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8.f)2) Audit Services Meeting Date: 6/21/2011 Agenda Item: 8 � ��' � City Council Agenda Report City of Scandia 14727 209`h St. North Scandia, MN 55073 (651) 433-2274 Action Requested: Consider whether to authorize release of a request for proposals (RFP) for audit services for 2011, 2012 and 2013. Alternatively, the Council could decide to extend the agreement with the current auditor, LarsonAllen. Deadline/ Timeline: N/A Background: • LarsonAllen has served as the city's auditor for the 2007, 2008 and 2009 fiscal years. In July of 2010, the Council extended the agreement for one year to cover the 20l 0 fiscal year. • LarsonAllen has submitted a proposal to continue to provide audit services, for the next three years. The cost quote for the 2011 audit is $22,000, the same as the cost of the 2010 audit. The cost for 2012 & 2013 would be $22,500 for each year. • � If the Council wishes to obtain proposal from other firms, in order to have a new auditor on board in a timely manner for the 2011 audit, an RFP should be issued this summer. The RFP should include services for at least three years to avoid having to frequently seek new proposals. • If an RFP is issued, the recommended schedule is as follows: Council review RFP: July 19 Issue RFP: August 1 Responses due: September 14 (4 p.m.) Review of proposals/interviews: September/October Selection of firm by Council: October 18 or November 15 Recommendation: The Council should decide if an RFP should be issued for audit services. If you are satisfied with LarsonAllen's services and the proposed cost, you could choose to extend the agreement with them for one or more years. Attachments/ • Letter dated June 13, 2011 from LarsonAllen Materials provided: Contact(s): Prepared by: Anne Hurlburt, Administrator (auait rfp) Page 1 of 1 06/13/11 � � 1 � - 11 .�• �1 . • � 11 e f June 13,2011 Ms.Anne Hurlburt City Administrator City of Scandia 14727 209`h Street North Scandia, MN 55073 Dear Ms. Hurlburt: Thank you for the opportunity to continue serving as external auditors to the City of Scandia. I and the LarsonAllen service team have enjoyed working with you and everyone at the City of Scandia; and look forward to continuing that relationship. At LarsonAllen, our vision is not to be the largest firm,but to be the best. We achieve this by developing honest, sincere relationships with our clients; expressing our genuine interest in their respective industries;investing heavily in our personnel resources;and providing noticeably different client service. Engagement summary We propose to continue providing the following services: • Perform an audit of the financial statements of City of Scandia for the years ending December 31, 201 l through 2013 in accordance with auditing standards generally accepted in the United States of America (generally accepted auditing standards) and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States. . Provide a report on compliance and internal control over financial reporting as required by Government Auditing Standards. • Perform and audit of the City's compliance with the State of Minnesota Legal Compliance Manual. • Develop a management letter of our comments and recommendations regarding internal control, planning opportunities and other matters observed during the course of our engagements. • Presentation of audit results to the City Council. • Prepare the City Financial Reporting Form to be submitted to the State of Minnesota Office of the State Auditor. • Serve as a resource to your staff and management throughout the year. The value of continuity LarsonAllen prides itself on having staff turnover rates at levels substantially less than industry averages. In the past three years, our nonprofit and government group's turnover rate was less than 10 percent. The accounting industry overall has a turnover rate of approximately 20 percent. Our low staff turnover benefits our clients because we are able to maintain continuity in staffing from year to year and from project to project. � LarsonAllen LLP is a mertiber a'hexia lMcrnational, a worldwide network d independcnt aawrrong ard conwking fimn. INTENNATIOHAL City of Scandia June13,2011 Page 2 You'll see continuity in our service team, as follows: . . . . • . . - . . - . - - - . . . Craig Popenhagen, CPA Principal 17 6 Alternate Engagement Rache) Flanders, CPA Principal (if principal 15 -- rotation is desired) Brady Hoffman, CPA Manager 6 4 Michelle Hoffman, CPA Senior 4 1 We will add additional staff as necessary for the audit,once exact timing is determined. We also have the ability to rotate a new principal into your service team to provide a fresh perspective while also maintaining continuity and historical knowledge of your operations with a returning manager and senior. In the event that turnover happens with any of the people we have committed to serve you, we will provide professional summaries of suggested replacements to you and will discuss reassigned work assignments prior to finalizing. We want you to be comfortable with the assigned staff prior to the start of any work. Proposed fees Fee philosophy We operate under the philosophy of open and direct communication regarding billing. Our professiona] fees for the services described throughout our proposal are based on the level of expertise of the individuals who will perform the services. We require your assistance in providing the workpapers and supporting documents needed for the audit. Because we believe that a long-term relationship is important for your organization, we commit to this level of fees for the 2011 —2013 services,assuming your operations do not change significantly. We believe in ongoing contact as a means of better serving you, and we encourage your questions throughout the year. We include this portion of our overall service to you in our fee quote. You will not be billed separately. Our fee quote for the proposed services is summarized below. � � � City of Scandia $22,000 $22,500 $22,500 Serve as a resource throughout the year. Included Included Included Out-of-pocket costs Included Included Included Total �22,000 $22,500 �22,500 City of Scandia June13,2011 Page 3 Based on our discussions with you, we do not anticipate that the City will need an A-133 compliance during the above proposed service period. Also, our proposed fees are not contingent upon extending our relationship for the full five years. Choose the extension range that best fits the City's needs—one year,two years,all three years,or other. These fees assume good continuity and quality of the City's staff. Engagement timetable We are