City of San Anselmo - Dollar Cost Bid for Professional Auditing Services Schedule of Professional Fees and Expenses for the Audit of the Basic Financial Statements and Non-Attest Services Fiscal Year June 30, 2015. Audit Service Estimated Hourly Proposed Pricing_ Come_onent Position Hours Rates Total Fee Attest services: Audit of basic financial Statements of City of San Anselmo: Terry E. Krieg , CPA Partner, CPA 100 $175 $ 17,500 Charlotte W. Maris, CPA Senior CPA 40 130 5,200 140 22,700 Out of pocket expenses: Lodging Included Travel Included Total Attest Services $22,700 Non-Attest services: Separate pricing for the compilation of: City's Annual Report of Financial Transactions to the State Controller 32 $3,500 Annual Gann Limit Report 4 500 Total Non-attest services 36 $ 4,000 TOTAL CITY SERVICES 176 $26,700 Separate pricing for Federal OMB Circular A-133 Single Audit, if Required 40 $ 5,000 Total if Single Audit Required 216 $ 31 , 700 Item 10 Attachment 4 Page 1 of 23
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City of San Anselmo - Dollar Cost Bid for Professional Auditing Services Schedule of Professional Fees and Expenses for the Audit of the Basic Financial Statements and Non-Attest Services Fiscal Year June 30, 2015.
Audit Service
Estimated Hourly Proposed Pricing_ Come_onent Position Hours Rates Total Fee Attest services:
Audit of basic financial Statements of City of San Anselmo:
Terry E. Krieg, CPA Partner, CPA 100 $175 $ 17,500 Charlotte W. Maris, CPA Senior CPA 40 130 5,200
140 22,700 Out of pocket expenses: Lodging Included Travel Included
Total Attest Services $22,700
Non-Attest services: Separate pricing for the compilation of: City's Annual Report of
Financial Transactions to the State Controller 32 $3,500 Annual Gann Limit Report 4 500
Total Non-attest services 36 $ 4,000
TOTAL CITY SERVICES 176 $26,700
Separate pricing for Federal OMB Circular A-133 Single Audit, if Required 40 $ 5,000
Total if Single Audit Required 216 $ 31,700
Item 10 Attachment 4 Page 1 of 23
City of San Anselmo - Dollar Cost Bid for Professional Auditing Services Schedule of Professional Fees and Expenses for the Audit of the Basic Financial Statements and Non-Attest Services Fiscal Year June 30, 2016 and 2017.
\Service I 201s-2016 I I 2016-2011 I I Attest services:
Audit basic financials
Non-attest services:
Compilation Annual Report of Financial Transactions Compilation GANN Report
Total City services
Federal Single Audit if required Total City Services and Federal Single Audit
Submitted By: I.wry\ lA ~
$22, 700
$3,500 $500
$4,000
$5,000
$31, 700
Name and Title: Terry E. Krieg, CPA & Owner
Date: Mrivill 1~ 1·Vt3
$22, 700
$3,500 $500
$4,000
$5,000
$31,700
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Financial Statement Auditing Services Proposal for the Town of San Anselmo, California
For The Fiscal Years Ending June 30, 2015 -2017
Terry E. Krieg, CPA 131-A Stony Circle, Suite 500 Santa Rosa, California 95401
Proposal For Financial Statement Auditing Services Table of Contents
Section and Topics
Transmitta l Letter
The Firm's Governmental Auditing Qualifications
Years in business, type clients, GFOA Awards Peer reviews, GASB 34 experience Size of firm, independence, licensing, disciplinary status
Memberships, insurance, other matters Characteristics of Firm's municipal audit clients Names and telephone numbers of municipal audit clients Background of Terry E. Krieg, CPA and Charlotte Maris, CPA
Audit Services to be Provided -Audit of Basic Financial Statements
Audit of basic financial statements In relationship to opinion on nonmajor funds Limited procedures in regard to RSI - The MD&A /Budget/OPES City's responsibilities
Timing of audit work and segmentation Estimated audit hours
Audit Services to be Provided - Proposed Audit Technique or Strategy Planning and Understanding Stage :
Internal Control Over Financial Reporting:
Basic financial management system Budgeting system Investment system
Banking system Capital asset system Accounts payable system Debt management system Payroll system Revenue system Statutory system
Preliminary Analytical Reviews
Preliminary Materiality Levels
Sampling Methods
Preliminary Fraud Risk Assessments
Formal Documented Audit Plan
Final Audit Fieldwork Stage
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Proposal For Financial Statement Auditing Services Table of Contents
Section and Topics
Non-Audit Services
Preparation of Basic Financial Statements
Basic financial statements: Auditor's report Management's Discussion and Analysis (The MD&A) Government Wide Statement of Net Assets Government Wide Statement of Activities
GASS 34 revenue matrix GASS 34 expenditure matrix
Balance Sheet - Governmental Funds Reconciliation - Governmental Funds Balance Sheet to Statement of Net
Assets Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation to Statement of Activities
Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses and Changes in Net Assets -
Proprietary Funds Statement of Cash Flows - Proprietary Funds Notes to the Financial Statements Required Supplemental Information (RSI)
General Fund Budget to Actual Schedule Schedule of OPEB Funding Progress
Optional Supplementary Information
Deliverables
Basic
Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes Net Assets
Budget to Actual Schedules - Nonmajor Governmental Funds Combining Statement Net Assets, Changes Net Assets, cash Flows IS Funds
Independent Auditors' report Yellow Book Report on Internal Control and Compliance Management Letter Report on Internal Control and Compliance Over Major Federal Programs
OMB data Collection Form Agreed Upon Procedures Report - Appropriations Limit Notification of Irregularities and Illegal Acts
Communications to Those Charged With Governance (Report to City Council)
Audit Involvement of Firm's Principal
Audit Staff Time By Position
Information About Charlotte Maris, CPA
Retention of Audit Working Papers and Assignment of Services
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Proposal For Financial Statement Auditing Services Table of Contents
Section and Topics Other Insurance matters and signature
PEER Review Report
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Terry E. Krieg, CPA Certified Public Accountant
March 20, 2015
Ms. Daria Carrillo Finance and Administrative Services Director Town of San Anselmo 525 San Anselmo Avenue San Anselmo, California 94960
Dear Ms. Carrillo:
Enclosed herein is my Firm's technical proposal to provide independent financial statement auditing services to the Town of San Anselmo for the fiscal year ending June 30, 2015 through 2017. Also, enclosed is a separate Sealed Dollar Cost Bid for the requested auditing services.
