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Exh 8E.. ~L 7 r4+~ r CITY OF ATLANTIC BEACH CITY COMMISSION STAFF REPORT AGENDA ITEM: Authorization to Sign Letter of Engagement With Purvis Gray and Company DATE: July 21, 1999 SUBMITTED BY: David E. Thompson, City Manager BACKGROUND: Please see the attached memorandum from Finance Director Nelson Van Liere. When the RFP for auditing was advertised, it was advertised as a five (5) year commitment. However, the contracts run annually and have to be renewed annually. Please see the attachment. Purvis Gray and Company has done a good job for the City, and they have a reasonable expectation of continuing to provide this service for another year. RECOMMENDATION: Staff recommends authorizing the Mayor to sign the Audit Engagement Letter with Purvis Gray and Company. ATTACHMENT: Memorandum from Nelson Van Liere dated July 13, 1999 Audit Engagement Letter with Purvis Gray and Company Page from Request for Audit Services f m the RFP in 1997 REVIEWED BY CITY MANAGER: AGENDA ITEM NUMBER: ' 800 SEMINOLE ROAD ATLANTIC BEACH, FLORIDA 32233-5445 TELEPHONE (904) 247-5800 FAX (904) 247-5805 SUNCOM 852-5800 MEMORANDUM Date: July 13,1999 To: David Thompson, City Manager From: Nelson Van Liere, Finance Director ~,~ Subject: Purvis Gray and Company Audit Engagement Letter to be signed by the Mayor BACKGROUND: An engagement letter is a standard component of the annual audit which is used to confirm an understanding of the work to be performed by both the City and the auditors. The Audit Engagement Letter puts into writing the responsibilities of both the auditors and the City. The auditors are to perform the same services that they have done in the past. The City is to assist with the audit by answering questions, providing documentation and preparing reconciling schedules. The Audit Engagement Letter also contains the fees, and the date the report will be delivered. The fees are the same as for the previous year's audit. BUDGET: The budget for the audit is allocated throughout a number of departmental budgets. It is fully funded and being charged to the respective professional service accounts of those departments. RECOMMENDATION: The City Commission authorize the Mayor to sign the Audit Engagement Letter to confirm the understanding of the division of responsibilities between the City and Purvis Gray and Company in the completion of the Annual Audit in this third year of a five year commitment in the amount of $23,000. ATTACHMENT: Purvis Gray and Company Audit Engagement Letter June 23, 1999 AUDIT ENGAGEMENT LETTER Honorable City Commissioners c/o Mr. Nelson Van Liere, Finance Director City of Atlantic Beach 800 Seminole Road Atlantic Beach, Florida 32233-54 TS G ay Company We are pleased to confirm our understanding of the services we are to provide for the City of Atlantic Beach, Florida, for the year ended September 30, 1999. We will audit the general-purpose financial statements of the City of Atlantic Beach, Florida, as of and for the year ended September 30, 1999. Also, the document we submit to you will include the following additional information that, except for certain statistical information in the Board Covenant Continuing Disclosure Section, will be subjected to the auditing procedures applied in our audit of the general-purpose financial statements: ^ Combining Statements, By Fund Type v Schedule of Net Revenues in Accordance With Bond Resolutions ^ Pension Schedules ^ Bond Covenant Continuing Disclosures Our audit will be a single audit conducted in accordance with generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; the provisions of OMB Circular A-133, Audits of Stares, Local Government, and Non-Profit Organizations; Chapter 11, Florida Statutes; and the Rules of the Auditor General, and will include tests of the accounting records of the City of Atlantic Beach, Florida, and other procedures we consider necessary to enable us to express an unqualified opinion that the financial statement(s) are fairly presented, in all material respects, in conformity with generally accepted accounting principles and to report on the schedule of expenditures of federal awards and on the City of Atlantic Beach, Florida's compliance with laws and regulations and its internal controls as required for a single audit. If our opinion is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the single audit engagement, we will not issue a report as a result of this engagement. ~,. The management of the City of Atlantic Beach, Florida is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of general-purpose financial statements in accordance with generally accepted accounting principles, and that federal awards programs are managed - in compliance with applicable laws and regulations. .._ - Certified Public Accounfanfs -. P.O. Box 23999 • 222 N.E. 1 st Street • Gainesville, Florida 32602 • (352) 378-2461 • •FAX (352) 378-2505 - ~---: MEMBERS OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS ~' MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COM1tPANIES AND S.E.C. PRACTICE SECTIONS - Honorable City Commissioners City of Atlantic Beach Atlantic Beach, Florida -2- June 23, 1999 In planning and performing our audit for the year ended September 30, 1999, we will consider the internal control in order to determine our auditing procedures for the purpose of expressing our opinions on the City of Atlantic Beach, Florida's general-purpose financial statements and on its compliance with requirements applicable to major programs and to report on the internal control in accordance with OMB Circular A-133, and not to provide assurance on the internal control. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the general-purpose fnancial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the general-purpose financial statements. (Tests of controls are required only if control risk is assessed below the maximum level.) Our tests, if performed, will be less in scope than would be necessary to render an opinion on the internal control and, accordingly, no opinion will be expressed. We will perform tests of controls, as required by OMB Circular A-133, to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each of the City of Atlantic Beach, Florida's major federal awards programs. Our tests will be less in scope than would be necessary to render an opinion on these controls and, accordingly, no opinion will be expressed. We will inform you of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the general-purpose financial statements. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by OMB Circular A-133. Compliance with laws, regulations, contracts, and grant agreements applicable to the City of Atlantic Beach, Florida is the responsible of the City's management. As part of obtaining reasonable assurance about whether the general-purpose financial statements are free of material misstatements, we will perform tests of the City's compliance with certain provision of laws, regulations, contracts, and grants. However, the objective of our audit will not be to provide an opinion on overall compliance with such provisions, and we will not express such an opinion. Our audit will be conducted in accordance with the standards referred to in the second paragraph. OMB Circular A-133 requires that we plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with certain provisions of laws, regulations, contracts, and grants. Our procedures will consist of the applicable procedures described in the OMB's compliance supplement. The purpose of our audit will be to express an opinion on the City of Atlantic Beach, Florida's compliance with requirements applicable to major programs. Honorable City Commissioners City of Atlantic Beach Atlantic Beach, Florida -3- June 23, 1999 Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representation from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statemenis are free of material misstatement. As required by the Single Audit Act Amendments of 1996, our audit will include tests of transactions related to federal award programs for compliance with applicable laws and regulations. Because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud or other illegal acts may exist and not be detected by us. However, we will inform you of any material errors and any fraud that come to our attention. We will also inform you of any other illegal acts that come to our attention, unless clearly inconsequential, We will include such matters in the reports required for a single audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. We understand that you will provide us with the basic information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. This responsibility includes the establishment and maintenance of adequate records and related controls, the selection and application of accounting principles, and the safeguarding of assets. Management is also responsible for identifying and ensuring that the entity complies with applicable laws and regulations. We understand that your employees will prepare various schedules for us in advance and will be available io locate any invoices selected by us for testing. The workpapers for this engagement are the property of Purvis, Gray and Company and constitute confidential information. However, we may be requested to make certain workpapers available to certain grantor agencies pursuant to authority given to it by law or regulation. If requested, access to such workpapers will be provided under the supervision of Purvis, Gray and Company personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to certain grantor agencies. These grantor agencies may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. We expect to begin our audit in the summer, and to issue our report no later than January 31, 2000. Draft reports will be submitted.in accordance with the schedule in your request for proposals. Honorable City Commissioners City of Atlantic Beach Atlantic Beach, Florida -4- June 23, 1999 Our fees for the services set forth above will not exceed $23,000.00 for the single audit, including the preparation of financial statements and the performance of accounting services normally provided during an audit. Bills for services are due when rendered; and interim billings may be submitted as work progresses. Assistance to be supplied by your personnel, including the preparation of schedules and the analysis of accounts will be discussed and coordinated with your Finance Director, Mr. Nelson