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Audit Services Eide Bailly Dii~~E ~~~ MEMORANDUM March 14,2006 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Audit Services Recommendation Fiscal year ended June 30, 2005 was the final year of a five-year contract for providing audit services for the City of Dubuque. A Request for Proposal was issued for audit services for the next five years. Two firms submitted proposals in response: McGladrey & Pullen LLP and Eide Bailly LLP. Finance Director Ken TeKippe recommends the City Council approve of the retention of Eide Bailly LLP as the City's auditing firm for the next five fiscal years. The significant factors benefiting Eide Bailly LLP include; 1) price, $251,600 lower over five year proposal, 2) recent experience auditing the City of Dubuque, 3) local office performs audit work which provides convenience of access to senior audit staff and utilization of audit staff familiar to City personnel, and 4) other larger city clients include Ames, Burlington, Cedar Falls, Davenport, Iowa City, Muscatine and Urbandale. I concur with the recommendation and respectfully request Mayor and City Council approval. ~{~mL _ Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Kenneth J. TeKippe, Finance Director 6~~~E ~<k~ Memorandum TO: Michael C. Van Milligen, City Manager Kenneth J. TeKippe, Finance Director ~J (/J; ~"fll?. SUBJECT: Audit Services Recommendation FROM: DATE: March 14,2006 INTRODUCTION Fiscal year ended June 30, 2005 was the final year of a five-year contract for providing audit services for the City of Dubuque. An audit committee was established to review proposals and recommend a firm to provide audit services to the City for the next five fiscal years (FY'06 - FY'10). Committee members included; Ken TeKippe, Finance Director; Jean Nachtman, Assistant Finance Director; Dawn Lang, Budget Director; Chris Kohlmann, Information Services Manager; Aggie Tauke, Community Development Specialist; Rick Till, Financial Analyst; and Gil Spence, Leisure Services Manager. The committee developed a Request for Proposal (RFP) for audit services and mailed a letter on February 7,2006 to the following four largest local CPA firms, Eide Bailly LLP, Honkamp Krueger & Co., McGladrey & Pullen LLP, and O'Connor, Brooks & Co., P.C., soliciting their interest. DISCUSSION Two local firms responded with timely notification of interest, McGladrey & Pullen LLP and Eide Bailly LLP. In addition, Bland and Associates, P.C., a CPA firm with an Omaha, Nebraska office, expressed interest in submitting a proposal. The RFP and various City financial reports for FY'05 were provided to each firm. McGladrey & Pullen LLP and Eide Bailly LLP submitted proposals. Bland and Associates, P.C. opted not due to the logistics of the engagement and their minimal experience in City audits and preparing CAFR's. The audit committee reviewed both firms' proposals. Although McGladrey & Pullen LLP is a quality firm and submitted a good proposal, the committee recommends retaining Eide Bailly LLP as the CPA firm for the next five years. Significant factors benefiting Eide Bailly LLP include; 1) price, $251,600 lower over five year proposal, 2) recent experience auditing the City of Dubuque, 3) local office performs audit work which provides convenience of access to senior audit staff and utilization of audit staff familiar to City personnel, and 4) other larger Iowa city clients including Ames, Burlington, Cedar Falls, Davenport, Iowa City, Muscatine and Urbandale. Based on the strong consensus of the committee, I recommend your support in seeking City Council approval to issue a contract. Site interviews of the firms were not required to make a recommendation. The proposed audit fees for the fiscal year ending June 30, 2006 audit are approximately 15% higher than the fees for the fiscal year ended June 30, 2005 audit. Important reasons provided by Eide Bailly LLP for the larger than normal increase in fees include: 1. Increased cost of retaining experienced staff. 2. Increased cost of continuing professional education. Eide Bailly LLP obtains more education than they are required to have under the rules for the AICPA, State of Iowa, and Government Auditing Standards (Yellow Book). 3. Increased technology costs for laptops, other related hardware, and software programs. 4. Eide Bailly LLP is now a member of the AICPA Governmental Audit Quality Center. The Center's primary purpose is promoting the importance of quality government audits. In addition to the normal audit reviews performed each year by the firm's internal staff, a high percentage of audit reports and work papers are reviewed as well. This is a requirement of GAQC. In addition, more internal government audit training will be required to ensure audit quality throughout the firm. Through continued updating of internal auditing procedures and utilization of the recently upgraded general ledger software, there may be opportunities to reduce audit fees in future years. A copy of the Eide Bailly LLP proposal and dollar cost bid are enclosed. ACTION The audit committee requests your review and submission to the City Council for the approval of Eide Bailly LLP to continue as the City's auditing firm for the next five fiscal years and subsequent authorization for you to sign the audit service agreement. If there are any questions on the process or recommendation, please feel free to contact me. Thank you for your consideration. KJT/jmg Enclosures cc: Jean Nachtman, Assistant Finance Director Dawn Lang, Budget Director Chris Kohlmann, Information Services Manager Aggie Tauke, Community Development Specialist Rick Till, Financial Analyst Gil Spence, Leisure Services Manager I I I I I I I I I I I I I I I I I I Dollar Cost Bid March 6, 2006 D~~~E ~</k.