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HomeMy WebLinkAbout1987-05-26; City Council; 9020; Audit agreement - 1986-87 annual auditRB# DEPT. FIN MTG. 5/26/87 RECOMMENDED ACTION: TITLE: AUDIT AGREEMENT - CITY MGR.~ 1986-87 ANNUAL AUDIT Adopt Resolution No. 9&9/ authorizing the City to enter into an agreement with Deloitte Haskins & Sells for audit services related to the 1986-87 financial statements and singe audit of federal programs. ITEM EXPLANATION: Each year the City conducts an independent audit of the annual financial statements prepared by the Finance Director. This audit provides the City Manager and Council with an independ- ent opinion on the fairness and completeness of the finance reports and helps to insure the fiscal integrity of the City. The City typically seeks proposals from CPA firms every three to five years for the conduct of these audits. The long-term arrangement allows the City and auditor to learn to work efficiently together and, by the end of the third year, pro- vides a more orderly routine audit of the City records. The propsed agreement represents the fourth year with Deloitte Haskins & Sells. These agreements do not usually require Council approval because the price of each engagement is usually below the $10,000 level. However, last year the federal government mandated that any agency receiving more than $100,000 in financial assistance must prepare a "single audit" of all federal programs in addition to the usual City financial audit. This law provides for the review of each federal grant for both fiscal and procedural compliance with all federal regulations. Any deviation, no matter how small, must be reported to the federal government. The City has five programs which fall under the single audit guidelines: 1) Housing Authority (HUD) 3) Highway Bridge Repair and Replacement (Agua Hedionda Bridge) 2) Community Development Block Grants (HUD) 4) Revenue Sharing 5) Area Agency on Aging - Senior Citizens The single audit of these programs will cost approximately $15,000 for the 1986-87 report. Some of these costs can be charged against the grant programs; however, the Highway and Block grant projects do not allow for overhead charges of this type. These costs will be borne by the City. PAGE 2 of AB# 9820 Staff is recommending that the City continue using the auditors of the past three years, Deloitte Haskins & Sells, for the performance of the City's annual audit and the single audit program. FISCAL IMPACT: The 1987-88 Budget includes funding for the regular audit, costing $15,000 and the single audit at $15,000. The audit work will begin in late May 1987, and will be completed in late September. All costs will be paid from the available funds, no additional transfers are necessary. EXHIBITS: 1. Resolution No. %9/ Authorizing the City to enter into an agreement with Deloitte Haskins & Sells for audit services related to the 1986-87 financial statements and single audit of federal programs. 2. Agreement with Deloitte Haskins & Sells for audit services. 1 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. -- 9091 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY TO ENrER INTO AN AGREEMENT WITH DELOITrE HASKINS & SELLS FOR AUDIT SERVICES RELATED r0 THE 1986-87 FINANCIAL STATEMENTS AND SINGLE AUDIr OF FEDERAL PROGRAMS. - WHLREAS, the Citb annually retains an independent *eview arid express an opinion on the annual financial 'arlsbad , and WHEREAS, the City is also required by federal law If all qualified federal proorams as defined by the S md WHEREAS, the City Council has determined that the CPA firm to perform a statements of the City of to perform a single aud t ngle Audit Act of 1984, firm of Deloitte Haskins & Sells, by virtue of its contact with city programs, throuqh past audits and 'amiliarity with the Single Audit Act, can perform these functions in a irofessional manner. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, 'alifornia, that the Mayor is authorized to execute the attached agreement with Ieloitte Haskins & Sells for the conduct of an annual financial audit and single wdit for the fiscal year ended 3une 30, 1987. Ill Ill 111 111 111 111 Ill Ill Ill Ill : i 4 C b t r i E 5 1c 1: 1: 1: .I 14 15 1E 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED, AND ADOPTED at a regular meeting of the Carlsbad Citl 'ouncil held on the 26th day of Ma), 1987, by the following vote, to wit: AYES: NOES: None ABSENT: None Council Members Lewis, Kulchin, Pettine, Mamaux and Larson ITTEST: SEAL ) AGREEMENT FOR AUDIT SERVICES RELATED TO THE ANNUAL AUDIT OF THE CITY'S FINANCIAL REPORTS FOR THE YEAR ENDED JUNE 30, 1986 THIS