1990-1322651L-11/3689
ORDINANCE NO. q0-13,a,_
AN ORDINANCE AUTHORIZING THE EXECUTION OF A CHANGE ORDER TO A
CONTRACT BETWEEN THE CITY OF DENTON AND JAGOE PUBLIC CONSTRUC-
TION; PROVIDING FOR AN INCREASE IN THE CONTRACT PRICE; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, on March 12, 1990, the City awarded a contract for
the construction of certain improvements to Jagoe Public Con-
struction in the amount of $1,173,266.50; and
WHEREAS, the City Manager having recommended to the Council
that a change order be authorized to amend such contract with
respect to the scope and price and said change order being in
compliance with the requirements of Chapter 252 of the Local
Government Code; NOW, THEREFORE,
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF DENTON:
SECTION I. That the change order to the contract between the
City and Jagoe Public Construction, a copy of which is attached
hereto, in the amount of Five Thousand Nine Hundred Eighty Seven
and 25/100 Dollars ($5,987.25), is hereby approved and the
expenditure of funds therefor is hereby authorized.
SECTION II. That this ordinance shall become effective
immediately upon it passage and approval.
PASSED AND APPROVED this 7//_0 day of1990.
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY:
APPROVED AS TO LEGAL FORM:
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
BY:
DATE: September 4,1990
CITY COUNCIL REPORT
TO: Mayor and members of the City Council
FROM: Lloyd V. Harrell, City Manager
SUBJECT: BID #1069 - OAK, HICKORY & FRY STREET PAVING AND
DRAINAGE (CHANGE ORDER #2)
RECOMMENDATION: We recommend this change order in the amount of
$5,987.25 be approved.
SUMMARY: Change order number 2 includes actual quantities of 12"
waterline, and 2" and 1" services installed. Also included are
necessary fittings for realignment of the waterline i.e. Tees,
bends, plug and valves not included in the original contract
price.
This changes order number 2 in the amount of $5,987.25 plus
change order number 1 previously approved in the amount of
$30,016.25 brings the contract total to $1,209,308.00.
BACKGROUND: Minutes from P.U.B. meeting, change order form with
quantities listed.
PROGRAMS, DEPARTMENT OR GROUPS AFFECTED: Denton Municipal
Utilities, Jagoe Public Construction, Citizens of Denton.
FISCAL IMPACT: Funds for this change order will come from the
original funds set aside for waterline construction. Account
623-081-RB90-RX05-9138.
Respectfully submitted:
Prepared by:
Name: Tom D:' Shaw, C.P.M.
Title: Purchasing Agent
TS/j h
055.DOC
Llo r
y anager
AUG-28-'90 TUE 17:05 ID:CITY OF DENTON UA
TEL NO:817-566-8236 4128 P02/03
EXCERPT
MINUTES OF PUBLIC UTILITIES BOARD
August 15, 1990
4. CONSIDER CHANGE ORDER NO. 2 IN THE AMOUNT OF $5,987.2
JAGOE-PUBLIC CORPORATION FOR WEST OAK 12" WATER LINE
BONNIE BRAE TO THOMAS.
Allison advised the Board this water line was replaced on
west Oak Street since, during street construction, it was
determined that the line was not deep enough and would break
under the strain of heavy traffic.
Laney made a motion to recommend to the City Council
approval of the change order as submitted. Second by
LaForte. All ayes, no nays, motion carried.
City Manager, Harrell, expressed his appreciation to the
Utility crews who worked many hours of overtime in order to
complete the line installations so that the street could be
paved.
CITY OF DENTON CHANGE ORDER
1. Division (Department) 2. Purchase Order No. 3. Change Order No.
Engineering 95983 2
Name o Project 5. Project Acct No. 6. Date Prepared
Oak,Hickory & Fry Paving & Drainage 623-081-RB90-RX05-9138 August 2, 1990
Name an Address o Contractor
Jagoe-Public Co. P.O. Box 250 Denton, Tx. 76201
Description of Work Included in Contract
Complete Reconstruction of Oak, Hickory, and Fry Streets.
9. Changes ordered and reason ordered List individual changes as: A, B, C, D, etc.
See Attached Memo
10.
Bid
Original
Contract
Revised
Negotiated
Original
Revised
Contract
Item
Estimated
Unit
Estimated
C.O. Unit
Estimated
Estimated
Changes
No.
Quantity
Price
Quantity
Price
Cost
Cost
B. See Attached Memo
C.
D.
Total Total
11. Original Contract rice Increase in Contract rice 5,987.25
New Contract Price *$1,209,38U.00 Decrease in Contract Price
*with Change Order
12. Contract time increase ecrease by days. New contract time days
THE AFOREMENTIONED CHANGE, AND WORK AFFECTED THEREBY, IS SUBJECT TO ALL
CONTRACT STIPULATIONS AND COVENANTS.
13. ISSUED FOR REASONS INDICATED ABOVE: ZaA
~_9O
- bection Supervisor Date
14. ACCEPTED BY CITY ENGINEER: SLk=== - 6Z71 na ure -`Ti t1e - ate
15. ACCEPTED BY CONTRACTOR: Z ,-SPA _7~P
Si ature Title Da e
16. ASSISTANT CITY MANAGER
Signature -1,1 1, ee- 0 to
DIRECTOR OF UTILITIES: LP~ Z "
Signature ~t e at
CONDITIONS OF APPROVAL:
17. PURCHASING/FINANCE
Signature - 7` e - ~e
COUNCIL APPROVAL (If needed) Date
0637E
Oak St. Lowered Waterline
DESCRIPTION OF WORK
•
Unit
Of
Quentitg
Ori9110e1
Quentitg
Completed
Unit
Yelue
of Completed
Item
Measure
Estimate-
to Date
Price
Work
12' PVC
LF
85
$30.25
$2,571.25
2' Service Line
EA
1
$715.00
$715.00.
1 Service Line
EA
1
($605.00)
($605.00)
12x 12x 12 Tee
EA
1
1
$450.00
$450.00
12' 22' r Bend
EA
1
1
$446.00
$446.00
12 902 Bend
EA
1
1
$350.00
$350.00
12' Plug
EA
2
2
$80.00
=160.00
12' Yelve wou
EA
2
2
$950.00
$10900.00
TOTAL
=5-g87 ,25
Deloifte &
buche
F/~
CITY OF DENTON
Proposal to Provide Professional Services
July 2, 1992
Member
n w~
so::: International
Deloitte &
Touche
801 Cherry Street, Suite 2340 Metro: 654-2777
Fort Worth, Texas 76102-6801
Telephone: X817) 336-2531
July 2, 1992
Purchasing Agent
City of Denton
901-B Texas Street
Denton, Texas 76201
Dear Purchasing Agent:
Deloitte & Touche is pleased to present our proposal to continue to provide professional services to the
City of Denton. We have taken pride in serving you in the past and are confident that you will
continue to find our services to be of the highest degree of professionalism and quality.
Fulfilling your service requirements and meeting all specified deadlines for the timely completion of
your audit will continue to be integral parts of our service plan. It is our understanding that the scope
of services to be performed includes an audit of the financial statements of all funds and account
groups in accordance with generally accepted auditing standards and the AICPA Audits of State and
Local Governmental Units. The scope will also include an audit of federal grant programs for
compliance with the Single Audit Act in accordance with Government Auditing Standards.
Deloitte & Touche is a leading provider of accounting, financial reporting and consulting services to
local government entities across the Metroplex. We currently serve an impressive list of governmental
clients in the area, including the City of Denton; the Cities of Fort Worth, Grapevine, Greenville,
Lancaster, Hurst, Burleson, Cedar Hill, The Colony, Duncanville, Rowlett, Highland Park and
University Park; and the North Central Texas Council of Governments. This position of leadership
has been attained through a strong commitment to our public sector practice and the devotion of
dedicated personnel who are fully trained in governmental accounting. Our experienced staff is able to
understand the client's operations and exhibit sensitivity to management's concerns.
We believe very strongly that accounting firms are different. They can be differentiated by the
services they provide and by the credentials of the team assigned to serve you. As you review the
following proposal, we encourage you to focus on the following features that distinguish Deloitte &
Touche and our service approach.
■ Knowledge of the City - We have served the City with efficient, timely service for several
years. In short, we know you and you know us. During this time, not only have we
performed the annual audit but we have helped the City deal with bond issuances and
numerous special projects, including:
- Use of bond proceeds
- Review of the utility billing system
- Review of procedures over hotel/motel tax and collections
- Review of insurance programs
- Review of airport operating lease
- Review of Denton County Appraisal District operations
- Litigation support
We propose to continue to perform an annual special project as requested by the Audit
Committee at no cost to the City.
■ Commitment of Resources - We have assigned a service team with exceptional technical
skills that includes our office's most experienced government services partner, who has a
full-time commitment to our governmental practice. Your audit manager has served the City
of Denton for several years and also has experience with special districts.
■ High Degree of Compliance Experience - Of great importance to the City is an audit firm
with compliance experience. Our firm is highly experienced with compliance audits. This
experience and knowledge of the City's programs ensure a quality, effective single audit.
■ GFOA Certificate Experience - A specific goal of our service plan will be to assist the City
of Denton in retaining the GFOA Certificate of Achievement. The audit partner and manager
assigned to the City of Denton engagement are reviewers for the GFOA Certificate program
and will be a valuable resource for the City. Locally, Deloitte & Touche has one of the
highest percentages of Certificate clients of any of the major accounting firms in the
Metroplex. Twenty of our current Metroplex clients have the GFOA Certificate of
Achievement.
■ Relevant Local Utility Experience - Of particular interest to the City of Denton is our strong
position in the utility industry as well as our record of services to cities with similar
operations, such as the Cities of Greenville, Bryan and Garland. Members of your audit
team have played key roles in the audits of these entities. Our Metroplex offices serve as the
auditors for some of the largest public utilities in North Texas, including Texas Utilities. In
addition, our Management Consulting Public Utilities Group is located in our Dallas office.
Their knowledge and experience in electrical generation, distribution, customer service and
regulatory issues are available to the City.
■ Diversity of Services - Deloitte & Touche offers a full range of services beyond those
involved in the traditional audit. Some of our services are provided to support the audit, and
others are provided to management to improve the efficiency and effectiveness of its
operations. In light of the continued rising cost of providing public services and diminishing
revenue sources, our clients have found our ideas and services innovative and effective.
loft &
uche
0
■ Maximum Value for Your Audit Dollar - In the high-profile public sector environment, we
are committed to providing the highest-quality services that give our clients maximum value
for their professional service dollar. We are committed to providing prompt, effective and
efficient services that not only respond to, but also anticipate, our clients' needs, and to
performing those services with competence, objectivity and integrity.
As you review our proposal, we encourage you to keep the foregoing factors in mind. We are
confident that Deloitte & Touche is the firm best suited to meet your needs. As a partner and the
leader of our Metroplex local government practice, George Scott is authorized to make representations
for ,nd to bind our firm. This proposal is a firm and irrevocable offer for 60 days. If you have any
questions concerning this proposal, we invite you to contact him by telephone at (817) 347-3313.
Yours truly,
Deloftte
0
Contents
Section
Page
1
Auditor Rotation
1
2
Independence
3
3
Commitment to Equal Opportunity
4
4
Firm Qualifications and Experience
5
5
Our Service Team
12
6
Our Experience With Cities and Client References
15
7
The Deloitte & Touche Audit Approach
25
8
Professional Arrangements
35
Appendices
A Peer Review Reports
B Resumes
BOOM &
Touche
0
Section I
"Periodically, some
observers of the public
accounting profession have
Rotation
Auditor
suggested that the quality of
.
audits could be improved if
audit firm rotation were
Our audit relationship with the City of Denton began in
required after some specified
period. This
1986. In the ensuing six years, Deloitte & Touche has
recommendation rests on the
utilized its experience and expertise in governmental
premise that establishing a
auditing and accounting to provide the highest-quality
long-term client relationship
services delivered in a professional and timely manner.
can impair the auditors'
During this time period, the City has continued to be
objectivity.
recognized by the Government Finance Officers
"The American Institute of
Association (GFOA) through the Certificate of
Certified Public
Achievement award for the quality of financial reporting
Accountants, with
in its Comprehensive Annual Financial Report.
approximately 305,000
Additionally, we have consistently provided value-added
members, is continually
services by conducting numerous special projects,
pursuing initiatives to
providing litigation support, issuing quality management
enhance the quality of
letters and assisting the City in the issuance of both
audits. As a result, any
general obligation and revenue bonds. We have
suggestion to enhance audit
maintained strong and constant communications with the
quality and objectivity is
seriously considered.
Audit Committee and City staff.
However, after studying the
We believe continuity is important to our relationship with
question of audit firm
rotation, the Institute has
any client. Supporting this belief, the AICPA recently
concluded that there is no
produced a forceful statement of position regarding
credible evidence that such a
mandatory Rotation of Audit Firms of Publicly Held
requirement would improve
Companies. Although addressed specifically to publicly
the quality of audits. To the
held companies, we believe that the principles discussed
contrary, the Institute
believes that mandatory audit
therein apply to the private and government sectors as
firm rotation would not be in
well. In its summary, the statement says:
the public interest. For one
thing, it would dramatically
increase costs for firms,
clients and the public. In
addition, it would increase
the likelihood of poor audits,
by depriving auditors of a
most valuable tool:
experience with a client and
No& &
Toucho
-1-
o
the resulting comprehensive without the undesirable
knowledge of its business and consequences of mandatory
operations. rotation. "
"Audits are
strengthened by
institutional
continuity. It is a
significant benefit to
be well acquainted
with a client's
business operations
and controls. "
"In brief, mandatory audit firm
rotation is not necessary or
appropriate because:
■ Audits are strengthened by
institutional continuity. It is
a significant benefit to be
well acquainted with a
client's business, operations
and controls. Experience
shows that allegations of
audit failure occur much
more frequently when a firm
is in its first couple of years
as a company's auditors
■ Audit firm rotation is
disruptive, time consuming
and would increase overall
audit costs
■ Key individuals involved in
the audit process - audit firm
personnel, client
management and audit
committee members - all
change in the normal course
of events anyway
■ Audit committees are in the
best position to evaluate the
desirability of changing
auditors
■ Growing public expectations,
regulatory changes and
recent professional initiatives
have all served to improve
the auditing and financial
reporting processes as well
as to create an environment
for ongoing improvement
D@Ioltte &
Touche
-2- 0
Section 2
Independence
We confirm that we are independent with respect to the
City of Denton as defined by generally accepted auditing
standards and Government Auditing Standards (the. Yellow
Book). None of our partners, managers or staff have any
direct or indirect financial interest in City contracts, and
no one assigned to the audit of the City will be related to
any employee of the City. In addition, Deloitte & Touche
meets the independence requirements of the AICPA and
the SEC. In compliance with such guidelines, our firm
will maintain professional objectivity and independence
with respect to any services performed for the City.
In This Section
License to Practice
-3-
License to Practice
Deloitte & Touche is a
partnership registered in the
state of Texas and hereby
affirms that we are a
properly licensed certified
public accounting firm. Our
Certificate of Registration is
available upon request.
Our firm and all of our key
professional personnel,
including George Scott,
Peggy McCormick and Craig
Milacek, are duly licensed as
certified public accountants
to practice in the state of
Texas.
Deloitte &
buehe
0
Affirmative Action
Policies
Both locally and nationally,
Deloitte & Touche is
Commitment to Equal
committed to an aggressive
program of affirmative
Opportunity
action, in practice as well as
in principle. We actively
seek to recruit, employ and
promote women and
members of minority groups,
Deloitte & Touche is committed to e
Like the Cit
ual
and minorities and women
y,
q
employment opportunity and affirmative action within our
are represented at every level
of our firm.
firm and to increasing minority representation within the
accounting and consulting professions as a whole.
Just as Deloitte & Touche is
committed to affirmative
action within our firm, we
also are dedicated to
increasing overall minority
participation in the
accounting and consulting
professions.
Recruitment and Hiring
Initiatives
In keeping with our firm's
affirmative action policy
statements, the Metroplex
office actively recruits
minority Accounting students
from major southwestern
colleges and universities. In
addition, a Metroplex office
recruiter visits two
predominantly minority
college campuses each year.
Administratively, we have
employed minority high
school students from inner-
city magnet high schools in a
In This Section vocational work/study
program.
Affirmative Action Policies
Recruitment and Hiring Initiatives
-4-
Deloft&
0
Local Practice
The Dallas/Fort Worth
Metroplex offices of
Deloitte & Touche will
Firm Qualifications and
provide services to the City
of Denton. We audit
Ex
erience
numerous public and private
p
sector entities in the
Dallas/Fort Worth
Deloitte & Touche is one of the world's largest
metropolitan area.
professional services firms - a general partnership
Our professionals are
providing comprehensive auditing and accounting, tax
articulate, intelligent and
consulting and compliance, management consulting and
highly trained individuals
actuarial services to thousands of public and private
with diverse backgrounds
companies and governmental entities of all sizes through
and skills. Many partners
more than 100 offices throughout the United States. Our
and members of the client
U.S. firm has a full-time professional and support staff
service staff have graduate
complement of 16,500, including 1,525 partners. Our
degrees in business,
international organization consists of 500 offices in more
accounting, tax, law and
other related fields.
than 100 countries, with a total staff complement of
56,000 professionals.
With a staffing level of over
400 professionals from
partner through support
staff, the Metroplex offices
are large enough to handle
both the City's day-to-day
and peak service needs.
Because of our strong
practice in local government
in This Section
accounting, about 35% of
our Metroplex audit staff
Local Practice
has "hands-on" experience
and training
in
Computer Assurance Services
governmental accounting,
Meeting the Public Sector's Needs: Our Range of Services
auditing and financial
Public Utilities Experience
reporting. As a result, we
Texas Municipal Power Association (TMPA) Experience
have a pool of trained and
Local Utilities Expertise
experienced professionals
Quality Control
available to serve the City.
Why Deloitte & Touche
The professional staff by
Our Service Philosophy
level and department is listed
Valued Client
in the chart on the next page.
Training/Professional Education
Conclusion
Deloitte &
buc e
-s-
We anticipate that the City's.
audit will be staffed with a senior
accountant and two staff
accountants on a full-time basis.
Your audit partner and manager
will provide supervisory
assistance and will be frequently
on site during the audit process.
Computer Assurance
Services
Deloitte & Touche is one of the
leading providers of Computer
Assurance Services. Our
Computer Assurance Service
Group (CAS), which is
comprised of computer specialists
dedicated to the computer audit
area, will provide the City with a
review of the EDP function.
This review and the personnel
involved are described in greater
detail in the Audit Approach
section of this proposal.
Meeting the Public Sector's
Needs: Our Range of
Services
The Dallas/Fort Worth practice
offers a full range of services in
addition to accounting, auditing
and tax. We have an exceptional
breadth of skills and capabilities
for serving the City. Our
services address a wide variety of
needs and are constantly being
refined and updated. We
monitor industry trends closely
and listen carefully to what
clients tell us about their needs to
ensure that our clients receive
sound and timely advice about
trends and opportunities. A brief
description of some of the
services that we furnish to our
public sector clients is listed
below.
Financial Services
■ Public Security Offerings -
Deloitte & Touche has
extensive experience
assisting government clients
with public securities
offerings. The members of
the management team
selected to serve the City are
thoroughly familiar with the
relevant procedures,
including the guidelines set
forth in the GFOA
publication, Disclosure
Guidelines for Offerings of
Security by State and Local
Governments.
Our National Government
Group keeps local offices
informed about the effects of
the Tax Reform Act of 1986
(TRA) on tax-exempt
securities, including the
status of proposed
regulations under
consideration by the Internal
Revenue Service and
proposals being considered
by the Securities and
Exchange Commission that
may impact municipal
securities offerings.
■ Bond Verification Ser-
vices - A national team of
bond verification specialists
is located in our Houston
office. This specialized
team serves clients across the
country, and their expertise
would be available to the
City. Since no two
refunding transactions are
structured alike, our
computer program is tailored
to meet the specifications
and requirements of the
individual transaction. As a
part of our service, we
The Dallas/Fort Worth practice of Deloitte & Touche has a staff of 410, including 43 partners and directors.
The
professional complement is as follows:
Audit
Tax
Consulting
ABC
Valuation Support
Total
Partners/Directors 19
8
13
2
1
43
Managers 32
15
32
3
5
87
Staff 112
32
19
10
4
177
Administration 13
13
9
3
2 63
103
Total 176
68
73
8
12 63
410
-6-
Deloitte &
buche
0
verify the accuracy of certain
mathematical computations and
issue a report to the
governmental entity, the
underwriters, bond counsel and
financial advisors.
Tax Services
Typically, tax consultation is not
significant to a government unit.
However, the Tax Reform Act of
1986 imposed several tax law
changes that have substantial
impact on the operations of local
government. Perhaps the most
complex and restrictive of these
changes are the arbitrage rebate
provisions of TRA.
As part of our public sector
practice, Metroplex tax
specialists provide a range of tax
services designed to help
governmental entities in such
areas as compliance with
arbitrage rebate provisions and
information reporting
requirements.
■ Arbitrage Rebate Services -
Because of the concentration
of governmental experience
in the Metroplex, our local
office has been named the
Deloitte & Touche National
Center for Arbitrage Rebate
Services. Deloitte & Touche
arbitrage rebate services are
comprehensive in scope.
We can calculate the yield
on the tax-exempt bonds,
compute the amount of the
rebate (if any) for the
period, issue a report
detailing current and
cumulative investment
activity and the rebate result,
and prepare any necessary
Internal Revenue Service
forms to accompany a rebate
payment.
■ Tax Information
Reporting - All
organizations have been
affected by the new IRS
information reporting
regulations. Reporting
requirements have become
increasingly complex and
pervasive, and the IRS is
assessing substantial
penalties for noncompliance
much more frequently.
Metroplex tax specialists
have conducted information
reporting evaluations for
several clients to ensure they
are in compliance with the
relatively new IRS rules.
Consulting Services
Our Management Consulting
Group was developed to provide
a balanced range of consulting
services consistent with our
practice as certified public
accountants. Our consulting
staff, located in Dallas, Fort
Worth and other key cities
throughout the United States,
provides a breadth and depth of
experience necessary to service
clients in a wide range of
business and functional areas of
operations. This approach brings
together the necessary
generalized and specialized skills
and supervision to attain
successful results. Many of our
-7-
consultants joined our firm from
positions in government and are
experienced in areas such as
financial management, general
management, data processing,
industrial engineering and
personnel administration. This
blend of business disciplines has
enabled us to respond
constructively, creatively and
realistically to client
requirements for consulting
services in a wide range of
activities.
Our approach has always been to
provide our clients with the finest
professional services available.
We make every effort to render
prompt, effective and efficient
services wherever and whenever
needed. We staff each engage-
ment with highly qualified
personnel who have the skills and
experience to match the clients'
needs. In addition, we will make
available to the City any of our
specialists who have a particular
expertise that you may need.
Summarized below is a sample of
some of the consulting services
we can provide:
■ Management and
Operational Reviews -
Typically referred to as a
management audit, a
management/operational
review provides an
independent analysis of an
entity's operations and offers
recommendations for
streamlining operations,
improving programs and
cutting costs. The service
loftb&
uche
0
"Our ability to meet
many clients' needs
from within our
organization is a
factor that
distinguishes
Deloitte & Touche. "
focuses on the efficiency and
effectiveness of a particular
department, division or
function. An organization
and staffing analysis can be
included. Recent
management audits
conducted by Deloitte &
Touche consultants have
included such areas as
purchasing, municipal court,
risk management and public
works.
■ Privatization - Privatization
studies focus on whether
governmental entities should
contract for services with
outside vendors or continue
to provide the services
internally. An operational
review of existing operations
is the first step in identifying
opportunities to reduce costs
and improve productivity.
Deloitte & Touche
consultants determine the
real cost of a service by
analyzing direct and indirect
costs and the level of service
currently being provided. If
privatization is still a viable
alternative, we can help you
develop a request for
proposal and analyze the
proposals received.
■ Management Information
Systems - Deloitte & Touche
management information
systems services include
developing information
system strategic plans,
selecting hardware and/or
software, designing
operational environments
-s-
and determining
communication/support
requirements. Since we do
not have any proprietary
financial software or binding
contractual agreements with
either hardware or software
vendors, Deloitte & Touche
can be totally independent in
its recommendations.
■ Rate Studies - Deloitte &
Touche is nationally
recognized as a leader in
performing rate studies for
municipal governments and
public utilities. We have
specialists in our Dallas and
regional offices who have
conducted cost of service
studies and rate analyses to
develop electrical, water and
sewer rates and rate
structures for cities in the
Metroplex and throughout
the nation.
■ Actuarial, Benefits and
Compensation Services -
Our ABC Group provides a
full range of services in the
areas of employee benefit
plans, compensation plans,
employer health care
services, and pension and
actuarial services. These
services are particularly
valuable to our clients as
personnel and benefit costs
continue to spiral.
This scope of expertise is
unsurpassed; most firms offer
one or only a few of these
services. Our ability to meet
many clients' needs from within
Delottte &
Touch
0
our organization is a factor that
distinguishes Deloitte & Touche.
Moreover, our client-centered
service approach ensures that all
aspects of the work we do for the
City will be relevant and well
managed.
New Accounting Standards
Our commitment to the public
sector practice includes active
monitoring of accounting issues
and standards. We believe it is
important to assist our clients in
the early implementation of new
standards after joint identification
of the advantages that early
implementation will provide.
Deloitte & Touche conducts an
annual Governmental Accounting
Standards Board (GASB) update
seminar for our clients to keep
them abreast of recent
pronouncements. Your client
service partner, George Scott,
serves as Chairman for the Texas
Society of Certified Public
Accountants Governmental
Standards Committee. George
has also recently been appointed
to the American Institute of
Certified Public Accountants
Governmental Accounting and
Auditing Committee.
Patrick Hardiman, partner with
the Deloitte & Touche National
Office, has a full-time
commitment to the public sector.
His role in the National Office is
to monitor the activities of the
GASB, GAO and Federal OMB
and coordinate Deloitte &
Touche responses to any
documents released by these
groups. He is the only
representative of a national
accounting firm to attend every
meeting of the GASB.
Deloitte & Touche is the only
firm to respond to each GASB
pronouncement or proposed
technical release on behalf of
our clients and ourselves.
The involvement of City of
Denton engagement team
members in professional
organizations is described in
Appendix C, Resumes.
Public Utilities Experience
Both nationally and locally,
Deloitte & Touche occupies a
premier position serving some of
the nation's largest public
utilities. Nationally, Deloitte &
Touche serves 14 of the top 50
utilities in the nation, some of
which are located in this area. In
North Texas, the Metroplex
offices serve some of the region's
largest utility entities such as
Texas Utilities Company and
Lone Star Gas Company. We
also serve entities such as
Pedernales Electric Cooperative
and municipal utility companies.
Texas Municipal Power
Association (TMPA)
Experience
Deloitte & Touche has significant
experience serving TMPA and its
member cities. Deloitte &
Touche has recently served as the
independent auditors of TMPA.
In addition to the City of Denton,
-9-
we currently provide audit
services to the City of Greenville
and recently rotated off the audits
of the Cities of Bryan and
Garland. Specifically, members
of your audit team have been
extensively involved in these
services. This unparalleled
experience provides the City with
relevant, seasoned experience
relating to TMPA and the City's
Utility Funds.
Local Utilities Expertise
The list of clients of our
Metroplex offices means that
utilities expertise is available
locally - in our Metroplex
offices. Our Dallas office has a
partner who is the National
Director of Utility Consulting.
Thomas J. Flaherty is a firm-
designated public utilities
industry expert and is one of our
firm's leading experts on rate and
regulatory matters. Another
partner is one of our firm's
leading experts on depreciation
studies for utility entities. Our
Public Utilities Consulting
Group, comprised of partners
and consultants experienced in
serving the industry, is located in
the Dallas office.
Quality Control
Within the public accounting
profession, Deloitte & Touche
has taken a leading role in the
quality control "peer review"
program that was established by
the American Institute of
Certified Public Accountants in
1976. This program is an
Deloftb&
0
important part of the profession's
system of self-regulation. It calls
for a public accounting firm to
have another firm or a panel of
CPAs review its quality control
system to ensure that they meet
the standards of the profession.
Our predecessor firms engaged
other firms to conduct peer
reviews of our firms prior to the
AICPA establishing such a
program. Both Deloitte &
Touche's most recent peer
reviews resulted in unqualified
reports issued on our systems of
quality control and our
compliance with those systems'
controls. These peer review
reports are included as
Appendix A of this proposal.
Deloitte & Touche conducts an
additional quality control
program on a nationwide basis.
Teams of partners and managers
visit about one-third of our
offices each year to review their
audit work and review client
reports for compliance with the
Firm's policies and procedures,
generally accepted auditing
standards and authoritative
accounting pronouncements.
The respect our peers have for
the high quality of our
professional services is
demonstrated by the fact that
Deloitte & Touche has been
selected by both Price
Waterhouse & Co. and Arthur
Andersen & Co. to provide peer
reviews of their accounting and
auditing practices.
In addition, the Metroplex office
of Deloitte & Touche has had
two quality control reviews by
federal audit agencies performed
in the last three years. No
findings were identified through
these reviews. Our performance
met the requirements of the
GAO, the AICPA and OMB
Circular A-128.
We also confirm that no
disciplinary actions have been
taken or are pending against the
Metroplex office during the last
three years with federal or state
regulatory bodies or professional
organizations.
Why Deloitte & Touche
As a result of our understanding
of your service needs and our
considerable knowledge of public
sector entities, we believe the
City needs an accounting firm
that can demonstrate superior
qualifications in several major
areas:
■ Proactive Advice. Identify
financial issues before they
become a problem
■ Creativity. Understand the
nature of your operations
and formulate ideas that may
result in increased financial
resources to the City
■ Responsiveness. Immediate
and well-informed attention
to your questions, problems
and opportunities; a service
plan that is complete and
_10-
action-oriented; involvement
throughout the year
■ Top-Caliber People. A
team of professionals with a
"hands on" service style and
the right mix of experience
serving public sector entities.
We will continue to provide
professionals capable of
working effectively with
your Council, management
and staff
■ Valued-Added Service. A
focus on adding value to
your organization as an
integral part of the audit
process
■ Audit Excellence.
Thorough familiarity with
public sector entities and the
issues that have an impact on
business, financial and audit
risks
Our experience with public sector
clients has shown that we are
committed to excellence and
strive to provide clients with
proactive advice, creativity and
value-added service. If we are
accepted as your independent
accountants, the City would
remain an important client of our
Dallas/Fort Worth practice.
Our Service Philosophy
Our service philosophy is a
simple one and may be summed
up as "uncompromising
dedication to distinctive client
service." It is the canon of our
Chairman Mike Cook, and our
No& &
Touche
0
professionals seek to embody this
approach in all the work they
perform for our clients.
Valued Client
The City will continue to be a
most valued client, not only of
our Dallas/Fort Worth practice
but of our national organization.
As a pledge of our commitment
to you, we have taken several
steps to ensure that the City
receives the degree of high-level
attention it merits - attention
from some of the best people our
firm has to offer.
Your organization operates in a
complex, highly visible
environment. The City needs an
accounting firm that does not just
"audit" but that can be a business
advisor that contributes to
moving your City forward. We
will get involved to assist you in
dealing with the many business
issues the City faces.
Our approach to serving a
complex organization like the
City is to:
■ Appoint a local client service
team with skills, capabilities
and experiences to meet your
needs
■ Obtain staffing and technical
assistance, as necessary,
from members of the Firm
involved in similar
engagements to ensure a
smooth transition
■ Conduct extensive client
service planning in concert
with management
■ Execute an audit plan
specifically designed to meet
your organization's unique
requirements
Training/Professional
Education
Our continuing professional
education program complies with
the requirements of the SEC
Practice Section of the AICPA
Division for CPA firms. All
professional staff, including
partners, must have 20 hours of
qualifying CPE each calendar
year and at least 120 hours for
each three-year period.
Like most large accounting
firms, Deloitte & Touche has
developed a formal, structured
professional education program
for our staff. This program
provides for the development of
a responsive and capable
professional staff and includes
focus on selected industries. All
of the personnel associated with
the audit of the financial
statements of the City are
participants in our specialized
firm training program for
personnel serving local
governments. This means that
we will not assign anyone to your
audit who is not enrolled in at
least 24 hours of this specialized
training over a two-year period.
This training is developed on a
national and local basis to meet
and exceed the single audit
-11-
(Yellow Book) training
requirements.
