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Page 1: Anniston City Council - 12/18/12

SPECIAL SESSION

OF THE

ANNISTON CITY COUNCIL

DECEMBER 18, 2012

5:00 p.m.

INVOCATION (Mayor)

PLEDGE OF ALLEGIANCE (Mayor)

CALL TO ORDER (Mayor)

ROLL CALL (Mayor)

NEW BUSINESS (City Attorney)

I. RESOLUTIONS

(a) A resolution authorizing reimbursements to City officials for expenses incurred

while traveling away from the City.

(b) A resolution authorizing the City Manager to execute an Agreement with the

Alabama Fire College and Personnel Standards Commission.

II. MOTIONS

(a) A motion to approve a Master Plan Development for the new Wells Fargo Bank

located at 1000 Quintard Avenue.

(b) A motion to appoint Kemp & Associates, CPA PC to audit the financial

information of the City of Anniston for the period ending September 30, 2012, with

the option for administration to renew the engagement to provide auditing services

for the fiscal years ending September 30, 2013 and September 30, 2014.

PUBLIC COMMENTS (Mayor)

COUNCIL COMMENTS (Mayor)

ADJOURNMENT (Mayor)

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RESOLUTIONS

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MOTIONS

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C I T Y O F A N N I S T O N

P.O. Box 2168

Anniston, AL 36202

MEMORANDUM

TO: CITY COUNCIL & CITY MANAGER

FROM: DANNY MCCULLARS, FINANCE DIRECTOR

SUBJECT: AUDITING SERVICES

DATE: 12/14/2012

The Finance Department has solicited proposals for auditing services for FY 2012 with options for FY 2013

and FY 2014. Invitations for proposal were sent to nine Alabama based accounting firms with

governmental auditing experience. Six responded.

FY 12 FY 13 FY 14

Kemp and Associates $ 36,900.00 $ 34,900.00 $ 35,900.00

Carr Riggs and Ingram 35,000.00 36,000.00 37,000.00

Banks, Finley, White and Company 50,000.00 50,000.00 50,000.00

Barfield, Murphy, Shank & Smith 55,000.00 55,000.00 55,000.00

Jackson Thornton 63,000.00 58,000.00 58,000.00

Machen, McChesney & Chastain 65,000.00 65,000.00 65,000.00

Warren, Averett, Kimbrough and Marino Did not respond

MDA Professional Group Did not respond

Joan Sander and Associates Did not respond

The proposals are attached along with this memorandum in Dropbox. Only one local firm submitted a

proposal. Kemp and Associates has audited the City in the past. However, all the firms that submitted are

certainly qualified to handle the reporting requirements of the City of Anniston. Other local firms,

Warren, Averett, Kimbrough and Marino as well as Joan Sanders and Associates did not respond to our

request for proposal.

The responsibility pursuant to the Council Manager Act is for the Council to appoint the auditor. Based on

price (Kemp was low cost edging Carr, Riggs and Ingram), past experience, as well as being a long standing

Anniston firm, my recommendation would unofficially be for the Council to allow city administration to

engage Kemp and Associates for up to these three years. However, this is not a formal recommendation,

as this appointment must and should come from the elected body. Note, pursuant to the Council-

Manager Act, the same firm cannot audit the city books more than three years in a row.

If you have any questions, please feel free to email me over the weekend or whenever. I am always

available to answer any issue that I may.

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PROFESSIONAL SERVICES AUDITING PROPOSAL

FOR  

City of Anniston, Alabama   

December 7, 2012

 Proposer:

Carr, Riggs & Ingram, L.L.C. 2100 16th Avenue South 

Suite 300 Birmingham, Alabama 35205 

205.933.7822 CRIcpa.com

 

Submitted by: 

    Jason Harpe  Engagement Partner 

205.949.8670 • [email protected]   

      Brian Barksdale  Engagement Quality  

Control Review Partner 205.949.8601 • [email protected] 

   

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Section                                     Page 

QUALIFICATIONS OF FIRM  UNDERSTANDING YOUR NEEDS    3‐4 

        FIRM PROFILE    5‐7    ENGAGEMENT TEAM    8‐13    OUR COMMITMENT TO QUALITY    14    RELEVANT EXPERIENCE    15    INDEPENDENCE    16    QUALITY CONTROL    17‐18  

SERVING YOU      SCOPE OF SERVICES    19  TRANSITION TO CRI    20  

OUR APPROACH    21‐27    

FEES    28  

                                 APPENDIX A – ADDITIONAL CLIENT REFERENCES    29    

  

      

TABLE OF CONTENTS

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 December 7, 2012  Danny A. McCullars, Director of Finance City of Anniston Anniston, Alabama  Re: Request for Proposals for Professional Auditing Services  Thank you for allowing Carr, Riggs & Ingram, LLC (CRI) to submit this proposal to provide professional auditing services to the City of Anniston, Alabama  (the “City”). We are genuinely excited about the prospect  of  establishing  a  long‐term  relationship with  you  and  believe  the  following  factors  are relevant in your assessment of us:  

Governmental Auditing Expertise. CRI is keenly aware of the business issues facing the City. Our firm  maintains  a  specialized  governmental  practice  and  represents  a  large  clientele  of governmental  entities  throughout  the  South  which  translates  into  a  unique  and  diverse understanding  of  the  environment  in  which  the  City  operates.  Your  engagement  partners leverage many years of experience serving governmental industry clients, providing the expertise you expect from your independent auditors.   

Local Relationships & National Resources. Currently ranked among the top 30 public accounting firms  in  the United  States,  CRI  is  the  South’s  third  largest  regional  firm.  Possessing  both  the appropriate resources and decision‐making authority positions us to help you meet your goals in a timely, efficient manner.   

Dedicated Team Members. Your assigned service  team  is comprised of proactive professionals who are committed to delivering the highest level of business acumen and knowledge to the City. Our commitment  to providing you with consistent  staffing allows you  to maximize  savings and remain focused on business. 

Transition Experience. Our team offers a great deal of experience with transitioning new clients, and our proven process streamlines the transition while minimizing the disruption to you during the auditor change. 

Fee  Structure. Our  fee  is  indicative of our desire  to  invest  in  a  long‐term, mutually beneficial relationship with the City and will provide immediate and continuing savings. 

 We  understand  that  the  City  is  seeking  to  engage  a  firm  to  audit  the  City’s  annual  financial statements  for the  fiscal years ending September 30, 2012, 2013 and 2014, and prepare the A‐133 Single Audit.   The audits will be performed  in accordance with all applicable professional standards. The audit report and related findings will be issued and presented in their final form to the City as set forth in the RFP.        

QUALIFICATIONS OF THE FIRM – UNDERSTANDING YOUR NEEDS

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We welcome  the opportunity  to display  to you  the same  teamwork, expertise, and  responsiveness that has made us one of  the  fastest growing public accounting  firms  in  the United States over  the past ten years. Please contact me at  (205) 949‐8670 or  [email protected] with any questions you may have  regarding our proposal. Again, we appreciate your consideration of our  firm  to  serve as your external auditors.   Sincerely, 

 Jason Harpe, CPA    

                             

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 Carr, Riggs & Ingram, LLC (CRI) is a regional certified public accounting and consulting firm ranked by Public Accounting Report as the 29th largest firm in the nation and the 3rd largest in the South. 

  

As a  result of our membership  in  these organizations, we are subject to stricter quality control standards than firms that  choose  not  to  take  the  voluntary  steps  to  join  the various  AICPA  and  PCAOB  organizations  to  improve  the quality of their practices.   CRI  is  also  a  member  of  Moore  Stephens  International Limited, a network of independent public accounting firms having  647 member  offices  in  98  countries,  over  20,000 people and fee income of $2.23 billion. Our membership in this  prestigious  alliance  allows  us  to  provide  our  clients with both national and international resources.  

     

 

 

 

 

QUALIFICATIONS OF THE FIRM – FIRM PROFILE

Professional Organization Memberships 

American Institute of Certified Public Accountants (AICPA) Alliance for CPA firms 

AICPA Private Companies Practice 

Section 

Center for Audit Quality (CAQ) 

Employee Benefit Plan Audit Quality 

Center of the AICPA 

Governmental Audit Quality Center of 

the AICPA 

Information Systems Audit and Control 

Association (ISACA) 

Institute of Internal Auditors (IIA) 

Public Accounting Oversight Board (PCAOB) 

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Firm‐wide,  CRI  performs  auditing  and  consulting  services  for  over  200  governmental  clients with more  than 100 governmental auditing staff.   Also, partners  in our various offices confer  frequently about  complex  governmental  accounting  issues.  CRI  places  emphasis  on  training  staff  in governmental  accounting  through  in‐house  training  as  well  as  State  and  National  governmental accounting  conferences  and  educational  seminars.  Partners  and managers  in  CRI’s  governmental accounting  services  group  teach  governmental  accounting  courses  to other CPAs  and  government professionals several times annually.    We  are  confident  we  can  and  will  provide  superb  engagement  management  to  the  City.  Your engagement team will bring a strong, balanced blend of talent and  industry experience—important ingredients  for  delivering  superior,  quality  services.    We  also  have  two  scholars‐in‐residence professors  to  assist  in  technical  accounting matters  if  necessary  and  we  utilize  other  nationally recognized governmental accounting experts with university and GASB backgrounds.    CRI’s technology consulting division also provides a resource that can be used by our clients related to computer technology and security  issues.   We feel that we have a broad amount of expertise  in the government accounting arena and we are available at any  time  to provide  technical advice or consultation.  Additionally,  examples  of  partner  involvement  in  the  CPA  profession,  which  demonstrates  our commitment to quality, services, and capability include:   Past Chair of the U.S. Auditing Standards Board 

Members of the Alabama State Boards of Accountancy 

Past Chair of the Alabama Society of Certified Public Accountants 

Member of the GAO Advisory Council on Government Auditing Standards 

Multiple reviewers for the GFOA’s Certificate of Achievement for Excellence in Financial Reporting program 

Firm membership in the AICPA’s Governmental Audit Quality Center, including an individual member of the Executive Council 

Multiple authorships of national governmental publications, guides and articles ‐ including PPC’s “Guide to Single Audits” and “Audits of Local Governments” 

Multiple speaking engagements for State and National governmental conferences 

 

 

 

 

 

 

QUALIFICATIONS OF THE FIRM – FIRM PROFILE

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The audit of the City of Anniston will be conducted by partners and staff members of our Birmingham office.    The  professionals  in  the  Birmingham  office  are  comprised  of  6  partners,  7 managers,  10 seniors and 10 accounting staff.  With  seven  CPA’s  that  focus  specifically  on  governmental  clients,  the  Birmingham  office’s governmental  auditing  staff  has  over  70  years  combined  experience  in  governmental  accounting including A‐133 Single Audits.  It is our anticipation that four professional staff will be devoted to the City’s audit on a full‐time basis and two professional staff will participate on a part‐time basis.  As  needed  on  various  engagements, we  utilize  professional  staff members who  have  specialized training  and  experience  in  information  technology  (IT).    For  example,  some of our  staff members have dual degrees or dual majors in IT as well as accounting.  In addition, our firm employs individuals who have been certified as Network Engineers and Information Systems Auditors.  These individuals have many years of experience in working with a wide range of information systems in areas such as network design, security, risk analysis and other areas.  Our professional staff members receive ongoing continuing education training in topics applicable to governmental accounting and auditing and receive the required number of hours on a yearly basis.  All of our governmental audit professionals from seniors to partners have training and experience in the application of GASB Statement 34, and all of our governmental audit clients have become  fully compliant with the provisions of that pronouncement.                           

QUALIFICATIONS OF THE FIRM – FIRM PROFILE

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 We have assembled a team of professionals who will ensure the highest level of personal dedication and  professional  excellence  to  you.   Our  team  has  the  requisite  blend  of  technical,  industry  and business skills that we believe are important to the City.    Brief profiles of each member of the team identified below follow on subsequent pages:  

 

Brian Barksdale

ENGAGEMENT QUALITY CONTROL REVIEW PARTNER

Jason Harpe

ENGAGEMENT PARTNER

Harold  L. Monk, Jr.

TECHNICAL REVIEW PARTNER

Courtney Brown

ENGAGEMENT MANAGER

Andrew Waits

SUPERVISING SENIOR

Carley Ezzell

SENIOR

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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Jason Harpe, CPA 

Engagement Partner       

 Experience Jason has more than 19 years of experience in accounting and auditing. He allocates the majority of his time to the firm’s governmental clients, providing both audits as well as compliance testing to clients in this  area.    In  addition,  he  provides  consulting  services  related  to  internal  controls  and  compliance consulting.  

Areas of Specialization 

Governmental accounting and auditing 

Educational Institutions  

Education, Licenses & Certifications 

B.S., Business Administration, with  concentration in Accounting, Auburn  University 

Certified Public Accountant  

Professional Affiliations  

American Institute of Certified Public Accountants 

Alabama Society of Certified Public Accountants  

Other 

President – Auburn University Accounting Advisory Board 

Member – Auburn University College of Business Advisory Council 

Treasurer – Breast Cancer Research Foundation of Alabama  

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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Brian Barksdale, CPA 

Engagement Quality Control Review Partner      

 Experience Brian  brings  over  30  years  of  accounting  and  audit  experience  to  this  engagement,  the majority  of which relates to serving governments, non‐profits and educational institutions.  

