R2000-093 08-28-00RESOLUTION NO. R2000-93
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO
ENTER INTO A CONTRACT WITH NULL-LAIRSON, P.C. FOR THE CITY'S
FISCAL YEAR 2000 FINANCIAL AUDIT.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That certain contract by and between the City of Pearland and
Null-Lairson, P.C., a copy of which is attached hereto as Exhibit "A" and made a part
hereof for all purposes, is hereby authorized and approved.
Section 2. That the City Manager or his designee is hereby authorized to execute
and the City Secretary to attest a contract with Null-Lairson, P.C., for the City's Fiscal Year
2000 Financial Audit.
PASSED, APPROVED and ADOPTED this the 28thday of August
A.D., 2000.
ATTEST:
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
TOM REID
MAYOR
NuIIiLairson
(IR 11111)1 11311CA000(Ih1,A\IS
HMI LSSIO\AI CORPORATION'
July 25, 2000
To the Honorable Mayor,
City Council and Management
City of Pearland, Texas
We are pleased to confirm our understanding of the services we are to provide for the City of
Pearland Texas (the "City") for the year ending September 30, 2000. We will audit the City's
general-purpose financial statements as of and for the year ended September 30, 2000. The general-
purpose financial statements being audited will be included in the City's Comprehensive Annual
Financial Report (CAFR). Our audit opinion will cover the financial information to be included in
the financial section of the City's CAFR as well as the Schedule of Expenditures of Federal Awards
(and State Awards, if applicable) included in the City's supplemental Single Audit Report(s). The
CAFR and supplemental Single Audit Report(s) will be prepared, with our assistance, by the City's
finance staff. The CAFR will be submitted to the GFOA for purposes of receiving a certificate of
recognition for reporting excellence. All provisions of this agreement referring to the `auditors'
report(s)", "opinion(s)" or "report(s)" include our reports applicable to both the CAFR's financial
section and the supplemental Single Audit Report(s). Also, all provisions of this agreement referring
to the City's "financial statements" include both the CAFR and the supplemental Single Audit
Report(s).
The CAFR's financial section will also include required supplementary information on pension plan
funding progress that will not be subject to the auditing procedures applied in our audit of the
general purpose financial statements, and for which our auditors' report will disclaim an opinion.
Audit Objectives
The objective of our audit is the expression of an opinion as to whether your general purpose
financial statements are fairly presented, in all material respects, in conformity with generally
accepted accounting principles and to report on the fairness of the additional information referred to
in the first paragraph when considered in relation to the general purpose financial statements taken
as a whole. The objective also includes reporting on -
Internal control related to the financial statements and compliance with laws, regulations,
and the provisions of contracts or grant agreements, noncompliance with which could have a
material effect on the financial statements in accordance with Government Auditing
Standar ds.
Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations and the provisions of contracts or grant agreements that
could have a direct and material effect on each major program in accordance with the Single
Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local
Governments, and Non -Profit Organizations.
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To the Honorable Mayor,
City Council and Management
City of Pearland, Texas
July 25, 2000
Page 2
Audit Objectives (continued)
Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance w'th laws, regulations, and the provisions of contracts or grant agreements that
could have a direct and material effect on each major program in accordance with Uniform
Grant Management Standards of the State of Texas and the state single audit circular
(UGMS), if applicable.
The reports on internal control and compliance will each include a statement that the report is
intended for the information and use of the Mayor and City Council, management, specific
legislative or regulatory bodies, federal awarding agencies, and if applicable, pass -through entities.
Our audit will be conducted in accordance with generally accepted auditing standards; the standards
for financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States; the Single Audit Act Amendments of 1996; the provisions of OMB Circular
A-133, and UGMS (if applicable), and will include tests of accounting records, a determination of
major program(s) in accordance with Circular A-133 and UGMS (if applicable), and other
procedures we consider necessary to enable us to express such an opinion and to render the required
reports If our opinion on the general purpose financial statements or the Single Audit compliance
opinion(s) is other than unqualified we will fully discuss the reasons with you in advance. If, for
any reason, we are unable to complete the audit or are unable to form or have not formed an
opinion, we may decline to express an opinion or to issue a report as a result of this engagement.
