1996-084C \WPDOCS\ORD\TOUCHE ORD
ORDINANCE NO ~
AN ORDINANCE OF THE CITY OF DENTON, TEXAS, AUTHORIZING THE CITY
MANAGER TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF DENTON AND
DELOITTE AND TOUCHE LLP FOR AN INDEPENDENT AUDIT, AUTHORIZING THE
EXPENDITURE OF FUNDS THEREFOR, AND PROVIDING AN EFFECTIVE DATE.
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION I. That the City Manager is hereby authorized to
execute, on behalf of the City, an agreement between the City of
Denton and Deloitte and Touche LLP for independent auditing
services, a copy of which is attached hereto and incorporated by
reference herein
SECTION II That the expenditure of funds in an amount not to
exceed Forty-three Thousand Seven Hundred Dollars ($43,700.00) is
hereby authorized
SECTION III. That this ordinance shall become effective
immediately upon its passage and approval.
PASSED AND APPROVED this the ~/U~day of ~ , 1996
BOB CASTLEBERRY, MAY~ ~
/
ATTEST'
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM:
HERBERT L PROUTY, CITY ATTORNEY
CONTRACT FOR AUDITING SERVICES
,,~
Thls Agreement is entered into this ~day of ,~~a ~gistere
1996 by and between Deloitte & Touche LLP ("Auditor")
limited liability partnership with an office located at Suite 2340,
801 Cherry Street, Fort Worth, Texas 76102-6801, and the City of
Denton, Texas ("Client"), a home-rule municipal corporation with
administrative offices at 215 East McKlnney, Denton, Texas 76201
WHEREAS, Client desires to engage Auditor to provide audit
services as herein defined; and
WHEREAS, Auditor is willing to provide such services;
NOW, THEREFORE, in consideration of the promises and mutual
undertakings herein, the parties agree as follows
A sCOPE OF SERVICES
Auditor will provide the following services
1. Auditor will perform the annual audit of Client's general
purpose financial statements. Such audit w~ll be conducted in
accordance with generally accepted auditing standards; Government
Audltlna Standards, issued by the Comptroller of the United States,
the Single Audit Act of 1994, and OMB Circular A-128, Audits of
State and Local Governments
2. Auditor will issue a management letter to Client reporting
any material weaknesses in Client's internal accounting controls
discovered during the annual audits of Client's financial state-
ments.
3 Auditor wlll perform the annual compliance audit of
Client's federal financial assistance programs Such audit w~ll be
conducted in accordance with generally accepted auditing standards;
Government Audltln~ Standards, issued by the Comptroller of the
United States; OMB's Compliance Supplement for Sln~le Audits of
State add Local Governments, OMB Circular A-128, Audits of State
and Local Governments, and AICPA Statement on Auditing Standard No.
63, Compliance Audltln~ APPlicable to Governmental Entitles and
Other Recipients of Governmental Financial Assistance.
4. All services set forth in Auditor's letters of March 6,
1996, copies of which are attached hereto as Exhibit "A".