~ Eide Bailly LLP 3999 Pennsylvania Avenue, Suite 100 Dubuque,lA 52002-2639 Contact: Andrew J. Traeger, Partner 563.556.1790 alraeger@eidebailly.com PEOPLE. PRINCIPLES. POSSIBILITIES. I I I I I I I I I I I I I I I I I I I ~~>>"" EideBailly" ~ CPA~ & BUSINESS ADVISORS March 6, 2006 Mr. Ken TeKippe Finance Director City of Dubuque 50 West 13th Street Dubuque, IA 52001-4864 Dear Mr. TeKippe: This dollar cost bid has been prepared by Eide Bailly LLP. Eide Bailly LLP certifies that Andrew J. Traeger is a partner with said firm and, as such, is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Dubuque, Iowa. Eide Bailly LLP will accept reimbursement for travel related costs at the prevailing City of Dubuque's rates for its employees. If the City of Dubuque desires to reduce their audit fees, we will be available during the audit contract to discuss ways to reduce the audit fees by having City staff convert their cash basis records to accrual, recording journal entries, as well as writing the audit reports. Please let us know at any time if you want to discuss further. EIDE BAILLY LLP CP As & Business Advisors ~P4 Andrew J. Traeger, CPA Partner PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fax 563.557.7842 I EOE I I I I I I I I I I I I I I I I I I I ~"""'I EideBailly. ~ PROPOSAL FOR AUDIT SERVICES ALL-INCLUSIVE MAXIMUM PRICE SUMMARY FOR THE CITY OF DUBUQUE Proposal for Audit Services: Price of First Year of Engagement (FY06) $ 52.000 Price of Second Year of Engagement (FY07) $ 53.000 Price of Third Year of Engagement (FY08) $ 56.200 Price of Fourth Year of Engagement (FY09) $ 59.600 Price of Fifth Year of Engagement (FYlO) $ 63.200 Total All-Inclusive Maximum Price $ 284.000 Proposal of Eide Baillv LLP Address 3999 Pennsvlvania Avenue. Suite 100. DubuQue. Iowa 52002-2639 Authorized Signer / ....) LbJ!;,.. ~hr/1 Andre J. Traeger v ------ Date March 6. 2006 Note: Regarding the sale of debt securities, if we are required to issue a "consent and citation of expertise" as the auditors and any necessary "comfort letters," we will bill these at our standard hourly rates. I I I I I I I I I I I I I I I I I I I ~..~ EideBailly. ~ SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2006 FINANCIAL STATEMENTS FOR THE CITY OF DUBUQUE Employee Hourly Classification Hours Rates Total Partners 80 $ 255 $ 20.400 Managers 220 $ 135 $ 29,700 Staff 440 $ 100 $ 44,000 Clerical 60 $ 85 $ 5.100 Subtotal 800 $ 99 .200 Out-of-Pocket Expenses- Transportation/Parking $ 200 Adjustment to Maximum Price $ (49,400) Subtotal $ 50,000 Additional fee to update the financial reporting software for the City's new chart of accounts $ 2,000 Total all-inclusive maximum price for FY 2006 audit engagement $ 52 000 I I I I I I I I I I I I I I I I I I I ------..~ EideBail1y~ ~ SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2007 FINANCIAL STATEMENTS FOR THE CITY OF DUBUQUE Employee Hourly Classification Hours Rates Total Partners 75 $ 265 $ 19.875 Managers 210 $ 145 $ 30.450 Staff 430 $ 105 $ 45.150 Clerical 60 $ 90 $ 5 .400 Subtotal 775 $ 100.875 Out-of-Pocket Expenses- Transportation/Parking $ 200 Adjustment to Maximum Price $ (48.075) Total all-inclusive maximum price for FY 2007 audit engagement ~ 53 000 I I I I I I I I I I I I I I I I I I I ~""""'I EideBailly. ~ SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2008 FINANCIAL STATEMENTS FOR THE CITY OF DUBUQUE Employee Hourly Classification Hours Rates Total Partners 70 $ 275 $ 19.250 Managers 200 $ 155 $ 31.000 Staff 430 $ 110 $ 47.300 Clerical 60 $ 95 $ 5.700 Subtotal 760 $ 103.250 Out-of-Pocket Expenses- TransportationJParking $ 200 Adjustment to Maximum Price $ (47,250) Total all-inclusive maximum price for FY 2008 audit engagement $ 56 200 I I I I I I I I I I I I I I I I I I I ~~""'" EideBail1y~ ~ SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2009 FINANCIAL STATEMENTS FOR THE CITY OF DUBUQUE Employee Hourly Classification Hours Rates Total Partners 70 $ 280 $ 19.600 Managers 200 $ 160 $ 32.000 Staff 420 $ 115 $ 48.300 Clerical 60 $ 100 $ 6.000 Subtotal 750 $ 105.900 Out-of-Pocket Expenses- Transportation/Parking $ 200 Adjustment to Maximum Price $ (46.500) Total all-inclusive maximum price for FY 2009 audit engagement $ 59.600 I I I I I I I I I I I I I I I I I I I ~...~ EideBailly~ ~ SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2010 FINANCIAL STATEMENTS FOR THE CITY OF DUBUQUE Employee Hourly Classification Hours Rates Total Partners 70 $ 285 $ 19.950 Managers 200 $ 165 $ 33.000 Staff 420 $ 120 $ 50.400 Clerical 60 $ 105 $ 6.300 Subtotal 750 $ 109.650 Out-of-Pocket Expenses - TransportationlParking $ 200 Adjustment to Maximum Price $ (46.650) Total all-inclusive maximum price for FY 2010 audit engagement $ 63.200 CULTURE The Foundation of Success Caring for our external and internal clients with a passion to go the extra mile. Respecting our peers and their individual contributions. Conducting ourselves with the highest level of integrity at all times. Trusting and supporting one another. Being accountable for the overall success of the Firm, not iust individual or office success. Stretching ourselves to be innovative and creative, while managing the related risks. ARIZONA Phoenix 602.264.5844 Recognizing the importance of maintaining a balance between work and home life. IDAHO Boise 208.344.7150 Promoting positive working relationships. IOWA Dubuque 563.556.1790 And, most of all, enjoying our jobs ... and having fun! MINNESOTA Minneapolis 952.944.6166 ~..~ EideBailly,. ~ MONTANA Billings 406.896.2400 NORTH DAKOTA Bismarck 701.255.1091 Fargo 701.239.8500 Minot 701.852.2517 OKLAHOMA Oklahoma City 405.478.3334 Tulsa 918.299.8833 SOUTH DAKOTA Aberdeen 605.225.8783 Sioux Falls 605.339.1999 www.eidebailly.com R." 1 /2005 I I I I I I I I I I I I I I I I I I Proposol for Professional Services March 6, 2006 DI~~~E ~~~ Eide Bailly UP 3999 Pennsylvania Avenue, Suite 100 Dubuque, IA 52002-2639 Contact: Andrew J. Traeger, Partner 563.556.1790 atraeger@eidebailly.com PEOPLE. PRINCIPLES. POSSIBILITIES. I I I I I I I I I I I I I I I I I I I ~~>>~ EideBaill~L, ~ CPA.'i & m;SlJ'-':ESS ADVISORS March 6, 2006 Ken TeKippe Finance Director City of Dubuque - City Hall 50 West 13th Street Dubuque, IA 52001-4864 Dear Mr. TeKippe: Eide Bailly LLP is pleased to submit this proposal to perform professional audit services for the City of Dubuque. This technical proposal explains the qualifications of our firm, the scope and approach of the audit and our commitment to delivering high quality, professional services to the City of Dubuque (City). We believe that our broad experience and commitment to serving governmental organizations makes Eide Bailly the firm best qualified to serve the City of Dubuque. Our firm brings the following distinct competencies to this engagement: . An audit team with extensive experience auditing the City of Dubuque and many other cities of similar size, who communicate clearly and regularly with City staff . Accounting professionals that provide valuable support to the