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HomeMy WebLinkAbout2019-05-06-J01J Denman Audit AgreementJ1J PROPOSAL FOR PROFESSIONAL AUDIT SERVICES David Ellis, Partner 1601 22nd Street, Suite 400 West Des Moines, Iowa 50266 (515) 453-1628 dellis@denman-cpa.com www.denman-cpa.com 2 CONTENTS Page Letter of Transmittal 3 Firm Profile 4 Qualifications 5-6 Engagement Team 7-8 Scope and Services and Proposed Project Schedule 9-10 Fees and Compensation 11-12 Peer Review Reports 13-14 3 EXECUTIVE SUMMARY April 5 2019 City of Waukee Attn: Linda Burkhart, Finance Director 230 W Hickman Road Waukee, IA 50263 We are please to present our proposal for professional audit services to the City of Waukee, Iowa. We will audit the financial statements for the years ending June 30, 2019 through 2021 in accordance with the standards and the time period outlined in the proposal. The proposal includes our firm profile and qualifications which will explain to you how our capabilities and experience make Denman & Company, LLP uniquely qualified to serve you. We appreciate this opportunity to present our proposal to you, which explains our capabilities and experience in governmental auditing. We would be pleased to discuss any aspect of this proposal with you. Very truly yours, DENMAN & COMPANY, LLP David Ellis, Partner On Behalf of the Firm 4 FIRM PROFILE Who We Are Commitment to Quality Partner Involvement Governmental Expertise Client Satisfaction Denman & Company, a one-office firm located in West Des Moines, Iowa, is one of the largest locally based CPA firms in the state. Comprised of eleven partners, five managers and twenty-four professional staff, we have a total of thirty-two CPAs in our office. Our clients are provided a full range of assurance, auditing, tax and consulting services. For a more in-depth look at our services, specialists, objectives and identity, please visit our website (www.denman-cpa.com). In practice for over sixty-three years, the firm has been serving as independent certified public accounts for governmental entities since inception. Denman & Company is a member of the AICPA division for CPA firms. Each CPA is an individual member of the American Institute of Certified Public Accountants and the Iowa Society of Certified Public Accountants. We are in compliance with the registration and permit requirements to engage in the practice of public accounting in the State of Iowa. We are committed to quality and technical excellence. The Peer Review Program under the American Institute of Certified Public Accountants (AICPA) is an indicator of an accounting firm's quality. We have successfully completed our thirteenth independent peer review. The peer review determined that our practices and procedures comply with stringent quality control standards established by the AICPA. We believe our Firm offers you a number of advantages including prompt attention to your needs, a familiarity and understanding of municipal governments, and the personal involvement of our partners and managers. These partners and managers work personally with you to provide the professional services you require. Our service philosophy is focused on adding value. We view our role as business advisors who know your City, keep informed of current activities, and provide you with timely advice to help you achieve your goals. Our considerable expertise with governmental entities allows us to provide you with more than an audit. We closely monitor governmental accounting issues and will promptly communicate interpretations of change to you. We recognize our most important product is prompt and effective service of the highest quality. All our efforts are directed toward achieving that goal. We believe we can serve you to your complete satisfaction. Accessibility and availability of partners and professionals to our clients is of paramount importance to us. The highest level of skills available to our Firm will be brought to bear on the servicing of your needs. 5 QUALIFICATIONS Staff Experience Government Auditing Experience The partners and managers of our Firm collectively have over four hundred years of experience in public accounting. A partner at our Firm has an average of thirty years of experience, a manager has an average of eleven years of experience and the professional staff average over four years. Our Firm has a total of twenty professionals who have met the educational requirements set out in Government Auditing Standards as issued by the Comptroller General of the United States and have participated in engagements subject to these standards and the provisions of the Uniform Guidance. These professionals are all available to be involved as needed in the performance of your audit. We have gained extensive experience through involvement with various governmental entities, nonprofit agencies and political subdivisions. All of the individuals listed on the "Engagement Team Profile" who will be involved in the audit portion of the engagement have met the requirements noted above and are licensed to practice as certified public accountants in Iowa. We utilize a consistent program of planning, supervision and review of all engagements. It is the responsibility of the engagement partner