February 15, 2013
PROPOSAL FOR City of Milwaukie, Oregon
Prepared by:
James C. Lanzarotta, Partner
Annamarie McNiel, Manager
Moss Adams LLP
975 Oak Street, Suite 500 Eugene, Oregon 97401 (541) 686-1040
February 15, 2013
Rina M. Byrne City of Milwaukie 10722 SE Main Street Milwaukie, Oregon 97222
Dear Ms. Bryne:
We are pleased to present this proposal to the City of Milwaukie (“the City”). We understand this proposal is for the annual financial and compliance examination of the City’s CAFR beginning with the fiscal year ending June 30, 2013 extending through the next four subsequent fiscal years and that upon completion of the audit for each fiscal year the City requires the following reports:
• Audit opinion on the City’s financial statements (CAFR) in accordance with Generally Accepted and Government Auditing Standards, including component units not requiring stand-alone financial statements • All reports required for compliance with the provisions of OMB Circular A-133 and Single Audit Act Amendment of 1996, if necessary • Communications with those charged with governance (SAS 114 Letter) • Management Letter related to internal controls, compliance with laws and regulations and accounting systems, functions and procedures especially in regards to Cost effectiveness • Make immediate written reports of irregularities and illegal acts to management • Be available throughout the year to provide ongoing consulting services for minor financial issues that may occur, all at no additional cost
We deliver our audits, unlike many firms, with significant partner and senior manager level attention. Your audit team is dedicated to the industry, and our firm is one of the most experienced in conducting audits in accordance with the Single Audit Act and Office of Management and Budget (OMB) Circular A-133. Jim Lanzarotta, the National Practice Leader of our Firm’s Government Services Group, will represent our firm for proposal and contract purposes.
Our Government, Not-for-Profit & Regulated Entities Services Group is the service provider to more than 1,100 organizations–including over 200 government entities.
As one of the nation’s largest CPA and business consulting firms, we have the resources to serve you now and in the future. Whatever needs may arise, Moss Adams has the capability and
Proposal for City of Milwaukie | Rina M. Byrne City of Milwaukie February 15, 2013
experience to meet them with effective, innovative solutions. And we will serve you on a very personal level--not just remotely--from our local offices in Portland and Eugene.
Moss Adams LLP is a licensed public accounting firm in the state of Oregon, and all team members, eligible for licensure, who are assigned to this engagement are certified public accountants licensed, or with practice privileges, to perform audit services in the state of Oregon. We agree to perform all of the work outlined in the City’s request for proposal within the time periods established by the City and outlined in the Request for Proposal.
We are ready to enter into a contract with the City of Milwaukie with just a few minor revisions to the contract that we have noted in the Appendix E of our proposal. Moss Adams is independent of the City and understands our proposal is a firm and irrevocable offer through June 30, 2013.
The City of Milwaukie will be a very important client to us. We are confident you will be pleased with our industry strength, business insight and the personalized service we offer. We welcome any questions you may have about this proposal and thank you for your consideration.
Sincerely,
James C. Lanzarotta, CPA Annamarie McNiel, CPA Partner, Government Services Specialist Manager 975 Oak Street, Suite 500 805 SW Broadway, Suite 1200 Eugene, OR 97401 Portland, OR 97205 for Moss Adams LLP for Moss Adams LLP (541) 686-1040 (503) 478-2338 [email protected] [email protected]
Proposal for City of Milwaukie
TABLE OF CONTENTS
COMPLIANCE MATRIX 1
EXECUTIVE SUMMARY 1 WHY CHOOSE MOSS ADAMS? 1
FIRM QUALIFICATIONS 3 SERVING GOVERNMENTAL ENTITIES JUST LIKE YOURS 3 A-133 EXPERIENCE 7
YOUR SERVICE TEAM 8
OUR AUDIT APPROACH 14 EFFECTIVE FINANCIAL STATEMENT PLANNING 15 EXECUTING THE FINANCIAL STATEMENT AUDIT PLAN 16 EFFECTIVE A-133 COMPLIANCE PLANNING 18 TESTING A-133 INTERNAL CONTROLS AND COMPLIANCE 18 FINAL REVIEW AND DELIVERY OF REPORTS 19 PERTINENT MANAGEMENT LETTERS 19 WORKING WITH THE CITY’S PERSONNEL 20 USE OF TECHNOLOGY AND IT SPECIALISTS 20 THE BENEFITS OF OUR THOROUGH AUDIT APPROACH 21 FRAUD INVESTIGATION & FORENSIC ACCOUNTING SERVICES 22 AUDIT TIMELINE 23
PROFESSIONAL FEES 24 NOT TO EXCEED PRICE FOR PROPOSED SERVICES SCHEDULE 24 ANTICIPATED HOURS 25 BILLING RATES 26
Proposal for City of Milwaukie TABLE OF CONTENTS—CONTINUED
ABOUT MOSS ADAMS 27
Proposal for City of Milwaukie
COMPLIANCE MATRIX The matrix below illustrates graphically how our information in this proposal is organized to match up with the key requirements outlined in your request for proposal.
RFP Question/Requirement Page Question
I. Title Page N/A
II. Transmittal Letter N/A
III. External Quality Review Appendix A
Disciplinary Action and Litigation Pg. 28
IV. Firm’s Current & Non-Current Municipal Audit Engagements Pg. 3
V. Single Audit Experience Pg. 7
Examples of A-133 Audits Appendix B
VI. Sample of Municipal Audit Report Appendix B
VII. Sample of Management Letter Reports Appendix C
VIII. Key Personnel Pgs. 8-13
IX. Audit Approach & Methodology Pgs. 14-22
X. Use of City Personnel Pg. 20
XI. Audit Schedule & Timeline Pg. 23
Pg. 25 & XII. Expected Hours for 2013 Appendix D
Pg. 25 & XIII. Expected Hours for 2014-2017 Appendix D
Pg 24 & XIV. Not to Exceed for Proposed Service Schedule Appendix D
XV. Firm Policy on Changes and Special Requests Pg. 25
XVI. Firm’s Billing Rates Pg. 26
Proposal for City of Milwaukie
EXECUTIVE SUMMARY
WHY CHOOSE MOSS ADAMS? Like you, we have a passion for government service and for partnering with public servants who want to move society forward. Firm-wide, we serve nearly 1,100 government, not-for-profit and regulated industry clients, in more than 50 cities across the United States. Moss Adams is a leader in the West for providing audit, tax, and consulting services to governmental organizations. Your proposed engagement team is comprised of the most talented people in our firm who devote their attention to government clients just like you. Your engagement team will feature a combination of both local and regional specialists who will provide you with the wisdom of their experience and responsive service. Here are a few more reasons for making the switch to Moss Adams:
Government Audit Experience: Your engagement team has more than 20 years of experience serving the accounting and auditing needs of governments. These clients include counties, cities, utilities, ports and airports, other special districts, and public pension systems. Jim Lanzarotta currently serves as the AICPA representative to the Government Accounting Standards Advisory Council, just completed six years of service to the AICPA State and Local Government Expert Panel including the last three as the chair, and is a nationally recognized expert and speaker in the government sector.
Significant Federal A-133 Audit Experience: Since records have been maintained by the Federal Single Audit Clearinghouse dating back to 1997, Moss Adams has performed the second-highest number of Single Audits in the West and the eighth-highest number nationally. Annamarie McNiel is one of the Firm’s most experienced managers in providing single audits to our clients.
Communication with, and Assistance to, Management Throughout the Year: We believe that communication and availability is something an auditor should provide to clients year-round, not just during the audit engagement. From the initial transition to Moss Adams, to routine questions you may have about immediate issues of concern, and formal meetings you would like us to conduct, we will always be available to you when you need us. We will also proactively notify you about any emerging accounting, compliance, and regulatory matters or concerns.
Assistance with Accounting and Regulatory Compliance: Among the common concerns we hear from governing boards and management is the many accounting, legal, and regulatory requirements the government is subject to. With Moss Adams on your team, you can rest assured that our audit approach is specifically tailored to look into the more significant areas including assistance to management on best practices and communication to the board on any areas that
Proposal for City of Milwaukie | 1
could be improved. We know these regulations well and can remove the guesswork and worry from your plate.
A Thorough Audit: We will perform an audit that leaves no stones unturned and gives you peace of mind that the results are solid.
Working Partners: Our partners and other management personnel will be an active part of your engagement. Unlike many firms, our most seasoned staff hold key roles in the work portion of each engagement. The firm philosophy is that someone who stays active in the business is a better team member and a more valuable asset to our clients. Our partners and managers usually contribute 30-35 percent of our work effort to the total audit. They understand your operations and concerns and will help you solve issues quickly. You will be able to count on them being at your office working with you when you need them.
We Will Meet Your Deadline: Your proposed audit team has a proven track record of completing governmental audits on time and solving problems as they go. We do this by working with clients to identify, address, and resolve issues early in the process. We will develop a schedule with you to ensure that we issue the audit report to meet your desired timeline.
Access to Substantial Resources and Local Decision Making: As the largest firm based in the Western United States, we have substantial resources at your disposal, yet decisions are made at the local level and in partnership with you. We offer you quick decision-making right here within your engagement team. We are big enough to have the resources and capabilities of the larger national firms, yet lean and agile enough to provide the kind of personal, timely service more common at smaller firms—all within a fee commensurate with the value of the service we provide. What’s more, because of this “firm without walls” philosophy, we can grow with you, meaning you can tap into our resources as your accounting issues become more complicated—something the smaller firms cannot offer.
You Will See Our Team Working On-site: Our partners and managers will be on-site during the course of the audit. We address issues during the audit, review our work as we move forward, and review the financial statements in your office. You will be able to monitor our progress through our updates and day-to-day contact. This practice of open and obvious communication allows us to get the audit work done right the first time.
Proposal for City of Milwaukie | 2
FIRM QUALIFICATIONS
SERVING GOVERNMENTAL ENTITIES JUST LIKE YOURS What makes it easy to select one auditor over another is when a particular firm has experience auditing organizations similar to your own in scope. It allows for a clearer understanding of the specific issues faced by such organizations, what to anticipate when conducting the audit and how long the audit will take. A list of our current municipal auditing engagement clients:
Client Name Contact Scope of Work
Shannon Bell, Finance Director County financial audit, A-133 audit, 10 S. Oakdale Ave Urban Renewal Agency audit, Special Jackson County Medford, OR 97501 District audits, PFC audit, Pension Fund 541-774-6003 audit [email protected]
Mike Barnhart Financial Services Manager Financial audit, A-133 audit 125 East 8th Ave landfill attest, local income tax initiative Lane County Eugene, OR 97401 consulting, internal control review by 541-682-4200 health care specialists [email protected]
Don Cox, Accounting Compliance Officer Financial audit, A-133 audit 600 NE Grand Ave Oregon Municipal Standards METRO Portland, OR 97232 Information technology consulting 503-797-1632 National Transit Database reporting [email protected]
Robert Moon, Accounting Supervisor Service District #1, TriCities SD, and Clackamas County 2051 Kaen Rd Surface Water Management Water Environment Oregon City, OR 97045 Component Unit financial audits, Services 503-742-4585 financial statement preparation [email protected]
Jane Kingston, Controller th Financial audit 1120 SW 5 Avenue A-133 audit City of Portland Portland, OR 97204 Oregon Municipal Standards 503-823-4358 Information technology consulting [email protected]
Proposal for City of Milwaukie | 3
We have been fortunate in that we have not been replaced or terminated on any of our Oregon governmental audit clients within the past three years. We have re-proposed, and were successful in retaining, the following governmental clients over the past three years.
• City of Portland • Portland Development Commission • Multnomah County • Lane County • Metro • TriMet
In addition, we have been the successful proposers on the following new clients over the past year: • Curry County • Klamath County • Jackson County
A sampling of our previous City government experience includes audit services to: • City of Tualatin • City of Astoria • City of Warrenton • City of Springfield • City of Ashland • City of Rockaway Beach
Proposal for City of Milwaukie | 4
Our robust and ever-growing government audit and accounting service practice offers experienced partners and senior managers who lead audit engagements for counties, cities, state agencies, public colleges and universities, special purpose governments, public retirement funds, and others. Here is a summary of our experience with governments:
Service Our Experience
Audits of Financial Statements & CAFRs / Management Over 1,100 tax-exempt organizations, including more than Recommendation Letters 200 governmental entities.
OMB Circular A-133 Audit Over 1,600 Single Audits conducted for clients since 1997
Audit numerous entities in several states, including many Audits of Bond Funds cities, counties, utilities, and universities, that issue bonds.
We have assisted many of our current and previous clients in achieving the GFOA Certificate of Excellence including: GFOA Certificate of Excellence in Financial Reporting Jackson County, City of Portland, Multnomah County, Lane program County, Clackamas County Water Environment Services, Bernalillo County (NM), Portland’s METRO, City of Tualatin, City of Astoria, and many more.
Members of your team serve on several AICPA, GASB, and FAF committees, including the Government Implementation of Governmental Accounts Standards Accounting Standards Advisory Council, the GASB Board (GASB) Pronouncements Comprehensive Implementation Guide Advisory Committee, and the AICPA State and Local Government Expert Panel and its various task forces.
Members of your team have recently audited federal awards such as Capitalization Grants for Drinking Water State Revolving Funds - ARRA (CFDA 66.468) for City of Portland. State Clean Diesel Grant Program (CFDA Auditing Federal Grants for Environmental Protection #66.040) for Metro. Capitalization Grants for Clean Agency (EPA) Water State Revolving Funds (CFDA 66.458) for Clackamas County. We are familiar with many more federal awards that are commonly received by cities that are not listed above.
