Item 4HCITY OF
SOUTHLAKI
Item 4H
MEMORANDUM
December 29, 2014
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.
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 $110,000 which is same
amount as the prior year.
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 -standard agreement.
Alternatives: None
Supporting
Documents: Professional Service Agreement
Staff
Recommendation: Approve professional services contract with Weaver L.L.P.
weaver}
July 21, 2014
To the Audit Committee
City of Southlake
1400 Main Street
Southlake, Texas 76092
We are pleased to confirm our understanding of the services we are to provide City of Southlake
for the year ended September 30, 2014.
We will audit the financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information, including the related notes to the
financial statements, which collectively comprise the basic financial statements of City of
Southlake (the City) as of and for the year ended September 30, 2014. Accounting standards
generally accepted in the United States of America provide for certain required supplementary
information (RSI), such as management's discussion and analysis (MD&A), to supplement
City's 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 City's RSI in accordance with auditing standards generally accepted in the
United States of America. These limited procedures will consist of inquiries of management
regarding the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial statements, and
other knowledge we obtained during our audit of the basic financial statements. We will not
express an opinion or provide any assurance on the information because the limited procedures
do not provide us with sufficient evidence to express an opinion or provide any assurance. 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
We have also been engaged to report on supplementary information other than RSI that
accompanies City's financial statements,
AN INDEPENDENT WEAVER AND TIDWELL LLP DALLAS
MEMBER OF BAKER TILLY CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS 12221 MERIT DRIVE, SUITE 1400, DALLAS, TX 75251
INTERNATIONAL WWW.WEAVERLLPCOM P:(972) 490 1970 F (972)102 8321
City of Southlake
July 21, 2014
Page 2
We will subject the following supplementary information to the auditing procedures applied in
our audit of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to
prepare the financial statements or to the financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America and will provide an opinion on it in relation to the financial statements as a whole:
1) Combining and individual fund financial statements and schedules
2) Schedules of capital assets used in the operation of governmental funds
The following other information accompanying the financial statements will not be subjected to
the auditing procedures applied in our audit of the financial statements, and our auditor's report
will not provide an opinion or any assurance on that other information.
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 supplementary information
referred to in the second paragraph when considered in relation to the financial statements as a
whole. Our audit will be conducted in accordance with auditing standards generally accepted in
the United States of America 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 City and other procedures we consider necessary to enable us
to express such opinions. We cannot provide assurance that unmodified opinions will be
expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add
emphasis -of -matter or other -matter paragraphs. If our opinions on the financial statements are
other than unmodified, 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 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 the provisions of laws, regulations, contracts, and grant
agreements, noncompliance with which could have a material effect on the financial statements
as required by Government Auditing Standards.
City of Southlake
July 21, 2014
Page 3
The reports on internal control and compliance will each include a paragraph that states that the
purpose of the report is solely to describe the scope of testing of internal control over financial
reporting and compliance, and the result of that testing, and not to provide an opinion on the
effectiveness of internal control over financial reporting or on compliance, and that the report is
an integral part of an audit performed in accordance with Government Auditing Standards in
considering internal control over financial reporting and compliance. The paragraph will also
state that the report is not suitable for any other purpose. if during our audit we become aware
that City 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.
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 assist with
preparation of your financial statements and related notes. You will be required to acknowledge
in the written representation letter our assistance with preparation of the financial statements and
that you have reviewed and approved the financial statements and related notes prior to their
issuance and have accepted responsibility for them. You agree to assume all management
responsibilities for any nonaudit services we provide; oversee the services by designating an
individual, preferably from senior management, who possesses suitable skill, knowledge, or
experience; evaluate the adequacy and results of the services; and accept responsibility for them.
Management is responsible for establishing and maintaining effective internal controls, including
evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives
are met; for the selection and application of accounting principles; and for the preparation and
fair presentation of the financial statements 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 ensuring that management is reliable and financial information is reliable
and properly recorded. You are also responsible for providing us with (1) access to all
information of which you are aware that is relevant to the preparation and fair presentation of the
financial statements, (2) additional information that we may request for the purpose of the audit,
and (3) unrestricted access to persons within the government from whom we determine it
necessary to obtain audit evidence.
City of Southlake
July 21, 2014
Page 4
Your responsibilities include adjusting the financial statements to correct material misstatements
and for confirming to us in the written 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 could have a material effect on the financial statements. 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, violations of contracts or grant agreements, or
abuse that we may report.
