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HomeMy WebLinkAbout87-97 RESOLUTION P A in a is . _ RESOLUTION NO. 8 7-9 7 - i_ A RESOLUTION APPROVING THE SELECTION OF RFP 96-6 AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE A CONTRACT WITH ARTHUR ANDERSEN, LLP TO PROVIDE INDEPENDENT AUDIT SERVICES TO THE CITY OF FAYETTEVILLE. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. The City Council hereby approves the selection of RFP 97-6 and authorizes the Mayor and City Clerk to execute a contract with Arthur Andersen, LLP to provide independent audit services to the City. A copy of the contract is attached hereto marked Exhibit "A" and made a part hereof. PASSED AND APPROVED this 16th day of September , 1997. APPROVED: By: F ed Hanna, Mayor ATTEST: By I a% A t Traci Paul, City Clerk r{/97fr( iJGOJ,1HfG S .! 'llllll/lllllll1 w ', .a�'.,, 1 July 20, 1998 PER YOLANDA FIELDS, INTERNAL AUDITOR, THE CONTRACT WAS NEVER SIGNED. ARTHUR ANDERSEN .Arthur Andersen LLP August 19, 1997 Suite 5n00 To The Honorable Mayor and City Council of the a D Main Street Dallas TX 7;202-3799 City of Fayetteville, Arkansas: 214 741 8300 ACKNOWLEDGMENT This letter will confirm our understanding of the arrangements made with Ben Mayes, Administrative Services Director, covering the audit you wish us to perform of the combined Balance Sheet of the City of Fayetteville as of December 31, 1997, and the related combined Statement of Revenues, Expenditures, and Changes in Fund Balances, the combined Statement of Revenues, Expenses and Changes in Retained Earnings, and the combined Statement of Cash Flows - all Proprietary Fund Types and the Single Audit for the City of Fayetteville for the year ended December 31, 1997. Upon completion of our audit, we will provide you with our auditors' reports on the financial statements and Single Audit referred to above, and bring to your attention any material errors, and any irregularities or illegal acts of which we become aware during our audit. Audit Responsibilities and Limitations We will conduct our audit in accordance with generally accepted auditing standards, the standards for financial audits contained in Government Auditing Standards (1994 revision), issued by the Comptroller General of the United States (the "Yellow Book"), the Single Audit Act and the provisions of OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Reference is made to the enclosed Attachment I which further describes our responsibilities under generally accepted auditing standards and explains our additional responsibilities under the Yellow Book, the Single Audit Act and the provisions of A-133. Accordingly, we will examine, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assess the accounting principles used and significant estimates made by management, and evaluate the overall financial statement presentation. As part of our audit, we will consider, solely for the purpose of determining the nature, timing and extent of our audit procedures, the City's internal control structure. This consideration will not be sufficient to enable us to render a separate opinion on the effectiveness of the internal control structure over financial reporting. The objective of our audit is to obtain reasonable assurance about whether the financial statements are free of material errors or irregularities. While an effective internal control structure reduces the likelihood that errors or irregularities (including misappropriation of assets), may occur and remain undetected, it does not eliminate ARTHUR ANDERSEN To The Honorable Mayor and City Council of the City of Fayetteville, Arkansas August 19, 1997 Page 2 that possibility. For that reason, and because we use selective testing in our audit, we cannot guarantee that material errors or irregularities, if present, will be detected. The working papers prepared in conjunction with our audit are the property of our firm, constitute confidential information and will be retained by us in accordance with our firm's policies and procedures. Management's Responsibilities and Representations The financial statements referred to above are the responsibility of the management of the City. In this regard, management is responsible for properly recording transactions in the accounting records and maintaining an internal control structure sufficient to permit the preparation of reliable financial statements and ensuring the entity's compliance with applicable laws, regulations, contracts and grants. Management is also responsible for making available to us, upon request, all of the City's original accounting records and related information, and personnel to whom we may direct inquiries. As required by generally accepted auditing standards, we will make specific inquiries of management and others about the representations embodied in the financial statements, the effectiveness of the internal control structure, and compliance with laws, regulations, contracts and grants. Generally accepted auditing standards also require that we obtain a representation letter covering the financial statements and compliance from certain members of management. The results of our audit tests, the responses to our inquiries, and the written representations comprise the evidential matter we intend to rely upon in forming an opinion on the financial statements and rendering our other reports. Because of the importance of management's representations to an effective audit, the City of Fayetteville agrees to release Arthur Andersen LLP and its personnel from any liability and costs relating to our services under this letter attributable to any misrepresentations by management. If you intend to publish or otherwise reproduce the financial statements together with our report(or otherwise make reference to our firm) in a document that contains other information, you agree to (a) provide us with a draft of the document to read, and (b) obtain our approval for inclusion of our report, before it is printed and distributed. Other Services Any additional services that you may request, and that we agree to provide, will be the subject of separate written arrangements. ARTHUR ANDERSEN To The Honorable Mayor and City Council of the City of Fayetteville, Arkansas August 19, 1997 Page 3 Fees and Billing Arrangements Our charges for the services referred to above will be$52,000. Billings for our services t will be rendered as the work progresses. The audit fees contemplate that the City will provide assistance in connection with the audit as follows: 1. Adhere to agreed upon timetable to be mutually agreed upon between the City and Arthur Andersen. 2. Prepare trial balances for all funds, including posting of closing adjustments. 3. Prepare audit schedules, as agreed, and determine such schedules agree with the general ledger. 4. Prepare and print the Comprehensive Annual Financial Report, including related footnotes and schedules, and provide support for all footnote disclosures and schedules. 5. Prepare the schedule of federal and state financial assistance, including related footnotes, and provide support for all footnote disclosures. 6. Analyze and explain variations in selected account balances between years and/or from budget, as identified by Arthur Andersen. 7. Prepare appropriate year-end accruals. 8. Provide copies of executed legal documents supporting significant current year transactions, i.e., bond sales, lawsuit settlements, etc. 9. Provide timely resolution of exceptions or questioned costs as identified during the course of the audit. 10. Completion of GFOA checklist, as appropriate, to ensure compliance with GFOA Certificate program. The above discussion of responsibilities has been included in an effort to provide maximum client service at minimum cost to the City. In the event the City is unable to either complete the procedures outlined or to complete them on schedule, Arthur Andersen is authorized to request an adjustment in fees and/or completion dates. As part of our continuing commitment to the City, we extend an offer to the City to send up to three people per year to pertinent training courses. ARTHUR ANDERSEN To The Honorable Mayor and City Council of the City of Fayetteville, Arkansas August 19, 1997 Page 4 In addition, we understand that the City may require us to perform certain procedures which are beyond the scope of our engagement. Although not a part of this specific arrangement, we are available to assist the City in such other audit-related areas. Such= areas might include loan staff assistance in completing the City's responsibilities under these arrangements, assistance in the preparation of Official Statements as contemplated by the "Disclosure Guidelines for State and Local Governments" issued by the Government Financial Officers Association, special reviews of selected areas, and/or provide the City with grant accounting or other technical assistance in connection with the audit. Arthur Andersen LLP's maximum liability to the City of Fayetteville for any reason relating to the services under this letter shall be limited to the fees paid to Andersen for the services or work product giving rise to liability, except to the extent finally determined to have resulted from the negligence or willful misconduct of Andersen. Acknowledgment Please confirm your agreement with the above terms by signing a copy of this letter and returning it in the enclosed self-addressed envelope. We are pleased to have this opportunity to serve you and assure you that this engagement will be given our close attention. Should you have any questions about this letter, please do not hesitate to contact Calvin Webb at(214) 741-8718 or Ben Kohnle at (214) 741-8736. Very truly yours, A,„4,,, LLP Agreed and Acknowledged by: ,/id /1.,,,i,-- Fred amna, Mayor Date . .....--- IN\ 1/17A7 Ben Mayes, Administr 've Services Director Date Attachment Attachment I Description of Independent Public Accountant's Responsibilities Under Generally Accepted Auditing Standards, Government Auditing Standards and the Single Audit Act INTERNAL CONTROL STRUCTURE Responsibility under Generally Accepted Auditing Standards (GAAS). We will obtain an understanding of the internal control structure. Based on this understanding we assess control risk- the risk that a material misstatement could occur in the financial statements that will not be prevented or detected on a timely basis by the City's internal control structure. Based on our understanding of the internal control structure and the assessed level of control risk, we will determine the nature, timing and extent of our audit procedures. The procedures we perform under GAAS do not provide sufficient evidence to enable us to express an opinion or any other assurance relative to the internal control structure's design or effectiveness. The purpose of our consideration of the internal control structure is to plan the audit and to determine the nature, timing and extent of the substantive tests necessary to enable us to form an opinion as to the fair presentation of the City's financial statements. Responsibility under Government Auditing Standards Government Auditing Standards does not require us to perform any procedures with respect to the internal control structure beyond those required by GAAS. However, we are required to issue a written report(either as a part of our report on the financial statements or separately) on our consideration of the internal control structure. Our report must disclose reportable conditions and material weaknesses, if any, we identify as a result of the procedures we performed. The report does not provide any assurance on the internal control structure's design or effectiveness. Responsibility under the Single Audit Act and Circular A-133 In addition to the procedures performed to meet GAAS and Government Auditing Standards requirements, the Single Audit Act and Circular A-133 require that we specifically consider the internal control structure over federal financial