The practitioners who serve these government clients are not only highly experienced in this sector; many are also respected professionals who are actively involved in a variety of ways with the industry standard setters:
• Jim Lanzarotta (partner selected for your engagement) currently serves as the AICPA representative to the Government Accounting Standards Board Advisory Committee responsible for assisting the GASB with their project plan and providing feedback on proposed accounting standards, is the past chair of the AICPA State and Local Government Expert Panel responsible for
Proposal for City of Milwaukie | 5
reviewing proposed accounting and auditing standards and providing feedback to the AICPA, GASB, and GAO. • Julie Desimone (Partner and National Practice Leader of the Utility Services Group) served as a Governmental Financial Officers Association technical reviewer for enterprise funds. Julie has also spoken at numerous national utilities meetings covering technical issues and internal controls. • Erica Forhan (partner and the Firm’s liason in the Firm’s Professional Practice Group to the Government Services Group) serves on the Government Audit Quality Center Executive Committee responsible for improving the technical capabilities of CPAs auditing government entities. Two other Moss Adams Partners, Mary Case and Scott Simpson, served in this role prior to Erica. • Bob Bunting (retired partner, former CEO) is the past president of the AICPA and currently the chairman of the International Federation of Accountants. We use these appointments to keep our clients up-to-date on the latest accounting and auditing issues.
Proposal for City of Milwaukie | 6
A-133 EXPERIENCE Moss Adams is one of the most experienced firms in the Western United States in conducting audits in accordance with the Single Audit Act and Office of Management and Budget (OMB) Circular A-133 (A-133 Audit). The vast majority of these audits have been conducted by the members of our group. They also have experience with a variety of grants and contracts.
The table below shows the number of A-133 audits conducted by our firm since 1997 (the year the federal government began record keeping of these audits). This information was pulled from the Web at the Single Audit Database: http://harvester.census.gov/sac and from Audit Analytics NFP Single Audit Database.
With experience comes proficiency and efficiency. Our professionals have conducted A-133 audits for many types of organizations and program types. This makes them well-suited to anticipate and solve potential problems and complete these audits in a timely manner.
Single Audits Total Federal Fiscal Year Conducted Expenditures Audited
1997-2004 771 $4.2 billion
2005 124 $2 billion
2006 139 $5.4 billion
2007 138 $5.5 billion
2008 135 $8.8 billion
2009 136 $9.4 billion
2010 155 $11.5 billion
$11.6 billion 2011 137 (reported to date*)
15 Year Total 1,735 $58.4 Billion *Data as of June 2012
This is the second-highest number of Single Audits performed by a firm in the Western United States.
Proposal for City of Milwaukie | 7
YOUR SERVICE TEAM The key members of your engagement team have completed training that meets Generally Accepted Government Audit Standards requirements, state licensing requirements, and they have been focused on government, single audit, and not-for-profit related topics. All of these individuals receive continuing education well in excess of the requirements of their respective professional licensing. Furthermore, several members of your team are sought-after speakers at governmental conferences where both government finance officers and other CPAs go to get their CPE credits. Meet the key members of our proposed City of Milwaukie audit service team:
Jim Lanzarotta, CPA, Partner ENGAGEMENT REVIEWER OR CPA License No. 5435; OR Muni License No. 1116
Role: Jim will serve as the engagement reviewer on your engagement. He will be responsible for ensuring your audit is performed in compliance with Firm and professional standards, working with the City Council on communicating audit and financial related matters, working with management on the implementation of new accounting standards as well as providing technical assistance and review for the City’s financial statements, single audit, and other reports.
Experience: Jim has focused on performing governmental financial and compliance audits for over 28 years. Jim has served on a national level for the past six years on shaping governmental accounting and auditing standards through his work with the AICPA. Jim’s experience comes from auditing numerous governments including: counties; cities; ports; water, sewer, and lighting districts; state agencies; and many other special purpose districts. Jim is the State and Local Government National Practice Leader for the Firm. 2013 marks Jim’s first year of service as the AICPA representative to the Governmental Accounting Standards Advisory Council responsible for working with the GASB on setting their work agenda, reviewing staff papers on proposed accounting standards, and providing feedback to the GASB on behalf of the AICPA. He just completed six years of service on the AICPA State and Local Government Expert Panel (SLGEP), with the last three years as its chair. SLGEP is responsible for reviewing all proposed governmental accounting, financial and compliance auditing standards; addressing governmental practice issues; and preparing updates to several AICPA publications such as the State and Local
Proposal for City of Milwaukie | 8
Government Audit Guide, Audit Risk Alerts, and practitioner practice aids. Jim is nationally recognized and sought-after speaker for organizations including the AICPA, GFOA, OMFOA, NACUBO, as well as several State Society of CPA’s including Oregon and California, among others. Jim is the past chair of the Oregon Board of Accountancy CPE Committee responsible for ensuring new applicants to, and renewing members of, the Municipal Audit Roster meet the applicable requirements for licensure. Jim has served on the GFOA Special Review Committee responsible for reviewing CAFRs submitted for GFOA’s Certificate of Excellence in Financial Reporting program – and has assisted nearly all his clients in achieving this award.
Professional Affiliations: • American Institute of Certified Public Accountants • Government Accounting Standards Advisory Council, AICPA representative member • AICPA State and Local Government Expert Panel, past-chair • Oregon Board of Accountancy CPE Committee, past-chair • Government Finance Officers Association, associate member • Oregon Society of Certified Public Accountants • Oregon Municipal Finance Officers Association, associate member
Proposal for City of Milwaukie | 9
Julie Desimone, CPA, Partner Concurring Reviewer OR CPA License No. 11192; OR Muni License No. 1436
Role: Julie will serve as the concurring reviewer and will participate in project planning, status and exit meetings. She will review work products including providing a overall technical concurring review of the financial statements
Experience: Julie has been in public accounting and serving governmental water, sewer, electric and natural gas utilities since 2001. She is the National Practice Leader of the firm’s Utility Services Group. Julie is responsible for numerous utility audit engagements. In addition to audit services, Julie has performed many consulting projects and speaking engagements covering technical and operational issues. Some specific areas of her professional experience include: advanced utility accounting, regulatory assets and liabilities, technical auditing services including A-133, contracting issues and internal control evaluation. In addition, Julie serves on the firm’s training and development committee as well as an audit task force. Julie is a licensed certified public accountant and an enterprise funds technical reviewer for the GFOA. In addition to the industry associations noted above, Julie is a member of the American Institute of Certified Public Accountants and Washington Society of Certified Public Accountants.
Proposal for City of Milwaukie | 10
Annamarie McNiel, CPA, Manager AUDIT MANAGER/IN- CHARGE OR CPA License No. 12159; OR Muni License No. 1454
Role: Responsible for management oversight of engagement operations, such as assigning work tasks, developing and maintaining sub-task work plans, drafting final reports, performs quality controls and technical review of the financial statements, supervise work, provide technical supervision, and interface with the client personnel throughout the engagement
Experience: Annamarie has over 9 years’ experience in accounting and auditing, working primarily with Governments, Not-for-Profit, Higher Education, and Utility clients. Current and past client experience includes the City of Portland, Metro, TriMet, City of Tualatin, Oregon Secretary of State, Oregon University System, several higher education institutions and utility organizations, She has been the in-charge auditor on multiple audits and review engagements. Annamarie has performed audits in accordance with OMB Circulars A-133 and A-87, as well as program audits and has taught sections at various trainings relating to OMB Circular A-133. She has experience assessing, observing and testing internal control procedures and compliance with laws, regulations, and grant requirements. Annamarie recently was accepted as a technical reviewer for the GFOA’s certificate of achievement program. Annamarie is a member of the American Institute of Certified Public Accountants, Oregon Society of Certified Public Accountants and the Government Finance Offices Association.
Proposal for City of Milwaukie | 11
Nancy Young, CPA, Senior Manager TECHNICAL SUPPORT OR CPA License No. 9073; OR Muni License No.1423
Role: IT Systems evaluation, SAS 99 Fraud Risk Assessments and related audit procedures
Experience: Nancy has practiced public accounting since 1996 and has been with Moss Adams since 2006. She is an active member in the Government Services Group and leads the firm’s Fraud Investigations and Forensic Accounting Services practice. Previously, she worked for 10 years as an audit manager with the Oregon Secretary of State Audits Division. During her ten years with the division she was responsible for managing the Divisions Fraud, Waste & Abuse hotline and fraud investigations team.
Her experience includes government clients at the state, local, tribal, special purpose governments and utilities performing financial, IT, and performance audits as well as providing consulting services related to internal controls, fraud investigations, and forensic accounting services.
Nancy is also an adjunct professor at Portland State University teaching forensic and investigative accounting. Nancy speaks at many professional conferences on the topic of fraud prevention and detection as well as the cases she has conducted.
Credentials: • Certified Fraud Examiner and member of the Association of Certified Fraud Examiners • Certified Public Accountant and member of the AICPA • Certified Information Systems Auditor and member of the Information Systems Audit and Control Association. • MBA, Portland State University, 2006 • B.S Degree in Business Management and Communications, Corban College, 1996.
Proposal for City of Milwaukie | 12
Michael Smoot, Business Assurance Senior
SENIOR AUDITOR
OR CPA License No. 12991; HA CPA License No 4937
Role: Responsible for performing complex areas of work, such as developing spreadsheets, performing preliminary research of technical issues, prepares project deliverables. Provide limited technical support, quality control review and interface with client personnel throughout the engagement.
Experience: Michael Smoot is a business assurance senior with more than five years of experience in public accounting. Michael has assurance experience with a broad client base, including Utility, Municipalities, Forest Products, Manufacturing and Distribution, Healthcare and Not-for-Profit organizations, as well as a variety of experience in other types of industry.
Michael is a licensed certified public accountant in the state of Oregon. He graduated with a Bachelor of Business Administration with a concentration in accounting from Gonzaga University.
Clients Michael continues to serve include: Clackamas County Water Environment Services, City of Portland Bureau of Environment Services, Central Electric Cooperative, Kauai Island Utility Cooperative, Imperial Irrigation District, City of Portland, McMinnville Water & Light and Arizona Electric Cooperative.
Proposal for City of Milwaukie | 13
OUR AUDIT APPROACH
Effective Financial Statement Planning and Risk Assessment • Obtaining copies of departmental control documentation by audit cycle and by key financial statement assertion • Obtaining documentation of your IT systems’ general and application controls, reviewing related policies and procedures, and testing against the Control Objectives for Information and related Technology (COBIT) standards and best practices • Reading minutes, resolutions and ordinances • Assessing how your transactions are processed at the department level and City-wide • Performing walkthroughs of transaction processes to verify control design and implementation • Analyzing results of steps above to identify risks at various levels: business, environmental and internal
Establishing Materiality Levels • Applying both quantitative and qualitative judgments from a preliminary analysis of your financial statements at the opinion unit level • Evaluating relative levels of inherent risk and controls risk and the potential risk of material misstatement resulting from error or fraud for each balance or transaction cycle • Re-evaluating materiality throughout, and at the conclusion of, the audit
Determining Audit Approach for Each Transaction Cycle • Perform analytical procedures: develop expectations and perform comparison of current and prior year results, actual and budgetary information, and, as appropriate, a comparison of City specific benchmarks to your results are among the techniques we may use • Re-evaluating relative levels of inherent risk and control risk based on results so far • Tailoring audit programs based on final decisions of evidence desired from a combination of internal control testing, analytical procedures, and substantive tests of detailed transactions
Proposal for City of Milwaukie | 14
EFFECTIVE FINANCIAL STATEMENT PLANNING
Our audit planning includes the following procedures:
Risk Assessment: • Obtaining copies of updated control documentation by audit cycle and by key financial statement assertion, and discussing changes with those involved • Obtaining and/or updating documentation of your IT system general and application controls, reviewing related policies and procedures, and testing against the COBIT standards and best practices • Reading minutes, resolutions and ordinances • Assessing how your transactions are processed at the department level and City-wide • Performing walkthroughs of transaction processes to verify control design and implementation • Analyzing results of steps above to identify risks at various levels: business, environmental and internal
Establishing Materiality Levels: • Applying both quantitative and qualitative judgments from a preliminary analysis of your financial statements at the opinion unit level • Evaluating relative levels of inherent risk and controls risk and the potential risk of material misstatement resulting from error or fraud for each balance or transaction cycle • Re-evaluating materiality throughout, and at the conclusion of, the audit
Determining Audit Approach for each Transaction Cycle: • Perform analytical procedures: develop expectations and perform comparison of current and prior year results, actual and budgetary information, and, as appropriate, a comparison of City-specific benchmarks to your results are among the techniques we may use • Re-evaluating relative levels of inherent risk and control risk based on results so far • Tailoring audit programs based on final decisions of evidence desired from a combination of internal control testing, analytical procedures, and substantive tests of detailed transactions
Proposal for City of Milwaukie | 15
EXECUTING THE FINANCIAL STATEMENT AUDIT PLAN We tailor audit programs to obtain evidence from a combination of internal control testing, analytical procedures, and substantive tests of details of transactions and ending balances. A discussion follows this table on our planned audit approach tailored to the City of Milwaukie based on our assessed risk of material misstatement, whether due to error or fraud, at both the financial statement and the assertion levels.