to assure that all engagements are adequately planned and supervised. The engagement partner may delegate this function, but must be certain that all personnel assigned to the engagement are involved in the process to an appropriate degree. An essential part of the planning is the development or updating of adequate information about the client to allow: An understanding of the industry and special characteristics of the client. Consideration of current economic conditions or external influences affecting the client. Determination of manpower requirements and time estimates. Arrangements to be made for work to be performed by specialized personnel. It is the policy of our Firm that professional staff members are properly supervised by a qualified member of our Firm, normally a partner, during the performance of engagement procedures. The close supervision assures that adequate and proper engagement procedures are performed in the most efficient manner. In accordance with our adopted quality control standards, all procedures performed and workpapers prepared by staff members are first reviewed and approved by the supervisory person. A second review is performed by a member of our assurance services committee that is considered to be a specialist in the industry. We feel the supervision and review procedures followed enable our Firm to assure our clients will receive high quality professional services. Supervision and Review 6 QUALIFICATIONS (CONTINUED) Continued Professional Education Denman & Company’s quality control document requires all professional personnel to complete a minimum of one hundred twenty hours of CPE in the last three calendar years, and not less than twenty hours every year. All professional persons are encouraged to include at least forty hours of accounting and auditing subjects each year in their continuing education. Denman & Company, LLP will assure City of Waukee that all professional personnel will attend continuing professional education courses to meet the requirements set forth by the “Revised Yellow Book” published by the Office of Management and Budget (OMB). A partial list of governmental entities for whom we provide audit services follows: Audit engagements performed in accordance with provisions of the Uniform Guidance: Our Clients Des Moines Area Community College Partner—David Ellis Ben Voaklander, Controller (515) 964-6319 Period of Service: June 30, 2004—present 500 hours Warren County Housing Authority Partner—Mandi Holcomb Betsey Baker, Executive Director (515) 961-1073 Period of Service: June 30, 2014—present 120 hours City of Clive Partner—David Ellis Joyce Cortum, Finance Director (515) 223-6220 Period of Service: June 30, 2015—present 200 hours City of Pleasant Hill Partner—David Ellis Dena Spooner, City Clerk/Finance Director (515) 309-9410 Period of Service: June 30, 2012—present 150 hours City of Indianola Partner—David Ellis Andy Lent, Finance Director (515) 962-5246 Period of Service: June 30, 2018—present 200 hours Audit engagements performed in accordance with Government Auditing Standards: Other cities for which we have performed audit engagements in the past ten years include: City of Story City City of Ankeny City of West Des Moines City of Johnston City of Windsor Heights City of Roland 7 ENGAGEMENT TEAM By their nature, professional services are inseparable from the people who deliver them. We have assembled a team who has the experience and business skills you need. The team members who will serve you are committed to quality, teamwork, communication and service to our clients. You can look forward to continuing a strong professional relationship with them. The team assigned to serve the City of Waukee is as follows: David will serve as the engagement partner for the City of Waukee. He will oversee the activities of the professionals who will serve the City of Waukee. He will also be responsible for ensuring adequate professional staff, with the appropriate level of experience, are utilized to provide you with the most efficient and effective delivery of service by professionals with a comprehensive understanding of governmental accounting. David has been associated with Denman & Company for twenty-three years, and in public accounting for thirty-three years. A majority of that time has been devoted to governmental accounting and auditing. He is licensed to practice as a certified public accountant in Iowa. He is independent with respect to the City of Waukee, as defined by Government Auditing Standards. David has assisted clients in obtaining the GFOA Certificate of Achievement for Excellence in Financial Reporting and the ASBO Certificate of Excellence in Financial Reporting. Areas of Focus: Government Auditing Experience: Municipal Governments City of Pleasant Hill Higher Education City of Clive Health Care Kirkwood Community College Employee Benefit Plans Des Moines Area Community College Continued Professional Education Professional Affiliations: Iowa Governmental Roundtable AICPA Iowa Local Government Audit Update ISCPA AICPA National Government Accounting And Auditing Update Performing Effective Yellowbook Audits Implementing Risk Assessment Robert will serve as audit manager. He will be responsible for