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HomeMy WebLinkAboutResolution No. 2010-072CITY OF THE COLONY, TEXAS RESOLUTION NO. 10 - f "79, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF THE COLONY, APPROVING THE TERMS AND CONDITIONS OF THE PROFESSIONAL SERVICES CONTRACT BY AND BETWEEN THE CITY OF THE COLONY AND BKD, LLP FOR AN ANNUAL AUDIT OF THE CITY'S FINANCIAL STATEMENTS, TO INCLUDE FOUR EXTENSIONS; AUTHORIZING THE CITY MANAGER TO EXECUTE THE CONTRACT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City and Consultant have entered into an agreement such that the Consultant is to provide the following services: Audit of the Cites Financial Statements; and WHEREAS, the City has determined that it is in the best interest of the City to enter into the Contract with BKD, LLP, which is attached hereto and incorporated herein by reference as Exhibit "A," under the terms and conditions provided therein. WHEREAS, with this Contract the City of The Colony is agreeing to pay a sum not to exceed $51,400.00 for the first year and fees per proposal for an additional four (4) years. THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS, THAT Section 1. The Professional Services Contract which is attached and incorporated hereto as Exhibit "A", having been reviewed by the City Council of the City of The Colony, Texas, and found to be acceptable and in the best interest of the City and its citizens, be, and the same is hereby, in all things approved, and the City Manager is hereby authorized to execute the Agreement on behalf of the City of The Colony, Texas. Section 2. That this Resolution shall take effect immediately from and after its adoption and it is so resolved. PASSED, APPROVED and EFFECTIVE this V ),d#of August, 2010. e s ~ Joe M`cCour ayor City j~,/The V1101rny, Texas 14241 Dallas Parkway, Suite 1100 Dallas, TX 75254-2961 972.702.8262 Fax 972.702.0673 www.bkd.com September 1, 2010 Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance 6800 Main Street The Colony, Texas 75056-1133 E. N T %"I up If We are pleased to confirm the arrangements of our engagement and the nature of the services we will provide to The Colony, Texas. ENGAGEMENT OBJECTIVES We will audit the basic financial statements of The Colony, Texas, as of and for the year ended September 30, 2010, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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. ✓ Issuance of a report on your internal control over financial reporting based on the audit of your financial statements. OUR RESPONSIBILITIES Auditing standards generally accepted in the United States of America and Government Auditing Standards require that we plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Accordingly, a material misstatement may remain undetected. Our audit is designed to detect misstatements 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. experience BKO PraxitY. MEMBER GLOBAL ALLIANCE OF INDEPENDENT FIRM°S Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance September 1, 2010 Page 2 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 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. Kevin Kemp 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 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 Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance September 1, 2010 Page 3 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. 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 will provide you with the following nonattest service: • Preparing a draft of the financial statements and related notes In addition, we may perform other services for you not covered by this engagement letter. You agree to assume full responsibility for the substantive outcomes of the service described above and for any other services that we may provide, 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. Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance September 1, 2010 Page 4 ENGAGEMENT FEES Our fees will be $56,900. 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. 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. 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. 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. 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. Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance September 1, 2010 Page 5 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. 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. Honorable Mayor Joe McCourry and Members of the City Council Attn: Mr. Troy Powell, City Manager Ms. Rebecca Lai, Director of Finance September 1, 2010 Page 6 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 QKQ«. The services and arrangements described in this letter are in accordance with our understanding and are acceptable to us. THE COLONY, TEXAS B. and Title) Date: kk:bst Enclosure GFR/69684 Clifton Gunderson LLP Certified Public Accountants & Consultants System Review Report 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) applicable to non-SEC issuers 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 applicable to non-SEC issuers 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. July 31, 2008 i_lffp-t: in 17 tales an-1 DC Iniernalional Attachment to the Peer Review Report of BKD LLP Description of the Peer Review Process Overview Firms enrolled in the AICPA Center for Public Company Audit Firms (the Center) Peer Review Program 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 applicable to non-SEC issuers 