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HomeMy WebLinkAboutR-2004-173 Auditing Services RESOLUTION NO. 2004-173 A RESOLUTION OF THE CITY OF DANIA BEACH, FLORIDA, AUTHORIZING THE ENGAGEMENT OF RACHLIN, COHEN & HOLTZ TO SERVE AS THE EXTERNAL . AUDITOR OF THE CITY, FOR PERFORMANCE OF AUDIT SERVICES FOR THE FISCAL YEARS ENDING SEPTEMBER 30, 2004 THROUGH SEPTEMBER 30, 2006; PROVIDING FOR CONFLICTS; FURTHER, PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City of Dania Beach (the "City") prepares and has audited its general purpose financial statements in the form of an annual Comprehensive Annual Financial Report ("CAFR"); and WHEREAS, such financial statements are audited in order to obtain an opinion that they are accurately presented in conformity with accounting principles generally accepted in the United States; and WHEREAS, the audit tests the accounting records of the City in order to provide information relating to the reliability of such accounting records to the City Commission, City management, and other users of the CAFR; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DANIA BEACH, FLORIDA: Section 1. That the City engages Rachlin, Cohen & Holtz to provide auditing services for the City of Dania Beach for a three-year period for fiscal years ending September 30, 2004, September 30, 2005 and September 30, 2006. Section 2. That the City Manager is authorized to pay $52,000.00 for FY 2004, $53,800.00 for FY 2005 and $56,000.00 for FY 2006 for a total of$161,800.00 for the three year period as stated in the response to the City"Request for Proposals", a copy of which document is attached to this Resolution and incorporated by this reference, for the fiscal years ending 1 RESOLUTION NO. 2004-173 September 30, 2004, 2005 and 2006, respectively for the preparation, review and printing of the -� CAFR. Section 3. That all resolutions or parts of resolutions in conflict with this resolution are repealed to the extent of such conflict. Section 4 . That this resolution shall be in force and take effect immediately upon its passage and adoption. PASSED AND ADOPTED on October 12, 2004. .K. MCEL A MAYOR—COMMISSIONER -ATTEST: ROLL CALL: l COMMISSIONER ANTON - YES COMMISSIONER CHUNN- YES -LOUISE STILSON COMMISSIONER FLURY - YES CITY CLERK VICE-MAYOR MIKES - YES MAYOR MCELYEA - YES APPROVED AS TO FQ AND CORRECTNESS: BY: THOMAS.j.'AM BRO I CITY ATTORNEY 2 RESOLUTION NO. 2004-173 �1 .,,,Cohen INA `,) >>�noltz Accountants Advisors October 14, 2004 Mr. Ivan Pato, City Manager City of Dania Beach 100 W. Dania Beach Blvd. Dania Beach,FL 33004 Dear Mr. Pato: We are pleased to confirm our understanding of the services we are to provide the City of Dania Beach, Florida (the City) for the fiscal years ended September 30, 2004, 2005 and 2006. We will audit the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information,which collectively comprise the entity's basic financial statements, of the City as of and for the fiscal year ending September 30, 2004, 2005 and 2006. Also; the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the financial statements: 1. Management's discussion and analysis. 2. Schedule of expenditures of federal awards and state financial assistance. 3. Combining and individual fund statements and schedules. 4. Required Supplementary Information. The document will also include the following additional information that will not be subject to the auditing procedures applied in our audit of the financial statements, and for which our auditor's report will disclaim an opinion. 1. Statistical section 2. Introductory section Audit Objectives The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the financial statements taken as a whole. The objective also includes reporting on— • Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements,noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the Florida Single Audit Act and Chapter 10.550, Rules of the Auditor General of the State of Florida. Rachlin Cohen& Holtz LLP One Southeast Third Avenue ® Tenth Floor ® Miami,Florida 33131 a Phone 305.377.4228 ® Fax 305.377.8331 ® www.rachlin.com An Independent Member of Baker Tilly International M I A M I • F 0 R T L A U D E R D A L E • W E S T P A L M B E A C H • S T U A R T Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 2 The reports on internal control and compliance will each include a statement that the report is intended for the information and use of the City Commission, management, specific legislative or regulatory bodies, federal and state awarding agencies, and if applicable, pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Our audits will be conducted in accordance with auditing standards generally accepted in the United States; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, the Florida Single Audit Act and Chapter 10.550, Rules of the Auditor General, and will include tests of accounting records, a determination of major program(s) in accordance with Circular A-133 and the Florida Single Audit Act, and other procedures we consider necessary to enable us to express such an opinion and to render the required reports. If our opinion on the financial statements or the Single Audit compliance opinion is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. Our liabilities for this engagement are not limited to the fees paid for the work performed. Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that federal and state award programs are managed in compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with such information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, including the schedule of expenditures of federal awards and state financial assistance, but the responsibility for the financial statements remains with you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to your financial statements. You are responsible for reviewing the entries and understanding the nature of any proposed entries and the impact they have on the financial statements. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting and compliance, the selection and ohen r�Holtz Accountants Advisors Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 3 application of accounting principles, and the safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate,to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the government involving (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations. Additionally, as required by OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. As part of our audit we will prepare a draft of your financial statements and related notes. In accordance with professional standards,you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further you are required to designate a qualified management level individual to be responsible and accountable for overseeing our services. Audit Procedures—General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audits will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audits to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133 and the Florida Single Audit Act and Chapter 10.550 Rules of the Auditor General, our audits will include tests of transactions related to major federal and state award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or • Cohen Accountants Advisors Mr. Ivan Pato, City Manager City of Dania Beach October 14,2004 Page 4 governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audits, we will also require certain written representations from you about the financial statements and related matters. Audit Procedures—Internal Controls In planning and performing our audits, we will consider the internal control sufficient to plan the audits in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinions on the City of Dania Beach basic financial statements and on its compliance with requirements applicable to major programs. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls relative to the financial statements are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly,no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General, we will perform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal and state award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our Cohen ��Holtz Accountants Advisors i Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 5 report on internal control issued pursuant to OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the City Commission and management of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by Government Auditing Standards and OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General. Audit Procedures—Compliance iOur audits will be conducted in accordance with the standards referred to in the section titled Audit Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City of Dania Beach compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General require that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. The purpose of those procedures will be to express an opinion on City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-133 and the Florida Single Audit Act. Audit Administration,Fees, and Other We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any invoices selected by us for testing. Cohen Accountants Advisors Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 6 At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data Collection Form (required under Federal Single Audit Act only) that summarizes our audit findings. We will provide our reports to the City of Dania Beach; however, it is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we will provide information to management as to where the reporting packages should be submitted and the number to submit. The audit documentation for this engagement is the property of Rachlin Cohen & Holtz LLP and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to a regulatory or grantor agency pursuant to • authority given to it by law or regulation. If requested, access to such audit documentation will be provided under the supervision of Rachlin Cohen &Holtz LLP personnel. Furthermore, upon request, we may provide copies of selected audit documentation to a regulatory or grantor agency. The regulatory or grantor agency may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of three years after the date the auditors' report is issued or for any additional period requested by the regulatory or grantor agency. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. Our fees for these services will be our standard hourly rates. Our fees will be as follows: 2004 2005 2006 Audit of Financial Statements $47,000 $49,050 $51,250 Federal and Florida Single Audits, if applicable 4,000 4,000 4,000 Preparation and Printing of Comprehensive Annual Financial Report(50 copies) 1,000 750 750 TOTAL $ 2�00 $51800 $56.000 Boltz Accountants Advisors Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 7 The above fees are based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audits. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Our invoices for these fees will be rendered as the work progresses, and are payable on presentation. In accordance with our firm policies, should any invoices remain unpaid for more than thirty days, we reserve the right to defer providing any additional services until all outstanding invoices are paid. A late payment charge of 1% per month will be added to all unpaid balances after thirty days. You agree that we are not responsible for the impact on the City of any delay that results from such non-payment by you. We acknowledge your right to terminate our services at any time, and you acknowledge our right to resign at any time (including instances where in our judgment, our independence has been impaired or we can no longer rely on the integrity of management), subject in either case to our right to payment for charges incurred to the date of termination or resignation. • In the event that we determine to resign, and you seek damages allegedly resulting from such resignation, our maximum liability to you in the event we are held liable because of such resignation shall be limited to the fees actually paid to us to the date of resignation. It is