Areas of Specialization 

Governmental accounting and auditing 

Nonprofit entities 

Educational Institutions  

Education, Licenses & Certifications 

B.S., Business Administration, with  concentration in Accounting, Samford  University 

Certified Public Accountant  

Professional Affiliations  

American Institute of Certified Public Accountants 

Alabama Society of Certified Public Accountants  

Other 

Partner in Charge of CRI‐Birmingham 

Former Chairman of the Board ‐ Alabama Society of Certified Public Accountants (2009‐2010) 

Member – Samford University Business Advisory Council 

Member – UAB Accounting Advisory Board  

            

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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Harold L. Monk, Jr., CPA Technical Review Partner  

    

 Experience Harold  Monk  has  over  40  years  of  public,  private  and  governmental  accounting  and  auditing experience. Harold  is  the  immediate  past Chair  of  the Auditing  Standards Board of  the AICPA. He served as a member of  the Board of Directors of  the AICPA, and has  served  in  the past on  the CPE Executive Committee, Peer Review Board, Auditing Subcommittee of  the AICPA Board of Examiners, the  Special  Committee  on  Financial  Reporting,  and  the  Special  Committee  on  Assurance  Services.  Harold is currently serving on GAO’s Advisory Council on Government Auditing Standards.  Numerous articles authored by Harold have been  featured  in state and national publications and he has authored or  co‐authored  “Advanced Auditing  for Partners and Managers”  (AICPA),  “Compliance Auditing”  (AICPA), “Guide  to Single Audits”  (PPC), “Audits of Local Governments”  (PPC), “Preparing Non  Profit  Financial  Statements”  (PPC),  “Annual  Accounting  and  Auditing  Update”  (PPC)  and “Maximizing Single Audit Efficiency” (PPC).  Education, Licenses & Certifications 

BSBA, Accounting, University of Florida 

Certified Public Accountant 

Certified Fraud Examiner  Professional Affiliations  

American Institute of Certified Public Accountants  

Florida Institute of Certified Public Accountants  

Government Finance Officers Association 

Florida Government Finance Officers Association 

 

           

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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Courtney Brown, CPA Manager  Experience Courtney brings over 12 years of audit experience to this engagement.  Approximately 90% of Courtney’s workload is related to governmental clients.  Education, Licenses & Certifications 

B.S., Accountancy, Auburn University – Montgomery  

Certified Public Accountant  Professional Affiliations 

American Institute of Certified Public Accountants

Alabama Society of Certified Public Accountants

 Andrew Waits, CPA Supervising Senior  

Experience Andrew  brings  over  five  years  of  audit  experience  to  this  engagement.    Approximately  60%  of  his workload is related to governmental clients.   Education, Licenses & Certifications 

B.S., Business Administration, Samford University 

Masters of Accountancy, Samford University 

Certified Public Accountant  Professional Affiliations 

American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants 

        

    

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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 Carley Ezzell, CPA Senior   Experience Carley  brings  over  four  years  of  audit  experience  to  this  engagement.  Approximately  60%  of  her workload is related to governmental clients.   Education, Licenses & Certifications 

B.S., Accounting, Auburn University 

Certified Public Accountant   Professional Affiliations 

American Institute of Certified Public Accountants 

Alabama Society of Certified Public Accountants   

QUALIFICATIONS OF THE FIRM –ENGAGEMENT TEAM

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 OUR PEOPLE  The quality of a professional services firm is determined by its people. To ensure the highest possible level of quality  for every client, we employ carefully designed protocols  for  recruiting, developing, promoting, and supervising our staff. Our professionals participate in formal training with respect to accounting,  auditing,  tax  and  other  competencies,  including  industry  specific  topics.  Additionally, they all receive business training that focuses on their leadership skills.  

CRI’S CPE WEEK TECHNICAL TRAINING 

 You expect your audit team to provide you with all  of  the  information  needed  related  to  the latest  accounting  and  reporting  hot  topics  and auditing  requirements.  Therefore,  our  firm follows the requirements set forth in or by the:  

Financial Accounting Standards Board (FASB) 

Governmental Accounting Standards Board (GASB)  

Securities and Exchange Commission (SEC) 

AICPA 

Government  Auditing  Standards  issued  by the Comptroller General of the United States 

PCAOB  

For the needed technical updates to address the above,  our  firm  hosts  CPE  Week,  an  annual continuing  professional  education  series designed  to  inform  our  professionals. Additionally,  it  provides  a  forum  for  our professionals  to  share  best  practices—ensuring that  you  receive  the benefit of expertise  from our firm’s 800+ professionals. 

CRI’S LEADERSHIP ACADEMY BUSINESS TRAINING 

 In  today’s  business  world  of  constant communication,  business  skills  are  almost  as important  as  technical  expertise.    We  believe that  building  our  next  generation  of  leaders  is key  to  our  firm’s  success  and  essential  for excellent client service.   Therefore, we  invest  in the  skills  necessary  for  our  professionals  to provide quality services — while communicating effectively  throughout  the  process.  This  belief led  to  investment  in  and  the  formation  of  our Leadership  Academy,  which  is  designed  to provide  training on  the  “soft  skills” of business leadership. These skills include analytical review, communication, presentation, and leadership.  Additionally,  we  believe  that  it  is  incumbent upon us to instill and reinforce our core values of client  service,  respect,  and  integrity.  Therefore, we offer two courses based specifically on those values at critical career points.    

     

QUALIFICATIONS OF THE FIRM – OUR COMMITMENT TO QUALITY

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Confidential CRI will deliver deep  resources, ability and experience  to  the City of Anniston ensuring world‐class engagement management to the City.   Your engagement team boasts many years of experience  in providing audit and other services to governmental entities, and brings a strong, balanced blend of talent and experience—important ingredients for delivering superior, quality services.   

 Below we share specific, relevant client references; we encourage you to consult with them as to our performance:  

Client 

Approximate 

Ongoing Years 

of Service 

Total 

Engagement 

Hours  Assigned Staff  Scope of Work 

City of Homewood, Alabama 

Melody Salter 

Principal Accountant 

205.332.6108 

 

2 years  350  Jason Harpe 

Carley Ezzell 

Audit of City and related 

organizations – 

Government Auditing 

Standards and OMB A‐133 

City of Tarrant, Alabama 

Lynn Juneau 

Finance Director 

205.849.2800 

 

7 years  300  Jason Harpe 

Andrew Waits 

Audit of City and Electric 

Authority – Government 

Auditing Standards and 

OMB A‐133 

City of Vestavia Hills, Alabama 

Melvin Turner 

Treasurer 

205.978.0128 

 

11 years  325  Jason Harpe 

Brian Barksdale 

Courtney Brown 

Audit of City and related 

organizations – 

Government Auditing 

Standards and OMB A‐133 

City of Mountain Brook, Alabama 

Steve Boone 

Director of Finance 

205.802.3825 

 

16 years  325  Jason Harpe 

 

Audit of City and Library – 

Government Auditing 

Standards and OMB A‐133 

City of Talladega, Alabama 

Theresa St. James 

Finance Director 

256.362.8186 ext. 1025 

1 year  350  Jason Harpe 

Courtney Brown 

Andrew Waits 

Carley Ezzell 

Audit of City and related 

organizations – 

Government Auditing 

Standards and OMB A‐133 

 

   Please see APPENDIX A for a list of additional client references.     

QUALIFICATIONS OF THE FIRM –RELEVANT EXPERIENCE

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Affirmation of Independence  The firm and all key professional staff are properly registered and licensed to practice in the State of Alabama  and  are  independent  to  the  City  of  Anniston,  as  defined  by  the  requirements  of Government Auditing Standards, published by the Comptroller General of the United States. There are  no  conflicts  of  interest with  regard  to  any  other work  performed  by  our  firm  for  the  City  of Anniston.  The  firm  is  in good standing with  the Alabama State Board of Public Accountancy, and has had no enforcement actions or complaints filed with the board against the firm, its partners or employees.

QUALIFICATIONS OF THE FIRM –INDEPENDENCE

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 Peer reviews are performed every three years by another  independent public accounting firm.   The most recent review of our firm, which included specific governmental engagements, was performed in 2010 by EideBailly. The report was the most favorable possible and is included below.   

   

QUALIFICATIONS OF THE FIRM –QUALITY CONTROL

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INTERNAL QUALITY CONTROL REVIEWS AND OTHER EXTERNAL REVIEWS  

Experienced partners and professional staff of our firm conduct quality control reviews of our audits.  Each partner’s work is reviewed annually, and the inspection process includes periodic testing of the effectiveness of our quality controls and a continuous improvement program.  In addition, we are registered with the PCAOB and our 2006 and 2009 PCAOB inspection reports were also the most favorable possible ‐ no audit deficiencies or quality control defects identified. The 2009 PCAOB report can be viewed at www.pcaob.com/inspections/public_reports/2009/Carr_Riggs.pdf.  AUDIT METHODOLOGY FOR QUALITY CONTROL REVIEW  

Virtually  all  of  our  audit  documentation  is  maintained  electronically.  Compliance  with  our methodology  is  regularly  reviewed and evaluated as part of our  internal quality program, which  is further  discussed  in  this  section  under  INTERNAL  QUALITY  CONTROL  REVIEWS  AND  EXTERNAL REVIEWS.   Comprehensive policies and procedures governing our accounting and auditing practices covering professional and regulatory standards and implementation issues are constantly updated for new  professional  developments  and  emerging  issues.    See  PAGES  21‐27  for  a  more  detailed description of our audit methodology and approach.  

                          

QUALIFICATIONS OF THE FIRM –QUALITY CONTROL

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 CRI will provide  the  following  services  to  the City  as part of our engagements  for  the  fiscal  years ending September 30, 2012 through 2014:  

Prepare  the  City’s  annual  financial  statements  (subject  to  review  and  approval  by management).  

Perform external audit services in accordance with auditing standards generally accepted in the  United  States  of  America  (GAAS)  and  Generally  Accepted  Governmental  Auditing Standards (GAGAS). 

  Perform a review and provide feedback  (i.e.  limited procedures) regarding supplementary 

information  such  as  Management’s  Discussion  and  Analysis,  budgetary  comparison schedules, statistical information, etc. 

 

Prepare and issue a Single Audit Report on the City’s Major Federal programs in accordance with OMB A‐133. 

 

Verbal  and/or  written  communication  with  management  with  the  express  purpose  of enhancing the financial reports to provide accurate, timely information for users. 

  Communicate directly with management regarding the results of our procedures.  

Other  related  projects  as  they  arise  and  upon  request, while  taking  care  to  retain  our independence as required by auditing standards. 

                      

SERVING YOU – SCOPE OF SERVICES

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 Your decision to make an auditor change  is significant, and working with new  independent auditors can often  be  a  concern.   Our  team members  are  experienced with  the  transition  of  new  clients  and  are positioned  to provide you with value  from  the very  first encounter.   Our approach  is designed  to avoid interruption of  service,  raise  the  standard of  service and establish ongoing  channels of communication with  the  City‘s management  and  audit  committee.   We  will  accomplish  the  transition  with minimal disruption  and  investment  of  management’s  time.    CRI  has  a  well‐defined  approach  for  ensuring  a smooth, efficient and seamless transition.  The transition plan is comprised of the following key activities, and can occur within approximately two weeks, depending on the availability of the parties involved: 

 PHASE 

 ACTIVITY 

Pre‐Approval and Acceptance   

  Management and/or Audit Committee approves the change in auditor, pending new auditor completion of client acceptance procedures 

  CRI performs client acceptance procedures, such as: 

Interview key service provider relationships 

Interview predecessor auditor 

Internal firm review and approval 

Predecessor Auditor Communications   

  CRI makes inquiries of and reviews predecessor auditor workpapers related to the prior year audit 

  Predecessor auditor provides copies of requested workpapers 

Client Understanding and Planning   

  CRI, Management and/or Audit Committee sign engagement letter 

  CRI, Management and/or Audit Committee develop communication plan protocol 

  CRI and Management finalize timetable and key dates (see 

OUR APPROACH for draft timetables and key dates) 

  CRI develops initial understanding of internal controls 

  CRI reports to management internal control and review items subsequent to initial planning stage 

             

SERVING YOU –TRANSITION TO CRI

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 Our  general  audit  approach  is  risk‐based,  specifically  tailoring  our  audit  procedures  to  City’s  unique circumstances.    We  design  the  nature,  timing  and  extent  of  our  audit  procedures  based  on  a comprehensive planning process which includes studies of internal control, inquiries with client personnel and internal strategy sessions.  We involve partner and manager‐level personnel in all phases of our audit and use our experience, technology and high‐caliber staff to perform an effective and efficient audit. 

