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HomeMy WebLinkAboutRESPONSE - RFP - 7516 AUDIT SERVICES (2)Proposal for Audit Services Bid 7516 July 16, 2013 McGladrey LLP 555 – 17th Street, Suite 1000 Denver, Colorado 80202 Kevin Smith, Partner 303.298.6499 City of Fort Collins, Colorado Assurance  Tax  Consulting 555 – 17th Street, Suite 1000 Denver, Colorado 80202 O 303.298.6400 F 303.298.6401 www.mcgladrey.com July 16, 2013 City of Fort Collins, Colorado Purchasing 215 North Mason Street, 2nd Floor PO Box 580 Fort Collins, Colorado 80522-0580 We appreciate the opportunity to provide the City of Fort Collins, Colorado (the City) information about our qualifications to serve as your audit provider. We are prepared to give full attention to the areas of greatest importance to you—and look forward to continuing to have the City as a valued client of our firm. We understand the City is seeking the following services of its audit provider: • Annual audit of the City of Fort Collins, Colorado for the year ending December 31, 2013 with the option to extend for an additional four, one year contracts (2014 through 2017). The results of this engagement will include: • Independent auditor’s report on the basic financial statements of the City and an “in-relation-to” opinion on the schedule of expenditures of federal awards and the supplementary information contained in the Comprehensive Annual Financial Report (CAFR) • Auditing standards generally accepted in the United States of America as set forth by the American Institute of Certified Public Accountants and the standards for financial audits set forth by the Comptroller General of the United States and the Government Auditing Standards, including reports on internal control over financial reporting and over compliance • Technical review of the CAFR • The provisions of the Single Audit Act of 1996, as amended, the provisions of U.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments and Nonprofit Organizations • Written communication to management and those charged with governance including a description of significant deficiencies and material weaknesses identified in the audit and a management letter which will include suggestions of operational improvements • Separately issued auditor’s reports and required communications to management and those charged with governance for the Poudre Fire Authority (PFA) and the Poudre River Public Library District (Library District) • Meetings with the City’s Council Finance Committee to discuss the results of the audit Timing Requirements – We commit to your timing requirements as outlined in your request for proposal We recognize the need to communicate and cooperate closely and regularly with management and the Council Finance Committee during the audit process. From the preliminary audit planning through delivery of the reports and presentation of the management letters, we strive to maintain open communications. This includes meeting with your staff to discuss audit approach and schedules to be prepared, gaining an understanding of your accounting controls via interviews and questionnaires, and conversing throughout the year to discuss changes and develop strategies to cope with these changes. It is important for us to provide an understanding of what is expected to minimize disruptions in your internal work schedules. Why McGladrey? During times like these, it is important to work with a professional services firm that understands government entities and has a team dedicated to serving them. The following are some features that make us uniquely qualified to serve your needs: • We understand your industry. Nationally, we provide services to approximately 2,000 public sector entities. This specialization provides a perspective that only comes with experience. We have developed a governmental practice with the primary goal of developing more specialization within the governmental niche so we can create higher value for our clients through better advice, more efficient audit processes and deeper knowledge of their organization. Your financial statements will be audited by a firm that understands Cities. Knowing your financial reporting meets industry accepted standards will help confirm the report’s credibility to your various stakeholders. • Dedication to continuous and innovative learning opportunities. In order to provide services to the public sector, our firm requires team members to serve a significant number of clients in the public sector and attend industry specific continuing education. We go beyond basic industry standards to ensure your engagement team understands governmental and specific industry related issues. We provide team members constant learning opportunities through such mediums as webcasts, local office training and industry conferences. Keeping abreast of industry trends ensures you will not be asked to train team members on governmental issues. • Exceptional level of service. We take a team approach that is heavy on experienced partner and manager involvement. With a partner-to-staff ratio of 1:13, you won’t just meet the partner/manager at the initial planning sessions; your partner and manager is in contact with you regularly to help ensure we meet your delivery expectations. They will also challenge your thinking, offer potential solutions and provide sound business advice, when appropriate. We are structured to ensure our clients receive a high amount of attention and involvement. Many times throughout the year, questions arise concerning accounting procedures, tax matters, benefit plans, staffing, budgeting and other matters. We believe you will find it reassuring to be able to call experienced professionals and seek their advice whenever needed. We believe you will find our responsive service is different from what you will find with other accounting firms. • Our Governmental Practice has gained a national reputation for excellence. Many of our governmental clients have been referred to us by regulators, among whom we have developed a reputation for providing quality auditing services. In addition, we have assisted many clients in receiving and maintaining the GFOA’s Certificate of Achievement for Excellence in Financial Reporting. In the following pages, our goals are to demonstrate how the City of Fort Collins, Colorado will benefit from selecting our firm as your professional services provider; underscore our commitment to providing you a quality audit at a competitive fee within the agreed-upon time period. Our proposal represents an irrevocable offer for a period of 60 calendar days from the date of this letter. Once you have had the opportunity to review the following response, we would be pleased to discuss your needs in greater detail or make a presentation to your team. Please feel free to contact us with any questions. Sincerely, McGladrey LLP Kevin Smith, Partner Kristen Hughes, Director Table of Contents TECHNICAL PROPOSAL ............................................................................................................... 