HomeMy WebLinkAboutAgenda Report - April 7, 1993 (106)� os
CITY OF LC'.."PI
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COUNCIL COMMUNICATION
AGENDA TITLE: Extend Contract With Peat Marwick & Main for Audit Services
MEETING DATE: April 7, 1993
PREPARED BY: Assistant City Manager
RECOMMENDED ACTION: That the City Council authorize the firm of Peat Marwick &
Main to conduct an audit of Sanitary City Disposal
Company's financial records for the period April 1, 1992 to
March 31, 1993. The cost of the audit will be presented to
the City Council on April 7.
BACKGROUND: The City Council directed staff to have an audit performed
of Sanitary City Disposal Company's financial records. In
that the City contracts with Peat Marwick & Main for annual
audits of the City's financial records, staff contacted
that firm to perform the required audit.
Staff has met with representatives of that firm and Sanitary City to clarify
what was to be included. Peat Marwick & Main has been in contact with Sanitary
City to write a scope of the assignment and approximate hours involved.
We have agreed this audit will not commence until Sanitary City has closed
their books and has had their auditors complete their work. It is estimated
the audit will commence sometime in the middle of June.
We will not receive the proposal from Peat Marwick until April 6, and it is
therefore not included in the Council agenda material.
FUNDING: 10-015.01 Contingency Fund.
Respectfully submitted,
ry L. Glenn
Assistant City Manager
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THOMAS A. PETERSON lecyriea paver
` City Manager
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Certified PubM. Aetourtants
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2495 Natomas NO Orroo.. Telephone 916 925 e00o 1e►etax 916 641 3199
Sacrernemto. CA 55933-2938
April 5, 1993
Mr. Dixon Flynn, Finance Director
City of Lodi
221 West Pine Street
Lodi, California 95241
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We have been requested ihat we provide you with a proposal to audit Lodi Sanitary City
Disposal, Co., Inc. ("Company") as of and for the year ended March 31, 1993. This letter
will set forth our understanding of the scope and objectives of our audit and the estimate of
the hours and related fees to complete the engagement.
The Company currently has a review completed by the certified public accounting firm of
Alder, Green & Hasson C'CPA") of Los Angeles, California. The Company's CPAs will
complete their review of the Company's financial statements as of March 31, 1993 during
May of 1993. KPMG Peat Marwick ("Peat Marwick") will need to review the CPA's
review working papers as of and for the years ended March 31, 1992 and 1993. Since
you have requested us to complete an audit of the Company we will have to perform
additional audit procedures as of April 1, 1992 to assure ourselves the opening balance
sheet is fairly stated.
Peat Marwick will conduct the audit in accordance with generally accepted auditing
standards with the objective of expressing art opinion as to whether the presentation of the
Company's financial statements, taken as a whole, conforms with generally accepted
accounting principles. In conducting the audit, we will perform tests of the accounting
records and such other procedures as we consider necessary in the circumstances to
provide a reasonable basis for our opinion on the financial statements. We will examine,
on a test basis, evidence supporting the ammnts and disclosures in the financial statements.
We will also assess the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. The
Company has agreed that all records, documentation, and information we request in
connection with our audit will be made available to us, that all material information will be
disclosed to us, and drat we will have the full cooperation of the Company's management.
It should be understood that management of the Company has responsibility for the
financial statements and all representations contained therein. Management of the Company
is also responsible for the adoption of sound accounting policies and the implementation of
recordkeeping and an internal control structure to maintain the reliability of the financial
statements and to provide reasonable assurance against the possibility of errors and
irregularities that are material to the financial statements.
MEMO
AVYWER Peat Marwick
Mr. Dixon Flynn, Finance Director
City of Lodi
April 5, 1993
Page 2
An audit is designed to obtain reasonable assurance about whether the financial statements
are free of material misstatement. Even a material misstatement may remain undetected.
however, by an audit performed in accordance with generally accepted auditing standards.
Upon completion of our audit procedures, we will issue our opinion on the Company's
financial statements by August 1, 1993, subject to the conditions stated below. We are
prepared to commence our audit procedures on May 31, 1993. We also will furnish to you
a report on the Company's internal control structure with any recommendations about the
internal control structure that we note during the audit which appear to be of significance
under the circumstances.
We estimate that it will tpLke approximately 325 to 425 hours to complete the audit, draft the
financial statements and management letter and report our findings to the City's
management. Our fees will range from $16,250 to $21,250. In addition, expenses such as
travel, telephone, postage and typing are billed separately as incurred. We will also
separately bill the City the costs charged by the Company's CPAs for time and expenses
incurred on their part due to Peat Marwick reviewing their review working papers. Our
estimate of expenses is S1,500 to $2,500, exclusive of the pass through billings by the
Company's CPAs. These estimates reflect our anticipation of the necessary partner,
manager and staff hours and expenses to successfully complete the audit.
Due to the nature of the project we have made certain assumptions. Our fee estimate
assumes reasonable cooperation by the City's and Company's personnel and timely access
to the current CPA's workpapers. The Company will not be required to prepare any audit
schedules, however, personnel will pull all requested supporting documentation, answer all
questions and inquires we may have, research items, and provide account analysis. We
expect the Company's accounts will be in good order, posted up to date and that
explanations of account balances and fluctuations will be provided. In addition, trial
balances and other requested information will be available upon our arrival on May 31,
1993. The estimated fee is based upon the above assumptions and does not include time
that may result from your requests to increase our scope beyond what is planned
If circumstances are encountered or requests are made during the conduct of the audit that
warrant additional time or expense we will endeavor to notify you as they are assessed. If
the Company does not provide reasonable assistance as anticipated the hours to complete
the audit and the fees charged could increase significantly. We will also advise the City of
all budget overages being incurred and the reasons for those overages. The City will
reimburse Peat Marwick at the rate of S50 per hour for all reasonable and explainable
budget overages.
In the event Peat Marwick is Mluested pursuant to subpoena or other legal process to
produce its documents relating to the audit of the Company in judicial or administrative
proceedings to which Peat Marwick is nor a party, the City shall reimburse Peat Marwick at
standard billing rates for its professional time and expenses, including reasonable
attorney's fees, incurred in responding to such requests.
:aPP 07 '9—HT—r^,;'Pt;IC;
Peat Marwick
W. Dixon Flynn, Finance Director
City of Lodi
April 5, 1993
Page 3
If the foregoing is in accordance with you requirements, please indicate your acceptance by
signing the copy of this letter in the space provided below. We appreciate the opportunity
to be of service to the Qty of Lodi.
SPS
enclosure
RESPONSE:
This letter correctly sets forth the
understanding of the City of Lodi
By:
Date:
--
Very truly yours.
KPMG PEAT MARWICK
L obcrtson, CrParm