AUDITING SERVICES REGARDING GRANT PROGRAMS
AGREEMENT
THIS AGREEMENT, made and entered into this~~day of ~,
2001 by and between the CITY OF CLEARWATER, FLORIDA, a mun(9ip!l
corporation, hereinafter referred to as "City," and Grant Thornton
LLP, a firm of Certified Public Accountants, located at 101 East
Kennedy Street, Suite 3850, Tampa, Florida 33602, hereinafter
referred to as "Contractor;"
WITNESSETH
WHEREAS, the City is required by Article II, Section 2.01(c) (3)
of the City Charter to provide for an annual audit of its financial
accounts; and
WHEREAS, the City participates in Community Development Block
Grant, Community Oriented Policing Service Grants, and other Federal,
State and County Assistance programs which require independent
financial and compliance audits in accordance with rules established
by the U.S. Department of Housing and Urban Development, Florida
Auditor General, and other agencies; and
WHEREAS, the Contractor is in the business of public accounting,
is fully qualified to meet the requirements of applicable City, State
and Federal law, and desires to perform the necessary services:
NOW, THEREFORE, the parties agree as follows:
1. This agreement relates specifically to the City's fiscal years
ending September 30, 2001 thru 2005. This agreement may be
terminated by the City on the basis of unsatisfactory
performance with written notice at least six months prior to
the September 30 fiscal year-end, or by the contractor for
reasons specified in the Engagement Letter which is hereby
incorporated by reference and made a part hereof. City
Charter Section 2.01(c) (3) currently prohibits any single
audit firm from being employed for more than five consecutive
years. The fees for subsequent years are fixed per this
agreement and not expected to deviate from the amounts stated
herein except for unanticipated significant changes ln the
scope of auditing services required by the City.
2 .
The Contractor shall review the City's comprehensive annual
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financial report for compliance with GAAP and the applicable
requirements of the Certificate of Achievement for Excellence ln
Financial Reporting program of the Government Finance Officers
Association and assist the City in complying with new or existing
requirements. The Contractor shall, subject to the terms and
conditions of the engagement letter, render a report on the fair
presentation of the City's general purpose financial statements in
conformity with generally accepted accounting principles, for the
fiscal years ending September 30, 2001 thru 2005. The Contractor
shall, subject to the terms and conditions of the engagement letter,
render a report on the fair presentation of the City's combining and
individual fund and account group financial statements and schedules
in conformity with generally accepted accounting principles. The
Contractor is not required to audit the supporting schedules contained
in the comprehensive annual financial report, however, the Contractor
shall provide an "in-relation-to" report on the supporting schedules
based on the audit procedures applied during the audit of the general
purpose financial statements and the combining and individual fund
financial statements and schedules. The Contractor is not required to
audit the statistical section of the report.
The Contractor shall also perform the required financial and
compliance audits associated with the Community Development Block
Grant, Community Oriented Policing Service, and other Federal, State,
and County Assistance programs in accordance with the Single Audit Act
of 1984 (PL 98-502)and u.S. Office of Management and Budget (OMB)
Circular A-133; the provisions of the Florida Single Audit Act
(Section 216.3491 Florida Statutes); and rules of other agencies.
3. In performing the services described in #2 above, the
Contractor shall comply with the following:
o
generally accepted auditing standards
o
the standards set forth for financial audits in the
u.S. General Accounting Office's (GAO) Government
Auditing Standards
o
the provisions of the federal Single Audit Act
o
u.S. Office of Management and Budget (OMB) Circular A-
133
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o Section 11.45 Florida Statutes
o the Rules of the Auditor General of the State of
Florida, Chapters 10.550 and 10.660
o regulations of the State Department of Banking and
Finance
o Audits of State and Local Governmental Units - AICPA
o Chapter 73-600 of the Florida Statutes referring to
Fire District Audit requirements
As a part of the audit, the Contractor will consider the City's
internal control structure, as required by generally accepted auditing
standards and Government Auditing Standards.
