Audit Training Professional Organizations American Institute of Certified Public Accountants Texas Society of Certified Public Accountants Special Review Committee of GFOA -11- CATHY SEFCIK, CPA Audit Senior Sample of Governmental Experience City of Waco City of Forest Hill East Texas Council of Governments South East Texas Regional Planning Alamo Area Council of Governments Commission Wood County City of Sherman City of Luling City of Caldwell Tarrant County MHMR Services Rockwall County City of Mexia Henderson County Education Service Center—Region XII McLennan County Educational Background BBA Accounting University of Texas at Austin Sample of Continuing Professional Education 2000 County Auditors' Conference 1999 TAC Post-Legislative Conference 1999 Semi-Annual TARC Conference 1999 Forty-first County Auditors' Institute 1999 Summer Audit Training 1998 Summer Audit Training 1998 Fortieth County Auditors' Institute 1997 Summer Auditing Training 1997 Thirty-ninth County Auditors' Institute Professional Organizations American Institute of Certified Public Accountants Texas Society of Certified Public Accountants -12- GOVERNMENTAL EXPERIENCE PRIOR FIRM EXPERIENCE IN PUBLIC SECTOR AUDITS Below is a sample of single audits within the last five years with reporting situations similar to City of Friendswood, Texas. Please feel free to contact any of the below mentioned references as you so desire. Estimated Number of Fiscal Years Audit/Partner/Manager Hours Contact Audited * City of Waco 1,200 Janice Andrews 1999 James C. Curry Waco, Texas - - Todd Pruitt 254/750-5769 * Town of Flower Mound 500 Harlan Jefferson 1995— 1999 James C. Curry Flower Mound, Texas Todd Pruitt 214/539-6006 * City of DeSoto 750 Camelia Browder 1998— 1999 James C. Curry DeSoto, Texas Todd Pruitt 972/230-9678 * City of New Braunfels 450 Chet Lewis 1997— 1999 James C. Curry New Braunfels, Texas Todd Pruitt 830/608-2100 Alamo Area Council of Governments 600 Al Notzon 1997— 1999 James C. Curry San Antonio,Texas Todd Pruitt 210/362-5200 * These entities received their Certificate of Excellence in Financial Reporting from the GFOA. H -13- • EXPERIENCE WITH GFOA'S CERTIFICATE OF ACHIEVEMENT As indicated below, many of our clients have elected to pursue the Certificate of Achievement for Excellence in Financial Reporting. In all instances where we have been associated with this pursuit, the GFOA has awarded the entity the certificate. Moreover, our governmental audit staff includes three members of the Special Review Committee of the GFOA. The following is a sample of our clients that have received this award in the past three years. Abilene Regional MHMR Center Hood County City of Belton Johnson County MHIMR Center City of Copperas Cove City of Kerrville City of Del Rio McLennan County Denton County City of New Braunfels City of Eagle Pass City of Sherman Ellis County City•of Waco Town of Flower Mound Walker County Grayson County Williamson County Gregg County City of Wylie Henderson County -14- OTHER REFERENCES Listed below are additional references with similar auditing requirements to the City of Friendswood. • OTHER REFERENCES City Governments Athens Flower Mound New Braunfels Bellmead Forest Hill Northcrest Belton Fredericksburg Palestine Brady Gatesville San Benito Caldwell Hearne Sherman • Clifton Hewitt Thornton Copperas Cove Hillsboro Waco Corinth Kerrville West Tawakoni Del Rio Lacy-Lakeview Woodway DeSoto Live Oak Wylie Eagle Pass Mart Fairfield Mexia County Governments Bastrop Grimes Orange Bosque Henderson Pecos Cameron Hill Robertson Denton Hood Sabine Dimmitt Jasper Tyler Ellis Kaufman Upshur Fannin • Leon Walker Freestone Limestone Williamson Gillespie Medina Wood Grayson McLennan Gregg Montgomery Councils of Governments Alamo Area Council of Governments Brazos Valley Council of Governments Concho Valley Council of Governments East Texas Council of Governments Heart of Texas Council of Governments Permian Basin Regional Planning Commission South East Texas Regional Planning Commission South Texas Development Council -15- SPECIFIC AUDIT APPROACH SPECIFIC AUDIT APPROACH James C. Curry, CPA, CGFM,will be the partner in charge of the audit. Todd Pruitt, CPA,will be the manager and Cathy Sefcik, CPA,the individual in charge of the day-to-day audit in the field. All of the aforementioned personnel are familiar with the activities and accounting procedures associated with a City's operations. (See"Resumes in this proposal) As a part of the quality control to be associated with our audit, we will, among other things use the following approach: 1. Our workpapers will be subject to continuous review beginning at the senior level and progressing through the manager to final review by a partner at the end of fieldwork. The fmancial statements will be cross-referenced to supporting statements and schedules within the report, to footnotes and to the related audit workpapers. It will be proved in all respects before being released for printing. 2. We will determine that the financial statements are presented in accordance with generally accepted accounting principles applied on a consistent basis and that all material disclosures have been made. 3. All working papers will be systematically organized and referenced. They will be in sufficient detail to facilitate review by the City and/or cognizant State or Federal audit agencies. Any weaknesses in internal accounting control or needed improvements in accounting procedures will be summarized in the workpapers and presented in the form of a management letter at the close of the engagement. We will review all management letter comments with the City Manager prior to drafting it. Audit Approach We will make an organization-wide financial audit in regard to the general purpose financial statements and combining statements and perform work necessary to provide an "in-relation-to" report on other schedules. Our audit will be conducted in accordance with generally accepted auditing standards established by the American Institute of Certified Public Accountants as included in "Statements on Auditing Standards" and AICPA Industry Audit Guide "Audits of State and Local Government Units", the standards for financial and compliance audits contained in the United States General Accounting Office's "Government Auditing Standards" (1994 