management of the cities with whom we work . Significant and varied governmental experience, including work with many entities that receive the GFOA Certificate for Excellence in Financial Reporting . Knowledge and vast experience with the audit of Federal award programs in accordance with the Single Audit Act of 1996 and OMB Circular A-133 We understand and will comply with the schedules and scope for the audit, as outlined in your Request for Proposal and will perform all work within the time frames outlined. This proposal is a firm and irrevocable offer for 90 days. We are committed to providing the City of Dubuque with competent, timely and personalized professional services. Thank you for the opportunity to present this proposal, and we look forward to the opportunity to serve you. Sincerely, Eide Bailly LLP 71:"P4 Andrew J. Traeger, CPA Partner PEOPLE. PRINCIPLES. POSSIBILITIES. www.eidebailly.com 3999 Pennsylvania Ave., Suite 100 I Dubuque, Iowa 52002-2639 I Phone 563.556.1790 I Fax 563.557.7842 I EOE I I I I I I I I I I I I I I I I I I I ~..~ EideBail1y~ ~ Contents Executive Summary .... ... ... ... ... ......... ... ... ... ... ... ... ... ... ... ....... ... ... ...... ..... ... ... ... 1 Independence............................................................................................ 3 license ta Practice. ... ... ... ..... ... ... ... ... ... ... ... ... ... ... ... .......... ... ... ... ...... ... ... ..... ... 4 Firm Qualifications and Experience............................................................... 5 Partner, Supervisory ond Staff Qualifications and Experience............................ 8 Similar Engagements ......... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... ... ........ ... ... ... 10 Audit Approoch ..... ... ........ ...... ... ... ... ... ... ... ... ... ... ... ... .... ... ... ... ... ... ... ... ..... ... 11 Potential Audit Problems............................................................................ 15 Appendix A - Peer Review......................................................................... 16 Appendix B - Teom Profiles........................................................................20 Appendix C - Proposer Guarantee ............................................................. 24 Appendix D - Proposer Warronties............................................................. 25 I ~...~ EideBailly~ ~. I I Executive Summary I City of Dubuque Proposal for Auditing the City of Dubuque's Financial Statements for Fiscal Year June 30, 2006, with the option of four subsequent fiscal years I The City of Dubuque has requested a proposal for the following services: I Audit of financial statements for fiscal year ending June 30, 2006, including converting the City's accounting infonnation from cash basis to accrual basis. Preparation of Comprehensive Annual Financial Report (CAFR) that conforms to the GFOA format, with a separate management letter. I I Separate financial statements for Parking Facilities, Dubuque Metropolitan Area Solid Waste Agency, and the Dubuque Regional Airport Passenger Facility Charges Audit - all prepared on a converted accrual basis. I These reports shall be issued for the CAFR: I . A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles. . A report on compliance and on internal control over financial reporting in accordance with Government Auditing Standards. . A report on compliance with requirements applicable to each of its major programs and internal control over compliance in accordance with OMB Circular A-133. I I We understand the City of Dubuque will select a firm with: I . Strength in the Government Industry. You desire to work with experienced professionals who have strong knowledge and in-depth understanding of your industry. They will work to help you achieve the "Certificate of Achievement for Excellence in Financial Reporting. " . A Value Investment. You expect your audit firm to provide excellent services that are commensurate with your investment and present the greatest value for the high quality of services you are receiving. . Superior Service. Competent, attentive service and timeliness are important to you. The audit plan and schedules must be supplied by June 1. . Valuable Opinions. You want a firm who has depth and breadth of experience to present management opinions that sustain your fmancial strength and excellence in Dubuque's city government. . Availability. You want your audit team to be professional, prepared and available for the City Council, conferences with the Finance Department, and questions related to the Government Finance Officers Association or other occurrences that may warrant additional financial attention. I I I I I PEOPLE. PRINCIPLES, POSSIBIUTIES. 1 I I ~...~ EideBailly. ~ I I Executive Summary I Eide Bailly has the industry experience, breadth of services, and desire to meet and exceed the City of Dubuque's expectations. We are committed to serving you with experienced professionals who are sincerely interested in helping you reach your goals. I I As your auditor for the past 25 years, we believe we have a lot to offer the City of Dubuque. You have evidence of our strengths. We have provided very consistent staffing from year-ta-year to prevent your staff from having to fe-educate us on your policies, procedures and processes. We have two partners who are very knowledgeable about the financial operations of the City of Dubuque, allowing us to offer insightful solutions tailored to the issues you face over the years. I I Eide Bailly has also tried to be available to you in every situation, attending meetings and answering questions as requested and without delay. I Weare confident the investment you make in a professional service relationship with Eide Bailly will deliver outstanding value to the City of Dubuque. I Eide Bailly is a regional CPA firm with eleven offices throughout the Midwest and West. We presently have 90 partners and approximately 870 professional staff. Since Eide Bailly, and especially the Dubuque office, is dedicated to the government industry, you will especially benefit from our expertise and personalized service. I I The City of Dubuque has utilized our proprietary internally developed federal single audit software to assist them with accumulating federal revenues and expenditures for audit and reporting purposes. This is made available to Eide Bailly clients only. I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTIES. 2 I I I I I I I I I I I I I I I I I I I I ~..