AGREEMENT, made and entered into as of the day of , 19 , by and between the CITY OF CARLSBAD, a municipal corporation, hereinafter referred to as "City," and DELOITTE HASKINS & SELLS hereinafter referred to as "Auditor." RECITALS City requires the services of an independent certified public accountant to perform the annual audit of the City's financial statements for the one year period from July 1, 1986 to 3une 30, 1987; and The Auditor possesses the necessary skills and qualifications to provide the services required by City; NOW, THEREFORE, in consideration of these recitals and the mutual covenants contained herein, the City and Auditor agree as follows: (1) AUDITOR'S OBLIGATIONS A. SCOPE AND DURATION 1. The Auditor shall conduct an examination of the financial statements, accounts, records and procedures of all funds, agencies andlor subdivisions of the City of Carlsbad covering operations of the City during the period July 1, I986 to June 30, 1987. 2. The engagement shall include an audit of all federal program grant funds as required under the Single Audit Act of '1984. 3. The engagement shall include a review of the system of internal control and of compliance with budgetary and legal requirements by the City. B. AUDIT STANDARDS 1. The Auditor shall conduct the examination in accordance with generally accepted auditing standards and procedures applicable to governmental units, as prescribed in the following documents: a. and Local Governmental Units. b. General Accounting Office, Standards of Audit Governmental Orgariizat ions, Programs, Activities, and Functions. c. Statements of the Governmental Accounting Standards Board. AICPA, Statements of Auditing Standards and Audits of State 2. Should the Auditor encounter circumstances requiring an increase in the scope of the audit, or in the extent of detailed investigation, written notice to that effect will be given to the Finance Director, and this agreement will be modified by mutual agreement as to additional work and compensation. Such modifications must be in writing and approved by the Finance Director and/or City Manager. C. REPORTS AND OTHER COMMUNICATIONS I. The Auditor shall submit a written report on observed weaknesses in internal accounting controls. 2. The Auditor shall submit a management letter on observed mmaqement weaknesses. 3. The Auditor shall submit a written report containing an expression of opinion that the financial statements are fairly stated, or, if a qualif led or adverse opinion or disclaimer of opinion is necessary, the reasons theref or. 4. The Auditor shall submit a written report affirming that the City is in compliance with applicable legal provisions referred to in Section A-3 above or as required by the Single Audit Act of 1984. If the City was not in compliance with specific legal provisions, the Auditor shall so state in his written report. 5. The Auditor shall assist the City in preparing final financial statements in compliance with the standards set by Governmental Accounting, Auditing and Financial Reporting (GAAFR). 6. The Auditor shall prepare and submit to the City one final typed copy of the combined financial statements, notes to the financial statements and the supplemental data section of the annual financial report as defined in GAAFR. The Auditor shall provide one original of the auditor's opinion on'the combined financial statements. The Auditor shall provide 15 copies of the letters and reports as described in Sections l.C(l), I.C(2), I.C(4) and 'l.C(7). 7. The Auditor shall prepare separate financial statements for the City Water Enterprise and Redevelopment Agency complete with separate opinions. 8. The Auditor shall revise his written reports as may be required for their acceptance by federal grantor agencies. 'The Auditor shall make available working papers upon request, in accordance with federal and state grant provisions. 9. after the submission of his written reports. The Auditor shall attend up to two (2) public meetings to be held (2) CITY OBLIGATIONS A. The City shall have adjusted or closed all accounts and shall have them available for examination by . 8. shall respond promptly to requests for information, provide all necessary City staff shall render all feasible assistance to the Auditor, and books and records, and provide physical facilities required by the Auditor for the expeditious conduct of the engagement. C. 