1 Independence .................................................................................................................................. 1 License to practice in the state of Colorado ..................................................................................... 1 Firm qualifications and experience .................................................................................................. 2 Partner, supervisory and staff qualifications and experience .......................................................... 4 Prior engagements with the City of Fort Collins ............................................................................... 5 Similar engagements with other governmental entities ................................................................... 6 Specific audit approach .................................................................................................................... 8 Identification of anticipated audit problems .................................................................................... 11 Report format ................................................................................................................................. 11 Addendums .................................................................................................................................... 11 APPENDICES Appendix A—Engagement team biographies and continuing professional education ..................... i Appendix B—Proposed team’s auditing experience ........................................................................vi Appendix C—External quality control review ................................................................................. viii Appendix D—Proposer guarantees .................................................................................................ix Appendix E—Proposer warranties ................................................................................................... x Appendix F—Sample reports ...........................................................................................................xi 1 Technical proposal Independence McGladrey LLP (McGladrey) is independent with respect to the City of Fort Collins, Colorado and its component units, as that term is defined by Rule 101 of the Code of Professional Ethics of the American Institute of Certified Public Accountants and the Government Auditing Standards. Those rules require that the firm and all of its partners be independent with respect to any clients (not only on a local, but also on a national level) who engage McGladrey to express an opinion on the financial statements. Those rules specify that an auditor may not have or be committed to acquire a direct financial interest or material indirect financial interest in a client or any of the client's affiliates during the period of his or her engagement or at the time he or she expresses an opinion. Further, those rules specify that an auditor may not act in a capacity of promoter, underwriter, officer, director, voting trustee or employee of the audit client during the periods covered by his opinion. McGladrey has served as the external auditor for the City (including its component units) the PFA and the Library District for the years ending December 31, 2008 through 2012. There have been no other professional relationships with the City of Fort Collins or any of its component units during the past five years. We will provide the City written notice of any professional relationships that are entered into during the contract period. License to practice in the state of Colorado McGladrey LLP and all assigned key professional staff are properly registered/licensed to practice in the state of Colorado. 2 Firm qualifications and experience Firm profile McGladrey LLP was recently ranked as the fifth largest accounting, tax and business consulting firm in the United States for the seventh consecutive year by Accounting Today. With more than 6,700 professionals and associates in 75 cities nationwide, McGladrey LLP is the largest U.S. provider of assurance, tax and consulting services focused on the middle market. McGladrey is a licensed CPA firm and a member of RSM International (RSM), the seventh largest global network of independent accounting, tax and consulting firms. For more information, join our Facebook fan page at McGladrey News, follow us on Twitter @McGladrey, and connect with us on LinkedIn and YouTube. We combine the resources of a large, world-class firm with the personal service and attention to detail of a small firm. Our engagement teams are comprised of professionals who are optimally positioned to serve you, both geographically and in terms of relevant experience. Description of public sector practice and staffing of engagement Our national government practice includes over 100 partners/principals and hundreds of professionals at various levels of expertise. Members of this practice serve over 2,800 public sector clients, including more than 700 government clients. Our governmental clients range in size from small to large cities, towns, counties, and school districts as well as utilities, housing authorities, redevelopment agencies, event centers and transportation authorities. This translates into direct knowledge of the challenges faced by municipal governments—and experience in helping them meet business challenges and achieve their goals and objectives. We take pride in our service and commitment to the public sector. As a result, we will deliver the specialized industry expertise that you expect and deserve. As a national firm, we have dedicated resources to monitor industry developments. These resources communicate regularly with local practice offices on important issues affecting your industry to ensure our client service personnel are well versed in issues affecting you. Our firm has a team of public sector specialists that are available to serve the City. The primary goal of building this team is to develop more specialization within the governmental niche so we can create higher value for our clients through better advice, more efficient audit processes and deeper knowledge of their organization. A related objective is to provide a valuable career path for those professionals from various offices who want to spend significant amounts of time focused on clients in this industry. The audit of the City will be performed only by public sector industry specialists. Public sector industry specialists spend approximately 75 to 100 percent of their time auditing similar governmental entities. There are approximately 100 public sector industry specialists available to serve you. We now have one of the largest Public Sector Practices and the broadest local expertise in serving the needs of the industry. We anticipate staffing the engagement with a lead partner, a quality control partner, a director, a senior associate (in-charge) and three audit associates. All professional staff assigned to this engagement will be on a full-time basis and will be sourced from the Denver, Colorado and Kansas City, Missouri offices. 