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HomeMy WebLinkAboutC05-322 McMahan and Associates C 4/ AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE COUNTY OF EAGLE, STATE OF COLORADO AND MCMAHAN AND ASSOCIATES, L.L.C. This Agreement Regarding Provision of Professional Services ("Agreement") dated this \ day of November, 2005, is between the County of Eagle, State of Colorado, a body corporate and politic, by and through its Board of County Commissioners ("County") and McMahan and Associates, L.L.C" a Colorado limited liability company ("Contractor"), Recitals A. County desires professional certified public accounting services to provide the Services outlined in the attached Request for Proposals dated August 25, 2005 (RFP). B. Contractor has submitted to County a proposal for performing the Services (defined in Section 1 hereunder) and represented that it has the expertise and personnel necessary to properly and timely perform the Services, C. Contractor and County intend by this Agreement to set forth the scope ofthe responsibilities of the Contractor in connection with the Services and related terms and conditions to govern the relationship between the Contractor and County in connection with the Services. Agreement Therefore, based upon the representations by the Contractor set forth in the foregoing recitals, for good and valuable consideration, including the promises set forth herein, the parties agree to the following: 1. Scope of the Services: The Services shall be comprised of the following: a, Contractor shall provide the Scope of Services as more particularly described in Section II ofthe RFP and as set forth in the Audit Proposal dated September 13,2005, attached hereto and incorporated by reference ("Services"), If there is any discrepancies between the services set forth in this Agreement and the RFP and Audit Proposal, the terms and conditions of this Agreement shall control. b, Contractor shall be responsible for the completeness and accuracy of the Services, including all supporting data and other documents prepared or compiled in performance of the Services, and shall correct, at its sole expense, all significant errors and omissions therein, The fact that County has accepted or approved the Professional Services shall not relieve Contractor of any of its responsibilities. Contractor shall perform the Services in a skillful, professional and competent manner and in accordance with the highest standards of care, skill and diligence. 1 c. The parties hereto recognize that the scope of the Services may change. When the Contractor believes that the scope of the Services has been changed or that by reason of a decision of County it will be required to redo properly completed Services, Contractor shall immediately advise County of such belief and shall also provide a statement of the maximum additional charges for such services, Contractor shall not be entitled to be paid for any such additional services unless and until County agrees in writing that the Scope ofthe Services has changed and accepts the statement of the maximum additional charges. d. Additional services, if required beyond the Scope of Services, shall be separately negotiated and agreed to by both County and Contractor prior to the Contractor performing the additional services, 2, Contract Documents: The relationship of the parties hereto shall be controlled by the following documents set forth in the order of controlling priority: a, This Agreement; b. Exhibit A - Schedule ofProt'essional Fees; c, Exhibit B - Request for Proposals dated 8/24/05; d, Exhibit C - McMahan & Associates, LLC Audit Proposal dated 9/15/05; e. Exhibit D - McMahan and Associates, LLC engagement letter dated 10/17/05 3. Time of Performance and Termination: a. This Agreement shall commence upon execution of this Agreement, subject to the provisions of Subsection 3(b) hereof, shall continue in full force and effect pursuant to the schedules as set forth in Article iv ofthe RFP attached hereto as Exhibit "B" or until earlier terminated as provided for herein, This agreement shall automatically renew for four (4) additional fiscal year periods under the terms and conditions set forth herein or as otherwise agreed to by the Parties in writing, unless the Contractor is notified that the agreement will not be renewed as provided in Subsection 3(b) hereof. b. County may, in its sole discretion, terminate this Agreement, with or without cause, upon ten (10) days written notice to the Contractor, In the event of any termination of this Agreement, Contractor shall be compensated for Services satisfactorily completed prior to said termination, 4, Compensation and Payment: a. In consideration of Contractor's performance of the Scope of Services, Contractor shall be reimbursed based on the actual time spent at Contractor's standard hourly rates, plus travel and other out-of-pocket costs such as report production, typing, and postage as set forth in Exhibit "A." Based on the Contractor's proposal, the parties agree that reimbursement for the Scope of Services shall not exceed an amount of $35,000 unless agreed upon in writing by County. 2 b, Contractor shall submit to County monthly invoices upon the progressive completion ofthe Services, Such invoices shall describe the Services performed, hours incurred, and an itemized breakdown of other expenses such as travel and out-of-pocket costs. Upon request, Contractor shall provide County with such other supporting information as County may request. Upon receipt of a proper invoice, County shall pay all proper charges within thirty (30) days of receipt of invoice, c, Contractor shall maintain comprehensive, complete and accurate records and accounts of its performance relating to this Agreement for a period of three (3) years following final payment hereunder, which period shall be extended at County's reasonable request. S, Independent Contractor: It is expressly acknowledged and understood by the parties hereto that nothing contained in this Agreement shall result in, or be construed as establishing, an employment relationship, Contractor shall be, and shall perform as, an independent Contractor, No agent, subcontractor, employee, or servant of Contractor shall be, or shall be deemed to be, the employee, agent or servant of County. Contractor shall be solely and entirely responsible for its acts and for the acts of Contractor's agents, employees, and servants during the performance ofthis Agreement. Contractor shall maintain liability, unemployment and workmen's compensation insurance on Contractor's behalf, as necessary. 6. Personnel: Contractor understands and hereby acknowledges that County is relying primarily upon the expertise and abilities of Michael Jenkins and McMahan and Associates, L.L.C. Contractor may not assign, subcontract or delegate any part of the Services or substitute subcontractors without County's written consent, which consent County may exercise in its sole discretion. 7. Confidentiality: Contractor acknowledges that during the term ofthis Agreement, Contractor may receive confidential information from County for use in connection with its performance of the Services. Contractor further acknowledges that it may in the performance of the Services develop information, including facts, data, and opinions, which are, or in County's judgment should be, confidential or limited in terms of dissemination. Contractor shall take all precautions necessary to maintain and protect the confidentiality of any such information and to ensure that it shall be used only for the purposes of the Services. All facts, data, and opinions developed by Contractor in the course of its performance of the Services shall be deemed to belong to County and no such facts, data, or opinions shall be disseminated to anyone for any purpose without County's express written consent. Contractor shall retain all knowledge and information which it has acquired as a result of this Agreement in trust in a fiduciary capacity for the sole benefit of County, its successors and assigns, Copies of all documents (including electronic files) which are obtained during or prepared in the performance of this Agreement shall be delivered to County before final payment is made to Contractor or upon earlier termination of this Agreement. 8. Indemnification: Within the limits allowed by law, Contractor shall indemnify, hold harmless and defend County and its officials, boards, officers, principals and employees, harmless from, all costs, claims and expenses, including reasonable attorney's fees, arising from claims of any nature whatsoever made by any person in connection with the acts or omissions of, or representations by, the Contractor in the performance of this Agreement. 3 9, Notices: Any notice and all written communications required under this Agreement shall be given by personal delivery, courier delivery, facsimile transmission together with a "hard copy" by United States mail, or first class mail, to the appropriate party at the following addresses: Contractor: McMahan and Associates, L.L.C. Suite 222, Avon Center 100 West Beaver Creek Blvd. P.O. Box 5850 Avon, Colorado 81620 Phone: 970-845-8800 Fax: 970-845-0851 County: Eagle County Attorney's Office 500 Broadway P,O, Box 850 Eagle, Colorado 81631 Phone: 970-328-8685 Fax: 970-328-8699 Notice shall be deemed given on the first to occur of delivery, transmission by facsimile (if transmitted during customary business hours, or the following business day if not), or three (3) calendar days after deposit in the mails, as applicable, 10, Miscellaneous: a. Contractor shall not discriminate against any employee or applicant for employment to be employed in the performance of this Agreement on the basis of race, color, religion, national origin, sex, ancestry, physical handicap, age, political affiliation, or family responsibility. b. The makin!r. execution and deliverv of this A2Teement bv the oarties hereto has not .....,./ .I __ .I.... been induced by any prior or contemporaneous representation, statement, warranty or agreement as to any matter other than those herein expressed, This Agreement, including the Contract Documents, embodies the entire understanding and agreement of the parties, and there are no further or other agreements or understandings, written or oral, in effect between them relating to the subject matter hereof. This Agreement may not be amended, including by any modification of, deletion from or addition to the Scope of Services, except by a written document of equal formality executed by both parties hereto. c. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Colorado and the parties hereby agree to submit to the jurisdiction of the courts thereof. The parties agree that venue in any action to enforce or interpret this Agreement shall be in the District Court in the Fifth District for the State of Colorado, If any action is brought to enforce the provisions of this Agreement, the prevailing party shall be entitled to reasonable costs and attorney fees. 4 d, This Agreement does not and shall not be deemed to confer upon or grant to any third party any right enforceable at law or equity arising out of any term, covenant, or condition herein or the breach thereof. e, The funds appropriated for this project are equal to or in excess of the contract amount. Notwithstanding anything to the contrary contained in this Agreement, County shall have no obligations under this Agreement, nor shall any payment be made to Contractor in respect of any period after any December 31 of each calendar year during the term of this Agreement, without an appropriation therefore by County in accordance with a budget adopted by the Board of Eagle County Commissioners in compliance with applicable provisions oflaw, IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. COUNTY OF EAGLE, STATE OF COLORADO By a~rough Its Board of Co missioners "" By: of County Commissioners ~s41~:AND ASSOCIATES, L.L.c. /;~~" '/ ' I By' . (I /\ e InS STATE OF COLORADO ) ) ss: COUNTY OF EAGLE ) The foregoing instrument was before me this I day of November, 2005, by Michael Jenkins as McMahan and Associates, L.L.C, Witness m'y ~and an~ official sfal.