The firm is especially qualified to serve you based upon my 40 years of Governmental auditing experience and the 30 years of experience held by Charlotte Maris, CPA who will work with me to serve the City of Ukiah. All of the firm's clients are cities, water districts, irrigation districts, community service districts, joint powers agencies, or other types of local government. I provide primarily financial statement auditing services to our governmental clients, but we also provide special services such as preparing financial statements, preparing state controller reports, applying agreed-upon procedures to certain internal control areas, and providing consultation and advice on fiscal matters.
Last fiscal year, the firm served as the independent auditors for 10 California Cities and several special districts and joint powers agencies. We also have recent Federal Single Audit experience.
In addition, the firm's most recent Peer Review was recently completed (February 11 , 2014) and the reviewing firm issued a Pass with No Deficiencies Opinion on my Firm. This is the highest possible rating that can be issued by a Reviewing Firm.
I personally provide time to my clients during the audit fieldwork stage to provide assurance that the engagement is properly planned, executed, and completed in accordance with professional standards. This means that I actually perform audit fieldwork to provide these services to you. I believe that our clients benefit from this by having access to the most experienced person in the Firm and also the Firm's decision maker.
Please review this proposal and feel free to call me at our Office (707) 544-5684 or call me direct on my Cell Phone at (707) 888-1052 if you want to discuss further how we can serve you. Also, I believe that our existing clients would provide you with some positive information about us should you desire to contact them concerning the services provided by my Firm.
If y fin this proposal acceptable, then please let me know. Upon notification of acceptance, I would t n sub it to you an audit engagement letter which would summarize the terms of our arrangement and
5~en :lyn;~\d A .:uthoriZBtion for us to start work.
J3r~eg~CP~
131-A Stony Circle, Suite 500 Santa Rosa, California 95401
Terry E. Krieg, CPA----40 Years of Governmental Auditing Experience Comprehensive and Complete Service -- Local Governments THE FIRM'S GOVERNMENTAL AUDITING QUALIFICATIONS
The firm of Terry E. Krieg, CPA is especially qualified to provide financial statement auditing and consulting services to local governments because:
• The firm has been in business for the last 27 years and during that time has been providing strictly governmental auditing and consulting services
• Terry E. Krieg, CPA, the firm's owner and principal, has 40 years of governmental auditing and consulting experience with primarily local governments in California
• All of the firm's clients are California cities, water districts, community service districts, wastewater agencies, irrigation districts, or special governmental agencies.
• Within the last 5 years, the firm has annually performed financial statement audits of 1 O cities and 6 to 10 special districts and special purpose governments
• Five of our municipal clients annually publish Comprehensive Annual Financial Reports(CAFRs) and we assist our clients in formatting, designing and publishing these expanded financial reports
• Terry E. Krieg, CPA, has served as a reviewer of CAFR's for the California Society of Municipal Finance Officers Outstanding Financial Reporting Awards Program and he is familiar with what is required to participate in that program
• Five (50%) of our municipal clients annually receive the Government Finance Officers Association (GFOA) Awards for Excellence in Financial Reporting and we are familiar with what is required to participate in that financial statement review program
• The firm of Terry E. Krieg, CPA complies with professional auditing and accounting standards and has completed 8 triennial PEER reviews with the most recent Peer Review having been issued February 11. 2014. (There were no reportable deficiencies and a rating of pass was awarded by the Reviewing CPA Firm)
• We are very familiar with the auditing requirements and financial reporting requirements of California Cities and Special Districts as we assist our clients in preparing the audited financial statements
• We understand business-type/enterprise fund type financial reporting and auditing as about 80 percent of our municipal auditing clients own and operate substantial water and wastewater enterprises. In addition, most of our special district JPA audit clients also use enterprise accounting for financial reporting purposes.
