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HomeMy WebLinkAbout13 - Financial Audit Contract RenewalCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 13 May 27, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Dennis Danner, Director, (949) 644 -3123 ddanner @city.newport- beach.ca.us SUBJECT: ANNUAL FINANCIAL AUDIT CONTRACT RENEWAL RECOMMENDATION: Authorize the City Manager to renew the contract with the CPA firm of Conrad AND Associates, L.L.P., to perform the City's annual financial audit for the fiscal years ending June 30, 2003, 2004, and 2005. This item has been reviewed by the City's Finance Committee and they concur in this recommendation. DISCUSSION: The CPA firm of Conrad AND Associates, L.L.P., has performed the City's annual financial audit for the past three fiscal years ending on June 30, 2000, 2001, and 2002. In the opinion of staff, they have performed the City's annual financial audit in an outstanding manner at a very reasonable price. In addition, they were invaluable in assisting the City to successfully implement GASB Statement #34 in the first year it was required (fiscal year ended June 30, 2002). This Statement greatly changed the way the financial information of the City was reported and presented. Council Policy F -15, pertaining to the City's annual financial audit, states in part that the City will normally award an audit contract for a three -year period. The Policy further states that the audit contract may be renewed for an additional three -year period, without going through a new invitation for bid procedure, with the same firm, if the City Council is satisfied with the performance of the auditors and authorizes the extension. Conrad AND Associates, L. L. P., is proposing the renewal with a minor fee increase of 2.5 percent for each of the three years of the extension, or a price of $41,830, $42,876, and $43,948 for the fiscal years ending June 30, 2003, 2004, and 2005 respectively. Staff believes this minor fee increase is appropriate. Annual Financial Audit Contract Renewal May 27, 2003 Page 2 Funding Availability: Funding for audit services is available and included in the annual budget. Alternatives: Obtain bids for audit services and select a different CPA firm. Submitted by: Dennis C. Danner, Director Attachment: Contract UONRAD AND CERTIFIED PUBLIC ACCOUNTANTS ASSOCIATES, L.L.P. 1100 STREET, SUITE C IRVI EACALIFORNIA 9 614 (949) 474 -2020 April 28, 2003 Fax (949) 263 -5520 Dennis Danner Administrative Service Director City of Newport Beach P.O. Box 1768 Newport Beach, California 92658 -8915 Dear Dennis: The purpose of this letter is to set forth the nature, terms, and objectives of our engagement to audit the financial statements of the City of Newport Beach for the fiscal years ending June 30, 2003, 2004 and 2005. ABOUT CONRAD AND ASSOCIATES. L.L.P Our firm is on the forefront of financial reporting for local governments. We currently serve as the auditor for 43 cities throughout southern California, including nearly half of the cities in Orange County. We have already implemented GASB Statement No. 34 for 12 of our 43 city clients. Mr. Al -Imam of our office assisted GASB in the preparation and editing of GASB's most recent GASB 34 Implementation Guide. Mr. Al -Imam is also a member of CCMA and has authored a number of CCMA white papers, including the recent CCMA white paper on the classification of revenues under GASB No. 34. SCOPE OF OUR ENGAGEMENT We trust that you have been happy with our services. We value the City of Newport Beach as an important client of our firm. We will conduct our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We will report to you in writing any material weaknesses in internal control or other reportable conditions detected by our procedures, as well as recommendations for improvement in City policies and procedures revealed by our procedures. We agree to conduct our audits for the years ending June 30, 2003, 2004, and 2005 for $41,830, $42,876, and $43,948, respectively. This reflects a small annual fee increase of only 2.5 %. Should the City request additional services beyond the scope of the normal annual audit, we will bill you for such additional services at the following rates: Classification Partner $186 Senior Manager 133 Manager 106 Supervisor 95 Senior Accountant 80 Staff Accountant 64 April 28, 2003 City of Newport Beach Annual Audit Engagement Letter Page 2 At the start of the final exam phase of the audit, the City will provide trial balances reflecting necessary year end adjustments, as well as necessary schedules, analyses, and reconciliations supporting and agreeing to the material asset and liability balances in the year end trial balances of the City. Should the City desire assistance in reconciliations, analysis, or journal entry preparation, we would be pleased to assist the City at the hourly rates set forth above. The City will draft, word process, copy, and bind the comprehensive annual financial report (CAFR). Our fee contemplates no substantial changes in the scope of the audit (e.g., added enterprise activity, component units, etc.) we would discuss with you any impact of the same on the scope of the audit. The auditing standards require that we disclose to you the following: Auditors are responsible for planning the audit in a manner to provide reasonable, but not absolute, assurance that the financial statements are free of material misstatement. Management is responsible for maintaining the accounting records in accordance with generally accepted accounting principles and for adjusting the accounting records to correct misstatements so that the effects of any uncorrected misstatements are immaterial, both individually and in the aggregate to the financial statements taken as a whole. Also, because an audit is performed on a limited test basis, it cannot be relied upon to disclose instances of noncompliance, fraud or irregularity. However, we will report to you any such matters that come to our attention. We are looking forward to continuing our service to the City of Newport Beach. If you are in agreement with the foregoing arrangements for the City audit, please sign and return the enclosed copy of this letter for our files. Sincerely, CONRAD AND ASSOCIATES, L.L.P, Ken Al -Imam, C.P.A. Partner Accepted: CITY OF NEWPORT BEACH By: _ Title: Date: