HomeMy WebLinkAboutRESOLUTION NO. 2018-74 RESOLUTION NO. 2018-74
A RESOLUTION TO ACCEPT AN AUDIT PROPOSAL
FOR FY19, FY20 AND FY21
WHEREAS, the City of Fairfax, Iowa is required to have an annual audit; and
WHEREAS, the City of Fairfax, Iowa, has sent our audit RFPs for FY19, FY20, and
FY21; and
WHEREAS, the City of Fairfax received three responses, the lowest cost one being from
the Office of Auditor of State, State of Iowa.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Fairfax,
Fairfax, Iowa, that they approve the audit proposal for FY19, FY20, and FY21 from the Office of
Auditor of State, State of Iowa as follows:
FY2019 FY2020 FY2021
Estimated Fee 10,900 11,200 11,500
Estimated Other 1,000 -1100-0 1,000
TOTAL 11,9()() 12,200 12,500
BE IT FURTHER RESOLVED,by the Fairfax City Council of the City of Fairfax,Iowa,
that the Mayor and City Clerk are hereby directed to certify this resolution of approval.
Passed and approved this 9th day of October, 2018.
AYES: Otto, Daly, Kell, Volk, and Wainwright
NAYS: None
bilrnell G. Frieden, Mayor
ATTEST:
(X.nthia K. Stimson, City Clerk/Treasurer
C)
OFFICE OF AUDITOR OF STA'I'E
,0'9, 0
STATE OF IOWA
Mary Mosirnan,CPA
State Capitol Building Auditor of State
Des Moines, Iowa 50319-0004
O Telephone(515)281-5834 Facsimile(515)281-6518
September 7, 2018
To the Honorable Mayor and Members of the City Council:
The Office of Auditor of State is pleased to present this proposal for the audit of the financial
statements of the City of Fairfax. Based upon the information available, we believe we have an excellent
understanding of the scope of audit services to be provided.
The primary objective of our audit will be to render opinions on the financial statements and
supplemental information of the City of Fairfax for the three years ending tune 30, 2019, June 30, 2020
and June 30, 2021. Our audit will be conducted in accordance with U.S. generally accepted auditing
standards, Government And in Standards and applicable standards governing audits of Federal
financial assistance. We will also obtain an understanding of the City and its environment including its
internal control and will provide the City with our observations and suggestions regarding internal
control, operating and accounting policies and other matters worthy of management's attention.
In addition to providing audit services to the City of Fairfax, we are also able to provide valuable
training and technical assistance to your staff during the course of the audit. `Fhe Office of Auditor of
State is actively involved throughout the year in providing technical guidance, assistance and training to
government officials, employees and auditors. Our experience in these areas and our extensive local
government auditing experience would be used to assist the City of Fairfax, both currently and in
subsequent years, in operating as efficiently and as effectively as possible.
We look forward to the opportunity to provide these services to the City of Fairfax. If we can
provide any additional information please contact me at:
Office of Auditor of State
State Capitol Building
Des Moines, Iowa 50319
(515)281-5834
Sincerely,
Andrew E. Nielsen, CPA
Deputy Auditor of State
Table of Contents
Profile of the Office of Auditor of State 3-4
Professional Service'rearn 4-6
Scope and Ojectives of the Audit 6
Timing of Work 6
Professional Fees 6-7
Contract 8-9
Profile of the Office of Auditor of State
As with any product or service that you buy, it is important to consider quality as well as price. This is
especially true in your capacity as a public official. The various laws and regulations which this office and your
City operate under are designed to provide safeguards for both the citizens and the public officials. An audit must
provide an adequate test of compliance with these laws and regulations to be of the greatest benefit to you and the
citizens. Since governmental audits are the only audits done by this office, we are therefore very knowledgeable in
this area. We believe this is acknowledged by the extensive amount of time we spend. annually assisting CPA
firms who may not be as familiar with these laws and regulations, governmental attorneys and private attorneys.
