Anniston City Council - 12/18/12

SPECIAL SESSION OF THE ANNISTON CITY COUNCIL DECEMBER 18, 2012 5:00 p.m.

INVOCATION (Mayor) PLEDGE OF ALLEGIANCE (Mayor) CALL TO ORDER (Mayor) ROLL CALL (Mayor) NEW BUSINESS (City Attorney)

I.

RESOLUTIONS (a) A resolution authorizing reimbursements to City officials for expenses incurred while traveling away from the City. (b) A resolution authorizing the City Manager to execute an Agreement with the Alabama Fire College and Personnel Standards Commission.

II.

MOTIONS

(a) A motion to approve a Master Plan Development for the new Wells Fargo Bank located at 1000 Quintard Avenue. (b) A motion to appoint Kemp & Associates, CPA PC to audit the financial information of the City of Anniston for the period ending September 30, 2012, with the option for administration to renew the engagement to provide auditing services for the fiscal years ending September 30, 2013 and September 30, 2014.

PUBLIC COMMENTS (Mayor) COUNCIL COMMENTS (Mayor) ADJOURNMENT (Mayor)

RESOLUTIONS

MOTIONS

CITY OF ANNISTON P.O. Box 2168 Anniston, AL 36202 MEMORANDUM

TO:

CITY COUNCIL & CITY MANAGER

FROM:

DANNY MCCULLARS, FINANCE DIRECTOR

SUBJECT:

AUDITING SERVICES

DATE:

12/14/2012

The Finance Department has solicited proposals for auditing services for FY 2012 with options for FY 2013 and FY 2014. Invitations for proposal were sent to nine Alabama based accounting firms with governmental auditing experience. Six responded.

Kemp and Associates Carr Riggs and Ingram Banks, Finley, White and Company Barfield, Murphy, Shank & Smith Jackson Thornton Machen, McChesney & Chastain Warren, Averett, Kimbrough and Marino MDA Professional Group Joan Sander and Associates

$

FY 12 36,900.00 35,000.00 50,000.00 55,000.00 63,000.00 65,000.00

FY 13 $ 34,900.00 36,000.00 50,000.00 55,000.00 58,000.00 65,000.00 Did not respond Did not respond Did not respond

$

FY 14 35,900.00 37,000.00 50,000.00 55,000.00 58,000.00 65,000.00

The proposals are attached along with this memorandum in Dropbox. Only one local firm submitted a proposal. Kemp and Associates has audited the City in the past. However, all the firms that submitted are certainly qualified to handle the reporting requirements of the City of Anniston. Other local firms, Warren, Averett, Kimbrough and Marino as well as Joan Sanders and Associates did not respond to our request for proposal.

The responsibility pursuant to the Council Manager Act is for the Council to appoint the auditor. Based on price (Kemp was low cost edging Carr, Riggs and Ingram), past experience, as well as being a long standing Anniston firm, my recommendation would unofficially be for the Council to allow city administration to engage Kemp and Associates for up to these three years. However, this is not a formal recommendation, as this appointment must and should come from the elected body. Note, pursuant to the CouncilManager Act, the same firm cannot audit the city books more than three years in a row.

If you have any questions, please feel free to email me over the weekend or whenever. I am always available to answer any issue that I may.

PROFESSIONAL SERVICES AUDITING PROPOSAL

FOR

City of Anniston, Alabama

December 7, 2012

Proposer: Carr, Riggs & Ingram, L.L.C. 2100 16th Avenue South Suite 300 Birmingham, Alabama 35205 205.933.7822 CRIcpa.com

Submitted by: Jason Harpe Engagement Partner 205.949.8670 • jharpe@cricpa.com

Brian Barksdale Engagement Quality Control Review Partner 205.949.8601 • bbarksdale@cricpa.com

TABLE OF CONTENTS

Section

QUALIFICATIONS OF FIRM

UNDERSTANDING YOUR NEEDS

FIRM PROFILE

ENGAGEMENT TEAM

OUR COMMITMENT TO QUALITY

RELEVANT EXPERIENCE

INDEPENDENCE

QUALITY CONTROL

SERVING YOU

SCOPE OF SERVICES

TRANSITION TO CRI

OUR APPROACH

FEES

APPENDIX A – ADDITIONAL CLIENT REFERENCES

Page

3‐4

5‐7

8‐13

14

15

16

17‐18

19

20

21‐27

28

29

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QUALIFICATIONS OF THE FIRM – UNDERSTANDING YOUR NEEDS

December 7, 2012

Danny A. McCullars, Director of Finance City of Anniston Anniston, Alabama

Re: Request for Proposals for Professional Auditing Services

Thank you for allowing Carr, Riggs & Ingram, LLC (CRI) to submit this proposal to provide professional auditing services to the City of Anniston, Alabama (the “City”). We are genuinely excited about the prospect of establishing a long‐term relationship with you and believe the following factors are relevant in your assessment of us:

 Governmental Auditing Expertise. CRI is keenly aware of the business issues facing the City. Our firm maintains a specialized governmental practice and represents a large clientele of governmental entities throughout the South which translates into a unique and diverse understanding of the environment in which the City operates. Your engagement partners leverage many years of experience serving governmental industry clients, providing the expertise you expect from your independent auditors.  Local Relationships & National Resources. Currently ranked among the top 30 public accounting firms in the United States, CRI is the South’s third largest regional firm. Possessing both the appropriate resources and decision‐making authority positions us to help you meet your goals in a timely, efficient manner.  Dedicated Team Members. Your assigned service team is comprised of proactive professionals who are committed to delivering the highest level of business acumen and knowledge to the City.

Our commitment to providing you with consistent staffing allows you to maximize savings and remain focused on business.  Transition Experience. Our team offers a great deal of experience with transitioning new clients, and our proven process streamlines the transition while minimizing the disruption to you during the auditor change.  Fee Structure. Our fee is indicative of our desire to invest in a long‐term, mutually beneficial relationship with the City and will provide immediate and continuing savings.

We understand that the City is seeking to engage a firm to audit the City’s annual financial statements for the fiscal years ending September 30, 2012, 2013 and 2014, and prepare the A‐133 Single Audit. The audits will be performed in accordance with all applicable professional standards.

The audit report and related findings will be issued and presented in their final form to the City as set forth in the RFP.

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QUALIFICATIONS OF THE FIRM – UNDERSTANDING YOUR NEEDS

We welcome the opportunity to display to you the same teamwork, expertise, and responsiveness that has made us one of the fastest growing public accounting firms in the United States over the past ten years. Please contact me at (205) 949‐8670 or jharpe@cricpa.com with any questions you may have regarding our proposal. Again, we appreciate your consideration of our firm to serve as your external auditors.

Sincerely,

Jason Harpe, CPA

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QUALIFICATIONS OF THE FIRM – FIRM PROFILE

Carr, Riggs & Ingram, LLC (CRI) is a regional certified public accounting and consulting firm ranked by Public Accounting Report as the 29th largest firm in the nation and the 3rd largest in the South.

Professional Organization Memberships American Institute of Certified Public Accountants (AICPA) Alliance for CPA firms AICPA Private Companies Practice Section Center for Audit Quality (CAQ) Employee Benefit Plan Audit Quality Center of the AICPA Governmental Audit Quality Center of the AICPA Information Systems Audit and Control Association (ISACA) Institute of Internal Auditors (IIA) Public Accounting Oversight Board (PCAOB)

As a result of our membership in these organizations, we are subject to stricter quality control standards than firms that choose not to take the voluntary steps to join the various AICPA and PCAOB organizations to improve the quality of their practices.

CRI is also a member of Moore Stephens International Limited, a network of independent public accounting firms having 647 member offices in 98 countries, over 20,000 people and fee income of $2.23 billion. Our membership in this prestigious alliance allows us to provide our clients with both national and international resources.

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QUALIFICATIONS OF THE FIRM – FIRM PROFILE

Firm‐wide, CRI performs auditing and consulting services for over 200 governmental clients with more than 100 governmental auditing staff. Also, partners in our various offices confer frequently about complex governmental accounting issues. CRI places emphasis on training staff in governmental accounting through in‐house training as well as State and National governmental accounting conferences and educational seminars. Partners and managers in CRI’s governmental accounting services group teach governmental accounting courses to other CPAs and government professionals several times annually.

