HomeMy WebLinkAboutReso - CC - 039-1998RESOLUTION NO. 39-98
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURLINGAME
APPROVING AGREEMENT BETWEEN THE CITY AND KPMG PEAT MARWICK FOR
AUDIT SERVICES FOR 1997-1998 AUDIT AND AUTHORIZING CITY MANAGER TO
EXECUTE AGREEMENT BY AND ON BEHALF OF THE CITY
RESOLVED, by the City Council of the City of Burlingame:
WHEREAS, the City has an independent audit performed annually, which includes the City's
financial statements, transient occupancy taxes, and compliance audits; and
WHEREAS, KPMG Peat Marwick is a national accounting firm, which has provided
excellent service to the City; and
WHEREAS, KPMG Peat Marwick is willing to provide these services to the City,
NOW, THEREFORE, IT IS RESOLVED AND ORDERED:
1. The Agreement Letter and Scope of Services for one year attached hereto are approved.
2. The City Manager is authorized and directed to execute the Agreement oyrbehalf of
the City. I
3. The Clerk is requested and directed to attest to
I, JUDITH A MALFATTI, City Clerk of the City of Burlingame, do hereby certify that the
foregoing resolution was introduced at a regular meeting of the City Council held on the 20 t h day of APR I L
1998, and was adopted thereafter by the following vote:
AYES: COUNCILMEMBERS: GALLIGAN, KNIGHT, O'MAHONY, SPINELLI
NOES: COUNCILMEMBERS: NONE
ABSENT: COUNCILMEMBERS: JANNEY
C= CLERK
KPMG Peat Marwick LLP
One Kaiser Plaza
Oakland, CA 94612
March 25, 1998
Mr. Rahn Becker
Finance Director
City of Burlingame
501 Primrose Road
Burlingame, California 94010
Dear Mr. Becker:
Telephone 510465 4663
100
18971997
Telefax 510465 4764
KPMG Peat Marwick LLP (KPMG) has enjoyed our professional relationship with the City
of Burlingame. As you are aware, we are now at the end of another three year contract with
the City. Because of this, we respectfully submit this proposal to continue to serve as the
City's independent auditors.
We are motivated to retain the City's business without undergoing an expensive proposal
effort. KPMG has historically offered services to the City at considerably discounted rates
to demonstrate our desire to retain the City as a valued member of our client base. While our
proposed fees demonstrate an increase over the prior year, the adjustment is not reflective of
the fact that our costs are increasing at much higher rates.
The following points illustrate some of the reasons we believe we are the best position to
serve the City of Burlingame:
We know the City and we recognize the integrity of the City personnel. These are
key elements in evaluating the risk component in any pricing decision. We know
what it takes to complete the audit and we are confident in our ability to provide
efficient, timely, yet effective service to the City.
2. We are the only large professional services firm to designate government services as
a separate business line. Because of this we can and have staffed the City's
engagement team with individuals who are experts in dealing with the unique issues
you are facing as a local governmental entity. To supplement our vast local
expertise, our line of business structure allows us to avail ourselves of experienced
government technical resources throughout California and across the country.
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KPMG Peat Marwick LLP
Mr. Rahn Becker
Finance Director
City of Burlingame
March 25, 1998
Page 2
3. Our team is knowledgeable on the latest changes in governmental accounting and
reporting standards and is well qualified to assist the City in implementing those
standards as they become effective.
We expect that the scope of services would be comparable to prior years. The specific
engagement terms are outlined in the attachment to this letter. Estimated fees, based on the
scope outlined above, would be as follows:
1998 1999 2000
General Purpose $49,500 54,500 59,500
Financial
Statements,
including Article
X11I B Letter
Hotel Agreed Upon $2,000 2,000 2,000
Procedures, per hotel
Measure A $2,500 2,500 2,500
Compliance Letter
Single Audit $10,000 10,000 10,000
(if required)
This estimate is based on the level of expertise of the individuals who will perform your
audit. Expenses for items such as travel, telephone, postage, and typing, printing, and
reproduction of financial statements are included in the above amounts. Circumstances
encountered during the performance of the audit that warrant additional time or expense
could cause us to be unable to complete the audit within the above estimates. We will
endeavor to notify you of any such circumstances as they are assessed.
kAW Peat Marwick LLP
Mr. Rahn Becker
Finance Director
City of Burlingame
March 25, 1998
Page 3
Our fees and expenses will be billed in accordance with the following schedule:
June 1 25%
September 15 40%
October 15 25%
November 15 10%
In accordance with your instructions, we have forwarded a copy of this letter to the City
Manager.
