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HomeMy WebLinkAboutAgenda - 06-06-1994 - VIII-G 1 ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No. V3IL-Cr ACTION AGENDA ITEM ABSTRACT Meeting Date: June 6, 1994 SUBJECT: 1993-94 Audit Contract ------------------------------ ---------------------------------- DEPARTMENT: Finance PUBLIC HEARING YES: NO: X ------------------------------- ---------------------------------- ATTACHMENT(S) : INFORMATION CONTACT: Ken Chavious Ext 2453 Contract TELEPHONE NUMBER- Engagement Letter Hillsborough - 732-8181 Chapel Hill - 968-4501 Mebane - 227-2031 Durham - 688-7331 ---------------------------------------------------------------------- PURPOSE: To consider awarding a contract to perform the audit for the fiscal year ending June 30, 1994. BACKGROUND: Local governments are required by G.S. 159-34 to have an annual audit of their financial records by an independent auditor. The audit for 1993 was performed by Deloitte and Touche, an international accounting firm with an excellent reputation in the field of Governmental Accounting and Auditing. Deloitte & Touche has proposed a contract to perform the 1993- 1994 audit for a fee of $52,500. The audit costs consist of $31,500 for the Comprehensive Annual Financial Report (CAFR) and certification of tax levy, and $21,000 for the Single Audit of grant funds. The Single Audit is required by the State and Federal goverments as a condition for receipt of grant funds. In order to meet the Single Audit requirements, the auditor must perform financial, as well as, compliance testing as established by audit guidelines issued by the grantors. The proposed costs reflect an increase of $2,700 over the previous year. The audit costs associated with the CAFR, tax levy and internal control structure have not increased for several years. This is due mainly to the work undertaken by the Finance Department staff in the preparation of all statements and schedules, many of which used to be prepared by the auditors. The increase can be attributed to additional grant programs which will require more review by the auditors to comply with the Single Audit Act. The auditors will be indivdually testing these programs as well as performing more compliance testing than in previous years. M t la Existing and new programs which have had the most significant ► impact on the Single Audit include, Child Support Enforcement, Home Partnership Program, Whitted Forrest, and increased funding levels in the various Social Services programs. The majority of costs associated with the Single Audit are recouped through indirect cost reimbursements received from State and Federal grantors. RECOMMENDATION(S) : The manager recommends that the Board approve the audit contract with Deloitte & Touche for fiscal year 1993-94 and authorize the Chair to sign. LCC-205 (Rev. 11111994) CONTRACT TO AUDIT' ACCUL.NIb File is Triplicate. of Orange Courity 2 i Ge+wmeaal Una On this 16th day of may , 19 94 Deloitte tt Tbtche A"tw PO Box 2778, Raleigh, NC 27602-2778 Malbat Aft es hereinafter referred to as the Auditor, and Bd of 22t M Ca md--sioners of Orange Comity hereinafter refer.sd Go"raK Dowd Gwwnaaaeal Unk to as the Governmental Unit, agree at follows: 1. The Auditor shall audit all statements and disclosures required by p nerally accepted accounting principles and additional required legal statements and disclosures of all funds and/or divisions of the Govesmnental Unit for the period beginning MY 1 , 19-23.and ending June 30 . 19,4 The combining.individual fund, and account group financial statements and schedules shall be subjected to the auditing procedures applied in the audit of the combined financial statements and an opinion will be rendered in relation to the combined financial statements taken as a whole. The audit will have no scope limitations except. None 2. The Auditor shall conduct his audit and render his report in accordance with generally accepted auditing standards.The audit shall include such tats of the accounting records and such other auditing procedures as are-considered by the Auditor to be necessary in the circumstances, except as follows: (See Item 12.) 3. It is agreed that generally accepted auditing standards include a review of the Governmental Unit's system of internal con- trol and accounting as same relates to accountability of funds and adherence to budget and law requirements applicable thereto; that the Auditor will make a written report, which may or may not be a part of the written report of audit, to the Governing Board setting forth his findings, together with his recommendations for improvement.That written report must include all matters defined as"reportable conditions"in AU 325 of the AICPA Professional Standards.The Auditor shall file a copy of that report with the Secretary of the Local Government Commission. 