HomeMy WebLinkAboutC2010-236 - 7/13/2010 - ApprovedCOLLIER, iOHNSON ~ WOODS, P.C.
555 N. Carancahua, Suite 1000
Corpus Christi, Texas 78478-0052
361-884-9347 p'ax 361-884-9422
www caw-cpa. com
July 13, 2010
Mx. Angel R. Escobar
City Manager
City of Corpus Chxisti
P. 0. Box 9277
Corpus Christi, Texas 7$469-9277
Dear Mr. Escobar:
We are pleased to conf rm our understanding of the services we are to provide for the City of
Corpus Christi (City} for the year ended July 31, 2010. We will audit the financial statements of the
governmental activities, the business-type activities, the aggregate discretely presented component
units, each major fund, and aggregate remaining fund information, which collectively comprise the
basic financial statements, of the City of Corpus Christi as of and for the year ended July 31, 2010.
Accounting standards generally accepted in the United States provide for certain required
supplementary information (RSI), such as management's discussion and analysis (MD&A), to
supplement the City's basic f nancial statemen#s. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board who considers it
to be an essential part of financial reporting fax placing the basic financial statements in an
appropriate operational, economic, or historical context. As part of our engagement, we will apply
certain limited procedures to the City's RSI in accordance with auditing standards generally accepted
in the United States of America. These limited procedures will consist of inquiries of managemen#
regarding the methods of pxeparing the information and comparing the information for consistency
with management's responses to ozzr inquiries, the basic financial statements, and other knowledge
we obtained dzzring our audit of the basic financial statements. We will not express an opinion ox
provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance. The following RSI is required by
generally accepted accounting principles and will be subjected to certain limited procedures, but will
not be audited:
1. Management's Discussion and Analysis
2. Employment Retirement Benefits -Analysis of Funding Progress
2010-236
M2010-172
07/13/10
Colliex ,johnson & Woods
~~~~~
r 'S
Mr. Angel R. Escobar
ruIy 13, 2Q 10
Page 2
Supplementary information other than RSI also accompanies the City's financial statements.
We will subject the following supplementary information to the auditing procedures applied in our
audit of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare
the financial statements or to the financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America and will
provide an opinion on it in relation to the f nancial statements as a whole:
1. Combining and individual fund statements.
2. Budgetary Comparison Schedules.
3. Capital Assets Used in Operation of Governmental Funds.
4. Schedule of Expenditures of Federal Awards.
The following other information accompanying the financial statements will not be subjected
to the auditing procedures applied in our audit of the financial statements, and for which our
auditor's report will not pxovide an opinion or any assurance:
1. Introductory information
2. Statistical information
Audit Objectives
The objective of our audit is the expression of an opinion as to whether your basic financial
statements are fairly presented, in all material respects, in conformity with U.S. generally accepted
accounting principles and to report on the fairness of the additional information referred to in the
first paragraph when considered in relation to the basic financial statements taken as a whole. The
objective also includes reporting on:
• Internal control related to the financial statements and compliance with the provisions of
applicable laws, regulations, contracts, agreements and grants, noncompliance with which could
have a material effect on the financial statements in accordance with Government Auditing
Standards.
• Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations, and the provisions of contracts or grant agreements that could
have a direct and material effect on each major program in accordance with the Single Audit Act
Amendments of 1996 and OMB Circular A-133,Audits of States, Local Governments, andNon-
Profzt Organizations.
~}
Mr. Angel R. Escobar
3uly 13, 2010
Page 3
The reports on internal control and compliance will each include a statement that the report is
intended for the information and use of the Honorable Mayor and Members of the City Council,
management, federal awarding agencies and pass-through entities and is not intended to be and
should not be used by anyone other than these specif ed parties.