Management Responsibilities
Management is responsible for establishing and maintaining internal control and for compliance
with the provisions of contracts, agreements and grants. In fulfilling this responsibility, estimates
and judgments by management are required to assess the expected benefits and related costs of the
controls. The objectives of internal control are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition,
that transactions are executed in accordance with management's authorizations and recorded
properly to permit the preparation of general purpose financial statements in accordance with
generally accepted accounting principles, and that federal and state award programs are managed in
compliance with applicable laws and regulations and the provisions of contracts and grant
agreements.
To the honorable Mayor,
City Council and Management
City of Pearland, Texas
July 25, 2000
Page 3
Management Responsibilities (continued)
Management is responsible for making all financial records and related information available to us.
We understand that you will provide us with such information required for our audit and that you
are responsible for the accuracy and completeness of that information. We will advise you about
appropriate accounting principles and their application and will assist in the preparation of your
financial statements, including the schedule of expenditures of federal and .state awards, but the
responsibility for the financial statements remains with you. That responsibility includes the
establishment and maintenance of adequate records and effective internal control over financial
reporting and compliance, the selection and application of accounting principles, and the
safeguarding of assets Additionally, as required by OMB Circular A-133 and UGMS, it is
management's responsibility to follow up and take corrective action on reported audit findings and
to prepare a summary schedule of prior audit findings and a corrective action plan. The summary
schedule of prior audit findings should be available for our review at the outset of our work.
Audit Procedures General
An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit will involve judgment about the number of transactions to
be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable
rather than absolute assurance about whether the financial statements are free of material
misstatement, whether caused by error or fraud As required by the Single Audit Act Amendments
of 1996, OMB Circular A-133 and UGMS, our audit will include test of transactions related to
major federal and state award programs for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements. Because an audit is designed to provide reasonable,
but not absolute assurance and because we will not perform a detailed examination of all
transactions there is a risk that material errors, fraud other illegal acts, or noncompliance may exist
and not be detected by us. In addition, an audit is not designed to detect immaterial errors, fraud, or
other illegal acts or illegal acts that do not have a direct effect on the general purpose financial
statements or to major programs. However, we will inform you of any material errors and any fraud
that comes to our attention. We will also inform you of any other illegal acts that come to our
attention, unless clearly inconsequential. We will include such matters in the reports required for a
Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does
not extend to matters that might arise during any later periods for which we are not engaged as
auditors.
To the Honorable Mayor,
City Council and Management
City of Pearland, Texas
July 25, 2000
Page 4
Audit Procedures -General (continued)
Our procedures will include tests of documentary evidence supporting the transactions recorded in
the accounts, and may include tests of the physical existence of inventories, and direct confirmation
of receivables and certain other assets and liabilities by correspondence with selected individuals,
creditors, and financial institutions. We will request written representations from your attorneys as
part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of
our audit, we will also require certain written representations from you about the financial
statements and related matters.
Audit Procedures -Internal Controls
In planning and performing our audit, we will consider the internal control sufficient to plan the
audit in order to determine the nature, timing, and extent of our auditing procedures for the purpose
of expressing our opinions on the City s general purpose financial statements and on its compliance
with requirements applicable to major programs.
We will obtain an understanding of the design of the relevant controls and whether they have been
placed in operation, and we will assess control risk. Tests of controls may be performed to test the
effectiveness of certain controls that we consider relevant to preventing and detecting errors and
fraud that are material to the general purpose financial statements and to preventing and detecting
misstatements resulting from illegal acts and other noncompliance matters that have a direct and
material effect on the general purpose financial statements. Tests of controls relative to the general
purpose financial statements are required only if control risk is assessed below the maximum level.
Our tests, if performed, will be less in scope than would be necessary to render an opinion on
internal control and, accordingly, no opinion will be expressed in our report on internal control
issued pursuant to Government Auditing Standards.