4. After completing his audit, the Auditor shall submit to the Governing Board a written report of audit. This report shall include,at least,the financial statements of the governmental unit and all of its component units and notes thereto prepared in accordance with generally accepted accounting principles, combining and supplementary information requested by the client or required for full disclosure under,the law, and the auditor's opinion on the material presented.The Auditor shall furnish the required number of copies of the report of audit to the Governing Board as soon as practical after the close of the accounting period. (See Item 15.) S. It is agreed that time is of the essence in this contract. All audits are to be performed and the report of audit submitted by October 31 19_14 6. Should circumstances disclosed by the audit call for a more detailed investigation by the Auditor than necessary under ordinary circumstances,the Auditor shall inform the Governing Board in writing of the need for such additional investiga- tion and the additional compensation required therefor. Upon approval by the Secretary of the Local Government Com- mission, this agreement may be varied or changed to include the increased time and compensation as may be agreed upon by the Governing Board and the Auditor. 7. The Auditor shall perform a compliance audit for all federal and State financial assistance programs in accordance with the Single Audit Act of 1984 (Pub. L. No. 98.502 and G.S. 159-34).The Auditor will file the required number of copies of all reports required under the Federal and State Single Audit Acts with the Secretary of the Local Government Commission. (This includes the report required in Item 3.) (See Items 15 and 18.) S. In consideration of the satisfactory performance of the provisions of this agreement, the Governmental Unit shall pay to the Auditor, upon approval by the Secretary of the Local Government Commission, a fee which includes any cost the Auditor may incur from work paper or peer reviews or any other quality assurance program required by third CA FR(Federal and StiLte agencies or other organizations as r uired under the Federal and State Single Audit Aces: �x and Certification of Tax law $31,500; Single Audit of Grant P&As $21,000. 9. All local government and public autTiority contracts for annual or special audits,financial statement preparation,finance- related investigations, or any audit-related work in the State of North Carolina require the approval of the Secretary of the Local Government Commission.Invoices for seroiew rendered under these contracts shall not be paid by the Govern- mental Unit until the invoice has been approved by the Secretary of the Local Government Commission. (This also includes any progress billings.)All invoices should be submitted in triplicate to the Secretary of the Local Government Commission. The original and one copy will be returned to the Auditor. Approval is not required on contracts and invoices for system improvements and similar services of a non-auditing nature. (Continued on Reverse) 3 E 10. The contract should be executed and submitted in triplicate to the Secretary of the Local Government Commission, 325 North Salisbury Street, Raleigh. North Carolina 27803-1385. I 11. Upon approval,the original contract will be returned to the Governmental Unit, a copy will be forwarded to the Auditor, and a copy retained by the Secretary of the Local Government Commis:ion. The audit should not .,e started before the contract is approved. 12. This contract eontemPlates art unqualified ophsion being rendered.Aug$naitations or restrictiom in acope which would Lead to a qualification should be fully aWlained in an atta*nwat to this contraa. Contracts with such limitations will not be approved unless satisfactory explanation Is made. 13. If an approved contract needs to be varied or changed, the change must be reduced to waiting, signed by both parties, preaudited if necessary, and submitted to the Secretary of the Local Government Commission for approval. No change shall be effective unless approved by the Secretary of the Local Government Commission, the Govaning Board, and the Auditor. 14. A separate contract should not be made for each division to be audited or report to be submitted. The:Dope of the audit and the fee for the audit should be dearly stated. A separate contract must be executed for each component unit which is a local government and for which a separate audit report is issued. 15. The auditor shall file three copies of the report of audit (four copies for councils of governments, one copy If no single audit is required) with the Secretary of the Local Government Commission when (or prior to)submitting the invoice for the services rendered. The report of audit, as filed with the Secretary of the Local Government Commission, becomes a matter of public record for inspection and review in the offices of the Secretary by any interested parties. These reports are used in the preparation of Official Statements for debt offerings as well as by municipal bond rating services. 