Our audit will be conducted in accordance with auditing standards generally accepted in the
United States of America; the standards for fnancial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; the Single Audit Act
Amendments of 1996; and the provisions of OMB Circular A-133, and will include tests of
accounting records, a determination of majax programs} in accordance with OMB Circular A-133,
and other procedures we consider necessary to enable Lis to express such opinions and to render the
required reports. If our opinions on the financial statements or the Single Audit compliance opinions
are other than unqualified, we will fully discuss the reasons with you in advance. If, fox any reason,
we are unable to complete the audit or are unable to form or have not farmed opinions, we may
decline to express opinions or to issue a report as a result of this engagement.
Management Responsibilities
Management is responsible fox the basic financial statements and all accompanying
information as well as all representations contained therein. Management is also responsible for
identifying government award programs and understanding and complying with the compliance
requirements, and preparation of the schedule of expenditures of federal awards. in accordance with
the requirements of OMB Circular A-133. As part of the audit, we will assist with preparation of
your financial statements, schedule of expenditures of federal awards, and related notes. You are
responsible for making all management decisions and performing all management functions relating
to the financial statements, schedule of expenditures of federal awards, and related notes and for
accepting full responsibility for such decisions. You will be required to acknowledge in the
management representation letter our assistance with preparation of the financial statements and the
schedule of expenditures of federal awards and that you have reviewed and approved the financial
statements, schedule of expenditures of federal awards, and related notes prior to their issuance and
have accepted responsibility for them. Further, you are required to designate an individual with
suitable skill, knowledge, or experience to oversee any non-audit services we provide and for
evaluating the adequacy and results of those services and accepting responsibility for them.
Management is responsible for establishing and maintaining effective internal controls,
including internal controls over compliance, and for monitoring ongoing activities, to help ensure
that appropriate goals and objectives are met and that there is reasonable assurance that government
programs are administered in compliance with compliance requirements. You are also responsible
for the selection and application of accounting principles; for the fair presentation in the financial
statements of the respective financial position of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information ofthe City and the respective changes in financial position and, where
applicable, cash flows in conformity with U.S. generally accepted accounting principles; and for
<<
Mr. Angel R. Escobar
7~uly 13, 2010
Page 4
compliance with applicable laws and regulations and the provisions of contracts and grant
agreements.
Management is also responsible for making all financial records and related information
available to us and for ensuring that management and financial information is reliable and properly
recorded. Your responsibilities also include, including identifying significant vendor relationships in
which the vendor has responsibility for program compliance and for the accuracy and completeness
of that information. Your responsibilities include adjusting the financial statements to correct
material misstatements and confirming to us in the representation letter that 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.
You are responsible for the design and implementation of programs and controls to prevent
and detect fraud, and far informing us about all known or suspected fraud or illegal acts affecting the
government involving { 1) management, {2) employees who have significant roles in internal control,
and {3) others where the fraud or illegal acts could have a material effect on the financial statements.
Your responsibilities include informing us of your knowledge of any allegations of fraud or
suspected fraud affecting the government received in communications from employees, former
employees, grantors, regulators, or others. In addition, you are responsible for identifying and
ensuring that the entity complies with applicable laws, regulations, contracts, agreements, and grants.
You are responsible for the preparation of the supplementary information in conformity with U.S.
generally accepted accounting principles. You agree to include our report on the supplementary
information in any document that contains and indicates that we have reported on the supplementary
information. You also agree to present the supplementary information with the audited financial
statements OR make the audited financial statements readily available to users of the supplementary
information no later than the date the supplementary information is issued with our report thereon.
Management is responsible for establishing and maintaining a process for tracking the status
of audit findings and recommendations. Management is also responsible for identifying for us
previous financial audits, attestation engagements, performance audits, or other studies related to the
objectives discussed in the Audit Objectives section of this letter. This responsibility includes
relaying to us corrective actions taken to address significant findings and recommendations resulting
from those audits, attestation engagements, performance audits, or studies. You are also responsible
for providing management's views on our current f ndings, conclusions, and recommendations, as
well as your planned corrective actions, for the report, and for the timing and format for providing
that information.
