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HomeMy WebLinkAbout10C - Financial Auditor INTRODUCTION: DISCUSSION: STAFF AGENDA REPORT JUNE 16, 2003 10 C RALPH TESCHNER, FINANCE DIRECTOR CONSIDER APPROVAL OF A RESOLUTION APPOINTING THE FIRM OF ABDO, EICK AND MEYERS TO PERFORM THE CITY'S FINANCIAL AUDITS FOR FISCAL YEARS 2003 - 2005. Abdo, Eick and Meyers has prepared the City's financial statements for the past eight years. At the request of Staff Abdo, Eick & Meyers has submitted a proposal to continue its audit services for the City of Prior Lake for the fiscal years of 2003 thru 2005. Staff has requested the proposal from this firm only because: 1) Our experience confirms that their fees are competitive. 2) The three (3) year cost does not exceed the $50,000 bid threshold. 3) The relative small amount of their proposed increase. 4) Auditing is considered a professional service. 5) The assistance the firm has been providing the City already to comply with GASB 34 reporting requirements that are required to be implemented over the course of the next three years. Current Circumstances Attached to your agenda report is a proposal that sets forth the scope of their services according to GAAP (generally accepted auditing standards and the Government Auditing Standards. Their proposed fee schedule for the three-year period is outlined below: Year 2003 2004 2005 General City Annual $ Annual % Audit Fee Increase Increase $11,700 $0 0.0% $12,050 $350 3.0% $12,400 $350 2.9% Fire Relief Annual $ Annual % Audit Fee Increase Increase $1,660 $0 0.0% $1,710 $50 3.0% $1,760 $50 2.9% TIF Annual $ Annual % Report Fee Increase Increase $850 $0 $0 $850 $0 $0 $850 $0 $0 Year 2003 2004 2005 Year 2003 2004 2005 H: IAUDITlAuditproposal.doc 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ISSUES: AL TERNA TIVES: RECOMMENDED MOTION: REVIEWED BY: Attachments: H:IAUDITlAuditproposal.doc It is important to maintain a degree of continuity when selecting an accounting firm to prepare the financial audit because of the significant amount of time necessary for the firm to be brought up to speed on the internal operating procedures of the City and for them to become familiar as to the location of all the information i.e, files, contract documents, minutes, resolutions etc. necessary during the course of their examination of the City's transactions. As a result, the audit examination process these past few years has been considerably faster and more efficient from a time perspective than in the beginning. It is Staffs opinion that the firm has done a good job in putting together the financial report that has been in total compliance with State of Minnesota review qualifications. Steve McDonald has been very helpful in completing the TIF reporting forms that have become more and more complex and difficult to administer. Also, their continued accounting assistance will be important because of the national implementation requirement of GASB Statement 34 that will require new accounting formats and the capital cost preparation of major road infrastructure retroactively to January 1, 1980. There is a compliance time period of three years to accomplish these changes that would coincide with the City's next three financial report years. The proposed cost for the upcoming three (3) years is very reasonable and represents a total increase of $700.00 or 1.99% per year for the general city audit plus a total of $100.00 for the fire relief association's audits and TIP reports. As indicated within their proposal the City has the right to terminate services at any time for any reason. The following alternatives are available to the City Council: 1. Approve A Resolution Appointing the Firm of Abdo, Eick and Meyers to Perform the City's Financial Audits for Fiscal Years 2003 - 2005 and authorize the Mayor and City Manager to execute the City's Standardized Professional Services Agreement. 2. Reject the proposal for a specific Council reason. approval of A Resolution Appointing the d Meyers to Perform the City's Financial 2003 - 2005. 1. A Re lu' n Appointing the Firm of Abdo, Eick and Meyers to Perform t e City's Financial Audits for Fiscal Years 2003 - 2005. 2. Standard Professional Services Agreement. 3. Abdo, Eick & Meyers' Proposal for Audit Services for the City of Prior Lake, Fire Relief Association and TIF reporting for the Years Ending December 31, 2003, 2004 and 2005. H: \A UDlTlAuditproposal.doc MOTION BY: WHEREAS, WHEREAS, WHEREAS, WHEREAS, RESOLUTION 03-XX SOLUTION APPROVING THE FIRM OF ABDO, EICK AND MEYERS LLP TO PERFORM THE CITY'S FINANCIAL AUDITS FOR FISCAL YEARS 2003 - 2005. SECOND BY: The certified public accountant firm of Abdo, Eick and Meyers LLP has been instrumental in improving the administrative controls of the City's financial operation; and The City of Prior Lake has determined that continued accounting assistance will be important because of the national implementation requirement of GASB Statement 34 that will require new accounting formats and the capital cost preparation of major road infrastructure; and The financial reports of the City of Prior Lake's fiscal condition has resulted in an unqualified opinion for the past three years; and The proposed annual cost for such audit services over the next three years IS determined to be reasonable and cost effective. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that the City of Prior Lake hereby exercises its option to engage Abdo, Eick and Meyers LLP to perform the audit services for the following years and cost: Fiscal Year 2003 2004 2005 General Audit Fee $11,700.00 $12,050.00 $12,400.00 Fire Relief Assn. Audit Fee $1,660.00 $1,710.00 $1,760.00 TIF Report Fee $850.00 $850.00 $850.00 FURTHER, the Mayor and City Manager are authorized to execute the agreement on behalf of the City. Passed and adopted this 16th day of June, 2003. YES NO Haugen Blomberg LeMair Petersen Zieska Haugen Blomberg LeMair Petersen Zieska City Manager City of Prior Lake 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER {Seal} H: IAUDITlAuditres03-xx.doc STANDARD AGREEMENT FOR PROFESSIONAL SERVICES THIS AGREEMENT is made on the 16th day of June, 2003, between the City of Prior Lake, Minnesota (hereinafter "City"), whose business address is 16200 Eagle Creek Avenue S.E., Prior Lake, MN 55372-1714, and Abdo, Eick and Meyers LLP, a Minnesota limited liability partnership (hereinafter "Consultant") whose business address is 5201 Eden Avenue #370, Edina, MN 55436. PRELIMINARY STATEMENT The City has adopted a policy regarding the selection and hiring of consultants to provide a variety of professional services for City projects. That policy requires that persons, firms or corporations providing such services enter into written agreements with the City. The purpose of this agreement is to set forth the terms and conditions for professional services by Consultant for auditinq services hereinafter referred to as the "Work". The City and Consultant agree as follows: 1. Scope of Work. The Consultant agrees to provide the professional services described as follows in connection with the Work: a general auditing services and consulting services for the calendar years of 2003, 2004 and 2005. Fire Department Relief Association financial statements for the calendar years of 2003, 2004 and 2005. tax increment financing reporting for the calendar years 2003, 2004, and 2005. a a 2. Time for Performance of Services. The Consultant shall perform the services described in Paragraph 1 above annually for the calendar years 2003, 2004 and 2005 unless otherwise agreed upon in writing. 3. Compensation for Services. City agrees to pay the Consultant as follows for the services as described in Paragraph 1: Fiscal Year General Audit Fire Relief Assn. Audit TIF Reporting 2003 $11,700 $1660 $850 2004 $12,050 $1710 $850 2005 $12,400 $1760 $850 A. Any changes in the scope of the work which may result in the compensation due the Consultant shall require prior written approval by an authorized representative of the City or by the City Council. The City will not pay additional compensation for services that do not have prior written authorization. B. No fees for special consultants or additional expenses will be reimbursable by the City unless authorized in writing by the City prior to any expenditure. C. City agrees to pay Consultant for extra services by the Consultant when authorized in writing by the City prior to providing such extra services. 1 1:\AGREEMENTS\Prof Serv - Auditing.DOC Created on 6/9/2003 12:01 PM 4. The City agrees to provide the Consultant with the complete information concerning the Scope of the Work and to perform the following services: A. Access to the Area. Depending on the nature of the Work, Consultant may from time to time require access to public and private records. As may be necessary the City shall obtain access to and make all provisions for the Consultant to access public and private records as required for the Consultant to perform such services necessary to complete the Work. B. Consideration of the Consultant's Work The City shall give thorough consideration to all reports, sketches, estimates, drawings, and other documents presented by the Consultant, and shall inform the Consultant of all decisions required of City within a reasonable time so as not to delay the work of the Consultant. C. Standards. The City shall furnish the Consultant with a copy of ary standard of criteria, they may require in the preparation of the report for the Work. D. Owner's Representative. A person shall be appointed to act as the City's representative with respect to the work to be performed under this Agreement. He or she shall have complete authority to transmit instructions, receive information, interpret, and define the City's policy and decisions with respect to the services provided or materials, equipment, elements and systems pertinent to the work covered by this Ageement. 