We are confident we can and will provide superb engagement management to the City. Your engagement team will bring a strong, balanced blend of talent and industry experience—important ingredients for delivering superior, quality services. We also have two scholars‐in‐residence professors to assist in technical accounting matters if necessary and we utilize other nationally recognized governmental accounting experts with university and GASB backgrounds.

CRI’s technology consulting division also provides a resource that can be used by our clients related to computer technology and security issues. We feel that we have a broad amount of expertise in the government accounting arena and we are available at any time to provide technical advice or consultation.

Additionally, examples of partner involvement in the CPA profession, which demonstrates our commitment to quality, services, and capability include:

 Past Chair of the U.S. Auditing Standards Board  Members of the Alabama State Boards of Accountancy  Past Chair of the Alabama Society of Certified Public Accountants  Member of the GAO Advisory Council on Government Auditing Standards  Multiple reviewers for the GFOA’s Certificate of Achievement for Excellence in Financial Reporting program  Firm membership in the AICPA’s Governmental Audit Quality Center, including an individual member of the Executive Council  Multiple authorships of national governmental publications, guides and articles ‐ including PPC’s “Guide to Single Audits” and “Audits of Local Governments”  Multiple speaking engagements for State and National governmental conferences

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QUALIFICATIONS OF THE FIRM – FIRM PROFILE

The audit of the City of Anniston will be conducted by partners and staff members of our Birmingham office. The professionals in the Birmingham office are comprised of 6 partners, 7 managers, 10 seniors and 10 accounting staff.

With seven CPA’s that focus specifically on governmental clients, the Birmingham office’s governmental auditing staff has over 70 years combined experience in governmental accounting including A‐133 Single Audits. It is our anticipation that four professional staff will be devoted to the City’s audit on a full‐time basis and two professional staff will participate on a part‐time basis.

As needed on various engagements, we utilize professional staff members who have specialized training and experience in information technology (IT). For example, some of our staff members have dual degrees or dual majors in IT as well as accounting. In addition, our firm employs individuals who have been certified as Network Engineers and Information Systems Auditors. These individuals have many years of experience in working with a wide range of information systems in areas such as network design, security, risk analysis and other areas.

Our professional staff members receive ongoing continuing education training in topics applicable to governmental accounting and auditing and receive the required number of hours on a yearly basis.

All of our governmental audit professionals from seniors to partners have training and experience in the application of GASB Statement 34, and all of our governmental audit clients have become fully compliant with the provisions of that pronouncement.

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

We have assembled a team of professionals who will ensure the highest level of personal dedication and professional excellence to you. Our team has the requisite blend of technical, industry and business skills that we believe are important to the City.

Brief profiles of each member of the team identified below follow on subsequent pages:

Brian Barksdale

Jason Harpe

ENGAGEMENT QUALITY CONTROL REVIEW PARTNER

ENGAGEMENT PARTNER

Harold L. Monk, Jr. TECHNICAL REVIEW PARTNER

Courtney Brown ENGAGEMENT MANAGER

Andrew Waits

Carley Ezzell

SUPERVISING SENIOR

SENIOR

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

Jason Harpe, CPA Engagement Partner

Experience Jason has more than 19 years of experience in accounting and auditing. He allocates the majority of his time to the firm’s governmental clients, providing both audits as well as compliance testing to clients in this area. In addition, he provides consulting services related to internal controls and compliance consulting.

Areas of Specialization  Governmental accounting and auditing  Educational Institutions

Education, Licenses & Certifications  B.S., Business Administration, with concentration in Accounting, Auburn University  Certified Public Accountant

Professional Affiliations  American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants

Other  President – Auburn University Accounting Advisory Board  Member – Auburn University College of Business Advisory Council  Treasurer – Breast Cancer Research Foundation of Alabama

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

Brian Barksdale, CPA Engagement Quality Control Review Partner

Experience Brian brings over 30 years of accounting and audit experience to this engagement, the majority of which relates to serving governments, non‐profits and educational institutions.

Areas of Specialization  Governmental accounting and auditing  Nonprofit entities  Educational Institutions

Education, Licenses & Certifications  B.S., Business Administration, with concentration in Accounting, Samford University  Certified Public Accountant

Professional Affiliations  American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants

Other  Partner in Charge of CRI‐Birmingham  Former Chairman of the Board ‐ Alabama Society of Certified Public Accountants (2009‐2010)  Member – Samford University Business Advisory Council  Member – UAB Accounting Advisory Board

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

Harold L. Monk, Jr., CPA Technical Review Partner

Experience Harold Monk has over 40 years of public, private and governmental accounting and auditing experience. Harold is the immediate past Chair of the Auditing Standards Board of the AICPA. He served as a member of the Board of Directors of the AICPA, and has served in the past on the CPE Executive Committee, Peer Review Board, Auditing Subcommittee of the AICPA Board of Examiners, the Special Committee on Financial Reporting, and the Special Committee on Assurance Services.

Harold is currently serving on GAO’s Advisory Council on Government Auditing Standards.

Numerous articles authored by Harold have been featured in state and national publications and he has authored or co‐authored “Advanced Auditing for Partners and Managers” (AICPA), “Compliance Auditing” (AICPA), “Guide to Single Audits” (PPC), “Audits of Local Governments” (PPC), “Preparing Non Profit Financial Statements” (PPC), “Annual Accounting and Auditing Update” (PPC) and “Maximizing Single Audit Efficiency” (PPC).

Education, Licenses & Certifications  BSBA, Accounting, University of Florida  Certified Public Accountant  Certified Fraud Examiner

Professional Affiliations  American Institute of Certified Public Accountants  Florida Institute of Certified Public Accountants  Government Finance Officers Association  Florida Government Finance Officers Association

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

Courtney Brown, CPA Manager Experience Courtney brings over 12 years of audit experience to this engagement. Approximately 90% of Courtney’s workload is related to governmental clients.

Education, Licenses & Certifications  B.S., Accountancy, Auburn University – Montgomery  Certified Public Accountant

Professional Affiliations  American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants

Andrew Waits, CPA Supervising Senior

Experience Andrew brings over five years of audit experience to this engagement. Approximately 60% of his workload is related to governmental clients.

Education, Licenses & Certifications  B.S., Business Administration, Samford University  Masters of Accountancy, Samford University  Certified Public Accountant

Professional Affiliations  American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants

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QUALIFICATIONS OF THE FIRM – ENGAGEMENT TEAM

Carley Ezzell, CPA Senior

Experience Carley brings over four years of audit experience to this engagement. Approximately 60% of her workload is related to governmental clients.

Education, Licenses & Certifications  B.S., Accounting, Auburn University  Certified Public Accountant

Professional Affiliations  American Institute of Certified Public Accountants  Alabama Society of Certified Public Accountants

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QUALIFICATIONS OF THE FIRM – OUR COMMITMENT TO QUALITY

OUR PEOPLE

The quality of a professional services firm is determined by its people. To ensure the highest possible level of quality for every client, we employ carefully designed protocols for recruiting, developing, promoting, and supervising our staff. Our professionals participate in formal training with respect to accounting, auditing, tax and other competencies, including industry specific topics. Additionally, they all receive business training that focuses on their leadership skills.

CRI’S CPE WEEK CRI’S LEADERSHIP ACADEMY TECHNICAL TRAINING BUSINESS TRAINING

You expect your audit team to provide you with In today’s business world of constant all of the information needed related to the communication, business skills are almost as latest accounting and reporting hot topics and important as technical expertise. We believe auditing requirements. Therefore, our firm that building our next generation of leaders is follows the requirements set forth in or by the: key to our firm’s success and essential for

excellent client service. Therefore, we invest in the skills necessary for our professionals to  Financial Accounting Standards Board (FASB) provide quality services — while communicating  Governmental Accounting Standards Board effectively throughout the process. This belief (GASB) led to investment in and the formation of our  Securities and Exchange Commission (SEC) Leadership Academy, which is designed to  AICPA provide training on the “soft skills” of business  Government Auditing Standards issued by leadership. These skills include analytical review, the Comptroller General of the United States communication, presentation, and leadership.  PCAOB

Additionally, we believe that it is incumbent For the needed technical updates to address the upon us to instill and reinforce our core values of above, our firm hosts CPE Week, an annual client service, respect, and integrity. Therefore, continuing professional education series we offer two courses based specifically on those designed to inform our professionals. values at critical career points.

