Item 4LMEMORANDUM
November 25, 2008
TO: Shana Yelverton, City Manager
FROM: Sharen Jackson, Finance Director
SUBJECT: Authorize a professional services agreement with Weaver and Tidwell, L.L.P.,
for audit services.
Action Requested: Approval of Weaver and Tidwell 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 and Tidwell 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 $110,000.
Citizen Input/
Board Review: None required
Legal Review: Not considered necessary- standard agreement.
Alternatives: None
Supporting
Documents: Professional Service Agreement
Staff
Recommendation: Approve professional services contract with Weaver and Tidwell L.L.P.
.I'ltrre Na
12721 Moilf)diw
Sxle 1 400
17all,u, 1 a —,u 75271 -2280
P72.490.1); 0
F' 972.702.8.3 21
WW W.W EAV ERAN DTI D WE LL.CCM
AN INDEPENDENT MEMBER OF
BAKER TILLY
INTERNATIONAL
We are pleased to confirm our understanding of the services we are to provide the
City of Southlake for the year ended September 30, 2008. We will audit the
financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information, which
collectively comprise the basic financial statements of the City of Southlake as of
and for the year ended September 30, 2008. Accounting standards generally
accepted in the United States provide for certain required supplementary
information (RSI), such as management's discussion and analysis (MD &A), to
accompany the City of Southlake's basic financial statements. As part of our
engagement, we will apply certain limited procedures to the City of Southlake's
RSI. These limited procedures will consist principally of inquiries of management
regarding the methods of measurement and presentation, which management is
responsible for affirming to us in its representation letter. Unless we encounter
problems with the presentation of the RSI or with procedures relating to it, we
will disclaim an opinion on it. The following RSI is required by generally
accepted accounting principles and will be subjected to certain limited
procedures, but will not be audited:
1) Management's Discussion and Analysis.
2) Budgetary Comparison Schedules.
3) Condition Rating of Street System.
Supplementary information other than RSl also accompanies the City of
Southlake's basic financial statements. We will subject the following
supplementary information to the auditing procedures applied in our audit of the
basic financial statements and will provide an opinion on it in relation to the basic
financial statements:
1) Combining and individual fund financial statements are schedules.
2) Schedules of capital assets used in the operation of governmental funds.
OFFICES IN
DALLAS FORT WOHTH HOUSTON
October 16, 2008
WEAVER
TIDWELL
To the Honorable Mayor and
Members of City Council
CERTIFIED AN TLIC
ACCOUNTANTS
City of Southlake
AND CONSULTANTS
1400 Main Street
Southlake, TX 76092
.I'ltrre Na
12721 Moilf)diw
Sxle 1 400
17all,u, 1 a —,u 75271 -2280
P72.490.1); 0
F' 972.702.8.3 21
WW W.W EAV ERAN DTI D WE LL.CCM
AN INDEPENDENT MEMBER OF
BAKER TILLY
INTERNATIONAL
We are pleased to confirm our understanding of the services we are to provide the
City of Southlake for the year ended September 30, 2008. We will audit the
financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information, which
collectively comprise the basic financial statements of the City of Southlake as of
and for the year ended September 30, 2008. Accounting standards generally
accepted in the United States provide for certain required supplementary
information (RSI), such as management's discussion and analysis (MD &A), to
accompany the City of Southlake's basic financial statements. As part of our
engagement, we will apply certain limited procedures to the City of Southlake's
RSI. These limited procedures will consist principally of inquiries of management
regarding the methods of measurement and presentation, which management is
responsible for affirming to us in its representation letter. Unless we encounter
problems with the presentation of the RSI or with procedures relating to it, we
will disclaim an opinion on it. The following RSI is required by generally
accepted accounting principles and will be subjected to certain limited
procedures, but will not be audited:
1) Management's Discussion and Analysis.
2) Budgetary Comparison Schedules.
3) Condition Rating of Street System.