~ EideBailly_ ~ Independence Eide Bailly is independent of the City as dermed by the generally accepted auditing standardslthe U.S. General Accounting Office's Government Auditing Standards. Within the past five years, the firm has not had any relationships involving the City or its agencies, component units or oversight unit, outside of serving as auditors to the City. Should Eide Bailly enter into any professional relationships deemed relevant during the course of this engagement, we will notify the City in writing of such relationship. PEOPLE. PRINCIPLES. POSSIBIUTIES. 3 I I I I I I I I I I I I I I I I I I I ~..~ EideBailly:. ~ License to Practice Eide Bailly and each of the professional staff assigned to the City engagement are licensed to practice in the state of Iowa. PEOPLE. PRINCIPLES. POSSIBIUnES. 4 I I I I "We wanted to again thank you and your I team for another first class engagement. As always, there were I tough questions asked but it was done in a very professional manner. Helping us I work through the myriad of details, pointing out errors, I assisting with accuracy in the narratives, pleasant manners around our I office staff, solid Council presentation and a genuine I willingness to help are just some of the attributes that are greatly appreciated. " I Jim Carufel I Finance Director City ofS. St. Paul, MN I I I I I I I ~.."", EideBailly. ~ Firm Qualifications and Experience Eide Bailly has grown to be the 22"' largest CPA fIrm in the nation, with II offices located throughout the Upper Midwest and Southwest. Eide Bailly provides top-quality, reliable service while providing personal and practical assistance tailored to OUf clients' needs. Firmwide, our client base consists primarily of governmental entities, mid-sized privately held organizations and nonprofIts. Governmental entities represent the second largest industry group served by our fIrm. As such, we are committed to providing our people with specific, ongoing training in governmental issues so that they are always in the best position to provide service to our clients. Eide Bailly currently has more than 800 employees, including 100 people who are part of the Governmental Services Group. This engagement will be performed from the fIrm's Dubuque offIce, where ten people participate in the Governmental Services Group. Of these people, we anticipate that four will work on the City audit on a full-time basis, and one will work on a part-time basis. PEOPLE. PRINCIPLES. POSSIBIUTIES. 5 I I I I "Eide Bailly I performs financial audits for several other cities similar to our size. This is I very beneficial because they are able to provide me I with specific examples of how others are reporting items or handling a I particular situation. /I I J elUlifer Rodenbeck, Finance Manager City of Cedar Falls I I I I I I I I I I ~..~ EideBailly. ~ Firm Qualifications and Experience Our firm's program for continuing professional education includes requiring all professional stalfto obtain education that exceeds the requirements of the American Institute of Certified Public Accountants (AICP A) and where applicable, Government Auditing Standards. The firm places a high emphasis on lifelong learning; this past year, we provided our client service professionals with an average of 56 hours of professional education, compared with the 40-hour accounting industry average. Our governmental audit staff obtains government-specific continuing professional education through the following means: . Government-specific seminars sponsored by the Iowa Society of Certified Public Accountants. . Seminars sponsored by the Government Finance Officers Association (GFOA). . Seminars taught by Eide Bailly management and/or outside industry experts that dealt specifically with governmental issues. The most recent of these was held in June 2005. We believe that by expanding our knowledge of issues important to governmental organizations, we are able to provide more in-depth, knowledgeable solutions to our clients. Firmwide, Eide Bailly governmental auditors are well positioned in organizations associated with governmental entities. For example, we are members of the AICPA Governmental Audit Quality Center whose primary purpose is to promote the importance of quality government audits. We have held leadership roles in the Government Finance Officers Association at the national level. Through this involvement, we stay abreast of, and have input into, new issues in governmental accounting. Our service team is well versed in emerging issues and how we can assist the City in dealing with these issues. Members of our government team, including Andy Traeger, Dave Cahill and Brian Unsen from the Dubuque office, are members ofthe GFOA's Special Review Committee for the Certificate of Excellence for Achievement in Financial Reporting. Eide Bailly clients that have received this prestigious award include the following (these are Dubuque-office clients only, not firmwide): City of Dubuque, IA City of Burlington, IA City of Ames, IA City of Marshalltown, IA City of Cedar Falls, IA Davenport Community Schools City of Muscatine, IA City of Iowa City, IA City of Davenport, IA City of Urban dale, IA LilUl County PEOPLE. PRINCIPLES. POSSIBIUTIES. 6 I ~..~ EideBail1y~ ~ I I Firm Qualifications and Experience I A copy of our firm's most recent peer review is included as Appendix A of this technical proposal. The quality control review included a number of governmental engagements. I Our firm has not had any of its audits subject to a federal or state desk review during the past three years, nOf has any disciplinary action been taken or is currently pending against the firm during the past three years by state regulatory bodies or professional organizations. I I I I I I I I I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTIES. 7 I ~...