KPMG has had a pleasant and professional working relationship with the entire City
organization and would welcome the opportunity to continue that relationship. We ask that
you present this proposal to the Audit Committee of the City Council for their consideration.
I would be pleased to personally discuss the terms of this letter with you and the Audit
Committee at their convenience.
For your convenience in confirming these arrangements, we enclose a copy of this letter.
Please sign and return it to us. Thank you for this opportunity to continue serving the City.
Very truly yours,
KPMG Peat Marwick LLP
Denise J. Price
Partner
DJP:vms
Attachment
cc: Mr. Dennis Argyres, City Manager
KPMG Peat Marwick LLP
City of Burlingame
Scope of Services
The following paragraphs will confirm our understanding of our engagement to report upon our
audit of the City of Burlingame's general purpose financial statements as of and for the years
ending June 30, 1998, 1999 and 2000 and the nature and scope of the services we will provide in
accordance with OMB Circular A-133, if required.
Financial Statement Audit
We will conduct our audit of the financial statements in accordance with generally accepted
auditing standards and the standards for financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. The objective of an audit
carried out in accordance with such standards is the expression of an opinion as to whether the
financial statements, taken as a whole, conform with generally accepted accounting principles. In
conducting the audit, we will perform tests of the accounting records and such other procedures
as we consider necessary in the circumstances to provide a reasonable basis for our opinion on
the general purpose financial statements. We also will assess the accounting principles used and
significant estimates made by management, as well as evaluate the overall financial statement
presentation.
The management of City of Burlingame has responsibility for the financial statements and all
representations contained therein. Management also has responsibility for the adoption of sound
accounting policies and the implementation of record keeping to maintain the reliability of the
financial statements and to provide reasonable assurance against the possibility of misstatements
that are material to the financial statements.
The management of the City of Burlingame has responsibility for establishing and maintaining
internal control. To fulfill this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs for internal control structure policies
and procedures. 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, and that transactions are executed in accordance with management's authorization
and recorded properly to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Because of inherent limitations in any internal control
structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of
any evaluation of internal control to future periods is subject to the risk that procedures may
become inadequate because of changes in conditions, or that the effectiveness of the design and
operation of policies and procedures may deteriorate.
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KPl[%� Peat Marwick LLP
As part of our audit, we will consider the City of Burlingame's internal control and assess
control risk, as required by generally accepted auditing standards, for the purpose of establishing
a basis for determining the nature, timing and extent of auditing procedures necessary for
expressing our opinion concerning the financial statements and not to provide assurance on
internal control. Our consideration of internal control performed as part of the financial
statement audit contributes to the evidence supporting our opinion on the financial statements;
however, it does not provide a basis for opining on internal control. The limited purposes of this
consideration may not meet the needs of some users who require additional information about
internal control.
In accordance with Government Auditing Standards, we will prepare a written report on our
understanding of the City of Burlingame's internal control and the assessment of control risk
made as part of the financial statement audit. Our report will include (1) the scope of our work in
obtaining an understanding of internal control and in assessing control risk, and (2) the reportable
conditions, including the identification of material weaknesses, identified as a result of our work
in understanding and assessing the control risk for the financial statement audit. Reportable
conditions involve matters coming to our attention relating to significant deficiencies in the
design or operation of 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 general-purpose financial statements.
An audit is planned and performed to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether caused by error or fraud. Absolute
assurance is not attainable because of the nature of audit evidence and the characteristics of
fraud. Therefore, there is a risk that material errors or fraud (including fraud that may be an
illegal act) may exist and not be detected by an audit performed in accordance with generally
accepted auditing standards.