Mr. Angel R. Escobar
July 13, 2010
Page 5
Audit Procedures-General
An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements; therefore, our audit will involve judgment about the number
of transactions to be examined and the areas to be tested. We will plan and perform the audit to
obtain reasonable rather than absolute assurance about whether the financial statements are free of
material misstatement, whether from {1} errors, (2) fraudulent fnancial reporting, (3)
misappropriation ofassets, or (4) violations of laws or governmental regulations that are attributable
to the entity or to acts by management or employees acting on behalf of the entity. Because the
determination of abuse is subjective, Government Auditing Standards da not expect auditors to
provide reasonable assurance of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because
we will not perform a detailed examination of all transactions, there is a risk that material
misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not
designed to detect immaterial misstatements, or violations of laws or governmental regulations that
do not have a direct and material effect on the basic financial statements or major programs..
However, we will inform you of any material errors and any fraudulent financial reporting or
misappropriation of assets that come to our attention. We will also inform you of any violations of
laws or governmental regulations that come to our attention, unless clearly inconsequential. We will
include such matters in the .reports required for a Single Audit. Our responsibility as auditor is
limited to the period covered by our audit and does not extend to matters that might arise during any
Later periods for which we are not engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions
recorded in the accounts, and may include tests of the physical existence of inventories, and direct
confirmation of receivables and certain other assets and liabilities by correspondence with selected
individuals, creditors, and financial institutions. We will request written representations from your
attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the
conclusion of our audit, we will also require certain written representations from you about the
financial statements and related matters.
Audit Procedures-Internal Controls
Our audit will include obtaining an understanding of the entity and its environment, including
internal control, suff cient to assess the risks of material misstatement of the financial statements and
to design the nature, timing, and extent of further audit procedures. Tests of controls may be
performed to test the effectiveness of certain controls that we consider relevant to preventing and
detecting errors and fraud that are material to the financial statements and to preventing and detecting
misstatements resulting from illegal acts and other noncompliance matters that have a direct and
material effect on the financial statements. Our tests, if performed, will be less in scope than would
be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed
in our report on internal control issued pursuant to Government Auditing Standards.
i
Mr. Angel R. Escobar
July 13, 2010
Page 6
As required by OMB Circular A-133, we will perform tests of controls over compliance to
evaluate the effectiveness of the design and operation of controls that we consider relevant to
preventing or detecting material noncompliance with compliance requirements applicable to each
major federal award program. However, our tests will be less in scope than would be necessary to
render an opinion on those controls and, accordingly, no opinion will be expressed in our report on
internal control issued pursuant to OMB Circular A-133.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, during the audit, we will communicate to management and those charged
with governance internal control related matters that are required to be communicated under
professional standards, Government Auditing Standards, and OMB Circular A-133.
Audit Procedures-Compliance
As part of obtaining reasonable assurance about whether the basic financial statements are
free of material misstatement, we will perform tests of the City's compliance with applicable laws
and regulations and the provisions of contracts and agreements, including grant agreements.
However, the objective of those procedures will not be to provide an opinion on overall compliance
and we will not express such an opinion in our report on compliance issued pursuant to Government
Auditing Standards.
OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable
assurance about whether the auditee has complied with applicable laws and regulations and the
provisions of contracts and grant agreements applicable to major programs. Our procedures will
consist ofthe applicable procedures described in the OMB Circular A-133 Compliance Supplement
for the types of compliance requirements that could have a direct and material effect on each of the
City's major programs. The purpose of those procedures will be to express an opinion on the City's
compliance with requirements applicable to major programs in our report on compliance issued
pursuant to OMB Circular A-133.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other
confirmations we request anal will locate any invoices selected by us for testing.
At the conclusion ofthe engagement, we will complete the appropriate sections of and sign
the Data Collection .Form that summarizes our audit findings. We will provide copies of our reports
to the City; however, it is management's responsibility to submit the reporting package (including
f nancial statements, schedule of expenditures of federal awards, summary schedule of prior audit
findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the
designated federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection
Form and the reporting package must be submitted within the earlier of 30 days after receipt of the
auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to
Mr. Angel R. Escobar
July 13, 2010
Page 7
in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we
will provide information to management as to where the reporting packages should be submitted and
the number to submit.