Planned Audit Assurance From:
Risk Test of Analytical Test of Significant Audit Area Assessment Controls Procedures Details
Cash and investments
Grant revenues/receivables
Fees & charges revenues/receivables
Tax revenues/receivables Capital assets Long term debt Payroll expenditures Materials & services expenditures/payables Pension, OPEB, & other liabilities Interfund transactions Financial reporting
Oregon Minimum Standards & local budget law
Assessing Your Internal Control Includes: • Designing tests to determine whether controls are operational throughout the audit period • Conducting detailed testing of sampled transactions for key internal controls considered effective • Utilizing IT specialists to test key automated controls, such as access to vendor data
Proposal for City of Milwaukie | 16
• Meeting with your personnel to discuss our review
Analytical Procedures Encompass the Following: • Substantive testing phase: analysis of changes to certain accounts, such as capital asset and receivable accounts, and predictive analytical tests for other accounts • Audit conclusion: holistic review of financial statements and re-performance of analytical procedures used in planning phase to assure we have tested all critical areas
Test of Details May be Applied to Your Transactions or Balances: • Confirming amounts with third parties such as financial institutions, customers, and other governmental agencies • Test year-end account reconciliations for unusual items and trace significant outstanding transactions to subsequent months’ account statements • Test the significant assumptions and inputs for significant estimates, such as claims and judgments accruals, pensions and OPEB obligations • Evaluate fund balance and net asset classifications against applicable accounting guidance • Compare current year revenues and expenditures with expectations and budgeted amounts • Test financial statement disclosures against the requirements of GASB • Audit Command Language (ACL) is a robust data mining tool. ACL allows us to isolate and manipulate a large volume of transactions without interrupting current processes, and without affecting the original data
Oregon Standards Minimum Compliance For the State compliance testing, we review the requirements of Oregon Administrative Rules section 162 Division 10 as well as the related ORS chapters addressing cash and investments, public purchasing, local budget law, insurance, programs funded by outside sources, use of highway funds, and certain other sections addressing fiscal matters. Our firm has developed audit programs to test the local budget law and Oregon minimum standards requirements efficiently and effectively.
Proposal for City of Milwaukie | 17
EFFECTIVE A-133 COMPLIANCE PLANNING
Planning for the A-133 Compliance Audit The process begins with a review of your schedule of expenditures of federal awards and consideration of the requirements of OMB Circular A-133 and Government Auditing Standards.
This is followed by:
• An assessment of each federal program and the associated audit risks to determine which are major programs • Further assessments of:
o Technology and your organization o Materiality o Internal controls in place for each program o Results of desk reviews and on-site reviews by regulatory agencies o Audit approach and design
Determining Applicable Laws and Regulations for the A-133 Audit • Review of grant agreements, contracts, and related publications to determine the applicable compliance requirements for each major program • Determining which of 14 possible compliance requirements are direct and material to each major program • Analyze instructions from pass-through agencies, existing regulatory guidance, and management inquiries • Review of audit guides and communications from regulators and relevant national and state accounting bodies
TESTING A-133 INTERNAL CONTROLS AND COMPLIANCE
Testing Direct and Material Compliance Requirements for Controls and Compliance • Specific tests of internal control and of compliance are performed and generally include sampling guidance from the AICPA and Government Accountability Office • Efficiencies are generally obtained by use of the same sample to test for both evidence of controls as well as ultimate compliance
Proposal for City of Milwaukie | 18
• We use ACL data extraction software to gather samples from populations of transactions and perform testing
Reporting Non-Compliance and Findings • We use a tiered approach that assesses the significance of any observed error, lack of effective control mechanism, or instance of non-compliance • We use an assessment that considers the materiality of the issue to each major program and a risk analysis of the pervasiveness of the issue • We identify and report only those major systemic problems that put the City of Milwaukie at risk or constitute significant noncompliance. Isolated instances and administrative errors not required to be reported more broadly are reported to management
FINAL REVIEW AND DELIVERY OF REPORTS Once drafts of the financial statements are presented to us, we will perform a thorough technical review for compliance with GAAP. In addition, Jim Lanzarotta (your engagement reviewer) as a result of his participation on that AICPA Expert Panel and his new appointment to the GASAC, keeps us readily aware of practice issues and potential changes in GAAP long before the GASB issues final professional standards. Our excellent working relationship with the staff at the GASB enhances our ability to obtain immediate technical assistance when needed. This level of national involvement also provides an opportunity for the City representatives to have a voice in the standard-setting process, if you are interested in being involved at that level.
PERTINENT MANAGEMENT LETTERS It is customary for our firm to produce a management letter in conjunction with each engagement. The audit process provides an opportunity to assess performance and trends, identify opportunities to improve internal controls and/or accounting efficiency, and spot emerging needs or opportunities. By reporting these conditions and opening them to discussion, the management letter can play an important role in maintaining the financial health of the organization.
We will also provide the following required communications:
• Auditor’s responsibility under generally accepted auditing standards • Qualitative consideration of accounting policies • Significant accounting policies • Management judgments and accounting estimates • Significant audit adjustments • Passed audit adjustments
Proposal for City of Milwaukie | 19
• Internal control structure and related issues • Matters concerning performance of the audit • Suggestions for operational improvement
WORKING WITH THE CITY’S PERSONNEL Early in the audit process, we will meet with your personnel to gain an understanding of the nature of schedules and other support you prepare in the financial close and reporting process. We strive to use what you routinely prepare instead of dictating the nature of all audit schedules we might request to facilitate the audit process. We will utilize what we can of your planned documentation. We will work with management to identify additional schedules or information helpful to the audit process. We will also explore with you the use of ACL to minimize the level of effort on your part in providing information for us, as in further detail below.
Furthermore, if we do identify internal control weaknesses or other best practice observations, we will discuss them with finance management as well as department staff during the audit to be sure we have all the relevant facts. In addition, we will share any written communications with City staff before they are finalized to provide an opportunity for discussion before such communications will be finalized. We strive to eliminate surprises in the reporting of our findings and best practice observations and recommendations.
USE OF TECHNOLOGY AND IT SPECIALISTS During the audit, we will utilize various technology tools such as Audit Command Language (ACL) and our Secure File Transfer Portal (Portal). ACL is a high-powered data mining tool often used to analyze data and extract information useful to both our audit professionals and your staff. Our Portal is a web-based system that provides an easy, yet secure, means of transferring documents between our professional staff and the City. The Portal has several folders that can be restricted for sensitive documents. The benefit of the Portal is that our professionals do not need to be onsite to gather information and files can be uploaded to the Portal as they are prepared and reviewed by the City.
We are fortunate in that we have a large internal pool of IT specialists that we utilize in our governmental audits. Our clients have benefited from this significantly in that we are able to go beyond basic IT checklists, and provide insightful feedback to our clients on risks inherent in their hardware and software configurations, security risks, and access issues. Many of our IT specialists are also CPA’s, which is very helpful to bridge the gap between the knowledge and experience of these two disciplines to better communicate issues to both IT and Finance professionals within our governmental clients.
Proposal for City of Milwaukie | 20
THE BENEFITS OF OUR THOROUGH AUDIT APPROACH
The Wisdom of Experience The following is a sampling of the many benefits achieved by our city audit clients as a result of the findings from our audit approach and from the experience our team brought to those engagements.
• Identification of delayed billings to grantor agencies, including the federal government for reimbursable expenditures. In one extreme case, delayed billings represented roughly $17M of cash flow. Once our suggested improvements were made, cash flow improved by $17M, and the organization did not need to borrow money to cover its cash flow needs for the period from July to November when property tax collections begin, saving over $400,000 in interest costs. • Identification of inter-fund borrowings from the General Fund to other funds to service cash flow requirements in cases where the borrowings are not projected to be repaid in the near future. The result was a more transparent reporting of resources within the funds that actually have the benefit of use of the resources. • Identification of IT security issues that leave the City vulnerable to unauthorized access from within, and outside, the City. We incorporate our experienced IT professionals with specific IT education and training in our audit team and audit approach, and have received many favorable comments from clients as a result–compared to a standard check-list type approach utilized by firms that don’t have IT professionals on staff. • Identification of grant compliance issues before review by Federal Agencies. We have the most experienced team of federal grant compliance auditors of firms based in the Northwest. We have identified potential compliance issues early, provided education on requirements, and assisted in the changes necessary to adopt best practices on better processes and controls. Examples include assistance with the use of indirect cost rates to charge against Federal Grants for IT costs incurred, facilities costs, and other overhead costs; proper reporting of payroll that is reimbursable against Federal Grants including fringe benefits; and training provided to departments that administer Federal Grants to assist them in their oversight duties. • Assistance with the implementation of new accounting standards. Our proposed team has been involved in the standard setting process. This allows us to have better and earlier conversations with our clients as to the ‘why’ in certain requirements in addition to how best to implement them. For those that want a voice in the standard setting process, we can accommodate that by serving as a conduit for your feedback to the AICPA, GASB, GAO, and others. You will not be taken by surprise by new standards and their impact on your City. Examples include early implementation of GASB 45 on reporting Other Post-Employment Benefits, assistance in the creation of tools to track and report pollution remediation liabilities under GASB 49, assistance with tools to track and properly report fund balances under GASB 54, and assistance with the analysis that will be required under GASB 61 on the revised standards for reporting component units to get a jump on the implementation of that new standard. In addition, with our involvement in the new GASB standards on pension
Proposal for City of Milwaukie | 21
reporting, and service on the AICPA pension task force, we are uniquely qualified to assist you in the implementation of these new standards. • Better communication throughout the year, in addition to the status of the audit. Our communication plan includes an enhanced understanding of the phases of the audit, timelines and significant milestones, and reporting any potential issues early in the process. You will find no unpleasant ‘surprises’ that could occur when matters are not reported to management or the Board until final delivery of audit reports. Examples include our quarterly government newsletter that provides timely information to finance managers, periodic webcast trainings on government-related accounting and auditing topics, and direct trainings provided to management. In most cases, all of these additional services are provided to our clients at no extra cost.
FRAUD INVESTIGATION & FORENSIC ACCOUNTING SERVICES Fraud is serious issue facing our businesses, nonprofits and municipalities, and Moss Adams has the training, experience, and bandwidth to help you fight it—regardless of size or complexity. Our team of Certified Fraud Examiners works across office locations and with other professionals at the firm to deliver the following services:
• Investigative and forensic accounting. Our team can investigate suspected fraud, abnormalities, and irregularities as well as provide expert witness testimony. • Data analysis. We can uncover potentially fraudulent behavior with analytical tools that reveal inconsistencies in data. • Fraud risk management. We can help you develop and evaluate your risk management program to decrease your vulnerability to fraud and misconduct. • Fraud awareness training. We offer training on industry-specific risks to help you evaluate existing and identify missing controls as well as to help employees identify and respond to fraud indicators.
Proposal for City of Milwaukie | 22
AUDIT TIMELINE The following is the proposed schedule for the first year audit for the City of Milwaukie.
Audit Schedule Proposed Timing
Auditor Transition
Schedule to meet with your prior auditor to review their working papers. May 2013
Audit Planning
Meet with management for pre-audit planning, and to obtain an May/June 2013 understanding of systems, internal controls, and current year issues.
Provide management with a detailed listing of items needed to perform the June 2013 audit, including the timing of when items are needed.
Audit Fieldwork
Perform interim audit fieldwork and tests of internal controls. June 2013
Send confirmations of cash, investment, and other accounts as deemed July 2013 necessary.
Perform substantive audit fieldwork. September/October 2013
Report Preparation
Present draft of financial statements, audit report, and management letter November 2013 to senior management.
Present draft of audit opinions/reports, SAS 114 communication, and November/December management letter 2013
Delivery of final reports Early December 2013
Board Communications
Present final audit report, financial statements, and management letter to TBD the city council.
Proposal for City of Milwaukie | 23
PROFESSIONAL FEES
NOT TO EXCEED PRICE FOR PROPOSED SERVICES SCHEDULE Moss Adams is providing City of Milwaukie an exceptional value. The Not to Exceed Price for Proposed Services Schedule can be found in Appendix D.
Fiscal Year Ended June 30,
2013 2014 2015 2016 2017
Financial Statement Audit $82,350 $76,388 $80,207 $84,217 $88,428
Single Audit $15,700 $16,485 $17,309 $18,174 $19,083
Cost of Supplies & Materials
Additional Fees (if applicable)
Total $98,050 $92,873 $97,516 $102,391 $107,511
Business Discount $(33,050) $(23,873) $(26,016) $(28,391) $(30,011)
Adjusted Total $65,000 $69,000 $71,500 $74,000 $77,500
We are absolutely committed to transparency with our fees and billing methods. In most cases it takes a few months for a new auditor to learn your systems which usually results in a higher first year fee. In addition to the hours making up the fee estimates above and attached, we expect to incur approximately 50 additional hours getting up to speed on The City of Milwaukie. You will not be charged for these additional hours. We are also providing a substantial discount to the City. This time and committment affords us the opportunity to develop a deep knowledge of your systems, which allows us to serve you more effectively as a business partner. This is an investment we make in you as a valued client.
Assumptions
Our proposed fees in Appendix D are based on a number of conditions and assumptions:
• Your books and records are in good condition and do not require audit adjustments. • Your accounting/finance staff will provide reasonable and customary assistance.
Proposal for City of Milwaukie | 24
• There will be no significant changes in your operations from current levels. • There will be no new audit standards or significant changes to existing standards. In the event that any assumptions or conditions change during the course of this engagement, there is a strong likelihood that we would need to incur additional time and, we would not do any additional work or add any new charges without first communicating with you.
