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HomeMy WebLinkAboutRES.1676.06-04-2001BILL NO. 2001-121 RESOLUTION NO. �( A RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT FOR AUDITING SERVICES WITH KERBER, ECK & BRAECKEL, LLP BE IT RESOLVED BY THE COUNCIL OF THE CITY OF CAPE GIRARDEAU, MISSOURI, AS FOLLOWS: SECTION 1. The City Manager, for and on behalf of the City of Cape Girardeau, Missouri, is hereby authorized to enter into a Contract for Auditing Services with Kerber, Eck & Braeckel, LLP. A copy of said Contract is attached to this Resolution and made a part hereof. PASSED AND ADOPTED THIS DAY OF i,;��f� 20f)f �J A. Spradling, III, M&Yor ATTEST: ,-/- �)J-4h A (00� Gayle 4. Conrad City Clerk CONTRACT FOR AUDITING SERVICES This Contract entered into on the day of , 2001, by and between KERBER, ECK & BRAECKEL, LLP, Certified Public Accountants, hereinafter referred to as "KEB" and the CITY OF CAPE GIRARDEAU, MISSOURI, hereinafter referred to as "City" 1 . The parties hereto agree that KEB will provide basic auditing services to the City in accordance with the requirements of the "City of Cape Girardeau Request for Proposal", said Request for Proposal is marked Exhibit A and attached hereto and incorporated herein by reference as though fully set out. 2. The parties hereto agree that the above referenced Request for Proposal and KEB's "Auditing Services Proposal" marked Exhibit B attached hereto and made part hereof by reference as though set out herein shall constitute the agreement between the parties with respect to the provision of auditing services to the City by KEB. 3. The parties agree that the City shall provide compensation to KEB for the services as provided in the Request for Proposal and the Auditing Services Proposal. 4. The obligations of the parties pursuant to this Contract shall continue for the fiscal year ending June 30, 2001 and for one (1) additional fiscal year ending June 30, 2002. THIS AGREEMENT shall be binding upon the successors and assigns of the parties. KERBER, ECK & BRAECKEL, LLP [Typed Name & Title of Signer] ATTEST: [Typed Name & Title of Signer] CITY OF CAPE GIRARDEAU, MISSOURI Michael G. Miller, City Manager ATTEST: Gayle A. Conrad, City Clerk CITY OF CAPE GIRARDEAU AUDITING SERVICES REQUEST FOR PROPOSAL The City of Cape Girardeau invites qualified CPA firms to submit proposals for the providing of auditing services as described in the attached specifications. Written proposals will be received until 11:30 A.M. on May 11, 2001 at the City Finance Department, City Hall, 401 Independence Street, Cape Girardeau, Missouri 63703. Conditions Qualifying a CPA Firm to Propose 1. Required Affirmations Each proposer must make the following affirmations in its proposal: a. The proposer is properly licensed for public practice as a certified public accountant. b. The proposer meets the independence requirements of the Standards for Audit of Government Organizations, Programs, Activities, and Functions, 1994 revision, published by the U.S. General Accounting Office. c. The proposer has not been the object of any disciplinary action during the past three years. 2. Other Qualifications Each proposer must include a narrative in its proposal that demonstrates the following: a. The proposer has a staff that is knowledgeable of current governmental auditing standards and accounting principles as they relate to performing the services outlined in this Request for Proposal(RFP). The proposer should at a minimum address the following in its discussion: 1. Prior governmental audits performed. 2. The main individuals to be involved in the audit. 3. The continuing education in governmental accounting and auditing received by those listed in item 2 within the last two years. b. The proposer has a formal program that insures it maintains a staff that is knowledgeable of current governmental auditing standards and accounting principles as they relate to performing the services outlined in this request for proposal for future years. The proposer will also provide the following items: 1. The results of peer reviews received within the last two years. 2. A copy of the latest quality control review report for the firm. 3. A listing of any restrictions placed on the firm by governmental agencies or state boards of accountancy which would affect performance of the audit or acceptance of the audit report. 1 EXHAINT3A, Procedural Instructions 1. Sealed Proposals A proposal must be submitted in a sealed envelope or package bearing the title "City of Cape Girardeau Auditing Services" along with the proposer's name and address. The Proposer shall return two (2) copies of the completed proposal no later than May 11, 2001 at the City Finance Department, City Hall, 401 Independence Street, Cape Girardeau, Missouri 63703. It is the proposer's responsibility to ensure that the proposal arrives on time at the right place. Any proposals received after the above time may be disqualified. Each proposal must state the basis on which fees are to be calculated in each of the five years and the basis on which fees for any additional audit work outside the Audit's scope are to be calculated. 2. Public Information All submitted proposals and information included with the request for proposal shall become public record upon their delivery to the City Finance Department. 