Since our practice consists entirely of governmental audits, we also possess a broad knowledge of practices
and procedures utilized in other governmental units. 'This experience will be used to assist you by proposing
alternative practices or procedures, where appropriate, which may be more effective or cost-efficient than those
presently used by the City.
Another factor to be considered is our recognized independence. The Office of Auditor of State can ensure an
impartial and completely independent view in conducting the audit because we are not dependent upon any
location or area for our work and continued existence. The quality and usefulness of our audits is not affected by
unusually or artificially low fees. This independence is recognized by the citizens, which provides additional
assurances as to the proper conduct of public affairs.
The Office of Auditor of State is one of the largest audit organizations within the State of Iowa, with a
professional staff of 1.01 individuals, including 3S Certified Public Accountants. The goal of our office is:
(1) to provide effective, independent, cost efficient audits of governmental
units in a timely manner; and
(2) to inform the taxpayers and other interested parties of the financial
stewardship, legal compliance, and efficiency and effectiveness of the
operation of government while providing recommendations and
management assistance to increase the accountability and responsiveness
of government.
To accomplish this, the office is organized into three divisions, as follows:
Financial Audit Division - Responsible for audits of all State agencies, cities, counties,
schools, public hospitals, colleges and universities and various Federal programs under
direct contract with the Federal government or as part of the single audit concept.
Perl`6rmangLnpLq_q -Division - Responsible for performance audits of State agencies
and State universities, responds to legislative requests for evaluations of State
government programs and investigates suspected fraud and misappropriations involving
State and local government funds.
Administration Division. - Responsible for computer support, printing services, personnel
policies, employee training and other administrative and accounting support.
In addition to the Administrative Office in Des Moines,the Office of Auditor of State currently maintains area
offices in Acnes and Iowa City. These offices are supervised by Managers who, in addition to their responsibilities
for designated audit engagements, provide valuable assistance to government officials and other individuals to
achieve effective, efficient government.
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The Financial Audit Division consists of84 individuals, including 30Certified Public Accountants, classified
as follows:
Deputy I
l|
Senior Auditor Dm 14
Senior Auditors 9
Staff Auditors 20
Assistant Auditors 28
Support Staff }
Total --84
The Financial Audit Division has been instrumental in the Office of Auditor of State achieving its position as
unscoguimvd leader in improving the quality ofgovernmental audits throughout the State. We actively cooperate
and participate in the Positive Euforomuocot Program of the To`pu /\oonuutunoy Examining Board designed to
identify and correct substandard audit work hyCertified Public Accounting finum.
In addition, the Office of Auditor of State annually prepares sample audit report formats, including financial
mtatooueotm` supplemental information and statutory compliance oonuzoents. These aomp|m rmpndu are prepared to
umoiut CPA ±lono in complying with apP|iuoh|m pzo6ommiouol and statutory requirements. At the request ofthe Iowa
Society of Certified Public /\ccuuu1ooto` these are presented at training meaaioom each year to update auditors and
answer their questions regarding govonnroeo1o| audits. Topics include audit report presentation, the Code of Iowa,
legislative updates, Pedmnn| audit requirements, internal onubol and oouuy more. Our position as the leading
authority ooIowa governmental audits remains unchallenged.
The Office of Auditor of State is registered as a firm with the Iowa Accountancy Examining Board.
Professional Service Team
The most important uxyout in serving audit clients is the people ommiguud to provide the service. The
personnel assigned tothis engagement will be those individuals who have experience, docomnoLnUmd ability and
epuuiuUz#d skills required for satisfactory completion of your service /mquivoroeotm. Brief doocdydonn of the
functions and responsibilities of the individuals associated with this euAugwnuout and their qualifications are as
/h|\ovvm:
De tty cUtQr of State - Andy Nielsen is the Deputy Auditor of State for the Financial Audit
Division and has o|1inoaie responsibility for the audit omgug#mnuu1.
Be keeps uhrmuat of developments within the governmental area to ensure that services are
responsive 10the changing eovirnom/on< and requirements that governmental units operate in.