ANTICIPATED HOURS Fiscal Year Ended June 30, 2013
F/S Audit Single Audit Key Personnel Total Hours Hourly Rate Total Hours Hours
Engagement Partners 30 8 38 $380 $14,400
Engagement Managers 95 20 115 $250 $28,750
Engagement Seniors 120 - 120 $185 $22,200
Engagement Staff 100 50 150 $150 $22,500
Clerical / Support Staff 5 2 7 $80 $560
Other 0 0 0 0 0
First Year Investment 40 8 48 $200 $9,600
Total Hours 390 88 478 $98,050
Discount & First Year $(33,050) Investment
Total Fees 390 88 478 $65,000
Proposal for City of Milwaukie | 25
BILLING RATES Staff Level Hourly Rates
Partner $350-$405
Senior Manager $280-$305
Manager $200-$250
Senior $185-$200
Staff $150-$180
Proposal for City of Milwaukie | 26
ABOUT MOSS ADAMS
Firm Background Moss Adams LLP provides accounting, tax, and consulting services to public and private middle- market enterprises in many different industries. Founded in 1913 and headquartered in Seattle, Moss Adams has 21 locations in Washington, Oregon, California, Arizona, New Mexico, and Kansas.
Our assurance services include audits, accounting, internal controls, business risk management, royalty compliance, and employee benefit plans. Our tax services include federal, state, and local tax planning and compliance; international tax planning and compliance; cost segregation; and research and development tax credits. We also provide consulting and advisory services for mergers and acquisitions, corporate finance, valuations, business owner succession, business planning, litigation and forensic accounting, information technology integration and reviews, and compensation.
We offer additional services such as investment banking and asset management by drawing on our two affiliate companies, Moss Adams Capital LLC and Moss Adams Wealth Advisors LLC.
Moss Adams is one of the 15 largest accounting and consulting firms in the United States. Our staff of over 1,800 includes approximately 230 partners. Moss Adams is also a founding member of Praxity, AISBL, a global alliance of independent accounting firms providing clients with local expertise in the major markets of North America, South America, Europe, and Asia.
Proposal for City of Milwaukie | 27
License to Practice in Oregon Moss Adams is properly licensed in Oregon to practice as certified public accountants. Our federal tax identification number is 91-0189318. Our Secretary of State Corporation Division Business Registry number is 712938-81.
Disciplinary Action In the course of providing professional services to clients, Moss Adams and its clients are occasionally subject to oversight or review by various professional and regulatory bodies. However, no such matters have been material to our ability to provide the services identified herein.
Litigation As with any large firm, Moss Adams is occasionally involved in addressing legal and regulatory issues. However, no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal, or other governmental authority is pending, or to our knowledge is threatened against Moss Adams, related to or which would have a material effect upon the services contemplated herein.
Contract Matters In review of the contract for service we noted certain areas where we will want to work with you to further clarify your intentions and requirements, and revise the wording as deemed appropriate. Our changes can be found in Appendix E – Personal Services Agreement.
Note that we have successfully signed professional services agreement with many other governmental clients and we commit to working in good faith to successfully negotiate a mutually agreeable contract on a timely basis should we be awarded this contract.
Proposal for City of Milwaukie | 28
APPENDIX
A—PEER REVIEW REPORT
Proposal for City of Milwaukie | 29
Peer Review Report (Cont.)
Proposal for City of Milwaukie | 30
B—SAMPLE MUNICIPAL AND A-133 AUDITS Please visit the following websites to view our CAFR and A-133 compliance reports for our most recent Oregon government audits:
Jackson County—with GFOA Certificate of Achievement http://www.co.jackson.or.us/Page.asp?NavID=603
Lane County—with GFOA Certificate of Achievement http://www.lanecounty.org/Departments/CAO/Operations/Pages/default.aspx
Clackamas County Water Environment Services, CCSD No. 1, TCSD, SWMA—with GFOA Certificate of Achievement http://www.clackamas.us/wes/about.html
Proposal for City of Milwaukie | 31
C—SAMPLE MANAGEMENT LETTERS
Proposal for City of Milwaukie | 32
January 25, 2012
LaVonne Griffin-Valade, City Auditor Jack D. Graham, Chief Administrative Officer Rich Goward, Jr., Chief Financial Officer Jane Kingston, Controller Audit Services Division 1221 SW 4th Ave, Rm 310 Portland, OR 97204
We have completed our audit of the financial statements of the City for the year ended June 30, 2011 and have issued our report thereon dated January 25, 2012. In planning and performing our audit of the financial statements in accordance with auditing standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures and for the purpose of expressing our opinion on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
During the course of the audit, one material weakness in internal controls was identified, and reported to the City in a separate communication. We also noted certain other matters involving the internal control structure, operations, and financial reporting that are presented for your consideration that we would categorize as ‘best practices’ which are reported to you below. Our comments and recommendations have been discussed with appropriate members of management, and are intended to improve the internal control structure or result in other operating efficiencies. We will be pleased to discuss these comments in further detail at your convenience, to perform any desired additional study of these matters, or to assist you in implementing the recommendations.
Our comments are as follows.
Best Practices Observations and Other Matters
Office of Management and Finance (OMF)
Improving the City’s ability to prepare a timely and accurate CAFR – repeated and re- issued from 2010. We have found the individuals responsible for the CAFR preparation to be sufficiently trained, knowledgeable, and capable of producing an accurate annual report that meets the requirements of generally accepted accounting standards promulgated by the GASB. In addition, we found them to be knowledgeable of the additional requirements of the Government Finance Officers Association necessary to obtain the Award of Excellence in Financial Reporting.
Furthermore, we have found that the City’s Technical Accounting is made up of highly dedicated individuals as evidenced by their willingness to work overtime including weekends to get the CAFR drafted. The project is very complex and time consuming given the structure of the City with many decentralized Bureaus that perform certain accounting functions individually and provide information to OMF for inclusion in the CAFR.
However, we noted that again this year, the OMF team responsible for the overall financial close and reporting and financial statement drafting was not able to complete the CAFR within the originally agreed timelines, and encountered challenges that added to the delays. Even with OMF staff working many weekends as well as over the holidays, an extension was required to the end of January 2012 to provide sufficient time to complete the CAFR.
This situation could result in several risks to the City, including unintentional errors in the statements and disclosures resulting from inadequate time to perform thorough review procedures, loss of quality City staff from the level of effort and personal sacrifice required, and ultimately, a risk that the CAFR is not issued by applicable State deadlines.
Recommendation: Last year, we made several recommendations including management’s review of the issues that had resulted in the delays, developing a plan to overcome these issues, improving communications and commitments with the Bureaus on the timely involvement in the process, and securing the staff resources necessary to enable completion of the CAFR according to initial timelines. We participated in certain discussions with finance management staff in the City’s efforts to identify the challenges encountered last year, so we know management endeavored to address our recommendations.
We would again recommend that the City evaluate the challenges encountered in 2011, and to establish a course of action necessary to shorten the time necessary to prepare the annual financial statements according to initial timelines. Staffing levels within the accounting division should be considered during this evaluation. While there are understandable pressures within the City to operate as lean and efficiently as possible, there are potential repercussions associated with understaffing. Achieving an optimal staffing level, which may include filling positions presently open, might be part of the solution to the difficulties experienced over the last two years.
In addition, we recommend that the evaluation should include the Bureaus, funds, and general ledger accounts that required additional reconciliations and adjustments after year- end to identify possible changes that could be implemented during the year that would reduce the amount of time necessary to close the books and draft the financial statements.
City Bureaus/Office of Management and Finance
Goods Received/Invoice Received (GR/IR) Accounts. The amounts owed by the City to vendors for goods and services received is recorded and tracked within GR/IR accounts, and totaled $4.1 million at June 30, 2011. When the accounts are functioning as designed, once an invoice is paid, the individual account payable is removed from the system leaving only the unpaid accounts at any point in time. We found that the GR/IR accounts consisted of 426,000 postings with ending positive and negative balances, 416,000 of which net to zero. Of the records with a balance, 700 totaling $(186,000) relate to fiscal year 2009 and 954 totaling $28,600 relate to fiscal year 2010. It appears that the posting of purchases and account payments is lacking adequate monitoring by certain Bureaus resulting in legacy balances that remain after an invoice is paid. It also makes it difficult to quickly determine information on vendors that still have balances owing, and difficult to reconcile the account to actual ending payables at any point in time.
Recommendation: While we did not note any errors in payable balances in total as of June 30, 2011, we recommend that the City implement procedures to ensure account detail is removed when items have been paid in full and to properly report partial payments that have left residual balances. This will improve reconciliation processes and facilitate the City’s ability to track actual amounts owed to a particular vendor at any point in time.
City Bureaus/Office of Management and Finance
Evaluation of the correct accounting for lease agreements. In our testing of the City’s lease agreements, we learned that most lease accounting decisions are made at the Bureau level. Lease accounting can be complex, and it may be difficult for personnel within each Bureau to have the technical knowledge and expertise to know when a lease is to be treated as an operating or capital lease for financial reporting purposes. To assist Bureau staff with lease accounting requirements, technical accounting has posted lease accounting resources on the City’s intranet, but it is unclear whether these resources are being used.
Recommendation: We recommend that technical accounting staff from OMF continue to work with the Bureaus that enter into lease agreements to help them provide sufficient training or education to their staff on lease accounting as well as the tools and resources that are available to them to assist them in getting the accounting correct. We understand that there are at least a couple of opportunities for educating Bureaus on the existing resources through the Projects and Fixed Assets user group as well as the Accounting Advisory Committee.
Portland Bureau of Transportation (PBOT)
Formalizing borrowing and repayment agreements to cover working capital needs. We found that PBOT has been in need of working capital and capital acquisition financing for the past several years. They have met those needs internally by borrowing from System Development Charge resources at amounts varying between $18 million and $20 million for the past several years. However, we found that the PBOT does not currently have a formal plan for repayment of this loan. In addition, SDC resources are restricted to specific capital projects as provided in the City’s capital improvement plan filed with the State. As long as SDC monies are in use by PBOT to meet working capital needs, they are unavailable to fund the restricted capital projects as specified in the capital improvement plan pursuant to applicable State law. We acknowledge that PBOT did obtain an opinion from the City’s legal department that there are no specific State laws barring the borrowing of SDC resources. Furthermore, management has represented to us that no capital projects included in the capital improvement plan have been delayed as a result of borrowing from SDC resources.
Recommendation: We recommend that any internal borrowing the City conducts contain certain repayment terms and a repayment plan as part of the initial loan approval process including specifying the source of repayment. If the borrowed funds originate from a restricted resource such as SDC revenues, we would recommend that management continue to seek internal legal counsel as to any legal issues that may be applicable and that repayment terms factor in the timing of projects that are to be funded with the restricted resources.
City Bureaus/Procurement
Documentation of suspension and debarment procedures. We found that the City did not retain documentation in 14 of 16 non-construction contract awards tested for compliance with the suspension and debarment requirement. Recipients of federal awards are required to verify that vendors awarded contracts funded with federal grants are not suspended or debarred from participation. We were told that the verification was done, and we verified that the vendors involved were not on the Federal list of suspended or debarred firms. For all vendors tested involving construction contracts, we found verification documentation was retained.
Recommendation: We recommend that the City revise its procurement procedures for all contracts funded with Federal grants to require retention of the verification process addressing the suspension and debarment compliance requirement to support that it met this compliance requirement.
Facilities Department
Adequate support for indirect overhead rate applied to Federal Grants. We found that an overhead rate for Facilities Department personnel was applied to, and reimbursed from, two Oregon Department of Transportation (ODOT) grants. This overhead rate is developed internally as the Facilities Department’s overhead rate is not included in the City’s Cost Allocation Plan as approved by the Department of Housing and Urban Development (HUD). We found that the overhead rate was developed based on budgeted information from the start of the fiscal year, and actual costs incurred were not calculated and adjustments made to amounts reimbursed by the grants as required by the allowable cost circular OMB Circular A-87. We were able to determine that the actual costs were not significantly different from reimbursed amounts based on the budgeted rate, and below the threshold requiring reporting under OMB Circular A-133 and the Single Audit Act.
Recommendation: We recommend that the City include Facilities Department overhead rates in its approved Cost Allocation Plan, or be certain to ‘true-up’ any indirect rates applied and charged to Federal grants based on budgets, to actual costs incurred, periodically during the year pursuant to the guidance contained in OMB Circular A-87.
Comments and Observations Relating to Future Year(s)
For your information, we are noting changes to accounting and auditing standards and other regulatory issues that we expect will have an impact on the City's future CAFR preparation and audit. While management at the Office of Management and Finance are aware of these forthcoming changes, you may need to be aware that implementing these changes may have a significant impact on the City’s financial statements, and might require additional resources for OMF to prepare future CAFRs timely.
New Accounting Standards
Service Concession Arrangements. GASB issued Statement No. 60 on the accounting and financial reporting for service concession arrangements in November 2010. In brief, and among other things, this standard addresses the accounting for capital assets owned by one entity that by agreement, provide the right for another entity to build, operate, maintain, and collect user fees from the capital assets and may provide for revenue sharing between the two entities during the term of the agreement. As an example, the City owns certain performing arts properties that it contracts with Metro to operate and maintain. This standard will require some research and effort to determine its applicability and the accounting treatment for the City’s service concession arrangements, and is applicable for the year ending June 30, 2013 although early application is encouraged.
Component unit reporting. GASB Statement No. 61 amending Statement No. 14 and No. 34 on the accounting and reporting of component units was issued in November 2010. The standard provides new guidance on when other related entities meet the definition of a component unit, as well as how they get reported within the primary government’s financial statements. This standard will require some research and effort to determine its applicability and impact on the City’s financial statements, and is effective for the year ending June 30, 2013 although early application is encouraged.