~ EideBailly. ~ I I Partner, Supervisory and Staff Qualifications and Experience I I Client service and professionalism are the cornerstones of our business philosophy, and we try to employ people who agree with our philosophy. Our client service team has the capability and experience to provide the City with more than just standard auditing services. We can also advise you on difficult business and technical issues that may arise throughout the year. We believe our tailored solutions are a very valuable asset we can provide to the City. I I The engagement will be staffed from our Dubuque office. Andy Traeger, who has worked with government agencies throughout his 28 years in public accounting, will lead the team and will serve as engagement partner. Throughout his career, Andy has been very active with the Government Finance Officers Association, serving on the Special Review Connnittee. He has also served on the Government Auditing and Accounting Connnittee of the Iowa Society of Certified Public Accountants. I I Over the past three years, Andy has undertaken a considerable amount of continuing education related to governmental entities, including coursework in topics such as GFOA report reviews, training on A-I33 audit procedures and general governmental auditing updates. He has also received training on other audit -related topics such as audit efficiency and peer reviews. I I I In addition to the team provided, we have the added valuable resources of our partner, Dave Cahill, available to you. Dave was on the City of Dubuque team in the past, and as a partner with 12 years of experience working with governmental entities, has a wealth of knowledge from working on the City of Dubuque and many other governments throughout Iowa. I Working closely with Andy as the manager for this engagement will be Brian Unsen. Brian has over seven years of public accounting experience, the vast majority of which has been spent serving governmental clients. Brian will be onsite full-time during the audit fieldwork. Brian is also a member of the Government Finance Officers Association, serving on the Special Review Committee. I I Brian's continuing professional education also focuses significantly on governmental entities; his coursework has included new GASB statement updates, local government audit updates, and Yellow Book and Single Audit updates. I Brian will provide direction to senior associate Jenny Larson, who will be heavily involved in the fieldwork for the City. Jenny is part of the audit team for some of Eide Bailly Dubuque office's largest government clients. Her experience extends beyond the more traditional governmental entities to include housing authorities and passenger facility charge audits. She also works frequently with single audits. I I PEOPLE. PRINCIPLES. POSSIBIUTIES. B I I I I I I I I I I I I I I I I I I I I ~..~ EideBailly. ~ Portner, Supervisory and Stoff Qualifications and Experience Because we know how important the relationship is between your staff and ours, we will keep staffing changes to a minimum. This provides stability in our business relationships - and eliminates the need for your City's staff to familiarize our people each year with the City's unique characteristics. We have been successful in retaining our staff by living a culture that emphasizes the value of our clients, people and relationships. Eide Bailly Firmwide 5taH Retention Rate 90% 86% 82% 78% 74% Indu$lry Eide Bailly Eide Bailly Eide Bailly Average 2003 2004 2005 However, should the need arise to change any ofthe key engagement personnel, we will notify you in writing of the change and provide a resume listing the qualifications of the proposed replacement. Profiles for each team member are included in Appendix B. We have provided two years of continuing professional education in our team profiles. Additional year of education is available upon request. PEOPLE, PRINCIPLES. POSSIBIUTIES. 9 I I I I "We at the City of I Muscatine have enjoyed a very positive professional relationship I with Eide Bailly now for several years. Not only is the staff professional and knowledgeable as it I relates to an independent and impartial audit, they stand ready to assist us I when dealing with a number of accounting, auditing and financial accountability issues that I the city may have to deal with. I "One key reason we chose Eide Bailly was because of their success in helping communities I obtain the Government Finance Officers Association nationally I recognized "Certificate of Achievement for Excellence in Financial Reporting". They have I successfUlly helped us reach that goal. "Overall we have been I extremely pleased with our professional relationship with Eide I Bailly; and highly and without reservation recommend them to anyone. I A.J. Johnson City Administrator I Muscatine, IA I I ~""""I EideBailly~ ~ Similar Engagements The most significant government engagements performed by the Dubuque office are as follows. All of these cities have been awarded the GFOA Certificate for Excellence in Financial Reporting. Over the years, our fIrm has worked hard to create efficiencies within the audit - efficiencies that work to the benefit of our clients. Throughout the course of the audit, Andy and Brian will work closely with our team and the City staff to ensure we are meeting your deadlines and your expectations. City of Ames Andrew 560 Annual Sue Rybolt Client since 2003 Traeger audit 515.239.5116 City of Burlington Andrew 470 Annual Doug Worden Client since 1998 Traeger audit 319.753.8163 City of Cedar Falls Andrew 455 Annual Jennifer Client since 1994 Traeger audit Rodenbeck 319.268.5108 City of Muscatine Andrew 540 Annual Nancy Lueck Client since 1994 Traeger audit 563.264.1550 City of Urban dale Dave Cahill 530 Annual Nicole (Nicci) Client since 2005 audit Lamb 515.331.6701 PEOPLE. PRINCIPLES. POSSIBIUTIES. 10 I I I I "The Eide Bailly audit I team was always well prepared. They took the time to plan the audit in advance of field work I and fiscal year end. Due to their pre-planning, they provided us with a I list of items required by the audit team. The list was given to us prior to I fiscal year end which gave us ample time to prepare the required I schedules in advance of field work. This process also ensured that the audit team was I adequately staffed and allowed the auditors to do their job in a timely, I efficient manner thereby reducing the number of auditor and staff hours. " I Pat Nagel, Comptroller I ND Housing Finance Agency I I I I I I ~...