ORDER NO. 30596 ENGAGE AUDIT FIRM TO CONDUCT FY 2006/07 KERR COUNTY AUDIT Came to be heard this the 29th day of October, 2007, with a motion made by Commissioner Letz, seconded by Commissioner Baldwin. The Court unanimously approved by vote of 2-0-0 to: Accept the recommendation of the Auditor and approve selecting the firm of Neffendorf, Knopp, Horry & Doss, P.C. for a one year contract for the 2006/07 outside audit. f ~ `~ J? ~J / ~O COMMISSIONERS' COURT AGENDA REQUEST PLEASE FURNISH ONE ORIGINAL AND TEN (101 COPIES OF THIS REQUEST AND DOCUMENTS TO BE REVIEWED BY THE COURT MADF, RY: Judge Tinley MEETING DATE: October 29, 2007 OFFICE: County Judge TIME PREFERRED: SUBJECT: Consider, discuss and take appropriate action to appoint /engage outside firm to conduct FY 06/07 Kerr County audit. EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON) NAME OF PERSON ADDRESSING THE COURT: Judge Tinley ESTIMATED LENGTH OF PRESENTATION: IF PERSONNEL MATTER -NAME OF EMPLOYEE: Time for submitting this request for Court to assure that the matter is posted in accordance with Title 5, Chapter 551 and 552, Government Code, is as follows: Meeting scheduled for Mondays: THIS REQUEST RECEIVED BY: THIS RQUEST RECEIVED ON: 5:00 PM previous Tuesday @ .M. All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has been prepared for the Court's formal consideration and action at time of Court Meetings. Your cooperation will be appreciated and contribute towards your request being addressed at the earliest opportunity. See Agenda Request Rules Adopted by Commissioners' Court. ESTIMATED COST OF AUDIT Name of Firm: Neffendorf, Knopp, Horry & Doss, P.C. Certification: I hereby certify that I am authorized to represent the firm, empowered to submit the fee estimate and authorized to sign a contract with the County of Kerr. ~ 7 ~ - Keith Neffe rf, C.P. ., President Total All-Inclusive Maximum Price: 2007 Fiscal Year S 30,000 APPENDIX E Part 2 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE FISCAL YEAR 2007 FINANCIAL STATEMENTS: COMBINING SCHEDULE-ALL SERVICES DESCRIBED IN THE REQUEST FOR PROPOSALS SECTION II E Nature of Service to be Provided Schedule Total Price Audit - FY 2007 Financial Statements Appendix E -Part I $ 30,000 (includes Federal Financial Assistance Schedule & Reports) Total $ 30 , 000 EACH SERVICE DESCRIBED IN SECTION II E SHOULD BE SUPPORTED BY AN INDIVIDUAL SCHEDULE IN THE FORMAT PROVIDED IN PART 3 OF THIS APPENDIX. 10/1/2007 25 9:53:41 AM APPENDIX E Part 1 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE FISCAL YEAR 2007 FINANCIAL STATEMENT'S Standard Quoted Hourly Hourly Hours Rates Rates Total Partners 8 0 $ 1 1 0 $ 1 1 0 $ 8, 8 0 0 Managers 8 0 9 0 9 0 7, 2 0 0 Supervisory staff 8 0 8 5 8 5 6, 8 0 0 Staff 80 65 65 5 , 200 Other (specify): 3 0 4 5 4 5 1, 3 5 0 Subtotal $2 9 , 3 5 0 Total for services described in Section II E of the request for proposals (Detail on subsequent schedules) $ - - Out-of-pocket expenses: 3 0 0 Meals and lodging Transportation _ 350 Other (specify): -- Total all-inclusive maximum price for Fiscal Year 2007 audit $30 , 000 Note: The rate quoted should not be presented as a general percentage of the standard hourly rate or as a gross deduction from the total all-inclusive maximum price. 10/1/2007 24 9:53:41 AM r, PROPO5AL FOR ANNUAL AUDIT SERVICES couNrY of KEitR, TEXA$ Kerrville, Texas For We Year Ending September 30, 2007 NEFFENDO/R~F, K/NOPPp, HORRY & I C~erti`ied pu~liC ~ccousr.~an.~ FREDERICKSBURG, TEXAS ar COUNTY OF KERB, TEXAS PROPOSAL FOR AUDIT SERVICES YEAR ENDED SEPTEMBER 30, 2007 Submitted by: ~' Neffendorf, Knopp, Horry & Doss, P.C. P.O. Box 874 Fredericksburg, Texas 78624 830/997-3348 Contact: Keith Neffendorf, C.P.A. October 16, 2007 TABLE OF CONTENTS Transmittal Letter ............................................. 1 I. EXECUTIVE SUMMARY ..................................... 2 II. TECHNICAL COMPONENT ...................................4 it 1. Independence ........................................ 5 2. License to Practice in Texas .............................. 6 3. Firm Qualifications and Experience .......................... 7 ~„ 4. Partner and Staff Qualifications and Experience ................. 9 5. Prior Engagements with County .......................... 11 6. Similar Engagements with Counties ........................ 12 7. Specific Audit Approach ................................ 13 8. Identification of Anticipated Potential Audit Problems ............ 15 9. Report Format ...................................... 16 III. GUARANTEES AND WARRANTIES ............................ 17 ~, A. Proposer Guarantees .................................. 18 B. Proposer Warranties .................................. 19 NEFFENDORF, KNOPP/,A HOnRRY & DOSS, P.C. ~erti~~ public ~ccountan~ P.O. BOX 874 • 736 S. WASHINGTON ST. ~ FREDERICKSBURG, TEXAS 78624-0874 (830) 997-3348 MEMBER FAX: (830) 997-3333 MEMBER 'r AMERICAN INSTITUTE OF Email: nkhd(g3austin.rr.com TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS Honorable Judge and County Commissioners County of Kerr, Texas Kerrville, TX 78028 Honorable Judge and County Commissioners, We are pleased to submit our proposal to provide audit services to the County of Kerr for the year ending September 30, 2007. This proposal is for performing the annual audit of the County in ~' accordance with AICPA, OMB and GASB standards, and the single audit on state and federal grants in conformance with OMB Circular A-133. ~. We also have attached a list of references for County audit clients. We are a member of the Private Companies Practice Section of the AICPA's Division for CPA firms. It is our policy to regularly attend continuing professional education conferences pertaining to governmental accounting, auditing and financial reporting. We confirm that we are independent of any obligations and interests that might conflict with the best interests of the County of Kerr, Texas and our ability to provide the desired services on a timely basis. ~" We will assign partners, managers and staff who are experienced with the unique demands of governmental accounting, to ensure that the annual audit is completed in an effective, efficient and timely manner. We confirm that the statement of qualifications is a firm and irrevocable offer for sixty wr days. We believe that we are the best qualified to perform the audit because of our experience and knowledge. • We will be happy to discuss this proposal with you and are ready to assist you in your accounting and financial reporting needs at your request. Any questions should be addressed to Keith Neffendorf at ~' the address or telephone number shown above. Sincerely, . , ~ it~ffe rf, C.P. ~` NEFFENDORF, KNOPP, HORRY & DOSS, P.C. October 16, 2007 1 I. EXECUTIVE SUMMARY I. EXECUTIVE SUMMARY The following items are included in this proposal: - Independence - We are independent of any professional relationships with the County. - Licenses - We are properly licensed to practice in Texas. - Quality Control Review - We received an unqualified opinion on our peer reviews. - Firm Qualifications and Experience - We have experienced staff with the appropriate knowledge and training. - Partner and Staff Qualifications and Experience -All partners and staff have substantial experience in county auditing. We also maintain our skills through training and continuing education. - Specific Audit Approach - We have the knowledge and experience to adjust our audit procedures for the assessed risk. What makes our firm uniquely qualified for this engagement? We are a small firm that concentrates on governmental auditing and accounting. All our clients are important to us! We enjoy working with people and serving our client's best interest. We are different from other firms in that the partners do a substantial part of the actual auditing and report writing. We do not send inexperienced staff out on audits; we know what we're doing to provide timely services. We also are very familiar with the County's software, Incode. We currently audit five other governmental entities that use Incode. We would be able to complete the audit in the time requirements set out in the request for proposals. 3 11. TECHNICAL COMPONENT ~r ^r 1. INDEPENDENCE We confirm that we are independent of the County as defined by generally accepted auditing standards and U.S. General Accounting Office's Government Auditing Standards. We also confirm that we are ;,,,,, independent of any professional relationships involving the County employees, Judge and Commissioners. We are also independent with respect to the County, component units or oversight units. 5 err 2. LICENSE TO PRACTICE IN TEXAS We affirm that the firm and all assigned key professional staff are properly licensed to practice in the State of Texas. Neffendorf, Knopp, Horry & Doss, P.C. Keith Neffendorf Greg Knopp Tracie Horry Brenda Doss License # C05639-001 (W03209) 016066 032375 072713 081398 6 3. FIRM QUALIFICATIONS AND EXPERIENCE Neffendorf, Knopp, Horry & Doss, P.C. is a local public accounting firm in Fredericksburg, Texas. ,~ The firm is composed of 4 shareholders, 3 professional staff and 3 administrative personnel. The firm, its officers and certified personnel are members in good standing with the Texas State Board of Public Accountancy, the American Institute of Public Accountants (AICPA), and the Texas Society of Certified Public Accountants (TSCPA). We have been a member of the AICPA's Private Companies Practice Section (PCPs) since 1988. Our most recent peer review was completed in December, 2004 by the firm of Bolinger, Segars, Gilbert & rr Moss, L.L.P., 1623 10th Street, Lubbock, Texas 79401. An unqualified opinion, dated December 16, 2004 was issued by Bolinger, Segars, Gilbert & Moss, L.L.P., and was approved by the AICPA review committee at their meeting in February, 2005. The peer review included three government engagements. We confirm that we have not had any disciplinary action taken or pending during the past three years by any state regulatory body or professional organization. We also have not been involved in any litigation. '~' It is the policy of Neffendorf, Knopp, Horry & Doss, P.C. to undergo a peer review every three years. In the interim years, it is firm policy that we conduct our own in-house review using the same guidelines as an actual peer review. We anticipate using all four partners, one professional staff and one administrative personnel on this engagement. All partners and staff would be on a full-time basis. It is also firm policy that all professional staff complete 40 hours of continuing education each year. For personnel involved in governmental auditing, 24 hours must be in the governmental environment to fulfill the GAO Yellow Book requirements. The firm uses outside specialists and consultants when needed. We do not anticipate such a need for the audit of the County of Kerr, Texas. r BOLIN(IER, SEG}ARS, GILBERT & MOSS, L.L.P. CERTIFIED PUBLIC ACCOUNTANT S PHONE: IB061 7473806 FAX: 1Ba61 747-381 5 1623 1QTH 9TAEET Lussorx, TExns 79401-2685 December 16, 2004 To the Owners Neffendorf, Knopp, Horry & Doss, P.C. We have reviewed the system of quality control for the accounting and auditing practice of ~- Neffendorf, Knopp, Horry 8 Doss, P.C., (the firm) in effect for the year ended June 30, 2004. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements of Quality Control Standards issued by the American Institute of Certified Public Accountants (AICPA). The design of the system and compliance with it are the responsibility of the firm. Our responsibility is to express an opinion on the design of the system, and the firm's compliance with the system based on our review. Our review was conducted in accordance with standards established by the Peer Review Board ~ of the AICPA. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. ~"` These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses. in the system of quality control or all instances of lack of compliance with it. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of Neffendorf, Knopp, Horry 8 Doss, P.C. in effect for the year ended June 30, 2004, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. Certified Public Accountants 8 it 4. PARTNER AND STAFF QUALIFICATIONS AND EXPERIENCE All four partners are licensed to practice as Certified Public Accountants in Texas and specialize in governmental auditing. The proposed audit team will be as follows: Partner-in-Charge -Keith Neffendorf, C.P.A. air Mr. Neffendorf is a Certified Public Accountant. He received his BBA from the University of Texas at Austin in 1974. Prior to owning his own practice, he worked as an assistant state auditor for the State Auditor's office in Austin from 1974 to 1980. He has been involved in county and governmental auditing for twenty-six years. He is a member of the American Institute of Certified Public Accountants, and the Texas Society of Certified Public Accountants. Senior Accountant -Gregory Knopp, C.P.A. Mr. Knopp is a Certified Public Accountant. He