audit planning, internal control evaluation, supervision of staff in the field, audit fieldwork procedures and audit report preparation. Robert has over eight years of audit experience, with a considerable amount of time committed to governmental accounting and auditing. As a Manager at Denman & Company, Robert has led audit engagements, prepared financial statements for various City and other governmental entities, and worked closely with the Firm’s Partners to assure exceptional client services. His experience in governmental auditing includes Uniform Guidance compliance audits and audits of accrual basis municipalities. Areas of Focus: Government Auditing Experience: Municipal Governments City of Indianola Not-for-profits City of Pleasant Hill Employee Benefit Plans Metro Waste Authority Continued Professional Education Professional Affiliations: Iowa Governmental Roundtable AICPA Iowa Local Government Audit Update ISCPA David Ellis, CPA, Partner Robert Endriss, CPA, Manager 8 Joe will serve as audit in-charge for this engagement. Joe has over five years of audit experience, with a significant amount of time committed to governmental accounting and auditing. He will be involved with audit planning, internal control structure evaluation, audit program preparation, super- vising and performing audit procedures and financial report preparation. Areas of Focus: Government Auditing Experience: Municipal Governments City of Story City Community Colleges Southwestern Community College Not-For Profits North Iowa Area Community College Continued Professional Education Professional Affiliations: Iowa Governmental Roundtable AICPA Iowa Local Government Audit Update ISCPA Other supervisory personnel who have experience in governmental auditing and who are available for consultation are as follows: Jim Hingtgen, Partner Over 38 years of experience Jay Horn, Partner Over 34 years of experience Bob Holtzbauer, Partner Over 30 years of experience Steve Schweizer, Partner Over 26 years of experience Steve Bruner, Partner Over 24 years of experience Mandi Holcomb, Partner Over 18 years of experience We would expect to use one or two additional staff members during the performance of the audit. Each will have participated in governmental audits since joining our Firm and currently have similar responsibilities for other audits. Our Firm's policy is to attempt to maintain staff continuity on en- gagements. Circumstances may arise which may necessitate changes in scheduling audit assistants; however, we make every effort to establish consistency in staffing. We consult with client personnel in charge of the audit process on any changes in engagement staffing. Our clients do have the ability to request staffing changes. We will work with you to assure that the staff assigned to the engage- ment provides the best service possible for the City. We are aware of no relationship or condition which would impair the independence of our firm with respect to the City of Waukee. Our Firm's policy is to comply with AICPA Professional Standards Volume 2, "Code of Professional Conduct, Bylaws, and Quality Control", and "Standards for Audit of Governmental Organizations, Programs, Activities and Functions" regarding matters of inde- pendence. ENGAGEMENT TEAM (CONTINUED) Joe Sparks, CPA, In- Independence 9 SCOPE AND SERVICES AND PROPOSED PROJECT SCHEDULE Our audit of the financial statements will be conducted in accordance with auditing standards generally accepted in the United States, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the Uniform Guidance, and Chapter 11 of the Code of Iowa. Those standards and guidance 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 believe that our audit will provide a reasonable basis for expressing an opinions on the fair presentation of the financial statements in conformity with generally accepted accounting principles for the City of Waukee. Our audit is subject to the inherent risk that material errors, irregularities, or illegal acts including fraud or defalcations, if they exist, will not be detected. However, we will inform you of any such matters that come to our attention. We will also communicate to you any material weaknesses or significant deficiencies in the internal control structure that we observe. During the course of our audit, we will try to initiate ideas or observations that we believe will help improve the operations of the City of Waukee. It is our practice to bring such matters to the attention of the appropriate level of management either orally or in writing. Upon completion of the audit, we will meet with the management team to review the financial statements and comments and recommendations. Our audit will be performed using a year-end audit approach. Procedures will be applied to account balances as of June 30, 2019. We will segment the audit by account type, cash and investments, accounts receivable, capital assets, current liabilities, long-term debt, fund balances and equity, federal grants and operations. The level of staff assigned to each of these segments will be based on the materiality and audit risk associated with the account balance and activity. We will then design an audit strategy for each segment based on the risk