             

Conduct-audit

conference

Understand

Evaluateeconomic &

industry factors

Review accounting &

Review

process

Conductrisk Establish

& accounting

Conduct risk assessment

Establish audit strategy

Conduct post audit conference w/ representatives of the City

Conduct  Pre‐Audit Conference 

Understand Business

Concerns & Challenges

Evaluate Economic &

Industry Factors

Review Accounting & Information

Systems

Review Accounting

Internal Control Process

Perform Audit Fieldwork

Complete Audit & Accounting

Specialist Reviews

Discuss Draft of Financial

Statements & Management

Letter

Issue Final Reports &

Management Letters

OUR APPROACH

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 We will segment the engagement into four separate stages: 1) planning, 2) fieldwork performance, 3) review, and 4) financial reporting.  Each segment will include partner and manager involvement, and we  will  staff  each  segment  appropriately  with  personnel  based  on  their  experience  level  and performance abilities.  The following is a brief summary of the four segments.   Planning 

Conduct entrance conference(s) with City personnel 

Communicate  with  predecessor  auditor  and  review  prior  year  workpapers,  financial 

statements and comment letters (if applicable) 

Obtain  an  understanding  of  the  City’s  internal  controls  through  interviews  with  City 

personnel 

Testing  internal  controls  as  deemed  appropriate,  including  walk  throughs  of  significant 

processes or transactions 

Perform  analytical  procedures  on  account  balances,  ratios  and  other  transactions  as 

deemed appropriate 

Hold internal discussions regarding significant audit and fraud risks 

Prepare detailed audit programs based on risk assessments 

 

Fieldwork Performance 

Performing substantive audit procedures on the City asset and  liability balances as well as 

revenue and expense amounts 

Completing audit procedures as required by Federal single audit standards 

Communicating the status of audit fieldwork to the City on a regular basis 

 

Review 

Detailed review of workpapers by the audit managers 

Review of key audit risk areas by the engagement partner 

 

Financial Reporting 

Conduct exit conference(s) with City personnel 

Review the draft of the financial statements, and prepare other reports and schedule drafts 

for review and approval by City personnel 

Review financial reports as required under OMB Circular A‐133 (Single Audit) 

Attend management meeting to submit and present audit report if requested  

   

 

OUR APPROACH

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 ANTICIPATED AUDIT STRATEGY   GAAP  provides  a  conceptual  framework  for  accounting,  financial  reporting,  and  disclosure;  in  the City's  situation,  we must  also  consider  governmental  reporting  requirements.  The  application  of GAAP  varies  depending  on  the  facts  and  circumstances  of  transactions  and  management’s interpretation.   Our general audit approach described herein  is  tailored  to address  the nature and  inherent  risk of each area. For all areas, we will meet with management to gain an understanding of management’s processes and controls. We will then assess and test such controls, as necessary. We will also perform substantive  analytical  audit  procedures  and  tests  of  details  as  well  as  ensure  that  the  proper accounting  is applied.  In certain complex areas we may use  functional  specialists  (e.g.  information technology  [IT],  valuation of  investments and  review of actuarial assumptions and  calculations)  to assist in the evaluation of complex transactions and account balances.  

In addition, we will review the financial statement disclosures and evaluate the overall transparency of  the  City’s  financial  reporting.   We  have  outlined  below  the  key  areas  of  audit  focus  based  on materiality and various judgments involved as well as our preliminary knowledge of the City and the governmental industry:  

  Anticipated Audit Strategy      Substantive Procedures   

Significant Areas Assessed Level of Risk 

Test of Controls 

Analytics Test of Details 

Use of CAATs 

Notes 

Initial audit procedures    High  ‐First time audit ‐ all areas will be impacted.‐We also will perform the requisite predecessor‐successor communications. 

Fraud risks  Moderate  ‐Will meet AICPA requirements fraud testing.‐Fraud is considered an intentional act that results in a material misstatement of the financial statements. ‐We will gather information to identify risks of material misstatement due to fraud, and evaluate the programs and controls that address fraud. 

Financial reporting  Moderate  ‐Period‐end financial reporting is generally important, this is where the information is compiled or reconciled to detailed information from underlying processes and systems. 

Other estimates and  contingencies 

Moderate  ‐Compensated absences – we will perform tests of details and substantive analytics to substantiate accuracy of account balance. 

Manual journal entries  Moderate  ‐Manual journal entries are inherently risky.

Cash and cash equivalents  Moderate  ‐Cash is significant because of the large account balance and number of transactions impacting account.   

Accounts receivable  High  ‐Accounts receivable are significant due to the account balance, number of transactions and issues related to estimates associated with the allowance for doubtful accounts. 

Capital assets and related expenditures 

Moderate  Capital assets are significant due to the account balance and susceptibility to misappropriation. 

OUR APPROACH

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  Anticipated Audit Strategy      Substantive Procedures   

Significant Areas Assessed Level of Risk 

Test of Controls 

Analytics Test of Details 

Use of CAATs 

Notes 

Accounts payable and related expenditures 

Moderate  Accounts payable are significant due to the account balance and number of transactions impacting accounts payable and the related expense accounts. 

Payroll, related liabilities and payroll expenditures 

Moderate  Payroll liability accounts and related expenditures are significant due to the account balance and payroll expenditures comprise a significant portion of the City’s expenditures. 

Long‐ term debt / debt covenants 

High  ‐Debt is significant due to the size of account balance and covenants associated with debt. ‐ We will perform tests of compliance through substantive analytics and confirmation of certain data with creditors and other third‐parties. 

Deferred revenue  Moderate  Deferred revenue is significant due to the size of account balance. 

Revenue recognition  High  ‐The City generates revenue through property and other taxes. ‐We will test revenue systems and processes and perform a combination of substantive analytical procedures and tests of details to test this area. 

Federal and State Grants  High  A Single Audit is required in accordance with OMB A‐133.  Grants would be considered high risk due to the inherent nature of grants and the requirements of OMB A‐133. 

Entity level controls  Moderate  ‐We will gain an understanding of the control environment, risk assessment, monitoring, information and communication channels to determine the nature, timing, and extent of reliance on and tests of controls of control activities, analytical procedures and substantive tests. ‐Our goal is to leverage the work already performed by management to the degree possible, which should reduce controls and substantive work.  

IT systems  High  ‐The underlying financial and operational systems supporting the key business cycles play a vital role in the ability to generate and compile compete and accurate financial information. ‐The controls over IT security, computer operations and program change over financially significant applications are vital. 

    

OUR APPROACH

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 The following graphs depict the key elements of our audit process, as well as the preliminary planned timing of our procedures for fiscal year 2012: 

 

Timing of Audit Procedures

PHASE 2012 2013

Client Acceptance & Pre-planning D J F M A M J J A S O N D

Appointment of audit firm

Ongoing consultation on major issues, and developments

Meet with management to discuss business risks and scope

Hold CRI engagement team planning meetings

Risk Assessment & Audit Strategy

Gain understanding of significant processes and key

Perform testing of key controls to reduce substantive testing

Determine nature, timing and extent of substantive procedures

Perform selected substantive procedures as of interim date

Finalize and communicate plan to management/governance

Audit Execution

Conduct remaining substantive tests based on the results of audit procedures performed to date

Discuss results of audit work with management

Report & Monitor

Review annual report(s)

Meet with management/governance to discuss audit results

Issue audit opinion(s)

OUR APPROACH

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 As requested, CRI will provide the following services as part of our engagement:  Audits of the financial statements of the City for the years ended September 30, 2012 through 2014, in  accordance  with  auditing  standards  generally  accepted  in  the  United  States  of  America, Government  Auditing  Standards  issued  by  the  Comptroller  General  of  the  United  States,  the provisions of the Federal Single Audit Act of 1996, and the United States Office of Management and Budget (OMB) Circular A‐133, Audits of State, Local Governments, and Non‐profit Organizations.   We realize the need for flexibility and creativity  in designing a process that works for the  individual needs of our clients.   Our audit process  is built on  frequent communication with management and City staff which focuses on critical issues and audit risks early in the audit process.  By concentrating on gathering valuable information about the City, and investing the time necessary to understand the business risks, we will develop an approach that is unique to the City.  Factors that differentiate CRI from  other  professional  services  firms  include  our  focus  on  client  relationships;  our  quest  for knowledge  of  our  clients’  operations  before  we  begin  the  assurance  process;  our  governmental experience; and the seasoned judgment of our partners in the sharing of intellectual capital.    Our clients recognize the benefits of a planned, proactive approach.  By providing you with a detailed plan before your audit begins, you are given a “road map” that outlines steps  in the process, and a corresponding  timeline.    Working  closely  with  the  City’s  finance/accounting  team,  we  identify possible areas of risk which might require special care and attention.  This advance planning typically results  in  a much more  efficient  audit  process  and  yields  an  audit  plan  responsive  to  those  risks identified.   We  are  committed  to providing  a high  level of  financial  integrity with  respect  to  your financial statements, and we design our audit plan accordingly.    Upon selection as auditors for the City we will divide the audit into manageable segments, during our preliminary  planning meetings.    The  natural  segments  will  be  along  the major  lines  of  business activities as well as other  required  reporting units.   Utilizing prior  financial  information,  the 2011‐2012 budget, reviews of the prior auditor’s workpapers and  interviews with key personnel, we will identify the significant audit areas.  Significant audit areas are determined based on perceived risk of financial misstatement, whether by error or by  fraud.   These preliminary planning meetings will be completed in a manner consistent with the completion of timelines as set forth in the City’s request for proposal.    As part of  this work, we will prepare  the detailed audit plan and coordinate with City  staff on  the preparation of schedules, interim testing and scheduling.    During our audit, we will provide open dialogue with management  related  to  the progress of  the audit.    We  will  immediately  communicate  any  issues  related  to  the  audit  to  prevent  potential disagreements.  Open communication generally eliminates miscommunications and is integral in our professional relationship.  We also pride ourselves on being available to answer any questions during our engagement and we are easily available for consultation in periods between audits.     

OUR APPROACH

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 Furthermore,  CRI will  act  as  your  advisor.    As  stated  earlier,  our  vast  expertise  in  governmental auditing  and  accounting  allows  us  to  provide  sound  advice  related  to  unique  governmental accounting matters.   During the course of our engagement, we will consistently seek opportunities for  improvement while  recognizing  problems  or  critical  areas  requiring  added  attention. We will provide  this  information  in  two  ways:  1)  as  part  of  our  on‐going  communication;  and  2)  via  a management letter which will be issued at the completion of the engagement if necessary.  Resolution of Audit or Accounting Issues Any audit or accounting  issues  that are encountered during  the course of  the engagement will be brought to the attention of management and/or the audit committee, as deemed appropriate.  The engagement team will work with the City’s management,  in order to resolve any  issues  in a timely and acceptable manner.    If  significant accounting  issues are encountered during  the course of  the audit  and  it  is  determined  that  additional  time  will  be  required  of  CRI  personnel,  we  will communicate  with  the  City  an  estimate  of  costs  for  additional  services  required,  before  those services are rendered.  Audit Communications At  the  conclusion  of  the  audit,  in  addition  to  written  communications  required  to  be  issued  in accordance with current auditing standards to those charged with the governance of the City, we will present  our  audit  findings  and  internal  control  deficiencies  and  recommendations  to  the  audit committee.    Anticipated Potential Audit Problems We  do  not  anticipate  any  audit  problems.  Should  any  issues  arise, we  have  the  experience  and knowledge to determine an appropriate resolution. 

          

OUR APPROACH

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 Our  goal  is  to  create  mutually‐rewarding  relationships.    We  trust,  therefore,  that  our  high  quality, responsive  service will  yield  returns  far  greater  than  your  investment  in  our  professional  fees.  Below please find our proposal of fees to provide the requested services.  

Our fees for the proposed services are as follows: 

Fiscal Year Total Fee Per Fiscal Year 

September 30, 2012 $35,000

September 30, 2013 $36,000

September 30, 2014 $37,000

The above proposed  fees are the total all‐inclusive maximum price, per year, and contain all direct and indirect costs, including all out‐of‐pocket expenses.  

If the City requests additional services outside of this audit contract, professional fee hourly rates are as follows, but may be negotiated depending on the project request:

Classification Hourly Rate

Partner $225

Manager $140

Senior  $100

Staff   $80

IT Specialist $200

Fraud Specialist $200 Our professional fees are based on the key assumptions that the City will:  

Ensure  that  the  predecessor  auditor’s  workpapers  will  be made  available  for  our  timely review; 

Make  available documents  and workpapers  for  review  at  the City’s headquarters  location, although we may choose to review at alternate locations; 

Prepare certain schedules and analyses;  Provide us with supporting documents as requested;  Assist us in obtaining an understanding of the accounting systems of the City;   Not experience a significant change in business operations (i.e. adjustments to the quoted fee 

may be necessary for  items such as, but not  limited to, significant acquisitions,  investments, new service offerings, or significant changes in the City’s ICFR); and 

Not experience a significant change  in  financial reporting standards  (i.e. adjustments to the quoted fee may be necessary for items such as, but not limited to, adoption of International Financial Reporting Standards (IFRS)). 

        

FEES

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Services Provided Annual Audit 

A‐133 Audit 

GFOA Certif. 

IT   Advisory 

Various Acctg. Services 

Municipal Government Clients City of Birmingham, Alabama           City of Enterprise, Alabama      City of Tuskegee, Alabama           City of Montgomery, Alabama      City of Andalusia, Alabama           

City of Brundidge, Alabama       

City of Florala, Alabama       

City of Tallahassee, Florida       

City of Callaway, Florida       

City of Palatka, Florida           

City of Bonifay, Florida       

City of Panama City Beach, Florida           

City of Lynn Haven, Florida       

City of Mexico Beach, Florida           

City of Destin, Florida       

City of Gainesville, Florida       

Water and Sewer Industry Clients Alabama Drinking Water Finance Authority           

Alabama Water Pollution Control Authority           

Alabama Water and Wastewater Institute, Inc.           City of Enterprise Water Works Board           

Water Works and Sewer Board of Selma, Alabama        The Utilities Board of the City of Opp, Alabama           The Utilities Board of the City of Andalusia, Alabama         

Coffee County Water Authority      Utilities Board of the City of Florala, Alabama           

State Agency Clients Retirement Systems of Alabama         

Alabama Department of Economic and Community Affairs          Alabama Department of Insurance           Florida Department of Financial Services        Mississippi Division of Medicaid           

County Government Clients Walton County, Florida           Holmes County, Florida      Putnam County, Florida       

Bay County, Florida           

Gulf County, Florida       

Alachua County, Florida           

Jackson County, Florida       

St. Johns County, Florida           

Sumter County, Florida           

Washington County, Florida       

Baker County, Florida       

Dixie County, Florida       

Gilchrist County, Florida       

Clay County, Florida           

Levy County, Florida           

APPENDIX A – ADDITIONAL CLIENT REFERENCES

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Submitted by:

John Shank, CPA, CVA Barfield, Murphy, Shank & Smith, P.C.