• All of our municipal audit clients participating in the GFOA Awards Program received the GFOA Awards for Excellence in Financial Reporting in the First year in which they participated in the Program.
• The firm has experience compiling special district and municipal State Controller Financial Transaction Reports using the new automated reporting system.
• Terry E. Krieg, CPA also has experience auditing electric enterprises have served many years as the independent auditor for the Tri-Dam Power Authority ( a JPA selling electric power generation to PG&E ) and the Tri-Dam Project ( a joint-powers JPA having water rights and multiple dam facilities)
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Terry E. Krieg, CPA---- 40 Years of Governmental Auditing Experience--Comprehensive and Complete Service -- Local Governments THE FIRM'S GOVERNMENTAL AUDITING QUALIFICATIONS
• The firm has an established history of recruiting and hiring college-educated(with degrees in accounting) junior and senior accountants to assist in providing services to audit clients
• The firm is small and this means that you have direct access to the firm's decision maker as regards the services being provided to you.
• Staff accountant turnover is a fact and reality of public accounting and the firm expands and contracts as does any business organization depending upon the client commitments. The firm's over the years has employed from one to three junior or senior accountants to provide services. When unexpected growth happens, the firm adds staff and if necessary hires qualified temporary staff or other CPAs to assist the firm in meeting client commitments.
• Terry E. Krieg, CPA, municipal auditing experience includes rural and urban cities. Also this experience includes cities with populations under 10,000, cities, over 20,000 in population and cities over 100,000 in population.
• Many of the firm's clients receive federal grant funds and are annually subject to the federal single audit requirements. The firm is familiar with as variety of federal financial assistance programs including Community Development Block Grants, HOME Partnership Investment grants, ARRA Grants, COPS and several other federal programs
• Independence is always maintained for all audit clients and the firm has no professional relationships with audit clients which could impair its independence. The firm is also independent of any component units of all clients.
• The firm is properly licensed to practice in California under CPA License number 26963 dated December 1, 1978. No disciplinary actions are pending or have been imposed upon the firm.
• We maintain member ships in the American Institute of Certified Public Accountants as the leading professional organization serving the CPA profession.
• Insurance is maintained by the firm as a matter of standard business practice including State Compensation Insurance Fund for Workers Compensation Coverage, General Liability coverage with an aggregate coverage of $ 4 million, and Professional Accountant's Liability Coverage with a $1 million per claim and$ 2 million aggregate.
• Many of the firm's municipal audit clients have redevelopment agencies and we are fami liar with the preparation of blended component unit financial statements of redevelopment agencies as well as the need to convert such component unit financial statements to the GASB 34 reporting formats. We are also familiar with the Private Purpose trust accounting and financial reporting issues pertaining to Successor Agencies having custodial responsibilities of the assets and obligations of former redevelopment agencies.
• The Firm of Terry E. Krieg, CPA is independent of the Town of San Anselmo as defined by generally accepted auditing standards. No previous services have been provided to the Town of San Anselmo.
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Terry E. Krieg, CPA----40 Years of Govemmental Auditing Experience-Comprehensive and Complete Service for-- Local Governments THE FIRM'S GOVERNMENTAL AUDITING QUALIFICATIONS
• The Firm of Terry E. Krieg, CPA is independent of all component units of the Town of San Anselmo as defined by generally accepted auditing standards.
• The Firm of Terry E. Krieg, CPA most recent Peer Review was completed February 11. 2014 and that Peer Review consisted specifically of the peer review of governmental audit engagements as the clients of the Firm are all governmental entities.
MUNICIPAL AUDIT CLIENT REFERENCES (Financial Reporting Characteristics of the Firm's Municipal Audit Clients)
In comparison to the Town of San Anselmo, about 80 percent of our current municipal audit clients also include water and wastewater enterprises within their reporting entities.
Seven of our municipal clients are Phase 2 GASB governments with annual revenues between $10 million and $100 million as of June 30, 2013, and the remaining municipal clients are Phase One GASB 34 Implementation Governments with annual revenues of less than $10 million.
Two of our current municipal audit clients, also include internal service funds within their financial reporting entity.
Five of our current municipal audit clients participate in the GFOA Certificate of Achievement for Excellence in Financial Reporting Awards Program.
Essentially, all of the Firm's municipal audit clients are similar in basic structure to the Town of San Anselmo based upon the number of funds and the types of governmental funds being maintained by each
Because the firm has been providing financial statement auditing and consulting services to cities and special districts for the past 27 years, there are many governmental managers, finance directors, city councils, and boards of directors who are familiar with the types of services we provide and the quality and caliber of the auditing services provided to each. Therefore, the following list of active references is being provided should you desire to discuss with firm clients their impressions and assessments of the services we have provided in the past.