3 The combination of local presence and national strength assures you will receive exceptional advice from professionals experienced in the governmental industry, prompt responses to your needs and questions, and timely and cost-effective delivery of services. While our size affords us the national resources needed to serve complex industries, size by itself is not important. What is important are the factors that have resulted in our success. We believe McGladrey is unique because while we possess the expertise of a national firm, our client service philosophy matches that of a local accounting firm. Our growth has been the result of our ability to provide our clients with close, personal attention, continuity and accessibility of all professional personnel, including partners, and prompt quality services in a cost-effective and innovative manner. External quality control review Our non-SEC audit practice is subject to the triennial peer review requirements of the American Institute of Certified Public Accountants. As specifically required by the standards for such reviews and our membership in the AICPA Governmental Audit Quality Center (GAQC), a representative sample of the approximately 1,000 audits that are performed annually in accordance with Government Auditing Standards, including approximately 600 single audits, were selected for review. McGladrey’s system of quality control for the accounting and auditing practice applicable to non-SEC issuers in effect for the year ended April 30, 2010, was subject to peer review by the firm of BKD LLP, a GAQC member firm. That review included a representative sample of university, government and nonprofit engagements. Under the peer review standards, firms can receive a rating of pass, pass with deficiency(ies) or fail. McGladrey received a peer review rating of pass. A copy of our most recent peer review report is included in Appendix C. Results of federal or state desk reviews or field reviews during previous three years Our firm performs approximately 1,000 audits annually in accordance with Government Auditing Standards, approximately 600 of which are single audits. Every year, approximately 1 percent of these engagements are selected for either desk or quality control reviews by state or federal cognizant/oversight agencies. When any issues arise, our national director of public sector services (who has 30 years of compliance audit experience) is required to be consulted. He works directly with the engagement teams to mitigate any issues raised in connection with these reviews. All issues raised during the last three years have been resolved to the satisfaction of the oversight agencies involved. Our own system of quality control also requires that McGladrey’s national director of public sector services be consulted to mitigate any issues that might be internally identified relative to the quality of any prior audits performed by the firm. Any such issues identified in the last three years have also been resolved, when applicable, to the satisfaction of the oversight agencies involved. There has been no disciplinary action against McGladrey by the AICPA or any other governing authority which oversees the accounting profession. 4 Partner, supervisory and staff qualifications and experience Key personnel to be assigned to engagement McGladrey is geared to providing you the seasoned professionals and personalized service your City deserves. We are committed to providing the highest quality work. We provide talented, bright professionals for the engagement, all of which are licensed to practice public accounting in the state of Colorado and exceed the minimum professional education requirements of the Government Auditing Standards. The following professionals would be responsible for the City’s audit. The full biographies, including memberships in professional organizations and continuing professional education hours of the team members are provided in Appendix A. AUDIT PARTNER Kevin Smith Partner 303.298.6499 kevin.smith@mcgladrey.com Kevin is the industry leader for the governmental practice in McGladrey’s Kansas City and Denver offices and will serve as the partner on the engagement. He will be responsible for assuring the quality of services and continuity of the client service team and for determining your needs and providing resources. He will also have ultimate responsibility for the overall quality of the audit and will ensure required professional services are delivered in a timely and efficient manner. AUDIT DIRECTOR Kristen Hughes Director 816.751.4004 kristen.hughes@mcgladrey.com Kristen will serve as the manager on the engagement and will also be responsible for the quality and timeliness of the audit services provided, including determining the content of our auditor’s reports and being responsible for overseeing the engagement team and carrying out the audit plan. AUDIT SENIOR Joel Banas Senior Associate 303.298.6478 joel.banas@mcgladrey.com Joel will serve as the senior on the engagement and will lead the field engagement team in auditing the financial statements and compliance of the City. He has worked on audits of multiple governmental clients similar to the City in addition to serving as the in-charge on the City’s audit of fiscal year 2012. QUALITY ASSURANCE AND FINANCIAL REPORTING PARTNER Michelle Horaney Partner 303.298.6503 michelle.horaney@mcgladrey.com Michelle is the industry leader for the governmental practice for McGladrey’s Central Region and will serve as the quality control second partner review which includes determining the content of our auditor’s reports and being responsible for ascertaining that state, professional and regulatory standards have been met. In addition to the above, three other audit associates will be assigned to the engagement team and will be staffed from our Denver office’s governmental team. 5 Affirmative action policy McGladrey is committed to the policy of providing equal employment opportunities for all employees and applicants without regard to