HomeMy WebLinkAboutAgenda - 06-20-2017 - 8-l - Amended Contract Regarding Fee for FY 2016-2017 Audit 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 20, 2017
Action Agenda
Item No. 8-I
SUBJECT: Amended Contract Regarding Fee for FY 2016-2017 Audit
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
Amended Contract Gary Donaldson, (919) 245-2453
PURPOSE: To approve a contract amending the fee for the FY 2016-17 audit by Mauldin &
Jenkins, PLLC from $78,500 to $84,500 due to increased State audit requirements for the
Medicaid audit program.
BACKGROUND: An audit of Orange County's financial records and transactions is required
each year. Orange County previously contracted with the audit firm of Mauldin & Jenkins, PLLC
to perform the County's audits for a three year period beginning last year. The FY 2016-17
audit will be the second year of the three-year contract. Audit contracts and any amendments
require Board approval, and North Carolina General Statute 159-34 requires changes to be
approved by the Local Government Commission (LGC) after Board approval.
The audit fee change is due to an increase in the scope for the Medicaid audit program. For FY
2015-16 there were four (4) basic requirements on each Medicaid participant's file and five (5)
financial verification tests. For the FY 2016-17 audit procedures, the new State guidance has
eleven (11) basic requirements and ten (10) financial verification tests. Additionally, the State
has required an increase in the sample size.
The audit fee increase addresses additional time for the auditors to review, examine and test the
Orange County Department of Social Services (DSS) state reporting and reconciliation of
federal and state grant awards and program expenditures.
SOCIAL JUSTICE IMPACT: There is no Orange County Social Justice Goal impact associated
with this item.
FINANCIAL IMPACT: The $6,000 increase is included in the Manager's Recommended FY
2017-18 budget.
RECOMMENDATION(S): The Manager recommends that the Board approve the amended
contract and authorize the Chair to sign.
2
LGC-205 (Rev. 2017)
CONTRACT TO AUDIT ACCOUNTS
Of Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Unit(DPCU) if applicable
On this 23rd day of May 2017
Auditor: Mauldin&Jenkins,PLLC Auditor Mailing Address:
200 Galleria Parkway Suite 1700 Atlanta,Georgia 30339 Hereinafter referred to as The Auditor
and County Manager and Board of Commissioners (Governing Board(s)) of Orange County
(Primary Government)
and n/a : hereinafter referred to as the Governmental Unit(s), agree as follows:
(Discretely Presented Component Unit)
1. The Auditor shall audit all statements and disclosures required by generally accepted accounting principles (GAAP)
and additional required legal statements and disclosures of all funds and/or divisions of the Governmental Unit (s)
for the period beginning July 1 2016 , and ending June 30 , 2017 . The
non-major combining, and individual fund statements and schedules shall be subjected to the auditing procedures
applied in the audit of the basic financial statements and an opinion will be rendered in relation to (as applicable) the
governmental activities, the business-type activities, the aggregate DPCUs, each major governmental and enterprise
fund, and the aggregate remaining fund information (non-major government and enterprise funds, the internal
service fund type, and the fiduciary fund types).
2. At a minimum, the Auditor shall conduct his/her audit and render his/her report in accordance with generally
accepted auditing standards. The Auditor shall perform the audit in accordance with Government Auditing Standards
if required by the State Single Audit Implementation Act, as codified in G.S. 159-34. If required by OMB Uniform
Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards', (Uniform Guidance)
and the State Single Audit Implementation Act, the Auditor shall perform a Single Audit. This audit and all
associated audit documentation may be subject to review by Federal and State agencies in accordance with Federal
and State laws, including the staffs of the Office of State Auditor (OSA) and the Local Government Commission
(LGC). If the audit and auditor communication are found in this review to be substandard, the results of the review
may be forwarded to the North Carolina State Board of CPA Examiners (NC CPA Board).
County and Multi-County Health Departments: The Office of State Auditor will designate certain programs that
have eligibility requirements to be considered major programs in accordance with OMB Uniform Guidance for the
State of North Carolina. The LGC will notify the auditor and the County and Multi-Health Department of these
programs. A County or a Multi-County Health Department may be selected to audit any of these programs as major.
3. If an entity is determined to be a component of another government as defined by the group audit standards - the
entity's auditor will make a good faith effort to comply in a timely manner with the requests of the group auditor in
accordance with AU-6 §600.41 - §600.42.
4. This contract contemplates an unqualified opinion being rendered. The audit shall include such tests of the
accounting records and such other auditing procedures as are considered by the Auditor to be necessary in the
circumstances. Any limitations or restrictions in scope which would lead to a qualification should be fully explained
in an attachment to this contract.
