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2003/04/22 City Council Resolution (14)RESOLUTION NO. 2003- 91 RESOLUTION OF THE COUNCIL OF THE CITY OF ROHNERT PARK EXTENDING AGREEMENT TO PROVIDE AUDITING SERVICES WITH THE ACCOUNTING FIRM OF MACIAS, GINI & COMPANY LLP WHEREAS, the City's financial statements are audited each fiscal year by independent Certified Public Accountants; and WHEREAS, Macias, Gini and Company LLP has conducted said audit since 1993 -94; and WHEREAS, Macias, Gini and Company LLP has submitted a proposal to conduct the annual audit for 2002 -03, 2003 -04 and 2004 -05 at terms which are acceptable to the City. NOW, THEREFORE, BE IT RESOLVED that the attached engagement letter dated April 3, 2003 be accepted and the Mayor is authorized to execute any documents for and on behalf of the City. BE IT FURTHER RESOLVED that all other terms and conditions contained in the Agreement For Auditing Services approved by Council on March 8, 1994 will remain in full force and effect. DULY AND REGULARLY ADOPTED this 22nd day of April, 2003. ATTEST j .� .. 4 VA 4� 4 v- r o(°"IK RO K IIYu �OQ FLORES: AYE MACKENZIE: ABSENT NORDIN: AYE SPRADLIN: AYE VIDAK- MARTINEZ: AYE AYES: (4) NOES: (0) ABSENT: (1) ABSTAIN: (0) <...... Macias, Gini & Company LLP Certified Public Accountants and Management Consultants April 3, 2003 Mr. Carl Leivo City Manager City of Rohnert Park 6750 Commerce Boulevard Rohnert Park, CA 94928 Parhrers Kenneth A. Macias, Managing Partner Ernest J. Gini Kevin J. O'Connell Richard A. Green Jan A. Rosati James V. Godsey Mt. Diablo Plaza 2175 N. California Boulevard Suite 620 Walnut Creek, CA 94596 -3565 925.274.0190 925.274.3819 rAx www.maciasgini.com We are pleased to confirm our understanding of the services we are to provide the City of Rohnert Park (City) for the years ending June 30, 2003, 2004 and 2005. We will audit the financial statements of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City, as of and for the years ending June 30, 2003, 2004 and 2005. Also, the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audits of the financial statements: • Combining and individual fund financial statements and schedules, that will not be audited but will be subject to "in- relation -to" procedures applied during the audits of the financial statements. In addition, the documents we submit to you will include additional information required by the Government Finance Officers Association for Comprehensive Annual financial Reports that will not be audited by us, including introductory and statistical sections to be prepared by the City's management. • Supplementary information required under GASB Statement No. 34, such as management's discussion and analysis and budgetary comparison schedules. We will not audit the required supplementary information, but we will apply certain limited procedures regarding the methods of measurement and presentation. • In addition to our audits of the financial statements of the City, we will also audit and separately report on the component unit financial statements of the Rohnert Park Financing Authority (Authority) and the Rohnert Park Community Development Commission (Commission). • We will also audit and separately report on the individual fund financial statements of the Transportation Development Act Program (TDA). • Our engagement will include performing agreed -upon procedures to review compliance with appropriations limit requirements of Section 1.5 or Article XIII13 of the California Constitution. Offices located throughout California Mr. Carl Leivo City Manager April 3, 2002 Page 2 Audit Objectives The objective of our audits is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America and to report on the fairness of the additional information referred to in the first bulleted paragraph above when considered in relation to the financial statements taken as a whole. Our audits of the City, the Authority and the Commission will be conducted in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in the Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of the accounting records, certain procedures to test the Commission's compliance with the specific laws, regulations, and administrative requirements governing entities as required by Health and Safety Code Section 33001. 1, and other procedures we consider necessary to enable us to express such opinions. If our opinions on the financial statements of the City, the Authority and the Commission are other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audits or are unable to form or have not formed opinions, we may decline to express our opinions or to issue reports as a result of this engagement. We will also provide reports (that do not include opinions) on internal control related to the financial statements and compliance with laws, regulations, and the provisions or grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with laws, regulations, contracts and agreements. In fulfilling these responsibilities, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the Untied States of America. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with such information required for our audits and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will advise you in the preparation of your financial statements, but the responsibility for the financial statements remains with you. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for 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 Mr. Carl Leivo City Manager April 3, 2002 Page 3 and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the government involving (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations. 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. 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 errors, fraudulent financial reporting, misappropriation of assets, or 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 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 that come to our attention, and we will inform you of any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you 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 matters that might arise during any 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, creditors, and financial institutions. We will request written representations from the 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 also require certain written representations from you about the financial statements and related matters. Identifying and ensuring that the City, the Authority and the Commission comply with laws, regulations, contracts, and agreements is the responsibility of management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City's, the Authority's and the Commission's compliance with applicable laws and regulations and the provisions of 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. Mr. Carl Leivo City Manager April 3, 2002 Page 4 Audit Procedures — Internal Controls In planning and performing our audits, we will consider the internal control sufficient to plan the audit in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinions on the City's, the Authority's and the Commission's financial statements. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. 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. Tests of controls relative to the financial statements are required only if control risk is assessed below the maximum level. 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. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the governing body of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Audit Administration, Fees and Other We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any invoices selected by us for testing. The workpapers for this engagement are the property of Macias, Gini & Company LLP and constitute confidential information. However, we may be requested to make certain workpapers available to the appropriate regulatory agencies pursuant to authority given to it by law or regulation. If requested, access to such workpapers will be provided under the supervision of Macias, Gini & Company LLP personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to the regulatory agencies. The regulatory agencies may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. We expect to begin our interims during April or May and to conduct our final phase fieldwork during August or September. We plan to issue our reports no later than December 1. Mr. Carl Leivo City Manager April 3, 2002 Page 5 Our fees for these services are based on the estimated hours in Attachment I and our current fee rates, discounted 20 %. Our fees will increase by 5 % each year thereafter. Comprehensive Annual Financial Report, Appropriations Limit Report and Transportation Development Act Program Rohnert Park Financing Authority Community Development Commission Total 2003 2004 $ 51,510 5,408 8,048 $ 64,966 $ 54,086 5,678 8,450 $ 68,214 2005 $ 56,790 5,962 8,873 $ 71,625 Government Auditing Standards require that we provide you with a copy of our most recent peer review report. Our 2000 peer review report accompanies this letter. We appreciate the opportunity to be of service to the City, the Authority and the Commission and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please feel free to contact me. 