received his BBA from the Texas A & M University in 1978. He has been involved in governmental auditing for twenty-four years. He is a member of the American Institute of Certified Public Accountants, and the Texas ~„ Society of Certified Public Accountants. Senior Accountant - Tracie R. Horry, C.P.A. ~"' Ms. Horry is a Certified Public Accountant. She received her BBA from McMurry University in 1995. She has been involved in county and governmental auditing for six years. She is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. Senior Accountant -Brenda Doss, C.P.A. Ms. Doss is a Certified Public Accountant. She received her BBA from University of Texas at San Antonio in 1998. She has been involved in county and governmental auditing for seven years. She is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. ..r The staff member who will be responsible for overall audit planning, fieldwork direction and reporting is Keith Neffendorf. Should the engagement become amulti-year contract, it is anticipated that the audit team would remain the same. ~ Since the four partners perform most of the auditing, the quality of the staff will remain the same over the term of the audit. 9 v 4. CONTINUING EDUCATION Each of the proposed audit team have attended the following continuing professional education courses during the last three years in fulfillment of the Yellow Book requirements. Description Hours A) Using Audit-City to Prepare Financial Statements for Local Governments for 2007 8 B) Auditor's Risk Assessment Process $ C) Texas Schools Accounting and Auditing Update - FY 2007 8 D) 2007 Texas School District Accounting and Auditing Conference 16 E) 2006 Rural Development Utilities Programs 16 F) Annual Yellow Book Update and Review 8 G) Texas Schools Accounting & Auditing Update for 2006 $ H) 2006 Texas School Districts Accounting & Auditing Conference 16 I) Workpaper Techniques for Government and Nonprofit Organizations 14 J) Advanced Texas School District Accounting and Audit Update - 2005 $ 10 5. PRIOR ENGAGEMENTS WITH THE COUNTY We did not have any prior engagements with the County of Kerr. 11 ~r 6. SIMILAR ENGAGEMENTS WITH COUNTIES Christina Moeller, County Auditor Audit -Year Ended 9/30/06 Bandera County # hours - 320 P. 0. Box 877 Bandera, TX 78003 830/796-3781; 830/796-4573 Dana Baethge, County Auditor Audit -Year Ended 9/30/06 Kendall County # hours - 300 201 E. San Antonio St., Suite 113 Boerne, TX 78006 830/249-9343 Larry Crump, County Auditor Audit -Year Ended 9/30/06 Gillespie County # hours - 210 101 W. Main, Unit #4 Fredericksburg, TX 78624 830/997-6777 Camille Swift, County Treasurer Audit -Year Ended 9/30/06 Blanco County # hours - 210 P. 0. Box 471 Johnson City, TX 78636 830/868-4566 Polly McMillan, County Treasurer Audit -Year Ended 12/31 /06 County of Mason # hours - 130 P. O. Box 475 Mason, TX 76856 325/347-5251 12 ~r 7. SPECIFIC AUDIT APPROACH A. AUDIT SEGMENTATION Estimated # Hours Planning 20 Internal Control/Preliminary Analytical Review Procedures 30 Cash and Investments 30 Receivables/Revenues 50 Capital Assets 25 Other Assets 5 Liabilities/Expenditures 30 Long Term Debt 15 Fund Balance/Equity 5 Budget 10 Grants/Compliance 50 Sub-total (Field Work) .270 Report Preparation 80 Total Hours 350 13 "® 7. SPECIFIC AUDIT APPROACH B. We use the AICPA's audit program, internal control questionnaire and checklists from the publication 'Auditing Governmental Financial Statements: Programs and Other Practice Aids." We also use the AICPA's publication "Fraud Detection in a GAAS Audit" to develop our fraud Procedures and checklists specifically for governmental entities. ~. We use audit programs tailored specifically for counties to include all financial, compliance and internal control requirements in accordance with generally accepted auditing standards and the GAO Government Auditing Standards (the Yellow Book). +r To test those requirements, we utilize a comprehensive and systematic plan that focuses directly on the assessment of audit risk and integrates statistical theory with the use of ~+ audit judgement. The plan provides for the translation of subjective audit judgements into quantitative terms for the following features: • Tolerable error wr • Reliance on internal control • Evidence from analytical review or other related substantive procedures • Inherent risk associated with the engagement and the specific items to '~' be sampled C. Sample size and type of statistical sampling depend on internal control evaluation and fraud risk assessment factors. We usually use a combination of random sampling; about 3 to 5 per cent for cash receipts, cash disbursements, billings and purchases. We use judgmental sampling for large dollar transactions and preliminary analytical review variances. .^ D. We will need an ascii file at year-end for our reporting software. We also have several excel spreadsheets (monthly reports of collections for each office, taxes receivable and +r collections, long-term debt, payroll and employee benefits, leases and investments). E. We use preliminary analytical review for all accounts to determine our subsequent tests „~„ and sampling. We use final analytical review for all accounts to explain all significant variances. The preliminary and final analytical reviews include comparison of actual revenues and expenditures to budgeted amounts (both original and final amended budgets). ~r. F. We obtain an understanding of the County's internal control structure by the use of organizational charts; manuals and procedures; financial and billing systems and +~ programs; and questionnaires. We also use a separate questionnaire for fraud. G. After reviewing internal control and performing our preliminary analytical review, we ~, determine materiality. Generally, we use 3% of assets or revenues for each major fund as our materiality amount. H. We test for compliance with laws and regulations in several areas: budget, taxes, investments, purchasing, assessments, expenditures and grants. We use a combination of random and judgmental sampling for compliance for grants and programs. The type of sampling we use varies with the type of grant or program. J. We will provide a listing of audit materials we will need. We can also provide the County staff a copy of the excel spreadsheets if they would like to prepare them. 14 w 8. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS We do not anticipate any potential audit problems. However, we would immediately discuss any items with you if they should arise. We also use the following approach for implementing SAS No. 99 ~,,, (Consideration of Fraud in a Financial Statement): SAS NO. 99 CONSIDERATION OF FRAUD IN A FINANCIAL STATEMENT .r SAS No. 99 places a renewed emphasis on professional skepticism. Maintaining the appropriate questioning mindset is the single most important success factor to implement this Statement. As part rr of our audit procedures, we use the following methods to implement SAS No. 99. Discussion among engagement personnel regarding the risks of material misstatement due to fraud. Obtaining the information needed to identify the risks of material misstatement due to fraud. ~+ 1. Inquiries of management and others within the entity about the risks of fraud. 2. Considering the results of the analytical procedures performed in planning the audit. 3. Using internal control questions relating specifically to fraud. 4. Reviewing industry-specific conditions that may indicate the presence of fraud. Identifying risks that may result in a material misstatement due to fraud. ~r • Assessing the identified risks after taking into account an evaluation of the entity's programs and controls. Responding to the results of the assessment. Evaluating audit evidence. Communicating about fraud to management, the audit committee and others. In addition to the above procedures, we work with the client to implement controls and procedures to reduce the risk of fraud. We feel it is very important for the client to maintain controls and procedures ~. consistently during the year (not just annually at audit time). 15 9. REPORT FORMAT ~" We will issue the following reports upon completion of the audit of the financial statements: Comprehensive Annual Financial Report 1. A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles. 2. A report on the internal control structure based on the auditor's understanding of the control structure and assessment of control risk. 3. A report on compliance with applicable laws and regulations. Separate Report on Federal Financial Assistance 1. An "in-relation-to" report on the schedule of federal financial assistance. m 2. A report on the internal control structure used in administering federal financial assistance programs. .rr 3. A report on compliance with laws and regulations related to major and nonmajor federal financial assistance programs. Separate Management Letter A separate letter to management will be issued to include the following: 1. The auditor's responsibility under generally accepted auditing standards 2. Significant accounting policies 3. Management judgments and accounting estimates 4. Significant audit adjustments 5. Other information in documents containing audited financial statements 6. Disagreements with management 7. Management consultation with other accountants 8. Major issues discussed with management prior to retention 9. Difficulties encountered in performing the audit 10. Non-Reportable conditions 11. Nonmaterial instances of noncompliance 12. Other comments and recommendations 16 irr III. GUARANTEES AND WARRANTIES 17 APPENDIX C PROPOSER GUARANTEES ~ The proposer certifies it can and will provide and make available, at a minimum, all services set forth in Section II, Nature of Services Required. ' Y Signature of Official: J '~' Name (typed): Keith Neffendorf Title: President ~r Neffendorf, Knopp, Horry & Doss, P.C. Firm: ~ Date: 10/16/07 9:53:41 AM 0/ 1 /2007 18 • APPENDIX D PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Texas laws with respect to foreign (non-state of Texas) corporations. '~ B. Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts, or omissions of any officers, employees or agents thereof. C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the ;,, express prior written permission of the County. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official: Name (typed): Title: Firm: Date: President Neffendorf, Knopp, Horry & Doss, P.C. 10/16/07 Keith Neffendor 10/1/2007 9:53:41 AM 19 ESTIMATED FEES SECTION /~~-L l~~tll~La~rsOn cFRT~r~~n ~ua<.~C ~ccourvr.~r~-rs PRC)fE5S{O~lr1t. CORPC)R1\71C)N Fiscal Year 2007 2008 2009 Estimated Fees $48,500 $50,000 $51,500 Certification: The person signing the proposal is entitled to represent the firm, empowered to submit the proposal and authorized to sign a contract with Kerr County. Date Submitted October 12, 2007 ESTIMATED FEES Obviously, fee considerations are an important factor in selecting a firm for professional services such as auditing and consulting. In this regard, we welcome input on our fee estimate levels during the proposal process. As you are aware, we would very much like to have the opportunity to serve Kerr County and would welcome the opportunity to discuss the appropriateness of our fee estimate levels, especially if they become a significant factor in making our firm the County's choice. Our proposed time budget includes all of the time we feel is necessary to complete the job adequately and we welcome the use of internal audit staff again to result in lower audit costs. Our proposed hours and rates shown below is only for our staff levels necessary to complete the work and would be reviewed in fmal negotiations of the annual audit fee with the County Judge. We do, however, expect to review internal audit reports that were completed during the year and, to the extent possible, this may help to reduce our time in completing the work. We have taken this into consideration in estimating the total hours to be charged to the engagement that is shown below. Our plans for service include up to 425 hours of time commitment by our partners, managers and professional staff for project services. We would expect to remain within any negotiated fee level unless factors considered by us in estimating the fee level change significantly. Should circumstances dictate that material increases in our time requirements are necessary, we would discuss this with management and the board immediately. We would not bill the County for amounts in excess of our negotiated fees without first discussing the matter and receiving approval from management. We will review the status and integrity of our negotiated fees at the conclusion of this year's work with the County Judge. Fees for our services are based on our standard hourly rates. These rates vary based on the level of our staff performing services. The final negotiated fee for performing the audit services requested will be based on the time expected to be expended by our staff in doing the work. Our billing procedures are performed monthly. We would bill the County for our services on a monthly basis as services are performed. 