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Home My WebLink About5E Auditing Services Agreement Extension Report 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: OCTOBER 21, 2019 AGENDA #: 5E PREPARED BY: JASON ETTER, ACCOUNTING MANAGER CATHY ERICKSON, FINANCE DIRECTOR PRESENTED BY: CATHY ERICKSON, FINANCE DIRECTOR AGENDA ITEM: ADOPT RESOLUTION NO. 19-117 EXTENDING THE AUDITING SERVICES AGREEMENT WITH MALLOY, MONTAGUE, KARNOWSKI & RADOSEVICH (MMKR) FOR CALENDAR YEARS ENDING 2020 AND 2021 GOAL AREA AND OBJEC- TIVE: High-Value City Services 1. Establish financial stability for all funds. DISCUSSION: Introduction The purpose of this agenda item is to consider staff recommendation to extend the auditing services agreement with Malloy, Montague, Karnowski & Radosevich (MMKR) for providing professional auditing services for the years 2020 and 2021. Current Circumstances The City has been satisfied with the high-quality auditing services that have been provided by MMKR for the past three years. Audit fees for the current 2017-2019 agreement are as follows: Year Audited Amount 2017 $ 29,950 2018 $ 30,500 2019 $ 31,100 Total $ 91,550 The Standardized Professional Services Agreement with MMKR provides for an extension upon the written mutual consent of the parties for such additional period as they deem appropriate. MMKR has provided a proposal for providing auditing services for calendar years ending 2020 and 2021 as follows: Year Audited Amount 2020 $ 31,775 2021 $ 32,500 Total $ 64,275 A copy of the proposal is attached to this agenda report. Conclusion Based upon the proposal received, City Staff is recommending that an extension is authorized to the existing Professional Services Agreement with the firm of Malloy, 2 Montague, Karnowski & Radosevich (MMKR) to provide professional auditing ser- vices for calendar years ending 2020 and 2021. ISSUES: As the City Council is aware, under State Statute, the selection of an auditing firm is considered a professional service. Accordingly, criteria in addition to cost are considered. There are significant upcoming projects in the Finance department (AMRS project wrap up, utility rate study completion and implementation, and the utility billing software system replacement), so staff recommends that we continue the auditing services with MMKR for one more term and then request proposals for the 2022 annual audit. FINANCIAL IMPACT: The preliminary 2020 budget includes $31,775 for auditing services. The proposal submitted by MMKR includes the following maximum price for con- ducting auditing services: Year Audited Amount 2020 $ 31,775 2021 $ 32,500 Total $ 64,275 Other services such as preparation of PERA reporting, single audit of federal ex- penditures, etc. will be addressed by separate agreement. ALTERNATIVES: 1. Motion and second to approve as part of the consent agenda to approve a res- olution extending the auditing services agreement with Malloy, Montague, Kar- nowski & Radosevich (MMKR) for 2020 and 2021. 2. Motion and second to remove the resolution extending the auditing services agreement with Malloy, Montague, Karnowski & Radosevich (MMKR) for 2020 and 2021 from the consent agenda for additional discussion. RECOMMENDED MOTION: Alternative #1. http://splash/teams/am/October 4 2010/10 21 2019/5E Auditing Services Agreement Extension - Resolution - 2019.10.21.docx 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 19-117 A RESOLUTION EXTENDING THE AUDITING SERVICES AGREEMENT WITH MALLOY, MONTAGUE, KARNOWSKI & RADOSEVICH (MMKR) FOR CALENDAR YEARS ENDING 2020 AND 2021 Motion By: Second By: WHEREAS, The City of Prior Lake is required to conduct an annual financial audit and to prepare an annual financial statement; and WHEREAS, The City seeks to provide the highest quality service for the best value; and WHEREAS, The City entered into a Standardized Professional Services Agreement with the firm Malloy, Montague, Karnowski and Radosevich (MMKR) to provide auditing services for calendar years ending 2017, 2018 and 2019; and WHEREAS, MMKR has delivered high quality auditing services; and WHEREAS, The Standardized Professional Services Agreement provides for an extension upon the written mutual consent of the parties for such additional period as they deem appropriate; and WHEREAS, MMKR has provided a proposal for providing auditing services for calendar years ending 2020 and 2021 that is reasonable. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. An extension of the original Standardized Professional Services Agreement with MMKR is hereby authorized to provide professional auditing services for the City of Prior Lake for calendar years ending 2020 and 2021 as follows: 2020 $31,775 2021 $32,500 Total $64,275 3. Funding for these professional services will be drawn from the General Fund Account #101- 41540.00-53010.00. PASSED AND ADOPTED THIS 21st DAY OF OCTOBER 2019. VOTE Briggs Thompson Burkart Braid Erickson Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ 2 ______________________________ Jason Wedel, City Manager DOLLAR COST BID PROPOSAL SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR CITY OF PRIOR LAKE, MINNESOTA FOR PROFESSIONAL AUDITING SERVICES FOR FISCAL YEARS ENDING DECEMBER 31, 2020 AND 2021 JAMES H. EICHTEN, CPA MANAGING PARTNER E-MAIL: JEICHTEN@MMKR.COM 952.545.0424 September 10, 2019 Ms. Cathy Erickson City of Prior Lake 4646 Dakota Street SE Prior Lake, Minnesota 55372 Dear Ms. Erickson: We are pleased to submit this proposal to provide auditing services for the City of Prior Lake, Minnesota (the City) for the fiscal years ending December 31, 2020 and 2021, subject to the annual review and approval of the City. Our audits will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial and compliance audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the provisions of the Legal Compliance Audit Guide promulgated by the State Auditor pursuant to Minnesota Statutes § 6.65; and any other applicable state or federal audit guide. We will review the City’s internal control and test accordingly. We anticipate issuing the following report letters in relation to the City’s audits: 1.A report on the fair presentation of the basic financial statements in conformity with accounting principles generally accepted in the United States of America, with an “in relation to” opinion on the combining and individual fund financial statements and supporting schedules. 2.A report on compliance and on internal control over financial reporting based on an audit of financial statements performed in accordance with Government Auditing Standards. 