our goal to maintain a constructive and positive relationship with you. If for any reason you are dissatisfied with the quality or costs of our services,please let us know so we can discuss and, hopefully, rectify the problem. Should we be unable to amicably resolve any such dispute,we believe a prompt and fair resolution, without the time and expense of formal court proceedings, would be in our mutual interests. To this end, we both agree that any controversy (including fee disputes and malpractice claims) we may have may be submitted to arbitration to be conducted in Florida before the American Arbitration Association("AAA") in accordance with the Commercial Arbitration Rules of the AAA. We both do not waive any right to bring a court action, or to have a jury trial, and agree that the party prevailing in any arbitration or litigation shall be entitled to recover from the non-prevailing party its reasonable attorney's or attorneys' fees and costs, including fees and costs which might be incurred in litigation related to the arbitration. In accordance with our firm's policy, the terms of this engagement letter are subject to approval by our internal Risk Acceptance Committee. Accountants Advisors • Mr. Ivan Pato, City Manager City of Dania Beach October 14, 2004 Page 8 This contract is renewable at the option of the City of Dania Beach. We appreciate the opportunity to be of service to you and believe that this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter,please sign the enclosed copy in the space provided, and return it to us as our authority to begin our services. Sincerely, �y G. Jerry Chiocca,CPA Partner RESPONSE: ® This letter correctly sets forth the up er anding of the City of Dania Beach,Florida. By: v Title: City Manager Date: December 3 , 2004 F:\04\61090\Engagement Letter ��Cohen &Holtz Accountants Advisors Agenda Request Form Raft City of Dania Beach Agenda Item: Date of Commission meeting: 10/12/2004 Description of Agenda Item: Engage Rachlin, Cohen & Holtz as the City's external auditors Commission action being requested: Adopt Resolution or Ordinance ® Expenditure ❑ Award BID/ RFP Presentation ❑ General approval of item ❑ Continued from meeting k ,mar,: io/ - i�' 3 Other(Pleas&A6 plain) , r� . Surgmary explanation a'nd background Due to drastic personnel changes with Grau & Co., the City's current audtior, the City has issued an RFP to seek an auditing firm that can performed the City's audit for FY 2004, 2005 and 2006 in a timely • and efficient manner. Proposals were reviewed by the Committee which consists of the City Manager, Assistant Finance Director and Director of Finance. Management is recommending to engage Rachlin, Cohen & Holtz as the City's external auditors for a three year period. Attachedexhibitsand additionalbackup materials (P,leaselist) Staff Memo Resolution Rachlin, Cohen & Holtz reponse to the "RFP" For purchasing requests ONLY Department: Amount: Fund: General: ® Water: ® Sewer: ® Stormwater: ® Grants: ❑ Capital: ❑ Account Name: Account Number: Submitted by: pvarney Date: 10/2/2004 Department Director.- Date: Admin. Services Director: Date: • Finance Director: Patricia Varney Date: 10/2/2004 City Manager. Ivan Pato Date: 10/4/2004 • - CITY OF DANIA BEACH DEPARTMENT OF FINANCE MEMORANDUM TO: City Commission Memo: DFA-04-039 VIA: Ivan Pato City Manager FROM: Patricia Varney Director of Finance DATE: September 30, 2004 SUBJECT: Engagement of auditing services for FY 2004 to FY 2006 Issue To engage a certified public accounting firm to perform auditing services for the City for the • fiscal years ending September 30, 2004, 2005 and 2006. Explanation Staff issued a "Request for Proposals" in August to seek a certified public accounting firm to perform auditing services for the City. The City advertised in a newspaper of general circulation and sent out 15 notices to different accounting firms inviting them to submit a proposal. Four firms responded. The Audit Committee consisted of the City Manager, the Assistant Finance Director and the Director of Finance. The Committee reviewed the proposals and ranked the firms individually. The firms were rated based on their experience with engagements similar to those needed by the City of Dania Beach, experience of the proposed audit team, experience in the implementation of GASB 34, Single Audit, the audit approach, references and cost. The top two firms ranked by the Committee are: Rachlin, Cohen, and Holtz, and Caballero & Castellanos. These two firms were also interviewed by the Committee on September 28, 2004. Recommendation Both firms have governmental experience and received high recommendations from their governmental clients. After the interviews, the Committee ranked Rachlin, Cohen and Holtz as the top firm. The reasons for Rachlin, Cohen and Holtz scoring higher than the other firm are as follows: • 1 • a) They have performed more municipal audits than the other firms. Rachlin, Cohen and Holtz have performed audits for 27 municipal clients, while Caballero & Castellanos has approximately one dozen such clients. b) Rachlin, Cohen and Holtz implemented GASB 34 for twenty municipalities; Caballero & Castellanos has implemented it for nine municipalities. c) In their response to the proposal, Rachlin, Cohen and Holtz indicated the highest number of hours planned for the engagement. d) Rachlin, Cohen and Holtz's engagement partner and concurring review partner have a combined governmental experience of over 45 years, while Caballero & Castellanos has 21 years. e) Rachlin, Cohen and Holtz have implemented a computer forensic process into the audit process. This process will evaluate the city's system applications and physical controls, and will ensure that internal controls are in place for the security and accuracy of data that the information systems produce. This is extremely important for fiscal year 2004, since the City implemented a new computer system. Based on the above, the Committee is recommending that Rachlin, Cohen & Holtz be engaged as the audit firm for a three year period beginning fiscal year 2004. • • 2