3. Responses to Proposer's Questions A proposer may only submit written questions for further clarification of items included in this request for proposal. The proposer's question and the City's answer will become public records and will be shared with all proposers to whom the request for proposal has been sent. 4. City's Contact Person The City's Finance Director shall be the contact person with any aspects of this request for proposal. John Richbourg can be reached at the Finance Department (573) 334-7146. 5. Right to Request Additional Information The City reserves the right to request additional information it deems appropriates from any proposer after reviewing the proposals. 6. Right to Reject Proposals The City reserves the right to reject any or all proposals. 7. Execution of Agreement If the selected firm does not execute an agreement within twenty (20) days after being notified of selection, the City may give notice to the firm of the City's intent to select the next most qualified 2 proposing firm or call for new proposals, whichever the City deems most appropriate. Selection Process 1. Criteria for Selection Each proposer will be judged on the abilities of its staff and its demonstration of a commitment to maintaining a staff that is knowledgeable of current auditing standards and accounting principles as they relate to the performance of services requested in this request for proposal. Cost of services will be a secondary factor. 2. Advisory Committee The following City staff will judge the proposals: Finance Director and Internal Auditor. They will recommend to the City Council the proposer they feel is best qualified to perform the services at a reasonable cost to the City. The City Council will make the final selection decision. Contract Terms 1. Contract Period The selected firm shall perform the City's annual audit as described later in this request for proposal for the next five fiscal years beginning with the fiscal year ending June 30, 2001. 2. Cancellation of Contract The audit services contract shall provide the City the right to cancel the contract at any time upon one hundred twenty (120) days' prior written notice of its intent to terminate the agreement. The designated firm shall provide the City at least one hundred twenty (120) days' prior written notice of its intent to terminate the agreement. A decision to terminate the contract may not be as a result of an offering of a lower price from another firm during the contract period. 3. Award of Contract The City of Cape Girardeau Auditing Services Contract is expected to be awarded at the City Council meeting on June 5, 2001. Description of City and Records to be Audited 1. General Information The City of Cape Girardeau operates under a charter that was adopted in 1981. The City Charter provides for a non-partisan municipal government consisting of a mayor, six council members, and a City Manager. The City Manager operates as the administrative head of the City. The City provides the following services financed from general fund revenue: street maintenance and construction, police and fire protection, transit, engineering and planning, building inspections, and parks and recreation. The City currently owns and operates several enterprise and internal service operations. The sanitary sewers, water, solid waste, golf course, and Shawnee Softball Complex are financed by usage charges that are intended to be self-sustaining. The fleet and data processing operations provide service to all City departments and charges these departments amounts sufficient to cover their operations. The Employees' Benefit Fund and Risk Management Fund provide for the accounting of the City's self-insured health and workmen's compensation plans respectively. Both funds charge other city funds premiums based on actuarially determined expected claims. The Equipment Replacement Fund buys and leases equipment to other city funds. The City health and library services are financed through their own tax levies. The Cape Girardeau Public Library has its own board of directors which is appointed by the City Council. It issues its own annual financial statements. The Library is treated as an agency fund of the City. The City organized in 1988 the Cape Girardeau Public Facilities Authority (CGPFA) under the general not-for-profit corporation law of the State of Missouri. The purpose of the CGPFA is to issue bonds to finance City capital expenditures under lease purchase agreements between the City and the CGPFA. The CGPFA has six outstanding bond issues in the total amount of $8,950,000. The CGPFA is treated as a blended component unit of the City and its results are presented on a combined basis with the financial statements of the City. The City operates a Municipal Court office, which is a division of the General Fund. This division is to be audited as a separate entity. This division consists of the Court Clerk, two full-time employees, and one part-time employee. The Court Clerk maintains a municipal court appearance bond checking account. In addition, a petty cash account is maintained at the office. The Municipal Court monitors the receipt of all fines and court costs which are deposited daily. 