Item 4B CITY OF
S4UTHLAKE
MEMORANDUM Item 4B
November 28, 2016
To: Shana Yelverton, City Manager
From: Sharen Jackson, Chief Financial Officer
Subject: Approve a professional services agreement with Weaver
L.L.P., for audit services, in the amount not to exceed
$130,000.
Action
Requested: Approval of Weaver L.L.P. professional services agreement.
Background
Information: City Charter requires the City at the close of each fiscal year
have an independent audit performed by a Certified Public
Accountant. The objective of the audit is the expression of
an opinion as to whether the financial statements are fairly
presented, in all material respects, in conformity with GAAP-
generally accepted accounting principles.
Weaver L.L.P. will also provide a report on internal control
related to the financial statements and compliance with laws,
regulations, and the provisions of contracts or grant
agreements.
Financial
Considerations: The total amount is not to exceed $130,000.
Strategic Link: F1 Adhere to financial management principles and budget
F4 Establish and maintain effective internal controls
Citizen Input/
Board Review: None required
Legal Review: Not considered necessary-a standard agreement.
Alternatives: None
Supporting
Documents: Professional Service Agreement
Staff
Recommendation: Approve professional services contract with Weaver L.L.P.
we ave r
Assurance•Tax.Advisory
September 12, 2016
To the Audit Committee
City of Southlake
1400 Main Street
Southlake, Texas 76092
You have requested that we audit the financial statements of the governmental activities,the
business-type activities, each major fund, and the aggregate remaining fund information of City
of Southlake (the City), as of September 30, 2016, and for the year then ended and the related
notes to the financial statements,which collectively comprise the City's basic financial
statements as listed in the table of contents. We are pleased to confirm our acceptance and our
understanding of this audit engagement by means of this letter.
Accounting principles generally accepted in the United States of America require that
management's discussion and analysis and budgetary comparison information, among other
items, be presented to supplement the basic financial statements. Such information, although not
a part of the basic financial statements, is required by the Governmental Accounting Standards
Board, who considers it to be an essential part of financial reporting for placing the basic
financial statements in an appropriate operational, economic, or historical context. As part of our
engagement,we will apply certain limited procedures to the required supplementary information
(RSI) in accordance with auditing standards generally accepted in the United States of America.
These limited procedures will consist primarily of inquiries of management regarding their
methods of measurement and presentation, and comparing the information for consistency with
management's responses to our inquiries. We will not express an opinion or provide any form of
assurance on the RSI. The following RSI is required by accounting principles generally accepted
in the United States of America. This RSI will be subjected to certain limited procedures but
will not be audited:
1. Management's Discussion and Analysis
2. General Fund Budgetary Comparison Schedule
3. Schedule of Net Pension Liability and Related Ratios—TMRS
4. Schedule of Contributions—TMRS
5. Condition Rating of Street System
Supplementary information other than RSI will accompany the City's basic financial statements.
We will subject the Combining and Individual Fund Statements and Schedules and the Schedules
of Capital Assets used in the Operation of Governmental Funds to the auditing procedures
applied in our audit of the basic financial statements and perform certain additional procedures,
including comparing and reconciling such information to the underlying accounting and other
records used to prepare the financial statements or to the financial statements themselves, and
additional procedures in accordance with auditing standards generally accepted in the United
States of America.
AN INDEPENDENT MEMBER OF WEAVER AND TIDWELL,L.L.P. 12221 MERIT DRIVE,SUITE 1400,DALLAS,TX 75251
BAKER TILLY INTERNATIONAL CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS P: 972.490.1970 F: 972.702.8321
City of Southlake
September 12,2016
Page 2
We intend to provide an opinion on the Combining and Individual Fund Statements and
Schedules and the Schedules of Capital Assets used in the Operation of Governmental Funds in
relation to the financial statements as a whole.
Also, the document we submit to you will include the following other additional information that
will not be subjected to the auditing procedures applied in our audit of the financial statements:
1. Statistical Section
2. Introductory Section
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial
statements are fairly presented, in all material aspects, in conformity with generally accepted
accounting principles and to report on the fairness of the supplementary information referred to
above when considered in relation to the financial statements as a whole. The objective also
includes reporting on internal control related to the financial statements and compliance with the
provisions of laws,regulations, contracts, and grant agreements,noncompliance with which
could have a material effect on the financial statements in accordance with Government Auditing
Standards. We cannot provide assurance that an unmodified opinion will be expressed.
Circumstances may arise in which it is necessary for us to modify our opinions, add emphasis-of-
matter, or other-matter paragraphs. If our opinions on the financial statements or compliance are
other than modified,we will discuss the reasons with you in advance. If, for any reason,we are
unable to complete the audit or are unable to form or have not formed opinions, we may decline
to express opinions or withdraw from this engagement.
Auditor Responsibilities
We will conduct our audit in accordance with auditing standards generally accepted in the United
States of America(U.S. GAAS) and Government Auditing Standards issued by the Comptroller
General of the United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the basic financial statements are free from
material misstatement. An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the
financial statements,whether due to error, fraudulent financial reporting, misappropriation of
assets, or violations of laws, governmental regulations, grant agreements, or contractual
agreements. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
City of Southlake
September 12, 2016
Page 3
Because of the inherent limitations of an audit, together with the inherent limitations of internal
control, an unavoidable risk that some material misstatements may not be detected exists,even
though the audit is properly planned and performed in accordance with U.S. GAAS and
Government Auditing Standards issued by the Comptroller General of the United States of
America. In addition, an audit is not designed to detect immaterial misstatements or violations
of laws or governmental regulations that do not have a direct and material effect on the financial
statements. However,we will inform the appropriate level of management of any material
errors, fraudulent financial reporting, or misappropriation of assets that comes to our attention.
We will also inform the appropriate level of management of any violations of laws or
governmental regulations that come to our attention,unless clearly inconsequential. Our
responsibility as auditors is limited to the period covered by our audit and does not extend to any
later periods for which we are not engaged as auditors.
In making our risk assessments, we consider internal control relevant to the City's preparation
and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances but not for the purpose of expressing an opinion on the
effectiveness of the City's internal control. However, we will communicate to you in writing
concerning any significant deficiencies or material weaknesses in internal control relevant to the
audit of the financial statements that we have identified during the audit.
As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement,we will perform tests of the City's compliance with the provisions of
applicable laws, regulations, contracts, and agreements. However,the objective of our audit will
not be to provide an opinion on overall compliance and we will not express such an opinion.
Management Responsibilities
Our audit will be conducted on the basis that management acknowledge and understand that they
have responsibility:
a. For the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America;
For the design,implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material
misstatement, whether due to error, fraudulent financial reporting, misappropriation of
assets, or violations of laws, governmental regulations, grant agreements, or contractual
agreements; and
City of Southlake
September 12, 2016
Page 4
c. To provide us with:
i. Access to all information of which management is aware that is relevant to the
preparation and fair presentation of the financial statements such as records,
documentation, and other matters;
ii. Additional information that we may request from management for the purpose of
the audit; and
iii. Unrestricted access to persons within the City from whom we determine it
necessary to obtain audit evidence.
d. For including the auditor's report in any document containing financial statements that
indicates that such financial statements have been audited by the City's auditor;
e. For identifying and ensuring that the City complies with the laws and regulations
applicable to its activities; and
f. For adjusting the financial statements to correct material misstatements and confirming to
us in the management representation letter that the effects of any uncorrected
misstatements aggregated by us during the current engagement and pertaining to the
current year under audit are immaterial,both individually and in the aggregate,to the
financial statements as a whole; and
g. With respect to any nonauditlnonattest services we perform, including preparation of
financial statements,for(a) making all management decisions and performing all
management functions; (b) assigning an individual with suitable skills, knowledge, and
experience to oversee the services; (c) evaluating the adequacy of the services performed;
(d) evaluating and accepting responsibility for the results of the services performed; and
(e) establishing and maintaining internal controls, including monitoring ongoing
activities. These nonauditlnonattest services do not constitute an audit under Government
Auditing Standards and such services will not be conducted in accordance with
Government Auditing Standards.
h. With regard to the supplementary information referred to above: (a) for the preparation of
the supplementary information in accordance with the applicable criteria; (b)to provide
us with the appropriate written representations regarding supplementary information; (c)
to include our report on the supplementary information in any document that contains the
supplementary information and that indicates that we have reported on such
supplementary information; and(d)to present the supplementary information with the
audited consolidated financial statements, or if the supplementary information will not be
presented with the audited consolidated financial statements,to make the audited
financial statements readily available to the intended users of the supplementary
information no later than the date of issuance by you of the supplementary information
and our report thereon.
City of Southlake
September 12,2016
Page 5
Government Auditing Standards require that we document an assessment of the skills,
knowledge, and experience of management, should we participate in any form of preparation of
the basic financial statements and related schedules or disclosures as these actions are deemed a
nonauditlnonattest service.