5. If this audit engagement is subject to the standards for audit as defined in Government Auditing Standards, 2011
revisions, issued by the Comptroller General of the United States, then by accepting this engagement, the Auditor
warrants that he has met the requirements for a peer review and continuing education as specified in Government
3
Contract to Audit Accounts (cont.) Orange County,North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units (DPCU)if applicable
Auditing Standards. The Auditor agrees to provide a copy of their most recent peer review report regardless of the
date of the prior peer review report to the Governmental Unit and the Secretary of the LGC prior to the execution of
the audit contract (See Item 22). If the audit firm received a peer review rating other than pass, the Auditor
shall not contract with the Governmental Unit without first contacting the Secretary of the LGC for a peer review
analysis that may result in additional contractual requirements.
If the audit engagement is not subject to Government Accounting Standards or if financial statements are not
prepared in accordance with GAAP and fail to include all disclosures required by GAAP, the Auditor shall provide
an explanation as to why in an attachment..
6. It is agreed that time is of the essence in this contract. All audits are to be perfouned and the report of audit
submitted to the State and Local Government Finance Division (SLGFD) within four months of fiscal year end.
Audit report is due on: October 31 2017 . If it becomes necessary to amend this due date
or the audit fee, an amended contract along with a written explanation of the delay must be submitted to the
secretary of the LGC for approval.
7. It is agreed that generally accepted auditing standards include a review of the Governmental Unit's systems of
internal control and accounting as same relate 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 "significant deficiencies and material
weaknesses" in AU-C 265 of the AICPA Professional Standards (Clarified). The Auditor shall file a copy of that
report with the Secretary of the LGC.
8. All local government and public authority contracts for audit or audit-related work require the approval of the
Secretary of the LGC. This includes annual or special audits, agreed upon procedures related to internal controls,
bookkeeping or other assistance necessary to prepare the Governmental Unit's records for audit, financial statement
preparation, any finance-related investigations, or any other audit-related work in the State of North Carolina.
Invoices for services rendered under these contracts shall not be paid by the Governmental Unit until the
invoice has been approved by the Secretary of the LGC. (This also includes any progress billings.) [G.S. 159-34
and 115C-447] All invoices for Audit work must be submitted by email in PDF foimat to the Secretary of the LGC
for approval. The invoices must be sent via upload through the current portal address:
http://nctreasurer.slgfd.leapfile.net Subject line should read"Invoice—[Unit Name]. The PDF invoice marked
`approved' with approval date will be returned by email to the Auditor to present to the Governmental Unit for
payment. Approval is not required on contracts and invoices for system improvements and similar services of a
non-auditing nature.
9. In consideration of the satisfactory performance of the provisions of this contract, the Primary Governmental Unit
shall pay to the Auditor, upon approval by the Secretary of the LGC, the fee, which includes any cost the Auditor
may incur from work paper or peer reviews or any other quality assurance program required by third parties (Federal
and State grantor and oversight agencies or other organizations) as required under the Federal and State Single Audit
Acts. (Note: Fees listed on signature pages.)
10. If the Governmental Unit has outstanding revenue bonds,the Auditor shall include documentation either in the notes
to the audited financial statements or as a separate report submitted to the SLGFD along with the audit report, a
calculation demonstrating compliance with the revenue bond rate covenant. Additionally, the Auditor should be
aware that any other bond compliance statements or additional reports required in the authorizing bond documents
need to be submitted to the SLGFD simultaneously with the Governmental Unit's audited financial statements unless
otherwise specified in the bond documents.
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4
Contract to Audit Accounts (cont.) Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units (DPCU)if applicable
11. After completing the audit, the Auditor shall submit to the Governing Board a written report of audit. This report
shall include, but not be limited to, the following information: (a) Management's Discussion and Analysis, (b) the
financial statements and notes of the Governmental Unit and all of its component units prepared in accordance with
GAAP, (c) supplementary information requested by the client or required for full disclosure under the law, and (d)
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.
12. If the audit faro is required by the NC CPA Board or the Secretary of the LGC to have a pre-issuance review of their
audit work, there must be a statement added to the engagement letter specifying the pre-issuance review including a
statement that the Governmental Unit will not be billed for the pre-issuance review. The pre-issuance review must
be performed prior to the completed audit being submitted to the LGC. The pre-issuance report must accompany
the audit report upon submission to the LGC.