'The City shall prepare all introductory arid statistical sections to be included in the annual financial report, and shall submit all sections to the Auditor for review prior to September 30, 1987. (3) - PROGRESS AND COMPLETION The work under this contract will begin upon execution of this agreement and shall be comleted by October 31, 1987 for the Comprehensive Annual Report arid December 31, 1987 for the Single Audit, provided all other deadlines are met. the Auditor and agreed to in writing by the Finance Director. (4) FEES TO BE PAID TO AUDITOR Extensions of time may be granted by the Finance Director if requested by The City shall pay the Auditor a total fixed fee of $15,000 for services rendered in connection with the Comprehensive Annual Report and an amount not to exceed $15,000 in connection with the Single Audit. The City shall compensate the Auditor for additional work agreed upon in writing and approved by both parties as allowed under Section 1.8.2 of this agreement. (5) PAYMENT OF FEES Periodic progress billings may be submitted for services rendered to date, but riot more often than monthly. The final payment for any audit shall become due after the submission of all reports required by Section C and their acceptance by the City and federal grantor agencies. Invoices should be mailed to the attention of Finance Director, City of Carlsbad, 1200 Elm Avenue, Carlsbad, CA 92008-1989. The City shall retain 10% of the total fees paid until all reports have been received and accepted by the City or grantor agencies. , (6) PAYMENT OF FEES OR COMMISSIONS The Auditor warrants that their firm has not employed or retained any company or person, other than a bona fide employee working for the Auditor, to solicit or secure this agreement, and that Auditor has not paid or agreed to pay any company or person, other than a bona fide employee, any fee, commission, percentage, brokerage fee, gift, or any other consideration contingent upon, or resulting from, the award &r making this agreement. For breach or violation of this warranty, the City shall have the right to annul this agreement without liability, or, in its discretion, to deduct from the agreement price or consideration, or otherwise recover, the full amount of such fee, commission, percentage, brokerage fee, gift or contingent fee. (7) NONDISCRIMINATION CLAUSE The Consultant shall comply with applicable State and Federal laws ,regarding nondiscrimination. (8 1 TERMINATION OF CONTRACT In the event of the Auditor's failure to perform the work as provided for in this agreement, the City may terminate this aqreemerrt for nonperformance by notifying the Auditor by certified mail of the termination of the agreement. The Auditor, thereupon, has five working days to deliver all documents owned by the City and copies of all work in progress to the Finance Director. The Finance Director shall make a determination of fact based upon the documents delivered to City of the percentage of work which the Auditor has performed which is usable and of worth to the City in having the audit completed. Based upon that finding as reported to the City Council, the Council shall determine the final payment of the agreement. Final payment shall be in compliance with the Code of Federal Regulations. The Auditor agrees to cooperate with the City and any subsequent audit firm employed by the City by providing access to and/or copies of any work papers associated with any City audit as needed. Auditor's obligations under this Section shall be consistent with existing American Institute of Certified Public Accountant (AICPA) guidelines and standards. The (9) DISPUTES If a dispute should arise regarding the performance of work under this agreement, the following procedure shall be used to resolve any question of fact or interpretat ion not otherwise settled by agreement between parties. questions, if they become identified as a part of a dispute among persons operating under the provisions of this agreement, shall be reduced to writing by the principal of the Auditor or the Finance Director. A copy of such documented dispute shall be forwarded to both parties involved along with recommended methods of resolution which would be of benefit to both parties. The Finance Qirector or principal receiving the letter shall reply to the letter along with a recommended method of resolution within ten calendar days. If the resolution thus obtained is unsatisfactory to the aggrieved party, a letter outlining the dispute shall be forwarded to the City Council for their resolution through the office of the City Manager. The City Council may then opt to consider the directed solution to the problem. In such cases, the action of the City Council shall be binding upon the parties involved, although nothing in this procedure shall prohibit the parties seeking remedies available to them at law. (10) SUSPENSION