Additionally, it provides a forum for our

professionals to share best practices—ensuring

that you receive the benefit of expertise from our firm’s 800+ professionals.

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QUALIFICATIONS OF THE FIRM – RELEVANT EXPERIENCE

Confidential CRI will deliver deep resources, ability and experience to the City of Anniston ensuring world‐class engagement management to the City. Your engagement team boasts many years of experience in providing audit and other services to governmental entities, and brings a strong, balanced blend of talent and experience—important ingredients for delivering superior, quality services.

Below we share specific, relevant client references; we encourage you to consult with them as to our performance:

Client City of Homewood, Alabama Melody Salter Principal Accountant 205.332.6108

City of Tarrant, Alabama Lynn Juneau Finance Director 205.849.2800

City of Vestavia Hills, Alabama Melvin Turner Treasurer 205.978.0128

City of Mountain Brook, Alabama Steve Boone Director of Finance 205.802.3825

City of Talladega, Alabama Theresa St. James Finance Director 256.362.8186 ext. 1025

Approximate Ongoing Years of Service 2 years

Total Engagement Hours 350

7 years

Assigned Staff Jason Harpe Carley Ezzell

Scope of Work Audit of City and related organizations – Government Auditing Standards and OMB A‐133

300

Jason Harpe Andrew Waits

Audit of City and Electric Authority – Government Auditing Standards and OMB A‐133

11 years

325

Jason Harpe Brian Barksdale Courtney Brown

Audit of City and related organizations – Government Auditing Standards and OMB A‐133

16 years

325

Jason Harpe

Audit of City and Library – Government Auditing Standards and OMB A‐133

1 year

350

Jason Harpe Courtney Brown Andrew Waits Carley Ezzell

Audit of City and related organizations – Government Auditing Standards and OMB A‐133

Please see APPENDIX A for a list of additional client references.

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QUALIFICATIONS OF THE FIRM – INDEPENDENCE

Affirmation of Independence

The firm and all key professional staff are properly registered and licensed to practice in the State of Alabama and are independent to the City of Anniston, as defined by the requirements of Government Auditing Standards, published by the Comptroller General of the United States. There are no conflicts of interest with regard to any other work performed by our firm for the City of Anniston.

The firm is in good standing with the Alabama State Board of Public Accountancy, and has had no enforcement actions or complaints filed with the board against the firm, its partners or employees.

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QUALIFICATIONS OF THE FIRM – QUALITY CONTROL

Peer reviews are performed every three years by another independent public accounting firm. The most recent review of our firm, which included specific governmental engagements, was performed in 2010 by EideBailly. The report was the most favorable possible and is included below.

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QUALIFICATIONS OF THE FIRM – QUALITY CONTROL

INTERNAL QUALITY CONTROL REVIEWS AND OTHER EXTERNAL REVIEWS

Experienced partners and professional staff of our firm conduct quality control reviews of our audits.

Each partner’s work is reviewed annually, and the inspection process includes periodic testing of the effectiveness of our quality controls and a continuous improvement program.

In addition, we are registered with the PCAOB and our 2006 and 2009 PCAOB inspection reports were also the most favorable possible ‐ no audit deficiencies or quality control defects identified. The 2009 PCAOB report can be viewed at www.pcaob.com/inspections/public_reports/2009/Carr_Riggs.pdf.

AUDIT METHODOLOGY FOR QUALITY CONTROL REVIEW

Virtually all of our audit documentation is maintained electronically. Compliance with our methodology is regularly reviewed and evaluated as part of our internal quality program, which is further discussed in this section under INTERNAL QUALITY CONTROL REVIEWS AND EXTERNAL REVIEWS. Comprehensive policies and procedures governing our accounting and auditing practices covering professional and regulatory standards and implementation issues are constantly updated for new professional developments and emerging issues. See PAGES 21‐27 for a more detailed description of our audit methodology and approach.

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SERVING YOU – SCOPE OF SERVICES

CRI will provide the following services to the City as part of our engagements for the fiscal years ending September 30, 2012 through 2014:

 Prepare the City’s annual financial statements (subject to review and approval by management).

 Perform external audit services in accordance with auditing standards generally accepted in the United States of America (GAAS) and Generally Accepted Governmental Auditing Standards (GAGAS).

 Perform a review and provide feedback (i.e. limited procedures) regarding supplementary information such as Management’s Discussion and Analysis, budgetary comparison schedules, statistical information, etc.

 Prepare and issue a Single Audit Report on the City’s Major Federal programs in accordance with OMB A‐133.

 Verbal and/or written communication with management with the express purpose of enhancing the financial reports to provide accurate, timely information for users.

 Communicate directly with management regarding the results of our procedures.

 Other related projects as they arise and upon request, while taking care to retain our independence as required by auditing standards.

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SERVING YOU – TRANSITION TO CRI

Your decision to make an auditor change is significant, and working with new independent auditors can often be a concern. Our team members are experienced with the transition of new clients and are positioned to provide you with value from the very first encounter. Our approach is designed to avoid interruption of service, raise the standard of service and establish ongoing channels of communication with the City‘s management and audit committee. We will accomplish the transition with minimal disruption and investment of management’s time. CRI has a well‐defined approach for ensuring a smooth, efficient and seamless transition. The transition plan is comprised of the following key activities, and can occur within approximately two weeks, depending on the availability of the parties involved:

PHASE Pre‐Approval and Acceptance

Predecessor Auditor Communications

Client Understanding and Planning

ACTIVITY

Management and/or Audit Committee approves the change in auditor, pending new auditor completion of client acceptance procedures CRI performs client acceptance procedures, such as:  Interview key service provider relationships  Interview predecessor auditor  Internal firm review and approval

CRI makes inquiries of and reviews predecessor auditor workpapers related to the prior year audit Predecessor auditor provides copies of requested workpapers

CRI, Management and/or Audit Committee sign engagement letter CRI, Management and/or Audit Committee develop communication plan protocol CRI and Management finalize timetable and key dates (see OUR APPROACH for draft timetables and key dates) CRI develops initial understanding of internal controls CRI reports to management internal control and review items subsequent to initial planning stage

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OUR APPROACH

Our general audit approach is risk‐based, specifically tailoring our audit procedures to City’s unique circumstances. We design the nature, timing and extent of our audit procedures based on a comprehensive planning process which includes studies of internal control, inquiries with client personnel and internal strategy sessions. We involve partner and manager‐level personnel in all phases of our audit and use our experience, technology and high‐caliber staff to perform an effective and efficient audit.

Conduct

Conduct Pre‐Audit -audit Conference conference Conduct post audit conference w/ representatives of the City Understand Understand Business Concerns & Challenges

Issue Final Reports & Management Letters

Evaluate Evaluate Economic economic && Industry Factors industry factors

Discuss Draft of Financial Statements & Management Letter

Review Review Accounting accounting && Information Systems

Review Review Accounting Internal Control Process process

Conduct Conduct risk risk assessment

Complete Audit & accounting & Accounting Specialist Reviews

Establish Establish audit strategy

Perform Audit Fieldwork

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OUR APPROACH

We will segment the engagement into four separate stages: 1) planning, 2) fieldwork performance, 3) review, and 4) financial reporting. Each segment will include partner and manager involvement, and we will staff each segment appropriately with personnel based on their experience level and performance abilities. The following is a brief summary of the four segments.

 Planning 

Conduct entrance conference(s) with City personnel



Communicate with predecessor auditor and review prior year workpapers, financial statements and comment letters (if applicable)



Obtain an understanding of the City’s internal controls through interviews with City personnel



Testing internal controls as deemed appropriate, including walk throughs of significant processes or transactions



Perform analytical procedures on account balances, ratios and other transactions as deemed appropriate



Hold internal discussions regarding significant audit and fraud risks



Prepare detailed audit programs based on risk assessments

 Fieldwork Performance



Performing substantive audit procedures on the City asset and liability balances as well as revenue and expense amounts



Completing audit procedures as required by Federal single audit standards



Communicating the status of audit fieldwork to the City on a regular basis

 Review



Detailed review of workpapers by the audit managers



Review of key audit risk areas by the engagement partner

 Financial Reporting



Conduct exit conference(s) with City personnel



Review the draft of the financial statements, and prepare other reports and schedule drafts for review and approval by City personnel



Review financial reports as required under OMB Circular A‐133 (Single Audit)



Attend management meeting to submit and present audit report if requested

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OUR APPROACH

ANTICIPATED AUDIT STRATEGY

GAAP provides a conceptual framework for accounting, financial reporting, and disclosure; in the City's situation, we must also consider governmental reporting requirements. The application of GAAP varies depending on the facts and circumstances of transactions and management’s interpretation.