Conclusion
We don't merely promise
results - we deliver them - and
we have the track record to prove
it. We meet deadlines, we are
accessible and we are creative on
your behalf - we will take the
initiative to identify improvement
opportunities and to develop
plans for capturing them, and we
will bring outstandingly qualified
people to your service and keep
them there. In a single phrase,
we will continue to be fully
responsive to the City's needs.
De TO
0
Section 5
Our Service Team
We have assembled a team of experienced industry and
functional practitioners from whom the City can expect to
receive the highest level of professional excellence. Our
engagement team will comprise:
■ A core service team of partners, managers and
professional staff responsible for the planning and
execution of our audit, which includes our leading
specialists in governmental accounting, auditing and
consulting services
■ A network of firmwide resources, consisting of
partners and managers whose expertise is available to
integrate into our services to the City
In This Section
Client Service Team
Participation in Professional Organizations
Staff Continuity
-12-
Our team is organized to
provide strong centralized
coordination of Deloitte &
Touche's resources in the
public sector industry under
the direction of George Scott
as Client Service Partner.
The key team members
represent a strong, balanced
blend of talent, professional
skills, industry experience
and creativity that we believe
is most critical to working
effectively with you:
■ Broad public sector
services backgrounds
■ Demonstrated technical
proficiency
■ Seasoned professional
judgment
■ Experience in
coordinating audit, tax
and other services
Each of them has repeatedly
demonstrated an uncom-
promising dedication to
responsive, high-value client
service and has the ability to
work effectively with the
City's management and
staff.
The quality of our staff can
continue to be assured over
time through our training
programs, the substantial
size of our government
practice in the Metroplex
and the long-term reputation
for quality of Deloitte &
Touche.
Deb
uche
0
Client Service Team
Client Service Partner
George A. Scott, Client Service
Partner, will continue to direct
our services. He will consult
with you frequently on your
objectives and strategies and call
in our firmwide resources
whenever needed. George is a
firm-designated government
specialist who spends all his time
serving public sector clients. He
is familiar with both the technical
and communication needs of
entities such as the City. George
serves as National Audit Partner
for Arbitrage Rebate Services
and is a national specialist on the
single audit. In addition, George
is a member of the AICPA
Government Accounting and
Auditing Committee.
Consulting Partner
Peggy V. McCormick, a firm
specialist for governments, will
continue to serve as consulting
partner. In this role, she will
concur on all accounting and
auditing issues that require
substantial attention and will
perform a concurring review of
each report issued. Peggy will
be a significant resource for this
engagement. She has been on
the GFOA Certificate of
Achievement Special Review
Committee for the past six years
and serves as the audit partner
for the City of Houston.
Audit Senior Manager
Craig Milacek will continue to
serve as audit senior manager
with day-to-day responsibility for
the management of our services.
Craig has more than ten years of
public accounting experience
serving both the public and
private sectors and has served the
City for the past four years. He
has extensive knowledge of your
practices and procedures, and he
has experience in local
government accounting and
auditing, including GASB
pronouncements.
Senior Accountant
Deanne Simmons will continue
to serve as senior accountant.
She will be on site whenever
fieldwork is performed and will
supervise our staff accountants.
Deanne has over four years of
public accounting experience and
has served a variety of
governmental clients, including
the City of Denton. Like all of
our engagement staff, she has
extensive training and experience
in microcomputer auditing
techniques, including
Lotus 1-2-3.
Management Consulting
Services
Jay Riley, Local Government
Consulting Senior Manager, will
direct any consulting services for
the City. Jay is a firm-
designated specialist in
management audits and
governmental consulting and is
-13-
the Local Government
Consulting Services Senior
Manager for North Texas, one of
Deloitte & Touche's major public
sector practice areas. He has
directed major consulting
projects for Metroplex public
sector clients and participated in
projects for regional, national
and international public sector
clients.
Participation in
Professional Organizations
Our engagement team members
have actively participated in
major professional organizations
and are frequent speakers at
conferences and seminars.
George Scott, Audit Partner,
speaks extensively to various
groups on governmental auditing.
He has served as a discussion
leader for AICPA, TSCPA and
the North Central Texas Council
of Governments' courses on
auditing and public finance. He
is an active member of GFOA,
GFOA of Texas, ASBO and
TASBO.
George serves as Chairman for
the Texas Society of Certified
Public Accountants
Governmental Standards
Committee. George has also
recently been appointed to the
American Institute of Certified
Public Accountants
Governmental Accounting and
Auditing Committee.
Deloitte &
buche
0
"We recognize the
importance of staff
continuity. Turnover
is not only disruptive
to our clients but also
affects our ability to
perform efficiently. it
George is the author of articles
on the Single Audit Act
published by Practical
Accountant and School Business
Affairs. His article on Arbitrage
and Rebate Services was
published in the GFOA of Texas
Newsletter. He serves on the
faculty of the Texas Tech
Southwest School of
Governmental Finance.
Craig Milacek, Audit Senior
Manager, serves on the
GFOA Certificate of
Achievement Special Review
Committee as well as the GASB
Response Committee of the
GFOA of Texas. He has served
as a discussion leader for TSCPA
courses on governmental auditing
and has made presentations for
the GFOA of Texas.
Jay Riley, Local Government
Consulting Services Senior
Manager, has made presentations
to numerous public sector
organizations on the subjects of
human resource management,
operational efficiency and
performance reviews. His
articles have been published in
Texas Town and City, and in
cooperation with a Deloitte &
Touche partner, he has written an
article on Management Audit
Projects which has been
published. He is also on the
faculty of the Texas Tech
Southwest School of
Governmental Finance.
-14-
Staff Continuity
We recognize the importance of
staff continuity. Turnover is not
only disruptive to our clients but
also affects our ability to perform
efficiently.
Our goal in staffing is to strike a
balance and to provide continuity
of our staff. We want to provide
for as great a degree of
continuity as possible at the
engagement management level.
This means less time (and
money) getting acquainted with
your business. All staff assigned
to your engagement team will
strive to bring a fresh approach
to problem-solving.
Although the Firm has no
rotation requirements for
Deloitte & Touche personnel
involved in engagements, we
propose a seven-year staff
rotation plan for all engagement
partners, with a longer term
possible if you request it. We
are flexible regarding our staff
rotation policy and will take your
views into consideration before
taking any action. Partners may
return to serve clients previously
served after two years.
Deloft&
v
City of Fort Worth
(1987 - present)
Our Experience With Cities
and Client References
Client satisfaction is one of the best measures of the.
quality of services we provide to clients. Deloitte &
Touche is proud of its record of service to the many
governmental clients in the Metroplex and is pleased to
provide the City of Denton with a list of our government
clients for the past three years. We invite and encourage
the City to contact the individuals listed in this section.
Additional references will be provided upon request.
In This Section
City of Fort Worth
City of Hurst
City of Lancaster
Richardson Independent School District
Client Listing
-15-
Scope:
Financial Audit
Single Audit
Arbitrage Rebate
Bond Services
Review of Tax Office
Review of Indirect Cost
Plan
Developed Information
System Management
Plan for Water
Department
Contact:
Mr. Judson Bailiff,
Director of Finance
(817) 870-8186
City of Hurst (1990.
present)
Scope:
Financial Audit
Single Audit
Annual Report
Preparation
Self-Insured Actuarial
Services
Contact:
Ms. Anita Thetford,
Director of Finance
(817) 281-6160
W*,_,
Touche
0
City of Lancaster (1986 -
present)
Scope:
Financial Audit
Single Audit
Bond Services
Fiscal Studies
Contact:
Ms. Pauline Hodges,
Finance Director
(214) 227-2111
"The exhibit on the
following pages shows
the audit clients we
have served in the last
three years. it
Richardson Independent
School District (1988 -
present)
Scope:
Financial Audit
Single Audit
Annual Report Preparation
Arbitrage Rebate
Information Systems Long-
Range Planning
Feasibility Study
Procurement of System
Hardware
Review of Clerical
Services
Contact:
Ms. Debbie Cabrera,
Internal Auditor
(214) 301-3454
-16-
Client Listing
The exhibit on the following
pages shows the audit clients we
have served in the last three
years.
Touche
0
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Bond
Audit
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
MUNICIPAL GOVERNMENTS
Town of Addison
•
•
.
•
■ Review of airport
(1986 through
operations
1991)
■ Development of airport
rate structure
City of Cedar
Hill
•
•
1990 th
gh
present)
City of Colleyville
•
•
1
•
•
■ Assistance in improving
(1983 through
internal control system
1991)
through reports to
management
■ Fixed asset
management system
a Review of investment,
collateralization policies
■ Municipal court reviews
City of The Colony
•
•
•
■ Assistance in improving
(1984 through
administrative and
present)
accounting controls
through reports to
management
■ Special review of
Eastvale consolidation
■ Pro forma financial
statements for utility
district consolidation
■ Municipal court review
City of Denton
h
•
•
1
7I
.
•
■ Feasibility studies
V
ifi
i
i
(1986 throug
■
er
cat
on serv
ces
present)
■ Hospital review
■ Management reviews of
municipal court,
purchasing, airport and
self-insurance program
City of Duncanville
h
•
.
.
■ Tax services
Liti
ti
(1988 throug
■
ga
on support
present)
services
*Attained Certificate on First Attempt With Deloitte & Touche Assistance
Deloitte &
buche
0
~V_
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Bond
Audit
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
City of Farmers
•
•
•
•
■ Fixed asset
i
Branch (1986
management serv
ces
through 1991)
■ Litigation support
services
■ Cash management
services
City of Fort Worth
•
•
•
■ Review of tax office
R
i
f i
di
(1987 through
■
ev
ew o
n
rect cost
present)
plan
■ Benefits consulting
■ Utility rate studies
■ Utility software
specifications study
■ Development of
strategic information
system plan
■ Wholesale water rate
study
City of Garland
•
•
•
•
•
■ Assistance in improving
i
l
t
l
(1984-1987)
nterna
con
ro
s
through reports to
management
City of Grapevine
•
•
•
(1989 through
present)
City of Greenville
.
•
•
•
(1990 through
present)
City of Hurst
.
•
•
■ Self-insured actuarial
i
(1990 through
serv
ces
present)
ter
City
of
g
•
•
•
•
throu
(186
h
present)
City of University
•
•
•
Park (1990 through
present)
Deloitte &
Touche
0
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Bond
Audit
Oft
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
City of Rowlett
•
•
•
(1991 through
present)
City of Burleson
•
•
•
(1991 through
present)
Town of Highland
•
Park (1991 through
present)
City of Dallas
■ Operations review of
(1991)
Park and Recreation
Department
■ Financial feasibility
study for Convention
Center
City of Richland
■ Municipal court review
Hills (1991)
LOCAL SCHOOL DISTRICTS
Fort Worth ISD
•
•
.
•
■ Special data processing
(1986 through
audit
present)
■ Review of payroll
department internal
accounting controls
■ Verification services
■ Tax services
■ Review of tax office
contracting
relationships
■ Review of grant
administration
procedures
■ Review of selected
purchasing procedures
Carrollton-Farmers
•
•
•
•
■ Development of PC-
b
d l
Branch ISD
ase
ong-range
(1987 through
forecasting system
present)
■ Review of warehouse
operations
-19-
Deloitte &
Touche
0
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Bond
Audi
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
Richardson ISD
•
•
•
•
•
•
■ Information systems
(1988 through
long-range planning
present)
■ Feasibility study
■ Procurement of system
hardware
■ Clerical staffing review
Hurst-Euless-
•
•
.
.
•
■ Tax services
Bedford ISD
(1987 through
present)
Grapevine-
•
•
•
•
■ Development of PC-
Colleyville ISD
based long-range
(1987 through
forecasting system
present)
■ Special procedures in
payroll contracts
■ Employee travel
expense reimburse-
ment
■ Transportation
department operations
review
Plano ISD
•
•
•
•
■ Management review of
(1989 through
food services and motor
present)
pool
■ Organizational study
■ Capital projects
management review
■ Purchasing study
■ Information systems
outsourcing analysis
■ Finance department
management review
■ Operational review of
warehouse
-20-
Deloitte &
Touche
0
Representative Government Clients Served by the Metroplex Office
7
8
Financial
Single
GFOA
ASBO
Grant
=
1
Arbitrage
Bond
Audit
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
Irving ISD
o Management review of
(1986)
personnel and human
resources department
■ Data processing review
■ Budget, purchasing,
financial services and
cash management
reviews
■ Tax collection review
■ Planning, research and
evaluation analysis
■ Word processing needs
analysis
Arlington ISD
■ Interim operation of
(1986 through 1987)
data processing
facilities
■ Management of
hardware/software
vendor relations
■ Recruitment of new
data processing
director
Garland ISD
■ Management audit of
(1988 through 1989)
maintenance,
purchasing and ware-
house operations
Jordan, Utah,
■ Transportation review
School District
■ Activity-based cost
(1992)
analysis
Dublin, Ohio,
■ High-level review of
City Schools (1992)
district operations
Houston ISD
■ Review of facilities,
(1992)
maintenance and
operating departments
Victoria ISD
■ Comprehensive
(1991)
operational review
Lubbock ISD
■ Comprehensive
(1991)
operational review
-21-
Deloitte &
Touche
0
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Bond
Audit
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
Kansas City,
■ Comprehensive
Missouri, School
management review
District (1990
through present)
MASS TRANSIT
Dallas Area
■ Microcomputer long-
Rapid Transit
•
•
•
range planning model
Fi
d
i
t
(1987 through
xe
■
asse
serv
ces
1991)
■ Audits of employee
benefit plans
■ Strategic information
systems plan
Fort Worth
Transportation
•
•
•
•
Authority
(1987 through
present)
OTHER GOVERNMENTAL
ENTITIES
Colony Municipal
Utility District
(1985 through
present)
•
•
Dallas County
■ Feasibility studies
Utility and
•
•
•
.
■ Construction audit
Fi
d
t
Reclamation District
xe
asse
■
(1978 through
management system
present)
■ Hardware, software
selection for accounts
receivable and
general ledger
systems
■ Accounting policies and
procedures
■ Ongoing financial/
technical assistance
Dallas Housing
Authority (1989
•
•
is
•
•
through present)
-22-
Deloitte &
_Touche
0
Representative Government Clients Served by the Metroplex Office
Prepare
Financial
Single
GFOA
ASBO
Grant
Annual
Arbitrage
Arb
Bond
Audit
Audit
Certificate
Certificate
Audits
Report
Rebate
Services
Other Services
North Central Texas
■ Contract audits
Govern of
•
•
•
Governments
(1988 through
present)
Trinity River
■ Compliance audits
Authority of Texas
19
6
h
h
•
.
•
•
•
■ Selection of data
(
5
t
roug
processing systems
present)
■ Water rate study
Trinity River
■ Water rate study
Industrial De-
i
A
h
l
•
■ Compliance audits
l
i
or
ve
opment
ut
ty
■ Se
ect
on of data
(1978 through
processing systems
present)
Texas Education
■ Development of
Agency
management audit
(1988-1989)
methodology for local
school district use
Utah State Office
■ Program accounting
of Education
system
(1989 through
■ Review of indirect cost
present)
plan
Dallas County Park
■ Tax services
Cities Municipal
•
.
Utility District
(1990 through
present)
Tarrant County
•
•
1
•
•
•
■ Fixed asset
(1984 through
management services
1990)
Gregg County
•
•
•
Tarrant County 911
Emergency
•
•
Assistance District
(1987 through
1989)
-23-
Deloitte &
Touche
0
Representative Government. Clients Served by the Metroplex Office
Financial
Audit
Single
Audit
GFOA
Certificate
ASBO
Certificate
Grant
Audits
Prepare
Annual
Report
Arbitrage
Rebate
Bond
Services
Other Services
Frisco Municipal
•
•
•
■ Construction period
dit
i
Utility District
au
serv
ces
(1990 through
present)
Texas Comptroller
■ Conducted Texas
of Public Accounts
school performance
(1991)
reviews
-24-
Delaitte &
Tauche
/0
Accounting and
Auditing
Deloitte & Touche's
accounting and auditing
The Deloitte & Touche Audit
services go far beyond basic
attest functions. Our
Approach
business-oriented approach
will help you achieve your
One of the most important considerations in the selection
operational objectives and
of independent auditors is their ability to perform and
goals, strengthen your
management processes and
complete the work in a timely and efficient manner, with
improve profitability.
a minimum of interference with your day-to-day
operations and your personnel. As described below, we
Your selection of an auditing
have developed an audit plan for you which matches
and accounting firm centers
optimum efficiency with the highest level of quality audit
on forming a relationship
work and adherence to professional standards. One of
with people. That is why
our first priorities will be to review this plan with your
Deloitte & Touche places
management and make any necessary revisions so that our
such a premium on judgment
work will be scheduled at times that are most convenient
and personal chemistry. Our
professionals possess
for your personnel and consistent with meeting deadlines
superior technical skills.
you establish. We believe that a carefully prepared, well-
Y Y
Equally important, they have
thought-out, organized audit plan is of primary
strong personal qualities;
importance in accomplishing our audit objectives.
demonstrated perceptiveness;
Accordingly, we will use our audit programs, related
the ability to think
check lists and other audit procedures as appropriate in
strategically and detect
examining your operations. In addition, we will apply our
future implications of current
governmental experience in refining programs and
trends and internal
procedures to fit the City's specific methods of operation
circumstances;
communication and project-
and unique areas of concentration, thereby ensuring
anagement abilities; and
thorough analysis of your procedures and adequate audit
m
gy, enthusiasm and
coverage on our part.
commitment to client service
and high professional
In This Section
standards.
Risk-Focused Audit
Accounting and Auditing
Approach
Risk-Focused Audit Approach
Internal Auditor Partnership
We apply a top-management
The Deloitte & Touche Audit Process
perspective to the issue of
Computerized Audit Tools
identifying specific audit and
Identification of Improvement Opportunities
business risks; that is, the
Meeting Your Deadlines
- 2s -
De oil
0
likelihood a specific business risk Internal Auditor reliance on the work of your
could impair the integrity of your Partnership internal auditor
financial statements.
You will benefit directly from
this approach because we allocate
our resources on the basis of
specific risk identification at all
appropriate business unit levels.
We can then focus on these
precisely defined areas rather
than treating all business
activities equally or assigning
random or arbitrary levels of
risk. This risk focus places a
premium on effective audit
planning. For that reason, our
entire engagement team
participates in the planning
process with appropriate client
managers. This process results
in these benefits to you:
■ Our audit conforms to the
expectations of management
and the City Council. We
work with management to
identify and evaluate each
area of risk. Our audit
focuses on those areas that
keep you awake at night
■ Costs are controlled. We
spend no more time in any
one area than it deserves, but
we spend all the time it
needs
■ There are no last-minute
surprises. We remain
involved year-round, on the
scene
Establishing a working
relationship with your internal
auditor will be an important
element of our approach. We
will work with your internal
auditor to define the exact nature
of the assistance to be provided
within the framework specified in
the Request for Proposal.
At Deloitte & Touche, our
philosophy is to create a working
relationship and partnership with
your internal auditor consistent
with professional auditing
standards and the expectations of
the City.
As evidence of this partnership
attitude, we would make
available to your internal auditor
certain of our staff training
programs. Your internal auditor
would receive full continuing
education credit as required by
governmental auditing standards
for any of these sessions.
In addition, we will meet on a
regular basis with the internal
auditor to discuss our mutual
plans and goals. The purpose of
these discussions is threefold:
■ To ensure there is no
duplication of efforts or
procedures between the
internal auditor and our audit
team
■ To identify areas where our
audit procedures or testing
may be reduced because of
■ To keep each other informed
about our respective
activities
The Deloitte & Touche
Audit Process
The Deloitte & Touche audit
philosophy is to tailor our
approach to meet the specific
needs of each client. This
requires a thorough
understanding of the client's
operations and an in-depth
analysis of the critical audit
areas. We develop that
understanding through
comprehensive audit planning
and risk assessment.
Risk assessment is the essential
element in the audit planning
process. When reliable risk
assessment decisions are made in
the initial planning process, the
amount of testing can be
correlated with each audit area's
relative risk. The result is a
more focused and more efficient
audit. On the following pages,
we provide a detailed definition
of audit risk and a discussion of
its crucial impact on the auditing
process.
Effective audit planning requires
substantial involvement by the
engagement management team.
Where appropriate, we also
involve specialists from our
Management Consulting (MC)
and Tax departments in the
planning. Their technical
-26-
Deloitte &
buche
0
expertise very frequently enables
us to make constructive
observations and
recommendations in areas beyond
those normally addressed by
auditors. We also make
extensive use of functional or
industry specialists, such as our
Computer Assurance Services
Group. Involving these
personnel early in the planning
process allows us to identify
areas for potential improvements
in our procedures.
Following is a discussion of our
comprehensive audit planning
and risk assessment, including a
flowchart depicting our process.
Auditing is a dynamic process,
and our audit plan may therefore
change during the course of the
engagement as new information
and circumstances come to our
attention.
Understanding the City's
Business
The key element of effective
audit planning is a thorough
understanding of the client's
operations. This includes
operating environment,
accounting and internal
accounting control systems, and
financial position. Our
understanding must be
sufficiently detailed to allow us
to:
■ Identify the nature of the
account balances or classes
of transactions under
examination
■ Effectively assess risks
■ Design effective, efficient
audit tests
Understand Your Accounting
Process
One of the best ways to ensure
audit efficiency is to "get the big
picture" before designing
auditing procedures. This
process involves:
■ Thoroughly understanding
the transactions or account
balance we are auditing
■ Carefully assessing our
objectives
■ Analyzing the client's
accounting policies
■ Determining how the
accounting system records
and summarizes the
transactions
Only then can we judge what the
most efficient and effective
auditing procedures would be.
Knowing the content of the
client's internal reports can
further assist us in developing
our analytical review procedures.
Furthermore, if we know that an
account consists mainly of a few
large items, we may decide that
examining all of the large items
would be more efficient than
performing our tests using
statistical sampling.
We also gain an understanding of
the nature of each significant
-27-
account or group of related
accounts. Our understanding
comprises:
■ The nature of the account
■ The significance of the
account within the financial
statements
■ The flow of transactions
through the accounting
system for the account and
the type(s) of transactions
that it includes
Understanding Your Control
Environment
Prior to identifying risk and the
potential error level, we
consider, in the light of our
knowledge of the client's
business, controls that reduce
risk. Such controls may be
categorized as specific
accounting controls or
administrative controls.
Specific accounting control
procedures which may reduce the
risk of error include:
■ Proper general and specific
authorization and approval
levels
■ Adequate segregation of
duties
■ Adequate safeguards over
access to assets
■ Appropriate independent
checks (for example,
periodic comparison of
assets with recorded amounts
Told*
0
or checking the sequence of selected information system ■ Testing controls that mitigate
prenumbered documents) applications of the City. specific risks of error, if
applicable
Administrative control
procedures are policies and
procedures that are generally
performed by management after
the transactions have been
processed to monitor the results
of operations and of the
accounting system.
The potential for controls to
reduce the risk of identified
errors is dependent upon the
nature of the error. We consider
the likelihood that controls will
reduce the risk of such errors
based on the facts and
circumstances of each identified
risk.
The growing complexity of the
data processing environment
mandates special audit
procedures performed by proven
experts. Deloitte & Touche has
been a leader in addressing this
need through its Computer
Assurance Services Group. This
group addresses computer risks
related to the quality, security
and continuity of information
systems. The CAS Group
supports the financial audit by
identifying and analyzing the
potential impact of computer
risks on the audit process and
planning an audit response to
focus on that risk. Our
Metroplex Computer Assurance
Services Group has extensive
experience reviewing and
evaluating highly technical
information processing systems
and, in fact, has reviewed
Our specialists from the
Computer Assurance Services
Group have full capability to
conduct the evaluation of EDP
controls. To ensure that the
City's existing systems are
performing to full advantage and
that internal accounting controls
are providing maximum
effectiveness, Deloitte & Touche
has developed a business-oriented
approach and related program to
evaluate the audit features of
internal controls which are
unique to electronic data
processing systems. The features
of this program are directed to
computer controls of accounting
significance including, but not
limited to, input, processing and
output controls, adequate
procedural documentation,
information security and
contingency planning.
Developing and Performing the
Audit Plan
We obtain all our required
assurance from our basic level of
substantive testing when no
specific risks or error are
identified or there are controls
that mitigate specific risks or
error.
Our basic level of substantive
testing standard audit response
comprises:
■ Confirming our initial
conclusions as to the
reliability of the system
-28-
Performing a basic level of
substantive testing, which
includes a minimum level of
tests of details and
substantive analytical review
When we identify specific risks
of error, we perform focused
substantive testing to ensure that
we obtain adequate assurance that
no material errors are present.
Our focused substantive testing
consists of performing additional
tests that directly address specific
identified risks.
Our sample sizes will vary
depending on the particular
application. Our general tests of
revenues, payrolls,
disbursements, asset balances,
liability balances and any other
accounts are based on a
materiality factor ranging from
.5 % to 5 % of revenues or
expenditures by fund type
depending on the size of the
entity, internal controls and audit
risk assessments which may
extend the sample. Our samples
are all representative of the total
populations being tested;
however, statistical samples are
only used when the selection time
does not substantially exceed that
for other sampling techniques.
We make extensive use of
analytical procedures, including
analytical review in our audit
planning process, a detailed
De OW&
Touche
0
analytical review of actual
amounts to budget in our basic
audit work and a final analytical
review at the report level. We
also do additional analysis to
make a general analytical
comparison to other similar
cities.
As discussed above, we will
interview your personnel and
observe procedures to update and
document our understanding of
the City's internal control
structure.
For the single audit, we will use
Deloitte & Touche's specialized
programs prepared nationally to
test for compliance with federal
laws and regulations.
All sample selections would be
subject to legal compliance
testing - see selection techniques
discussed above. Our audit
approach for legal compliance
testing and reporting is entirely
consistent with Statement on
Auditing Standards No. 68,
"Compliance Auditing
Applicable to Governmental
Entities and Other Recipients of
Governmental Financial
Assistance," issued by the
American Institute of Certified
Public Accountants in 1991.
Assess Risk
Central to our audit approach is
our risk assessment process
which builds on information
gathered in our audit planning
process to identify factors which
indicate the existence of specific
identified risks of material
misstatement in the financial
statements and to tailor our
auditing procedures to respond to
such risks. Our risk assessment
includes the following phases:
■ Identifying groups of related
accounts
■ Understanding the nature of
the accounts
■ Searching for specific
identified risks of error
■ Pinpointing the potential
error level
We consider audit risk in
selecting particular substantive
tests to achieve our audit
objectives. We are concerned
with limiting overall audit risk to
an acceptable level. The nature,
timing and extent of our auditing
procedures will be correlated
with our assessment of risk -
specifically, more emphasis will
be placed on high-risk assertions.
The extent of our substantive
audit tests will be directly related
to our assessment of risk prior to
performing such tests.
Our approach classifies risk
factors into broad groups:
overall risk factors and risk
factors specific to account
balances or classes of
transactions, which include the
related internal accounting
controls, the nature of the
transactions and errors found in
the past.
-29-
We tailor our auditing procedures
to correspond with the
significance of the assertion and
our assessed level of risk. Some
tests of details will usually be
required on every audit
engagement. Although analytical
review procedures can often
provide the required assurance
regarding many financial
statements assertions, tests of
details are necessary for some
assertions in order to limit audit
risk to acceptable levels. This is
especially true of many
significant balance sheet
accounts. Analytical review
procedures applied to income
statement accounts are often
effective and efficient because
these accounts are more likely to
follow a predictable pattern. On
the other hand, tests of details
are usually more effective for
balance sheet accounts because
persuasive evidence supporting
their balances at a given time
often is more readily available.
We consider the risk of errors
when we decide to rely on
analytical review for substantive
assurance. Generally, the more
reliance we place on analytical
review, the more effective it
should be in detecting significant
errors. In this regard, we seek a
higher degree of corroborative
evidence for explanations of
fluctuations in high-risk areas
than in low-risk areas. In this
phase of the risk assessment
process, we identify risks of
error associated with each
Deloitbe &
buehe
a
significant type of transaction
within the group of accounts by
considering:
■ Materiality
■ Our understanding of the
business and the risk factors
identified during the initial
planning phase
■ Risks associated with the
accounting process
■ The susceptibility of assets to
theft or loss
■ The history of error
■ Our knowledge of the risk
levels normally associated
with each type of transaction
Identifying Groups of Related
Accounts
Many accounts or groups of
accounts are affected
simultaneously by the same
transactions or are interrelated in
some way. Our risk assessment
procedures can, therefore,
normally be conducted more
efficiently for such groups of
related accounts rather than for
individual accounts. Certain
accounts can be grouped together
because they represent opposite
sides or related parts of the same
transaction. In such situations,
assessing risk or obtaining
evidence for one account
provides us with information
about the others.
Computerized Audit Tools
The computerized audit tools we
use to support our audit staff
increase our efficiency and cost-
effectiveness and will yield
tangible benefits to the City.
Our leadership position in the use
of computer technology results
from our firm is utilizing the
latest technological advances in
hardware and software. Our
microcomputer and mainframe
audit software tools consist of the
following:
■ A+. Used for electronic
work paper preparation and
includes a work paper
organizer, spreadsheet and
word processing
■ ACL and SAS. Run in 16
different EDP environments
and are data retrieval
software tools used by
auditors without affecting the
integrity of data
■ Control Plan. Assists in the
study, evaluation and
documentation of systems of
internal accounting control.
It produces various easy-to-
understand reports that
document the internal control
system, and it identifies
potential sources of
weakness
■ STAR (Statistical
Techniques for Analytical
Review). Combines
professional judgments about
materiality and internal
control with regression
-30-
analysis to focus on
conditions which are
sufficiently unusual to
warrant further investigation
■ Estimation Sampling.
Used to estimate the value of
a population when there are
significant numbers of small
errors, for example,
comparing physical
inventory to perpetual
inventory records
Deloitte &
buche
0
The Deloitte & Touche Audit Process
Perform Preliminary Analytical Procedures
Determine Planning Material
Develop the City's Client Service Objectives
Assess Risk
Perform
Audit Plan
Specific Identified Risk
Rely on Controls?
Identify Controls That
Mitigate Risk
No Specific Identified Risk
Control Reliance Strategy?
Identify Controls and, i/
Efficient, Establish a
Rotation Plan
Perform Subsequent Events Review
Del
O
"We will develop our
constructive service
suggestions as the
audit progresses and
discuss important
matters with you as
they arise. it
Identification of
Improvement Opportunities
During the course of the audit,
our partners, managers and staff
will be alert to identify
improvements that may be made
in financial controls or
operational efficiencies. As part
of our preliminary review
procedures, we will observe your
operations and raise questions
and exchange ideas with your
people in many areas: internal
controls, data processing,
financial structure, cash
management, inventory control
and tax planning.
We will develop our constructive
service suggestions as the audit
progresses and discuss important
matters with you as they arise.
Members of our engagement
team will meet regularly with
your management to review
interim reports and ensure that
the work being done is in line
with the City's expectations.
Meeting Your Deadlines
Meeting your deadlines for
completion of the financial
statement audit, single audit, and
management letter means precise,
timely execution of each step in
the audit process. Our extensive
experience serving many
governmental entities means we
are thoroughly familiar with the
time and personnel needed to
serve you effectively. A master
timetable, however efficient,
does not take into account the
individual needs of each client.
-32-
We therefore tailor our schedule
based on your needs.
A chart graphically depicting our
time-phased audit plan appears
on the following pages.