2. City Accounting Fund Structure The following is a listing of current fund types used by the City's accounting system with an indication of the accounting basis used by each type and funds included under each type. Audit work to be done is to be completed at the fund level. GENERAL FUND -uses modified accrual basis General SPECIAL REVENUE FUND -uses modified accrual basis 4 Convention and Tourism Airport Downtown Business District Parks and Recreation Health Motor Fuel Tax Capital Improvement Sales Tax — Flood Control Project Capital Improvement Sales Tax — Water Projects Capital Improvement Sales Tax — Sewer System Improvements Flood Protection Vision 2000 Transportation Sales Tax — I Trust Fund Transportation Sales Tax — II Trust Fund DEBT SERVICE FUND -uses modified accrual basis Debt Service CAPITAL PROJECTS FUND -uses modified accrual basis General Capital Improvement Army Corp of Engineer Flood Control Project Street Improvement FAU Street Grant Community Development Block Grant Park Improvement Water Improvement Projects (This fund has a project length budget.) ENTERPRISE FUND -uses accrual basis Sewer Water Solid Waste Golf Course Softball Complex INTERNAL SERVICE FUND -uses accrual basis Data Processing Fleet Management Employees' Benefit Risk Management Equipment Replacement TRUST AND AGENCY FUND -uses modified accrual Library Arena Improvement 5 Deferred Compensation Park Development Foundation ACCOUNT GROUPS General Fixed Assets General Long-term Debt 3. Accounting System -Software The City currently uses software developed by Systems Consultants, Inc., of St. Louis, Missouri for the following: a. General ledger including three years of on-line transaction detail b. Financial reporting including comparison to budgeted data c. Sewer, water, and solid waste billing d. Sewer, water, and solid waste receivable e. Accounts payable entry, payment, reporting, and automatic updating of the general ledger accounts f. Fixed asset entry, depreciation, reporting, and automatic updating of the general ledger accounts for depreciation g. Budgetary control including encumbrance accounting h. Payroll disbursement, distribution, reporting, and automatic updating of the general ledger for payroll disbursement i. Business license billing and receivable J. Miscellaneous billing and receivable In addition the following software is being used by the city for the following purposes: a. Special assessment billing and receivable — uses an access database b. Gasoline inventory and usage distribution - Phoenix c. Parts and labor distribution for fleet services — CFA Fleet Management d. Hotel/motel and restaurant tax billing and receivable — uses an access database e. Parks and recreation billing and scheduling — Class Systems All software is currently being run on a Unisys E -Commerce Server with Windows N/T operating system. The majority of the software has been operational since July 1998. Real estate and personal property taxes after 1986 have been billed and collected by the county. The county sends monthly reports and cash distributions to the City. Real estate and personal property tax receivables before 1986 are collected by the City and maintained on a manual system. 4. Accounting System -Other The City accounting records are maintained almost entirely by two divisions within the Finance Department. The City Collector's division consisting of the City Collector and six full-time ri employees perform the following functions: cashier, bank deposit, utility billing and collection, business license billing and collection, and other miscellaneous billing and collection. The payroll function is currently being performed under the Personnel/Risk Management division by one full- time employee. The Finance Director's division, consisting of the Finance Director and six full-time employees, perform the following functions: cash receipts posting, grant reimbursement administration, payroll audit, account reconciliation, distribution of internal service funds' charges, investment administration, all journal entry preparation and posting, month-end journals' support schedule preparation, bank reconciliation, verification of the county's tax collections, monthly statement preparation for the City Council, purchasing, accounts payable, and budget preparation. In additions to these two divisions, various other divisions within the City perform the cashier function. The City's cashiers receive cash and checks and produce documentation for posting to the general ledger. Actual posting to the general ledger is done by the Finance Director's division. The City's accounts payable system is an encumbrance system and uses purchase orders and receiving reports. Purchase orders are reviewed to determine they are in budget compliance before being approved for payment. The City has a written procedures manual for the purchasing function, but does not have any written procedures manuals for any of the other accounting functions. The City maintains the following bank accounts at Commerce Bank of Cape Girardeau: cash operating account, health claims, overnight repurchase account, an account for each of the 2 community development block grant projects, and 1 project impact account. The cash operating account is used to receive all City deposits except community development block grant receipts and project impact funds. The operating account is a zero balance account with any collected funds being used to purchase overnight repurchase agreements. The community development bank accounts and the project impact account are used to receive all community development block grant and project impact receipts and to make disbursements to the City cash operating account to reimburse the City for qualifying expenditures. All bank statements are reconciled monthly. 