1121 Riverchase Office Road Birmingham, AL 35244

(205) 982-5513 [email protected]

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December 6, 2012 Danny A. McCullars Jarrod Simmons City of Anniston 1128 Gurnee Avenue Anniston, AL 36202 Dear Danny & Jarrod,

Barfield, Murphy, Shank & Smith (BMSS) would like to thank you for the opportunity to offer the City of Anniston solutions for its audit needs. We understand your need for quality audited financial statements, reports on compliance and internal controls and single audit report on compliance for each major program and are committed to issuing all within the timelines in your request for proposal. Having worked extensively with municipalities and government agencies for over 20 years, we understand the operational, financial, compliance and legal issues you face. However, we realize that each organization is unique and will focus on understanding the City of Anniston’s distinctiveness and needs. The following characteristics, which we can provide, are essential for a CPA firm to have in order to provide successful solutions for your accounting goals and objectives:

Value Service, responsiveness and open communication Efficient and effective delivery of your audit reports Depth of not-for-profit experience Understanding of your needs

Value

You want to ensure you are receiving high-quality work at a reasonable value that is congruent with your budget. Our fee structure represents a streamlined and coordinated approach to providing high-quality services from experienced and knowledgeable auditors utilizing advanced technology. By working closely with your staff, committing to open communication and providing regular progress reports, we are able to maximize your investment in our services. BMSS has uniquely low employee turnover which allows us to minimize staff changes on engagements. Staff consistency allows us to create strong, long-term client relationships and provide efficient and effective audit solutions while reducing costs to our clients. We want to remove fees as a barrier to our discussions. If you have any questions or concerns in this regard, please feel free to discuss them openly with us.

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Service, Responsiveness and Open Communication

As a BMSS client, the City of Anniston will experience superior levels of service and responsiveness. We believe the key to a successful relationship is the day-to-day rapport that is developed between you and your BMSS team. Our client-focused approach centers on hands-on involvement from experienced, knowledgeable auditors (including a high level of shareholder involvement) who will invest the time required to understand the City of Anniston’s operations, people, goals and needs. Your BMSS audit team will be available to meet with your staff to discuss concerns and provide thorough insight, research and advice. Any issues encountered are promptly addressed and brought to your attention. Input and open communication are welcome and regular meetings are encouraged to share feedback related to your audit goals and objectives. Efficient and Effective Delivery of Your Audit Reports

You deserve accountants who value communication, emphasize planning and can quickly understand and adapt to your changing needs to efficiently and effectively complete your audit engagements. We believe BMSS can provide the City of Anniston with this solution. Your goal is to have a high quality and timely audit performed. We are committed to beginning and finishing the audit by your delivery schedule. BMSS works closely with clients through open communication and regular progress reports to maximize efficiency, effectiveness and the value of our services. As a member of the AICPA Peer Review Program, we meet industry standards of quality control and have passed each of our peer reviews. Membership in the AICPA Center for Audit Quality and Governmental Audit Quality Center involves voluntarily adhering to additional training, quality control, and internal inspection which is a testament to our dedication to achieve audit quality. Client references will tell you they not only enjoy the efficient and effective way we conduct our audit engagements, but they truly enjoy the close relationship and rapport we maintain with them throughout the year. Our significant level of client loyalty and retention speaks volumes to our effectiveness, results and value. We have been told by clients that we exceed their expectations of an accounting firm. By providing you with an experienced team with deep technical knowledge, a high level of shareholder involvement and staff continuity on your engagements, we are able to efficiently and effectively meet your audit needs within your budget and timeframe.

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Depth of Experience and Understanding of Your Needs

The more training, knowledge and experience accountants have, the more familiar they will be with audit best practices, requirements and standards as well as your own specific needs. BMSS, known for having one of the premier auditing practices in Alabama, performs over 100 audits annually. By specializing in audit services, we maximize knowledge, training, research and implementation of best practices for our clients. Working with cities, counties, municipalities and government agencies with budgets from $1 - $500 million, our professionals have deep industry knowledge and technical experience working with government entities. We currently work with over 90 not-for-profit and governmental clients. Over the past 20 years, BMSS has helped municipalities identify ways to maximize the value they deliver to their residents and businesses and has developed practical solutions to internal control issues while delivering quality audit solutions. Because of the depth of our experience, we are well-versed on issues you may encounter and we bring a knowledge-based perspective on trends, opportunities, issues and regulations that frames our approach and addresses your needs and requirements. Why Should The City of Anniston Select BMSS As Their Audit Partner?

Not all accounting firms are alike. We are not the standard black and white zebra. Our zebra stands out in the herd of accounting firms! The City of Anniston deserves accountants with knowledge and experience in providing quality services for organizations similar to yours. We offer qualified, knowledgeable and experienced accountants who are focused on service and communication and have a solid understanding of auditing municipalities. Our interest in your organization would go far beyond handling your audit - BMSS wants to be your trusted business and financial advisor and provide value-added services to you through educational seminars, newsletters and articles. BMSS is passionate about exceeding your expectations of a CPA firm and looks forward to working with you as your audit partner.

Sincerely,

Barfield, Murphy, Shank & Smith, P.C.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Table of Contents

Page

BMSS Profile ............................................................................................................................. 7

Value: Fees & Understanding of Investment ............................................................................ 9 Qualifications: Experience & Understanding of Your Needs ................................................. 10 Qualifications: Your BMSS Team ............................................................................................ 12

Qualifications: Client References ............................................................................................ 15 Solutions: Audit Approach & Plan .......................................................................................... 16 What Makes BMSS Different & Why Should You Select Us? ................................................. 22 Peer Review Report ................................................................................................................. 23

Statement of Confidentiality The information in this document is considered by Barfield, Murphy, Shank & Smith to be confidential. We request that it be treated as such and in turn, assure you that any and all information provided to produce this proposal will be treated in the same fashion.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

BMSS Profile BMSS recently celebrated its 20th anniversary of providing accounting services. Two decades highlighted by steady growth and professional recognition. In 1991, Don Murphy, Keith Barfield and John Shank decided to create a public accounting firm where employees can have a successful career that also supports their lives outside the office. The founders began the firm as the only employees, with zero clients, in the basement of one of their homes. Steve Smith joined in 1994. Now, twenty years later, BMSS has a staff of 9 shareholders, 95 employees (including 50 CPAs) and provides services to over 2,000 clients. BMSS is one of the largest locally-owned firms in Alabama and ranks in the Top 10 in size in the state and Top 200 in the United States. This expansion has not been through mergers or acquisitions but through organic growth contributed in part to the family-friendly policies and core values of the firm: Character, Family, Life/Work Balance, and Treating Everyone Professionally. BMSS has a high level of employee satisfaction, low turnover and the ability to recruit topnotch professionals. We utilize our low turnover to minimize staff changes. Staff consistency allows us to reduce costs to clients and ensure long-term relationships. The employee growth and low turnover has allowed BMSS to receive several recognitions including “Top Small Workplace” by The Wall Street Journal, “Best Accounting Firm to Work For” by Accounting Today, “Best Place to Work” by the Birmingham Business Journal and the Alfred P. Sloan Award for Business Excellence in Workplace Flexibility. We are proud to be named a “Southern Hero” by SouthernLINC Wireless and to have received the AICPA Public Service award for our commitment to our community as demonstrated through service projects and employee volunteer days. BMSS established sister companies Abacus IT Solutions (www.abacusit.com), Payroll & Benefit Solutions (www.pbspay.com) and Benefits Administration Services (www.bastpa.com) to further meet our clients’ needs. In 1998, BMSS was selected to join the prestigious BDO Seidman Alliance. This arrangement allows BMSS to access national resources to assist with specialized needs. Clients recognize the value of working with BMSS. Of the 2,000 clients currently served by BMSS, over 500 of those clients have been with BMSS for over 10 years. With BMSS, you will discover not all accounting firms are alike.

BMSS Profile

20 years of success

Top 10 in size in Alabama, Top 200 in U.S.

95 employees, 50 CPAs

Low employee turnover

“Top Small Workplace” by The Wall Street Journal

“Best Accounting Firm to Work For” by Accounting Today

BDO Seidman Alliance

Client loyalty & retention

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BMSS Profile (continued) Independence

Your engagement will be conducted in accordance with generally accepted auditing standards which require that an auditor be independent in both fact and appearance. BMSS meets the independence standards of the U.S. General Accountability Office’s Government Auditing Standards as well as the American Institute of Certified Public Accountants’ Code of Professional Ethics and independence rules with respect to The City of Anniston, and we will confirm such independence. We obtain annual independence representations from all professional personnel, conduct independence training annually and consider any potential conflicts of interest during both client acceptance and engagement planning. There are no identified or known conflicts of interest between BMSS and the City of Anniston. License to Practice

BMSS and all assigned key professional staff are properly licensed and in compliance with registration requirements to practice in Alabama. There have been no letters of comment, state or federal reviews, or disciplinary actions against our firm. BMSS is in good standing with the State Board of Accountancy. Dedicated to achieving the highest possible standards of audit quality, we are members of the AICPA Peer Review Program and have passed every peer review. Our last peer review was performed in November 2011. (See page 23.)

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Value: Fees & Understanding of Investment You want to ensure you are receiving high-quality work at a reasonable value. Our fee structure is very competitive based on our streamlined and coordinated approach to providing high-quality services from knowledgeable and experienced professionals who maximize advanced technology. Based on our discussions, we expect our fees would be as follows:

2012 2013 2014

All-Inclusive Maximum Fee and Out-of-Pocket Expenses for Audit Services

$55,000 $55,000 $55,000

In addition to the services listed above, we will provide: Ongoing communications* Recommendations about areas in which we observe opportunities for improvement Formal presentation of reports if requested 24/7 access to your secure client portal to access, upload and download documents

This quote assumes accounting conditions will remain relatively stable, you do not make significant changes in your internal controls, accounting or financial reporting systems, key personnel, and certain information will be available when requested. *If telephone assistance and communication do not involve extensive research, it is our policy not to charge for answering your question. If we have to perform research to find the answer, we will let you know and give you an estimate of fees (billed at our standard rates). Quoted fees are based on budgeted time expended by each professional at standard billing rates (listed below) which are very competitive and create value based on the experience and knowledge of our team and advanced technology utilized.

2012 Rate $ Shareholder 250 – 315 Senior Accountant 100 – 140 Senior Manager 170 – 250 Staff Accountant 90 – 130 Manager 120 – 215 Bookkeeper 75 – 115 Supervisor 110 – 175

Valid for 90 days from date of cover letter. Rates subject to change annually. Fees for future years would be expected to increase by our annual composite individual rate adjustments and the impact of accounting pronouncements, as applicable. We want to remove fees as a barrier to our discussions. If you have any questions or concerns, please feel free to discuss them openly with us.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: Experience & Understanding of Your Needs BMSS Governmental Accounting Practice

With over 100 years of combined experience and 20 years devoted to the not-for-profit and governmental industry, BMSS is known for having one of the premier accounting practices in Alabama. BMSS has over 95 employees, including 50 CPAs. Our Not-For-Profit & Governmental Practice Group contains 12 auditors (all working from our one office in Birmingham) within our management group and all are licensed as a CPA to practice in Alabama. (See your team on pages 12-14.) Our firm is committed to meeting the industry standards of corporate governance, quality control and industry best practices. We stay current on laws and regulations applicable to not-for-profits and government entities. At BMSS, we annually perform over 100 audits ranging from $1 million to over $2 billion in revenues and have performed A-133 audits for eight different organizations and agencies. Membership in the AICPA Center for Audit Quality and Governmental Audit Quality Center involves voluntarily adhering to additional training, quality control, and internal inspection and is a testament to our dedication to audit quality. The Governmental Audit Quality Center is designed to help CPAs meet the challenges of performing quality audits in this unique and complex area. We focus on serving clients of a similar size and scope as the City of Anniston and currently provide accounting, auditing and tax solutions to over 90 organizations and governmental agencies. (See references on page 15). To further our commitment to the industry, we are active in the Alabama Association of Nonprofits, Government Finance Officers Association and the BDO Seidman Alliance Non-Profit and Governmental Industry Groups. (See page 11 for more info on BDO.) By specializing in not-for-profit and governmental accounting and auditing, we maximize knowledge, training, research and implementation of best practices for our clients. The power of not-for-profit industry experience is the perspective we bring to help you leverage your own capabilities and resources. We are passionate about helping you succeed and exceeding your expectations of an accounting firm.

BMSS Experience:

Over 100 years combined

Perform over 100 audits annually

Meet quality control standards of AICPA Peer Review

AICPA Center for Audit Quality and Governmental Audit Quality Center

20 years devoted to not-for-profit and governmental industry

Focus on clients of similar size and scope - over 90 not-for-profit and governmental clients

Member of Alabama Association of Nonprofits and Government Finance Officers Association

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: Experience & Understanding of Your Needs (continued)

BDO Seidman Alliance

The BDO Seidman Alliance is a nationwide association of independently owned local accounting firms with similar client service goals. By supplementing our services, the BDO Seidman Alliance brings us tools to better serve our clients with greater flexibility, efficiency and cost effectiveness. As an independent member firm, our BDO Seidman Alliance allows BMSS to:

Enhance our client services and broaden our capabilities; Gain greater technical knowledge in specialty areas; Utilize governmental accounting specialists; Access the most up-to-date technical information; Participate in the latest training programs; and Provide our clients with key business contacts throughout the U.S.