assistance programs and perform tests of those controls. The test of controls must cover the controls used to administer at least 50% of the expenditures under all federal and state financial assistance programs. We are required to issue a report(in addition to the report required by Government Auditing Standards) on our consideration of the internal control structure over federal and state financial assistance programs, including tests of those controls. Our report must disclose any reportable conditions and material weaknesses we identify as a result of the procedures we performed. This report does not provide any assurance on the design or the effectiveness of the internal control structure used to administer federal and state financial assistance programs. Additional services available. While the work described above is not intended to result in the expression of assurance or an opinion on the design and operating effectiveness of the internal control structure, you could engage us to perform agreed-upon procedures or examine and report on a written assertion from the City's management as to the design and, if desired, the operating effectiveness of the internal control structure or a segment of that structure. The examination would be conducted in accordance with AICPA standards for attestation engagements. COMPLIANCE WITH LAWS AND REGULATIONS Responsibility under GAAS. We are required to design the audit to provide reasonable assurance of detecting errors and irregularities material to the financial statements, and illegal acts with a direct and material effect on financial statement amounts. With respect to illegal acts that could have a material indirect effect on the financial statements, if information comes to our attention that provides evidence of the existence of possible indirect effect illegal acts, we must apply procedures directed to ascertaining whether an illegal act has occurred. The results of these procedures are considered by us in forming an opinion on the financial statements. Responsibility under Government Auditing Standards. In addition to the responsibilities under GAAS, we are required to design the audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contract or grant agreements with a direct and material effect on the determination of financial statement amounts. Government Auditing Standards requires that if specific information comes to our attention providing evidence of possible noncompliance that could have a material indirect effect on the financial statements, we must apply audit procedures directed to ascertaining whether that noncompliance has occurred. We are required to issue a written report, separately or as a part of the report on the financial statements, on the results of the procedures performed with respect to compliance with applicable laws and regulations. Responsibility under the Single Audit Act and Circular A-133. In addition to the requirements of GAAS and Government Auditing Standards, the Single Audit Act and Circular A-133 require auditors to perform procedures sufficient to provide positive and negative assurance on the general requirements and to perform procedures to provide sufficient evidence to express an opinion as to whether the City has administered its major federal and state financial assistance programs in compliance with applicable laws and regulations. • For fiscal year 1997, the City anticipates three major programs as listed below: CFDA/Grant Grantor Number Program Federal- U. S. Department of Housing and 14.218 Community Development Urban Development Block Grant U. S. Department of Housing and 14.239 Home Grant Urban Development U. S. Department of Transportation 20.106 Airport Improvement Program We will perform procedures sufficient to express an opinion as to whether the programs have been administered in compliance with applicable laws and regulations. Additional services available. We could also render the following additional services regarding compliance: • Financial statements. If the City asserts it complied, in all material respects, with specified laws and regulations, we could perform agreed-upon procedures or an examination engagement in accordance with AICPA attestation standards. The procedures we will perform, as required by GAAS and Government Auditing Standards, are more limited than if we were to express an opinion on management's assertion. • Federal financial assistance. The City has other federal financial assistance programs, which are considered nonmajor. Neither the Single Audit Act nor Circular A-133 requires us to perform procedures to determine whether that program has been administered in compliance with applicable laws and regulations. However, we could perform additional procedures that would enable us to determine if the City has administered the program in accordance with applicable laws and regulations. If we perform those procedures, we would issue a report expressing our opinion as to that program's compliance with laws and regulations. EXHIBIT I A. 1 . 05 REQUEST FOR PROPOSAL FOR INDEPENDENT AUDIT CITY OF FAYETTEVILLE, ARKANSAS 97-6 The City of Fayetteville invites proposals to audit the financial statements of the City for fiscal years ended December 31 , 1997 to 2001 , including all funds which are included under the provisions of the Single Audit Act. I . PROCUREMENT PROCESS A. One ( 1) signed original and nine (9) signed copies of the proposal are to be delivered to the following address in a sealed envelope with the outside clearly marked with the name of the firm, address of the firm, and the words "Independent Auditor Proposal" : Peggy Vice Purchasing Manager 113 W. Mountain Fayetteville , AR 72701 Proposals will be received at this address until Auaust 8 , 5 :00 p.m. B. Upon opening the proposals, the Auditor Selection Committee will convene to evaluate the proposals on the basis of the criteria described below. Interviews may be held with the three firms deemed to be the most highly qualified to provide the services required. A contract will be negotiated with the firm ranked the best qualified by the selection committee. If the selection committee is unable to negotiate a satisfactory contract with the top ranked firm, negotiations with that firm shall be terminated, and negotiations would begin with the next highest ranked firm. Once a recommendation is reached by the selection committee, the selection will be presented to the City Council for their approval. At any point in the selection process, the proposer may be requested to submit information supplemental to the proposal. Copies of the City's 1996 CAFR are available from the Internal Auditor. In addition, the City's budget and prior year audit schedules are available for review. The Internal Auditor will be available to provide additional information prior to the opening of the proposals. 1 1 . 06 The following ` of the award of a audit contract: tentative ainestablished for the completion July 6 Advertisement for Proposals Aug 11 Opening of proposals Aug 18 - Aug 22 Committee Review and Negotiations Su t 16 Presentation to the City Council p C. Proposals will be evaluated on the following criteria: MANDATORY 1. The firm must Certified ic Accou the n stating e fiof properly licensed to practice in Arkansas. 2. The firm must meet the independence standards of the General Accounting Office Standards for Audit of Governmental Organizations , Programs , Activities and Funct:onS . ta shall maintain 3 . The proposer shall procure , and sha in during the life of this contract, professional liability insurance in the amount of $1,000 ,000 combined single limit. Certificates of insurance stating coverage indicated above must be delivered to the Purchasing Manager prior to issuance of Notice to Proceed with this proposal. TECHNICAL 1. Qualifications of the firm and its coordinating office in performing governmental audits. 2. Experience, competence, and capacity for performance by the firm and its coordinating office, in governmental audits. 3. Proposed method of performing firm audit. 4. Past performance by the and its coordinating office in governmental audits. 5. Price Proposal D. Audit Contact Any vendor contact concerning this RFP should only be directed to: Yolanda Fields Internal Auditor 113 W. Mountain Fayetteville, AR, 72701 (501) 575-8290 2 1 . 07 E. Reservation of Right of Rejection The City of Fayetteville reserves the right to reject any or all proposals when it is in the best interest of the City as determined by the Auditor Selection committee. II. AUDIT OBJECTIVES AND SCOPE OF SERVICES A. There are two objectives of the services covered by this RFP. Each responder must consider each of these objectives separately and reflect such treatment in the proposal: 1. To render an unqualified opinion on the General Purpose Financial Statements of the City of Fayetteville, and to meet the audit requirements of the laws of the State of Arkansas. 2 . To assist in the preparation of the Comprehensive Annual Financial Report of the City of Fayetteville in order for the City to receive the Certificate of Achievement for Excellence in Financial Reporting presented by the Government Finance Officers Association. The auditor will be expected to comply substantially with GASB reporting standards in all work associated with the production and submission of the CAFR. B. The audits will be conducted in accordance with Generally Accepted Auditing Standards, as well as the following guidelines and requirements: 1. AICPA Industry Audit and Accounting Guide - Audits of State and Local Governmental Units 2. Standards for Audit of Governmental Organizations, Programs , Activities and Functions (1994 Revision) 3 . Audits of State and Local Governments and Non- Profit Organizations-OMB Circular A-133 4. Grants and Cooperative Agreements with State and Local Governments-OMB Circular A-102 5. OMB Compliance Supplement for Single Audits of State and Local Governments 3 1 . 08 6. Applicable laws of the State of Arkansas The Arkansas Legislative Joint Auditing Committee has requirements of ted the ty from the record keeping Act 159 of 1973 . In the event that there are conflicting or otherwise inconsistent policies applicable to financial and compliance audits of Federal awards , the following order or precedence shall apply: 1 .Single Audit Act of 1984 (Public Law 98-502) 2 .Single Single Audit Act 10me4 5ndme;s of 1996 (Public Law 3 .OMB Circular A-133 lementing OMB Circular A- 133 4 .Agency regulations im and the Single Audit Act 5.Agency program regulations 6.Federal Financial Assistance Agreement C. The periods to be covered are the City's fiscal years ending December 31, 1997 , 1998 , 1999, 2000 , and 2001. A contract will be awarded for all five years upon approval of the City Council with the consent of the proposer in accordance with the terms of the proposal. Each year of the contract shall be contingent upon satisfactory performance and funds being appropriated. Should funds not be appropriated, the contract would be canceled for any remaining years. D. Any adjusting entries will be submitted to the City in writing with sufficient explanation and detail , so that they can be easily understood and properly posted to the financial accounts. E. The independent auditor is expected to provide assistance in interpreting financial reporting requirements. It will be the auditor's responsibility to proofread, cross check and critique the entire CAFR document in addition to auditing the numbers and disclosures contained therein. The vide all ents on the ve Annual Financial Report (CAFR) Comto the City prehensi by the 15th of May each year. 4 1 . 