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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. Rw _= �� 3;g-+: c�M KPhIG Imemaronai 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. W -,C wo. 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 :�L"Tq 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.