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HomeMy WebLinkAbout213-10 RESOLUTIONRESOLUTION NO. 213-10 A RESOLUTION APPROVING A CONTRACT WITH BAIRD, KURTZ & DOBSON (BKD), LLP, IN THE AMOUNT OF $84,200.00 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 a contract with Baird, Kurtz & Dobson (BKD), LLP, in the amount of $84,200.00 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 7th day of December, 2010. APPROVED: ATTEST: SON RA E. SMITE Cler tY Treasurer BKD... CPAs & Advisors 5000 Rogers Avenue, Suite 700 Fort Smith, AR 72903-2079 479.452.1040 Fax 479.452.5542 www.bkd.com November 1, 2010 Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas 113 West Mountain St. Fayetteville, AR 72701 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 basic financial statements of the City of Fayetteville, Arkansas as of and for the year ended December 31, 2010, 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 fmancial 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 fmancial statements. ✓ 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 in the U. S. Office of Management and Budget Circular A- 133 Compliance Supplement that are applicable to each of your major federal award programs. ✓ 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. experience BKD r xi ° tx: MEMBER GLOBAL ALLIANCE OF INDEPENDENT FIRMS -2 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas ✓ Issuance of a report on your schedule of expenditures of federal awards. We will also examine the written assertion about the compliance with certain state acts made by the management of the City of Fayetteville, Arkansas as of and for the year ended December 31, 2010, in accordance with attestation standards established by the American Institute of Certified Public Accountants. The objective of our examination is the expression of an opinion on the conformity of the subject matter of the assertion in all material respects, with the applicable criteria against which it is measured. Our report is intended solely for the information and use of the governing body, management and the State of Arkansas and is not intended to be and should not be used by anyone other than these specified parties. 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. 1 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 fmancial 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 fmancial 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. -3 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas An audit also includes obtaining an understanding of the entity and its environment, including internal controls, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing and extent of further 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 material weaknesses or significant deficiencies. However, we will communicate to you any matter that comes to our attention that we consider a material weakness or significant deficiency. Because of the limits of internal control, 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. David Coleman is responsible for supervising the engagement and authorizing the signing of the report or reports. 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 each 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 -4 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas 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 internal 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 an administrative fee of 3% to cover items such as copies, postage and other delivery charges, supplies, technology -related costs such as computer processing, software licensing, research and library database and similar expense items. The fee for our services, including the administrative fee, will be $84,200. Our pricing for this engagement and our fee structure is based upon the expectation that our invoices will be paid promptly. We will issue progress billings during the course of our engagement, and payment of our invoices is due upon receipt. Interest will be charged on any unpaid balance after 30 days at the rate of 10% per annum. -5 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas Our fees are based upon the understanding that your personnel will be available to assist us. Assistance from your personnel is expected to include: • Preparing audit schedules to support all significant balance sheet and certain other accounts • Responding to auditor inquiries • Preparing confirmation and other letters • Pulling selected invoices and other documents from files • Helping to resolve any differences or exceptions noted We will provide you with a detailed list of assistance needed before the audit begins. Our timely completion of the audit depends on your timely and accurate schedule and analyses preparation and on the availability of your personnel to provide other assistance. If there are inaccuracies or delays in preparing this material, or if we experience other assistance difficulties that add a significant amount of time to our work, our fees will increase. If these circumstances occur, we will promptly notify you to discuss alternative solutions and the impact on our fees. 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 also increase if our duties or responsibilities are increased by rulemaking of any regulatory body or any additional new accounting or auditing standards. We will consult with you in the event any other regulations or standards are issued that may impact our fees. If our invoices for this or any other engagement you may have with BKD are not paid within 30 days, 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. -6 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas You agree to indemnify and hold 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. 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 American Arbitration Association will administer any such mediation in accordance with its Commercial Mediation Rules. 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. Either of us may terminate these services at any time. Both of us must agree, in writing, to any future modifications or extensions. If services are terminated, you agree to pay us for time expended to date. In addition, you will be billed travel costs, if any, and an administrative fee of 3% to cover items such as copies, postage and other delivery charges, supplies, technology - related costs such as computer processing, software licensing, research and library databases and similar expense items. 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. 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. We may from time to time utilize third -party service providers, e.g., domestic software processors or legal counsel, or disclose confidential information about you to third -party service providers in serving your account. We remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures and safeguards to protect the confidentiality of your information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information. In the event we are unable to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the sharing of your confidential information with the third -party service provider. We will, at our discretion or upon your request, deliver financial or other confidential information to you electronically via email or other mechanism. You recognize and accept the risk involved, particularly in email delivery as the Internet is not necessarily a secure medium of communication as messages can be intercepted and read by those determined to do so. -7 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas You agree you will not modify these documents for internal use or for distribution to third parties. You also understand that we may on occasion send you documents marked as draft and understand that those are for your review purpose only, should not be distributed in any way and should be destroyed as soon as possible. 