2 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF FISCAL YEAR 2007 FINANCIAL STATEMENTS: Standard Quoted Estimated Hourly Hourly Staff Level Hours Rates Rates Total Engagement partner 45 $ 200 $ 150 $ 6,750 Audit manager 170 125 110 18,700 Staff accountants 210 95 90 18,900 Total hours 425 Subtotal $ 44,350 Out-of-pocket expenses: Meals and lodging 3,350 Transportation 800 Total Estimated Fee for 2007 Audit $ 48,500 3 SEALED DOLLAR COST BID PROPOSAL For PROFESSIONAL AUDITING SERVICES FOR KERR COUNTY Presented by 1 I~~~I~~~rson CF~TIEIED I'L1BI.IC ACCC-UNTANTS FROFESSIQNAL COR('ORATiC~I 11 Greenway Plaza, Suite 1515 Houston, Texas 77046 Telephone: (713) 621-1515 Fax: (713)621-9212 contact persons Christopher Breaux, CPA Tom Pedersen, CPA Date Submitted: October 12, 2007 ~Gav~mrr~ental ~ Alit Qu~lityr Gnt~r -', ~ss~rc~A~s = : ,~. . !]'t'i'BRkVATI~ti~L TABLE OF CONTENTS Page Transmittal Letter 1 Executive Summary 3 Scope and Audit Approach 5 Summary of Qualifications 16 Attachments: Peer Review Report 26 Appendix C Proposer Guarantees 28 Appendix D Proposer Warranties 29 ~1~~ 11 Greenway Plaza, Suite 1515 ~ ~1~ • ~lr~Vn One Sugar Creek Blvd., Suite 920 irr Houston, TX 77046 Sugar Land, TX 77478 (713) 621-1515 CERT~IED ('E.1~1C ACCOUMMITS (281) 242-8600 Fax: (713) 621-1570 PROFESSIONAL CORPORATION Fax: (281) 242-7333 err October 12, 2007 To the Honorable County Judge and Members of Commissioners' Court Kerr County, Texas We are pleased to submit our qualifications to provide professional auditing services for Kerr County as detailed in the County's Request for Qualifications. The overall strength of services we w offer can be stated as follows: / Communications. Along with the sophistication of governmental accounting staff over the past decade, comes increasingly difficult auditing and reporting requirements which defy the "once-a-year visit" by an entity's audit firm. Our commitment to quarterly audit committee meetings with Commissioners/management is representative of our desire to assure the free ;~ flow of communications between Commissioners' Court, management and audit team. / Significant governmental audit expertise. Our Firm has been conducting governmental audits for over thirty years. We currently serve as auditors for over 75 governmental entities. Our partners have been recognized for their expertise and have conducted seminars on various governmental accounting, auditing and financial reporting topics for the American Institute of CPA's, Texas Society of CPA's, other CPA firms, the Government Finance Officers Association of Texas, and the Houston-Galveston Area Council. / Independence. Our Firm is independent of Kerr County as defined by the U.S. Governmental Accountability Office's Government Auditing Standards (2003). ,`- / Null Lairson, P.C. is committed to performing the requested services in a timely manner to provide Kerr County with sound and objective financial information and advice. The persons listed on the front of this proposal document are authorized to make representations for the r^ firm in relation to this proposed engagement. We appreciate the opportunity to serve Kerr County and look forward to meeting with you and discussing further our audit philosophy, approach, and methodology. Sincerely, Null-Lairson, P.C. ~~a~.,P~ .. EXECUTIVE SUMMARY ~' EXECUTNE SUMl~~IARY r. We are pleased to submit our qualifications to provide professional auditing services for Kerr County (the "County") as detailed in its Request for Statement of Qualifications. The following ,~ highlights significant aspects of our firm's qualifications. Technical capabilities and experience. Our firm has been providing requested services to governmental entities in Texas for over=30 years. Our fum has provided auditing and consulting services for 3'counfi~s an:7~~xcks ~'~ ~ ~un-~nth s~n~e as auditors and consultants for two other Texas ,. ~ n-•r,,~.., -.~.~ z-~~~- ~--~~~::. counties and over 7~ _o~r,r municipalities and other governmental clients. Null-Lairson, P.C. provides all customary services expected of a progressive and proactive CPA firm. The firm includes over 60 professional auditors, financial management consultants, accountants, and support staff committed to the philosophy of providing quality and timely services to clients. Our assurance services practice is structured in a manner that will provide appropriate coverage of the services that HISD has requested. The firm's assurance services structure is shown below: Firm Managing Partner Assurance Services Managing Partner Corporate and For-Profid Non-Profit Entities Employee Benefit Plans Special Political Subdivisions General Government and Quality Control Partner Partner Director Partner Partners (2) Audit Managers (3) s ~ Audit Seniors (7) ~ Audit Staff Support (11) As part of our dedication to the state and local government industry, our firm maintains associate memberships in the Texas Association of Counties, Government Finance Officers Association, the .r Texas Municipal League, and the American Institute and Texas Society of Certified Public Accountants. Through these affiliations, we are able to access tremendous resources that allow us to serve our governmental and non-profit clients at the highest levels. Null Lairson, P.C. will strive to be a valued member of the County's financial management team. We plan on assigning firm members for involvement with the County who possess strong abilities in .. those disciplines most valuable to you. The firm is adequately staffed with professional and support personnel to provide all necessary services and to maintain personalized involvement with each client. Each client is actively encouraged to call onus at any time the need arises. We are accessible ~` when you need us. In the References Section, we have included a partial listing of clients for your review. As a member of CPA Associates International, a worldwide association of quality-oriented accounting firms, our firm has completed an association peer review performed by members of the group in accordance with the AICPA's Private Companies Practice Section requirements. This peer review covered the year ended December 31, 2004 and resulted in an unqualified opinion and included a review of specific governmental engagements. We have attached our most recent peer review report for you review. We perform our internal inspections annually