13. The Auditor shall electronically submit the report of audit to the LGC as a text-based PDF file when (or prior to)
submitting the invoice for services rendered. The report of audit, as filed with the Secretary of the LGC,becomes a
matter of public record for inspection, review and copy in the offices of the SLGFD by any interested parties. Any
subsequent revisions to these reports must be sent to the Secretary of the LGC. These audited financial statements,
excluding the Auditors' opinion, may be used in the preparation of official statements for debt offerings, by
municipal bond rating services to fulfill secondary market disclosure requirements of the Securities and Exchange
Commission and other lawful purposes of the Governmental Unit without subsequent consent of the Auditor. If
it is determined by the LGC that corrections need to be made to the Governmental Unit's financial statements,
they should be provided within three days of notification unless another time frame is agreed to by the LGC.
If the OSA designates certain programs to be audited as major programs, as discussed in item #2, a turnaround
document and a representation letter addressed to the OSA shall be submitted to the LGC.
The LGC's process for submitting contracts, audit reports and invoices is subject to change. Auditors should use the
submission process in effect at the time of submission. The most current instructions will be found on our website:
https://www.nctreasurer.com/slg/Pages/Audit-Forms-and-Resources.aspx
14. 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 investigation and the additional compensation required therefore. Upon approval by the Secretary of the
LGC, this contract may be varied or changed to include the increased time and/or compensation as may be agreed
upon by the Governing Board and the Auditor
15. If an approved contract needs to be varied or changed for any reason, the change must be made in writing,
on theAmended LGC-205 contract form and pre-audited if the change includes a change in audit fee. This
amended contract needs to be completed in full, including a written explanation of the change, signed and dated by
all original parties to the contract, and then must be submitted through the audit contract portal to the Secretary of
the LGC for approval. The portal address to upload your amended contract is http://nctreasurer.slgfd.leapfile.net
No change shall be effective unless approved by the Secretary of the LGC,the Governing Board,and the Auditor.
16. A copy of the engagement letter, issued by the Auditor and signed by both the Auditor and the Governmental Unit
should be attached to the contract, and by reference here becomes part of the contract. In case of conflict between.
the terms of the engagement letter and the terms of this contract,the terms of this contract will control.Engagement
letter terms that conflict with the contract are deemed to be void unless the conflicting terms of this contract are
specifically deleted in Item #25 of this contract. Engagement letters containing indemnification clauses will
not be approved by the LGC.
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5
Contract to Audit Accounts (cont.)
Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely presented component units if applicable
17. Special provisions should be limited. Please list any special provisions in an attachment.
See attached engagement letter.
18. A separate contract should not be made for each division to be audited or report to be submitted. If a DPCU is
subject to the audit requirements detailed in the Local Government Budget and Fiscal Control Act and a separate
audit report is issued, a separate audit contract is required. If a separate report is not to be issued and the DPCU is
included in the primary government audit, the DPCU must be named along with the parent government on this audit
contract. Signatures from the DPCU Board chairman and finance officer also must be included on this contract.
19. The contract must be executed, pre-audited, physically signed by all parties including Governmental Unit and
Auditor signatures and submitted in PDF format to the Secretary of the LGC. The current portal address to upload
your contractual documents is http://nctreasurer.slgfd.leapfile.net Electronic signatures are not accepted at this
time. Included with this contract are instructions to submit contracts and invoices for approval as of November
2016. These instructions are subject to change. Please check the NC Treasurer's web site at
https://www.nctreasurer.com/slg/Pages/Audit-Forms-and-Resources.aspx for the most recent instructions.
20. The contract is not valid until it is approved by the LGC Secretary. The staff of the LGC shall notify the
Governmental Unit and Auditor of contract approval by email. The audit should not be started before the
contract is approved.
21. 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
LGC.
22. E-Verify. Auditor shall comply with the requirements of NCGS Chapter 64 Article 2. Further, if Auditor utilizes
any subcontractor(s), Auditor shall require such subcontractor(s) to comply with the requirements of NCGS
Chapter 64,Article 2.
23. Contractor hereby certifies that Contractor, and all subcontractors, are not on the Iran Final Divestment List("List")
created by the North Carolina State Treasurer pursuant to N.C.G.S. 147-86.58. Contractor shall not utilize any
subcontractor that is identified on the List.
25. All of the above paragraphs are understood and shall apply to this contract, except the following numbered
paragraphs shall be deleted: (See Item 16 for clarification).
Number 22, because the Auditor does not 25 or more employees in the State of North Carolina.