~ EideBailly:" ~ Audit Approach All accounting firms have the appropriate tools, methodologies and approach to perform an efficient and effective audit. However, one feature that sets Eide Bailly apart from other firms is the level and frequency of involvement our partners and managers have with clients during the audit process. Both Andy and Brian have significant experience working with governmental organizations, and you can expect that experience to be brought to all interactions with the City's staff, management and the City Council. Both will spend time on-site during the audit process working with our team In addition, they are available to meet with management and the Council throughout the year. Your audit staff will do more than just look at the numbers during fieldwork. Our experience as your auditor for the past 25 years has provided us with a great opportunity to better understand the City, its internal controls, processes and programs so that we can provide extended value beyond the audit process. We have not rested on our laurels; as the City has grown and expanded, we have grown and expanded as well, bringing leading technology, information and wisdom to our work, ensuring your recurring receipt of the "Certificate of Achievement for Excellence in Financial Reporting. " We strive to support the City of Dubuque's successes. Another factor that differentiates Eide Bailly from other firms is our management letters. You will find that our management letters go beyond "just the numbers" to provide information about what we believe to be some of the critical business issues facing the City. We will use the management letter to help the City plan for the upcoming year. Our approach to audit fieldwork will be to segregate the audit steps for each significant audit area. Based on our review afyour prior year's audit report and discussions with City personnel, we anticipate the following to be a realistic sunnnary of audit areas and the anticipated hours to complete by staff area. PEOPLE. PRINCIPLES. POSSIBIUTIES. II I I I I I I I I I I I I I I I I I I I ~...~ EideBailly. ~ Audit Approach IloLlI" Othc] Audit Area Partnc] M~lnagel Prolcsslol1a]s Control system review, planning, analytical review, and testing 12 44 28 Minutes, contracts, and ordinance review - 12 16 Cash and investments - 16 24 Revenues - 8 24 Property and equipment - - 48 Expenditures - 8 32 Payroll - - 16 Debt and debt service - 6 16 Federal programs 48 - - Trial balances - 48 72 Iowa Code compliance review - 8 32 Review, report writing, and other nonfield work time 20 70 132 Typing/Clerical - - 60 Total 80 220 500 Sampling may be performed for tests of controls, compliance testing and snbstantive tests of certain accounts and transactions. In our audit of basic financial statements, we will also select various transactions for testing based on materiality assessed at the appropriate level. These transactions may include such items as capital asset additions, subsequent disbursements and subsequent receipts. We will be pleased to discuss specific sample sizes and selection methods when they are determined, either during audit planning or during fieldwork. We will use confirmations in the areas of cash and investments, notes receivable, and other areas deemed necessary. We will perform tests of the City's compliance with certain provisions oflaws, regulations. contracts and grants. We will assess the risk of material misstatement resulting from violations of laws and regulations having a direct and material effect on the determination of financial statement amounts. These laws and regulations can relate to items such as budgetary compliance, purchasing compliance and cash and investment compliance, as well as Single Audit compliance, as applicable. PEOPLE. PRINCIPLES. POSSIBIUTlES. 12 I I ~...""' EideBailly~ ~ I Audit Approach I We will combine compliance tests oflaws and regulations that involve the inspection of documentation supporting transactions with substantive tests of transactions and tests of control procedures. I I The sample size will be the largest sample size necessary to support our conclusions in compliance with laws and regulations. I Our audit will meet all federal and state requirements, including the Federal Single Audit Act of 1996 and Circular A-133 issued by the Federal Office of Management and Budget, as applicable. Samples will be used to the extent necessary to support our conclusions on compliance with laws and regulations. I Analytical procedures will be used in general planning to improve our understanding of the City's operations and to identify audit areas for increased attention and will be applied to assist in planning the nature, timing, and extent of other procedures. They will be applied to all balance sheet, revenue/receipt and expense/expenditure areas. These procedures will include, but not be limited to, the comparison of current year to prior year and budget amounts. Areas that show results different from those anticipated or planned will be further investigated to determine the validity of the variance. I I I Eide Bailly software will be used to the fullest extent possible in the analytical review, sampling, account analysis and federal program areas. We may ask City staff to provide certain electronic data files on which we will use our data extraction software. I The approach we will take to gain an understanding of the City's internal controls includes the following: I . Interview City personnel . Review of organizational charts, accounting and procedure manuals and programs . Completion of internal control questionnaires . System narrative write-ups . Evaluation ofthe items selected for testing . Review of controls over financial information systems I I I I I PEOPLE. PRINCIPLES. POSSIBIUTIES. 13 I I ~..~ EideBail1y~ 1....---/ I I Audit Approach I In addition, our engagement approach is based on the following key assumptions: I . As part of our procedures on the financial report, we will compare the financial information, schedules and disclosures against the GFOA Certificate for Excellence in Financial Reporting Checklist . We will initiate ideas from observations that we believe will help the objectives of the City. We will be pleased to respond to inquiries you may have about financial or other business matters . The assistance to be provided by your personnel, including the preparation of schedules and analyses of accounts, will be discussed with the Finance Department. The timely completion of this work will assist us in perfonning our work efficiently I I I I I I I I I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTlES. 14 I ~.....