Supplementary information other than RSl also accompanies the City of
Southlake's basic financial statements. We will subject the following
supplementary information to the auditing procedures applied in our audit of the
basic financial statements and will provide an opinion on it in relation to the basic
financial statements:
1) Combining and individual fund financial statements are schedules.
2) Schedules of capital assets used in the operation of governmental funds.
OFFICES IN
DALLAS FORT WOHTH HOUSTON
City of Southlake
October 16, 2008
Page 2
The following additional information accompanying the basic financial statements
will not be subjected to the auditing procedures applied in our audit of the
financial statements, and for which our auditor's report will disclaim an opinion.
1) Introductory section.
2) Statistical 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 respects, in conformity
with U.S. generally accepted accounting principles and to report on the fairness of
the additional information referred to in the first paragraph when considered in
relation to the basic financial statements taken as a whole. Our audit will be
conducted in accordance with generally accepted auditing standards established
by the Auditing Standards Board (United States) and the standards for financial
audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States, and will include tests of the accounting records of
the City of Southlake and other procedures we consider necessary to enable us to
express such opinions. If our opinions on the financial statements are other than
unqualified, we will fully 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 to issue a report as a
result of this engagement.
We will also provide a report (that does not include an opinion) on internal
control related to the financial statements and compliance with laws, regulations,
and the provisions of contracts or grant agreements, noncompliance with which
could have a material effect on the financial statements as required by
Government Auditing Standards. The report on internal control and compliance
will include a statement that the report is intended solely for the information and
use of management, the body or individuals charged with governance, others
within the entity, and specific legislative or regulatory bodies and is not intended
to be and should not be used by anyone other than these specified parties. If
during our audit we become aware that the City of Southlake is subject to an audit
requirement that is not encompassed in the terms of this engagement, we will
communicate to management and those charged with governance that an audit in
accordance with U.S. generally accepted auditing standards and the standards for
financial audits contained in Government Auditing Standards may not satisfy the
relevant legal, regulatory, or contractual requirements.
City of Southlake
October 16, 2008
Page 3
Management Responsibilities
Management is responsible for the basic financial statements and all
accompanying information as well as all representations contained therein. As
part of the audit, we will prepare a draft of your financial statements and related
notes. You are responsible for making all management decisions and performing
all management functions relating to the financial statements and related notes
and for accepting full responsibility for such decisions. You will be required to
acknowledge in the management representation letter that you have reviewed and
approved the financial statements and related notes prior to their issuance and
have accepted responsibility for them. Further, you are required to designate an
individual with suitable skill, knowledge, or experience to oversee any nonaudit
services we provide and for evaluating the adequacy and results of those services
and accepting responsibility for them.
Management is responsible for establishing and maintaining internal controls,
including monitoring ongoing activities; for the selection and application of
accounting principles; and for the fair presentation in the financial statements of
the respective financial position of the governmental activities, the business -type
activities, the aggregate discretely presented component unit, each major fund,
and the aggregate re mainin g fund information of the City of Southlake and the
respective changes in financial position and cash flows, where applicable, in
conformity with U.S. generally accepted accounting principles.
Management is also responsible for making all financial records and related
information available to us and for the accuracy and completeness of that
information. Your responsibilities include adjusting the financial statements to
correct material misstatements and for confirming to us in the representation letter
that the effects of any uncorrected misstatements aggregated by us during the
current engagement and pertaining to the latest period presented are immaterial,
both individually and in the aggregate, to the financial statements taken as a
whole_
You are responsible for the design and implementation of programs and controls
to prevent and detect fraud, and for informing us about all known or suspected
fraud affecting the government involving (1) management, (2) employees who
have significant roles in internal control, and (3) others where the fraud or illegal
acts could have a material effect on the financial statements.
City of Southlake
October 16, 2008
Page 4
Your responsibilities include informing us of your knowledge of any allegations
of fraud or suspected fraud affecting the government received in communications
from employees, former employees, grantors, regulators, or others. In addition,
you are responsible for identifying and ensuring that the entity complies with
applicable laws, regulations, contracts, agreements, and grants for taking timely
and appropriate steps to remedy any fraud, illegal acts, violations of contracts or
grant agreements, or abuse that we may report.