09 The CAFR will be written, typed, printed and distributed to GFOA by June 15 of each year. F. The auditor in charge shall conduct an entrance and an exit conference with the City. Review of accounting systems , test of internal controls and test of transactions should occur prior to year end. A list of all work papers and schedules to be prepared by the City staff should be presented to the City by October 1 of the preceding year. This list should include any documents which will need to be pulled for auditor review. The general ledger will be closed by the third week of March and the trial balance prepared. Year end field work shall be completed by May 1 . Prior to June 15 of each year, the auditor will issue a management letter. Where appropriate, recommendations for system improvements are to be included and the Auditor may be requested to provide assistance to implement recommendations. A draft of this letter should be submitted for review by the City before final copies are prepared. The Auditor will provide 50 copies of this letter. G. Interest of Auditor: Auditor covenants that neither it or any of its members has any interest and shall not acquire any interest, direct or indirect, financial or otherwise, that would conflict in any manner or degree with performance of service hereunder. Auditor certifies that no one in their firm has or will have, during the course of the firm's audit contract, any financial interest under this agreement as an officer or employee of City. 5 1 . 10 H. Non-Assignability: Both parties recognize that this proposal is one for personal services and cannot be transferred, assigned, or sublet by either party without prior written consent of the other. I. Worker's Compensation: it is By executing an agreement,provision n of uditor A.C A §certifies 119 401at which aware of the pror provide compensation requires every employer to pay for an employee's disability or death from injury arising out of or in the course of employment and certifies that it will comply with such provisions before commencing the performance of the work of this proposal. J. Miscellaneous provisions: 1. Periodic progress billings may be submitted as work progresses , but not more often than monthly and not more than 75% of the estimated cost of audit services will be paid during the yearly audit period. The remaining 25% will be paid after total yearly contract fulfillment. The total progress billings must be itemized based on the amount of time expended on each fund. 2. A copy of the audit work papers will be presented to the City at the completion of the audit, audit nd prior to final payment. This copy of the work papers shall become the property of the City when final payment is made. 3. The auditor shall keep the City advised of pending and actual changes in financial disclosures, accounting practices and reporting guidelines which would impact the City and its financial records, and shall be available for consultation and clarification of such matters. 6 1 . 11 III . DESCRIPTION OF THE GOVERNMENTAL ENTITY AND ITS ACCOUNTING SYSTEM A. The City of Fayetteville is a municipality in the State of Arkansas . The City currently has a General Fund which is the main operating fund for the City, six special revenue funds , one debt service fund, two capital projects funds , four enterprise funds , one internal service funds , three trust funds , four agency funds, three account groups , and one discretely presented component unit. B. All intergovernmental grants , entitlements and shared revenues will be included under the single audit concept. C. The laws of the State of Arkansas require an operating budget for the General Fund. This budget is disclosed in the CAFR and reflects all approved amendments. All other governmental funds which have an adopted budget shall be disclosed in the same manner with appropriate disclosures for any governmental funds which do not have an adopted budget. D. Description of the Automated Accounting Systems 1. The City has a data processing division which consists of six full time employees: a data processing manager, three programmer/analysts, a GIS Coordinator, and a systems operator. Assistance from this division in obtaining necessary reports and data can be obtained on a scheduled basis. 2. Currently, the City is utilizing the following New World Systems software modules on an IBM AS/400 (Model 310, 96MB Ram, 18GB disk storage) : a. Financial Management Software: general ledger, budgetary accounting, annual budget processing, accounts payable, purchasing and encumbrance control, requisition processing, revenue accounting/cash receipts, billing and receivables, fixed assets, integrated inventory/purchasing, and cash register interface. b. Human Resources Software: payroll with base personnel module, and advanced personnel module. 7 1 . 12 c. Utility Management Information System Software: water/sewer/other module, and automatic PC meter read. d. Animal Licensing Software. e. Public Works Software: equipment/vehicle maintenance, and work order processing. f . Parking Tickets Module. 3 . The City currently has the following systems which are run on a Novadyn( 486 PC) series 14-400 running Reality Operating System: a. Investments package which will be converted to run on the IBM AS/400 at a future date. b. Municipal Court package which will be converted to New World System Software package to be run on a AS/400 at the Fayetteville Police Department. c. Hotel , Motel and Restaurant record maintenance to be converted to the New World Systems Municipal Billing package on the AS/400 . 4. The City has a Novell LAN used primarily by the Planning, Engineering, and Inspection Divisions for storage of AutoCad files, inspection and planning data bases , and GIS information. 5. The City has personal computers which are interfaced with the IBM AS/400 and/or the LAN which use various software packages , including the following: a. Lotus 123 Spreadsheet software b. WordPerfect Word processing software c. Paradox database software 6. The City has an IBM advanced system 36 which is used for the Police, Fire, and Central Dispatch. This system currently runs CHIEFS software package by Public Safety Management. The City is in the process of replacing this system with an IBM AS/400 0 and New World Systems Public Safety and Court Management Software. 8 1 . 13 E. Office space is available for audit staff use. Access is available to a telephone, and access may be made available to a computer terminal connected to the mainframe. IV. TECHNICAL QUALIFICATIONS AND APPROACH The format of the proposal may be styled at the discretion of the auditor. However, all proposals will address each of the following items in the order presented: A. Qualifications of the firm and its coordinating office in performing governmental audits 1 . Describe the firm's strengths , audit philosophy and strategy for the future. 2. Describe the firm's clientele. 3. Describe what positions have been taken by the firm with the AICPA, FASB or GASB which could be viewed as controversial. 4. List any members of the firm which are nationally recognized professionals in public finance or government accounting, such as members of the executive boards of committees of the GFOA or GASB. 5. Describe the firm's affirmative action plan and how minorities are placed in the firm. B. gjtuerience . competence. and capacity for performance of the firm and its coordinating office in governmental audits 1. Qualifications of the Coordinating Office: a. State whether the office is part of a national, regional or local accounting firm. b. List the number of partners, managers, supervisors and staff located in the coordinating office in the audit, tax, and management consulting divisions. c. Describe the extent of statistical and computer assisted audit techniques used in governmental audits including the use of microcomputers to generate work papers. d. Describe the organization of the audit staff. 9 1 . 14 2. Availability and qualifications of the assigned individuals: a. List the partners , managers and supervisors who will be assigned to the engagement. Please provide specific qualifications of these individuals in municipal accounting and auditing. On your list, include education, position in the firm and years and types, of experience. training or b. Describe specialized skills , background in public finance and governmental accounting of the assigned individual staff members. Indicate which of the assigned staff members have completed, within the last two years , at least 80 credit hours of continuing education and training that contributes directly to the . auditor's professional proficiency to perform the audit, including specifics on training in the governmental accounting and auditing field. c. Address the availability of staff members both during the audit and throughout the year for consultation. Include an explanation of the plan your firm has to commit the necessary resources to ensure completion of the audit work by the due dates. 3. Description of the firm's internal quality control procedures: a. Outline the levels of review to which work papers are subjected. action imposed by b. Describe any disciplinary the AICPA, State Boards of Public Accountancy, State Societies of CPAs, or e past Securities and t Exchange Commission during three years indicating any involvement of the coordinating office. c. Describe results of recent peer review and its status under the Peer Review Program. 10 1 . 15 C. Proposed method of performing audit 1. Describe how the firm's overall philosophy applies to this particular engagement. 2. Describe the audit plan in general and specify areas that in your opinion may require particular audit emphasis. 3 . Explain the firm's understanding of the audit work that is to be performed for the City of Fayetteville. 4. Describe in detail the type of personnel assistance that the City would be expected to provide and how this would be coordinated by the auditors with the City management. 5. Indicate in detail computer expertise which would be expected from City staff or other resources expected in order to complete the control reviews. D. Past performance of the firm and its coordinating office in governmental audits. 1. List local government clients or other clients which are felt to be relevant to this RFP which are currently or have been served by the firm and the coordinating office, indicating those having a Certificate of Achievement for Excellence in Financial Reporting awarded by GFOA. 2. Provide names and telephone numbers of appropriate officials for reference purposes. 11 • 1 . 16 E._ Price Proposal . 1. Basis for fee and not-to-exceed cost shall be submitted to the Purchasing Officer in the sealed proposal envelope. This proposal should include a schedule for each of the four years in the following format: a. Billing rates per class of employee b. Estimated number of hours per class of employee c. Maximum not to exceed cost per year d. Any special provisions which would affect the proposed fees V. PROFESSIONAL POLICY Attached is a copy of the City's Professional Contract Policy. Proposals should be prepared simply ,and economically, providing a straight forward, concise description of auditor's ability to meet the requirements for the project. Fancy bindings, colored displays and promotional material are not required. Emphasis should be on completeness and clarity of content. . - . 12 L 3.S. PURCE.A.S ING : ADM I N I STR AT I VE Professional Services 1 . 17 POLICIES & PROCEDURES Selection. Policy: a ..vE7tc, =`c+ ,,� ^�,s MANUAL oTHER SERVICES NUMMI Rtvlslos! LFFCCTIVC QATC: rac t '` _ I • PQR-13 1 June 27, 1990 1 of 4 ►►h, N Cam'"_ $uFLRttota ArrPavtC $Y: January 30, 1991 r</ FUR-13 . 