SIGNATURE PAGES FOLLOW
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6
Contract to Audit Accounts (cont.) Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units(DPCU)if applicable
Orange County, North Carolina -FEES
Year-end bookkeeping assistance—[For audits subject to Government Auditing Standards, this is limited to
bookkeeping services permitted by revised Independence Standards]
Audit 84,500
Preparation of the annual financial Statements
Prior to submission of the completed audited financial report, applicable compliance reports and amended contract(if
required)the Auditor may submit invoices for approval for services rendered,not to exceed 75%of the total of the stated
fees above. If the current contracted fee is not fixed in total,invoices for services rendered may be approved for up to
75%of the prior year audit fee.
The 75% cap for interim invoice approval for this audit contract is$ 63,375
**NA if there is to be no interim billing
Communication regarding audit contract requests for Orange County, North Carolina
modification or official approvals will be sent to the PRE-AUDIT CERTIFICATE:Required by G.S.159-28
email addresses provided in the spaces below. (a)
Audit Firm Signature: This instrument has been pre-audited in the manner
Mauldin &Jenkins, PLLC required by The Local Government Budget and Fiscal
Name of Audit Firm Control Act or by the School Budget and Fiscal Control
B Joel M. Black Act. Additionally,the following date is the date this audit
By contract was approved by the governing body.
Authorized A ' irm representative name:Type or print
Gary Donaldson
By Signature of thorized audit firm representative
B Primary Governmental Unit Finance Officer:
Date May 23, 2017 Type or print name
jmblack @mjcpa.com
Email Address of Audit Firm
Primary Government Finance Officer Signature
Governmental Unit Signatures:
Orange County,North Carolina Date
Name of Primary Government (Pre-audit Certificate must be dated.)
Mark Dorosin
By gdonaldson @orangecountync.gov
Mayor/Chairperson:Type or print name and title
Email Address of Finance Officer
Signature of Mayor/Chairperson of governing board
Date
By n/a Date Primary Government Governing Body
Chair of Audit Committee-Type or print name Approved Audit Contract-G.S. 159-34(a)
**
Signature of Audit Committee Chairperson
Date
**If Governmental Unit has no audit committee, mark
this section "N/A"
Page 5 of 8
7
Contract to Audit Accounts (cont.) Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units (DPCU)if applicable
**This page to only be completed by Discretely Presented Component Units **
n/a FEES
Year-end bookkeeping assistance—[For audits subject to Government Auditing Standards,this is limited to
bookkeeping services permitted by revised Independence Standards]
Audit
Preparation of the annual financial Statements
Prior to submission of the completed audited financial report,applicable compliance reports and amended contract(if
required)the Auditor may submit invoices for approval for services rendered,not to exceed 75%of the total of the stated
fees above. If the current contracted fee is not fixed in total,invoices for services rendered may be approved for up to
75%of the prior year audit fee.
The 75% cap for interim invoice approval for this audit contract is $
**NA if there is to be no interim billing
Communication regarding audit contract requests for
modification or official approvals will be sent to the PRE-AUDIT CERTIFICATE:Required by G.S.159-28
email addresses provided in the spaces below. (a)
DPCU Governmental Unit Signatures: This instrument has been pre-audited in the manner
required by The Local Government Budget and Fiscal
Name of Discreetly Presented Component Unit Control Act or by the School Budget and Fiscal Control
Act. Additionally,the following date is the date this audit
By contract was approved by the governing body.
DPCU Board Chairperson:Type or print name and title
By
Signature of Chairperson of DPCU governing board DPCU Finance Officer:
Type or print name
Date
DPCU Finance Officer Signature
By Date
Chair of Audit Committee-Type or print name (Pre-audit Certificate must be dated.)
**
Signature of Audit Committee Chairperson Email Address of Finance Officer
Date
**If Governmental Unit has no audit committee, mark
this section "N/A" Date DPCU Governing Body Approved Audit
Contract-G.S. 159-34(a)
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8
Contract to Audit Accounts (cont.) Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units (DPCU)if applicable
Steps to Completing the Audit Contract
1. Complete the Header Information—NEW:If a DPCU is subject to the audit requirements as detailed in the Local
Government Budget and Fiscal Control Act and a separate audit report is issued, a separate audit contract is
required. If a separate report is not issued for the DPCU and is to be included in the Primary Government's audit,
the DPCU must be named with the parent government on this Audit contract. The Board chairman of the DPCU
also must sign the Audit contract.
2. Item No. 1 —Complete the period covered by the audit
3. Item No. 6—Fill in the audit due date. For Governmental Unit (s), the contract due date can be no later than 4
months after the end of the fiscal year,even though amended contracts may not be required until a later date.