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 applicable to non-SEC issuers were being complied with to provide the firm with reasonable assurance of complying with professional standards. A peer review is based on selective tests and directed at assessing whether the design of and compliance with the firm's system of quality control for its accounting and auditing practice applicable to non-SEC issuers provides the firm with reasonable, not absolute, assurance of complying with professional standards. Consequently a peer review on the firm's system of quality control is not intended to, and does not, provide assurance with respect to any individual engagement conducted by the firm or that none of the financial statements audited by the firm should be restated. The Center's Peer Review Committee (PRC) establishes and maintains peer 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 Center's staff 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. Firms that perform audits or play a substantial role in the audit of one or more SEC issuers, as defined by the Public Company Accounting Oversight Board (PCAOB), are required to be registered with and have their accounting and auditing practice applicable to SEC issuers inspected by the PCAOB. Therefore, we did not review the firm's accounting and auditing practice applicable to SEC issuers. Planning the Review for the Firm's Accounting and Auditing Practice Applicable to Non- SEC Issuers To plan the review of BKD LLP, we obtained an understanding of (l) 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 system of quality control in preventing the performance of engagements that do not comply with professional standards. Performing the Review of the Firm's Accounting and Auditing Practice Applicable to Non- SEC Issuers 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 system of quality control. The engagements selected for review included engagements performed under the Government Auditing Standards, audits 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. Prior to concluding the review, we reassessed the adequacy of scope and conducted a meeting with firm management to discuss our findings and recommendations. CONSULTANT CONTRACT CITY OF THE COLONY STATE OF TEXAS § § KNOW ALL MEN BY THESE PRESENTS: COUNTY OF DENTON § THIS CONTRACT is made and entered into this date by and between the CITY OF THE COLONY, a Texas municipal corporation (hereinafter referred to as the "CITY", and BKD, LLP (hereinafter referred to as "AUDITOR") and evidences the following: 1. PURPOSE AUDITOR shall provide Auditing Services for the 2010 audit. II. DESCRIPTION OF SERVICES The services which AUDITOR shall provide for the CITY shall include the following: A. AUDITOR hereby covenants and agrees that AUDITOR is to work closely with the CITY's Finance Director, or his/her chosen agent, and/or other appropriate officials of the CITY, and that AUDITOR is to perform any and all tasks required of AUDITOR to fulfill the purposes of this Contract. B. AUDITOR and the CITY covenant and agree that AUDITOR shall perform all of the services and work contained in AUDITOR'S proposal to the CITY (attached hereto as "Exhibit A"); said document being part of this Contract and incorporated in its entirety herein. The parties agree that should there be any conflict between the terms of the incorporated document and this Contract, the provisions of this Contract shall control. C. AUDITOR expressly covenants and agrees to provide the CITY with such written reports as may be required by the scope of the proposal. D. AUDITOR will prepare the CITY'S Comprehensive Annual Financial Report (CAFR). III. PERFORMANCE OF WORK AUDITOR or AUDITOR'S associates and employees shall perform all the work called for in this Contract. AUDITOR hereby covenants and agrees that all of AUDITOR'S associates and employees who work on this project shall be fully qualified to undertake same and are competent to do the work described in this Contract. IV. PAYMENT The CITY shall pay to AUDITOR a sum not to exceed Fifty-six thousand nine hundred dollars ($56,900.00) for the services including expenses for the first year, and amounts in subsequent years per the AUDITOR'S proposal. AUDITOR shall bill CITY on a monthly basis for services rendered, based upon percentage of work completed. City shall make prompt monthly payments in the amount shown by the AUDITOR'S approved monthly statements and other documentation submitted. No interest shall ever be due on late payments. Within 30 days after the final completion and acceptance by the CITY of all work under this Contract, final payment shall be paid. V. TERM OF THE CONTRACT This Contract shall commence and be in full force and effect upon the signing of the Contract and observance of the appropriate formalities. This Contract shall be in effect for a period of one (1) year and may be extended for another four (4) one year terms subject to the annual review and recommendation of the Finance Director, the satisfactory negotiation of terms, the concurrence of the City of The Colony and the annual availability of an appropriation. Vl. CONTRACT PERSONAL CONSULTANT and the CITY hereby covenant and agree that this Contract provides for personal services and that these services are not to be assigned or sublet in whole or part without the prior written consent of the CITY. VII. CONFLICT OF INTEREST AUDITOR hereby covenants and agrees that during the Contract period that AUDITOR and any of AUDITOR'S associates and employees will have no interest