Van Liere. Our fees are based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee before we incur the additional costs. The above fee does not include the preparation of the Annual Report to the Department of Banking and Finance, or the preparation of the annual pension reports. The above fee also does not include preparation of a Comprehensive Annual Financial Report (CAFR) far tre City. We will also perform the Form 5500 for the City's cafeteria plan and an annual calculation of the City's arbitrage liability, if any, on its bond issue for an additional fee not to exceed $1,000. I will be the partner in charge of all work we perform for you. It will be my responsibility to ensure that you and your management receive good service. I will call upon other partners and staff in our firm for assistance as necessary. Government Auditing Standards-1994 Revision requires that we provide you with a copy of our most recent quality control review report. Our 1998 peer review report accompanies this letter. We appreciate the opportunity to continue to be of service to the City of Atlantic Beach, Florida, and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, PURVIS, GRAY AND COMPANY ~'~" Joseph J. VV'elch, C.P.A. Audit Partner JJW/db Enclosures Honorable City Commissioners City of Atlantic Beach Atlantic Beach, Florida -5- RESPONSE: This letter correctly sets forth the understanding of the City of Atlantic Beach, Florida. Signature: Title: Mayor Date: June 23, 1999 1 ~ ~ ,~~ Division for CPA i~trms SEC PRACTICE SECTION COMMITTEE APPOINTED REVIEW TEAM REVIEW NUMBER 128199 To the Partners . Purvis, Gray and Company We have reviewed the system of quality control for the accounting and auditing practice of Purvis, Gray and Company (the Firm) in effect for the year ended May 31,1998. A system of quality control encompasses the Firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements of Quality Control Standards issued by the American Institute of Certified Public Accountants (the AICPA). The design of the system, and compliance with it, are the responsibilities of the Firm. In addition, the Firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on the design of the system, and the Firm's compliance with that system and with the Section's membership requirements based on our review. . Our review was conducted in accordance with standards established by the Peer Review Committee of the Section. In performing our review, we obtained an understanding of the system of quality control for the Firm's accounting and auditing practice. In addition, we tested compliance with the Firm's quality control policies and procedures and with the membership requirements of the Section to the extent we considered appropriate. These tests covered the application of the Firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses. in the system of quality control or all instances of lack of compliance with it or with the membership requirements of the Section. As is customary in a peer review, we are issuing a letter under this date that sets forth comments relating to certain policies and procedures or compliance with them. These matters were not considered to be of sufficient significance to affect the opinion expressed in this report. Because there are inherent limitations in the effectiveness of any system of quality control,. departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of Purvis, Gray and Company in effect for the year ended May 31,1998, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA, and was complied with during the year then ended to provide the Firm with reasonable assurance of complying with professional standards. Also, in our opinion, the Firm has complied with the membership requirements of the Sectio in all material respects. Team Captain September 17,1998 American Institute of Certified Public Accountants Narborside Fnancial Center, 201 Plaza Three, Jersey City, NJ 07311-3881 (201) 938-3005 • (212) 318-0500 • fax (201) 938-3404 CPA CITY OF ATLANTIC BEACH REQUEST FOR AUDIT SERVICES The City of Atlantic Beach, Florida is requesting proposals from qualified firms of Certified Public Accountants to audit its financial statements for the fiscal year ending September 30, 1997, and the next four subsequent fiscal years. These audits shall be performed in accordance with the performance specifications listed in Section B, Scope of Services, of this Request for Proposals. The City .of Atlantic Beach, Florida desires the auditor to express an opinion on the fair presentation of its General Purpose Financial Statements and the Financial Statements for the City's Public Employees' Retirement System, in conformity with Generally Accepted Accounting Principles. The firm selected will be retained for a period of five years, beginning with the audit for Fiscal Year 1996-97 and ending with Fiscal Year 2000-01. Each year of the engagement will be dependent upon a satisfactory completion of the annual audit, and the contract period will be from April 1st to March 31st of each year. Copies of previous annual reports of the City are on file in the Finance Department. Questions concerning this Request for Proposals should be directed to Ann B. Meuse, CPA, Finance Director at (904) 247-5807.