4. Following the completion of the audit, the Contractor
shall, subject to the terms and conditions of the engagement letter,
render the following reports:
f
o
A report on the fair presentation of the financial
statements in conformity with generally accepted
accounting principles.
o
A report on the internal control structure based on the
auditor's understanding of the control structure and
assessment of control risk.
o
A report on compliance with applicable laws and
regulations, including those relating to funds received
form a State of Florida grants and aid appropriation
pursuant to a grant or contract.
o
A report on the internal control structure used in
administering federal assistance programs.
o
A report on compliance with laws and regulations
related to major and non-major federal financial
assistance programs.
o
A supplementary management letter if required to comply
with the regulations of the State of Florida Auditor
General.
o
A report on compliance with general compliance
requirements as required by the Single Audit Act and
OMB Circular A-133.
3
o
A report on compliance as required by the Florida
Single Audit Act.
5. The Contractor shall retain all working papers for a minimum
of five (5) years, unless notified in writing by the City of the need
to extend the retention period. The Contractor shall make working
papers available, upon request, to the following parties or their
designees:
o
City of Clearwater
u.s. Department of Housing and Urban Development
U.S. General Accounting Office (GAO)
Parties designated by the federal or state governments
or by the City of Clearwater as part of an audit
quality review process
Auditors of entities of which the City of Clearwater lS
subrecipient of grant funds
o
o
o
o
In addition the Contractor shall, providing all fees have been
paid, respond to the reasonable inquiries of successor auditors and
allow successor auditors to review working papers relating to matters
of continuing accounting significance.
6. The Contractor shall assist the City in scheduling the
Comprehensive Annual Financial Report to be completed and issued no
later than March 1, succeeding each fiscal year. Contractor/City
meetings will be held at least once per month until completion of this
contract. Weekly status meetings shall be held while the Contractor
is working at the City. The Contractor shall complete performance
under this contract by March 31 succeeding each fiscal year.
7. The Contractor shall bill the City and the City shall pay the
Contractor for the performance of the services under this contract on
the basis of the Contractor's normal and customary charges for such
services, plus ordinary out-of-pocket expenses customarily stated
separately by the Contractor in his general practice.
The total
amount of this contract including out-of-pocket expenses shall not
exceed:
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2001
$87,000
2002 thru 2005
Adjusted annually by the Consumer Price Index for
all Urban Consumers (CPI-U) for the twelve
month period ending June 30 of the fiscal
year audited.
The City may, by amendment of this agreement, increase this maXlmum
fee and/or extend the completion date upon the Contractor's showing
evidence of conditions which require substantially more time than
would generally be required to perform the prescribed services.
Progress payments will be made periodically for work completed to date
based on invoices submitted by the Contractor. The sum of such
progress payments shall not exceed 90% of the maximum specified above.
The final payment will be made within 30 days of receipt of the final
audit reports.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed the day and year first above written:
Countersigned:
Bria~A~
Mayor-Carom ssioner
CITY OF CLEARWATER, FLORIDA
BY:~-:S.~JI.
William B. Horne, II
Interim City Manager
Approved as to form
and correctness:
paif:.K. Akin
City Attorney
Attest:
Witnesses:
GRANT ,~:RN\ON LLP ~
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Attest:
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Accountants and
Management Consultants
The US Member Firm of
Grant Thornton International
Grant Thornton ai
GRANT THORNTON LLP
May 17,2001
City Manager and City Commission
City of Clearwater
100 South Myrtle Avenue
Clearwater, Florida 33756
City Manager and City Commission:
We will audit the general-purpose financial statements and the combining and individual fund and account group
financial statements of the City of Clearwater, Florida (the "City") as of September 30, 2001, 2002, 2003, 2004 and
2005, and for the years then ended. The supplementary schedules and the supplementary schedules of expenditures of
federal awards and of state awards that are presented for purposes of additional analysis as required by the U.S. Office
of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations and the Florida
Single Audit Act, are not a required part of the general-purpose financial statements. However, all supplementary
schedules will be subjected to the auditing procedures applied in our audit of the general-purpose financial statements
taken as a whole.
Our audit of the general-purpose financial statements and the combining and individual fund and account group
financial statements will be conducted in accordance with auditing standards generally accepted in the United States of
America ("US GAAS") and the standards for financial audits contained in GovemmentAuditing Standards, issued by the
Comptroller General of the United States. Our audit will include our examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. An audit includes
obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing, and
extent of audit procedures to be performed. An audit is not designed to provide assurance on internal control or to
identify reportable conditions. However, we are responsible for ensuring that the City Commission or others with
equivalent authority or responsibility are aware of any reportable conditions that come to our attention during the
course of our engagement. Our objective will be the completion of the foregoing audits and, upon their completion
and subject to their findings, the rendering of our reports on the financial statements and supplementary
information. However, it is possible that because of unexpected circumstances, we may determine that we cannot
render a report or otherwise complete the engagement. If, in our professional judgment, the circumstances require,
we may resign from the engagement prior to completion.
As required by GovernmentAuditing Standards, we will render a report on the City's compliance and internal controls
over financial reporting based on our audit performed in accordance with GovernmentAuditing Standards. Such report
will be considered integral to the general-purpose financial statements and will be referred to in our report thereon.
Government Auditing Standards, issued by the Comptroller General of the United States, requires us to plan and
perform our audit to obtain reasonable assurance about whether the general-purpose financial statements are free of
material misstatement. Tests of compliance with laws, regulations, contracts, and grants and internal control over
financial reporting in a financial statement audit contribute to the evidence supporting the rendering of our report
on the financial statements. As part of obtaining reasonable assurance about whether the City's general-purpose
financial statements are free of material misstatement, we will perform tests of the City's compliance with certain
provisions of laws, regulations, contracts, and grants, in which noncompliance could have a direct and material
Suite 3850
101 E. Kennedy Blvd.
Tampa, FL 33602-5154
Tel: 813 229-7201
Fax: 813 223-3015
JP
City Manager and City Commission
City of Clearwater
May 17,2001
Page Two
effect on the determination of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audits, and accordingly, we will not express such an opinion.
Additionally, in planning and performing our audits, we will consider the City's internal control over financial
reporting in order to determine our auditing procedures for the purpose of rendering our report on the financial
statements and not to provide assurance on the internal control over financial reporting. Therefore, our
consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal
control over financial reporting that might be material weaknesses.
We could, however, as a separate engagement, be engaged to perform agreed-upon procedures or examine and
report on management's written assertion about internal controls or that management complied with specified laws,
regulations, contracts, and grants. Such engagements would be conducted in accordance with the American
Institute of Certified Public Accountants ("AICPA") standards for attestation engagements.
GovernmentAuditing Standards require that we provide you with a copy of our most recent quality control review report.
Our October 29, 1998 peer review report accompanies this letter.
In accordance with the Single Audit Act Amendments of 1996, the U.S. Office of Management and Budget (0 MB)
Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the Florida single Audit Act, we will
plan and perform the audits of the City to obtain reasonable assurance about whether noncompliance with the
requirements of laws, regulations, contracts, and grants applicable to each of its major federal and state programs
could have a direct and material effect on a major federal or state program. An audit includes examining, on a test
basis, evidence about the City's compliance with those requirements and performing such other procedures as
considered necessary to render an opinion with respect to such compliance. However, our audits of compliance will
not provide a legal determination of the City's compliance with those requirements. Our objective will be the
completion of the foregoing audits and, upon their completion and subject to their findings, the rendering of our
reports on the City's compliance, in all material respects, with the requirements referred to above that are applicable
to each of its major federal and state programs for the years ended September 30, 2001, 2002 and 2003,2004 and
2005.
Further, in planning and performing our audits, we will consider the City's internal control over compliance with
requirements that could have a direct and material effect on a major federal or state program in order to determine
our auditing procedures to test and report on the internal control over compliance in accordance with OMB Circular
A -133 and the Florida Single Audit Act. Additionally, our testing of the internal control over compliance would not
necessarily disclose all matters in internal control that might be a material weakness as defined by US GAAS. Our
tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no
opinion will be expressed in our report on internal control issued pursuant to 0 MB Circular A -133 and the Florida
Single Audit Act.
However, it is possible that because of unexpected circumstances, we may determine that we cannot render a report
on compliance with requirements applicable to each major program and on internal control over compliance in
accordance with OMB Circular A-133 and the Florida Single Audit Act or otherwise complete the engagement. If,
in our professional judgment, the circumstances require, we may resign from the engagement prior to completion.