Management is responsible for establishing and maintaining a process for tracking
the status of audit findings and recommendations. Management is also responsible
for identifying for us previous audits or other engagements or studies related to
the objectives discussed in the Audit Objectives section of this letter. This
responsibility includes relaying to us corrective actions taken to address
significant findings and recommendations resulting from those audits or other
engagements or studies. You are also responsible for providing management's
views on our current findings, conclusions, and recommendations, as well as your
planned corrective actions.
Audit Procedures — General
An audit includes ex aminin g, 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. We
will plan and perform the audit to obtain reasonable rather than absolute assurance
about whether the financial statements are free of material misstatement, whether
from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets,
or (4) violations of laws or governmental regulations that are attributable to the
entity or to acts by management or employees acting on behalf of the entity.
Because the determination of abuse is subjective, Government Auditing Standards
do not expect auditors to provide reasonable assurance of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance
and because we will not perform a detailed examination of all transactions, there
is a risk that material misstatements may exist and not be detected by us. 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 you of any material errors
and any fraudulent financial reporting or misappropriation of assets that come to
our attention. We will also inform you of any violations of laws or governmental
regulations that come to our attention, unless clearly inconsequential.
City of Southlake
October 16, 2008
Page 5
Our responsibility as auditors is limited to the period covered by our audit and
does not extend to later periods for which we are not engaged as auditors.
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, funding
sources, creditors, and financial institutions. We will request written
representations 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 require
certain written representations from you about the financial statements and related
matters.
Audit Procedures Internal Controls
Our audit will include obtaining an understanding of the entity and its
environment, including internal control, sufficient to assess the risks of material
misstatement of the financial statements and to design the nature, timing, and
extent of further audit procedures. 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 financial statements and to
preventing and detecting misstatements resulting from illegal acts and other
noncompliance matters that have a direct and material effect on the financial
statements. Our tests, if performed, will be less in scope than would be necessary
to render an opinion on internal control and, accordingly, no opinion will be
expressed in our report on internal control issued pursuant to Government
Auditing Standards.
An audit is not designed to provide assurance on internal control or to identify
significant deficiencies. However, during the audit, we will communicate to
management and those charged with governance internal control related matters
that are required to be communicated under AICPA professional standards and
Government Auditing Standards.
Audit Procedures — Compliance
As part of obtaining reasonable assurance about whether the financial statements
are free of material misstatement, we will perform tests of the City of Southlake's
compliance with the provisions of applicable laws, regulations, contracts,
agreements, and grants.
City of Southlake
October 16, 2008
Page 6
However, the objective of our audit will not be to provide an opinion on overall
compliance and we will not express such an opinion in our report on compliance
issued pursuant to Government Auditing Standards.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash or other confirmations
we request and will locate any documents selected by us for testing.
We agree that any dispute between you and Weaver and Tidwell, L.L.P., relating to
this engagement, this agreement, or the breach of it, shall 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 before resorting to arbitration_ We agree to conduct the mediation in
good faith and make reasonable efforts to resolve any dispute by mediation. Failure
or refusal by either party to mediate shall not in any way affect any subsequent
arbitration. We agree to conduct the mediation in Fort Worth, Texas, or another
mutually agreed upon location.
If the dispute is not resolved by mediation, the dispute shall be subject to binding
arbitration under the Dispute Resolution Rules for Professional. Accounting and
Related Services Disputes of the AAA, 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 these rules.
The parties agree to conduct the arbitration in Fort Worth, Texas, or another
mutually agreed upon location. The arbitrator may only award actual 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 attorney and expert witness fees, court costs, and the administrative costs,
fees, and expenses of the AAA, as the case may be, incurred in the same, in addition
to any other relief that may be awarded.
Notwithstanding the provisions of the immediately preceding paragraph, neither
we nor you shall be compelled to arbitrate any dispute between us which arises
out of or is related to any claim asserted against either of us by a third parry unless
the third party (whether one or more) agrees to join the arbitration or can be
compelled to join it.