Our general audit approach described herein is tailored to address the nature and inherent risk of each area. For all areas, we will meet with management to gain an understanding of management’s processes and controls. We will then assess and test such controls, as necessary. We will also perform substantive analytical audit procedures and tests of details as well as ensure that the proper accounting is applied. In certain complex areas we may use functional specialists (e.g. information technology [IT], valuation of investments and review of actuarial assumptions and calculations) to assist in the evaluation of complex transactions and account balances.

In addition, we will review the financial statement disclosures and evaluate the overall transparency of the City’s financial reporting. We have outlined below the key areas of audit focus based on materiality and various judgments involved as well as our preliminary knowledge of the City and the governmental industry:

Anticipated Audit Strategy

Substantive Procedures Assessed Level of Risk

Test of Controls

Analytics

Test of Details

Use of CAATs

High









Fraud risks

Moderate









Financial reporting

Moderate









Other estimates and contingencies

Moderate







Manual journal entries Cash and cash equivalents

Moderate Moderate

 

High



Moderate



Significant Areas Initial audit procedures

Accounts receivable

Capital assets and related expenditures

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 















Notes ‐First time audit ‐ all areas will be impacted. ‐We also will perform the requisite predecessor‐successor communications. ‐Will meet AICPA requirements fraud testing. ‐Fraud is considered an intentional act that results in a material misstatement of the financial statements. ‐We will gather information to identify risks of material misstatement due to fraud, and evaluate the programs and controls that address fraud. ‐Period‐end financial reporting is generally important, this is where the information is compiled or reconciled to detailed information from underlying processes and systems. ‐Compensated absences – we will perform tests of details and substantive analytics to substantiate accuracy of account balance. ‐Manual journal entries are inherently risky. ‐Cash is significant because of the large account balance and number of transactions impacting account. ‐Accounts receivable are significant due to the account balance, number of transactions and issues related to estimates associated with the allowance for doubtful accounts.

Capital assets are significant due to the account balance and susceptibility to misappropriation.

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OUR APPROACH

Anticipated Audit Strategy

Substantive Procedures Assessed Level of Risk

Test of Controls

Analytics

Test of Details

Use of CAATs

Accounts payable and related expenditures

Moderate









Payroll, related liabilities and payroll expenditures

Moderate









High







Moderate







Revenue recognition

High







Federal and State Grants

High







Moderate









High









Significant Areas

Long‐ term debt / debt covenants

Deferred revenue

Entity level controls

IT systems



Notes Accounts payable are significant due to the account balance and number of transactions impacting accounts payable and the related expense accounts.

Payroll liability accounts and related expenditures are significant due to the account balance and payroll expenditures comprise a significant portion of the City’s expenditures. ‐Debt is significant due to the size of account balance and covenants associated with debt. ‐ We will perform tests of compliance through substantive analytics and confirmation of certain data with creditors and other third‐ parties.

Deferred revenue is significant due to the size of account balance. ‐The City generates revenue through property and other taxes. ‐We will test revenue systems and processes and perform a combination of substantive analytical procedures and tests of details to test this area.

A Single Audit is required in accordance with OMB A‐133. Grants would be considered high risk due to the inherent nature of grants and the requirements of OMB A‐133. ‐We will gain an understanding of the control environment, risk assessment, monitoring, information and communication channels to determine the nature, timing, and extent of reliance on and tests of controls of control activities, analytical procedures and substantive tests. ‐Our goal is to leverage the work already performed by management to the degree possible, which should reduce controls and substantive work. ‐The underlying financial and operational systems supporting the key business cycles play a vital role in the ability to generate and compile compete and accurate financial information. ‐The controls over IT security, computer operations and program change over financially significant applications are vital.

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OUR APPROACH

The following graphs depict the key elements of our audit process, as well as the preliminary planned timing of our procedures for fiscal year 2012: Timing of Audit Procedures PHASE

2012

Client Acceptance & Pre-planning

D

2013 J

F

M

A

M

J

J

A

S

O

N

D

Appointment of audit firm Ongoing consultation on major issues, and developments Meet with management to discuss business risks and scope Hold CRI engagement team planning meetings Risk Assessment & Audit Strategy Gain understanding of significant processes and key

Perform testing of key controls to reduce substantive testing Determine nature, timing and extent of substantive procedures Perform selected substantive procedures as of interim date Finalize and communicate plan to management/governance Audit Execution Conduct remaining substantive tests based on the results of audit procedures performed to date Discuss results of audit work with management Report & Monitor Review annual report(s) Meet with management/governance to discuss audit results Issue audit opinion(s)

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OUR APPROACH

As requested, CRI will provide the following services as part of our engagement:

Audits of the financial statements of the City for the years ended September 30, 2012 through 2014, in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards issued by the Comptroller General of the United States, the provisions of the Federal Single Audit Act of 1996, and the United States Office of Management and Budget (OMB) Circular A‐133, Audits of State, Local Governments, and Non‐profit Organizations.

We realize the need for flexibility and creativity in designing a process that works for the individual needs of our clients. Our audit process is built on frequent communication with management and City staff which focuses on critical issues and audit risks early in the audit process. By concentrating on gathering valuable information about the City, and investing the time necessary to understand the business risks, we will develop an approach that is unique to the City. Factors that differentiate CRI from other professional services firms include our focus on client relationships; our quest for knowledge of our clients’ operations before we begin the assurance process; our governmental experience; and the seasoned judgment of our partners in the sharing of intellectual capital.

Our clients recognize the benefits of a planned, proactive approach. By providing you with a detailed plan before your audit begins, you are given a “road map” that outlines steps in the process, and a corresponding timeline. Working closely with the City’s finance/accounting team, we identify possible areas of risk which might require special care and attention. This advance planning typically results in a much more efficient audit process and yields an audit plan responsive to those risks identified. We are committed to providing a high level of financial integrity with respect to your financial statements, and we design our audit plan accordingly.

Upon selection as auditors for the City we will divide the audit into manageable segments, during our preliminary planning meetings. The natural segments will be along the major lines of business activities as well as other required reporting units. Utilizing prior financial information, the 2011‐ 2012 budget, reviews of the prior auditor’s workpapers and interviews with key personnel, we will identify the significant audit areas. Significant audit areas are determined based on perceived risk of financial misstatement, whether by error or by fraud. These preliminary planning meetings will be completed in a manner consistent with the completion of timelines as set forth in the City’s request for proposal.

As part of this work, we will prepare the detailed audit plan and coordinate with City staff on the preparation of schedules, interim testing and scheduling.

During our audit, we will provide open dialogue with management related to the progress of the audit. We will immediately communicate any issues related to the audit to prevent potential disagreements. Open communication generally eliminates miscommunications and is integral in our professional relationship. We also pride ourselves on being available to answer any questions during our engagement and we are easily available for consultation in periods between audits.

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OUR APPROACH

Furthermore, CRI will act as your advisor. As stated earlier, our vast expertise in governmental auditing and accounting allows us to provide sound advice related to unique governmental accounting matters. During the course of our engagement, we will consistently seek opportunities for improvement while recognizing problems or critical areas requiring added attention. We will provide this information in two ways: 1) as part of our on‐going communication; and 2) via a management letter which will be issued at the completion of the engagement if necessary.

Resolution of Audit or Accounting Issues Any audit or accounting issues that are encountered during the course of the engagement will be brought to the attention of management and/or the audit committee, as deemed appropriate. The engagement team will work with the City’s management, in order to resolve any issues in a timely and acceptable manner. If significant accounting issues are encountered during the course of the audit and it is determined that additional time will be required of CRI personnel, we will communicate with the City an estimate of costs for additional services required, before those services are rendered.

Audit Communications At the conclusion of the audit, in addition to written communications required to be issued in accordance with current auditing standards to those charged with the governance of the City, we will present our audit findings and internal control deficiencies and recommendations to the audit committee.

Anticipated Potential Audit Problems We do not anticipate any audit problems. Should any issues arise, we have the experience and knowledge to determine an appropriate resolution.