age, race, color, religion, sex, sexual orientation, disability, veteran status, pregnancy, citizenship status, national origin, genetic information or any other category protected under federal, state or local law. The policy applies to all terms and conditions of employment including, but not limited to, hiring, promotion, transfer, termination, compensation, benefits and training. To further the principles of equal employment opportunity, McGladrey has developed affirmative action programs for females, minorities, individuals with disabilities and covered veterans. Our Staff Continuity Commitment We recognize the impact staffing changes have on clients and are committed to maintaining continuity and team stability as much as possible. Our policy is to maintain the integrity of the client service team from year to year. While we cannot guarantee that every member of the service team will return each year, we provide staffing consistency whenever possible. Although our firm has a low turnover rate by national standards, we know how to minimize disruption when necessary. If a change in key personnel should arise, partners and directors on your account will transfer specific knowledge about the City to new team members, helping to bridge any gaps and avoid interruptions in performance of services. Prior engagements with the City of Fort Collins McGladrey has performed the City’s financial statement and compliance audit and the audit of the PFA and the Library District for the past five fiscal years (2008 through 2012). The scope of the engagements were to audit the City, PFA and the Library District’s basic financial statements and to perform the City’s Single Audit in accordance with OMB Circular A-133. Kevin Smith served as the audit partner for fiscal years 2010 through 2012 and prior to that Sarah Bohnsack served as the audit partner on the 2008 and 2009 engagements. The engagements were staffed from McGladrey’s Denver and Kansas City offices. Total hours were 930, 940, 1,140, 780 and 930 for fiscal years 2008, 2009, 2010, 2011 and 2012, respectively. The principal client contact on the engagements was Kevin Smith, phone number 303.298.6499. 6 Similar engagements with other governmental entities The engagement team assigned to the City of Fort Collins, Colorado has a substantial portfolio of governmental clients. See a complete listing of governmental clients served by your engagement team in Appendix B. A list of five of these clients, including contact information and a description of the engagement is included below: City of Columbia, Missouri John Blattel, Finance Director 701 E. Broadway Columbia, Missouri Phone: 573.874.7374 Email: jblatte@gocolumbiamo.com Hours: 1,000 GFOA Certificate Holder City Utilities: power and light, water, sewer, solid waste Engagement Partner: Kevin Smith Scope: Engagement includes the audit of the City’s September basic financial statements and related component units and audit of federal programs in accordance with the Single Audit Act. The City is a current audit client and has been since 2009. City of Independence, Missouri James Harlow, Director of Finance & Administration 111 East Maple PO Box 1019 Independence, Missouri Phone: 816.325.7173 Email: jharlow@indepmo.org Hours: 1,000 GFOA Certificate Holder City Utilities: power and light, water, sewer Engagement Partner: Kevin Smith Scope: Engagement includes the audit of the City’s June basic financial statements and related component units and audit of federal programs in accordance with the Single Audit Act. The City is a current audit client and has been since 2012. 7 City of Overland Park, Kansas David Scott, CFO 8500 Santa Fe Drive Overland Park, Kansas Phone: 913.895.6154 Email: dave.scott@opkansas.org Hours: 800 GFOA Certificate Holder City Utilities: none Engagement Partner: Kevin Smith Scope: Engagement includes the annual audit of the City’s December basic financial statements and its related component units and the audit of federal programs in accordance with the Single Audit Act. The City is a current audit client and has been since 2007. City of Longmont, Colorado Molly Kostelecky, Assistant Finance Director 350 Kimbark Street Longmont, Colorado Phone: 303.651.8670 Email: molly.kostelecky@ci.longmont.co.us Hours: 700 GFOA Certificate Holder City Utilities: power and light, water, sewer, storm drainage Engagement Partner: Kevin Smith Scope: Engagement includes the audit of the City’s December basic financial statements and the audit of federal programs in accordance with the Single Audit Act. The City is currently an audit client and has been since 2009. City of Boulder, Colorado Duane Hudson, Controller 1777 Broadway Boulder, Colorado Phone: 303.441.1812 Email: HudsonD@bouldercolorado.gov Hours: 700 GFOA Certificate Holder City Utilities: water, wastewater, storm water Engagement Partner: Sarah Bohnsack Scope: Engagement includes the audit of the City’s December basic financial statements and related component units and audit of federal programs in accordance with the Single Audit Act. The City was an audit client in and prior to 2010. 8 Specific audit approach We will engage in early planning with the City—meeting with management during the year and in a formal planning meeting before starting the audit. These conversations enable us to identify key components and risk areas, and to tailor our procedures to your specific concerns and areas of risk. In serving the City, we will employ a continuous audit process, whereby we address and resolve issues, new accounting standards and changes in your organization throughout the year rather than just at year- end. A “no-surprises” audit is always our goal. As part of our commitment to you, we will look beyond accounting entries to underlying transactions and organization systems and place substantial emphasis on understanding your operations and fundamental organization strategies. And because we view your audit as a tool you can use to improve your organization, we make recommendations about your internal controls, operating and accounting procedures and other important matters. These are communicated to you first orally and then in a written management letter. Proposed segmentation of the engagement • Preplanning—The first step of the audit is preplanning, which involves meeting with management of the City to clearly identify the lines of communication, perform a risk analysis, discuss audit scopes, discuss any concerns and set expectations. During this time, we will discuss and coordinate with the City the materials that we would expect the City to prepare, and discuss the level of support and types of activities that will be expected for the City and the related entities. We would anticipate the schedules