[ My commISSIOn expues: 3 lO 01 G:CONTRACTS\audit contract.DOC 5 c McMAHAN AN~ -\SSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA,COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. F"ACSIMILE: (970) 845-085 I P.O. Box 5850 AVON, CO 8 I 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM TOTAL, ALL-INCLUSIVE MAXIMUM PRICE For the AUDIT of the FINANCIAL STATEMENTS of EAGLE COUNTY. COLORADO For the year ending December 31,2005: $35.000 I hereby certify that I am entitled to represent McMahan and Associates, L.L.C., empowered to submit this bid, and authorized to sign a contract with Eagle County. As a condition of submitting this proposal, McMahan and Associates, L.L.C. agrees to accept reimbursement for travel, lodging and subsistence at the prevailing rates established by Eagle County for its employees, McMAHAN and ASSOCIATES, L.L.C. BY: ~- - Michael N. Jenkins, CA, C,PA Principal RECEIVED SEP 1 6 2005 EAGLE COUNTY FINANCE DEPT Performing services for local governments throughout Colorado D. Jerry McMahan, CP.A. Daniel R. Cudahy, C.P.A. Pau/J. Backes, C.P.A. Michael N. Jenkins, C.A., CP.A. Members: American Institute of Certified Public Accountants/Colorado Society of Certified Public Accountants National and Colorado Government Finance OJ+;'cers Association/Colorado Municipal League 1 McMAHAN AN ~SSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O. Box 5850 AVON, CO 8 I 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM SCHEDULE of PROFESSIONAL FEES and EXPENSES For the AUDIT of the 2005 FINANCIAL STATEMENTS of EAGLECOUNTY,COLORADO Standard Quoted Hourly Hourly Staffing Hours Rates Rates Total Partners: Michael N. Jenkins, CA, C.PA 95 $125 $113 $ 10,735 Managers: Tracy A. Walters, CPA 119 $105 $95 11,305 Audit field staff: 2 staff to be assigned 186 $75 $68 12,510 Other: Secretarial & proof-reading 10 $50 $45 450 Subtotal $ 35,000 Total for services descrribed in Section II-E of the RFP Included (Detail on subsequent page) Out-at-pocket expenses: Meals As an Eagle County firm, such out-of- Lodging pocket expenses are expected to be Transportation minimal, and will not be billed to the - Other County Total, all-inclusive maximum price for 2005 audit $ 35,000 NOTE: Although not specifically addressed in the Request for Proposal, the above-quoted fees include the following services which will likely be required by Eagle County: RECEIVED . Landfill compliance reporting . Preparation of Federal Data Collection Form SEP 1 6 2005 EAGLE CO FINANCE Performing services for local governments throughout Colorado D. Jerry McMahan, CPA. Daniel R. Cudahy, CPA Paul J. Backes, CPA. Michael N. Jenkins, CA, CPA Members: American Institute of Certified Public Accountants/Colorado Society of Certified Public Accountants National and Colorado Government Finance Officers Association/Colorado Municipal League 2 EAGLE COUNTY AUDIT COMMITTEE REQUEST FOR PROPOSALS FOR PROFESSIONAL AUDITING SERVICES August 24, 2005 P.O, BOX 850, EAGLE, CO 81631 G:\DOCS\audit.RFP .doc 2 EAGLE COUNTY REQUEST FOR PROPOSALS TABLE OF CONTENTS I. INTRODUCTION A. General Information B. Term of Engagement II. NATURE OF SERVICES REQUIRED A. General B. Scope of Work to be Performed C. Auditing Standards to be Followed D, Reports to be Issued E, Special Considerations F, Working Paper Retention and Access to Working Papers III. DESCRIPTION OF THE GOVERNMENT A. Name and Telephone Number of Contact Persons B. Background Information C. Fund Stmcture D. Budgetary Basis of Accounting E, Pension Plans F, Component Units G, J oint Ventures H. Magnitude of Finance Operations I. Computer Systems J. Availability of Prior Reports and Working Papers 3 IV, TIME REQUIREMENTS A. Proposal Calendar B, Notification and Contract Dates C. Date Audit May Commence D, Schedule for the 2005 Fiscal Year Audit 1. Interim Work 2, Detail Audit Plan and Programs 3, Fieldwork 4, Draft Reports E, Entrance Conferences, Progress Reporting and Exit Conferences F. Date Final Report is Due V, ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance B. Electronic Data Processing (EDP) Assistance C. Statements and Schedules to be Prepared by the Staff of the Eagle County D. Work Area, Telephone, Photocopying and FAX Machines E, Report Preparation VI. PROPOSAL REQUIREMENTS A. General Requirements 1. Submission of Notification of Interest 2. Inquiries 3. Submission of Proposals 4 B. Technical Proposal 1. General Requirements 2, Independence 3. License to Practice in Colorado 4. Firm Qualifications and Experience 5. Partner, Supervisory and Staff Qualifications and Experience 6. Prior Engagements with the Eagle County 7, Similar Engagements with Other Government Entities 8, Specific Audit Approach 9. Identification of Anticipated Potential Audit Problems 10. Report Format C. Sealed Dollar Cost Bid 1. Total All-Inclusive Maximum Price 2. Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each 3, Out-of-pocket Expenses in the Total All-inclusive Maximum Price and Reimbursement Rates 4, Rates for Additional Professional Services 5, Manner of Payment VII. EVALUATION PROCEDURES A. Audit Committee B. Evaluation Criteria 1. Mandatory Elements 2, Technical Qualifications 3. Price C. Oral Presentations D. Final Selection E, Right to Reject Proposals 5 APPENDICES A. Findings from Recent External and Internal Audits B. Organizational Chart C. Proposer Guarantees D. Proposer Warranties E, Format for Schedule of Professional Fees and Expenses to Support the Total All- Inclusive Maximum Price 6 EAGLE COUNTY REQUEST FOR PROPOSALS I. INTRODUCTION A. General Information Eagle County (The County) is requesting proposals from qualified firms of certified public accountants to audit its financial statements for the fiscal year ending December 31, 2005, with the option of auditing its financial statements for each ofthe four subsequent fiscal years, These audits are to be performed in accordance with generally accepted auditing standards, the standards set forth for financial audits in the General Accounting Office's (GAO) Government Auditing Standards (1994), the provisions of the federal Single Audit Act of 1984 (as amended in 1996) and US. Office of Management and Budget (OMB) Circular A-l33, Audits of States, Local Governments, and Non-Profit Organizations, There is no expressed or implied obligation for the County to reimburse responding firms for any expenses incurred in preparing proposals in response to this request. To be considered, ten copies of a proposal must be received by Michael C, Roeper at P.O. Box 850; Eagle, CO 81631 by 5:00 P,M, on September 16,2005, The County reserves the right to reject any or all proposals submitted, All questions about the meaning or intent of this Request for Proposal shall be submitted to Mr. Roeper in writing, Replies will be issued by addenda mailed, faxed or delivered to all parties recorded by Mr. Roeper as having received a Request for Proposal. Proposals submitted will be evaluated by an Audit Committee selected by the County, During the evaluation process, the Audit Committee and Eagle County reserve the right, where it may serve the County's best interest, to request additional information or clarifications from proposers, or to allow corrections of errors or omissions, At the discretion of the County or the Audit Committee, firms submitting proposals may be requested to make oral presentations as part of the evaluation process, The County reserves the right to retain all proposals submitted and to use any ideas in a proposal regardless of whether that proposal is selected. Submission of a proposal indicates acceptance by the firm of the conditions contained in this 7 request for proposals, unless clearly and specifically noted in the proposal submitted and confirmed in the contract between the County and the firm selected. It is anticipated the selection of a firm will be completed by October 14, 2005, Following the notification ofthe selected firm it is expected a contract will be executed between both parties by November 1,2005 in a form prepared by and acceptable to the County. B. Term of Engagement A five year contract is contemplated, subject to the annual review and recommendation of the Audit Committee, the satisfactory negotiation of terms (including a price acceptable to both Eagle County and the selected firm), the concurrence of Eagle County and the annual availability of an appropriation, A contract for the 2005 fiscal year and an exercisable option by the County for four additional one year audits shall be required, II. NATURE OF SERVICES REQUIRED A, General Eagle County is soliciting the services of qualified firms of certified public accountants to audit its financial statements for the fiscal year ending December 31, 2005, with the option to audit the County's financial statements for each of the four subsequent fiscal years. These audits are to be performed in accordance with the provisions contained in this request for proposals. B, Scope of Work to be Performed Eagle County desires the auditor to express an opinion on the fair presentation of its basic financial statements in conformity with generally accepted accounting principles. The County also desires the auditor to express an opinion on the fair presentation of its combining and individual fund financial statements and schedules in conformity with generally accepted accounting principles. The auditor is not required to audit the supporting schedules contained in the comprehensive annual financial report. However, the auditor is to provide an "in-relation-to" opinion on the supporting schedules based on the auditing procedures applied during the audit of the basic financial statements and the combining and individual fund financial statements and schedules, The auditor is not required to audit the introductory section of the report or the statistical section ofthe report, The auditor shall also be responsible for performing certain limited procedures 8 involving required supplementary information required by the Governmental Accounting Standards Board as mandated by generally accepted auditing standards. The auditor is not required to audit the schedule of expenditures of federal awards, However, the auditor is to provide an "in-relation-to" report on that schedule based on the auditing procedures applied during the audit ofthe financial statements, C. Auditing Standards To Be Followed To meet the requirements of this request for proposals, the audit shall be performed in accordance with: generally accepting auditing standards as set forth by the American Institute of Certified Public Accountants, the standards for financial audits set forth in the U,S, General Accounting Office's Government Auditing Standards (1994), the provisions of the Single Audit Act of 1984 (as amended in 1996) and the provisions ofD.S. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, Audits of State and Local Governments. D, Reports to be Issued Following the completion of the audit of the fiscal year's financial statements, the auditor shall issue: 1. A report on the fair presentation of the financial statements in conformity with generally accepted accounting principles, including an opinion on the fair presentation of the supplementary schedule of expenditures of federal awards in relation to the audited financial statements. 