MEETING DATE: JULY 07, 2015
AGENDA ITEM #4
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AGENDA ITEM: Resolution Approving a Professional Audit Service Agreement with Bryant
L. Jolley, CPA. MEETING DATE: July 7, 2015
PREPARED BY: Odi Ortiz, Interim City Manager/Finance Director
REVIEWED BY: Odi Ortiz, Interim City Manager/Finance Director
City Council to adopt Resolution No. 2015-_, approving a three (3) year professional audit service agreement to cover auditing services for fiscal years 2014-15, 2015-16, and 2016-17 with Bryant L. Jolley, CPA.
State law requires that all general-purpose local governments publish, a complete set of :financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed Certified Public Accountants. Bryant L Jolley, CPA complies with all requirements and experience. Bryant Jolley has performed the annual City and former RDA audits since fiscal year 2005-06.
The annual audit for fiscal year 2014-15 is expected to start sometime in August or September if all year end procedures are completed in a timely manner.
Approve a three (3) year professional audit service agreement to cover auditing services for fiscal years 2014-15, 2015-16, and 2016-17 with Bryant L. Jolley, CPA.
Fiscal impact for first year $36,000 has been reported on adopted budget for 2014-15. Proposed FY15-16 City audit fee is $37,000 and $38,000 for fiscal year 2016-17 under the three (3) year agreement.
1) Resolution approving professional audit service agreement with Bryant L. Jolley, CPA.
2) Exhibit A : Three (3) year professional audit service agreement with Bryant L. Jolley, CPA to cover auditing services for fiscal years 2014-15, 2015-16, and 2016-17
RESOLUTION NO. 2015-
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LIVINGSTON APPROVING A THREE (3) YEAR PROFESSIONL AUDIT SERVICE
AGREEMENT BETWEEN THE CITY OF LIVINGSTON AND BRYANT L. JOLLEY, CPA AND AUTHORIZING THE INTERIM CITY MANAGER TO EXECUTE THE AGREEMENT
WHEREAS, the State law requires that all general-purpose local government publish, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm licensed as Certified Public Accountant; and
WHEREAS, Bryant L. Jolley, CPA firm meets these requirements; and
WHEREAS, Bryant L. Jolley, CPA firm has been performing the City’s annual audits since fiscal year 2005-06; and
WHEREAS, the associated auditing fees have been or will be included on the fiscal year budget(s); and
WHEREAS, the City wishes to approve a professional audit service agreement between the City of Livingston and Bryant L. Jolley, CPA for a three (3) year term.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Livingston hereby adopts a Resolution to approve the professional audit service agreement with Bryant L. Jolley, CPA and authorizes the Interim City Manager to execute AGREEMENT between the City of Livingston and Bryant L. Jolley, CPA.
Passed and adopted this 7th day of July 2015, by the following vote:
Rodrigo Espinoza, Mayor of the City of Livingston
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I, hereby certify, that the foregoing resolution was regularly introduced, passed and adopted at a regular meeting of the City Council of the City of Livingston this J1h day of July, 2015.
Antonio Silva, City Clerk of the City of Livingston
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BRYANT L. JOLLEY
CERTIFIED PUBLIC ACCOUNTANTS Bryant L.Jolley C.P.A.
Ryan P.Jolley C.P.A. Darryl L. Smith C.P.A. Travis B. Evenson
June 25, 2015 EXHIBIT A
City of Livingston 1416 "C" Street
Livingston, CA 95334
Dear Mr. Ortiz:
We are pleased to confirm our understanding of the services we are to provide the City of Livingston (the City) for the years ended June 30, 2015, June 30, 2016, and June 30, 2017. We will audit the :financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the basic :financial statements, of the City as of and for the years then ended. Accounting standards generally accepted in the United States provide for certain required supplementary information (RSI), such as management’s discussion and analysis (MD&A), to supplement the City’s basic :financial statements.
Such information, although not a part of the basic :financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.
As part of our engagement, we will apply certain limited procedures to the City’s RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist principally of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtain during our audit of the basic financial statements.
We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on-
• Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards.