This arrangement within the Alliance is very similar to the arrangement that exists between national firms with multiple offices. We do not anticipate utilizing the Alliance for your engagement team. However, BDO and the Alliance firms are available as technical resources or for any future specialized needs you may have. BDO (www.bdo.com), the fifth largest accounting network in the world, serves clients through 41 offices and more than 400 independent Alliance firm locations nationwide. As the U.S. independent member firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,100 offices in 135 countries. BDO’s commitment to the not-for-profit industry led to the development of the Institute of Nonprofit Excellence (the Institute) in Washington, D.C. The Institute develops strategies for tax-exempt organizations and disseminates information pertaining to accounting and business management. BDO provides information on impending changes such as pension administration and new GASB and FASB implementation. With over 2,000 clients in the government and not-for-profit industries, BDO is one of the industry leaders in providing OMB Circular A-133 audits to individual organizations that have corporate Federal funding in excess of $10 million. BMSS can utilize BDO and our Alliance partners to assist in complex transactions or draw upon our close contacts at regulatory institutions or professional service organizations to provide you with quick responses when timing is critical. We can provide you access to BDO’s Acsense, a complimentary series designed to assist committee members and financial executives in keeping up-to-date on the latest corporate governance and financial reporting developments through webinars and self-study courses. The BDO Seidman Alliance gives you the resources, coverage, and experience of a national accounting firm, while we provide you with exceptional local service and rates.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: Your BMSS Team The BMSS Not-For-Profit & Governmental Practice Group provides you with qualified, knowledgeable auditors who can quickly adapt to meet your changing needs. Because of our extensive experience, we are well-versed on various issues you may encounter. BMSS takes the lead in research and in educating our clients by providing seminars, newsletters and articles. As a result, we are available to keep you updated on legislative changes, recent cases and issues both from a technical and practical viewpoint. Commitment to Staff Development and Continuity

BMSS devotes significant resources to train and provide our team with the necessary Continuing Professional Education (CPE) to stay on top of changes that affect our profession and the areas in which they practice. Because of our uniquely high level of employee satisfaction, we have extremely low turnover. We utilize our low turnover to strive to dedicate the same team to serve you each year to maximize our experience with your facility, staff and procedures. Staff continuity on year-to-year engagements allows us to create strong, long-term client relationships and provide efficient and effective accounting solutions while reducing costs to our clients. Your BMSS team members participate in the following CPE related to not-for-profit and governmental accounting and auditing:

Accounting & Auditing Update Audit Documentation Auditing Non-Profits: Tips & Traps Becoming a Better Auditor Conducting Governmental Audits under

GAAS, GAGAS and Single Audit Fieldwork & Planning Logistics

Focus on Fraud Fraud Risk Assessment Non-Profit Accounting & Auditing Non-Profit Accounting & Reporting from

Start to Finish Obtaining and Evaluating Audit Evidence

Your BMSS team members participate in these related organizations:

AICPA Center for Audit Quality AICPA Governmental Audit Quality Center Alabama Association of Nonprofits BDO Seidman Alliance Governmental Industry Group BDO Seidman Alliance Nonprofit Industry Group Government Finance Officers Association of Alabama

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: Your BMSS Team After carefully reviewing your needs, we identified the professionals to lead your BMSS audit team. The professionals selected are all licensed to practice as a CPA in Alabama, have established track records with governmental clients, strong technical abilities and outstanding leadership and communication skills. John Shank, CPA, CVA Founding Shareholder

As audit engagement shareholder, John Shank will lead the team in providing you with quality services and ensure that you receive the right level of resources. He will be the primary decision maker on key audit issues.

John brings over 26 years of experience to you and is one of the shareholders who founded BMSS in 1991. He leads our Not-For-Profit & Governmental Practice Group and serves as lead shareholder on over 50 BMSS audit clients.

He is the shareholder for the City of Moody, Southeastern Bible College and Talladega Randolph Clay Child Care Corporation and has previously worked on the audits for the City of Leeds, City of Montgomery, City of Enterprise, City of Autaugaville and the Town of Indian Springs.

As a Certified Valuation Analyst (CVA), John performs business valuations during the purchase or sale of a business, succession planning and estate taxes.

John is Past Chair of the Alabama Society of CPAs, is a trustee with the Birmingham Business Alliance and is on the board of the Birmingham Venture Club. He has been awarded "Who's Who in Law and Accounting" and "Top 40 Under 40" by the Birmingham Business Journal.

B.A. Accounting with Honors Huntingdon College

Derrel G. Curry, CPA Concurring Audit Shareholder

Derrel Curry will serve as the concurring shareholder and will be responsible for the independent quality review and for making certain that the technical audit matters have been properly addressed by the engagement team.

Derrel has 29 years of experience providing auditing services as well as accounting and consulting on financial reporting and operational issues, with a focus on governmental and not-for-profit clients.

He serves as shareholder for the Bessemer Airport Authority and Shelby County Community Corrections and has worked on special projects for the City of Homewood.

Derrel serves as the BMSS Accounting & Auditing Quality Control Shareholder and leads a monthly Accounting & Auditing Update for all BMSS auditors. He has served numerous clients who are of the size and complexity of the City of Anniston throughout his career. Prior to joining BMSS, Derrel worked with Ernst & Young, LLP and was responsible for the audits of significant clients.

He serves on the Accounting Advisory Boards for Samford University, UAB and Troy University and was inducted into the Accounting Hall of Fame at Troy University.

B.S. Accounting with Honors University of Alabama

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: Your BMSS Team Patrick Bowman, CPA Senior Manager, Engagement Leader

Patrick Bowman will serve as the engagement leader in providing guidance to the team and coordinating resources. He will perform reviews of the work performed and will be a key component of the engagement planning.

Patrick has 13 years of public accounting experience and joined BMSS in 2001. He works with governmental and not-for-profit clients providing accounting & auditing services, budgeting and forecasting and internal control reviews and serves as engagement leader on the majority of our governmental and not-for-profit clients.

He is the engagement leader for the Bessemer Airport Authority, City of Moody, Shelby County Community Corrections, Southeastern Bible College and Talladega Randolph Clay Child Care Corporation, the A-133 audits for Family Connection, Inc. and Habitat for Humanity of Birmingham and previously worked with the City of Leeds.

Patrick is responsible for overseeing CPE efforts for BMSS auditors and monitoring updates in accounting techniques and pronouncements.

He serves on the Board of Directors of the Alabama Association of Nonprofits and is a member of the Government Finance Officers Association of Alabama.

B.A. and Master’s in Accounting Troy University

Stephen N. Von Hagel, CPA Audit Manager

Stephen Von Hagel has been providing accounting services for 8 years, with a focus on audits, single audits and internal control documentation for government agencies. He manages the audits for the City of Moody, Shelby County Community Corrections and Southeastern Bible College and the A-133 audits for Family Connection, Inc. and Habitat for Humanity of Birmingham.

He serves on his church finance council, leads the BMSS basketball team and is a member of the ASCPA Leadership Program.

B.S. Commerce and Business Administration Master of Accountancy University of Alabama Ashley Caldwell, CPA Senior Accountant

Ashley Caldwell began her accounting career as an intern at BMSS in 2007. Ashley has 5 years of experience providing accounting and auditing services with a focus on not-for-profit and governmental clients. She works on the audits for the City of Moody and the Birmingham Business Alliance, the Single Audit for Entegreat, Inc. and has worked on the audit for the City of Leeds.

Ashley is active in BMSS employee recruiting and training new employees on audit practices, standards and software.

B.S. Accounting Master of Accountancy University of Alabama

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Qualifications: References of Similar Clients Bessemer Airport Authority Financial statement compilation client since 2007 Shareholder: Derrel Curry Engagement Leader: Patrick Bowman Supervisor: Marcie Morris Total Hours: 30 Clinton Harris, (205) 424-7234 City of Moody & GUSC Board Audit client since 1991 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Total Hours: 302 Patsy Beard, (205) 640-2503 Shelby County Community Corrections Audit client since 2007 Shareholder: Derrel Curry Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 150 David Horn, (205) 669-8965

Southeastern Bible College Audit and A-133 Audit client since 2004 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 205 Paul Willard, (205) 970-9206 Talladega Clay Randolph Child Care Corporation Audit, A-133 Audit & 401k Audit client since 2008 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 210 Angela Thomas, (256) 362-3852

Client Testimonials

“We have been a very satisfied client of BMSS since 2000. We have found the staff to be knowledgeable and professional in all aspects.” “Our financial statements are prepared on a timely basis along with various other reports completed during the year. More importantly is the character and integrity of BMSS who has earned the trust and respect of our senior management.” “The different ideas presented to us by BMSS have benefited us more than we could have ever imagined. Their promptness is impeccable and something we were not used to in the past with another firm.” “I have been very impressed with the quality of service and personnel and their dedication to client service. I highly recommend any of the numerous services provided by BMSS.” “From an accounting firm, I expect three things: Independence from management, Value, & Timeliness. I believe that BMSS is a strong group of auditors and tax professionals who provide a good value for the money. I rely on their judgment as a check and balance. I’ve worked with them since 1999.”

Client Testimonials:

Knowledgeable and professional

Very timely

Character & integrity

Earned trust and respect of senior management

Impeccable promptness

Benefitted from different ideas presented

Dedicated to client service

Good value

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan Seamless Transition

Our team members are experienced with the transition of new clients and can readily resolve problems that may occur during this change. We devote the highest priority to the careful and thoughtful planning required to help ensure a smooth audit transition to BMSS with the least possible disruption to your personnel and operations. BMSS has extensive, first-hand experience in transitioning services from various accounting firms. We view the transition as an opportunity to provide a fresh perspective of your accounting systems, controls and operations and are confident we have the experience and resources required to complete the transition in a timely, efficient and seamless manner. Service, Responsiveness and Open Communication

The City of Anniston will continue to experience a superior level of service and responsiveness. As a BMSS client, you will note:

You will be treated with integrity and professionalism. You will work with knowledgeable, personable and experienced staff. Our client-focused approach centers on hands-on involvement from experienced,

knowledgeable accountants who will invest the time required to understand your operations, people and needs.

We encourage regular meetings to ensure we contribute meaningful ideas, strategies and solutions to define and prioritize timetables and designate responsibility to proper individuals.

We promptly address issues and report back to you. We welcome open communication, input and feedback. Our goal is to exceed your expectations of a CPA firm.

Efficient & Effective Delivery of Your Audit Reports

Efficient and effective delivery of successful audit engagements at the best value to the City of Anniston depends on certain factors that we can provide including:

Staff continuity on your engagements; Significant technical experience; Advanced approach to utilizing state-of-the-art technology; Extensive and timely planning; Close coordination with you; Quality control; and Emphasis on developing quality recommendations to you regarding financial and

operational matters.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan (continued) Commitment to Open Communication

BMSS believes in the importance of open communication and we will make ourselves available to you to address issues, questions and to provide the appropriate guidance. Your BMSS team is available to meet with you throughout the year, not just at the start or conclusion of the audit engagement. Our policy is to respond to voicemail and email within 24 hours. Even if we do not have an answer to your question, we will respond to give you an estimated time frame. We understand the importance of communicating relevant information to you on a timely basis. Because your staff has schedules and other matters to deal with and you need to conduct business with minimal disruptions, it is our policy to schedule meetings in advance to keep management informed of the progress. Your BMSS team will conduct pre-audit meetings with you and pertinent staff, management or committee members. This meeting will be early in the planning phase of the engagement, to discuss and develop a detailed listing of information requested, establish timetables, designate responsibility to proper individuals and discuss other matters necessary. By identifying and resolving issues on a continuing basis, we help address these matters before they possibly develop into problems, surprises or delays. Progress meetings will be scheduled at mutually convenient times. Our quality control process will be accomplished without causing surprises as our quality control review members are involved throughout the process. Working closely with your staff allows us to eliminate duplication of effort, create a more efficient and effective approach to accounting and to strive to maximize your investment in external services. Additionally, our goals are congruent with yours - fair and meaningful financial statements prepared under a strong system of internal control by honest management. Maintaining open communications ensures continual and effective challenge of the audit approach, which we believe is beneficial in driving efficiency from the top down. We want you to feel comfortable communicating with everyone on your team. Continuous feedback is encouraged and input is always welcome.

Communication:

Ongoing access to your BMSS team

Timely basis

Pre-audit meeting

Progress conferences

Keep management informed of progress

Identify and resolve issues on continuing basis

Continuous feedback

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan (continued) Audit Methodology

BMSS utilizes a five-step approach to provide efficient, effective and quality audit services:

Extensive planning; On-going open communication; Close coordination with you, your staff and management; State-of-the-art techniques utilizing advanced technology; and Timely, appropriate recommendations and management letters.