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Terry E. Krieg, CPA---40 Years of Governmental Auditing Experience--Comprehensive and Complete Service for-- Local Governments
THE FIRM'S GOVERNMENTAL AUDITING QUALIFICATIONS
MUNICIPAL AUDIT CLIENT REFERENCES - (Clients in Blue are Municipal Audit Clients That Are Also GFOA Award Recipients)
Reference Contact Person
Central Coast Cities:
Position Municipal
Audit Client Telephone
Mr. John Thornberry Director Administrative Services City of Carpinteria
City of Solvang
(805) 684-5405 Extension 448
Ms. Sandra Featherson Director Administrative Services (805) 688-5575
Bay Area Cities:
Ms. Kathleen Bradbury Finance Manager Town of Yountville (707) 944-8851
Ms. Jessica O'Connell General Ledger Accountant City of Cotati (707) 665-3629
Mr. Larry Mclaughlin City Manager/City Attorney City of Sebastopol (707) 823-1153
Mr. Eric Erickson Director of Finance City of Mill Valley ( 415) 388-4035
Ms. April Mitts Director of Finance City of St. Helena (707) 463-6220 (707) 994-8201
Mr. Chris Becnel Director of Finance City of Clearlake Extension 122
Ms. Joanne Cavallari Finance Manager City of Cloverdale (707) 894-1715
Ms. Marie Essig Director of Finance City of Fortuna (707) 725-1410
The firm of Terry E Krieg, CPA has also served in years past as the independent audit firm for the cities of Calistoga, Arcata, El Cerrito, San Bruno, Sonoma, Pismo Beach, Grover Beach, San Pablo, East Palo Alto, and Town of Colma. The firm of Terry E Krieg, CPA also served for many years as the independent audit firm for the Tri-Dam Power Authority (direct resale of electric power to PG&E), The Tri-Dam Project, Oakdale Irrigation District and South San Joaquin Irrigation District (Both of whom were joint-venture owners of the Tri-Dam Power Authority and Tri-Dam Project. In addition, Terry E Krieg, CPA, while serving as a partner or manager in other CPA firms has directly performed the audits of the cities of Los Gatos, Santa Rosa, Modesto, Newman, Patterson, Ceres, Sonora, Hughson, and Coeur d' Alene, Idaho.
In addition, Terry E. Krieg, CPA has extensive experience auditing for profit golf and country clubs located in Northern California; and experience auditing the municipal golf course fund of another North Bay City.
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Terry E. Krieg, CPA--40 Years of Governmental Auditing ExperienceComprehensive and Complete Service for-- Local Governments
Background of Terry E. Krieg, CPA
Terry E Krieg, CPA graduated in 1973 from San Diego State University with a B.S.Degree with High Honors and Distinction in Accounting.
Immediately after graduation, he joined the United States Air Force Audit Agency as a civilian auditor. While with the Agency, he was trained in computerized auditing techniques and in operational as well as financial statement auditing. During his three years with the Agency, he passed all parts of the Uniform CPA Examination; and this ultimately led to his decision to enter public accounting.
After three years with the Agency, Mr. Krieg joined a local CPA firm in Modesto California involved in conducting financial statement audits of cities in its geographical area. Mr. Krieg became a partner in the firm and was responsible for all auditing services.
In 1982, Mr. Krieg joined the International CPA Firm of Pannell Kerr Forster in its San Francisco Office as an Audit Supervisor in charge of providing financial statement auditing and consulting services to governments in Northern California. During this period of time, he was also responsible for providing financial statement auditing services to California Cities, hotels, country clubs, retail establishments and not-for-profit organizations. He was ultimately promoted to Audit Manager and stayed with the firm until 1987 when he formed his own CPA Firm.
Since 1987, Mr. Krieg has been directly involved in providing financial statement auditing services and consulting services to California cities and special districts. The firm has experienced steady growth in its clientele and has continued to provide professional services to local governments in Northern California and in the Central Coast Area of California.
During his career, Mr. Krieg has been in charge of and provided financial statement auditing services to about 30 different California cities including general law cities, charter cities, small cities and larger cities having more than 100,000 in population. In addition, the firm provides financial statement auditing services to water districts, irrigation districts, housing authorities, community service districts, financing authorities, home mortgage financing authorities, and local governmental joint ventures including emergency paramedical systems, financing authorities and similar type organizations.
Background of Charlotte Maris, CPA
Charlotte W Maris, CPA graduated from Central Washington University in 1982 with a BS Degree in Accounting and Business Administration. She established her own accounting firm in 1984. Prior to obtaining her CPA license, Charlotte spent 11 years working on financial statement audits in California including cities in Santa Barbara County, San Luis Obispo County, Humboldt County, San Mateo, and Contra Costa County. She is past President of the local Chapter of the Washington State Society of CPAs. She owns and operates Maris & Associates, CPAs a full service CPA firm serving over 150 local businesses and over 850 individuals. Maris & Associates, CPAs include Charlotte and three full time staff accountants.
Charlotte Maris CPA has worked on municipal audits in California for over eleven years under the direct supervision of Terry E. Krieg, CPA and gained her CPA state required auditing experience during this process. She continues to meet all required continuing education and Peer Review requirements applicable to her firm. Ms. Maris will be an employee of Terry E. Krieg, CPA while providing audit services under this proposal.