• If a Single Audit is required, internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
The reports on internal control and compliance will each include a statement that the report is intended solely for the information and use of management, the body or individuals charged with governance, others within the entity specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller
901 "N" STREET, SUITE 104 FIREBAUGH, CALIFORNIA 93622 PHONE 559.659.3045 FAX 559.659.0615
General of the United States, and if required, the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major program(s) in accordance with OMB Circular A-133, and other procedures we consider necessary to enable us to express such opinions and to render the required reports. If our opinions on the financial statements or the Single Audit compliance opinions are other ‘than unqualified, we will discuss the reasons with you in advance. If,for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a report as a result of this engagement.
Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. If a Single Audit is required, management is also responsible for identifying government award programs and understanding and complying with the compliance requirements, and for preparation of the schedule of expenditures of federal awards in accordance with the requirements of OMB Circular A-133.
As part of the audit, we will assist with preparation of your financial statements, schedule of expenditures of federal awards, and related notes. You are responsible for making all management decisions and performing all management functions relating to the financial statements, schedule of expenditures of federal awards, and related notes and for accepting full responsibility for such decisions.
You will be required to acknowledge in the management representation letter that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance and have accepted responsibility for them.
Management is responsible for establishing and maintaining effective internal controls, including internal controls over compliance, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met and that there is reasonable assurance that government programs are administered in compliance with compliance requirements.
You are also responsible for the selection and application of accounting principles; for the fair presentation in the financial statements of the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City and the respective changes in financial position and, where applicable, cash flows in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements.
Management is also responsible for making all financial records and related information available to us and for ensuring that management and financial information is reliable and properly recorded. Your responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information.
Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government involving (1) management,(2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements.
Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws, regulations, contracts, agreements, and grants. Additionally, if required by OMB Circular A-133, it is management’s responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan.
The summary schedule of prior audit findings should be available for our review. You are responsible for the preparation of the supplementary information in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information.
Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies.
You are also responsible for providing management’s views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information.
Audit Procedures- General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested.
We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity.
Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs.
However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. If required, we will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not>engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will require certain written representations from you about the financial statements and related matters.
Audit Procedures-Internal Controls
Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements.
Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards.
If applicable, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program.
However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133.
An audit is not designed to provide assurance on internal control or to identify significant deficiencies. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A-133 if applicable.
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City’s compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards.
If applicable, OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs.
Our procedures will consist of tests of transactions and other applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types ofcompliance requirements that could have a direct and material effect on each of the City’s major programs.
The purpose of these procedures will be to express an opinion on the City’s compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-133.
Engagement Administration, Fees, and Other
We may from time to time, and depending on the circumstances, use third-party service providers in serving your account. We may share confidential information about you with these service providers, but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures, and safeguards to protect the confidentiality of your personal information.
In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. In the event that we are unable to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the sharing of your confidential information with the third-party service provider. Furthermore, we will remain responsible for the work provided by any such third-party service providers.
We understand that your employees will assist in the preparation ofrequested audit schedules.
Our services also include preparation of the City and Street Annual State Controllers Reports and any required Federal Single Audit reports. If applicable, we will issue a separate Management Letter that includes recommendations for improvements in internal control, accounting procedures and other significant observations that are not considered material weaknesses.
The audit documentation for this engagement is the property of Bryant L. Jolley, CPA and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit :findings, or to carry out oversight responsibilities.
We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of Bryant L. Jolley’ s personnel. Furthermore, upon request, we may provide copies of provided under the supervision of Bryant L. Jolley’s personnel. Furthennore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies.
The audit documentation for this engagement will be retained for a minimum of five years after the report release or for any additional period requested by any federal of state agency. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party contesting the audit finding for guidance prior to destroying the audit documentation.
Our fee for these services will be at our standard hourly rates except that we agree that our gross fee will not exceed $36,000 for June 30, 2015, $37,000 for June 30, 2016, and $38,000 for June 30, 2017.
This fee includes the preparation of the State Controller’s Report. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered upon audit completion.
Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our most current peer review accompanies this letter.
We appreciate the opportunity to be of service to the City of Livingston and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us.
This letter correctly sets forth the understanding of the City of Livingston.
Odi Ortiz, Interim City Manager