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<br />~ <br />~~HILLS <br /> <br />MEMORANDUM <br /> <br />DATE: <br /> <br />July 24,2007 <br /> <br />AGENDA ITEM 4D <br /> <br />TO: Honorable Mayor and City Council <br />Michelle Wolfe, City Administrator <br /> <br />FROM: Sue Iverson, Finance Director <br /> <br />SUBJECT: Final Payment to MMKR for 2006 Audit <br /> <br />BACKGROUND <br /> <br />At the November 27, 2006 meeting, the City Council approved a contract with Malloy, <br />Montague, Kamowski, Radosevich, Co., P.A. for auditing services for 2006 at a cost of <br />$24,750.00. This bid was put together assuming that the current City staff at the time would be <br />the personnel the auditors were working with, and that the department would be fully staffed. <br /> <br />DISCUSSION <br /> <br />As you know, the Finance Director left in August of2006 and the Accounting Analyst left in <br />December of 2006. When the auditors came to do the first part of the audit work, there was no <br />one in the Finance Department except the utility billing clerk. The City had no work papers or <br />any items ready for the auditors when they arrived. When they arrived for their "planned" final <br />visit, I had only been here for two weeks and had not yet had a chance to work on any audit work <br />papers or files. This added considerable cost to the audit and would be in addition to the bid <br />price of the audit as stated in the proposal. Further, the auditors did not realize that the previous <br />auditors did all the financial statement reconciliations and adjusting entries, except those that <br />were disclosed in the Management Report for 2005 as a reporting deficiency. This would also <br />add considerable cost to the audit and would be in addition to the bid price. <br /> <br />The preparation of the financial statements had been included in the bid price accepted by the <br />council, but only in the format previously done in prior years. This was not in the form of a <br />Comprehensive Annual Financial Report (CAFR) as recommended by the Government Finance <br />Officers Association (GFOA), thus the cost is greater. <br /> <br />Once I evaluated the situation, I suggested to the auditors that I prepare the financial statements <br />and in exchange I asked if we could convert them to the CAFR form. This was acceptable to the <br />auditors. However, due to the amount of correcting entries, personnel shortages in the Finance <br />