Deloft&
0
Critical Audit-Related Dates - City of Denton
August
November
December
January
Estimated
Time
Perform and finalize audit planning,
including coordination of Single
Audit
SI/M/P
80
Collect and review pertinent documents
for permanent files
St
12
Read minutes of City Council meetings
SI/M/P
SI/M/P
SI/M/P
10
Plan for participation of City personnel
IA/SI/M
IA/SI/M
12
Evaluate internal accounting controls
and, for Single Audit, applicable
grant administrative controls
IA/SI
IA/SI
50
Discuss format and preparation of
financial and Single Audit reports
and review potential audit and
reporting problems with management
and, as to Single Audit, the
cognizant agency
M/P
10
Perform Single Audit procedures by
evaluating compliance with applicable
statutes, ordinances and regulations
IA/St
IA/St
St
80
Meet with management to review audit
status
SI/M/P
SI/M/P
SI/M/P
20
Hours
P:
Partner
56
M:
Manager
84
SI:
Senior-in-Charge
250
St:
Staff
460
IA:
Internal Auditor
150
1,000
-33-
Deloltte &
Touc e
Critical Audit-Related Dates - City of Denton (Continued)
August
November
December
January
Estimated
Time
Review and test (including Single Audit
procedures):
Revenues and expenditures
St
IA/St
St
125
Cash and investments
St
IA/St
St
50
Taxes receivable
St
St
St
20
Receivables
St
St
St
32
Inventories
St
St
St
15
Fixed assets
St
St
St
40
Other assets
St
St
St
10
Accounts payable and accrued liabilities
St
St
St
30
Long-term debt, capital leases and interest
St
St
St
40
Other liabilities and deferred revenue
St
St
20
Interfund receivables/payables
St
St
5
Fund balances
St
St
20
Other contingencies
St
St
10
Review trial balances by fund and fund type
SI
SI
30
Supervision and review of staff
SI/M/P
SI/M/P
SI/M/P
150
Prepare all applicable Single Audit reports
SI/M
16
Review drafts of Comprehensive Annual
Financial Report (CAFR)
SI/M/P
65
Review drafts of CAFR and other reports with
City management
SI/M/P
16
Prepare management letter
SI/M/P
SI/M/P
SI/M/P
20
Issue CAFR, present to City Council
M/P
3
Review management letter with appropriate
City management
SI/M/P
6
Issue management letter and Single Audit
reports, present to City Council
M/P
3
TOTAL HOURS
11000
-34-
Deloitte &
Touche
0
Scope of Services
Professional Arrangements
Our firm has undertaken many initiatives in recent years
to ensure that our professional services are cost-effective.
We control our professional fees by:
■ Making significant, ongoing investments in enhancing
our audit tools, techniques and technologies
■ Coordinating manpower utilization, budgeting our
services on a task basis and monitoring results against
that budget
■ Regularly reviewing the progress of our audit
performance with our clients
■ Obtaining advance fee agreements for additional
services as requested
The City of Denton is one of our Metroplex office's most
important city clients. Accordingly, you deserve quality
professional services at a reasonable cost. We exercised
special care in selecting a management team to provide
you with continuing quality service, and we have priced
our fee to reflect our desire to continue to serve you.
In This Section
Scope of Services
Single Audit and Other Compliance Audits
Internal Auditor Assistance
Professional Fees
Fee Schedule
Value-Added Services
-35-
Deloitte & Touche will
provide the following
services which will result in
the issuance of all reports
identified in your Request
for Proposal:
■ F"inancial Audit
We will audit the City's
financial statements for
the year ending
September 30, 1992, for
the purpose of
expressing an opinion on
those statements. In
addition, we will review
the Comprehensive
Annual Financial Report
(CAFR) prepared by
City personnel. The
audit fieldwork will be
completed by mid-
December of each year.
Our audit will be
conducted in accordance
with generally accepted
auditing standards for
governmental entities.
An audit includes
examining, on a test
basis, evidence
supporting the amounts
and disclosures in the
financial statements. An
audit also includes
assessing the accounting
principles used and
significant estimates
made by management,
as well as evaluation of
the overall financial
statement presentation.
Deb
udle
0
"We will issue a
separate management
letter which will
include a statement of
observations
(flndings) and
recommendations "
Every audit is subject to the
inherent risk that errors or
irregularities may not be
detected. We will, however,
promptly advise the City if
conditions are discovered
which lead to the belief that
material errors, defalcations
or other irregularities may
exist or if any other
circumstances are
encountered that require
extended services.
■ Management Letter
We will issue a separate
management letter which
will include a statement of
observations (findings) and
recommendations affecting
the financial statements,
internal accounting controls,
data processing systems,
legality of actions, instances
of noncompliance with laws
and regulations,
inefficiencies in the City's
operations or procedures and
any other material matters.
Single Audit and Other
Compliance Audits
We will perform a compliance
audit on the federal and state
financial assistance programs
(Single Audit) in accordance with
the Single Audit Act and OMB
Circular A-128, generally
accepted auditing standards and
the GAO's Government Auditing
Standards of all grant-related
transactions occurring during the
year and will issue all reports
-36-
required by the federal and state
cognizant agencies.
Internal Auditor Assistance
In connection with the City's
newly created internal audit
position, providing assistance to
the external auditors provides a
means for the internal auditor to
obtain extensive knowledge about
the City's financial operations as
well as enhance their auditing
skills. Our proposal assumes we
will receive internal audit
assistance equivalent to 150 staff
hours previously spent on the
City's audit.
Professional Fees
We propose to perform the audits
described above for the year
ending September 30, 1992, for
$34,500 ($30,500 for the
financial audit and $4,000 for the
compliance audit), including all
out-of-pocket expenses. A
schedule of professional fees and
expenses is included at the end of
this section. The scope of
services covered by this fee
estimate is discussed above. Our
fees for additional accounting
assistance or auditing services
that may be requested from time
to time will be subject to separate
quotations and an addendum to
the audit contract when the
services are defined or requested
by the City. Such additional
accounting assistance or audit-
related services will be
performed at the same rates set
forth in the schedule of
professional fees and expenses.
De O& &
Touche
0
"We have a proven
record of cost control
in our audit
relationship with the
City. We will closely
coordinate all of our
work with
management to
minimize the time
required and the
disruption to your
staff.
Other services which are clearly
unrelated to our audit services
(operational reviews, arbitrage
services, actuarial services, etc.)
would be performed at a rate
mutually agreed upon by
Deloitte & Touche and the City.
We estimate that the 1992 audit
will take approximately 1,000
hours to complete (including the
internal audit assistance), and we
expect similar hour commitments
in subsequent years.
Cost Control
We consider it an important
responsibility to control the costs
of the services we provide to the
City and will cooperate fully to
control our professional fees
consistent with maintaining the
highest professional standards.
We will prepare careful budgets
for all of our services based on
our evaluation of internal
controls, the effectiveness of
accounting procedures and the
amount of support available from
the City's staff. We have a
proven record of cost control in
our audit relationship with the
City. We will closely coordinate
all of our work with management
to minimize the time required
and the disruption to your staff.
Annually, we will review the
results of the audit performance
with the City management and
get your suggestions for planning
future work.
-37-
Fee Schedule
The fee schedule at the end of
this section is organized to
respond to the information
requested in your Request for
Proposal.
Fees Beyond 1992
We commit to maintain this level
of fees, increased only for
upward adjustments in the
Consumer Price Index (CPI) in
the Dallas area, for future years.
Value Added Services
We propose to continue to
perform an annual special project
as requested by the Audit
Committee at no cost to the City.
Our past projects have resulted in
value-added management letter
recommendations that have
increased the efficiency and
effectiveness of the City's
operations.
MOM &
Touche
0
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE 1992 FINANCIAL STATEMENTS
Standard Quoted
Hourly Hourly
Hours Rates Rate Total
Partners
56
$275
$108 $
6,050
Managers
84
215
83
6,950
Supervisory staff
250
125
40
10,000
Staff
460
75
25
11,500
Total hours (1) 850
Out-of-pocket expenses (2)
Total all-inclusive maximum price
for 1992 audit $ 34,500
(1) Excludes internal audit assistance.
(2) Out-of-pocket expenses will be absorbed by Deloitte & Touche.
Deloft&
-38-
Appendix A
Peer Review Reports
Following are the most recent peer review
reports and related documents for Deloitte &
Touche and Deloitte Haskins & Sells, one of the
predecessor firms to Deloitte & Touche.
-39-
Del~o
0
Deloitte &
Touche
Ten Westport Road Telephone: (203) 761-3000
Wilton, CT 06897-0820 Facsimile: (203) 834.2200
48
February 1991
To our people, our clients and
business associates:
About a year ago, Deloitte & Touche was formed with the combination
of Deloitte Haskins & Sells and Touche Ross & Co. The culture of
the predecessor firms and the culture and shared values of Deloitte
& Touche include our commitment to providing professional services
of the highest quality. As part of our commitment to quality, we
have established quality control policies and procedures which are
designed to ensure that we meet the performance standards of the
profession and the Firm. Every third year, as part of the profes-
sion's self-regulatory program, we engage another CPA firm to
evaluate our quality control system for accounting and auditing
services and to determine, based on tests of representative engage-
ments, our adherence to that system and to the standards of the
profession and the Firm.
In 1990, we engaged Ernst & Young to evaluate our system of quality
control for accounting and auditing services. Their report on the
results of that review is included in this booklet. We are pleased
that their review resulted in an unqualified opinion on our quality
control system and our compliance with it. A letter of comments is
customarily issued in a peer review. The letter of comments and
our response are included herein for your review, along with the
AICPA's Peer Review Committee's letter of acceptance and congratu-
lations. In addition, in its Annual Report for the year ended June
30, 1990, the Public Oversight Board indicated that it was pleased
that the managements of the large merged firms have taken steps to
protect the quality of their audit services and commended us for
our commitment to quality.
A summary of our Code of Professional Conduct is also included for
your review. The Code assists us in fulfilling our-responsibility
to our clients, the public and our profession to deliver our ser-
vices in a professional manner, without compromising our values and
standards.
Member
"M e a Intemat(onal
We are proud of our record of performance and of our people -
united in providing quality service to our clients. It is this
commitment to quality that has earned us the trust and confi-
dence of our clients and the public and which will sustain that
confidence in the future.
sincerely,
J ichael Cook
Chairman and
Chief Executive officer
Edward A. Ka gas
Managing Partner
01 ERNST & YOUNG if 277 Park Avenue a Phone: 212 773 3000
New York, New York 10172
To the Partners of
Deloitte & Touche
We have reviewed the systems of quality control for the accounting and auditing
practices of Deloitte & Touche in effect from inception (December 3, 1989, the date
Deloitte Haskins & Sells and Touche Ross & Co. combined their practices) through
March 31, 1990 and of Deloitte Haskins & Sells for the period from April 1, 1989
through December 2, 1989. The system of quality control of Deloitte & Touche
consists of quality control policies and procedures of Deloitte & Touche, including
those of its predecessor firms which remain in effect until replaced by those
established for the combined Firm. Our reviews were conducted in conformity with
standards for peer reviews promulgated by the Peer Review Committee of the SEC
Practice Section of the AICPA Division for CPA Firms (the "Section"). We tested
compliance with the quality control policies and procedures of Deloitte & Touche
and Deloitte Haskins & Sells (the "Firms"), for the periods indicated above, at their
national office and at selected practice offices in the United States and with the
membership requirements of the Section to the extent we considered appropriate.
These tests included the application of the Firms' policies and procedures for those
periods on selected accounting and auditing engagements. We tested the supervision
and control of portions of engagements performed outside the United States.