committed to meeting your specified timelines and deadlines. The following table outlines the key phases of the engagement and illustrates our tentative schedule to serve you: j �� �!.. � 1. �'� i4,ll�,�'� Planning and Transition Planning and emerging issues meetings. Share client ' assistance letter. Risk assessmendengagement planning Identify and resolve accounting issues and concems ' Develop overall audit approach Fieldwork 8�Reporting Activities : Review data processing activities and controls �: .; Review detailed audit approach for critical issues Perform analytical review procedures Perform year-end substantive procedures Hold audit exit conference,end of fieldwork . Meetings to review reports on financial statements, . management letters,and other reports Final issuance and meeting with City Council . Please feel free to call if you have any questions. Sincerely, LarsonAllen LLP • �� Craig W.Popenhagen Principal 612-397-3087 cpopenhagen(n�larsonallen.co�n City of Scandia June13,2011 Page 4 Supporting Documents . r ' • • - . • - " • . • - ` � . Craig is a principal in the LarsonAllen Nonprofit and Government Group out of the Minneapolis office. Craig specializes in governmental audits, including compliance audits under OMB ,�..,,, Circular A-133. Craig leads the audits for several cities including '�#� Brooklyn Park, Buffalo, Delanq Lino Lakes, Mahtomedi, Hopkins, ; .. - Cottage Grove, Scandia and Watertown. Other governmental clients . ..,,, � that Craig serves include the Housing and Redevelopment Authority � .,,,�� of Winona, Enterprise Minnesota, Inc., Central Minnesota Municipal Power Agency, Midwest Consortium of Municipal Utilities, � i Watertown Firemen's Relief Association and Buffalo Firemen's Relief Association. Craig has 17 years of experience in working with governments, state universities, state agencies, and non-profit organizations, including extensive experience in audits of federal grant programs under OMB Circular A-133. Craig's client base also includes governmental organizations which report as special purpose entities, business-type activities under GASB Statement No. 34. Craig is involved with LarsonAllen's in-house training program and has delivered technical training on the topics of new accounting standards, new auditing standards, and new standards affecting audits of federal grant programs under OMB Circular A- 133. Craig is a reviewer for the GFOA's Certificate of Achievement for Excellence in Financial Reporting, and serves clients who receive the award including the Cities of Brooklyn Park, Lino Lakes,Hopkins, Cottage Grove, and Mahtomedi,Minnesota. Craig graduated from the University of Northern Iowa with a B.A. in Accounting, and is a Certified Public Accountant licensed in Minnesota, Wisconsin and Iowa. He is a member of the American Institute of Certified Public Accountants, the National Council of State Housing Agencies, the Affordable Housing Association of Certified Public Accountants, and the Government Finance Officers Association. City of Scandia June13,2011 Page 5 � - • - � . � � . • - ` �. Rachel is a principal in the nonprofit and government group of � LarsonAllen and has 15 years of auditing experience, specializing in �: nonprofit and governmental audits. � , � Rachel also serves as a quality liaison for the firm, specializing in federal grant compliance and developing single audit reference materials, tools, '� __ and internal trainings. Rachel has presented at various conferences on ,r topics ranging from preparation for a single audit from the auditee's perspective, proper internal controls for federal award administration, ''� ' new accounting pronouncements, and financial statement analysis for • board members. Rachel also serves as a quality reviewer for governmental audit engagements in the firm. Rachel is a reviewer for the GFOA's Certificate of Achievement for Excellence in Financial Reporting,and serves several clients who receive the award Rachel is a 1996 graduate of Winona State University with a B.S. in Accounting, and is a Certified Public Accountant, holding active individual licenses in both Minnesota and Colorado. She is a member of the American Institute of Certified Public Accountants, the Minnesota Society of CPA's, the Government Finance Officers Association, and the Association of School Business Officials(Minnesota Chapter). Rachel currently serves on the board of directors as treasurer for the Minnesota Adoption Resource Network(MARN). � City of Scandia June13,2011 Page 6 : .t t • • . • - • - - � • • . e ' • • �� Brady Hoffinan is a manager with the LarsonAllen Nonprofit and � „'� 1 Government Group out of the Minneapolis office. Brady has six years of experience in public accounting and works heavily with _. _. � governmental clients including the Cities of Cottage Grove, � ��, Stillwater, Hopkins, Brooklyn Park, Watertown, Eden Prairie Public �'� � ' Schools, Robbinsdale Area Schools, Roseville Area Schools and The � '�, � � Schools of Eastern Carver County. Brady also has extensive experience with A-133 single audits of federal grant programs. �_ '� Brady is a reviewer for the GFOA's Certificate of Achievement for Excellence in Financial Reporting, and serves clients who receive the award including the Cities of Brooklyn Park, Cottage Grove, Hopkins, and Stillwater, Minnesota. Brady also serves Eden Prairie Public Schools and Robbinsdale Area Schools who receive ASBO's Certificate of Excellence in Financial reporting. Brady is also involved with LarsonAllen's in-house training program and has developed and delivered technical training on the topics of basic governmental accounting, Minnesota legal compliance and audits of federal grant programs. Brady has a B.A. degree in Accounting from Gustavus Adolphus College. He currently belongs to the Minnesota Society of Certified Public Accountants, the American Institute of Certified Public Accountants, and the Minnesota Government Finance Officers Association. City of Scandia � June13,2011 Page 7 � ` � - • • - ' . • . • ' • • ��� Michelle is a senior auditor within the LarsonAllen Nonprofit and � � Govemment Group out of the Minneapolis office. She has four years of � experience in public accounting and works heavily with governmental � ,;�, ,�,� clients including City of Mahtomedi,City of Stillwater, City of Hopkins, � � City of Watertown, Minnetonka Public Schools, and Wayzata Public w-- -� � Schools. � '�� Michelle has a B.S. degree in Accounting from the University of Minnesota. She currently belongs to the Minnesota Society of ti�!, ,. Certified Public Accountants and the American Institute of Certified Public Accountants.