nor acquire any interest, either direct or indirect, which will conflict in any manner with the performance of the services called for under this Contract. All activities, investigations and other efforts made by AUDITOR pursuant to this Contract will be conducted by employees or associates of AUDITOR. AUDITOR further covenants and agrees that it understands that the Code of Ordinances of the City of The Colony prohibits any officer or employee of the CITY from having any financial interest, either direct or indirect, in any business transaction with the CITY. Any violation of this paragraph which occurred with the actual or constructive knowledge of AUDITOR will render this Contract voidable by the CITY. VIII. CHANGE IN WORK The CITY, through its Finance Director, may request changes in the scope and focus of the activities and studies called for under this Contract. Any such change which, in the opinion of AUDITOR or the CITY varies significantly from the scope and focus of the work set out herein or entails a significant increase in cost or expense to AUDITOR must be mutually agreed upon by AUDITOR and the CITY. The parties herein acknowledge that any change in the scope or focus of the work which results in the increase in compensation to AUDITOR of the fee stated in Paragraph IV hereof must first be approved by the CITY's City Manager or City Council, where applicable. IX. CONFIDENTIAL WORK Any reports, information, data or any other documentation given to or prepared or assembled by AUDITOR under this Contract shall be kept confidential and may not be made available to any individual or organization by AUDITOR without the prior written approval of the CITY except as may be required by law. X. OWNERSHIP OF DOCUMENTS AUDITOR acknowledges that CITY owns all notes, reports, or other documents intellectual property or documentation produced by the AUDITOR pursuant to this agreement or in connection with its work. AUDITOR acknowledges that CITY shall have copyright privileges to those notes, reports, documents, processes and information. However, AUDITOR acknowledges that the finished product, the report and/or documents and plans prepared for the CITY, as well as city documents reviewed in the preparation of the report, are the property of the CITY. AUDITOR shall provide CITY a copy of all such notes, reports, documents, and information (except to the extent that they contain confidential information about third parties) at CITY expense upon written request. CITY agrees to keep all such information in the strictest of confidence and not to disclose such material to any third party or allow any third party access to such material except as such disclosure is expressly required to applicable law. XI. NO VERBAL AGREEMENT This Contract contains the entire commitments and agreements of the parties to the Contract. Any verbal or written commitment not contained in this Contract or expressly referred to in this Contract and incorporated by reference shall have no force or effect. XII. TERMINATION The CITY may, at its option and without prejudice to any other remedy to which it may be entitled at law or in equity, terminate further work under this Contract, in whole or in part, by giving at least ten (10) days prior written notice thereof to AUDITOR with the understanding that all services being terminated shall cease upon the date specified in such notice. The CITY shall equitably compensate AUDITOR, in accordance with the terms of this Contract for the services properly performed prior to the date specified in such notice following inspection and acceptance of same by the CITY. AUDITOR shall not, however, be entitled to lost or anticipated profits should the CITY choose to exercise its option to terminate. XIII. VENUE The parties to this Contract agree and covenant that this Contract will be performable in The Colony, Texas, and that if legal action is necessary to enforce this Contract, exclusive venue will lie in Denton County, Texas. The parties to this Contract covenant and agree that in any litigation relating to this Contract, the terms and conditions of the Contract will be interpreted according to the laws of the State of Texas. (moved from #XVII below). XIV. APPLICABLE LAWS This Contract is made subject to the existing provisions of the Charter of the City of The Colony, its rules, regulations, procedures and ordinances, present and future, and all applicable laws of the State of Texas and the United States of America. XV. NOTICES All notices, communications and reports under this Contract must be mailed or delivered to the respective parties at the addresses shown below, unless either party is otherwise notified in writing by the other party: CITY: Rebecca Lai, CPA, CGFO, CPM Finance Department City of The Colony 6800 Main Street The Colony, Texas 75056 972/624-3140, Fax 972/624-2313 AUDITOR: BKD, LLP Kevin L. Kemp, CPA 14241 Dallas Parkway, Suite 1100 Dallas, Texas 75254-2961 972/702-8283, Fax 972/702-0673 XVI. WAIVER OF ATTORNEYS FEES AUDITOR and CITY expressly covenant and agree that in the event of any litigation arising between the parties to this contract, each party shall be solely responsible for payment of its attorneys and that in no event shall either party be responsible for the other party's attorney's fees regardless of the outcome of the litigation. EXECUTED this the 17th day of Au ust, 2010. CITY OF THE COLONY, TEXAS: Tro ow K' City Ma nager AUDITOR: Y~~ . 0 BKD, LLP ATTEST: Christie Wilson, City Secretary ATTEST: ~tte~s~retaa-y J