Even after we perform and report the results of additional tests of compliance and internal control over each major
federal program, some reasonable needs of report users still may be unmet. We could, as a separate engagement, be
engaged to perform agreed-upon procedures or examine and report on management's written assertion about
internal controls or that management complied with specified laws and regulations. Such engagements would be
conducted in accordance with AICPA standards for attestation engagements.
i
City Manager and City Commission
City of Clearwater
May 17, 2001
Page Three
In providing for an audit of the financial statements to be performed on a test basis, US GAAS and Government
Auditing Standards require the auditor to obtain reasonable, but not absolute, assurance that the financial statements
are free of material misstatement, whether caused by error or fraud. Additionally, in providing for an audit of
compliance with the requirements of OMB Circular A-133 and the Florida Single Audit Act for each of the City's
major federal and state award programs, OMB Circular A-133 and the Florida Single Audit Act require the auditor
to obtain reasonable, but not absolute, assurance that the City complied with those requirements. Accordingly, an
audit is not a special examination designed to detect errors or fraud nor a guarantee of the accuracy of the financial
statements or that the City complied with the requirements of each of its major federal and state award programs.
An audit is subject to the inherent risk that errors, fraud, or illegal acts, if they exist, might not be detected.
However, if you wish us to direct special auditing procedures to such matters, we would be pleased to work with you
to develop a separate engagement for that purpose.
As you know, the financial statements are the responsibility of the management and City Commission of your City
who are primarily responsible for the data and information set forth therein, as well as for the evaluation of the
capability and integrity of the City's personnel, ensuring that the City complies with all laws, regulations, contracts,
and grants, and the maintenance of effective internal controls over financial reporting, which includes adequate
accounting records and procedures to safeguard the City's assets. Management is responsible for adjusting the
financial statements to correct material misstatements and for affirming to us in a representation letter that the
effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the
latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a
whole. As required by OMB Circular A-133 and the Florida Single Audit Act, management is also responsible for
taking corrective action on any reported findings and! or questioned costs reported to them and to prepare a summary
schedule of prior audit findings and a corrective action plan, if applicable. It is also the responsibility of management
to make all financial records and related information available to us during our engagement. Accordingly, our
completion of the audit will require management's cooperation. In addition, as required by US GAAS, our
procedures will include obtaining written representation from management concerning such matters, upon which we
will rely.
At the conclusion of the engagement, it is management's responsibility to submit the reporting package (including
financial statements, schedule of expenditures of federal awards, auditors' reports, and, if applicable, a summary
schedule of prior audit findings and a corrective action plan) along with the Data Collection Form to the designated
federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection Form and the reporting
package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after
the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for
audit. It is also management's responsibility to submit the schedule of expenditures of state awards and other
information required by the Florida Single Audit Act to the Florida Auditor General.
The inclusion by you of our reports in documents containing information in addition to the financial statements and
our reports thereon (OMB Circular A-133 Data Collection Form, and other regulatory filings) may require us to
perform additional procedures to fulfill our professional or legal responsibilities. Accordingly, our reports should
not be used for any such purposes without our permission or prior notification, which such permission shall not be
unreasonably withheld. In addition, to avoid unnecessary delay or misunderstanding, it is important that you give us
timely notice of your intention to issue any such document.
The reports on compliance and internal control will each include a statement that restricts the use of the report to
specified parties. Each report is intended solely for the information and the use of management, specific legislative
or regulatory bodies, federal awarding agencies and, if applicable, pass-through entities and is not intended to be and
should not be used by anyone other than these specified parties.
f1\
City Manager and City Commission
City of Clearwater
May 17, 2001
Page Four
The workpapers for this engagement are the property of Grant Thornton LLP and constitute confidential
information. However, we may be requested to make certain workpapers available to Federal and State grantor or
regulatory Agencies pursuant to authority given to them by law or regulations. If requested, access to the
workpapers will be provided to Federal and State grantor or regulatory Agencies under the supervision of Grant
Thornton LLP audit personnel and at a location designated by our Firm. Furthermore, upon request, we may
provide photocopies of selected workpapers to Federal and State grantor or regulatory Agencies. The Federal and
State grantor or regulatory Agencies may intend, or decide, to distribute the photocopies or information contained
therein to others, including other governmental agencies. You authorize us to allow Federal and State grantor or
regulatory Agencies access to and photocopies of the workpapers in the manner discussed above.
