1995-121A: \DELOITTE. 0RD
ORDINANCE NO. 9~--/~-1
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 the amount of
Thirty-three Thousand Seven Hundred Dollars ($33,700.00) is hereby
authorized.
SECTION IV. That this ordinance shall become effective immed-
approval
iately upon its passage and ~~
PASSED AND APPROVED this the ~D~4~day of ~ , 1995.
BOB CASTLEBERRY, MA~
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPR~ED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
CONTRACT FOR AUDITING SER~HES ~j
This Agreement is entered into this ~)_~day of ~ ~ ,
1995 by and between Deloitte & Touche LLP ~"Auditor"),~registered
limited liability partnership with an office located a~JSuite 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 McKinney, 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 will be conducted in
accordance with generally accepted auditing standards; Government
Auditing 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 will perform the annual compliance audit of
Client's federal financial assistance programs. Such audit will be
conducted in accordance with generally accepted auditing standards;
Government Auditinq Standards, issued by the Comptroller of the
United States; OMB's Compliance Supplement for Sinqle Audits of
State and Local Governments; OMB Circular A-128, Audits of State
and Local Governments; and AICPA Statement on Auditing Standard No.
63, Compliance Auditinq Applicable to Governmental Entities and
Other Recipients of Governmental Financial Assistance.
4. Ail services set forth in Auditor's letters of April 17,
1995 and April 31, 1995, 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, 1995. Auditor's
financial and compliance audit work should be completed no later
than ninety (90) days after Client's fiscal year end. This will
allow the Comprehensive Annual Financial Report for each fiscal
year to be submitted to the Government Finance Officers Association
preferably by December 15, 1995, but no later than January 15,
1996, 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 in
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, 1995 shall
not exceed Thirty-three Thousand Seven Hundred Dollars
($33,700.00). These fees are dependent upon Auditor receiving 150
hours of assistance from the Internal Auditor. Without assistance
from the Internal Auditor, Auditor's fees will increase to a
maximum of Forty-two Thousand Dollars ($42,000.00) .
Client and Auditor recognize that the scope of services and
compensation under this Agreement are predicated upon (i) current
audit requirements imposed by laws, regulations and professional
standards relating to such services; (ii) expectations of reason-
able cooperation with Auditor by Client pursuant to this Agreement;
and (iii) 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 (i) irregularities; (ii) the absence of such reasonable
cooperation; (iii) 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 writing 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 adjustment 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 byAuditor 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 this Agreement,
Client may request Auditor to provide services in 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
Client may request renewal of this Agreement for two addition-
al one-year periods as Client desires. Payment for Auditor's ser-
vices for the two one-year periods shall include a Consumer Price
Index ("CPI") increase based upon the Dallas/Fort Worth metroplex
increases existing during the years of the renewal options, and may
include increases due to changes in accounting and auditing
standards which create a need for an increase in the scope of ser-
vices. If such changes have occurred, Auditor shall notify Client
of the changes and the proposed fee adjustments.
PAGE 3
H. INSURANCE
Upon written request by Client, Auditor shall provide Client
with a certificate evidencing that Auditor has the following
insurance: (i) general liability; (ii) automobile liability; and
(iii) 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 ACCR~S 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-
tor'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-
PAGE 4
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.
2. Amendments. No amendment of this Agreement shall be valid
unless in writing and signed by both parties.
3. Notice. 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 mail, 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 801 Cherry St., Suite 2340
Denton, TX 76201 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 Agreement. 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 Majeure. Notwithstanding any other provision in
this 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, entities 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.
PAGE 5
6. ~- 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.
7. Survival. This provisions of the following sections
hereof shall survive the expiration or termination of this
Agreement: D, I (last sentence), L, M, and N.
8. ~. The headings of this Agreement are for the
convenience of reference only and shall not affect in any manner
any of the terms and conditions of this Agreement.
9. ~. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, then such
provision 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. Governin Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Texas.