OR TERMINATION OF SERVICES Such This agreement may be terminated by either party upon tendering 30 days written notice to the other party. termination, upon request of the City, the Auditor shall assemble the work product and put same in order for proper filing and closing and deliver one copy of said product to City. In the event of termination, the Auditor shall be paid In the event of such suspension or for work performed to the termination date; however, the total shall not exceed the guaranteed total maximum. The City shall make the final determination as to the portions of tasks completed and the compensation to be made. Compensation is to be made in compliance with the Code of Federal Regulations. The Auditor shall make any work papers or files available to the City or its representatives consistent with the AICPA guidelines and standards. (11) STATUS OF THE AUDITOR The Auditor shall perform the services provided for herein in Aud own way as an independent certified public accountant and not as an emp tor's oyee of the City. completion date of work and the personnel assigned. ( 12) HOLD HARMLESS AGREEMENT The Auditor shall be under control of the City only as to the The City, its agents, officers and employees shall not be liable for any claims, liabilities, penalties, fines, or any damage to goods, properties, or effects of any person whatever, nor for personal injuries or death caused by, or resulting from, or claimed to have been caused by, or resulting from, any act or omission of Auditor or Auditor's agents, employees or representatives. Auditor agrees to defend, indemnify and save free and harmless the City and its authorized agents, officers, and employees against any of the foregoing liabilities or claims of any kind and any cost and expense that is incurred by the City on account of any of the foregoing liabilities. apply to the Auditor's opinion or other products described within this agreement. (13) ASSIGNMENT OF CONTRACT This Section does not The Auditor shall riot assign this contract or any part thereof or any monies due thereunder without the prior written consent of the City. (14) SUBCONTRACTING The Auditor shall not subcontract any of the work to be performed under this contract by the Auditor unless approved by the City in writing. The Auditor shall be fully responsible to the City for the acts and omissions of Auditor's subcontractor and of the persons either directly or indirectly employed hy the subcontractor, as the Auditor is for the acts and omissions of persons directly employed by Auditor. Nothing contained in this contract shall create any contractual relationship between any subcontractor of the Auditor arid the City. The Auditor shall bind every subcontractor and every subcontractor of a subcontractor by the terms of this contract applicable to Auditor's work unless specifically noted to the contrary in the subcontract in question 4 approved in writing by the City. (15) PROHIBITED INTEREST No official of the City who is authorized in such capacity on behalf of the City to negotiate, make, accept, or approve, or take part in negotiating, making, accepting, or approving of any agreement, shall become directly or indirectly interested personally in this agreement or in any part thereof. No officer, employee, or attorney, of or for the City who is authorized in such capacity and on behalf of the City to exercise any executive, supervisory, or other similar functions in connection with the performance of this agreement shall become directly or indirectly interested personally in this agreement or any part thereof. (16) VERBAL AGREEMENT OR CONVERSATION No verbal agreement or conversation with any officer, agent, or employee of the City, either before, during, or after the execution of this agreement, shall affect or modify any of the terms or obligations herein contained nor such verbal agreement or conversation entitle the Auditor to any additional payment whatsoever under the terms of this agreement. ('17) SUCCESSORS OR ASSIGNS Subject to the provisions of paragraph (12), Hold Harmless Agreement, all terms, conditions, and provisions hereof shall insure to and shall bind each of the parties hereto, and each of their respective heirs, executors, administrators, successors and assigns. (18) EFFECTIVE DATE This agreement shall be effective on and from the day and year first above written. ( 19 CONTRACT RENEWAL This contract may be renewed annually by the City Council and Deloitte Haskins and Sells. IN WITNESS WHEREOF, we have hereunto set our hands and seals. ciry OF CARLSBAD /1 CLAUDE A. LEWIS Mayor ATTES r : By Title APPROVED AS TO FORM:*,