CR 96-203 Designate Auditors For 1996•
•
December 12, 1996
Proposed Action.
Staff recommends adoption of the following motion: Move that KPMCJ Peat Marwick be
designated as the City's auditors for the reporting year 1996.
Adoption of this motion now will allow the audit firm to begin preliminary reviews and
prepare audit schedules and confirmations.
Overview
DESIGNATE AUDITORS FOR THE YEAR 1996
A Request for Proposed Audit Services was sent to the four major auditing firms that are
still auditing government entities. Response was received from two firms with bids and one
firm declined to bid.
Primary Issues to Consider.
o Which firm will best serve the needs of Hopkins?
o Are the fees reasonable and competitive?
SupDorfn Information.
o Request for Audit Services
o E. Schedler, Finance Director
Council Report 96 -203
Council Report 96 -203
December 12, 1996
Page 2
Primary Issues to Consider
Two bids for audit services were received.
Peat Marwick (I)
Tautges Redpath (2)
1996 audit 19,900 19,452
1997 audit 18,900 19,225
1998 audit 18,900 19,800
(1) Peat bids a maximum price for all three years.
(2) Tautges bids a fee not to exceed for 1996 only.
The decline in fees, from 1996 to 1997 in both bids, is due to Congress increasing the
threshold which precipitates a need for a "single audit ". The City is projected to fall below
the new amount, thus eliminating the requirement for a "single audit ".
Peat Marwick has been the auditors for Hopkins for several years. We have had a good
working relationship with them. The quality of their audits have been very satisfactory.
Peat Marwick has always been willing and helpful to assist the City when questions arise
about accounting procedures or changes.
As one of the Big Six national auditing firms, Peat also provides helpful literature and letters
to clients periodically as new technical items of interest arise.
Tautges Redpath is a regional firm with a network to other accounting firms. They do
several other governmental audits within Minnesota.
The Finance Department at year end prepares many schedules to analyze operations and help
us prepare the annual financial report. The auditor uses these schedules for their review plus
Finance prepares additional schedules and documents to assist the audit. What Finance does
in this area helps contain the audit cost and we will continue to provide this type of
information. Tautges requests the City to provide certain other schedules and information
which I expect the auditors to provide as Peat already does.
STATEMENT OF INTENT
The City of Hopkins intends to hire a Certified Public Accounting firm for a minimum
three year period (fiscal years 1996 - 1998) to audit the City's Comprehensive Annual
Financial Report in accordance with the performance specifications described herein.
Further, the City plans to continue its efforts to comply with Government Finance Officers
Association Certificate of Achievement in Financial Reporting program and expects that
this standard will be maintained in future years.
CITY OF HOPKINS - GENERAL INFORMATION
A. City Operations
1. Hopkins is a statutory city with a council - manager form of government.
2. With 16,534 residents, Hopkins is a second ring suburb.
3. The City provides a full range of municipal services consisting of Public
Safety (Police and Fire), Public Works, Parks and Recreation, and general
administrative services. It also operates five enterprise funds - Water,
Sanitary Sewer, Storm Sewer, Refuse and Pavilion/Ice Arena.
B. City Staff
REQUEST FOR AUDIT SERVICES
CITY OF HOPKINS, MN
1. The number of full time permanent employees by division is as follows:
General Government 27
Operations & Maintenance 26
Public Safety 41
Utility 13
Ice Arena 4
Total 111
The Finance Department consists of the following full time permanent
employees:
Finance Director
Sr. Accounting Clerks (2)
Utility Billing Clerk
Page 1
C. Accounting System
REQUEST FOR AUDIT SERVICES
CITY OF HOPKINS, MN
1. Most revenue and expenditure transactions are accounted for on a cash
basis during the year. At year end, adjustments are made to convert
Governmental and Agency funds to a modified accrual basis and to convert
Enterprise funds to a full accrual basis.
2. Utility billing transactions, general ledger, payroll and accounts payable
functions are maintained on an in -house computer financial management
system. The City's present system was put into service January 1, 1996.
3. The estimated annual number of accounting transactions are as follows:
4. Hopkins has the following fund types with the number of each listed:
III. PERFORMANCE STANDARDS
Our current fee for the audit of the City, the BRA, single audit and
preparation of the State Auditor's TIF report is $20,600.