IN WITNESS W~EREOF, Client and Auditor have caused this
Agreement to be executed and delivered by their respective duly
authorized representatives as of the date first set forth above.
g LL~Y~ V. HAl{ , /
CITY MANAGER
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
HERBERT L. PROUTY, CITY ATTORNEY
DELOITTE & TOUCHE LLP
E: \~PDOCS\K\D&T. K
PAGE 6
Deloitte&
Touche LLP
Suite 1600 Telephone: (214) 777-7000
Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201-6778
April 17 1995
Ms. Kathy DuBose
Director of Accounting
City of Denton
215 East McKirmey
Denton, Texas 76201
Dear Ms. DuBose:
We are pleased to serve as independent certified public accountants for the City of Denton, Texas
(the "City") for the year ending September 30, 1995
Mr. George Scott will be partner in charge of all work we perform for you. We believe that frequent
and timely communication throughout the year reduces the problems that are often associated with an
annual audit. In addition, we have found that we can often assist clients on current problems as they
arise. We hope you xvill 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 xve 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, 1994
Schedule of Federal Financial Assistance
Compliance with laws and regulations related to federal financial 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, "Audits of State and Local Governments",
dated April 12, 1985.
Dei tte Teuche
Teitmatsu
Ms. Kathy DuBose
April 17, 1995
Page 2
The objective of an audit carried out in accordance with these standards and regulations is (i) the
expression of our opinion concerning whether the financial statements present fairly, in all material
respects, the financial position, results of operations, and cash flows of the organization in conformity
with generally accepted accounting principles, (ii) whether the schedule of federal financial assistance
is presented fairly in relation to the financial statements taken as a whole, (iii) the reporting on our
determination whether the internal control structure provides reasonable assurance of compliance with
federal and other laws and regulations; and (iv) the expression of an opinion on whether the
organization complied with specific terms and conditions of its major federal financial assistance
programs.
Our audit will include tests of the accounting records of the City and such other procedures as we
consider necessary to enable us to render the following reports:
Opinion on whether the City's general purpose financial statements are fairly presented, in all
material respects, in conformity with generally accepted accounting principles
Report on the internal control structure related to our audit of the financial statements
Report on compliance with laws and regulations with which noncompliance may be material to
the financial statements
Report on the schedule of federal financial assistance
Report on the internal control structure used in administering major federal financial assistance
programs
Opinion on compliance with the specific requirements related to major federal financial
assistance programs identified in the schedule of federal financial assistance
Report on compliance with general requirements of federal programs
Report on compliance with specific program requirements related to nonmajor federal financial
assistance program transactions selected for testing.
In addition, we will render a report on illegal acts and a report on findings and questioned costs, as
required, depending on the results of our audit procedures.
The management of the City is responsible for establishing and maintaining an internal control
structure. To fulfill this responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs for internal control structure to provide management with
reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use
or disposition, and that transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in accordance with generally
accepted accounting principles. Because of inherent limitations in any internal control structure,
errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation
of the structure to future periods is subject to the risk that procedures may become inadequate because
of changes in conditions, or that the effectiveness of the design and operation of policies and
procedures may deteriorate.
As part of our audit, we will consider the City's internal control structure and assess control risk, as
required by generally accepted auditing standards, for the purpose of establishing a basis for
determining the nature, timing and extent of auditing procedures necessary for expressing our opinion
Ms. Kathy DuBose
April 17, 1995
Page 3
concerning the financial statements, and not to provide assurance on the internal control structure.
The report on our understanding of the City's internal control structure and the assessment of control
risk made as part oftbe financial statement audit will include (1) the scope of our work in obtaining an
understanding of the internal control structure and in assessing the control risk; (2) the City's
significant internal controls or control structure, including the controls established to ensure
compliance with laws and regulations that have a material impact on the financial statements; and
(3) the reportable conditions, including the identification of material weaknesses identified as a result
of our work in undemt~ding and assessing the control risk, if applicable.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements and the schedule of federal financial assistance; therefore, our audit will involve
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 financial statements are
free of material misstatement. However, because oftbe concept of reasonable assurance and because
we will not perform a detailed examination of all transactions, there is a risk that material errors,
irregularities or illegal acts, including fraud or defalcations, may exist and not be detected by us.
Management is also responsible for compliance with laws, regulations, contracts and grants, and for
establishing and maintaining an internal control structure to assure such compliance with federal
award requirements.
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we will perform tests of the City's compliance with certain provisions of laws,
regulations, contracts and grants. However, our objective is not to provide an opinion on overall
compliance with such provisions.
As part of our audit of compliance with the general requirements of federal financial assistance and
specific requirements of major programs, we will obtain an understanding of the City's internal control
structure related to administering major federal financial assistance programs and we will assess
control risk as required by OMB Circular,,t-128 for the purpose of establishing the nature, timing and
extent of auditing procedures necessary for expressing our opinion concerning compliance with laws
and regulations related to major federal programs and for expressing positive assurance as to items
tested and negative assurance as to items not tested for general compliance requirements.