2, A report on compliance and internal control over financial reporting based on an audit ofthe financial statements 3, A report on compliance and internal control over compliance applicable to each major federal program. In the required report[s] on compliance and internal controls, the auditor shall communicate any reportable conditions found during the audit. A reportable condition shall be defined as a significant deficiency in the design or operation ofthe internal control structure, which could adversely 9 affect the organization's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Reportable conditions that are also material weaknesses shall be identified as such in the report. Nonreportable conditions discovered by the auditors shall be reported in a separate letter to management, which shall be referred to in the report[s] on compliance and internal controls. The report on compliance and internal controls shall include all material instances of noncompliance, All nonmaterial instances of noncompliance shall be reported in a separate management letter, which shall be referred to in the report on compliance and internal controls, Irregularities and illegal acts. Auditors shall be required to make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which they become aware to the following parties: The Board of County Commissioners The County Administrator Reporting to the County, Auditors shall assure themselves that the County is informed of each of 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 E. Special Considerations 10 1. Eagle County will send its comprehensive annual financial report to the Government Finance Officers Association ofthe United States and Canada for review in their Certificate of Achievement for Excellence in Financial Reporting program. It is anticipated that the auditor will not be required to provide special assistance to the County to meet the requirements of that program, 2. Eagle County has determined that the United States Department of Transportation will serve as the cognizant agency in accordance with the provisions of the Single Audit Act of 1984 (as amended in 1996) and U.S, Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, 3, The Schedule of Expenditures of Federal Awards and related auditor's report, as well as the reports on compliance and internal controls are to be issued as part ofthe comprehensive annual financial report, 4, A list of findings and other weaknesses from Eagle County's most recent financial statement audit, as well as a list of findings from internal audits conducted during the most recent fiscal period to be audited, are attached to this document (Appendix A), Ofthose findings and other weaknesses, management believes that all have been resolved. F. Working Paper Retention and Access to Working Papers All working papers and reports must be retained, at the auditor's expense, for a minimum of three (3) years, unless the firm is notified in writing by Eagle County of the need to extend the retention period, The auditor will be required to make working papers available, upon request, to the following parties or their designees: Eagle County U.S. Department of Transportation U.S, General Accounting Office (GAO) Parties designated by the federal or state governments or by Eagle County as part of an audit quality review process Auditors of entities of which Eagle County is a subrecipient of grant funds In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of 11 continuing accounting significance. III. DESCRIPTION OF THE GOVERNMENT A. Contact Information The auditor's principal contact with Eagle County will be Michael C. Roeper, Finance Director, or a designated representative, who will coordinate the assistance to be provided by the County to the auditor. B. Background Information Eagle County serves an area of 1,694 square miles with a population of 47,000, Eagle County's fiscal year begins on Jan. 1 and ends on Dec. 3l.Eagle County provides the following services to its citizens: General Administration Sheriff Jail Coroner Roads & Bridges Parks & Open Space Solid waste landfill Airport Health & Social Services Affordable Housing Eagle County has a total payroll of$17,913,000, covering 415 employees, The County is organized into 45 departments and agencies. The accounting and financial reporting functions of the County are centralized. More detailed information on the government and its finances can be found in the Budget documents or previous Comprehensive Annual Financial Reports, which will be provided upon written request. C. Fund Structure Eagle County uses the following fund types and account groups in its financial reporting: Number of Number With Individual Legally Adopted 12 Fund Type Funds Annual Budgets General fund 1 -- Special revenue funds 18 18 - - - - Debt service funds Capital projects funds Permanent funds Enterprise funds 2 -- Internal service funds 3 -- Private-purpose trust funds Investment trust funds Pension (and other employee benefits) trust funds Agency funds 2 2 -- -- D, Budgetary Basis of Accounting Eagle County prepares its budgets on a basis consistent with generally accepted accounting principles, E, Pension Plans Eagle County participates in the County Officials and Employees Retirement Association (CCOERA), which is a qualified plan as defined by IRS Code Section 401(A), F. Component Units Eagle County is defined, for financial reporting purposes, in conformity with the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, Using these criteria, component units are included in the County's financial statements, The management of the Eagle County identified the following component units for inclusion in the County's financial statements: Eagle County Air Terminal Corporation is a not-for profit corporation formed to finance and construct the airport terminal building, Its year ends on December 31 and Michael C, Roeper will be the primary contact person. This component unit is to be audited as part of the audit of the Eagle County's financial statements. Eagle Lease Finance Corporation is a not-for profit corporation formed to facilitate County financings, including real estate, property and improvement acquisitions for lease to the County, Its year ends on December 31 and Michael C. Roeper will be the primary contact person, This component unit is to be audited as part of the audit of the Eagle County's financial statements. 13 Eagle County Service and Support Corporation is a not-for profit corporation formed to further the County's Department of Health and Human Services, Its year ends on December 31 and Michael C. Roeper will be the primary contact person, This component unit is to be audited as part of the audit of the Eagle County's financial statements, Eagle County Emergency Telephone Service Authority is a Board of County Commissioner appointed authority and its purpose is to oversee the installation and operation of emergency telephone service throughout the County. Its year ends on December 31 and Michael C. Roeper will be the primary contact person. This component unit is to be audited as part of the audit of the Eagle County's financial statements, Eagle Riverview Affordable Housing Corporation is a not-for profit corporation formed to facilitate the development, operation and maintenance of affordable housing to individual families of low to moderate income, Its year ends on December 31 and Michael C. Roeper will be the primary contact person, This component unit is to be audited as part of the audit of the Eagle County's financial statements. Golden Eagle Elderly Housing Corporation is a not-for profit corporation formed to facilitate the acquisition, construction, development, operation and maintenance of affordable housing to handicapped and aged individuals throughout the County. Its year ends on December 31 and Michael C. Roeper will be the primary contact person, This component unit is to be audited as part ofthe audit ofthe Eagle County's financial statements, Lake Creek Affordable Housing Corporation is a not-for profit corporation formed to finance the cost of a 272 unit, multifamily affordable apartment complex in Eagle County, Its year ends on December 31 and Rex Gambrell of the Corum Real Estate Group; Greenwood Village, Co. will be the primary contact person. This component unit is NOT to be audited as part ofthe audit ofthe Eagle County's financial statements. The current auditors of this component unit are Feldhake & Associates, P.C.; Englewood, Co. G. Joint Ventures Eagle County does not participate in joint ventures with other governments, H, Magnitude of Finance Operations The finance department is headed by Michael C. Roeper, Finance Director and 14 consists of 6 of employees. The principal functions performed and the number of employees assigned to each are as follows: Function Number of Employees Payroll 1 Accounts Payable 2 Fixed Assets 1 Budget 2 CAFR 3 Mailroom 1 I. Computer Systems Hardware KVS application runs on an HP ProLiant ML570 Server, with Compaq 36.4GB Wide Ultra 3 SCSI Drives installed, Product Description HP ProLiant ML570 G2 - Xeon MP 2,8 GHz Type Server Form Factor Rack-mountable - 7 U Dimensions (WxDxH) 17.5 in x 25.6 in x 12,8 in Localization English / United States Processor 2 x Intel Xeon MP 2,8 GHz Cache Memory 4 MB L3 cache Cache Per Processor 2 MB RAM 1 GB (installed) / 32 GB (max) - DDR SDRAM - ECC - 200 MHz - PC1600 Storage Controller SCSI (Ultral60 SCSI) Floppy Drive 3.5" 1.44 MB floppy Hard Drive None. Optical Storage CD-ROM Monitor None. Graphics Controller PCI - AT! RAGE IIC - 8 MB 15 Networking Network adapter - Ethernet, Fast Ethernet Power AC 110/230 V (50/60 Hz) Software KVS Financial System Budget Preparation Fixed Assets General Ledger Payroll & Personnel Purchasing Corporate Headquarters KVS Information Systems, Inc. 821 Maple Road Williamsville, NY 14221 Phone: (716) 626-1976 Fax: (716) 626-1973 Email: sales@kvsinfo.com www.kvsinfo.com Quickbooks, Version 2003 for three County related corporations Data Bases Cobol J, Availability of Prior Audit Reports and Working Papers Interested proposers who wish to review prior years' audit reports and management letters should contact Michael C, Roeper. Eagle County will use its best efforts to make prior audit reports and supporting working papers available to proposers to aid their response to this request for proposals. IV, TIME REQUIREMENTS A. Proposal Calendar The following is a list of key dates up to and including the date proposals are due to be submitted: 16 Request for proposal issued August 24, 2005 Due date for notification of interest August 22, 2005 Due date for proposals September 16, 2005 B. Notification and Contract Dates Selected firm notified October 14, 2005 Contract date November 1, 2005 C, Date Audit May Commence The County will have all records ready for audit and all management personnel available to meet with the firm's personnel as of March 17,2006, D. Schedule for the 2005 Fiscal Year Audit (A similar time schedule will be developed for audits of future fiscal years if Eagle County exercises its option for additional audits), Each ofthe following should be completed by the auditor no later than the dates indicated, 1. Interim Work The auditor shall complete interim work by January 20,2006. 2, Detailed Audit Plan The auditor shall provide Eagle County by February 10, 2006 both a detailed audit plan and a list of all schedules to be prepared by the County. 3, Fieldwork The auditor shall complete all fieldwork by March 31, 2006 4, Draft Reports The auditor shall have drafts of the audit report[ s] and recommendations to management available for review by the Audit Committee and the chief financial officer by April 21, 2006, 17 E, Entrance Conferences, Progress Reporting and Exit Conferences (A similar time schedule will be developed for audits of future fiscal years if Eagle County exercises its option for additional audits), At a minimum, the following conferences should be held by the dates indicated on the schedule: Week of Entrance conference with Finance Director November 14, 2005 Entrance conference with all key finance department personnel and department heads of key offices or programs November 14,2005 - The purpose of this meeting will be to discuss prior audit problems and the interim work to be performed, This meeting will also be used to establish overall liaison for the audit and to make arrangements for work space and other needs of the auditor Entrance conference with Finance Director to commence year-end audit work December 5,2005 Exit conference with Finance Director and department heads of key offices or programs March 28, 2006 - The purpose of this meeting will be to summarize the results of the field work and to review significant findings F, Date Final Report is Due The Finance Director shall prepare draft financial statements, notes and all required supplementary schedules [and statistical data] by April 28, 2006, The auditor shall provide all recommendations, revisions and suggestions for 18 improvement to the Finance Director by May 5, 2006. A revised report, including a draft auditor's report shall be delivered to the audit committee by May 19, 2006. The Finance Director and the Audit Committee will complete their review ofthe draft report as expeditiously as possible, It is not expected that this process should exceed one week. During that period, the auditor should be available for any meetings that may be necessary to discuss the audit reports. Once all issues for discussion are resolved, the final signed report shall be delivered to the Finance Director within five working days. It is anticipated that this process will be completed and the final report delivered by May 31, 2006. The final report and ten signed copies should be delivered to the Finance Director at the Eagle County Building; 850 Broadway; Eagle Co. V. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION A. Finance Department and Clerical Assistance The finance department staff and responsible management personnel will be available during the audit to assist the firm by providing information, documentation and explanations, The preparation of confirmations will be the responsibility of Eagle County. In addition, all necessary hours of clerical support will be made available to the auditor for the preparation of routine letters and memoranda, B. Electronic Data Processing (EDP) Assistance The Director of Innovation and Technology will be available to assist the auditor in performing the engagement. EDP personnel will also be available to provide systems documentation and explanations. The auditor will be provided computer time and the use of Eagle County's computer hardware and software. Such use will be limited to inquiry and download capability. C. Statements and Schedules to be Prepared by the Staff of Eagle County: The staff of Eagle County will prepare all necessary statements and schedules for the auditor by the dates reasonably required by the auditor. D, Work Area, Telephones, Photocopying and FAX Machines 19 The County will provide the auditor with reasonable work space, desks and chairs, The auditor will also be provided with access to one telephone line, photocopying facilities and FAX machines and such use will be limited to County audit issues, E, Report Preparation Report preparation, editing and printing shall be the responsibility of the auditor. VI. PROPOSAL REQUIREMENTS A, General Requirements 1. Submission of Notification ofInterest Firms interested in submitting a proposal are encouraged to submit their written notification by August 22, 2005, 2. Inquiries Inquiries concerning the request for proposals and the subject ofthe request for proposals must be made in writing to: Michael C, Roeper, Finance Director P,O, Box 850; Eagle, CO 81631 970-328-3511 CONTACT WITH PERSONNEL OF EAGLE COUNTY OTHER THAN THE ABOVE REGARDING THIS REQUEST FOR PROPOSALS MAY BE GROUNDS FOR ELIMINATION FROM THE SELECTION PROCESS, 3, Submission of Proposals The following material is required to be received by September 16, 2005 for a proposing firm to be considered: a. A master copy (so marked) of a Technical Proposal and ten copies to include the following: 1. Title Page Title page showing the request for proposals subject; the firm's name; the name, address and telephone number of the contact person; and the date of the proposal. 20 11. Table of Contents Ill. Transmittal Letter A signed letter of transmittal briefly stating the proposer's understanding of the work to be done, the commitment to perform the work within the time period, a statement why the firm believes itself to be best qualified to perform the engagement and a statement that the proposal is a firm and irrevocable offer for 45 days and if selected, the firm will execute a reasonable contract prepared by the County incorporating the terms and conditions herein, IV, Detailed Proposal The detailed proposal should follow the order set forth in Section VI B of this request for proposals. v, Executed copies of Proposer Guarantees and Proposer Warranties, attached to this request for proposal (Appendix C and Appendix D) b, The proposer shall submit an original and ten copies of a dollar cost bid in a separate sealed envelope marked as follows: SEALED DOLLAR COST BID PROPOSAL FOR EAGLE COUNTY FOR PROFESSIONAL AUDITING SERVICES September 16, 2005 c, Proposers should send the completed proposal consisting of the two separate envelopes to the following address: Michael C. Roeper, at the above address B. Technical Proposal 1. General Requirements 21 The purpose ofthe Technical Proposal is to demonstrate the qualifications, competence and capacity of the firms seeking to undertake an independent audit of Eagle County in conformity with the requirements ofthis request for proposals, As such, the substance of proposals will carry more weight than their form or manner of presentation, The Technical Proposal should demonstrate the qualifications of the firm and of the particular staff to be assigned to this engagement. It should also specify an audit approach that will meet the request for proposals requirements, THERE SHOULD BE NO DOLLAR UNITS OR TOTAL COSTS INCLUDED IN THE TECHNICAL PROPOSAL DOCUMENT, The Technical Proposal should address all the points outlined in the request for proposals (excluding any cost information which should only be included in the sealed dollar cost bid). The Proposal should be prepared simply and economically, providing a straightforward, concise description of the proposer's capabilities to satisfy the requirements of the request for proposals, While additional data may be presented, the following subjects, items Nos, 2 through 10, must be included, They represent the criteria against which the proposal will be evaluated, 2, Independence The firm should provide an affirmative statement that it is independent of Eagle County as defined by generally accepted auditing standards/the U.S. General Accounting Office's Government Auditing Standards (1994) The firm also should provide an affirmative statement that it is independent of all of the component units of Eagle County as defined by those same standards, The firm should also list and describe the firm's (or proposed subcontractors') professional relationships involving Eagle County or any of its agencies or component units for the past five (5) years, together with a statement explaining why such relationships do not constitute a conflict of interest relative to performing the proposed audit. In addition, the firm shall give the County written notice of any professional relationships entered into during the period of this agreement. 3. License to Practice in Colorado, An affirmative statement should be included that the firm and all assigned key professional staff are properly licensed to practice in Colorado, 22 4. Firm Qualifications and Experience The proposer should state the size of the firm, the size of the firm's governmental audit staff, the location of the office from which the work on this engagement is to be performed and the number and nature of the professional staff to be employed in this engagement on a full-time basis and the number and nature ofthe staff to be so employed on a part-time basis, If the proposer is a joint venture or consortium, the qualifications of each firm comprising the joint venture or consortium should be separately identified and the firm that is to serve as the principal auditor should be noted, if applicable. The firm is also required to submit a copy ofthe report on its most recent external quality control review, with a statement whether that quality control review included a review of specific government engagements, The firm shall also provide information on the results of any federal or state desk reviews or field reviews of its audits during the past three (3) years. In addition, the firm shall provide information on the circumstances and status of any disciplinary action taken or pending against the firm during the past three (3) years with state regulatory bodies or professional organizations, 5, Partner, Supervisory and Staff Qualifications and Experience Identify the principal supervisory and management staff, including engagement partners, managers, other supervisors and specialists, who would be assigned to the engagement. Indicate whether each such person is registered or licensed to practice as a certified public accountant in Colorado, Provide information on the government auditing experience of each person, including information on relevant continuing professional education for the past three (3) years and membership in professional organizations relevant to the performance of this audit. Provide as much information as possible regarding the number, qualifications, experience and training, including relevant continuing professional education, ofthe specific staffto be assigned to this engagement. Indicate how the quality of staff over the term of the agreement will be assured, The proposer should identify the extent to which staff to be assigned to the 23 audit reflect Eagle County's commitment to Affirmative Action, Engagement partners, managers, other supervisory staff and specialists may be changed if those personnel leave the firm, are promoted or are assigned to another office. These personnel may also be changed for other reasons with the express prior written permission of Eagle County. However, in either case, Eagle County retains the right to approve or reject replacements, Consultants and firm specialists mentioned in response to this request for proposal can only be changed with the express prior written permission of the County, which retains the right to approve or reject replacements. Other audit personnel may be changed at the discretion of the proposer provided that replacements have substantially the same or better qualifications or experience, 6, Prior Engagements with Eagle County List separately all engagements within the last five years, ranked on the basis oftotal staff hours, for Eagle County by type of engagement (i,e" audit, management advisory services, other). Indicate the scope of work, date, engagement partners, total hours, the location of the firm's office from which the engagement was performed, and the name and telephone number of the principal client contact. 7. Similar Engagements With Other Government Entities For the firm's office that will be assigned responsibility for the audit, list the most significant engagements (maximum - 5) performed in the last five years that are similar to the engagement described in this request for proposal. These engagements should be ranked on the basis oftotal staff hours, Indicate the scope of work, date, engagement partners, total hours, and the name and telephone number of the principal client contact. S, Specific Audit Approach The proposal should set forth a work plan, including an explanation ofthe audit methodology to be followed, to perform the services required in Section II of this request for proposal. In developing the work plan, reference should be made to such sources of information as Eagle County's budget and related materials, organizational charts, manuals and programs, and financial and other management information systems, 24 Proposers will be required to provide the following information on their audit approach: a, Proposed segmentation of the engagement b, Level of staff and number of hours to be assigned to each proposed segment of the engagement NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL c. Sample size and the extent to which statistical sampling is to be used in the engagement d, Extent of use ofEDP software in the engagement e. Type and extent of analytical procedures to be used in the engagement f. Approach to be taken to gain and document an understanding of the County's internal control structure g. Approach to be taken in determining laws and regulations that will be subject to audit test work h, Approach to be taken in drawing audit samples for purposes of tests of compliance 9, Identification of Anticipated Potential Audit Problems The proposal should identify and describe any anticipated potential audit problems, the firm's approach to resolving these problems and any special assistance that will be requested from the County, 10. Report Format The proposal should include sample formats for required reports, NO DOLLARS SHOULD BE INCLUDED IN THE TECHNICAL PROPOSAL C, Sealed Dollar Cost Bid 1. Total All-Inclusive Maximum Price 25 The sealed dollar cost bid should contain all pricing information relative to performing the audit engagement as described in this request for proposal. The total all-inclusive maximum price to be bid is to contain all direct and indirect costs including all out-of-pocket expenses, Eagle County will not be responsible for expenses incurred in preparing and submitting the technical proposal or the sealed dollar cost bid, Such costs should not be included in the proposal. The first page of the sealed dollar cost bid should include the following information: a. Name of Firm b. Certification that the person signing the proposal is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with Eagle County, c. A Total All-Inclusive Maximum Price for the 2005 engagement and the four subsequent years, 2, Rates by Partner, Specialist, Supervisory and Staff Level Times Hours Anticipated for Each The second page ofthe sealed dollar cost bid should include a schedule of professional fees and expenses, presented in the format provided in the attachment (Appendix E), that supports the total all-inclusive maximum price, The cost of special services described in Section II E of this request for proposal should be disclosed as separate components ofthe total all- inclusive maximum price. 