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Agenda - Mail Packet - 9/4/2018 - Special Council Finance & Audit Committee Agenda - September 5, 2018
Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com AGENDA Special Council Finance & Audit Committee September 5, 2018 3 - 5 pm CIC Room - City Hall 1. Auditor Vendor Selection T. Storin Council Finance Committee Agenda Planning Calendar 2018 RVSD 08/28/18 mnb Sep 5th Auditor Vendor Selection 2 hrs T. Storin Sep 17th Fee Review – Fee Team Report, Total Impact 30 min J. Poznanovic Regional Road Fee & School PILOs Update 20 min G. Sawyer Year End Adjustment Ordinance 20 min L. Pollack Oct 15th Utility Rate Increases 20 min L. Smith Infrastructure Financing 30 min T. Storin Internet Sales Tax – Work Plan 15 min J. Poznanovic Nov 19th GERP Review 15 min J. Voss Financial Management Policy Review 45 min J. Voss Future Council Finance Committee Topics: • Revenue Contingency Plan Review COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Travis Storin, Accounting Director Gerry Paul, Purchasing Director John Voss, Senior Manager Accounting Date: September 5, 2018 SUBJECT FOR DISCUSSION: Selection of Audit Firm EXECUTIVE SUMMARY: The purpose of this item is to interview two finalists for financial audit services. A Request for Proposal (RFP) was issued and seven firms made proposals. A team of eight that included staff from the City, PFA and Library reviewed the written proposals and recommend BKD and Clifton, Larson Allen for consideration by the Council Finance Committee. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED • Recommend an audit firm for subsequent selection via City Council Resolution. BACKGROUND/DISCUSSION UProcess OverviewU: Each firm will have up to 15 minutes to present, followed by 30 minutes for questions from the Committee. At the end of the interviews the Committee will discuss and recommend an audit firm. Staff that reviewed the written proposals will be available to answer questions from the Committee. The Committee recommendation will be brought to City Council on September 18. The auditor selected will have annual contracts that are renewable for a maximum of 5 years, and per recent Code modifications are eligible to be competitively selected for one additional 5-year period, for a maximum tenure of 10 years for a given firm. ATTACHMENTS 1. Proposals from BKD 2. Proposals from Clifton, Larson, Allen 3. Request for Proposal plus addendums 1 and 2 4. Scoring criteria used by staff 5. Government Finance Officers Association – Audit Procurement 6. Government Finance Officers Association – Understanding the Audit DELIVERING EXCELLENCE & INNOVATION CITY OF FORT COLLINS Request for Proposal 8781 Financial Auditing Services Submitted by BKD, LLP Christopher J. Telli, CPA, CIA® // Partner 1801 California Street // Suite 2900 // Denver, CO 80202 Phone: 303.861.4545 August 10, 2018 Our acceptance of this engagement is subject to completion of our normal client acceptance procedures. Upon acceptance, the actual terms of our engagement will be documented in a separate letter to be signed by you and us. The information provided in this proposal is intended for informational purposes only and may not be copied, used or modified, in whole or in part, without BKD’s prior written approval. All information in this proposal is as of May 31, 2017, unless otherwise noted. III. TRANSMITTAL LETTER ................................................... iv B. TECHNICAL PROPOSAL ................................................... 1 2. Independence................................................................................... 1 3. License to Practice in the State of Colorado .................................... 1 4. Firm Qualifications & Experience ..................................................... 2 5. Partner, Supervisory & Staff Qualifications & Experience ............... 3 6. Prior Engagements with the City of Fort Collins .............................. 7 7. Similar Engagements with Other Government Entities ................... 8 8. Specific Audit Approach ................................................................... 9 9. Identification of Anticipated Potential Audit Problems ................. 15 10. Report Format .............................................................................. 17 C. DOLLAR COST PROPOSAL ............................................ 28 1. Total All-Inclusive Maximum Price ................................................. 28 2. Rates by Partner, Specialist, Supervisory & Staff Level Times Hours Anticipated for Each ............................................................. 30 3. Out-of-Pocket Expenses Included in the Total All-Inclusive Maximum Price & Reimbursement Rates ...................................... 30 4. Rates for Additional Professional Services ..................................... 31 5. Manner of Payment ....................................................................... 31 APPENDIX .............................................................................. 32 Our Commitment to Sustainability ..................................................... 33 Proposer Guarantees .......................................................................... 34 Proposer Warranties ........................................................................... 38 Addenda .............................................................................................. 39 Future Negotiations ............................................................................ 40 AICPA Peer Review Letter ................................................................... 41 BKD Peer Review Report ..................................................................... 42 Unmatched Client Service ................................................................... 43 BKD Firm Profile .................................................................................. 44 BKD PRIDE Values ................................................................................ 45 iv III. TRANSMITTAL LETTER August 10, 2018 Mr. Gerry Paul Purchasing Director City of Fort Collins Purchasing Division 215 North Mason Street // Second Floor P.O. Box 580 Fort Collins, CO 80522 DEAR MR. PAUL: Those charged with governance in public sector entities are committed to protecting the resources provided by their constituents and being responsible stewards of both current and future resources. The quality of a government’s external audit firm is affirmation of this commitment to its constituents, bondholders, investment bankers, the Office of the State Auditor, Government Finance Officers Association (GFOA) and other readers of these financial statements. The City of Fort Collins (the City) needs to work with an experienced CPA and advisory firm that understands the complexities and industry challenges of governmental entities, including those providing innovative new services such as broadband. We know that quality, innovation and performance are a top priority for the City. This is evident by the City being awarded the Malcom Baldrige National Quality Award. This is an extremely impressive honor and exemplifies the City’s commitment to quality and performance. BKD, LLP believes our own Unmatched Client Service and PRIDE values will complement the City’s commitment in these areas. We understand you are seeking a Financial Statement Audit in Accordance with Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance) for the years ending December 31, 2018 through 2022. Ultimately, you have to pick one firm to serve you. The key question from our perspective is: what then makes BKD the right choice? Expertise: You will be served by skilled professionals who are experienced in your industry—you will not to need to train our personnel—that is our job. Support: We encourage questions throughout the year—we want to quickly become familiar with your operations to help decrease the risk of adjustments or problems—a coordinated approach. Local & National Depth: As one of the country’s largest CPA and advisory firms, we have the local and national resources to serve your needs and the experience of working with a diverse client base to effectively address the complex issues you may encounter. Transition: We believe a smooth and efficient transition with little disruption to day-to-day operations is not only possible, but to be expected. Our goal is to simplify and help reduce transition time and costs with effective communication and our flexibility in using existing information. v Timeliness: Using mutually agreed-upon dates and semiweekly or weekly status meetings with management, we have an excellent record for providing timely services to our clients. In fact, we are so committed to your deadlines that timeliness is embedded in our five standards of unmatched client service and commit to perform the work within the time period requested. Excellence: BKD works closely with you on submitting your comprehensive annual financial report to GFOA, and our clients have an outstanding record of certificates with minimal comments. Education: We host a complimentary annual conference (continuing professional education-eligible) for our clients’ available personnel as part of our value-added approach. We also offer a wide range of webinars and communications to help you stay informed of industry changes that can affect your financial reporting and compliance. Value: We strive to bring value to our clients, beyond the audit process. We do this in the form of sharing best practice ideas and providing educational opportunities and year-round communications. In addition, we also use an experienced IT professional to review the control structure of your IT environment. Commitment: Our governmental clients are important to our business—we will not abandon this practice segment as economic conditions change—we want to be the leading provider of governmental services both in Colorado and nationally. We believe our proposal outlines all you have requested and might need in your selection process, but would be happy to answer any questions you may have. We prefer to meet face to face with management or the selection committee whenever possible. BKD takes great pride in serving many of the most prestigious governmental clients in Colorado and nationwide and would be honored to serve the City. In addition, we work with hundreds of telecommunication clients nationally, including entities involved in broadband, telephone, wireless and other communication systems. We believe access to our telecommunications team could be valuable to the City as it moves forward with Fort Collins Connexion. This proposal highlights our firm’s guiding principles, our service approach and philosophy, and the quality of our people. While we believe this is very important information, the best evidence of the quality of our firm is what our clients think of our service, our people and our professionalism. Please call our references and we are convinced you will understand BKD’s commitment to unmatched client service. We believe our proposal will help you select our firm for timely, efficient and objective services delivered by experienced professionals. Our proposal is a firm and irrevocable offer for 60 days. We will call you soon to answer questions you may have about this proposal, or you may reach us at 303.861.4545 or by email as provided below. Sincerely, Christopher J. Telli, CPA, CIA® Anna L. Thigpen, CPA Partner Senior Manager ctelli@bkd.com athigpen@bkd.com 1 For the convenience of City of Fort Collins (the City), BKD, LLP has structured our proposal according to the requirements in your Request for Proposal (RFP). We believe our proposal will demonstrate our qualifications to serve the City with a Financial Statement Audit in Accordance with Government Auditing Standards and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance). 2. INDEPENDENCE The firm should provide an affirmative statement that is independent of the City of Fort Collins as defined by generally accepted auditing standards/the U.S. Government Accountability Office’s Government Auditing Standards (1994). The firm also should provide an affirmative statement that it is independent of all of the component units of the City of Fort Collins as defined by those same standards. The City of Fort Collins currently has one component unit, the Fort Collins Downtown Development Authority, whose budget and any issuance of debt requires approval of the Fort Collins’ City Council. BKD is independent with respect to the City, and your component units, as defined by the Code of Professional Conduct of the American Institute of CPAs (AICPA) and the United States Government Accountability Office’s Government Auditing Standards. We are not aware of any relationship that would impair our independence. The firm should also list and describe the firm’s (or proposed subcontractors’) professional relationships involving the City of Fort Collins or any of its component units or joint venture members for the past five (5) years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. BKD has not had any known professional relationship with the City. We have provided audit services to Platte River Power Authority, a joint venture with the City, for the past five years. However, we do not believe any relationship exists that would constitute a conflict of interest relative to performing the proposed audit, as each engagement will be served by separate engagement teams. In addition, the firm shall give the City of Fort Collins written notice of any professional relationships entered into during the period of this agreement. BKD will provide written notice to the City should any professional relationships are entered into that would compromise our independence. 3. LICENSE TO PRACTICE IN THE STATE OF COLORADO An affirmative statement should be included that the firm and all assigned key professional staff are properly licensed to practice in the State of Colorado. BKD is properly licensed to practice public accounting in the state of Colorado. All key professionals who would be assigned to your engagement are properly registered/licensed to practice in the state of Colorado. B. TECHNICAL PROPOSAL “BKD’s personnel from staff to partner that I’ve worked with are very professional and consider the operations and timelines of the agency personnel in their planning. They are willing to discuss issues and accounting treatments in an open method while ensuring that the standards are met. The comments and recommendations are helpful and have assisted the city in making improvements.” Beth Machann City Controller 2 4. FIRM QUALIFICATIONS & EXPERIENCE The proposer should state the size of the firm, the size of the firm’s governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in this engagement on a full-time basis and the number and nature of the staff to be so employed on a part- time basis. FIRM SIZE BKD is one of the largest CPA and advisory firms in the United States. As of July 2018, we have 38 offices located in 17 states. Our approximately 2,650 CPAs, advisors and dedicated staff serve clients in all 50 states and clients with operations in more than 40 countries. GOVERNMENTAL AUDIT STAFF SIZE BKD has approximately 130 professionals who spend more than 50 percent of their billable hours providing audit services to governmental entities. LOCATION The City’s requested services will be provided by our Colorado offices in Denver and Colorado Springs. DENVER BKD, LLP 1801 California Street // Suite 2900 Denver, CO 80202 COLORADO SPRINGS BKD, LLP 111 South Tejon Street // Suite 800 Colorado Springs, CO 80903 NUMBER & NATURE OF STAFF We anticipate providing one partner, one managing director, one senior manager and one senior associate on a full-time basis and one managing director (concurring reviewer) on a part-time basis to complete the City’s audit. In addition, we anticipate providing two to three associates to complete the City’s audit. If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. BKD is not a joint venture or consortium. The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements. BKD is committed to providing quality audit services to our clients. We submit our work to external reviewers who challenge our approach and findings. We are proud of the findings from these reviews, which indicate our process works. Our report contained a rating of “Pass,” which is the best peer review rating available under the current peer review standards. A copy of our most recent AICPA peer review report is included in the Appendix. Our peer review included inspection of engagements performed under Government Auditing Standards. 3 The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations. From time to time, selected BKD audit engagements are subject to desk review by federal or other regulators. All such reviews during the past three years have shown our work to be generally satisfactory, and no disciplinary or other administrative proceedings have resulted from those reviews. In December 2014, BKD, LLP consented, without admitting or denying the findings, to a U.S. Securities and Exchange Commission (SEC) Order Instituting Public Administrative and Cease-and-Desist Proceedings (“Order”). The Order was based upon the SEC’s findings that BKD had violated the SEC’s independence rules by participating in drafting client financial statements in connection with broker-dealer audits from 2010 through 2012. The remedies provided for in the Order included a small fine. In November 2016, BKD reached a related settlement with the California Board of Accountancy. None of these proceedings affect BKD’s ability to serve clients. 5. PARTNER, SUPERVISORY & STAFF QUALIFICATIONS & EXPERIENCE Identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement. Indicate whether each such person is registered or licensed to practice as a certified public accountant in the State of Colorado. Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. Indicate how the quality of staff over the term of the agreement will be assured. The most critical factor in providing high-quality service is choosing your engagement team. We take team selection seriously and have the appropriate team of advisors to meet your needs over the term of the engagement. As previously stated, BKD is properly licensed to practice public accounting in the state of Colorado. All key professionals who would be assigned to your engagement are properly registered/licensed to practice in the state of Colorado. ENGAGEMENT TEAM ORGANIZATIONAL CHART Anna L. Thigpen, CPA Senior Manager Audit Senior Manager Rhonda R. Plantenga, CISA, CRISC Managing Director IT Managing Director Christopher J. Telli, CPA, CIA® Partner Lead Engagement Partner Jodie L. Cates, CPA Managing Director Concurring Reviewer Michael Meryhew, CPA Senior Associate II Audit In-Charge 4 ENGAGEMENT TEAM EXPERIENCE Christopher J. Telli, CPA, CIA® Partner Chris is a regional industry leader for BKD National Public Sector Group and is a member of the firm’s Not-for-Profit, Higher Education & Public Sector Committee. He has more than 18 years of experience in accounting and auditing, including three years as an internal auditor for a large not-for-profit organization. Chris assists governmental entities with audit, compliance and general business consulting and works with a variety of governmental entities, including municipalities, state agencies, airports, school districts, higher education institutions and public authorities. He routinely writes and speaks on a variety of governmental and not-for-profit accounting, audit and compliance issues and has served as an instructor for BKD internal seminars and trainings. He serves on the BKD Public Sector Center of Excellence, an internal committee of public sector leaders from across the firm who deliberate a variety of issues important to governments, and has served on both peer review and internal inspection teams. Chris is a member of the American Institute of CPAs, Colorado Society of CPAs (COCPA), Government Finance Officers Association of the United States and Canada (GFOA), Association of Government Accountants, The Institute of Internal Auditors and Association of Certified Fraud Examiners, Inc. He is a current board member of the COCPA, a former co-chair of the Governmental Issues Forum and previously served on the planning committee for the society’s Governmental Conference. Chris also is currently an advisor to the GFOA Committee on Accounting, Auditing, and Financial Reporting. He is active in the community and is the immediate past chair for the American Red Cross of Southeastern Colorado, and still serves on the board. Chris is a summa cum laude graduate of Regis University, Colorado Springs, Colorado, with a B.S. degree in accounting, and University of Colorado, Colorado Springs, with an M.B.A. degree in finance. He also holds the Certified Internal Auditor® (CIA® ) designation. He has completed approximately 207.5 hours of continuing professional education (CPE) in the last three years. Jodie L. Cates, CPA Managing Director Jodie has more than 25 years of governmental accounting and auditing experience, including four years with a local government subject to Single Audit requirements. She is a member of BKD National Public Sector Group, dedicating the majority of her time to the governmental practice. She provides audit and other advisory services to cities and counties, school districts, charter schools, utilities, state agencies, colleges and universities and various tax-exempt organizations. Her areas of expertise include compliance and controls for Single Audits of federal grant awards and implementing new accounting standards of the Governmental Accounting Standards Board. She also is very familiar with the Government Finance Officers Association (GFOA) Certification Program for Comprehensive Annual Financial Reports (CAFR). Jodie has conducted presentations for the Colorado GFOA and internal and external BKD seminars and has served on various BKD governmental committees and internal inspection teams. She is a member of the American Institute of CPAs, Colorado Society of CPAs and Colorado GFOA. Jodie is active in her community, serving as treasurer for various organizations. Jodie is a 1991 graduate of Oklahoma State University, Stillwater, with a B.S. degree in business administration. She has completed approximately 165.5 hours of CPE in the last three years. 5 Rhonda R. Plantenga, CISA, CRISC Managing Director Rhonda is a member of BKD’s IT Risk Services division. She has more than 20 years of experience helping governmental entities and has both public practice and industry experience. Her expertise includes IT risk services, regulatory compliance, System and Organization Controls (SOC) reports/SSAE 18 reviews and general IT auditing. She has been involved with regulatory governance, compliance and control issues, implemented risk-based approaches to identify and protect key applications/data and has performed and managed IT general control reviews and SOC/SSAE 16 reviews. Rhonda is a member of the American Institute of CPAs and ISACA® . She has earned numerous certifications, including Certified Information Systems Auditor (CISA), Certified in Risk and Information Systems Control (CRISC) and ITIL Foundation. She is a graduate of University of Nebraska–Lincoln, with a B.S. degree in finance and management, and a graduate of University of Missouri, Kansas City, with an M.S. degree in accounting with a concentration in accounting information systems. Rhonda has completed approximately 226.5 hours of CPE in the last three years. Anna L. Thigpen, CPA Senior Manager Anna has more than 10 years of governmental accounting and auditing experience, spending the majority of her time in the public sector practice. As a member of BKD National Public Sector Group, she provides audit and attest services to a wide variety of governmental clients, including cities and counties, school districts, charter schools, library districts, state departments and utility organizations. As a senior manager, Anna is responsible for overseeing and reviewing all audit phases, including planning, risk assessment and reporting. She has extensive knowledge in Single Audit compliance and helps clients navigate the complex requirements of federal guidelines under Uniform Guidance. Anna currently serves on the Town of Firestone Finance Committee. In addition, she has served on the BKD Colorado Foundation Committee and Engagement Council and was a participant in the 2016–2017 Leadership Weld County program. Throughout Anna’s career she has presented on a variety of accounting topics at BKD’s governmental seminars, Colorado Government Finance Officers Association (CGFOA), the Colorado Department of Education’s Charter School Program’s Finance Seminar, as well as various internal trainings. Anna is a member of the American Institute of CPAs, Colorado Society of CPAs and CGFOA. She is a 2007 graduate of University of Northern Colorado, Greeley, with a B.S. degree in business with an emphasis in accounting. Anna has completed approximately 144.5 hours of CPE in the last three years. Michael Meryhew, CPA Senior Associate II Mike has more than four years of experience in the public accounting industry. He provides audit services for a variety of public sector clients, including municipalities, airports, state agencies and authorities. As an audit in-charge, Mike leads the client engagement process, including supervising the audit team, managing deadlines and reviewing audit workpapers. Mike is a graduate of Jon M. Huntsman School of Business, Utah State University, Logan, with a B.S. degree in accounting and an M.Acc. degree. He has completed approximately 216 hours of CPE in the last three years. 6 CONTINUING PROFESSIONAL EDUCATION Our audit professionals are required to receive at least 120 hours of CPE every three years. For auditors involved with audits performed under Government Auditing Standards, this education includes the hours required to comply with Government Auditing Standards Yellow Book guidance. All individuals, including specialists involved in performing fieldwork on Government Auditing Standards audits, are required to obtain at least 24 hours of CPE every two years in subjects directly related to governmental auditing or the governmental environment. In addition, engagement team members responsible for planning, directing or reporting on Government Auditing Standards audits who spend more than 20 percent of their time performing Government Auditing Standards audits also are required to complete a minimum of 80 hours of CPE every two years that directly enhances their professional proficiency to perform audits. BKD offers an internal industry update seminar for managers through partners, as well as a seminar for our in-charge level employees. These seminars include auditing and accounting issues that are specific to governments, including Government Auditing Standards, Single Audits and accounting standards for governmental financial reporting. BKD professionals also receive additional training from external sources. RECOGNIZED LEARNING & DEVELOPMENT Since 2014, BKD has been ranked among Training magazine’s Training Top 125. We also have received Chief Learning Officer magazine’s LearningElite award since 2016, including a Gold- level recognition for 2018. These programs rank an organization’s excellence in employer- sponsored training and recognize outstanding outcomes in learning and development. STAFF CONTINUITY Whenever possible, we keep a consistent engagement team for our clients. This helps reduce the learning curve and saves the time, frustration and disruption of dealing with new advisors unfamiliar with their organization. Past experience is a primary determinant for assigning professionals to engagements, and we will assign individuals who are experienced in working with public sector organizations for the City’s engagement. Though it is impossible for any firm to know the future career paths of its professionals, many of our clients maintain the same underlying BKD engagement team for years. The proposer should identify the extent to which staff to be assigned to the audit reflect the City of Fort Collins’s commitment to Affirmative Action. It’s not just about the law. While many organizations, including BKD, have a policy to comply with federal, state and local laws and regulations related to U.S. Equal Employment Opportunity (EEOC), we don’t stop there. We believe an EEOC policy that prohibits discrimination in employment on the basis of age, race, color, sex, sexual orientation, gender identity, national origin, religion, genetic information, disability, protected veteran status and other protected classifications is crucial to building a diverse workplace where each individual knows they are valued. We strive to move beyond the compliance function of our EEOC policy and embrace the reason these laws were created in the first place—to help create a work environment that offers all employees equal opportunities. We work diligently toward this goal every day, because having an inclusive culture doesn’t just allow us to attract the talent we need to thrive; it benefits our clients by bringing a broad perspective to their services. BKD’S SKY INITIATIVE SKY is a firmwide initiative to emphasize and strengthen diversity and inclusion in our firm. Focused on attracting, retaining and developing women leaders, SKY’s goal is to identify and remove cultural barriers and biases that could otherwise prevent BKDers from maximizing their potential. 7 Engagement partners, managers, other supervisory staff and specialists may be changed if those personnel leave the firm, are promoted or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of the City of Fort Collins. However, in either case, the City of Fort Collins retains the right to approve or reject replacements. Consultants and firm specialists mentioned in response to this request for proposal can only be changed with the express prior written permission of the City of Fort Collins, which retains the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience. In the event we are required to make a change to any key personnel assigned to your engagement, we will discuss this with you to explain the circumstances and proposed change. Your proposed lead engagement partner, Chris Telli, will be coordinating personnel changes. We generally do not remove key personnel from an audit once it has begun, but occasionally employee turnover or other events beyond our control require such a change. If a personnel change is required, we are confident we can provide a qualified replacement to complete your audit with limited interruption. We understand engagement team members, consultants and firm specialists mentioned in our response to this RFP can only be changed with the prior express written permission of the City, which retains the right to approve or reject replacements. 6. PRIOR ENGAGEMENTS WITH THE CITY OF FORT COLLINS List separately all engagements within the last five years, ranked on the basis of total staff hours, for the City of Fort Collins by type of engagement (i.e., management advisory services, other). Indicate the scope of work, date, engagement partners, total hours, the location of the firm’s office from which the engagement was performed, and the name and telephone number of the principal client contact. As previously mentioned, BKD has not had any prior professional relationship with the City. “BKD has been the best accounting firm I have used– helpful, reliable and responsive. They are terrific at facilitating a schedule that allows our audit to be completed within the established timelines and commitments.” Cherie Sanchez Accounting Manager City of Westminster, Colorado 8 7. SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES For the firm’s office that will be assigned responsibility for the audit, list the most significant engagements (maximum - 5) performed in the last five years that are similar to the engagement described in this request for proposal. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. Our clients are our best ambassadors, and we encourage you to contact them about their satisfaction with our services. The following clients have consented to discussing BKD’s services and service delivery with you at your convenience. City and County of Denver Scope of Work: Financial Statement Audit, Standalone Audit of Airport System, Single Audit & Passenger Facility Charge Audit Date: 2006 to Present Engagement Partner/Managing Director: Christopher Telli Total Hours: 4,000 Ms. Beth Machann Controller 720.913.5515 City of Aurora Scope of Work: Financial Statement Audit, Single Audit & Agreed-Upon Procedures for the Scientific Cultural Facilities District Date: 2006 to Present Engagement Partner/Managing Director: Christopher Telli Total Hours: 1,010 Ms. Terri Vasquez, CPA, CPFO Director of Finance 303.739.7780 City of Arvada Scope of Work: Financial Statement Audit (City, Arvada Urban Renewal Authority, & Ralston House), Single Audit & Agreed-Upon Procedures for the U.S. Department of Housing & Urban Development’s Real Estate Assessment Center Date: 2013 to Present Engagement Partner/Managing Director: Jodie Cates Total Hours: 640 Mr. Bryan Archer Director of Finance 720.898.7123 City of Westminster Scope of Work: Financial Statement Audit & Single Audit Date: 2011 to Present Engagement Partner/Managing Director: Jodie Cates Total Hours: 570 Ms. Tammy Hitchens Finance Director 303.658.2036 Platte River Power Authority Scope of Work: Financial Statement Audit Date: 2006 to Present Engagement Partner/Managing Director: Jodie Cates Total Hours: 370 Mr. Dave Smalley Deputy General Manager/Chief Financial Officer 970.226.4000 9 8. SPECIFIC AUDIT APPROACH The proposal should set forth a work plan, including an explanation of the audit methodology to be followed, to perform the services required in Section II of this request for proposal. In developing the work plan, reference should be made to such sources of information as City of Fort Collins’s budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. AUDIT QUALITY STRUCTURE Our audit practice evaluates risk characteristics to focus key resources on technical matters. Our risk analysis is tied to team member experience in the industry or subject matter area, and audit engagement leaders are assigned specific responsibilities. Our goal is to help ensure talented and experienced personnel are addressing our clients’ challenging needs. Structurally, BKD audit engagements are subject to quality review by a professional not otherwise involved in the details of a client relationship. This layer allows for a fresh perspective on each engagement. In addition to engagement-based leadership, our professional practices team is vital to our results. Office-based accounting and auditing directors form the first line of support for engagement teams and often serve as quality reviewers. Talented personnel are recruited for these positions based on the strength of their technical ability. Accounting and auditing directors are supported through a firmwide network of similar personnel and with specific regional and national training and guidance. FINANCIAL STATEMENT AUDIT IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS & THE UNIFORM GUIDANCE What is an Audit? Auditing standards set the technical requirements for our process, culminating with the expression of our opinion on the presentation of your financial statements. Our audit will be performed in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. What is an Audit Experience? While auditor selection should start with evaluating technical competence, it also should extend to your expectations for a service experience. Your audit experience includes how your engagement is managed, how you and your team are treated, the quality and timeliness of communication you receive and your confidence in the results and guidance you receive. We want you to consider our philosophy around independence, integrity and quality, along with our commitment to unmatched client service and the strength of your proposed engagement team. THE BKD DIFFERENCES THAT MATTER People Our people are key components of what differentiates a BKD audit. Through intentional training and our firm culture, our teams integrate a commitment to quality with an appreciation for client needs and expectations. We also bring relevant industry experience, which means you will not be required to train our staff. Leadership The engagement executive managing your audit will maintain a high level of involvement with the City by delegating appropriate tasks to other audit team members as needed while remaining engaged with you and the audit team. Our engagement executives are on site and participate in the supervision and delivery of your audit. 10 Communication Challenging matters or simple misunderstandings can arise, and they shouldn’t be ignored. While our responsibility is to issue an appropriate opinion on your financial statements, it is important for us to help keep your team informed of issues as they occur and recommend the appropriate solution. Our philosophy is to be courteous and professional, communicate timely and make reasonable requests. We are committed to treating you and your team with openness, candor and respect. Technology Technology plays a growing role in our audit as we adopt new tools to enhance our effectiveness and efficiency. We have invested heavily in improving dynamic workflows and increasing our audit data analytics capabilities. Though we use traditional tools such as Excel, we also delve deeper into analytic tools with ACL, unstructured data with Kira and artificial intelligence and trend analysis with MindBridge. These technologies, combined with our secure portal, help improve our results, enhance your experience and increase the insight we can provide. ONBOARDING & PROJECT MANAGEMENT Your BKD audit experience starts as soon as you select us. Our priorities include building rapport with your team, developing a deeper understanding of your operations and collaborating with you on the design and expectations of our service relationship. These efforts are part of the BKD Smooth Transition™ approach. The proposal process has provided us with the basics of your organization, but learning more will help us serve you better. If not already completed, we will finish the details of client acceptance to confirm what we have learned and verify confidential information not already obtained, such as litigation history or other sensitive matters. We will address various elements of project management with you, including how you will use BKDconnect Client Sites, our secure portal, to exchange and track information, the key dates of our processes and refinements to the details discussed in this proposal. We will schedule the professionals outlined in this proposal and coordinate with your team on details, such as timing of visits to your locations and discussions with your management. Proposed Timeline Engagement Phase Timing Planning & Interim Procedures, Including Predecessor Auditor Procedures November/December Single Audit November/December Final Fieldwork April/May Draft Audit Deliverables No Later Than June 1 Issuance of Final Audit Deliverables No Later Than June 15 Presentation to City Council Finance Committee June/July EXECUTING THE AUDIT Once we have established our overall process and communication plans with you, the detailed work can begin. Key elements of that work include: Risk Assessment We will identify and assess risks of material misstatement in your financial statements, including those from potential fraud. Our work is supported by building a strong understanding of your business environment through documents you provide and by gathering information through interviews and tests for significant transaction cycles. 11 Audit Design Based on risks identified, we will design an audit approach specific to your organization. This tailoring takes into consideration the uniqueness of your operations, the design of internal controls you have implemented and the nature of financial statement amounts and disclosures. We consider whether matters are truly important (materiality), as well as obtain input about concerns from management and the finance committee to design the tests we will perform. Gathering Evidence Once the plan is complete, we will execute the audit through a combination of on- and off-site work performed in accordance with the agreed-upon timeline. Reviewing the Work Critical to our process is a review of the team’s work by our engagement executive, as well as a quality review by another executive who is independent from the detailed work. The quality review is designed to improve our deliverable by providing a fresh perspective and reinforcing quality. Sharing Our Results We base our audit opinion on the evidence gathered and then communicate our findings. Professional standards drive the content of our opinion and the required communication about any deficiencies and other items we may identify during the audit. Beyond these requirements, we share results formally through our letters and presentations to management/city council/the finance committee, as well as opportunities for improvement through conversations during the audit process. COMPLIANCE AUDIT IN ACCORDANCE WITH THE UNIFORM GUIDANCE BKD performs hundreds of Single Audits annually, focusing on two objectives: first, an audit of your financial statements and reporting on the Schedule of Expenditures of Federal Awards (SEFA) in accordance with Government Auditing Standards, and second, a compliance audit for federal awards expended during the fiscal year in accordance with the Uniform Guidance. At least one-third of our not-for-profit and governmental clients receive federal funding. Our extensive experience with compliance testing in accordance with the Office of Management and Budget (OMB) requirements can help provide the City with a Single Audit performed properly and submitted on time. Our Approach During our audit procedures of federal award programs, we do not simply look for findings to report. We look for opportunities to advise you of more efficient ways to comply with federal regulations to reduce the risks of sanctions or reduced funding. BKD has developed contacts at federal agencies and has been able to work cooperatively with these agencies to help clients resolve or avoid issues. Entities subject to the Uniform Guidance and Government Auditing Standards will benefit from BKD’s specially designed audit programs, checklists and database of federal audit programs. Identification and testing of your federal programs will be performed primarily during interim fieldwork, which will typically be performed before your fiscal year-end. We have found this to be the most efficient manner in which to perform our audit services when the additional Uniform Guidance requirements are present. Training Requirements for Single Auditors The City can have confidence in BKD auditors’ experience in testing federal funding subject to the Uniform Guidance. Our audit professionals are required to receive at least 120 hours of CPE every three years, and for auditors involved with audits performed under Government Auditing Standards, this education includes the hours required to comply with Government Auditing Standards Yellow Book guidance. Staff members attend a series of core audit and accounting courses over the first four years of their careers. Staff subsequently receive additional training on accounting and auditing for the not-for-profit and governmental environment. 12 GENERAL IT SECURITY REVIEW Our evaluation of IT controls starts with a top-down, risk-based approach. By leveraging BKD’s expertise in IT review, security and risk management, clients get a fair, efficient and quality evaluation of their IT infrastructure and processes as they relate to core business functions. Through our experience in a wide variety of industries and our understanding of both medium- and large-sized companies, we have the flexibility to adjust to our clients’ ever- changing needs. BKD uses industry standard frameworks, such as COBIT and COSO, along with other established methodologies, to align specific IT processes with industry best practices. Evaluating the control environment with the client’s IT processes in mind, BKD makes it a priority to consider the big picture. As risk managers, we strive to identify the critical elements affecting our clients’ IT infrastructure and operations and to build a professional working relationship based upon trust and working toward a goal of security, sustainability and success. A NETWORK OF EXPERIENCED IT RISK SERVICES ADVISORS BKD’s IT Risk Services (ITRS) division comprises professionals located in BKD offices across the country. This highly specialized team provides IT reviews, risk assessments, cybersecurity, business continuity planning, penetration testing, social engineering and Sarbanes-Oxley Act of 2002 (SOX) consulting services. Our experienced, certified consultants can help the City understand the various risks and industry-specific regulations that affect you, as well as identify the likelihood and occurrence of risk within your business. PROPOSERS WILL BE REQUIRED TO PROVIDE THE FOLLOWING INFORMATION ON THEIR AUDIT APPROACH: a. Proposed segmentation of the engagement b. Level of staff and number of hours to be assigned to each proposed segment of the engagement Proposed Audit Segmentation Estimated Hours Staff Level Risk assessment procedures, including meetings with officials & staff, preliminary analytics, review minutes & design of audit procedures based on assessed risks 65 All Professionals Document & evaluate internal controls, including IT 100 Senior Manager, Manager & Associate(s) Substantive procedures & analytical review techniques 315 All Professionals Review prepared comprehensive annual financial report (CAFR) & presentation to the finance committee 65 All Professionals Single Audit testing 90 Senior Manager, Manager & Associate(s) Supervision, review & technical assistance 75 Partner/ Managing Director/ Senior Manager/Manager 13 c. Sample size and the extent to which statistical sampling is to be used in the engagement Although it is not possible to set absolute rules for identifying sample sizes, we apply our professional judgment in identifying the appropriate sample size. The objective is to test the population to obtain reasonable confidence that the test objectives have been met. Sample sizes are controlled by the following considerations: Tolerable error (precision) – as the expected monetary conclusion becomes more critical, sample size should increase to tighten the range of the extrapolated estimate Significance of the account to the financial statements – as the significance increases, sample size should increase Assessment of internal control risk – as assessed risk is reduced, sample size for substantive tests should decrease Extent of other substantive audit procedures related to same audit objective (tests of detail, as well as analytical review) – as the extent of other procedures increase, sample size should decrease Frequency and magnitude of expected errors – as the frequency and magnitude of expected errors increase, sample size should increase The size of the population to be sampled and whether a sample is appropriate We anticipate using certain data extraction tools, such as ACL, in selecting and testing samples or complete populations, where appropriate. These effective tools allow us to efficiently test larger amounts of data. d. Extent of use of EDP software in the engagement Technology should do more than just execute an audit, which is why BKD continues to invest in significant technological enhancements. Our aim is to make the service process smoother and improve the client experience. We’re going beyond simply adapting to an electronic environment––we’re deploying tools that harness data analytics, artificial intelligence and powerful benchmarking solutions, all while emphasizing the importance of security and confidentiality. UNSTRUCTURED DATA ANALYSIS Kira is a data analysis platform that can help accelerate data organization and improve our ability to identify issues when assessing a large volume of documents. Beyond optical character recognition, Kira allows us to quickly and effectively process contracts, leases, debt agreements and other documents to extract relevant information to address disclosures and risk areas sooner. DATA ANALYTICS Our data analytics capabilities continue to expand. While common platforms such as Excel provide some level of data query and investigation, we train our personnel on more advanced tools. ACL is one such tool that helps normalize various types of reports and perform sophisticated analysis on the resulting data. We are piloting the use of artificial intelligence through MindBridge, an even more advanced application that allows us to upload multiple years of general ledger data. Using MindBridge, we can run analytics on 100 percent of the City’s transaction detail to detect potential anomalies and patterns that indicate risk. IMPROVING BUSINESS PROCESS WORKFLOWS While our industry-tailored forms have been an important differentiator in our practice thus far, we’re now moving to more sophisticated and dynamic checklists and workflows. We believe this new approach will increase efficiency and improve the data gathering experience for all parties. This evolution is enabling greater use of electronic signatures for contracts and will be integral to improved data sharing and transparency between BKD and our clients. BKDCONNECT CLIENT SITES We view project management as having multiple elements, with communication, timeliness and facilitating efficient exchanging of information among the most key. BKDconnect Client Sites is an innovative client portal designed to help address the challenges financial engagements present and conveniently connect you with our advisors. 14 BKDconnect Client Sites can make it easier to: View and manage information about your engagement or project Share documents and files with your BKD advisors and project teams Organize documents and files for retrieval Assign tasks to your team and receive requests for information from BKD Track the progress of tasks toward completion Access our award-winning, industry-specific articles, webinars, videos and more e. Type and extent of analytical procedures to be used in the engagement Analytical procedures involve auditing a material assertion or account balance by investigating its relationship to an expectation such as other accounts, historical trends or other related measures. BKD recognizes that stronger analytical procedures can help reduce or eliminate other substantive procedures that are usually more time-consuming. We would typically consider: Ratio analysis – comparing relationships among account balances, ratios, nonfinancial data, budgets or industry averages Reasonableness tests – using financial and/or nonfinancial data to develop an expectation of an account balance Successfully using analytical procedures requires auditors to ask the questions: What is the risk of material misstatement? How would we find those misstatements? Have I gathered enough audit evidence? When analytical procedures provide sufficient evidence, other substantive audit procedures should not be necessary. If analytical procedures are not sufficient, some combination of analytical and substantive procedures is likely to be the preferred approach. f. Approach to be taken to gain and document an understanding of the City of Fort Collins’s internal control structure Understanding your operations and the design of your controls helps create an effective and efficient audit process. When performing our first audit, this effort is more substantial. There are several data sources we intend to use, including your prior auditor. Our first objective is to identify those resources that might advance our understanding without extra effort on your part. If you have documentation of your organizational structure, control environment (including technology) and the controls you have in place, along with any testing of those controls, we can often just read and supplement that information as needed. Even when clients have effective controls, their documentation is often limited, so additional effort may be required. When starting with limited documentation, we will: Perform a risk assessment using your financial statements to identify the relevant areas for documenting our understanding and related testing. While we want to have an understanding of your operations, it isn’t necessary for us to document every control, particularly when a control is not related to a significant audit area. Ask you to complete industry-specific questionnaires that summarize your control structure. You might complete these forms directly or we may interview you to guide the process, or some combination of both. This process includes understanding your information system and related controls. Identify who performs or can perform control activities. We can use industry-based assignment of duties forms to capture those assignments. Assess and/or identify key controls you have in place for significant areas of risk. We will look for gaps in your design and potential overlapping assignments of duties that could or should be segregated. Perform limited tests of design effectiveness of control activities. These tests will help us evaluate whether our documentation matches the activities occurring. 15 Consider extended tests of controls. In some cases, your information may be so complex or voluminous that extended control testing is needed to rely on your control and reduce other substantive testing in our audit. Summarize recommendations for your consideration. For minor deficiencies or suggestions, we may discuss changes during our audit. For others, including significant deficiencies or material weaknesses, we will prepare written recommendations for your consideration. In periods following our first audit, the majority of our understanding and documentation will be complete. Going forward, we focus on changes that have occurred and continue performing tests of design effectiveness or expanded testing to evaluate whether control design has remained the same. g. Approach to be taken in determining laws and regulations that will be subject to audit test work Identification of applicable laws and regulations will begin with an inquiry of the City as to your understanding of applicable laws and regulations. In addition, our reviews of various documents, indentures, agreements, etc., will be designed to further assess that all known laws and regulations are encompassed within the scope of the audit. We are experienced in auditing public sector entities in the state of Colorado and are familiar with the laws and regulatory environment in which you operate. h. Approach to be taken in drawing audit samples for purposes of tests of compliance The sampling approach anticipated to be used in connection with the various areas of the audit is judgmental in nature. The size and nature of the population being tested, along with the assessed risk of the associated financial statement line item affected, will determine the size and approach for selecting a sample. All sample sizes will be sufficient to meet all requirements of the various state and federal laws and regulations. We anticipate using data extraction tools, such as ACL’s data extraction and analysis software, in certain situations in selecting and testing samples or complete populations, where appropriate. 9. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS The proposal should identify and describe any anticipated potential audit problems, the firm’s approach to resolving these problem and any special assistance that will be requested from the City of Fort Collins. ACCOUNTING ISSUES While we do not anticipate significant audit problems, we understand the importance of good channels of communication with key engagement team members to facilitate the discussion of issues that may arise. Once we commence final fieldwork, we would ask for management’s participation in weekly progress meetings that would facilitate such communication and allow for timely identification and response to problems that may be encountered. When accounting issues arise, e.g., potential errors or interpretation differences, communication becomes even more important. Our communication process essentially consists of the following actions: Putting the Moose on the Table – We will make you aware of the potential issue, even if we may not yet have all the facts to result in a conclusion. Understanding Your Analysis First – We will listen to your analysis of the facts that led to the accounting decision or disclosures considered. Seeking Help – In addition to the immediate team’s research, we may reach out to others with specialized industry or service experience to provide guidance and may consult with regional and national resources to evaluate the issue as required. Finding the Appropriate Resolution – We will share the facts as we have them, the guidance we have used and the conclusions we think are appropriate for resolution. Your engagement executive is responsible for communicating accounting and audit-related issues with management and will take the lead on any significant accounting matters. 16 OUR EXPECTATIONS OF YOUR STAFF In working with similar clients, we have developed efficient approaches that aim to avoid wasted effort. Your participation helps control costs, reduce unnecessary disruptions and meet deadlines. We need your team to maintain records in good condition, provide the necessary schedules and cooperate with our audit team. Most clients routinely prepare these records and schedules during their normal monthly or annual closing process. Specific assistance from your personnel may include: Preparing a complete and accurate general ledger trial balance by account, to which very few adjustments are needed Preparing accurate audit schedules to support all significant balance sheet and certain other accounts Responding to auditor inquiries Preparing confirmation and other letters Pulling selected invoices and other documents from files Helping to resolve any differences or exceptions noted Completing documentation of internal controls Completing financial statements and footnote information We will provide a list of the needed schedules well in advance of any deadlines, as well as spreadsheet templates for many of these schedules. We also will meet with your staff, as needed, to help them clearly understand what we need. 17 10. REPORT FORMAT The proposal should include sample formats for required reports. 18 19 20 21 22 23 24 25 26 27 32 APPENDIX 33 OUR COMMITMENT TO SUSTAINABILITY For the City, sustainability and environmental awareness lie at the heart of your core values. These are not just idealistic concepts for the future, they are the way you do business today. BKD appreciates and embraces efforts to protect the environment and has undergone a number of specific steps to do our part. When relocating our National Office in Springfield, Missouri, we made a conscious decision to select a developer and builder who would construct an environmentally responsible building. The Opus Corporation, specializing in sustainable development, designed and constructed the building with the express purpose of achieving Leadership in Energy and Environmental Design (LEED® ) Certification, a process coordinated through the United States Green Building Council (USGBC). In October 2010, BKD was awarded the USGBC Gold Certificate. Reasons cited for the award include our efforts during construction to lower operating costs, reduce waste in landfills, conserve water and energy and reduce harmful greenhouse emissions. In addition, more than 75 percent of construction wastes were salvaged or recycled. Our green building includes many environmentally focused features, such as low-flow plumbing fixtures, energy-efficient heating and air systems, water-efficient landscaping and a white roof designed to reduce urban heat. Our green efforts that directly benefit our professionals are apparent in our internal recycling programs, bicycle storage and changing rooms. In addition, your BKD audit engagement will be conducted in a paperless environment. That means, to the extent possible, audit documentation will be obtained and maintained electronically. 34 PROPOSER GUARANTEES 35 BKD PARTNERS & PRINCIPALS As of July 2018, BKD’s partners and principals include: A.J. Pearl, CPA Abraham J. Cole, CPA Adam B. Zieren, CPA Adam W. Smith, CPA Allan M. Blum, CPA Andrew A. Rinzel, CPA Andrew D. Klemens, CPA Andrew M. Richards, CPA Andrew M. Williams, CPA Angela M. Miratsky, CPA, CHFP® , FHFMA Angela R. Morelock, CPA, ABV, CFE, CFF Ann M. King White, CPA Ann M. Puckett, CPA Anna Shaferova, CPA Anthony D. Kruse, CPA Anthony J. Balistreri, CPA Anthony J. Pasternak, CPA Anthony M. Perazzo, CPA Anthony M. Spratte, CPA Ari Rothkopf, CPA Barry Adamson, CPA Barry L. Davis, CPA Benjamin D. Howard, CPA Bradley K. Brotherton, CPA Bradley R. Monahan, CPA Brandon L. Shirley, CPA Brian D. Matlock, CPA Brian D. Todd, CPA Brian D. West, CPA Brian J. Mischel, CPA Brian P. Hickman, CPA Brian T. Mall, CPA Bruce L. Meister, CPA Bryan B. Bodnar, CPA Bryan J. Wright, CPA Bryant B Macaraeg, CPA C. Travis Webb, CPA Camille B. Lockhart, CPA Cara L. Benningfield, CPA Cary D. Hines, CPA Chad E. Gassen, CPA Chad M. Garber, CPA Chad M. Moore, CPA Chad W. Back Cheryl A. Clauson, CPA Chris J. Lindner, CPA, CGFM® Chris M. Van Long, CPA Christopher Dalton, CPA Christopher J. Doolittle, CPA Christopher J. Kramer, CPA Christopher J. Murphy, CPA Christopher J. Telli, CPA Christopher M. Linck, CPA 36 Gregory D. Rexing, CPA Gregory E. Usry, CPA Gregory S. Sissel, CPA H. Bryan Callahan, CPA, CFF, CFE, CVA Harold Gelernter, CPA Holly M. Pantzer, CPA Isabel P-D Santner, CPA J. Christopher Clark, CPA J. Corey Jennings, CPA J. Mark Lundy, CPA J. Randy Vogel, CPA J. Scott Golan, CPA J. Scotty White, CPA Jack E. Thurman, CIMA® Jacob A. Beniawski, CPA James E. Creeden, CPA James M. Anderson, CPA James P. Regnier, CPA Jason A. Myers, CPA Jason J. Barb, CPA, CHFP® , FHFMA Jason L. Rader, CPA Jason W. Bombeck, CPA Jay A. Hargis, CPA Jaye L. Waynick, CPA Jean M. Nyberg, CPA Jeffrey A. Layman, CFA® Jeffrey E. Allen, CPA Jeffrey E. Beach, CPA, CVA Jeffrey M. Ronsse, CPA Jeffrey R. Naig, CPA Jeffrey T. Conrad, CPA, JD Jeffrey T. Deane, CPA Jeremy D. Carnahan, CPA Jerry M. Goolsby, CPA Jerry T. Henderson, CPA Jesse A. Frommer, CPA Jesse L. Palmer, CPA Jim P. Still, CPA Jody A. Gauthier, CPA Joel R. Dziedzic, CPA, CIT John D. Schlagenhauf, CPA John E. Bourquard John E. Curry, CPA John M. Kmetz, CPA John M. Mather, CPA John R. Bruce, CPA John W. Steffes, CPA Jon A. Unroe, CPA Jon M. McDowell, CPA Jon P. Redelsperger, CPA Jonathan D. Harris, CPA Joseph D. Meyer, CPA Joseph E. Roos, CPA, CFE Joseph M. Watt, CPA Joseph P. Vande Bosche, CPA 37 Michelle M. Brekken, CPA Monica Fraczek, CPA Nancy E. Ozuna, CPA Olivia B. Host, CPA Pamala D. Renninger, CPA Patricia Quintana-Perron, CPA Paul M. Koster, CPA Peder R. Johnson, CPA Peter J. Kern, CPA Preston G. “Tracy” Young III, CPA Rachel R. Dwiggins, CPA Randy A. Biernat, CPA, ABV Randy D. Oberdiek, CPA Randy F. Throener, CPA Richard T. Wittgren, CPA Rick L. Klahsen, CPA Robert A. Wedding, CPA Robert D. MaCoy, CPA Robert E. Opitz, CPA Robert E. Purdy, CPA, CTFA Robert J. Pruitt, CPA Robert J. Wagner II, CPA Robert M. Swartz, CPA Robert T. Johnson, CPA Robert W. Brandenburg, CPA, FHFMA Robert W. Conner, CPA Robyn A. Devore, CPA Russell L. Romanelli, CPA Ryan S. Reiff, CPA, CHFP® S. Todd Burchett, CPA, ABV, ASA, CFF, CFE Scott A. Humphrey, CPA Scott C. Dowling, CPA Scott C. Termine, CPA Scott J. Brouillette Scott L. Fields, CPA Scott R. Bezjak, CPA, CGMA® Scott W. Gold, CPA Shaun D. McLean, CPA Shaun P. Duffin, CPA, ABV, ASA, CMA® , CFM Shawn R. Grotte, CPA Sherri W. Greenwood, CPA Stephanie C. Weis, CPA Stephen H. Heilman, CPA Steve K. Holden, CPA Steven D. Warren, CPA Steven H. Martin, CPA Steven L. Toomey, CIMA® Steven L. Webb, CPA Sue Brammer, CPA, CHFP® , FHFMA 38 PROPOSER WARRANTIES 39 ADDENDA We received Addendum No. 1 on August 3, 2018. We received Addendum No. 2 on August 8, 2018. 40 FUTURE NEGOTIATIONS Upon being selected as the successful bidder, BKD may require modification to the terms and conditions, as referenced in the RFP, to comply with professional standards and/or BKD’s policies. As BKD has successfully resolved similar terms and conditions with other municipalities, BKD is confident the parties can successfully negotiate a mutually acceptable agreement. 41 AICPA PEER REVIEW LETTER 42 BKD PEER REVIEW REPORT 43 UNMATCHED CLIENT SERVICE 44 BKD FIRM PROFILE 45 BKD PRIDE VALUES 28 1. TOTAL ALL-INCLUSIVE MAXIMUM PRICE The sealed dollar cost bid should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of-pocket expenses. The City of Fort Collins will not be responsible for expenses incurred in preparing and submitting the technical proposal or the dollar cost proposal. Such costs should not be included in the proposal. The first page of the dollar cost proposal should include the following information: a. Name of Firm BKD, LLP b. Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Fort Collins. As partner of the firm, Chris Telli is authorized to submit the bid as well as represent and contractually bind BKD. c. A Total All-Inclusive Maximum Price for the 2018 engagement and subsequent 4 years (Fill-out Appendix A). BKD knows our clients do not like fee surprises. Neither do we. Our goal is to be candid and timely, and we want to answer your questions about fees upfront. We determine our fees by evaluating a number of variables: the complexity of the work, the project’s scope, the time we will spend and the level of professional staff needed. C. DOLLAR COST PROPOSAL 29 PROPOSED ALL-INCLUSIVE MAXIMUM FEES 30 2. RATES BY PARTNER, SPECIALIST, SUPERVISORY & STAFF LEVEL TIMES HOURS ANTICIPATED FOR EACH The second page of the dollar cost proposal should include a schedule of professional fees and expenses, presented in the format provided in the attachment (Appendix A), that supports the total all-inclusive maximum price. The cost of special services described in Section of this request for proposal should be disclosed as separate components of the total all-inclusive maximum price. 3. OUT-OF-POCKET EXPENSES INCLUDED IN THE TOTAL ALL- INCLUSIVE MAXIMUM PRICE & REIMBURSEMENT RATES Out-of-pocket expenses for firm personnel (e.g., travel, lodging and subsistence) will be reimbursed at the rates used by the City of Fort Collins for its employees. All estimated out-of-pocket expenses to be reimbursed should be presented on the second page of the sealed dollar cost bid in the format provided in the attachment (Appendix A). All expense reimbursements will be charged against the total all-inclusive maximum price submitted by the firm. Our fees include travel costs, if any, and an administrative fee of 4 percent to cover items such as copies, postage and other delivery charges, supplies, technology-related costs, such as computer processing, software licensing, research and library databases, and similar expense items. Our fees may increase if our duties or responsibilities change because of new rules, regulations and accounting or auditing standards. We will consult with you should this happen. Our estimate of fees does not include any time that may be required to address a restatement of the previously audited financial statements. Accordingly, any such work will be billed based on our quoted hourly rates. 31 In addition, a statement must be included in the sealed dollar cost bid stating the firm will accept reimbursement for travel, lodging and subsistence at the prevailing City of Fort Collins rates for its employees. BKD accepts reimbursement for travel, lodging and subsistence at the prevailing rates for the City’s employees. 4. RATES FOR ADDITIONAL PROFESSIONAL SERVICES If it should become necessary for City of Fort Collins to request the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between City of Fort Collins and the firm. Any such additional work agreed to between City of Fort Collins and the firm shall be performed at the same rates set forth in the schedule of fees and expenses included in the sealed dollar cost bid. BKD understands and accepts the above statement. 5. MANNER OF PAYMENT Progress payments will be made on the basis of hours of work completed during the course of the engagement and out- of-pocket expenses incurred in accordance with the firm’s dollar cost bid proposal. Interim billing shall cover a period of not less than a calendar month. Ten percent (10%) will be withheld from each billing pending delivery of the firm’s final reports. Our pricing for this engagement and our fee structure is based upon the expectation our invoices will be paid promptly. We will issue monthly progress billings during the course of our engagement and payment of our invoices is due upon receipt. Interest will be charged on any unpaid balance after 45 days at the rate of 10 percent per annum. WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. August 10, 2018 TECHNICAL Proposal to provide professional auditing services to: The City of Fort Collins Prepared by: CliftonLarsonAllen LLP 370 Interlocken Blvd., Suite 500 Broomfield, CO 80021 Paul Niedermuller, CPA, Principal 303-466-8822 paul.niedermuller@CLAconnect.com CLAconnect.com RFP for Auditing Services Proposal No. 8781 ©2018 CliftonLarsonAllen LLP | ii TABLE OF CONTENTS TRANSMITTAL LETTER ______________________________________________________________ iv B. TECHNICAL PROPOSAL ___________________________________________________________ 1 1. GENERAL REQUIREMENTS/EXECUTIVE SUMMARY _____________________________________ 1 2. INDEPENDENCE _________________________________________________________________ 2 3. LICENSE TO PRACTICE IN COLORADO ________________________________________________ 3 4. FIRM QUALIFICATIONS AND EXPERIENCE _____________________________________________ 3 Leading professional services firm ____________________________________________________ 5 Our governmental audit team _______________________________________________________ 5 Location of offices _________________________________________________________________ 6 Industry participation ______________________________________________________________ 9 Thought leadership and industry information ___________________________________________ 9 Use of subcontractors _____________________________________________________________ 10 Quality control procedures and peer review report _____________________________________ 10 Desk reviews and disciplinary action _________________________________________________ 13 5. PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE ___________________ 13 Engagement team members _______________________________________________________ 13 Staff continuity __________________________________________________________________ 16 Continuing professional education ___________________________________________________ 16 Affirmative action policy ___________________________________________________________ 16 6. PRIOR ENGAGEMENTS WITH THE CITY OF FORT COLLINS _______________________________ 17 7. SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES__________________________ 17 References _____________________________________________________________________ 17 8. SPECIFIC AUDIT APPROACH ______________________________________________________ 18 Audit approach and methodology ___________________________________________________ 18 Audit plan ______________________________________________________________________ 21 Single Audit approach _____________________________________________________________ 26 Transition plan __________________________________________________________________ 28 Communications _________________________________________________________________ 30 Technology _____________________________________________________________________ 33 Available resources _______________________________________________________________ 36 ©2018 CliftonLarsonAllen LLP | iii Project timeline __________________________________________________________________ 36 9. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS _________________________ 37 10. REPORT FORMAT _____________________________________________________________ 37 CONCLUSION ____________________________________________________________________ 37 C. DOLLAR COST PROPOSAL ________________________________________________________ 38 Appendix A _____________________________________________________________________ 39 Engagement team resumes ________________________________________________________ 39 APPENDIX B _____________________________________________________________________ 12 Sample Reports __________________________________________________________________ 12 APPENDIX C ______________________________________________________________________ 6 Required Forms ___________________________________________________________________ 6 ©2018 CliftonLarsonAllen LLP | iv CliftonLarsonAllen LLP 370 Interlocken Blvd., Suite 500 Broomfield, CO 80021 303-466-8822 | fax 303-466-9797 www.CLAconnect.com TRANSMITTAL LETTER August 10, 2018 City of Fort Collins Financial Services, Purchasing Division 215 N. Mason St., 2nd Floor Fort Collins, CO 80522 Attn: Gerry Paul, Purchasing Director Re: Proposal No. 8781 – Request for Proposal for Financial Auditing Services Dear Mr. Paul: Thank you for inviting CliftonLarsonAllen LLP (CLA) to propose our services to you. We gladly welcome the opportunity to share our approach to provide professional auditing services for the City of Fort Collins (the City). The enclosed proposal responds to your request for audit and compliance services for the year ending December 31, 2018 with the option to extend for four subsequent years. Understanding of Work to be Performed The audit will be performed in accordance with auditing standards generally accepted in the United States of America and the standards set forth for financial audits in Government Auditing Standards issued by the Comptroller General of the United States, and the provisions of 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (the Uniform Guidance), Subpart F. CLA is among the nation’s leading professional services firms with an exceptional level of knowledge, insight, and dedication to serving public sector entities. In the following pages, we hope to demonstrate why CLA is your best choice. The following are some of the key benefits of choosing CLA as your service provider: Commitment to the public sector industry – Our professionals are immersed in your industry. Those selected to serve you are not just accounting practitioners; they are solely dedicated to and have significant exposure, training, and knowledge in providing auditing, accounting, and other management and consulting services to governmental organizations, including city and town entities. With a national client base of more than 10,000 state and local governmental organizations and nonprofits, the firm has established this industry as one of our core industry sectors. In Colorado, our dedicated public sector group of approximately 130 professionals, serves local and state governments, including cities, towns, counties, school districts, special districts, higher education institutions, and various other local government entities. ©2018 CliftonLarsonAllen LLP | iii Experience to meet your needs – Each member of the proposed team has extensive experience in auditing governmental organizations. This means that your engagement team understands the complexities of the City’s financial reporting requirements and operating environment, saving the City and staff valuable time with audit involvement. Your engagement team also has the following relevant experience: o The vast majority of local governmental clients prepare and submit a Comprehensive Annual Financial Report (CAFR). Our experience allows us to provide guidance during this process for the City, as well as offer best practices, templates, and interpretation of the related standards, if needed. o Our firm is the number one provider of Single Audits across the country. Your engagement team has extensive experience in performing Single Audits and can provide valuable guidance to the City regarding the OMB’s Uniform Guidance. o We understand the challenges facing local governmental entities like the City. As such, we can provide insight and ways the City could address these concerns to meet its greater needs: - Vulnerabilities surrounding cyber security - Internal control policy and procedure inefficiencies - Best practices utilized by other Colorado municipalities for consideration by the City - Advanced discussions of new GASB Statement implementations to assist the City in meeting the required implementations and reporting requirements Commitment to excellence – We leverage our local experience to provide best practices and valuable feedback to improve processes and overall operations. We are committed to serving as thought leaders in Colorado, and are involved in the following training and other educational opportunities for the Colorado governmental community: o We typically host annual training sessions each year in Denver (for CPE) to provide GASB updates, internal control and fraud prevention training, Single Audit updates, data mining, cyber security, and other relevant topics. These sessions are provided at no cost. o Paul Niedermuller, the engagement principal for the City, has provided state and national training, along with speaking opportunities at the CGFOA conference, the GFOA conference, and other AICPA and AGA state conferences. Commitment to timely communications and an effective transition plan – Your engagement team will hold weekly meetings to update you on the status and progress of the engagement and answer any questions you may have. We commit to perform the work within the time period as outlined in the City’s request for proposal. This commitment requires adherence to a comprehensive timeline and overall game plan, which we will develop collaboratively with City management to verify it meets your specific deadlines and expectations. Lastly, given our experience transitioning other similar engagements, we will implement a proven transition plan to reach a smooth, efficient change in service providers. Commitment to value – You receive the depth of experience from our firm’s national resources while at the same time, the convenience and familiarity of our staff in the local Colorado offices. We believe our fees are competitive and fair. We will not surprise you with unexpected fees. Sustainability – FX Engagement is our paperless audit product. Our firm has been paperless for over six years. This product allows us to file and save all of our audit work papers in an electronic storage ©2018 CliftonLarsonAllen LLP | iv capacity, allowing our firm to save time and resources associated with maintaining and storing paper files. In addition, we focus on limiting the usage of our vehicles by staying in a hotel during our audit fieldwork to limit our footprint with vehicle emission. The costs of our hotel stay is included within the all-inclusive maximum price found in the fee proposal. Commitment to the City of Fort Collins – Senior members of your engagement team, including the principals and manager, will be actively involved in this engagement. Paul Niedermuller will serve as the City’s engagement principal, while Allison Slife will serve as the quality review principal on the engagement. We are committed to staying closely involved with you throughout our services, so you know your City will be served with a high degree of accuracy, professionalism and timely deliverables. We will be available not only during the audit, but also year-round to assist in answering your questions. We believe we are the best qualified firm to perform the engagement based on our experience with other Colorado entities similar to the City, and our commitment to providing excellent client service. We commit to perform the work within the time period defined in the request for proposal. This proposal is a firm and irrevocable offer for 60 days. As of the date of the submittal of our proposal, we are in receipt of Addendum No. 1 and Addendum No. 2 to the City’s request for proposal. If you have any questions about our offerings, please do not hesitate to contact me via phone at 303-466-8822 or email at paul.niedermuller@CLAconnect.com. As a principal, I am authorized to make presentations and contractually bind the firm, and negotiate the contract on behalf of the firm. Sincerely, CliftonLarsonAllen LLP Paul Niedermuller, CPA Principal CliftonLarsonAllen LLP 370 Interlocken Blvd., Suite 500 Broomfield, CO 80021 303-466-8822 ©2018 CliftonLarsonAllen LLP | 1 B. TECHNICAL PROPOSAL 1. GENERAL REQUIREMENTS/EXECUTIVE SUMMARY We understand that the City of Fort Collins is seeking an independent public accounting firm interested in conducting financial and compliance audits of the City for the year ending December 31, 2018 with the option to extend for four subsequent years. We know you have a wide selection of CPA firms when it comes to choosing your accounting firm. We would like to emphasize the fact that CLA hopes to be far more than your accounting firm – we hope to be your trusted advisor by providing the following benefits we believe are our strengths to the audit engagement: High Quality Audits As one of the leading national public accounting firms, CLA has developed a very strong and proven audit approach. CLA is required to have an unrelated firm perform an extensive peer review of its quality controls, policies and procedures every three years. CLA has successfully passed all ten independent peer reviews and has received a “no comments” report during its most recent review in 2016. We hold ourselves to very high standards. When you hire CLA, you can be assured that your work is performed with the highest level of quality. Ability to Meet Your Needs While we realize the City of Fort Collins is truly unique, there is nothing like extensive industry experience to qualify a firm for an engagement. Because CLA has been serving municipal governments for over 60 years, we understand the environment in which the City operates. Our professionals are forward-thinking and proactive, and they are committed to assisting the City in overcoming current challenges, as well as potential challenges in the future. The Engagement Team CLA is the only national firm that does not audit publicly traded companies other than bank holding companies. While other firms are pressing to meet SEC reporting deadlines, we are servicing our public sector clients. Because the public sector is our primary focus, every member of your audit team will have specific municipality and government experience and know your industry. We require our staff members to become specialized and receive industry-specific continuing professional education. CLA differentiates itself from other leading professional services firms by aligning our professionals with the industries they choose to serve, whereas, other firms are aligned geographically. It is the passion of each professional that drives their choice to serve a particular industry. Making industry specialization our number one priority grants us the opportunity to focus our efforts on providing clients industry and regulatory information in an efficient manner. Fair Fees Our goal is to provide the City with high quality service at a fair fee for these services with no surprises and unexpected fees. We do not charge fees based on findings or adjusting journal entries. Our fees also include the entrance conference and exit conference with the finance department and the City Council. Our time and fee estimates reflect our knowledge and extensive experience with audit services for local At CLA we are able to meet your critical deadlines, as we do not experience the same workload compression that other firms do, so our teams are accessible when you need them. ©2018 CliftonLarsonAllen LLP | 2 governmental agencies similar to the City. We are confident we can provide you the in-depth service the City needs to accomplish a fully completed and detailed audit. CLA has worked with many governmental agencies to accomplish successful audits, and we have not encountered any issues with the amount of time it takes to provide our services. CLA will serve the City in a timely, efficient and cost-effective manner. Please see our fee proposal under separate cover, as stipulated in the City’s request for proposal. Innovation Our clients are hungry for more than routine solutions and standard services; they are seeking out businesses who know them and can help them with a wide variety of business issues. To meet the changing needs of our clients, CLA continues to innovate and reinvent ourselves with a mindset toward innovation. Innovation is being advanced in all practice areas whether it be through automating tasks previously performed manually, emphasizing data analytics, or implementing new technologies. This ongoing focus challenges us to execute first-class compliance work, leverage all the technology available to us, and better demonstrate the strategic advantage of deep industry specialization. Transforming our processes is ambitious. However, these efforts improve the quality and impact of our practice, greatly enhance our efficiency, create more rewarding work experiences for our staff, and ultimately provide a better experience for our clients. 2. INDEPENDENCE CLA and all professionals assigned to this engagement are independent of the City of Fort Collins and all included component units of the City as defined by auditing standards generally accepted in the United States of America and the U.S. Government Accountability Office’s Government Auditing Standards. CLA will give the City written notice of any professional relationships entered into during the period of engagement. CLA is independent of the City of Fort Collins. CLA has detailed procedures in our Audit & Accounting Manual which include key elements such as: Independence training for all professionals. Annual written representations of independence from all personnel who perform client services. Extensive client and engagement acceptance and continuance policies. Separate sections in our manual specific to independence over Government Auditing Standards engagements. Requirements for confirming independence of outside accounting firms and independent contractors. Maintenance of a firm-wide client list and a restricted entities list. Conflict of interest There exists no conflict of interest relative to performing the proposed audit between CLA and members of the engagement team, and the City of Fort Collins. In addition, CLA has not had any professional relationships involving the City of Fort Collins or any of its component units or joint venture members for the past five (5) years. ©2018 CliftonLarsonAllen LLP | 3 3. LICENSE TO PRACTICE IN COLORADO CLA is a limited liability partnership and is duly licensed to practice public accountancy in the state of Colorado and other states in which it chooses to practice. All principals in the limited liability partnership and managers providing auditing services are licensed certified public accountants in Colorado and their licenses are active. A copy of our license to practice in Colorado is shown below. 4. FIRM QUALIFICATIONS AND EXPERIENCE We promise to know you and help you CLA delivers integrated wealth advisory, outsourcing, audit, tax, and consulting services to help clients succeed professionally and personally. Our broad professional services allow us to serve clients more completely — from startup to succession and beyond. Our professionals are immersed in the industries they serve and have specialized knowledge of their operating and regulatory environments. With more than 5,400 people, more than 110 U.S. locations, and a global affiliation, we bring a wide array of approaches to help clients in all markets, foreign and domestic. WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING ©2018 CliftonLarsonAllen LLP | 4 You can depend on CLA for several uncommon advantages: Deep industry specialization Our people are industry practitioners first and foremost. You will work with professionals who know you, your organization, and your industry — and combine their knowledge with yours to make you stronger. Seamless, integrated capabilities We offer planning and guidance to help address the City’s financial, operational, and regulatory issues, with particular care for you and your organization’s leaders. Our people connect with a vast network of resources behind the scenes — seamlessly presented and delivered for you. THE career building firm Our professionals are personally invested in your success, you will work with entrepreneurial people with the freedom and agility to serve you rather than merely perform obligatory functions. For more information about CLA, visit CLAconnect.com/aboutus. Our mission: Impactful interactions for success ©2018 CliftonLarsonAllen LLP | 5 Our governmental audit team CLA’s governmental audit staff includes more than 700 professionals. Because we have such a large governmental audit practice, every member of your engagement team will have governmental audit experience. These individuals serve governmental entities throughout Colorado, including many similar entities. Additionally, we have access to firm-wide experts and resources as needed to fulfill the requirements of the engagement. For the City’s financial audit, we anticipate assigning six professionals from our local governmental team. One supervisory staff member and two staff members will be on site on a full-time basis, while one principal and one manager will be on site regularly throughout the audit, to lead the engagement team’s efforts. In addition, we will utilize an Information Technology Specialist from CLA to perform testwork over the City’s financial IT system during the first year of the engagement. After the first year, we will determine whether the City’s financial system requires testing by the CLA specialist each fiscal year. If the situation arose that your engagement requires additional support, we have both the capability and depth in our local resources from which to draw. The single-most important factor in our firm’s success has been our uncompromising commitment to the highest standards of quality and professionalism. Providing quality service to our clients is our sole focus, and we have developed review procedures and communications to foster high standards of performance. The firm’s operating philosophy differs from many other large CPA firms. We are dedicated to the public sector practice. We serve our clients through close personal involvement by all our principals, managers/directors, and experienced professional staff. The public sector industry is the primary focus of our firm in Colorado, therefore giving us considerable depth of experience and knowledge. $750 million in revenue 5,400+ people Leading professional services firm 60+ years in business Governmental and nonprofit entities served More than 110 10,000+ locations nationwide Including: 700+ state and local government professionals ©2018 CliftonLarsonAllen LLP | 6 Location of offices CLA’s Mountain West Region consists of locations in 16 cities across five states, including offices in Broomfield, Colorado Springs, and Greenwood Village, Colorado. From our Colorado offices, where the City will be served from, we have 179 professionals. Of those, we have 24 principals, 47 managers/directors, approximately 66 senior associates and associates, 12 interns, and more than 30 administrative/support staff. The primary industries served by the Colorado offices are state and local government, nonprofits, health care, higher education, technology, and commercial services. Our public sector staff consists of 11 principals, 26 managers/directors, and approximately 40 other professionals including senior associates and associates. The team assigned to this engagement will serve the City exclusively from our Denver area office locations shown below. Broomfield Office Greenwood Village Office Colorado Springs Office 370 Interlocken Blvd., Ste 500 8390 E. Crescent Pkwy., Ste 500 102 So. Tejon St., Ste 350 Broomfield, CO 80021 Greenwood Village, CO 80111 Colorado Springs, CO 80903 Every business, organization, and citizen contributes to the success of their community. We want to be the firm that contributes everything we have to help the City move toward its goals. We want to be a value to the communities where we live and work, and serving the City would allow us to work together to identify and make improvements that directly or indirectly improve the citizen’s experience. Other firms may utilize personnel to serve the City whose primary career focus is in an industry other than governments. As citizens, both corporate and individual, we care about governmental clients and have a team committed solely to serving governmental organizations, including cities and towns. Our services do not begin and end with professional standards for completing an audit. Instead, we provide our service with the intention of offering valuable insights from our work. The time and effort investment by the City’s leadership and staff for an audit is significant and the City should expect value for this investment. We respond to your stated needs in a thorough and easy-to-follow manner. We understand your most important and relevant needs are: A proposed team of professionals carefully selected for compatibility with the City’s needs and circumstances — Your service team understands the strategic, operational, and regulatory issues impacting the City. These professionals dedicate a substantial percentage of their time assisting local governments with financial, regulatory, and information security matters. Efficiency — Our goal is to provide exceptional client service at the lowest possible cost. A well-planned and well-executed engagement by an experienced service team will minimize disruption to your staff and enable timely completion of all deliverables. Experience and continuity — Your engagement team members have in-depth experience in local government accounting, auditing, or compliance matters, serving a number of towns, cities and counties in the state, as well as across the country. We will commit the necessary resources to provide quality client service and timely report delivery. We have an extensive local and national government practice from which to draw resources. Fresh perspective — By engaging CLA, the City will benefit from a “fresh look” at its operations, systems, and processes. You will be served by an engagement team with enthusiasm and a desire to meet and exceed expectations. We are confident that our industry experience will reveal new ideas, new approaches, and new opportunities. ©2018 CliftonLarsonAllen LLP | 7 Experience with GASB As noted throughout this document, CLA works with hundreds of state and local governments across the nation who utilize GASB standards and principles as the primary source of generally accepted accounting principles. As such, from associates to principals, we are committed to staying ahead of the curve with respect to changes in accounting and auditing standards, particularly those GASB standard changes that are likely to impact our public sector clients. Our objective is to understand the nature of changes, as they are being developed, so that when new pronouncements become effective, we have a depth of understanding to assist our clients with the related implementation, all at no additional cost. We know that it takes a continuous effort to stay current on the latest issues and trends affecting governmental entities. Our dedication to the public sector results in professionals that are knowledgeable and experienced with GASB standards and other standards that impact state and local governments. In addition to ongoing communications through in-person trainings, webinars, and newsletters, we will provide continuous insight to the City so that you are aware of and prepared for any significant changes in accounting and reporting applicable to government organizations. For example, our Denver office led the charge on the implementation of GASB Statement No. 68 for our clients, leading local trainings as far back as five years ago. At these trainings, over 200 individuals from state and local governments around the Denver metro area attended. In addition, given our knowledge on the subject, local CLA representatives were asked over the past several years to speak on the subject at GFOA conventions and other conferences. These local trainings were reinforced by webinars led by CLA’s national office along with newsletters and email communications assisting our clients with the GASB Statement No. 68 implementation. This is just one example of many that CLA offers our clients in staying ahead of the curve as it relates to new GASB standards. Other examples include: We have members of our National Assurance Team dedicated solely to the public sector. These members provide timely guidance on technical questions encountered by teams while in the field. They are also responsible for keeping client serving members up-to-date on recent GASB exposure drafts, pronouncements, and other news. One of the members of the National Assurance Team discussed above is a member of the AICPA State and Local Expert Panel. As part of this panel, he responds to all GASB exposure drafts. In addition, through this panel, CLA has input on the AICPA State and Local Government Audit Guide. Locally, the Denver office hosts Public Sector seminars that generally offer anywhere from 5 – 8 hours of CPE. Each session, we offer a GASB update for participants. We believe that staying ahead of the curve and providing education on both approved and proposed accounting standard changes allows us and our clients to effectively and efficiently implement those changes. ©2018 CliftonLarsonAllen LLP | 8 Leaders in Performing Single Audits CLA performs Single Audits for over 800 organizations annually, ranking top in the nation for the number of Single Audits performed by any CPA firm. The majority of governmental organizations served by CLA receive federal funds and require a Single Audit in accordance with the OMB Uniform Guidance. Compliance with federal award provisions can have a major impact on future funding and continuance of services. We provide our clients with meaningful suggestions to improve the compliance environment when required, and we have developed templates for our clients to aid in documentation of controls over compliance and processes in place. We believe being proactive is key to the Single Audit process and continuously help our clients with interpretation of federal award provisions and requirements to provide best practice examples and tools to help with this area. CLA has designated specific principals who are authorized to review and approve Single Audit reports. In addition to the local resources, CLA has personnel throughout the firm as well as national technical personnel who specialize in Single Audits and as such provide resources and insights not found in many firms. CLA personnel were also invited to join and participated in Single Audit Task Forces formed by the AICPA to address Single Audit quality issues. All staff assigned to your audit perform Single Audits throughout the year and have received specialized training in governmental accounting, auditing and financial reporting. The table below illustrates CLA’s experience in serving organizations that receive federal funds and demonstrates our firm’s dedication to serving these organizations. Number of Single Audits Performed* *The information for the firms above was pulled from the Federal Audit Clearinghouse for audits with fiscal year ends between January 1, 2016 – December 31, 2016. 0 100 200 300 400 500 600 700 800 900 1000 BDO Eide Bailly CohnReznick Brandi Pritchard KPMG BKD Baker Tilly RSM Plante & Moran CliftonLarsonAllen CLA has designated specific individuals within the firm who are authorized to review and approve Single Audit reports. We require all Single Audits to be reviewed by a Designated Single Audit Reviewer, thereby assuring that standards set forth in the OMB Uniform Guidance are accurately maintained. ©2018 CliftonLarsonAllen LLP | 9 CLA performed over 800 Single Audits in 2016; therefore, the City can be assured that CLA will perform a high quality audit in accordance with OMB Uniform Guidance. Our designated Single Audit group stays current on all issues related to federal awards and the impact they may have on your Single Audit. Industry participation CLA actively supports industry education as a thought leader and industry speaker. Our firm focuses on supporting the educational needs of the industry through nationally sponsored trade events. Our team of local government professionals is sought after, both as educators and as experienced speakers who are invited to speak and teach at major professional events by leading trade associations. As an example, we have been speakers for the following organizations: AICPA – governmental and nonprofit national conferences State CPA societies Government Finance Officers Association Local chapters of the Government Finance Officers Association Association of Local Government Auditors Association of Government Accountants Thought leadership and industry information CLA goes beyond the numbers and offers value-added solutions. Rest assured, you will hear from us throughout the year. We send periodic email publications and host webcasts to keep clients and friends of the firm informed of relevant industry updates. Below are just a few of the resources we offer. Market and Economic Outlook — A quarterly publication that analyzes global economic conditions and market activity and what they may mean to individual investors. Perspectives — A periodic enewsletter providing news, tips, strategies, insights, and updates on regulatory and industry issues as well as subjects relevant to private clients (e.g., personal finances, estate planning, investment planning). National industry webcasts — Web-based seminars designed to provide information on upcoming industry trends, accounting, , risk, and other issues in either the accounting or the public sector industry. These webcasts are free to clients and provide CPE credit to attendees. Speaking engagements and workshops — We share our industry knowledge and experience by presenting at national, regional, and local events, as well as hosting our own industry events in various markets. We provide quality insight and education in the areas of improving profitability, reducing risk, building business value, and planning for succession. We typically host annual training sessions each year in Denver (for CPE) to provide GASB updates, internal control and fraud prevention training, Single Audit updates, data mining, cyber security, and other relevant topics. Our most recent training seminar was held on March 14, 2018. These sessions are provided at no cost. Recent industry articles — In addition to our direct participation with national organizations, CLA has had numerous articles published by our governmental industry professionals. For the most current listing of the published articles, please go to CLAconnect.com. In-person events — Annual economic, capital markets, and tax outlook seminars are presented by local professionals and CliftonLarsonAllen Wealth Advisors, LLC investment committee members. Investment Advisory Services offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. ©2018 CliftonLarsonAllen LLP | 10 You can register for our webcasts and find our extensive resource library on our website, CLAconnect.com. Use of subcontractors We do not anticipate using any subcontractors during this engagement. CLA is not a joint venture or consortium. Quality control procedures and peer review report In the most recent peer review report, we received a rating of pass, which is the most positive report a firm can receive. We are proud of this accomplishment and its strong evidence of our commitment to technical excellence and quality service. The full report is provided on the following pages of this proposal. In addition to an external peer review, we have implemented an intensive internal quality control system to provide reasonable assurance that the firm and our personnel comply with professional standards and applicable legal and regulatory requirements. Our quality control system includes the following: A quality control document that dictates the quality control policies of our firm. In many cases, these policies exceed the requirements of standard setters and regulatory bodies. Firm leadership promotes and demonstrates a culture of quality that is pervasive throughout the firm’s operations. To monitor our adherence to our policies and procedures, and to foster quality and accuracy in our services, internal inspections are performed annually. Quality control standards as prescribed by the AICPA. The engagement principal is involved in the planning, fieldwork, and post-fieldwork review. In addition, an appropriately experienced professional performs a risk-based second review of the engagement prior to issuance of the reports. Hiring decisions and professional development programs designed so personnel possess the competence, capabilities, and commitment to ethical principles, including independence, integrity, and objectivity, to perform our services with due professional care. An annual internal inspection program to monitor compliance with CliftonLarsonAllen’s quality control policies. Workpapers from a representative sample of engagements are reviewed and improvements to our practices and processes are made, if necessary, based on the results of the internal inspection. Strict adherence to the AICPA’s rules of professional conduct, which specifically require maintaining the confidentiality of client records and information. Privacy and trust are implicit in the accounting profession, and CliftonLarsonAllen strives to act in a way that will honor the public trust. A requirement that all Single Audit engagements be reviewed by a designated Single Audit reviewer, thereby confirming we are in compliance with the standards set forth in the Uniform Guidance. ©2018 CliftonLarsonAllen LLP | 11 ©2018 CliftonLarsonAllen LLP | 12 ©2018 CliftonLarsonAllen LLP | 13 Desk reviews and disciplinary action CLA has not been suspended or debarred from performing government audits or from other government activity, and has not been the object of any disciplinary action or legal proceedings filed against our firm in the past three years. From time to time, individuals in the firm are parties to an inquiry from a regulatory or ethics body. In all cases the individual, with the firm’s backing, shall cooperate in providing the information required to respond appropriately to the inquiry. The firm and professionals within the firm presently do not have any regulatory or ethics inquiries of a serious nature or outside the normal course of our practice. Also, the firm and its professionals have never had any serious regulatory or ethics sanctions imposed after completion of the inquiries’ proceedings. 5. PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE Engagement team members The core team assigned to the City’s engagement is identified below and encompasses significant knowledge and experience to provide promised continuity at all levels. They will continue to be available to the City and work with you and your staff to foster consistent communication, timely delivery of your audit needs and exemplary customer service. They will also work with you and your staff on a proactive and collaborative basis throughout the duration of the entire project to address areas of concern, such as accounting for complex and unique transactions the City may enter into. It is our priority to help the City achieve its compliance and fiscal responsibility goals. The team members have performed numerous engagements of this nature and will commit the resources necessary to give you top quality service throughout the engagement. Our Colorado offices have ample public sector resources to effectively service this engagement. Brief biographies of the City’s engagement team members may be found below. Detailed resumes for engagement team members may be found in Appendix A. Following are our proposed management team members: Engagement Team Title Role Years of Experience Paul Niedermuller Principal Engagement Principal 20 years Allison Slife Principal Unassociated Review Principal 12 years Eric Miller Manager Engagement Manager 6 years Morgan Holtzman Senior Associate Engagement In-Charge 3 years Mike Nyman Signing Director IT Specialist 20 years The most important resource any business has is people – the right people. ©2018 CliftonLarsonAllen LLP | 14 Paul Niedermuller, CPA, Engagement Principal Paul will be the engagement principal and responsible for the approval of the audit plan, principal level review and approval of the required reports and other deliverables. He will be available throughout the year to answer questions. Paul is licensed to practice as a certified public accountant in Colorado. Paul has been in public accounting for 20 years and all of his experience has been with governmental and nonprofit clients. He was a partner with a firm in California and joined CLA in 2006. His experience with government organizations in Colorado include City of Boulder, City of Golden, City of Longmont, City of Greeley, Town of Estes Park, City of Ft. Lupton, City of Durango, City of Parker, Arapahoe County, Adams County, Boulder County, City and County of Broomfield, Jefferson County School District, Adams 12 Five Star Schools, Academy School District 20, Boulder Valley School District, Poudre School District, School District 27j, Lewis-Palmer School District, Weld County School District 6, Adams County School District 14, Apex Park and Recreation District, College Assist, Colorado College, the University of Colorado, CollegeInvest, the Colorado Department of Human Services, the State of Kansas, the Colorado Water Conservation Board, the Colorado Department of Natural Resources, and Northern Colorado Water Conservancy District. Paul is a member of the Colorado Government Finance Officers Association (CGFOA), Colorado Society of Certified Public Accountants, and the American Institute of Certified Public Accountants. Paul is a national instructor in CLA’s firm-wide training program. His instruction is focused on governmental accounting, audit methodology, and Single Audit requirements. Paul is also a frequent speaker at GFOA, CGFOA, and numerous other events. Allison Slife, CPA, Unassociated Review Principal Allison will be the City’s unassociated review principal on the audit, and she will be responsible for the final review of the financial statements. Allison is licensed to practice as a certified public accountant in Colorado. Allison has 12 years of auditing experience. Her experience primarily includes serving state and local governments such as Colorado Department of Natural Resources, Colorado Judicial Department, Colorado Department of Labor and Employment, Wyoming Department of Transportation, State of Kansas Single Audit, Colorado Water Conservation Board, Adams County, Boulder County, City of Golden, City of Boulder, Boulder Valley School District, Cherry Creek School District, Poudre School District, Weld County School District 6, Apex Park and Recreation District, Fitzsimons Redevelopment Authority, Cunningham Fire Protection District, Arapahoe Library District, and the Metro Wastewater Reclamation District. Allison is well versed and experienced in Single Audits as a majority of her clients receive some level of federal funding and are impacted by the changes with the Uniform Guidance. She has presented on the Uniform Guidance and Single Audits both nationally and locally, including sessions at the CGFOA annual conference, the Colorado Governmental Human Services Finance Officers Association (CGHSFOA) annual conference, and other state and local training conferences. She is also a national instructor for CLA’s Public Sector Group. Allison is a member of the Colorado Government Finance Officers Association (CGFOA), Colorado Society of Certified Public Accountants, and the American Institute of Certified Public Accountants. Allison is also an instructor for CGFOA classes in Colorado. Eric Miller, CPA, Manager Eric will be responsible for monitoring the audit on a daily basis as well as performing test work throughout the course of the audit. He will further supervise CLA employees who are in charge of performing test work throughout the audit. Eric is licensed to practice as a certified public accountant. ©2018 CliftonLarsonAllen LLP | 15 Eric has six years of auditing experience with all being devoted to governmental clients. His experience includes serving state and local governments such as Boulder County, the Town of Erie, Town of Estes Park, City of Fort Lupton, Town of Platteville, City of Longmont, Boulder Valley School District, Academy School District Twenty, Poudre School District, Adams County School District 14, Colorado Springs School District 11, the State of Kansas, and Northern Colorado Water Conservancy District. Eric is a member of the Colorado Government Finance Officers Association (CGFOA), the Colorado Society of Certified Public Accountants, and the American Institute of Certified Public Accountants. Morgan Holtzman, Senior Associate Morgan will be responsible for overseeing performance of much of the test work and helping ensure that the engagement is on schedule and that our day-to-day service is exceeding client expectations. She will be supervising CLA employees who are in charge of performing test work throughout the audit and work with the City staff regarding any issues and questions that come up during the audit. Morgan has three years of auditing experience with all being devoted to governmental clients. Her experience includes serving state and local governments such as the Town of Erie, Town of Estes Park, Town of Platteville, City of Fort Lupton, Boulder County, Colorado Department of Natural Resources, Boulder Valley School District, Adams 12 Five Star School District, Cherry Creek School District, Apex Park and Recreation District, and Northern Colorado Water Conservancy District. Michael S. Nyman, CPA, CISA, CISSP, CITP, CRISC, IT Manager Mike will be responsible for designing and supervising the audit procedures performed over the City’s Information Technology internal control system. Mike has more than 20 years of experience in planning, developing, performing, supervising, and reviewing information system audits for external financial audits and co-sourced internal audit departments. This includes leading and managing Sarbanes/Oxley Internal Control audits from both management's assessment and the external audit. Mike leads the IT Audit procedures for the Central Arizona Water Conservation District and work on a special project for Northern Colorado Water Conservancy District. He has worked on numerous local, state, and federal government agencies. He has a working knowledge of the information systems auditing standards as published by the Information Systems Audit and Control Association. He has significant knowledge and experience with the concepts, terminology, capabilities, and application of business and control risk associated with various information systems architectures. Mike has an in-depth understanding of complex business processes with the underlying information security and control issues and is able to concisely and effectively communicate them to the internal and external parties. In addition, he has a well-rounded IT background of infrastructure and development management. Mike is a member of the American Institute of Certified Public Accountants (AICPA), the Arizona Society of Certified Public Accountants (AzCPA), Information Systems Audit Control Association (ISACA) and the International Information Systems Security Certification Consortium (ISC2). Associates Our associates currently have between one to three years for experience. Given the volume of public sector clients served from our Denver-area offices, all of this experience has been devoted to public sector audits. ©2018 CliftonLarsonAllen LLP | 16 Staff continuity We are committed to providing continuity throughout this engagement. It is our policy to maintain the same staff throughout an engagement, helping to reach maximum efficiency and keeping the learning curve low. We are also flexible in exploring alternative solutions to non-mandatory rotation policies. In any business, however, turnover is inevitable. When it happens, we will provide summaries of suggested replacements and will discuss re-assignments prior to finalizing. We have an adequate number of qualified staff members to provide the City with top service over the term of the engagement. CLA is committed to maintaining high staff retention rates, which we believe are a strong indicator of service quality. Continuity results in increased efficiency and quality because staff assigned to the engagement will not have to go through a “learning curve” with annual engagements or each new project. Client staff spends less time orienting the engagement team, and more time working toward goals. With a solid, steady engagement team, each year brings the additional benefits of trust and familiarity. High retention rates also indicate that our staff members have the resources they need to perform their tasks and a positive work/life balance. CLA’s retention rate for 2015 was 87.1%, for 2016 was 87.3%, and for 2017 was 88%. Continuing professional education CLA is committed to making sure our staff remains current on all accounting and auditing standards. All of our professional staff, both CPAs and non-CPAs, are required to attend a minimum of 40 hours per year of continuing education courses which are paid for by our firm. All supervisory personnel have completed in excess of 24 hours of qualified government continuing education courses every two years. This education is obtained by attending various courses such as our internal assurance conference held annually in Minneapolis, Minnesota, or virtually, where we cover all significant changes in auditing pronouncements, accounting principles, independence requirements, Single Audit requirements and other government related matters. This conference is supplemented with other government related courses provided through the Government Finance Officers Association (GFOA), Colorado Government Finance Officers Association (CGFOA), the American Institute of Certified Public Accountants (AICPA) and the Colorado Society of Certified Public Accountants (CSCPA) where we concentrate on education specific to governmental auditing and Single Audits. Included in Appendix A is a CPE summary for the last three year for the professional staff proposed above. Affirmative action policy Just as the City is committed to affirmative action, CLA is committed to making our firm the best place to work for its employees as an Equal Employment Opportunity employer. The firm recognizes the value that individual differences can bring to the workplace. These differences may include attributes such as gender, race, color, ethnicity, religious practice, disability, sexual orientation or age, and may also include differences in styles of work, physical abilities, communications or thinking. The firm commits to create an inclusive work environment: ©2018 CliftonLarsonAllen LLP | 17 That supports the firm's core values and business objectives. That fully leverages the contributions of all principals and employees to CLA’s success. Where employees are treated with dignity and respect. That challenges principals and employees to grow and develop professionally. That motivates principals and employees to outperform our competitors. That encourages principals and employees to demonstrate initiative, individual responsibility and teamwork to achieve business goals. We do this by providing a workplace free of discrimination and harassment on the basis of gender, race, color, ethnicity, religious practice, disability or age, including all forms of sexual harassment, or any characteristics protected from discrimination by law. CLA will not tolerate any such discrimination or harassment of its principals or its employees, or anyone doing business with the firm. 6. PRIOR ENGAGEMENTS WITH THE CITY OF FORT COLLINS CLA has not had any prior engagements within the last five years with the City. 7. SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES Similar engagements with other government entities CLA has one of the largest governmental audit and consulting practices in the country and we are an active member of the Governmental Audit Quality Center. We have extensive experience providing a variety of audit and consulting services to state and local government entities, including policy and procedure development, internal audits, agreed-upon procedures, compliance audits, internal control consulting projects, financial statement audits, enterprise risk management consulting, and Single Audits in accordance with the Uniform Guidance. Our government services team serves thousands of governmental engagements nationwide, including numerous counties, cities, municipalities, states and state agencies, special districts, school districts, governmental colleges and universities, and other types of governmental entities. References Please see the following references of recent significant engagements similar to the City: Client Contact Name Phone Scope of Services Engagement Principals Dates CAFR Link for Two Clients Adams County 4430 South Adams County Pkwy. Brighton, CO 80601 Ben Dahlman, Finance Director 720-523-6050 Financial Audit and Single Audit Allison Slife, Paul Niedermuller 2011 – Present http://www. adcogov.org/ comprehensi ve-annual- financial- report-cafr ©2018 CliftonLarsonAllen LLP | 18 Arapahoe County 5334 S. Prince St. Littleton, CO 80166 Janet Kennedy, Finance Director 303-795-4598 Financial Audit and Single Audit Jean Bushong, Allison Slife, Paul Niedermuller 2011 – Present http://www. arapahoegov .com/379/Fi nancial- Reports- CAFR City of Boulder 1777 Broadway Boulder, CO 80302 Cheryl Patelli, CFO 303-441-3246 Financial Audit and Single Audit, consulting services Allison Slife, Paul Niedermuller 2015 – Present City of Longmont 350 Kimbark St. Longmont, CO 80501 DeeAnn Hanson, Accounting Manager 303-651-8670 Financial Audit and Single Audit Paul Niedermuller 2014 - Present 8. SPECIFIC AUDIT APPROACH Audit approach and methodology While we believe our approach to be an effective, innovative, and comprehensive audit approach, we understand there are several other firms that also provide an audit methodology that adheres to professional standards. As such, what makes CLA’s Audit Methodology different? Commitment to Communication ©2018 CliftonLarsonAllen LLP | 19 Avoid any “surprises” at the end of the audit. Our proactive measures help to keep our communications, both written and oral, ongoing, relevant and routine to our engagements. Our commitment to this practice focuses on open lines of communication and prevents and/or mitigates service delivery issues. Our manager and engagement principal will consistently be available to you for such open and honest communication. Audit Philosophy The philosophy of CLA is to provide a full range of audit services with an emphasis on responsiveness to our clients that reach beyond standard audit services. Our audit philosophy is based on integrity, objectivity, independence and adherence to professional standards, regulations and laws. We employ a risk-based approach to auditing focusing on areas of highest concern for potential misstatement of the financial statements. Our audit objective extends beyond the issuing of an opinion on financial statements. We believe that a good audit yields substantial information for management, and is a valuable tool in recognizing opportunities and identifying areas that can be strengthened. An effective audit performed by our team will also provide: An objective look at your policies and procedures. Best practices and helpful tools. Valuable suggestions for improvements in your financial operations and other areas. An analysis of trends and unusual variations from year-to-year. Protection for current and future resources through improved internal controls. A deterrent to embezzlement and other fraudulent activities. Operational best practices gained from experiences with numerous governmental entities across the country. Project Management In order for the audit of the City to be successful and timely, proper planning and project management are critical elements. The proposed team members have worked on numerous similar size engagements and are accustomed to managing such projects and meeting related timelines. We understand that the timeliness of our procedures directly impacts the timeliness of management's and governance’s oversight responsibilities. In order to determine we are meeting required deadlines, we will implement a very detailed project management plan. This plan is a work in progress and can be adjusted to meet management’s need to avoid operational disruptions. Our approach to the audit and related services will be specifically tailored to address the unique aspects of the City’s structure and complexity. Audit Approach Many organizations view an audit as a requirement that doesn’t contribute to their overall operations or value. At CLA, we believe an audit should be an annual checkup that allows us to have insight into your organization and to share in-depth advice on how to improve your operations. Our industry experience makes it easier: CLA auditors are experienced in your industry, which allows us to make the process smoother. We approach our client engagements with a commitment to operational efficiency and to leverage our industry focused experience to bring positive impact and meaningful insights to our clients. What does this mean for your organization? It means we bring a team of professionals and an approach focusing on you, our client, listening to and working with you for a successful outcome. ©2018 CliftonLarsonAllen LLP | 20 Your time has value: Our approach recognizes that your time is valuable and best spent with key decision makers asking clarifying questions, discussing organizational strategies, and dealing with sensitive reporting issues. We believe this approach is effective and cost-efficient, produces a quality audit, provides you with substantive discussions with our team leaders, and recognizes there is more value to time spent discussing significant issues with management than reviewing detailed work papers. No surprises: Our experience enables us to focus on the areas of your organization that possess the greatest risk. Our emphasis on planning and communication allows for an efficient and effective audit process in which everyone involved knows their roles and expectations. Issues, as they arise, are dealt with immediately, not accumulated until the end of the audit. We provide a “no surprises” approach to our services, based on frequent and timely communication. As potential issues arise during the course of the audit, we will engage the right people in timely and frank discussions as a means of gaining resolution immediately. Work Plan Our approach emphasizes three key components: 1) continual communication; 2) full utilization of technological tools for an efficient audit; and 3) effective project management to facilitate a commitment to deadlines. Continual communication will be conducted throughout the year as well as during the conduct of the engagement. In addition, as discussed further below, we expect to conduct formal weekly update meetings with appropriate management staff during interim and final fieldwork. We stress the importance of these meetings with management and our team so that your expectations are fully understood, timing and milestones are agreed upon, technical and unique audit issues are dealt with early during the audit process, and management is aware of audit progress. These meetings are critical in resolving potential audit differences and/or control deficiencies. Timely and substantive communication between the auditor and management is important in order to avoid misunderstandings related to the fact pattern and to identify any possible compensating controls. In addition, this communication eliminates surprises at the end of the audit. Thus, continuous communication is a fundamental element in CLA’s work plan as discussed below. The audit will be conducted by using a variety of technological tools. Fully utilizing the benefits of these tools creates an efficient and effective audit. Further in our proposal, you will find a description of the software we will use during the audit. Lastly, our work plan emphasizes the commitment to timelines. Project management plans, milestones, and timelines are essential to audit an entity as large as the City and these tools will continue to be used to help the full team remain on task to complete procedures prior to the assigned deadlines. These milestones and timelines will be shared with management during the weekly status meetings to make management aware of the status of audit issues and any pending items needed to meet milestones. Known audit issues will be addressed during the interim timeframe so that such issues do not cause unnecessary delays during final fieldwork. The audit will be coordinated with management and will begin as soon as possible after our appointment as auditors. Our audit services are designed to protect the interests of management by concentrating on high-risk areas. Risk identification is the first step of the audit process, providing the basis upon which the overall plan is developed. Through careful consideration of risks and their interrelationships, we will develop an audit plan and related programs that concentrate our efforts on those elements of your financial statements that involve the greatest risk. ©2018 CliftonLarsonAllen LLP | 21 Audit plan In forming our proposed project plan to meet the City Council, OMB, and financial reporting deadlines, we have carefully reviewed the RFP and other information made available to us and aligned them with our past experience serving organizations very similar to the City of Fort Collins. We are confident that the proposed mix of governmental auditing experts we have chosen for the audit will allow us to address all technical requirements of the City and successfully issue all required reports consistent with the City’s deadlines. On the following pages, we have provided concise descriptions of CLA’s audit approach. Financial Statement Audit Approach CLA is one of the few firms that has developed its own proprietary audit programs. Most firms use canned, off-the- shelf audit programs, which limits their flexibility in determining what procedures they can and cannot perform because they must follow the audit methodology they have purchased. Our audit teams are able to customize our audit programs to address the specific risks and unique characteristics of your operations. We do not perform the exact same procedures for every industry. In addition, our audit programs are interactive, providing guidance to the staff while they are performing the audit procedures. We will conduct our audit in four primary phases, as shown below: Phase 1 – Planning & Strategy Phase 2 – Systems Evaluation Phase 3 – Testing & Analysis Phase 4 – Reporting & Follow-Up Benefits of CLA’s Risk-Based Approach Our audit services are designed to protect the interests of management by concentrating on high-risk areas. Risk identification is the first step of the audit process, providing the basis upon which the overall plan is developed. Our risk assessment process involves consideration of the following types of risk: Inherent risk - that an error in the accounting and reporting process may occur Control risk - that internal control systems designed to prevent/detect errors may fail Audit detection risk - the risk that audit procedures may fail to detect errors Through careful consideration of the above risks and their interrelationships, we will develop an audit plan and related procedures that concentrate our efforts on those elements of your financial statements that involve the greatest risk. At the same time, we will avoid the unnecessary application of commonplace and traditional procedures to low-risk areas. Proven Methodology. Our audit is performed using a risk-based approach and enhanced by gaining a thorough understanding of the City. Plus, our audit approach places particular emphasis on the planning phase to focus on maximum efficiency and effectiveness from the start of your engagement. ©2018 CliftonLarsonAllen LLP | 22 Planning & Strategy The main objective of the planning phase is to identify significant areas and design efficient audit procedures. We will accomplish our planning by first conducting an entrance meeting with the City. The engagement principal and other engagement staff will meet with City personnel to mutually agree on an outline of responsibilities and timeframes. The key steps of the Planning & Strategy phase are as follows: The agenda will include, but not be limited to the following: ─ Establish audit approach and timing schedule ─ Assistance to be provided by City personnel ─ Application of generally accepted accounting principles ─ Initial audit concerns ─ Concerns of the City’s management ─ Establishment of report parameters and timetables ─ Progress reporting process ─ Establish principal contacts Enhance our current understanding of the operations of the City, including any changes in its organization, management style, and internal and external factors influencing the operating environment. We will utilize reference materials such as the budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. Identify significant accounts and accounting applications, critical audit areas, significant provisions of laws and regulations, and relevant controls over operations. Determine the likelihood of effective Information Systems (IS) - related controls. Perform a preliminary overall risk assessment. Confirm protocol for meeting with and requesting information from relevant staff. Establish a timetable for the fieldwork phase of the audit. Determine a protocol for using Interactive Data Extraction and Analysis (IDEA), our data extraction and analysis software designed to consider full population of transactions and gain additional insight into the strength of controls and to yield value added operational insights for the City. Obtain the City Board’s meeting schedule and determine the timing and frequency of our attendance and presentation at these meetings. At a minimum we will request a meeting during the planning phase of the audit to establish a dialogue, set expectations, and determine any specific requests of City management and City Board if approved; and a meeting following fieldwork work completion to review the results of the audit along with the draft reports, and to address any questions or concerns of management. We will be available each time we meet with City Board. We will document our planning through preparation of the following: Entity Profile. This profile will help us update and enhance or current understanding of the City’s activities, organizational structure, services, management, key employees, and regulatory requirements. Phase 1 ©2018 CliftonLarsonAllen LLP | 23 Preliminary Analytical Procedures. These procedures will assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain evidential matter. They will focus on enhancing our understanding of the financial results, and will be used to identify any significant transactions and events that have occurred since the last audit date, as well as to identify any areas that may represent specific risks relevant to the audit. General Risk Analysis. This will contain our overall audit plan, including materiality calculations, fraud risk assessments, overall audit risk assessments, effects of our IS assessment, timing, staffing, client assistance, a listing of significant provisions of laws and regulations, and other key planning considerations. Account Risk Analysis. This document will contain the audit plan for the financial statements, including risk assessment and the extent and nature of testing by assertion. Prepared by Client Listing. This document will contain a listing of schedules and reports to be prepared by City personnel with due dates for each item. We will plan to meet with management weekly during the audit to discuss prioritization of these items so that management can focus on the most efficient use of their time. One of the key elements in the planning of this audit engagement will be the heavy involvement of principals and managers. We will clearly communicate any issues in a timely manner, and will be in constant contact with the City as to what we are finding and where we expect it will lead. We will develop our audit programs during this phase. Utilizing the information we have gathered and the risks identified we will produce an audit program specifically tailored to the City. This program will detail by major section the nature and types of tests to be performed. We view our programs as living documents subject to change as conditions warrant. We will hold an entrance conference with the City to discuss the audit timeframes, and will meet the appropriate City personnel at least one month prior to the start of the audit. Systems Evaluation During the systems evaluation phase, we will update our understanding of the internal control structure of the City for financial accounting and relevant operations. Next, we will identify control objectives for each type of control that is material to the financial statements, and then identify and gain an understanding of the relevant control policies and procedures that effectively achieve the control objectives. Finally, we will determine the nature, timing, and extent of our control testing and perform tests of controls. This phase of the audit will include testing of certain key internal controls: Over electronic data, including general and application controls reviews and various user controls Over financial reporting and compliance with laws and regulations We will test controls over certain key cycles which initially we expect will include operating revenue, information technology controls, payroll and general disbursements. One of our audit efficiency initiatives is to rely heavily on internal controls when appropriate and to enhance internal control testing to make it as efficient as possible. This means not routinely performing detailed tests of transactions using large samples. We will also develop our internal control tests to assess the compliance with certain provisions of laws, regulations, contracts and grants for which noncompliance could have a direct and material effect on the determination of financial statement amounts. Our use of multi-purpose tests allows us to provide a more efficient audit without sacrificing quality. Phase 2 ©2018 CliftonLarsonAllen LLP | 24 Our assessment of internal controls will determine whether the City has established and maintained internal controls to provide reasonable assurance that the following objectives are met: Transactions are properly recorded, processed, and summarized to permit the preparation of reliable financial statements and to maintain accountability over assets Assets are safeguarded against loss from unauthorized acquisition, use or disposition Transactions are executed in accordance with laws and regulations that could have a direct and material effect on the financial statements We will finalize our audit programs during this phase. We will also provide an updated Prepared by Client Listing based on our test results and our anticipated substantive testing. During the internal control phase, we will also perform a review of general and application Information Systems controls for the applications that are significant to financial statements to conclude whether IS general controls are properly designed and operating effectively, and consider application controls as part of the internal control assessment in the financial statement audit. Our strategy for the IS review of the applications will involve reviewing all of the general control activities, including the computerized and manual processes. We will determine the scope of work by applying the concepts of materiality and risk assessment to effectively reduce examination inefficiencies. When planning this examination, we will update our understanding of the City’s operations by reviewing its current controls and control objectives as documented, and will also review prior years audit work and the status of corrective actions. Based on our preliminary review, we will perform an initial risk assessment of each critical element in each general control category, as well as an overall assessment of each control category. We will then proceed to assess the significant computer-related controls. For IS related controls that we deem to be ineffectively designed or not operating as intended, we will gather sufficient evidence to support appropriate findings and will provide recommendations to improve internal controls. For those IS controls that we deem to be effectively designed, we will perform testing to determine if they are operating as intended through a combination of procedures, including observation, inquiry, inspection, and re-performance. Testing & Analysis The extent of our substantive testing will be based on results of our internal control tests. Substantive tests will include confirmation with third parties, data analytics through a review of 100% of the population of an account through efficient use of our IDEA tool, examination of underlying supporting documentation, analytical and variance analysis, inquiry, and observation. Audit sampling will be used only in those situations where it is the most effective method of testing. Before deciding to sample, we will consider all possible approaches and audit techniques. Items where, in our judgment, acceptance of some sampling risk is not justified will be examined 100 percent. These may include unusual items or items for which potential misstatements could individually equal or exceed tolerable error. After identifying individually significant or unusual items, we will decide on the audit approach for the remaining balance of items by considering tolerable error and audit risk. This may include (1) testing a statistical or judgmental sample of the remaining balance, (2) lowering the previously determined threshold for individually significant items to increase the percent of coverage of the account balance or (3) applying analytical procedures to the remaining balance. When we elect to sample balances we will use IDEA to efficiently control and select our samples. Phase 3 ©2018 CliftonLarsonAllen LLP | 25 Our work papers during this phase will clearly document our work as outlined in our audit programs. We will also provide the City with status reports during the course of the audit fieldwork. As in all phases of the audit, we will be in communication with the City to verify that all identified issues are resolved in a timely manner. We will also hold a final exit conference with the City to summarize the results of our fieldwork and review significant findings. Reporting & Follow-Up Our commitment to a smooth engagement also includes the timely delivery of our completed reports. To make sure you get the results you expect, our quality control professionals will review and, if needed, further challenge the work performed. We know a great deal of audit information often comes from third-parties, and sometimes information from those parties is not received on time. To keep your reports timely, we will keep you informed and may ask your help obtaining necessary third-party information. Reports to management and governance related to the financial statement audit will include oral and/or written reports regarding the following: Independent Auditors’ Report Independent Auditors’ Report on Internal Control over financial reporting and on compliance and other matters based on an audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Written Communication to City Board, which includes the following areas: Our responsibility under auditing standards generally accepted in the United States of America Changes in significant accounting policies or their application Unusual transactions Management judgments and accounting estimates Significant audit adjustments Other information in documents containing the audited financial statements Any disagreements with the City and/or consultations with other accountants Major issues discussed with management prior to retention Difficulties encountered in performing the audit Fraud or illegal acts Once the final internal reviews of our working papers and financial statements are completed, which is a process that actually starts while the fieldwork is in process, draft reports will be issued to the City management. Prior to this the City will be provided a draft of any comments that we propose to include in the management letter, enabling you to review the comments for accuracy prior to release of the draft reports. Any items that come to our attention that are not what we consider major items may be discussed verbally with management and not included in the management letter. Our management letter will include items noted during our analysis of your operations. The results of the audit will be presented in an exit conference with the City management, and at a separate meeting with City Board. Once all feedback has been incorporated in the reports and management has approved their finalization, our opinion, the financial statements, and management letter will be issued. Phase 4 ©2018 CliftonLarsonAllen LLP | 26 Single Audit approach In the current environment of increased oversight, it is more important than ever to find qualified auditors who have significant experience with federal grants specific to the City. Therefore, the Single Audit will be performed by a team of individuals who are managed by personnel who specialize in Single Audits in accordance with the Uniform Guidance and who will offer both knowledge and quality for the City. As part of our quality control process, the Single Audit will be reviewed by a firm Designated Single Audit Reviewer (DSAR). The OMB’s Uniform Guidance (2 CFR Part 200) was effective for federal grants made on or after December 26, 2014. This impacts how federal grants are managed and audited and will impact every organization that receives federal assistance. Grant compliance can be a confusing topic and many of our clients rely on their federal funding as a major revenue source, so it is important that they understand what these changes mean to their organization. As a leader in the industry, CLA is out in front of these changes and informing our clients of how they can be proactive about the changes. CLA professionals are available to provide guidance and tools tailored to the City’s needs, and to assist in timely compliance with the new rules. The AICPA clarified auditing standard, AU-C 801 “Compliance Audits” requires risk-based concepts to be used in all compliance audits including those performed in accordance with the Uniform Guidance (formerly Circular A- 133). Our risk-based approach incorporates this guidance. As illustrated below, we will conduct our audit in three primary phases: Phase 1 – Risk Assessment and Planning Phase 2 – Major Program Testing Phase 3 – Final Assessment and Reporting Tailored Single Audit Approach. Phase 1 – Risk Assessment and Planning The risk assessment and planning phase will encompass the overall planning stage of the Single Audit engagement. During this phase, we will work closely with the City’s management to verify that programs and all clusters of programs are properly identified and risk-rated for determination of the major programs for testing. We will also review the forms and programs utilized in the prior year to determine the extent of any changes which are required. Phase 1 - Risk Assessment and Planning Phase 2 - Major Program Testing Phase 3 - Final Assessment and Reporting ©2018 CliftonLarsonAllen LLP | 27 We will accomplish this by following the methodology below: Determine the threshold to distinguish between Type A and B programs, including the effect of any loans and loan programs. Utilizing the preliminary Schedule of Expenditure of Federal Awards, we will identify the Type A and Type B programs in accordance with the Uniform Guidance. Identifying the programs tested and the findings reported for the past three fiscal years. Determine and document the program risk based on the past three Single Audits. Determine the major programs to be tested for the current fiscal year based on the previous steps. Based on our determination of the major programs, we will obtain the current year OMB Compliance Supplement to aid in the determination of Direct and Material Compliance requirements, and customize the audit program accordingly. Prepare and distribute templates and conduct discussions with the City’s management to obtain the Summary Status of Prior Year Findings. Determine the preferred methods of communication during the audit. Phase 2 – Major Program Testing We will determine the programs to be audited based on the risk assessment performed in the planning phase. To accomplish this, we will perform the following: Schedule an introductory meeting and notify the City’s management of the major programs for the current fiscal year. Plan and execute the testing of the expenditures reported on the Schedule of Expenditures of Federal Awards. Perform tests of compliance and internal controls over compliance for each major program identified. Schedule periodic progress meetings to determine that schedules are adhered to and identify issues as they arise. Conduct entrance and exit conference meetings with each grant manager or department. Phase 3 – Final Assessment and Reporting We will re-perform the steps noted in the preliminary assessment and planning stage once the final Schedule of Expenditures of Federal Awards is received to determine if additional major programs were identified. Based on the final determination of the programs we will perform the following: Identify Type A and Type B programs which were not previously identified. Re-assess the risk and determine if we are required to audit additional programs. Perform testing to validate the status of prior year findings for those programs not selected for audit. Prepare the Schedule of Findings and Questioned Costs. Conduct exit conference with the City’s management to review drafts of required reports. ©2018 CliftonLarsonAllen LLP | 28 Transition plan We understand that you have been with your current service provider for several years and that a common fear of changing firms is the “pain” of transition. As shown in the figure below, we have developed a plan specific to the City to address any transition issues and to mitigate their impact on your organization. Our goal is that we provide a simple, easy transition – a transition in which at the end of the experience, the City is appreciative and pleased with the results, not feeling challenged and regretful. Management may be concerned about the potential disruption of its personnel during the transition period while the new firm becomes familiar with your operations. We believe we have lessened the impact of this concern on the City with a team that is very familiar with the state and local government industry that can provide additional value to the City. We will always perform a substantial amount of interim fieldwork, but in the first year, we will schedule additional time (some of this behind the scenes) for interim to relieve time pressures on City staff during final fieldwork and to verify no significant and unique accounting issues remain unresolved near the completion of the audit. In addition to the core components of our transition plan discussed above, upon appointment as your service providers, we will initiate a planning meeting with the appropriate management of the City. The purpose of the meeting will be to: Review our approach and roles, and solicit comments and concerns. Discuss City expectations. Schedule work. Establish key meeting and reporting dates. Develop detailed project management plan. Review unique and significant accounting and operational issues. Discuss audit protocol. Our commitment to key communication with the City will not end after this meeting. As discussed throughout this document, CLA is committed to continuous and meaningful communication. An effective communication system will be established at the beginning of the audit with the establishment of weekly status meetings. Such communication lines will continue through the course of the audit, and through the completion of all the Selecting a team Proposed principals and manager have transitioned other similar engagements. ALL of the engagement team members have municipality experience. The City does not have to "train" our team. Minimizing your workload Our planning process involves reviewing prior year work papers, using work papers routinely prepared as part of your normal business process and sharing templates we have developed for your industry. Arriving prepared We will spend additional time behind the scenes gaining an understanding of your organization and planning for the audit. Our planning procedures will begin long before you see us in the field. Investing in our relationship Each year, a large portion of our audit will be performed at interim. In Year 1, even more time will be dedicated to interim fieldwork to verify that all signficant unique audit issues are handled well before the end of the audit. We mitigate transition issues. ©2018 CliftonLarsonAllen LLP | 29 services being provided by CLA, as we see ourselves as one cohesive team providing seamless integration of services. Lastly, our approach to transition includes more intensive involvement by the principal and manager in the transition year. You can rest assured that you will receive substantial principal and manager time year after year with CLA. Yet, we commit to an even larger commitment of their time in year 1 to focus on a smooth transition. This additional commitment is at no charge, as we see this additional time as an investment in the future relationship with the City. a. Level of staff and number of hours to be assigned to each proposed segment of the engagement An important distinction between CLA and other firms is the amount of principal and manager involvement in the engagement. Because our principals and managers are directly involved in the engagement during fieldwork, we can proactively identify significant issues immediately and resolve them with management so that the engagement is essentially complete when fieldwork ends. We expect that the majority of our audit hours will be concentrated in the high-risk audit areas. Our approach is not to overwork every account with extensive substantive testing. While substantive testing remains part of the process, we think out-of-the-box analytically, identify relationships and truly learn about your operations. Planning and Interim Hours Substantive Hours Reporting & Concluding Hours Principals 20 Principals 45 Principals 30 IT Specialist 10 IT Specialist 40 5 Manager 50 Manager 90 Manager 35 Senior Associate 100 Senior Associate 130 Senior Associate 20 Associates 150 Associates 150 Associates 0 Total: 330 455 90 Grand Total: 875 The above hours represent a projection of total hours for the City’s financial statement audit and two major programs under the Single Audit. Also included is the preliminary Audit Committee meeting, final Audit Committee meeting and presentation to the City Council upon completion of the engagement. b. Sample size and the extent to which statistical sampling is to be used in the engagement In performing testing controls for the internal control system, our firm has developed guidelines for use of statistical sampling. For statistical sampling, the sample size will vary based on the number of units in the population, our planned reliance on the results of the testing procedures, and the overall precision we determine appropriate for the testing. In performing substantive tests of balances we may use non-statistical sampling. For non-statistical sampling, the sample size will vary based on the dollar value of the population, our materiality factors and the coverage desired for the testing. ©2018 CliftonLarsonAllen LLP | 30 c. Extent of use of EDP software in the engagement We utilize IDEA as an analysis and data extraction tool to perform analytical procedures and assist in substantive testing as appropriate. Some of the areas where IDEA can be used to gain insight into the City’s operations is in review of cash disbursements, payroll payments, and journal entries. d. Type and extent of analytical procedures to be used in the engagement We perform analytical procedures in all three phases of the engagement. Analytical procedures are performed in the planning phase to identify key risk areas based on variances from budget, prior year, and industry standards. After our initial meetings with key financial personnel and staff members, we will develop expectations of variances from prior year and the budget. We then compare these expectations to the actual changes to further investigate differences from expected variances. We also perform analytical review in the substantive testing phase and complete our use of analytical procedures by using them in the review phase. These types of procedures will include comparisons to budget and prior years, ratio analysis and predictive tests of revenue and expenditure amounts. e. Approach to be taken to gain and document an understanding of the City of Fort Collins’ internal control structure Our history with similar other cities and towns gives us deep insight into the development of the City’s internal controls. We would utilize a combination of internal control forms and interviews with key accounting personnel to gain and document an understanding of the City’s internal control structure. Tests of design and operating effectiveness would then be performed to confirm our understanding. f. Approach to be taken in determining laws and regulations that will be subject to audit test work Due to our experience with governmental entities and governmental audits in general, we are familiar with state and federal laws and regulations. We will update our knowledge of any changes in these laws prior to commencing audit work. We develop specific audit steps to test applicable laws and regulations. g. Approach to be taken in drawing audit samples for purposes of tests of compliance Our approach to drawing audit samples will depend both on the assessment of control risk and determination of accounting control systems in place. For example, if we can determine that only one disbursement system is in place, we will select a sample based on the entire population. If there are several different systems with various controls in place, our approach will be to test each system and select samples for each system where we decide to rely on controls. Our sample size will vary based on the level of assessment of control risk. We utilize some form of random sample selection. Additionally, refer to the “Sample size and extent to which statistical sampling is to be used in the engagement” section above. Communications Communication is an important part of making an audit efficient. Not only do we believe in an open line of communication during the audit period, but year round as well. We want your staff to feel comfortable in calling any one of our audit team members with questions or thoughts they may have concerning accounting, audit, or other issues. We feel it is much more efficient if your staff has us available as a resource throughout the year, allowing you to have the proper guidance when an issue arises rather than when the audit begins. We are committed to being available to the City staff throughout the contract period for answering questions or advising on various accounting matters. Communications with management will occur at different times during the audit and throughout the year, as follows: ©2018 CliftonLarsonAllen LLP | 31 Entrance Conference Prior to commencement of audit activities, the engagement team will meet with management and accounting personnel to discuss timing of the audit, expectations, transition plan, accounting matters, and other issues. We will also meet with representatives of the governing body to identify engagement expectations and conduct fraud inquiries. Fraud-Risk Discussions The engagement principals and managers will hold discussions with members of management to obtain an understanding of potential risks of fraud within the organization. These discussions are required by audit standards issued by the American Institute of Certified Public Accountants, and will be held during the planning phase of our audit. Regular Status Meetings At least weekly during fieldwork, we will conduct audit status meetings. Audit Exit Conferences We will conduct a formal audit exit conference with management, along with other personnel as needed, at the close of preliminary and final audit fieldwork to review any comments relating to internal control procedures and audit findings and recommendations. We will also present our observations about your organization's operations. Upon review of all deliverables, we will conduct a meeting with management personnel to review draft documents prior to finalization. Communication of Internal Control Related Matters The audit standard, Communicating Internal Control Related Matters Identified in an Audit, applies in all audits and requires the auditor to communicate significant deficiencies or material weaknesses in internal control in writing. We will discuss, immediately upon discovery, any instances of material accounting or internal control weakness or suspected fraud, defalcations, collusion or manipulation, and request instruction as to how to proceed with the audits. Management Letter At the conclusion of our audit, we will also communicate other recommendations and suggestions for strengthening your policies, accounting procedures, and /or processes which represent other opportunities for improvement but do meet the definition of internal control matters defined above, by way of a management letter. Irregularities and Illegal Acts It is our firm’s policy to immediately report alleged irregularities or illegal acts to the level of management having immediate oversight of the department or employee(s) suspected of committing the act. Professional standards also require us to report such matters directly to the governing body, depending upon the materiality of an identified illegal act. Report to Those Charged with Governance We will make certain that City Board and management are informed of each of the following: Significant accounting policies Management judgments and accounting estimates Significant audit adjustments and passed adjustments, if any Disagreements with management, if any Management consultation with other accountants, if any ©2018 CliftonLarsonAllen LLP | 32 Major issues discussed with management prior to retention Difficulties encountered in performing the audit, if any Presentation of the Audit We will present the auditors’ reports, financial statements, executive audit summary including management letter points, and required communication letter to the governing body. Updates on New Standards During the planning meeting prior to the engagements, part of our formal discussion will be to communicate changes to audit and accounting standards which will affect the current engagement. We will also make management aware of upcoming changes as we are made aware of them throughout the year via e-mail, webcasts, meetings or phone communications. Meetings During Non-Audit Periods We also offer to meet with management or governance during the non-audit period to provide optimal client service and audit product quality. We find that these meetings allow the client representatives opportunities to ask questions of current and possible future transactions and activities that might affect the audited financial statements. Thought Leadership - Publications, seminars, and reports published by CLA CLA has a plethora of resources available to provide assistance to the governmental community. We understand the growing challenge of keeping up-to-date on the topics and issues affecting your organization. We can help. Our active, ongoing participation in industry organizations and regulatory bodies – combined with our commitment to continuing professional education – will allow us to provide the City with frequent communication of relevant accounting matters. There are numerous ways in which we will provide the City with timely news and education. The following are just a few examples: Newsletters. We produce several publications that address the unique challenges facing entities similar to the City. Roundtables. We provide roundtable discussions for our clients to participate in and share challenges and insights. These informal peer-to-peer meetings provide governmental leaders with the opportunity to share insights and ideas on timely topics, while networking with colleagues from other similar organizations across the country. Seminars, Conferences, and Training Sessions. We provide live and recorded webcasts, as well as in- person training sessions and year-round email alerts, regarding news specific to your industry or issues that may affect the City. The members of our local governmental team frequently serve as instructors. Each of our client publications, as well as routine consultations, are included as part of our fee quote. You can view current and archived issues of all our publications, articles and white papers via our extensive online resource library, located at www.CLAconnect.com. Our public sector dedicated personnel have the experience and insight to address the specific issues facing the City and your industry. This ability will allow for more frequent communication of ideas and information, as well as a more efficient, successful engagement – saving the City time and money. ©2018 CliftonLarsonAllen LLP | 33 Technology Data analytics is a key element of our audits. We carefully consider the engagement objectives and design powerful logic into our data analysis. We compare and contrast a singular transaction to that of the larger population. We trend results over time. We incorporate outside facts, such as key dates and relationships between individuals and organizations. We work to identify anomalies and other transactions that exhibit key traits. In so doing, we are able to efficiently synthesize information from many different sources and create analytics that deliver many forms of insight, including: Key performance indicator (KPI) calculations Comparisons of results between or across departments Isolation and detection of high risk transactions that may be indicative of errors or fraud Isolation of instances of non-compliance with applicable rules, laws, and regulations Identification of internal control weaknesses and non-compliance with policies and procedures Additional strengths of our data analysis methodology include: 100 percent data coverage — the majority of data analysis procedures can be performed on entire populations, not only samples. Increased ability to test the completeness of information provided. The ability to retrieve and analyze data from virtually any computing environment including JD Edwards. Six Phases to Implementing Data Analysis At CLA, we recognize that successful data analysis is a dynamic process that continuously evolves throughout the duration of an engagement. Many of the phases benefit from collaboration; a team effort can add tremendous value. On each engagement, all of the following phases are considered: 1. Planning is required to direct our analytical procedures on key areas and focus on accomplishing objectives. 2. Initial risk assessment is necessary to focus our analytics. We will consider the risks facing the City and design analytics to address these risks. We also design analytics to identify unknown risks. 3. Data acquisition is the process by which we request and obtain information and data from the City. 4. Technical data analysis requires the skillful blend of analytical knowledge and technical capability. The analysis should follow the plan established in the planning and risk identification phases; it should also leave room to expand and contract as necessary using one’s professional judgment. 5. Interpret results and subsequent risk assessment is the process of reviewing and interpreting the results of the data analytics as a team. The most knowledgeable members of the engagement team should be relied on to identify which results are relevant to accomplishing the engagement objectives. We compare results to known risks and expectations and identify previously unknown anomalies and risks. 6. Response and document. For audit engagements, we design audit procedures whose nature, timing, and extent are responsive to assessed risks identified through data analytics and risk assessment. We document our procedures in compliance with professional standards. ©2018 CliftonLarsonAllen LLP | 34 IDEA Functionality Though the tool used to perform data analysis is less important than how it’s used, CLA has been able to leverage a powerful data analysis software, IDEA, to perform a myriad of analytics. Project/data management importing Benford’s Law Normalizing Duplicate testing Calculated/modified fields Gap testing Appending/merging Sampling Joining/connecting Pivot table Indexing/sorting Searching Filtering/extracting Statistical analysis Summarizing Charting Project/data management Exporting Stratification Searching Aging Figure 4 illustrates typical data analytics scenarios. Figure 4. Data Analytics. At the end of a series of pre-determined analytics (often retrieved from multiple proprietary accounting systems) that are customized to the project at hand, we identify anomalies and potential errors in transactions. In every case, we review what appears to be inappropriate activity, including supporting documentation evidencing the transactions. ©2018 CliftonLarsonAllen LLP | 35 FX Engagement – FX Engagement is our paperless audit product. Our firm has been paperless for over six years. This product allows us to file and save all of our audit work papers in an electronic storage capacity, allowing our firm to save time and resources associated with maintaining and storing paper files. All team members can access all the information within this file regardless of location or time of day. FX Engagement also includes a trial balance software program, which is utilized to produce lead schedules and allows us to perform trend analysis utilizing our clients’ trial balances. Audit Program Generator (APG) – In order to provide a tailored approach to engagements, the firm requires the use of APG, a software program custom-written for CLA. This software package allows the tailoring of audit programs, based on the requirements of your engagement. We have developed a customized CLA audit program, which effectively makes our audit processes paperless and will enhance our present electronic practices. APG is an example of a technology tool that is designed to promote audit efficiencies. This software produces an industry-specific base program that is intended to encourage more thoughtful and specific tailoring. For an engagement to be effective in dealing with the risk of errors and efficient in avoiding riskless work, the engagement team will create a plan – the program – that contains the steps necessary to accomplish the goals of your engagement. Using APG is viewed as a thinking process, not just a documentation process. CLA Document Portal – The CLA document portal is a web-based application used for secure file transfers and continued access between CLA and our clients. The portal can be accessed via CLAconnect.com. The CLA document portal will safely and securely collect, store, manage, and distribute sensitive information between our firm and the City. Most importantly, all files are securely stored using FIPS 140-2 validated AES encryption, the U.S. Federal government encryption standard. Our use of technology will be different from other CPA firms. We are an early adopter of industry-leading audit software, processes, and programs. With our state-of-the-art risk assessment software, the tools that are at our disposal are as sophisticated as those of the largest national CPA firms. With an extensive repertoire of available auditing strategies, we have the capability to customize the design of our auditing programs to help maintain the City’s focus and to deliver a highly tailored audit process specific to the City’s requirements. Our paperless engagement file system and use of current technologies create noticeable efficiencies. Virtually all of our work papers we require can be provided electronically. We also have many templates available to you to assist you in the process of gathering the necessary support, if requested. Effective use of current technologies, such as remote access, secure file sharing, audit-specific software, and portable scanners, provides the structure needed for our efficient approach, and allows us to serve our clients better. We have fostered a culture of efficient reliable technology that will create the best audit approach for the City. IT Experience and Auditing in an Electronic Environment CLA brings significant experience in auditing Information Technology (IT) systems and applications to the engagement, and has a wealth of skills in technology controls and processing. The IT Assurance and Security Services Team is comprised of nearly 100 dedicated IT security and IT audit professionals with numerous major professional certifications, including the following: Certified Information Security Manager (CISM) Certified Information System Auditor (CISA) Certified Internal Auditor (CIA) Certified Information Systems Security Professional (CISSP) Cisco Certified Networking Associate (CCNA) ©2018 CliftonLarsonAllen LLP | 36 Master Certified NetWare Engineer (MCNE) Microsoft Certified System Engineer (MCSE) Available resources In addition to the engagement team resources listed previously, the following personnel will be available to the City as needed. National Assurance Technical Group IT Specialists Forensics and Valuation Team Specialized Advisory Services Team Tax-Exempt Specialists Custom Accounting Solutions Team (CAST) From more than 110 locations across the country, the City will gain value from the extensive local, regional, and national government practice from which to draw resources. Project timeline We would be prepared to begin communications with the City as soon as the contract is in place. We have the resources (as listed in this proposal) in our local office to begin work as early as November 2018. In addition, these resources will be available to begin preliminary and final fieldwork in accordance with the schedule agreed upon by the City. We are committed to meeting your specified timelines and deadlines as outlined in the request for proposal. In order to make sure such deadlines are met in the future, a detailed project management timeline will be developed with management. A summary of a proposed timeline is provided below. This timeline can be adjusted based upon collaborative discussions with management and the City. Activities Tentative Schedule Planning and Transition November 2018 Preliminary/interim audit activities including the Single Audit and IT system work December 2018 Meet with management – Discuss the audit plan 1 month prior to interim and final fieldwork Final fieldwork – including fieldwork and CAFR preparation March – April 2019 (completed by May 15th) Completed CAFR June 1, 2018 Management letter issuance June 15, 2018 Completion of the Single Audit June 15, 2018 Presentation of final reports and results to City Council Prior to August 31, 2019 ©2018 CliftonLarsonAllen LLP | 37 In addition to the proposed timeline above, we commit to the specific reporting deadlines, as outlined in the request for proposal. 9. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS We do not anticipate any audit problems. However, in the event we come across problems during our audit, we will immediately communicate with the appropriate level of management and resolve the issue as quickly as possible. 10. REPORT FORMAT Please find sample reports in Appendix B. CONCLUSION Our public sector practice area serves local governments, federal government clients, state departments and agencies, higher education institutions, and school districts. To give you an idea of the depth of our experience, CLA currently works with 10,000 governmental and nonprofit entities. Our firm-wide public sector audit staff exceeds 700 people who are dedicated 100% to serving public sector clients. We believe CLA is an excellent choice for your audit needs. We offer you: Active involvement - Senior members of your engagement team will be actively involved in the engagement. They are committed to staying closely involved with you throughout our services, so you know you will be served with the highest degree of accuracy and professionalism. Local firm with valuable experience - The comprehensive services we offer include an in-depth understanding of our clients’ operations. Regional firms cannot compete with the scope or the quality of services that we are able to offer and larger firms struggle to provide the close personal attention and the willingness to respond as quickly as we can to your needs due to the fact that large firms focus so heavily on public company audits. Service beyond the audit report - Our staff not only has the knowledge and experience to provide superior audit services, but the depth of experience to be your trusted advisor in all financial and compliance matters. We will be available year-round during the period of the engagement to assist in answering your questions. A proven understanding of the City - Our recent experience serving as auditors for other city and town clients offers a depth of understanding of the City’s internal control structure, the accounting issues unique to the City, and information technology systems and processes of the City. This understanding will help with a seamless transition for the City’s 2018 audit. No matter how you define success, CLA would like to be a part of it. Our hands-on approach to client service, the extensive experience of our staff, our wealth of local and national resources and our responsiveness to client needs can provide you with the insight you need to accomplish your goals. ©2018 CliftonLarsonAllen LLP | 38 We also understand that you have a wide selection of CPA firms when it comes to choosing your audit service provider. In conclusion, we would like to emphasize the fact that CLA hopes to be far more than your audit service provider – we hope to be your trusted advisor by providing the following additional services and characteristics beyond just the audit engagement: Onsite educational sessions for the City’s professionals Access to thought leadership publications Working sessions to discuss implications of new auditing standards, laws, or regulations that impact the City Continuous principal and manager contact beyond the audit engagement Access to national firm resources while experiencing the interaction and expertise from our local Colorado offices We truly appreciate the opportunity to present this proposal, and look forward to developing a lasting relationship with the City. If you have any questions or require additional information, please contact Paul Niedermuller at 303-466-8822 or by email at paul.niedermuller@CLAconnect.com. C. DOLLAR COST PROPOSAL In compliance with the City’s request for proposal, please find our sealed cost proposal under separate cover. ©2018 CliftonLarsonAllen LLP | Appendix A Engagement team resumes ©2018 CliftonLarsonAllen LLP | Paul B. Niedermuller, CPA CliftonLarsonAllen LLP Principal 303-466-8822 Broomfield, CO paul.niedermuller@CLAconnect.com Relevant Experience Governmental clients include: o Cities and towns o Counties o States and state departments o School districts o Higher education institutions o Variety of special districts Frequent speaker at GFOA, CGFOA, and numerous other events Areas of Specialization Government audits and consulting Nonprofit audits Compliance audits Federal grant financial and compliance audits Education Bachelors of science, business administration, California Polytechnic State University Professional Organizations American Institute of Certified Public Accountants Colorado Society of Certified Public Accountants Professional Certifications Certified Public Accountant Continuing Professional Education 2015 Ethics 4 Assurance Quarterly Updates 5.5 Denver Government & Nonprofit Training Academy 11 Own the Impact: Plenary Sessions 16 Key Considerations when Completing Walkthroughs & Testing 2 Unraveling the Impact of OMB’s Uniform Grant Guidance 8 Principal Advance 2015 9.5 Total: 56 2016 Assurance Quarterly Update 4 Advanced Governmental Accounting 16 Audit: Back to Basics 24 PSG Single Audit 2 PSG Conference 3.5 Public Sector Training 6 Total: 55.5 2017 PSG Webcast Series #6 1.5 ©2018 CliftonLarsonAllen LLP | Colorado Rules and Regulations 2 Coaching the CLA Way - Winter 2017 Dreaming Season 2 Independence and Ethics 2017 2 August 2017 Assurance Update (Webcast) 2 Making Connections: The 2017 Regulated Industry Conference PSG breakout 8 Making Connections: The 2017 Regulated Industry Conference General Sessions 5.5 May 2017 Assurance Update (Webcast) 2 PSG Webcast Series #1: FASB/GASB Update & Common Errors Found in 2nd Review (Webcast) 2 CLA 2017 Denver Government and Nonprofit Training Academy - Governmental Breakout 3 CLA 2017 Denver Government and Nonprofit Training Academy - Governmental Breakout 5 January 2017 Assurance Update (Webcast) 2 Total: 37 ©2018 CliftonLarsonAllen LLP | Allison Slife, CPA CliftonLarsonAllen LLP Principal 303-466-8822 Broomfield, CO allison.slife@CLAconnect.com Relevant experience Principal in the Broomfield, Colorado office Focused on serving the public sector Clients include: o State departments o Counties o Cities and towns o School districts o Various special districts Areas of specialization Governmental audits Compliance audits Federal grant financial and compliance audits Education Bachelor of science, accounting and finance, Xavier University Professional organizations American Institute of Certified Public Accountants Colorado Society of Certified Public Accountants Colorado Government Finance Officers Association Professional certification Certified Public Accountant Continuing Professional Education 2015 Assurance Quarterly Update 2 Unraveling the Impact of OMB’s Uniform Grant Guidance 10 Planning for Your 2015 Fiscal Year End Single Audits 2 Considerations when Completing Walkthroughs and Internal Controls 2 Own the Impact: Public Sector Group 16 Government and Nonprofit Training Academy 10 CPAs and Independence 1 Total: 43 2016 2016 CONFERENCE 6 Assurance Quarterly Update - 2016 Q4 (Webcast) 2 TRAINING FOR AUDITORS OF COUNTY HUMAN SERVICES DEPARTMENTS 6.5 PSG Webinar Series: Accounting Complexities Facing Local Government (Webcast) 2 ©2018 CliftonLarsonAllen LLP | PSG Webinar Series #4: GASB 72 and Common Financial Statement Mistakes (Webcast) 6 Assurance Quarterly Update - 2016 Q3 (Group Internet Based) 2 Audit: Back to Basics (Greenwood Village) 8 PSG Webinar Series: Single Audit (Group Internet Based) 2 CLA 2016 Spring Public Sector Training 3 Participant credit for instructors: CLA 2016 Spring Public Sector Training 3 PSG Wealth Advisory Pilot: Results, Lessons & Tools (Group Internet Based) 1 Total: 41.5 2017 Colorado Rules and Regulations 2 PSG Webcast Series #6 2 Coaching the CLA Way - Winter 2017 Dreaming Season 2 Independence and Ethics 2017 2 2017 CONFERENCE 5 TRAINING FOR AUDITORS OF COUNTY HUMAN SERVICES DEPARTMENTS 6.5 PSG Webcast Series #5: Local Government/GASB 2 A&A Update for GASB 1.5 ADVANCED SERIES: FINANCIAL REPORTING ISSUES 3 Sandler Sales Training (Invite Only) 15 Audit: Be in the Know 8 INTERMEDIATE GOVERNMENTAL ACCOUNTING - ARVADA 8 Making Connections: The 2017 Regulated Industry Conference PSG breakout 8 Making Connections: The 2017 Regulated Industry Conference General Sessions 6 PSG Webcast Series #2: Single Audit (Webcast) 2 PSG Webcast Series #1: FASB/GASB Update & Common Errors Found in 2nd Review (Webcast) 2 CLA 2017 Denver Government and Nonprofit Training Academy - Governmental Breakout 5 CLA 2017 Denver Government and Nonprofit Training Academy - Governmental Breakout 3 January 2017 Assurance Update (Webcast) 2 Total: 85 ©2018 CliftonLarsonAllen LLP | Eric Miller, CPA CliftonLarsonAllen LLP Manager 303-466-8822 Broomfield, CO eric.miller@CLAconnect.com Relevant Experience Manager in the Colorado offices Focused on serving the public sector Governmental clients include: o Cities and towns o Counties o School districts o Water districts o State departments Consulting engagements include: o Comfort and consent letters Areas of Specialization Governmental auditing and accounting Federal grant financial and compliance audits Education Bachelor of arts, accounting, University of St. Thomas, St. Paul, MN Professional Organizations American Institute of Certified Public Accountants Colorado Society of Certified Public Accountants Professional Certification Certified Public Accountant Continuing Professional Education 2015 Strategic Management 3 Risk Management and Ethics 8 Denver Government and Nonprofit Training Academy 8 Internal Controls 6 Single Audits 2 Train the Trainer 8.5 Unraveling the Impact of OMB’s Uniform Grant Guidance 9 External Financial Audits 9 Total: 53.5 2016 Single Audit Update 6 Independence and Ethics Update 2 Assurance Quarterly Update 7.5 Audit: Back to Basics 8 ©2018 CliftonLarsonAllen LLP | Director & Manager Conference 17 PSG Webinar Series: Single Audit 1 Spring Public Sector Training 6 Total: 47.5 2017 PSG Webcast Series 4 Coaching the CLA Way 2 2017 Accounting Update 10 Accounting for Governmental Assets and Liabilities 4 Independence and Ethics 2 Sandler Sales Training 15 Regulated Industry Conference 12 Assurance Update 1.5 Denver Government and Nonprofit Training Academy 6 Total: 56.5 ©2018 CliftonLarsonAllen LLP | Morgan Holtzman CliftonLarsonAllen LLP Senior Associate 303-466-8822 Broomfield, CO morgan.holtzman@CLAconnect.com Relevant Experience Six years working in the public sector industry for a county Ten years of aviation experience Focused on serving the public sector Governmental clients include: o School districts o Special districts o Cities and towns o Counties o State departments Consulting engagements include: o Comfort and consent letters Areas of Specialization Governmental auditing and accounting Federal grant financial and compliance audits Education Bachelor of Science, Accounting, Regis University, Denver, CO Master of Science, Accounting, Regis University, Denver, CO Continuing Professional Education 2015 CLA 2nd Annual Denver Government and Nonprofit Training Academy 8 LEAP: Experience June 2015 39 PSG Webinar Series: Key Considerations when Completing Walkthroughs and Testing of Internal Controls (Webcast) 2 Total: 49 2016 Hours GAAS Guide: Sampling 1 Audit Risk Assessment: The Do's and Don'ts, Part 1 2 Government Ethics and Independence 2.5 How to Properly Prepare Audit Documentation & Workpapers, Part 1 2 Auditing Opinions: Understanding the Fundamentals from Standards to Reports 2.5 Not-for-Profit Accounting and Reporting: An Introduction 3 LEAP: Achieve (June 2016) 33.5 Total: 45.5 ©2018 CliftonLarsonAllen LLP | 2017 Risk Management in the Public Sector 2.5 Income Taxes (ASC 740) 2.0 Risk Assessment Considerations and Procedures - Does it all "Hang" Together? 1.0 Deliverables and Passed Adjusting Journal Entries 1.0 Audit Evidence 1.5 Effective In-Charging and Seamless Capabilities 1.5 LEAP: Propel Tax Level 1 Virtual Conference 2017 4.5 TRAINING FOR AUDITORS OF COUNTY HUMAN SERVICES DEPARTMENTS 6.5 LEAP: Propel Situational Leadership 1.0 Audit: Be in the Know 8.0 LEAP: Propel - The Basics of Estate Planning (Webcast) - CFP Program #236914 1.5 LEAP: Propel Assurance Virtual Conference 2017 3.0 LEAP: Propel Kick-off Virtual Conference (May 2017) 1.0 CLA 2017 Denver Government and Nonprofit Training Academy - Governmental Breakout 6.0 Total: 41.0 ©2018 CliftonLarsonAllen LLP | Michael S. Nyman, CPA, CISA, CISSP, CITP CliftonLarsonAllen LLP IT Manager 602-604-3524 Phoenix, AZ michael.nyman@CLAconnect.com Relevant experience Specializes in information system assurance, security, and risk assessments Information systems auditor Various experience in information technology processing platforms and internal controls Facilitated IT control assessments including Sarbanes Oxley Conducted information systems audits for organizations across the country Areas of specialization Information technology assurance Third party reporting Information security assessments Risk assessments Physical security assessments Education Bachelor of Science, Accounting, Brigham Young University Master's Degree, Information Technology, Brigham Young University Professional organizations American Institute of Certified Public Accountants (AICPA) Arizona Society of Certified Public Accountants (AzCPA) Information Systems Audit Control Association (ISACA) International Information Systems Security Certification Consortium Professional certifications Certified Public Accountant Certified Information Systems Auditor Certified Information Systems Professional Certified Information Technology Professional Continuing Professional Education 2015 Higher Education Conference 2 Government and Nonprofit Training Academy 18 Risk Management and Ethics Update 7 Professional Ethics 4 Total: 31 2016 Updated COSO Internal Control Framework 2 Identity Theft: How to Detect, Deter and Fix 3.5 Clarified Attestation Standards 2 Technology for Accounting Conference 8 ©2018 CliftonLarsonAllen LLP | Audit: Back to Basics 8 Assurance Quarterly Update 4 CLA Hands-On IT Auditing 7.5 CLA Defending Your Institution from Spear Phishing Attacks 1 CLA Trends in Cyber Crime 1 Specialized Advisory Services Learning – ISSG/BRS 19 Total: 56 2017 Assurance Update - October 2017 2.0 2017 Auditing Update 2.0 Professional Ethics for Arizona CPAs 4.0 2017 SOC SCHOOL: GUIDANCE FOR SUCCESSFUL ENGAGEMENTS 16.5 2017 ISSG/BRS Update 22.5 January 2017 Assurance Update (Webcast) 2.0 Total: 49.0 ©2018 CliftonLarsonAllen LLP | APPENDIX B Sample Reports ©2018 CliftonLarsonAllen LLP | 1 Sample Opinion INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council and City Manager City of Fort Collins Fort Collins, Colorado Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the entity’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. ©2018 CliftonLarsonAllen LLP | We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins as of December 31, 2018, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Keep Fort Collins Great Fund, and Urban Renewal Authority Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the modified approach for City Streets Infrastructure capital assets, and pension and postemployment information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Fort Collins basic financial statements. The combining and individual nonmajor fund financial statements and other schedules, listed in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and other schedules are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. ©2018 CliftonLarsonAllen LLP | The introductory, statistical sections and other schedules have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated REPORT DATE, on our consideration of the City of Fort Collins internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the City of Fort Collins internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Fort Collins internal control over financial reporting and compliance. CliftonLarsonAllen LLP Greenwood Village, Colorado REPORT DATE ©2018 CliftonLarsonAllen LLP | 1 Sample Yellow Book Report INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council and City Manager City of Fort Collins Fort Collins, Colorado We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the City of Fort Collins basic financial statements, and have issued our report thereon dated REPORT DATE. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Fort Collins internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Fort Collins internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Fort Collins internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material Honorable Mayor and Members of the City Council and City Manager City of Fort Collins ©2018 CliftonLarsonAllen LLP | weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Fort Collins financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CliftonLarsonAllen LLP Greenwood Village, Colorado REPORT DATE ©2018 CliftonLarsonAllen LLP | Sample Single Audit Report INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM, REPORT ON INTERNAL CONTROL OVER COMPLIANCE, AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and Members of the City Council and City Manager City of Fort Collins Fort Collins, Colorado Report on Compliance for Each Major Federal Program We have audited the City of Fort Collins compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City of Fort Collins major federal programs for the year ended December 31, 2018. The City of Fort Collins major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the City of Fort Collins major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Fort Collins compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City of Fort Collins compliance. ©2018 CliftonLarsonAllen LLP | Opinion on Each Major Federal Program In our opinion, the City of Fort Collins complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2018. Other Matters The results of our auditing procedures disclosed no instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance. Report on Internal Control Over Compliance Management of the City of Fort Collins is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City of Fort Collins internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Fort Collins internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. ©2018 CliftonLarsonAllen LLP | Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the City of Fort Collins basic financial statements. We issued our report thereon dated REPORT DATE, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. CliftonLarsonAllen LLP Greenwood Village, Colorado REPORT DATE ©2018 CliftonLarsonAllen LLP | APPENDIX C Required Forms ©2018 CliftonLarsonAllen LLP | ©2018 CliftonLarsonAllen LLP | WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. August 10, 2018 FEE Proposal to provide professional auditing services to: The City of Fort Collins Prepared by: CliftonLarsonAllen LLP 370 Interlocken Blvd., Suite 500 Broomfield, CO 80021 Paul Niedermuller, CPA, Principal 303-466-8822 paul.niedermuller@CLAconnect.com CLAconnect.com RFP for Auditing Services Proposal No. 8781 ©2018 CliftonLarsonAllen LLP | 1 C. DOLLAR COST PROPOSAL 1. Total all-inclusive maximum price a. Name of Firm: CliftonLarsonAllen LLP Contact Name: Paul Niedermuller Title: Principal b. Certification Signature: ____________________________________ This fee proposal is a firm and irrevocable offer for 60 days, as well as for the entire period of the engagement if selected as your service provider. Please refer all questions regarding this fee proposal to me by phone at 303-466-8822, or by email at paul.niedermuller@CLAconnect.com. As a principal, I am authorized to make representations and contractually bind the firm. 2. Rates by partner, specialist, supervisory and staff level times hours anticipated for each As shown below, we are in receipt of Appendix A, via Revised Addendum #2. Please see our fee schedule below. ©2018 CliftonLarsonAllen LLP | 2 3. Out-of-pocket expenses included in the total all-inclusive maximum price and reimbursement rates We have estimated fees that are competitive with other regional and national firms and provide the City with a level of quality and commitment that will extend for years to come. Assuming no changes in requested services or unplanned hardships during the audit, our fees will not exceed the amounts shown above. Should significant events occur or regulatory requirements change, we would address with you our fee estimates for these new matters affecting the scope of our work prior to the start of any work performed. CLA does not anticipate charging any additional out-of-pocket expenses. Any out-of-pocket expenses arising from unforeseen circumstances will be discussed and agreed upon in advance and CLA will accept reimbursement for travel, lodging and subsistence at the prevailing City rates for its employees. 4. Rates for additional professional services It is not our policy or practice to bill our clients every time we receive a phone call. In the course of providing our services to you, we will regularly consult with you regarding accounting, financial reporting, and significant business issues. If a specific project is complex or requires significant time or resources, we will first discuss with you the scope of the project and its fee, to make sure there are no surprises. While it is difficult to establish an exact policy for billing in these situations, we commit to discussing with you in advance of performing our services if we believe the time requirement to provide you the desired assistance is other than routine. We will discuss the scope of the project and our estimate to complete it prior to commencing work. Our standard billing rates are shown below. ©2018 CliftonLarsonAllen LLP | 3 Standard Billing Rates Our hourly rates for our professionals on standard rate engagements are as follows: Our last word on fees – we are committed to serving you. Therefore, if fees are a deciding factor in your selection of an accounting firm, we would appreciate the opportunity to discuss with you the scope of our audit plan. At CLA, it’s more than just getting the job done. 5. Manner of payment Progress payments will be billed on the basis of hours of work completed during the course of the engagement. Interim billing shall cover a period of not less than a calendar month. Title Current Rates Principals $300 - $400 Directors/ Managers $195 - $300 Senior Associates $125 - $150 Associates $80 - $125 RFP 8781 Financial Audit Services Page 1 of 31 REQUEST FOR PROPOSAL 8781 FINANCIAL AUDITING SERVICES The City of Fort Collins is requesting proposals from qualified firms to provide financial auditing services. To meet the requirements of this request for proposals, each audit shall be performed in accordance with generally accepting auditing standards as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the U.S. Government Accountability Office's Government Auditing Standards (1994), the provisions of the Single Audit Act of 1984 (as amended in 1996) and the provisions of U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Audits of State and Local Governments. As part of the City’s commitment to Sustainable Purchasing, proposals submission via email is preferred. Proposals shall be submitted in a single Microsoft Word or PDF file under 20MB and e-mailed to: purchasing@fcgov.com. If electing to submit a hard copy proposal instead, one (1) hard copy and one (1) electronic copy on a jump drive, will be received at the City of Fort Collins' Purchasing Division, 215 North Mason St., 2nd floor, Fort Collins, Colorado 80524. Proposals must be received before 3:00 p.m. (our clock), August 10, 2018 and referenced as Proposal No. 8781. If delivered, they are to be sent to 215 North Mason Street, 2nd Floor, Fort Collins, Colorado 80524. If mailed, the address is P.O. Box 580, Fort Collins, 80522-0580. Please note, additional time is required for proposals mailed to the PO Box to be received at the Purchasing Office. The City of Fort Collins is subject to public information laws, which permit access to most records and documents. Proposals will be evaluated by members of the City Council Finance Committee and interviews will be conducted in a public meeting. Proposals must not include any information which respondents deem proprietary, confidential or trade secrets because the proposals will be subject to public disclosure. The City encourages all Disadvantaged Business Enterprises (DBEs) to submit proposals in response to all requests for proposals. No individual or business will be discriminated against on the grounds of race, color, sex, or national origin. It is the City’s policy to create a level playing field on which DBEs can compete fairly and to ensure nondiscrimination in the award and administration of all contracts. Questions regarding RFP should be directed to Gerry Paul, Purchasing Director at 970-221- 6779 or gspaul@fcgov.com and the Project Manager, John Voss, Senior Manager, Accounting at 970-221-6772 or at jvoss@fcgov.com. All questions must be submitted in writing via email to Gerry Paul and John Voss, no later than 5:00 PM our clock on August 1, 2018. Questions received after this deadline will not be answered. A copy of the RFP may be obtained at http://www.bidnetdirect.com/colorado/city-of-fort-collins. Financial Services Purchasing Division 215 N. Mason St. 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6775 970.221.6707 fcgov.com/purchasing RFP 8781 Financial Audit Services Page 2 of 31 New Vendors: The City requires new vendors receiving awards from the City to fill out and submit an IRS form W-9 and to register for Direct Deposit (Electronic) payment. If needed, the W-9 form and the Vendor Direct Deposit Authorization Form can be found on the City’s Purchasing website at www.fcgov.com/purchasing under Vendor Reference Documents. Sales Prohibited/Conflict of Interest: No officer, employee, or member of City Council, shall have a financial interest in the sale to the City of any real or personal property, equipment, material, supplies or services where such officer or employee exercises directly or indirectly any decision- making authority concerning such sale or any supervisory authority over the services to be rendered. This rule also applies to subcontracts with the City. Soliciting or accepting any gift, gratuity favor, entertainment, kickback or any items of monetary value from any person who has or is seeking to do business with the City of Fort Collins is prohibited. Collusive or sham proposals: Any proposal deemed to be collusive or a sham proposal will be rejected and reported to authorities as such. Your authorized signature of this proposal assures that such proposal is genuine and is not a collusive or sham proposal. The City of Fort Collins reserves the right to reject any and all proposals and to waive any irregularities or informalities. Utilization of Award by Other Agencies: The City of Fort Collins reserves the right to allow other state and local governmental agencies, political subdivisions, and/or school districts to utilize the resulting award under all terms and conditions specified and upon agreement by all parties. Usage by any other entity shall not have a negative impact on the City of Fort Collins in the current term or in any future terms. Sustainability: Consulting firms/teams participating in the proposal are to provide an overview of the organization’s philosophy and approach to Sustainability. In no more than two (2) pages please describe how your organization strives to be sustainable in the use of materials, equipment, vehicles, fuel, recycling, office practices, etc. The City of Fort Collins incorporates the Triple Bottom Line into our decision process by including economic (or financial), environmental, and social factors in our evaluation. The selected Service Provider shall be expected to sign the City’s standard Agreement prior to commencing Services (see sample attached to this Proposal). Sincerely, Gerry Paul Purchasing Director RFP 8781 Financial Audit Services Page 3 of 31 REQUEST FOR PROPOSALS 8781 FINANCIAL AUDITING SERVICES SECTION 1 – GENERAL SCOPE OF SERVICES A. Scope of Services to be Performed 1. The City of Fort Collins desires the auditor to express an opinion on the fair presentation of its governmental activities, its business-type activities, its aggregate discretely presented component units, each of its major funds, and its aggregate remaining fund information in conformity with generally accepted accounting principles. 2. The City of Fort Collins also desires the auditor to express an opinion on the fair presentation of its combining and individual fund financial statements and schedules in conformity with generally accepted accounting principles. The auditor is not required to audit the supporting schedules contained in the comprehensive annual financial report. However, the auditor is to provide an "in-relation-to" opinion on the supporting schedules based on the auditing procedures applied during the audit of the basic financial statements and the combining and individual fund financial statements and schedules. The auditor is not required to audit the introductory section of the report or the statistical section of the report. 3. The auditor shall also be responsible for performing certain limited procedures involving required supplementary information required by the Governmental Accounting Standards Board as mandated by generally accepted auditing standards. 4. The auditor is not required to audit the schedule of expenditures of federal awards. However, the auditor is to provide an "in-relation-to" report on that schedule based on the auditing procedures applied during the audit of the financial statements. B. Auditing Standards To Be Followed To meet the requirements of this request for proposals, the audit shall be performed in accordance with generally accepting auditing standards as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the U.S. Government Accountability Office's Government Auditing Standards (1994), the provisions of the Single Audit Act of 1984 (as amended in 1996) and the provisions of U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Audits of State and Local Governments. C. Reports to be Issued Following the completion of the audit of the fiscal year's financial statements, the auditor shall issue: 1. A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles, including an opinion on the fair presentation of the supplementary schedule of expenditures of federal awards in relation to the audited financial statements. 2. A report on compliance and internal control over financial reporting based on an audit of the financial statements 3. A report on compliance and internal control over compliance applicable to each major federal program. RFP 8781 Financial Audit Services Page 4 of 31 In the required report[s] on compliance and internal controls, the auditor shall communicate any significant deficiency or material weakness found during the audit. A significant deficiency shall be defined as a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected. A material weakness shall be defined as a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Significant deficiencies that are also material weaknesses shall be identified as such in the report. Control deficiencies discovered by the auditors that are neither significant deficiencies nor material weaknesses shall be reported in a separate letter to management, which shall be referred to in the report[s] on compliance and internal controls. A control deficiency shall be deemed to have occurred whenever the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The report on compliance and internal controls shall include all material instances of noncompliance. All nonmaterial instances of noncompliance shall be reported in a separate management letter, which shall be referred to in the report on compliance and internal controls. 4. Irregularities and illegal acts. Auditors shall be required to make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties: • Mayor and Council Members of the City of Fort Collins • Council Finance Committee • City Manager • Chief Financial Officer • Accounting Director • Controller 5. Reporting to the Council Finance Committee. Auditors shall assure themselves that the City of Fort Collins's Council Finance Committee is informed of each of the following: • The auditor's responsibility under generally accepted auditing standards • Significant accounting policies • Management judgments and accounting estimates • Significant audit adjustments • Auditor’s judgments about the quality of the entity’s accounting principles • Other information in documents containing audited financial statements • Disagreements with management • Management consultation with other accountants • Major issues discussed with management prior to retention • Difficulties encountered in performing the audit RFP 8781 Financial Audit Services Page 5 of 31 D. Special Considerations 1. The City of Fort Collins will send its comprehensive annual financial report to the Government Finance Officers Association of the United States and Canada for review in their Certificate of Achievement for Excellence in Financial Reporting program. It is anticipated that the auditor will not be required to provide special assistance to the City of Fort Collins to meet the requirements of that program. 2. The City of Fort Collins currently anticipates it will prepare one or more official statements in connection with the sale of debt securities which will contain the general purpose financial statements and the auditor's report thereon. The auditor shall be required, if requested by the fiscal advisor and/or the underwriter, to issue a "consent and citation of expertise" as the auditor and any necessary "comfort letters." 3. The City of Fort Collins has determined that no specific United States Department functions as the cognizant agencies in accordance with the provisions of the Single Audit Act of 1984 (as amended in 1996) and U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. All federal awards and related expenditures are reported to the Federal Clearinghouse. 4. The Schedule of Expenditures of Federal Awards and related auditor's report, as well as the reports on compliance and internal controls are not to be included in the comprehensive annual financial report, but are to be issued separately. 5. A list of findings and other weaknesses from the City of Fort Collins's most recent financial statement audit, as well as a list of findings from internal audits conducted during the most recent fiscal period to be audited may be found at http://fcgov.com/finance/?departments. E. Working Paper Retention and Access to Working Papers All working papers and reports must be retained, at the auditor's expense, for a minimum of three (3) years, unless the firm is notified in writing by the City of Fort Collins of the need to extend the retention period. The auditor will be required to make working papers promptly available, upon request, to the following parties or their designees: 1. City of Fort Collins 2. U.S. Government Accountability Office (GAO) 3. Parties designated by the federal or state governments or by the City of Fort Collins as part of an audit quality review process 4. Auditors of entities of which the City of Fort Collins is a subrecipient of grant funds 5. Auditors of entities of which the City of Fort Collins is a component unit 6. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance. F. Schedule for the 2018 Fiscal Year Audit (A similar time schedule will be developed for audits of future fiscal years if the City of Fort Collins exercises its option for additional audits). Each of the following should be completed by the dates indicated, unless otherwise approved by both the City and Auditor. RFP 8781 Financial Audit Services Page 6 of 31 1. Interim Field Work The auditor shall complete interim work by November 15th. 2. Detailed Audit Plan The Auditor shall provide the City at least 1 month before interim and final field work a detailed audit plan and a list of all schedules to be prepared by the City. 3. Fieldwork The auditor shall complete all fieldwork by May 15th. 4. City Charter Requirement for Public Notification of Summary Financials In accordance with the City of Fort Collins Charter, Article II, Section 17, a summary of the independent audit of the City’s financial records needs to be published no later than May 31st. In order to meet this deadline, staff requests the auditors complete a review of the summary by May 24th. 5. City Prepared Reports Fund Financial Statements, Notes and Required Supplementary Information - The City shall have drafts ready for auditing on the first day of final field work. Financial Statements – The City shall complete the management’s discussion and analysis, government wide financial statements, fund financial statements, notes, required supplementary information and all elements of a Comprehensive Annual Financial Report by May 15th. The Auditor shall provide all corrections, suggestions and comments to the City by June 1. 6. Auditor Prepared Reports Opinion Letters, Single Audit Reports, and Management Letter - The auditor shall have drafts of the audit report[s] and recommendations to management available for review by the City by June 1st. The City shall have all comments and suggestions on these items by June 8th. The Auditor will print and deliver the final reports by June 15th. Number of Auditor Reports – For the City of Fort Collins, the Auditor shall an electronic version of opinion letter, 25 Single Audit Reports, and 25 Management Letter Reports by June 15. For the Poudre River Public Library District and the Poudre Fire Authority, the Auditor shall print, for each, 25 Financial Statements, including Opinion Letter, and 25 Management Letter Reports by June 30. The auditor should deliver all reports to the Controller at 215 North Mason Street, 2nd Floor, Fort Collins, CO 80522-0580. 7. Presentation to Governing Bodies The auditor shall present the results of the audit to the three governing bodies by August 31: o City of Fort Collins Council Finance and Audit Committee o Poudre River Public Library District Board o Poudre Fire Authority Board RFP 8781 Financial Audit Services Page 7 of 31 SECTION 2 – DESCRIPTION OF THE GOVERNMENT A. Name and Telephone Number of Contact Persons/Organizational Chart/ Location of Offices 1. The auditor's principal contact with the City of Fort Collins will be Mike Beckstead, Chief Financial Officer, phone 970-221-6795. However, the designated representatives will be John Voss, Controller, phone 970-221-6772, and Travis Storin, Accounting Director, 970-221-2367, who will coordinate the assistance to be provided by the City of Fort Collins to the auditor. 2. An organizational chart and a list of key personnel can be seen in the 2017 CAFR, pages 8-9. Link to the City’s website: http://www.fcgov.com/finance/annual-financial- reports.php B. Background Information 1. The City of Fort Collins serves an area of 57 square miles with a population of 171,100. The City of Fort Collins's fiscal year begins on January 1 and ends on December 31. 2. The City of Fort Collins provides the following services to its citizens: ▪ general government ▪ public safety ▪ streets and highways ▪ cultural opportunities and recreation ▪ transportation ▪ sustainability ▪ planning and development ▪ electric distribution ▪ broadband (new in 2018) ▪ water treatment and distribution ▪ wastewater collection and treatment ▪ storm drainage ▪ golf 3. The City of Fort Collins has a total payroll of $184 million covering 2,122 FTE employees. $ In millions Entity with Unique Tax ID Gross Pay Benefits Total Payroll FTE City $ 114.8 $ 36.6 $ 151.4 1,741 Downtown Development Authority 0.4 0.1 0.5 5 Poudre Fire Authority 21.1 5.2 26.3 282 Library District 4.5 1.4 5.9 94 TOTAL $ 140.8 $ 43.3 $ 184.1 2,122 4. The City is organized into 9 service areas and 3 agencies. The accounting and financial reporting functions of the City of Fort Collins are generally centralized with the most significant exception of dedicated personnel in Utilities. 5. More detailed information on the government and its finances can be found in the Budget Document, CAFR’s, and Single Audit Report. See website - http://www.fcgov.com/finance/ RFP 8781 Financial Audit Services Page 8 of 31 C. Fund Structure The City of Fort Collins uses the following fund types in its financial reporting: Individual Fund Type Funds Annual Budgets General fund 1 1 Special revenue funds 16 16 Special rev fund (blended component) 5 5 Debt service funds 1 1 Capital projects funds 3 0 Permanent funds 0 0 Enterprise funds 6 6 Internal service funds 5 5 Private-purpose trust funds 0 0 Investment trust funds 0 0 Pension (and other employee benefits) trust funds 1 1 Agency funds 2 0 Other Entity’s Fund Type Funds Annual Budgets DDA General (discrete c.) 1 1 DDA Debt service (discrete c) 1 1 PFA General 1 1 PFA Capital project 1 0 Library General 1 1 Library Capital project 1 0 D. Basis of Budgeting The City of Fort Collins does not always prepare its budgets on a basis consistent with generally accepted accounting principles. Proprietary funds are budgeted on current financial resources basis. In some of the funds, grants and capital projects are budgeted on a project length basis, rather than annual budgets. E. Federal and State Awards Refer to 2017 single audit report, which is typical in its volume and complexity. https://www.fcgov.com/finance/files/single-audit-compliance-2017.pdf F. Pension Plans The City of Fort Collins participates in the following pension plans: Plan Multiple Employer Cost Sharing Agent Single Employer Defined Benefit Contribution General Employees Retirement Program (GERP) X Money Purchase Plan (401a) X Actuarial services for the GERP plan are provided by Milliman. The defined contribution plan is administered by ICMA-RC. * The Poudre Fire Authority is planning to replace their 401a, for employees represented by a bargaining unit, with a defined benefit pension through the Fire & Police Pension Association of Colorado. Estimated to begin in 2019. RFP 8781 Financial Audit Services Page 9 of 31 G. Component Units 1. The City of Fort Collins is defined, for financial reporting purposes, in conformity with the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, Section 2100. Using these criteria, component units are included in the City of Fort Collins's financial statements. 2. The management of the City of Fort Collins identified the following component units for inclusion in the City of Fort Collins's financial statements: a) Fort Collins Colorado Downtown Development Authority. The DDA is a discrete component unit and is to be audited as part of the audit of the City of Fort Collins's financial statements. b) Fort Collins Urban Renewal District. This is a blended component unit that is presented in the City’s CAFR as another fund. c) General Improvement District #1. This is a blended component unit that is presented in the City’s CAFR as another fund. d) General Improvement District #15 – Skyview. This is a blended component unit that is presented in the City’s CAFR as another fund. 3. The management of the City of Fort Collins has determined that the following potential component units should not be included in the City of Fort Collins's financial statements for the following reasons: Potential Component Unit Reason for Exclusion Poudre Fire Authority Joint Venture Poudre River Public Library District Completely separate board, we don’t contribute financially, different boundaries H. Joint Ventures The City of Fort Collins does participate in joint ventures with other governments. NAME OF JOINT VENTURE NAME OF OTHER PARTICIPATING GOVERNMENT(S) TYPE OF SERVICES PROVIDED Fort Collins- Loveland Airport City of Loveland Airport Operations North Front Range Transportation & Air Quality 10 Northern CO municipalities, and Larimer and Weld Counties Transportation & Air Quality Planning Poudre Fire Authority Poudre Valley Fire Protection District Fire Protection Platte River Power Authority Longmont, Loveland & Estes Park Wholesale Power Supply I. Magnitude of Finance Operations Financial services area has 47 people and is headed by Mike Beckstead, Chief Financial Officer for the City. There are 4 departments in Financial Services: Finance Administration, Purchasing, Safety, Security & Risk Management, Sales Tax, and Accounting & Treasury. The Accounting & Treasury Department is headed by Travis Storin, Director of Accounts. Other Services Areas throughout the City have positions performing financial work and have dotted line accountability to Financial Services. RFP 8781 Financial Audit Services Page 10 of 31 J. Computer Systems 1. JDE Production Database Server • HP BL 460 Gen 9 • 2 – 12 core processors • 128 GB RAM • Operating System: Windows Server 2012 R2 (64 bit) • Applications: Oracle DBMS 12c Enterprise Edition Release 12.1.0.2.0 2. JDE Production Web Server • VM Ware Virtual Machine (running on top of same physical blades) • 2 - 2 Core Processors • 16 GB RAM • Operating System: Windows Server 2012 R2 (64 bit) • Applications: Oracle WebLogic Server 3. JDE Production Batch Server • HP BL 460 Gen 9 • 2 – 12 core processors • 128 GB RAM • Operating System: Windows Server 2012 R2 (64 bit) • Applications: Oracle/JD Edwards Software 4. JDE Software Version • Oracle JD Edwards EnterpriseOne 9.2, Tools Release 9.2.1.2 5. JD Edwards EnterpriseOne Modules (go live date) • Financials, A/P, Purchasing, Budget, Job Costing, Foundation & Security (1/1999) • Accounts Receivable, Procurement (12/1999) • Human Resources/Payroll (1/2000) • Fixed Assets (8/2001) • Enterprise Asset Management (12/2003) • Self Service Benefits Enrollment (10/2004) • Employee and Manager Self Service (10/2006) • SAP Business Objects implemented for Enterprise Reporting (10/2006) • JDE Chart of Accounts Conversion (11/2008) • Expense Management (9/2015) • AP Automation via Tungsten Networks Integration (target 9/2018) K. Availability of Prior Audit Reports and Working Papers Interested proposers who wish to review prior years' audit reports and management letters should contact Kevin Smith at 4801 Main Street, Suite 400, Kansas City, MO 64112-2543, phone 816-751-4027. The City of Fort Collins will use its best efforts to make prior audit reports and supporting working papers available to proposers to aid their response to this request for proposals. L. Organizational Chart and listing of Key Officials may be found in the CAFR https://www.fcgov.com/finance/annual-financial-reports.php RFP 8781 Financial Audit Services Page 11 of 31 SECTION 3 - TIME REQUIREMENTS A. Proposal Calendar The following is a list of key dates up to and including the date proposals are due to be submitted: Last day to submit bid questions Aug 1, 2018 Due date for proposals Aug 10, 2018 3:00 PM (MDST) B. Notification and Contract Dates (estimated subject to change) Interviews of finalists September 5, 2018* Selected firm notified September 7, 2018 Contract date September 17, 2018 * The interview date is firm and will be conducted September 5, 2018 from 3:00 pm to 5:00 pm. Interviews will be conducted by City Council member of the Council Finance Committee. All proposals and the interviews will be open to the public. C. Date Audit May Commence The City of Fort Collins will have all records ready for audit and all management personnel available to meet with the firm's personnel as of October 1, 2018. D. Schedule for the 2018 Fiscal Year Audit (A similar time schedule will be developed for audits of future fiscal years if the City of Fort Collins exercises its option for additional audits). Each of the following should be completed by the auditor no later than the dates indicated. 1. Interim Work The auditor shall complete interim work by December 15th. City is open considering alternative dates 2. Detailed Audit Plan The auditor shall provide City of Fort Collins by December 31 both a detailed audit plan and a list of all schedules to be prepared by the City of Fort Collins. 3. Fieldwork The auditor shall complete all fieldwork by May 15. 4. City Charter Requirement for Public Notification of Summary Financials In accordance with the City of Fort Collins Charter, Article II, Section 17, a summary of the independent audit of the City’s financial records needs to be published no later than May 31. In order to meet this deadline, staff request the auditors complete review of the summary by May 24. 5. Draft Reports The auditor shall have drafts of the audit report[s] and recommendations to management available for review by the Chief Financial Officer and Controller/ Assistant Financial Offer by June 1. RFP 8781 Financial Audit Services Page 12 of 31 E. Date Opinion Letter and Single Audit Report is Due The City staff shall prepare draft financial statements, notes and all required supplementary schedules by May 6. The auditor shall provide a draft of all recommendations, revisions and suggestions for improvement to the Chief Fiscal Officer and Controller/Assistant Financial Officer by June 1. The final signed opinion letter should be provided electronically for inclusion in the CAFR no later than June 15. SECTION 4 - ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance The finance department staff and responsible management personnel will be available during the audit to assist the firm by providing information, documentation and explanations. The preparation of confirmations will be the responsibility of the City on Auditor approved forms. B. Electronic Data Processing (EDP) Assistance The Enterprise Resource Planning (ERP) personnel will be available to assist the auditor in performing the engagement during normal working hours, with reasonable advanced notice. ERP personnel will also be available to provide systems documentation and explanations. The auditor will be provided reasonable computer time and the use of the City of Fort Collins's computer hardware and software. This will be limited to inquiry and review of accounting records. C. Statements and Schedules to be Prepared by the Staff of the City of Fort Collins The staff of City of Fort Collins will prepare the following statements and schedules for the auditor by the dates indicated: Statement or Schedule Date Fund statements April 15 Notes April 22 Government Wide May 1 MD&A, Statistical, Intro Section May 7 D. Work Area, Telephones, Photocopying and FAX Machines The City of Fort Collins will provide the auditor with reasonable work space, desks and chairs. The auditor will also be provided with access to one telephone lines, photocopying facilities and FAX machines. E. Report Preparation Report preparation, editing and printing shall be the responsibility of the auditor. SECTION 5 - PROPOSAL REQUIREMENTS A. General Requirements 1. Submission of Proposals The following material is required to be received by August 10, 2018 by 3:00 PM for a proposing firm to be considered: i. Title Page Title page showing the request for proposals subject; the firm's name; the name, address and telephone number of the contact person; and the date of the proposal. ii. Table of Contents RFP 8781 Financial Audit Services Page 13 of 31 iii. Transmittal Letter A signed letter of transmittal briefly stating the proposer's understanding of the work to be done, the commitment to perform the work within the time period, a statement why the firm believes itself to be best qualified to perform the engagement and a statement that the proposal is a firm and irrevocable offer for 60 days. iv. Detailed Proposal The detailed proposal should follow the order set forth in Section 5 B and C of this request for proposals. v. Executed copies of Proposer Guarantees and Proposer Warranties, attached to this request for proposal (Appendix B and Appendix C) B. Technical Proposal 1. General Requirements The purpose of the Technical Proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of the City of Fort Collins in conformity with the requirements of this request for proposals. As such, the substance of proposals will carry more weight than their form or manner of presentation. The Technical Proposal should demonstrate the qualifications of the firm and of the particular staff to be assigned to this engagement. It should also specify an audit approach that will meet the request for proposals requirements. THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE TECHNICAL PROPOSAL DOCUMENT. The Technical Proposal should address all the points outlined in the request for proposals (excluding any cost information which should only be included in the sealed dollar cost bid). The Proposal should be prepared simply and economically, providing a straightforward, concise description of the proposer's capabilities to satisfy the requirements of the request for proposals. While additional data may be presented, the following subjects, items Nos. 2 through 10, must be included. They represent the criteria against which the proposal will be evaluated. 2. Independence The firm should provide an affirmative statement that is independent of the City of Fort Collins as defined by generally accepted auditing standards/the U.S. Government Accountability Office's Government Auditing Standards (1994). The firm also should provide an affirmative statement that it is independent of all of the component units of the City of Fort Collins as defined by those same standards. The City of Fort Collins currently has one component unit, the Fort Collins Downtown Development Authority, whose budget and any issuance of debt requires approval of the Fort Collins’ City Council. The firm should also list and describe the firm's (or proposed subcontractors') professional relationships involving the City of Fort Collins or any of its component units or joint venture members for the past five (5) years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. RFP 8781 Financial Audit Services Page 14 of 31 In addition, the firm shall give the City of Fort Collins written notice of any professional relationships entered into during the period of this agreement. 3. License to Practice in the State of Colorado An affirmative statement should be included that the firm and all assigned key professional staff are properly licensed to practice in the State of Colorado. 4. Firm Qualifications and Experience The proposer should state the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in this engagement on a full-time basis and the number and nature of the staff to be so employed on a part-time basis. If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. The firm is also required to submit a copy of the report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements. The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations. 5. Partner, Supervisory and Staff Qualifications and Experience Identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement. Indicate whether each such person is registered or licensed to practice as a certified public accountant in the State of Colorado. Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, of the specific staff to be assigned to this engagement. Indicate how the quality of staff over the term of the agreement will be assured. The proposer should identify the extent to which staff to be assigned to the audit reflect the City of Fort Collins's commitment to Affirmative Action. Engagement partners, managers, other supervisory staff and specialists may be changed if those personnel leave the firm, are promoted or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of the City of Fort Collins. However, in either case, the City of Fort Collins retains the right to approve or reject replacements. RFP 8781 Financial Audit Services Page 15 of 31 Consultants and firm specialists mentioned in response to this request for proposal can only be changed with the express prior written permission of the City of Fort Collins, which retains the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience. 6. Prior Engagements with the City of Fort Collins List separately all engagements within the last five years, ranked on the basis of total staff hours, for the City of Fort Collins by type of engagement (i.e., management advisory services, other). Indicate the scope of work, date, engagement partners, total hours, the location of the firm's office from which the engagement was performed, and the name and telephone number of the principal client contact. 7. Similar Engagements With Other Government Entities For the firm's office that will be assigned responsibility for the audit, list the most significant engagements (maximum - 5) performed in the last five years that are similar to the engagement described in this request for proposal. These engagements should be ranked on the basis of total staff hours. Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. 8. Specific Audit Approach The proposal should set forth a work plan, including an explanation of the audit methodology to be followed, to perform the services required in Section II of this request for proposal. In developing the work plan, reference should be made to such sources of information as City of Fort Collins's budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. Proposers will be required to provide the following information on their audit approach: a. Proposed segmentation of the engagement b. Level of staff and number of hours to be assigned to each proposed segment of the engagement c. Sample size and the extent to which statistical sampling is to be used in the engagement d. Extent of use of EDP software in the engagement e. Type and extent of analytical procedures to be used in the engagement f. Approach to be taken to gain and document an understanding of the City of Fort Collins's internal control structure g. Approach to be taken in determining laws and regulations that will be subject to audit test work h. Approach to be taken in drawing audit samples for purposes of tests of compliance 9. Identification of Anticipated Potential Audit Problems The proposal should identify and describe any anticipated potential audit problems, the firm's approach to resolving these problem and any special assistance that will be requested from the City of Fort Collins. RFP 8781 Financial Audit Services Page 16 of 31 10. Report Format The proposal should include sample formats for required reports. C. Dollar Cost Proposal 1. Total All-Inclusive Maximum Price The sealed dollar cost bid should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of- pocket expenses. The City of Fort Collins will not be responsible for expenses incurred in preparing and submitting the technical proposal or the dollar cost proposal. Such costs should not be included in the proposal. The first page of the dollar cost proposal should include the following information: a. Name of Firm b. Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Fort Collins. c. A Total All-Inclusive Maximum Price for the 2018 engagement and subsequent 4 years (Fill-out Appendix A). 2. Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each The second page of the dollar cost proposal should include a schedule of professional fees and expenses, presented in the format provided in the attachment (Appendix A), that supports the total all-inclusive maximum price. The cost of special services described in Section of this request for proposal should be disclosed as separate components of the total all-inclusive maximum price. 3. Out-of-pocket Expenses Included in the Total All-inclusive Maximum Price and Reimbursement Rates Out-of-pocket expenses for firm personnel (e.g., travel, lodging and subsistence) will be reimbursed at the rates used by the City of Fort Collins for its employees. All estimated out-of-pocket expenses to be reimbursed should be presented on the second page of the sealed dollar cost bid in the format provided in the attachment (Appendix A). All expense reimbursements will be charged against the total all-inclusive maximum price submitted by the firm. In addition, a statement must be included in the sealed dollar cost bid stating the firm will accept reimbursement for travel, lodging and subsistence at the prevailing City of Fort Collins rates for its employees. 4. Rates for Additional Professional Services If it should become necessary for City of Fort Collins to request the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between City of Fort Collins and the firm. Any such additional work agreed to between City of Fort Collins and the firm shall be performed at the same rates set forth in the schedule of fees and expenses included in the sealed dollar cost bid. RFP 8781 Financial Audit Services Page 17 of 31 5. Manner of Payment Progress payments will be made on the basis of hours of work completed during the course of the engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billing shall cover a period of not less than a calendar month. Ten percent (10%) will be withheld from each billing pending delivery of the firm's final reports. SECTION 6 – REVIEW AND ASSESSMENT Firms will be evaluated on the following criteria. These criteria will be the basis for review and assessment of the written proposals and optional interview session. At the discretion of the City, interviews of the top rated firms may be conducted. The rating scale shall be from 1 to 5, with 1 being a poor rating, 3 being an average rating, and 5 being an outstanding rating. WEIGHTING FACTOR QUALIFICATION STANDARD 2.0 Scope of Proposal Does the proposal address all elements of the RFP? Does the proposal show an understanding of the project objectives, methodology to be used and results/outcomes required by the project? Are there any exceptions to the requirements, Scope of Services, or agreement? 2.0 Assigned Personnel Qualifications Do the individuals who will be assigned to the project have the necessary skills and qualifications? Are sufficient people of the requisite skills and qualifications assigned to the project? 2.0 Cost and Schedule Does the proposal address all the cost elements and are the line-item costs competitive? Do the proposed cost compare favorably with the Project Manager's estimate and other proposals? Does the firm take any exceptions to the audit submittal dates. 2.0 Firm Capability & Reputation Does the firm have the resources, financial strength, capacity and support capabilities required to complete a comprehensive audit? Has the firm successfully completed previous audits of this type and scope? Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 18 of 31 APPENDIX A SCHEDULE OF PROFESSIONAL FEES & EXPENSES FOR ADDITIONAL SERVICES NATURE OF SERVICE TO BE PROVIDED MAXIMUM ALL-INCLUSIVE TOTAL PRICE 2018 Audits of City, Poudre Fire Authority and Library District $ 2019 Audits of City, Poudre Fire Authority and Library District $ 2020 Audits of City, Poudre Fire Authority and Library District $ 2021 Audits of City, Poudre Fire Authority and Library District $ 2022 Audits of City, Poudre Fire Authority and Library District $ Issuance of Consent Letter for a Bond Issue $ Verification of Arbitrage at the End of Each • Five-Year Period of a Bond Issue $ Verification of Bond Escrow for a Bond Issue $ Agreed Upon Procedures Performed in Relation to City’s Cable TV Franchise Agreement with Service Provider $ Of the Total all-inclusive maximum price for the 2018 audit, please estimate the expected costs for the services related to the Library District and the Poudre Fire Authority: • Library District $ • Poudre Fire Authority $ Proposer: Signature: Printed: Address: City/State/Zip: Phone: Email: Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 19 of 31 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES This schedule should reflect the hourly rates for any additional work outside the scope of this RFP if the City requests it. STANDARD HOURLY RATES QUOTED HOURLY RATES Partners $ $ Managers $ $ Supervisory Staff $ $ Staff $ $ Other (specify): $ $ $ $ $ $ $ $ ADDITIONAL COSTS Out-of-pocket expenses: $ Meals and lodging (amount per person per day) $ Transportation (cents-per-mile) $ Other (specify): $ $ $ $ Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 20 of 31 APPENDIX B PROPOSER GUARANTEES The Proposer certifies it can and will provide and make available all services set forth in Scope of Work and Time Requirements. Signature of Official: Printed: Title: Date: LIST OF PRINCIPALS The names and titles of the Proposer’s principals are: 1. 2. 3. 4. 5. Proposer: Address: City/State/Zip: Phone: Email: Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 21 of 31 APPENDIX C PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Colorado laws with respect to foreign (non-state of Colorado) corporations. B. Proposer warrants, that if it is awarded the contract it shall obtain and maintain during the Agreement term the following insurance coverage’s with policy limits in accordance with NORA specifications: 1. Errors and omissions coverage for the willful or negligent acts, or omissions of any officers, employees or agents thereof; 2. Professional liability coverage; 3. Comprehensive general liability coverage; 4. Automobile liability coverage, including hired and non-owned vehicles; and 5. Workers’ compensation. Waiver of subrogation and hold harmless agreements will be agreed to for all of the above coverage. The City shall be named an additional insured for all insurance coverage. C. Proposer warrants that it will not delegate or subcontract its responsibilities under the contract without the prior written permission of the City of Fort Collins. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official: Name: (Print or type) Title: Firm: Date: Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 22 of 31 SAMPLE SERVICES AGREEMENT (DO NOT SIGN) SERVICES AGREEMENT THIS AGREEMENT made and entered into the day and year set forth below by and between THE CITY OF FORT COLLINS, COLORADO, a Municipal Corporation, hereinafter referred to as the "City" and , hereinafter referred to as "Service Provider". WITNESSETH: In consideration of the mutual covenants and obligations herein expressed, it is agreed by and between the parties hereto as follows: 1. Scope of Services. The Service Provider agrees to provide services in accordance with the scope of services attached hereto as Exhibit A, consisting of ( ) page(s) and incorporated herein by this reference. Irrespective of references in Exhibit A to certain named third parties, Service Provider shall be solely responsible for performance of all duties hereunder. 2. The Work Schedule. [Optional] The services to be performed pursuant to this Agreement shall be performed in accordance with the Work Schedule attached hereto as Exhibit , consisting of ( ) page(s), and incorporated herein by this reference. 3. Time of Commencement and Completion of Services. The services to be performed pursuant to this Agreement shall be initiated within ( ) days following execution of this Agreement. Services shall be completed no later than . Time is of the essence. Any extensions of the time limit set forth above must be agreed upon in a writing signed by the parties. 4. Contract Period. This Agreement shall commence , 20 , and shall continue in full force and effect until , 20 , unless sooner terminated as herein provided. In addition, at the option of the City, the Agreement may be extended for additional one year periods not to exceed ( ) additional one year periods. Renewals and pricing changes shall be negotiated by and agreed to by both parties. Written notice of renewal shall be provided to the Service Provider and mailed no later than thirty (30) days prior to contract end. 5. Delay. If either party is prevented in whole or in part from performing its obligations by unforeseeable causes beyond its reasonable control and without its fault or negligence, then the party so prevented shall be excused from whatever performance is prevented by such cause. To the extent that the performance is actually prevented, the Service Provider must provide written notice to the City of such condition within fifteen (15) days from the onset of such condition. Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 23 of 31 6. Early Termination by City/Notice. Notwithstanding the time periods contained herein, the City may terminate this Agreement at any time without cause by providing written notice of termination to the Service Provider. Such notice shall be delivered at least fifteen (15) days prior to the termination date contained in said notice unless otherwise agreed in writing by the parties. All notices provided under this Agreement shall be effective when mailed, postage prepaid and sent to the following addresses: Service Provider: City: Copy to: Attn: City of Fort Collins Attn: PO Box 580 Fort Collins, CO 80522 City of Fort Collins Attn: Purchasing Dept. PO Box 580 Fort Collins, CO 80522 In the event of early termination by the City, the Service Provider shall be paid for services rendered to the date of termination, subject only to the satisfactory performance of the Service Provider's obligations under this Agreement. Such payment shall be the Service Provider's sole right and remedy for such termination. 7. Contract Sum. The City shall pay the Service Provider for the performance of this Contract, subject to additions and deletions provided herein, ($ ) as per the attached Exhibit " ", consisting of page(s), and incorporated herein by this reference. 8. City Representative. The City will designate, prior to commencement of the work, its representative who shall make, within the scope of his or her authority, all necessary and proper decisions with reference to the services provided under this agreement. All requests concerning this agreement shall be directed to the City Representative. 9. Independent Service provider. The services to be performed by Service Provider are those of an independent service provider and not of an employee of the City of Fort Collins. The City shall not be responsible for withholding any portion of Service Provider's compensation hereunder for the payment of FICA, Workmen's Compensation or other taxes or benefits or for any other purpose. 10. Subcontractors. Service Provider may not subcontract any of the Work set forth in the Exhibit A, Statement of Work without the prior written consent of the city, which shall not be unreasonably withheld. If any of the Work is subcontracted hereunder (with the consent of the City), then the following provisions shall apply: (a) the subcontractor must be a reputable, qualified firm with an established record of successful performance in its respective trade performing identical or substantially similar work, (b) the subcontractor will be required to comply with all applicable terms of this Agreement, (c) the subcontract will not create any contractual relationship between any such subcontractor and the City, nor will it obligate the City to pay or see to the payment of any subcontractor, and (d) the work of the subcontractor will be subject to inspection by the City to the same extent as the work of the Service Provider. 11. Personal Services. It is understood that the City enters into the Agreement based on the Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 24 of 31 special abilities of the Service Provider and that this Agreement shall be considered as an agreement for personal services. Accordingly, the Service Provider shall neither assign any responsibilities nor delegate any duties arising under the Agreement without the prior written consent of the City. 12. Acceptance Not Waiver. The City's approval or acceptance of, or payment for any of the services shall not be construed to operate as a waiver of any rights or benefits provided to the City under this Agreement or cause of action arising out of performance of this Agreement. 13. Warranty. a. Service Provider warrants that all work performed hereunder shall be performed with the highest degree of competence and care in accordance with accepted standards for work of a similar nature. b. Unless otherwise provided in the Agreement, all materials and equipment incorporated into any work shall be new and, where not specified, of the most suitable grade of their respective kinds for their intended use, and all workmanship shall be acceptable to City. c. Service Provider warrants all equipment, materials, labor and other work, provided under this Agreement, except City-furnished materials, equipment and labor, against defects and nonconformances in design, materials and workmanship/workwomanship for a period beginning with the start of the work and ending twelve (12) months from and after final acceptance under the Agreement, regardless whether the same were furnished or performed by Service Provider or by any of its subcontractors of any tier. Upon receipt of written notice from City of any such defect or nonconformances, the affected item or part thereof shall be redesigned, repaired or replaced by Service Provider in a manner and at a time acceptable to City. 14. Default. Each and every term and condition hereof shall be deemed to be a material element of this Agreement. In the event either party should fail or refuse to perform according to the terms of this agreement, such party may be declared in default thereof. 15. Remedies. In the event a party has been declared in default, such defaulting party shall be allowed a period of ten (10) days within which to cure said default. In the event the default remains uncorrected, the party declaring default may elect to (a) terminate the Agreement and seek damages; (b) treat the Agreement as continuing and require specific performance; or (c) avail himself of any other remedy at law or equity. If the non-defaulting party commences legal or equitable actions against the defaulting party, the defaulting party shall be liable to the non-defaulting party for the non-defaulting party's reasonable attorney fees and costs incurred because of the default. 16. Binding Effect. This writing, together with the exhibits hereto, constitutes the entire agreement between the parties and shall be binding upon said parties, their officers, employees, agents and assigns and shall inure to the benefit of the respective survivors, heirs, personal representatives, successors and assigns of said parties. Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 25 of 31 17. Indemnity/Insurance. a. The Service Provider agrees to indemnify and save harmless the City, its officers, agents and employees against and from any and all actions, suits, claims, demands or liability of any character whatsoever brought or asserted for injuries to or death of any person or persons, or damages to property arising out of, result from or occurring in connection with the performance of any service hereunder. b. The Service Provider shall take all necessary precautions in performing the work hereunder to prevent injury to persons and property. c. Without limiting any of the Service Provider's obligations hereunder, the Service Provider shall provide and maintain insurance coverage naming the City as an additional insured under this Agreement of the type and with the limits specified within Exhibit , consisting of one (1) page, attached hereto and incorporated herein by this reference. The Service Provider before commencing services hereunder, shall deliver to the City's Purchasing Director, P. O. Box 580, Fort Collins, Colorado 80522, one copy of a certificate evidencing the insurance coverage required from an insurance company acceptable to the City. 18. Entire Agreement. This Agreement, along with all Exhibits and other documents incorporated herein, shall constitute the entire Agreement of the parties. Covenants or representations not contained in this Agreement shall not be binding on the parties. 19. Law/Severability. The laws of the State of Colorado shall govern the construction interpretation, execution and enforcement of this Agreement. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Agreement. 20. Prohibition Against Employing Illegal Aliens. Pursuant to Section 8-17.5-101, C.R.S., et. seq., Service Provider represents and agrees that: a. As of the date of this Agreement: 1. Service Provider does not knowingly employ or contract with an illegal alien who will perform work under this Agreement; and 2. Service Provider will participate in either the e-Verify program created in Public Law 208, 104th Congress, as amended, and expanded in Public Law 156, 108th Congress, as amended, administered by the United States Department of Homeland Security (the “e-Verify Program”) or the Department Program (the “Department Program”), an employment verification program established pursuant to Section 8- 17.5-102(5)(c) C.R.S. in order to confirm the employment eligibility of all newly hired employees to perform work under this Agreement. b. Service Provider shall not knowingly employ or contract with an illegal alien to perform work under this Agreement or knowingly enter into a contract with a subcontractor that knowingly employs or contracts with an illegal alien to perform work under this Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 26 of 31 Agreement. c. Service Provider is prohibited from using the e-Verify Program or Department Program procedures to undertake pre-employment screening of job applicants while this Agreement is being performed. d. If Service Provider obtains actual knowledge that a subcontractor performing work under this Agreement knowingly employs or contracts with an illegal alien, Service Provider shall: 1. Notify such subcontractor and the City within three days that Service Provider has actual knowledge that the subcontractor is employing or contracting with an illegal alien; and 2. Terminate the subcontract with the subcontractor if within three days of receiving the notice required pursuant to this section the subcontractor does not cease employing or contracting with the illegal alien; except that Service Provider shall not terminate the contract with the subcontractor if during such three days the subcontractor provides information to establish that the subcontractor has not knowingly employed or contracted with an illegal alien. e. Service Provider shall comply with any reasonable request by the Colorado Department of Labor and Employment (the “Department”) made in the course of an investigation that the Department undertakes or is undertaking pursuant to the authority established in Subsection 8-17.5-102 (5), C.R.S. f. If Service Provider violates any provision of this Agreement pertaining to the duties imposed by Subsection 8-17.5-102, C.R.S. the City may terminate this Agreement. If this Agreement is so terminated, Service Provider shall be liable for actual and consequential damages to the City arising out of Service Provider’s violation of Subsection 8-17.5-102, C.R.S. g. The City will notify the Office of the Secretary of State if Service Provider violates this provision of this Agreement and the City terminates the Agreement for such breach. 21. Special Provisions. Special provisions or conditions relating to the services to be performed pursuant to this Agreement are set forth in Exhibit - Confidentiality, consisting of one (1) page, attached hereto and incorporated herein by this reference. Official Purchasing Document Last updated 10/2017 RFP 8781 Financial Audit Services Page 27 of 31 THE CITY OF FORT COLLINS, COLORADO By: Gerry Paul Purchasing Director DATE: ATTEST: APPROVED AS TO FORM: SERVICE PROVIDER'S NAME By: Printed: Title: CORPORATE PRESIDENT OR VICE PRESIDENT Date: Official Purchasing Document Last updated 10/2017 RFP 8757 Body Armor, Ballistic Vests & Rifle Plates Page 28 of 31 EXHIBIT A SCOPE OF SERVICES Official Purchasing Document Last updated 10/2017 RFP 8757 Body Armor, Ballistic Vests & Rifle Plates Page 29 of 31 EXHIBIT (BID SCHEDULE/COMPENSATION) Official Purchasing Document Last updated 10/2017 RFP 8757 Body Armor, Ballistic Vests & Rifle Plates Page 30 of 31 EXHIBIT INSURANCE REQUIREMENTS 1. The Service Provider will provide, from insurance companies acceptable to the City, the insurance coverage designated hereinafter and pay all costs. Before commencing work under this bid, the Service Provider shall furnish the City with certificates of insurance showing the type, amount, class of operations covered, effective dates and date of expiration of policies, and containing substantially the following statement: “The insurance evidenced by this Certificate will not reduce coverage or limits and will not be cancelled, except after thirty (30) days written notice has been received by the City of Fort Collins.” In case of the breach of any provision of the Insurance Requirements, the City, at its option, may take out and maintain, at the expense of the Service Provider, such insurance as the City may deem proper and may deduct the cost of such insurance from any monies which may be due or become due the Service Provider under this Agreement. The City, its officers, agents and employees shall be named as additional insureds on the Service Provider 's general liability and automobile liability insurance policies for any claims arising out of work performed under this Agreement. 2. Insurance coverages shall be as follows: A. Workers' Compensation & Employer's Liability. The Service Provider shall maintain during the life of this Agreement for all of the Service Provider's employees engaged in work performed under this agreement: 1. Workers' Compensation insurance with statutory limits as required by Colorado law. 2. Employer's Liability insurance with limits of $100,000 per accident, $500,000 disease aggregate, and $100,000 disease each employee. B. Commercial General & Vehicle Liability. The Service Provider shall maintain during the life of this Agreement such commercial general liability and automobile liability insurance as will provide coverage for damage claims of personal injury, including accidental death, as well as for claims for property damage, which may arise directly or indirectly from the performance of work under this Agreement. Coverage for property damage shall be on a "broad form" basis. The amount of insurance for each coverage, Commercial General and Vehicle, shall not be less than $1,000,000 combined single limits for bodily injury and property damage. In the event any work is performed by a subcontractor, the Service Provider shall be responsible for any liability directly or indirectly arising out of the work performed under this Agreement by a subcontractor, which liability is not covered by the subcontractor's insurance. Official Purchasing Document Last updated 10/2017 RFP 8757 Body Armor, Ballistic Vests & Rifle Plates Page 31 of 31 EXHIBIT CONFIDENTIALITY IN CONNECTION WITH SERVICES provided to the City of Fort Collins (the “City”) pursuant to this Agreement (the “Agreement”), the Service Provider hereby acknowledges that it has been informed that the City has established policies and procedures with regard to the handling of confidential information and other sensitive materials. In consideration of access to certain information, data and material (hereinafter individually and collectively, regardless of nature, referred to as “information”) that are the property of and/or relate to the City or its employees, customers or suppliers, which access is related to the performance of services that the Service Provider has agreed to perform, the Service Provider hereby acknowledges and agrees as follows: That information that has or will come into its possession or knowledge in connection with the performance of services for the City may be confidential and/or proprietary. The Service Provider agrees to treat as confidential (a) all information that is owned by the City, or that relates to the business of the City, or that is used by the City in carrying on business, and (b) all information that is proprietary to a third party (including but not limited to customers and suppliers of the City). The Service Provider shall not disclose any such information to any person not having a legitimate need-to-know for purposes authorized by the City. Further, the Service Provider shall not use such information to obtain any economic or other benefit for itself, or any third party, except as specifically authorized by the City. The foregoing to the contrary notwithstanding, the Service Provider understands that it shall have no obligation under this Agreement with respect to information and material that (a) becomes generally known to the public by publication or some means other than a breach of duty of this Agreement, or (b) is required by law, regulation or court order to be disclosed, provided that the request for such disclosure is proper and the disclosure does not exceed that which is required. In the event of any disclosure under (b) above, the Service Provider shall furnish a copy of this Agreement to anyone to whom it is required to make such disclosure and shall promptly advise the City in writing of each such disclosure. In the event that the Service Provider ceases to perform services for the City, or the City so requests for any reason, the Service Provider shall promptly return to the City any and all information described hereinabove, including all copies, notes and/or summaries (handwritten or mechanically produced) thereof, in its possession or control or as to which it otherwise has access. The Service Provider understands and agrees that the City’s remedies at law for a breach of the Service Provider’s obligations under this Confidentiality Agreement may be inadequate and that the City shall, in the event of any such breach, be entitled to seek equitable relief (including without limitation preliminary and permanent injunctive relief and specific performance) in addition to all other remedies provided hereunder or available at law. Addendum 1 – 8781 Financial Auditing Services Page 1 of 8 ADDENDUM NO. 1 SPECIFICATIONS AND CONTRACT DOCUMENTS Description of RFP 8781: Financial Auditing Services OPENING DATE: 3:00 PM (Our Clock) August 10, 2018 To all prospective bidders under the specifications and contract documents described above, the following changes/additions are hereby made and detailed in the following sections of this addendum: 1. Additional Information Exhibit 1 – Questions & Answers Please contact Gerry Paul, Purchasing Director, at (970) 221-6779 or gspaul@fcgov.com with any questions regarding this addendum. RECEIPT OF THIS ADDENDUM MUST BE ACKNOWLEDGED BY A WRITTEN STATEMENT ENCLOSED WITH THE BID/QUOTE STATING THAT THIS ADDENDUM HAS BEEN RECEIVED. Financial Services Purchasing Division 215 N. Mason St. 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6775 970.221.6707 fcgov.com/purchasing Addendum 1 – 8781 Financial Auditing Services Page 2 of 8 Exhibit 1 Questions & Answers 1. On page 6 of 31 of the RFP it states that interim work should be completed by November 15. However, on page 11 of 31 the date of completion for interim is December 15. Would you please clarify which the City prefers? Answer: December 15. 2. Could you provide clarification of what is included in the summary financials for public notification described on RFP page 11 of 31? What is the expected auditor’s responsibility over this information? Answer: See Attachment 1. City staff publishes as unaudited. Auditors have no responsibility. 3. Does the City compile the financial statements for the Poudre River Public Library District and Poudre Fire Authority or is the auditor engaged to compile these statements? Answer: Both the Library and PFA staff partner with City staff to compile their respective CAFR’s. 4. Would you please confirm that the City compiles the CAFR? Answer: Yes, City staff compile the CAFR. 5. Why is the City going out to bid and is the incumbent auditor permitted to bid? Answer: End of five-year contract. No. The City is in the process of changing the code to require mandatory partner rotation after five years, and firm rotation after ten years. 6. If applicable, would you provide a copy of the December 31, 2017 management letter? Answer: See Attachment’s 2 and 3. 7. What is the composition of the selection committee in terms of members of management and City Council or Council Finance Committee members? Answer: Written proposals will be reviewed by staff representatives for the City, PFA and Library; approximately eight individuals. Interviews will be conducted by the three City Council Member that make up the Council Finance Committee. 8. How many audits adjusting journal entries have been proposed, whether posted or waived, if any, and would you please provide? Answer: See Attachment 2. Addendum 1 – 8781 Financial Auditing Services Page 3 of 8 9. How many major programs under Uniform Guidance does the City anticipate for 2018? Answer: Probably the same as last year. Recommend looking at 2017 Compliance Report found at https://www.fcgov.com/finance/files/single-audit-compliance- 2017.pdf 10. Other than those outlined in the RFP, do you have any other specific accounting or auditing concerns regarding new regulations or standards or any overall audit concerns? Answer: No. 11. How many auditors were onsite for both interim and final fieldwork and for how long? Answer: Interim – 5 days for 3 people. Final – 20 days for 4 people. 12. Would you please provide the audit fees for the prior three years? If available would you provide the fees disaggregated between the financial audit and the single audit and the separate audits of the Poudre Fire Authority and Poudre River Public Library District? Answer: $87,800 $90,400 $93,100 These are the combined fees for all entities including single audit. 13. Has there been any significant turnover in the accounting or finance departments? Answer: No. 14. Please clarify the nature of service for verification of arbitrage as indicated on page 18 of 31. Is the nature of service to review the arbitrage, or perform the verification of arbitrage? Answer: This service is no longer anticipated to be performed by the selected auditor. 15. In regard to verification of arbitrage: a. Can you clarify whether the Certificates of Participation and Assignment of Lease Payments are included in the arbitrage verification? b. Are there any comingled Debt Service Reserve Funds or any other types of bond funds that are comingled? c. Do any of the bonds have Guaranteed Investment Contracts for their investments? Answer: This service is no longer anticipated to be performed by the selected auditor. Addendum 1 – 8781 Financial Auditing Services Page 4 of 8 16. Page 1 of the RFP indicates that respondents must not include any proprietary, confidential or trade secret information in their proposal. However, certain information requested by the City to be included in the proposal is considered proprietary trade secret information not subject to disclosure as under CORA. As proposer wishes to be included for consideration, we would appreciate some additional direction on how to identify or otherwise prepare confidential information in the proposal. Answer: As stated in the RFP, the proposals will be evaluated by members of the City Council Finance Committee and interviews will be conducted in a public meeting. The contents of the proposals will be subject to public disclosure. If you believe responding to any particular information requested by the City is confidential or proprietary, please state so in your response. However, do not submit any information which you believe is proprietary and/or a trade secret. 17. Based on insurance industry standards, insurers will not add clients as additional insureds, provide waivers of subrogation, or enter into hold harmless agreements on professional liability policies (which includes errors and omissions coverage) as described in Appendix C Proposer Warranties form. In addition, insurers will not add clients as addition insureds on worker’s compensation policies. Appendix C Proposer Warranties is required to be completed and returned with the proposal. Please confirm that these requirements are only applicable to the extent allowed by the proposer’s insurance policies. Answer: The City will require to be a named additional insured for general and vehicle liability. Additional insured is not required for professional liability (errors and omissions) or Worker’s Compensation insurance. 18. In the City’s request for proposal, on P.6 it outlines interim fieldwork shall be completed by November 15th and on P.11 it outlines interim fieldwork shall be completed by December 15, 2018. Does the City have a preference as to the completion of interim fieldwork? Answer: December 15. 19. What is the City’s preference in regard to performing a majority of the single audit test work during the interim fieldwork timeline? Answer: Prefer as much testing to be done in interim as possible. 20. The deliverables section of the RFP does not necessarily discuss the separate Fire Authority and Library audits, but in the presentations section, the expectation is that presentations will be given to all three boards. The fee proposal includes all three entities as well. Are all three audits falling under this single RFP? Answer: Yes, all three audits fall under this single RFP. See Appendix A Schedule of Professional Fees & Expenses for Additional Services. It ask for an inclusive price for each year, and separately an estimate of the Library and Poudre Fire Authority for the first year audited (2018). Addendum 1 – 8781 Financial Auditing Services Page 5 of 8 21. Page 12 (section 4E) of RFP mentions that the preparation of the CAFR is the responsibility of the auditor but everywhere else in the RFP, it reads as if the City prepares the CAFR. Who will be responsible for the preparation of the CAFR? Answer: In all cases, the City and associated organizations staff compile the respective CAFR. 22. How long has RSM been auditing the City? How would you characterize the current relationship with them? Answer: Ten years. Very good. 23. What were the prior year audit fees? Answer: See response to question 12. 24. Does the City expect any significant changes in fiscal year 2018 and beyond, such as new debt, debt defeasance, new service lines, new grants, etc.? Answer: In 2018 borrowed $143 million to build and finance operations for a new Broadband service. Revenue pledged from Light & Power enterprise fund. It will be a subfund in the City’s general ledger and combined in the CAFR under the Light & Power Fund. Discussing borrowing $17 million for interchange improvements at I25 and Prospect. Discussing borrowing $8 million for a jointly owned police training facility with City of Loveland. Discussing borrowing $10 million for grade separated crossing (bridge) on north Lemay Avenue 25. Do the auditors typically identify journal entries as part of the audit? Answer: Yes, but most are passed on. See Attachments 2-3. 26. Has there been a management letter issued in the past few years with audit findings? Answer: See Attachments 2-3. 27. Do you anticipate any significant changes (increases or decreases) in the spending levels of the federal grants reported on the 12/31/17 SEFA? Answer: No. 28. Who is responsible for the preparation of the SEFA? Answer: City staff. Addendum 1 – 8781 Financial Auditing Services Page 6 of 8 29. Does the City typically require assistance from the auditors with the implementation of new accounting standards? Answer: Usually minimal. Assistance is typically limited to interpretation questions, confirming approaches proposed by staff, ask for samples from other entities or clients that have previously implemented, etc. 30. What are the things that are most important to the City and its staff with respect to the audit engagement? Answer: Beyond the four evaluation criteria listed in the RFP, in no particular order we value: • Continuity at the staff level from year-to-year on the auditor side (to the extent possible) • Where possible, reliance on substantive analytic and/or control testing in an effort to reduce detailed testing • Guidance or suggestions on improvements year-over-year, both in terms of the City’s systems and controls but also in audit efficiency. • Input and guidance during changes in standards (i.e. new pronouncements) • Targeted interim testing in an effort to smooth out workload spikes related to the audit • A collegial relationship at all levels of each organization 31. Have there been or are there planned changes in key management and accounting staff of the City? Answer: No. 32. What challenges or significant changes does the City expect to face over the next five years (i.e. GASB 75, 84, and 87, Uniform Guidance, accounting system conversion, etc.…)? How can the auditor assist City with these challenges, taking into consideration independence requirements? Answer: See response to question 30. 33. RFP Section 1 F1 indicates that interim procedures should be completed by November 15th, however, Section 3 D1 states that interim procedures should be completed by December 15th. Does the City have a preference? Answer: December 15. 34. What other operational or strategic ventures does the City anticipate or welcome assistance from their auditor on (P3s, broadband, affordable housing, etc.)? Answer: At this point we don’t anticipate any specific assurance or advisory services pertaining to emerging City initiatives. It’s possible we request assistance in risk assessment, internal control indexing and tests of design, or evaluation of our policies on fund balance minimums. Addendum 1 – 8781 Financial Auditing Services Page 7 of 8 35. Why is the City going out for audit? Answer: See response to question 5. 36. Were there any issues with the current auditor? Answer: See response to question 22. 37. Is your current auditor allowed to propose on the 2018 audit or is this a normal rotation process for the City? Answer: See response to question 5. 38. How many auditors and how many days were the auditors in the field for interim and final fieldwork? Answer: See response to question 11. 39. Outside of the audit process, what does the City find/define value from its auditors? Answer: Duplicate of #30 40. What part of the audit process would the City like to improve over the past audits? Answer: PBC lists that are updated annually as the audit firm gains an understanding of the City. 41. What transition issues would the City be concerned about if the audit is awarded to new auditors? Answer: Time required to help the new audit firm understand the City processes, programs, etc. 42. Have there been any significant changes in key staff in the past year that would affect the 2018 audit? Answer: No. See response to question 13. 43. Are there any significant changes in federal funding anticipated for 2018? Answer: No. 44. Do you anticipate the major funds to be the same in 2018 as they were in 2017? Answer: Yes. Addendum 1 – 8781 Financial Auditing Services Page 8 of 8 45. Assuming each bidder’s proposed fees are equal, what is the next most important thing to the City? Answer: Please see the RFP, page 17 for the specific evaluation criteria and the response to question #30 above for any additional qualitative factors. 46. What were the audit fees for the City, Poudre Fire Authority and Poudre River Public Library District for the 2016 and 2017 financial statement audits? Answer: See response to question 12. 47. What were the fees for the single audit part of the 2016 and 2017 audits? Answer: See response to question 12. 48. Were separate fees quoted for the Ft. Collins Downtown Development Authority? If so, please disclose those as well. Answer: See response to question 12. Include with City portion of audit fees. 49. Please send us a copy of the Poudre Fire Authority and Poudre River Public Library District 2017 financial statements and Management letters. Answer: See Attachments 4 and 5. 50. Is there any fraud we need to know about in the current or prior years? Answer: No instances of fraud or abuse among elected officials, appointed officials, or high-ranking executives have been identified. The City has been made aware of one instance of de minimis petty theft by a contractor, one instance of circumvention of internal control by a staff person pertaining to retention of vendor invoices, and one cybersecurity hack against an external vendor. 51. Please provide procedures to be performed in relation to agreed-upon procedures over the City’s Cable TV Franchise Agreement with service provider. Answer: At this time this service not anticipated to be needed. 52. Are there any significant audit issues of the City or new regulations or standards (GASB’s) that you are concerned with for the upcoming year and beyond? Answer: No. City early implemented GASB 75 in 2017 CAFR. 53. Can you provide us with the following related to the 2017 audit? a. Audit journal entries b. Passed (uncorrected) audit journal entries c. Management Letter d. Letter to Governance Answer: See Attachments 2 and 3. Addendum 2 – 8781 Financial Auditing Services Page 1 of 2 ADDENDUM NO. 2 SPECIFICATIONS AND CONTRACT DOCUMENTS Description of RFP 8781: Financial Auditing Services OPENING DATE: 3:00 PM (Our Clock) August 10, 2018 To all prospective bidders under the specifications and contract documents described above, the following changes/additions are hereby made and detailed in the following sections of this addendum: 1. Revised APPENDIX A Addendum No. 1 to the RFP removed the requirements for verification of arbitrage (reference question 14) and Cable TV Franchise Agreement (reference question 51). However, APPENDIX A was not revised to delete pricing for these two services. In addition, the City has removed the requirements to perform the following services: • Issuance of Consent Letter for a Bond • Verification of Bond Escrow for a Bond Issue Please replace APPENDIX A with the attached revised APPENDIX A. Please contact Gerry Paul, Purchasing Director, at (970) 221-6779 or gspaul@fcgov.com with any questions regarding this addendum. RECEIPT OF THIS ADDENDUM MUST BE ACKNOWLEDGED BY A WRITTEN STATEMENT ENCLOSED WITH THE BID/QUOTE STATING THAT THIS ADDENDUM HAS BEEN RECEIVED. Financial Services Purchasing Division 215 N. Mason St. 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6775 970.221.6707 fcgov.com/purchasing Addendum 2 – 8781 Financial Auditing Services Page 2 of 2 APPENDIX A Revised by Addendum #2 SCHEDULE OF PROFESSIONAL FEES & EXPENSES FOR ADDITIONAL SERVICES NATURE OF SERVICE TO BE PROVIDED MAXIMUM ALL-INCLUSIVE TOTAL PRICE 2018 Audits of City, Poudre Fire Authority and Library District $ 2019 Audits of City, Poudre Fire Authority and Library District $ 2020 Audits of City, Poudre Fire Authority and Library District $ 2021 Audits of City, Poudre Fire Authority and Library District $ 2022 Audits of City, Poudre Fire Authority and Library District $ Of the Total all-inclusive maximum price for the 2018 audit, please estimate the expected costs for the services related to the Library District and the Poudre Fire Authority: • Library District $ • Poudre Fire Authority $ Proposer: Signature: Printed: Address: City/State/Zip: Phone: Email: 2 Scope of Proposal Does the proposal address all elements of the RFP? Does the proposal show an understanding of the project objectives, methodology to be used and results/outcomes required by the project? Are there any exceptions to the requirements, Scope of Services, or agreement? 2 Assigned Personnel Qualifications Do the individuals who will be assigned to the project have the necessary skills and qualifications? Are sufficient people of the requisite skills and qualifications assigned to the project? 2 Cost & Schedule Does the proposal address all the cost elements and are the line-item costs competitive? Do the proposed cost compare favorably with the Project Manager's estimate and other proposals? Does the firm take any exceptions to the audit submittal dates. 2 Firm Capability & Reputation Does the firm have the resources, financial strength, capacity and support capabilities required to complete a comprehensive audit? Has the firm successfully completed previous audits of this type and scope? Professional firms will be evaluated on the following criteria. These criteria will be the basis for review of the written proposals and interview session. The rating scale shall be from 1 to 5, with 1 being a poor rating, 3 being an average rating, and 5 being an outstanding rating. The rating is then automatically multiplied by the weighting factor to determine the qualification score. Definitions Sustainable Purchasing is a process for selecting products or services that have a lesser or reduced negative effect on human health and the environment when compared with competing products or services that serve the same purpose. This process is also known as “Environmentally Preferable Purchasing” (EPP), or “Green Purchasing”. The Triple Bottom Line (TBL) is an accounting framework that incorporates three dimensions of performance: economic, or financial; environmental, and social. The generally accepted definition of Andrew Savitz for TBL is that it “captures the essence of sustainability by measuring the impact of an organization’s activities on the world…including both its profitability and shareholders values and its social, human, and environmental capital.” Weighting Factor Qualification Standard 6/12/2018 Audit Procurement http://www.gfoa.org/print/42 1/2 The Government Finance Officers Association (GFOA) has long recommended that state and local governmental entities obtain independent audits of their financial statements performed in accordance with the appropriate professional auditing standards. Properly performed audits play a vital role in the public sector by helping to preserve the integrity of the public finance functions and by maintaining citizens confidence in their elected leaders. GFOA makes the following recommendations regarding the selection of auditing services: The scope of the independent audit should encompass not only the fair presentation of the basic financial statements, but also the fair presentation of the financial statements of individual funds and component units. The cost of extending full audit coverage to the financial statements of individual funds and component units can be justified by the additional degree of assurance provided. Nevertheless, the selection of the appropriate scope of the independent audit ultimately remains a matter of professional judgment. Accordingly, those responsible for securing independent audits should make their decision concerning the appropriate scope of the audit engagement based upon their particular governments specific needs and circumstances, consistent with applicable legal requirements. Governmental entities should require in their audit contracts that the auditors of their financial statements conform to the independence standard promulgated in the General Accounting Offices Government Auditing Standards even for audit engagements that are not otherwise subject to generally accepted government auditing standards. Governmental entities should enter into multiyear agreements of at least five years in duration when obtaining the services of independent auditors. Such multiyear agreements can take a variety of different forms (e.g., a series of single-year contracts), consistent with applicable legal requirements. Such agreements allow for greater continuity and help to minimize the potential for disruption in connection with the independent audit. Multiyear agreements can also help to reduce audit costs by allowing auditors to recover certain "startup" costs over several years, rather than over a single year. Governmental entities should undertake a full-scale competitive process for the selection of independent auditors at the end of the term of each audit contract, consistent with applicable legal requirements. Ideally, auditor independence would be enhanced by a policy requiring that the independent auditor be replaced at the end of the audit contract, as is often the case in the private sector. Unfortunately, the frequent lack of competition among audit firms fully qualified to perform public-sector audits could make a policy of mandatory auditor rotation counterproductive. In such cases, it is recommended that a governmental entity actively seek the participation of all qualified firms, including the current auditors, assuming that the past performance of the current auditors has proven satisfactory. Except in cases where a Audit Procurement BACKGROUND: RECOMMENDATION: BEST PRACTICE 6/12/2018 Audit Procurement http://www.gfoa.org/print/42 2/2 203 N. LaSalle Street - Suite 2700 | Chicago, IL 60601-1210 | Phone: (312) 977-9700 - Fax: (312) 977-4806 multiyear agreement has taken the form of a series of single-year contracts, a contractual provision for the automatic renewal of the audit contract (e.g., an automatic second term for the auditor upon satisfactory performance) is inconsistent with this recommendation. Professional standards allow independent auditors to perform certain types of nonaudit services for their audit clients. Any significant nonaudit services should always be approved in advance by a governmental entitys audit committee. Furthermore, governmental entities should routinely explore the possibility of alternative service providers before making a decision to engage their independent auditors to perform significant nonaudit services. The audit procurement process should be structured so that the principal factor in the selection of an independent auditor is the auditors ability to perform a quality audit. In no case should price be allowed to serve as the sole criterion for the selection of an independent auditor. References: CPA Audit Quality: A Framework for Procuring Audit Services, General Accounting Office, August 1987. Audit Management Handbook, Stephen J. Gauthier, GFOA, 1989. An Elected Officials Guide to Auditing, Stephen J. Gauthier, GFOA, 1992. Governmental Accounting, Auditing and Financial Reporting (GAAFR), Stephen J. Gauthier, GFOA. Better Understanding the Financial Statement Audit STEPHEN J. GAUTHIER For most local governments, the annual financial state- ment audit is as much a part of the yearly round of pub- lic finance as the approval of the operating budget. Despite its routine character,however, the financial statement audit appears to remain something of mystery to most outside the auditing profession.This article will attempt to dispel the cloud of mystery by first briefly reviewing the nature and purpose of the financial statement audit and then examining ten specific points of misunderstanding commonly encoun- tered in practice. NATURE AND PURPOSE Anyone entrusted with responsibility for managing finan- cial resources on behalf of others should provide a full accounting of that stewardship. For state and local govern- ments, such an accounting ideally takes the form of financial statements prepared in conformity with generally accepted accounting principles (GAAP). It is easy,of course, to imagine circum- stances where those giving an accounting of their stewardship might be tempted to be less than forthcoming, or worse. Accordingly, those who must rely on financial statements to make decisions have traditionally sought the assurance of a disinterested third party to justify that reliance. That third party, of course, is the independent auditor. Role of Management. Since management is responsible for the stewardship of financial resources,it is also primarily responsible for preparing the financial statements that give an accounting of that stewardship. Even when management seeks outside help to prepare the financial statements, it remains responsible for their contents, just as taxpayers remain responsible for their tax returns,even if the returns are prepared by paid tax professionals.Thus,managers must take ownership of their financial reporting. Generally accepted auditing standards (GAAS) require that managers do so explicitly in the form of a management representation letter. Role of Internal Control. It would be hard to place confi- dence in an approval process that amounted to little more than affixing initials to documents without first examining them. So too,it would hardly be meaningful for management to assume responsibility for the data presented in financial statements if management did not have some reasonable basis for doing so.That reasonable basis can be provided only by a comprehensive framework of internal control. Role of the Governing Body. While management is primarily responsible for financial reporting (including the comprehensive framework of internal control used to gener- ate the financial statements), the governing body remains ultimately responsible for ensuring that management meets its responsibilities in this regard.Typically,an audit committee, comprising members of the governing body, provides the necessary oversight. Objective of Fair Presentation. Precision comes at a price.That price can be justified only if the resulting benefits exceed their cost. In real life, few decisions require that amounts in financial statements be exact “down to the penny.” Thus, the goal of financial statements is fairness rather than absolute accuracy.That is,the objective of financial reporting 46 Government Finance Review | June 2009 era, poor financial condition is in no way inconsistent with fair financial statement presentation. No. 2: Financial statement audits are not designed to detect all instances of fraud, abuse, and program non- compliance (i.e., smaller items may be expected to fly under the radar screen). Many people assume that the prin- cipal goal of a financial statement audit is to uncover fraud, abuse, and instances of program noncompliance.In fact,the discovery of such items is only incidental to the purpose of a financial statement audit. As already explained,the true purpose of a financial state- ment audit is to achieve reasonable (rather than absolute) assurance that the financial statements are fairly (rather than accurately) presented. Accordingly, the audit is designed to detect only those instances of fraud,abuse, or program non- compliance that would be material (i.e.,significant enough to affect decisions made based on the financial statements). Needless to say, many, if not most,instances of fraud, abuse, and program noncompliance fail to reach this threshold and thus “fall between the cracks”of a financial statement audit. The independent auditors will, of course, report any instances of fraud, abuse, and program noncompliance that they do encounter while performing the audit (unless it is clearly inconsequential), regardless of materiality. Still, the financial statement audit is not designed to identify immateri- al instances of fraud,abuse,and program noncompliance,nor is it likely to do so. No. 3: Size is not the sole consideration in judging materiality (i.e., big things can come in small packages). Sometimes a government’s managers and its auditors will disagree as to whether a specific item should be treated as material. Such disagreements arise, as often as not, from a mistaken notion that size is the sole criterion for judging materiality.As discussed earlier,however,an item is considered to be material based on its potential for changing a decision. Clearly a relatively small amount could have just that effect in the right circumstances (e.g., the difference between a surplus and a deficit,the difference between a positive and a negative trend, a legal or contractual violation). That is, materiality has a qualitative as well as a quantitative dimen- sion.Viewed another way,the very fact that the materiality of an item is being debated would seem to be an argument in favor of its importance (i.e.,materiality) to someone. No. 4: Quantitative materiality needs to be assessed in relation to individual major funds and to each of the gov- ernment-wide activity columns (the big picture is not good enough). Private-sector business enterprises do not use fund accounting; therefore,quantitative materiality is assessed in relation to the enterprise’s financial statements “taken as a whole.” Conversely, in the public sector, quantitative materiality is assessed separately for each major fund (and for nonmajor funds in the aggregate). It also is assessed separately for the governmental activities and business-type activities columns reported in the government-wide financial statements. As a result,an amount that might not have been material from the perspective of the government “taken as a whole”may be material from the narrower vantage point of an individual major fund or activity column. No. 5: You cannot assess the reliability of data yet bility of the underlying system that generates the data (e.g., validate the amount reported as vendor payables by testing the reliability of the processing of transactions in the pur- chasing system).Auditors describe the first approach as sub- stantive testing and the second as the testing of controls. There was a time in the not-so-distant past when auditors could choose to rely on the substantive testing to the virtual exclusion of tests of controls.More recently,the audit profes- sion has concluded that auditors can never simply bypass the testing of controls.The basic notion behind the change is that no amount of substantive testing can counterbalance the unreliability inherent in data generated by a system that is fundamentally flawed (i.e., just as it would be hard to justify relying on the assertions of an individual known to be dis- honest, incompetent, or otherwise unreli- able).Thus, the independent auditor must always assess the reliability of the internal controls that support financial reporting. No. 6: Auditors must report control weaknesses even if those weaknesses had no effect on the fair presentation of the financial statements (you can- not afford to ignore cracks in a dam). It is possible,of course, to leave the front door of the house open wide upon leav- ing for work in the morning and still come home at night to find that nothing has been stolen. Such an outcome does not diminish the seriousness of the risk posed by leaving the door of a house wide open all day long with everyone gone. Likewise, auditors are required to disclose significant deficiencies as part of the audit even if it can be clearly established that no harm actually resulted from those deficiencies. No. 7: Auditors are not allowed to perform any task that would compromise their independence (you cannot be both judge and defense attorney). A government’s inde- pendent auditors possess a wealth of experience and expert- ise that managers understandably wish to draw upon. Accordingly, auditors routinely provide clients with profes- sional advice on a broad range of topics.All the same,audi- tors must refrain from placing themselves in the position of having to audit their own work, which would occur if they were to perform managerial tasks (e.g., approving payroll, making journal entries) or a special assignment whose work product fell within the scope of the audit (e.g., selection or implementation of general ledger software). Thus, the inde- pendent auditors are severely restricted in the types of non- audit work they may perform for a governmental client. No. 8: Audit fees cannot be the principal factor in selecting an audit firm (you often get what you pay for). The quality of professional services will naturally vary with the professional that performs them.GAAP for state and local governments are substantially different from private-sector GAAP, just as public-sector auditing typically requires expert- ise well beyond GAAS (e.g., Government Auditing Standards, also known as the “Yellow Book”or generally accepted govern- ment auditing standards—GAGAS, and the Single Audit). Therefore, in the audit procurement process, it is essential that a government 48 Government Finance Review | June 2009 No. 10: Mandatory auditor rotation may pose special risks in the public sector (do not force yourself into a bad decision). Many people believe that periodically chang- ing audit firms offers real advantages such as a fresh outlook and greater independence from management. Accordingly, many private-sector business enterprises and not-for-profits mandate that a new audit firm be selected periodically. The potential benefits of auditor rotation depend on the presence of a sufficient number of qualified firms being inter- ested in performing the audit.Unfortunately,such is often not the case in the public sector, where the highly specialized character of governmental GAAP and governmental auditing standards often severely restrict the number of qualified firms in a given location.Accordingly,a policy of mandatory auditor rotation, when applied to state and local governments,could force a government into the position of hiring a less-than fully qualified replacement for its current independent auditor. Given these facts, the best course of action for most governments is to mandate an aggressive procurement effort at the end of the audit contract to maximize the possibility for auditor rotation, without precluding the current audit firm from participating. Furthermore, many of the potential benefits of auditor rotation could be achieved by rotating the personnel assigned to the engagement within the current auditing firm. CONCLUSIONS There is no reason for the financial statement audit to remain a mystery for managers and others outside the audit- ing profession.Gaining a better understanding of the financial statement audit and the principles that underlie it should help all concerned to better cooperate toward the common goal of greater accountability.❙ STEPHEN J. GAUTHIER is director of the GFOA’s Technical Services Center in Chicago, Illinois. Work face-to-face with a Top 10 CPA and advisory fi rm and experience round-the-clock commitment to ideas from nearly 200 professionals trained in the not-for-profi t and government industry. Learn more at www.bkd.com. 10 experience ideas experience top first determine whether a firm possesses the requisite expertise and experience to perform a quality audit before consider- ing price. Unfortunately, it is easy for gov- ernments to allow price to trump all other considerations in the auditor selection process, which often has led to substan- dard audits.A substandard audit is not a bargain at any price. No. 9: It is in the government’s best interest to sign a multi-year audit con- tract (why pay more for the same thing?). In an initial audit of a set of finan- cial statements, the new auditors must incur substantial costs to gain an understanding of and doc- ument the environment in which the government operates and its framework of internal control.In subsequent years,the auditor typically needs only to update that understanding and documentation. In a competitive, multi-year audit con- tract process,proposing audit firms can spread the initial cost over the entire term of the contract to arrive at the lowest pos- sible bid.Conversely, if a government contracts for the finan- cial statement audit only one year at a time,proposing firms must include the entire initial cost as part of the fee for that year or risk incurring a loss should the firm’s contract not be renewed. Accordingly, the Government Finance Officers Association recommends that governments minimize poten- tial audit costs by entering into multi-year audit contracts of no less than five years. June 2009 | Government Finance Review 47 Even when management seeks outside help to pre- pare the financial statements, it remains responsible for their contents, just as taxpay- ers remain responsible for their tax returns, even if the returns are prepared by paid tax professionals. ignore the system that generates the data (it is risky to trust unreliable people, even when they appear to be telling the truth). There are two fundamental approaches an auditor can take to determine the reliability of data presented in financial statements. One approach is to directly test a given item (e.g., confirm the amount reported as cash on deposit with the bank).The other approach is to test the relia- is a presentation that is free from material misstatement (i.e., an error of such signifi- cance that it could affect decisions made based on it). Concept of Reasonable Assurance. Considerations of cost benefit also affect the work of the independent auditor. It would typically be impractical for the independent auditor to examine each and every transaction. Instead, auditors seek reasonable assurance that amounts are fairly presented by testing samples of items. TEN COMMON POINTS OF MISUNDERSTANDING No. 1: Fair presentation is not equivalent to financial health (i.e., a good picture is not necessarily a pretty pic- ture). People frequently criticize the independent auditors when they find out that a government currently experiencing financial difficulties received an unqualified (i.e., “clean”) opinion on the fair presentation of its financial statements.Yet there is no inconsistency between a government receiving an unqualified opinion on the fairness of its financial statements and that same government experiencing financial difficulties. The financial statement audit is designed to vouch for the reliability of the financial statements,not the soundness of the finances they portray. Just as the image of something unat- tractive in a photograph is no indication of a defective cam- June 2009 | Government Finance Review 45 Despite its routine character, the financial statement audit appears to remain something of mystery to most outside the auditing profession. CLA is committed to ongoing communication throughout the engagement. Continual communication starts when an engagement letter is issued, continues throughout the completion of an engagement and throughout the remainder of the year. We believe effective communication is critical to a successful professional relationship. First, we will begin our professional relationship with an in-depth planning meeting for the audit. During this planning meeting, we will identify milestones and deadlines, set expectations, address audit emerging issues, coordinate efforts for each segment, and address other topics critical to a successful engagement. During the engagement, we will hold regular status meetings (at least weekly) for each segment to discuss day-to-day operations, results, and any issues are commonly understood and addressed. The objectives of tracking and formally reporting the engagement status are to: Provide a consistent and formalized technique for monitoring progress against plan. Identify any issues quickly to allow for timely corrective action. Provide an objective rather than subjective evaluation of status. Provide timely information on a regular basis. Assist with obtaining confirmation of fact pattern of any potential audit adjustments, deficiencies, recommendations, etc. on a timely basis. Susan M. Miller, CPA, FHFMA Susan W. Jones, J.D. T. Carley Williams, CPA T. Teal Dakan, CPA Tad A. Goodenbour, CPA Tammy J. Rivera, CPA Theodore D. Dickman, CPA Thomas B. Murtagh, CPA Thomas F. Wheeland, CPA Thomas J. Miller, CPA Timothy A. Jackson, CPA Timothy D. Johnson, CPA Timothy J. Adler, CPA Timothy J. Wilson, CPA Timothy L. Chitwood, CPA, CFE Timothy M. Hughes, CPA Timothy T. Burns, CPA Timothy T. Wilson, CPA, CCIFP® Todd E. Thorson, CPA Todd J. Kenney, CPA Todd J. Lisle, CPA, ABV, CIA® Todd J. Pefferman, CPA Tom W. Watson, CPA, FHFMA Tondeé L. Lutterman, CPA Travis S. Hudson, CPA Trent E. Parten, CPA Trey W. Turnage III, CPA Trisha M. Neidig, CPA Troy E. Hill, CPA Troy J. Gilstorf, CPA Vincent F. Halupczynski, CPA Vito G. Loisi, CPA, CIT W. Ryan Underwood, CPA, CFSA® Wallace P. Wetherill, CPA Wendy J. Henry, CPA William A. Pickert, CPA William D. James William E. Rasmussen, CPA William G. Finnecy, CPA, CVA Note: Certified Financial Planner Board of Standards, Inc. owns the CFP® marks in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. Joseph R. Blatt, CPA Joseph R. Herting, CPA Joseph S. Nelson, CPA Joseph Weinberger, CPA Juli C. Pascoe, CPA Julie R. Hipsky, CPA Justin A. Roberts, CPA Justin D. McNabb, CPA Keith Conine, CPA Keith M. Messmer, CPA Keith T. Galante, CPA Kelly R. Hein, CPA Kenneth M. Bishop, CPA Kevin D. Gore, CPA Kevin E. Cook, CPA Kevin E. Morey, CPA Kevin E. Pahud, CPA Kevin G. Horn, CPA, CFA® Kevin Kemp, CPA Kimberly K. McKay, CPA Kimberly S. Hamm, CPA, CGFM Koy K. Dever, CPA Kraig A. Ritter, CPA Kristen G. Bright, CPA Kristine D. Marsh, CPA Kurt B. Berry, CPA Kyle G. Hesemann, CPA L. Douglas Bennett, CPA L. Jamison McDonald, CPA L. Toug Plilar, CPA Lance M. Davis, CPA Leslie D. Wilson, CPA Lindsey D. Oakley, CPA Lyle S. Alexander, CPA M. Paige Gerich, CPA M. Steven Moore, CPA Mark A. Wilkerson, CPA Mark P. Sharp, CPA Marty J. Fredericks, CPA Marvin W. Debner, CPA Mary Anne Pipkin, CPA Mary E. McKinley, CPA Matthew P. Macdonald, CPA Matthew P. Smith, CPA, CVA, CHFP® Matthew P. Stout, CPA Matthew R. List, CPA Matthew S. Coffey, CPA Melissa M. Pozniak, CPA Michael A. Ososki, CPA, CFIRS™ Michael C. Gerber, CPA Michael C. Senko, CPA Michael G. Wolfe, CPA Michael J. Engle, CPA Michael R. Earls, CPA Michael R. Gray, CPA, CPIM Michael W. Burlew, CPA Cindy H. Boyle, CPA, CIA® , CITP, CISA Connie Benton Cagle, CPA Craig C. Moffatt, CPA, CVA Craig D. Kuechenberg, CPA Dale C. Johnston, CPA Danielle N. Solomon, CPA David A. Weber, CPA David C. Fields, CPA, CMA® , CFM David C. Kottak, CPA David E. Tate, CPA David G. Bluemling, CPA, CVA David L. Leising, CPA David M. Coleman, CPA David M. Kot, CPA, CFE David R. Siehoff, CPA, CFE David R. Vasquez, CPA David S. Freeman, CPA, CMA® David S. Mason, CPA David S. Taylor, CPA Deborah R. Whitley, CPA Deborah S. Scanlon, CPA Derek L. Smith, CPA Derek R. Pierce, CPA, FHFMA Donald DeSoto, CPA Donald J. Rawe, CPA Donna M. Doerhoff, CPA, CFE Donna W. Bruce, CPA Douglas E. Born, CPA Douglas Van Meter, CPA Drew Speed, CPA Eddie C. Marmouget, CPA Eric L. Hansen, CPA Eric M. DeCoursey, CPA Eric S. Goldfarb, CPA Erica L. Smith, CPA Eugene A. Morgenthaler Jr., CPA Francis X. Godfrey, CPA Frederick H. Markwell, CPA Frederick K. Helfrich, CPA Gary A. Edwards, CPA Gary G. Genenbacher, CPA Gary Kamath, CPA Gary W. Schafer II, CPA, CMA® George S. Storey, CPA Georgia L. Salinas, CPA Gordon J. Dobner, CPA Grant G. Glackman, CPA, CFP® City and County of Denver, Colorado