GASB Codification of pre-1989 applicable FASB standards. GASB has issued Statement No. 62 in December 2010, which codified all pre-November 1989 FASB standards that are applicable to government entities. While this standard’s objective was limited to clarifying and codifying within the governmental accounting standards guidance that was previously only found in FASB standards, there was clarifying guidance in at least one area that will change the accounting treatment currently used by the City. The codification included clarifying language regarding the accounting for no interest or below market interest rate loans issued by a governmental entity. Prior to this clarifying guidance, it was common for these loans to be reported net of a discount to report the net present value of the receivable given the below market interest rate inherent in the loan. The clarified guidance provides that discounts to a net present value is not appropriate when the government ‘makes the market’ for loans. This will require a restatement of the loan receivable balance in the year of adoption as well as a change in the City’s current accounting practice. While this standard is not effective until the year ending June 30, 2013, early application is encouraged.
GASB Exposure Draft on Pension Accounting. GASB has been deliberating for some time on revised accounting requirements for government reporting of its’ involvement in public pension plans, and issued an exposure draft for public comment in 2011. Among other changes, the proposed standard will require that government employers report a liability on the face of the financial statements if its share of pension plans’ net assets is less than the actuarially determined liability. GASB’s project agenda includes a similar proposal for the accounting for a governmental employer’s involvement in other post-employment benefit plans (OPEB).
As of June 30, 2011, the City’s recorded liability on the face of the financial statements for the fire and police disability and retirement plan totaled $1.1 billion, compared with the actuarially determined liability of $2.6 billion. The City is not reporting any liability related to its involvement in Oregon PERS, a cost-sharing multi-employer plan, which is appropriate under current accounting standards. As of December 31, 2010, the last formal actuarial valuation conducted for Oregon PERS, the plan reported actuarially accrued liabilities in excess of plan net assets ranging from 25% to 14% depending on what particular portion of the plan a participating government was involved in. The City’s share of this underfunded position has not been calculated or estimated. Furthermore, the City’s recorded liability for OPEB totaled $28.7 million at June 30, 2011 based on currently applicable accounting standards, compared with an actuarially determined liability of $118.9 million based on the last valuation dated June 30, 2009.
While the proposed pension standard is still being deliberated by the GASB and the OPEB project has not yet been started, it is likely the provision requiring underfunded positions in governmental pension plans to be reported on the face of the financial statement will be retained in the final standard and matched in the following OPEB standard. This will have a significant impact on the City’s government-wide financial position and reporting of its net assets. Implementation of the standard will be sometime in the future, but we recommend that management follow this proposed standard and the one to follow on other post employment benefits in order to prepare and work with credit rating agencies proactively and early to minimize any potential impact on the rating provided on any future City debt issuance.
New Regulatory Issues:
Securities and Exchange Commission (SEC) and Government Accounting Office (GAO) survey and review of the Municipal Securities Market. Both the SEC and the GAO are in the midst of gathering information about tax-exempt bond offerings issued by governmental entities. Municipal bonds are currently exempt from certain SEC regulations and filing requirements, which significantly reduces the cost of debt financing by governments compared to commercial entities. Among other objectives, the SEC and GAO are gathering information about the transparency of certain financial disclosures, the timeliness of interim and annual financial statements, and ultimately, to determine if more regulation of the municipal securities market is warranted.
The City is fortunate in that it has personnel currently involved on a national level serving on certain committees responsible for following and advising governments on best practices in debt financing. We would encourage you to continue to support your management staff in these endeavors in an effort to keep the City informed of the risks and pressures that could lead to changes in compliance requirements, required disclosures, the timing of issuance of interim and annual financial information, and ultimately, the cost of tax-exempt debt financing compared to other options.
Federal Funding Accountability and Transparency Act (FFATA). FFATA was introduced in 2010 in an effort to increase transparency and accountability over the reporting of federal awards. The Act requires direct recipients of federal awards to report certain sub-award and contract information for sub-awards and contracts exceeding $25,000 paid to third parties. The City is now required to report certain awards and contracts to third parties made from direct federal awards received by the City by the end of the month following the month of the award as a result of this Act.
The Act also carries certain audit requirements of external auditors that should be clarified by the Office of Management and Budget (OMB) in the 2012 edition of the OMB Compliance Supplement. It is anticipated that auditors will want to verify that the entity has implemented procedures in order to comply with the Act requirements. They will likely need to verify that the entity has controls in place to identify sub-awards subject to the reporting requirements, and have implemented internal controls to assist with reporting obligations under the Act, as well as to test the entity’s compliance.
We recommend that the City review its procedures and internal controls in its efforts to comply with the requirements of the Act, and prepare for some additional inquiries from the external auditors.
Status of prior year best practice observations and recommendations
We found the City had taken action and otherwise made improvements with all the issues we included in the prior year management letter with exception of the lease accounting documentation and timely completion of the CAFR items as noted above.
********
We wish to thank Jane Kingston, Samina Gillum, Sheila Black-Craig and other members of OMF staff for their support and assistance during our audit, the direction and leadership provided to them from Rich Goward, Jr., and Jack Graham, as well as LaVonne Griffin-Valade, City Auditor, and Fiona Earle of the City Auditor's office who were very professional and pleasant to work with regarding the administration of our audit contract with the City.
Very truly yours,
Moss Adams LLP
MULTNOMAH COUNTY, OREGON
Management Letter
June 30, 2012
To Mark Campbell, Chief Financial Officer Multnomah County Portland, Oregon
Dear Mr. Campbell:
In planning and performing our audit of the financial statements of Multnomah County, Oregon (“the County”) as of and for the year ended June 30, 2012, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America, we considered the County’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control.
However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The memorandum that accompanies this letter summarizes our observations, comments and suggestions regarding those matters.
We will review the status of these comments during our next audit engagement. We have already discussed these comments and suggestions with various County personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations.
This report is intended solely for the information and use of the management of Multnomah County, the Audit Committee and the Auditor’s Office of Multnomah County, and is not intended to be and should not be used by anyone other than these specified parties. We would be happy to further discuss any of the items in this letter with you at your convenience.
Eugene, Oregon December 13, 2012
2
Multnomah County Portland, Oregon December 13, 2012
FINDINGS FROM LAST YEAR - MANAGEMENT ADVISORY COMMENTS
Time and Effort Reporting Requirements
Finding: During audit procedures for allowable costs of the JAG Cluster (CFDA 16.738, 16.803, 16.804) it was noted that one employee’s time in the Department of Community Justice (DCJ) was charged to the award based upon budgeted amounts. This major program was selected for testing in July 2011, prior to closing of the County’s accounting records. It is uncertain whether the annual true-up would have occurred based on department internal controls over compliance had this program not been selected for testing so early during the audit process.
Update: A similar finding was noted within a different department during the current year audit. See current year management advisory findings for explanation.
Disbursement Support Documentation
Finding: During audit procedures for the allowable costs of the Distribution of Receipts to State and Local Governments program (CFDA 15.227), a sample of search and rescue meal expenditures were selected for testing. The support documentation provided for these expenditures was inconsistent, ranging from a packet that included detailed receipts and volunteer logs to just a single credit card swipe receipt.
Update: We did not find this issue again in the current audit, and this issue is deemed to have been resolved.
Timely / Appropriate Accounting Entries
Finding: It was noted that several non-routine accounting entries were not made into SAP on a timely basis, or were not made appropriately at the initial time of entry. These non-routine entries included:
Accounting for the fair value of investments. Treasury did not perform the mark to market analysis in a timely manner, which required adjusting journal entries to be made after the year end close to report certain investments at fair value. This also resulted in the original journal entry to roll forward beginning working capital (BWC) for fiscal year 2012 to be incorrect and to also require an adjustment. 3
Multnomah County Portland, Oregon December 13, 2012
Accounting for debt proceeds. Debt proceeds in the amount of $500,000 were issued to the County in advance of a total debt issue of $15 million as a good faith deposit. The good faith deposit was received by the County on November 30, 2010, and the entry to record the deposit in SAP was made on January 6th, 2011 with a posting date of December 1, 2010. The balance of the debt issue of $14,500,000 was received by the County on December 14, 2010, and then entered into SAP on January 6, 2011.
Accounting for ‘incurred but not reported (IBNR) liability’. The County records a liability for ‘incurred but not reported’ claims in the Behavioral Health Care fund and the Federal/State Program fund for claims incurred but not yet paid. In our review of the IBNR liability, we noted the account was not reviewed or adjusted throughout fiscal year 2011 as payments were made and new claims were reported. Because the liability account was not reviewed or adjusted throughout the year, significant year-end adjustments and entries are required, and the County could be reporting an inaccurate cost and liability balances throughout the year.
Update: We did not find these specific issues again in the current audit, however, there were other issues noted during the performance of audit procedures. See current year management advisory findings for explanation.
Restricted Resources
Finding: When management implemented GASB 54, the County’s Finance and Budget Policies were revised to include the order of spending of resources with restricted resources spent first, followed by committed, then assigned, and with unassigned resources spent last. The County’s policies also state that only the Board of County Commissioners, within the County, can place constraints on resources outside of a restriction placed by an external party. A department had designated a particular resource stream as restricted and did not get a resolution from the Board placing any type of constraint on this resource stream that would meet the County’s Finance and Budget Policies. The County had incurred significant expenditures that met the department’s restrictions, but the department chose not to use the restricted resources. Restricted funds should have been spent prior to spending unrestricted General fund dollars in order to comply with the provisions of GASB 54 and with County policies.
Update: We did not find this issue again in the current audit, and this issue is deemed to have been resolved.
4
Multnomah County Portland, Oregon December 13, 2012
Issuance and Related Spending of Debt
Finding: During the audit of the County’s long-term debt, it was noted the County had a significant balance of unspent debt proceeds related to a debt issuance from March of 2010. The County issued $9.8 million in Full Faith and Credit Obligations on March 31, 2010. As of June 30, 2011, there was approximately $7 million in unspent debt proceeds. In fiscal year 2011, the County paid interest expense of $328,497 on the outstanding debt at a rate of approximately 3.5%. The longer unspent bond proceeds exist, the more interest costs are incurred that could have been avoided, and the risk of incurring arbitrage liabilities and compliance issues increases.
Update: We did not find this issue again in the current audit, and this issue is deemed to have been resolved.
CURRENT YEAR - MANAGEMENT ADVISORY COMMENTS
Time and Effort Reporting Requirements
Finding: Over the past few years the County has experienced repeat findings in the Single Audit with respect to time and effort reporting where grants have been charged for County personnel costs based on budgets or preliminary estimates. If personnel costs are charged to grants based upon budgetary amounts, there is a requirement for quarterly historical assessments and then comparison with an annual reconciliation between the historical assessments and budgetary charges. Since fiscal year 2007, the County has worked very hard to review and revise payroll tracking and reporting processes in order to be in compliance with Federal requirements. This is an on-going effort as smaller divisions and offices in the County receive Federal awards that may not be fully aware of specific time and effort reporting requirements. During audit procedures for allowable costs of the Weatherization Assistance Program (CFDA 81.042) it was noted that of the twenty payroll samples selected from the Department of County Human Services (DCHS) for testing, the quarterly assessment had not been performed for one employee.
Recommendation: We commend the County for its efforts to address this issue over the past several years, and recommend continued diligence especially for smaller departments that may not be fully knowledgeable regarding the compliance requirements.
5
Multnomah County Portland, Oregon December 13, 2012
Management’s Response: The County has made significant improvement in time and effort reporting, but management recognizes that we still have work to do in this area to be fully compliant with our Federal grants. Due to the size of our organization and the number of Federal grants we receive, it is a continuous challenge to ensure complete compliance with time and effort reporting across the County.
DCHS management is currently reviewing the existing time and effort reporting process for the Weatherization Assistance Program to identify and correct the breakdown in the process. DCHS management will evaluate the current process for time and effort reporting for the Weatherization Assistance Program to ensure we are meeting the requirements of OMB A-87 as well as our business needs. In addition, DCHS management will work to provide additional time and effort training to the Weatherization Assistance Program and other smaller program areas.
Accounting Period Cutoff for Grants
Finding: During audit procedures for the Grants to States Program (CFDA 45.310) received by the Library and the State Energy Program (CFDA 81.041) received by the Department of County Assets, it was noted that the population of expenditures provided did not agree to the expenditures reported on the schedule of expenditures of federal awards (SEFA). The differences were immaterial to both programs: approximately $33,160 for the Grants to States Program and $17,450 for the State Energy Program. Per inquiry of Department grant personnel and central finance, these differences were due to the inclusion of expenditures from prior accounting periods that should have been reported in prior years.
Recommendation: It is recommended that grant personnel record grant related transactions timely, especially at the end of the fiscal year. Grant personnel should anticipate potential grant related expenditures at the end of the fiscal year and ensure these expenditures are recorded in the proper accounting period.
Management’s Response: Annual year-end trainings help Department finance staff be mindful of year-end cutoff considerations and the importance of recording revenues and expenditures to the proper period. For the fiscal year 2013 close, we will be sure to emphasize the importance of cutoff and especially with respect to our Federal awards. Further discussion with those Departments involved in the Single Audit will also occur prior to year-end close as a reminder.
6
Multnomah County Portland, Oregon December 13, 2012
Use of Negative Confirmation as a Compliance Control
Finding: During audit procedures for the Grants to States Program (CFDA 45.310) received by the Library, it was noted that within the sample of three cash draws selected for testing, in one case grant personnel relied upon negative confirmation for management approval of the cash drawdown request. An email was sent by the Library finance supervisor to the manager for approval, requesting a response if the manager did not approve of the cash drawdown request.
Recommendation: It is recommended that grant personnel use a process that provides a distinct record of approval for the cash drawdown requests. This should include evidence from the manager that the cash drawdown request has been reviewed and approved for processing.
Management’s Response: Since this was brought to our attention, the Library has improved this process: the finance supervisor emails the manager requesting his/her review and approval for the cash draw request, the manager will evidence his/her approval by emailing it back to the finance supervisor and noting the approval in the email. This will provide for an audit trail on the approval process and we will also print the email exchange for our grant files.