Our approach is a risk-based combination of substantive and compliance auditing using the most widely accepted electronic auditing guidance in the U.S. This fosters an active understanding of your strategic direction, particular risks, control strengths and weaknesses and other significant matters pertaining to the audit cycle, which is critical to audit quality. BMSS follows a “top-down, risk-based” approach to assess the entity level risks and controls in order to assess the overall general risks and controls (including IT general controls) and to identify specific financial reporting risks. The information gathering analysis performed by the audit team establishes a risk assessment for each significant financial statement area. This risk assessment also takes into account the general risks and controls (including IT general controls) identified in the analysis. By utilizing our fieldwork when we are at your facility learning more about your organization, together with our understanding of the governmental industry, we can provide insightful and constructive suggestions that can result in improved operations, as well as improved accounting procedures and controls. Our five-step approach allows us to deliver an audit tailored to the specific and unique facts and circumstances surrounding the City of Anniston. Overall Supervision

To maximize the effectiveness of our services, we exercise a high degree of oversight, supervision and shareholder involvement. Planning is performed by everyone on the engagement including the shareholder. The engagement leader exercises the day-to-day supervision and oversight and keeps the shareholder updated during the engagement and will be communicating with you regarding any issues that arise.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan (continued) Audit Fieldwork

Fieldwork will be scheduled to meet your reporting deadlines. To ensure the most cost effective and efficient audit for our clients, BMSS has made a significant commitment to utilizing state-of-the-art technology in the audit process. Our investment in technology allows us to focus on providing quality technical services and add value to our clients. ProSystem Engagement electronically interfaces with client general ledger systems for preparation of trial balances and financial statements. Our automated workflow management system allows staff to know the status of every project and allows us to easily provide clients with project updates. With our employees having secure remote connections, they can quickly access data and software from their current location. Paperless and electronic documentation, along with online bank confirmations, saves time and costs. (Please see additional information about how BMSS provides value through our advanced technology on page 21.) Information Requested

Your BMSS audit team will request internal control narratives be provided to us by your accounting staff and we will also provide internal control questionnaires to be completed by you and your accounting staff. We will interview appropriate individuals for fraud considerations and obtain an understanding of the internal control system. We will test payroll and insure that individuals in the organization's employment are being paid an appropriate amount. Using a variety of analytical procedures, we will analytically test both balance sheet and income statement accounts. We use a variety of sampling techniques to perform detail testing on account balances and will also use sampling to test processes and procedures. We will inspect contracts, agreements, funding source agreements, and any other information that affects the revenues and expenses. We will research single audit compliance requirements and design our tests appropriately in order to issue the A-133 reports and will select the appropriate sample sizes in order to test those requirements. We will test the revenues of the organization by examining the original documentation for each major category of revenue. To minimize disruption of your staff, we provide a detailed Client Assistance Letter in advance that contains information we will need to perform our procedures so you can have time to gather requested information. We have designed our audit fees with the expectation that most of the information requested in the Client Assistance Letter will be available when we arrive for fieldwork. If needed, we can discuss all the items with you in the letter.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan (continued) Audit Report Preparation and Delivery

We do not anticipate any potential problems. If we become aware of any irregularities and illegal acts, we will report those in writing to the Finance Director. Your BMSS team will meet with management at an exit conference at the end of fieldwork to review drafts of the financial statements and management letter. Once management has had a chance to thoroughly review the financial statement drafts and BMSS has performed its quality control process, we will prepare the annual financial statements with all required note disclosures, including all statements and supplemental information required, and express an opinion on the fair representation of the financial statements in conformity with GAAP. We will issue a management letter to make recommendations related to financial statements, internal controls, management controls, operations, accounting systems, compliance issues including material weaknesses and significant deficiencies and identifying possible noncompliance with legal provisions as well as any other areas in which we may have seen any opportunities for improvement. We will prepare a Single Audit report on the financial statements, internal controls and compliance in accordance with GAS and OMB A-133. At completion, BMSS will provide the requested 10 quantities of the bound audit reports, including management letters, as well as making the high quality PDF file reports available to you in electronic format via our secure client portal. If requested, BMSS will make a formal presentation of the report to the Board.

Workpaper Review & Access

We will be happy to make our workpapers available as requested. Because our audit workpapers are maintained in a paperless environment, the easiest way for someone to review our workpapers is electronically. We are glad to provide hard copies of workpapers requested. Workpapers will be retained for a minimum of five years from the date of the written audit.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Solutions: Approach & Plan (continued) Use of Advanced Technology

At BMSS, we are an early adopter of industry-leading software, processes and programs. We place significance on utilizing state-of-the-art technology including a high-speed fiber network in our office and VoIP system for faster and more efficient communications. An automated workflow management system allows our staff to know the exact status of every project and allows us to easily provide clients with project updates. With our employees having secure remote connections, they can quickly access data and software from their current location. Paperless and electronic documentation, along with online bank confirmations, saves time and costs. BMSS has used paperless documentation and processing since 2003 and received the Practical Accountant “Practice Innovation Award” for our early, successful paperless adoption. We have helped clients implement paperless processes in their offices as well. Robust online research databases and industry-leading software allow us to handle more complex and technical accounting engagements. Our sister company, Abacus IT Solutions, is available for data mining, reporting consultation and business intelligence, as well as consulting on your current hardware, software and IT infrastructure. Your private data is critical to protect. Laptops are secured with two-factor identification password protection. Secure networking of our computers and servers allows us to share information without having to use higher risk removable storage devices. We destroy any electronic or hard copy information we obtain other than what is necessary to maintain. BMSS offers a secure client portal which you can access 24/7 at no additional cost. In your portal, you can access electronic copies going back 10 years (if applicable) and upload your own files for secure recordkeeping. Our investment in technology allows us to focus on providing quality technical services and adding value to our clients.

Use of Advanced Technology:

Early adopter of industry-leading software, processes, and programs

High-speed fiber network

VoIP

Workflow management system for quick status updates

Paperless documentation

Paperless processing

Online bank confirmations

Robust online research databases

Commitment to maintaining data security & privacy

Secure online client portal with free access 24/7

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

What Makes BMSS Different & Why Should You Select Us? Top 10 Reasons Why BMSS is Your Best Decision:

Service & Responsiveness 1. Commitment to your success and helping you achieve your needs and goals 2. Staff continuity on your BMSS engagement team from year to year 3. On-going, open communication and close coordination with your staff

Efficient & Effective 4. Forward-thinking processes utilizing advanced technology 5. Timely input regarding operational and financial issues 6. Client retention and satisfaction is a testament to our effectiveness and results

Depth of Experience & Understanding of Your Needs 7. Strength and depth of not-for-profit and governmental industry knowledge 8. Significant technical auditing skills and experience 9. Quality and quantity of similar clients

Value 10. Value of services received based on notable factors listed above

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Professional Services Proposal City of Anniston, Alabama

December 7, 2012

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Letter of Transmittal .........................................................................................................................................1 Section One Profile of Jackson Thornton ...........................................................................................................................2 - 3 Section Two Qualifications and Experience .....................................................................................................................3 - 5 Section Three Scope of Services and Proposed Project Schedule .................................................................................5 - 7 Section Four Fees and Compensation ..............................................................................................................................7 - 9 Section Five Summary ..........................................................................................................................................................9 Attachments References and Similar Engagements .................................................................................................... Attachment A Peer Review Report .................................................................................................................................... Attachment B

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LETTER OF TRANSMITTAL City of Anniston Anniston, Alabama Please accept this proposal for audit services relating to the City of Anniston, Alabama’s Financial and Single Audit Report for the years ending September 30, 2012, 2013, and 2014. These engagements will be conducted out of the Montgomery, Alabama office located at 200 Commerce Street. Our team of municipal auditors will include the following Principals of the Firm:

Diane L. Steinhilber, (334) 351-0436 Chris A. Neuenschwander, (334) 240-3644

Additional staffing may be utilized from our team of municipality auditors as listed in Section Two. Diane L. Steinhilber is your primary contact for this proposal.

JACKSON THORNTON & CO., P.C. Diane L. Steinhilber, CPA Principal

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Mission Statement We at Jackson Thornton provide assurance, advisory, consulting, and tax services to a wide range of individuals, business, and industry. Our service is an integration of people, experience, processes, and technologies which are constantly evolving with the needs of our clients. Our foundation is integrity and our standard is accountability. We commit our resources, our intelligence, and strength believing our work makes a difference. Jackson Thornton was founded in 1919. Our regional Firm has 33 principals and employs more than 165 professional staff and support personnel in five offices in Alabama and one office in central Tennessee. The Montgomery office will service the City’s account. Our professional staff includes 36 accountants qualified for governmental audit engagements. We have nine dedicated professionals in the Jackson Thornton Governmental work group. This specialization provides auditors and consultants who are knowledgeable of your business. Our specialization also gives you a ready resource for questions and concerns that may come up during the year. See Section Two for a listing of professional staff to be assigned to this engagement on a full–time basis. Jackson Thornton provides auditing, accounting, internal control evaluation services, and other industry-specific business consulting to organizations like the City for over 50 years. Our industry concentration allows us to stay abreast of the changes in the industry through continuing education and our work with multiple industry associations like the Alabama League of

Municipalities, Government Finance Officers Association of Alabama, and the Association of Government Accountants. Although we are proud to be locally grounded, we are equally proud to have been chosen by the national accounting firm of McGladrey to be their Alliance affiliate in central and south Alabama. McGladrey is the sixth largest accounting and consulting firm in the world. As a McGladrey Alliance member, we have access to all resources and services McGladrey provides in its own offices. Jackson Thornton & Co., P.C., through the McGladrey Alliance, has an expanded menu of specialized services and expertise it can offer. Our professionals work with clients in the general services areas related to accounting, auditing, taxation, systems design, and IT evaluations. We have specialized departments that offer a variety of industry-specific professional business consulting services. Our objectives are to provide for each client the highest quality of professional service at a reasonable price and on a timely basis. In order to achieve these objectives, each business client is assigned to a team of professionals that matches the needs of that client. This team approach also provides continuity for the ongoing needs of that client by providing more than one professional who is familiar with each client. License and Professional Memberships The Firm is licensed for public practice as a certified public accounting firm in the State of Alabama. Our license number issued by the Alabama State Board of Public Accountancy is 496. The Firm is in good standing with the Alabama State Board of Public Accountancy. Jackson Thornton is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants.

1 Profile of Jackson Thornton

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Independence Jackson Thornton is independent of the City of Anniston, Alabama (primary government) as defined by Governmental Auditing Standards.

2 Qualifications and Experience

Should we be selected to assist the City, our proposed team for this engagement would utilize individuals with experience in municipal accounting, auditing, and management consulting functions. These professionals include two Principals with combined years of experience in working with municipalities that exceeds 40 years. This team's expertise, combined with Jackson Thornton's commitment to quality and timely delivery of services, will ensure that your engagement objectives are attained. Similar Engagements with Other Municipalities We offer a schedule of similar municipal engagements as a demonstration of our experience. Please see Attachment A for current references. A brief resume of members of our team that will be assigned to your engagement is as follows: Diane L. Steinhilber, CPA, Principal, has 29 years of experience with Jackson Thornton & Co., P.C., serving governmental clients throughout her tenure. She has participated in extensive formal continuing professional education related to governmental organizations. Diane has provided financial accounting, audit, and consulting services to numerous governmental entities. In addition, she has served as a consultant to underwriters in public financings for various municipalities throughout the State of Alabama. She is also a member of the American Institute of

Certified Public Accountants and the Alabama Society of Certified Public Accountants. Diane holds a Bachelor's Degree in Accounting from Auburn University and is a certified public accountant licensed in Alabama. Chris A. Neuenschwander, CPA, CFE, Principal, has over 15 years of experience in public accounting and specializes in services to the Firm’s governmental and not for profit clients. He will be the Principal responsible for services to the City. Chris has served governmental clients for the past 10 years. He has participated in extensive formal continuing professional education related to governmental organizations. In addition, he served as a national instructor of the risk based auditing approach for McGladrey and Pullen, LLP. He is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, the Association of Certified Fraud Examiners, the Association of Government Accountants, and the Government Finance Officers Association of Alabama. Chris holds a Bachelors Degree in Accounting from Harding University. He is a certified fraud examiner and a certified public accountant licensed in Alabama. Joseph A. Vickery, CPA, Manager, has over 10 years of audit and accounting experience, during which he has served governmental clients. He will be the manager responsible for services to the City. He has participated in numerous continuing education programs related to governmental entities. His area of specialization is audits of not for profit and governmental organizations. He is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants. Joseph holds a Bachelors and Masters Degree in Accounting from Auburn University and is a certified public accountant licensed in Alabama.

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Cassie M. Plunkett, CPA, Senior Associate, has four years of audit and accounting experience serving governmental clients. She has participated in extensive formal continuing professional education related to governmental organizations. Her area of specialization is audits of governmental and not for profit entities. She will provide Single Audit services to the City. She is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants. Cassie holds a Bachelors Degree in Accounting from Auburn University Montgomery and is a certified public accountant licensed in Alabama. For your reference, we have provided a listing of individuals within our municipal team who are available for consultation: Lucinda S. Bollinger, CPA, Principal, has over 30 years of experience in public accounting and specializes in services to the Firm’s not for profit and governmental clients. Lucinda has served governmental clients for the past 25 years. She will be the principal responsible for the technical review of the engagement in accordance with the Firm's quality control policies and procedures. She has participated in extensive formal continuing professional education related to governmental organizations. She serves as a Firm Accounting and Auditing Specialist. She is the former chair of the Governmental Accounting and Auditing Forum and the Alabama State Board of Public Accountancy. She is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, and the Association of Government Accountants. Lucinda holds a Bachelors Degree in Accounting from Huntingdon College and is a certified public accountant licensed in Alabama. Gina T. Williams, CPA, CGFM, Senior Manager, has over 18 years of audit and accounting experience, during which she has served governmental clients for the past seven years.