4. Item No. 8 —If the process for invoice approval instructions changed, the Auditor should make sure he and his
administrative staff are familiar with the current process. Instructions for each process can be found at the
following link. https://www.nctreasurer.com/slg/Pages/Audit-Forms-and-Resources.aspx
5. Item No. 9—NEW:Please note that the fee section has been moved to the signature pages,Pages 5 &6.
6. Item No. 16—NEW:It is now expected that an engagement letter will be attached to the contract. Has the
engagement letter been attached to the contract submitted to the SLGFD?
a. Do the terms and fees specified in the engagement letter agree with the Audit contract? "In case of
conflict between the terms of the engagement letter and the terms of this contract, the terms of this
contract will control."
b. Does the engagement letter contain an indemnification clause? The audit contract will not be
approved if there is an indemnification clause—refer to LGC Memo#986.
7. Complete the fee section for BOTH the Primary Government and the DPCU(if applicable)on the signature
pages,please note:
• The cap on interim payments is 75% of the current audit fee for services rendered if the contracted fee
amount is a fixed amount. If any part of the fee is variable, interim payments are limited to 75% of the
prior year's total audit fee. If the contract fee is partially variable, we will compare the authorized
interim payment on the contract to 75% of last year's actual approved total audit fee amount according to
our records. There is a report of audit fees paid by each governmental unit on our web site:
https://www.nctreasurer.com/slg/Pages/Non-Audit-Services-and-Audit-Fees.aspx - Auditors and Audit
Fees.
Please call or email Darrus Cofield at 919-814-4299 darrus.cofield(&nctreasurer.com if you have any
questions about the fees on this list.
• For variable fees for services, are the hourly rates or other rates clearly stated in detail? If issued
separately in an addendum, has the separate page been acknowledged in writing by the Governmental
Unit?
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9
Contract to Audit Accounts (cont.) Orange County, North Carolina
Primary Governmental Unit
not applicable
Discretely Presented Component Units(DPCU)if applicable
• For fees for services that are a combination of fixed and variable fees, are the services to be provided for
the fixed portion of the fee clearly stated? Are the hourly rates or other rates clearly stated for the
variable portion of the fee? (Note: See previous bullet point regarding variable fees.)
• If there is to be no interim billing,please indicate N/A instead of leaving the line blank.
8. Signature Area There are now 2 Signature Pages: one for the Primary Government and one for the DPCU.
Send the page(s) that are applicable to your Unit of Government. Make sure all signatures have been obtained,
and properly dated. The contract must be approved by Governing Boards pursuant to G.S. 159-34(a).
NEW-If this contract includes auditing a DPCU that is a Public Authority under the Local Government Budget
and Fiscal Control Act it must be named in this Audit contract and the Board chairperson of the DPCU must also
sign the Audit contract in the area indicated. If the DPCU has a separate Audit, a separate Audit'!contract is
required for the DPCU'
9. Please place the date the Unit's Governing Board and the DPCU's governing Board(if applicable)approved the
audit contract in the space provided.
a. Please make sure that you provide email addresses for the audit firm and finance officer as these will be
used to communicate official approval of the contract.
b. Has the pre-audit certificate for the Primary Government(and the DPCU if applicable)been signed and
dated by the appropriate party?
c. Has the name and title of the Mayor or Chairperson of the Unit's Governing Board and the DPCU's
Chairperson(if applicable)been typed or printed on the contract and has he/she signed in the correct area
directly under the Auditor's signature?
10. If the Auditor is performing an audit under the yellow book or single audit rules, has year-end bookkeeping
assistance been limited to those areas peiniitted under the revised GAO Independence Standards? Although not
required, we encourage Governmental Units and Auditors to disclose the nature of these services in the contract
or an engagement letter. Fees for these services should be shown in the space indicated on the applicable
signature page(s)of the contract.
11. Has the most recently issued peer review report for the audit firm been included with the contract? This is
required if the audit firm has received a new peer review report that has not yet been forwarded to us. The audit
firm is only required to send the most current Peer Review report to us once—not multiple times.
12. After all the signatures have been obtained and the contract is complete,please convert the contract and all other
supporting documentation to be submitted for approval into a PDF file. Peer Review Reports should be
submitted in a separate PDF file. These documents should be submitted using the most current submission
process which can be obtained at the NC Treasurer's web site — https://www.nctreasurer.com/slg/Pages/Audit-
Foi ills-and-Resources.aspx.
13. NEW: If an audit is unable to be completed by the due,date, an Amended Contract should be completed and
signed by the unit and auditor,using the new "Amended LGC-205"form(Rev. 2015). The written explanation
for the delay is now included on the contract itself to complete, and must be signed by the original parties to the
contract.
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