~ EideBailly. ~ I I Potential Audit Problems I We do not anticipate any potential problems with the City audit. However, should an unforeseen situation occur, our approach will be to communicate immediately with the appropriate City personnel. We will identify the cause of our concern and explain the scope of the issue based on our current knowledge. Because it is our experience that such issues are best resolved jointly between the client and Eide Bailly, we will then jointly develop a plan to address the issue. I I I I I I I I I I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTlES. 15 . . . I I I I . I ~ I I '. I I I I I I I ~..~ EideBailly. ~ Appendix A - Peer Review PEOPLE. PRINCIPLES. POSSIBIUTlES. 16 I ~...~ EideBailly~ ~ I I I m s=.DOal LLP I Certified Public Accownb.... & Comultantl I October 11, 2002 I To the Partners Eide Bailly LLP I We have reviewed the system of quality control for the accounting and auditing prsctice of Bide Bailly LLP (the "Firm") in effect for the year ended July 31, 2002. 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 complying with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American IrnJtilute of Certified Public Accountants (the "AJCPA"). The design of the system, and compliance with it, are the responsibilities of the Firm. In addition, the Firm has agreed to comply with the membership requirements of the SEe Prsctice Section of the AJCPA Division for CPA Firms (the "Section"). Our responsibility is to express an opinion on the design of the system, and the Firm's compliance with that system and the Section's membership requirements based on our review. I I I Our review was conducted in accordance with standards established by the Peer Review Committee of the Section and included procedures to plan and perform the review that are summarized in the attached description of the peer review process. Our review would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it or with the membership' requirements of the Section since it was based on selective tests. 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.!n conditions, or that the degree of compliance with the policies or procedures may deteriorate. I I I In our opinion, the system of quality control for the accounting and auditing prsctice of Eide Bailly LLP in effect for the year ended July 31, 2002, has been designed to meet the requirements of the quality control standards for an accounting and auditing prsctice established by the AICPA, and was complied with during the year then ended to provide the Firm with reasonable assurance of complying with professional standards. Also, in our opinion, the Finn has complied with the membership requirements of the Section in all material respects. I As is customary in a peer review, we have issued a letter under this date that sets forth comments relating to certain policies and procedures or compliance with them. The matters described in the letter were not considered to be of sufficient significance to affect the opinion expressed in this report. I I Offices in 13 states and Washington, DC C~-~t-Lf 111,--, I PEOPLE. PRINCIPLES. POSSIBIUTlES. 17 I I ~..~ EideBailly. ~ I I I I ~s=rson LLP Certlflecl Public AccounlMl." CONUlt.nb I October 11,2002 I To the Partners Bide Bailly lLP I We have reviewed the system of quality control for the accounting and auditing practice of Bide Bailly lLP (the "Firm") in effect fnr the year ended July 31, 2002, and have issued our repnrt thereon dated October 11, 2002. The matters described below were not considered to be of sufficient significance to affect the opinion expressed in that report, which should be read ,in conjunction with this letter. I Engagement Performance I Comment - The finn's audit programs outline steps for performing and documenting audit planning procedures for planned level of control risk and fraud risk. However, our review disclosed several instances where the finn's planning workpapers did not include documentation for these areas or was incomplete. Through discussion with firm engagement personnel, we were able to satisfy ourselves that the engagement planning was adequate. I Recommendation The firm should hold a training session for all professionals on the matters to be considered and documented when planning for the assessed level of control risk and fraud risk. This training session should include a detailed review of all forms and checklists required by the firm in documenting audit risk areas. ' I I Comment - The finn's quality control policies and procedures require that the firm comply with professional pronouncements with regard to agreed upon procedure engagements. However, on several engagements reviewed, we noted that the accountant's report did not include appropriate wording required, procedures agreed upon included vague language, and sampling methods were not adequately defined. We were able to satisfy ourselves that sufficient procedures had been perfonned, and the reporting deficiency was not of such significance to require additional action by the firm. I Recommendation The finn should discuss in a staff meeting the importance of adhering to professional pronouncements and standards in regards to agreed upon procedures. I Comment - The finn's audit programs outline steps for performing and documenting confirmation procedures for accounts and notes receivable and communications with attorneys. However our review disclosed several instances where the workpapers did not include complete documentation in these areas. Through discussion with engagement personnel, we were able to satisfy ourselves that the work perfonned in these areas was adequate. I I Offic<:s in 13 Slates ~nd W~shIJlgtoJl, DC fIIII,",.,"."O".' I PEOPLE. PRINCIPLES. POSSIBIUTIES. 18 I I ~..~ EideBailly. ~ I I I Bide Bailly October 11. 