B DURATION
This Agreement is for audit services by Auditor, as specified
herein, for the financial statements of Client, as specified here-
in, for Client's fiscal year ending September 30, 1996 Auditor's
financial and compliance audit work should be completed no later
than ninety (90) days after Client's fiscal year end This wlll
allow the Comprehensive Annual Financial Report for each fiscal
year to be submitted to the Government Finance Officers Association
preferably by December 15, 1996, but no later than January 15,
1997, subject to availability of Client's records
C CLIENT RESPONSIBILITIES
Client understands that the proper and timely completion of
Auditor's services hereunder require the reasonable cooperation of
Client (including, without limitation, its agencies, and their
respective officers, directors, employees, other personnel and
agents) Client agrees to provide all such reasonable cooperation
requested by Auditor, including, without limitation, the following
Access to, and/or copies of, Client's books and
records,
Access to Client personnel,
Office space and access to support services such as
copying and telephone,
Written representations from Client's attorneys,
both internal and external, the latter may bill
Client for such services,
Written representations from Client about the
financial statements and other matters, and
Closing of Client's books and records of account ~n
accordance with laws, regulations and professional
standards applicable to the services provided
hereunder
Client understands and agrees with the provisions contained in
the engagement letters attached as Exhibit "A" hereto
D COMPENSATION
Client shall pay Auditor for time charges and expenses
incurred Auditor's standard hourly rate vary according to the
degree of responsibility involved and the experience level of the
personnel assigned to Client's audit Except as provided hereun-
der, Auditor's fees for the performance of the services described
in Section A for the fiscal year ending September 30, 1996 shall
not exceed Thirty-five Thousand One Hundred Dollars ($35,100 00)
These fees are dependent upon Auditor receiving 250 hours of J
assistance from the Internal Auditor Without assistance from the
Internal Auditor, Auditor's fees shall not exceed Forty-three
Thousand Seven Hundred Dollars ($43,700 00)
Client and Auditor recognize that the scope of services and
compensation under thls Agreement are predicated upon (1) current
audit requirements imposed by laws, regulations and professional
standards relating to such services, (il) expectations of reason-
able cooperation with Auditor by Client pursuant to this Agreement,
and (ill) the absence of any irregularities or circumstances which
might necessitate the extension of audit services beyond the normal
scope of auditing services
PAGE 2
Should (1) irregularities; (11) the absence of such reasonable
cooperation; (ill) increase in the level of services required under
applicable laws, regulations or professional standards; or (iv)
other unforeseen conditions be encountered which might necessitate
the extension of auditing work beyond the scope of normal auditing
procedures, Auditor agrees to advise Client promptly in wrltlng of
the circumstances and to request an equitable adjustment in the
maximum fee before significant additional time is incurred by
Auditor. Any such requests for adjustments shall be in writing and
shall contain an explanation of why the adjustments are necessary
Client and Auditor agree to negotiate in good faith to
determine an equitable ad3ustment in the maximum fee. Should
Client and Auditor be unable to agree upon an equitable adjustment
within fourteen (14) days of Auditor's written request, or such
other time period as agreed upon in writing by Client and Auditor,
either party may, notwithstanding any other provision in this
Agreement, terminate this Agreement upon seven (7) days notice to
the other party. Client shall be liable for time charges and
expenses actually incurred by Auditor except for any such addition-
al time and expense which has been incurred as a result of the
circumstances necessitating the adjustment.
E METHOD OF PAYMENT
Auditor shall submit periodic invoices for time charges and
expenses incurred as the services hereunder are performed Such
invoices are payable upon presentation Client will be in material
breach of this Agreement if Client's account becomes ninety (90)
days or more overdue. Auditor may, at its sole option and without
waiver of any rights pursuant to the termination provision In this
Agreement or otherwise, suspend its services and resume them upon
receipt from Client of the full amount due Auditor
F ADDITIONAL PROCEDURES
During the contractual period covered by th~s Agreement,
Client may request Auditor to provide services ~n addition to the
services provided hereunder. Auditor may, at its option, agree to
provide such additional services upon terms and condItions mutually
agreed upon by Client and Auditor.
G RENEWAL
Fiscal Year 1995-96 is the final year covered in the five (5)
year proposal. The City of Denton will be submitting requests for
proposals for a period beginning with Fiscal Year 1996-97.
H INSURANCE
Upon written request by Cllent, Auditor shall provide Client
wlth a certificate evidencing that Auditor has the following
insurance: (1) general liability, (ii) automobile liability, and
PAGE 3
(111) worker's compensation.
I. TERMINATION
Either party may terminate this Agreement at any time upon 30
days notice to the other party. Auditor shall be entitled to com-
pensation for time charges and expenses for all services properly
rendered pursuant to this Agreement prior to its termination
pursuant to this Section.
J. SUBCONTRACTING
Neither this Agreement nor the audit services to be provided
hereunder may be assigned or subcontracted without the written
approval of Client
K. EMPLOYMENT PRACTICES
Auditor agrees that in connection with the services provided
hereunder, it will comply with applicable laws and regulations
regarding equal opportunity and employment discrimination.