Specifically, he dctsnoimoy the content of the auditor's report and is responsible K»r
ascertaining that office and professional standards have been complied with throughout the
ouSugemueu1. In addition, bedirects the activities of the audit team, reviews the audit results
and conclusions and keeps abreast nfthe client's activities and plans and imalso available for
consultation with the Manager throughout the audit engagement,
Mr. Nielsen is u Certified Public Accountant who graduated from the University of Northern
Iowa in 1975. He then worked for the accounting finu ofMoG|udruy, Hendrickson and Cu.,
omiU 'oiuingthis office inlV8|.
As Deputy Auditor of State in charge of the Financial /\odk Division, he is involved in
approximately 20Oaudits annually.
8e is a000ruberofthe /\zuurioao Institute ofCertified Public Accountants, the Iowa Society of
Certified Public Accountants and the Association of Government Accountants.
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Manager—Ernie Ruben will be the Manager and participates in developing the audit programs,
and selecting and assigning personnel. Fie is responsible for the day-to-day supervision of
staff personnel in specific areas of the audit engagement and for the in-depth review of all
working papers and reports. Fie is also available to provide additional limited auditing
assistance to the City throughout the year, as requested,
Mr. Ruben is a Certified Public Accountant who graduated from the University of Northern
Iowa. He joined our office in 1993. Since that time, he has participated in over 200
governmental audits, including audits of cities and counties.
In-chugqAtLditor---Jamie Reuter will be the in-charge auditor who assists in the development
of the audit plan and is responsible for directing the day-to-day performance of that plan. He
is responsible for ensuring the report and working papers are complete and accurate. He also
has the responsibility to discuss all auditing and accounting problems with the Manager and
to obtain the Manager's concurrence with conclusions.
Mr. Reuter graduated from the University of Northern Iowa and joined our staff in 2011. Since
that time, he has participated on approximately 50 governmental audits.
Assistant Auditors - Assistant auditors will be assigned as necessary to perform assigned audit
tasks as directed by the in-charge auditor. The staff would include those who have previous
experience with your City or one of the other cities.
Other Resources - All of our staff have experience in the application of the standards included
in Government AILditing Standards and applicable standards governing audits of Federal
- -
financial assistance, as well as U.S. generally accepted auditing standards. In addition, many
of our staff have experience in auditing cities. These auditors would be consulted as
necessary to effectively perform this engagement.
I11depe - The individuals listed above are and any assistant auditors assigned, as
Ltidence
necessary, to this engagement will be independent of the City of Fairfax as defined by U.S.
generally accepted auditing standards and Government Auditing Standards, issued by the
Comptroller General of the United States.
Policy—on Notification of Personnel Changes - We will immediately notify the City of any
changes in key personnel assigned to this engagement.
_QjLai ity_Co IttQt - The Financial Audit Division is subject to quality control reviews by the
Administration Division.
The Office of Auditor of State is also a participant in the National State Auditor's Association
quality control review program and has successfully completed quality control reviews of
audits issued during the years ended June 30, 1998, 2001, 2004, 2007, 2010, 2013 and 2016.
Our most recent peer review report and letter of comment can be located on our website at
The Office of Auditor of State nor any of its employees have been subject to litigation or
referred to the Iowa Accountancy Board.
ContiggLin-61 Professional Education-Continuing education is of great importance as it forms the
-foundation for high quality work and provides assurance that the staff will have the
knowledge required to fulfill assigned responsibilities. The office's continuing education
requirements are in accordance with Government Anclxtira Standards. 'Training consists of
seminars or workshops relating to government auditing, accounting and related topics. Staff
are given training commensurate with their experience and work assignments.
5
Staff and
- Tb* and the assistants onthe audit will require
workspace utthe City. They will request client assistance unnecessary and will work with the
City inthe timing n[this assistance.