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FEES

Our goal is to create mutually‐rewarding relationships. We trust, therefore, that our high quality, responsive service will yield returns far greater than your investment in our professional fees. Below please find our proposal of fees to provide the requested services.

Our fees for the proposed services are as follows:

Fiscal Year September 30, 2012 September 30, 2013 September 30, 2014

Total Fee Per Fiscal Year $35,000 $36,000 $37,000

The above proposed fees are the total all‐inclusive maximum price, per year, and contain all direct and indirect costs, including all out‐of‐pocket expenses.

If the City requests additional services outside of this audit contract, professional fee hourly rates are as follows, but may be negotiated depending on the project request:

Classification Partner Manager Senior Staff IT Specialist Fraud Specialist

Hourly Rate $225 $140 $100 $80 $200 $200

Our professional fees are based on the key assumptions that the City will:      



Ensure that the predecessor auditor’s workpapers will be made available for our timely review; Make available documents and workpapers for review at the City’s headquarters location, although we may choose to review at alternate locations; Prepare certain schedules and analyses; Provide us with supporting documents as requested; Assist us in obtaining an understanding of the accounting systems of the City; Not experience a significant change in business operations (i.e. adjustments to the quoted fee may be necessary for items such as, but not limited to, significant acquisitions, investments, new service offerings, or significant changes in the City’s ICFR); and Not experience a significant change in financial reporting standards (i.e. adjustments to the quoted fee may be necessary for items such as, but not limited to, adoption of International Financial Reporting Standards (IFRS)).

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APPENDIX A – ADDITIONAL CLIENT REFERENCES

Services Provided

Annual Audit

A‐133 Audit

GFOA Certif.

IT Advisory

Various Acctg.

Services

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Municipal Government Clients City of Birmingham, Alabama City of Enterprise, Alabama City of Tuskegee, Alabama City of Montgomery, Alabama City of Andalusia, Alabama City of Brundidge, Alabama City of Florala, Alabama City of Tallahassee, Florida City of Callaway, Florida City of Palatka, Florida City of Bonifay, Florida City of Panama City Beach, Florida City of Lynn Haven, Florida City of Mexico Beach, Florida City of Destin, Florida City of Gainesville, Florida

Water and Sewer Industry Clients Alabama Drinking Water Finance Authority Alabama Water Pollution Control Authority Alabama Water and Wastewater Institute, Inc. City of Enterprise Water Works Board Water Works and Sewer Board of Selma, Alabama The Utilities Board of the City of Opp, Alabama The Utilities Board of the City of Andalusia, Alabama Coffee County Water Authority Utilities Board of the City of Florala, Alabama State Agency Clients Retirement Systems of Alabama Alabama Department of Economic and Community Affairs Alabama Department of Insurance Florida Department of Financial Services Mississippi Division of Medicaid County Government Clients Walton County, Florida Holmes County, Florida Putnam County, Florida Bay County, Florida Gulf County, Florida Alachua County, Florida Jackson County, Florida St. Johns County, Florida Sumter County, Florida Washington County, Florida Baker County, Florida Dixie County, Florida Gilchrist County, Florida Clay County, Florida Levy County, Florida

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS

Submitted by: John Shank, CPA, CVA Barfield, Murphy, Shank & Smith, P.C. 1121 Riverchase Office Road Birmingham, AL 35244 (205) 982-5513 jshank@bmss.com

2

December 6, 2012 Danny A. McCullars Jarrod Simmons City of Anniston 1128 Gurnee Avenue Anniston, AL 36202

Dear Danny & Jarrod, Barfield, Murphy, Shank & Smith (BMSS) would like to thank you for the opportunity to offer the City of Anniston solutions for its audit needs.

We understand your need for quality audited financial statements, reports on compliance and internal controls and single audit report on compliance for each major program and are committed to issuing all within the timelines in your request for proposal.

Having worked extensively with municipalities and government agencies for over 20 years, we understand the operational, financial, compliance and legal issues you face. However, we realize that each organization is unique and will focus on understanding the City of Anniston’s distinctiveness and needs.

The following characteristics, which we can provide, are essential for a CPA firm to have in order to provide successful solutions for your accounting goals and objectives:     

Value Service, responsiveness and open communication Efficient and effective delivery of your audit reports Depth of not-for-profit experience Understanding of your needs

Value You want to ensure you are receiving high-quality work at a reasonable value that is congruent with your budget. Our fee structure represents a streamlined and coordinated approach to providing high-quality services from experienced and knowledgeable auditors utilizing advanced technology.

By working closely with your staff, committing to open communication and providing regular progress reports, we are able to maximize your investment in our services.

BMSS has uniquely low employee turnover which allows us to minimize staff changes on engagements. Staff consistency allows us to create strong, long-term client relationships and provide efficient and effective audit solutions while reducing costs to our clients.

We want to remove fees as a barrier to our discussions. If you have any questions or concerns in this regard, please feel free to discuss them openly with us.

3

Service, Responsiveness and Open Communication As a BMSS client, the City of Anniston will experience superior levels of service and responsiveness.

We believe the key to a successful relationship is the day-to-day rapport that is developed between you and your BMSS team.

Our client-focused approach centers on hands-on involvement from experienced, knowledgeable auditors (including a high level of shareholder involvement) who will invest the time required to understand the City of Anniston’s operations, people, goals and needs.

Your BMSS audit team will be available to meet with your staff to discuss concerns and provide thorough insight, research and advice. Any issues encountered are promptly addressed and brought to your attention.

Input and open communication are welcome and regular meetings are encouraged to share feedback related to your audit goals and objectives.

Efficient and Effective Delivery of Your Audit Reports You deserve accountants who value communication, emphasize planning and can quickly understand and adapt to your changing needs to efficiently and effectively complete your audit engagements. We believe BMSS can provide the City of Anniston with this solution.

Your goal is to have a high quality and timely audit performed. We are committed to beginning and finishing the audit by your delivery schedule.

BMSS works closely with clients through open communication and regular progress reports to maximize efficiency, effectiveness and the value of our services.

As a member of the AICPA Peer Review Program, we meet industry standards of quality control and have passed each of our peer reviews.

Membership in the AICPA Center for Audit Quality and Governmental Audit Quality Center involves voluntarily adhering to additional training, quality control, and internal inspection which is a testament to our dedication to achieve audit quality.

Client references will tell you they not only enjoy the efficient and effective way we conduct our audit engagements, but they truly enjoy the close relationship and rapport we maintain with them throughout the year. Our significant level of client loyalty and retention speaks volumes to our effectiveness, results and value.

We have been told by clients that we exceed their expectations of an accounting firm.

By providing you with an experienced team with deep technical knowledge, a high level of shareholder involvement and staff continuity on your engagements, we are able to efficiently and effectively meet your audit needs within your budget and timeframe.

4

Depth of Experience and Understanding of Your Needs The more training, knowledge and experience accountants have, the more familiar they will be with audit best practices, requirements and standards as well as your own specific needs.

BMSS, known for having one of the premier auditing practices in Alabama, performs over 100 audits annually. By specializing in audit services, we maximize knowledge, training, research and implementation of best practices for our clients.

Working with cities, counties, municipalities and government agencies with budgets from $1 - $500 million, our professionals have deep industry knowledge and technical experience working with government entities. We currently work with over 90 not-for-profit and governmental clients.

Over the past 20 years, BMSS has helped municipalities identify ways to maximize the value they deliver to their residents and businesses and has developed practical solutions to internal control issues while delivering quality audit solutions.

Because of the depth of our experience, we are well-versed on issues you may encounter and we bring a knowledge-based perspective on trends, opportunities, issues and regulations that frames our approach and addresses your needs and requirements.

Why Should The City of Anniston Select BMSS As Their Audit Partner?

Not all accounting firms are alike. We are not the standard black and white zebra. Our zebra stands out in the herd of accounting firms!

The City of Anniston deserves accountants with knowledge and experience in providing quality services for organizations similar to yours. We offer qualified, knowledgeable and experienced accountants who are focused on service and communication and have a solid understanding of auditing municipalities.

Our interest in your organization would go far beyond handling your audit - BMSS wants to be your trusted business and financial advisor and provide value-added services to you through educational seminars, newsletters and articles.

BMSS is passionate about exceeding your expectations of a CPA firm and looks forward to working with you as your audit partner.