requested by our firm will be consistent with those the City has prepared in the past (including confirmation letters, preparation of workpapers, providing supporting documentation, etc.). We will also establish a preliminary timetable to ensure a smooth audit process. • Interim fieldwork—The next step in the audit process is the performance of interim fieldwork. This would take place at some point before year-end, at the convenience of the City, and would consist of obtaining and documenting the City’s system of internal controls and testing these controls. During this time, we would also review the City’s information systems and evaluate economic and industry factors affecting your operations. A progress meeting would be held with management at the end of this period for the purpose of communicating any internal control deficiencies and confirming the audit plan for final fieldwork. • Final Fieldwork—Final fieldwork is the largest part of the audit process and includes our substantive test of details and variance analysis. Throughout the fieldwork phase, a weekly meeting will be scheduled with the appropriate personnel from the City to review the progress of the audit and the schedule for the upcoming week to ensure the audit remains on track and the progress has been communicated. • Reviews—To ensure the final audit is of the highest quality, we review files and reports several times. Each review focuses on specific areas of the audit, with intentional overlap so every part of the audit is reviewed at least twice. McGladrey performs these reviews while in the field. Your Comprehensive Annual Financial Report will also be reviewed for compliance with the GFOA’s Certificate of Achievement for Excellence in Financial Reporting Program. 9 • Resolution of accounting issues—Because we communicate frequently with you throughout the year, we expect few, if any, major accounting-related issues to arise during the audit. Most accounting issues arise from a misunderstanding of the facts, circumstances and complexities unique to an organization and its industry. Because we take a business advisory approach to auditing, we truly believe we are better equipped to understand the issues surrounding management’s position on accounting and reporting matters. Rather than analyze the transaction after the fact, we will help management and the finance department with their decision-making process as accounting issues arise. • Audit conclusion—At the conclusion of the audit process, we will have an exit conference with management of the City to summarize the results of fieldwork and review significant findings, including proposed management letter comments. We will then issue a management letter discussing these internal control recommendations and weaknesses. The letter will also include observations about accounting methods and procedures, business and industry practices or issues, operational ideas and suggestions to further enhance the City. We will advise you of any new accounting pronouncements that have been or may be issued and indicate their potential impact on you. • Council Finance Committee—We will meet with the Finance Committee at the conclusion of the audit to discuss the results of our work and present the audited financial statements and related deliverables. Timeline for the 2013 audit We anticipate the following schedule would be used for the 2013 audit. These dates can be altered to meet the City’s goals: Audit Services Timing Entrance conference with the City November Interim fieldwork Prior to December 15 Final fieldwork April/May CAFR review May Drafts of audit deliverables Prior to June 1 Issuance of final audit deliverables Prior to June 15 Presentation to City Council Finance Committee July Level of staff and number of hours to be assigned to each segment Fieldwork Segment Number of Hours Anticipated Partner Director In-Charge Other Staff Total Preplanning 2 4 10 10 26 Interim 4 6 50 50 110 Final fieldwork 20 56 150 430 656 Report review and final deliverables 14 14 10 10 48 Total 40 80 220 500 840 10 Use of advanced audit technologies The computer-assisted audit techniques we use are summarized below: • CaseWare. McGladrey uses an audit automation tool that streamlines audit work. Use of this software reduces work for your accounting staff and allows for a more efficient audit effort. In an automated audit engagement, workpapers are created and stored in electronic files. Audit program sheets are integrated with electronic workpapers and inserted into a comprehensive engagement file. This tool facilitates our documentation of your financial processes and internal control procedures, as well as testing for an understanding of the actual operation of these processes and controls. • Data mining and extraction. We use IDEA™ as our data mining and extraction tool. In addition to some of the more common audit retrieval tools, IDEA™ improves audit efficiency by allowing us to perform fewer manual procedures. Functions include: (a) sampling, including selection and evaluation for systematic, random, stratified random, monetary unit and attribute sampling; (b) field manipulation that allows fields to be appended for calculations and re-computations, facilitates account reconciliations and analyzes the population for major or unusual transactions; and (c) field statistics that display and print statistics about transactions. This software supports various file types, including Excel, PDF and text, which allows us to utilize what is available from the Finance Department. • Secured file transfer protocol. As a McGladrey client, you will have access to our secured file transfer protocol. We will deploy an SFTP data repository in an effort to ensure client-prepared data files are posted to a central location, thus reducing, or otherwise eliminating, issues that may arise when such files are exchanged between client personnel and audit staff. Sample size and extent to which statistical sampling is to be used in the engagement Our firm’s policies, which align with generally accepted auditing standards, dictate sample sizes for testing of significant account balances. Statistical sampling will be utilized when efficient. Typical accounts, if deemed significant in a year, that are sampled for substantive testing, include investment price testing, capital asset additions and confirmation of revenue/receivable balances. Type and extent of analytical procedures Analytical procedures will be used where deemed appropriate and effective. Typical analytical procedures for the City would include reviews of capital outlay, payroll expense, certain revenue and expenditure accounts and certain accrued liability balances. 