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, MACIAS, GINI & COMPANY LLP Certified Public Accountants By: -C � l Kevin J. O'Connell, CPA Partner KJO /vj RESPONSE: This letter correctly seats forth the understanding of the City of Rohnert Park. By: Vicki Title: Date: April 22, 2003 Per Resolution No. 2003 -91 adopted by the City Council on April 22, 2003 Attachment I PROFESSIONAL STAFFING We have indicated below the approximate number of professional hours for each segment of the City's audit according to staff level. GENERAL PROCEDURES Planning and preparation Conferences and Council /Board presentations Coordinate planning efforts with City staff and audit staff Prepare and complete preliminary checklist Review prior year's workpapers, files, reports and budget Review minutes Apply preliminary analytical procedures 811jBTQTAi INTERNAL CONTROL PROCEDURES Obtain an understanding of the City's internal control structure and identify the accounting control procedures. Conduct a review of the City's EDP system. Test financial transaction cycles and internal controls Review and supervise internal control procedures SUBSTANTIVE PROCEDURES Customize audit program based on our understanding and results of systems and controls reviews. Perform tests of detail to detect any material misstatements in: Assets Liabilities Fund Equity/Government Wide Conversion Journal Entries Commitments and contingencies Confirmations Analytical tests Audit adjustments Review and supervise substantive procedures CAFR assistance Prepare and complete deliverables: Management Lefler Comprehensive Annual Financial Report COMMUNITY DEVELOPMENT COMMISSION Obtain understanding of development and passthrough agreements Test for compliance with redevelopment laws and regulations Review and supervise redevelopment agency audit work Prepare and complete deliverables: Redevelopment financial statements & auditor's reports SUBTOTAL ROHNERT PARK FINANCING AUTHORITY Obtain an understanding of current year activity Complete substantive procedures Review and supervise audit work Prepare and complete deliverables: Financial Is & auditor's reports SUBTOTAL Macias, Gini & Company LLP Partner In Charge Engage- ment Manager Audit Senior Staff Auditor Admin. Assist- ants Total Budget Hours - 2 6 8 - 4 8 16 4 4 4 - 12 2 4 8 5 6 - 4 4 - 4 4 4 12 12 12 4 1 4 - 4 4 8 - 24 24 - 4 8 12 2 4 i 8 5 31 - 4 4 8 - 24 24 - 4 8 12 2 4 12 8 5 31 City of RohneH Park Attachment I PROFESSIONAL STAFFING We have indicated below the approximate number of professional hours for each segment of the City's audit according to staff level. Macias, Gini & Company LLP City of Rohnert Park Partner Engage- Admin. Total In ment Audit Staff Assist- Budget Charge Manager Senior Auditor ants Hours APPROPRIATIONS LIMIT Apply procedures to the appropriations limit. - - 4 4 Review and supervise Appropriations Limit work. 2 2 Prepare and complete deliverables: Appropriations Limit compliance report 1 1 2 2 6 [5, j 5 �`r,aSf 5 A., r P.�. : V 'i'E 2 e 4f G Z TRANSPORTATION DEVELOPMENT ACT FUND Test for compliance with Transportation Development Act laws and regulations. _ g _ 8 Review and supervise audit work _ 1 2 - 3 Prepare and complete deliverables: Transportation Development Act Fund financial statements 1 2 4 4 11 ii4 T ; �+y��yy -r A } { ( •��� LSV.'���p`&-r.� i''. �i� � f. � C i � � zM .F," y � '��'w2 P } _ � F 1'" �`; Y �ij2FP5�`X P� r.yR.3`'"9 d y. v3 F Ij Nip c"'i Q 4�i..sfi 44 ;F� S�liL.� Macias, Gini & Company LLP City of Rohnert Park Attachment II City of Rohnert Park Fees and Billing Schedule Macias, Gini & Company LLP City of Rohnert Park Estimated Service Hours Fees Comprehensive Annual Financial Report and Management Letter 389 $ 44,520 Community Development Commission 75 8,048 Rohnert Park Financing Authority 52 5,408 Appropriations Limit Report 12 1,304 Transportation Development Act Fund 22 2,336 Subtotal 550 61,616 Out of pocket expenses: Printing (65 CAFRs) 1,000 Mileage 2,350 Total estimated hours / all- inclusive maximum price 550 $ 64,966 Macias, Gini & Company LLP City of Rohnert Park Attachment III City of Rohnert Park Billing Rate Schedule * Rate reflect a 20% discount. Macias, Gini & Company LLP City of Rohnert Park Standard Quoted Hourly Hourly Name / Functions Rate Rate Kevin J. O'Connell/ Partner In Charge $ 240 $ 192 David G. Bullock/ Engagement Manager 180 $ 144 Enrique Magana/ Senior Auditor 150 $ 120 Staff Auditor 115 $ 92 Administrative Assistant 80 $ 64 * Rate reflect a 20% discount. Macias, Gini & Company LLP City of Rohnert Park WILLIAM V. ALLEN, Jr. Certified Public Accountants PEER REVIEW REPORT June 9, 2000 To the Partners Macias, Gini & Company. LLP 2148 Margarita Drive The Villages, FL .32159 (352)750 -9636 FAX (352)750 -9466 E -mail: bill @billallen.com We have reviewed the system of quality control for the accounting and auditing practice of Macias, Gini & Company, LLP (the firm) in effect for the year ended March 31, 2000. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality. Control Standards issued by the American Institute of Certified Public Accountants (AICPA) The design of the system and compliance with it are the responsibility of the firm. Our responsibility is to express an opinion on the design of the system, and the firm's compliance with the system based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection 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 because 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 of Macias, Gini & Company, LLP in effect for the year ended March 31, 2000, 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 conforming with professional standards. William V Ufen, Jr