The primary objective ofour audit will behrender opinions on the basic financial statements and
supplemental information of City of Fairfax for the three years ending June 30, 2019, June 30, 2020 and June 30,
2021. Our audit will be conducted in accordance with U.S. generally accepted auditing nUaudu,dm, Government
Auditing , and uppUueh|s m1undmdm governing audits of Federal financial assistance. Accordingly, the
audit will include such tests of the accounting records and such other auditing procedures as we consider necessary
iuthe circumstances.
Although the primary nkimodve of an audit is to provide independent assurance that financial ruyuib are
presented [xirhv and objectively and the federal program(s) were administered properly, if nppUcah|o` other
benefits will result umnpart ofour audit. At the conclusion ofour field work, vvewill hold onexit conference with
applicable City nt5oiub to discuss our observations and suggestions regarding internal control, operating and
accounting policies and other matters worthy of management's attention. These discussions will bcbased onfirst-
hand mboervu1ionazouduhyou,undemtondiugn[UbeCitvundhoouvirmonueot, iuc|udingitoioterno| uonbo|.
VVowill tailor the scope of our audit according to the strengths in the system of internal controls existing at
the City of Fairfax. Under our approach, we will obtain on understanding of the City and its uovixnurnord,
including its internal oonirol. The design ofrelevant policies and procedures will also be evaluated to determine
whether these relevant policies and procedures have been irnp|eznoutmd and to determine further audit procedures
to be performed. The results of our procedures and our reuor000mndu1inom, if any, will be coomnuniooded to
applicable City oO5uiu|m in ucconinuou with pu`temmiooni uimodurdw. Any findings meeting the definition of
significant deficiencies and/or nuatmdul vvouknuum*o as defined by applicable professional m1uudu,da will be
included within the audit report, as required.
We will unacam control risk for relevant [Iouuciu| mto6enu*o< assertions related to each significant account
balance orbunmuotiou o|uaa, including those relating to overall oonup]iuuuc with |uv,n and regulations that have o
direct and material effect onthe financial statements. Our evaluation procedures should provide management with
some excellent suggestions for improving operating procedures.
We anticipate performing fieldwork for the mndd nfthe year ended June ]U, 201.9 in /u1m January or early
February 2U2O, with approximately l?0hours offieldwork and review. Report preparation and office review will
be performed with completion and delivery of a mutually-agreed nurubc, of copies of the Doa| report by
March 3l` 2U20. A similar schedule-for the years ending June 30, 2020 and June 30, 2021 is anticipated.
Professional Fees
The Code of Iowa roonguizcu the public iu|mrex1 is beat served vdzeo u complete audit is conducted. A
aozop|otc audit, or desirable amoiat000e to public officials, may not result when an auditor is influenced, even
subconsciously, by the inability to be fairly compensated for necessary work.
We are very aware of the need to be cost efficient in our audits and to equitably bill for our services. Our fees
are based upon the time spent ou an engagement at hourly rates currently ranging from $53.25 to $96.50 per hour,
depending on the level of experience and training of the individual assigned. 1[bemm umne hourly nduo would he
billed for tcubuioa| uoainiunue. We also bill for out-of-pocket cxpcoupn, at coat, and for Clio statutory filing tem. K
is our practice to submit for payment one hi\| upon completion and release of the audit report, However, if you
prefer, v/ecan submit progress billings.
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Our hourly rates by staff classification are as Follows:
Director/Manager $96.50-81,75
Senior Auditor 11 71.00
Senior Auditor 61.75
Staff Auditor 56.00
Assistant Auditor 53.25
While these hourly rates may change from year to year, any changes in the hourly rates will not affect the total
fees proposed by year.
Based upon the information available, we estimate the cost to perform the audit for the three years ending
June 30, 2019, June 30, 2020 and June 30, 2021 will not exceed the following, except as specifically agreed by the
City of Fairfax and the Office of the Auditor of State.
Fiscal Year
2019 2020 2021
Estimated hours 170 170 170
Estimated fee $ 10,900 11,200 11,500
Estimated out-of-pocket expenses ,()00_...__ 1._000
Totalt 2, Q,
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These estimates do not include the required filing fee of$425 as provided for under Iowa Code section 11.5,
subsection 10.