16. There are no special provisions except: See engag t letter attached 17. Whenever the Auditor uses an engagement letter with the client, Item 16 should be completed by referencing the engage- ment letter and attaching a copy of the engagement letter to the contract to incorporate the engagement letter into the • contract. In case of conflict between the terms of the engagement letter and the terms of this contract, the terra:of this contract will control.Engagement letter terms are deemed to be void unless the conflicting tams of this contract are specifically, deleted in Item 21 of this contract. 18. A Governmental Unit not having a single audit on federal and State funds would list Item 7 in Item 21 of the contract as being a deleted provision. An explanation must be given in Item 21 for anv Governmental Unit not receiving a single audit on federal and State funds (e.g., a single audit is not required under the Federal and State Single Audit Acts and is not being performed). 19. If this audit engagement is subject to the standards for audit as defined in the Government Auditing Standards, issued by the Comptroller General of the United States, then the Auditor warrants by accepting this engagement that helshe will meet the requirements for an external quality control review and continuing education requirements specified in the Government Auditing Standards. Copies of any written communications that are a result of an erternal quality control review will be made available to the Secretary of the Local Government Commission upon his request. 20. There are no other agreements between the parties hereto and no other agreements relative hereto that shall be enforceable unless entered into in accordance with the procedure set out herein and approved by the Secretary of the Local Govern- ment Commission. 21. All of the above paragraphs are understood and shall apply to this agreement,except the following numbered paragraphs shall be deleted: (See Items 17 and 18.) Deloitte & Touche Orange County, North Carolina . Audit Hem Gavwameani Usk By Rea Price, Partner By Moses Carey, Jr., Chairman / (PWM e�pa,pr txfee same) G (Thaw tYR or print etra and tlHa) Mpntura) (Upomn of Maroc or;Caakpweoa of praeaitq bowd) Approved by the Secretary 4 the Local Government This instrument has been preaudited In the manner re- Commission as provided in Article 3, Chapter 159 of the quired by The Local Government Budget and Fiscal Con- General Statutes or Article 31, Part 3, Chapter 115C of trol Act or by The School Budget and Fiscal Control Act. the General Statutes. Kenneth T. C havious Far the$attatary, Iaeal Gsvanmest Cam mica Go wameaea) Uait Fiaame Offraw (TSeaw type a mat name) (Si jstartsa) (5tptae+os) Date Date 4 Delofte & Touch /\ Suite 1800, First Union Capitol Center Telephone:(919)546-8000 150 Fayetteville Street Mall Telex:4995716 P.O.Box 2778 Facsimile:(919)833-3276 Raleigh,North Carolina 27602-2778 May 16, 1994 The Board of County Commissioners Orange County, North Carolina Ladies and Gentlemen: We are pleased to serve as independent accountants and auditors for Orange County, North Carolina. Mr. Rex Price will be responsible for all services we perform for you. It will be the responsibility of Mr. Price to make sure that your management receives quality service. He will, as considered necessary, call upon other individuals with specialized knowledge, either in this office or elsewhere in our firm. While auditing and reporting on your annual financial statements is to be the recurring basic service we provide, we would also like to assist you on issues as they arise throughout the year. Hence, we hope you will call Mr. Price whenever you feel he can be of assistance. Report on Audit of Financial Statements The purpose of our engagement is to audit the County's financial statements for the year ending June 30, 1994, and to evaluate the fairness of presentation of the statements in conformity with generally accepted accounting principles, in all material respects. Our audit will be conducted in accordance with generally accepted auditing standards which involves obtaining an understanding of the internal control structure, including the control environment, the accounting system and the control procedures established by management. Based on our understanding, we will design our audit to provide reasonable assurance of detecting errors and irregularities that are material to the financial statements. D�oltteTouch T*n tau ICI 5 i The Board of County Commissioners Orange County, North Carolina Page Two However, because of the characteristics of irregularities, particularly those involving forgery and collusion, a properly designed and executed audit may not detect such items. Therefore, an audit conducted in accordance with generally accepted auditing