As required by OMB Circular A-133and UGMS, we will perform tests of controls to evaluate the
effectiveness of the design and operation of controls that we consider relevant to preventing or
detecting material noncompliance with compliance requirements, applicable to each major federal
and state award program. However, our tests will be less in scope than would be necessary to render
an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal
control issued pursuant to OMB Circular A-133 and UGMS
To the Honorable Mayor,
City Council and Management
City of Pearland, Texas
July 25, 2000
Page 5
Audit Procedures -Internal Controls (continued)
An audit is not designed to provide assurance on internal control or to identify reportable
conditions. However, we will inform you of any matters involving internal control and its operation
that we consider to be reportable conditions under standards established by the American Institute
of Certified Public Accountants. Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of the internal control that in our
judgment, could adversely affect the entity's ability to record, process, summarize, and report
financial data consistent with the assertions of management in the general purpose financial
statements. We will also inform you of any nonreportable conditions or other matters involving
internal control, if any, as required by OMB Circular A-133 and UGMS
Audit Procedures -Compliance
Our audit will be conducted in accordance with the standards referred to in the section titled Audit
Objectives. As part of obtaining reasonable assurance about whether the general purpose financial
statements are free of material misstatement, we will perform tests of the City's compliance with
applicable laws and regulations and the provisions of contracts and agreements, including grant
agreements. However, the objective of those procedures will not be to provide an opinion on overall
compliance and we will not express such an opinion in our report on compliance issued pursuant to
Government Auditing Standards.
OMB Circular A-133 and UGMS require that we also plan and perform the audit to obtain
reasonable assurance about whether the auditee has complied with applicable laws and regulations
and the provisions of contracts and grant agreements applicable to major programs Our procedures
will consist of the applicable procedures described in the OMB Circular A-133 Compliance
Supplement and other applicable resources for the types of compliance requirements that could have
a direct and material effect of each of the City's major programs. The purpose of those procedures
will be to express an opinion on the City's compliance with requirements applicable to major
programs in our report on compliance issued pursuant to OMB Circular A-133 and UGMS
Audit Administration, Fees, and Other
We understand that your employees will prepare aii cash, accounts receivable, or other
confirmations we request, will locate any invoices selected by us for testing and will generally assist
us as needed during the course of our audit.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data
Collection Form that summarizes our audit findings. We will provide copies of our reports to the
To the Honorable Mayor,
City Council and Management
City of Pearland, Texas
July 25, 2000
Page 6
Audit Administration, Fees, and Other (continued)
City, however, it is management's responsibility to submit the reporting package (including
financial statements, schedule of expenditures of federal awards, summary schedule of prior audit
findings, auditors reports, and a corrective action plan) along with the Data Collection Form to the
designated federal clearinghouse and, if appropriate, to pass -through entities. The Data Collection
Form and the reporting package must be submitted within the earlier of 30 days after receipt of the
auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to
in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement,
we will provide information to management as to where the reporting packages should be submitted
and the number to submit.
The workpapers for this engagement are the property of Null-Lairson, P.C. and constitute
confidential information. However, we may be requested to make certain workpapers available to
appropriate governmental regulatory agencies pursuant to authonty given to it by law or regulation.
If requested, access to such workpapers will be provided under the supervision of Null-Lairson,
P.C. personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to
appropriate governmental regulatory agencies. These agencies may intend, or decide, to distribute
the photocopies or information contained therein to others, including other governmental agencies.
The workpapers for this engagement will be retained for a minimum of three years after the date the
auditors' report is issued or for any additional period requested by an appropriate governmental
regulatory agency If we are aware that a federal or state awarding agency, pass -through entity, or
auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for
guidance prior to destroying the workpapers.
We expect to begin our audit and to issue our reports in accordance with time frames acceptable to
the City's management as determined at the outset of our work. Our fees for these services will be
at our standard hourly rates plus out-of-pocket costs (such as report reproduction, typing, postage,
travel, copies, telephone, etc.). We estimate that our total fees for the services described in this letter
will not exceed $37,500. These estimated fees are based on an anticipated total commitment of
approximately 460 professional hours by our firm members in performing the necessary work. Our
standard hourly rates vary according to the degree of responsibility involved and the experience
level of the personnel assigned to your audit. Our invoices for these fees will be rendered each
month as work progresses and are payable on presentation.
The estimated fees shown above are based on anticipated cooperation from your personnel and the
assumption that unexpected circumstances will not be encountered during the audit. If significant
1 o the tionorabne mayor,
City Council and Management
City of Pearland, Texas
July 2.5, 2000
Page 7
Audit Administration, Fees, and Other (continued)
additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we
incur the additional costs.
Y ou may request that we perform additional services not contempiateu oy tnis engagement letter it
this occurs, we will communicate with you regarding the scope of the additional services and the
estimated fees. We also may issue a separate engagement letter covering the additional services. In
the absence of any other written communication from us documenting such additional services. our
services will continue to be governed by the terms of this engagement letter.