as required by program ~ requirements. The frequency of peer reviews is every third year. 16 SUMMARY OF QUALIFICATIONS Firm Independence Null Lairson, P.C. is independent of Kerr County as defined by both auditing standards generally accepted in the United States of America and U.S. Governmental Accountability Office's Government Auditing Standards (the "Yellow Book). License to Practice in Texas +• Null-Lairson, P.C. and all key professional staff are properly registered licensed to practice public accounting in the State of Texas. The firm has not been notified of any disciplinary action being taken or pending against it with state regulatory bodies or professional organizations. Null-Lairson, r P.C. is not currently under the terms of a public or private reprimand by the Texas State Board of Public Accountancy and/or licensing boards of other states. References As previously noted, our firm has broad experience in providing the services requested by the Kerr County. Our audit partners and managers have collectively over 90 years of experience in providing services to governments. Our audit team includes staff accountants, as necessary, with experience and training in governmental accounting, auditing, and consulting. We have included a listing of some of our area clients for your review. Null Lairson, P.C. has provided core audit services and/or various forms of consulting services ranging from entity-wide organizational structure studies to detailed help in compiling basic fmancial data. This listing of clients is for the use of the County only in evaluating our proposal and is not to be used for any other purpose and is not to be distributed to anyone outside those persons +~ involved in the selection of auditors for the County. All of these clients are currently receiving the services requested by the County in this proposal. 17 SUlV[~~IARY OF QUALIFICATIONS VENDOR REFERENCES REFERENCE ONE Government/Company Name: Galveston County Address: 601 Tremont• Galveston Texas 77550 Contact Person and Title: Honorable Jim Yarbrough Count~ud~e Phone: (409) 766-2244 Fax: (409) 765-2653 Contract Period: Approximatel~years Scope of Work: Audit and consulting services REFERENCE TWO Government/Company Name: Fort Bend County Address: 301 Jackson Street Suite 533• Richmond, Texas 77469 Contact Person and Title: Robert Ed Sturdivant County Auditor Phone: (281) 238-3210 Fax: X281) 344-3774 Contract Period: 2 years Scope of Work: Audit services REFERENCE THREE ,,. Government/Company Name: City of Alvin Address: 216 West Sealy• Alvin Texas 77511 Contact Person and Title: Si»v Kou Finance Director Phone: 5281) 388-4216 Fax: (281) 331-7215 Contract Period.• Approximatel~8 years Scope of Work: Audit and consultin¢ services 18 .. SL:1~~IMARY OF QUALIFICATIONS Selected Municipal and Other Governmental Clients served: ~+• Audi Alvin Independent School District Fort Bend Independent School ~ District Klein Independent School District Galena Park Independent School +r District it and related services: Cypress-Fairbanks Independent School District Humble Independent School District Spring Branch Independent School District Lamar Consolidated Independent School District Texas State Comptroller/Legislative Budget Board - TSPR work: Hamilton Independent School District Mount Pleasant Independent School District Galveston Independent School District Bastrop Independent School District Elgin Independent School District Smithville Independent School District ~+ McDade Independent School District Hays Consolidated Independent School District Cedar Hill Independent School District Eagle Pass Independent School District La Pryor Independent School District Crystal City Independent School District Rockwall Independent School District Wharton Independent School District San Elizario Independent School District Hearne Independent School District ~• Other consulting services: McKinney Independent School District Los Fresnos Independent School District Round Rock Independent School District Stillwater Public Schools -Oklahoma +~ Liberty Independent School District Howard County Maryland Public Schools Frontier Public Schools -Oklahoma Portsmouth Public Schools -Virginia Municipalities and Other Governments City of Bellaire City of Deer Park City of Galveston City of Katy City of Houston City of La Porte ~. City of Houston City of Jacinto City City of Missouri City City of La Marque City of Meadows City of West University City of Stafford City of Sugar Land Taylor Lake Village ~. City of Wharton City of Pearland Hams County Municipal Utility Districts and Special Districts Humble W.C.I.D. No. 2 Quail Valley U.D. Thunderbird U.D. Cimarron M.U.D. West Harris County M.U.D. #2 Harris County M.U.D. #18 Harris County M.U.D. #58 Malcomson Road U.D. Treasure Island M.U.D. First Colony Levee Improvement District Greater Greenspoint Management District Harris County Improvement District No. 1 r Pearland Economic Development Corporation Port of Galveston Woodlands Utility Districts (9 MUD's) Ken Drainage District Town Center Improvement District Katy TIRZ Galveston County Health District Shadow Creek TIRZ 19 ti.. .~ S RY OF QUALIFICATIONS Staffing of Project Our proposed audit team will include an engagement partner from our General Govemment section, an audit manager, a senior accountant and up to three support staff members. The assurance service managing partner will be available to the project team for assistance with planning activities and in ~ dealing with issues related to the audit and financial reporting. We feel this staffing level allows our firm to provide the necessary service quality based on the County's requirements. ~ All of our staff have appropriate experience and educational backgrounds and complete a minimum of twenty to forty hours of continuing education related to governmental auditing, accounting, and reporting annually. This annual training is designed to be in accordance with U.S. General ~. Accounting Office's Government Auditing Standards issued by the Comptroller General of the United States (the "Yellow Book"). Our staff members come from a variety of different backgrounds. We strive for diversity in our staff in our hiring practices. The quality of staff involved with our clients is ensured through the heavy involvement of management personnel in all phases of the engagement, including key planning and fieldwork engagement segments. We have included brief resumes of partner level personnel and the manager that will be assigned to this