The audit documentation for this engagement is the property of Collier, Johnson & Woods
P.C. anal constitutes confidential information. However, pursuant to authority given by law ar
regulation, we may be requested to make certain audit documentation available to oversight or
grantor agencies for purposes of a quality review of the audit, to resolve audit findings, or to carry
out oversight responsibilities. We will notify you of any such request. if requested, access to such
audit documentation will be provided under the supervision of Collier, Johnson & Woods 1'.C.
personnel. Furthermore, upon request, we may provide copies of selected audit documentation to
oversight or grantor agencies. The oversight or grantor agencies may intend, or decide; to distribute
the photocopies or information contained thereinto others, including other governmental agencies.
The workpapers for this engagement will be retained for a minimum of five years after the
date the auditors' report is issued or for any additional period requested by the oversight agency for
audit orpass-through entity. Tf we are aware that a federal awarding agency, pass-through entity, or
auditee is contesting an audit finding, we will contact the parties contesting the audit finding fax
guidance prior to destroying the audit documentation.
F. John Shepherd is the engagement partner and is responsible for supervising the
engagement and signing the reports or authorizing another individual to sign them. Our fees for
these services will be based on the actual time spent at our standard hourly rates, plus travel and
other out-of pocket costs such as report production, typing, postage, etc. Our standard hourly rates
vary according to the degree of responsibility involved and the experience level of the personnel
assigned to your audit.
We estimate that our fees for the engagement cover the following tasks:
Financial Audit of the City 105,000
Compliance Audit 35,000
TOTAL
140,000
We do not anticipate the fee to exceed $190,000 for the above services, unless unforeseen
circumstances arise. Such circumstances will be discussed when, and if, encountered. Our invoices
for these fees will be rendered as work progresses and will be payable within 30 days of receipt and
work will cease if fees are not paid. We acknowledge that no fees for the tasks outlined above that
exceed $140,000 in the aggregate are authorized by this agreement, without the prior written
authorization of the Director of Financial Services. Expenses will be itemized and will be limited to
reasonable and customary charges.
V L
Mr. Angel R. Escobar
July T 3, 2010
Page S
The City is obligated to pay such fees under this agreement as may lawfully be made from
funds budgeted and appropriated for that purpose during the current fiscal year. Should the City fail
to budget and appropriate funds for the audit in the subsequent f scat year this agreement shall be
terminated.
We appreciate the opportunity to be of service to the City of Corpus Christi and believe this
letter accurately summarizes the significant terms of our engagement. Tf you have any questions,
please Iet us know. Tf you agree with the terms of our engagement as described in this letter, please
sign the enclosed copy and return it to us.
Very truly yours,
COLLIER, JOHNSON & WOODS
A Professional Corporation
~-~w~
F. John Shepherd
RESPONSE:
This letter correctly sets forth the understanding of the City of Corpus Christi.
~~ ..
Age R. Escobar, City Manager Armando Chapa, Cit ~ecretary
Date: ~~~~~® Date: ~~ ~ a
Motion No.: ~~~ ~'' ~ ~~
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COLLIER, jOHNS4N ~ WOODS, P.C.
Juiy 13, 2010
Mr. Angel R. Escobar
City Manager
City of Corpus Christi
P. O. Box 92`17
Corpus Christi, Texas 78469-9277
Dear Mr. Escobar:
555. N. Carancahua, Suite 1000
Corpus Christi, Texas 7$478-0052
361-884-9347 • Fax 361-884-9422
wwvv.cjw-cpa.com
Enclosed are tvwo copies of the audit engagement letter far the City's fiscal year ended July
31, 2010.
The fee quoted in this engagement letter is $140,000 in accordance with the audit contract for
the fiscal year ended July 31, 2010.
If you have any questions regarding the engagement letter, please do not hesitate to contact
us.
Very truly yours,
COLLIER, JOHNSON & WOODS
A Professional Corporation
F. John Shepherd