01 The purpose of this direc .ve is to establish a formal Competitive Selection of Professional Services Policy for all professional services other than those for legal , architectural , engineering, and land surveying and the responsibilities for its execution. PQR-13 .02 DEFINITION A. The City and all its boards , commissions and authorities shall competitively select based on qualifications and performance evaluation criteria all professional services done for or on behalf of the City. B. It is the policy of the City to publicly announce • requirements for the competitive selection for • professional services as referenced above, and to negotiate contracts for such services on the basis of demonstrated competence and qualifications for the type of professional services required provided that the services are rendered at fair and reasonable prices. FUR-13 .03 RESPONSIBILITY C. All municipal boards, commissions , and authorities established pursuant to state statute or other legislative authority other than that provided for in A.C.A. tit. 14 , ch. 47,A.C.A. sec. 14-47-101 et seq, shall be responsible for the implementation of such policies and procedures as are hereinafter delegated to the City Manager and the Board of directors. PQR-13 .04 ______ __ A. The competitive selection for such services shall be conducted by a review committee which shall include one board member appointed by the Mayor' to serve and represent the board, the City Manager (or repre- sentative) , the Chief Financial Officer (or repre- sentative) , the involved Department Heads, appropriate City personnel and may include professional , and/or individuals with expertise in the community. The 1 . 18 review committee for each proposed contract shall establish the qualifications and evaluation criteria necessary for the specific services to be provided. - This committee shall be established pr pr `4 the issuance of any RFP or RFQ so that it may review the proposed RFP or RFQ. B. The RFP or RFQ shall outline the structure of the tran es selection committee and shall state the ppt ntar aeso which will be used to select the firm. I c .sh state an expected cost range for the C. The City Manager will cause to be advertised in a newspaper of general circulation a notice that City has a need to contract for a particular professional rrt fssthea parties service and shall invite all interested to submit, to the extent permitted by the ethical standards of that profession, a statement of their qualifications and other relevant information based on the evaluation criteria specifically developed for the proposed services to be provided. p[1R-13 .os SELECTION PI3OCESS A. In evaluating the qualifications of each firm, the review committee shall include the following: pu i i fi emotions in Relation to S eCi f i c Orniee�t to (1) qualifications be Performed: Information reflecting of the firm. Indicated specialized experience and technical competence of the firm in connection with the type and complexity of the service required. Subcontractors, if - used, must be listed with information on their organization. ( 2) Exnerience. Competence. and Capacity for performance: Information reflecting the names, titles, and qualifications ( including experience and technical competence) of the major personnel assigned to this specific project. Provide detailed breakdown of to be tractorused to ,suppleme t your staff.s staff to be used and hoar they are (3) proposed Method of Dainc Work: A proposed work plan (description of how the project would be • conducted as well as other facts concerning approach to scope you wish to present) indicating methods and schedules for accomplishing each phase of the work. Include with this the amount of work presently underway. (4) past Performance: Previous evaluations (as set forth in PUR-13 .08) shall be considered a • 1 . 19 significant factor. If previous evaluations with this City are not available, the professional firm's past performance records with City and others will be used, including quality of work' timely perfor- mance , diligence , ability to meet past budgets , and any other pertinent information. Firm will provide a list of similar jobs performed and person whom we can contact for information. (5) Price B. proposal Zvaluaticn: In evaluating the qualifications of each firm, the review committee shall consider the following (assigning point ranges for each element from 10% to 35%, so that the total for the five elements combined equals 100%) : ( 1 ) Qualifications in relation to specific project • to be performed: ( 2) Experience, competence, and capacity of performance; ( 3 ) Proposed method of doing work; (4 ) Past performance; and ( 5) Price. . • C. The review committee shall evaluate all submittals and may conduct interviews with up to five ( 5) firms regarding anticipated concepts and the relative utility of alternative methods of approach for furnishing the required services and then shall select therefrom, in order of preference, based on criteria established and published by the review committee, no less than three ( 3) of the firms deemed to be the most highly qualified to provide the services required. The method of selection shall be for each commettee member to rate the firms based on the points established in the RFP or RFQ so that each member selects 3 firms, rated 1,2,and 3 . The firm receiving the highest number of 1st place votes shall be selected ( if a tie occurs, the firm receiving the highest number of 1st and 2nd place votes shall be selected. If a tie still exists, the Committee shall hold further discussions and a re-vote shall occur. ) D. The review committee or its designee shall then negotiate a contract with the highest qualified firm for the services to be rendered, at compensation which the review committee, or its designee, determines to be fair and reasonable to the City, subject to the approval of the Board of Directors. E. Should the review committee, or its designee, be unable to negotiate a satisfactory contract with the firm considered to be the most qualified, at a price deter- mined to be fair and reasonable to the City, negotiations 1 . 20 • with that firm shall be formally terminated. The review committee, or its designee, shall then undertake negotiations with the second most qualified firm. Should the review committee, or its designee, be unable to negotiate a satisfactory contract with any of the selected firms, then the review committee shall reevaluate the services including the scope and reasonable fee requirements. =R-1l.0" The selection committee will recommend, after negotiA. e Attorney, Internal Auditorns and, Accouneview ting Supervisor, and Internal eous Purchasing Manager, the most advanta9 contract to the Board for awarding. paR-13 .07 COwTRACT5 VIM S10 .000 A. The requirements for a review s commttee may be waived and the review of qual Oe to the hereinabove stated shall be delegated responsible department head for recommendation ove to the City Manager, who shall review and app or disapprove all professional services contracts in an amount of ten thousand dollars (510,000) or less. Egtt-L 3 "OS e +=014 21tfiTECT A. Upon completion or termination of a contract, the division head responsible for the project submit a summary evaluation of the professional firm's handling of the project to include the • following data: (a) name of professional firm: (b) date' of contract and date of completion: (c) cost as stated in initial contract, amount paid, and reason for any difference; (d) special strengths exhibited by professional firm: (e) problems or weaknesses in professional firm's handling of the project: (f) adherence to time schedule by the professional firm; and (q) names of key personnel working on the project and comments on their performance. B. The summary evaluation will be sulaitted to the Purchasing Manager through the department director and will be filed in the Purchasing Manager's records. A copy will be sent to the professional firm. comments received from the in the Purchasing Manager professional firm ' the evaluation will be f records. 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C C C > - U •_ C .r ; ti 1.. C ;n 3. - v ti YtC G :; • 9D CA a C.J c c c Cl. — o- ti .. O E, !lc 'O O C y — m N Ch L j ti ti Z C G. s Z O d v O ti ca. C ti U C V 'U ` - ..... y ti 2 -O C ti > C O y v L .a v v > 5- a a) ti ..C C" . G v c :u C O 1. -r .r y .�. O 1. N ti CJ 1�. VI A .c .r -. ... ti m 0 C C c 5r) 'II y+', 7 .a n a, y V C ti +' C Z C ti c V "C C V - ti C v U `. u C ti I' > or, u G. 3•C a, _ >, R OG C y ,O - U U 0 ti "0 et0 .y y G. .r 3 C C od v od = G A C. R C I. (11 n Z C <L +. CV v C .� O L V v = /�' C C, C r x •.. m ti •C C y O C W u x ate. C6 i U ` 7! U ;J .-. °G" ad •_ :J 'V ..- ..... ti. ° �.. ti > G. L. 7 v.. C 6, C :7,5 - >, O U C f w C ^� C y Ti "C G Cu C N m C `: c V Gam, ti O •C C i 'V C� ti J .ti. V r v y •;LI C "C Ct u c ti5. °- a c ti y ti c c e` o a V FV- C z, c .c.' c o c>, ti V C>, 0 C C y V BUM U U U a: CC E- 04 :J U > F > Q N in C .--- • N M el• Lt .O N. c6 •-+ N .. N Cr; I cil C C x .L v Le` cd U C C G. x u CV Qtil C V L < .J .fir �./ r^. 1 1 . 58 c c z ` to • ea -a t i a O r . L ti z UMWE a Z _ �Le .- c x It ' > 1 O C O CJ t C L c _ c Q C d a T. .0 C L 'A L ¢ 1.. - ^ Vi y u .� r„,• .• CO r C a u d �� Z v Z CC 0 T.J .0 •.r U /• ' 'C C 4 = u .. et v, a ►.. v u T .. O» a c a c >` �� Z C a E U ti � a) a u O E 0 00 "re c 8 ._ a c L a ti B y °_ ≥ - r C y c c c _ 3 c L a = y ti C J C.) C .. - fl. C E J m a L a `t — O L c .L,. E R Q. ii c c ti ,_ J a R R •N C p 7 C r^, ti a C G. ti C 7 ti (Lu� c - r ti C . >to L.- c y •u ti L r 4 cn .... 00 <t C �' O ti t 4 U y ci a E L c �_° E a a o it V c >. L a v a 'a E �n co °a' -- o _ ti .c `' v_ a .. Z ea C C .G et - i G C E ^ a x y ti .0 'ti ti _w vs r, 0. .' C z s _ a >' E Ea) c E — J ° 00 �. C Y - E C _ y J J j, y E G C u — CG C. ft n W > — ti a., 6i1 `z. cu L fe z E C _ •- .c y c a Q 7 m ti to .C. ar y u � va Z ti ti m A J C pC ^C C C 'LS . Ca re .0 _ _ G m a) C Z •N R R .CJ a •J 0. v -3 - ›. •p C ^ re t' a U) p. as) u• 4. a >• 'tef G E u J y •'G O C E C C c y a • a .. T, O v _ a ft flf<e E v a 7 d L n. >` J ti 0_ 1. 2 v ''J v y ; H h. G. CI,t., m ' 'C •s ti re G y - v ti U) C C ti C J v a .. as a ti .�'. ti •.r7. C - E O. '^? en ..•R U) C y v a ` w. G i y 3 c c a >, J ti a >. L c t.., c ti c •.E CD L " = C eg °L' >, y y ° .n C a .> J e .$ 4 a, ti Y U R .. .. ti C •, u ≤e C O v is C ti Q C L u x U >. ti a a v c • J U c c E J a c a v, c ti c X 4) O a ti L 6 C M G ti •ff fl. I" 4 E :% L. c c U c 3 ti ti ti v y V °L' J E d v a 0 > LO 7 : V V Q1 V L h •> l0 Q. C �• C ii y �, > • U m > m y y ti y c>i v O E C a C U U O J Fa- E= Ea- Cd E= a Ey �a' I-- F= (-- i w W x U ti c a. w 0G d ZS Q r» N M4 ui .c c: .� N c*i •: N C eq. c*i 4 vi c E L. X p :J--! Cl...hi. u▪ v t.. II ta .a. ...' a C. .• 1 . 59 z uz IIMMI ••— z CC mom v a a, s .0' tea, a) v1 .. C: Z C E vi ti E u ti r ex y Lr u C. iL ti es et ..NG• of 'V y .+ tt OC .. V C V eA C: aJ .... ft C U • ti p c..) d O 60 61 ti ._. O. 61 aJ .'"0 C O H V tC aJ O'6.7 ►ti. C c c ft v 6 w d aJ O C v. �. ea C C ti c r0 r. u c' .= .. re C pc p0 v W 7 .C Z ti .. E L a - 0J tiI O C. LL �c E Q. :~ U L v Q. y C •`' CL C '`- y G°J oo ti w. Ti a! 'G ¢ 'C CC v •0C m G " 'L C a Z ≥ Q `_ c "3 . :? A u .. �_ aJ V=. '1 r. lti tC C: T 1 Intl � • ..r CIJ �' ti q¢� O d 74 v u- 7 C 0 ° .G tC^C to E Q .L V .r C Lc E .2.' ° C w _ C cs et o eo .0 °u v E c ° ti a It to I o t"/� i E s. C.. et ... C tti. R W C 0) tti. C, .-• C - Emi 0. °' °' r, c ti C "a c ° vi > t ti ti E 3 !C Q .. E 0) ° v t E ° ° "C L a ti a`� c to ° -° y ° ti 'a u ti 2 ti W •C c o ,..,••-' a v ' ti oC E 'v 4) •2SI, 3 3 3 2 ti W Q pC f u 8 1 . 