Timely / Appropriate Accounting Entries
Finding: It was noted that several non-routine accounting entries were not made into SAP on a timely basis, or were not made appropriately at the initial time of entry. These non-routine entries included:
Sellwood Bridge Construction Project: The Sellwood Bridge construction project is a significant and material project in the financial statements. In fiscal year 2012, the County setup a separate special revenue fund (2511) to track and account for all Sellwood Bridge transactions. During the performance of audit procedures, several aberrations were observed and noted below:
o June 2012 ODOT Revenues (SAP Document #1813002208) indicates this transaction was reversed from fiscal year 2013 and re-entered into fiscal year 2012. Department of Community Services (DCS) did not properly record fiscal year 2012 revenues to the general ledger timely. o There was a $1 million write-off of the June 2011 ODOT receivable which affects federal grant revenues, essentially overstating the County’s SEFA for fiscal year 2011. We have discussed this particular error with management, and DCS has since implemented additional controls over receivables and has 7
Multnomah County Portland, Oregon December 13, 2012
taken steps to improve communication with ODOT (grantor agency) to ensure revenues are properly recorded. o Subsequent to year end, review of the available cash balance in the Sellwood Bridge fund noted the fund was operating with a cash deficit of approximately $784,000 in September 2012. On September 28, 2012, the County drew an additional $25 million on the non-revolving line of credit for the Sellwood Bridge to meet cash needs. However, prior to that point, the Sellwood Bridge fund did not have the necessary resources to pay current liabilities. The County has a process in place to review cash balances by fund after the month- end closing process, however there does not appear to be a process in place to detect when funds may report negative cash balances.
As this will be a continuing project for the next several years, and the County intends to issue long term debt to finance the project, we are obliged to stress to management the importance of properly recording and accounting for this project.
Use of the Federal / State Program Special Revenue Fund: The County utilizes the Federal / State Program Special Revenue Fund (Fund 1505) to properly account for revenue sources that are subject to external restrictions and the associated expenditures that meet those external restrictions. Use of this special revenue fund is also critical for accurate and timely preparation of the SEFA. During the performance of audit procedures, it was noted that: o A State Justice Institute Grant award received by the Department of County Assets for $40,500 was budgeted within the Federal / State Program Special Revenue Fund (1505), but the expenditures against this award (SAP Document #1012109549 and #1812033750) recorded in the Facilities Management Fund (Fund 3505). o A State Homeland Security Program grant in the Sheriff’s Office was miscoded to the Direct State general ledger accounts instead of the Federal through State general ledger account by the Sheriff’s Office.
Capital Asset Disposition: during performance of audit procedures over current year capital asset dispositions, it was noted there was a building disposition (Kelly Building) that was not recorded timely by the Department of County Assets, and the initial transaction was not posted correctly. The transaction was originally recorded “net” instead of being correctly posted “gross”. Central Finance detected and corrected this error as part of the financial close and reporting process.
Recommendation: We recommend the County implement procedures to support timely and appropriate accounting entries for non-routine transactions.
8
Multnomah County Portland, Oregon December 13, 2012
Management’s Response: Sellwood Bridge Construction Project: Since activity on the Sellwood Bridge project has increased significantly over the past year, the Department of Community Services (DCS) continues to implement additional controls over project invoicing and billing. Some of these controls include an additional review over all grant related invoices for the Sellwood Bridge Fund. In addition, DCS management has been working on improving our communications with our primary grant funder, ODOT, to ensure ODOT’s costs agree with the County’s spreadsheets and accounts. Internal communications have also been strengthened with regular check-in meeting between the DCS Sellwood Project Managers and the Finance staff. The Sellwood Bridge project also uses an Owner’s Representative firm that has helped with reviewing project invoices and ensuring the costs meet Federal Highway Administration funding eligibility.
In December 2012 the County issued $128 million in Full Faith & Credit Obligations for the Sellwood Bridge project. Additionally, in December the County completed negotiations for the maximum price (MP) from the contractor for the bridge main span and interchange construction. The MP will produce a contractor schedule which will be used to update the County’s cash flow model. As we track our spending for the Sellwood project, we will also monitor our cash balances in the Sellwood Bridge fund. Any anticipated cash deficits will be communicated early with the CFO to determine if additional resources are needed to assist with the Sellwood Bridge fund’s operations.
Use of the Federal / State Program Special Revenue Fund: To ensure that Federal funds are recorded to the proper general ledger account and captured in the County’s Schedule of Expenditures of Federal Awards and Single Audit, a mid-year review of general ledger revenue accounts by Fiscal Compliance will help identify if any Federal funds have been miscoded to the wrong account. We will also emphasize the importance of recording Federal awards to the correct account and fund during our year-end communications.
Capital Asset Disposition: The Department of County Assets (DCA) was formed on July 1, 2011 and as this Department continues to take shape, opportunities for strengthening processes and procedures as well as improving our internal controls arise. DCA Management is currently in the process of streamlining the finance staff’s operations, and will continue to work with finance staff who oversee grant accounting, reporting and assisting with budgeting for grants. DCM and DCA management are working closely together to help develop the support functions in DCA, including Finance and Budget administration. Over the next year we will continue to refine our support processes and procedures and work to identify where efficiencies can be gained and where controls can be strengthened.
9
Multnomah County Portland, Oregon December 13, 2012
Assumptions within Actuarial Valuation Reports
Finding: The County relies upon an actuarial valuation report for determining and reporting its other post employment benefit obligation. This actuarial report is based upon several key assumptions, including the discount rate used to determine the present value of the County’s liability for these obligations. The most recent report issued on October 10, 2011 utilizes a discount rate of 4.0%. The applicable accounting standards require that the discount rate to be used should match the expected rate of return realized on the resources used to fund benefit payments. The County is paying benefits from cash and investments held internally in its treasury. Current practice by similar entities that pay benefits out of their internal cash and investment pool is to use a discount rate of between 3.0% to 3.5%. It is noted that a minor change in the discount rate can have a significant impact on the current year expense calculation, and to the overall liability; and the difference could be material to the financial statements.
Recommendation: The County will be acquiring a new actuarial report within the next fiscal year. It is recommended that the discount rate used within the new report be adjusted downward to more accurately reflect current economic conditions and the long-term expected rate of return on cash and investments held in the County’s internal investment pool.
Management’s Response: The County is in the process of developing a contract for OPEB actuarial services. As we move further in this process and begin working on the 1/1/2013 actuarial valuation we will take a closer look at the assumptions used in the past to calculate our OPEB liability. These discussions between management and our actuaries will also include an evaluation of what is an appropriate discount factor to consider and use in our valuation. In addition, the County will be looking at options to establish a separate trust fund in connection with the requirements of GASB #45 to help prefund OPEB obligations which will in turn impact the discount rate.
Individual Entering and Approving Their Own Time in Payroll System
Finding: During audit procedures of internal control over the payroll cycle, analysis techniques were performed over the payroll module population data. From the population of approximately 1.5 million entries, it was discovered that 282 of those entries consisted of an individual entering their own time into the payroll system and approving that same time for processing. This is noted as a segregation of duties issue in that the roles of entering payroll and reviewing and approving the payroll should be separated. Additional analysis was performed over these records, and the total time entered for each day was consistently 8 hours, there was no overtime noted for this 10
Multnomah County Portland, Oregon December 13, 2012
employee within the records examined. We did not compare the employee’s timecards to the payroll entries as this was beyond the scope of the audit.
Recommendation: In most cases, the ability to enter payroll and then perform review and approval of the payroll entries is separated by roles created within SAP. In those rare instances in which an employee has been granted the authority to perform both functions, policy and standard practice should be voluntary separation of these roles within the department processing payroll.
Management’s Response: Since this exception was brought to our attention during the external audit, Central Payroll met with the District Attorney Department and helped implement additional manual controls to ensure segregation of duties is achieved and prevent an employee from entering and approving her/his own time. In addition, the payroll manager will review time entry and SAP approval roles on a semi-annual basis to ensure segregation of duties are achieved and manual controls are followed for those offices that have been granted an exception.
11
D – NOT TO EXCEED PRICE FOR PROPOSED
Proposal for City of Milwaukie | 33 a. Not to Exceed Price for Proposed Service Schedule
In accordance with the Request for Proposal for Professional Auditing Services issued by the City of Milwaukie, Oregon, the firm referenced below hereby submits the following hourly fee quotation and hours proposed for all positions to be assigned to the audit:
Fiscal Year Ended June 30, 2013 F/S Audit Single Audit Key PersonnelHoursHours Total Hours Hourly Rate Total Engagement Partners Engagement Manager Engagement Senior Engagement Staff Clerical/Support Staff Other
In accordance with the Request for Proposal for Professional Auditing Services issued by the City of Milwaukie, Oregon, the firm referenced below hereby submits the following cost proposal:
Fiscal Years Ending June 30th, 2013 2014 2015 2016 2017 Financial Statement Audit: Single Audit: Cost of Supplies & Materials: Additional Fees (if applicable)*: Total
*The City of Milwaukie expects to receive technical assistance, as needed, from the audit firm throughout the fiscal year that may include inquiries regarding accounting, reporting and internal control issues. If fees related to this technical assistance are not included in the firm’s financial statement audit fee, please include them here.
I hereby certify that the undersigned is authorized to represent the firm stated below, and empowered to submit this bid, and if selected, authorized to sign a contract with the City of Milwaukie, for the services identified in the Request for Proposal.
Firm Name: ______
Signature: ______
Printed Name: ______
Title: ______
Date: ______
Email Address: ______
City of Milwaukie, Oregon RFP for Professional Auditing Services 10
E – PERSONAL SERVICES AGREEMENT
Proposal for City of Milwaukie | 34
EXCEPTIONS
This Proposal is contingent upon satisfaction of applicable professional standards (including SAS 84 communications with the prior auditors), completion of the Moss Adams new client acceptance process, and negotiation of a mutually acceptable contract. We have successfully signed professional services agreements with thousands of clients, including many cities and other municipalities, and commit to working in good faith to successfully negotiate such an agreement on a timely basis following award of this contract.
With regard to the sample Professional Services Agreement included with the RFP, Moss Adams asserts the following exceptions. Suggested alternative language to address these exceptions is set forth in the attached redline.
Exception Nature of Exception Section(s) Impacted
1 Deleting §4 as inconsistent with §26, which correctly states 4 ownership in the context of audit services 2 Focusing indemnification, including to preserve independence under 7 AICPA standards 3 Acknowledging Firm’s professional liability coverage is per claim, 8 only GCL and Auto policies permit additional insureds, and the forms utilized by carriers no longer include the 30-day cancellation language, and protecting the confidentiality of insurance policies 4 Providing for mutuality regarding termination 12
5 Following the American Rule on attorney’s fees 12, 20
6 Addressing access to workpapers by the entity being audited to 131 protect the integrity of the audit 7 Addressing warranties, including remedy for breach, solely in §19 7, 19
Additionally, pursuant to professional standards and firm practice, we suggest including our standard engagement provisions regarding financial statement audits and A-133 audit services, either as part of the Agreement or in our Engagement Letter.
1 This same exception applies to the section III.g. of the RFP.
Contract #______
PERSONAL SERVICES AGREEMENT WITH THE CITY OF MILWAUKIE, OR FOR AUDIT SERVICES
THIS AGREEMENT made and entered into this (Day) day of (Month), (Year) by and between the City of Milwaukie, a municipal corporation of the State of Oregon, hereinafter called City, and (Firm's Name), hereinafter called Firm.
RECITALS WHEREAS City has need for the services of a person or an entity with particular training, ability, knowledge, and experience as possessed by Firm, and
WHEREAS City has determined that Firm is qualified and capable of performing the professional services as City does hereinafter require, under those terms and conditions set forth,
THEREFORE the Parties agree as follows:
1. SERVICES TO BE PROVIDED Firm shall provide services as specified in the Scope of Work, a copy of which is attached hereto, and hereby incorporated by reference. Firm shall initiate services immediately upon receipt of City’s notice to proceed, together with an executed copy of this Agreement.
2. EFFECTIVE DATE AND DURATION This Agreement shall become effective upon the date of execution, and shall expire, unless otherwise terminated or extended, by (Month - Day - Year). All work under this Agreement shall be completed prior to the expiration of this Agreement.
This Agreement shall be for a term of five years, to complete the audit of five (5) individual fiscal years, commencing with auditing services for the fiscal year ending June 30, 2013. The contract may be renewed annually at the option of the City, for two successive years. Any renewal shall be upon the same original terms and provisions, provided however that the fees and “not-to-exceed” amounts may be increased as set forth in the Payment section below. Renewal shall be given in writing by the City between the period of February1 and March 1 prior to the expiration of the original term or each renewal period.
3. COMPENSATION The City hereby affirms that for the first year of this Contract proper provision for the payment of the fee has been or will be duly made and that funds for the payment thereof are or will be made legally available; however, as to future years, this Contract is subject to appropriation of funds (See Termination, Section C (i)).
A. Amount of Payment
[FIRM] shall be compensated for all goods, materials, expenses, and services as follows: payment based on the lump-sum contract price and [FIRM]’s schedule, as set forth in Section 11 of Exhibit B, provided however that the contract amount shall not exceed:
City of Milwaukie, Oregon RFP for Professional Auditing Services 12
Contract #______
1. $XX,XXX for FY 2012-13 2. $XX,XXX for FY 2013-14 3. $XX,XXX for FY 2014-15 4. $XX,XXX for FY 2015-16, and 5. $XX,XXX for FY 2016-17
If the Options to Renew the Contract are exercised by the City as set forth in Duration above, the fees charged for each annual period of renewal shall be [FIRM]’s published municipal rates, or the prior year’s rates plus CPI, whichever is less. The “not to exceed” amount shall be:
1. $XX,XXX for FY 2017-18; and 2. $XX,XXX for FY 2018
Payment shall be based upon the following applicable terms:
A. Payment by City to Firm for performance of services under this Agreement includes all expenses incurred by Firm, with the exception of expenses, if any identified in this Agreement as separately reimbursable.