5. Budgetary System The City currently has a 57 million -dollar budget for the current year. The City prepares a budget annually for all funds, which is adopted at the department level by a budget ordinance. The City does not maintain a system of budgetary accounts that is formally integrated into the accounting system. Budgetary control is maintained through the accounting software which allows each account to reflect a budgeted and an encumbered amount. The accounting reports produced show budgeted to actual comparisons and amounts available to be spent for expenses and amounts uncollected for revenues. 6. Transaction Statistics The following is the approximate volume of accounting activity experienced by the City: a. 15,000 sewer, water, and solid waste utility bills per month 7 b. 2,500 business licenses per year c. 442 building permits per year d. 1,291 electrical, plumbing, excavation permits per year e. 2,500 bank deposits per year f. 19,500 expense and payroll checks per year Required Services 1. Financial and Compliance Audits under the Single Audit Act The proposer shall adhere to all audit standards, complete all audit procedures, produce all reports, and issue any opinions that are required by the Single Audit Act Amendments of 1996 and The Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non -Profit Organizations. 2. Financial Audit The proposer shall make an examination of the general purpose financial statements and the related combining fund and account group statements in accordance with generally accepted governmental auditing standards adopted by the American Institute of Certified Public Accountants. The proposer shall issue an opinion on the above statements and present a bid to represent this examination. The proposer shall also examine the general purpose financial statements of the Cape Girardeau Public Library in accordance with generally accepted auditing standards and issue an opinion on them. A separate bid will be proposed for the examination of the Cape Girardeau Public Library. The proposer, as a separate bid, will examine the general purpose financial statements of the Municipal Court of the City in accordance with generally accepted auditing standards and issue an opinion on them. 3. Period of the Audit The first year for which services are requested for the City, Cape Girardeau Public Library, and Municipal Court is the fiscal year ending June 30, 2001. 4. Report Requirements The City will require fifteen copies of the City's audit report, fifteen copies of the Cape Girardeau Public Library's audit report, and ten copies of the Municipal Court's audit report. Included with this request for proposal is a table of contents of the previous year's audit reports of the City, Cape Girardeau Public Library, and the Municipal Court. They should be used as a guideline of the required contents of each audit report with the exception of any additional statements that may be required in the future as a result of new accounting pronouncements or the establishment of additional funds by the City. The audit reports of previous years will be available upon request at the City Finance Department. For the fiscal year ending June 30, 1994, the City issued its first comprehensive annual financial report. This report allows the City to participate in the Government Finance Officers Association "Certificate of Achievement for Excellence in Financial Reporting Program." This report is prepared solely by City staff and is due within six months of the end of the fiscal year. The comprehensive annual financial report is similar to the audit report requirements with the exception of the introductory section which includes a letter of transmittal from management, and a statistical section which provides ten years of trend data on the City. The firm is responsible for reviewing the statistical section of the comprehensive annual financial report and issuing a separate independent auditors' report to cover this section which will be included in the comprehensive annual financial report. Copies of the comprehensive annual financial report are available at the City Finance Department. 5. Time Requirements The selected firm may begin preliminary field work any time after an audit contract has been signed and work until June 30, 2001. Post closing field work may begin September 7, 2001 or earlier if the City consents. All field work should be substantially complete by October 26, 2001. The preliminary drafts of the audit should be available for discussion with the City by November 27, 2001 and the final audit reports should be formally submitted to the City Council at their first study session in the month of December 2001. The City requests that similar time schedules be followed in future years. Assistance Available to Proposers 1. General Information The audit reports of the previous four years have been issued by Begley, Janssen, Young, & Birk of Cape Girardeau, Missouri. For the year ending June 30, 2000 an unqualified opinion was issued. 