3, Out-of-pocket Expenses Included in the Total All-inclusive Maximum Price and Reimbursement Rates Out-of-pocket expenses for firm personnel (e,g" travel, lodging and subsistence) will be reimbursed at the rates used by Eagle County for its employees. All estimated out-of-pocket expenses to be reimbursed should be presented on the second page ofthe sealed dollar cost bid in the format provided in the attachment (Appendix E). All expense reimbursements will be charged against the total all-inclusive maximum price submitted by the firm, In addition, a statement must be included in the sealed dollar cost bid 26 stating the firm will accept reimbursement for travel, lodging and subsistence at the prevailing Eagle County rates for its employees, 4, Rates for Additional Professional Services If it should become necessary for Eagle County to request the auditor to render any additional services to either supplement the services requested in this RFP or to perform additional work as a result of the specific recommendations included in any report issued on this engagement, then such additional work shall be performed only if set forth in an addendum to the contract between Eagle County and the firm, Any such additional work agreed to between Eagle County and the firm shall be performed at the same rates set forth in the schedule of fees and expenses included in the sealed dollar cost bid. 5. Manner of Payment Progress payments will be made on the basis of hours of work completed during the course ofthe engagement and out-of-pocket expenses incurred in accordance with the firm's dollar cost bid proposal. Interim billing shall cover a period of not less than a calendar month. VII, EVALUATION PROCEDURES A. Audit Committee Proposals submitted will be evaluated by an Audit Committee selected by the County, B. Evaluation Criteria In evaluating bids, the County will consider the qualifications of bidders including, but not necessarily limited to the following: 1. Mandatory Elements a. The audit firm is independent and licensed to practice in Colorado. b, The firm has no conflict of interest with regard to any other work performed by the firm for Eagle County, c, The firm adheres to the instructions in this request for proposal on preparing and submitting the proposal. 27 d, The firm submits a copy of its last external quality control review report and the firm has a record of quality audit work.. 2. Technical Qualifications a. Expertise and Experience (1) The firm's past experience and performance on comparable government engagements (2) The quality ofthe firm's professional personnel to be assigned to the engagement and the quality ofthe firm's management support personnel to be available for technical consultation b, Audit Approach (1) Adequacy of proposed staffing plan for various segments of the engagement (2) Adequacy of sampling techniques (3) Adequacy of analytical procedures 3, Price 4. Any other information deemed relevant by the County. C. Oral Presentations During the evaluation process, the Audit Committee may, at its discretion, request anyone or all firms to make oral presentations. Such presentations will provide firms with an opportunity to answer any questions the Audit Committee may have on a firm's proposal. Not all firms may be asked to make such oral presentations, D, Final Selection The County will select a firm taking into consideration the recommendation of the Audit Committee, It is anticipated that a firm will be selected by October 14,2005. Following notification of the firm selected, it is expected a contract will be executed between both parties by November 1,2005, 28 E, Right to Reject Proposals Submission of a proposal indicates acceptance by the firm of the conditions contained in this request for proposal unless clearly and specifically noted in the proposal submitted and confirmed in the contract between Eagle County and the firm selected. The County reserves the right without prejudice to reject any or all proposals. 29 APPENDICES A, Findings from Recent External and Internal Audits B. Organizational Chart C. Proposer Guarantees D, Proposer Warranties E. Format for Schedule of Professional Fees and Expenses to Support the Total All- inclusive Maximum Price 30 APPENDIX A FINDINGS FROM RECENT EXTERNAL AUDITS None 31 APPENDIX B ORGANIZATIONAL CHART ATTACHED 32 APPENDIX C PROPOSER GUARANTEES A, Proposer certifies it can and will provide and make available, as a minimum, all services set forth in Section II, Nature of Services Required, A. Proposer has reviewed and is fully informed ofthe work that is being bid. B, Proposer will timely execute a professional services agreement in a form prepared by and acceptable to Eagle County incorporating the terms and conditions ofthis RFP and the submittal by Proposer in response to the same, C, Proposer acknowledges the right of Eagle County in its sole discretion to reject any or all proposals submitted and that an award may be made to a proposer other than the lowest cost. D, Proposer acknowledges and agrees that the discretion of Eagle County in selection of the successful proposer shall be final, not subject to review or attack. E, By submission ofthis proposal, the proposer acknowledges that Eagle County has the right to make inquiry or investigation it deems appropriate to substantiate or supplement information contained in the proposal and related documents, and authorizes release to Eagle County of any and all information sought in such inquiry or investigation. 33 APPENDIX D PROPOSER WARRANTIES A. Proposer warrants that it is willing and able to comply with State of Colorado laws with respect to foreign (non-state of Colorado) 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 prior written permission of Eagle 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: 34 APPENDIX E Page 1 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2005 FINANCIAL STATEMENTS Standard Quoted Hourly Hourly Hours Rates Rates Total Partners - - - Managers - - - Supervisory staff - - - Staff - - - Other (specify): - - Subtotal Total for services Described in Section II E of the RFP (Detail on subsequent pages) Out-of-pocket expenses: Meals and lodging Transportation Other (specify): Total all-inclusive maximum price for 2005 audit 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. 35 APPENDIX E Page 2 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2005 FINANCIAL STATEMENTS: COMBINING SCHEDULE - ALL SERVICES DESCRIBED IN RFP SECTION II E Nature of Service To Be Provided Schedule Total Price EACH SERVICE DESCRIBED IN RFP SECTION II E SHOULD BE SUPPORTED BY AN INDIVIDUAL SCHEDULE IN THE FORMAT PROVIDED ON PAGE 3 OF THIS APPENDIX. 36 Appendix E Page 3 SCHEDULE OF PROFESSIONAL FEES AND EXPENSES FOR THE AUDIT OF THE 2005 FINANCIAL STATEMENTS: SUPPORTING SCHEDULE FOR [NAME OF SERVICE] Standard Quoted Hourly Hourly Hours Rates Rates Total Partners - - - Managers - - - Supervisory staff - - - Staff - - - Other (specify): - - - Subtotal Out-of-pocket expenses: Meals and lodging Transportation Other (specify): Total price for [NAME OF SERVICE] 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 37 EAGLE COUNTY GOVERNMENT Eagle, Colorado Audit Proposal McMahan and Associates, LLC. P. O. Box 5850 Avon, Colorado 81620 (970) 845-8800 www.mcmahancpa.com Our Mission Statement We are committed to achieving professional excellence and will continually provide ethical, progressive, and responsive service to all our clients. -- == Governmental _ Audit Quality Center .., EAGLE COUNTY GOVERNMENT Eagle, Colorado Audit Proposal Table of Contents Pages Letter of Submission 1-2 Appendices: Appendix A - Detailed Technical Proposal 3-9 Appendix B - Proposer Guarantees 10 Appendix C - Proposer Warranties 11 Appendix D - Unqualified Peer Review Report 12 i McMAHAN ANG .ASSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 I 00 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O. Box 5850 AVON, CO 8 I 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM LETTER of SUBMISSION September 15, 2005 Board of County Commissioners Eagle County, Colorado P.O. Box 850 Eagle, Colorado 81631 Attention: Michael C. Roeper, Finance Director Dear Commissioners: In response to the Request for Proposal issued by Eagle County, Colorado with respect to the financial and compliance audits of the County for the fiscal year ending December 31, 2005 and thereafter, we are pleased to submit the following proposal for the provision of audit and consulting services. Although our proposal addresses the major areas of concern identified by Eagle County in the Request for Proposal, I would like to take the opportunity to summarize the reasons why we feel it is in the County's best interest to utilize McMahan and Associates as your auditors and consultants. Our qualifications are: . County Auditing and Financial Consulting Expertise: We currently serve as auditors and consultants to approximately 10% of Colorado counties. The Colorado Society of CPAs lists our firm as governmental accounting and auditing experts in their technical advisory manual. We have provided assistance with bond issues, budgeting, investment strategies, continuing disclosure requirements, and arbitrage calculations. While our technical expertise will enable us to provide assistance in compliance related areas, we also will make operational recommendations which will result in savings for the County. . Human Services Expertise: We have extensive experience auditing and providing consulting services to County human service departments. Changes in the Colorado's human service systems have resulted in more complicated reporting and reconciling requirements. Members of our staff have worked directly for the Colorado Department of Human Services audit division. As a result we have extensive experience with every human services program the County provides. In addition, as part of our audit of the County's expenditures of federal awards, we will prepare the County's Single Audit Data Collection Form and all required federal schedules and reports thereby reducing the amount of time spent on compliance issues. . Landfill Compliance and Planning Expertise: We have extensive experience preparing landfill compliance studies for the Colorado Department of Public Health and Environment (Solid Waste Division). We can assist you in planning for closure and post-closure costs and reduce the County's financial compliance costs. Performing services for local governments throughout Colorado D. Jerry McMahan, CPA Daniel R. Cudahy, CPA. Paul J. Backes, CPA Michael N. Jenkins, C.A., CPA. Members: American Institute of Certified Public Accountants/Colorado Society of Certified Public Accountants National and Colorado Government Finance Officers Association/Colorado Municipal League 1 Board of County Commissioners Eagle County, Colorado Attention: Michael C. Roeper, Finance Director September 15, 2005 . Airport Audit Expertise: McMahan and Associates