A. General Audit Requirements:
3,200 Receipts
4,300 Accounts Payable Checks
3,700 Payroll Checks
16,700 Utility Bills
General 1
Special Revenue 15
Debt Service 9
Capital Projects 2
Enterprise 5
Construction Funds 2
Financial and compliance audits of all funds and account groups for fiscal
year ended December 31, 1996 with extensions for 1997 and 1998. City
staff will prepare the majority of the year end work papers and publish the
final financial statements, schedules and tables for the report.
The auditor will express a written opinion on the combined financial
statements, combining individual funds and account group statements.
Page 2
3. The audit examination shall result in financial statements prepared in
conformity with generally accepted accounting principles for local
governments as determined by the GASB, the AICPA Industry Audit
B. Timetable
2. The final audit report must be rendered no later than May 15, or within six
weeks following completion of the City's work papers and account
analysis.
C. Reports
REQUEST FOR AUDIT SERVICES
CITY OF HOPKINS, MN
Guide for State and Local Governments. The audit shall also meet the
minimum audit procedures prescribed by the Minnesota State Auditor
pursuant to the provisions of MSA Chapter Six, the Single Audit Act of
1984 and OMB Circular A -128.
1. A joint planning meeting between city staff and the auditor will be held
each year to establish target dates and work schedules for completion of
the financial audit.
The year end report must include:
- Comprehensive Annual Financial Report (CAFR)
- Management Report or Letter
2. The Comprehensive Annual Financial Report format will be based upon the
guidelines established for the Government Finance Officers Association
(GFOA) Certificate of Achievement Program.
IV. AUDIT FIRM REQUIREMENTS
The CPA firm will meet with the Director of Finance for the purpose of
reviewing its audit findings and recommendations prior to the issuance of
the CAFR and management report or letter.
4. The CAFR and findings of the Management Report must be presented to
the City Council by the auditor.
A. The CPA firm must be a member of the American Institute of Certified Public
Accounts and adhere to the AICPA professional standards of audit practices and
conduct.
Page 3
REQUEST FOR AUDIT SERVICES
CITY OF HOPKINS, MN
B. The firm must have audited governmental units which are as large and as complex
as the City of Hopkins in the past three years and must have the capability of
assisting the City in retaining its Certificate of Achievement for Excellence in
Financial Reporting from the GFOA.
C. The firm must also have the capability of assisting the City in maintaining its A -1
bond rating.
INSTRUCTIONS FOR SUBMITTING PROPOSALS
A. Interested firms should submit, by 1:00 PM on December 10, 1996, three (3)
copies of their proposal to:
John E. Schedler
City of Hopkins
1010 First Street South
Hopkins, MN 55343
B. Proposals should include the following information:
A profile of the firm. Please state whether the firm is national, regional or
local and identify the office which will perform the audit if different from
the office which prepares the proposal.
A statement of understanding of the work, a description of the audit
approach, and an explanation of the audit procedure that will be used and a
commitment to perform the work in the designated time period.
3. A listing of the personnel proposed to supervise and perform the audit.
This should include biographies, including relevant municipal audit
experience, of the individuals who will be assigned to the engagement.
4. A listing of comparable Minnesota cities that your firm, or personnel in
your firm, have audited in the past three years and the names of contact
people in each city.
Certificate of Achievement. Please list the firm's municipal clients that
currently hold the GFOA' s Certificate of Achievement for Excellence in
Financial Reporting, as well as a list of all certificate reviewers at your firm.
Page 4
REQUEST FOR AUDIT SERVICES
CITY OF HOPKINS, MN
Peer Review. Provide a copy of the report of your firm's most recent
external quality control review, with a statement whether that quality
control review included a review of government engagements.
A proposed fee schedule for each year in the three year period, including a
not -to- exceed amount for the 1996 fiscal year audit. The City types the
final copy of the report. In addition, an estimate of the total engagement
hours by staffing category and hourly rates should be provided.
8. A listing of other finance related services that are available from your firm.
VI. CITY'S EXPECTATIONS
The City is interested in retaining an auditor who can provide the mandated work and also
may serve as a special advisor. To meet these needs, the auditor will have to:
o complete field work and reports in a timely and accurate manner
o cost - effectively service the account
o responsively address requests
o be familiar with City
o maintain independence
o be knowledgeable about municipal topics
The City will enter into an annual agreement with the auditor. Based on satisfactory
performance, the City may extend the agreement annually without solicitations from other
firms. However, competitive proposals may be required once an engagement has totaled
three consecutive years. In event of unsatisfactory performance, or when in the best
interest of the City, proposals may be solicited before the end of the three year period.
Page 5