HomeMy WebLinkAbout02-05 RESOLUTIONRESOLUTION NO. 02-05
A RESOLUTION APPROVING THE ANNUAL CONTRACT
RENEWAL WITH BAIRD, KURTZ & DOBSON (BKD), LLP, IN
THE AMOUNT $57,000.00 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. That the City Council of the City of Fayetteville, Arkansas
hereby approves the annual contract renewal with Baird, Kurtz & Dobson (BKD),
LLP, in the of $57,000.00 to provide independent audit services to the City of
Fayetteville. A copy of the engagement letter for services marked Exhibit "A" is
attached hereto, and made a part hereof.
PASSED and APPROVED this 4th day of January 2005.
ATTEST:
By:
oma„
S NDRA SMITH, City Clerk
APPROVE
By:
DAN COODY, Mayor
��p�aunrbrrr
..0RTR ....
FAYETTEVILLE:
WRIWAN*4÷,1
°aq07-01• CP,
lag!
Solutions
for
Success
•
5000 Rogers Avenue, Suite 700
Fon Smith, AR 72903-2079
479 452-1040 Fax 479 452-5542
•
400 W. Capitol Avenue, Suite 2500
P.O. Box 3667
Little Rock, AR 72203-3667
501 372-1040 Fax 501 372-1250
200 E. 11th Avenue
P.O. Box 8306
Pine Bluff, AR 71611-8306
870 534-9172 Fax 870 534-2146
December 2, 2004
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
City of Fayetteville, Arkansas
113 West Mountain
Fayetteville, Arkansas 72701
bkd.com
We are pleased to confirm the arrangements of our engagement and the nature of the services we
will provide to the City of Fayetteville, Arkansas.
ENGAGEMENT OBJECTIVES
We will audit the financial statements of City of Fayetteville, Arkansas as of and for the year
ended December 31, 2004 in accordance with auditing standards generally accepted in the
United States of America, the standards applicable to financial audits' contained in Government
Auditing Standards issued by the Comptroller General of the United States and U.S. Office of
Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and
Nonprofit Organizations.
The objectives of our audit are:
✓ Expression of:an opinion on the conformity of your financial statements, in all material
respects, with accounting principles generally accepted in the United States of America.
✓ Issuance of a report on your compliance based on the audit of your financial statements.
7
Issuance of a report on your internal control over financial reporting based on the audit of your
financial statements.
✓ Expression of an opinion on your compliance, in all material respects, with the types of
compliance requirements described to the U. S. Office of Management and Budget Circular A-
133 Compliance Supplement that are applicable to each of your major federal award programs.
A member of
Mares Rowland mn
mremamrw
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 2
✓ Issuance of a report on your internal control over compliance based on the audit of your
compliance with the types of compliance requirements that are applicable to each of your major
federal award programs.
✓ Issuance of a report on your schedule of expenditures of federal awards
OUR RESPONSIBILITIES
Auditing standards generally accepted in the United States of America, Government Auditing
Standards and OMB Circular A-133 require that we plan and perform:
✓ The audit of the financial statements to obtain reasonable rather than absolute assurance about
whether the financial statements are free of material misstatement, whether caused by error or
fraud.
✓ The audit of compliance with the types of compliance requirements described in the OMB
Circular A-133 Compliance Supplement applicable to each major federal award program to
obtain reasonable rather than absolute assurance about whether noncompliance having a direct
and material effect on a major federal award program occurred.
Accordingly, a material misstatement or noncompliance having a direct and material effect may
remain undetected.
Our audit of the financial statements is designed to detect misstatements and noncompliance that, in
our judgment, could have a material effect on the financial statements taken as a whole.
Consequently, our audit will not necessarily detect errors or fraud resulting in an immaterial
misstatement of the financial statements.
Likewise, our audit of compliance with the types of compliance requirements applicable to each
major federal award program is designed to detect noncompliance having a direct and material
effect on a major program. Consequently, our audit will not necessarily detect noncompliance
having an indirect and material or an immaterial effect on any program.