L. OWNERSHIP OF WORKPAPERS AND PROPERTY
All workpapers of Auditor shall remain in the property of
Auditor. In addition, to the extent that Auditor utilizes any of
its property (including, without limitation, any hardware or
software of Auditor or any proprietary or confidential informatIon
or trade secrets of Auditor) in performing the services hereunder,
such property shall remain the property of Auditor, and Client
shall acquire no right or interest in such property
M. RETENTION OF AND ACCESS TO RECORDS
For a period of three years after the date of Auditor's report
on any audit completed hereunder, upon reasonable written notice to
Auditor and Client, representatives of the cognizant audit agency
(or Its designee), the Texas state auditing agency and the United
States General Accounting Office shall be entitled during Auditor's
regular business hours during the said three year period to inspect
and designate for copying Auditor's audit workpapers relating to
such completed audit. Copies will be made at Client's or reques-
tot's expense by, or under the control of, Auditor
N. MISCELLANEOUS
1. Independent Contractor. Each of the parties hereto is an
independent contractor and neither party Is, nor shall be consid-
ered to be, an agent, distributor or representative of the other
Neither party shall act or represent itself, directly or by
implication, as an agent of the other or in any manner assume or
create any obligation on behalf of, or in the name of, the other.
PAGE 4
2. Amendments. No amendment of this Agreement shall be valid
unless in writing and slgned by both parties.
3. ~otice. Unless otherwise provided in this Agreement, any
notice to the parties required or permitted hereunder will be
deemed to have been duly given as of the date of receipt if in
writing and delivered personally, mailed by certified mall, return
receipt requested, or sent by overnight delivery by the U.S. Postal
Service or other independent carrier, to the following:
Client: Auditor.
City of Denton Deloitte & Touche LLP
ATTN: City Manager ATTN: George Scott
215 E. McKinney 301 Commerce Street, Ste
Denton, TX 76201 City Center Tower II
Suite 2950
Ft Worth, TX 76102-6801
Either party may change its address for notice by giving the
other party prior written notice of the new address in conformity
which the foregoing provisions of this Section and the date upon
which such new address will become effective
4. Entire Aqreement. This Agreement, including all Exhibits
annexed hereto and made a part hereof, constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other oral or written representa-
tions, understandings or agreements relating to the subject matter
hereof. Neither party shall be bound by the provisions of any pre-
printed or other written terms and conditions subsequent to the
date of this Agreement relating to the subject matter hereof unless
such additional terms and conditions are made effective pursuant to
the Amendments subsection of this section
5. Force Maleure. Notwithstanding any other provision in
thls Agreement, Auditor shall not be liable or held responsible for
any failure to perform or delays in performing its obligations
under this Agreement, including but not limited to, the completion
of the audit and issuance of its report thereon, which result from
circumstances or causes beyond Auditor's reasonable control,
Including, without limitation, acts or omissions or the failure to
cooperate pursuant to this Agreement by Client (including, without
limitation, entitles or individuals under its control, or any of
their respective officers, directors, employees, other personnel
and agents), fire or casualty, act of God, strike or labor dispute,
war or other violence, or any law, order or requirement of any
governmental agency or authority.
6. Authority Each party warrants that it is authorized to
enter into this Agreement and that the individual executing this
Agreement is authorized to enter Into this Agreement
PAGE 5
7. Survival. This provisions of the following sections
hereof shall survlve the expiration or termination of th~s
Agreement. D, I (last sentence), L, M, and N
8. Headings. The headings of th~s Agreement are for the
convenlence of reference only and shall not affect ~n any manner
any of the terms and conditions of this Agreement.
9 Severabllltv. If any provision of thls Agreement
declared or found to be lllegal, unenforceable or void, then such
provlslon shall be null and void, but each other provision hereof
not so affected shall be enforced to the full extent permitted by
applicable law.
10. Governlna Law. This Agreement shall be governed by and
construed in accordance with the ~nternal laws of the State of
Texas.