2002 Page 2 I Recommendation The finn should include in its next training sesaion a discussion on the documentation requirements when auditing accounts and notes receivable and communicating with attorneys. I Comment - The finn's audit programs outline steps for performing and documenting audit procedures in regard to marketable equity securities. However, our review disclosed several instances where the finn's working papers did not include adequate documentation of the work perfonned in this area and one instance in which a required procedure was not perfonncd. Through discussion with engagement personnel, we were able to satisfy ourselves that sufficient procedUI'el were perfonned in the areas that lacked documentation. In the instance in which a required procedure WOB not performed. the finn hOB subsequently perfonned the omitted procedure. I I I Recommendation - The firm should hold a tmining session for all professionals on the matters to be considered and documented in the area of testing marketable equity securities. SEeps Membership Requirements I Comment The Section's membership requirements require that member finns establish independence policies that include monitoring for prohibited investments. Annual independence certifications are received from professionals; however, no additional follow.up is done by the firm to check for such investments other than review of the certifications. There were no prohibited investments noted on the independence certifications. I Recommendation - The firm should establish independence policies and procedures consistent with the Section's membership requirements in regard to monitoring for prohibited investments. I (!~~LLr I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTIES. 19 I I I I I I I I I I I I I I I I I I I I ~........, EideBailly~ ~ Appendix B - Team Profiles PEOPLE. PRINCIPLES. POSSIBIUTlES. 20 I I I I I I I I I I I I I I I I I I I ~.."'" EideBailly. ~ Andrew J. Traeger, CPA Partner-in-Charge, Gavernmental Audits 563.556.1790 I atraeger@eidebailly.cam Knowledge and Experience . 25 years in public accounting, specifically in the governmental accounting and auditing areas. . Partner-in-Charge of all city, county and school district audits of the Dubuque office. Professional Memberships and Technical Accomplishments . American Institute of Certified Public Accountants . Iowa Society of Certified Public Accountants . State of Illinois Department of Professional Regulation . State of Florida Department of Business and Professional Regulation . Member and past president of the Northeast Iowa Chapter of the Iowa Society of Certified Public Accountants Accreditation . Certified Public Accountant, Iowa, Illinois and Florida Education . Bachelor of Science, Accounting and Business Administration - University of Wisconsin, Platteville . Completed 101 hours of continuing professional education in the last two years . Completed 40 hours of governmental accounting and auditing education in the last two years PEOPLE. PRINCIPLES. POSSIBIUTIES. 21 I I I I I I I I I I I I I I I I I I I ~..~ EideBailly. ~ Brian M. Unsen, CPA Manager 563.556.1790 I bunsen@eidebailly.com Knowledge and Experience . Seven years experience in public accounting. . Responsible for audits of governmental units, non-profit entities and employee benefit plans. . Governmental audit experience includes Cities of Cedar Falls, Dubuque, Burlington, Iowa City, Marshalltown, and Urbandale, Iowa; White Bear Lake, Mirmesota; Davenport School District, Iowa and Benton County, Iowa. Professional Memberships and Technical Accomplishments . American Institute of Certified Public Accountants . Iowa Society of Certified Public Accountants, member of Governmental Auditing and Accounting committee . Government Finance Officer's Association Special Review Committee Accreditation . Certified Public Accountant, Iowa Education . Bachelor of Arts, Accounting - Loras College, Dubuque, Iowa . Completed 151 hours of continuing professional education in the last two years . Completed 26 hours of continuing education in the area of governmental accounting and auditing in the last two years. PEOPLE. PRINCIPLES. POSSIBIUTIES. 22 I I I I I I I I I I I I I I I I I I I ~...~ EideBailly. ~ Jennifer M. Larson Senior Associote 563.556.1790 I jlarson@eideboilly.eom Knowledge and Experience . Six years experience in public accounting in the areas of auditing governmental entities, health care entities, non-profit organizations, and employee benefit plans. . Governmental audit experience includes the Counties of Johnson, Dubuque, Benton, Louisa, and Linn, and Cities of Dubuque, Cedar Falls, Museatine, Burlington, Marshalltown, Iowa City, Urbandale, Dyersville and Asbury. Education . Bachelor of Arts, Accounting - Loras College Dubuque, Iowa . Completed 107 hours of continuing education in the last two years . Completed 33 hours of continuing education in the area of govermnental accounting and auditing in the last two years PEOPLE. PRINCIPLES. POSSIBIUTIES. 23 I I I I I I I I I I I I I I I I I I I Appendix C - Proposer Guarantee ~"""I EideBailly_ ~ The proposer certifies it can and will provide and make available, as a minimum, all services set forth in Section II, Nature of Services Required. Signature of Official: ~P--4-- Name (typed): Andrew J. Traeger. CPA Title: Partner Firm: Eide Bailly LLP Date: March 6. 2006 PEOPLE. PRINCIPLES. POSSIBIUTlES. 24 I ~....~ EideBailly. ,-",/ I I I I Appendix D - Proposer Warranties A. Proposer warrants that it is willing and able to comply with State of Iowa laws with respect to foreign (non-state ofIowa) corporations. I B. Proposer warrants that it has and will maintain 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. I C. Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement without the prior written permission of the City of Dubuque. I D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. I I Signature of Official: ~P4 Name (typed): Andrew J. Traeger. CPA I Title: Partner I Firm: Eide Bailly LLP Date: March 6. 2006 I I I I I I I PEOPLE. PRINCIPLES. POSSIBIUTlES. 2S CULTURE The Foundation of Success Caring for our external and internal clients with a passion to go the extra mile. Respecting our peers and their individual contributions. Conducting ourselves with the highest level of integrity at all times. Trusting and supporting one another. Being accountable for the overall success of the Firm, not iust individual or office success. Stretching ourselves to be innovative and creative, while managing the related risks. ARIZONA Phoenix 602.264.5844 Recognizing the importance of maintaining a balance between work and home life. IDAHO Boise 208.344.7150 Promoting positive working relationships. IOWA Dubuque 563.556.1790 And, most of all, enioying our jobs ... and having fun! MINNESOTA Minneapolis 952.944.6166 ~..~ EideBailly~ ~ MONTANA Billings 406.896.2400 NORTH DAKOTA Bismarck 701.255.1091 Fargo 701.239.8500 Minot 701.852.2517 OKLAHOMA Oklahoma City 405.478.3334 Tulsa 918.299.8833 SOUTH DAKOTA Aberdeen 605.225.8783 Sioux Falls 605.339.1999 www.eidebailly.com Rev: 1/2005