As required by OMB CircularA-128, our audit will also include tests of transactions related to federal
assistance programs for compliance 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 material errors, irregularities or illegal acts, including fraud or
defalcations, may exist and not be detected by us. We will advise you, however, of any matters of that
nature that come to our attention, and will include such matters in the reports required for an audit in
accordance with OMB Circular.,l-128. Our responsibility as auditors is limited to the period covered
by our audit and does not extend to matters that arise during any later periods for which we have not
been engaged as auditors and for which we have performed no auditing procedures.
Similarly, in performing our audit we will be aware of the possibility that illegal acts may have
occurred. However, it should be recognized that our audit provides no assurance that illegal acts
generally will be detected, and only reasonable assurance that illegal acts having a direct and material
effect on the determination of financial statements amounts will be detected.
Our auditing 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
Ms. Kathy DuBose
April 17, 1995
Page 4
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.
Management's Responsibility
It is our uederstanding that you will provide us with the basic information required for our audit and
that you are responsible for the accuracy and completeness of that information. We will advise you
about accounting principles and their application and will assist in the preparation of your financial
statements, but the responsibility for the financial statements remains with you. This responsibility
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 Auditing Standards, our report on our tests of compliance with applicab[e
laws and regulations related to our audit of the financial statements will describe all instances of
noncompliance reportable under Government Auditing Standards.
As required by OMB Circular ~4-128, our report on compliance 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 financial statements, the scope of the engagement includes an
audit in accordance with Government Auditing Stand. ds and the requirements of OMB Circular
A-128, our reports on compliance with laws and regulations, including legal compliance and reports
on your systems of internal 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 require such observations or questioned costs. If any observations or findings are
reported to you, you must provide a written corrective action plan under the requirements of the OMB
Circular .,1-128.
Our audit is not specifically designed and cannot be relied on to disclose all reportable conditions (that
is, significant 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
communicate 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 principles, 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 in the control structure and, further, to confirm management's responsibility
for compliance with laws and regulations, applicable to federal financial assistance programs.
Ms. Kathy DuBose
~April 17, 1995
Page 5
We understand that our reports on the internal control structure as part of the financial statement audit
and on compliance with laws and regulations are intended for the information of the audit committee,
management and appropriate federal agencies.
As required by Government Auditing Standards and OMB Circular .4-128, we will maintain the
working papers for a minimum of three years from the date of our reports. These working papers will
be made available to representatives of the cognizant audit agency (or its designee), other government
audit staffs, and/or the United States General Accounting Office upon their request and al~er they have
properly notified you of their request to review the working papers.
Fees
Fees for our services are based on per diem rates, plus out-of-pocket expenses, all of which will be
billed as our work progresses. Our professional fee for the audit of the general purpose financial
statements for the fiscal year ending September 30, 1995, will be $37,000 which reflects the annual
inflation adjustment. Should an increase in the scope of our services be required, we would provide
you with a change in our fee prior to commencing the work. These fees are dependent upon our
receiving 150 hours of assistance from the Internal Auditor. Without assistance from the Internal
Auditor, our fee will increase to $42,000.
During the course of our engagement, we may observe opportunities for economy in or improved
controls over your operations. We will bring such matters to the attention of the appropriate level of
management in writing.
We appreciate the opportunity to be of service to the City, and we 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.
Yours very truly,
RESPONSE:
This letter correctly sets forth the understanding of the City of Denton, Texas.
Approved by.
Date
Deloitte&
Touche LLP
Suite 1600 Telephone: (214) 777-7000
~ Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201-6778
Ma3' 31, 1995
Ms. Kathy Dubose
Executive Director of Finance
City of Denton
215 E. McKinney
Denton, Texas 76201
Dear Ms. Dubose:
As we discussed on May 10, Deloitte & Touche I~I~1', is willing to reduce the audit fee for the
audit of the City of Denton for the year ended September 30, 1995, by $3,300 for an additional
100 hours of assistance from Susan Croft, the City's internal auditor.
In order for the City to receive the discount for the internal audit assistance, all work assigned to
the internal auditor must be completed through the review process required by Deloitte & Touche
policy and professional standards.
We appreciate the opportunity to be of service to the City, and we 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.
'Yours very truly,
RESPONSE:
This letter correctly sets forth the understanding of the City of Denton, Texas.
Approved by.
Date.
DetettteTeuche
Tehnmtsu
International