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 3
An audit also 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. An audit is
not designed to provide assurance on internal control over financial reporting or on internal
control over compliance or to identify reportable conditions. However, we will communicate to
you any matter that comes to our attention that we consider a reportable condition. Because of
the limits in any internal control structure, errors, fraud, illegal acts or instances of
noncompliance may occur and not be detected. Also, in the future, 'procedures could become
inadequate because of changes in conditions or deterioration in design or operation. Two or
more people may also circumvent controls, or management may override the system. We are
available to perform additional procedures with regard to fraud detection and prevention at your
request, subject to completion of our normal engagement acceptance procedures. The actual
terms and fees of such an engagement would be documented in a separate letter to be signed by
you and BKD.
If, for any reason, we are unable to complete our audit of the financial statements or our audit of
compliance with the types of compliance requirements applicable to ieach major federal award
program 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 this engagement. If we discover conditions that
may prohibit us from issuing a standard report, we will notify you as well. In such
circumstances, further arrangements may be necessary to continue our engagement.
YOUR RESPONSIBILITIES
To facilitate our audit, management is responsible for making all financial records
documentation and other financial and compliance related information available to us At the
conclusion of our engagement, management will provide to us a letter acknowledging certain
responsibilities outlined in this engagement letter and confirming:
• The availability of this information
• Certain representations made during the audits for all periods presented
• The effects of any uncorrected misstatements, if any, resulting from errors or fraud
aggregated by us during the current engagement and pertaining to the latest period
presented are immaterial, both individually and in the aggregate, to the financial
statements taken as a whole
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 4
Management is responsible for fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America, for adjusting the
financial statements to correct material misstatements and for identifying and ensuring
compliance with the laws, regulations, contracts and grants applicable to your activities including
your federal award programs. Management is also responsible for establishing and maintaining
effective intemal control over financial reporting and compliance and setting the proper tone;
creating and maintaining a culture of honesty and high ethical standards; and establishing
appropriate controls to prevent, deter and detect fraud, illegal acts and instances of
noncompliance.
The results of our tests of compliance and internal control over financial reporting performed in
connection with our audit of the financial statements may not fully meet the reasonable needs of
report users. Management is responsible for obtaining audits, examinations, agreed-upon
procedures or other engagements that satisfy relevant legal, regulatory or contractual
requirements or fully meet other reasonable user needs.
OTHER SERVICES
We may perform other services for you not covered by this engagement letter. You agree to
assume full responsibility for the substantive outcomes of those services, including any findings
that may result. You also acknowledge that those services are adequate for your purposes and
that you will establish and monitor the performance of those services to ensure that they meet
management's objectives. Any and all decisions involving management functions related to
those services will be made by you, and you accept full responsibility for such decisions. We
understand that you will designate a management -level individual to be responsible and
accountable for overseeing the performance of those services, and that'you will have determined
this individual is qualified to conduct such oversight.
ENGAGEMENT FEES
Our fees will be based on time expended plus charges for travel, long-distance telephone, copies,
etc. and will not exceed $57,000. We will issue progress billings 'during the course of our
engagement and our statements are due when received.
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 5
Our engagement fee does not include any time for post -engagement consultation with your
personnel or third parties, consent letters and related procedures for the use of our reports in
offering documents, inquiries from regulators or testimony or deposition regarding any -
subpoena. Charges for such services will be billed separately.
Our fees may increase if our duties or responsibilities are increased by rule making of any
regulatory body or new accounting or auditing standards. We will consult with you in the event
any regulations or standards are issued that may impact our fees.
Our invoices are due within 30 days. If our invoices for this or any other engagement you may
have with BKD are not paid when due, we may suspend or terminate our services for this or any
other engagement In the event our work is suspended or terminated as a result of nonpayment,
you agree we will not be responsible for any consequences to you.
OTHER ENGAGEMENT MATTERS AND LIMITATIONS
Our workpapers and documentation retained in any form of media for this engagement are the
property of BKD. We can. be compelled to provide information under legal process. In addition,
we may be requested by regulatory or enforcement bodies to make certain workpapers available
to them pursuant to authority granted by law or regulation. You agree that we have no legal
responsibility to you in the event we provide such documents or information.
To the extent permitted by the laws of the State of Arkansas, you agree to indemnify and hbld
harmless BKD and its personnel from any claims, liabilities, costs, and expenses relating to our
services under this agreement attributable to false or incomplete representations by management,
except to the extent determined to have resulted from the intentional or deliberate misconduct of
BKD personnel.
