HomeMy WebLinkAboutC2010-558 - 7/13/2010 - ApprovedCOLLIER, JOHNSON & WOODS, P.C.
555 N. Carancahua, Suite 1000
Corpus Christi, Texas 78401 -0839
36Z -884 -9347 • Fax 361 -884 -9422
www.gw- cpa.com
June 29, 2011
Mr. Ronald L. Olson
City Manager
City of Corpus Christi
P. O. Box 9277
Corpus Christi, Texas 78459 -9277
Dear Mr. Olson:
We are pleased to confirm our understanding of the services we are to provide for the City of
Corpus Christi (City) for the year ended July 31, 2011. 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, 2011.
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 financial statements. Such information, although not apart of the basic
financial statements, is required by the Governmental Accounting Standards Board who considers it
to be an essential part of financial reporting for 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 management
regarding the methods of preparing the information and comparing the information for consistency
with management's responses to our inquiries, the basic financial statements, and other knowledge
we obtained during our audit of the basic financial statements. We will not express an opinion or
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 -558
M2010 -172
07/13/10
Collier, Johnson & Woods INDEXED
Mr. Ronald L. Olson
June 29, 2011
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 financial 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 provide 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 laws, regulations, and the
provisions of contracts or grant agreements, 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 of5tates, Local Governments, andNon-
Profit Organizations.
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 specified parties.
Mr. Ronald L. Olson
June 29, 2011
Page 3
Our audit will be conducted in accordance with auditing standards generally accepted in the
United States of America; the standards for financial 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 major program {s} in accordance with OMB Circular A -133,
and other procedures we consider necessary to enable us 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, for any reason,
we are unable to complete the audit or are unable to form or have not formed opinions, we may
decline to express opinions or to issue a report as a result of this engagement.
Management Responsibilities
Management is responsible for 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 malting 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 evaluating and 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 of the City and the respective changes in financial position
and, where applicable, cash flows in conformity with U.S. generally accepted accounting principles;
and for compliance with applicable laws and regulations and the provisions of contracts and grant
agreements.
Mr. Ronald L. Olson
June 29, 2011
Page 4
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 for 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.
Additionally, as required by OMB Circular A -133, it is management's responsibility to follow up
and take corrective action on reported audit findings and to prepare a summary schedule of prior
audit findings and a corrective action plan. 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 findings, conclusions, and recommendations, as
well as your planned corrective actions, for the report, and for the timing and format for providing
that information.
Mr. Ronald L. Olson
June 29, 2011
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 financial reporting, (3)
misappropriation of assets, 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 do 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, and of
any material abuse that comes to our attention. 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 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, funding sources, 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, sufficient 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
Mr. Ronald L. Olson
June 29, 2011
Page 6
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.
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 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 of test of transactions and other applicable procedures described in the OMB CircularA -133
Compliance Supplement and related addenda 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
each of its major programs in our report on compliance issued pursuant to OMB Circular A -133.
Engagement Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other
confirmations we request and will locate any invoices selected by us for testing.
At the conclusion of the 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
financial 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
Mr. Ronald L. Olson
June 29, 2011
Page 7
federal audit clearinghouse. We will coordinate with you the electronic submission and certification.
If applicable, we will provide copies of our report for you to include with the reporting package you
will submit 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 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. and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to oversight agencies
or its designee, a federal agency providing direct of indirect funding, or the U.S. Government
Accountability Office 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 P.C.
personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the
aforementioned parties. These parties may intend, or decide; to distribute the copies or information
contained therein to others, including other governmental agencies.
The documentation for this engagement will be retained for a minimum of five years after the
report release or for any additional period requested by the oversight agency for audit or pass - through
entity. If 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 for 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 108,000
Compliance Audit 36,000
TOTAL
144,000
We do not anticipate the fee to exceed $144,000 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
Mr. Ronald L. Olson
June 29, 2011
Page 8
work will cease if fees are not paid. We acknowledge that no fees for the tasks outlined above that
exceed $144,000 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.
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 fiscal year this agreement shall be
terminated.
Government Auditing Standards require that we provide you with a copy of our most recent
external peer review report and any letter of comment, and any subsequent peer review reports and
letters of comment received during the period of the contract. Our 2010 peer review report
accompanies this letter.
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. If you have any questions,
please let us know. If 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
— * � SZ �.
F. John Shepherd
RESPONSE:
� A 01 0 - 1 � 2 AUTHORLIS
Dr COUNCIL.-Y7 I- I �
SECRETARY 1 •
This letter correctly sets forth the understanding of the City of Corpus Christi.
A , C
Ronald L. Olson, City Manager
Date: aD qo !/
Armando Chapa, C'tt_ Secretary
Date:
Motion No.:
Approved as to form: 11
Lisa Aguil r
Assistant City Attorney
For City Attorney
Carneiro, Chumney&Co., L-c.
I'Au3 Robert th Mc CPA CPA CE UIRED PUBLIC ACCOUNT7iNn Allen E. Robertson. r CpA
Julia C. Norton, CPA CPA
Julia C. Nurture, C'A Edwarcl H. Comm,, "':hael J. Schaub, CPA
SysteTn Review Report
October 22, 2010
To the Shareholders
Collier, Johnson & Woods, P.C.
and the Peer Review Committee of the Texas Society of CPAs
We have reviewed the system of quality control for the accounting and auditing practice of
Collier, johnsort & Woods, P.G. (the firm) in effect fof the year ended ]une 30, 2 010. Our peer
review was conducted in accordance wide they Standards for Performing and Reporting on Peer
Reviews established by the Peer Review Board of the American Institute of Certified Public
Accountants. The firm is resp0n5ible for designing a system of quality control and complying
with it to provide the firm with reasonable assurance of performing, and reporting in conformity
with applicable professional standards in all material respects. Our responsibility is to express
are opinion on the design of the system of .quality control and the firm's compliance therewith
based on our review. The nature., objectives, scope, limitations of, and the procedures
performed in a System Review are described in the standards at wlvw.aicpa.orglprsurnmary,
As 'required b the standards engagements .selected for review included engagements
performed under the Government Auditing Standards, audits of Employee Benefit l'lanst, and
audits of Depository Institutions with assets of $ ,500 million or greater.
In our opinion, the system of quality control for the accounting, and auditing practice of Collier,
Johnson & Woods, p.C„ in effect for the year ended June 30, 201.0, has been suitably designed
and complied with to provide the firer with reasonable assurance of performing and reporting;
in conformity with applicable professional standards in all material respects. Firms can receive a
rating of pass, pass taftlr defic.ieney(les), ar fitil. Collier, )ohwon & Woods, P.C. has received a peer
review rating of pass.
'Helping C1 arils Succeed for more thin 8o years'
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