has performed audits for numerous entities with regional airport operations. This experience includes grant reporting, passenger facility charge compliance, flight subsidy calculations, and day-to-day operations. This will assist Eagle County in complying with grant requirements imposed by the Department of Transportation and other grant agencies. . Affordable Housing and Rental Operation Expertise: Our practice includes extensive experience with all forms of affordable housing, including 63-20 corporations, deed-restrictions, and rental operations. We can assist in streamlining and improving the efficiency of Eagle County's affordable housing operations. As a local employer, our staff (which consists almost entirely of Eagle County residents) prides themselves on community involvement and commitment to client service. Our firm is proud of the assistance we have provided to our clients throughout the years. We have developed long-term working relationships and have helped make our clients financially stronger and operationally more efficient. We look forward to working with you in the coming years to help Eagle County meet its financial goals. Please do not hesitate to contact us at your convenience if you have any questions. Sincerely, McMAHAN and ASSOCIATES, L.L.C. ~- ~ Michael N. Jenkins, CA, C.PA Principal 2 McMAHAN AN \SSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O. Box 5850 AVON, CO 8 I 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM - APPENDIX A - DETAILED TECHNICAL PROPOSAL September 15, 2005 Board of County Commissioners Eagle County, Colorado P.O. Box 850 Eagle, Colorado 81631 Attention: Michael C. Roeper, Finance Director Dear Commissioners: In accordance with the provisions of the Request for Proposal (the "RFP") issued by Eagle County, Colorado for the financial and compliance audits of the County for 2005 and subsequent years, we are pleased to submit this technical proposal detailing the qualifications of McMahan and Associates, L.L.C. for the provision of audit and consulting services. Independence McMahan and Associates, L.L.C. and its staff are independent, as defined by U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States, of Eagle County and its component units identified in the RFP. The following is a list of our firm's professional relationships involving Eagle County, its agencies or component units during the past five years: Eagle Riverview Affordable Housing Corporation - Financial statement audits (2001 - 2004) Mountain Glen Affordable Housing Corporation - Financial statement audits (2001 - 2003) Miller Ranch Affordable Housing Project - Agreed-upon procedures (2005) Because these relationships represent services provided directly to the County (in the case of Miller Ranch) or its agencies (in the case of the affordable housing entities), they cannot be considered to represent a conflict of interest relative to performing the County's audit for 2005. During the term of our engagement with Eagle County, we will provide prompt written notice of any personal or professional relationships which would pose a conflict of interest as defined by the applicable professional standards established by the American Institute of Certified Public Accountants and the U.S. General Accounting Office. Performing services for local governments throughout Colorado D. Jerry McMahan, CPA. Daniel R. Cudahy, CP.A. Paul J. Backes, CPA Michael N. Jenkins, G.A, CP.A. Members: American Institute of Certified Public Accountants/Colorado Society of Certified Public Accountants National and Colorado Government Finance Officers Association/Colorado Municipal League 3 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15, 2005 License to Practice in Colorado Our firm and all CPAs on staff are licensed to practice in the State of Colorado. Neither our firm nor any staff member has been subject to any disciplinary action with state regulatory bodies or professional organizations. Firm Qualifications and Experience McMahan and Associates has provided professional services to local governments throughout the State of Colorado for over thirty-five years. In addition to the 3 firm principals, McMahan and Associates, L.L.C. has 12 professional staff working from offices in Avon, Colorado. A majority of our practice is focused on providing assurance and consulting services to local governments throughout Colorado. We are proud to be members of the AICPA's Governmental Audit Quality Center, which is dedicated to promoting the importance of quality governmental audits and the value of such audits to purchasers of governmental audit services. We currently anticipate that staffing for the 2005 audit of Eagle County will be comprised of the primary partner, a senior manager and two additional staff members. All such firm personnel will be utilized on a full-time basis in performing Eagle County's audit. Government Auditing Standards - 1994 Revision requires that we provide you with a copy of our most recent quality control review report. Our firm's 2003 unqualified peer review report, which represents the highest level of assurance in the AICPA peer review process, is included as Appendix D to this proposal. Due to our firm's concentration in governmental audits, the peer review included a review of specific government audit engagements. Ourfirm has not been subject to any Federal field or desk reviews of audits during the past 3 years. As part of the annual field review initiative of the State of Colorado Department of Human Services ("CDHS"), our audit files with respect to Social Services testing and Single Audit Act compliance were reviewed by CDHS Audit Division staff in 2002. No findings were reported as a result of that field review. No disciplinary actions have been taken (or are pending) against the firm within the last 3 years by state regulatory bodies or professional organizations. Partner, Supervisory and Staff Qualifications and Experience Michael N. Jenkins, CA, C.PA will be the principal contact person and partner in charge of audit and consulting services for Eagle County. He has over seventeen years of auditing, accounting and consulting experience, including nine years with McMahan and Associates and four years with Ernst & Young. Michael is licensed as a C.PA in both Colorado and Wyoming, and holds memberships in the following professional bodies: . American Institute of Certified Public Accountants (AICPA) . Consulting Services and Tax Services sections of the AICPA . Colorado Society of Certified Public Accountants (CSCPA) . Colorado Government Finance Officers Association (CGFOA) . Government Finance Officers Association (GFOA) . Canadian Institute of Chartered Accountants As a principal in the firm, Michael has provided audit and consulting services to our governmental clients for the past nine years. He is also listed in the CSCPA's Technical Advisory Guide as an expert in Governmental Audit and Accounting. 4 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15,2005 Partner, Supervisory and Staff Qualifications and Experience (continued) Michael's continuing professional education coursework related to governmental issues in the past 3 years includes attendance at the following: . AICPA Governmental Accounting & Audit Conference . CSCPA Governmental Conferences . Fraud in Governmental & Not-for-Profit Environments . Colorado Dept. of Human Services Annual Update for County Auditors . GASB-34 Auditing Paul J. Backes, C.PA, a principal with our firm, will serve as an additional contact for County administration. As a partner in McMahan and Associates, L.L.C., he has over seventeen years of accounting, auditing, and consulting experience, including fifteen years with our firm. Paul has served as the Chair of the CSCPA's Governmental Issues Committee and has lectured at several governmental conferences. Licensed as a C.PA in Colorado, Paul is also listed in the CSCPA's Technical Advisory Guide as an expert in Governmental Audit and Accounting. Tracy A. Walters, C.PA, a senior manager with our firm, will assist in overseeing the ongoing audit of the County and supervision of site personnel. Tracy, who is licensed in Colorado, has more than thirteen years of audit experience, including 3 years with our firm and seven years with PricewaterhouseCoopers, LLP. Tracy is a member of the AICPA, the CSCPA, and a senior fellow of the American Leadership Forum. Some of his recent continuing professional education relating to governments includes: . AICPA Governmental Accounting & Audit Conference . CSCPA Governmental Conferences . "Veil ow Book" compliance . GASB Accounting Standards Update Additional firm personnel will be assigned to staff Eagle County's audit as considered necessary. As required by the GAO's "Veil ow Book", all professional staff assigned to the County's audit will meet the standards for governmental professional education, and have prior experience in governmental auditing. Our firm's staff includes a GFOA Certificate Reviewer and a former field auditor with the Colorado Department of Human Services. No part of the County's audit will be subcontracted by McMahan and Associates. Prior Engagements with Eagle County During the past five years, McMahan and Associates, L.L.C. has performed the following services for Eagle County: Eagle Riverview Affordable Housing Corporation Annual audits of the financial statements, including reporting on compliance with trust indentures, were performed for fiscal years 2001 - 2004. Paul Backes served as the principal in charge of this engagement, working closely with County Finance Director Michael Roeper. Mountain Glen Affordable Housing Corporation For fiscal years 2001 - 2003, we performed annual financial statement audits, together with reporting on compliance with trust indentures. Paul worked with Mr. Roeper in completing the 2003 audit and with Terry Lowell (previous County Finance Director) for the earlier periods. 5 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15, 2005 Prior Engagements with Eagle County (continued) Miller Ranch Affordable Housing Project We are currently working on an agreed-upon procedures engagement with respect to the calculation of Eagle County's "Equity Share" of the proceeds on sale from these housing units. Michael Jenkins worked with former Eagle County Attorney Diane Mauriello in the early stages of this project. Similar Engagements with Other Government Entities We currently provide professional services to more than 90 local governmental entities throughout Colorado, including cities, towns, counties, special districts (metropolitan, water, sewer, fire, recreation and other districts), and school districts. In addition to traditional audit services, McMahan and Associates has also rendered assistance to our governmental clientele for the following matters: , . Bond issue refunding and rating studies . Fixed asset evaluations and studies . Budgeting assistance . Construction project auditing . Internal control reviews and administrative cost studies . Federal cost allocation plans . Accounting and expenditure cost control reviews and evaluations . Computer studies and assistance with implementation of software systems . TABOR Amendment consulting . Landfill closure and post-closure financial assurance consulting . CAFR compliance review The following is a list of the five most significant Colorado local government entities for which our firm provides audit and other services: Name Scope of Work Dates of Service Contact Person Garfield County Audit/consulting services 2004 - present Patsy Hernandez Controller (970) 945-1377 Town of Vail Audit/consulting services 1968 - present Judy Camp Finance Director (970) 479-2119 City of Aspen Audit/consulting services 1999 - present Paul Menter Finance Director (970) 384-6400 Gunnison County Audit/consulting services 1992 - present Linda Nienhauser Accountant (970) 641-7622 Roaring Fork Audit/consulting services 2003 - present Susan Atwood Transportation Authority Finance Director (970) 920-1905 Additional references from other governments can be provided upon request. 