11 Approach to be taken in documenting and understanding the City’s internal control structure A solid understanding of the City’s systems of internal controls is the foundation of our audit process. Our assessment of internal control is concentrated in the following areas: • Inquiries of appropriate entity personnel regarding the design and/or application of a relevant internal control policy or procedure including the classes of transactions to which the policy or procedure applies; how it is applied and by whom; and the disposition of exceptions detected by the policy or procedure; • Inspection of documents and/or reports evidencing the design and/or application of the relevant policy or procedure by entity personnel; noting how the policy or procedure is applied and by whom; the classes of transactions to which it applies; and the disposition of exceptions detected by the policy or procedure; • Observation by the auditor of the performance of the relevant policy or procedure by entity personnel; noting how the policy or procedure is applied and by whom; the classes of transactions to which it applies; and the disposition of exceptions detected by the policy or procedure; and/or • Re-performance of the application of the policy or procedure by the auditor and comparison between the results obtained by the auditor and the results obtained by the entity personnel. Our audit approach, as noted above, is based on our gaining a solid understanding of your internal control systems. This understanding, along with testing the significant control areas, will allow us to reduce substantive testing procedures, focus the audit approach to risk areas, and gain efficiencies as we audit the City. We will use this understanding to provide feedback in our management letter about opportunities in which you may have to strengthen controls or streamline processes. Approach to be taken in determining laws and regulations that will be subject to audit test work McGladrey utilizes the State of Colorado Financial Management Manual and reviews relevant statutes to determine the types of laws and regulations that could have a material effect on the City’s financial statements. Once these areas are identified, they will be tested for compliance during the audit process. Approach to be taken in drawing audit samples for purposes of test of compliance All sampling related to tests of compliance is conducted in accordance with the recommended guidelines in Chapter 11 of the AICPA Audit Guide titled Government Auditing Standards and Circular A-133 Audits. Identification of anticipated audit problems There are no anticipated potential audit problems identified at this time. Report format See Appendix F for sample format for the required reports. Addendums We acknowledge the receipt of Addendums No. 1 and No. 2 to the City’s Bid No. 7516: Audit Services. i Appendices Appendix A—Engagement team biographies and continuing professional education Kevin Smith Partner, Assurance McGladrey LLP kevin.smith@mcgladrey.com 303.298.6499 Summary of Experience Kevin specializes in the public sector industry. As a public sector specialist for the firm, he focuses on providing audit, consulting and reporting services to governmental and not-for-profit entities. In his role as a public sector specialist, Kevin brings an in-depth understanding of governmental and not-for-profit accounting, auditing and compliance reporting to his clients. As a condition of meeting the firm’s standards for this designation, he is versed in the financial and compliance-related requirements of governmental entities. Kevin is an internal control specialist for the firm. This designation is given to auditors who receive special training in internal control understanding and evaluation and requires him to assist on engagement teams of all industries in understanding and documenting internal control. Kevin is a reviewer for the GFOA’s Certificate of Achievement for Excellence in Financial Reporting. Kevin is involved in teaching professional education courses on a national and local level. These courses include yellow book seminars. He has received specific training for governmental units and future governmental accounting standard changes and has received the necessary continuing professional education to be considered yellow book certified. Professional Affiliations and Credentials • Certified Public Accountant • American Institute of Certified Public Accountants • Missouri Society of Certified Public Accountants • Government Finance Officers Association • Kansas Government Finance Officers Association • Colorado Government Finance Officers Association • Government Finance Officers Association of Missouri Education • St. Ambrose University, Bachelor of Arts Degree in Accounting ii Kristen Hughes Director, Assurance McGladrey LLP kristen.hughes@mcgladrey.com 816.751.4004 Summary of Experience As a public sector specialist for the firm, Kristen focuses on providing audit, consulting and reporting services to governmental and not-for-profit organizations. In her role as a governmental specialist, she brings an in-depth understanding of governmental accounting, auditing and compliance reporting to her clients. She has received specific training for governmental organizations and future governmental accounting standard changes and has received the necessary continuing professional education to be considered yellow book certified. Kristen is a reviewer for the GFOA’s Certificate of Achievement for Excellence in Financial Reporting. Kristen also has experience with internal controls as she served as the senior lead on an engagement for a large accelerated public filer for three years, including the year of Sarbanes Oxley implementation. Professional Affiliations and Credentials • Certified Public Accountant • American Institute of Certified Public Accountants • Government Finance Officers Association • Missouri Society of Certified Public Accountants • Kansas Government Finance Officers Association Education • Truman State University, Bachelor of Science Degree in Accounting • Truman State University, Masters of Accountancy iii Joel Banas Senior Associate, Assurance McGladrey LLP Joel.Banas@mcgladrey.com 303-298-6478 Summary of Experience Joel is a senior assurance associate providing services in an in-charge capacity to various industries, with a focus on governmental and casino entities. He has served as the in-charge for several years on the audits of small to large tribal governments, municipalities, and casinos. Audits led have included financial and internal audits, including OMB A-133 Single Audits. He currently serves as the in-charge on the audits of The School District of Douglas County, Colorado, and the Cities of Longmont and Fort Collins, Colorado, as well as several