B. Payment will be made in installments based on Firm’s invoice, subject to the approval of the City Manager, or designee, and not more frequently than monthly. Payment shall be made only for work actually completed as of the date of invoice.
C. Payment by City shall release City from any further obligation for payment to Firm, for services performed or expenses incurred as of the date of the invoice. Payment shall not be considered acceptance or approval of any work or waiver of any defects therein.
D. Where applicable, Firm must make payment promptly as due to persons supplying Firm labor or materials for the execution of the work provided by this order. Firm must pay all contributions or amounts due from Firm to the Industrial Accident Fund incurred in the performance of this order. Firm shall not permit any lien or claim to be filed or prosecuted against City or any subdivision of City on account of any labor or material to be furnished. Firm further agrees to pay to the Department of Revenue all sums withheld from employees pursuant to ORS 316.167.
E. If Firm fails, neglects or refuses to make prompt payment of any claim for labor or services furnished to Firm or a subcontractor by any person as such claim becomes due, City’s Finance Director may pay such claim and charge the amount of the payment against funds due or to become due the Firm. The payment of the claim in this manner shall not relieve Firm or their surety from obligation with respect to any unpaid claims.
F. If labor is performed under this order, then no person shall be employed for more than eight (8) hours in any one day, or forty (40) hours in any one week, except in cases of necessity, or emergency or where the public policy absolutely requires it, and in such cases, except cases of contracts for personal services as defined in ORS 279A.055, the labor shall be paid at least time and a half for all overtime in excess of eight (8) hours a day and for all work performed on Saturday and on any legal holidays as specified in ORS 279B.020. In cases of contracts for personal services as defined in ORS 279A.055, any labor shall be paid at least time and a half for all hours worked in excess of forty (40) hours in any one week, except for those individuals excluded under ORS 653.010 to 653.260 or under 29 USC SS 201-209. City of Milwaukie, Oregon RFP for Professional Auditing Services 13
Contract #______
G. Firm shall promptly, as due, make payment to any person, co-partnership, association or corporation, furnishing medical, surgical and hospital care or other needed care and attention incident to sickness or injury to the employees of Firm or all sums which Firm agrees to pay for such services and all moneys and sums which Firm collected or deducted from the wages of employees pursuant to any law, contract or agreement for the purpose of providing or paying for such service.
H. The City certifies that sufficient funds are available and authorized for expenditure to finance costs of this contract.
4. OWNERSHIP OF WORK PRODUCT
City shall be the owner of and shall be entitled to possession of any and all work products of Firm which result from this Agreement, including any computations, plans, correspondence or pertinent data and information gathered by or computed by Firm prior to termination of this Agreement by Firm or upon completion of the work pursuant to this AgreementReserved.
5. ASSIGNMENT/DELEGATION Neither party shall assign, sublet or transfer any interest in or duty under this Agreement without the written consent of the other and no assignment shall be of any force or effect whatsoever unless and until the other party has so consented. If City agrees to assignment of tasks to a subcontract, Firm shall be fully responsible for the acts or omissions of any subcontractors and of all persons employed by them, and neither the approval by City of any subcontractor nor anything contained herein shall be deemed to create any contractual relation between the subcontractor and City.
6. STATUS OF FIRM AS INDEPENDENT FIRM Firm certifies that:
A. Firm acknowledges that for all purposes related to this Agreement, Firm is and shall be deemed to be an independent Firm as defined by ORS 670.700 and not an employee of City, shall not be entitled to benefits of any kind to which an employee of City is entitled and shall be solely responsible for all payments and taxes required by law. Furthermore, in the event that Firm is found by a court of law or any administrative agency to be an employee of City for any purpose, City shall be entitled to offset compensation due, or to demand repayment of any amounts paid to Firm under the terms of this Agreement, to the full extent of any benefits or other remuneration Firm receives (from City or third party) as a result of said finding and to the full extent of any payments that City is required to make (to Firm or to a third party) as a result of said finding.
B. The undersigned Firm hereby represents that no employee of the City, or any partnership or corporation in which a City employee has an interest, has or will receive any remuneration of any description from Firm, either directly or indirectly, in connection with the letting or performance of this Agreement, except as specifically declared in writing.
If this payment is to be charged against Federal funds, Firm certifies that he/she is not currently employed by the Federal Government and the amount charged does not exceed his or her normal charge for the type of service provided.
City of Milwaukie, Oregon RFP for Professional Auditing Services 14
Contract #______
Firm and its employees, if any, are not active members of the Oregon Public Employees Retirement System and are not employed for a total of 600 hours or more in the calendar year by any public employer participating in the Retirement System.
C. Firm certifies that it currently has a City business license or will obtain one prior to delivering services under this Agreement.
D. Firm is not an officer, employee, or agent of the City as those terms are used in ORS 30.265.
7. INDEMNIFICATION City has relied upon the professional ability and training of Firm as a material inducement to enter into this Agreement. Firm warrants that all its work will be performed in accordance with generally accepted professional practices and standards as well as the requirements of applicable federal, state and local laws, it being understood that acceptance of a Firm’s work by City shall not operate as a waiver or release.
Firm agrees to indemnify and defend the City, its officers, agents, employees and volunteers and hold them harmless from any and all liability, causes of action, claims, losses, damages, judgments or other costs or expenses including attorney's fees and witness costs and (at both trial and appeal level, whether or not a trial or appeal ever takes place) that may be asserted by any person or entity which in any way arise from personal injury (including death) or damage to real or tangible personal property to the extent caused by the negligent acts or omissions of Firm, during or in connection with the performance of the work described in this contract, except to the extent that the liability arises out of the sole negligence of the City and its employees. Such indemnification shall also cover claims brought against the City under state or federal workers’ compensation laws. If any aspect of this indemnity shall be found to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this indemnification.
8. INSURANCE Firm and its subcontractors shall maintain insurance acceptable to City in full force and effect throughout the term of this contract. Such insurance shall cover all activities of the Firm arising directly or indirectly out of Firm's work performed hereunder, including the operations of its subcontractors of any tier. Such insurance shall be primary and non-contributory.
The policy or policies of insurance maintained by the Firm and its subcontractor shall provide at least the following limits and coverage:
A. Commercial General Liability Insurance Firm shall obtain, at Firm’s expense, and keep in effect during the term of this contract, Commercial General Liability Insurance covering Bodily Injury and Property Damage on an “occurrence” form . This coverage shall include Contractual Liability insurance for the indemnity provided under this contract. The following insurance will be carried:
Coverage Limit General Aggregate 3,000,000 Products-Completed Operations Aggregate 3,000,000 Personal & Advertising Injury 3,000,000 Each Occurrence 2,000,000 Fire Damage (Any one fire) 500,000 Medical Expense (Any one person) 5,000
City of Milwaukie, Oregon RFP for Professional Auditing Services 15
Contract #______
B. Commercial Automobile Insurance Firm shall also obtain, at Firm’s expense, and keep in effect during the term of this contract, Commercial Automobile Liability coverage including coverage for all owned, hired, and non-owned vehicles. The Combined Single Limit per occurrence shall not be less than $2,000,000.
C. Professional Liability Insurance Firm shall obtain, at Firm's expense, and keep in effect during the term of this contract, Professional Liability Insurance covering any damages caused by an error, omission or any negligent acts. Combined single limit per occurrence claim shall not be less than $2,000,000. Annual aggregate limit shall not be less than $2,000,000.
D. Workers’ Compensation Insurance The Firm, its subcontractors, if any, and all employers providing work, labor or materials under this Contract who are subject employers under the Oregon Workers’ Compensation Law and shall comply with ORS 656.017, which requires them to provide workers’ compensation coverage that satisfies Oregon law for all their subject workers. Out-of-state employers must provide workers’ compensation coverage for their workers that comply with ORS 656.126. Employer’s Liability Insurance with coverage limits of not less than $500,000 each accident shall be included.
E. Additional Insured Provision The Commercial General Liability Insurance and Commercial Automobile Insurance policies and other policies the City deems necessary shall include the City, its officers, directors, employees and volunteers as additional insureds with respect to this contract.
F. Notice of Cancellation There shall be no cancellation, material change, exhaustion of aggregate limits or intent not to renew insurance coverage without 30 days written notice to the City. Any failure to comply with this provision will not affect the insurance coverage provided to the City. The certificates of insurance provided to the City shall state that the insurer shall endeavor to provide 30 days notice of cancellation to the City.
G. Insurance Carrier Rating Coverage provided by the Firm must be underwritten by an insurance company deemed acceptable by the City. The City reserves the right to reject all or any insurance carrier(s) with an unacceptable financial rating.
H. Certificates of Insurance As evidence of the insurance coverage required by the contract, the Firm shall furnish a Certificate of Insurance to the City. No contract shall be effected until the required certificates have been received and approved by the City. The certificate will specify and document all provisions within this contract. A renewal certificate will be sent to the above address 10 days prior to coverage expiration.
City of Milwaukie, Oregon RFP for Professional Auditing Services 16
Contract #______
Certificates of Insurance for GCL and Auto should read “Insurance certificate pertaining to contract for audit services. The City of Milwaukie, its officers, directors and employees shall be added as additional insureds with respects to this contract. A notation stating that “Insured coverage is primary” shall appear in the description portion of certificate.
I. Independent Firm Status The service or services to be rendered under this contract are those of an independent Firm. Firm is not an officer, employee or agent of the City as those terms are used in ORS 30.265.
J. Primary Coverage Clarification The parties agree that Firm’s coverage shall be primary to the extent permitted by law. The parties further agree that other insurance maintained by the City is excess and not contributory insurance with the insurance required in this section.
K. Cross-Liability Clause A cross-liability clause or separation of insureds clause will be included in the general liability policy.
Firm’s insurance policy shall contain provisions that such policies shall not be canceled or their limits of liability reduced without thirty (30) days prior notice to City. A copy of each insurance policy, certified as a true copy by an authorized representative of the issuing insurance company, or at the discretion of City, in lieu thereof, a certificate in form satisfactory to City certifying to the issuance of such insurance shall be forwarded to:
Office of City Recorder City of Milwaukie Business Phone: 503-786-7504 10722 SE Main St. Business Fax: 503-653-2444 Milwaukie, Oregon 97222 Email Address:
Such policies or certificates must be delivered prior to commencement of the work.
The procuring of such required insurance shall not be construed to limit Firm’s liability hereunder. Notwithstanding said insurance, Firm shall be obligated for the total amount of any damage, injury, or loss caused by negligence or neglect connected with this contract.
9. METHOD & PLACE OF SUBMITTING NOTICE, BILLS AND PAYMENTS All notices, bills and payments shall be made in writing and may be given by personal delivery, mail or by fax. Payments may be made by personal delivery, mail, or electronic transfer. The following addresses shall be used to transmit notices, bills, payments, and other information:
City Firm City of Milwaukie Company: (insert name of firm) Attn: Accounts Payable Attn: (insert contract manager's name) 10722 SE Main St., Address: (insert contract manager's Milwaukie, Oregon 97222 address) Phone: 503-786-7524 Phone: (insert #) Fax: 503-786-7528 Fax: (insert #) Email Address: [email protected] Email Address: (insert address) City of Milwaukie, Oregon RFP for Professional Auditing Services 17
Contract #______
and when so addressed, shall be deemed given upon deposit in the United States mail, postage prepaid, or when so faxed, shall be deemed given upon successful fax. In all other instances, notices, bills and payments shall be deemed given at the time of actual delivery. Changes may be made in the names and addresses of the person to who notices, bills and payments are to be given by giving written notice pursuant to this paragraph.
10. MERGER This writing is intended both as a final expression of the Agreement between the parties with respect to the included terms and as a complete and exclusive statement of the terms of the Agreement. No modification of this Agreement shall be effective unless and until it is made in writing and signed by both parties.
11. TERMINATION WITHOUT CAUSE At any time and without cause, City either party shall have the right, in its sole discretion, to terminate this Agreement by giving notice to Firmthe other party. If City terminates the contract pursuant to this paragraph, it shall pay Firm for services rendered to the date of termination.
12. TERMINATION WITH CAUSE A. City may terminate this Agreement effective upon delivery of written notice to Firm, or at such later date as may be established by City, under any of the following conditions:
1) If City funding from federal, state, local, or other sources is not obtained and continued at levels sufficient to allow for the purchase of the indicated quantity of services. This Agreement may be modified to accommodate a reduction in funds 2) If federal or state regulations or guidelines are modified, changed, or interpreted in such a way that the services are no longer allowable or appropriate for purchase under this Agreement. 3) If any license or certificate required by law or regulation to be held by Firm, its subcontractors, agents, and employees to provide the services required by this Agreement is for any reason denied, revoked, or not renewed. 4) If Firm becomes insolvent, if voluntary or involuntary petition in bankruptcy is filed by or against Firm, if a receiver or trustee is appointed for Firm, or if there is an assignment for the benefit of creditors of Firm.
Any such termination of this agreement under paragraph (a) shall be without prejudice to any obligations or liabilities of either party already accrued prior to such termination.
B. City, by written notice of default (including breach of contract) to Firm, may terminate the whole or any part of this Agreement:
1) If Firm fails to provide services called for by this agreement within the time specified herein or any extension thereof, or 2) If Firm fails to perform any of the other provisions of this Agreement, or so fails to pursue the work as to endanger performance of this agreement in accordance with its terms, and after receipt of written notice from City, fails to correct such failures within ten (10) days or such other period as City may authorize.