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AUDIT SERVICES TO BE PROVIDED
Audit of Basic Financial Statements - Scope of Services
o We propose to audit the basic financial statements of the Town of San Anselmo, California for the fiscal years ending June 30, 2015, 2016,and 2017. Our audit shall be conducted in accordance with (1) auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States and, (2) in accordance with OMB Circular A-133 and the Single Audit Act of 1984 when the Town expends more than $500,000 to increase to $750,000 in fiscal 2016) in federal grant funds. The purpose of the audit is to enable us to form an independent auditor's opinion as to whether or not the Town's basic financial statements present fairly, in all material respects, the financial position of the Town's governmental-type activities, business-type activities, each major fund, and the aggregate remaining fund information, and the respective changes in financial position and cash flows, where applicable, thereof in conformity with accounting principles generally accepted in the United States of America.
CJ In addition, we shall perform sufficient procedures in connection with the audit of the Town's basic financial statements to enable us to express an in relationship to type of opinion on the Town's combining balance sheet, combining statement of revenues, expenditures and changes in fund balances for the Town's non-major governmental funds and the related budget to actual comparison schedules for the Town's nonmajor governmental funds, the schedules of capital assets used in governmental operations, and the combining statement of net position, changes in net position, and cash flows of the Town's proprietary funds.
o We shall perform such procedures we deem necessary in regard to the Town's Management's Discussion and Analysis Section (The MD&A Section) of its basic financial statements to enable us to determine that the MD&A is in substantial conformity with Governmental Accounting Standards. Because the Town may expend more than $500,000 in federal grant funds and is therefore subject to the Single Audit Act and requires its audit to be performed in accordance with Government Auditing Standards, it is expressly understood that the Town will prepare and draft the MD&A Section of its basic financial statements. As your independent auditing firm, we are expressly prohibited from preparing or drafting your MD&A Section when audits are performed in accordance with the Single Audit Act or in accordance with Government Auditing Standards (A Yellow Book Audit) . The GAO Independence Standards specifically state that an audit firm's independence is considered Impaired under their interpretation of Government Auditing Standards.
o We shall perform such procedures as are appropriate to the Required Supplemental Information (RSI) as we believe necessary to determine that it is presented in conformity with U. S. Generally Accepted Accounting Principles. RSI is understood to mean the Budget to Actual Schedule for the Town's General Fund and the Schedule of Funding Progress for the Town's Other Post Employment Benefit Plan (OPEB) as required by GASB 45.
a In accordance with Government Auditing Standards, the Town is required to appoint a qualified individual to oversee the services we provide. It is understood that this individual will be Ms. Daria Carillo, the Town's Finance Director.
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AUDIT SERVICES TO BE PROVIDED (Continued
Audit of Basic Financial Statements - Scope of Services
o In accordance with Government Auditing Standards, the Town is required to accept full responsibility for its financial statements and related reports, and the Town is required to appoint a qualified and knowledgeable individual to be responsible for reviewing, editing, correcting and otherwise approving and accepting the Town's financial statements. We may draft the Town's financial statements and related notes to the financial statements for you, but the responsibility for their completeness and accuracy is that of the Town It is understood that this individual shall be Ms. Daria Carrillo.
o We shall draft the Town's basic financial statements for you. These services are considered to be nonaudit services within the meaning of Government Auditing Standards. The draft financial statements shall be submitted to the Town for review, editing, correction, approval and acceptance purposes.
o If our independent auditor's report shall be other than unqualified, we shall discuss the reasons therefore with you in advance of issuing our related reports.
o Our auditing procedures shall be designed to provide reasonable, but not absolute assurance, of detecting errors or irregularities that might be material in amounts to the Town's basic financial statements whether caused by error or fraud. The areas to be tested will be based upon professional judgment; therefore, the related auditing procedures should not be relied upon to detect all instances of errors, irregularities, fraud or noncompliance with significant matters that might have a material impact upon the Town's basic financial statements.
o The Town shall be responsible for providing us with information about all significant contracts, agreements, debt instruments, regulatory notices, and statutory requirements which should be considered in connection with the financial statement audit.
o As part of the financial statement audit, we shall consider the Town's internal control over financial reporting as a basis for determining my auditing procedures for the purpose of expressing an opinion on the Town's financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town's internal control over financial reporting. Accordingly, I shall not express an opinion on the effectiveness of the Town's internal controls over financial reporting. This process may include developing understandings of the control policies and procedures over the following accounting control areas:
1. Cash and investments 9. Accrued liabilities 17. Capital grants 2. Accounts receivable 10. Pension funding 18. Operating grants 3. Due from governments 11 . Bonds payable 19. General revenues 4. Assessments receivable 12. Loans payable 20. Charges for services 5. Internal balances 13. Agreements payable 21 . Cash disbursements 6. Utility receivables 14. Insurance 22. Payroll accounting 7. Capital assets 15. Compensated absences 23. Net assets 8. Accounts payable 16. Restricted assets 24. Fund balances
25. Other post-employment benefits
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services
If as a result of this process, deficiencies in internal control over financial reporting come to my attention, they shall be communicated to you in writing in the reports required under the Yellow Book auditing standards. Deficiencies in internal control over financial reporting exist when, in my judgment, the design or actual operation of an internal over financial reporting does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Town's financial statements will not be prevented, or detected and corrected on a timely basis.
o The audit fieldwork shall be performed at a mutually agreeable time frame. The schedule below shows that audit engagement broken into two segments with one segment being the initial or interim audit fieldwork and the other phase being the final work when the Town has closed its accounting records for the fiscal year and is ready for final audit work.