others. Joel has received specialized training for governmental units and the necessary continuing professional education to be considered yellow book certified. Education • Michigan State University, Bachelor of Science in Accounting iv Michelle Horaney Partner, Assurance McGladrey LLP michelle.horaney@mcgladrey.com 303.298.6503 Summary of Experience Michelle is a partner in McGladrey’s public sector industry group. She leads McGladrey’s Central region public sector practice and the Firm’s national education practice. In addition to her responsibilities as an industry leader, Michelle serves as the audit partner and quality control reviewer on a number of government, higher education and not-for-profit clients, providing audit and advisory services. Michelle is involved in teaching professional education courses on a national and regional level, both internally and externally. These courses include benchmarking, various higher education programs, and Financial Accounting Standards Board and Government Accounting Standards Board updates and implementation programs. Michelle participates in the Firm’s quality control system as a quality control reviewer and an interoffice inspector. She is a reviewer for the Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting. Professional Affiliations and Credentials • Certified public accountant • American Institute of Certified Public Accountants • Iowa Society of Certified Public Accountants • National Association of College and University Business Officers • Central Association of College and University Business Officers • Government Finance Officers Association • Colorado Government Finance Officers Association • Native American Finance Officers Association Education • Bachelor of Science degree in accounting, Illinois State University • Master of Business Administration degree, St. Ambrose University v Kevin Smith Continuing Professional Education 2010 2011 2012 Total CPE Credits 43.0 80.0 78.0 201.0 A&A Credits 34.0 25.0 45.0 104.0 Yellow Book 23.0 24.0 40.5 87.5 Kristen Hughes Continuing Professional Education 2010 2011 2012 Total CPE Credits 51.0 32.0 84.0 167.0 A&A Credits 33.0 28.0 23.5 84.5 Yellow Book 36.0 20.5 57.0 113.5 Joel Banas Continuing Professional Education 2010 2011 2012 Total CPE Credits N/A N/A 56.5 56.5 A&A Credits N/A N/A 48.5 48.5 Yellow Book N/A N/A 16.0 16.0 N/A – Not Available Joel joined McGladrey in 2012; however, he also worked on governmental engagements with his previous firm and met required CPE for GAS engagements. Michelle Horaney Continuing Professional Education 2010 2011 2012 Total CPE Credits 100.5 54.0 84.0 238.5 A&A Credits 74.0 50.5 79.0 203.5 Yellow Book 40.5 27.0 75.0 142.5 vi Appendix B—Proposed team’s auditing experience Your Proposed Team's Auditing Experience With Governmental Entities Contact GFOA Certificate A-133 Audit Service Years City of Fort Collins, Colorado √ √ 5 Poudre Fire Authority 5 Poudre River Public Library District 5 City of Longmont, Colorado √ √ 4 Colorado River Conservation District 5 Colorado Springs School District No. 11, Colorado √ √ 5 Douglas County School District RE-1 √ √ 1 City of Moline, Illinois √ √ 22 City of Peoria, Illinois √ √ 6 City of East Peoria, Illinois 4 City of Springfield, Illinois √ √ 3 City of Bettendorf, Iowa √ √ 22 City of Cedar Rapids, Iowa √ √ 13 City of Clear Lake, Iowa √ 17 City of Des Moines, Iowa Municipal Housing Agency, Iowa √ 11 City of Des Moines, Iowa √ √ 11 City of Waterloo, Iowa √ √ 5 City of Muscatine, Iowa √ √ 4 City of Excelsior Springs, Missouri √ √ 8 City of Riverside, Missouri √ √ 6 City of Columbia, Missouri √ √ 4 City of Independence, Missouri √ √ 2 City of Blue Springs, Missouri √ √ 1 City of Overland Park, Kansas √ √ 6 City of Roeland Park, Kansas √ 12 City of Tulsa, Oklahoma √ √ 3 Tulsa Metropolitan Utility Authority 3 Tulsa Public Facilities Authority 3 Metropolitan Tulsa Transit Authority √ 3 Tulsa Authority for Recovery of Energy 3 Tulsa Airports Improvement Trust 3 Tulsa Performing Arts Center Trust 3 Tulsa Parking Authority 3 Emergency Medical Services Authority √ 3 Regional Metropolitan Utility Authority 3 Tulsa Development Authority 3 Village of Milan, Illinois 41 vii Your Proposed Team's Auditing Experience With Governmental Entities Contact GFOA Certificate A-133 Audit Service Years Cedar Rapids/Linn County Solid Waste Agency, Iowa 13 Public Housing Agency of the City of Saint Paul, Minnesota √ √ 4 Eastern Iowa Airport, Iowa √ 12 Metropolitan Airport Authority, Illinois √ 31 Des Moines Wastewater Reclamation Authority, Iowa √ 11 Kansas City Area Transportation Authority, Missouri √ 6 i wireless Center, Illinois 16 Bi-State Regional Commission, Illinois √ 38 McLean County, Illinois √ √ 4 Rock Island County, Illinois √ √ 10 Platte County, Missouri √ √ 1 Platte County Regional Sewer District, Missouri √ 12 Des Moines Water Works, Iowa √ 8 State of Iowa - Office of Auditor 5 State of Iowa - Executive Council of Iowa 5 State of Iowa - Honey Creek Premier Destination Park Authority 5 State of Iowa - State Appeal Board 5 State of Iowa - Tobacco Settlement Authority 5 Overland Park Development Corp, Kansas 6 Overland Park Convention Center, Kansas 6 Davenport Community School District, Iowa √ √ 6 Des Moines Independent Community School District, Iowa √ √ 10 Iowa City Community School District, Iowa √ √ 9 Cedar Rapids School District, Iowa √ √ 5 School District of Kansas City, Missouri √ √ 6 Rock Island - Milan School District No. 41, Illinois √ √ 34 Moline School District No. 40, Illinois √ 11 Sioux Falls School District No. 49-5, South Dakota √ 20+ Mandaree Public School District No. 36, North Dakota √ 4 Twin Buttes School District No. 37 √ 1 Sac and Fox Tribe, Iowa √ 13 Chitimacha Tribe of Louisiana, Louisiana √ 5 Otoe - Missouria Tribe √ 1 Friends of the Davenport Public Library 2 viii Appendix C—External quality control review ix Appendix D—Proposer guarantees x Appendix E—Proposer warranties xi Appendix F—Sample reports Independent Auditor's Report To the Honorable Mayor and Members of the City Council and City Manager City of Fort Collins, Colorado Fort Collins, Colorado Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. xii Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado, as of December 31, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Keep Fort Collins Great Fund, the Transportation Services Fund, and Urban Renewal Authority Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 15 through 26, the modified approach for City Streets Infrastructure capital assets on pages 86 through 87, the Pension Plans Schedules of Funding Progress on page 88 and Other Postemployment Benefits Plan Schedule of Funding Progress on page 89 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Fort