5. Method of Payment. The Consultant shall submit to the City, on a monthly basis, itemized bills for professional services performed under Section 1 of this Agreement. Bills submitted shall be paid in the same manner as other claims made to the City. A. Proqress Payment. For work reimbursed on an hourly basis, the Consultant shall indicate for each employee, his or her name, job title, the number of hours worked, rate of pay for each employee, a computation of amounts due for each employee, 81d the total amount due for each project task. Consultant shall verify all statement submitted for payment in compliance with Minnesota Statutes Sections 471.38 and 471.391. For reimbursable expenses, if permitted, the Consultant shall provide such documentation as reasonably required by the City. B. Abandoned or Suspended Work. If any work performed by the Consultant is abandoned or suspended in whole or in part by the City, the Consultant shall be paid for any services performed on account of it pricr to receipt of written notice from the City of such abandonment or suspension. 7. Project Manager and Staffing. The Consultant has designated Steve McDonald to serve as the Manager of the Work. He shall be assisted by other staff members as necessary to facilitate the completion of the Work in accordance with the terms established herein. Consultant may not remove or replace Steve McDonald, from the Work without the approval of the City. 8. Standard of Care. All Work performed pursuant to this Agreemert shall be in accordance with the standard of care of the-State of Minnesota for professional services of the like kind. 9. Audit Disclosure. The Consultant shall allow the City or its duly authorized agents reasonable access to such of the Consultant's books and records as are pertinent to all services provided 2 1:\AGREEMENTS\Prof Serv - Auditing.DOC Created on 6/9/2003 12:01 PM under this Agreement. Any reports, information, data, etc. given to, or prepared or assembled by, the Consultant under this Agreement which the City requests to be kept confidential shall not be made available to any individual or organization without the City's prior written approval. All finished or unfinished documents, data, studies, surveys, drawings, maps, models, photographs, and reports prepared by the Consultant shall become the property of the City upon termination of this Agreement, but Consultant may retain copies of such documents as records of the services provided. 10. Term. The term of this Agreement shall be for the completion of the Work for the calendar years 2003, 2004 and 2005, the date of signature by the parties notwithstanding. This Agreement may be extended upon the written mutual consent of the parties for such additional period as they deem appropriate, and upon the terms and conditions as herein stated. 11. Termination. This Agreement may be terminated by either party by seven (7) days' written notice delivered to the other party at the address written above. Upon termination under this provision if there is no fault of the Consultant, the Consultant shall be paid for services rendered until the effective date of termination. If however, the City terminates the Agreement because of the Consultant has failed to perform in accordance with this Agreement, no further payment shall be made to the Consultant, and the City may retain another consultant to undertake or complete the work identified in Paragraph 1. If as a result, the City incurs total costs for the work (including payments to both the present contractor and a future contractor) which exceed a maximum Agreement amount, if any, specified under Paragraph 3, then the Consultant shall be responsible for the difference between the cost actually incurred and the Agreement amount. 12. Subcontractor. The Consultant shall not enter into subcontracts for services provided under this Agreement except as noted in the Scope of Work, without the express written consent of the City. The Consultant shall pay any subcontractor involved in the performance of this Agreement within the ten (10) days of the Consultant's receipt of payment by the City for undisputed services provided by the subcontractor. If the Consultant fails within that time to pay the subcontractor any undisputed amount for which the Consultant has received payment by the City, the Consultant shall pay interest to the subcontractor on the unpaid amount at the rate of 1.5 percent per month or any part of a month. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of less than $100, the Consultant shall pay the actual interest penalty due to the subcontractor. A subcontractor who prevails in a civil action to collect interest penalties from the Consultant shall be awarded its costs and disbursements, including attorney's fees, incurred in bringing the action. 