60 Deloitte & Touche LLP ) Ten Westport Road Telepnone:(203)761-3000 P.O.Box 820 ITT Telex:66262 Wilton.Connecticut 06897-0820 Facsimile:(203)834-2200 ) October 16, 1995 To the Partners of Arthur Andersen LLP We have reviewed the system of quality control for the accounting and auditing practice of Arthur Andersen LLP(the Firm)in effect for the year ended August 31, 1995. Our review was conducted in conformity with standards for peer reviews promulgated by the Peer Review Committee of the SEC Practice Section of the AICPA Division for CPA Firms(the Section). We tested compliance with the Firm's quality control policies and procedures at the Firm's Headquarters and at selected practice offices in the United States and with the membership requirements of the Section to the extent we considered appropriate. These tests included the application of the Finn's policies and procedures on selected accounting and auditing engagements. We tested the supervision and control of portions of engagements performed outside the United States. In performing our review, we have given consideration to the general characteristics of a system of quality control as described in quality control standards issued by the AICPA. Such a system should be appropriately comprehensive and suitably designed in relation to the firm's organizational structure, its policies and the nature of its practice. Variance in individual performance can affect the degree of compliance with a firm's prescribed quality control policies and procedures. Therefore, adherence to all policies and procedures in every case may not be possible. As is customary in a peer review, we are issuing a letter under this date that sets forth a comment related to compliance with certain policies and procedures. This matter was not considered to be of sufficient significance to affect the opinion expressed in this report. In our opinion,the system of quality control for the accounting and auditing practice of Arthur Andersen LLP in effect for the year ended August 31, 1995 met the objectives of quality control standards established by the AICPA and was being complied with during the year then ended to provide the Firm with reasonable assurance of conforming with professional standards. Also,in our opinion,the Firm was in conformity with the membership requirements of the Section in all material respects. AfiLelive4 Dlbiltehalso Wind= latunational 1 . 61 iT cl, V V , •,.., L., _ ct) cu MI"Of animill 111.3 CA •~ td) O Z N O 73 i rd c — bA O ft Z T .Imel . Nom C1) a)V Q m.... < .tt: 4 4...i. >. O r7--) u, mom a co s a cr r m w a J J rT1 w ImMit r LL LL O H rT v0 w I I 1 = VI a CIJ •'fl C1• n ct• cu y II eii !CC 00 4: Q4 cal .G E— , . 2 .[ c4 Tr n = 1 . 62 , z �T, 0 lomme r.. Z TS a ix _ . 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O U EL- G. :c 0 Cf) 3 ti a, E v F- 3 :: s Q a :: 'C H a a`, 1 . 64 ARTHUR ANDERSEN Arthur.-,nuersen LLP August 19, 1997 Suite:cC!0 X01 Main Street To The Honorable Mayor and City Council of the Dallas TX==202-3790 City of Fayetteville, Arkansas: 314 741 8300 This letter will confirm our understanding of the arrangements made with Ben Mayes, Administrative Services Director, covering the audit you wish us to perform of the combined Balance Sheet of the City of Fayetteville as of December 31, 1997, and the related combined Statement of Revenues, Expenditures, and Changes in Fund Balances, the combined Statement of Revenues. Expenses and Changes in Retained Earnings, and the combined Statement of Cash Flows - all Proprietary Fund Types and the Single Audit for the City of Fayetteville for the year ended December 31, 1997. Upon completion of our audit, we will provide you with our auditors' reports on the financial statements and Single Audit referred to above, and bring to your attention any material errors, and any irregularities or illegal acts of which we become aware during our audit. Audit Responsibilities and Limitations We will conduct our audit in accordance with generally accepted auditing standards, the standards for financial audits contained in Government Auditing Standards (1994 revision), issued by the Comptroller General of the United States (the "Yellow Book"), the Single Audit Act and the provisions of OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. Reference is made to the enclosed Attachment I which further describes our responsibilities under generally accepted auditing standards and explains our additional responsibilities under the Yellow Book, the Single Audit Act and the provisions of A-133. Accordingly, we will examine, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assess the accounting principles used and significant estimates made by management, and evaluate the overall financial statement presentation. As part of our audit,we will consider, solely for the purpose of determining the nature, timing and extent of our audit procedures, the City's internal control structure. This consideration will not be sufficient to enable us to render a separate opinion on the effectiveness of the internal control structure over financial reporting. The objective of our audit is to obtain reasonable assurance about whether the financial statements are free of material errors or irregularities. While an effective internal control structure reduces the likelihood that errors or irregularities (including misappropriation of assets), may occur and remain undetected, it does not eliminate A ARTHUR 1 . 65 ANDERSEN To The Honorable Mayor and City Council of the City of Fayetteville, Arkansas August 19, 1997 Page 2 that possibility. For that reason, and because we use selective testing in our audit, we cannot guarantee that material errors or irregularities, if present, will be detected. The working papers prepared in conjunction with our audit are the property of our firm, constitute confidential information and will be retained by us in accordance with our firm's policies and procedures. Management's Responsibilities and Representations The financial statements referred to above are the responsibility of the management of the City. In this regard, management is responsible for properly recording transactions in the accounting records and maintaining an internal control structure sufficient to permit the preparation of reliable financial statements and ensuring the entity's compliance with applicable laws, regulations, contracts and grants. Management is also responsible for making available to us, upon request, all of the City's original accounting records and related information, and personnel to whom we may direct inquiries. As required by generally accepted auditing standards, we will make specific inquiries of management and others about the representations embodied in the financial statements, the effectiveness of the internal control structure, and compliance with laws, regulations, contracts and grants. Generally accepted auditing standards also require that we obtain a representation letter covering the financial statements and compliance from certain members of management. The results of our audit tests, the responses to our inquiries, and the written representations comprise the evidential matter we intend to rely upon in forming an opinion on the financial statements and rendering our other reports. Because of the importance of management's representations to an effective audit, the City of Fayetteville agrees to release Arthur Andersen LLP and its personnel from any liability and costs relating to our services under this letter attributable to any misrepresentations by management. If you intend to publish or otherwise reproduce the financial statements together with our report(or otherwise make reference to our firm) in a document that contains other information, you agree to (a) provide us with a draft of the document to read, and(b) obtain our approval for inclusion of our report, before it is printed and distributed. Other Services Any additional services that you may request, and that we agree to provide,will be the subject of separate written arrangements. • . 66 ARTHUR ANDERSEN To The Honorable Mayor and City Council of the City of Favettevtile, Arkansas August 19, 1997 Page 3 Fees and Billing Arrangements Our charges for the services referred to above will be $52,000. Billings for our services will be rendered as the work progresses. The audit fees contemplate that the City will provide assistance in connection with the audit as follows: • 1. Adhere to agreed upon timetable to be mutually agreed upon between the City and Arthur Andersen. 2. Prepare trial balances for all funds. including posting of closing adjustments. 3. Prepare audit schedules. as agreed, and determine such schedules agree with the general ledger. 4. Prepare and print the Comprehensive Annual Financial Report, including related footnotes and schedules, and provide support for all footnote disclosures and schedules. 5. Prepare the schedule of federal and state financial assistance, including related footnotes, and provide support for all footnote disclosures. 6. Analyze and explain variations in selected account balances between years and/or from budget, as identified by Arthur Andersen. 7. Prepare appropriate year-end accruals. 8. Provide copies of executed legal documents supporting significant current year transactions, i.e., bond sales, lawsuit settlements, etc. 9. Provide timely resolution of exceptions or questioned costs as identified during the course of the audit. 10. Completion of GFOA checklist, as appropriate, to ensure compliance with GFOA Certificate program. The above discussion of responsibilities has been included in an effort to provide maximum client service at minimum cost to the City. In the event the City is unable to either complete the procedures outlined or to complete them on schedule, Arthur Andersen is authorized to request an adjustment in fees and/or completion dates. As part of our continuing commitment to the City, we extend an offer to the City to send up to three people per year to pertinent training courses. ARTHUR 1 . 67 ANDERSEN To The Honorable Mayor and City Council of the City of Fayetteville, Arkansas August 19, 1997 Page 4 In addition, we understand that the City may require us to perform certain procedures which are beyond the scope of our engagement. Although not a part of this specific arrangement, we are available to assist the City in such other audit-related areas. Such areas might include loan staff assistance in completing the City's responsibilities under these arrangements, assistance in the preparation of Official Statements as contemplated by the "Disclosure Guidelines for State and Local Governments" issued by the Government Financial Officers Association, special reviews of selected areas, and/or provide the City with grant accounting or other technical assistance in connection with the audit. Arthur Andersen LLP's maximum liability to the City of Fayetteville for any reason relating to the services under this letter shall be limited to the fees paid to Andersen for the services or work product giving rise to liability, except to the extent finally determined to have resulted from the negligence or willful misconduct of Andersen. Acknowledgment Please confirm your agreement with the above terms by signing a copy of this letter and returning it in the enclosed self-addressed envelope. We are pleased to have this opportunity to serve you and assure you that this engagement will be given our close attention. Should you have any questions about this letter, please do not hesitate to contact Calvin Webb at(214) 741-8718 or Ben Kohnle at(214) 741-8736. Very truly yours, /44,46. LLP Agreed to and Acknowledged by: Fred Hanna, Mayor Date Ben Mayes, Administrative Services Director Date Attachment 1 . 