During the course of our engagement, we will request information and explanations from
management regarding the City's operations, internal controls, future plans, specific transactions
and accounting systems and procedures. At the conclusion of our engagement, we will require,
as a precondition to the issuance of our report,that management provide certain representations
in a written representation letter. The City agrees that as a condition of our engagement to
perform an audit that management will, to the best of its knowledge and belief,be truthful,
accurate and complete in all representations made to us during the course of the audit and in the
written representation letter. The procedures we perform in our engagement and the conclusions
we reach as a basis for our report will be heavily influenced by the written and oral
representations that we receive from management. False or misleading representations could
cause us to expend unnecessary efforts in the audit; or,worse, could cause a material error or a
fraud to go undetected by our procedures. Thus, the City agrees that we will not be liable for any
damages or otherwise responsible for any misstatements in the City's financial statements that
we may fail to detect as a result of false or misleading representations that are made to us by
management. Moreover,the City agrees to indemnify and hold us harmless from any claims and
liabilities, including reasonable attorneys' fees, expert fees and costs of investigation and
defense, arising out of or related to this engagement if false or misleading representations are
made to us by any member of the City's management.
Reporting
We will issue a written report upon completion of our audit of the City's basic financial
statements. Our report will be addressed to the governing body of the City. We cannot provide
assurance that unmodified opinions will be expressed. Circumstances may arise in which it is
necessary for us to modify our opinions, add an emphasis-of-matter or other-matter paragraph(s),
or withdraw from the engagement,
In accordance with the requirements of Government Auditing Standards,we will also issue a
written report describing the scope of our testing over internal control over financial reporting
and over compliance with laws, regulations, and provisions of grants and contracts, including the
results of that testing. However,providing an opinion on internal control and compliance over
financial reporting will not be an objective of the audit and,therefore,no such opinion will be
expressed.
City of Southlake
September 12,2016
Page 6
Other
We understand that your employees will prepare all confirmations we request and will locate any
documents or invoices selected by us for testing.
In the unlikely event that circumstances occur which we in our sole discretion believe could
create a conflict with either the ethical standards of our firm or the ethical standards of our
profession in continuing our engagement, we may suspend our services until a satisfactory
resolution can be achieved or we may resign from the engagement. We will notify you of such
conflict as soon as practicable, and will discuss with you any possible means of resolving them
prior to suspending our services.
Both of us agree that any dispute between you and Weaver and Tidwell, L.L.P., arising from the
engagement, this agreement, or the breach of it, may, if negotiations and other discussion fail be
first submitted to mediation in accordance with the provisions of the Commercial Mediation
Rules of the American Arbitration Association (AAA)then in effect. Both of us agree to
conduct any mediation in good faith and make reasonable efforts to resolve any dispute by
mediation. Mediation is not a pre-condition to the arbitration provided for below and the failure
or refusal by either party to request or participate in mediation shall not preclude the right of
either party to initiate arbitration. We agree to conduct the mediation in Dallas,Texas or another
mutually agreed upon location.
Both of us agree that any dispute arising from the engagement,this agreement or the breach of it
shall be subject to binding arbitration under the provisions of the Federal Arbitration Act(9
U.S.C. § 1, et seq.) and of the Dispute Resolution Rules for Professional Accounting and Related
Services Disputes of the AAA (the Rules), and judgment on the award rendered by the arbitrator
may be entered in any court of competent jurisdiction. The arbitration shall be heard before one
or more arbitrators selected in accordance with the Rules. The parties agree to conduct the
arbitration in Dallas, Texas or another mutually agreed upon location. The arbitrator may only
award direct damages and may not award consequential, exemplary, or punitive damages. The
prevailing party in any arbitration or litigation shall be entitled to recover from the other party
reasonable attorneys' and expert witness fees, court costs, and the administrative costs,
arbitrator's fees, and expenses of the AAA incurred in the arbitration or litigation in addition to
any other relief that may be awarded.
Notwithstanding the provisions of the immediately preceding paragraph, neither of us shall be
compelled to arbitrate any dispute between us which arises out of any claim asserted against
either of us by a third party, unless the third party (whether one or more) agrees to join the
arbitration or can be compelled to join it.
City of Southlake
September 12,2016
Page 7
If any term of this engagement letter is declared illegal, unenforceable, or unconscionable,that
term shall be severed and the remaining terms of the engagement letter shall remain in force.
Both of us agree that the arbitrator(s)or Court, as the case may be, should modify any term
declared to be illegal,unenforceable, or unconscionable in a manner that will retain the intended
term as closely as possible. If a dispute arising from the engagement or from this agreement or
any term of it or any alleged breach of it is submitted to a Court for interpretation or
adjudication, both of us irrevocably waive right to trial by jury and agree that the provisions of
this engagement letter regarding damages, attorneys' fees, and expenses shall be applied and
enforced by the Court.