Sincerely,

Barfield, Murphy, Shank & Smith, P.C.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Table of Contents Page BMSS Profile ............................................................................................................................. 7 Value: Fees & Understanding of Investment ............................................................................ 9 Qualifications: Experience & Understanding of Your Needs ................................................. 10 Qualifications: Your BMSS Team............................................................................................ 12 Qualifications: Client References ............................................................................................ 15 Solutions: Audit Approach & Plan .......................................................................................... 16 What Makes BMSS Different & Why Should You Select Us? ................................................. 22 Peer Review Report ................................................................................................................. 23

Statement of Confidentiality The information in this document is considered by Barfield, Murphy, Shank & Smith to be confidential. We request that it be treated as such and in turn, assure you that any and all information provided to produce this proposal will be treated in the same fashion.

6

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS BMSS Profile BMSS recently celebrated its 20th anniversary of providing accounting services. Two decades highlighted by steady growth and professional recognition.

In 1991, Don Murphy, Keith Barfield and John Shank decided to create a public accounting firm where employees can have a successful career that also supports their lives outside the office. The founders began the firm as the only employees, with zero clients, in the basement of one of their homes. Steve Smith joined in 1994.

Now, twenty years later, BMSS has a staff of 9 shareholders, 95 employees (including 50 CPAs) and provides services to over 2,000 clients.

BMSS is one of the largest locally-owned firms in Alabama and ranks in the Top 10 in size in the state and Top 200 in the United States.

BMSS Profile 

20 years of success



Top 10 in size in Alabama, Top 200 in U.S.



95 employees, 50 CPAs



Low employee turnover



“Top Small Workplace” by The Wall Street Journal



“Best Accounting Firm to Work For” by Accounting Today



BDO Seidman Alliance



Client loyalty & retention

This expansion has not been through mergers or acquisitions but through organic growth contributed in part to the family-friendly policies and core values of the firm: Character, Family, Life/Work Balance, and Treating Everyone Professionally.

BMSS has a high level of employee satisfaction, low turnover and the ability to recruit topnotch professionals. We utilize our low turnover to minimize staff changes. Staff consistency allows us to reduce costs to clients and ensure long-term relationships.

The employee growth and low turnover has allowed BMSS to receive several recognitions including “Top Small Workplace” by The Wall Street Journal, “Best Accounting Firm to Work For” by Accounting Today, “Best Place to Work” by the Birmingham Business Journal and the Alfred P. Sloan Award for Business Excellence in Workplace Flexibility. We are proud to be named a “Southern Hero” by SouthernLINC Wireless and to have received the AICPA Public Service award for our commitment to our community as demonstrated through service projects and employee volunteer days.

BMSS established sister companies Abacus IT Solutions (www.abacusit.com), Payroll & Benefit Solutions (www.pbspay.com) and Benefits Administration Services (www.bastpa.com) to further meet our clients’ needs.

In 1998, BMSS was selected to join the prestigious BDO Seidman Alliance. This arrangement allows BMSS to access national resources to assist with specialized needs.

Clients recognize the value of working with BMSS. Of the 2,000 clients currently served by BMSS, over 500 of those clients have been with BMSS for over 10 years.

With BMSS, you will discover not all accounting firms are alike.

7

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS BMSS Profile (continued) Independence Your engagement will be conducted in accordance with generally accepted auditing standards which require that an auditor be independent in both fact and appearance.

BMSS meets the independence standards of the U.S. General Accountability Office’s Government Auditing Standards as well as the American Institute of Certified Public Accountants’ Code of Professional Ethics and independence rules with respect to The City of Anniston, and we will confirm such independence.

We obtain annual independence representations from all professional personnel, conduct independence training annually and consider any potential conflicts of interest during both client acceptance and engagement planning.

There are no identified or known conflicts of interest between BMSS and the City of Anniston.

License to Practice BMSS and all assigned key professional staff are properly licensed and in compliance with registration requirements to practice in Alabama.

There have been no letters of comment, state or federal reviews, or disciplinary actions against our firm. BMSS is in good standing with the State Board of Accountancy.

Dedicated to achieving the highest possible standards of audit quality, we are members of the AICPA Peer Review Program and have passed every peer review. Our last peer review was performed in November 2011. (See page 23.)

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Value: Fees & Understanding of Investment You want to ensure you are receiving high-quality work at a reasonable value. Our fee structure is very competitive based on our streamlined and coordinated approach to providing high-quality services from knowledgeable and experienced professionals who maximize advanced technology.

Based on our discussions, we expect our fees would be as follows: 2012 All-Inclusive Maximum Fee $55,000 and Out-of-Pocket Expenses for Audit Services

2013

2014

$55,000

$55,000

In addition to the services listed above, we will provide:  Ongoing communications*  Recommendations about areas in which we observe opportunities for improvement  Formal presentation of reports if requested  24/7 access to your secure client portal to access, upload and download documents This quote assumes accounting conditions will remain relatively stable, you do not make significant changes in your internal controls, accounting or financial reporting systems, key personnel, and certain information will be available when requested.

*If telephone assistance and communication do not involve extensive research, it is our policy not to charge for answering your question. If we have to perform research to find the answer, we will let you know and give you an estimate of fees (billed at our standard rates).

Quoted fees are based on budgeted time expended by each professional at standard billing rates (listed below) which are very competitive and create value based on the experience and knowledge of our team and advanced technology utilized.

Shareholder Senior Manager Manager Supervisor

250 – 315 170 – 250 120 – 215 110 – 175

2012 Rate $ Senior Accountant Staff Accountant Bookkeeper

100 – 140 90 – 130 75 – 115

Valid for 90 days from date of cover letter. Rates subject to change annually. Fees for future years would be expected to increase by our annual composite individual rate adjustments and the impact of accounting pronouncements, as applicable.

We want to remove fees as a barrier to our discussions. If you have any questions or concerns, please feel free to discuss them openly with us.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: Experience & Understanding of Your Needs BMSS Governmental Accounting Practice With over 100 years of combined experience and 20 years devoted to the not-for-profit and governmental industry, BMSS is known for having one of the premier accounting practices in Alabama.

BMSS Experience: 

Over 100 years combined

BMSS has over 95 employees, including 50 CPAs. Our Not-For-Profit & Governmental Practice Group contains 12 auditors (all working from our one office in Birmingham) within our management group and all are licensed as a CPA to practice in Alabama. (See your team on pages 12-14.)



Perform over 100 audits annually

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Meet quality control standards of AICPA Peer Review



AICPA Center for Audit Quality and Governmental Audit Quality Center

Our firm is committed to meeting the industry standards of corporate governance, quality control and industry best practices. We stay current on laws and regulations applicable to not-for-profits and government entities.



20 years devoted to not-for-profit and governmental industry



Focus on clients of similar size and scope - over 90 not-for-profit and governmental clients



Member of Alabama Association of Nonprofits and Government Finance Officers Association

At BMSS, we annually perform over 100 audits ranging from $1 million to over $2 billion in revenues and have performed A-133 audits for eight different organizations and agencies.

Membership in the AICPA Center for Audit Quality and Governmental Audit Quality Center involves voluntarily adhering to additional training, quality control, and internal inspection and is a testament to our dedication to audit quality. The Governmental Audit Quality Center is designed to help CPAs meet the challenges of performing quality audits in this unique and complex area.

We focus on serving clients of a similar size and scope as the City of Anniston and currently provide accounting, auditing and tax solutions to over 90 organizations and governmental agencies. (See references on page 15).

To further our commitment to the industry, we are active in the Alabama Association of Nonprofits, Government Finance Officers Association and the BDO Seidman Alliance Non-Profit and Governmental Industry Groups. (See page 11 for more info on BDO.) By specializing in not-for-profit and governmental accounting and auditing, we maximize knowledge, training, research and implementation of best practices for our clients. The power of not-for-profit industry experience is the perspective we bring to help you leverage your own capabilities and resources.

We are passionate about helping you succeed and exceeding your expectations of an accounting firm.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: Experience & Understanding of Your Needs (continued) BDO Seidman Alliance The BDO Seidman Alliance is a nationwide association of independently owned local accounting firms with similar client service goals. By supplementing our services, the BDO Seidman Alliance brings us tools to better serve our clients with greater flexibility, efficiency and cost effectiveness.