58 Attachment I Description of Independent Public Accountant's Responsibilities Under Generally Accepted Auditing Standards, Government Auditing Standards and the Single Audit Act INTERNAL CONTROL STRUCTURE Responsibility under Generally Accepted Auditing Standards (GAAS). We will obtain art understanding of the internal control structure. Based on this understanding we assess control risk- the risk that a material misstatement could occur in the financial statements that will not be prevented or detected on a timely basis by the City's internal control structure. Based on our understanding of the internal control structure and the assessed level of control risk, we will determine the nature, timing and extent of our audit procedures. The procedures we perform under GAAS do not provide sufficient evidence to enable us to express an opinion or any other assurance relative to the internal control structure's design or effectiveness. The purpose of our consideration of the internal control structure is to plan the audit and to determine the nature, timing and extent of the substantive tests necessary to enable us to form an opinion as to the fair presentation of the City's financial statements. Responsibility under Government Auditing Standards Government Auditing Standards does not require us to perform any procedures with respect to the internal control structure beyond those required by GAAS. However, we are required to issue a written report (either as a part of our report on the financial statements or separately) on our consideration of the internal control structure. Our report must disclose reportable conditions and material weaknesses, if any, we identify as a result of the procedures we performed. The report does not provide arty assurance on the internal control structure's design or effectiveness. Responsibility under the Single Audit Act and Circular A-133 In addition to the procedures performed to meet GAAS and Government Auditing Standards requirements, the Single Audit Act and Circular A-133 require that we specifically consider the internal control structure over federal financial assistance programs and perform tests of those controls. The test of controls must cover the controls used to administer at least 50% of the expenditures under all federal and state financial assistance programs. We are required to issue a report(in addition to the report required by Government Auditing Standards) on our consideration of the internal control structure over federal and state financial assistance programs, including tests of those controls. Our report must disclose any reportable conditions and material weaknesses we identify as a result of the procedures we performed. This report does not provide any assurance on the design or the effectiveness of the internal control structure used to administer federal and state financial assistance programs. 1 . 69 Additional services available. While the work described above is not intended to result in the expression of assurance or an opinion on the design and operating effectiveness of the internal control structure, you could engage us to perform agreed-upon procedures or examine and report on a written assertion from the City's management as to the design and, if desired, the operating effectiveness of the internal control structure or a segment of that structure. The examination would be conducted in accordance with AICPA standards for attestation engagements. COMPLIANCE WITH LAWS AND REGULATIONS Responsibility under GAAS. We are required to design the audit to provide reasonable assurance of detecting errors and irregularities material to the financial statements, and illegal acts with a direct and material effect on financial statement amounts. With respect to illegal acts that could have a material indirect effect on the financial statements, if information comes to our attention that provides evidence of the existence of possible indirect effect illegal acts, we must apply procedures directed to ascertaining whether an illegal act has occurred. The results of these procedures are considered by us in forming an opinion on the financial statements. Responsibility under Government Auditing Standards. In addition to the responsibilities under GAAS,we are required to design the audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contract or grant agreements with a direct and material effect on the determination of financial statement amounts. Government Auditing Standards requires that if specific information comes to our attention providing evidence of possible noncompliance that could have a material indirect effect on the financial statements, we must apply audit procedures directed to ascertaining whether that noncompliance has occurred. We are required to issue a written report, separately or as a part of the report on the financial statements, on the results of the procedures performed with respect to compliance with applicable laws and regulations. Responsibility under the Single Audit Act and Circular A-133. In addition to the requirements of GAAS and Government Auditing Standards,the Single Audit Act and Circular A-133 require auditors to perform procedures sufficient to provide positive and negative assurance on the general requirements and to perform procedures to provide sufficient evidence to express an opinion as to whether the City has administered its major federal and state financial assistance programs in compliance with applicable laws and regulations. 1 ?U • For fiscai year 1997, the City anticipates three major programs as listed below: _ CFDA/Grant Grantor Number Program Federal - U. S. Department of Housing and 14.218 Community Development Urban Development Block Grant U. S. Department of Housing and 14.239 Home Grant Urban Development U. S. Department of Transportation 20.106 Airport Improvement Program We will perform procedures sufficient to express an opinion as to whether the programs have been administered in compliance with applicable laws and regulations. Additional services available. We could also render the following additional services regarding compliance: • Financial statements. If the City asserts it complied, in all material respects, with specified laws and regulations, we could perform agreed-upon procedures or an examination engagement in accordance with AICPA attestation standards. The procedures we will perform, as required by GAAS and Government Auditing Standards, are more limited than if we were to express an opinion on management's assertion. • • Federal financial assistance. The City has other federal financial assistance programs, which are considered nonmajor. Neither the Single Audit Act nor Circular A-133 requires us to perform procedures to determine whether that program has been administered in compliance with applicable laws and regulations. However, we could perform additional procedures that would enable us to determine if the City has administered the program in accordance with applicable laws and regulations. If we perform those procedures, we would issue a report expressing our opinion as to that program's compliance with laws and regulations. 70A A)/ PQz- F7- 97 • ARTHUR RECEIVED ANDERSEN DEC 18OF 1998 CITY MAYOR'S OFFICE FAYETTEVILLE MICROFILMED Arthur Andersen LLP December 14,1998 Suite 5600 901 Main Street To the Honorable Mayor and Dallas D(75202-3799 City Council of the 214 741 8300 City of Fayetteville,Arkansas: This letter will confirm our understanding of the arrangements made covering the audit you wish us to perform of the combined Balance Sheet of the City of Fayetteville as of December 30,1998,and the related combined Statement of Revenues, Expenditures, and Changes in Fund Balances, the combined Statement of Revenues, Expenses and changes in Retained Earnings,and the combined Statement of Cash Flows-all Proprietary Fund Types and the Single Audit for the City of Fayetteville for the year ended December 30, 1998. Audit Responsibilities and Limitations The objective of our audit is to provide you with our auditor's report expressing an opinion on the financial statements referred to above. We will conduct our audit in accordance with generally accepted auditing standards,the standards for financial audits contained in Government Auditing Standards (1994 revision),issued by the Comptroller General of the United States (the "Yellow Book"),the Single Audit Act and the provisions of OMB Circular A-133,Audits of States,Local Governments and Non- Profit Organizations. Reference is made to the enclosed Attachment I which further describes our responsibilities under generally accepted auditing standards and explains our additional responsibilities under the Yellow Book,the Single Audit Act and the provisions of A-133. We have also included a copy of our most recent peer review report,in accordance with the Yellow Book. Accordingly,we will examine,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assess the accounting principles used and significant estimates made by management, and evaluate the overall financial statement presentation. Generally accepted auditing standards require that we obtain reasonable,rather than absolute,assurance that the financial statements are free of material misstatement, whether caused by error or fraud. Accordingly,a material misstatement may remain undetected. Also, an audit is not designed to detect error or fraud that is immaterial to the financial statements. However,we will bring to your attention any material misstatements and any fraudulent or illegal acts of which we become aware during our audit. Pursuant to professional standards,in the unusual event that we are unable to ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas December 14,1998 Page 2 complete the audit or are unable to form or have not formed an opinion,we may decline to express an opinion or decline to issue a report as a result of the engagement. While an audit includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature,timing and extent of audit procedures to be performed, it is not designed to provide assurance on internal control or to identify significant deficiencies in internal control. However,we are responsible for ensuring that management and the City Council are aware of any such deficiencies that come to our attention. Year 2000 responsibilities. An audit of financial statements is not designed to detect whether any systems are Year 2000 compliant. Further,we have no responsibility with regard to the City's efforts to make its systems,or any other systems (such as those of the City's vendors, service providers or any other third parties),Year 2000 compliant or provide assurance on whether the City has addressed or will be able to address all of the affected systems on a timely basis. This is the responsibility of management. However, we will make inquiries of management regarding the Year 2000 issue,consider management's assessment of the potential impact of the Year 2000 issue on the current year's financial statements and our audit,and discuss or otherwise be satisfied that management and the City Council are apprised of any observations we have relative to its Year 2000 remediation plan. The working papers prepared in conjunction with our audit are the property of our firm,constitute confidential information and will be retained by us in accordance with our firm's policies and procedures. However,arrangements may be made to make the working papers available to representatives of federal and state agencies,if necessary. Management's Responsibilities and Representations The financial statements are the responsibility of the City's management. Management is also responsible for (1) maintaining effective internal control over financial reporting, (2) identifying and ensuring the City complies with the laws,regulations,contracts and grants applicable to its activities and (3) making available to us all financial records and related information and personnel with information of relevance to our audit. As required by generally accepted auditing standards,we will make specific inquiries of management and others about the representations embodied in the financial statements, the effectiveness of the internal control structure, and compliance with laws, regulations,contracts and grants. Generally accepted auditing standards also require that we obtain a representation letter covering the financial statements and compliance ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville,Arkansas December 14,1998 Page 3 from certain members of management. The results of our audit tests, the responses to our inquiries,and the written representations constitute the evidential matter we intend to rely upon in forming an opinion on the financial statements and issuing our other reports in connection with the Single Audit. Because of the importance of management's representations to an effective audit, the City of Fayetteville agrees to release Arthur Andersen LLP and its personnel from any liability and costs relating to our services under this letter attributable to any misrepresentations by management. If you intend to publish or otherwise reproduce the financial statements together with our report(or otherwise make reference to our Firm) in a document that contains other information,you agree to provide us with a draft of the document to read and comment on before it is printed and distributed. Furthermore,you agree that the terms of this engagement do not encompass an undertaking by us (1) to consent,by means of a separate letter or otherwise,to the inclusion of our auditors' report on the financial statements referred to above in a filing with a Federal or state regulatory agency or otherwise reissue our report for purposes of a securities offering or other financing transaction,or (2) to acknowledge reliance on our report by others. Other Services Any additional services that you may request,and that we agree to provide,will be the subject of separate written arrangements. Fees and Billing Arrangements Our charges for the services referred to above will be$53,500 for the audit and$3,500 for the post audit review of the $6,950,000 Hotel and Restaurant Receipts Tax Bonds,Series 1998. Billings for our services will be rendered as the work progresses. The audit fees contemplate that the City will provide assistance in connection with the audit as follows: 1. Adhere to agreed upon timetable to be mutually agreed upon between the City and Arthur Andersen. 