If you intend to publish or otherwise reproduce the financial statements and make reference to
our firm, you agree to provide us with printers' proofs or masters for our review and approval
before printing. You also agree to provide us with a copy of the final reproduced material for
our approval before it is distributed.
During the course of the engagement,we may communicate with you or your personnel via fax
or e-mail, and you should be aware that communication in those mediums contains a risk of
misdirected or intercepted communications.
Mr. John DeBurro is the engagement partner for the audit services specified in this letter. His
responsibilities include supervising our services performed as part of this engagement and
signing or authorizing another qualified firm representative to sign the audit report.
We estimate that the fee for our audit will range between $120,000 and $130,000. The fee
estimate is 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 estimate before we incur the
additional costs. Our invoices for these fees will be rendered each month as work progresses and
are payable on presentation. Our fee is based upon the complexity of the work to be performed
and the tasks required. Fees for our services are due upon receipt of our invoice. For bills not
paid within 60 days of the billing date, a late charge will be added to the outstanding balance.
The late charge will be assessed at .5% on the unpaid balance per month, or payments are due in
compliance with the Texas Local Government Code.
During the course of the audit we may observe opportunities for economy in, or improved
controls over,your operations. We will bring such matters to the attention of the appropriate
level of management, either orally or in writing.
The audit documentation for this engagement is the property of Weaver and Tidwell, L.L.P. and
constitutes confidential information.
City of Southiake
September 12, 2016
Page 8
However, we may be requested to make certain audit documentation available to regulators or
other outside parties pursuant to authority given to it by law or regulation, or to peer reviewers.
If requested, access to such audit documentation will be provided under the supervision of
Weaver and Tidwell, L.L.P.'s personnel. Furthermore,upon request,we may provide copies of
selected audit documentation to regulators or other outside parties. The regulators or other
outside parties may intend, or decide,to distribute the copies of information contained therein to
others, including other governmental agencies. We agree to retain our audit documentation or
work papers for a period of at least five years from the date of our report.
In accordance with the requirements of Government Auditing Standards, we have attached a
copy of our latest external peer review of our firm for your consideration and files.
Please sign and return the attached copy of this letter to indicate your acknowledgment of, and
agreement with,the arrangements for our audit of the financial statements including our
respective responsibilities.
We appreciate the opportunity to be your financial statement auditors and look forward to
working with you and your staff.
Yours truly,
Wvw&l
WEAVER AND TIDWELL, L.L.P.
71D:res
RESPONSE:
This letter correctly sets forth the understanding.
Acknowledged and agreed on behalf of City of Southlake by:
Signature:
Title:
Date:
EideBailly.
CPAs&BUSINESS ADVISORS
System Review Report
October 4,2013
To the Partners of Weaver and Tidwell,L.L.P.
and the National Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of Weave and Tidwell,
L.L.P. (the firm)applicable to non-SEC issuers in effect for the year ended May 31,2013. Our peer review was
conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the
Peer Review Board of the American Institute of Certified Public Accountants. As a part of our peer review,we
considered reviews by regulatory entities,if applicable, in detennining the nature and extent of our procedures.
The firm is responsible for designing a system of quality control and complying with it to provide the firm with
reasonable assurance of performing and reporting in conformity with applicable professional standards in all
material respects. Our responsibility is to express an opinion on the design of the system of quality control and the
firm's compliance therewith based on our review. The nature, objectives, scope,limitations of,and the procedures
performed in a System Review are described in the standards at www.aicpa.orglPrsulnm4a.
As required by the standards,engagements selected for review included engagements performed under
Government Auditing Standards;audits of employee benefit plans, audits performed under FDICIA,and
examinations of service organizations(Service Organizations Control(SOC) 1 and 2 engagements).
In our opinion,the system of quality control for the accounting and auditing practice of Weaver and Tidwell,
L.L.P. applicable to non-SEC issuers in effect for the year ended May 31,2013,has been suitably designed and
complied with to provide the firm with reasonable assurance of performing and reporting in conformity with
applicable professional standards in all material respects.Firms can receive a rating ofpass,pass with
deficiency(ies) or fail. Weaver and Tidwell,L.L.P.has received a peer review rating of pass.
-, , .4/-7"
Ride Bailly LLP
www.eidebailly.com
800 Nicollet Mall,Ste,1300 Minneapolis,MN 55402-7033 1 T 612.253.6500 F 612.253.6600 { EOE