The rights and remedies of City provided in the above clause related to defaults (including breach of contract) by Firm shall not be exclusive and are in addition to any other rights and remedies provided by law or under this Agreement. City of Milwaukie, Oregon RFP for Professional Auditing Services 18
Contract #______
If City terminates this Agreement under paragraph (B), Firm shall be entitled to receive as full payment for all services satisfactorily rendered and expenses incurred, an amount which bears the same ratio to the total fees specified in this Agreement as the services satisfactorily rendered by Firm bear to the total services otherwise required to be performed for such total fee; provided, that there shall be deducted from such amount the amount of damages, if any, sustained by City due to breach of contract by Firm. Damages for breach of contract shall be those allowed by Oregon law, reasonable and necessary attorney fees, and other costs of litigation at trial and upon appeal.
13. ACCESS TO RECORDS City shall have access to such books, documents, papers and records of Firm as are directly pertinent to this Agreement for the purpose of making audit, examination, excerpts and transcripts. Notwithstanding the foregoing, access to audit workpapers shall be limited to entities designated as part of an audit quality review process, the Oregon Secretary of State, Audits Division, and successor auditors, in compliance with SAS 84.
14. FORCE MAJEURE Neither City nor Firm shall be considered in default because of any delays in completion and responsibilities hereunder due to causes beyond the control and without fault or negligence on the part of the parties so disenabled, including but not restricted to, an act of God or of a public enemy, civil unrest, volcano, earthquake, fire, flood, epidemic, quarantine restriction, area-wide strike, freight embargo, unusually severe weather or delay of subcontractor or supplies due to such cause; provided that the parties so disenabled shall within ten (10) days from the beginning of such delay, notify the other party in writing of the cause of delay and its probable extent. Such notification shall not be the basis for a claim for additional compensation. Each party shall, however, make all reasonable efforts to remove or eliminate such a cause of delay or default and shall, upon cessation of the cause, diligently pursue performance of its obligation under the Agreement.
15. NON-WAIVER The failure of City to insist upon or enforce strict performance by Firm of any of the terms of this Agreement or to exercise any rights hereunder should not be construed as a waiver or relinquishment to any extent of its rights to assert or rely upon such terms or rights on any future occasion.
16. NON-DISCRIMINATION Firm agrees to comply with all applicable requirements of federal and state civil rights and rehabilitation statues, rules, and regulations. Firm also shall comply with the Americans with Disabilities Act of 1990, ORS 659A.142, and all regulations and administrative rules established pursuant to those laws.
17. ERRORS Firm shall perform such additional work as may be necessary to correct errors in the work required under this Agreement without undue delays and without additional cost.
18. EXTRA (CHANGES) WORK Only the City staff member's title & name may authorize extra (and/or change) work. Failure of Firm to secure authorization for extra work shall constitute a waiver of all right to adjustment in the contract price or contract time due to such unauthorized extra work and Firm thereafter shall be entitled to no compensation whatsoever for the performance of such work.
City of Milwaukie, Oregon RFP for Professional Auditing Services 19
Contract #______
19. WARRANTIES City has relied upon the professional ability and training of Firm as a material inducement to enter into this Agreement. Firm warrants that all its work will be performed in accordance with generally accepted professional practices and standards as well as the requirements of applicable federal, state and local laws, it being understood that acceptance of a Firm’s work by City shall not operate as a waiver or release. All work shall be guaranteed by Firm for a period of one year after the date of final acceptance of the work by the owner. Firm warrants that all practices and procedures, workmanship and materials shall be the best available unless otherwise specified in themeet applicable professional standards. As sole and exclusive remedy for breach of any warranty contained in this Agreement, Firm shall, at no cost to City, re-perform the services so that they conform to the warranty. Neither acceptance of the work nor payment therefore shall relieve Firm from liability under warranties contained in or implied by this Agreement.
20. ATTORNEY'S FEES In case suit or action is instituted to enforce the provisions of this contract, the parties agree that the losing each party shall pay such sum as the court may adjudgeits own reasonable attorney fees and court costs, including attorney's fees and court costs on appeal.
21. GOVERNING LAW The provisions of this Agreement shall be construed in accordance with the provisions of the laws of the State of Oregon. Any action or suits involving any question arising under this Agreement must be brought in the appropriate court of the State of Oregon.
22. COMPLIANCE WITH STATE AND FEDERAL LAWS/RULES Firm shall comply with all applicable federal, state and local laws, rules and regulations, including, but not limited to, the requirements concerning working hours, overtime, medical care, workers compensation insurance, health care payments, payments to employees and subcontractors and income tax withholding contained in ORS Chapters 279A and 279B, the provisions of which are hereby made a part of this agreement
23. CONFLICT BETWEEN TERMS It is further expressly agreed by and between the parties hereto that should there be any conflict between the terms of this instrument in the proposal of the contract, this instrument shall control and nothing herein shall be considered as an acceptance of the said terms of said proposal conflicting herewith.
24. AUDIT Firm shall maintain records to assure conformance with the terms and conditions of this Agreement, and to assure adequate performance and accurate expenditures within the contract period. Firm agrees to permit City, the State of Oregon, the federal government, or their duly authorized representatives to audit all records pertaining to this Agreement to assure the accurate expenditure of funds.
25. SEVERABILITY In the event any provision or portion of this Agreement is held to be unenforceable or invalid by any court of competent jurisdiction, the validity of the remaining terms and provisions shall not be affected to the extent that it did not materially affect the intent of the parties when they entered into the agreement.
City of Milwaukie, Oregon RFP for Professional Auditing Services 20
Contract #______
26. PUBLICATION RIGHTS/RIGHTS IN DATA All material contained in the CAFR and related reports (graphics, photos, etc.), prepared by the City are the property of the City. The auditors’ reports are the property of [FIRM]; the City may reproduce and distribute the reports, or any part thereof, in such form as the City desires, but will inform [FIRM] if such reports are to be used in offering documents or similar materials and obtain the written permission of [FIRM] to do so.
[FIRM] shall not publish any of the results of the work without the prior written permission of the City. All original written material and other documentation, including background data, documentation, and staff work that is preliminary to final reports, originated and prepared for the City pursuant to this contract, is exclusively the property of [FIRM].
Material already in [FIRM]'s possession, independently developed by [FIRM] outside the scope of this contract or rightfully obtained by [FIRM] from third parties, shall belong to [FIRM].
27. COMPLETE AGREEMENT This Agreement and attached exhibits constitutes the entire Agreement between the parties. No waiver, consent, modification, or change of terms of this Agreement shall bind either party unless in writing and signed by both parties. Such waiver, consent, modification, or change if made, shall be effective only in specific instances and for the specific purpose given. There are no understandings, agreements, or representations, oral or written, not specified herein regarding this Agreement. Firm, by the signature of its authorized representative, hereby acknowledges that he has read this Agreement, understands it and agrees to be bound by its terms and conditions.
IN WITNESS WHEREOF, City has caused this Agreement to be executed by its duly authorized undersigned officer and Firm has executed this Agreement on the date hereinabove first written.
City of Milwaukie, Oregon RFP for Professional Auditing Services 21
Contract #______
[FIRM] CITY OF MILWAUKIE
By1:______[Authorized Signer] ______[Title] Casey Camors Date: ______Date: ______Finance Director [Firm Address] ______William Monahan Employer ID #2: XX-XXXXXXX Date: ______City Manager Check one: City of Milwaukie Sole Proprietor ______10722 SE Main Street Partnership ______Milwaukie, Oregon 97222 Corporation ______Limited Liability Company ______Date Authorized by Council, if applicable: Limited Liability Partnership ______Other: ______
Employer ID #3: XX-XXXXXXX
1 The individual signing on behalf of [AUDIT FIRM NAME] hereby certifies and swears under penalty of perjury: (a) the number shown on this form is PS [AUDIT FIRM NAME]'s correct taxpayer identification; (b) [AUDIT FIRM NAME] is not subject to backup withholding because (i) [AUDIT FIRM NAME] is exempt from backup withholding, (ii) [AUDIT FIRM NAME] has not been notified by the IRS that [AUDIT FIRM NAME] is subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified [AUDIT FIRM NAME] that [AUDIT FIRM NAME] is no longer subject to backup withholding; (c) s/he is authorized to act on behalf of PS [AUDIT FIRM NAME], s/he has authority and knowledge regarding PS [AUDIT FIRM NAME]'s payment of taxes, and to the best of her/his knowledge, [AUDIT FIRM NAME] is not in violation of any Oregon tax laws, (d) [AUDIT FIRM NAME] is an independent [AUDIT FIRM NAME] as defined in ORS 670.600; and (e) the above [AUDIT FIRM NAME] data is true and accurate. 2 [AUDIT FIRM NAME]’s disclosure of Social Security number or Taxpayer Identification number is requested so that the City may comply with federal and state income tax reporting requirements. 5 USC 552a. This contract is subject to public disclosure. You may submit the social security / taxpayer identification number by separate letter to the Finance Director, along with a request that it not be subject to public disclosure. In such event, the City shall only disclose the social security / taxpayer identification number as required by the Oregon Public Records law, ORS 192.502. 3 [AUDIT FIRM NAME]’s disclosure of Social Security number or Taxpayer Identification number is requested so that the City may comply with federal and state income tax reporting requirements. 5 USC 552a. This contract is subject to public disclosure. You may submit the social security / taxpayer identification number by separate letter to the Finance Director, along with a request that it not be subject to public disclosure. In such event, the City shall only disclose the social security / taxpayer identification number as required by the Oregon Public Records law, ORS 192.502. City of Milwaukie, Oregon RFP for Professional Auditing Services 22
Contract #______
C. SCOPE OF WORK (SERVICES TO BE PROVIDED)
CONTRACT DOCUMENTS
The contract documents shall consist of this Contract, the City’s Request for Proposals (RFP) (Exhibit A), [FIRM] proposal (Exhibit B), and the Engagement Letter (Exhibit C), and any conflict between the contract documents shall be resolved in the following priority:
1. This contract 2. Exhibit A - The City’s RFP; and 3. Exhibit B - [FIRM]’ proposal. 4. Exhibit C - Engagement letter
City shall, upon execution of this Contract, file a duplicate copy of the contract with the Oregon Secretary of State, Audits Division, Salem, Oregon.
SCOPE OF WORK
1. [FIRM] shall conduct an audit of the accounts and fiscal affairs of the City, for the year beginning July 1, 2012, and ending June 30, 2013, and annually thereafter. The Work shall be performed in accordance with: a. The Minimum Standards of Audits of Oregon Municipal Corporations; b. The requirements of Oregon Revised Statutes 297.405 through 297.740, and the regulations promulgated pursuant thereto; c. Generally accepted auditing standards, and, d. When required, Government Auditing Standards prescribed by the Comptroller General of the United States and Office of Management and Budget Circular A-133.
2. The audit shall be undertaken in order to express an opinion upon the financial statements of the City, and to determine if the City has complied substantially with appropriate legal provisions. The services to be provided are detailed in the Proposal issued by [FIRM] (Exhibit B).
3. [FIRM] agrees that the services they have contracted to perform under this contract shall be rendered by them or under the personal supervision of an auditor admitted to the Municipal Roster employed by them, and that the work will be faithfully performed with care and diligence.
4. Should unusual conditions arise or be encountered during the course of the audit whereby the services of [FIRM] are necessary beyond the extent of the work contemplated, written notification of such unusual conditions shall be delivered to the City, who shall instruct in writing [FIRM] concerning such additional services, and that a signed copy of each such notification and instruction shall be delivered immediately to the Secretary of State by the party issuing the same.
City of Milwaukie, Oregon RFP for Professional Auditing Services 23
Contract #______
5. The audit shall be started as soon after this contract is executed as is agreeable to the parties hereto and shall be completed and all written reports thereon delivered within a reasonable time, but no later than six months, after the close of the audit year covered by this contract, unless extended by mutual agreement and as approved by the Oregon Secretary of State.
6. Adequate copies of the auditors’ reports on financial statements and related reports and opinions required by professional standards shall be delivered to the City, and their form and content shall be in accordance with and not less than that required by the Minimum Standards for Audits of Oregon Municipal Corporations.
7. City acknowledges that it is responsible for such financial statements as may be necessary to fully disclose and fairly present the results of operations for the year under audit and the financial condition at the end of that year. Should such financial statements not be prepared and presented within a reasonable period of time, it is understood [FIRM] shall prepare them for the City. The cost of preparing such financial statements shall be in addition to the fee for conducting the audit as set forth below.
8. All final reports shall be provided in both written and electronic format. Electronic format shall be in a format coordinated with the City and shall be fully compatible with such software programs specified by the City, .e.g. Microsoft Word, Microsoft Excel, or such other software program as specified by the City.
9. The Scope of Work is subject to the following restrictions and assumptions:
a. City’s staff shall reasonably cooperate with [FIRM]. b. The books are closed, balanced and reconciled, and that no unexpected circumstances will be encountered during the audit. c. City will prepare all financial schedules that it has traditionally prepared, will prepare the Comprehensive Annual Financial Report (CAFR). d. City will print the financial statements, except reports and opinions of [FIRM], and will prepare all statistical tables for the CAFR. g. If audit or reporting requirements change substantially, the parties will agree to renegotiate audit and assistance fees to allow [FIRM] to meet professional standards without economic harm or benefit, regardless of whether those new requirements reduce or increase [FIRM]’s responsibilities.
City of Milwaukie, Oregon RFP for Professional Auditing Services 24