HomeMy WebLinkAboutC2013-487 - 10/16/2013 - NA COLLIER, JOHNSON &WOODS, P.C. Corpus Christi,Texas 78401-0839
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October 8, 2013
Mr. Ronald L. Olson
City Manager
City of Corpus Christi
P. O. Box 9277
Corpus Christi, Texas 78469-9277
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 31,2013. 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, 2013.
Accounting standards generally accepted in the United States of America 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 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 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
2013-487
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October 8, 2013
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We have also been engaged to report on supplementary information other than RSI that
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 and State 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 opinions 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
second 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 of Stales, Local
Governments, and Non-Profit Organizations.
The reports on internal control and compliance will each include a paragraph that states that
the purpose of the report is solely to describe (1) the scope of testing of internal control over
financial reporting and compliance and the result of that testing and not to provide an opinion on the
effectiveness of internal control over financial reporting or on compliance, (2)the scope of testing
Mr. Ronald L. Olson
October 8, 2013
Page 3
internal control over compliance for major programs and major program compliance and the result of
that testing and to provide an opinion on compliance but not to provide an opinion on the
effectiveness of internal control over compliance,and(3)that the report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering internal control over
financial reporting and compliance and OMB Circular A-133 in considering internal control over
compliance and major program compliance. The paragraph will also state that the report is not
suitable for any other purpose.
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(unmodified),we will 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 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 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
Mr. Ronald L. Olson •
October 8, 2013
Page 4
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.
•
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. You are also responsible for providing us with(1) access to all information of which you
are aware that is relevant to the preparation and fair presentation of the financial statements, (2)
additional information that we may request for the purpose of the audit,and(3)unrestricted access to
persons within the government from whom we determine it necessary to obtain audit evidence.
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 preparation of the schedule of expenditures of federal awards in
conformity with OMB Circular A-133. You agree to include our report on the schedule of
expenditures of federal awards in any document that contains and indicates that we have reported on
the schedule of expenditures of federal awards. You also agree to include the audited financial
statements with any presentation of the schedule of expenditures of federal awards that includes our
report thereon OR make the audited financial statements readily available to intended users of the
schedule of expenditures of federal awards no later than the date the schedule of expenditures of
federal awards is issued with our report thereon. Your responsibilities include acknowledging to us
in the written representation letter that (1) you are responsible for presentation of the schedule of
expenditures of federal awards in accordance with OMB Circular A-133; (2) that you believe the
schedule of expenditures of federal awards, including its form and content, is fairly presented in
accordance with OMB Circular A-133; (3)that the methods of measurement or presentation have not
Mr. Ronald L. Olson
October 8, 2013
Page 5
changed from those used in the prior period(or,if they have changed,the reasons for such changes);
and (4) you have disclosed to us any significant assumptions or interpretations underlying the
measurement or presentation of the schedule of expenditures of federal awards.
You are responsible for the preparation of the other supplementary information, which we
have been engaged to report on, 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. Your responsibilities include
acknowledging to us in the written representation letter that(1)you are responsible for presentation
of the supplementary information in accordance with GAAP; (2)that you believe the supplementary
information, including its form and content, is fairly presented in accordance with GAAP; (3) that
the methods of measurement or presentation have not changed from those used in the prior period
(or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any
significant assumptions or interpretations underlying the measurement or presentation of the
supplementary information.
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.
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 of the inherent limitations of an audit, combined with the inherent limitations of
internal control,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,even though
Mr. Ronald L. Olson
October 8, 2013
Page 6
the audit is properly planned and performed in accordance with U.S. generally accepted auditing
standards and Government Auditing Standards. 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 financial statements or major programs. However, we will inform the
appropriate level of management of any material errors or any fraudulent financial reporting or
misappropriation of assets that come to our attention. We will also inform the appropriate level of
management 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 auditors 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
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.
Mr. Ronald L. Olson
October 8, 2013
Page 7
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 Circular A-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
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.
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
Mr. Ronald L. Olson
October 8, 2013
Page 8
aforementioned parties. These parties may intend, or decide;to distribute the copies or information
contained therein to others, including other governmental agencies.
The audit 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 114,000
Compliance Audit 38,000
TOTAL 152,000
We do not anticipate the fee to exceed $152,000 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 $152,000 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.
1 a
Mr. Ronald L. Olson
October 8, 2013
Page 9
Very truly yours,
COLLIER, JOHNSON & WOODS
A Professional Corporation
Or
F. Jo` Shepherd
RESPONSE:
This letter correctly sets forth the understanding of the City of Corpus Christi.
/111
1,--y*.ti• /
o „ on, ice"anager Armando Chapa, City Secretary
Date: Date: K J 1 4
Motion No.: H'1t9\0V13