She has participated in extensive formal continuing professional education related to governmental organizations. Her area of specialization is audits of state and local government municipalities. She is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, and the Government Finance Officers Association of Alabama. She is the current year chair of the Government Accounting and Auditing Forum. Gina holds a Bachelors Degree in Accounting from Auburn University Montgomery. She is a Certified Governmental Financial Manager (CGFM). She is a certified public accountant licensed in Alabama. Engagement Team The aforementioned members are independent of the City of Anniston, Alabama as defined by Governmental Auditing Standards. We will notify the City should key personnel assigned to the engagement change. We would expect to provide two additional staff members with one to five years of experience, in addition to the aforementioned team. Continuing Professional Education Requirements Jackson Thornton requires all professionals assigned to governmental engagements to meet the CPE requirements as indicated by the Government Auditing Standards. This requires that they complete a minimum of 24 hours of CPE related to governmental auditing every two years. Our municipal group employees have all met this requirement and have done so for the preceding three years. Peer Review Program As a member of the American Institute of Certified Public Accountants, the Firm is subject to independent peer review of its accounting and audit practice every three years. This review

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includes an assessment of our system of quality controls. Please refer to Attachment B for a copy of our most recent peer review report. The report states that the Firm received an unqualified opinion on our accounting and auditing practice’s quality control system. No letter of comments was issued.

3 Scope of Services and Proposed Project Schedule

Description of Services The audits will be conducted in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America and The Single Audit Act of 1996 with Amendments and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (when applicable). An audit of financial statements includes obtaining an understanding of the entity and its environment, including its internal control, sufficient to assess the risk of material misstatement of the financial statements whether due to error or fraud and to design the nature, timing, and extent of further audit procedures. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. As a result, an audit is not designed to detect errors or fraud that is immaterial to the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

Upon completion of our documentation and review of internal controls, which are performed to gain an understanding of the entity and its environment and to design our audit procedures, we will meet with the Director of Finance to report on the results of the internal control review and clearly identify each weakness noted. Following the meeting, we will provide a written memorandum which summarizes the meeting to the Finance Director within ten working days. Should any other material internal control weaknesses be noted during the audit process, these will also be reported to the Finance Director within ten working days of the date of the discovery of the internal control weakness. At the conclusion of our audits, we will issue the following reports:

• Draft financial statements and notes to the financial statements including all six discreetly-presented component units and the one blended component unit.

• Independent auditor’s report.

• Independent auditor’s report on compliance with the requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133.

• Independent auditor’s report on internal

control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards.

The independent auditors’ reports would provide opinions on the fairness of the financial statement presentations in conformity with accounting principles generally accepted in the United States of America. Our reports will conform to AICPA Audit Guides, Government Accounting Standards Board reporting requirements, and the requirements of The Single Audit Act of 1996 with

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Amendments and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (when applicable). In addition to the reports included with the audited financial statements, we would issue written communications required by professional standards (SAS 115 letter) or that would provide suggestions for management’s consideration. Such communications would include auditor’s comments, observations, and recommendations on internal accounting controls, operational controls, policies, and procedures, planning and budgeting considerations, or any other areas where improvements might result in savings, efficiencies, or strengthened internal controls. These communications would also include a discussion of deficiencies noted that were not considered significant enough to be reportable under the applicable auditing standards. We would schedule an exit conference with management at the conclusion of the audit to discuss any issues related to the audit. If circumstances dictated the need for a conference regarding issues related to the audit prior to an audit’s conclusion, we would schedule such a conference. We will arrange for the presentation of the audit and related reports to the City Council. Also, we would issue letters to the Mayor and members of the City Council (SAS 114 letter) about significant matters related to the conduct of the annual audit so that they could appropriately discharge their oversight responsibility, and that we comply with our professional responsibilities to the City Council. This information would include significant audit adjustments, disagreements with management, and any difficulties encountered in performing the audits. A tentative copy of the letter communicating this information would be discussed with management during the exit conference at the conclusion of the audit.

Audit Approach Jackson Thornton applies the risk-based auditing approach for financial statement audits. In developing an audit plan, our engagement team performs risk assessment procedures to gather information and gain an understanding of the entity and its environment. We gain that understanding through inquiries, observation, inspection, and analytical procedures. The purpose of obtaining that understanding is to identify and assess the risk of material misstatement, which includes both control risk and inherent risk, and design and perform further audit procedures responsive to the assessed risk. Our audit emphasis will be placed on areas that are significant in both volume of transactions and dollars. We feel that in addition to the substantive tests that we perform in an audit, heavy emphasis will be placed on analytical review procedures to help corroborate financial statement balances. Jackson Thornton reviews and assesses information systems used in the client’s financial reporting and compliance functions in sufficient depth to plan and perform the audit. Jackson Thornton utilizes a paperless document management system as well as data analysis software that enables the engagement team to read, display, analyze, manipulate, sample, or extract data files from almost any source, contributing to an efficient and effective audit and review process. Timing of Services We agree to the required milestone dates for completion of the reports required by you assuming there are no delays caused by City staff. Our ability to meet these deadlines is dependent on the City’s timely assistance. Provided there are no internal delays, Jackson Thornton would deliver completed reports by March 31 to meet the continuing disclosure covenants.

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Work Plan and Client Assistance As part of the detailed work plan that will describe the individual tasks to be performed and the relative scheduling of those tasks, we will provide the City a list of confirmations, anticipated schedules, reports, and detailed support that will be needed to efficiently perform our audit procedures. We will provide this list timely to allow your staff to compile the information before the field work of the audit begins. We will arrange a pre-fieldwork check of your records to ensure that the records are ready for audit and give your staff time to correct or compile any additional information.

4 Fees and Compensation

We recognize that engaging an accounting firm is an important investment. You can expect this investment with Jackson Thornton to add value to your business. Our goal is to provide high quality, reliable service at reasonable fees. We have provided our estimated fees based on providing audit services. Hourly Rate by Staff Classification Our fee proposal is based on hourly rates, determined by each professional’s level of experience. Our standard billing rates are as follows:

HOURLY RATE Principal $250 Manager 170 Senior associate 120 Associate 105

Our proposed all-inclusive, maximum fees are as follows:

SERVICE FEES GASB 34 Compliant Financial Statement and Single Audit of the City September 30, 2012 $63,000 September 30, 2013 $58,000 September 30, 2014 $58,000 Exit Conference September 30, 2012 no additional charge September 30, 2013 no additional charge September 30, 2014 no additional charge City Council Presentation September 30, 2012 no additional charge September 30, 2013 no additional charge September 30, 2014 no additional charge Out-of-Pocket Costs September 30, 2012 no additional charge September 30, 2013 no additional charge September 30, 2014 no additional charge With any new engagement, there are fees associated with first time audit procedures, developing an understanding of the City’s business, and the initial planning process. We have included the first time fees in the 2012 amount. Frequency and Timing of the Billing Process Our fees for these services will be billed monthly as the work progresses. Such bills are payable on presentation and a late charge of 1½% per month will be imposed for any portion of the billed amount not paid within 30 days of the bill date. We reserve the right to suspend our work and/or to terminate our engagement if any bill is

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Professional Services Proposal

8

not paid in full within 30 days of the bill date. In the event of suspension of our work or termination of our engagement, such work shall not be resumed and such engagement shall not be reinstated, as the case may be, until the account balance and all late charges are paid in full. Assumptions The proposal assumes the City’s accounting staff will be available to answer inquiries and provide additional information during the engagements. The proposal is based to a large extent on the quality, timeliness, and accuracy of the workpapers that the City’s staff prepares. The proposal assumes the following staff participation: • Providing a closed trial balance with

supporting ledgers or statements in an electronic format.

• Preparation of required adjustments

and account groupings for financial presentation in compliance with generally accepted accounting principles.

• Providing analysis of transactions and

accounts, including reconciliations in an electronic format.

• Providing assistance such as pulling

selected invoices and receipts. • Preparing confirmation requests.

• Providing copies of significant contracts

and agreements. • Providing in writing the City’s policies

and procedures related to the accounting system.

• Providing copies of City documents and other documents of ongoing matters in an electronic format.

• Providing the Schedule of Expenditures

of Federal Awards in electronic format.

• Providing information needed to update the City’s notes to the basic financial statements.

• Providing support of the City’s analysis

and implementation of GASB standards as the standards become effective.

• Overseeing the draft of the financial

statements and trial balance adjustments.

Our fees are based on hourly rates, determined by each professional’s level of experience and actual time spent on the engagement. Significant changes in the nature and scope will result in fee increases. This proposal also assumes there will be no:

• Significant change in the City’s operations, or the accounting systems.

• Significant changes in the regulatory, audit, or accounting standards.

• Significant changes in key financial personnel positions.

• More than five significant audit adjusting journal entries as a result of our procedures.

• More than two major programs and no compliance findings.

• Change in the reporting unit.

• Maintenance of the depreciation schedule by us.

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9

• Other factors that would significantly

affect the scope of the audits.

Our proposal does not include accounting assistance, such as the calculation of accounts receivable, the estimated allowance for uncollectible accounts receivable, deferred charges and debt issue costs, capitalizeable capital assets, accounts payable and deferred revenue, which is outside the scope of the financial statement audit and could impair independence. Brief oral consultations on audit and accounting matters are included in the proposed fees. Because the nature and extent of periodic technical questions cannot be anticipated, we choose not to include those when we are proposing a fee for audit services. Special projects and consultations requiring research and preparation of written correspondence can be priced on a project basis or at our hourly rates, depending on your needs. We will clearly communicate a fee expectation for non-routine services prior to beginning our work. We believe that our fee structure is competitive and appropriate. We do, however, recognize the economics of a competitive proposal process. If fees become the determining factor in your decision process, we request an opportunity to discuss any significant difference in fees with you prior to your final decision. Ready for the Future Jackson Thornton assists many municipalities with their participation in the Certificate of Achievement for Excellence in Financial Reporting Program (CAFR Program) of the Government Finance Officers Association. We would be happy to discuss with you how to participate in this program and take your financial reporting to the next level.

5 Summary

We appreciate the opportunity to present this proposal. We would be happy to meet with you and/or the Mayor to discuss the proposed services. Please call Diane Steinhilber at (334) 351-0436 if you have any questions or need any additional information. Statement of Confidentiality The description of services offered by Jackson Thornton is designed as a response to the request of the City. We respectfully request that information in this proposal not be disclosed outside the City and not be duplicated, used, or disclosed in whole or in part, for any purpose other than for the City to evaluate our proposal. Engagement Acceptance Auditing standards require that an auditor communicate with the predecessor auditor before accepting an engagement. Thus, the awarding of any audit engagements will be subject to our communication with the predecessor auditor and our evaluation of such communications. The proposal assumes access to the prior auditor and their workpapers for the year ended September 30, 2011.

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Professional Services Proposal

ATTACHMENT A

REFERENCES AND SIMILAR ENGAGEMENTS

Last Fiscal Engagement Engagement Year Scope of Work for Most Engagement Phone

Client Principal Manager Engagement Previous Engagement Hours Contact Number

City of Montgomery Neuenschwander Vickery 2011 Financial Statement Audit; Single Audit 2500 Lloyd Faulkner (334) 241-2025

City of Wetumpka Neuenschwander Vickery 2012 Financial Statement Audit 410 Janice Whorton (334) 567-5147

City of Prattville and its component units Steinhilber Williams 2012 Financial Statement Audit; Single Audit 740 Doug Moseley (334) 358-3224

City of Millbrook Steinhilber Williams 2012 Financial Statement Audit; Single Audit 580 Mac Champion (334) 285-6428

Other Firm References:Wilkerson & Bryan, P.C. Mark Wilkerson (334) 265-1500Montgomery, Alabama

Bradley Arant Boult Cummings LLP Wendell Carley (334) 956-7700Montgomery, Alabama

Merchant Capital, LLC Reid Cavnar (334) 834-5100Montgomery, Alabama

Coosa Valley Electric Cooperative Burton Benkwith, CFO (256) 362-4180Talladega, Alabama

Hand Arendall, LLC Roger Bates (205) 324-4400Birmingham, Alabama

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rhb1
Typewritten Text
ATTACHMENT B
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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

Page 136: Anniston City Council - 12/18/12

December 6, 2012 Mr. Danny A. McCullars, Director of Finance The City of Anniston, Alabama 1128 Gurnee Avenue Anniston, AL 36201

Dear Mr. McCullars, Thank you very much for the opportunity to offer this proposal for audit services. Our mission statement reveals that we strive to serve clients who share our commitment to excellence, and to maintain a professional team that is trustworthy, self-motivated, and highly skilled. Our clients express the importance of experience, continuity, teamwork, communication, technology, timeliness and availability. We are committed to be ready and responsive to what you express is important to your organization. We will work closely with your management team and audit committee to be a business advisory partner and use our knowledge and experience to add value to the relationship. Devoting our resources and our energy, we will strive to identify ways to help the City of Anniston maximize operational and reporting efficiency. We believe this makes our firm different. We understand your priority is to obtain high quality audit services, on a timely basis, for a reasonable fee, and we are committed to those objectives. We believe our firm can meet those objectives due to:

1) Our experience obtained from serving Governmental entities for over 55 years. 2) The continuity of a highly skilled and trained professional team that will service your needs. 3) The overall staff size that we have to assure that work is completed timely. 4) Our risk-based audit approach applied to produce an effective and efficient audit. 5) Our desire to develop and maintain a mutually beneficial, long-term relationship with the City of

Anniston.

We have prepared a proposal which provides you with information needed to make a decision that is in the best interest of The City of Anniston. If you should need additional information or clarification of any part of our proposal, please give us a call.