To the extent permitted by the laws of the State of Arkansas, you agree that any dispute
regarding this engagement will, prior to resorting to litigation, be submitted to mediation upon
written request by either party. Both parties agree to try in good faith to settle the dispute in
mediation. The results of the mediation proceeding shall be binding only if each of us agrees to
be bound. We will share any costs of mediation proceedings equally. '
If any provision of this agreement is declared invalid or unenforceable, no other provision of this .
agreement is affected and all other provisions remain in full force and effect.
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 6
This engagement letter represents the entire agreement regarding the 'services described herein
and supersedes all prior negotiations, proposals, representations or agreements, written or oral,
regarding these services It shall be binding on heirs, successors and assigns of you and BKD.
If you intend to include these financial statements and our report in an offering document at
some future date, you agree to seek our permission to do so at that time. You agree to provide
reasonable notice to allow sufficient time for us to perform certain additional procedures. Any
time you intend to publish or otherwise reproduce these financial statements and our report and
make reference to our firm name in any manner in connection therewith, you agree to provide us
with printers' proofs or masters for our review and approval before printing or other
reproduction. You will also provide us with a copy of the final reproduced material for our
approval before it is distributed. Our fees for such services are in addition to those discussed
elsewhere in this letter.
You agree to notify us if you desire to place these financial statements or our report thereon on
an electronic site, such as the World Wide Web. You recognize that we have no responsibility as
auditors to review information contained in electronic sites.
BKD is a registered limited liability partnership under Missouri law. Under applicable
professional standards, partners of BKD, LLP have the same responsibilities as do partners in a
general accounting and consulting partnership with respect to conformance by themselves and
other professionals in BKD with their professional and ethical obligations. However, unlike the
partners in a general partnership, the partners in a registered limited liability partnership do not
have individual civil liability, directly or indirectly, including by way of indemnification,
contribution, assessment or otherwise, for any debts, obligations or liabilities of or chargeable to
the registered limited liability partnership or each other, whether arising in tort, contract or
otherwise.
If the above arrangements are acceptable to you, please sign the enclosed copy of this letter and
return it to us.
BKD, LLP
• •
Audit Committee and Board of Directors
Honorable Dan Coody, Mayor
Mr. Stephen Davis, Finance and Internal Services Director
Ms. Marsha Farthing, Accounting Manager
December 2, 2004
Page 7
The services and arrangements described in this letter are in accordance with our understanding
and are acceptable to us.
CITY OF FsYETTEV LE, ARKANS
BY
DATE
(Name & Title)
117 I°/
kk/vls
2004CLIENT/71997/ENGL2613
•
a ei evi k
ARKANSAS
To: Mayor Dan Coody and the Fayetteville City Council
From: Marsha Farthing, Accounting Manager
Date: December 13, 2004
Subject: Annual Audit
Recommendation
Staff recommends approval of the third year audit engagement with BKD,LLP.
eSt//t/ ,d5
002 -05
&ire/ /41v7 ,
.L ,7 tt//Ruc1�f
sve__
Background
In August 2002 the City Council passed Resolution 124-02 approving a five year contract
with Baird, Kurtz & Dobson (BKD), LLP, to provide independent audit services for the
City. It is time to approve the engagement letter for services in connection with the audit
for the year ending December 31, 2004.
Discussion
The City is required, under Arkansas statutes and applicable bond issues, to have an
annual financial audit conducted by either Legislative Audit or a Certified Public
Accounting firm licensed in Arkansas. Because of the requirements of bond indentures,
the City has for the past thirty plus years utilized the services of a private CPA firm to
perform these mandated financial audits.
BKD was selected by the City following the applicable rules and regulations concerning
the procurement of auditing services. The City entered into a five-year agreement in
August 2002. Under this contract BKD will provide an annual audit of the City's
financial statements and a review of the City's internal control system as required by state
law In addition to the financial audit, BKD also issues a report on internal control and
compliance requirements for major federal award programs as required by the Single
Audit Act. The single audit is the primary mechanism used by federal agencies to ensure
accountability for federal awards to non-federal entities.
Finally, BKD also provides technical assistance to the City in producing the
Comprehensive Annual Financial Report (CAFR). The CAFR includes the City's
financial statements as well as statistical information required by the City's bond
covenants.
Budget Impact
The cost of the 2004 audit by contract was not to exceed $53,700. The contract presented
is for $57,000. The requested increase is due to additional auditing requirements from
new auditing standards. The audit has been budgeted in General Fund but the costs will
be allocated to the various funds of the City.