2. Prepare trial balances for all funds,including posting of closing adjustments. 3. Prepare audit schedules,as agreed, and determine such schedules agree with the general ledger. � e ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas December 14, 1998 Page 4 4. Prepare and print the Comprehensive Annual Financial Report,including related footnotes and schedules,and provide support for all footnote disclosures and schedules. 5. Prepare the schedule of expenditures of federal and state awards, including related footnotes,and provide support for all footnote disclosures. 6. Analyze and explain variations in selected account balances between years and/or from budget, as identified by Arthur Andersen. 7. Prepare appropriate year-end accruals. 8. Provide copies of executed legal documents supporting significant current year transactions,i.e.,bond sales,lawsuit settlements,etc. 9. Provide timely resolution of exceptions or questioned costs as identified during the course of the audit. 10. Completion of GFOA checklist as appropriate,to ensure compliance with the GFOA Certificate Program. The above discussion of responsibilities has been included in an effort to provide maximum client service at minimum cost to the City. In the event the City is unable to either complete the procedures outlined or to complete them on schedule, Arthur Andersen is authorized to request an adjustment in fees and/or completion dates. As part of our continuing commitment to the City,we extend an offer to the City to send up to three people per year to pertinent training courses. In addition,we understand that the City may require us to perform certain procedures which are beyond the scope of our engagement. Although not a part of this specific arrangement,we are available to assist the City in such other audit-related areas. Such areas might include loan staff assistance in completing the City's responsibilities under these arrangements, assistance in the preparation of Official Statements as contemplated by the "Disclosure Guidelines for State and Local Governments" issued by the Government Financial Officers Association,special reviews of selected areas, and/or provide the City with grant accounting or other technical assistance in connection with the audit. � f � ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville,Arkansas December 14,1998 Page 5 Arthur Andersen LLP's (Andersen) maximum liability to the City of Fayetteville for any reason,including Andersen's negligence,relating to the services under this letter shall be limited to the fees paid to Andersen for the services or work product giving rise to liability,except to the extent finally determined to have resulted from the gross negligence or willful misconduct of Andersen. Acknowledgment Please confirm your agreement with the above terms by signing a copy of this letter and returning it in the enclosed self-addressed envelope. We are pleased to have this opportunity to serve you and assure you that this engagement will be given our close attention. Should you have any questions about this letter, please do not hesitate to contact Ben Kohnle at 214-741-8736 or Angie Norris at 214-939-6606. Very truly yours, dr414V alte4P1‘14' al° Agreed to and Acknowledged by: Vi/Oar Fr d Hanna,Mayor Date 044tc Iget% evm Cr sson,Administrative Services Director Date Attachment • Attachment I Description of Independ nt Public Accountant's Responsibilities Under Generally Accepted Auditing Standard ,Government Auditing Standards and the Single Audit Act INTERNAL CONTROL S RUCTURE Responsibility under Gen rally Accepted Auditing Standards(GAAS). We will obtain an underst nding of the internal control structure. Based on this understanding we assess control risk-the risk that material misstatement could occur in the financial statements that will not be prevented or detected on timely basis by the City's internal control structure. Based on our understanding of the inte al control structure and the assessed level of control risk,we will determine the nature,timing and ext nt of our audit procedures. The procedures we perfor under GAAS do not provide sufficient evidence to enable us to express an opinion or any other assur ce relative to the internal control structure's design or effectiveness. The purpose of our considerati n of the internal control structure is to plan the audit and to determine the nature,timing and extent f the substantive tests necessary to enable us to form an opinion as to the fair presentation of the City's f ancial statements. Responsibility under Gov rnment Auditing Standards Government Auditing Stand rds does not require us to perform any procedures with respect to the internal control structure beyond ose required by GAAS. However,we are required to issue a written report (either as a part of our rep rt on the financial statements or separately)on our consideration of the internal control structure. ur report must disclose reportable conditions and material weaknesses,if any,we identify as a resul of the procedures we performed. The report does not provide any assurance on the internal control stru tare's design or effectiveness. Responsibility under the S ngle Audit Act and Circular A-133 In addition to the procedu es performed to meet GAAS and Government Auditing Standards requirements, the Single Audit Act inclu ing the Single Audit Act Amendments of 1996,and Circular A-133 require that we specifically consider th internal control structure over federal and state award programs and perform tests of those controls. Th test of controls must cover the controls used to administer at least 50% of the expenditures under all fed ral and state award programs unless we determine the City to be a low risk auditee,in which case we ould use a 25% threshold. We are required to issue a report(in addition to the report required by Gov rnment Auditing Standards)on our consideration of internal control over federal and state programs including tests of those controls. Our report must disclose any reportable conditions and material w aknesses we identify as a result of the procedures we performed. This report does not provide any assu nce on the design or the effectiveness of the internal control structure used to administer federal and stat award programs. Additional services availa le. While the work described above is not intended to result in the expression of assurance or an opinion on the design and operating effectiveness of the internal control structure,you could engage us to perform agreed-upon procedures or examine and report on a written assertion from the City's management as to the design and,if desired,the operating effectiveness of the internal control structure or a segment of that structure. The examination would be conducted in accordance with AICPA standards for attestation engagements. s , Attachment I Description of Independent Public Accountant's Responsibilities Under Generally Accepted Auditing Standards,Government Auditing Standards and the Single Audit Act COMPLIANCE WITH LAWS AND REGULATIONS Responsibility under GAAS. We are required to design the audit to provide reasonable assurance of detecting errors and irregularities material to the financial statements,and illegal acts with a direct and material effect on financial statement amounts. With respect to illegal acts that could have a material indirect effect on the financial statements,if information comes to our attention that provides evidence of the existence of possible indirect effect illegal acts,we must apply procedures directed to ascertaining whether an illegal act has occurred. The results of these procedures are considered by us in forming an opinion on the financial statements. Responsibility under Government Auditing Standards. In addition to the responsibilities under GAAS,we are required to design the audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contract or grant agreements with a direct and material effect on the determination of financial statement amounts. Government Auditing Standards requires that if specific information comes to our attention providing evidence of possible noncompliance that could have a material indirect effect on the financial statements, we must apply audit procedures directed to ascertaining whether that noncompliance has occurred. We are required to issue a written report,separately or as a part of the report on the financial statements, on the results of the procedures performed with respect to compliance with applicable laws and regulations. Responsibility under the Single Audit Act and CircularA-133. In addition to the requirements of GAAS and Government Auditing Standards,the Single Audit Act including the Single Audit Act Amendments of 1996 and Circular A-133 require auditors to perform procedures to provide sufficient evidence to express an opinion as to whether the City has administered its major federal and state award programs in compliance with applicable laws and regulations. After yearend,we will determine,with the City's assistance,the major programs,and we will perform procedures sufficient to express an opinion as to whether the programs have been administered in compliance with applicable laws and regulations. Additional services available. We could also render the following additional services regarding compliance: • Financial statements. If the City asserts it complied,in all material respects,with specified laws and regulations,we could perform agreed-upon procedures or an examination engagement in accordance with AICPA attestation standards. The procedures we will perform,as required by GAAS and Government Auditing Standards,are more limited than if we were to express an opinion on management's assertion. • This letter will confirm our understanding of the arrangements made covering the audit 1 you wish us to perform of the combined Balance Sheet of the City of Fayetteville as of b December 30.1998. and the related combined Statement of Revenues. Expenditures. and Changes in Fund Balances, the combined Statement of Revenues, Expenses and changes in Retained Earnings, and the combined Statement of Cash Flows - all Proprietary Fund Types and the Single Audit for the City of Fayetteville for the year ended December 30, 1998. •f ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas December 14,1998 Page 2 r complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or decline to issue a report as a result of the engagement. While an audit includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to be performed, it is not designed to provide assurance on