engagement below. Additionally we will have senior and staff accountants assigned to the engagement as necessary based on project scheduling at the desired time of the County's audit work. 20 ~r. Charles G. Yaple, CPA Engagement Resource and Principal -Audit Services Charles Yaple grew up in Houston, where he graduated from ^. Lamar High School in 1975. He is also a graduate of Baylor University where he received a Bachelor of Business Administration in accounting in 1979 and has been licensed as a +~ certified public accountant in Texas since 1981. Mr. Yaple has been in public accounting for over twenty years, and with Null- Lairson, P.C. since 1982. As a principal in the firm, he oversees and coordinates the firm's audit practice. Mr. Yaple has primary responsibility for the firm's major governmental audits which include audit, review and preparation of Basic Financial Statements, Comprehensive Annual Financial Reports receiving the GFOA/ASBO reporting excellence awards, and/or special financial compliance reports (including Single Audit Act). He has managed and performed a variety of special engagements for the firm's clients, including management advisory services, computer design and acquisition consulting and other financial related services. ~ Mr. Yaple's experience includes governmental, corporate, non-profit, and school district auditing and accounting. He has been awarded the Certificate of Educational Achievement in Governmental Accounting and Auditing by the American Institute of Certified Public Accountants. He is also a member of the Government Finance Officers Association (GFOA) and is on the GFOA Special Review ~ Committee involved with reviewing Comprehensive Annual Financial Reports nationally. Mr. Yaple has written articles for government industry publications. He has served as Chairman of the Governmental Services Committee for CPA Associates International, Inc., an intemational association of CPA firms. Mr. Yaple has provided workshop sessions and other information sessions for the Texas Association of Counties, the local GFOA affiliate, and for the Texas Association of School Business Officials (TASBO) and other governmental and industry associations and public accounting firms. Mr. Yaple is a member of the American Institute of Certified Public "" Accountants, the Texas Society of Certified Public Accountants and the American Management Association. 21 Christopher L. Breaux, CPA Engagement Resource and Principal -Audit Services Christopher Breaux is a graduate of Texas A & M University where he received a Bachelor of Business Administration in accounting in 1984. He has been licensed as a certified public accountant since 1987 and has been in public practice in the greater Houston area for over fifteen years. Mr. Breaux's experience includes providing auditing and consulting services to municipalities, school districts, counties, and special districts as well as a variety of non-profit and private sector clients. A large percentage of these clients are recipients of both federal and state funding and/or are subject to specific regulatory reporting requirements. As a principal in the audit services area, he is responsible for interfacing with clients and cognizant agencies as well as developing and implementing audit procedures to conform to applicable professional, state, and federal standards. Mr. Breaux has provided extensive assistance in the preparation and +~ review of Comprehensive Annual Financial Reports that have been awarded a Certificate of Achievement for Excellence in Financial Reporting. He has been awarded the Certificate of Educational Achievement in Governmental Accounting and Auditing by the AICPA. He has also been involved in providing advisory services to municipal clients in the areas of workflow studies, computer systems «^ and programming, financial compliance systems and reporting, program compliance, and other finance-related legal compliance areas. Professionally, Mr. Breaux is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. He is active in both the Gulf Coast Finance Officers Association and the Government Finance Officers Association of Texas additionally he serves as a research committee member for the Texas Association of School Business Officials as an associate member. Mr. Breaux serves on the national committee for Government Services for CPA Associate, International and is the past chairman of the Houston Chapter of the Texas Society of Certified Public Accountants Government Auditing and Accounting Committee. He has provided certification training for government finance personnel and is involved in developing training on government auditing standards. 22 Tom Pedersen, CPA Engagement Partner and Principal -Audit Services Tom Pedersen is a graduate of Stephen F. Austin State University, where he received a Bachelor of Business Administration in accounting in 1976. He has been licensed as a Certified Public Accountant since 1980. Mr. Pedersen has been in public practice for over twenty years and has also worked for ten years with the City of Texas City, where he held the title of Director of Finance. .~., Mr. Pedersen has specialized in school district and municipal auditing and consulting, audits of public housing authorities, banks, and community colleges. His experience in these areas included the preparation and review of Comprehensive Annual Financial Reports that have been awarded the Certificate of Achievement for Excellence in Financial Reporting. He has been awarded the ,~ Certificate of Educational Achievement in Governmental Accounting and Auditing by the AICPA. During his ten years with Texas City, Mr. Pedersen directed all accounting and business activities including banking, investments, general insurance, health and welfare benefits, accounting policy development, cash management, utility billing, general ledger, accounts payable, accounts receivable, payroll, purchasing, tax billing, street assessments, and management information systems. Mr. Pedersen was responsible for preparation and management of a multi- million dollar city budget and developing sound a financial plan for the City. He is familiar with the day to day operations of running a finance department to include managing the city's $25 million investment portfolio, preparing monthly forecast for revenue and expenditures, and developing monthly departmental performance measures. Additionally, Mr. Pedersen directed the selection, installation, and implementation of the city's administrative software, developed real- world financial management policies, prepared prospectus for bond sales and implemented a centralized purchasing system. The City of Texas City was the recipient of the Certificate for ... Excellence in Financial Reporting for its Comprehensive Annual Financial Report as conferred by the Government Finance Officers Association. Mr. Pedersen is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. 