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. You recognize that we have no responsibility as auditors to review information contained in electronic sites. Any time you intend to reference our firm name in any manner in any published materials, including on an electronic site, you agree to provide us with draft materials for our review and approval before publishing or posting such information. 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. HIPAA BUSINESS ASSOCIATE AGREEMENT We agree not to use or disclose Protected Health Information of your employees (hereinafter referred to as "PHI") obtained or produced in any form of media during the course of our work in a manner prohibited by HIPAA, as amended. We may use or disclose PHI for purposes of (a) performing our engagement, (b) management and administration of BKD, or (c) carrying out -8 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas legal responsibilities of BKD. We represent to you that we have implemented what we consider to be appropriate administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of your PHI. With respect to your PHI, we will report to you any breach (as defined in 45 CFR 164.402), material security incident or use or disclosure not authorized by this agreement and, to the extent practical, assist you in mitigating any harmful effects caused by breaches, material security incidents or unauthorized uses or disclosures of which we become aware. To assist you in fulfilling your responsibility to notify impacted individuals and others of a breach involving unsecured PHI (as required under 45 CFR 164.400 et seq.), in this report we will identify to you, to the extent reasonably possible: 1. Each individual whose unsecured PHI was subject to the breach. 2. Any other available information you are required to include in your notification to such individual(s) or others under 45 CFR 164.404(c). We agree that any material violation of these confidentiality provisions entitles you to terminate this engagement. BKD agrees to: 1. Upon their request, make available to the Secretary of Health and Human Services (HHS) our internal practices and books and records relating to the use and disclosure of PHI for purposes of determining your compliance with the Security and Privacy Rule, subject to any applicable legal privileges. 2. Make available information necessary for you to make an accounting of disclosures of PHI about an individual. 3. To the extent we maintain information that is part of a Designated Record Set, make available information necessary for you to respond to requests by individuals for access to PHI that is not in your possession but is considered part of a Designated Record Set. 4. Upon receipt of a written request from you, incorporate any amendments or corrections to PHI contained in our workpapers in accordance with the Security and Privacy Rule to the extent such PHI is considered part of a Designated Record Set. For purposes of this agreement, the term "Security and Privacy Rule" refers to the final rules published to implement the Administrative Simplification provisions of the Health Insurance -9 - Audit Committee and City Council Honorable Lioneld Jordan, Mayor Mr. Paul Becker, Finance Director Ms. Marsha Hertweck, Accounting Director City of Fayetteville, Arkansas Portability and Accountability Act of 1996, specifically 45 CFR Parts 160 and 164. The terms "Protected Health Information" and "Designated Record Set" have the same meaning as defined in the Security and Privacy Rule. At the conclusion or termination of this engagement, any PHI retained by us will be subject to the same safeguards as for active engagements. We will obtain from any agents, including subcontractors, to whom we provide PHI received from you, or created or received by us on behalf of you, an agreement to the same restrictions and conditions that apply to us with respect to such PHI. To the extent that any relevant provision of HIPAA is eliminated or held to be invalid by a court of competent jurisdiction, the corresponding portion of this agreement shall be deemed of no force and effect for any purpose. To the extent that any relevant provision of HIPAA is materially amended in a manner that changes the obligations of business associates or covered entities that are embodied in term(s) of this engagement, the Parties agree to negotiate in good faith appropriate amendment(s) to this engagement to give effect to such revised obligations. In addition, the terms of this engagement should be construed in light of any interpretation and/or guidance on HIPAA issued by HHS from time to time. If the above arrangements are acceptable to you, please sign the enclosed copy of this letter and return it to us. BKD, LLP 6/4 01 Li_i0 The services and arrangements described in this letter are in accordance with our understanding and are acceptable to us. CITY OF FA . TTEVILLE, ARKANSAS TITLE DATE /70,//Z) Certified Public Accountants & Consultants System Review Report July 31, 2008 To the Partners of BKD, LLP and the Center for Public Company Audit Firms 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, 2008. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prsummary. As required by the standards, engagements selected for review included engagements performed under the Government Auditing Standards; audits of employee benefit plans, and an audit performed under FDICIA. In our opinion, the system of quality control for the accounting and auditing practice of BKD, LLP in effect for the year May 31, 2008 has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. BKD, LLP has received a peer review rating of pass. LLQ' Offices in 17 states and Washington, DC Marsha Hertweck Submitted By City of Fayetteville Staff Review Form City Council Agenda Items and Contracts, Leases or Agreements 1 %-7- 2431� City Council Meeting Date Agenda Items Only Accounting and Audit Division Action Required: Finance and Internal Services Department Approval of the a contract with Baird, Kurtz and Dobson (BKD), LLP for the 2010 annual audit. 84,200.00 Cost of this request various funds Account Number Project Number Budgeted Item 84,200.00 Category / Project Budget Program Category / Project Name Funds Used to Date Program / Project Category Name 84,200.00 Remaining Balance Fund Name Budget Adjustment Attached TeA 2-2. MD Previous Ordinance or Resolution # Departm - e._e: rector Date / Original Contract Date: (i' � ! f (G� " /(2 Original Contract Number: Date Ci (1- t1. -2o tp Finaaace and Internal Services Director Date Ch'iefofS Date Received in City Clerk's Office 1 1 -1 8 -1 0A03:52 RCVD yy, Received in Mayor's Office Comments: Revised January 15, 2009 Ta'atyev11e THE CITY OF FAYETTEVILLE, ARKANSAS To: Mayor Lioneld Jordan and the Fayetteville City Council Thru: Paul Becker, Finance Director From: Marsha Hertweck, Accounting Director Atki\v- Date: November 19, 2010 Subject: Annual Audit Recommendation Approval of a contract with Baird, Kurtz & Dobson (BKD), LLP for the 2010 annual audit. 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 and selected BKD for another five years through the RFP process in July 2007. 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 2010 audit is $84,200. The audit will be budgeted in General Fund and allocated to the various funds of the City. RESOLUTION NO. A RESOLUTION APPROVING A CONTRACT WITH BAIRD, KURTZ & DOBSON (BKD), LLP, IN THE AMOUNT OF $84,200.00 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 a contract with Baird, Kurtz & Dobson (BKD), LLP, in the amount of $84,200.00 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 7th day of December, 2010. APPROVED: ATTEST: By: By: LIONELD JORDAN, Mayor SONDRA E. SMITH, City Clerk/Treasurer