3.A report on compliance with Minnesota State Laws and Regulations. We understand the City does not expect to earn more than $750,000 of federal awards annually and, accordingly, is not expected to need a single audit of federal awards expenditures. We will also provide a management report to communicate comments and recommendations as a result of the audit, including: a discussion of any internal control-related or compliance findings resulting from the current year audit; recommendations to management on improving its accounting system and financial reports; an update on prior year audit issues; and the formal communications to the City ’s finance committee or its equivalent as required by Statement on Auditing Standards No. 114, The Auditor’s Communication With Those Charged With Governance. We understand that you will provide us with the basic 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, but the responsibility for the financial statements remains with you. This r esponsibility includes the maintenance of adequate records and related internal control policies, the selection and application of accounting principles, and the safeguarding of assets. C E R T I F I E D A C C O U N T A N T S P UBLIC PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 • Fax: 952-545-0569 • www.mmkr.com Standard Letterhead-r2.qxp_167639 Letterhead-RV1 9/7/18 6:34 PM Page 1 Ms. Cathy Erickson Page 2 City of Prior Lake September 10, 2019 The assistance to be supplied by your personnel, including the prepar ation of schedules and analysis of accounts, typing all cash or other confirmations we request, and locating any invoices selected by us for testing, will be discussed and coordinated with you. We understand that we will be responsible for preparing the initial draft of the financial statements, notes, and supplementary schedules. We will be responsible for typing, editing, and printing the financial statements. The City’s management will be responsible for preparing the required “management’s discussion and analysis.” Prior to issuance of the final audit report, we shall review the report draft, management report, internal control letters, and any other required state or federal compliance reports with the City’s management. If our audit procedures indicate that material errors, illegal acts, or other irregularities might exist, we will make an immediate, written report to the City’s management, the City Council, and/or other city officials as appropriate. Our fees for these services will be based on the actual time spent at our standard hourly rates, plus travel and other out-of-pocket costs such as report production, typing, postage, etc. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the pe rsonnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable upon presentation. The anticipated fees for the indicated services are shown on the Schedule of Professional Fees and Expenses included in this Dollar Cost Bid Proposal. The fees charged are based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If we find that additional audit procedures are required, or if additional services are requested by the City, those services will be billed at our standard hourly rates. Additional audit procedures might be required for certain accounting issues or events such as new contractual agreements, new accounting and auditing standards, transactions and legal requirements of new bond issues, new funds, major capital projects, or if there is an indication of misappropriation or misuse of public funds, or if significant difficulties are encountered due to the lack of accounting records, incomplete records, or turnover in the City’s staff. Our proposal assumes that the City will be responsible for preparing substantially all financial schedules and other information required for the audit, as has been the case in our previous audit engagements with the City. The cost of any additional accounting assistance performed at the request of the City will be based on the actual time required and the hourly rates of the individuals performing the services. We will not perform extended services at a cost to the City unless so authorized by the appropriate city officials. We hope you will give our firm and proposal due consideration. We will continue to give the City Council and administration the kind of quality service you expect from your auditors. If you have any questions, please contact James H. Eichten, Managing Partner. This proposal covers the fiscal years December 31, 2020 and 2021, and is a firm and irrevocable offer for a period of ninety (90) days. Sincerely, MALLOY, MONTAGUE, KARNOWSKI, RADOSEVICH & CO., P.A. James H. Eichten, CPA Managing Partner JHE:lmb Year Ending Basic December 31,Audit 2020 31,775$ 2021 32,500$ City of Prior Lake, Minnesota Schedule of Professional Fees and Expenses For Professional Auditing Services Estimated fees for the years ending December 31, 2020 and 2021: I certify that I am entitled to represent Malloy, Montague, Karnowski, Radosevich & Co., P.A., (MMKR), empowered to submit the bid, and authorized to sign a contract with the City of Prior Lake (the City). Signed: James H. Eichten, CPA Managing Partner Additional services hourly rates: If it should become necessary for the City to request the auditor to render any additional service to either supplement the services requested in this proposal or to perform additional work as a result of the specific recommendations included in any report issued on this engagement or as a result of new standards, then such additional work shall be performed only if set forth in an addendum to the contract between the City and MMKR. Any such additional work agreed to between the City and MMKR shall be performed at the same rates set forth in the Schedule of Professional Fees and Expenses included in this Dollar Cost Bid Proposal. MMKR does not charge its audit clients for inquiries and technical assistance during the year that are minor in nature (those that would not require a significant amount of research or result in the issuance of a separate report letter or letter). Standard Quoted Hourly Hourly Hours Rates Total Total Basic audit Principals 30 280$ 225$ 6,750$ Managers 25 190 160 4,000 Senior associates 120 110 105 12,600 Associates and staff accountants 75 105 85 6,375 Other – clerical 25 55 55 1,375 Subtotal 275 31,100 675 31,775$ City of Prior Lake, Minnesota Reimbursable expenses (photocopies, mileage, etc.) Total base fee for the 2020 audit Estimated fees for the year ending December 31, 2020: For Professional Auditing Services Schedule of Professional Fees and Expenses