Sincerely,

Melissa W. Motley, CPA

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

TABLE OF CONTENTS

Page

Our Firm ........................................................................................................................................................ 4 Our Experience .......................................................................................................................................... 5-6 Client Service Team Approach ..................................................................................................................... 7 Engagement Team ..................................................................................................................................... 8-9 Audit Process ............................................................................................................................................... 10 In Summary ................................................................................................................................................. 11 Our Value Based Fees ................................................................................................................................. 12 Attachment A: Proposed Fees .............................................................................................................. 13-14 Attachment B: Peer Review Report ........................................................................................................... 15 Statement of Confidentiality The information in this document is considered by Machen, McChesney & Chastain, LLP to be confidential. We request that it be treated as such and in turn, assure you that any and all information provided us to produce this proposal will be treated in the same fashion.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR FIRM

Machen, McChesney & Chastain, LLP is committed, as it has been since 1954, to providing high quality professional services. Our firm currently employs 32 individuals, 20 of which are Certified Public Accountants. Our governmental audit staff is comprised of 12 of these Certified Public Accountants. Serving as our clients' advocate and advisor, we have become a leading provider of accounting, audit, tax and consulting services in East Alabama. Machen, McChesney & Chastain, LLP consistently earns exemplary marks from the American Institute of Certified Public Accountants, the independent peer review body that evaluates all CPA firm's adherence to the our industry's prescribed standards. We believe our commitment to our clients, our professionals, and our community makes Machen, McChesney & Chastain, LLP different. Our commitment to you, our client, means being ready and responsive to your specialized needs and providing a consistent engagement team to help you grow and prosper. Our commitment to our professionals means maintaining a positive work environment and providing them with resources to perform and add value to you the client. Our commitment to serve others and give back to the community builds character and fosters relationships. We encourage our professionals to be involved in community and family activities. Our desire is to build a close working relationship with you. We want you to look at us as your partner, advocate and advisor. We will work to keep you abreast of your entity's progress, opportunities and/or weaknesses and make ourselves accessible and responsive to you throughout the year, not just during the audit. It is that type of relationship that we enjoy with hundreds of clients throughout the region and would very much like to have with the City of Anniston.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR EXPERIENCE

Machen, McChesney and Chastain, LLP (MM&C) has been providing high quality, governmental and not-for-profit audit services to various entities in Alabama for over fifty-five years. Our experience also includes a variety of additional services that complement audits of general-purpose financial statements, such as internal control studies, agreed-upon procedures related to the operation of municipal courts, and Single Audits. Some of the clients we have served are listed below as references: The City of Auburn, Alabama – audit of general purpose financial statements and Single Audit Finance Director – Penny Smith, (334) 501-7223 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 850 Auburn City Board of Education - audit of general purpose financial statements and Single

Audit Chief Financial Officer – Dennis Veronese, (334) 887-2100 Engagement partner – Mike Machen Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 450 The Water Works Board of the City of Auburn – audit of general purpose financial statements Finance Director – Penny Smith, (334) 501-7223 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 235 The Industrial Development Board of the City of Auburn – audit of general purpose financial

statements Secretary/Treasurer of IDB – Phillip Dunlap, (334) 501-7270 Engagement partner – Melissa Motley Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 250 The City of Sylacauga, Alabama – audit of primary government financial statements and Single

Audit City Clerk – Patricia Carden, (256) 401-2405 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 550

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR EXPERIENCE (Continued)

Parks and Recreation Board of the City of Sylacauga – audit of general purpose financial

statements Director – Jim Armstrong, (256) 249-8561 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 100 B.B. Comer Memorial Library – audit of general purpose financial statements Director – Shirley Spears, (256) 249-0961 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 75 Sylacauga City Board of Education – audit of general purpose financial statements and Single

Audit Chief Financial Officer – Lisa Dickerson, (256) 245-5256 Engagement partner – Mike Machen Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 400 Many of MM&C’s governmental and not-for-profit clients receive federal and state grant funds. In the past few years, Single Audits have been prepared for City of Auburn, Auburn Board of Education, City of Sylacauga, and Sylacauga Board of Education. Some of the programs audited are:

U.S. Department of Housing and Urban Development - Community Development Block Grants U.S. Department of Transportation - Highway Planning and Construction, Airport Improvement

Program U.S. Department of Education – Title I, VIB Special Education, IDEA U.S. Department of Agriculture – Child Nutrition Cluster U.S. Department of Justice – Edward Byrne Memorial Justice Assistance Grant Program U.S. Department of Energy – Energy Efficiency and Conservation Block Grant Program

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

CLIENT SERVICE TEAM APPROACH

We have assembled a team of professionals with governmental audit experience, and we give them the training and experience necessary to provide excellent service to our clients. MM&C partners and associates are actively involved with client services. We will work closely on a day-to-day basis with your management team to ensure that they are fully informed and benefit from our knowledge and experience regarding governmental entities. You can expect professional audit services from the MM&C team. In addition to MM&C’s extensive experience with its governmental audit clients, several members of the engagement team have a broad variety of experience with other industries. MM&C enjoys low personnel turnover and very high levels of employee satisfaction. Our reputation has enabled us to attract top-notch accounting professionals who want to be part of our team. For you, our client, it means you can depend on the same highly qualified accounting specialists to work with you day in and day out. What sets us apart from other firms is our audit approach, the MM&C team and our affiliation with BDO USA, LLP, which is one of the nation’s leading accounting and consulting firms. This alliance provides the “best of both worlds” approach, if needed, to meeting your needs by combining the personal touch of a local firm with the accessibility of the many services and resources that are available through a large international accounting and consulting firm such as BDO USA, LLP.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

ENGAGEMENT TEAM

The following members of our team would be assigned to serve the City of Anniston. Each member of the engagement team is registered as a certified public accountant in the State of Alabama and each has received all required continuing professional education in governmental accounting and auditing within the preceding two years. Melissa W. Motley, CPA – Engagement Partner Melissa has over 25 years of public accounting experience, and has been a partner with Machen, McChesney and Chastain, LLP since January 1997. As engagement partner, it is Melissa’s responsibility to oversee all facets of service to the City of Anniston and to be your primary contact. Governmental auditing experience - current clients: The Industrial Development Board of the City of Auburn, City of Auburn, The Water Works Board of the City of Auburn, Auburn City Board of Education, City of Sylacauga, Sylacauga City Board of Education, Parks & Recreation Board of the City of Sylacauga, B.B. Comer Memorial Library. Prior experience: City of Lafayette, City of Opelika, Opelika City Board of Education. Michael D. Machen, CPA, CVA – Audit and Assurance Partner Mike has over 22 years of public accounting experience, and has been a partner with Machen, McChesney and Chastain, LLP since January 1997. As audit and assurance partner, it is Mike’s responsibility to oversee all audit and assurance engagements of the firm. Governmental auditing experience: Auburn City Board of Education, Sylacauga City Board of Education, City of Auburn, The Water Works Board of the City of Auburn. Amelia Blessing, CPA – Audit Supervisor Amelia has over 6 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2008. Amelia will serve as audit in-charge for the City of Anniston. She will be the primary contact for audit planning, field work and financial statement preparation. Governmental auditing experience: City of Auburn, City of Sylacauga, The Water Works Board of the City of Auburn, B.B. Comer Memorial Library. Allison Moore, CPA – Audit Supervisor Allison has over 8 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2004. Allison will serve as an additional audit in-charge for the City of Anniston to help with audit planning, field work and financial statement preparation. Governmental auditing experience: City of Auburn, City of Sylacauga, The Water Works Board of the City of Auburn, Parks & Recreation Board of the City of Sylacauga.

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Liz Springer, CPA – Audit Staff Liz has over 4 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2011. Liz will perform key audit procedures for the team. Governmental auditing experience- current clients: City of Auburn, City of Sylacauga, Auburn City Board of Education, Sylacauga City Board of Education, Parks & Recreation Board of the City of Sylacauga, B.B. Comer Memorial Library. Prior experience: City of Valley, City of Lafayette. Laura L. Taber, CPA – Audit Staff Laura has been with Machen, McChesney and Chastain, LLP since August, 2012. Laura will perform key audit procedures for the team. Governmental auditing experience: City of Auburn, Sylacauga City Board of Education.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

AUDIT PROCESS

Machen, McChesney & Chastain, LLP prides itself on a long history of providing quality audit services. We are licensed to practice in the State of Alabama and our firm is a member in good standing of the Alabama State Board of Public Accountancy. Our most recent peer review resulted in an unqualified opinion with no letter of comment. A copy of the report is included in this proposal as Attachment B. As part of our commitment to quality control, we have written policies regarding the independence of our employees with respect to our clients. These policies require quarterly and annual monitoring, as well as specific assertions signed by all employees assigned to our governmental audit engagements. Machen, McChesney & Chastain, LLP is independent (as defined by Government Auditing Standards, issued by the Comptroller General of the United States) with respect to the City of Anniston and has no conflict of interest with regard to any other work performed by the firm for the City of Anniston. As mentioned previously, our firm currently employs 32 individuals, including 20 certified public accountants. Our governmental audit staff is comprised of 12 of these individuals, all of which are CPAs. Each member of the governmental audit team is required to obtain 24 hours of continuing professional education directly related to governmental accounting and auditing every two years in accordance with Government Auditing Standards. For the past three years, MM&C employees assigned to governmental audit engagements have exceeded these continuing education requirements. Our audit plan/strategy includes a five-step approach to providing audit services:

Planning based on a risk-based audit approach (fully implemented SAS risk standards). Ongoing communication with Management and those charged with governance (as needed). Close coordination with your accounting staff during field work. Utilizing technology to perform audit techniques and procedures. Providing timely reports to those charged with governance.

We will gain an understanding of your operational and accounting efficiencies and examine the adequacy of your internal accounting controls. To the extent possible, we prefer to perform the maximum amount of our audit work in the client’s office. We do, however, prefer to have trial balance amounts and certain other information supplied to us before we arrive at the client’s office in order that we may begin work immediately upon arrival at your office. We will provide the administrative staff of the City a schedule of items to be prepared by them and we will monitor their completion of these items by the agreed upon dates. We will maximize the ability to perform audit procedures at an interim period close to, but before, year end to ensure timeliness of report delivery dates. To the extent possible, we will perform work paper review and draft reports before we leave the client’s office.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

IN SUMMARY

Our objective is to provide the City of Anniston with the highest quality audit and accounting services at a fair and reasonable cost. We will also provide high quality advice and recommendations as we work with management to help the City continue to grow and provide the best service to its citizens. We are available throughout the year to serve as a resource for city personnel and to offer our expertise when requested. Our firm has been richly blessed with being able to attract high quality people. The ability of an accounting firm to be successful in providing excellent service to its clients depends on the quality of each member of the firm. We are committed to provide the training and technology to enable our team to deliver excellent client service. The professionals of our firm work together as a team to provide the best solutions for our clients in accounting, audit, and business related issues. We are proud of our professionals and feel we have some of the best in the accounting business. We have an extremely low turnover rate, which means you will be working with the same professional each year. We value our professionals and provide them with the best technology and training available to us. Our goal is to provide value added service to every client we serve. We would certainly appreciate the opportunity to serve as independent auditors for the City of Anniston.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR VALUE BASED FEES

Our fees are based primarily on the complexity of the work undertaken and on the amount of time and expense required to perform each engagement. They are minimized by effective planning, communication and our desire to understand your entity. We consider it an important responsibility to control the costs of services we provide to your entity. The MM&C team is committed to a long-term, mutually beneficial service relationship with you. It is our policy to bill each month based upon our production incurred during the respective month. In the first year, due to the necessity of establishing our permanent file, and reviewing and documenting procedures, we are likely to have more costs in the engagement than in future years. You would not be billed for these “first time through” procedures. If selected, we would work with you to make the transition to us from your then predecessor audit firm as smooth as possible. We would discuss with them the most effective way to facilitate a review of items we deem necessary, and they may invoice you for this. We will not bill you for our transition-related services. We will not bill you for telephone calls where we are able to provide an appropriate response to your question without spending time on research or analysis. Should additional time be required, we will be happy to provide you with an estimate before starting the extra work. Additional time would typically be invoiced at our standard hourly rates. Our fee quote is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. Any issues that might require additional audit time would be identified during the planning phase, and we would work with management to determine a fair and reasonable fee adjustment prior to performing additional procedures. Our proposal was prepared using the City of Anniston’s audited financial statements for September 30, 2011, and assumes that future years will include a similar number of federal grant programs that require testing, and a similar number of major funds that are required to be reported. Significant increases in grant testing or major fund testing are not covered in the scope of our proposal, and would require a fee negotiation with management prior to performing the work. Additional unusual circumstances, such as a large debt refunding, are also not covered in our proposal. Unless specifically named otherwise in our proposal, our proposal incorporates all requirements of the City of Anniston’s Request For Proposal dated November 19, 2012.

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ATTACHMENT A

PROPOSED FEES

The services covered in this proposal are as follows:

SERVICES 1. Audit of the City of Anniston general purpose financial statements

for the year ended September 30, 2012, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements

2. Audit of the City of Anniston general purpose financial statements for the year ended September 30, 2013, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements.

3. Audit of the City of Anniston general purpose financial statements for the year ended September 30, 2014, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements

Unless there are mitigating circumstances to which the administrative staff of the City is responsible, we agree to meet the reporting requirements by June 30 each year as required by the request for proposal.

Should the City of Anniston NOT agree to a three-year engagement, our proposal for the year ended September 30, 2012 would be $79,000.

FEES

$65,000

$65,000

$65,000

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14 ATTACHMENT B

PEER REVIEW REPORT