The estimate above does not include the cost of a Single Audit, if required. If it is determined a Single Audit
in accordance with Office of Management and Budget (OMB) Circular A-133 is required, an additional estimate
will be provided.
In addition to performing an audit of the City of Fairfax's financial statements and its compliance with laws
and regulations, the Office of Auditor of State routinely provides management advisory services, including
technical assistance, staff consultation and assistance with procedural matters, such as reconciliations of various
accounting records. We believe that these are important services that can provide both a current and a continuing
benefit to the City, and we provide these services at the same hourly rates previously noted. 'rhe extent to which
these services are necessary or desirable is largely dependent upon your decision to utilize the resources that we
can provide for the benefit of your City.
We recognize that the City may be able to contract for this audit at a lower fee. However, as previously
stated, we believe that the Office of Auditor of State is the leading authority to help assure the proper conduct of
City affairs, which is the ultimate obligation of all City officials. We would fulfill our joint responsibilities in the
roost cost-effective manner possible.
Thank you for your consideration.
AEN/dId
.................
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AGREEMENT BETWEEN
CITY OF FAIRFAX
AND
MARY MOSIMAN, CPA
.AUDITOR OF STATE
THIS AGREEMENT made and entered into this 5th day of September 2018 by and between City of
Fairfax,hereinafter called CITY and Mary Mosiman, CPA, Auditor of State hereinafter called "CPA,"
WHEREAS, the CITY wishes to obtain the services of the CPA to perform the annual audit required by
Section 11.6, Code of Iowa, for the three years ending June 30, 2019, June 30, 2020 and June 30, 2021 and
WHEREAS,the CPA is equipped and staffed to assist in the above audit; and
WHEREAS, this agreement is in the public interest in fulfilling the requirements of Chapter 11 of the
Code of Iowa.
NOW, THEREFORE, BE IT UNDERSTOOD AND AGREED:
1. That the CPA will:
A. Provide auditors of various classifications and for estimated hours as detailed in 2.A of
this agreement
B. Begin work on the audit engagement as specifically agreed upon with the CITY.
C. Perform all work in accordance with U.S. generally accepted auditing standards,
GQ..KQtt11)L
Qqt-A4djfL11)
SS
-Ltandards and applicable federal requirements.
D. Immediately inform the CITY, the Auditor of State and the County Attorney if the audit
discloses any irregularity in the collection or disbursement of public funds.
E. Provide access to the working papers to any appropriate federal agencies for the period
of time specified in relevant agreements entered into by the CITY.
F. Provide access to the working papers to the Auditor of State in accordance with Chapter
I I of the Code of Iowa.
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2. Conditions of Payment:
A. It is understood that the 'fees for the services set -forth above shall be reimbursed at the
following hourly rates:
-Classification Estimated Hours Hourly Rate
Director/Manager 18 96.50/81.75
Senior II/Senior 76 71.00/61.75
Staff/Assistant 76 56.00/53.25
While these hourly rates may change from year to year, any changes in the hourly rates will not affect the
total fees proposed by year,
B. The CPA shall present an invoice for services in the following manner:
One invoice upon release of the report.
C. Payment shall be made within 30 days of receipt of invoice.
D. The total reimbursement shall not be for more than $11,900 for the audit of the year
ended June 30, 2019, $12,200 for the year ending June 30, 2020 and $12,500 for the year
ending June 30, 2021 unless mutually agreed upon by the CITY and the Auditor of State.
3. Termination of Agreement:
A. The CITY may terminate this contract without notice if the CPA fails to perform the
covenants or agreements contained herein, or may terminate, with 30 days' notice prior
to start of fieldwork.
B. The C shall be paid for all work satisfactorily performed to the date of termination.
IN WITNESS THEREOF, the CITY and CPA have executed this AGREEMEN'r as of the date indicated
below:
C'I 'Y
—
By: BY,�2/
Title: Auditor of State 'Title:
Date: P er temb2018 Date: 16)
_..-__.__._.w_._. -----—
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