City of Southlake
October 16, 2008
Page 7
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.
Our fee for these services will be at our standard hourly rates plus out -of- pocket
costs. We estimate that our gross fee, including expenses, will range between
$95,000 and $110,000. Our standard hourly rates vary according to the degree of
responsibility involved and the experience level of the personnel assigned to this
engagement. Our invoices for these fees will be rendered each month as work
progresses and are payable on presentation. For invoices not paid within 60 -days
of the billing date, a late charge will be added to the outstanding balance. The
rate charged will be calculated using the then current "prime rate" charged to
commercial customers by local area financial institutions, up to a maximum
annual percentage of 10 %. The fee is also based on the assumption that
unexpected circumstances will not be encountered during the procedures
performed. If significant additional time is necessary, we will discuss it with you
and arrive at a new fee estimate.
The audit documentation for this engagement is the property of Weaver and
Tidwell, L.L.P. and constitutes confidential information. However, pursuant to
authority given by law or regulation, we may be requested to make certain audit
documentation available to a federal agency providing direct or indirect funding,
or the U.S. General Accounting Office for purposes of a quality review of the
audit, to resolve audit findings, or to carry out oversight responsibilities. We will
notify you of any such request. If requested, access to such audit documentation
will be provided under the supervision of Weaver and Tidwell, L.L.P. personnel.
Furthermore, upon request, we may provide copies of selected audit
documentation to the aforementioned parties. These parties may intend, or decide,
to distribute the copies or information contained therein to others, including other
governmental agencies.
Government Auditing Standards require that we provide you with a copy of our
most recent external peer review report and any letter of comment, and any
subsequent peer review reports and letters of comment received during the period
of the contract. Our 2007 peer review accompanies this letter.
City of Southlake
October 16, 2008
Page 8
We appreciate the opportunity to assist you 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,
CW
WEAVER AND TIDWELL, L.L.P.
ut" .7
RESPONSE:
This letter correctly sets forth the understanding of the City of Southlake.
Officer signature
Title
SPOKANE OTH iO
HOME QU NCY
COLFAX TBI-CrrIES
G[ANDVIEW WALLA WALLA
MOSES LAKE VIRRAM
OMAK ypXIMA
AOML NT1NG To the Partners of
Weaver and Tidwell, UP
AND and the Center for Public Company Audit Firms Peer Review Committee
CONSULT1NO
We have reviewed the system of duality control for the accounting and auditing practice of weaver
sEKVrC S and Tidwell, LLP (the firm) applicable to non -SEC issuers in effect for the year ended May 31, 2007,
The firm's accounting and auditing practice applicable to SEC issuers was not reviewed by us since
the Public Company Accounting Oversight Board (PCAOB) is responsible for inspecting that portion
of the firm's accounting and auditing practice in accordance with PCAOB requirements. A system of
quality control encompasses the firm's organizational structure and the policies adopted and
MF�tHpROF procedures established to provide it with reasonable assurance of complying with professional
standards. The elements of quality control are described in the Statements on Quality Control
Tm Standards issued by the American Institute of Certified Public Accountants (the AMPA). The design
of the system, and compliance with it are the responsibilities of the firm. Our responsibility is to
McGLAnREY express an opinion on the design of the system, and the firm's compliance with that system based on
our review.
NE'IV9bRIC
Our review was conducted in accordance with standards established by the Peer Review Committee
of the Center for Public Company Audit Firms and included procedures to plan and perform the
review that are summarized in the attached description of the peer review process. Our review would
not necessarily disclose all weaknesses in the system of quality control or all instances of lack of
compliance with it since it was based on selective tests. Because there are inherent litnitations in the
effectiveness of any system of quality control, departures from the system may occur and not be
detected. Also, pmjection 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 or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice applicable to the'
non -SEC issuers of Weaver and Tidwell, LLP in effect for the year ended May 31, 2007, 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 applicable professional standards.
,,e706W4 K 0 4 - < — ,
Spokane, Washington
September 27, 2007