internal control or to identify significant deficiencies in internal control. However, we are responsible for ensuring that management and the City Council are aware of any such deficiencies that come to our attention. Year 2000 responsibilities. An audit of financial statements is not designed to detect whether any systems are Year 2000 compliant. Further, we have no responsibility with regard to the City's efforts to make its systems, or any other systems (such as those of the City's vendors, service providers or any other third parties), Year 2000 compliant or provide assurance on whether the City has addressed or will be able to address all of the affected systems on a timely basis. This is the responsibility of management. However, we will make inquiries of management regarding the Year 2000 issue, consider management's assessment of the potential impact of the Year 2000 issue on the current U= year's financial statements and our audit, and discuss or otherwise be satisfied that management and the City Council are apprised of any observations we have relative to \'• its Year 2000 remediation plan. The working papers prepared in conjunction with our audit are the property of our /' firm, constitute confidential information and will be retained by us in accordance with our firm's policies and procedures. However, arrangements may be made to make the working papers available to representatives of federal and state agencies, if necessary. Management's Responsibilities and Representations The financial statements are the responsibility of the City's management. Management is also responsible for (1) maintaining effective internal control over financial reporting, (2) identifying and ensuring the City complies with the laws, regulations, contracts and grants applicable to its activities and (3) making available to us all financial records and related information and personnel with information of relevance to our audit. 'r- .. 9� 'r .-.,F° 1' _. ARTHUR Tf • T DCT To • the Honorable Mayor and City Council • of the City. of Fayetteville, Arkansas December 14,1998 Page 3 from certain members of management. The results of our audit tests, the responses to !.. our inquiries, and the written representations constitute the evidential matter we intend ` ` • t k to rely upon in forming an opinion on the financial statements and issuing our other. . FF�r reports in connection with the Single Audit. Because of the importance of management's representations to an effective audit, the City of Fayetteville agrees to release Arthur Andersen LLP and its personnel from an' 1iability,and costs relating to our services underthis letter attributable to any misrepresentations by management. o tl If you intend to publish or otherwise reproduce the financial statements together with our report (or otherwise make reference to our Firm) in a' document that contains other •a information, you agree to provide us with draft of the document to lead and comment F • printed on before it is and distributed. Furthermore, you agree that the terms of this by engagement do not encompass an undertaking by us (1) to consent, means of a r N•statements' 'separate letter or otherwise, to the inclusion of our auditors' report on the financial referred to above in a filing with a Federal or state regulatory agency or otherwise reissue our report for purposes of a securities offering or other financing S4 transaction; or (2) to acknowledge 'rehance' on our'report by others Other Services ARTHUR 2. ANVFPc�N L Ll ✓L To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas - a December 14,1998 Page 4 , 4. Prepare and print the Comprehensive Annual Financial Report, including related footnotes and schedules, and provide support for all footnote disclosures and schedules. 5. Prepare the schedule of expenditures of federal and state awards, including related :• footnotes, and provide support for all footnote disclosures. �r 6. Analyze and explain variations in selected account balances between years and/or from budget, as identified by Arthur Andersen. 7. Prepare appropriate year-end accruals. 8. Provide copies of executed legal documents supporting significant current year transactions, i.e., bond sales, lawsuit settlements, etc. 9. Provide timely resolution of exceptions or questioned costs as identified during the .,. course of the audit. 10. Completion of GFOA checklist as appropriate, to ensure compliance with the GFOA Certificate Program. The above discussion of responsibilities has been included in an effort to provide maximum client service at minimum cost to the City. In the event the City is unable to • either complete the procedures outlined or to complete them on schedule, Arthur Andersen is authorized to request an adjustment in fees and/or completion dates. As part of our continuing commitment to the City, we extend an offer to the City to send up to three people per year to pertinent training courses. 44 In addition, we understand that the City may require us to perform certain procedures which are beyond the scope of our engagement. Although not a part of this specific arrangement, we are available to assist the City in such other audit -related areas. Such areas might include loan staff assistance in completing the City's responsibilities under' these arrangements, assistance in the preparation of Official Statements as contemplated by the "Disclosure Guidelines for State and Local Governments" issued by the Government Financial Officers Association, special reviews of selected areas, and/or- provide the City with grant accounting or other technical assistance in connection with the audit. Description of Independent Public Accountant's Responsibilities Under Generally Accepted Auditing Standards, Government Auditing Standards and the Single Audit Act INTERNAL CONTROL STRUCTURE Responsibility under Generally Accepted Auditing Standards (GAAS). We will obtain an understanding of the internal control structure. Based on this understanding we assess control risk - the risk that a material misstatement could occur in the financial statements that will not be prevented or detected on a timely basis by the City's internal control structure. Based on our understanding of the internal control structure and the assessed level of control risk, we will determine the nature, timing and extent of our audit procedures. The procedures we perform under GAAS do not provide sufficient evidence to enable us to express an opinion or any other assurance relative to the internal control structure's design or effectiveness. The - - purpose of our consideration of the internal control structure is to plan the audit and to determine the nature, timing and extent of the substantive tests necessary to enable us to form an opinion as to the fair - S presentation of the City's financial statements. 5 Responsibility under Government Auditing Standards Government Auditing Standards does not require us to perform any procedures with respect to the internal control structure beyond those required by GAAS. However, we are required to issue a written report (either as a part of our report on the financial statements or separately) on our consideration of the internal control structure. Our report must disclose reportable conditions and material weaknesses, if I any, we identify as a result of the procedures we performed. The report does not provide any assurance on the internal control structures design or effectiveness. Responsibility under the Single AuditAct and Circular A-133 In addition to the procedures performed to meet GAAS and Government Auditing Standards requirements, the Single Audit Act including the Single Audit Act Amendments of 1996, and Circular A-133 require that'} we specifically consider the internal control structure over federal and state award programs and perform tests of those controls. The test of controls must cover the controls used to administer at least 50% of the - S, expenditures under all federal and state award programs unless we determine the City to be a low risk t auditee, in which case we would use a 25% threshold. We are required to issue a report (in addition to • the report required by Government Auditing Standards) on our consideration of internal control over federal and state programs, including tests of those controls. Our report must disclose reportable s t ,any conditions and material weaknesses we identify as a result of the procedures weperformed. This report �!' i p i tkb crr- does not provide any assurance on the design or the effectiveness of the internal control structure used to administer federal and state award programs. , Additional services available � � � t .. :. ... • •' '. While the work described above is not intended to result in the expression. of assurance or an opinion on Sal sY CYh�} !A " the design and operating effectiveness of the internal control structure, you could engage us to perform agreed -upon procedures or examine and report on a written assertion from the City's management as to V the design and, if desired, the operating effectiveness of the internal control structure or a segment of that ; ; < Standards, Government Auditing Standards and the Single Audit Act COMPLIANCE WITH LAWS AND REGULATIONS a: as Responsibility under GAAS. We are required to design the audit to provide reasonable assurance of detecting errors and irregularities material to the financial statements, and illegal acts with a direct and material effect on financial { statement amounts. .3. i . W41, :sp I- to ;»eal acts that co,Wtd have a material fln�._irect effecton the financial s+t tements, if 4 { { information comes to our attention that provides evidence of the existence of possible indirect effect illegal acts, we must apply procedures directed to ascertaining whether an illegal act has occurred. The results of these procedures are considered by us in forming an opinion on the financial statements. Responsibility under Government Auditing Standards. •q In addition to the responsibilities under GAAS, we are required to design the audit to provide reasonable • assurance of detecting material misstatements resulting from noncompliance with provisions of contract or • grant agreements with a direct and material effect on the determination of financial statement amounts. Government Auditing Standards requires that if specific information comes to our attention providing • evidence of possible noncompliance that could have a material indirect effect on the financial statements, 0 • we must apply audit procedures directed to ascertaining whether that noncompliance has occurred. �' We are required to issue a written report, separately or as a part of the report on the financial statements, q P P Y P P on the results of the procedures performed with respect to compliance with applicable laws and regulations. K'S Responsibility under the Single Audit Act and Circular A-133. In addition to the requirements of GAAS and Government Auditing Standards, the Single Audit Act including the Single Audit Act Amendments of 1996 and Circular A-133 require auditors to perform •7 _ procedures to provide sufficient evidence to express an opinion as to whether the City has administered : its major federal and state award programs in compliance with applicable laws and regulations. After yearend, we will determine, with the City's assistance, the major programs, and we will perform procedures sufficient to express an opinion as to whether the programs have been administered m F ttcompliance with applicable laws and regulations. Additional services available We could also render the following additional services regarding compliance : • t Financial statements. • If the City asserts it complied, in all material respects, with specified laws and regulations; we could © perform agreed upon procedures or an examination engagement accordance with AICPA __.,.. _ ._.:.. P eq .. Y attestation standards aThe procedures we will perform .as r ured b _.. � � P GAAS and'Goveriinint