standards is designed to obtain reasonable, rather than absolute, assurance about the financial statements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. The objective of our audit is the expression of an opinion on the County's financial statements. Our ability to express that opinion, and the wording of our opinion, will, of course, be dependent on the facts and circumstances at the date of our report. If our auditors' report requires modification, the reasons therefore will be discussed with you prior to its issuance. Management's Responsibility We direct your attention to the fact that the financial statements are the responsibility of management. In this regard, management has the responsibility for designing effective internal controls, for properly recording transactions in the accounting records, for making appropriate accounting estimates, for safeguarding assets, and for the overall accuracy of the financial statements. Other Communications Arising from the Audit In connection with the planning and the performance of our audit, generally accepted auditing standards require that we communicate to the Board of County Commissioners, to the extent that they come to our attention, irregularities and illegal acts that are clearly not inconsequential, and reportable conditions. Reportable conditions are significant deficiencies in the design or operation of the internal control structure that could adversely affect the County's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We may also have other comments for management on matters we have observed and possible ways to improve the efficiency of your operations or other recommendations concerning the internal control structure. 6 The Board of County Commissioners Orange County, North Carolina Page Three With respect to these other communications, it is our practice to discuss all comments, if appropriate, with the level of management responsible for the matters prior to their communication to senior management and/or the Board of County Commissioners. Full Disclosure Under the Law Publications from the following organization are considered by us in determining whether Orange County's financial statements include full disclosure under the law as required by the Local Government Commission Contract to Audit Accounts. Organization Publication United States Government Single Audit Act of 1984 OMB Circulars A-128 and A-133 Government Auditing Standards - Yellow Book State of North Carolina North Carolina G.S. 159.34 Annual Independent Audit; Rules and Regulations North Carolina Single Audit Implementation Act Government Accounting Standards Board Financial Reporting Standards National Council on Governmental Accounting Financial Reporting Standards American Institute of Certified Public Accountants Statement of Position 92-7 Financial Accounting Standards Boards SFAS 7 Board of County Commissioners Orange County, North Carolina Page Four Schedule of Audit Our audit is scheduled for performance and completion as follows: Beg_n Complete Audit Performance Schedule: Interim June 20, 1994 July 1, 1994 Year-end August 1, 1994 September 30, 1994 Audit Communications: Report on Audit of Financial Statements October, 1994 Other Communications: Reportable Conditions, if any October, 1994 The fees indicated below anticipate assistance to be supplied by your personnel, including the preparation of schedules, analyses of accounts, and drafting of the comprehensive annual financial report, which have been discussed with Mr. Ken Chavious, Finance Director. Meeting the dates for preparation of schedules and the report, as outlined on your Client Participation Schedule, is crucial to our timely completion of the audit. If, for any reason, any of these items will not be completed by the due dates, you should notify us immediately to determine how to proceed, if our assistance will be needed, and to discuss any additional fees that may be necessary. Other Services In addition, as part of our audit engagement, we will perform the following: a) an audit of the schedules of property taxes receivable and the related schedule of 1993 tax levy and collections for the year then ended, and b) a single audit in accordance with the Single Audit Act of 1984 and the State Single Audit Implementation Act. We are, of course, available to assist you in other areas that might arise. t 8 Board of County Commissioners Orange County, North Carolina Page Five Fees Our fees are based on the amount of time required at various levels of responsibility, plus actual out-of-pocket expenses, payable upon presentation of our invoices. We estimate that our fees for this audit will be $52,500, including expenses. We will notify you immediately of any circumstances we encounter which could significantly affect our estimate. We appreciate this opportunity to serve you and trust that our association will be a long and pleasant one. Yours truly,