1989-1002744L
NO 39 -100
AN ORDINANCE AUTHORIZING THE MAYOR TO ENTER INTO AN AGREEMENT
BETWEEN THE CITY OF DENTON AND DELOITTE, HASKINS, AND SELLS AS
AUDITORS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1989, AND
PROVIDING AN EFFECTIVE DATE
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS
SECTION I That the City Council of the City of Denton,
Texas es res to appoint Deloitte, Haskins and Sells as the
auditors for the City of Denton, Texas for the fiscal year ending
September 30, 1989
SECTION II That Deloitte, Haskins and Sells is hereby
designate as the auditing firm for the City of Denton, Texas for
the fiscal year ending September 30, 1989 in accordance with the
terms and provisions of the commitment letter of Deloitte,
Haskins and Sells dated June 27, 1989, and the conditions set
forth in the Proposal to Provide Professional Services, copies of
which are attached hereto and made a part hereof for all purposes
SECTION III That this ordinance shall
imme ate y upon its passage and approval
PASSED AND APPROVED this
1989
ATTEST.
the I S. day of
become effective
L f
SLCRE RY
J RS, CI
APPROVED AS TO LEGAL FORM
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
BY
Deloc'ae
Haskins+Sells
'Lesl
801 Cherry Street Suite 2340
Fort Worth Texas 76102 6801
2531
11 ~ Metr
JUN 2 81989 1I LI, # Metr o 336
654 2777
9 9 Cable DEHANDS
The Honorable Ray Stephens June 27, 1989
and Members of the City Council
City of Denton
215 E McKinney Street
Denton, Texas 76201
Dear Mayor Stephens and Council Members
This letter will confirm our understanding of the
arrangements covering our audit of the financial statements
of City of Denton ( City ) for the year ending September 30,
1989
We will audit the City's general purpose financial
statements for the year ending September 30, 1989 Our
audit will be made in accordance with generally accepted
auditing standards and the provisions of Government Auditing
Standards, promulgated by the U S Comptroller General, as
they pertain to financial audits Accordingly, the audit
will include such tests of the accounting records and such
other auditing procedures as we consider necessary in the
circumstances The objectives of our audit are to express
an opinion on the financial statements of the City, as well
as render a report on compliance of the City with the terms
and requirements of certain Federal laws
Our procedures will include, among others, tests of
documentary evidence supporting the transactions recorded in
the accounts, tests of tax receipts and related assessment
rolls, and direct confirmation of receivables, grant
receipts and certain other assets and liabilities by
correspondence with selected taxpayers, creditors, legal
counsel and banks At the conclusion of our examination,
we will request certain written representations from you
about the financial statements and matters related thereto
Before commencing our audit, we would be pleased to meet
with you to review and discuss the scope of our audit
procedures in more detail
The Honorable Ray Stephens
and Members of the City Council June 27, 1989 2
The fair presentation of financial position and results of
operations in conformity with generally accepted accounting
principles is management's responsibility Management is
responsible for the development, implementation and
maintenance of an adequate system of internal accounting
control and for the accuracy of the financial statements
Although we may advise you about appropriate accounting
principles and their applications, the selection and method
of application are responsibilities solely of management
Our engagement is subject to the inherent risk that material
errors, irregularities or illegal acts, including fraud or
defalcations, if they exist, will not be detected
However, we will inform you of any such matters that come to
our attention
Fees for our services are based on per diem rates, plus
out-of-pocket expenses, all of which will be billed as our
work progresses Our maximum fee for this engagement is
$35,700 Should an increase in the scope of our services
be required, we would provide you with a change in our fee
prior to commencing the work
During the course of our engagement, we may observe
opportunities for economy in or improved controls over your
operations We will bring such matters to the attention of
the appropriate level of management in writing
if you intend to publish or otherwise reproduce the
financial statements and make reference to our Firm, you
agree to provide us with printers' proofs or masters for our
review and approval before printing You also agree to
provide us with a copy of the final reproduced material for
our approval before it is distributed
Please indicate your agreement to these arrangements by
signing the attached copy of this letter and returning it to
us
The Honorable Ray Stephens
and Members of the City Council June 27, 1989 3
We appreciate your confidence in your appointment of us as
your certified public accountants and look forward to
working with you and your staff
Yours very truly,
George A
Scott
Partner
Approved By
Date
APPENDIX A
OUR SERVICE PLAN
Scope of the Audit
The primary ob4ective of our service plan will be to audit the
City of Denton s financial statements in order to determine that
they are fairly presented Based on our understanding of your
requirements we will perform the following activities
• Audit the financial statements of all accounts and funds in
accordance with generally accepted auditing standards
• Perform all required procedures and provide the necessary
reports to comply with the Single Audit Act
• Perform other audits or reviews as requested, after
submitting a separate proposal and proposed fee for approval
by City management
At the conclusion of each year's audit, Deloitte Haskins & Sells
will provide or assist in the preparation of the following
documents
• Comprehensive Annual Financial Report
• A separate management letter reporting on the adequacy of
the City's system of internal control (20 copies)
• A report on compliance with the requirements of the Single
Audit Act (20 copies)
• Copies of all work papers requested by the Finance
Department
Advance Planning and Transition Considerations In all our
au it ann ng, we stress individualized attention to our
client s needs and requirements our extensive advance planning
allows us ample time to coordinate our audit with your personnel
and to request appropriate work papers and staff support We
will remain sensitive at all times to the current workloads of
the City staff
We will use the schedules the City staff routinely prepares for
the year end audit When we determine that efficiencies can be
made in succeeding years, we will discuss any changes with you
well in advance so that there will be no last minute surprises
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Our experience has been that in succeedin ears we can reauce
t o num er o schedules Prepared our c ent s sta e
u y expect i s to be the case w t the city o Denton as it
has been with our many other governmental clients
our Audit Approach
For many years, Deloitte Haskins & Sells has led the accounting
profession in developing advanced auditing concepts, approaches
and techniques These innovations, included in our unified
audit approach known as AuditSCOPE, are designed to deal with
the increasing complexities of financial systems, to reduce and
control the rising costs of performing audits, and to maintain
quality auditing standards This unified system allows us to
provide all of our clients, regardless of size, the benefits of
our most advanced techniques AuditSCOPE includes such advanced
approaches and techniques as
0 A pinpoint approach to evaluating internal control and
correlating the results with the extent of detail testing
necessary
• Advanced statistical techniques which incorporate
predetermined reliability and precision levels
• Computer audit programs which speed selection and evaluation
of sample items
• Standardized audit work programs for each account group and
special industry audit programs
Constructive Service Approach We take an objective, business
approach to au t services so that we can be an effective
resource to your management
Our audit team will keep your objectives in mind and will be
alert for ways in which we can assist you in optimizing the
effectiveness of your operations While performing the audits,
we will develop constructive, practical suggestions on
opportunities for improving internal controls and accounting
procedures as well as for strengthening overall management
controls We combine our technical expertise with business
insight and specialized knowledge in each of your areas of
operation Thus, we can assist you in strengthening your
financial structure
This constructive service approach is an integral part of our
audit and does not involve any special studies In most cases,
it is a natural by-product of our audit procedures assigning
experienced people whose functional and industry knowledge is
most relevant to the audit areas in which they are working
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Year-Round Service is the Key Timely communication of
information y affect your operations is one of the most
important services we offer Our work plan, outlined below,
includes provisions to communicate with your personnel We are
available to meet, when needed, with members of the City Council
to discuss our progress and to keep them apprised of our
progress so that problems can be avoided
We are also available throughout the year Frequent and
individualized communications with each of our governmental
clients is an important part of our ongoing support program In
addition, we will contact you when new developments affect your
operations
Advanced Auditing Techniques
Our approach to audit service for the City of Denton will
emphasize and take advantage of advanced auditing concepts to
increase the efficiency and cost effectiveness of our services
Use of Personal Com uters At Deloitte Haskins & Sells we rely
extens ve y on t e use o microcomputers to perform many routine
tasks Personal computers ("PC's") promote audit efficiencies
and we use them extensively on our audit engagements to prepare
schedules, to make complex calculations and to analyze account
fluctuations The PC is particularly useful to prepare trial
balances and summarize report groupings
All of our management and staff routinely use PC's and are
trained on Lotus 1-2-3 software We make extensive use of
portable PC's at client locations to speed the audit process
We will make available to the City the Lotus Templates we
develop an use on t e City's au t y ma ng our temp ates
available to you, we feel t at we can increase the efficiency of
the City staff in routine matters and in preparing for each
year's audit
Audit Sampling Statistical parameters are essential for
exerc~s ng rigid control over the quantity and scope of audit
tests Our Audit Sampling Plan is recognized as the most
efficient and effective application of statistical methods in
auditing because, unlike traditional judgment samples where
sample reliability tends to vary from application to
application, our sampling plan is based on predetermined
reliability and precision levels Therefore, the sample size is
directly proportionate to the materiality of individual items
and degree of internal accounting control
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Our Approach to EDP Auditing
We have developed an objective approach and related program to
determine the audit features of internal controls which are
unique to electronic data processing systems The features of
this program are directed to all computer applications of
accounting significance including, but not limited to, adequate
procedural documentation, input and output controls, security
controls and emergency procedures
This program specifies procedures for the study and evaluation
of internal accounting controls It is completed for each
significant accounting application (e g , revenues, cash
receipts, purchases, cash disbursements, payroll, accounts
receivable, general ledger, etc ) during the early stages of our
field work
The program focuses on the evaluation of those accounting
controls on which we plan to place reliance or which are of
importance to management
The following EDP control objectives are comprehended in the
program
• Controls should provide reasonable assurance that accounting
application programs or systems are initially designed and
implemented to process in accordance with management's
general or specific authorizations
• Controls should provide reasonable assurance that changes to
programs are made only with proper management authorization
and that, upon implementation of the changes, the programs
continue to process in accordance with management's general
or specific authorizations
• Controls should provide reasonable assurance that all
authorized data, and only authorized data, is correctly
entered into the EDP system
• Controls should provide reasonable assurance that authorized
data, once entered into the system, is protected from
unauthorized deletion or modification
• Controls should provide reasonable assurance that intended
EDP output is delivered intact to the authorized users only
• Controls should provide reasonable assurance that the EDP
hardware and support software (e g , operating systems and
data base systems) are functioning properly
Proposed Work Plan
To assist the City of Denton in preparing for our audit, we are
committed to meet all timing and report deadlines stipulated by
City Council and management
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Professional Fees
Professional Fees Our professional fee will be based on the
actual time requ red to perform our examinations at hourly rates
based on the experience levels of the professionals serving the
City of Denton We estimate our maximum fee for the year ending
September 30, 1989 will be $35,700 including the printing cost
to prepare the annual financial report This fee estimate is
based on approximately 1,000 staff hours excluding start-up time
Our fees for subsequent years would remain at this level except
for increases based on the percentage increase in the National
Consumer Price Index
The fee quoted is an estimate and under the Rules of
Professional Conduct an accounting firm cannot be bound to
provide services for an estimated amount if our independence
would be impaired However, we do not render a fee estimate
without serious consideration and deliberation
A schedule of the billing rates for each classification of
personnel assigned to the engagement is as follows
Rate
Estimated
Per Hour
Hours
Partners
$180
5805
Managers
45
315
Senior accountants
30
550
Staff accountants
Our reputation as a quality professional firm is our most
valuable asset We will never compromise the quality of our
work in order to complete a job within the number of hours
estimated You can be sure that we will do as much work as is
necessary in our professional ,judgment to determine that our
reports are well documented and responsive to your needs
This Appendix is to be attached to our original engagement
letter dated June 27, 1989
/ Al-_.
George A Scott
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