IN WXTNEBS W~EREOF, Client and Auditor have caused this
Agreement to be executed and delivered by their respective duly
authorlzed representatives as of the date f~rst set forth above
ACTING CITY MANAGER
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
HERBERT L. PROUTY, CITY ATTORNEY
DELOITTE & TOUCHE LLP
GEORGE ~coT~,
PARTNER
C \WPDOCS\K\D&T K
PAGE 6
Deloitte&
Touche LLP
Oty Center Tower II Telephone (817) 347 3300
~ Suite 2950
301 Commerce Street
Fort Worth Texas 76102
March 6, 1996
Ms Kathy DuBose
Executive Director of Finance
City of Denton
215 East McKmney
Denton, Texas 76201
Dear Ms DuBose
We are pleased to serve as independent certified pubhc accountants for the C~ty of Denton, Texas
(the "City") for the year ending September 30, 1996
Mr George Scott will be partner tn charge of all work we perform for you We bebeve that frequent
and timely commumcat~on throughout the year reduces the problems that are often associated with an
annual audit In addmon, we have found that we can often assist chents on current problems as they
arise We hope you will call Mr Scott whenever you feel that he can be of assistance
This letter sets forth our understanding of the terms and objectives of our engagement, the nature and
scope of the services we will provide, and the related fee arrangements
Scope of Services
Audit Services
We will audit the City's
General purpose financial statements as of and for the year ending September 30, 1996
Schedule of Federal Financial Assistance
Comphance with laws and regulations related to federal financml assistance
Our audit will be conducted in accordance with the following standards
Generally accepted auditing standards
Government Auditing Standards, 1994 Revision, issued by the Comptroller General of the United
States
Office of Management and Budget Circular A-128, "Audtt~ of State and Local Governments",
dated Aprtl 12, 1985
DaloltteTouche
Tohmatsu
International
Ms Kathy DuBose
March 6, 1996
Page 2
The objecttve of an audit carrted out tn accordance wtth these standards and regulattons ts 0) the
expression of our oplmon concerumg whether the financial statements present fatrly, tn all matertal
respects, the financml positron, results of operations, and cash flows of the orgamzatlon tn conformtty
with generally accepted accounting prtnctples, (n) whether the schedule of federal financial asststance
~s presented fatrly tn relation to the financial statements taken as a whole, (m) the reporting on our
determmatton whether the internal control structure provtdes reasonable assurance of comphance w~th
federal and other laws and regulattons, and 0v) tbe expression of an oplmon on whether the
orgamzatton comphed w~th specific terms and condttlons of ~ts major federal financial assistance
programs
Our audit wdl include tests of the accounting records of the C~ty and such other procedures as we
constder necessary to enable us to render the followmg reports
Opmton on whether the Ctty's general purpose financtal statements are fairly presented, m all
mater~al respects, in conformity wtth generally accepted accounting principles
Report on the internal control structure related to our audit of the financial statements
Report on comphance w~th laws and regulations with whtch noncomphance may be matertal to
the financial statements
Report on the schedule of federal financml asststance
Report on the mterual control structure used In admlmstermg major federal financial assistance
programs
Opmlon on comphance w~th the speetfie requtrements related to major federal financial
assistance programs tdenttfied tn the schedule of federal financial assistance
Report on eomphanee wtth general reqmrements of federal programs
Report on comphance w~th specific program requtrements related to nonmajor federal financtal
assistance program transactions selected for testing
In addition, we wtll render a report on tllegal acts and a report on findings and questioned costs, as
required, depenthng on the results of our audtt procedures
The management of the C~ty ~s responsible for estabhshmg and maintaining an internal control
structure To fulfill this responstb~hty, esttmates and judgments by management are reqmred to assess
the expected benefits and related costs for internal control structure to prowde management w~th
reasonable, but not absolute, assurance that assets are safeguarded agamst loss from unauthorized use
or thsposltlon, and that transactions are executed m accordance w~th management's authorization and
recorded properly to permit the preparatmn of financial statements m accordance w~th generally
accepted accounttng principles Because of mherent hm~tattons m any internal control structure,
errors or ~rregular~ttes may nevertheless occur and not be detected Also, project~on of any evaluation
of the structure to future pertods is subject to the r~sk that procedures may become inadequate because
of changes mcondtttons, or that the effectiveness of the design and operatton of pohctes and
procedures may deteriorate