Compliance with laws, regulations, contracts and grants applicable to the City of Burlingame is
the responsibility of the City of Burlingame's management. In performing our audit, we will be
aware of the possibility that illegal acts or noncompliance may have occurred. However, it
should be recognized that our audit provides no assurance that illegal acts or noncompliance
generally will be detected and only reasonable assurance that illegal acts or noncompliance
having a direct and material effect on the determination of financial statement amounts will be
detected. As part of obtaining reasonable assurance about whether the financial statements are
free of material misstatement, we will perform tests of the City of Burlingame's compliance with
certain provisions of laws, regulations, contracts and grants. However, our objective is not to
provide an opinion on overall compliance with such provisions. In accordance with Government
Auditing Standards, we will prepare a written report on the results of our tests of compliance
with applicable laws and regulations.
lCPlVIG Peat Marwick LLP
In summary, under these standards, we will issue reports addressed to the City Council for the
years ending June 30, 1998, 1999, and 2000 as follows:
• A report on the general purpose financial statements;
• A report on internal controls and compliance based on an audit of the general purpose
financial statements performed in accordance with Government Auditing Standards;
Should the City of Burlingame wish to include these financial statements and our report thereon
in a document offering securities to third parties at some future date, we would consider our
consent to the inclusion of our report in such document at that time.
OMB Circular A-133
If required, we will also perform auditing procedures on the City of Burlingame's Federal
programs in accordance with the provisions of OMB Circular A-133, Audits of States, Local
Governments, and Non -Profit Organizations. OMB Circular A-133 includes specific audit
requirements, mainly in the areas of internal control and compliance with laws and regulations,
that exceed those required by Government Auditing Standards.
As part of our auditing procedures performed in accordance with the provisions of OMB Circular
A-133, we will perform tests to evaluate the effectiveness of the design and operation of internal
control that we consider relevant to preventing or detecting material noncompliance with laws
and regulations applicable to each of the City of Burlingame's major programs and report the
results to you. The tests of internal control performed in accordance with OMB Circular A-133
are less in scope than would be necessary to render an opinion on internal control. The limited
purpose of these tests may not meet the needs of some users of audit reports who require
additional information about internal control.
Compliance with laws, regulations, contracts and grants that govern Federal programs is the
responsibility of management. We will perform the tests of the City of Burlingame's compliance
with certain specific provisions of laws, regulations, contracts and grants we determine to be
necessary based on OMB's Compliance Supplement and report whether in our opinion the City of
Burlingame complied, in all material respects, with the laws and regulations applicable to its
major Federal programs. The procedures outlined in the Compliance Supplement are those
suggested by each Federal agency and do not cover all areas of regulations governing each
program. Program reviews by Federal agencies may identify additional instances of
noncompliance.
In summary, in accordance with OMB Circular A-133, we will issue a report to the City Council
which provides (1) our opinion on the schedule of expenditures of Federal awards in relation to
the financial statements taken as a whole, (2) our opinion on the City of Burlingame's
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PMG Peat Marwick LLP
compliance with laws, regulations, contracts and grant agreements that have a direct and material
effect on a major Federal program and (3) communicates our consideration of internal control
over Federal programs.
In addition to the OMB Circular A-133 requirements to maintain internal control and comply
with laws, regulations, contracts and grants that govern Federal programs as discussed above,
OMB Circular A-133 also requires the City of Burlingame to prepare a:
• Schedule of expenditures of Federal awards,
• Summary schedule of prior audit findings,
• Corrective action plan, and
• Data collection form (Part I).
While, we may be separately engaged to assist you in the preparation of these items, preparation
is, and must remain, the responsibility of the City of Burlingame.
Certain provisions of Circular A-133 allow a granting agency to request that a specific program
be selected as a major program provided that the Federal granting agency is willing to pay the
incremental cost of such a selection. The City of Burlingame agrees to notify KPMG of any such
request by a granting agency and to work with KPMG to modify the terms of this letter as
necessary to accommodate such requests.
Other Available Assurance Services
KPMG can provide other services to provide you with additional information on internal controls
and compliance with laws and regulations. We would be happy to discuss these services. As in
recent years, we can provide the city services to apply agreed-upon procedures to select hotels to
assist you in evaluating the reasonableness of the transient occupancy tax due to the City.
Other Engagement Issues
Our reports will be addressed to the City Council. We can not provide assurance that an
unqualified opinion will be rendered on the general purpose financial statements. Circumstances
may arise in which it is necessary for us to modify our report or withdraw from the engagement.