Timing of Audit Work and Segmentation
Type of Work Entrance conference Internal Control Policies and Procedures - Financial Reporting Internal Control Policies and Procedures - Federal Programs Review and Discuss financial fraud risk Review Town's fiscal audited 2014 financial statements Select sample of cash disbursements to vendors Review Utility rate structure Review long-term debt documents Review REMIF certificate insurance coverage Review latest GASB 45 OPEB Plan valuation Review employee MOU compensation and benefits provision Review implementation GASB 68 Pensions Fiscal 2015 Review 2015 subsidiary fixed asset and depreciation schedules Review Minutes, Resolutions, Ordinances Review adopted fiscal 2015 adopted budget Recalculate GASB 34 major fund thresholds Develop control sheet standard audit confirmation letters Review fiscal 2015 opening fund balances Review GASB 34 revenue and expense conversion table Develop written audit plan Planning and Exit conference
E/S =Means:
Time Period Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 22 to June 26 Week June 20 to June 26 Week June 22 to June 26 Week June 22 to June 26
EIS Interim or Final S Interim on site visit S Interim on site visit S Interim on site visit S Interim on site visit EIS Interim @ via email E/S Interim @ via email EIS Interim @ via email E/S Interim @ via email E Interim @ via email EIS Interim @ via email EIS Interim @ via email S/E Interim on site visit EIS Interim @ via email EIS Interim @via email EIS Interim@ via email E Interim @ via emai l E Interim @ via email EIS Interim @ via email E Interim @ via email S Interim on site visit S Interim on site visit
E=lnterim work document to be provided to audit firm by Town in electronic format via email (most likely PDF format) in advance of onsite visit by audit firm in order to provide for more effective audit effort. Could be submitted before June 22. S= Work to be performed by audit firm during on-site visit at Town Hall
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services Timing of Audit Work and Segmentation
Type of Work Time Period EIS Interim or Final Final account balance verifications and tests Exit conference final audit work level
~~~~~-,--~~~~-
0 ct ob er 15 to October 31 S Final on Site October 15 to October 31 S Final on Site
Deliver draft Financial statements November 1 to 30 E/S Final @ via email Deliver draft financial statements November 30 NA Final Hard Copies Deliver Final signed reports December 15 S Final on site
Estimated Audit Work Hours
Type of Audit Fieldwork and Non-audit Services Document Town's policies and procedures related to internal control over financial reporting Material disbursement tests Confirmation samples Long-term debt covenants and requirements Insurance arrangements Employee MOUs and policies PERS and OPEB Plans Minutes, resolutions, ordinances and related issues and budget matters Review predecessor auditor working papers Subsidiary depreciation records and related policies Federal programs compliance tests Final audit work- tests of account balances Preparation of financial statements Presentations and progress discussions Compilation Town's Annual Report of Financial Transactions to State Controller Compilation REMIF liability expenditure report Agreed upon procedures report Gann Limit Federal Single Audit procedures,, reports and Clearinghouse filings
Total estimated hours (Includes extra 36 hours for initial engagement matters)
10
Hours 16
8 8 8 4 8 8 8 4 6 16 72 16 13 24 6 3
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services
Audit Approach - Proposed Audit Technique or Strategy
In order to perform sufficient work to enable me to be able to express an independent auditors' opinion on your basis financial statements, I propose to approach the audit work in the following fashion especially in the first year of service. In subsequent years, the approach may vary because we shall have developed an understanding of your internal control over financial reporting practices.
Audit Stage and Objective
Planning And Understanding Stage:
Develop an Understanding of Town Internal Controls Over Financial Reporting:
The Basic Financial Management System:
The Budgeting System:
The Investment System:
The Banking System:
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Procedures and Considerations
Document how transactions are initiated Document how transactions are input Document how transactions are recorded Document how data is controlled Document what standard financial reports are generated by the accounting system Review qualifications of Finance personnel Review job descriptions Understand personnel assignments Determine who does what in Finance Evaluate the separation of duties Determine what non-standard financial reports are generated by Finance Determine who originates journal entries, who approves journal entries and how they are documented by Finance Review existing written accounting policies
Review adopted Budget and amendments Document how revenue estimates and appropriations are recorded in the financial management system
Determine how budget changes are approved, documented, and input
Review Town investment policy
Document who purchases investments, authorizes sales or withdrawals, records interest revenue and maintains subsidiary records
Determine what internal investment reports are generated, by whom, and how often Determine how investments are valued to fair value (estimated market value)
Determine what bank accounts exist Document how wire transfers are used Document which revenues are received via automatic deposits/electronic fund transfers (EFTs) Document which payments are made via EFTs Determine who prepares bank reconciliation and how often Determine how bank reconciliation's are used to verify all funds' cash holdings Document how accounts payable checks are issued , controlled, and the names of authorized signers Document how payroll checks are controlled and issued
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services Audit Approach - Proposed Audit Technique or Strategy Audit Stage and Objective Procedures and Considerations
Planning And Understanding Stage:
Develop an Understanding of Town Internal Controls Over Financial Reporting:
The Capital Asset System:
The Accounts Payable System:
The Debt Management System:
The Payroll System:
The Revenue Accounting System
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Review capitalization and depreciation policies for both general capital assets and infrastructure type capital assets. Document how subsidiary capital asset records are maintained and by whom Determine who makes accounting capitalization decisions Determine how often general ledger control accounts are reconciled to capital asset subsidiary records