Our billings for the services set forth in this letter, which will be based upon our rates for this type of work will be
rendered monthly and are payable within thirty (30) days after the City's receipt thereof. The fees, including out-of-
pocket expenses, for the year ended September 30, 2001 will not exceed $87,000. The fee will be adjusted for
inflation using the CPI index for all Urban Consumers (CIP-U) for June 30, 2001 as the base index and adjusting for
the new CPI on June 30, 2002 for the change in fee for the September 30,2002 year end, using the CPI on June 30,
2003 for the change in fee for the September 30, 2003 year end, using the CPI on June 30, 2004 for the change in
fee for the September 30,2004 yearend and using the CPI on June 30, 2005 for the change in fee for the September
30, 2005 year end. If extraordinary circumstances are encountered making it necessary for us to do additional work,
we will immediately report such conditions to the City Commission and both parties may negotiate such additional
compensation as appears to be justified. Additionally, fees for assistance in implementing GASB Statement No. 34
will be billed separately at the contract rates in effect at that time. It is understood that our responsibility for such
services will encompass only periods covered by our audits and will not extend to any subsequent periods for which
we are not engaged as auditors.
This engagement includes only those services specifically described in this letter. Costs and time spent in legal
matters or proceedings arising from our engagement, such as subpoenas, testimony, or consultation involving
private litigation, arbitration or government regulatory inquiries at your request or by subpoena, will be billed to you
separately at rates mutually agreed upon in advance by the City and Grant Thornton LLP.
We retain the right to suspend or terminate our service in the event of nonpayment. Services will not be resumed
until your account is paid as agreed. If we elect to terminate our services for nonpayment, you will be obligated to
compensate us for all services performed in accordance with the requirements hereof through the date of
termination.
During the course of our engagements, we may need to electronically transmit confidential information to each
other and to outside specialists or other entities engaged by either Grant Thornton LLP or the City of Clearwater,
Florida. E-mail is a fast and convenient way to communicate. However, e-mail travels over the public Internet,
which is not a secure means of communication and, thus, confidentiality could be compromised. The City of
Clearwater, Florida agrees to the reasonable use of e-mail and other electronic methods to transmit and receive
information, including confidential information, between Grant Thornton LLP and the City of Clearwater, Florida
and between Grant Thornton LLP and outside specialists or other entities engaged by either Grant Thornton LLP
or the City of Clearwater, Florida.
Grant Thornton LLP invests a great deal of time and effort in ensuring that we have top quality and appropriately
trained professionals to service our clients. Likewise, our clients have made a similar investment in their personnel.
When a client contacts us about its desire to hire one of our professionals, we recognize and appreciate the client's
confidence in our engagement team members. However, when we lose a valued member of our engagement team,
we incur significant expenses in hiring and training his or her replacement. Also, in some situations, a client's
employment of an engagement team member may raise independence issues. Accordingly, during the term of this
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City Manager and City Commission
City of Clearwater
May 17, 2001
Page Five
engagement and for a period of one (1) year after the services are completed, Grant Thornton LLP and the City of
Clearwater each agree not to solicit, directly or indirectly, or hire, the other party's personnel participating in the
performance of this engagement without the express written consent of the other party. If this provision is violated,
the violating party will pay the other party a fee equal to the hired person's annual salary in effect at the time of the
violation to reimburse the estimated costs of hiring and training replacement personnel.
As a supplement to this letter, we are enclosing an explanation of certain of our Firm's Client Service Concepts. We
have found that such explanation helps to clarify our services and enhances our ability to work more closely with
our clients.
If any portion of this letter is held invalid, it is agreed that such invalidity shall not affect any of the remaining
portlOns.
If you are in agreement with the terms of this letter, please sign one copy and return it for our files. We appreciate
the opportunity to continue to work with you.
Very truly yours,
GRANT THORNTON LLP
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Partner
John B. Hangartner
ckc
enc.
The foregoing letter fully describes our understanding and is accepted by us.
CITY OF CLEARWATER, FLORIDA
Date 71 ~l 0 ,
I
@._':R~:a:
llliam B. Horne, II
Interim City Manager
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