Collins, Colorado’s basic financial statements. The combining and individual nonmajor fund financial statements and other schedules, listed in the table of contents as supplementary information, and the other information, such as the introductory and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. xiii The combining and individual nonmajor fund financial statements and other schedules, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, this information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The accompanying introductory, statistical sections and other schedules, as listed in the table of contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated (ReportDate) on our consideration of the City of Fort Collins, Colorado's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Fort Collins, Colorado’s internal control over financial reporting and compliance. Denver, Colorado (ReportDate) xiv Independent Auditor's Report To the Honorable Mayor and Members of the City Council and City Manager City of Fort Collins, Colorado Fort Collins, Colorado Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. xv We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado, as of December 31, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund, the Keep Fort Collins Great Fund, the Transportation Services Fund, and Urban Renewal Authority Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 15 through 26, the modified approach for City Streets Infrastructure capital assets on pages 86 through 87, the Pension Plans Schedules of Funding Progress on page 88 and Other Postemployment Benefits Plan Schedule of Funding Progress on page 89 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Fort Collins, Colorado’s basic financial statements. The combining and individual nonmajor fund financial statements and other schedules, listed in the table of contents as supplementary information, and the other information, such as the introductory and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. xvi The combining and individual nonmajor fund financial statements and other schedules, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, this information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The accompanying introductory, statistical sections and other schedules, as listed in the table of contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Denver, Colorado (ReportDate) xvii Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Honorable Mayor and Members of the City Council and City Manager of the City of Fort Collins, Colorado Fort Collins, Colorado We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado (the City), as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated (ReportDate). Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. xviii Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the City in a separate letter dated (ReportDate). Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Denver, Colorado (ReportDate) xix Independent Auditor's Report on Compliance for Each Major Federal Program, on Internal Control Over Compliance and on the Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 Honorable Mayor and Members of the City Council and City Manager of the City of Fort Collins, Colorado Fort Collins, Colorado Report on Compliance for Each Major Federal Program We have audited the City of Fort Collins, Colorado’s (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended December 31, 2013. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance. xx Opinion on Each Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2013. Other Matters The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items 13-XX-XX and 13-XX-XX. Our opinion on each major federal program is not modified with respect to these matters. The City’s responses to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The City’s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. xxi Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified a certain deficiency in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item 13-XX-XX that we consider to be a significant deficiency. The City’s response to the internal control over compliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the governmental activities, business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated (ReportDate), which contained unmodified opinions on those financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Denver, Colorado (ReportDate) xxii Independent Auditor's Report To the Board of Trustees Poudre River Public Library District Fort Collins, Colorado Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Poudre River Public Library District (the District) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. xxiii Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Poudre River Public Library District, as of December 31, 2013, and the respective changes in financial position and, the budgetary comparisons for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 3 through 7, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The accompanying budgetary comparison schedule for the Capital Projects Fund on page 20 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, this information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Denver, Colorado (ReportDate) xxiv Independent Auditor's Report Board of Directors Poudre Fire Authority Fort Collins, Colorado Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Poudre Fire Authority (the Authority) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. xxv Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Poudre Fire Authority, as of December 31, 2013, and the respective changes in financial position and, the budgetary comparisons for the General Fund, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis on pages 3 through 9 and the Other Postemployment Benefits Plan Schedule of Funding Progress on page 35, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The accompanying budgetary comparison schedule for the Capital Projects Fund on page 41 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, this information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Denver, Colorado (ReportDate) www.mcgladrey.com McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with more than 6,700 people in 75 cities nationwide. McGladrey is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent assurance, tax and consulting firms. McGladrey uses its deep understanding of the needs and aspirations of clients to help them succeed. For more information, visit www.mcgladrey.com, like us on Facebook at McGladrey News, follow us on Twitter @McGladrey and/or connect with us on LinkedIn. © 2013 McGladrey LLP. All Rights Reserved.