Government Auditing Standards require that we provide you with a copy or our most recent quality
control review report. Our 1998 peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City of Pearland, Texas and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please
let us know. If you agree with the terms of our engagement as described in this letter, please sign
the enclosed copy and return it to us. This letter will continue in effect until canceled by either
party.
Sincerely,
a kikr c., frw w
Null-Lairson, P.C.
RESPONSE•
This letter correctly sets forth the understanding of the City of Pearland, Texas.
By:
Printed
Name.
Title:
Date:
Nu
/AYL
1ALairson
CERTIFIED PUBLIC ACCOUNTANTS
PROFESSIONAL CORPORATION
July 25, 2000
Mr. Jim Causey
Director of Finance
City of Pearland
3 519 Liberty Drive
Pearland, TX 77581
Dear Jim:
Enclosed is the engagement letter for the next year as we discussed recently. We have also
forwarded you our most recent external peer review report as required by Government Auditing
Standards. There are two copies of the engagement letter, one for the City's records and one to
return to us. Both should be signed to evidence approval.
As discussed, we are attempting this year to estimate a fee level consistent with previously
discussed City staff involvement. We anticipate reviewing our progress in achieving the reduction
in our time and discussing any projected variances from our hourly commitment level of
approximately 460 hours as the engagement progresses.
We look forward to continuing our work with the you, your staff, the City Manager, other
administrative staff members and Mayor and Council in the upcoming year.
We appreciate having the City of Pearland as a client of our firm and are glad to be of service in
whatever way we can. Please call us at any time with additional questions or concerns regarding
the audit or related matters.
Enclosures
Sincerely,
Null-Lairson, P.C.
40P,
CIS
Charles G. Yaple, CPA
Principal — Governmental Services
11 Greenway Plaza, Suite 1515 • Houston, TX 77046 • (713) 621-1515 • Fax: (713) 621-1570
One Sugar Creek Center Blvd., Suite 920 • Sugar Land, TX 77478 • (281) 242-8600 • Fax: (281) 242-7333
MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS,
CPA ASSOCIATES INTERNATIONAL, INC. WITH ASSOCIATED OFFICES IN PRINCIPAL U.S. AND INTERNATIONAL CITIES
June 9, 1999
To the Shareholders
Null - Lairson, P.C.
We have reviewed the system of quality control for the accounting and auditing practice of Null
- Lairson, P.C. (the firm) in effect for the year ended December 31, 1998. A system of quality control
encompasses the firm's organizational structure and the policies adopted and procedures established
to provide it with reasonable assurance of complying with professional standards. The elements of
quality control are described in the Statements on Quality Control Standards issued by the American
Institute of Certified Public Accountants (the "AICPA"). The design of the system, and compliance
with it, are the responsibilities of the firm. In addition, the firm has agreed to comply with the
membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the
Section). Our responsibility is to express an opinion on the design of the system, and the firm's
compliance with that system and the Section's membership requirements based on our review
Our review was conducted in accordance with standards established by the Peer Review
Committee of the Section. In performing our review, we obtained an understanding of the system of
quality control for the firm's accounting and auditing practice. In addition, we tested compliance with
the firm's quality control policies and procedures and with the membership requirements of the Section
to the extent we considered appropriate. These tests covered the application of the firm's policies and
procedures on selected engagements Because our review was based on selective tests, it would not
necessarily disclose all weaknesses in the system of quality control or all instances of lack of
compliance with it or with the membership requirements of the Section. As is customary in a peer
review, we are issuing a letter under this date that sets forth comments relating to certain policies and
procedures or compliance with them These matters were not considered to be of sufficient
significance to affect the opinion expressed in this report.
Because there are inherent limitations in the effectiveness of any system of quality control,
departures from the system may occur and not be detected. Also, projection of any evaluation of a
system of quality control to future periods is subject to the risk that the system of quality control may
become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Null -
Lairson, P.C. in effect for the year ended December 31, 1998, has been designed to meet the
requirements of the quality control standards for an accounting and auditing practice established by
the AICPA, and was complied with during the year then ended to provide the firm with reasonable
assurance of complying with professional standards. Also, in our opinion, the firm has complied with
the membership requirements of the Section in all material respects.
Lisa L. O'Dell, CPA
Team Captain
CPA Associates International, Inc.
Meadows Office Complex, 301 Route 17 North, Rutherford, N.J. 07070
Tel: 201-804-8686 Fax 201 804-9222
E-mail: homeofflce@cpaai.com