6 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15, 2005 Specific Audit Approach A. Proposed Segmentation of Engagement Our audit approach will be guided by our assessment of the relative risks inherent in each of the major functions performed by Eagle County. Our risk assessment will be developed through discussions with County management and determined in relation to professional standards and each area's impact on the County's operations. This risk-based approach permits the most effective use of audit techniques to ensure that, ultimately, Eagle County is able to rely upon its internally-generated financial information. As suggested by audit timetable included in the Request for Proposal, we will schedule a pre-audit planning session with relevant County management staff to document County functions which generate the County's financial data, collect or disburse cash, and affect the internal control systems of the County. Based on the documentation provided by Eagle County in connection with the Request for Proposal, we currently anticipate that our audit fieldwork would be allocated between major functions as follows: Estimated Hours Audit Segment & Task Partner Manaqer Staff Admin. TOTAL Systems documentation & testing, year-end balances, analytical review: Finance & General Administration 16 36 60 - 112 Treasurer 1 24 - - 25 Clerk 1 8 - - 9 Sheriff & Jail 1 - 8 - 9 Airport 4 8 4 - 16 Road & Bridge 1 - 4 - 5 Social Services 4 - 16 - 20 Assessor 1 - 4 - 5 Parks/Open Space 1 - 4 - 5 Landfill 1 - 6 - 7 Housing 8 - 4 - 12 Planning & Building 1 - 4 - 5 E-911 Authority 1 8 4 - 13 Golden Eagle Retirement 1 12 24 - 37 Eagle Riverview 1 12 24 - 37 Single Audit compliance & reporting 2 1 16 - 19 Fife review and wrap-up 20 10 4 - 34 Review of draft reports 24 - - - 24 Report finalization, processing & presentation 6 - - 10 16 95 119 186 10 410 We will specifically audit and test controls over cash, investments, receivables, fixed assets, payables, long-term debt, payroll, revenues and expenditures in accordance with specific audit programs designed for these areas and professional standards. We will review contracts, Board actions, pertinent legal agreements, and minutes of Board meetings to ensure that the underlying transactions are appropriately completed and documented. 7 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15, 2005 Specific Audit Approach (continued) A. Proposed Segmentation of Engagement (continued) We will complete reviews of the administrative and accounting controls in place at the County, utilizing questionnaires and other programs. Any findings arising from our review will be included in our Management Letter, so the County will be informed of opportunities for improvement in internal processes and procedures. We will plan and perform separate audit procedures on the County's Department of Social Services, as well as the offices of the Treasurer, Clerk, Sheriff, Jail, and any other departments utilizing a separate accounting function. B. Sampling Statistical sampling will be used in testing County transactions, with sample sizes determined from statistical tables for random sampling. Typical sample sizes range from 25 to 60 transactions, depending on the area being tested. In addition, we will test individual accounts and will perform both preliminary and final analytical reviews of significant or sensitive account balances. Statistical sampling will be used in all areas of testing unless considered more efficient or effective to utilize a substantive audit approach. C. Computers and the Audit Process Our staff is experienced and trained in data processing. In order to increase audit efficiency, we have implemented computerized auditing techniques in all phases of our audits. All audit personnel are assigned laptop computers for use in performance of audit fieldwork, including application of audit procedures to the County's data processing software, as considered necessary. As part of our audit procedures, we will review the County's internal control over information processing and identify any areas for improvement. D. AnalyilcalProcedures In accordance with AICPA Statement on Auditing Standard No. 56, Analytical Procedures, we will use analytical procedures in the pre-audit planning stage to identify audit problem areas based on account fluctuations, and in the post-field work stage to determine any areas that may require additional audit work. In addition to our computers, we will utilize the County's computer systems, to the extent practical, to extract analytical data to be used during the audits. County personnel will also be consulted in determining significant audit problems that will be assigned audit emphasis. E. Laws and Regulations McMahan and Associates personnel are thoroughly familiar with State of Colorado budget laws, other State statutes, and the Single Audit Law. The County's compliance with these and other laws and regulations will be assessed as part of our audit procedures. F. Engagement Management and Supervision All audit work papers will be subjected to a preliminary, on-site review by the firm principal in charge of the County's audit. Prior to issuance of the audit and other reports, all work papers, reports, drafts and audit evidence will have a final review by the assigned firm principal. Draft reports (including the Management Letter) will then be reviewed with appropriate County personnel before issuance or presentation to the County Commissioners. 8 Eagle County Government APPENDIX A - DETAILED TECHNICAL PROPOSAL RE: Professional Auditing Services September 15, 2005 Specific Audit Approach (continued) F. Engagement Management and Supervision (continued) At the conclusion of audit fieldwork, we will provide County staff with a complete set of audit adjustments, together with appropriate documentation, for review and approval by the County's Finance Director. As well, any findings and recommendations noted in the course of the audit will be discussed with the Finance Director, and other appropriate County personnel. As required by professional standards, we will communicate to the County Commissioners and administration, in writing, all material weaknesses or reportable conditions noted in the course of our audit. In addition, our Management Letter will include suggestions for improvement in County practices and procedures. G. A vailabifity of Work Papers Upon request, we will make our work papers available to the County. We will provide copies of work papers as requested. As provided in the County's Request for Proposal, we will retain all work papers for five years after completion of the audit. H. Ongoing Support and Consultation As with all clients, telephone conferences and meetings required to complete the audit and present the required reports within the agreed-upon time frame are included in our base audit fee. Similarly, telephone consultation during the year which does not require significant research time by our staff is provided to our clients at no additional cost. Anticipated Potential Audit Problems We currently anticipate no potential audit problems. However, should matters arise in the course of our audit, we will promptly discuss the potential problems with the County Finance Director and other appropriate County personnel to determine the most cost-effective resolution, and in accordance with professional auditing standards. Report Format Eagle County's audit report will be designed to comply with generally accepted auditing standards, Government Auditing Standards, the Single Audit Act reporting requirements, and the criteria for the GFOA Certificate of Excellence in Financial Reporting program. We appreciate the opportunity to be of service to Eagle County and look forward to building a strong relationship with the County Commissioners and administration. Please do not hesitate to contact us at your convenience if you have any questions. Sincerely, McMAHAN and ASSOCIATES, LLC. ~- Michael N. Jenkins, CA, CPA Principal 9 McMAHAN AN ~SSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O, Box 5850 AvoN, CO 8 I 620 E-MAIL: MCMAHAN@MCMAHANCPA.COM - APPENDIX B - PROPOSER GUARANTEES A. McMahan and Associates, L.L.C. ("Proposer") certifies that it can and will provide and make available, as a minimum, all services set forth in Section II, Nature of Services Required, of the Request for Proposal (the "RFP") issued by Eagle County, Colorado and dated August 24, 2005. B. Proposer has reviewed and is fully informed of the work that is being bid. C. Proposer will timely execute a professional services agreement in the form prepared by and acceptable to Eagle County, incorporating the terms and conditions of the RFP and the submittal by Proposer in response to same. D. Proposer acknowledges the right of Eagle County, in its sole discretion, to reject any or all proposals submitted and that an award may be made to a proposer other than the lowest cost. E. Proposer acknowledges and agrees that the discretion of Eagle County in selection of the successful proposer shall be final, not subject to review or attack. F. By submission of this proposal, Proposer acknowledges that Eagle County has the right to make inquiry or investigation it deems appropriate to substantiate or supplement information contained in Proposer's proposal and related documents, and authorizes release to Eagle County of any and all information sought in such inquiry or investigation. McMAHAN and ASSOCIATES, L.L.C. BY: ~- - Michael N. Jenkins, CA, C.P.A Principal Date: September 15, 2005 Performing services for local governments throughout Colorado D. Jerry McMahan, CPA. Daniel R. Cudahy, CPA Paul J. Backes, CPA. Michael N. Jenkins, CA, CPA Members: American Institute of Certified Public Accountants/Colorado Society of Certified Public Accountants National and Colorado Government Finance Officers Association/Colorado Municipal League 10 McMAHAN AN ".\SSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPA.COM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O. Box 5850 AvoN, CO 8 1620 E-MAIL: MCMAHAN@MCMAHANCPA.COM - APPENDIX C - PROPOSER WARRANTIES A. McMahan and Associates, L.L.C. ("Proposer") warrants that it is willing and able to comply with State of Colorado laws with respect to foreign (non-State of Colorado resident) 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 prior written permission of Eagle County. D. Proposer warrants that all information provided by it in connection with this proposal is true and accurate. McMAHAN and ASSOCIATES, L.L.C. BY: ~- - Michael N. Jenkins, CA, C.P.A Principal Date: September 15, 2005 Performing services for local governments throughout Colorado D. Jerry McMahan, CPA Daniel R. Cudahy, CPA. Paul J. Backes, CPA Michael N. Jenkins, CA, CPA Members: American Institute of Certified Public Accountants/Colorado Society Certified Public Accountants National and Colorado Government Finance Officers Association/Colorado Municipal League 11 Appendix D - Unqualified Peer Review Report Dtl,\~1 c. K~luul\.. U'.\ DANNY L H f\;DRI\. (I'" G.l<lI1N RlINIA. l.'I'A CORPORATION RcJl\ERI L ARClIlIIHA. erA TLRRY L GR/[I";. C1'A Riw H. AlliN. C1'A TI.\\ C RI". C1'A To the Partners McMahan and Associates, LLC We have reviewed the system of quality control for the accounting and auditing practice of McMahan and Associates, LLC (the firm) in effect for the year ended October 3 t, 2003. 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 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 conductcd in accordance with standards established by the Peer Review Board of the AICP A. 