23 S RY OF QUALIFICATIONS Continuing Professional Education The following is a table of continuing education courses topics that the project team has participated in or served as instructors in the past three years: ~~~~" To`~~ics . ~~- ~> Pedersen';° ~ Breaux r .Ya~~le ': Governmental uali Control X X X GASB 34 Reporting Model -Theory and Practical Im lementation Issues X X X OMB A133 & SAS82 X X X Governmental Accounting, Reporting, and Auditin X X X Generally Accepted and Governmental Auditin Standards X X X Public Funds Investment Act X Ethics X X X Arbitra e Rebate and Com liance U date X X X Statement on Auditing Standards No. 99, Considerations of Fraud in a Financial StatementAudit X X X Governmental Accounting Standards Board U date X X X GASB Statement No. 39 -Determining Whether Certain Organizations Are Com onent Units X X X Statement on Auditing Standards No. 112, Communicating Internal Control Matters Identi ed in an Audit X X X Statement on Auditing Standards No. 104 - 111,Risk Assessment Standards X X X .,~, Null-Lairson, P.C. is a registered sponsor of continuing education for the Texas State Board of Public Accountancy. As such, we can coordinate and/or provide quality continuing professional education for our clients and staff. Because of the diverse background of our personnel and practice areas, we can provide a wide range of educational assistance to client personnel as well as specific training in municipal accounting issues tailored to local governments' unique needs. 24 0 ATTAC~IlV~NTS Zs First National Bank Balding 400 Pine $tfe6C..rJUKe 600 ~ ~'r!~ Abilene, Texas 7?60i-5128 i aldca E326) 672-4000 FAX {325)672.7019 Davis, Kinard 8r Co., P.C. t•soo•ssaas2s Cer;i6ed AutftiC Acceuntsnts nlip~f:www.diwpa.com May 25, 2005 To the Shareholders Null-Lairson, P.C. We have reviewed the system of quality control for the accounting and auditing practice of Nut!- Lairson, P.C. (the firm) in effect for the year ended December 31, 2004. A system of quality +w control encompasses the firm's organizational structure, the policies adopted and procedures established to provide it with reasonable assurance of conforning with professional standards. The elements of quality control are described in the statemena on Quality Control Standanls issued by the American Irtstitutc of CPAs {AICPA). The firm is responsible for designing a w system of quality control and wmptying with it to provide the firm reasonable assurance of conforming with professional standards in at! material respects. Our responsibility is to express an opinion on the design of the systtarr of quality control and the firm's compliance with its system of quality control based on our review. err Our review was conducted in accordance with standards established by the Peer Review Board of the AiCPA. During our review, we read required representations from the firm, interviewed firm personnel and obtained an understanding of the nature of the firm's accounting and auditing rr practice, and the design of the firm's system of quality control sufficient to assess the risks implicit in its practice. Based on our assessments, we selected engagements and administrative files to test for conformity with professions} standards and compliance with the firm's system of quality control. The engagements selected represented a reasonable crass-section of the firm's irr accounting and auditing practice with emphasis on higher-risk engagements. The engagements selected included among others, audits of Employee Beneftt Plans and engagements performed under Government Auditing Standards. Prior to concluding the review, we reassessed the adequacy of the scope of the peer review procedures and met with firm management to discuss rir the results of our review. We believe that the procedures we performed provide a reasonable basis for our opinion. In perforating our review, we obtained an understanding of the system of quality control for the ~ film's accounting and auditing practice. in addition, we tested compliance with the film's quality control policies and procedures to the extent we considered appropriate. These tests covered tltc application of the firm's policies and procedures on selected engagements. Our review was based on selected tests therefore it would not necessarity detect all weaknesses in the „~„ system of quality eontml or alt instances of noncompliance with it. There are inherent limitations in the effectiveness of any system of yua)ity control and therefore noncompliance with the system of gustily control may occur and not be detected. Projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may became inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate- ~. t~ 26 i In our opinion, the system of quality control for the accounting and auditing practice of IVull- Lairson, P.C. in effect for the year ended Aecember 31, 2004 has been designed to meet the "" requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. "" As is customary in a system review, we have issued a letter under this date that sets forth comments that were not considered to be of sufficient significance to affect the opinion expressed in this report. DAVIS, KINARD & C4., P.C. 27 w APPENDIX C PROPOSER GUARANTEES The proposer certifies it can and will provide and make available, at a minimum, all services set forth in Section II, Nature of Services Required. Signature of Official: Name (typed): -Tom Pedersen Title: -Principal Firm: Null Lairson P.C. Date: October 12, 2007 .~. 28 APPENDIX D PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Texas laws with respect to foreign (non-state of Texas) corporations. B. Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy providing a prudent amount of coverage for the willful or negligent acts, or omissions of any officers, employees or agents thereof. C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the express prior written permission of the County. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. Signature of Official ~~ Name (typed):_Tom Pedersen Title: Principal Firm: Null Lairson P.C. Date: October 12, 2007 29