2. Assistance to be provided by the City Copies of the audit working papers of the previous years provided by staff are on record with the City and can be viewed at request. The City staff will be available to provide the following assistance: a. Prepare audit workpapers as requested. This includes but is not limited to the following: receivable and payable reconciliation, income reasonability test and reconciliations, ratio analysis, cash and investment reconciliation, and production of trial balances in requested format. Fj b. Prepare the combined balance sheet, combined statement of revenue, expenditures, and changes in fund balance/retained earnings, and all combining, individual fund and account group statements and schedules. c. Prepare confirmations and other necessary letters. d. Retrieving source documentation as requested. _ e. Produce reports and provide information in a variety of formats through the data base application of our data processing system. All financial statements are prepared by City staff in a presentable, standard reporting format for use in the firm's audit report and the City's comprehensive annual financial report. The cash flow statements are the only statements that are prepared by the firm but the City staff will produce those statements in a reporting format. The firm prepares the notes to the financial statements but the City staff provides clerical assistance in final presentation for the audit report and comprehensive annual financial report. The opinions are the responsibility of the firm. 10 CONTENTS Page Independent Auditors' Report 3 LIBRARY FUND Balance Sheet 4 Notes To Financial Statements 5 SUPPLEMENTAL INFORMATION Library Fund - Statement Of Revenues And Expenditures 9 State Aid Agency Fund - Statement Of Revenues And Expenditures - Unaudited 10 CONTENTS Page Independent Auditors' Report 3 MUNICIPAL COURT Balance Sheet 4 Statement Of Revenues And Expenditures - Budget And Actual (GAAP Basis) 5 Note To Financial Statements 6 CONTENTS FINANCIAL SECTION Page Independent Auditors' Report 7 GENERAL PURPOSE FINANCIAL STATEMENTS Combined Balance Sheet - All Fund Types and Account Groups 10 Combined Statement of Revenues, Expenditures and Changes in Fund Balance - All Governmental Fund Types 12 Combined Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budget Basis) - All Governmental Fund Types 13 Combined Statement of Revenues, Expenses and Changes in Retained Earnings - All Proprietary Fund Types 15 Combined Statement of Cash Flows - All Proprietary Fund Types 16 Notes to Financial Statements 17 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS GENERAL FUND Comparative Balance Sheet 63 Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 64 SPECIAL REVENUE FUNDS Combining Balance Sheet 65 Combined Statement of Revenues, Expenditures and Changes in Fund Balance 66 Convention/Visitors Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 67 CONTENTS - CONTINUED SPECIAL REVENUE FUNDS - Continued Airport Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 68 Downtown Business Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 69 Parks and Recreation Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 70 Health Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 71 Motor Fuel Tax Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 72 Capital Improvement Sales Tax Special Revenue Fund - Flood Control Projects Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 73 Capital Improvement Sales Tax Special Revenue Fund - Water Projects Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 74 Capital Improvement Sales Tax Special Revenue Fund - Sewer System Improvements Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 75 Transportation Sales Tax Trust Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 76 Flood Protection Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 77 CONTENTS - CONTINUED Vision 2000 Special Revenue Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 78 DEBT SERVICE FUND Debt Service Fund - Comparative Balance Sheet 79 CAPITAL PROJECTS FUND Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balance 81 General Capital Improvement Fund Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) M. Corp Flood Control Capital Project Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 83 Street Improvements Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 84 FAU Street Grants Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 85 Community Development Block Grant Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 86 Park Improvements Fund - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 87 Water Improvement Projects - Schedule of Revenues and Expenditures - Budget and Actual (Budget Basis) 88 CONTENTS - CONTINUED ENTERPRISE FUNDS Combining Balance Sheet • • Combining Statement of Revenues, Expenses and Changes in Retained Earnings 90 Combining Statement of Cash Flows 91 Sewer Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 92 Water Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 93 Solid Waste Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 94 Golf Course Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 95 Softball Complex Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 96 INTERNAL SERVICE FUNDS Combining Balance Sheet 97 Combining Statement of Revenues, Expenses and Changes in Retained Earnings 98 Combining Statement of Cash Flows 99 Data Processing Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 100 Fleet Management Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 101 Employees' Fringe Benefit Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 102 CONTENTS - CONTINUED Risk Management Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 103 Equipment Replacement Fund Schedule of Revenues and Expenses - Budget and Actual (Budget Basis) 104 AGENCY FUNDS Combining Balance Sheet 105 Combining Statement of Changes in Assets and Liabilities - All Agency Funds 106 FIXED ASSETS Schedule of General Fixed Assets by Source 107 Schedule of General Fixed Assets - By Function and Activity m Schedule of Changes in General Fixed Assets - By Function and Activity 109 LONG-TERM DEBT Schedule of Changes in Long -Term Debt 110 Statement of General Long -Term Debt 111 SINGLE AUDIT SECTION Independent Auditors' Report on Compliance With Requirements Applicable to Each Major Program And Internal Control Over Compliance In Accordance With OMB Circular A-133 113 Independent Auditors' Report on Compliance And On Internal Control Over Financial Reporting Based On An Audit of Financial Statements Performed In Accordance With Government Auditing Standards 116 Schedule of Expenditures of Federal Awards 118 Schedule of Findings and Questioned Costs 121 CITY OF CAPE GIRARDEAU, MISSOURI AUDITING SERVICES PROPOSAL June 30, 2001 SUBMITTED BY KERBER, ECK & BRAECKEL LLP 1221 Broadway Cape Girardeau, MO 63701 (573) 334-0568 CONTACT PERSON James E. Erlacker, Partner SUBMITTED ON May 25, 2001 EXH H 8 I TABLE OF CONTENTS Profile of Kerber, Eck & Braeckel LLP Summary of Qualifications Continuing Professional Education Work Plan 5 h 7 Peer Review Report 10 KERBER, E,CK & BRAECKEL LLP CERTIFIED PUBLIC ACCOUNTANTS 1221 Broadway Cape Girardeau, Missouri 63701-8502 573-334-0568 Fax 573-334-3962 Cape Girardeau, Missouri Belleville, Illinois Carbondale, Illinois Milwaukee, Wisconsin St. Louis, Missouri Springfield, Illinois Mr. John Richbourg Finance Director City of Cape Girardeau, Missouri 4011ndependence Cape Girardeau, MO 63701 Dear Mr. Richbourg: May 25, 2001 Basis of Proposal We are pleased to submit this proposal to provide professional services for the City of Cape Girardeau as described in our cover letter for the year ended June 30, 2001. This proposal will serve to present the qualifications of our firm, the scope and approach of the services which we intend to provide and other information requested by the City of Cape Girardeau, Missouri in the request for proposals. If you would like any amplification or additional data, either in writing or orally, please contact us. Required Affirmations As required in the Request for Proposal, we affirm the following. 1. We are properly licensed for public practice as certified accountants by the State of Missouri. 2. We meet the independece requirements of Standards for Audit of Government Organizations Programs, Activities, and Functions, 1994 revision published by the U.S. General Accounting Office. 3. We do not have any record of substandard audit work and there have never been any disciplinary or enforcement actions against our firm. Letter of Transmittal We will perform an audit of the financial statements of all accounts, funds and other monies in the care, custody or control of the City of Cape Girardeau for the year ended June 30, 2001. These audits will be performed in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and, if required, the Single Audit Act Amendments of 1996 and OMB Circular A-133. 3 The audit referred to above will determine whether or not: 1. The general purpose financial statements and the related combining and individual fund and account group statements of the City of Cape Girardeau present fairly the financial position and results of operations of the City of Cape Girardeau, in accordance with generally accepted accounting principles (GAAP) applicable to governmental entities. 2. The City of Cape Girardeau, Missouri has an internal control structure designed to prevent any conditions that may result in errors or irregularities in amounts that would be material in relating to the financial statements; and, if applicable, has an internal control structure designed to provide reasonable assurance that major federal financial assistance programs are being managed in compliance with applicable laws and regulations. 3. The City of Cape Girardeau has complied with laws and regulations that may have a material effect on the financial statements and on each major federal financial assistance program. It is understood that, although the objective of the audit is to lead to the expression of an unqualified opinion with respect to the general purpose financial statements being in conformity with generally accepted accounting principles, as applicable to governmental entities. If circumstances exist or arise which would have an effect upon our opinion, we will inform you as promptly as possible and attempt to arrive at a conclusion acceptable to both of us. If our opinion will be other than unqualified, the reasons therefore will be fully disclosed. It is also understood that the audit contemplated is based upon tests and samples, since detailed auditing of all transactions is not practical. Even when tests and samples are deemed adequate in the circumstances to provide the basis for a professional opinion that the general purpose financial statements are, in all material respects, fairly presented in accordance with generally accepted accounting principles, the audit is not designed, and cannot be relied upon to disclose fraud, defalcations or similar irregularities should any exist, although this discovery may result. We will, of course, inform you promptly of any findings which appear to be unusual or abnormal. An exit conference will be held prior to the issuance of the final report on the audit. The Finance Director or designee and other appropriate members of the City of Cape Girardeau's staff will be included in this exit conference. If the audit report includes any findings, the comments and plans for corrective action shall be included in the report. The audit report will meet all the requirements listed in the Request for Proposal. Upon notification of award from the City of Cape Girardeau, our work will commence and be completed and a preliminary draft report submitted to the City of Cape Girardeau prior to November 27, 2001, or three weeks after receiving the draft report from the City, whichever is later. 4 Profile of Kerber, Eck & Braeckel LLP A. Kerber, Eck & Braeckel LLP is a full service regional auditing, accounting and consulting firm with offices in Cape Girardeau and St. Louis, Missouri; Carbondale, Springfield and Belleville, Illinois; and Milwaukee, Wisconsin. We are one of the Midwest's largest regional accounting organizations. Among our six offices are more than 130 professional staff of CPA's, accountants and consultants. Engagement activity is directed by our 20 partners and principals. Established in 1931, our firm serves a wide range of governmental entities, commercial businesses and individuals. Our size enables us to properly staff and supervise an engagement and maintain direct partner contact with the client. B. Our Cape Girardeau, Missouri office will be responsible for conducting this proposed audit. The Cape Girardeau office was established in 1974 and currently has a well—rounded professional staff serving a diversified clientele. The Cape Girardeau office has 9 professional and support personnel, including two partners, two managers, three staff members and two support staff. With a substantial professional staff, Kerber, Eck & Braeckel LLP has the expertise suited to the most demanding client needs. We remain flexible enough, however, to serve on a personal level and to offer clients the continuity of long—term relationships with the same senior personnel. As members of both the SEC Practice Section and Private Companies Practice Section of the American Institute of Certified Public Accountants, the Missouri Society of Certified Public Accountants and various other state societies and professional organizations, we participate in numerous training seminars and draw on the vast information sources they offer. Our professional staff is in a continual process of educational development. Our goal is to provide high quality, timely service in each engagement. C. Services provided by the Cape Girardeau office include auditing, accounting, tax and management services. Approximately 50% of the practice of the Cape Girardeau office is the audit of financial statements involving thirty—nine business and governmental clients. D. All of our staff members have their own computers assigned to them (IBM compatibles) which are utilized to the fullest practical extent in the performance of audit work. In addition, we have laptop computers available for each of our staff members. A large majority of our audit clients utilize computers. All of our staff are familiar with the audit of computerized accounting systems. Summary of Qualifications A. List of Recent Local Governmental Audits Performed by Cape Girardeau Office Period Completion Ended Date City of Perryville, Missouri March 31, 2000 May 17, 2000 120 North Jackson March 31, 1999 May 25, 1999 Perryville, MO 63775 March 31, 1998 August 4, 1998 Craig Lindsley, City Administrator (573) 547-2594 5 Summary of Qualifications — Continued A. List of Recent Local Governmental Audits Performed by Cape Girardeau Office — Continued Regional Superintendent of Education June 30, 2000 October 5, 2000 for the Counties of Jackson and Perry June 30, 1999 September 22, 1999 Contracted through Illinois State Board June 30, 1998 September 23, 1998 of Education B. Partner and Manager Assigned to Job James E. Erlacker, Partner Partner in charge of Cape Girardeau office Bachelor of Science in Business Administration — Southeast Missouri State University Twenty—six years of governmental auditing and accounting experience Significant experience with micro—computers Member of American Institute of CPA's Member of Missouri Society of CPA's Jeffrey M. Hay, CPA Audit manager in charge of fieldwork Bachelor of Science in Business Administration — Southeast Missouri State University Fifteen years of governmental auditing and accounting experience Significant experience with micro—computers Member of American Institute of CPA's Member of Missouri Society of CPA's Vice—president Southeast Chapter — Missouri Society of CPA's Chairman — CPE Curriculum Committee — Missouri Society of CPA's C. Other Staff Assigned to Audit Darrin Sauerbrunn. CP Bachelor of Science in Business Administration — Southeast Missouri State University Two years of governmental auditing and accounting experience Experience with micro—computers Lisa Ruch, CPA Bachelor of Science in Business Administration — Southeast Missouri State University Two years of governmental auditing and accounting experience Experience with micro—computers 2 Continuing Professional Education It is a firm requirement that all professional staff receive at least 40 hours of continuing education each year and that all members that perform government audits meet the minimum requirements for continuing education as listed in the "Yellow Book". Since our office is involved in governmental auditing, we require all of our staff members to meet the continuing education requirements of the "Yellow Book". James E. Erlacker 2000—Governmental Accounting and Auditing Update 8 hours 2000 Governmental Accounting & Auditing Conference 8 hours Jeffrey M. Hay 2001 — MSCPA Governmental Accounting Conference 13 hours 2000 — 2000 Governmental Accounting & Auditing Conference 8 hours Peer Review Information Kerber, Eck & Braeckel LLP is a member of both the SEC Practice Section and Private Companies Practice Section of the American Institute of Certified Public Accountants. We underwent peer reviews in 1982, 1985, 1988, 1992, 1995 and 1998. A copy of our most recent peer review is included in this proposal. In addition, we have never had any restrictions placed upon our firm by governmental agencies or state boards of accountancy. Work Plan General 1. At present, we are aware of no limitations on staff availability, travel or starting dates. 2. We will follow Government Auditing Standards (GAS) in performing the audit. 3. We will follow the guidance estabilished by Generally Accepted Auditing Standards and Government Auditing Standards related to irregularities, illegal acts and other noncompliance, when planning the audit. Outline of Audit Work Plan Our audit work will be divided into four main components. These components are: 1. Planning 2. Study and evaluation of internal control structure 3. Compliance and substantive testing 4. Financial statements and exit conference VA Outline of Audit Work Plan — Continued Audit planning will be performed as soon as we receive notification from the City of Cape Girardeau by the partner and manager in charge of the engagement. The study and evaluation of the internal control structure will be performed by the audit manager and one staff person under the supervision of the partner. The compliance and substantive testing will be performed by the audit manager and two other staff persons under the supervision of the partner. Timetable and Estimated Fees The time requirements and due date of the report as set forth in the request for proposal are acceptable. Our firm endeavors to provide maximum service for our clients at the lowest fees consistent with our professional responsibilities. Our standard fees are determined on the basis of hours incurred at our standard hourly rates. Individual hourly rates vary according to degree of responsibility and the skill required. Our fee as previously submitted will be $23,000. Any additional services requested in connection with the implementation of GASB Statement 34, will be billed at $75 per hour. fj PEER REVIEW REPORT L A N E CERTIFIED PUBIIC G O R M A N A C C 0 U 4 T A N T S T R U B I T T A N 0 CONSULTANTS L _ L . P _ and 2626 Howell The Seventh Floor Dallas, Texas 75204 214.871.7500 Fax 214.87 1.001 1 www.Igt-cpa.com Members AICPA If McGladrey Network GMN International To the Owners Kerber, Eck & Braeckel LLP We have reviewed the system of quality control for the accounting and auditing practice of Kerber, Eck & Braeckel LLP(the "firm") in effect for the year ended September 30, 1998. 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 complying 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 (the "AICPA"). The design of the system, and compliance with it, are the responsibilities of the firm. In addition, the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the "Section"). Our responsibility is to express an opinion on the design of the system, and the firm's compliance with that system and the Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section. 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 and with the membership requirements of the Section 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 or with the membership requirements of the Section. 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. These matters were not considered to be of sufficient significance to affect the opinion expressed in this report. 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 that 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 Kerber, Eck & Braeckel LLP in effect for the year ended September 30, 1998, 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 ofcomplying with professional standards. Also, in our opinion, the firm has complied with the membership requirements of the Section in all material respects. Dallas, Texas December 18, 1998 10 Conclusion Thank you again for the opportunity to make this proposal. Please contact the undersigned if you need additional information. We look forward to hearing from you and welcome the opportunity to serve you better. Very truly yours, KERBER, ECK & BRAECKEL LLP games E. Erlacker, CPA Partner 11