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 McMahan and Associates, LLC in effect for the year ended October 31, 2003, has been designed to meet the requirements of the quality control standards tor 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 complying with professional standards. III EAST BROADWAY. SUITE 250' SAlT LAKE CITY. Ut 84111' TFI801-521-7620 FAX 801-521-7641 12 McMAHAN AND ASSOCIATES, L.L.C. Certified Public Accountants and Consultants WEB SITE: WWW.MCMAHANCPACOM SUITE 222/AvON CENTER TELEPHONE: (970) 845-8800 100 WEST BEAVER CREEK BLVD. FACSIMILE: (970) 845-085 I P.O. Box 5850 AVON, CO 81620 E-MAIL: MCMAHAN@MCMAHANCPA.COM October 17,2005 Board of County Commissioners Eagle County Government P.O. Box 850 Eagle, Colorado 81631 Attention: Michael C. Roeper, Finance Director We are pleased to confirm our understanding of the services we are to provide for Eagle County Government (the "County") for the year ending December 31,2005 (and subsequent years, as requested by the County). We will audit the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information, which collectively comprise the County's basic financial statements as of and for the year ending December 31,2005 (and subsequent years, as requested). The document we submit to you will also include management's discussion and analysis as supplementary information required by generally accepted accounting principles and which will be subjected to certain limited procedures, but will not be audited. Also, the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the financial statements upon which we will provide an opinion in relation to the basic financial statements: 1. Schedule of Expenditures of Federal Awards 2. Budgetary comparison schedules for each fund. 3. Local Highway Finance Report (prepared by the County). The document will also include introductory and statistical sections (prepared by the County) that will not be subject to the auditing procedures applied in our audit of the financial statements, and for which our auditor's report will disclaim an opinion. Audit Objective The objective of our audit is the expression of an opinion as to whether the County's financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the additional information identified above when considered in relation to the financial statements taken as a whole. The objective also includes reporting on: . Internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financials statements in accordance with Governmental Auditing Standards. . Internal control relating to the major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Performing services for local governments throughout Colorado D. Jerry McMahan, C.P.A EXHIBIT Paul J Backes, C. P.A Mic 1" " Members: American Institute of Certified Public Accountants/Colorado Society of Certified Publi ~ 1 1 ~ 1 1..., . p, "rr. , . ,. /(1 1 __L XL. .._._.1 T Eagle County Government October 17,2005 Page 2 of 6 Audit Objective (continued) The reports on internal control and compliance will each include a statement that the report is intended for the infonnation and use of the County Commissioners, management, specific legislative or regulatory bodies, federal awarding agencies, and, if applicable, pass-through entities and is not intended to be and should not be used by anyone other than these specific parties. Our audit will be conducted in accordance with U.S. generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act Amendments of 1996; and the provisions of OMS Circular A-133, and will indude tests of the County's accounting records, a detennination of major program(s) in accordance with Circular A-133, and other procedures we consider necessary to enable us to express such an opinion and to render the required reports. If our opinion on the financial statements or the Single Audit compliance opinion is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to fonn or have not fonned an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. Management Responsibilities Management is responsible for establishing and maintaining effective internal control and for compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to pennit the preparation of financial statements in accordance with generally accepted accounting principles, and that federal award programs are managed in compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is responsible for making all financial records and related infonnation available to us, including any significant vendor relationships in which the vendor has the responsibility for program compliance. We understand that you will provide us with such infonnation required for our audit and that you are responsible for the accuracy and completeness of that infonnation. We will advise you about appropriate accounting principles and their application and will assist you in the preparation of your financial statements, induding the Schedule of Expenditures of Federal Awards, but the responsibility for the financial statements remains with you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to the County's financial statements. You are responsible for reviewing the entries and understanding the nature of any proposed entries and the impact they have on the financial statements. That responsibility indudes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confinning to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for infonning us about all known or suspected fraud or illegal acts affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud or illegal acts could have a material effect on the financial statements. You are also responsible for infonning us of your knowledge of any allegations of fraud or suspected fraud or illegal acts affecting the County which has been received in communications from employees, fonner employees, grantors, regulators, or others. Eagle County Government October 17, 2005 Page 30f6 Management Responsibilities (continued) In addition, you are responsible for identifying and ensuring that the County complies with applicable laws and regulations and for taking timely and appropriate steps to remedy any fraud, illegal acts, violations of contracts or grant agreements, or abuse that we may report. Additionally, as required by OMB Circular A- 133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. As part of the audit and at the County's request, we may prepare a draft of your financial statements, Schedule of Expenditures of Federal Awards, and related notes. In accordance with Government Auditing Standards, you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further, you are required to designate a qualified management- level individual to be responsible and accountable for overseeing our services. Audit Procedures - General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the County or to acts by management or employees acting on behalf of the County. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions related to major federal award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Because an audit is designed to provide reasonable, but not absolute, assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect immaterial missta~ements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. We will include such matters in the reports required a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also require certain written representations from you about the financial statements and related matters. Audit Procedures -Internal Controls In planning and performing our audits, we will consider the County's internal control sufficient to plan the audit in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinions on the County's financial statements and on its compliance with requirements applicable to major programs. Eagle County Government October 17, 2005 Page 40f6 Audit Procedures -Internal Controls (continued) We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Test of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls relative to the financial statements are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on intemal control and accordingly, no opinion will be expressed in our report on intemal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we will consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. An audit is not designed to provide assurance on intemal control or to identify reportable conditions. However, we will inform the governing body or audit committee of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the intemal control that, in our judgment, could adversely affect the County's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of any nonreportable conditions or matters involving intemal control, if any, as required by Government Auditing Standards and OMB Circular A-133. Audit Procedures - Compliance Our audit will be conducted in accordance with the standards referred to in the section entitled Audit Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform test of the County's compliance with applicable laws and regulations and the provisions of contracts and agreements, induding grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMS Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the County's major programs. The purpose of those procedures will be to express an opinion on the County's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-133. Audit Administration, Fees, and Other Matters We understand that County staff will prepare all account reconciliations and confirmations we request, and will locate any documents selected by us for testing. We also understand that, as detailed in the County's Request for Proposal dated August 24, 2005, County staff will draft the County's 2005 financial statements, notes and supplementary schedules (required and otherwise), together with certain statistical and other information that will not be subject to audit. Eagle County Government October 17, 2005 Page 50'6 Audit Administration, Fees, and Other Matters (continued) At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data Collection Fonn that summarizes our audit findings. We will provide copies of our reports to the County; however, it is management's responsibility to submit the reporting package (induding financial statements, Schedule of Expenditures of Federal Awards, summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Fonn to the designated federal dearinghouse and, if appropriate, to pass-through entities. The Data Collection Fonn and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we will provide infonnation to management as to where the reporting packages should be submitted and the number to submit. The audit documentation for this engagement is the property of McMahan and Associates, L.L.C. and constitutes confidential infonnation. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to the County's cognizant or oversight agency or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities, as applicable. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of appropriate personnel from McMahan and Associates, LL.C. Furthennore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or infonnation contained therein to others, induding other government agencies. The audit documentation for this engagement will be retained for a minimum of three years after the date the auditors' report is issued or for any additional period requested by the County's cognizant or oversight agency, as applicable. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party/parties contesting the audit finding for guidance prior to destroying the audit documentation. As outlined in the Sealed Dollar Cost Bid accompanying our Audit Proposal dated September 15, 2005, our fees for these services will be based on the actual time spent at our standard hourly rates, plus out-of- pocket costs (such as report reproduction, word processing, postage, travel, copies, telephone, etc.), except that we agree that our gross fee, induding expenses, will not exceed $35,000. Our standard hourly rates vary according the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. The above fee is based on anticipated cooperation from County personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of our contract. A copy of our unqualified 2003 peer review report was provided to the County as part of our Audit Proposal dated September 15,2005. We appreciate the opportunity to be of service to Eagle County Government and believe this letter accurately summarizes the significant tenns of our engagement. If you have any questions, please let us know. If you agree with the tenns of our engagement as described in this letter, please sign the enclosed copy and return it to us. Sincerely, McMAHAN and ASSOCIATES, L.L.C. ft(c Jk~ L ~fct 7" I S 'Y~i~I , Eagle County Government October 17,2005 Page 60'6 RESPONSE: This letter correctly sets forth the understanding of Eagle County Government with respect to the services to be performed by McMahan and Associates, L.L.C. EAGLE COUNTY GOVERNMENT BY: Signature Title Date