In performing our reviews, we have given consideration to the general characteristics
of a system of quality control as described in quality control standards issued by the
AICPA. Such a system should be appropriately comprehensive and suitably designed
in relation to the firm's organizational structure, its policies, and the nature of its
practice. Variance in individual performance can affect the degree of compliance
with a firm's prescribed quality control policies and procedures. Therefore,
adherence to all policies and procedures in every case may not be possible. As is
customary in a peer review, we are issuing a letter under this date that sets forth
comments related to certain policies and procedures or compliance with them. None
of these matters were considered to be of sufficient significance to affect the opinion
expressed in this report
In our opinion, the systems of quality control for the accounting and auditing
practices of Deloitte & Touche in effect from inception (December 3, 1989) through
March 31, 1990 and of Deloitte Haskins & Sells in effect for the period from April
1, 1989 through December Z, 1989, met the objectives of quality control standards
J ERNST &YOUNG
To the Partners of
Deloitte & Touche
Page 2
established by the AICPA and were being complied with during those periods to
provide the Firms with reasonable assurance of conforming with professional
standards. Also, in our opinion, the Firms were in conformity with the membership
requirements of the Section in all material respects.
jg~-f e,417
New York, New York
November 16, 1990
01 ERNST & l OUNG - ■ 277 Park Avenue ■ Phone: 212 773 3000
New York, Ne%v York 10172
To the Partners of
Deloitte & Touche
We have reviewed the systems of quality control for the accounting and auditing
practices of Deloitte & Touche (D&T) in effect from inception (December 3, 1989,
the date Deloitte Haskins & Sells and Touche Ross & Co. combined their practices)
through March 31, 1990, and of Deloitte Haskins & Sells for the period from April
1, 1989 through December Z 1989, and have issued our unqualified report thereon
dated November 16, 1990. This letter should be read in conjunction with that report.
Our reviews were made for the purpose of reporting upon the Firms' systems of
quality control and the Firms' compliance with them and with the membership
requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the
"Section"). Our reviews were performed in accordance with the standards
promulgated by the Peer Review Committee of the Section; however, our reviews
would not necessarily disclose all weaknesses in the systems or lack of compliance
with them or with the membership requirements of the Section because our reviews
were based on selective tests.
There are inherent limitations that should be recognized in considering the potential
effectiveness of any system of quality control. In the performance of most control
procedures, departures can result from misunderstanding of instructions, mistakes of
judgment, carelessness, or other personal factors. Projection of any evaluation of a
system of quality control to future periods is subject to the risk that the procedures
may become inadequate because of changes in conditions or that the degree of
compliance with the procedures may deteriorate.
During the course of,.our reviews, we noted the following areas where compliance
with the Firms' systems of quality control could be improved.
DOCUMENTATION
Finding -The Firms have comprehensive policies regarding the documentation
of procedures for reviewing interim financial information and for accepting new
clients. We noted instances where the performance of procedures for
retrospective reviews of interim financial information, including fourth quarter
adjustments, or the performance of procedures for acceptance of new clients was
not adequately documented.
Recommendation for Improvement - We recommend that D&T emphasize to
its professional personnel the need to document the procedures they perform
when reviewing interim financial information and accepting new clients.
J ERNST&YOUNG
To the Partners of
Deloitte & Touche Page 2
MEMBERSHIP REQUIREMENT
Finding - Effective May 1, 1989, the Section requires member firms to report to
the SEC the termination of the client-auditor relationship for SEC clients by the
end of the fifth business day following the member firm's determination that the
relationship has ended. We noted instances where the termination of the client-
auditor relationship was not reported timely.
Recommendation for Improvement - We recommend that D&T emphasize to
its professional personnel the need to timely comply with the membership
requirement.
The foregoing matters were considered in determining our opinion set forth in our
unqualified report dated November 16, 1990, and this letter does not change that
report
New York, New York
November 16, 1990
Deloitte &
Touche
Ten Westport Road ITT Telex: 66262
P.O. Box 820 Facsimile: (203) 834-2200
InWilton, Connecticut 06897-0820
Telephone: (203) 761-3000
November 20, 1990
SECPS Peer Review Committee
American Institute of Certified Public Accountants
Quality Review Division
1211 Avenue of the Americas
New York, New York 10036-8775
Dear Committee Members:
We have received the unqualified report of Ernst & Young and the
related letter of comments issued in connection with their peer
review. The scope of the peer review is described in their re-
port. This letter is our response to the letter of comments.
Documentation
A letter will be distributed to our accounting and auditing
partners and professional personnel in December 1990 that will
reemphasize the importance of documenting the procedures they
perform when reviewing interim financial information and accept-
ing new clients.
Membership Requirement
We have issued additional guidance to our accounting and auditing
partners and professional personnel which reemphasizes the impor-
tance of timely reporting to the SEC the termination of the client-
auditor relationship in accordance with the SEC Practice Section
membership requirement.
In addition, we will stress compliance with the above matters in
early December at our national meeting of Professional Practice
Directors, who are responsible for quality control in the practice
offices. Our quality review (inspection) program will monitor com-
pliance with our guidance for these matters.
Yours truly,
L
Division for CPA Firms
N1211 ewAolbrk. rk' N~Y. 700. 100 `36 -8775 of the 775
Ne
(212) 575-6200
American Institute of Certified Public Accountants
Facsimile: (212) 575-3846
December 19, 1990
J. Michael Cook, CPA
Deloitte & Touche
Ten Westport Road
P.O. Box 820
Wilton, CT 06897
Dear Mr. Cook:
It is my pleasure to notify you that on December 11, 1990 the
SECPS Peer Review Committee accepted the report, the related
letter of comments, and your firm's response thereto on the most
recent peer review of your firm. The report will now be placed
in the public files of the Division for CPA Firms.
The scope of this peer review had been approved by the SEC
Practice Section Peer Review Committee at its February 14, 1990
meeting. The Committee approved the review of Deloitte & Touche
for the period from December 3, 1989, the date Deloitte Haskins
& Sells and Touche Ross & Co. combined their practices, through
March 31, 1990. The Committee also approved the review of
Deloitte Haskins & Sells for the period from April 1, 1989
through December 2, 1989. Deloitte Haskins & Sells had been
scheduled for its triennial peer review for the year ended March
31, 1990. No separate review of Touche Ross & Co. was required
at this time because the latest peer review of Touche Ross & Co.
had been completed for a period within three years of the merger
date.
As you know, the reviewers' opinion was unqualified. The
Committee asked me to convey its congratulations to the firm.
The field work on your next review should commence by December
31, 1993.
Sincerely,
L~
Daniel P. Mageras, C A
Chairman
SECPS Peer Review Committee
cc: Robert L. Guido, CPA
Firm Number: 10016352 Review Number: 13258
Appendix B
Resumes
George A. Scott
Audit Partner
Experience
Sixteen years of experience with
Deloitte & Touche. Firm-
designated specialist in education
services and governmental
accounting.
Project manager for the
development of a management audit
methodology to assist Texas school
districts in assessing the
effectiveness of their operations.
Clients Served
City of Fort Worth
City of Greenville
City of Denton
City of The Colony
City of Grapevine
City of Lancaster
Dallas Housing Authority
Plano Independent School District
Richardson Independent School
District
Texas Education Agency
Professional Affiliations
American Institute of Certified
Public Accountants,
Governmental Accounting and
Auditing Committee
Texas Society of Certified Public
Accountants, Governmental
Standards Committee, Chairman
-48-
Texas Association of School
Business Officials
Government Finance Officers
Association (GFOA)
GFOA of Texas
Member, GFOA Certificate of
Achievement for Excellence in
Financial Reporting Special
Review Committee
Community Activities
American Cancer Society, Board of
Directors and Vice President
March of Dimes, Board of
Directors, North Texas Chapter
Texas Tech University Southwest
School of Public Finance,
Advisory Board of Directors
Education
B.B.A., Texas Christian University
Peggy V. McCormick
Consulting Partner
Experience
Fourteen years of experience
providing accounting and auditing
services to the Houston office's
government clients.
Has served as a member of the
AICPA Government Accounting and
Auditing Committee. She has
De u
0
substantial experience with
numerous governmental bond
offerings, working with government
officials, legal counsel, underwriters
and financial advisors.
Has served as Adjunct Professor of
Municipal Finance at the Jones
Graduate School of Administration
at Rice University and was recently
appointed to the Rice Accounting
Council.
Clients Served
City of Houston
City of Bellaire
City of Lancaster
Housing Authority of the City of
Houston
Harris County
Fort Bend County
Waller County
Port of Houston Authority
Houston Job Training Partnership
Council
Professional Affiliations
American Institute of Certified
Public Accountants
Texas Society of Certified Public
Accountants
Houston Chapter, Texas Society of
Certified Public Accountants
Government Finance Officers
Association (GFOA)
Member, GFOA Certificate of
Achievement for Excellence in
Financial Reporting Special
Review Committee
Community Activity
Houston Business Forum, President
-49-
Education
M.P.A., Georgia State University
B.S., University of Tennessee
Craig Mdacek, CPA
Audit Senior Manager
Experience
Deloitte & Touche, 1982-Present
A firm-designated specialist in
governmental accounting and
reporting with over ten years
diversified audit and accounting
experience.
Has participated with governmental
clients in the preparation of CAFRs
to be submitted for the first time to
GFOA for the Certificate of
Achievement for Excellence in
Financial Reporting.
Has served as discussion leader for
TSCPA courses related to
governmental auditing.
Clients Served
City of Denton
City of Fort Worth
City of Hurst
City of The Colony
City of Cedar Hill
City of Greenville
Professional Affiliations
American Institute of Certified
Public Accountants
Texas Society of Certified Public
Accountants
Tube
a
Government Finance Officers
Association
Government Finance Officers
Association of Texas
Texas GFOA, GASB Response
Committee
Member GFOA Certificate of
Achievement for Excellence in
Financial Reporting Special
Review Committee
Real Estate Financial Executives
Association
Community Activities
Education
B.S., Southwest State University
Deanne Simmons
Senior Accountant
Experience
Accounting and auditing experience
with large and small clients in a
variety of industries, including
government and the public sector.
Extensive experience and training in
microcomputer auditing techniques,
including Lotus 1-2-3, OfficeWriter
and AuditPlus.
Clients Served
City of Denton
City of Burleson
Hurst-Euless-Bedford Independent
School District
Union Pacific Resources
Community Activities
Adopt-A-School program
Mayfest volunteer
United Way
Education
M.P.A., University of Texas at
Arlington
B.S., Texas Tech University
Jay Riley
Local Government Consulting
Senior Manager
Experience
Local government consulting senior
manager for the Dallas/Fort Worth
-offices of Deloitte & Touche with
over seven years' consulting
experience and over ten years'
experience in municipal
government, including City
Manager for the cities of Lancaster
and Navasota, Texas. A firm-
designated specialist in serving
schools, cities, districts, state
agencies and governmental entities,
with specialization in management
audits, operational reviews,
financial analysis and planning,
performance auditing and human
resources.
Clients Served
City of Dallas
City of Denton
City of Farmers Branch
City of Fort Worth
City of Plano
City of Richland Hills
-so-
Fort Worth Independent School
District
Garland Independent School District
Irving Independent School District
Plano Independent School District
Richardson Independent School
District
Select Committee on Public
Education
Spring Branch Independent School
District
Texas Comptroller of Public
Accounts
Texas Education Agency
Town of Addison
Utah State Office of Education
Professional Affiliations
Texas City Management Association
Southwest School of Governmental
Finance, Faculty Member
Education
M.P.A., East Texas State
University
B.S., The University of Texas at
Austin
Toudie
0