• •
RESOLUTION NO.
A RESOLUTION APPROVING THE ANNUAL CONTRACT
RENEWAL WITH BAIRD, KURTZ & DOBSON (BKD), LLP, IN
THE AMOUNT $57,000.00 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. That the City Council of the City of Fayetteville, Arkansas
hereby approves the annual contract renewal with Baird, Kurtz & Dobson (BKD),
LLP, in the of $57,000.00 to provide independent audit services to the.Cit of
Fayetteville. A copy of the engagement letter for services marked Exbi�tAls
attached hereto, and made a part hereof.
PASSED and APPROVED this 4ch day of January 2005;
-00
APPROVED:
ANG .Srn DY, Mayor
ATTEST:
SM1TiH, City Clerk
•
Clifton
Gunderson LLP
Certified Public Accountants & Consultants
October 4, 2002
To the Partners of
BKD LLP
and the SEC Practice Section Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of
BKD LLP (the firm) in effect for the year ended May 31, 2002. A system of quality control
encompasses the firm's organizational structure and the policies adopted and procedures
established to provide it with reasonable assurance of complying with professional standards.
The elements of quality control are described in the Statements on Quality Control Standards
issued by the American Institute of Certified Public Accountants (the AICPA). The design of
the system, and compliance with it, are the responsibilities of the firm. In addition, the firm
has agreed to comply with the membership requirements of the SEC Practice Section of the
AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on
the design of the system, and the firm's compliance with that system and the Section's
membership requirements based on our review.
Our review was conducted in accordance with standards established by the Peer Review
Committee of the Section and included procedures to plan and perform the review that are
summarized in the attached description of the peer review process. Our review would not
necessarily disclose all weaknesses in the system of quality control or all instances of lack of
compliance with it or with the membership requirements of the Section since it was based on
selective tests. Because there are inherent limitations in the effectiveness of any system of
quality control, departures from the system may occur and not be detected. Also, projection
of any evaluation of a system of quality control to future periods is subject to the risk that the
system of quality control may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of BKD
LLP in effect for the year ended May 31, 2002, has been designed to meet the requirements
of the quality control standards for an accounting and auditing practice established by the
AICPA, and was complied with during the year then ended to provide the firm with
reasonable assurance of complying with professional standards. Also, in our opinion, the
firm complied during that year with the membership requirements of the Section in all
material respects.
nin 1,iati
v nlunCb 1. 1
L L A
HLB
• •
Attachment to the Peer Review Report of BKD LLP
Description of the Peer Review Process
Overview
Member firms of the AICPA SEC Practice Section (the Section) must have their system
of quality control periodically reviewed by independent peers. These reviews are system
and compliance oriented with the objective of evaluating whether:
The reviewed firm's system of quality control for its accounting and auditing
practice has been designed to meet the requirements of the Quality Control
Standards established by the AICPA.
The reviewed firm's quality control policies and procedures were being complied
with to provide the firm with reasonable assurance of complying with
professional standards.
The reviewed firm was complying with the membership requirements of the
SECPS in all material respects.
The Section's Peer Review Committee (PRC) establishes and maintains review
standards. At regular meetings and through report evaluation' task forces, the PRC
considers each peer review, evaluates the reviewer's competence and performance, and
examines every report, letter of comments, and accompanying response from the
reviewed firm that states its corrective action plan before the peer,review is finalized. The
Transition Oversight Staff (formerly the staff of the Public Oversight Board), an
independent oversight body, plays a key role in overseeing the performance of peer
reviews working closely with the peer review teams and the PRC.
Once the PRC accepts the peer review reports, letters of comments, and reviewed firms'
responses, they are maintained in a file available to the public. In some situations, the
public file also includes a signed undertaking by the firm agreeing to specific follow-up
action requested by the PRC. That file also includes the firm's annual report which
contains information regarding the number of fine offices, firm professionals, and SEC
clients for which the firm is principal auditor -of -record.
Planning the Review
To plan the review of BKD LLP, we obtained an understanding of (1) the nature and
extent of the firm's accounting and auditing practice, and (2) the design of the firm's
system of quality control sufficient to assess the inherent and control risks implicit in its
practice. Inherent risks were assessed by obtaining an understanding of the firm's
practice, such as the industries of its clients and other factors of complexity in serving
those clients, and the organization of the firm's personnel into, practice units. Control
risks were assessed by obtaining an understanding of the design of the firm's system of
quality control, including its audit methodology, and monitoring procedures. Assessing
control risk is the process of evaluating the effectiveness of the reviewed firm's quality
control system in preventing the performance of engagements that do not comply with
professional standards.