As an independent member firm, our BDO Seidman Alliance allows BMSS to:      

Enhance our client services and broaden our capabilities; Gain greater technical knowledge in specialty areas; Utilize governmental accounting specialists; Access the most up-to-date technical information; Participate in the latest training programs; and Provide our clients with key business contacts throughout the U.S.

This arrangement within the Alliance is very similar to the arrangement that exists between national firms with multiple offices.

We do not anticipate utilizing the Alliance for your engagement team. However, BDO and the Alliance firms are available as technical resources or for any future specialized needs you may have.

BDO (www.bdo.com), the fifth largest accounting network in the world, serves clients through 41 offices and more than 400 independent Alliance firm locations nationwide. As the U.S. independent member firm of BDO International Limited, BDO serves multi-national clients through a global network of 1,100 offices in 135 countries.

BDO’s commitment to the not-for-profit industry led to the development of the Institute of Nonprofit Excellence (the Institute) in Washington, D.C. The Institute develops strategies for taxexempt organizations and disseminates information pertaining to accounting and business management. BDO provides information on impending changes such as pension administration and new GASB and FASB implementation.

With over 2,000 clients in the government and not-for-profit industries, BDO is one of the industry leaders in providing OMB Circular A-133 audits to individual organizations that have corporate Federal funding in excess of $10 million.

BMSS can utilize BDO and our Alliance partners to assist in complex transactions or draw upon our close contacts at regulatory institutions or professional service organizations to provide you with quick responses when timing is critical.

We can provide you access to BDO’s Acsense, a complimentary series designed to assist committee members and financial executives in keeping up-to-date on the latest corporate governance and financial reporting developments through webinars and self-study courses.

The BDO Seidman Alliance gives you the resources, coverage, and experience of a national accounting firm, while we provide you with exceptional local service and rates.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: Your BMSS Team The BMSS Not-For-Profit & Governmental Practice Group provides you with qualified, knowledgeable auditors who can quickly adapt to meet your changing needs. Because of our extensive experience, we are well-versed on various issues you may encounter.

BMSS takes the lead in research and in educating our clients by providing seminars, newsletters and articles. As a result, we are available to keep you updated on legislative changes, recent cases and issues both from a technical and practical viewpoint.

Commitment to Staff Development and Continuity BMSS devotes significant resources to train and provide our team with the necessary Continuing Professional Education (CPE) to stay on top of changes that affect our profession and the areas in which they practice.

Because of our uniquely high level of employee satisfaction, we have extremely low turnover. We utilize our low turnover to strive to dedicate the same team to serve you each year to maximize our experience with your facility, staff and procedures.

Staff continuity on year-to-year engagements allows us to create strong, long-term client relationships and provide efficient and effective accounting solutions while reducing costs to our clients.

Your BMSS team members participate in the following CPE related to not-for-profit and governmental accounting and auditing:      

Accounting & Auditing Update Audit Documentation Auditing Non-Profits: Tips & Traps Becoming a Better Auditor Conducting Governmental Audits under GAAS, GAGAS and Single Audit Fieldwork & Planning Logistics

    

Focus on Fraud Fraud Risk Assessment Non-Profit Accounting & Auditing Non-Profit Accounting & Reporting from Start to Finish Obtaining and Evaluating Audit Evidence

Your BMSS team members participate in these related organizations:      

AICPA Center for Audit Quality AICPA Governmental Audit Quality Center Alabama Association of Nonprofits BDO Seidman Alliance Governmental Industry Group BDO Seidman Alliance Nonprofit Industry Group Government Finance Officers Association of Alabama

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: Your BMSS Team After carefully reviewing your needs, we identified the professionals to lead your BMSS audit team.

The professionals selected are all licensed to practice as a CPA in Alabama, have established track records with governmental clients, strong technical abilities and outstanding leadership and communication skills.

John Shank, CPA, CVA Founding Shareholder

Derrel G. Curry, CPA Concurring Audit Shareholder

As audit engagement shareholder, John Shank will lead the team in providing you with quality services and ensure that you receive the right level of resources.

He will be the primary decision maker on key audit issues.

Derrel Curry will serve as the concurring shareholder and will be responsible for the independent quality review and for making certain that the technical audit matters have been properly addressed by the engagement team.

John brings over 26 years of experience to you and is one of the shareholders who founded BMSS in 1991. He leads our Not-For-Profit & Governmental Practice Group and serves as lead shareholder on over 50 BMSS audit clients.

Derrel has 29 years of experience providing auditing services as well as accounting and consulting on financial reporting and operational issues, with a focus on governmental and not-for-profit clients.

He serves as shareholder for the Bessemer Airport Authority and Shelby County Community Corrections and has worked on special projects for the City of Homewood.

He is the shareholder for the City of Moody, Southeastern Bible College and Talladega Randolph Clay Child Care Corporation and has previously worked on the audits for the City of Leeds, City of Montgomery, City of Enterprise, City of Autaugaville and the Town of Indian Springs.

Derrel serves as the BMSS Accounting & Auditing Quality Control Shareholder and leads a monthly Accounting & Auditing Update for all BMSS auditors. He has served numerous clients who are of the size and complexity of the City of Anniston throughout his career. Prior to joining BMSS, Derrel worked with Ernst & Young, LLP and was responsible for the audits of significant clients.

As a Certified Valuation Analyst (CVA), John performs business valuations during the purchase or sale of a business, succession planning and estate taxes.

John is Past Chair of the Alabama Society of CPAs, is a trustee with the Birmingham Business Alliance and is on the board of the Birmingham Venture Club.

He has been awarded "Who's Who in Law and Accounting" and "Top 40 Under 40" by the Birmingham Business Journal.

He serves on the Accounting Advisory Boards for Samford University, UAB and Troy University and was inducted into the Accounting Hall of Fame at Troy University.

B.S. Accounting with Honors University of Alabama

B.A. Accounting with Honors Huntingdon College 13

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: Your BMSS Team Patrick Bowman, CPA Senior Manager, Engagement Leader

Stephen N. Von Hagel, CPA Audit Manager

Patrick Bowman will serve as the engagement leader in providing guidance to the team and coordinating resources. He will perform reviews of the work performed and will be a key component of the engagement planning.

Stephen Von Hagel has been providing accounting services for 8 years, with a focus on audits, single audits and internal control documentation for government agencies.

He manages the audits for the City of Moody, Shelby County Community Corrections and Southeastern Bible College and the A-133 audits for Family Connection, Inc. and Habitat for Humanity of Birmingham.

Patrick has 13 years of public accounting experience and joined BMSS in 2001. He works with governmental and not-for-profit clients providing accounting & auditing services, budgeting and forecasting and internal control reviews and serves as engagement leader on the majority of our governmental and not-for-profit clients.

He serves on his church finance council, leads the BMSS basketball team and is a member of the ASCPA Leadership Program.

B.S. Commerce and Business Administration Master of Accountancy University of Alabama

He is the engagement leader for the Bessemer Airport Authority, City of Moody, Shelby County Community Corrections, Southeastern Bible College and Talladega Randolph Clay Child Care Corporation, the A-133 audits for Family Connection, Inc. and Habitat for Humanity of Birmingham and previously worked with the City of Leeds.

Ashley Caldwell, CPA Senior Accountant Ashley Caldwell began her accounting career as an intern at BMSS in 2007. Ashley has 5 years of experience providing accounting and auditing services with a focus on not-for-profit and governmental clients. She works on the audits for the City of Moody and the Birmingham Business Alliance, the Single Audit for Entegreat, Inc. and has worked on the audit for the City of Leeds.

Patrick is responsible for overseeing CPE efforts for BMSS auditors and monitoring updates in accounting techniques and pronouncements.

He serves on the Board of Directors of the Alabama Association of Nonprofits and is a member of the Government Finance Officers Association of Alabama.

B.A. and Master’s in Accounting Troy University

Ashley is active in BMSS employee recruiting and training new employees on audit practices, standards and software.

