HomeMy WebLinkAboutRes2008-073Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2008-073
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AMENDING THE CONTRACT WITH MIKUNDA,
COTTRELL & CO. TO REFLECT THE COST OF IMPLEMENTING
NEW AUDITING STANDARDS, AND APPROPRIATING FUNDS
WHEREAS, the Seward City Council approved athree-year contract with the
independent auditing firm of Mikunda, Cottrell & Co. on February 26, 2007 in Resolution
2007-010; and
WHEREAS, the contract allows for fees for the 2007 audit of $47,500 and for the 2008
audit of $49,500; and
WHEREAS, the standard-setting board (the American Institute of Certified Public
Accountants Auditing Standards Board) which oversees the auditing profession and defines the
criteria by which auditors conduct independent audits, implemented a major revision of
auditing standards for non-profits and governmental entities, requiring significant additional
auditing effort aimed at evaluating an entity's internal control framework and environment;
and
WHEREAS, these new standards result in additional annual audit costs of 20% to the
City of Seward, increasing the cost of the 2007 audit from $47,500 to $57,000, and for the
2008 audit from $49,500 to $59,400.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1. The City Council hereby authorizes the city manager to amend the contract
with Mikunda, Cottrell & Co. by increasing the 2007 audit fees from $47,500 to $57,000, and
by increasing the 2008 audit fees from $49,500 to $59,400.
Section 2. Funds in the amount of $11,000 are hereby appropriated from the General
Fund fund balance account no. 101-0000-3050 to the Audit account no. 101-1110-5110.
Section 3. This resolution shall take effect immediately upon adoption.
PASSED AND APPROVED by the City Council of the city of Seward, Alaska, this
l lt" day of August, 2008.
CITY OF SEWARD, ALASKA.
RESOLUTION 2008-073
THE CITY OF SEWARD, ALASKA
Clark Corbridge, Mayor
AYES: Dunham, Valdatta, Bardarson, Smith, Corbridge
NOES: Amberg
ABSENT: Kellar
ABSTAIN: None
ATTEST: ,..~
,f~ ~ ~ _ ...-~~
,,r-
Jea~i Lewis, CI~C
`
City Clerk `
(City Seal) aa~~N~~~~•i
~_~~ ;tea
...a-~
•.« •
•.,~rq~ ~F ~~p~,.
~A...~..aa~
Council Agenda Statement
Meeting Date: July 28, 2008
Through: Phillip Oates, City Managei~~~ -° .
From: Kristin Erchinger, Finance Director ~~t"-+~
Agenda Item: Increase in audit fees to reflect new federal auditing standards
BACKGROUND & JUSTIFICATION:
The City of Seward contracts with Mikunda, Cottrell & Co. ("Mikunda") to provide independent audit services on
behalf of the City. The current contract with Mikunda was approved by Resolution 2007-010 on February 27,
2007, for the audit years ended 2006, 2007, and 2008. The contract reflects fees of $47,500 for 2007, and
$49,500 2008.
In December, 2007, Mikunda sent a letter to the City Council to explain new Statement ofAuditing Standards
which auditors are now required to implement when conducting an audit of a governmental agency, and the
impact that those new standards were expected to have on upcoming audit fees. Some CPA firms were using
these changes in auditing standards to increase costs by 40% to 50%. The letter to the Council explained that it
would be difficult to estimate the magnitude of additional costs related to the new internal control standards,
because each City maintains different systems, personnel, and controls. Upon completion of the audit, it was
determined that the additional costs of auditing internal controls for the first year of the new standards is $9,500,
representing an increase over the current contract of 20%. This results in a total charge of $57,000 for the audit
for the period ended December 31, 2007. Given the magnitude of the increase, the audit fees for the 2008 audit
are expected to be $59,400.
The modified auditing standards did have a significant impact on the scope of the audit this year, requiring
auditors to focus specific attention on reviewing all internal controls of the fmance department, the accounting
system, the human resources function, computerized accounting systems, inventory systems, banking and
investment controls, payroll and accounts payable controls, personnel qualifications, etc. These new standards
required more than 200 hours of additional audit prep time by the City staff, as well as a material increase in the
scope of the audit for the audit field team.
I have attached a copy of the letter that was distributed to the City Council in December, 200?, justifying the
additional work required by the audit, and the corresponding need to increase fees.
CONSISTENCY CHECKLIST: Where applicable, this agenda statement is consistent with the Seward City
Code, Charter, Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures.
Other:
FISCAL NOTE:
This resolution results in total annual audit costs of $57,000 for 2007, requiring an appropriation of $11,000. The
2008 Budget included an estimated charge for the audit of $46,000, and the original approved contract reflected a
fee of $47,500. It will also am~e 2008 contract amount to $59,400, up 20% from the previously approved
amount of $49,500.
RECOMMENDATION: ,3
Approve Resolution 2008- ~ authorizing an increase in the contract with Mikunda, Cottrell & Co. for audit fees
for 2007 and 2008, and appropriating funds.
~..