Performing the Review
Based on our assessment of the combined level of inherent and control risks, we
identified practice units and selected engagements within those units to test for
compliance with the firm's quality control system. The engagements selected for review
included audits of clients that are SEC registrants, audit performed under the
Government Auditing Standards, an audit performed under FDICIA, a multi -office audit
and audits of Employee Benefit Plans. The engagements selected for review represented
a cross-section of the firm's accounting and auditing practice with emphasis on higher -
risk engagements. The engagement reviews included examining working paper files and
reports and interviewing engagement personnel.
The scope of the peer review also included examining selected administrative and
personnel files to determine compliance with the firm's policies and procedures for the
elements of quality control pertaining to independence, integrity, and objectivity;
personnel management; and acceptance and continuance of clients and engagements. In
addition, we tested compliance with the membership requirements of the Section,
including those pertaining to independence quality controls and concurring partner
review.
Prior to concluding the review, we reassessed the adequacy of scope and conducted an
exit conference with firm management to discuss our findings and recommendations.
STA REVIEW FORM - FINANCIAL OBLIGAUON
X AGENDA REQUEST
X CONTRACT REVIEW
GRANT REVIEW
For the Fayetteville City Council Meeting of: January 4, 2005
FROM:
Marsha Farthing
Name
Accounting and Audit Finance and Internal Services
Division Department
Approval of the third year engagement of a five year contract with BKD,LLP for annual
auditing services for in the amount of $57,000.
adjrs
$57,000.00
Cost of this request
Multiple accounts
Account Number
$54,000 Services and Charges
Category/Project Budget Program Category / Project Name
$ - Audit expense
Funds Used to Date Program / Project Category Name
N/A $ 54,000.00 Multiple funds
Project Number
Remaining Balance Fund Name
BUDGET REVIEW:
Budgeted Item Budget Adjustment Attached
Budget Manager Date
CONTRACT/GRANT/LEASE REVIEW:
Accounting Manager Date Internal Auditor Date
City Attorrpy ate Purchasing Manager Date
STAFjj�� RECOMMENDATION:
4Ois/ : A
D1V1 ion Head
Department Director
Finance & Internal Services Dir.
Date
Date
(1 -Lc -el
Date
Date
Mayor Date
Received in Mayor's Office
Cross Reference:
Previous Ord/Res#:
Date )p4
Orig. Contract Date:
Orig. Contract Number:
New Item: Yes No
Mayor: Department Director: Purchasing Manager:
Finance & Internal Services Director: Budget Manager: IT Manager:
Dispatch Manager: Utilities Manager: Other:
Special Instructions: - _ _---
41.
C to co dt P A CO•
N
Dr. ,'N
City:
Little Rock
Address:
400 West Capitol Ave. Suite 2500
(Vendor 74"
11856
City Fayetteville G
(Notta Purchase Order)
Shipping/Handling
Annual Audit;.
1 Description
71a,
Sr:
t0
-_
D
c
m
0
Venddr•Name + '? 4 irivr ",'h,':'""'`r"r :" , .,.
Lot
1Unit of Issue
> y
A 6
m
'Unit Cost
a
o
b
S0.00
a
o
b
o
a
0
b
0
a
0
b
o
50.00
a
0
b
0
a
0
b
to
a
0
bo
o
50.00
v.
-o
o
0
1Extended Cost
0
bo-
Account Numbers
.NLa
;
A
o
a
c,
co
m,
Zip Code: Shipto:code
72203
Fob Point:
Tax:
Total: 557,000.00
1Project/Subproject #
m
m,
CD x
Z
O
m °i.
Z
o
C
3
m
:"ON uogisinbaid
Inventory #
'Quotes Attached
Yes: No:
Expected Delivery Uate:
O
N
N
!Fixed Asset # _ 1
Clarice Pearman - BKD
From: Clarice Pearman
To: Farthing, Marsha
Subject: BKD
Attached is the resolution passed by the City Council on January 4, 2005 regarding independent audit
services with Baird, Kurtz & Dobson LLP.
I will send you the one of two originals via interoffice mail.
Thanks.
Page 1