Document how vendor invoices are received and by whom Document who approves vendor invoices Determine if a purchase order system is in use and if an encumbrance system is used Document how vendor invoices are controlled and input into the computer system Document what edit reports are generated by the system and who reviews them Document how year end accounts payable are recorded in the general ledger; either by batch journal entries or by an integrated invoice processing system Document how paid invoices are filed
Identify who the Town uses for Bond Counsel, Underwriting and Financial Advisor regarding Long-term debt Issues Identify the Trustee Banks with active accounts pertaining to Town debt Review official statements, trust agreements, loan agreements and other debt documents Identify pledged assets, rate structure covenants, reserve fund requirements, and net revenue to debt service coverage requirements Document how the Town complies with arbitrage rebate requirements Determine who develops debt disclosure information Document how and when debt service payments are made by the Town Review subsidiary debt documents and ledgers or records Review MOUs to determine authorized employee salary and benefit provisions Review employment contracts having termination benefits Document procedures for inputting, changing, updating employee master files Document procedures for processing payroll
Identify major sources of Town revenues by type and the Town's revenue recognition policies for:
Property tax revenues Incremental property tax revenues In lieu property tax revenues Low and moderate income housing set aside revenues Sales tax revenues In lieu sales tax revenues Franchise revenues Water sales, electric sales, wastewater service fees, transit
fares, streets, and other enterprise revenues Governmental grants and allocations both State and County Loan collections and deferred revenue policies
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services
Audit Approach - Proposed Audit Technique or Strategy Audit Stage and Objective Procedures and Considerations
Planning And Understanding Stage:
Develop an Understanding of Town Internal Controls Over Financial Reporting:
The Statutory System including Laws, Regulations, and Other Matters:
Preliminary Analytical Reviews Used To Identify Potential Audit Issues
Preliminary Materiality Levels Used to Establish Dollar Thresholds For Planning Purposes:
Sampling Methods Used To Identify Transactions To Be Tested:
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Review the Town's Municipal Code to identify what financial management systems, procedures and policies are prescribed to be in use and operational Review Ordinances that are still effective to identify financial policies that by Town Law are required to be followed and reflected in the financial management system Review Resolutions adopted in the fiscal year to identify significant financial events that have been authorized by the Town Council Review minutes of the Town Council to identify significant financial events, policies and procedures that have been authorized by the Town Council Review adopted investment policy to determine what types of investments have been authorized Review significant grant agreements to document and determine the nature and purpose of significant grant awards
Obtain most recent trial balances by fund including fund balance sheets and fund statements of revenues, expenditures and changes in fund balances. Compare significant account balances at this point in time to the last fiscal year's audited financial statements to identify account balances/funds that have material changes in terms of dollar amounts Compare current year opening fund balances to the prior year's audited ending fund balances to identify funds where the opening balances are in agreement and identify funds that are not in agreement Identify current year significant account balances that appear to be unusual in terms of their nature or dollar amounts
Using the most recent audited financial statements, calculate for each major fund and the aggregate remaining nonmajor funds a dollar limit of materiality Using these materiality dollar limits, select a dollar limit that will be used to select samples of cash disbursements and account balances that will be subjected to audit testing
Obtain listings of all accounts payable checks written during the fiscal year. Review the listings to determine if use of the dollar limit of materiality above will result in sufficient audit coverage of material transactions Sample size shall not be subject to a predetermined limit or number of transactions Sample selection shall be based upon transactions meeting the dollar materiality limit Sample selection may also include transactions below the materiality threshold that appear unusual Provide the sample selection to Town staff and request that all supporting documents be assembled for our review - perform tests
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services
Audit Approach - Proposed Audit Technique or Strategy
Preliminary Fraud Risk Assessments To Be Used in Planning Audit Work:
Develop Formal Documented Audit Plan :
End Planning and Understanding Stage
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Discuss with Town staff and document fraud risk controls in regard to financial reporting Bring forward from the internal control understanding any identified fraud risk factors Bring forward from the analytical review stage any identified fraud risk factors Bring forward from the Statutory Review stage any identified fraud risk factors Evaluate identified fraud risk factors and the need for additional audit work
Using information gathered in the internal control stage , analytical stage, sample selection and testing stage, and fraud risk assessment stage, develop a formal audit plan. Identify significant account balances to be subjected to further testing Identify unusual transactions to be subjected to further testing Identify any opening fund balances in need of further testing Identify significant financial transactions that were authorized but do not appear to have been recorded in the accounting system Identify significant financial transactions that were recorded but for which there was no specific authorization noted in other procedures Identify matters that may need to be resolved by the Town before the audit can be completed Identify any significant matters regarding the application of accounting principles, change in accounting principles, or unusual application of accounting principles Identify significant accounts where the balances have changed significantly from the prior year where the Town should review and confirm the change