13. Independent Consultant. At all times and for all purposes herein, the Consultant is an independent contractor and not an employee of the City. No statement herein shall be construed so as to find the Consultant an employee of the City. 14. Non-Discrimination. During the performance of this Agreement, the Consultant shall not discriminate against any employee or applicants for employment because of race, color, creed, religion, national origin, sex, marital status, status with regard to public assistance, disability, or age. The Consultant shall post in places available to employees and applicants for employment, notices setting forth the provision of this non-discrimination clause and stating that all qualified applicants will receive oonsideration for employment. The Consultant shall incorporate the foregoing requirements of this paragraph in all of its subcontracts for program work, and will require all of its subcontractors for such work to incorporate such requirements in all subcontracts for program work. 3 1:\AGREEMENTS\Prof Serv - Auditing.DOC Created on 6/9/2003 12:01 PM 15. Assignment. Neither party shall assign this Agreement, nor any interest arising herein, without the written consent of the other party. 16. Services Not Provided For. No claim for services furnished by the Consultant not s~cifically provided for herein shall be honored by the City. 17. Severability. The provisions of this Agreement are severable. If any portion hereof is, for any reason, held by a court of competent jurisdiction to be contrary to law, such decision shall not affect the remaining provisions of this Agreement. 18. Entire Agreement. The entire agreement of the parties is contained herein. This Agreement supersedes all oral agreements and negotiations between the parties relating to the subject matter hereof as well as any previous agreements presently in effect between the parties relating to the subject matter hereof. Any alterations, amendments, deletions, or waivers of the provisions of this Agreement shall be valid only when expressed in writing and duly signed by the parties, unless otherwise provided herein. 19. Compliance with Laws and Regulations. In providing services hereunder, the Consultant shall abide by all statutes, ordinances, rules and regulations pertaining to the provisions of services to be provided. The Consultant and City, together with their respective agents and employees, agree to abide by the provisions of the Minnesota Data Practices Act, Minnesota Statutes Section 13, as amended, and Minnesota Rules promulgated pursuant to Chapter 13. Any violation of statutes, ordinances, rules and regulations pertaining to the services to be provided shall constitute a material breach of this Agreement and entitle the City to immediately terminate this Agreement. 20. Waiver. Any waiver by either party of a breach of any provisions of this Agreement shall not affect, in any respect, the validity of the remainder of this Agreement. 21. Indemnification. Consultant agrees to defend, indemnify and hold the City, its officers, and employees harmless from any liability, claims, damages, costs, judgments, or expenses, including reasonable attorney's fees, resulting directly or indirectly from a negligent act or omission (including without limitation professional errors or omissions) of the Consult81t, its agents, employees, or subcontractors in the performance of the services provided by this Agreement and against all losses by reason of the failure of said Consultant fully to perform, in any respect, all obligations under this Agreement. 22. Insurance. A. General Liability. During the term of this Agreement, Consultant shall maintain a general liability insurance policy with limits of at least $600,000 for each person, and each occurrence, for both personal injury and property damage. This poley shall name the City as an additional insured for the services provided under this Agreement and shall provide that the Consultant's coverage shall be the primary coverage in the event of a loss. The policy shall also insure the indemnification obligation contained in Paragraph No. 21. A certificate of insurance on the City's approved form which verifies the existence of this insurance coverage must be provided to the City before work under this Agreement is begun. 4 1:\AGREEMENTS\Prof Serv - Auditing.DOC Created on 6/9/2003 12:01 PM B. Worker's Compensation. The Consultant shall secure and maintain such insurance as will protect Consultant from claims under the Worker's Compensation Acts and from claims for bodily injury, death, or property damage which may arise from the performance of Consultant's services under this Agreement. C. Professional Liability Insurance. The Consultant agrees to provide to the City a certificate evidencing that they have in effect, with an insurance company in good standing and authorized to do business in Minnesota, a professional liabilty insurance policy. Said policy shall insure payment of damage for legal liability arising out of the performance of professional services for the City, in the insured's capacity as the Consultant, if such legal liability is caused by an error, omission, or negligent act of the insured or any person or organization for whom the insured is legally liable. Said policy shall provide an aggregate limit of $1,000,000. 23. Records Access. The Consultant shall provide the City access to any books, documents, papers, and records which are directly pertinent to the specific contract, for the purpose of making audit, examination, excerpts, and transcriptions, for three years after final payments and all other pending matters related to this contract are closed. 