As part of our audit, we wtll eonstder the Ctty's internal control structure and assess control r~sk, as
required by generally accepted auditing standards, for the purpose of estabhshmg a basts for
determining the nature, t~mmg and extent of audtt~ng procedures necessary for expressing our opm~on
Ms Kathy DuBose
March 6, 1996
Page 3
concerning the financial statements, and not to prowde assurance on the tnternal control structure
The report on our understanding of the City's internal control structure and the assessment of control
risk made as part of the financial statement audit will include (1) the scope of our work In obtaining an
understanding of the tnternal control structure and m assessing the control risk, (2) the C~ty's
s~gmficant internal controls or control structure, including the controls estabhshed to ensure
compliance with laws and regulations that have a material ~mpact on the financtal statements, and
(3) the reportable cond~tions, ~ncludmg the ~dentfficat~on of materml weaknesses ~dentffied as a result
of our work in understandmg and assessing the control risk, ff applicable
An audit includes examining, on a test basts, evidence supporting the amounts and dtsclosures ~n the
financml statements and the schedule of federal financml assistance, therefore, our audit will revolve
judgment about the number of transactions to be examined and the areas to be tested Also, we will
plan and perform the audit to obtain reasonable assurance about whether the finanmal statements are
free of material m~sstatement However, because of the concept of reasonable assurance and because
we will not perform a detailed exam~nation of all transactions, there ~s a risk that materml errors,
irregularities or illegal acts, ~nclud~ng fraud or defalcations, may ernst and not be detected by us
Management ~s also responmble for comphance w~th laws, regulations, contracts and grants, and for
estabhshmg and malntalmng an internal control structure to assure such comphanee with federal
award requirements
As part of obtaining reasonable assurance about whether the financml statements are free of material
misstatement, we will perform tests of the City's comphance with certain prowslons of laws,
regulations, contracts and grants However, our object~ve ~s not to provide aa optmon on overall
compliance with such provis~ons
As part of our audit of comphance w~th the general reqmrements of federal financml asststance and
specific requirements of major programs, we will obtain an understanding of the C~ty's ~nternal control
structure related to adm~mstenng major federal finanmal assistance programs and we will assess
control risk as reqmred by OMB CtrcularA-128 for the purpose of estabhshlng the nature, timing and
extent of auditing procedures necessary for expressing our opinion concerning comphance w~th laws
and regulations related to major federal programs and for expressing positive assurance as to ~tems
tested and negative assurance as to items not tested for general comphance requirements
As reqmred by OMB CtrcularA-128, our audit will also ~nclude tests of transactmns related to federal
assistance programs for comphance with applicable laws and regulations However, because of the
concept of reasonable assurance and because we will not perform a detailed examination of all
transactions, there is a risk that materml errors, ~rregularlt~es or illegal acts, ~nclud~ng fraud or
defalcations, may exist and not be detected by us We will adwse you, however, of any matters of that
nature that come to our attention, and will include such matters ~n the reports reqmred for an audit m
accordance w~th OMB CtrcularA-128 Our responsibility as auditors is hm~ted to the period covered
by our audit and does not extend to matters that arise dunng any later periods for which we have not
been engaged as auditors and for whtch we have performed no auditing procedures
Similarly, m performing our audit we will be aware of the possibility that illegal acts may have
occurred However, it should be recogmzed that our audit provides no assurance that illegal acts
generally will be detected, and only reasonable assurance that dlegal acts hawng a d~rect and material
effect on the determination of financial statements amounts wdl be detected
Our auditing procedures will include tests of documentary ewdence supporting the transactions
recorded In the accounts, and may include tests of the physical existence of ~nventones and d~rect
confirmation of receivables and certain other assets and habfl~tles by correspondence with selected
Ms Kathy DuBose
March 6, 1996
Page 4
lndtvtduals, 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
Management's Responsibility
It Is our understanding that you will provide us with the basic information reqmred for our audit and
that you are responsible for the accuracy and completeness of that information We will advise you
about accounting pnneiples and their appheation and wdl assist m the preparation of your financial
statements, but the responsibthty for the financial statements remains with you This responslbdity