You are responsible for the preparation of the supplementary information in conformity with U.S.
generally accepted accounting principles. You agree to include our report on the supplementary
information in any document that contains and indicates that we have reported on the
supplementary information. You also agree to include the audited financial statements with any
presentation of the supplementary information that includes our report thereon or make the
audited financial statements readily available to users of the supplementary information no later
than the date the supplementary information is issued with our report thereon. Your
responsibilities include acknowledging to us in the written representation letter that (1) you are
responsible for presentation of the supplementary information in accordance with GAAP; (2) that
you believe the supplementary information, including its form and content, is fairly presented in
accordance with GAAP; (3) that the methods of measurement or presentation have not changed
from those used in the prior period (or, if they have changed, the reasons for such changes); and
(4) you have disclosed to us any significant assumptions or interpretations underlying the
measurement or presentation of the supplementary information.
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 financial audits, attestation engagements, performance audits or other studies related to
the objectives discussed in the Audit Objectives section of this letter.
City of Southlake
July 21, 2014
Page 5
This responsibility includes relaying to us corrective actions taken to address significant findings
and recommendations resulting from those audits, attestation engagements, performance audits,
or other studies. You are also responsible for providing management's views on our current
findings, conclusions, and recommendations, as well as your planned corrective actions, for the
report, and for the timing and format for providing that information.
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.
Audit Procedures ---General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements; therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. 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. 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.
City of Southlake
July 21, 2014
Page 6
Because of the inherent limitations of an audit, combined with the inherent limitations of internal
control, 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, even though the audit is
properly planned and performed in accordance with U.S. generally accepted auditing standards
and Government Auditing Standards. 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, any fraudulent financial reporting, or misappropriation of
assets that come 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 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 Control
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 or material weaknesses. 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,
City of Southlake
July 21, 2414
Page 7
Audit Procedures —Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, we will perform tests of City's compliance with the provisions of
applicable laws, regulations, contracts, agreements, and grants. 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.
Engagement 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.
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
July 21, 2014
Page 8
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 terra 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.
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.
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. Government Accountability 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.
The audit documentation for this engagement will be retained for a minimum of five years after
the report release date or for any additional period requested by the City. If we are aware that a
federal awarding agency or auditee is contesting an audit finding, we will contact the party(ies)
contesting the audit finding for guidance prior to destroying the audit documentation.
Mr. Shawn Parker is the engagement partner and is responsible for supervising the engagement and
signing the report on behalf of Weaver and Tidwell, L.L.P. We expect to begin our audit on
approximately September 29, 2014 and to issue our reports no later than March 30, 2015.
City of Southlake
July 21, 2014
Page 9
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.
Our fee for these services will be at our standard hourly rates plus direct expenses. We estimate
that our gross fee, including expenses, will range between $110,000 and $120,000. Our standard
hourly rates vary according to the degree of responsibility involved and the experience level of
the personnel assigned to your audit. Our invoices for these fees will be rendered each month as
work progresses and are payable on presentation. In accordance with our firm policies, work may
be suspended if your account becomes 60 days or more overdue and may not be resumed until
your account is paid in full. If we elect to terminate our services for nonpayment, our
engagement will be deemed to have been completed upon written notification of termination,
even if we have not completed our report. You will be obligated to compensate us for all time
expended and to reimburse us for all out-of-pocket costs through the date of termination. The
above fee 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.
We will issue a written report upon completion of our audit of the City's financial statements.
Our report will be addressed to the City Council of the City. We cannot provide assurance that an
unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to
modify our opinion, add an emphasis -of -matter or other -matter paragraph(s), or withdraw from
the engagement.
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 2013 peer review report
accompanies this letter.
If you intend to publish or otherwise reproduce the financial statements and make reference to
our firm name, you agree to provide us with a copy of the final reproduced material for our
approval before it is distributed.
We appreciate the opportunity to be of service to City of Southlake and believe this letter
accurately summarizes the significant terms of our engagement.
City of Southlake
July 21, 2014
Page 10
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 retuna it to us.
Yours truly,
WEAVER AND TIDWELL, L.L.P.
SMP:pel
RESPONSE:
This letter correctly sets forth the understanding of City of Southlake.
Officer signature
Title
Date
EideBailly.
ClWs & 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 fine) 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 determining 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.org(prsummary.
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) I 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 of pass, pass with
deficiency fts) or fail. Weaver and Tidwell, L.L.P. has received a peer review rating of pass.
Eide Bailly LLP
www.eidebaiIIy.com
800 Nicollet Mall, Ste. 1300 Minneapolis, MN 55402-7033 1 T 612.253,6500 1 F 612,253.6600 EOF