In such circumstances, our findings or reasons for withdrawal will be communicated to the City
Council.
The City of Burlingame agrees that all records, documentation, and information we request in
connection with our audit will be made available to us, that all material information will be
disclosed to us, and that we will have the full cooperation of the City of Burlingame's personnel.
As required by generally accepted auditing standards, we will make specific inquiries of
management about the representations embodied in the financial statements, the effectiveness of
internal control and City of Burlingame's compliance with certain laws and regulations, and
KPMG Peat Marwick LLP
obtain a representation letter from management about these matters. The responses to our
inquiries, the written representations, and the results of audit tests comprise the evidential matter
we will rely upon in forming an opinion on the financial statements.
Because of the importance of management's representations to the effective performance of our
services, City of Burlingame will release KPMG Peat Marwick LLP and its personnel from any
claims, liabilities, costs, and expenses relating to our services under this letter attributable to any
misrepresentations in the representation letter referred to above.
To the extent that they come to our attention, we will inform management about any material
errors, any instances of fraud and, unless clearly inconsequential, any illegal acts. It is our
responsibility to ensure that the audit committee is informed of any significant fraud or illegal
acts that we become aware of during our audit. If the illegal act involves funds from
governmental entities, it is City of Burlingame's responsibility to inform the governmental
entities of these acts. If City of Burlingame's management and audit committee are involved in
the illegal act or do not report it to the appropriate governmental entities on a timely basis, we, as
auditors, will be obligated to report the illegal acts to these governmental entities.
For your information, we have attached a copy of KPMG Peat Marwick LLP's most recent Peer
Review Report.
We understand that our reports on internal controls and on compliance with laws and regulations
are intended for the information of the audit committee, management, and others within the City
of Burlingame and the City's cognizant agency.
It should be understood the work papers for the engagement are the property of KPMG Peat
Marwick LLP and constitute confidential information. However, pursuant to Government
Auditing Standards, we are required to make certain work papers available to Federal regulatory
agencies upon request for their reviews of audit quality and use by their auditors. Access to the
requested work papers will be provided to the regulators under supervision of KPMG personnel.
Furthermore, upon request, we may provide photocopies of selected work papers to Federal
regulatory agencies. The Federal regulatory agencies may intend, or decide, to distribute the
photocopies or information contained therein to others, including other government agencies.
Costs incurred to comply with any such requests to review our work papers or make copies will
be billed directly to you.
Price Waterhouse LLP
November 8, 1996
To the Partners of KPMG Peat Marwick LLP:
30U A31aa:?ic Siren= Tele ;hone+ 203 358 O001
P 0. Rox zis 0."
S'zir, d 064U8
We have reviewed the system of quality control for the accounting and auditing practice of KPMG
Peat Marwick LLP (the Finn) in effect for the year ended March 31, 1996. Our review was
conducted in conformity with standards for peer reviews promulgated by the peer review committee
of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). We tested
compliance with the Firm's quality control policies and procedures at the Firm's national office and at
selected practice units in the United States and with the membership requirements of the Section to
the extent we considered appropriate. These tests included the application of the Firm's policies and
procedures on selected accounting and auditing engagements. We also tested the supervision and
control of portions of engagements performed outside the United States.
In performing our review, we have given consideration to the general characteristics of a system of
quality control as described in quality control standards issued by the AICPA. Such a system should
be appropriately comprehensive and suitably designed in relation to the firm's organizational
structure, its policies, and the nature of its practice. Variance in individual performance can affect
the degree of compliance with a firm's prescribed quality control policies and procedures. Therefore,
adherence to all policies and procedures in every case may not be possible. As is customary in a peer
review, we are issuing a letter under this date that sets forth comments relating to certain policies and
procedures or compliance with them. None of these matters were considered to be of sufficient
significance to affect the opinion expressed in this report.
In our opinion, the system of quality control for the accounting and auditing practice of KPMG Peat
Marwick LLP in effect for the year ended March 31, 1996, met the objectives of quality control
standards established by the AICPA, and was being complied with during the year then ended to
provide the Firm with reasonable assurance of conforming with professional standards. Also, in our
opinion, the Firm was in conformity with the membership requirements of the Section in all material
respects.