includes the maintenance of adequate records and related internal control structure policies and
procedures, the selection and application of appropriate accounting principles, and the safeguarding of
assets
We understand that your employees will type all cash or other confirmations that we request and will
help locate any invoices selected by us for testing
Other Communications Arising from the Audit
As required by Government .4udttmg Standards, our report on our tests of compliance with applicable
laws and regulations related to our audit of the financial statements will describe all instances of
noncompliance reportable under Government`4udttmg Standards
As required by OMB Circular.4-128, our report on comphance will contain our opinion on the City's
compliance, in all material respects, with the laws and regulations that apply to its major federal
financial assistance programs With regard to transactions selected from nonmaJor programs
and with our procedures related to general requirements of federal awards, our report on compliance
will contain a statement of positive and negative assurance, as discussed above
Because, in addition to our report on the finanmal statements, the scope of the engagement includes an
audit in aecordmlce with Government.4udttmg Standards and thc requirements of OMB Circular
A-128, our reports on compliance with laws and regulations, including legal compliance and reports
on your systems of mternal control may be accompanied by observations (findings) on your
compliance or on your systems of internal control and a schedule of questioned costs, if the results of
our audit procedures reqmre such observations or questioned costs If any observations or findings are
reported to you, you must provide a written corrective aet~on plan under the requirements of the OMB
Circular .4-128
Our audit is not specffically designed and cannot be relied on to disclose all reportable conditions (that
is, sigmfleant deficiencies in the design or operation of the Internal control structure) However,
during the audit, if we become aware of such reportable conditions that affect the financial internal
control systems or of ways that we believe management practices can be improved, we will
commumcate them to you in a separate letter
At the conclusion of the audit, we will request the City's management to provide us a representation
letter that, among other things, will confirm management's responsibility for the preparation of the
financial statements in conformity with generally accepted accounting pnnciples, and availability of
financial records and related data, the completeness and availability of all minutes of City Council
(and committee) meetings, the absence of irregularities involving management or those employees
who have significant roles m the control structure and, further, to confirm management's responsibility
for eomphanee with laws and regulations, applicable to federal financial assistance programs
Ms Kathy DuBose
March 6, 1996
Page 5
We understand that our reports on the internal control structure as part of the financial statement audit
and on comphance with laws and regulattons are intended for the information of the audit committee,
management and appropriate federal agencies
As required by Government Auditing Standards and OMB Ctrcular A-128, we will maintain the
working papers for a m~mmum of three years from the date of our reports These working papers will
be made avatlable to representattves of the cognizant audit agency (or ~ts designee), other government
audit staffs, and/or the Umted States General Accounting Office upon their request and after they have
properly notffied you of their request to rewew the working papers
Fees
Fees for our services are based on per d~em rates, plus out-of-pocket expenses, all ofwhmh will be
balled as our work progresses Our professional fee for the audit of the general purpose financial
statements for the fiscal year ending September 30, 1996, wdl be $35,100 which reflects the annual
inflation adjustment Should an increase m the scope of our services be required, we would provide
you with a change m our fee prior to commencing the work These fees are dependent upon our
receiving 250 hours of assistance from the Internal Auditor W~thout assistance from the Internal
Auditor, our fee will increase to $43,700
During the course of our engagement, we may observe opportunities for economy m or improved
controls over your operations We will bring such matters to the attention of the appropriate level of
management ~n writing
We appreciate the opportumty to be of service to the City, and we believe th~s letter accurately
summarizes the slgmfieant terms of our engagement If you have any questions, please let us know
If you agree with the terms of our engagement as descrtbed In this letter, please s~gn the enclosed copy
and return it to us
Yours very truly,
RESPONSE
This letter correctly sets forth the understanding of the City of Denton, Texas
Date