and materiality. Audit strategies include testing each item (precision), sampling or analytical procedures. Sampling will be performed on all material account balances except for direct confirmation of amounts received from federal and state sources. Analytical procedures will be used on all immaterial account balances and revenue and expense accounts. Statistical sampling will be used when it is deemed efficient. For accounts with a relatively few number of large items making up the balance, a nonstatistical sample will be used. We will document internal control by use of questionnaires, job descriptions, flowcharts and observation. These questionnaires are also designed to help determine applicable laws and regulations and will be used to determine nature, timing and extent of tests to be performed. Audit Services 10 SCOPE AND SERVICES AND PROPOSED PROJECT SCHEDULE (CONTINUED) The engagement will include the following services: Audit of the financial statements of the City of Waukee. Report on internal control structure related matters noted in our audit of the financial statements. Report on internal control and compliance over major federal programs required by the Uniform Guidance. Presentation of audit to the City Council. A proposed time table for the completion of the engagement for the year ending June 30, 2019 is as follows: Preliminary field work—Week of June 24th Final field work—We will schedule final work to begin the week of August 19th. We anticipate fieldwork will take all or part of two weeks to complete. Draft reports—We will submit draft copies of financial statements, notes and letters by October 31, 2019. Final reports—We will present the reports to the City Council by November 30, 2019. This proposed time table is dependent upon the receipt of the schedules and reports from City personnel in a timely manner. Audit Services Timeline 11 FEES AND COMPENSATION Routine Inquiries Fees Our Firm is sensitive to your responsibility to control costs and we desire to help you achieve your goals by providing cost-effective services. Our engagement team’s experience with governmental entities enables us to deliver efficient service. It is not our policy to bill you for responding to routine inquiries or questions requiring no significant commitment of research time on our part. We prefer our clients consider us as year round advisors, a resource to assist with issues and questions. Professional fees for special projects requiring significant amounts of time will be negotiated and billed separately. Our fees are based on the estimated time required by the individuals assigned to the engagements. Our fee proposal including estimated out-of-pocket expenses is as follows: Our fees for consultation services, upon request by management, would be billed based on the time required by the individuals to complete the project. Individual hourly rates vary according to the degree of responsibility and the skill required. The following schedule reflects our estimated professional hours. A schedule of hourly billing rates by staff levels is as follows: Partner $200 - $270 Manager 150 - 180 Supervisor staff 110 - 130 Staff 85 - 100 Hours Estimate And Billing Rates Year ending June 30 2019 2020 2021 Financial audit of the City of Waukee $26,300 $27,000 $27,800 Single Audit (if required) 3,600 3,700 3,800 Maximum all-inclusive fee $29,900 $30,700 $31,600 Estimated Professional Hours 2019 2020 2021 Partner 30 30 30 Manager 60 60 60 Year ending June 30 Supervisory Staff 120 120 120 Staff 50 50 50 Totals 260 260 260 12 FEES AND COMPENSATION (CONTINUED) We will schedule our personnel consistent with the demands of your engagement and will keep our expenditure of time to the minimum consistent with quality of service and professional standards. Interim billings will be submitted as work progresses. Billings are due upon thirty days of submission. We have indicated above the services to be included in our proposed fee. If circumstances arise during the course of providing those services which would require reconciliation procedures or which would cause additional work on our part, we would discuss those issues with the City's representative who oversees the audit process. We would encourage the City's staff to complete as many of these procedures as possible; however, if we are requested to do so, we would complete the work and bill the City at our standard rates. We hope you get at least two strong impressions of Denman & Company, LLP. First, we offer a team of professionals who are experts at accounting and financial and management planning, for governmental entities. Second, we understand your City and the professional accounting services you require. We can assure you that the City will receive the best service available from Denman & Company, LLP. We would very much like to work with you and look forward to a positive response to this proposal and a long and mutually satisfying relationship. If you have any questions regarding this proposal, please contact us at your convenience. Scheduling Additional Procedures Thank you for this opportunity 13 PEER REVIEW REPORTS Iowa Peer Review Committee Acceptance Letter 14 PEER REVIEW REPORTS Independent Peer Reviewer’s Opinion Letter