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Home My WebLink About5N - Audits Services Proposal MEETING DATE: AGENDA #: PREPARED BY: AGENDA ITEM: DISCUSSION: 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 CITY COUNCIL AGENDA REPORT JUNE 26, 2006 5N 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 2006 - 2007 Introduction Abdo, Eick and Meyers has prepared the City's financial statements for the past ten 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 2006 and 2007. Staff has requested the proposal from this firm only because: 1) Our experience confirms that their fees are competitive. 2) The two (2) 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. 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 two-year period is outlined below: r......................--.....- eneral City , f-....- Year Audit Fee 2666.....:.~:.:..::::.:....1. ..._......_~ 18, 000 2007 _._1__._1~_~.!.9_qQ.._....._. Annual $ !--.Annuaf.%1 Inc~~a~.~.........._..... __ Incre~se --.-1 $1100 6.5*,! $1 000 ......-.-._..-..-5~6~...~ .-.-.-.--..........................--.....-....-...-..---.-.--........-........-....-....-..r. .- I I Fire Relief ! Annual $ ! Annual 0 L.__..................y~ar _J___Audit Fee _._ _..__ In~rease I InCrea~g~..........._...... I 2006 I $1,950 $190! 10.8% t.................._.... 2oq:Z::::::_...............L...... $2,666..-.......... $50 _............. .......:....._......_..~.:~% ........... 1-..-.....................-....--..-..--.......-...........-.........-..---....--------.. ...-.....-.............-.- ! i TIF ! Annual $ I Annual % ~ r~:'- Re!r:~~ee -F~:~r nase L-_._._............_._._. ......__.._........._.........................................._.........._...._......._....__...__........... __............J Their total proposed fees for 2006 report preparation represents an aggregate increase of 6.4% above this year. The primary influence in the increase is the time associated with GASB 34 statement requirements which has added a fair amount of hours above the standard report and to make allowance for the new GASB 45 reporting requirements associated with other post employment www.cityofpriorlake.com audit Phone 952.447.4230 / Fax 952.447.4245 benefits known as OPEB liability disclosure. Issues 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 Le, 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 years has been considerably faster and more efficient from a time perspective than in the beginning. It is Staff's 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 accounting assistance was critical in the successful implementation of GASB Statement 34 that required new accounting formats and the capital cost preparation of major road infrastructure retroactively to January 1, 1980. The proposed cost for the two years is very reasonable and represents a total increase of $2100.00 for the general city audit plus a total of $240.00 for the fire relief association's audits and TIF reports. The City maintains the right to terminate services at any time for any reason. ALTERNATIVES: 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 2006 - 2007. 2. Reject the proposal for a speCific Council reason. RECOMMENDED MOTION: Alternative #1. ReVrJ 1. A Resolution Appointing the Firm of Abdo, Eick and Meyers to Perform the City's Financial Audits for Fiscal Years 2006 - 2007. 2. 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, 2006 and 2007. ATTACHME T H\AUDIT\Agenda audit proposaf.doc 16200 Eagle Creek Avenue S.E. Prior Lake, MN 55372-1714 RESOLUTION 06-xx RESOLUTION APPROVING THE FIRM OF ABDO, EICK AND MEYERS LLP TO PERFORM THE CITY'S FINANCIAL AUDITS FOR FISCAL YEARS 2006 and 2007. MOTION BY: SECOND BY: WHEREAS, 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 WHEREAS, The City of Prior Lake has determined that continued accounting assistance will be important because of the national implementation requirement of GASB Statement 45 that will require OPEB liability disclosure for other post employment benefits; and WHEREAS, The financial reports of the City of Prior Lake's fiscal condition has resulted in an unqualified opinion for all past audit years; and WHEREAS, The proposed annual cost for such audit services over the next two years is determined to be reasonable and cost effective. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE that: 1. The recitals set forth above are incorporated herein. 2. The City of Prior Lake hereby authorizes Abdo, Eick and Meyers LLP to perform the audit services for the following years and cost from the General Fund Operating Budget: Fiscal Year 2006 2007 General Audit Fee $18,000.00 $19,000.00 Fire Relief Assn. Audit Fee TIF ReDort Fee $1,950.00 $1,600.00 $2,000.00 $1,600.00 Passed and adopted this 26th day of June, 2006. YES NO Haugen Dornbush Erickson LeMair Millar Haugen Dornbush Erickson LeMair Millar {Seal} City Manager City of Prior Lake www.cityofpriorlake.com H:IAUDITIRes2006audit.doc Phone 952.447.4230 / Fax 952.447.4245 ABDO EICK.& MEYERSLLP Gerlt/lnl.. Publi1:. AC('tJllfl/(U11.s &: umsulhmlJl June 2, 2006 Gtalltlv iew Sol""'" 520J Eden A~ellue Suile 370 Ed;lnl, MN 55436 Honorable Mayor and Council City of Prior Lake 16200 Eagle Creek A venue Southeast Prior Lake, Minnesota 55372 The following sets forth the engagement of our services for the certified audit of the accounts of the City of Prior Lake, Minnesota (the City). We will audit the financial statements of the City of Prior Lake for the years ending December 31, 2006 and 2007 in accordance with auditing standards generally accepted in the United States of America 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 fmancial 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 fmancial 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. '. H." 9li2.B:i5_'12(,! www.lleltJefNls.colll City of Prior Lake June 2, 2006 Page Two We will perfonn the auditing services discussed above for the calendar years 2006 and 2007. If at any time during this period the Council is dissatisfied with our services for any reason whatsoever, our services may be tenninated by so infonning us. Our Finn, however, shall be obligated at your continuing discretion to perfonn the audit services for the two-year period at the following fees: Fire City Relief Year Audit TIF Audit 2006 $ 18,000 $ 1,600 $ 1,950 2007 19,000 1,600 2,000 · Our fee for services quoted is a "not to exceed" fee. You will be billed at our nonnal 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. It is our belief that the proposed two-year audit engagement is in the best interest of the City. Our Finn can provide the City with a fixed two-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 Finn to issue a Management Advisory Letter. As independent auditors, we are in a position to acquire a detailed knowledge of client fmandal 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 finn to that end. Sincerely, ABDO, EICK & MEYERS, LLP Certified Public Accountants & Consultants ~!VJ~ Steven R McDonald, CPA Managing Partner 952.835.9090 · Fax 952,835.3261 www.aemt'l'lIS.('orn City of Prior Lake June 2, 2006 Page Three RESPONSE: This letter correctly sets forth the understanding of the City of Prior Lake. Signature: Mayor Date: Signature City Manager Date: 952.835.9O'JO . fax 952.835.326J www.aemt'pas.t'llm