HomeMy WebLinkAboutContract 13185 AIRTHun ANDERSEN & CO.
SUITE 2200
ip-oi ELM STREET
DALLAS, TExAs 75270
(214) 741-2261
May 10, 1983
CITY SECRRETARY
CON-111-RA. T N01-2-1121/2
Audit Committee
City of Fort Worth, Texas
This will confirm our understanding of the arrangements made with
you covering our participation in the examination of the grant subrecipients
of the City of Fort Worth for the two years ending September 30, 1982,
The City subcontracts a portion of its CETA, CDBG and Aging Funds.
An audit of these subcontractors has not yet been performed for fiscal years
1981 or 1982. To comply with the federal audit requirements, which state
that all grant funds passed-through from the federal government must be
audited no less than once every two years, these subrecipients must be audited
currently. Such audits must comply with Office of Management and Budget
Circular A-102, Attachment P, for recipients which are state, local or indian
tribal governments. Audit requirements for organizations not within these
categories consist of those procedures utilized prior to Attachment P (i.e. ,
audits performed on an individual subcontractor basis in accordance with de-
tailed audit guides). In order to comply with these audit requirements,
subcontractors will be examined as presented below.
Governmental Subcontractors -
The City will request all governmental subcontractors of "substantial
size" to comply with the audit requirements of Attachment P for fiscal years
1981 and 1982. The Internal Audit Department will coordinate the development
of a monitoring function to ensure that funds subcontracted to these entities
are properly audited. The monitoring function will also be responsible for
following up as to the resolution of audit findings.
The City's preliminary review indicated that there are only two
governmental subcontractors of "substantial size". They are:
Fort Worth Independent School District
Texas Emplod ment Commission
L I I J = e L
UK I n,
ARTHUR ANDERSEN & Co.
Audit Committee -2- May 10, 1983
Both i of these entities receive pass-through funds under the CETA program. The
remaining governmental subcontractors of the City receive relatively insigni-
ficant awards. These entities will be incorporated within the "single audit"
of the City utilizing the approach discussed below under nongovernmental sub-
contractors.
Our work as it relates to governmental subcontractors of "substantial
size" will be limited to a review of audit reports and correspondence resulting
from the City's monitoring function for the purpose of identifying open audit
findings and audits not completed. These matters will be disclosed in the
City's letter of compliance.
Nongovernmental Subcontractors -
In order to minimize the cost and maximize the efficiency of non-
governmental subcontractor audits, City management has elected to incorporate
these entities within the City's 1982 "single audit". The examination of
nongovernmental subcontractors and selected governmental subcontractors, as
defined above, will be performed on a joint basis by Arthur Andersen & Co.
and the City's Internal Audit Department. The examination will be performed
as follows:
1. We will perform discussion and observation work to determine whether
procedures and controls are in place and operating within the
City which:
a. Provide reasonable assurance that payments to subcontractors
are properly authorized, and,
b. Provide reasonable assurance that subcontractors are in com-
pliance with the general and specific compliance requirements
of the affected grants.
2. We will select subcontractors for field visit on a scope basis. The
number to be visited will be based upon our findings at I. ,
however, we plan to arrange field visits for no more than eight
subcontractors. Our criteria for selection will be judgmental
giving consideration to size and past history. our selection
will include both subcontractors perceived by City management to
be relatively "clean" and "problem" subcontractors as a basis for
reliance on interface controls identified at 1.
3. Subcontractor field visits will be performed by the City's' Internal
Audit Department. We will supervise and review their work in
ARTHUR ANDERSEN & CO,
Audit Committee -3- May 10, 1983
accordance with Statement on Auditing Standards No. 9, "The
Effect of an Internal Audit Funcition on the Scope of the Inde-
pendent Auditor's Examination". Internal Audit will be responsible
for all field work and report preparation associated with these
examinations. We anticipate that the Internal Audit Department
will incur approximately 2,000 hours to accomplish the work.
Upon completion of the work, we will submit to you a letter docu-
menting the procedures which we have performed and our findings. The letter may
be submitted to federal and state grantor agencies as an indication as to the
reliance which may be placed upon the work performed by the Internal Audit
Department.
It is our understanding that the City has discussed the approach
to the audit of grant subrecipients presented herein with the appropriate
grantor agencies. our responsibility for the approach shall be limited to
performance of the work described in this arrangement letter.
Charges for this work will be based upon actual time expended,
estimated not to exceed $29,000. Billings will be submitted at the beginning
of each month as the work progresses and the City will remit payment by the
twenty-fifth day of the same month.
We appreciate the opportunity to provide these additional services
to the City of Fort Worth.
Very truly yours,
4e"
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City ty" Eenalls
Adayor and rte" Coi7rz 7n,ivi-jrz ira tit)in
DATE REFE"N" PAGE
PWME?EP suEjEC-, Audit of Grant Subrecipients
7/5/83 **C-6970
The City subcontracts a portion of its CET A, CDBG and Aging funds, To comply
with the federal audit requirements, which state that all grant funds passed
through from the federal government must be audited no less than once every
two years, subrecipients of the City must be audited for years 1981 and 1982,
The staff and the Audit Committee have negotiated with the City's current
independent auditors, Arthur Andersen & Co. , to arrive at the most effective
approach to satisfy the federal requirements, In order to minimize the cost
and maximize efficiency the internal audit staff of the City will dedicate
approximately 2,000 hours to assist the independent auditors. Arthur Andersen
& Co. proposes to direct the audit and perform the additional audit work at
a fee not to exceed $29,000. This cost will be allocated and charged to the
various grant programs.
Recommendation
The staff and the Audit Committee recommend that the City Council authorize
an agreement with Arthur Andersen & Co. to perform an audit examination of
grant subrecipients of the City for a fee not to exceed $29,000.
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