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AUDIT SERVICES TO BE PROVIDED (Continued)
Audit of Financial Statements - Scope of Services Audit Approach - Proposed Audit Technique or Strategy
Audit Stage and Objective
Final Audit Fieldwork Stage:
Final Audit Fieldwork Stage:
End Final Audit Fieldwork Stage
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Procedures and Considerations
Obtain final year end trial balances Obtain all funds' cash reconciliation Tie out all material cash and investment confirmations to final trial balances Obtain support for all material receivables Perform tests of subsequent receipts Tie out receivable confirmations Reconcile interfund internal balances Reconcile inetrfund transfers Obtain subsidiary capital asset and depreciation schedules Test capital asset additions to material cash disbursements tests Test depreciation calculations Test any material other assets Obtain subsidiary accounts payable lists Test material accounts payable Perform subsequent disbursement tests Test material accrued liabilities Reconcile PERS contributions Obtain latest OPEB actuarial valuations Reconcile changes in long-term debt Verify opening fund balances tie to prior year audited ending fund balances Obtain transaction history printouts for material revenue accounts Tie out material revenue transactions to County, State Controller , Federal Agency, and other Positive Confirmations Obtain transaction history printouts for material expenditure accounts Tie out material expenditures transactions to cash disbursement and accounts payable tests
Obtain support for committed and assigned fund balances If used, reconcile encumbrance control accounts to subsidiary encumbrance reports and supporting documents Obtain information about the dollar amount of material uncompleted contracts Review the nature of significant pending litigation and related disclosures Identify any significant pending matters and outstanding confirmations letters Identify any funds with significant budget violations -expenditures exceeding final budgets - discuss with management Identify any funds with deficit fund balances - review with management Submit proposed audit adjusting journal entries and review with Town staff Request that Town enter final adjusting journal entries Hold Exit Conference with Audit Committee Obtain adjusted final trial balances by fund Obtain final budget to actual revenue reports and expenditure reports by fund
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I I l l I l I 1 I l I I I I 1 l I ]
1 1 1 1 I I I 1 I I I l l
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NON-AUDIT SERVICES TO BE PROVIDED Preparation of Basic Financial Statements
After completion of final audit fieldwork services, we shall assist the Town in the preparation of its Basic Financial statements. This assistance shall take the form of drafting the financial statements and the notes to the financial statements, word processing your editing changes and corrections, and having the final document printed, bound, and delivered to you in final form with 12 bound copies to be provided to you plus one electronic PDF version. This assistance, which is deemed under professional standards, to be non-audit services shall consist of drafting the following sections of your basic financial statements:
Non-Audit Service - Basic Financial Statement preparation
Review MD&A Section for content and consistency with financial statements Draft GASS 34 Statement Net Position Draft GASS 34 Statement of Activities:
Draft GASS 34 revenue matrix Draft GASS 34 expenditure to expense matrix Review matrix classifications and approve
Draft Balance Sheet Governmental Funds Draft Reconciliation Governmental Funds Balance Sheet to Statement of Net Assets Draft Statement of Revenues, Expenditures And Changes in Fund Balances - Governmental Funds Draft Reconciliation to Statement of Activities Draft Statement of Net Position - Proprietary Funds Draft Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds Draft Statement of Cash Flows - Proprietary Funds Draft notes to the basic financial statements
Required SupPlemental Information Section:
Draft Schedule for General Fund, original and final budget, actual amounts, and variance Draft Schedule of Funding Progress - OPES Draft Schedules for Major Special Revenue Funds, original and final budget, actual amounts, variance
Optional Supplementary Information Section:
Draft Combining Balance Sheet -Nonmajor Governmental Funds Draft Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Draft Budget to Actual Schedules for Individual Nonmajor Governmental Funds Draft Combining Statement Net Position, Changes in Net Position, and Cash Flows Statements - Internal Service
CAFR Statistical Information Section:
Assist Town in developing and formatting the Statistical Section For a Comprehensive Annual Financial Report (CAFR)
Review, Editing, Approval and Acceptance of Basic Financial Statements
Review complete financial statements for corrections, wording changes, content, format, and accuracy
Identify specific final editing corrections Word process all final changes Submit final version basic financial statements for approval Accept and approve final basic financial statements for printing Arrange for printing/reproduction final basic financial statements Deliver final basic financial statements
U -.- Heidenreich & Heidenreich, CPAs, PLLC ...A.. tt 10201S.51't Street, Suite #170
Phoenix, AZ 85044 {480)704-6301 fax 785-4619
February 11, 2014
To the Owner of Terry Earl Krieg, CPA
System Review Report
and the Peer Review Committee of the CA Society of CPAs
We have reviewed the system of quality control for the accounting and auditing practice of Terry Earl Krieg, CPA (the firm) in effect for the year ended August 31, 2013. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. As a part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prsummary.
As required by the standards, engagements selected for review included engagements performed under the Government Auditing Standards.
In our opinion, the system of quality control for the accounting and auditing practice of Terry Earl Krieg, CPA in effect for the year ended August 31, 2013, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Terry Earl Krieg, CPA has received a peer review rating of pass.