revision),the Single Audit Act Amendments of 1996, Vernon's Texas Codes Annotated, Local Government Code, the Office of Management and Budget's Circular A-133, and the State of Texas Single Audit Circular. We will apply such tests of your accounting records and account balances as are necessary for us to express an opinion regarding the conformance of your financial statements with generally accepted accounting principles and compliance with applicable regulatory standards and law, as stated in this paragraph. Accordingly, our audit will be an integrated audit and shall encompass the entirety of your financial operations. -16- - The financial statement audit will be to determine whether (1) the financial statements present fairly the financial position, results of operations, and cash flows or changes in financial positions in accordance with generally accepted accounting principles, and (2) whether Friendswood, Texas, has complied with the laws and regulations for those transactions and events that may have a material effect on the financial statements. The financial related audit also includes determining (1) whether financial - - reports and related items are fairly presented, (2) whether financial information is presented in accordance with established or stated criteria including Statement 1 of the Governmental Accounting Standards Board (GASB) and the Government Finance Officers Association (GFOA) publication "Governmental Accounting,Auditing, and Financial Reporting" and(3)whether the City has adhered to specific financial compliance requirements. We will select statistical s ples of i bursements oft. - `+'• on an organizational wide basis. The samples will be selected r domly from t e population of all ch- ks of all City bank accounts. Sample sizes are normally limit to 60 payrol transactions . d 60 other . ansactions as higher sample sizes statistically do not provid significantly gher levels of r liance on t e sample chosen. Additional samples of transactions of fed al and sta programs may b- require. in varying degrees by OMB Circular A-133 and the State of Te ingle Audit Circular, base. on levels of funding. Such sample sizes typically are smaller due to the limited scope of the population. Determination of laws and regulations applicable to transactions selected by transaction tests and those which will require additional audit test work will be determined in accordance with the American Institute of Certified Public Accountant's "Statement on Auditing Standards" and the GAO's "Government Auditing Standards" (1994 revision). Analytical procedures will be performed on significantly all areas of the City's financial statements. The complexity of such procedures will be to the extent we consider necessary in the circumstances of the various areas. The complexity should not effect estimated time for the engagement as we plan for substantial amount of the information required in the analytical review to be compiled from schedules described in your request for proposals. We will use our laptop computers to compile information and perform calculations necessary for this review whenever possible. As a part of the audit of the general purpose financial statements, the annual audit will also include obtaining an understanding of the City's internal control structure and reporting any reportable conditions relating to the internal control structure that comes to our attention. Any material weakness noted during our study and evaluation of internal accounting and administrative controls will be reported. As part of the audit of the general purpose financial statements, transactions and records pertaining to federal and state programs will also be tested for material compliance with federal and state laws, rules and regulations, and all instances of noncompliance will be reported to City of Friendswood,Texas. While we will be assisting you in preparing the financial statements, City of Friendswood, Texas, is ultimately responsible for the fair presentation of the financial statements, and ensuring that the financial statements render a full and proper account of the activities of the City. The City further acknowledges that it is responsible for ensuring that its funds are handled properly and in compliance with laws and regulations,but also for achieving the purposes for which the funds are authorized. -17- Pattillo, Brown & Hill, L.L.P. accepts responsibility for ensuring that the audit is conducted by personnel who collectively have the necessary skills, that independence is maintained, that applicable standards are followed in conducting the audit, that the Firm has an appropriate internal quality control system in place, and maintains participation in an external quality control review program. Proposed Schedule At Pattillo, Brown & Hill, L.L.P., we are large enough to provide flexibility in scheduling, yet small enough to provide the personalized service that our clients deserve. We are committed to beating established deadlines. We will meet the following schedule subject to review and approval of the City's management. November 1,2000 Detailed audit plan December 15, 2000 Interim work shall be completed January 10,2001 Auditor shall complete all fieldwork February 9, 2001 Presentation of draft of audit report and Recommendations to Director of Administrative Services February 9, 2001 Presentation of final reports to City Manager February 19, 2001 Submission of the management letter General Planning Procedures We would prefer to perform preliminary audit procedures prior to the City's fiscal year-end. These procedures will be designed to gather information necessary to obtain an understanding of the City's operations, organization and internal controls. We will make an initial assessment of the risk of material misstatement of the financial statements and of material noncompliance with laws,regulations, and provisions of federal and state contracts and grant agreements. We will determine if a single audit is required under OMB Circular A-133 and the State of Texas Single Audit Circular. A determination of the City's major federal and state programs will be made, and which tests of controls and compliance tests are to be performed. Audit work programs will be prepared for each significant area covered by the audit and a complete time budget by audit area will be completed at this time. Staffing assignments will be determined and the audit plan will be discussed with City officials. We will provide the City a list of items to assemble prior to the start of fieldwork in order to facilitate the timing of the audit. Due to the nature of this segment of the audit, and the audit manager will be on-site for the majority of this stage in addition to the senior and staff auditors. -18- SAMPLE REPORTS I1Kll PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS SAMPLE INDEPENDENT AUDITORS' REPORT The Honorable Mayor and Members of the City Council City of Friendswood, Texas We have audited the accompanying general purpose financial statements of the City of Friendswood, Texas (the "City"), as of and for the year then ended September 30, 2000, as listed in the table of contents. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating . the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City at September 30, 2000, 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. In accordance with Government Auditing Standards, we have also issued our report dated , 2000, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. -19- 401 WEST HWY.6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583■ALBUQUERQUE,NM(505)266-5904■RIO RANCHO,NM(505)898-35(6 Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The combining and individual fund and account group financial statements, schedules and statistical data listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City. This additional information is the responsibility of the City's management. Such information, except for that portion marked "unaudited" on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the general purpose financial statements; and, in our opinion, the information is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. , 2000 -20- vim wi, PATTILLO, BROWN & HILL, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS IN BUSINESS CONSULTANTS SAMPLE REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and Members of the City Council City of Friendship, Texas We have audited.the general purpose financial statements of the City of Friendship, Texas, as of and for the year ended September 30, 2000, and have issued our report thereon dated , 2000. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to.financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the City's general purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management of the City of Friendship, Texas, in a separate letter dated , 2000. -21- 401 WEST HWY.6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pblicpa.com OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583■ALBUQUERQUE,NM(505)266-5904■RIO RANCHO,NM(505)898-3516 This report is intended for the information of the audit committee, management, City Council, and federal and state grantor agencies and is not intended to be and should not be used by anyone other than those specified parties. , 2000 A • -22- CONCLUDING REMARKS As outlined in this proposal, we believe that our Firm is well matched to the City of Friendswood's needs. To summarize: • We have significant experience auditing governmental organizations, including cities. • We can provide you with timely services at a reasonable cost. • We have extensive experience with the Certificate of Achievement Program of the Government Finance Officers' Association (GFOA). In fact, two members of your audit team are members of the Special Review Committee of the GFOA. • We are committed to meeting your deadlines. Pattillo, Brown &Hill, L.L.P. prides itself on being responsive to the needs of our clients. We believe this proposal underscores the points that set us apart from other accounting firms. We look forward to the opportunity to develop a mutually beneficial relationship with the City of Friendswood. • -23- PEER REVIEW REPORT L_ EB EUBANK & BETTS A Professional Limited Liability Company CERTIFIED PUBLIC ACCOUNTANTS 3820 Interstate 55 North / Post Office Box 16090 / Jackson,Mississippi 39236-6090 / Phone(601)987-4300 / Fax(601)987-4314 November 13, 1998 To the Partners Pattillo, Brown & Hill, L.L.P. We have reviewed the system of quality control for the accounting and auditing practice of Pattillo, Brown & Hill, L.L.P. (the firm) in effect for the year ended March 31, 1998. A system of quality control encompass 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. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures and with the membership requirements of the Section to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it 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. 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 Pattillo, Brown & Hill, L.L.P. in effect for the year ended March 31, 1998, 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 the professional standards. Also, in our opinion, the firm has complied with the membership requirements of the Section in all material respects. EUBANK&BETTS,PLLC MEMBERS • American Institute • Mississippi Society • Division for CPA Firms SEC • Tax Division of the •CPA Associates International,Inc. of Certified Public of Certified Public and Private Companies American Institute of with Associated Offices in Accountants Accountants Practice Sections Certified Public Accountants Principal U.S.and International Cities l_� APPENDIX B PROPOSER GUARANTEES 1. The Proposer certifies it can and will provide and make available, at a minimum, all services set forth in Section II,Nature of Services Required. Signature of Official: Name(typed): James C. Curry Title: Partner Firm: Pattillo, Brown&Hill,L.L.P. Date: September 28, 2000 -25- APPENDIX C PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Texas laws with respect to 1 foreign(non-state of Texas)corporations. _-• B. Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts or omissions of any officers, employees or agents thereof. C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the express prior written permission of the City. D. Proposer warrants that it is willing and able to meet required dates and report deadlines. E. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official: � .,.._ e. ecv„2,7 Name(typed): James C. Curry Title: Partner Finn: Pattillo, Brown&Hill,L.L.P. Date: September 28, 2000 -26- L__