24. Ownership of Documents. All plans, diagrams, analyses, reports and information generated in connection with the performance of the Agreement ("Information") shall become the property of the City. The City may use the Information for its purposes and he Contractor also may use the Information for its purposes. Reuse of the Information for the purposes of the project contemplated by this Agreement ("Project") does not relieve any liability on the part of the Contractor, but any reuse of the Information by the City or the Contractor beyond the scope of the Project is without liability to the other, and the party reusing the Information agrees to defend and indemnify the other from any claims or liability resulting therefrom. 25. Governing Law. This Agreement shall be controlled by the laws of the State of Minnesota. Executed as of the day and year first written above. Reviewed for form: CITY OF PRIOR LAKE City Attorney Mayor City Manager By: Its: 5 1:\AGREEMENTS\Prof Serv - Auditing.DOC Created on 6/9/2003 12:01 PM Certified Public Accountants & Consultants June 2, 2003 Grandview Square 5201 Eden Avenue Suite 370 Edina. MN 55436 Mayor and Council Members City of Prior Lake 16200 Eagle Creek Avenue Southeast Prior Lake, MN 55372 The following sets forth the engagement of our services for the certified audit of the accounts of the City of Prior Lake. We will audit the general purpose financial statements of the City of Prior Lake for the years ending December 31, 2003, 2004 and 2005 in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our audit will include tests of the accounting records and other procedures we consider necessary to enable us to express an opinion that the financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will 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. Because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that a material misstatement may exist and not be detected by us. In addition, an audit is not designed to detect errors, fraud, or other illegal acts that are immaterial to the general purpose financial statements. However, we will inform you of any material errors and any fraud that comes to our attention. We will also inform you of any other illegal acts that come to our attention, unless clearly inconsequential. 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 of which we are not engaged as auditors. 952.835.9090. Fax 952.835.3261 City of Prior Lake June 2, 2003 Page Two We will perform the auditing services discussed above for the calendar years 2003, 2004 and 2005. If at any time during this period the Council is dissatisfied with our services for any reason whatsoever, our services may be terminated by so informing us. Our firm, however, shall be obligated at your continuing discretion to perform the audit services for the three-year period at the following fees: Year Certified Audit Fee Fire Citv* Relief 2003 2004 2005 $ $ 1,660 1,710 1,760 11,700 12,050 12,400 * This fee excludes the cost of conversion to GASB Statement No. 34. The City is required to implement the requirements of this standard in the year ending December 31,2003. Additional costs relative to implementation will be billed at our standard hourly rates. · Our fee for services quoted is a "not to exceed" fee. You will be billed at our normal per diem rates and in all cases will not exceed the schedule fees, which include out-of-pocket expenses. · Our fee includes the City audit, the Management Advisory Letter, and general consulting related to the audit. Other services beyond the scope of the basic audit service include preparation of the Minnesota Office of the State Auditor TIP reporting forms. These forms can be completed for an additional cost of $850. It is our belief that the proposed three-year audit engagement is in the best interest of the City of Prior Lake. Our firm can provide the City with a fixed three-year fee schedule to facilitate the budgeting process. Further, our ability to provide meaningful assistance through our Management Advisory Letter will improve with each year of continued audit involvement. It is the policy of our firm to issue a Management Advisory Letter. As independent auditors, we are in a position to acquire a detailed knowledge of client financial and administrative procedures; the Management Advisory Letter serves to summarize our recommendations toward improving the accounting and administrative controls, strengthening financial structure and developing a more efficient business operation. Abdo, Eick & Meyers, LLP recognizes that its most important product is prompt and effective service of the highest quality. We will serve the City to its complete satisfaction and will apply the highest level of skills available in our firm to that end. Sincerely, ABDO, EICK & MEYERS, LLP Certified Public Accountants ~~ Steven R. McDonald, CPA City of Prior Lake June 2, 2003 Page Three RESPONSE: This letter correctly sets forth the understanding of the City of Prior Lake. Signature: Signature Mayor O<?..... ~~G GV~ City Manager Date: Date: