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Home My WebLink AboutRESPONSE - RFP - P905 AUDITING SERVICES (2)AUDIT PROPOSAL FOR THE City of Foil Collins Title Page PROPOSAL SUBJECT: Audit Proposal for the CITY OF FORT COLLINS OFFERED BY: BONDI & Co. up 44 Inverness Drive East Englewood, Colorado 80112 303.799.6826 800.250.9083 Website: www.bondico.com CONTACT PERSONS: Bert R. Bondi, CPA Partner Extension 113 E-mail: bbondi@bondico.com or Patty Jarvis Administrative Manager Extension 157 E-Mail: plj@bondico.com PROPOSAL DATE: October 24, 2003 Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 20 We encourage XYZ Governmental Entity to develop monthly analytical procedures for your utility billing area. We understand that you contracted with an expert in this area to assist with an analysis of your system. We encourage you to complete this analysis as quickly as possible. We believe this will help to identify any potential systems problems and provide you with a sound method to evaluate monthly activity. V. COMPUTER ACCOUNTING SYSTEM INTEGRATION You are investigating integrating cash receipt functions performed by different departments. For example, the Building Department collects building permit fees and use taxes. They enter the information into a database and forward it to the Finance Department for entry into the computerized general ledger system. The ideal situation would be for you to directly download the information from the database into the general ledger system. BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 21 We recommend that the XYZ Governmental Entity process information electronically. Electronic input could save staff time, expenses, and reduce the probability of errors that come with manual input. Additionally, the XYZ Governmental Entity will more fully benefit from the technology you already have in place. VI. TMELY DEPOSIT OF CASH RECEIPTS It is possible for your departments to receive cash receipts outside the normal receipt cycle. In some instances, the department may not know the reason for the receipt and may need to determine why they received it, which can take more time than usual. During our audit, we noted that some material cash receipts were not deposited for several weeks after receipt. However, strong internal controls over cash dictate that all cash receipts should be accounted for immediately upon receipt and deposited as soon as possible. The longer a receipt remains unaccounted for and undeposited, the greater the opportunity for loss or misappropriation. atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 22 The XYZ Governmental Entity has procedures in place to ensure immediate accounting and deposit of receipts. We encourage management to educate your staff on procedures for processing receipts outside the normal cycle. It is important these receipts be deposited promptly. VII. INTERNAL AUDIT We believe the volume and complexity of transactions at XYZ Governmental Entity necessitates consideration of an internal audit process. Our annual audit found many instances of noncompliance to XYZ Governmental Entity procedures. Cash collection sites are increasing, as are the opportunities for errors and misapplication of funds. We recommend you consider establishing an internal auditor position. We believe it is important to have an ongoing presence at the cash collection sites to let them know you are concerned about the controls in place, specifically regarding the monitoring and proper recording of cash. BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS t MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 23 VHI. PROPERTY AND EQUIPMENT It takes the Finance Department numerous hours to balance the property schedules in order to ensure you properly classify your assets. In addition, we noted fixed asset additions that were not capitalized. We attribute these issues to the large volume of additions over the last several years, and that there are presently no internal checks -and -balances in the fixed asset area. We recommend you establish a monitoring system for property additions to ensure that all appropriate items are being capitalized. We think you can achieve this by a monthly or quarterly reconciliation involving the evaluation of all current additions for proper classification. IX. HUMAN During our testing of the Human Resources Department, we noted inconsistencies in file maintenance, the information in the files, and the labeling of files. BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS t MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 24 For example, 56 percent of payroll deduction authorizations for life insurance and pension plans were not in the personnel files. We also noted approximately 50 percent of the I-9 employment eligibility forms were completed incorrectly. We believe this relates to a training issue, since we were eventually able to locate all of the forms. At the same time, we recognize your effort in improving this situation since November. You have added additional employees to your Human Resources Department to accommodate the increase in personnel and help ensure they accurately file and organize personnel data. We noted a significant improvement while revisiting the department during our post year-end work. The department established procedures to organize information in the personnel files and make them more accessible. If you faithfully maintain this information, we believe there is less room for error. We suggest you ensure I-9 forms are completed correctly and that adequate documentation to comply with the INS is on hand. t0BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 25 The XYZ Governmental Entity should also continue to review the operations of the Human Resources Department. We suggest you require the HR Department to input salary changes and new personnel authorizations. We believe this procedural change will improve the segregation of duties surrounding the payroll function. X. COMPUTER CONTROLS The need for adequate controls surrounding your computer system is vital. We encourage you to consider these control features: • Physical controls to limit access to computer hardware; • Procedures to ensure the confidentiality and uniqueness of passwords; • Requirements to change passwords at regular intervals; • Procedures to prevent unauthorized access to XYZ Governmental Entity data; • Development of a formal contingency plan for alternative processing in the event of loss, or interruption of the electronic data processing function; • Testing the contingency plan prior to the occurrence of disaster; • Periodic software audits to ensure adherence to licensing agreements. BONDI & Co. up CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 26 We suggest that you develop a plan to address these and other control issues pertaining to your computer hardware and software. As technology advances, controls to protect your assets are important. XI. SAFEKEEPING AGREEMENT The XYZ Governmental Entity is currently in the process of renegotiating its safekeeping agreement with the bank. This agreement is an important document that addresses issues regarding the custody of assets held by the bank on your behalf. We recommend the XYZ Governmental Entity expedite the completion of this agreement. We believe it is important that a current written agreement exist to support the banking relationship and to protect your assets. CONCLUSION We would like to thank the XYZ Governmental Entity council/board/management for allowing BONDI & Co. LLP to assist you with your financial consulting and auditing needs. atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 27 We would especially like to thank the Finance Department staff for taking the time to answer our questions and explain the current operations of the XYZ Governmental Entity. We appreciate the opportunity to be a part of your financial team, and look forward to assisting the XYZ Governmental Entity with your auditing and consulting needs in the future. Should you have any questions or if we can be of assistance implementing these suggestions, please contact Bert Bondi or Kim Higgins at 303.799.6826. March 21, 20OX BONDI & Co. LL.P BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS Table of Contents SUBJECT PAGE(S) Understanding of the Work to be Performed 1-2 Commitment to Perform Work Within Time Period 2 Statement of Qualifications 2-3 Statement of Firm and Irrevocable Offer 3 Conclusion 3 TECB NICAL PROPOSAL Independence 1 -2 License to Practice in Colorado 2 Firm Qualifications and Experience 2-4 Partner, Supervisory and Staff Qualifications and Experience 4 - 12 Similar Engagements with Other Governmental Entities 12 - 14 Specific Audit Approach 14 - 18 Potential Audit Problems 18 Firm Experience With Bond Offerings 19 Firm Experience With Arbitrage Rebate 19 Firm Experience With Escrow Verification 19 - 20 Firm Experience AUP Franchise Agreements 20 Additional Qualifications 21 - 24 Preparation and Value of our Management Letter 24 - 25 Concluding Remarks 25 Approval 26 ENCLOSURES Peer Review Report License Sample Newsletters Sample Management Letter (Under the "SAMPLE REPORT" tab) 44 INVERNESS DRIVE FAST ENGIEWOOD, COLORADO 90112 www.bondico.com October 24, 2003 BONDI & Co. W CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins c/o Mr. James B. O'Neill, II, CPPO, FNIGP 215 North Mason Street, 2od Floor Fort Collins, CO 80522-0580 Dear Members of the City Council: (303) 799-6826 PHONE (800) 250-9083 TOLL -FREE (303) 799-6926 FAX Re: Letter of Transmittal We are pleased to propose on audit services for the City of Fort Collins for the year ending December 31, 2003, with the option of auditing your financial statements for four subsequent fiscal years. We base our proposal on your request for proposal (RFP), our experience serving the City, our experience serving other entities similar to yours, and our belief that we continue to be partners to enhance your financial operation. We have responded in the manner requested in your RFP. This letter of transmittal outlines our understanding of the work to be performed, our commitment to perform the work within the required time period, a statement of our qualifications, and a statement of our firm and irrevocable offer. If you have any questions about the information in our letter of transmittal, please feel free to call Bert Bondi, CPA phone extension 113, or Patty Jarvis phone extension 157, at 303.799.6826. Understanding of the Work to be Performed If re-engaged by the City of Fort Collins, BONDI & Co. LLP will audit the basic financial statements of the City for the fiscal year ending December 31, 2003, with the option to audit the City's financial statements for four subsequent fiscal years. We will also audit the financial statements of the North Front Range MPO and Poudre Fire Authority as identified in your RFP. Our audit of your basic financial statements will be in accordance with auditing standards generally accepted in the United States of America (GAAS) as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the General Accounting Office's (GAO) Government Auditing Standards (1994), the provisions of the federal Single Audit Act as amended in 1996 and U. S. Office of Management and Budget (OMB) Circular A-133 for Audits of State and Local Governments. Affiliate Offices Woddwide City Council Audit Committee City of Fort Collins Page 2 - Transmittal Letter Before post year-end field work begins, we ask that you close and balance your annual books and reconcile your accounts to detail journals. We anticipate that your Finance Department staff will have financial statements, trial balances and supporting schedules prepared before we start. We also expect to be able to access your financial records electronically, by your providing us your financial data on disk in a readable format. Finally, we plan on staff members being available to reproduce documents, locate files, type correspondence and answer questions necessary for us to complete a thorough examination. Commitment to Perform Work Within Time Period BONDI & Co. LLP is able to comply with the timelines established in your RFP. If engaged, we will provide the City of Fort Collins a detailed audit plan and list of all schedules you will need to prepare by December 1, 2003. We will follow the City's timelines as established in your RFP. We have a long distinguished reputation for completing reports with timeliness and reliability. We believe our audit team will continue to work with the City of Fort Collins personnel to meet your timeline expectations. You are also welcome to call our references for testaments to our timely completion of audit reports. We have been completing thorough audits on time for more than 27 years. We fully expect to build on what we have already established. We are very interested in jointly developing with you a specific timeline for each annual audit that will include milestone tasks to be accomplished by specific dates so that your annual report is ready ahead of expectations. Statement of Qualifications We believe BONDI & Co. LLP is the best choice to perform the City of Fort Collins's audit because we offer better value for the service we perform. We base value on: • Our widely recognized governmental accounting knowledge and auditing thoroughness. We have served local governments through four decades and know the issues you face. BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 3 - Transmittal Letter • Our availability to help you address your issues. Our staff is always available to you, either in person or on the telephone. We make an effort to put your needs before other considerations. We will be there when you need us. • Our positive approach to helping you improve your financial operations and our commitment to guiding you toward increased efflciency and accountability. • Our honest desire to remain as your CPA firm. Our service has demonstrated that we appreciate your business and will work hard to keep it. Statement of Firm and Irrevocable Offer I This proposal is a firm and irrevocable offer for a five year period beginning with the 2003 fiscal year audit and ending with the 2007 fiscal year audit. Conclusion Thank you for the opportunity to propose on audit services to the City of Fort Collins for the year ended December 31, 2003, with the option of extending the engagement for the next four fiscal years. The following section contains our technical proposal in the order you specify in your RFP. If you have any questions regarding our responses, please give us a call. Sincerely, BONDI & Co. LLP Bert R. Bondi, CPA Partner BONDI & CO. LLP s CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Technical Proposal 44 WVERNESSDRWEEAST ENGLEWOOD, COLORADO 90112 www.bondico.com October 24, 2003 BONDI & Co. rr,P CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins c/o Mr. James B. O'Neill, II, CPPO, FNIGP 215 North Mason Street, 2' Floor Fort Collins, CO 80522-0580 Dear Mr. O'Neill and Members of the Audit Committee: (303) 799-6926 PHONE (800) 250-9093 TOU FREE (303) 799-6926 FAX Re: Technical Proposal Thank you for the opportunity to propose on audit services for the City of Fort Collins for the year ending December 31, 2003, with the option of auditing your financial statements for four subsequent fiscal years. We base our proposal on your request for proposal (RFP), our experience auditing the City of Fort Collins, our experience serving other governmental entities similar to yours, and our belief that we can team with you to enhance your financial position. We have responded to your RFP, and have provided all the information you requested, as well as additional information for your consideration. Below, we demonstrate our firm's qualifications to perform your audit, the depth of our audit team, as well as several other aspects of our firm that you requested. Please review our proposal carefully and call Bert Bondi, CPA, or Patty Jarvis at 303.799.6826 if you have any questions. BONDI & Co. LLP is independent from the City of Fort Collins, City of Fort Collins Downtown Development Authority, General Improvement District No. 1, City of Fort Collins Urban Renewal Authority, Poudre Fire Authority and the North Front Range MPO, as defined by auditing standards generally accepted in the United States of America (GAAS) and the U.S. General Accounting Office's Government Auditing Standards. City Council Audit Committee City of Fort Collins Page 2 - Technical Proposal BONDI & Co. w has audited the City of Fort Collins and the above component units of the City for two 5 year periods. We are independent as defined by auditing standards generally accepted in the United States of America (GAAS) and the U.S. General Accounting Office's Government Auditing Standards. BONDI & Co. LLP will give the City of Fort Collins written notification of any professional relationships entered into affecting the City during the term of the audit engagement. License to Practice in Colorado BONDI & Co. w practices in the State of Colorado under license #442. In addition, all key audit team members are licensed Certified Public Accountants, properly registered in Colorado. Firm Qualifications and Experience Firm Dynamics • Size of our firm and our governmental audit staff We are a firm of more than 30 team members. The specific breakdown of our staff is listed below. Governmental Total Audit Firm Staff Partners 2 2 Supervisors 7 6 Staff Accountants 12 8 Specialized Consultants 4 1 Administrative 6 6 Total 31 23 teBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 3 - Technical Proposal • Location of the office from which engagement work is to be performed Our office is located in the Denver metropolitan area in Inverness Business Park. We are always accessible to the City of Fort Collins via phone, fax, e-mail (bbondi@bondico.com) and personal visits. We commit to returning your phone calls daily. There is never a time when you should feel out -of -touch with your BONDI audit team. We serve local governments throughout Colorado. • Number and nature of audit team assigned to engagement All of the staff assigned to the City of Fort Cofins's engagement are employed on a full-time basis. We anticipate assigning partner Bert Bondi, two managers Jim Rae and Julia Stone, and two staff accountants to your audit. Others will serve as alternates for your audit to: 1) Assure you that top level personnel are always available to your staff, and 2) To provide "quality control reviews" on all audit work performed to ensure accuracy and quality on your engagement. Existence of Joint Venture/Consortium BONDI & Co. LLP is not a joint venture or consortium. We will serve as the only auditor and will not use subcontractors on your engagement. Most Recent External Quality Control Review We participate in a strenuous working paper and report review by outsiders who audit our quality control procedures. This means our audit work is repeatedly tested for accuracy and quality, ensuring we pass these attributes of our work on to you. We have succeeded with outstanding marks, and have been among less than four percent of tsBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 4 - Technical Proposal CPA firms nationally who have received an "unqualified report" since 1978. We have enclosed a recent review at the end of this proposal for you. In addition to our quality control evaluations, state and federal bodies regularly review our governmental audit reports for compliance to state and federal regulations. These state and federal agencies include HHS, DOT, HUD, and EPA. All have accepted our work without reservation. Furthermore, no current or pending disciplinary action exists against BONDI & Co. LCP. There have been no violations of professional ethics or standards. Partner, Supervisory and Staff Qualifications and Experience Audit Team for the City of Fort Collins's Engagement We anticipate assigning the audit team below to the City of Fort Collins's audit engagement. Following is a partial list of our team's governmental experience, relevant memberships in professional organizations, as well as information on relevant continuing professional education (CPE). Our staff receives a minimum of 40 hours of CPE each year, which far exceeds the GAO "yellow book" requirements of 24 hours of governmental CPE every two years. Over 24 hours of our annual required CPE is in governmental auditing and accounting. The remaining hours include a variety of sessions in customer service, technology software training, reporting, communication skills and personal Partner Assigned to the Engagement Bert R. Bondi, CPA University of Notre Dame, BBA in Accounting Registered and licensed to practice certified public accounting in Colorado Thirty-three years of experience in governmental auditing and accounting Served on the following governmental engagements. City and County of Broomfield City of Centennial City of Cripple Creek BONDI & Co. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Teamwork is the key to seeing and seizing opportunities that otherwise might not be recognized. BONDI & Co. LIP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Affiliate Offices Worldwide City Council Audit Committee City of Fort Collins Page 5 - Technical Proposal City of Fort Collins City of Fort Lupton City of Greeley City of Commerce City City of Glendale City of Louisville City of Superior Town of Elizabeth Town of Grand Lake Town of Winter Park Adams County Arapahoe County Douglas County Clear Creek County Eagle County El Paso County Elbert County Gilpin County Grand County Jackson County Jefferson County Park County Routt County Teller County Aurora Public Schools Arapahoe County Airport Authority Arapahoe County Water and Wastewater Authority Bayfield School District Brighton School District Number 27J Colorado Springs School District #11 Durango School District 9R Gilpin County School District Littleton Public Schools Steamboat Springs School District #RE-2 Adams County Housing Authority Adams County Retirement Association Aurora Fire Pension Fund Aurora Police Pension Fund City of Aurora General Employee Retirement Fund BONDI & CO. LLP t CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 6 - Technical Proposal Fire and Police Pension Association Foothills Park and Recreation District Lakehurst Water and Sanitation District Grand County Housing Authority Castle Pines Metropolitan District Hyland Hills Park and Recreation District Left Hand Water District Michigan River Conservancy District North Park Hospital District North Washington Fire Protection District Regional Transportation District Salaried Pension Plan Southgate Sanitation District Southgate Water District Spring Canyon Water and Sanitation District West Adams County Fire Protection District West Metro Fire Rescue Willow Trace Metropolitan District Willows Water District Relevant governmental CPE. Governmental Audit Guide, 2003 2 hours GASB 34 Website Seminar 3 hours GASB 40 Seminar 2003 2 hours "Implementing GASB 34" 2003/2002/2001/ 2000/Denver - Paul Glick 24 hours BONDI & Co. w In -House GASB Review, 2003, 2002, 2001, 2000, 1999, 1998/Denver 24 hours per year GFOA Conference, 2002/Denver 20 hours "Risk Based Auditing" August 2001 8 hours AICPA Governmental Conference Omni Hotel, Broomfield, September 2001 16 hours "Using Data Extraction Software on Governmental Audits" March 2000 20 hours GFOA Conference, 1998/San Francisco 16 hours CSCPA Colorado Governmental Conference, 1997, 1996, 1995/Denver 8 hours per year CSCPA "Fooling the Auditor," 1997/Denver 8 hours CSCPA Ethics Seminar, 1997, 1999/Denver 2 hours AICPA National Governmental Accounting and Auditing Update, 1998/Denver 16 hours BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 7 - Technical Proposal Memberships in Professional Organizations: AICPA, CSCPAs, State Revenue Estimating Committee, CML, SDA, GFOA, CGFOA Manager Assigned to the Engagement James E. Rae, CPA University of Northern Colorado, BBA in Accounting Registered and licensed to practice certified public accounting in Colorado Twenty one years of experience in governmental auditing and accounting Served on the following governmental engagements: City of Brighton City of Central City City of Commerce City City of Fort Collins City of Fort Lupton City of Golden City of Greeley City of Littleton City of Salida City of Steamboat Springs Town of Grand Lake Town of Larkspur Town of Kremmling Town of Winter Park Adams County Eagle County Elbert County Grand County Jefferson County Park County Routt County Jackson County Aurora Public Schools Brighton School District 27J Gilpin County School District Littleton Public Schools St. Vrain Valley School District Steamboat Springs School District RE 2 Regional Transportation District atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 8 - Technical Proposal Spring Canyon Water and Sanitation District Kremmling Sanitation District Northern Colorado BOCES Fire Police and Pension Association Willows Water District Willowbrook Water and Sanitation District West Metro Fire Protection District Southgate Water and Sanitation District Relevant governmental CPE. Governmental Audit Guide, 2003 GASB 34 Website Seminar GASB 40 Seminar 2003 "Implementing GASB 34" 2003/2002/2001 Denver - Paul Glick BONDI & Co. w In -House GASB Review, 2003, 2002, 2001/Denver GFOA Conference, 2002/Denver State of Colorado Social Services 2000 Governmental Conference 2000 AICPA - Implementing the New Reporting Model "GASB 34 Update", 2003/2002 Denver, Paul Glick "Risk Based Auditing" August 2001 AICPA Governmental Conference Omni Hotel, Broomfield, September 2001 "Using Data Extraction Software on Governmental Audits" March 2000 Compliance Auditing - Single Audit Fund Accounting and Administration, 1997 Memberships in professional organizations: AICPA, Colorado Society of CPAs 2 hours 3 hours 2 hours 24 hours 24 hours per year 20 hours 8 h ours 16 hours 8 hours 8 hours 8 hours 16 hours 20 hours 8 hours 16 hours Manager Assigned to the Engagement Julia A. Stone, CPA University of Kentucky, BS in Accounting Registered and licensed to practice certified public accounting in Colorado Six years of experience in governmental auditing and accounting Served on the following jeovernmental enjea¢ements: atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 9 — Technical Proposal City and County of Broomfield City of Fort Collins City of Glendale City of Westminster Town of Grand Lake Town of Winter Park Clear Creek County Grand County Jackson County Teller County Bayfield School District Brighton School District Number 27J Colorado Springs School District #11 Durango School District #9-R St. Vrain Valley School District RE-11 City of Boulder Housing Authority Berthoud Fire Protection District Columbine Lake Water District Fort Collins Housing Authority Fraser Valley Metropolitan Recreation District Grand County E-911 Authority Grand County Tourism Board Grand Lake Metropolitan Recreation District Lakehurst Water and Sanitation District North Park Hospital District North Lincoln Water and Sanitation District North Shore Water and Sanitation District North Washington Fire Protection District Tabernash Meadows Water and Sanitation District Three Lakes Water and Sanitation District Willow Trace Metropolitan District Willows Water District Relevant governmental CPE: Governmental Audit Guide, 2003 GASB 34 Website Seminar GASB 40 Seminar 2003 "Implementing GASB 34" 2003/2002/2001/ 2000/Denver - Paul Glick BONDI & Co. w In -House GASB Review, 2 hours 3 hours 2 hours 24 hours atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 10 - Technical Proposal 2003, 2002, 2001, 2000, 1999, 1998/Denver 24 hours per year GFOA Conference, 2002/Denver 20 hours "GASB 34 Update", February 15, 2002 Denver, Paul Glick 8 hours "Risk Based Auditing" August 2001 8 hours AICPA Governmental Conference Omni Hotel, Broomfield, September 2001 16 hours "Using Data Extraction Software on Governmental Audits" March 2000 20 hours Compliance Auditing - Single Audit 8 hours Fund Accounting and Administration, 1997 16 hours Memberships in professional organizations: AICPA, Colorado Society of CPAs Alternate Manager Assigned to the Engagement Stephen A. Clawson, CPA University of Utah, BA in Accounting Twelve years of experience in governmental auditing and accounting Served on the following governmental engagements: Boulder County El Paso County City of Centennial Arapahoe County Water & Wastewater Authority Arapahoe Library District Castle Pines Metropolitan District Estes Valley Park and Recreation District Hyland Hills Park and Recreation District RTD Salaried Employees' Pension Trust Southgate Sanitation District Southgate Water District Relevant governmental CPE: Governmental Audit Guide, 2003 2 hours GASB 34 Website Seminar 3 hours GASB 40 Seminar 2003 2 hours "Implementing GASB 34" 2003/2002 Denver - Paul Glick 24 hours BONDI & Co. uP In -House GASB Review, 2003, 2002/Denver 24 hours per year GFOA Conference, 2002/Denver 20 hours BONDI & Co. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 11 - Technical Proposal "GASB 34 Update", 2003/2002 Denver, Paul Glick 8 hours Compliance Auditing - Single Audit 8 hours Memberships in professional organizations: AICPA, Colorado Society of CPAs Our Firm and Audit Team's Additional Professional Involvement Our firm is a member of the Government Finance Officers Association, Colorado Government Finance Officers Association, Colorado Municipal League, Colorado Special District Association and Colorado Counties, Inc. Additionally, Partner Bert Bondi, CPA, was a member of the State of Colorado Revenue Advisory Committee from 1988 to 1998. This group is responsible for reviewing the State's budget each quarter and suggesting modifications based on activity in the Colorado economy. Partners have also served as liaison to the Governmental Accounting Standards Board (GASB) while serving on the national AICPA Committee on Governmental Accounting and Auditing. A partner regularly communicates with GASB staff on key issues affecting reporting issues. We have also served on the GASB task force to streamline financial statement note disclosure. A BONDI partner also served on the national AICPA Technical Issues Committee from 1992 to 1995. They were responsible for monitoring technical issues released within governmental accounting, as well as responding to those issues for local governments. Finally, our CPAs have chaired the Colorado Governmental Conference in 1990, 1991 and 1997. BONDI CPAs also serve as members of the GFOA Special Review Committee, which is responsible for reviewing governmental reports for the Certificate of Excellence in Financial Reporting. Our entire audit staff participates in this review of governmental reports by assisting our Special Review Committee members. Furthermore, three of our audit team members have served on the local governmental accounting committees of the Colorado Society of CPAs for the following terms: Julia Stone 2000 - Present Jim Rae 1996 - 2000 Kim Higgins 1985 - 1989 BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 12 - Technical Proposal This combined availability of governmental expertise within our firm brings the City of Fort Collins current governmental pronouncements and requirements in an extremely timely manner. Similar Engagements With Other Governmental Entities Experience Auditing Governmental Municipalities Below, we list five significant engagements performed in the last five years that are most similar to the engagement described in your RFP. Please feel free to contact any of these governmental entities for testaments to our firm's service, quality and competence at a reasonable fee. GOVERNMENTAL CLIENT REFERENCES (Partial Listing CLIENT CITY OF CENTENNIAL 12503 East Euclid Drive, Ste. 200 Centennial, CO 80522 303.734.4567 Mr. John Pazour, City Manager Mr. Randy Pye, Mayor Total Hours: 400 Bert R. Bondi, CPA, Partner DATES SCOPE OF WORK 2001 - Full Vs audit Present other consulting work regarding new municipality CITY AND COUNTY OF BROOMFIELD 1985 - Full f/s audit One DesCombes Drive Present including single audit; Broomfield, CO 80020 arbitrage calculations; 303.469.3301 TABOR assistance; Mr. George DiCiero, City Manager GASB 34 Implementation Plan; Mr. Charles Ozaki, Deputy City and County Mgr. converted to GASB 34 in 2002; Mr. Greg Demko, Finance Director and other consulting services Total Hours: 500 Bert R. Bondi, CPA, Partner Received GFOA Certificate of Achkvement atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 13 - Technical Proposal CLIENT GOVERNMENTAL CLIENT REFERENCES (Partial Listinp� DATES SCOPE OF WORK CITY OF COMMERCE CITY 1995 - Full Vs audit 5291 East 60°i Avenue Present including single audit; Commerce City, CO 80022 TABOR assistance; 303.289.3600 GASB 34 Implementation Plan; Mr. Perry VanDeventer, City Manager converted to GASB 34 in 2002; Mr. Roger Tinklenberg, Finance Director and other consulting services Total Hours: 500 Kimberley K. Higgins, CPA, Partner Received GFOA Certificate of Achievement CITY OF FORT LUPTON 130 South McKinley Ave Ft. Lupton, CO 80621 303.857.6694 Mr. Dick Blodgett, Acting City Manager Mr. Wesley LaVanchy, Finance Director Total Hours: 250 Bert R. Bondi, CPA, Partner CITY OF DURANGO 949 East 2' Avenue Durango, CO 81301 970.385.2829 Ms. Sherry Eilbes, Finance Director Total Hours: 250 Kimberley K. Higgins, CPA, Partner 1998 - Full f/s audit Present including single audit; audit of municipal golf course; GASB 34 Implementation Plan; converting to GASB 34 in 2003; and other consulting services 2002 - Full Vs audit; Present including single audit; converting to GASB 34 in 2003 We have included a more complete list of governmental references in the back of this proposal under the "REFERENCES" tab. We believe these references speak directly to our quality services, our timeliness, and our fair price. atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 14 - Technical Proposal Specific Audit Approach AUDIT METHODOLOGY Our audit methodology has developed through time and experience with governmental entities. We base our planning process on our experience auditing Colorado cities for more than 27 years. In order to make our audit of your financial statements and internal controls most efficient, we ask your Finance Department staff to help produce records of transactions, processes and documents. We test account balances in all fund types and account groups based on materiality levels and risk factors established in the planning process. We have found this method to be an effective way of conducting a thorough audit in the shortest amount of time possible. Steps we will follow during the audit process are discussed below: Task Staff Level 1) Conduct a preliminary review of the City's Partner/ financial procedures and operations. This review Manager brings together all permanent file data about the City, including analysis from planning meetings with the governing body, administration and financial personnel. The result is a planned calendar of audit events, timing and expectations based on the City's budget and related materials, organizational charts, manuals and programs, and financial and other management information systems. Estimated Hours 45 atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS A hiloso h of teamwork P P Y There are many roads to financial success. But the best, most successful paths are often shaped by the efforts of many people ... and a mutual commitment to solid, ongoing management of income and expenses. BONDI & Co. LLP is a team of successful, enthusiastic, experienced professionals who are committed to assisting with that management. Whether we're assisting in financial planning or preparing tax returns, auditing financial statements, providing complete accounting and record keeping services, or tailoring unique business consulting programs, we work in tandem with our clients to provide the individual assistance needed to satisfy their economic goals. It is BONDI's policy that no one professional be solely responsible for any engagement. Rather, the various components of a project are administered by the most appropriate staff person. This team approach ensures continuity on client engagements — and it has become a BONDI hallmark. M City Council Audit Committee City of Fort Collins Page 15 - Technical Proposal 2) Preparation of a "job planning memo," an Manager 55 internal document indicating key audit areas, how the audit is to be conducted and the time frame. Risks are assessed. Methods of testing electronic data is obtained and statistical, judgmental and substantive methods are discussed. Tailor-made programs are developed. Statistical and stratified sampling are used for parts of the selection, and substantive testing is used in key areas. 3) Partner in charge of the engagement reviews Partner 12 the job planning memo, amends the plan and directs key staff. 4) Timing and approach of the audit are discussed Partner/ 4 with the City. Commitment is obtained as to Manager documents to be readied for the audit and availability of physical facilities. 5) Any deviations from the audit plan are relayed Manager 4 to the appropriate personnel as they are determined by BONDI & Co. u.P. 6) Our auditors conduct audit field work. Both financial statement and compliance work will be performed. All working papers will be reviewed by the Manager and then by a Quality Control Manager. A quality control review will take place at the conclusion of every audit on all working papers. This is separate from the review performed by the engagement manager or engagement senior. atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 16 - Technical Proposal Interim testing includes detail transaction testing for the Manager/ 240 financial and single audit (if necessary). Cash Staff disbursements, cash receipts, payroll, general journal entries and property are tested. We prefer to perform this electronically to save your time and ours. Post year-end audit includes testing and confirmation of Manager/ 300 balance sheet accounts, substantive testing of revenues Staff and expenditures, and analytical review of several accounts, electronically if possible, by gaining access to your financial software transactions on disk. mawe 7) At the conclusion of the audit, and after the Partner/ 4 Partner review of the working papers, any proposed Manager audit adjustments are discussed with the appropriate personnel. 8) The City is informally asked if any changes in Partner/ 4 our method of testing or execution of our tests are Manager desired for subsequent audits. Audit team evaluates feedback. 9) Reports prepared and drafts submitted to the Manager 70 City staff. 10) A partner of the firm delivers report to the Partner/ 2 Audit Committee of the City Council. Manager atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 17 — Technical Proposal The advantage to the City of Fort Collins, resulting from our audit approach, is an audit that is efficient, thorough and credible to outsiders due to our reputation in the governmental community and a distinctive management report that will give you subtle issues to address internally that will make you more accountable and more efficient in your day to day procedures. UNDERSTANDING AND AUDITING VARIOUS MAJOR SEGMENTS OF THE ACCOUNTING SYSTEM, INCLUDING, BUT NOT LIMITED TO CASH, INVESTMENTS, RECEIVABLES, FIXED ASSETS, LONG-TERM DEBT, PAYROLL, REVENUES, AND EXPENSES We have audited the City of Fort Collins for several years. We have documented narratives in our working papers on how all facets of your accounting system(s) operate. We would update our existing understanding through inquiry of staff and requesting written documents of system changes. SAMPLE SIZE AND EXTENT OF STATISTICAL SAMPLING USED BONDI & Co. riP's approach to audit sample size is to keep them as small as possible to get the highest level of assurance. Our sample size may range from 10 to 80 items per audit area, depending on how much we can test electronically by you downloading your financial transactions onto a disc. USE OF EDP SOFTWARE We use audit software on our engagements. We also use our own laptop computers to generate schedules and tailor our governmental software to the City of Fort Collins. We use Creative Solutions Audit Engagement, GoAudit, ACL data extraction software, and PPC audit program software. This technology allows us to complete reports with accuracy and efficiency, keeping field work time and costs to a minimum. TYPE AND EXTENT OF ANALYTICAL PROCEDURES USED We use analytical procedures regularly in order to save time and make the audit process more effective. These procedures involve reviewing hard copies or CRT screens of large dollar accounts to determine the source and type of entries made to the account. BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 18 - Technical Proposal We also can download your system onto our laptop computers to review transactions for audit purposes. If there is adequate detail in the general ledger, the sample size and amount of detail testing are reduced. We also use data extraction software to help us implement analytical procedures. We use ACL software, GoSystem Audit software and McGladrey Audit Software during the audit. APPROACH TAKEN TO GAIN UNDERSTANDING OF INTERNAL CONTROL STRUCTURE We will interview key accounting, technology information, and management personnel to understand your system. We will also test transactions and inspect documents to make sure we can attest to how your systems operate. DETERMINING LAWS AND REGULATIONS SUBJECT TO TEST WORK Our approach to determining laws and regulations subject to audit test work is twofold: • Colorado Governmental Unit Checklist of state statutes and regulations, and • Federal Government Program Compliance supplements for general and specific requirements of laws attributed to federal monies. • Reviewing on -going information received from the Colorado Municipal League where we are associate members. APPROACH TO DRAWING AUDIT SAMPLES We selected both statistical and judgmental samples to ensure compliance with federal grants and to document the City's internal control structure. Potential Audit Problems Based on your RFP and our experience with the City of Fort Collins, we have not identified any potential audit problems. With our extensive experience in governmental auditing, we believe we are prepared to handle any audit problems that may arise. taBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 19 - Technical Proposal Firm Experience With Bond Offerings BONDI & Co. up has been involved with bond certification with many of our governmental clients, including the City of Fort Collins. We prepare this certification based upon information furnished to us by the City. Our office is authorized to approve all work involved with reviewing bond offering official statements. Our involvement would be dependent upon the conditions of the bond documents. Firm Experience With Arbitrage Rebate BONDI & Co. LCP has in the past been engaged by some of our local governmental clients to perform arbitrage rebate calculations. As you may recall, in the past, the service of arbitrage calculations has been completed for the City of Fort Collins by an outside firm. Firm Experience With Escrow Verification BONDI & Co. uP will provide escrow verifications upon request by the City. The staff assigned to the City engagement will perform the escrow verification using Excel spreadsheets. Below we have provided a partial listing of clients for which we have provided this service: CLIENT City and County of Broomfield Broomfield, CO 80038 303.469.3301 Mr. George DiCiero, City Manager Mr. Charles Ozaki, Asst. City Mgr. - Finance Total Hours: 120 DATES 1998 - 2003 SCOPE OF WORK Escrow Verifications (3) atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 20 - Technical Proposal CLIENT DATES Hyland Hills Park and Recreation District 1996 - Denver, CO 80221 Present 303.428.7488 (Operators and owners of Water World theme park) Mr. Greg Mastriona, Executive Director Ms. Yvonne Fischbach, Finance Director Total Hours: 80 Brighton School District Number 27J 1995 - Brighton, CO 80601 Present 303.659.4820 Mr. Roger Quist, Executive Director of Finance Total Hours: 80 SCOPE OF WORK Escrow Verifications (2) Escrow Verifications (2) Firm Experience With AUP Franchise Agreement BONDI & Co. ur will perform Agreed Upon Procedures relating to municipal franchise agreements with providers of cable television and other subscriber services. We have performed this service to the City of Fort Collins in the past: CLIENT DATES SCOPE OF WORK City of Fort Collins 1999 AUP Franchise Fees Fort Collins, CO Tele-Communications, Inc. 970.221.6788 Mr. Alan Krcmarik Mr. Chuck Seest Total Hours: 80 ti,BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 21 - Technical Proposal I Additional Oualifications I Our Firm Philosophy BONDI & Co. LLP is a Colorado -owned CPA firm that has been serving local governmental entities through four decades. Since our inception in 1976, we have provided audit, accounting, tax and financial accountability consulting services to a wide -range of clients, including many local governments. The strength of our philosophy is in the fact that we make service to our clients one of our first priorities. If re-engaged as your audit firm, we will provide you the assistance you need by: => Returning your phone calls quickly; =:> Explaining technical subjects clearly and concisely; and =:� Maintaining regular contact with you to stay on top of your needs. Our Firm's Service Concentration We are one of the oldest Colorado CPA firms concentrating in auditing local governments. Below, we graphically display our service mix for your review. BONDI & Co. LLP Service Mix Tax Services 20% Auditing 70% Consulting Services 10% atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 22 - Technical Proposal We want to be involved with the City of Fort Collins for more than just the audit function. Our firm can offer you many additional professional services. We have performed the following services, along with many others, for our governmental clients: Accounting System Design and Implementation Investment Analysis Budgeting TABOR Legislation Application Purchasing Studies Sales Tax Audits Financial Personnel Evaluations and Selection Job Description Development Internal Procedures Manuals Arbitrage Rebate Calculations EDP Reviews CPA Verifications for Bond Refunding Rate Studies Cost Reduction Audits While we can perform all of the above consulting services, and more, we are careful not to jeopardize our auditor independence. We want to be a resource to the City of Fort Collins Finance Staff, but we must remain independent relative to the audit process. As a result, we will not engage ourselves with any audit client to perform major consulting projects that may appear to question our auditor objectivity, such as re -designing your accounting system, selling you financial software or hardware, advising you on what investment vehicles to purchase, etc. Bert Bondi, our founding partner, has spoken on several occasions about auditor independence since the ENRON - Arthur Andersen situation occurred. BONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS t MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 23 - Technical Proposal A copy of our newsletter on this subject is enclosed for your review. We believe the interview with Mr. Bondi in this newsletter provides you our view of recent corporate and public accounting standards. Fund accounting is the largest single element of our practice, as presented in the following pie graph. We believe our strong concentration in governmental accounting displays a commitment to staying current with governmental issues and to providing quality audit services for the City of Fort Collins. BONDI & Co. LLP Fund Accounting Experience Fund Commercial Accounting Business 78% 22% The BONDI Difference We differ from most Colorado CPA firms in several respects. You know that we have been in Colorado through four decades. We are here to stay, and our consistency in the community translates into reliability to you. Additionally, we can quickly respond to your needs because we have a pool of resources within our firm itself. Five disciplines: Audit, Accounting, Tax, Technology Consulting and Financial Accountability Consulting, construct our firm. Our staff members have various backgrounds and knowledge bases that our audit team draws upon daily. atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 24 - Technical Proposal We believe the BONDI audit team and the City of Fort Collins can work together to make the audit process and end result a success. We can accomplish this through good communication, our expertise in governmental reporting, and your willingness to become a team with us. We would egjoy the opportunity to be part of your financial team for the 2003 engagement and beyond. Preparation and Value of our Management Letter Perhaps the most valuable product of our audit work is our management letter on financial issues. We analyze several financial aspects of your City, then comment on improvements made and areas to consider for further enhancement. We believe our management letters are valuable to our clients and the advancement of their financial goals. We include a copy of our sample management letter in the back of this proposal under the "SAMPLE REPORT" tab. Here a just a few examples of how BONDI & Co. has assisted the City of Fort Collins to improve your financial controls during our existing contract as your auditors: We recommended the City implement a capitalization policy which addresses purchase of items in lots which was implemented in 2002. We recommended the City enforce their policy in depositing cash within a day of receipt, purchase and utilizing a safe to store monies and use of duplicate receipts in the main recreation center. We recommended the City improve controls surrounding fleet inventory parts. atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS ,Committed to clients and communities Since BONDI's inception in 1976, our clients have included public and privately held businesses, governmental units, financial institutions, professional service organizations and non-profit entities. Due to the extensive background of the members of our professional team, we are able to provide our clients with the expertise associated with large, international CPA firms, but with the personalized touch that only a locally -owned firm can offer. Yet, through our affiliates in 28 countries, we can serve your worldwide needs. BONDI people are actively involved in both the professional and civic communities. They serve the American Institute and Colorado Society of Certified Public Accountants, including active involvement on select committees. And they volunteer in vital capacities with non-profit organizations representing a broad spectrum of services. Concern for the client and the community are just two of the many elements setting BONDI apart from its competition. City Council Audit Committee City of Fort Collins Page 25 - Technical Proposal In 2000, we recommended that the City would save time on implementing GASB 34 by making changes to their financial statement during 2001. We suggested the City begin tracking property and equipment and infrastructure which helped when you converted to the GASB 34 reporting model. We recommended the City take immediate steps to cross train employees in the payroll area. We recommended that the City review their reserve fund balances because the potential existed that the undesignated portion of the fund balance might show a negative number. We suggested that the City perform a vendor specific review of sales tax collections to enhance their ability to note unusual or unexpected variances. After the City implemented this recommendation, additional sales taxes were collected. We recommended in detail, that the City should have controls to mitigate the risk surrounding purchasing cards. We recommended steps to help protect the City from check fraud which led to changing check stock and signature cards to improve internal controls. Concluding Remarks Thank you for allowing BONDI & Co. w to offer audit services to the City of Fort Collins. Please consider this proposal carefully - we want to be part of your financial improvement team. If you have any questions regarding our services, please feel free to call Partner Bert Bondi, CPA or Patty Jarvis at 303.799.6826. BONDI & Co. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS City Council Audit Committee City of Fort Collins Page 26 - Technical Proposal Approval If these arrangements for the audit of the City of Fort Collins for the year ended December 31, 2003, are acceptable, we will include pertinent information from this proposal into our standard engagement letter for you to sign and return to us. Sincerely, 14".{Laub BONDI & Co. LLP BONDI & CO. LLP Ott CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Enclosures Peer Review Report Basso, McClure & Goeglein, LLP - CERTIFIED PUBLIC ACCOUNTANTS To the Partners Bondi & Co. LLP We have reviewed the system of quality control for the accounting and auditing practice of Bondi & Co. LLP (the firm) in effect for the year ended March 31, 2000. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (the "AICPA"). The design of the system, and compliance with it, are the responsibilities of the firm. In addition, the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on the design of the system, and the firm's compliance with that system and the Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures and with the membership requirements of the Section to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it or with the membership requirements of the Section. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of Bondi & Co. LLP in effect for the year ended March 31, 2000, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA, and was complied with during the year then ended to provide the firm with reasonable assurance of complying with professional standards. Also, in our opinion, the firm has complied with the membership requirements of the Section in all material respects. BASSO, MCCLURE & GOEGLEIN, LLP Lincoln, Nebraska July 25, 2000 211 South 84th Street, Suite 100 • Lincoln, Nebraska 68510 • Phone (402) 483-7781 • FAX (402) 483-5198 E-mail: BMGCPAs®navix.net • Web Site: www.BMGCPAs.com License STATE OF COLORADO DEPARTMENT OF REGULATORY AGENCIES DIVISION OF REGISTRATIONS BOARD OF ACCO ,ANCY4 ACTIVE' 0 f. PUBLI4 A�qp-N d*t "I`RM , 442: I 06/01/2002 I ` 2UU `` alkkCT R NUMBER ISSUED• BOND.-l- & CO LLP 44 INVERNESS DR BLDG B ENGLEWOOD CO 80112 LICENSEE'S SIGNATURE Sample Newsletters MR BOND4 ulleti. After Enronee.What Now? Managing Partner Bert Bondi answers the question, and provides insights In the wake of the Enron bankruptcy, thousands of investors lost billions of dollars. As a result, attention is being focused on the entire accounting profession, and questions are being asked: Were accounting standards adequate? Were auditing procedures sufficient? Did conflicts of interest exist? Due to the volatile nature of this case and its serious and far-reaching impact on the nation, Bert Bondi, Partner of BONDI & CO. LLr, one of the largest locally owned CPA firms in Colorado, addresses the "Enron -re- lated" issues that adversely affect the public and the accounting profession. Q. What is your overview of the recent Enron/Arthur Andersen situation? First, Enron is an economic failure. It appears as though a lot of mistakes were made. The big- gest mistake was the failed eco- nomic model that Enron used. The accounting profession gets in- volved in this process because ac- counting standards follow economic activity. That is to say, accounting standards don't lead the way; rather, economic activity leads the way. Enron engaged in some activities that were relatively new in the eco- nomic market place, so the ques- tion arises... "Do existing accounting standards demand full reporting of the types of transactions in which Enron was involved?" Based on what I've read and ob- served to date, the standards of my profession probably have not kept up with those economic models. Q. Are you saying the Enron failure is due to a combination of economic conditions and ac- counting reporting? No, I'm not. The Enron bankruptcy is due to economic conditions. An important question about the accounting is, "Did the account- ing standards provide for enough reporting so that inves- tors could foresee the failure of Enron?" However, in addition to out-of- date accounting standards, sev- eral other factors contributed to the Enron situation. Q. What do you by mean sev- eral other factors? Within the auditing and regulatory structures, there seem to have been some fail- ures, too. For example, What role did the auditors and the audit commit- tee play? and How active was the SEC in appropriate over- sight? If you watched the Congres- sional hearings involving testi- mony from sophisticated corpo- rate executives who served on Enron's audit committee, it ap- pears that they were lied to by management, and maybe others outside of management. Q. Is an audit committee, re- sponsible for determining who is telling the truth? That's a good question. An audit committee is respon- sible for making sure that audi- tors report directly to the com- mittee and not through the Chief That allows the "fox" to determine who watches the "henhouse". Executive Officer and Chief Fi- nancial Officer to help assure an independent examination. Obviously, no matter what the sophistication of the audit com- mittee, or the governing board of any organization, no one can be expected to detect a lie in- stantaneously. However, if a volume of evi- dence comes from both its cor- porate staff or audit committee members who are independent thinkers, and from outside audi- tors who are not bound by the business relationships they may have with the Chief Financial Officers, then the truth can be sifted out. Q. That's the first time you've raised the issue of rela- tionships between the auditors and Enron. What was Andersen's relationship with Enron? Was it appropriate? The relationship between all auditors and their clients is key to achieving reliable audit reports. It appears from the evidence that has come forward to date, that Andersen may have consulted with the Chief Financial Officer of Enron regarding the partner- ships that were related to the corporation's demise. The partnerships apparently held off -balance -sheet debt for the corporation. If the auditors were involved in devising or even approving this scheme that reported the debt off the balance sheet, then they were involved in a role with the com- pany beyond simply auditing the financial statements. Q. Is that unethical for audi- tors to do? It is unethical for audi- tors to audit their own work. The concept of an audit is to have a third party examine financial A positive orientation toward client services During the many years BONDI & Co. up has served its clients across the Rocky Mountain West, the firm has earned a reputation for its positive, assertive orientation. What this means to BONDI clients is that we literally roll up our sleeves and pitch in to find solutions, not just identify problems. We work with our clients to provide the timely, personalized service so greatly needed in financial matters. Our services range from the traditional —accounting, record keeping, income tax advice and auditing —to the innovative —unique consulting to businesses and individuals. This service mix was developed through extensive analysis of our clients' needs, and it reflects the BONDI commitment to solid teamwork, both within our company and with our clients. BONDI teamwork, combined with our commitment to personalized service, allows us to provide our clients with the interpretation, advice and information necessary for better fiscal management. r transactions prepared by staff, then report to the Board of Di- rectors or Audit Committee di- rectly so that there is a three legged stool of accountability, with the auditors being one leg, the Board of Directors/Audit Committee a second, and the staff of the organization, includ- ing the financial staff, the third. If those three legs do not oper- ate independently, the reliabil- ity of the audit report suffers. Bert Bondi describes the three- legged stool theory. Q. Has BONDI & Co. encountered situations where unethical behavior has oc- curred? Yes we have. The firm has resigned from several audit assignments over the past 25 years. We also have not been asked to submit proposals on some audit jobs based on our reputation for dealing directly with the Board of Directors of an organization. Recently, a governmental entity did not invite our firm to submit a proposal based on a previous experience when our firm did not allow management to con- trol what we put in our reports. At another governmental entity, we resigned from the audit en- gagement because we felt the fi- nancial staff was trying to man- age the audit process. Q. How can financial offic- ers manage the audit process? Very effectively. Often times governing boards delegate their responsibility of selecting outside auditors to the very staff that records transactions. Many times in the last 25 years we have gone to audit selection interviews where no member of the governing board was present. Only staff members, whose work was ultimately being au- dited, participated in interviewing the prospective au- ditors. That's a bad first step, in our opinion. That allows the "fox" to determine who watches the "henhouse." Q. How do financial manag- ers try to control the auditors? Several opportunities ex- ist. On a national basis, GFOA actually publishes a book titled "How to Manage Your Audit Process," for their Chief Finan- cial Officer members. Chief Fi- nancial Officers, just like the one at Enron, have a vested interest in how outside auditors view their transactions. Therefore, in order to have their point of view confirmed by out- side auditors, they get involved in selecting the auditors. They also get involved in man- aging the audit process on a daily basis, and control how the audi- tors deliver their reports. As many of our readers may have observed during the Con- gressional hearings into Enron's col -lapse, the audit committee members testified that Enron fi- nancial officers managed the audit process. The audit committee implied that there was an agreement between the auditors and the staff, when neither spoke up to challenge the other. Silence was inter- preted as agreement. Q. Are you suggesting that auditors meet with Boards of Directors or audit committees without staff present? No, I am not. How- ever, we have at least four au- dit committees who meet with us without staff present. Those committees ask direct questions of us about the pro- cedures we employed and their staff's involvement in our audit process. Generally speaking, nothing detrimental comes out of those private sessions. It does give the Board an op- portunity to speak directly with the auditors, absent executive staff (who may have controlled hiring the auditors to be with). Q. How do you think the Enron situation will affect your profession? E I believe significant changes are coming. Once a subject enters the political arena, it becomes a "hot potato." Somebody feels they have to do something to answer to their constituency. It seems clear to me that the regulatory process is going to stiffen. That includes the re latory process concernin it reports themselves, a ell as the process overseei uditors. And as we discjped earlier, some accountilVandards will have to change t e sure that financial state is reflect all meaningful fin ial activity, like the risk in th artnerships in the Enron situa n. The current financialVatement model may have to chanX In addition, regulations may n to be tightened over those who audit these fin &al models. Q. IUiWation really the weiMMis situation? APE It's hard to say that regu- on will satisfy all needs. However, as some journalists have pointed out, Enron may be only the "tip of the iceberg." Clearly, when the economy turns down, financial failures occur. Then finger pointing starts as to the cause. Generally, the person with the deepest pockets gets legally blamed. In the Enron situation, the scapegoat seems to be Andersen, not withstanding that that they may have admitted mak- ing several mistakes in the audit process. Therefore, it seems to me tis goinri'�o ocMMINNSUla- cur. tion is going to occur. qqqq Q. Hasn't the accounting profession regulated itself through a peer review program? A. Yes it has, but thug is some honest dialog that occur as to how effective review has been. We were early members of a vol- untary peer revo ram that began in 1977 the fact that the firms gone throu 1978 and received unqualified (the highest possible) opinions. On the other hand, we knomWMV are subs[ rti i prac- ticing almost everywhere. The prices they charge are gen- erally low. The scope of their audits is also poor. Yet, they get unqualified opinions from pe� reviewers. Q. Why does this occur? E CPA firms are not unlike any regulated industry, including local governments, publicly traded companies, public utilities and nonprofits. That is, CPAs know where to get an easy and cheap peer review, C just like other organizations know how to short change the audit process. It is troubling to see how many public accounting firms get their peer review "audits" done by a close associate. The peer review program hasn't i ough teeth to put a substan- rd CPA f off the last have been bottom line is the peer re- ✓ pyW.Lmm of public ac- dard firms. Therefore, I ex- pect that more regulation will cow Q. Do you think this regu- lation will be the profession regulating itself or will the gov- ernment get involved with the and Exchange Com- I believe the govern- ment will get more involved. In hcn we have a politi- cal climate of "less governme is better," its hard to imag' the federal government wil t fully involved to the in where all auditors mus em- ployed by a federal ncy. However, the is some discus- sion aboutIrfederal agency hir- ing outside private sector CPA firms to do the auditing. These private sector firms, like BONDI & Co., would then re- port directly back to the regula- tory agency, rather than the cli- ent, to enhance independence. I don't think this model is nec- essarily good, but unless we can get organizations to value an au- dit and get Boards of Directors and elected officials involved in audit committees, more regula- the situation you First, I don't belie of us has all of the Enron situation. ey're still to be dis But long a the Enron situa- tion ped, I believe that Boar irectors of both pub- lic a rivate companies have del ed too much of their au - di sponsibility to staff person- ey yhave seen it as a regula- ory compliance situation that they don't need to be involved in. So I think one solution is to get Boards of Directors speak- ing more regularly to their au- ditors. That should begin with the auditor selection process. I also believe that audit com- mittees and Boards of Directors need to provide a line of com- munication for auditors, so that communication is not filtered and modified by staff. Ultimately, good staff want good auditors. But inadequate staff or those who are not con- fident in their own abilities, al- ways prefer to control whatever process surrounds them, includ- ing the audit process. That needs to be cleaned up quickly. Increased regulation will mean increased costs. Regulation does not come without a price. there any good to of this situation? Yes, I think there will be positive changes. I think it is a wake-up call for those who have a fiduciary responsibility to oversee the financial operations of their organization. If they use the wake-up call and learn how to communicate with their outside auditors, I believe that financial accountability will be improved. Q. I know that BONDI & Co. issues a management letter to its audit clients. Is this the same as an audit report? No, it is not. Techni- cally, the management letter is an optional, subjective report re- ceived by the Board directly from the auditors. Generally speaking, most clients see more value from the management letter than from the audit opinion on the finan- cial statements. Q. Why do clients value the management letter more? P, Because it offers sub- jective recommendations on how to improve processes. In our management letters we also frequently benchmark our clients, comparing them to different standards in the in- dustry or other similar orga- nizations. To audit committees serving in a fiduciary responsibility, this additional subjective in- formation and comparative in- formation is more valuable than a standard -worded opin- ion on the financials that is often seen as "boilerplate." Q. How much of BONDI & Co.'s work is auditing ver- sus the consulting that we hear so much about with Enron? Approximately 70 % of BONDI & Co.'s revenues are derived from auditing. About 6% of total revenues are received from consulting. National CPA firms like Andersen are reported to de- rive two-thirds of their rev- enue from consulting, and only one-third from auditing and accounting. This allocation points out how different BONDI & Co. is from national firms. In your question is the root of the Enron/Andersen issue. Regulators are clearly suggest- ing that consulting should not be "...we know that there are substandard firms still practicing... The prices they charge are generally low. The scope of their audits is also poor." done by CPAs for audit clients. In the magnitude that apparently occurred in the Enron situation, we clearly agree. As is evident by our revenue sources at BONDI & Co., we do not do consulting on audit cli- ents. Our consulting is generally done with non -audit clients. However, our management let- ter can be seen as a consulting product as in much as it provides advice on how to clean up fi- nancial situations and how to better perform certain financial functions. Q. Are you saying that BONDI & Co. has not engaged in significant consulting activi- ties with audit clients? Yes, I am. Some is oc- curring for some clients, but the consulting has resulted in less than 10% of the client fees. We also do not audit any orga- nization where we compile fi- nancial statements. Although that is currently al- lowed under the profession's Code of Ethics and under state laws where we practice, we have opted as a firm not to audit any compiled financial statement prepared by our firm. Q. Why have auditors na- tionally shifted their business to consulting? I am aware that the large national CPA firms during the last 10 years have shifted their emphasis away from auditing fi- nancial statements (which had been the backbone of their C"- X practices for over 100 years) to consulting. You cannot even find the term "Certified Public Accountants" in the Andersen name, or the Price Waterhouse name or the KPMG name. Most of the na- tional accounting firms see themselves as financial consult- ing firms and more. The reason for this is that con- sulting has provided them with higher volumes of revenue than have auditing services. Organizations have devalued au- diting, so the large firms have gone where the market drove them. Q. Why would consulting provide more revenues than au- diting services? Because some clients are asking for, and maybe Enronis an example of this, advice on sophisticated deals like those partnerships that held off -bal- ance -sheet debt. This type of consulting has higher value than a required audit report. Audit reports themselves have been diminish- ing in value to the client in as much as they see them as a nec- essary evil. Therefore, the national market- place of public accounting has shifted towards where the cli- ents have put the most value. Q. Is there a lesson in this? I believe there should be a lesson here for everyone. That lesson is: unless the public demands better audits and places more value in a good audit, they will not receive an improved product. Audit fees have become a com- modity in the last several years. Clients shop auditors as they shop "blue light" specials at Kmart. They find an auditor who charges the lowest price and can spend the least amount of time looking at the records, and therefore, come up with the cleanest report. That mentality needs to change for audits to achieve a higher quality. Also, the accounting profession needs to learn the lesson that some reporting standards need to change. We also need to learn how to penalize those in the auditing business for doing low quality, substandard work. Until a few months ago CPAs had credibility ratings higher than most other professions. Unless we learn to change, we will not maintain that high de- gree of trust with those we serve. The BONDI Bulletin is prihlisheel gnarterlY h(,: BOADI & Co. t.t_t� (l:K1111 DPI191.1( \(I()IAIVAIs \1 \\ \11:\11.\ I( ONS1 I I \\ I s .100-2i 0- 9083 I� a n'.hnndica.eant BONDI &CO. LLP Fall 2003 -f....0 Government Finance Reporter GASB 41 Provides "Perspective Difference" Guidance GASB 41, Budgetary Comparison Schedules — Perspective Differences, the newest amendment to GASB 34, was issued in late May and must be implemented simultaneously with GASB 34. Governments that have already adopted GASB 34 should apply GASB 41 to financial statements for periods beginning after June 15, 2002. The new GASB 41 standard provides guidance �--- -- for governments that have signifi- cant differences between their ---------- budgetary fund structure and the fund structure required for GAAP reporting. When these differences result in a government's not being able to present budgetary comparison information for the general fund and its major special revenue funds, GASB 41 requires governments to present the information using their own budgetary fund structure as required supplementary information (RSI). GASB 41 explains that a perspective difference occurs when "the structure of financial information" used in a government's legally adopted budget differs from the fund structure required by GAAP. When this situation occurred prior to GASB 41, some governments concluded that budgetary comparison information was not required. Others were uncertain about how to report budgetary results when it was not possible to assign revenues and expenditures from the budgetary fund structure to GAAP funds. In some situations, governments were unable to meaningfully associate estimated revenues and expenditures from their legally adopted budgets to actual revenues and expenditures reported in their general fund and major special revenue funds. When perspective differences are significant, governments are required to present their budgetary comparison information using the budgetary funds, (Continued on back) GASB 41 Provides "Perspective Difference" Guidance (continued) organization, or program structure used for their legally adopted budget. Regardless of how the comparison information is presented, it must include all of the activities that are reported in the general fund and each major special revenue fund in the entity's statement of revenues, expenditures and changes in governmental fund balances. The NCGAI 10 reconciliation should be used to show adjustments needed to reclassify activities that should not be included, such as activities that are reported in other fund types or in nonmajor special revenue funds in the governmental fund statements. Also, reclassifications should be used to shift revenues and expenditures from the budgetary. funds, organizations, or program structures to the general fund and major special revenue funds used in the GAAP operating statement. The reconciliation may be to the total for the general fund and major special revenue funds or the total for all governmental funds (both major and nonmajor). When governments use budgetary funds, organizations, or program structures to present their budgetary comparisons, they are not permitted to present those comparisons as basic financial statements. Their reporting is limited to RSI. In its Basis for Conclusions, the GASB notes that a key element in its original decision to allow presenting budgetary comparisons as basic financial statements was that some governments have budgetary and GAAP fund structures that are "essentially the same." When perspective differences are so significant that a government is unable to present budgetary comparison information for its general fund and major special revenue funds, this is clearly no longer the case. When budgetary comparison schedules are presented as RSI, the reconciliation and other related disclosures (such as any excess of expenditures over appropriations in individual funds) should be presented as notes to RSI. Derivatives' Value, Risks Clarified in GASB Technical Bulletin Do you understand how to handle disclosures regarding derivatives? If the answer is "No," you're not alone. Now, happily, there's somewhere to turn for assistance. With the issuance of a Governmental Accounting Standards Board technical bulletin titled "Disclosure Requirements for Derivatives Not Presented at Fair Value on the Statement of Net Assets," some of the uncertainty over derivatives has been cleared up. The new document points out that disclosures should specify the objectives and terms of derivatives, related debt, fair value and associated risks, such as interest rate risk, basis risk, termination risk, rollover risk and market access risk. All of this is helpful, to be sure, but even more clarification is needed and it's on the way. Sort of. GASB is working on a full-fledged statement on derivatives, but it won't be ready for approximately two years. BERT R. BONDI, CPA Partner BONDI & Co. LLP Bert Bondi founded BONDI & Co. LLP Certified Public Accountants and Management Consultants in 1976 after spending four years with the international accounting firm Price Waterhouse and four years as partner in a Colorado CPA firm that was the forerunner to BONDI & Co. LLP. Through his three decades in accounting, Mr. Bondi has gained experience providing services for fund accounting entities, financial institutions, and Colorado businesses. Bert encourages BONDI clients toward economic accountability and responsibility. A 1967 graduate of the University of Notre Dame in South Bend, Indiana, Mr. Bondi has continued his education through such recognized courses as the National Tax Program at the University of Michigan and the Government Finance School at Texas Tech University. He is a licensed Certified Public Accountant in Colorado, California and Wyoming. Bert has served on the board of directors of a Colorado bank and is past president of the Metropolitan State College Foundation Board of Governors. He has been active in and continues to support many professional and civic organizations including: • JLD Advisory Board • Chambers of Commerce • Denver Art Museum • Denver Symphony • Home Builders Association • Community Associations Institute • American Cancer Society • State of Colorado Revenue Estimating Advisory Committee • Denver Post Charities • Rocky Mountain News Year of the Arts • CSCPA Committee for Aid to Disadvantaged Businessmen • Angels for CASA • ND Club of Denver • American Institute of Certified Public Accountants • Colorado, California, Wyoming Societies of CPAs • GFOA 1, KIMBERLEY K. HIGGINS, CPA Partner BONDI & Co. LLP Kim Higgins is a magna cum laude graduate of Murray State University in Murray, Kentucky, where she earned a bachelor of science degree in accounting. She began her accounting career with a large Kentucky -based CPA firm, working primarily with closely held businesses. In 1980, she joined BONDI & Co. LLP, where she immediately had a positive impact. Ms. Higgins has served on several professional committees and task forces, including those of the Colorado Society of Certified Public Accountants, the American Institute of Certified Public Accountants (AICPA) and the Governmental Accounting Standards Board (GASB). She has also been an instructor and speaker for the AICPA and other professional organizations. Kim has extensive experience with goal setting and monitoring, financial statement analysis, budgetary planning, personal and corporate tax planning, information system implementation (MIS), accounting system design, and sales cost analysis. Industries with which she is most familiar include closely held businesses, local governments, and nonprofit organizations. A charter member of Beta Alpha Psi honorary accounting fraternity, Ms. Higgins's activities include: • Junior League of Denver • Colorado Municipal League • Government Finance Officers Association (SRC) • Denver Chambers of Commerce • GASB Task Forces • American Institute of CPAs • Colorado Society of CPAs • Special District Association of Colorado • Elementary School Classroom Volunteer 1 Accounting, Record Keeping g and Financial Consulting BONDI's extensive computer capabilities are designed to assist businesses desiring complete accounting and record keeping services. This service can include recording of all financial activity. Clients submit check vouchers or check stubs, revenue records, accounts receivable invoices or summaries, liability documents and other key data. In return, a cash journal, payroll ledger, various subsidiary journals, general ledger and monthly financial statements are compiled by BONDI. It's a quick, simple service that many of our clients find indispensable. LAuditing Auditing financial statements is the largest single element of BONDI's practice. We review the client's entire financial operation so that the most complete assessment of financial statements may be rendered. Detailed recommendations for improvement result from this review. Tax Services BONDI & Co. LLP provides complete tax services that go well beyond preparing income tax returns. We assist in total tax planning, including key follow-up advice, information on new tax matters and advice on pension and profit sharing plans. In short, we provide the ideas necessary to minimize taxable income, and we do it in a timely, understandable format. BONDI also has an excellent reputation for playing a key role in estate and gift tax planning, participating with client attorneys, bank trust officers and insurance executives. JAMES E. RAE, CPA Manager BONDI & Co. LLP Jim Rae, CPA, audit manager for BONDI & Co. LLP, has worked in both public and private accounting, gaining a valuable perspective on, and appreciation for, the challenges and opportunities of each. He has that unique ability to empathize with clients' difficulties in implementing changes recommended by an outside auditor, while at the same time recognizing the importance of the auditor's perspective. Jim spent several years with the Thompson School District R24 in Loveland, Colorado. While with the district, he was responsible for preparing the Comprehensive Annual Financial Report. During his tenure, the district received the GFOA Certificate of Achievement for Excellence in Financial Reporting. He also designed and tested new financial software, coordinated with the auditors, reconstructed the district's fixed asset records, planned and coordinated the first equipment inventory in seven years, and supervised and trained accounting personnel. Mr. Rae holds bachelor's degrees in accounting and psychology from the University of Northern Colorado in Greeley. He worked as a federal grant auditor for another CPA firm before first joining BONDI & Co. LLP in 1984. He has served as co-chair of the Governmental Committee for the Colorado Society of Certified Public Accountants, is a member of the Government Finance Officers Association, and was chairman of the Supervisory Committee for Big Thompson Federal Credit Union. Mr. Rae currently holds the position of treasurer for a Loveland -based nonprofit organization, and serves on the board of a nonprofit organization in Greeley. Jim and his wife have four children who occupy most of their leisure time, but Mr. Rae also enjoys following the Colorado Rockies. NLIA STONE, CPA Manager BONDI & Co. LLP Challenge and the variety of experiences within public accounting are the two aspects of the profession that Julia Stone appreciates most. As a member of the BONDI & Co. LLP team, she is able to encounter both on a daily basis. With a diverse background in governmental and nonprofit accounting, auditing and tax issues, Julia has performed tax research, prepared and reviewed budgets, processed accounting records, and even managed personnel and operations. Before joining BONDI, Julia was the accountant for a local corporation. This experience instilled in her a sense of efficiency and accuracy that is important in any organization; she now carries this value with her when helping clients in many industries. Julia also has solid experience in several management operating systems and financial software packages on which BONDI trains and supports clients. She uses her experience, along with a zest for challenge, to assist clients with an approachable and problem solving appeal. A University of Kentucky graduate and longtime Wildcats fan, Julia was awarded a swimming scholarship in school and later became a scholar athlete. She is a member of the Colorado Society of CPAs Governmental Issues Committee. Away from the office, Julia carries over her love of adventure and different experiences by taking on new sports, such as biking and hiking. STEPHEN A. CLAWSON, CPA BONDI & Co. LLP When it comes to accounting and financial operations Steve Clawson, CPA, leaves no stone unturned. Before joining BONDI & Co. LLP, Steve spent ten years in public accounting working for two different CPA firms, where he supervised audits in several industries including nonprofits and governmental units. His drive for challenge later led him to a career as a Chief Financial Officer in the private sector. His responsibilities here included overseeing financial operations, information systems, and human resources. During his tenure as a CFO, Steve contributed to a twenty -fold increase in profitability. He also played a significant role in a multi -billion dollar acquisition and converted a frame -relay network to an internet- based network, resulting in an annual $100,000 cost savings. He was recognized for "outstanding performance" by the President's Club. Steve is a Colorado native and holds a Bachelors degree in accounting from the University of Utah in Salt Lake City. For almost two decades he has consistently completed a minimum of 40 hours of Continuing Profession Education per year in subjects that include accounting updates, technology, pension plans, governmental and nonprofit auditing, and communications. Proficient with numerous computer software applications, including Mas 90, Audit Vision, Accountants Trial Balances and more, Steve is also capable of managing NT networks and evaluating computer systems. As a BONDI & Co. audit manager, Steve utilizes his business, technology and accounting experiences to effectively organize, plan for, train and direct staff in completing efficient, effective and thorough engagements. Steve is an active member of the American Institute of Certified Public Accountants, Colorado Society of Certified Public Accountants, and is involved with the Boy Scouts of America. SUSANN R. HARTWIG, CPA Manager BONDI & Co. LLP It was probably inevitable that Susann Hartwig would follow her father into the accounting profession. After all, from the time she was old enough to understand basic accounting, she assisted him in Dickinson, North Dakota. However, it took many years and several different professions for Susann to reach the career decision of becoming a Certified Public Accountant. After some years in the workforce, Ms. Hartwig returned to college at the University of Colorado at Denver. She received her accounting degree from UCD and became a CPA a few years later. Upon graduation, she joined a Littleton -based property management firm as its bookkeeper, then later gained additional experience working for a local CPA firm for several years. There, she concentrated on small business, governmental and nonprofit audits, tax return preparation and other responsibilities. Susann is a firm believer in working together with clients to make decisions, and she sees her role as one of simplifying technical, complex, issues for them. She also applies a "treat your clients the way you treat your family" approach to public accounting that makes Ms. Hartwig invaluable to the BONDI team. She is a member of both the American Society of Certified Public Accountants and the Colorado Society of Certified Public Accountants. When she is not at work, you can find Ms. Hartwig with her three sons fishing, riding dirt bikes, target shooting and playing horseshoes at the family cabin in Jefferson County. Whenever possible she spends time boating on Lake Sakakawea, north of Dickinson. JEFF D. ULRICH, CPA Senior BONDI & Co. LLP Jeff Ulrich's primary work emphasis within BONDI & Co. LLP is auditing, where he oversees engagements and staff members, and looks for ways to further improve efficiencies and accountability for the clients he serves. Before joining BONDI & Co. LLP, Jeff had been with two other regional CPA firms for several years obtaining experience in auditing governmental and nonprofit entities. He subsequently worked for a large public Colorado -based banking institution as an internal auditor. His hands on experience as an internal auditor, strengthened by an enhanced understanding of accounting systems enabled him to collect and present financial data that provided guidance to decision makers within the organization. His proven ability to communicate, educate and work diplomatically with a range of personnel from staff to senior executives is a valuable asset when serving audit clients with a desire for knowledge. A native of Colorado, Jeff graduated with a Bachelors degree in accounting from the University of Northern Colorado in Greeley. He is a member of the American Institute of Certified Public Accountants and the Colorado Society of CPAs. When Jeff is not dreaming about golfing on a caribbean island his other interests include sports and music. PAUL E. GLICK Governmental Consultant BONDI & Co. LLP Paul E. Glick is a long time governmental accounting independent consultant. Previously he was the program manager of the financial management program, Governmental Training Division within the Carl Vinson Institute of Government at the University of Georgia in Athens, GA. He managed the financial management program and served as a course instructor for local government officials, participates in various seminars for state and local government officials and elected officials and developed many of these training programs. Glick also worked for the Government Finance Officers Association (GFOA) in Chicago, IL. At GFOA he served as lead instructor for governmental accounting and financial reporting training programs and worked with the GFOA Certificate of Achievement Program. Glick is the author/editor of 14 GFOA publications including the Financial Reporting Series and was a contributing author of GFOA's 1988 Governmental Accounting, Auditing and Financial Reporting publication. In addition, he has coauthored five other books. Glick has a B.A. degree in economics and a master's degree in school business management from Northern Illinois University. He is a certified school business official in Illinois and a registered school business official with the Association of School business Officials (ASBO), and he has served on many state and national advisory committees concerning governmental accounting and financial reporting. He is a member of the GFOA, a member of GFOA's Certificate of Achievement Special Review Committee, a member of GFOA's Certificate of Achievement Special Review Executive Committee, a member of GFOA's Budget Review Committee, a member of ASBO and a member of the arbitration panel for ASBO's Certificate of Excellence Program. Mayor Randy Pye City Council WARD I George Gatseos II Betty Ann Habig WARD II Bart Miller Becky Lennon Mayor Pro Tern WARD III Susan Nix Andrea Suhaka WARD IV Alan Fletcher Betty Wotring Treasurer Doug Milliken City Clerk Lise Seedroff City Manager John Pazour City Attorney Robert Cole C ;,ity of Center,'iial October 20, 2003 Bondi & Co. Certified Public Accountants Buildings A & B Englewood, CO 80112 To Whom It May Concern: We are pleased to recommend the Governmental Audit Services of Bondi & Company LLP. Centennial is a newly incorporated city that contracted to Bondi & Co. during its first year and for every year since for it's independent audit services. Bondi & Co. has completed two audits for the city and we have found their approach to conducting and completing the audits and subsequent management reports efficient and effective. We have found their staff to be well trained and competent and have been extremely pleased so far with the results. Mr. Bondi has been thorough in his review and his comments and management reports have been candid and have helped our young city put into place the proper procedures and controls. We look forward to Bondi & Co expertise in helping us to implement and coming into compliance with GASB 34 in the coming year. Please contact me directly if you have any questions regarding the firm or their performance. Mayor 12503 East Euclid Drive, Suite 200 Centennial, Colorado 80111 Phone 303.734.4567 Fax 720.488.0933 www.centennialcolorado.com C..ay of Commerce City Department of Finance January 22, 2003 To Governmental Entities: Re: Bondi & Co. Certified Public Accountants Bondi & Co. has performed the annual external audit for the City of Commerce City since 1996. We have found their staff to be professional and excellent to work with. They are attentive to our financial management needs, receptive to meeting our time requirements and responsive to our questions. Bondi & Co. is efficient and effective in completing audit services and in providing management reports. They excel in reviewing our internal controls and recommending improvements. They do a good job of balancing their recommendations with our unique circumstances without compromising their independence. We have found Bondi & Co. to be well informed and helpful in providing advice regarding unusual accounting issues. We have found their unique relationship with noted GASB expert Paul Glick to be extremely beneficial for our early compliance with GASBS-34. If you have any questions regarding the firm, please feel free to contact me at 303-289-3608 or the Deputy Finance Director, Carol Enninga, at 303-289-3605. Sincerely, Roge Tinklenberg G� Director of Finance 5291 East 60th Avenue • Commerce City, Colorado 80022-3203 • 303.289.3627 • Fax 303.289.3661 www.ci.commerce-cityco.us 40JyTY O/ce'V � O �At T s •��ORP� To Whom It May Concern: CIT , AND COUNTY OF BROOMFIELD One DesCombes Drive • Broomfield, CO 80020 • Phone: (303) 469-3301 October 14, 2003 I am pleased to recommend the Governmental Audit Services of Bondi & Company LLP. Bondi & Company has provided the independent audit services for the City of Broomfield for many years and was engaged when I came to Broomfield as Finance Director in 1995. Review of Bondi's prior audit work, provided me with an excellent foundation of the fiscal and financial management condition of the city. I have worked with Bondi on the past 8 audits. I have found Bondi's approach to conducting and completing audit services and subsequent management reports efficient and effective. Bondi excels in many audit areas including review of internal controls, management recommendations audit planning and the resultant efficiency. Bondi conducts substantial interim audit work to enhance the work conducted following year. Bondi & Company has always been available for advice on special accounting needs and has readily shared their knowledge to keep the city in conformance with GAAP and the latest GASB pronouncements. have found the audit staff to be well trained and efficient and have been extremely pleased with the results of each annual audit. Bert Bondi has been the partner in charge of our audits. His review has been thorough, his comments and management letters candid, and he has demonstrated diplomacy with presentations to management and City Council. If you have any questions regarding the firm or would like additional information about the City of Broomfield experiences, please contact me directly at (303) 438-6313. Sincerely, Greg Demko Finance Director Citp of fort Kupton THE "PROUD TO BE" CITY LA CIUDAD "ORGULLOSA DE SER" "HOKORI NO" MACHI P.O. Box 148 130 S. McKinley Avenue Fort Lupton, Colorado 80621 Performance, Integrity, Teamwork Accountability and Service September 20, 2001 Bondi & Co., Certified Public Accountants 44 Inverness Drive East Denver, CO 80112 Re: Reference Letter for Bondi & Co. To Whom It May Concern: County of Weld (303)857-6694 Fax (303) 857-0351 It is my pleasure to provide a letter of reference regarding the professional governmental auditing abilities of Bondi & Co. The Finance Committee and the City Council for the City of Fort Lupton selected Bondi & Co. to be their auditors for the term from 1998 to 2000 with the option for one three year renewal. Bondi has completed the audits for the years 1998 to 2000 and their contract has been extended for an additional three-year term. At the time that Bondi & Co. was chosen for municipal auditing services the City of Fort Lupton was looking for integrity and scope in dealing with serious management problems that the City was facing. The leaders of the City have been very pleased with the auditing work from Bondi & Co. and they feel the comments made through the annual management letter to City Council have been the major reason for improvements in operations of City government. In the two audits I have been specifically involved with I have found the audit team from Bondi & Co. to be knowledgeable, thorough, efficient, and a pleasure to work with. Mr. Bondi has taken a personal interest in the operations of the audit process and monitors progress for the City and the audit team and has been helpful in recommending areas of improvement. The City has also requested Bondi assist with other financial matters. During 2000 Bondi prepared the Parity Lien Certificate for a City bond issue. At the present time Bondi is assisting the City in converting to the GASB 34 model of account presentation. Staff has found Bondi & Co. to be very responsive and professional on these projects. Yours Very Truly, W. Alan Ruge Finance Director Lunique consultin services: An extra g BONDI's total commitment to its clients is most accurately reflected by our tailor-made consulting services. These services often complement or augment other services provided for existing clients. However, they can also be performed separately or as a group for any client, whether old or new. These services include, but are not limited to: • personal financial planning • computer and accounting equipment selection assistance • long range business analysis • personal evaluation and screening for key corporate and governmental positions • investment consulting • buy vs. lease cost analysis • budget control assistance • accounting systems design • service as agents for property management and trust accounts • operational auditing • litigation assistance and testimony • financial goal -setting ki rs H FPPA FIRE AND POLICE PENSION ASSOCIATION OF COLORADO September 27, 1999 Bert Bondi Bondi & Company Inverness Business Park 44 Inverness Drive East, Bldg. B Denver, CO 80112 Dear Bert: The Fire and Police Pension Association has retained the services of Bondi and Company since 1996. In April, our Board of Directors extended the contract with Bondi and Company through 2003. While that speaks for itself, I would like to add some of my own comments concerning your firm. Your staff is very professional and enjoyable to work with. They are considerate of our time constraints and busy schedules. and they plan ahead to create as little interruption to our normal daily activities as possible. They do their homework in preparing for the audit, and are very knowledgeable about our business. Your staff has been instrumental in our receiving the Government Finance Officers Association award for excellence in financial reporting every year, by coming up with a better format, that was clearer and more concise, and which saved us money on printing costs. I have also appreciated your personal involvement from the beginning of the relationship. Your professional reputation was well known to several of us at FPPA prior to our retention of your services. and you have lived up to our expectations. We are very pleased with the ongoing services that you provide and your attention to detail. We look forward to a continuing relationship with your firm. Sincere , Charles Dowden Controller 5290 DTC Parkway i Suite 100 Englewood. Colorado 80111-2721 3031770-3772 toll free 800/ 332-3772 fax 303t 771.7622 GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Adams County Arapahoe County Boulder County City and County of Broomfield Clear Creek County Douglas County Eagle County El Paso County Elbert County Gilpin County Grand County Jackson County Jefferson County Las Animas County Park County GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Routt County Teller County City of Aspen City of Black Hawk City of Brighton City of Central City City of Centennial City of Commerce City City of Cripple Creek City of Delta City of Durango City of Fort Collins City of Fort Lupton City of Fruita City of Glendale GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) City of Golden City of Gunnison City of Lafayette City of Louisville City of Loveland City of Salida City of Sheridan City of Steamboat Springs City of Sterling City of Superior City of Victor City of Westminster City of Winter Park City of Woodland Park Town of Dillon GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Town of Elizabeth Town of Fairplay Town of Grand Lake Town of Kremmling Town of Larkspur Adams County Employee Retirement Association Adams County Housing Authority Adams County Public Trustee Adams County School District #14 Arapahoe Library District Arapahoe County Public Airport Authority Arapahoe County Water & Wastewater Authority Arapahoe Water and Sanitation District Aspen/Piddn County Housing Authority Aurora CenterTech Metropolitan District GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Aurora Fire Pension Fund City of Aurora General Employee Retirement Fund Aurora Police Pension Fund Aurora Public Schools Barr Lake Metropolitan District Bayfield School District 10 JT-R Berthoud Fire Protection District Housing Authority of the City of Boulder Breckenridge Sanitation District Brighton Housing Authority Brighton School District Number 27J Castle Pines Metropolitan District Chapparal Metropolitan District Colorado Springs School District #11 Colorado Student Loan Program GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Columbine Lakes Water District Commerce City Housing Authority Cottonwood Water and Sanitation District Dolores Water Conservancy District Durango School District 9R Eastern Adams County Metro District Englewood Housing Authority Estes Valley Recreation and Park District Fire and Police Pension Association Foothills Park and Recreation District Fort Collins Housing Authority Front Range Airport Authority Gilpin School District Grand County Housing Authority Grand County Tourism Board GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Grand Lake Metro Recreation District Hyland Hills Park and Recreation District Idledale Water and Sanitation District Jefferson County Airport Authority Kremmling Water and Sanitation District Lakehurst Water and Sanitation District Lakewood Housing Authority Littleton Public Schools Mountain Water & Sanitation District Mountain View Fire Protection District Northern Colorado BOCES Northern Colorado Water Conservancy District North Park Hospital District North Shore Water and Sanitation District North Washington Fire Protection District GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) s Northwest Lakewood Sanitation District North Lincoln Water and Sanitation District Orchard Hills Water District Perry Park Water and Sanitation District Pleasant View Metropolitan District Purgatory Metro District Regional Transportation District Salaried Employees' Pension Trust Sable Altura Fire Protection District Sand Creek Metro District Section 14 Metropolitan District Skyline Fire Protection District Shannon Water & Sanitation District South Metro Fire Rescue District South Metro Fire Rescue Money Purchase Pension Plan Southgate Sanitation District GOVERNMENTAL CLIENT REFERENCES (Partial Listing - From 1980s through 2000s) Southgate Water District Spring Canyon Water and Sanitation District Steamboat Springs School District St. Vrain Valley School District RE-11 Three Lakes Water and Sanitation District West Metro Fire Rescue District Willow Trace Metropolitan District Willows Water District LPeople-oriented rofessionals p BONDI professionals are people first, CPAs second. Their diverse backgrounds and extensive experience, blended with their management ability and business acumen, provide a solid basis for the quality services BONDI & Co. up performs. But the people at BONDI are more than experienced, knowledgeable professionals. They know how to communicate with clients in a practical, problem -solving manner. They are as comfortable with clients in a one-on- one situation as they are in addressing a board of directors or a large gathering at the client's annual stockholders' meeting. SAMPLE MANAGEMENT LETTER FOR XYZ GOVERNMENTAL ENTITY Governing Board XYZ Governmental Entity Colorado CONFIDENTIAL For Management Use Only Ladies and Gentlemen: We have completed our audit of the XYZ Governmental Entity for the year ended December 31, 20OX. As part of our audit process, we observed your financial policies and procedures. These observations gave us the opportunity to comment on areas where you have made positive changes to your financial operation, as well as those areas that may benefit from further enhancements. During our audit, we also evaluated your overall financial performance and we detail our findings in this letter to management. We present our report in three sections: Financial Analysis, Areas of Noticeable Improvement, and Recommendations for Enhancing Your Operations. We hope you accept our comments in the positive manner intended. FINANCIAL ANALYSIS On the following pages, we graphically depict several aspects of your financial operations. We believe this will illustrate your financial trends, and help you better understand your financial status in selected aspects of your overall financial position. Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 2 • USE TAX REVENUE Our first graph depicts the XYZ Governmental Entity's growth in use tax revenues from new construction. You have experienced significant growth over the past five years and this is evident in the trend analysis graphed below. You experienced the highest annual growth rates from 199Y through 199Z. This growth has slowed over the past two years, possibly due to real estate values stabilizing. This affects your tax revenues, since the tax is based on a percentage of new construction value. In any event, the XYZ Governmental Entity has exceeded expected use tax revenues. Utilizing a portion of your use tax revenues for your Open Space fund to develop parks and open areas has had a positive effect on many businesses and residents. BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 3 TAX AND SAFETY COMPARISONS Our next two graphs analyze total tax revenues and public safety expenditures per capita compared to three similar government entities. Your per capita tax rate decreased from $207.00 in 200A to $202.69 for 200B. One of the major factors is the population increase. Total Taxes Per Capita XYZ Governmental $202.69 Entity Entity A $186.63 Entity B $123.17 Entity C $539.13 $- $100 $200 $300 $400 $500 $600 XYZ Governmental Entitv Entity A Entity B Entity C Tax Revenue $ 4,031,167 $ 2,933,124 $ 5,219,671 $ 9,352,906 Population 19,888 15,716 42,378 17,348 Total Taxes Per Capita $ 202.69 $ 186.63 $ 123.17 $ 539.13 atBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 4 Your Public Safety expenditures per capita increased from $163.44 in 200A to $183.94 in 200B. This increase reflects your spending of excess revenues on Public Safety. Public Safety Per Capita XYZ Governmental $183.94 Entity Entity A $77.26 Entity B $54.47 Entity C $191.65 $- $50 $100 $150 $200 $250 XYZ Governmental Entitv Entity A Entity B Entity C Public Safety $ 3,658,166 $ 1,214,233 $ 2,308,321 $ 3,324,736 Population 19,888 15,716 42,378 17,348 Public Safety Per Capita $ 183.94 $ 77.26 $ 54.47 $ 191.65 BONDI & Co. LLP t CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 5 • INVESTMENT INCOME VS. DEBT SERVICE INTEREST PAYMENTS Our next graph compares your investment income with your debt service interest payments. Investment income has risen in the last three years, while interest payments have decreased. If this trend continues, the XYZ Governmental Entity's financial well being will continue to be healthy. Investment Income and Interest Payment Analysis 3,500,000 3,000,000 2,500,000 2,000,000 ■Interest Payments 1,500,000 ■Investment Income 1,000,000 500,000 0 199Z 200A 200B Another indicator of an entity's financial health is its cash and investment position. On December 31, 200B, you had a cash balance of $679,960, and an investment balance of $248,332,527. Of the investment total, you hold $48,117,900 in trust for the exclusive benefit of deferred compensation plan participants. These "trust" assets no longer appear on your balance sheet due to your early implementation of Governmental Accounting Standards Board (GASB) Statement No. 32. BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 6 Total cash and investments have increased approximately 49 percent since 199X. Also, since 199X, your investment mix has changed somewhat. At the end of 20013, your investment portfolio consisted of 88 percent in fixed income securities, as compared to 95 percent at the end of 199X. Conversely, mutual fund holdings, a more liquid investment, made up five percent of your total portfolio in 199X, compared to 12 percent at the end of 200B. $1e0,000,DDD $140,000.000 $120.000,000 $100,oD0.000 s80,000,DDD ie0.0D0.000 $40,000,000 $2D,0D0,0D0 lox MY Inn 199X Mutual Funds/CDT Deferred Comp. Fixed Income Total $ 7,297,046 24,801,469 134,668,468 $ 166.766.983 200A 2MB $ 10,839,184 27,324,525 138,243,050 $ 176.406.759 199X-200B Filed Income Securitles/Corporate Bonds Defend Compensatlon Mutual Funds/CDT 199Z $ 10,361,027 33,841,939 150,254,534 $ 12L 57.500 r Li $ 19,211,685 40,078,678 156,377,532 $ 215,667,895 rrwl IN $ 24,645,423 48,117,900 175,569,204 248,332,527 BONDI & Co. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 7 • FIVE YEAR TREND OF GENERAL FUND The next graph demonstrates a five-year trend based on your revenues, expenditures and the fund balance for the General Fund. Overall, your revenues increased at a faster pace than your expenditures, primarily due to the increase in sales tax. At the same time, you have been successful in keeping your expenditures level during this period. $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 General Fund Five Year Analysis Revenues Expenditures Fund Balance 199X 199Y 199Z 200A 200B Revenues $ 6,001,030 $ 6,031,250 $ 6,702,064 $ 7,310,243 $ 7,764,366 Expenditures 6,110,050 5,050,250 6,233,374 6,667,443 6,631,672 Fund Balance 3,100,540 2,056,345 1,928,751 1,879,424 2,125,011 atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS I Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 8 • PERCENTAGE OF INTERGOVERNMENTAL REVENUES Our next graph compares XYZ Governmental Entity to five other Colorado entities based on intergovernmental revenues for the fiscal year ended 200a. In our analysis, we site some entities similar to XYZ Governmental Entity, as well as some unrelated entities, to indicate the distinctions between Colorado entities. You see in the graph that XYZ Governmental Entity has the highest percentage of grant (or intergovernmental) revenues. As the federal government continues to redefine intergovernmental roles, this revenue source may decrease. Consequently, XYZ Governmental Entity may have to consider different revenue sources or eliminate some of the services you now provide. BONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 9 AREAS OF SIGNIFICANT 1WROVENENT We would first like to commend the Finance Department staff for working so hard to complete everything we needed while we were performing the audit. Everyone was helpful and cooperative, even when the audit interrupted other tasks they needed to complete. We also commend the Accounting Manager for going out of her way to research balances, compile all of the fixed asset detail, and help in all areas of the audit. Due to the dedication and hard work of your staff, management has your annual 200B financial information earlier than in previous years. In the next several pages, we review areas where you have enhanced your internal control structure and financial policies and procedures over the past year. We commend the governing body and management for giving your staff the direction and resources to make these improvements. BONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Choosing a CPA firm? Let us provide you with some suggestions. Services — Look for a firm that offers a broad range of services, including some that you don't think you'll need. Chances are, your requirements will grow, and you will rely on the firm for ever-increasing financial needs. People — Since you will be working closely with your CPA firm, make sure that you choose one whose people are not only competent but enjoyable to have around, too. They will be spending varying amounts of time with you and your management, and that time should be quality time. References — Talk with some of the clients whose names are provided to you by your prospective CPA firm. Ask them the tough questions. Make sure you speak to top management, the ones who use the results of a CPA's work. Draw parallels between their needs and yours. And check with more than one. Peer Review — Make sure the CPA firm you choose is a member of the Division for CPA Firms of the American Institute of Certified Public Accountants. Then you can be sure that the firm is among a select group of CPA firms nationwide that voluntarily undergo a stringent review of their practices. The reports on these peer reviews are available to the public. W BONDI & Co. L P CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Denver Statewide Toll Free 303.799.6826 800-250.9083 Fax:303.799.6926 www.bondico.com M Affiliate Offices Worldwide CM 0 Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 10 A. ACCOUNTING STAFF'S TIMELY CLOSING OF ANNUAL BOOKS During our post year-end and interim audit field work, your accounting staff was prepared and efficiently closed your annual records quickly after year end. You should be pleased with the competence and care the financial team members have taken as part of the XYZ Governmental Entity's organization. B. FINANCIAL INFORMATION TO GOVERNING BODY XYZ Governmental Entity's governing body receives summary financial information prepared by your staff on a quarterly basis. This information helps the council/board make informed financial decisions on behalf of the XYZ Governmental Entity. We believe it is important to continue to provide the council/board with complete financial information to help them stay informed of the financial condition of the XYZ Governmental Entity. C. CAPITAL PROJECTS PROCEDURES MANUAL Reviewing the procedures for capital projects is the focus of a committee you established in 200A. The committee is updating the capital projects procedure manual to incorporate any changes. tsBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 11 We commend your vision in forming this committee. It demonstrates your commitment to further enhancing your financial position, as well as the service you provide to your citizens. D. INVESTMENT IN TECHNOLOGY The XYZ Governmental Entity invested in new computer hardware and software to increase the efficiency of your office staff. You are also training your employees to use the system. The new technology will provide staff with the tools necessary to report and account for information in a more timely manner, improving your overall productivity. Additionally, the XYZ Governmental Entity continues to monitor the use of the computer and technology resources you have available to your staff. Departments are reviewing their computer needs and evaluating how they can best allocate software and hardware within different departments. atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 12 Finally, you take measures to protect the data you store on the computer system by asking departments to employ back-up procedures. This ensures that staff would have to re-enter only minimal data into the system if information were lost. In addition, financial data and programs are stored off -site or in fire -proof safe vaults. E. CASH MANAGEMENT During our audit, we examined the investments and cash management procedures of the XYZ Governmental Entity. You have implemented procedures for investing cash in a manner that maximizes yields from cash and investments. Furthermore, your investment portfolio contains a variety of fixed -income securities and securities with variable rates. This enables the XYZ Governmental Entity to maintain the value of your investments in times of interest rate volatility. atBONDI & Co. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 13 We appreciate your attention to these details, which reflects positively on the XYZ Governmental Entity in comparison to other Colorado governmental entities that do not operate under such procedures. F. BUDGET AND PURCHASING CONTROLS Your internal controls in budget and purchasing areas are strong. Key controls and approvals are present from the time the budget is submitted and approved, through purchase order preparation and approval, to the recording of actual expenditures. Your Budget Director does an excellent job of assuring funds are available before he approves purchase orders. Additionally, when a purchase order is approved and entered into the system, the budget is automatically adjusted to ensure expenses do not exceed the budget. We commend the XYZ Governmental Entity's Budget Director for his accountability and management of the budget process. We acknowledge the timely service that is provided to all departments, while still maintaining the department's strong internal controls. BONDI & CO. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 14 G. SALES TAX AUDITS We are pleased to see you began enhancing your sales tax revenues by monitoring compliance with your ordinances. Even more impressive than performing the actual audits is the knowledge and training the XYZ Governmental Entity employees and taxpayers are receiving about sales tax compliance. You are granting a grace period to taxpayers, while also providing them with information on compliance and allowing them time to perform a self review or internal audit. In conjunction with this program, the XYZ Governmental Entity is waiving penalties and interest on underpaid taxes indemnified during the grace period. We support and commend management's approach to educating your employees and taxpayers about sales tax revenues. H. LONG RANGE CAPITAL PLAN The XYZ Governmental Entity maintains a Five -Year Asset Management Plan for future capital projects and repairs. This plan details the assets you acquire, the time frame for acquisition, and the source of funds for the acquisitions. BONDI & Co. LLP Ott CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 15 Your long-range capital plan addresses your needs so that you can establish priorities. You also accomplish acquisition, renovation, repair and maintenance in the most cost effective and least disruptive manner. You can plan cash flow for the different projects and avoid expensive, crisis -driven capital acquisition and repair. This is an example of your foresight and concern for responsible spending. We applaud your financial management. I. INVESTMENT COMMITTEE You organized an investment committee to assist in developing policies, evaluating investment decisions and reviewing compliance with your council/board/management-approved investment policies. We compliment the XYZ Governmental Entity for establishing this committee, which uses the talents of many individuals to sort out the complicated and changing area of investments. It is important for safeguarding your assets. BONDI & Co. LLP atCERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 16 You have made several other changes in the handling of your investments, such as adding a third party broker to purchase investments. Another employee is responsible for authorizing the investment, and yet another employee confirms the purchase with the broker. We believe this internal control structure will help ensure that more than one individual is involved in the transaction, intensifying your separation of duties. RECOMMENDATIONS FOR FURTHER ENHANCING YOUR OPERATIONS There are several areas we believe you should consider to further enhance your accounting system. We list them in the following section and intend them to help you improve your operating efficiency and internal control structure. We hope you accept our comments in the constructive manner we intend. I. FINANCIAL ACCOUNTING POLICIES AND PROCEDURES MANUAL The financial policies and procedures you follow continue to change, just as the XYZ Governmental Entity continues to change and expand its operations. Financial policies and procedures are important, not only for Finance Department staff, but for all employees to follow as well. They provide guidance for cross -training existing staff and training new employees. tsBONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 17 We encourage the Finance Department to develop a financial policies and procedures manual. You can use this manual as a valuable aid for training new employees as well as improving your internal control structure and providing guidance for existing staff. II. CROSS TRAINING STAFF One individual in the Accounting Department performs most of the accounting functions, such as bank reconciliations, detail account balance reconciliations, daily cash management, preparation of financial reports and monitoring grants. It will enhance your internal controls if another member of the accounting team is also able to perform all accounting functions. This is important for ensuring continuity of operations in case an individual is unable to work for any reason, such as illness or vacation. We recommend your Accounting Department staff members review all of the functions the department performs. They should ensure that more than one individual is appropriately trained in each of those functions. BONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS t MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 18 We understand how difficult this may be with a small accounting staff, however, we believe the Qrowth of your financial transactions warrants additional staff training. M. PROCUREMENT CARDS A procurement card (aka Purchasing Card) is a charge card used to purchase business -related goods and services. Many governmental entities are using procurement cards for the purchase of small dollar items. In most entities, small dollar purchases represent a slight percentage of the total dollars spent but are a large percentage of payables transactions. A properly utilized procurement card can streamline the purchasing process by eliminating the need for purchase orders, approvals, invoices and associated paper work. In addition, departments are not limited to one vendor but are able to shop multiple vendors for the best price available. A centralized administrator and use of customized management information reports provided by the issuing bank maintains control over the program. BONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS Council/Commissioners/Directors XYZ Governmental Entity Colorado Page 19 We recommend XYZ Governmental Entity explore a procurement card program as a tool to streamline and improve the efficiency of the purchasing process. As with any major change to established policies and procedures, XYZ Governmental Entity will need to weigh the cost/benefit of such a program. IV. RECORDING OF UTILITY TRANSACTIONS XYZ Governmental Entity records your utility billing revenue when you provide services and bill the customer. You allocate the payments received based upon a formula in the system and not necessarily by what the payment was for. We observed that the relationship between the amount billed and the amount paid was not consistent. Utility revenues represent a significant source of revenue to XYZ Governmental Entity. One of the best ways to monitor the activity is to develop monthly analytical procedures that evaluate the accuracy of your monthly billings and payments. It is important to develop a test to determine the accuracy of your billing and relate it to the number of customers and the time of the year. Sound analytical ratios will help XYZ Governmental Entity quickly identify potential problems or unusual circumstances. BONDI & CO. LLP CERTIFIED PUBLIC ACCOUNTANTS s MANAGEMENT CONSULTANTS