B.S. Accounting Master of Accountancy University of Alabama 14

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Qualifications: References of Similar Clients Bessemer Airport Authority Financial statement compilation client since 2007 Shareholder: Derrel Curry Engagement Leader: Patrick Bowman Supervisor: Marcie Morris Total Hours: 30 Clinton Harris, (205) 424-7234

Southeastern Bible College Audit and A-133 Audit client since 2004 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 205 Paul Willard, (205) 970-9206

City of Moody & GUSC Board Audit client since 1991 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Total Hours: 302 Patsy Beard, (205) 640-2503

Talladega Clay Randolph Child Care Corporation Audit, A-133 Audit & 401k Audit client since 2008 Shareholder: John Shank Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 210 Angela Thomas, (256) 362-3852

Shelby County Community Corrections Audit client since 2007 Shareholder: Derrel Curry Engagement Leader: Patrick Bowman Manager: Stephen Von Hagel Supervisor: Marcie Morris Total Hours: 150 David Horn, (205) 669-8965 Client Testimonials

“We have been a very satisfied client of BMSS since 2000. We have found the staff to be knowledgeable and professional in all aspects.”

“Our financial statements are prepared on a timely basis along with various other reports completed during the year. More importantly is the character and integrity of BMSS who has earned the trust and respect of our senior management.”

“The different ideas presented to us by BMSS have benefited us more than we could have ever imagined. Their promptness is impeccable and something we were not used to in the past with another firm.”

“I have been very impressed with the quality of service and personnel and their dedication to client service. I highly recommend any of the numerous services provided by BMSS.” “From an accounting firm, I expect three things: Independence from management, Value, & Timeliness. I believe that BMSS is a strong group of auditors and tax professionals who provide a good value for the money. I rely on their judgment as a check and balance. I’ve worked with them since 1999.”

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Client Testimonials: 

Knowledgeable and professional

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Very timely

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Character & integrity

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Earned trust and respect of senior management

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Impeccable promptness

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Benefitted from different ideas presented

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Dedicated to client service

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Good value

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan Seamless Transition Our team members are experienced with the transition of new clients and can readily resolve problems that may occur during this change. We devote the highest priority to the careful and thoughtful planning required to help ensure a smooth audit transition to BMSS with the least possible disruption to your personnel and operations.

BMSS has extensive, first-hand experience in transitioning services from various accounting firms.

We view the transition as an opportunity to provide a fresh perspective of your accounting systems, controls and operations and are confident we have the experience and resources required to complete the transition in a timely, efficient and seamless manner.

Service, Responsiveness and Open Communication The City of Anniston will continue to experience a superior level of service and responsiveness. As a BMSS client, you will note:   



  

You will be treated with integrity and professionalism.

You will work with knowledgeable, personable and experienced staff.

Our client-focused approach centers on hands-on involvement from experienced, knowledgeable accountants who will invest the time required to understand your operations, people and needs.

We encourage regular meetings to ensure we contribute meaningful ideas, strategies and solutions to define and prioritize timetables and designate responsibility to proper individuals.

We promptly address issues and report back to you.

We welcome open communication, input and feedback.

Our goal is to exceed your expectations of a CPA firm.

Efficient & Effective Delivery of Your Audit Reports Efficient and effective delivery of successful audit engagements at the best value to the City of Anniston depends on certain factors that we can provide including:       

Staff continuity on your engagements; Significant technical experience; Advanced approach to utilizing state-of-the-art technology; Extensive and timely planning; Close coordination with you; Quality control; and Emphasis on developing quality recommendations to you regarding financial and operational matters.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan (continued) Commitment to Open Communication BMSS believes in the importance of open communication and we will make ourselves available to you to address issues, questions and to provide the appropriate guidance.

Your BMSS team is available to meet with you throughout the year, not just at the start or conclusion of the audit engagement.

Our policy is to respond to voicemail and email within 24 hours.

Even if we do not have an answer to your question, we will respond to give you an estimated time frame.

We understand the importance of communicating relevant information to you on a timely basis. Because your staff has schedules and other matters to deal with and you need to conduct business with minimal disruptions, it is our policy to schedule meetings in advance to keep management informed of the progress.

Communication: 

Ongoing access to your BMSS team

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Timely basis

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Pre-audit meeting

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Progress conferences

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Keep management informed of progress

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Identify and resolve issues on continuing basis

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Continuous feedback

Your BMSS team will conduct pre-audit meetings with you and pertinent staff, management or committee members. This meeting will be early in the planning phase of the engagement, to discuss and develop a detailed listing of information requested, establish timetables, designate responsibility to proper individuals and discuss other matters necessary.

By identifying and resolving issues on a continuing basis, we help address these matters before they possibly develop into problems, surprises or delays. Progress meetings will be scheduled at mutually convenient times.

Our quality control process will be accomplished without causing surprises as our quality control review members are involved throughout the process.

Working closely with your staff allows us to eliminate duplication of effort, create a more efficient and effective approach to accounting and to strive to maximize your investment in external services.

Additionally, our goals are congruent with yours - fair and meaningful financial statements prepared under a strong system of internal control by honest management. Maintaining open communications ensures continual and effective challenge of the audit approach, which we believe is beneficial in driving efficiency from the top down.

We want you to feel comfortable communicating with everyone on your team.

Continuous feedback is encouraged and input is always welcome.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan (continued) Audit Methodology BMSS utilizes a five-step approach to provide efficient, effective and quality audit services:     

Extensive planning; On-going open communication; Close coordination with you, your staff and management; State-of-the-art techniques utilizing advanced technology; and Timely, appropriate recommendations and management letters.

Our approach is a risk-based combination of substantive and compliance auditing using the most widely accepted electronic auditing guidance in the U.S. This fosters an active understanding of your strategic direction, particular risks, control strengths and weaknesses and other significant matters pertaining to the audit cycle, which is critical to audit quality.

BMSS follows a “top-down, risk-based” approach to assess the entity level risks and controls in order to assess the overall general risks and controls (including IT general controls) and to identify specific financial reporting risks. The information gathering analysis performed by the audit team establishes a risk assessment for each significant financial statement area. This risk assessment also takes into account the general risks and controls (including IT general controls) identified in the analysis.

By utilizing our fieldwork when we are at your facility learning more about your organization, together with our understanding of the governmental industry, we can provide insightful and constructive suggestions that can result in improved operations, as well as improved accounting procedures and controls.

Our five-step approach allows us to deliver an audit tailored to the specific and unique facts and circumstances surrounding the City of Anniston.

Overall Supervision To maximize the effectiveness of our services, we exercise a high degree of oversight, supervision and shareholder involvement.

Planning is performed by everyone on the engagement including the shareholder. The engagement leader exercises the day-to-day supervision and oversight and keeps the shareholder updated during the engagement and will be communicating with you regarding any issues that arise.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan (continued) Audit Fieldwork Fieldwork will be scheduled to meet your reporting deadlines.

To ensure the most cost effective and efficient audit for our clients, BMSS has made a significant commitment to utilizing state-of-the-art technology in the audit process. Our investment in technology allows us to focus on providing quality technical services and add value to our clients.

ProSystem Engagement electronically interfaces with client general ledger systems for preparation of trial balances and financial statements. Our automated workflow management system allows staff to know the status of every project and allows us to easily provide clients with project updates.

With our employees having secure remote connections, they can quickly access data and software from their current location.

Paperless and electronic documentation, along with online bank confirmations, saves time and costs. (Please see additional information about how BMSS provides value through our advanced technology on page 21.)

Information Requested Your BMSS audit team will request internal control narratives be provided to us by your accounting staff and we will also provide internal control questionnaires to be completed by you and your accounting staff. We will interview appropriate individuals for fraud considerations and obtain an understanding of the internal control system. We will test payroll and insure that individuals in the organization's employment are being paid an appropriate amount.

Using a variety of analytical procedures, we will analytically test both balance sheet and income statement accounts. We use a variety of sampling techniques to perform detail testing on account balances and will also use sampling to test processes and procedures.

We will inspect contracts, agreements, funding source agreements, and any other information that affects the revenues and expenses. We will research single audit compliance requirements and design our tests appropriately in order to issue the A-133 reports and will select the appropriate sample sizes in order to test those requirements. We will test the revenues of the organization by examining the original documentation for each major category of revenue.

To minimize disruption of your staff, we provide a detailed Client Assistance Letter in advance that contains information we will need to perform our procedures so you can have time to gather requested information. We have designed our audit fees with the expectation that most of the information requested in the Client Assistance Letter will be available when we arrive for fieldwork.

If needed, we can discuss all the items with you in the letter.

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OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan (continued) Audit Report Preparation and Delivery We do not anticipate any potential problems. If we become aware of any irregularities and illegal acts, we will report those in writing to the Finance Director.

Your BMSS team will meet with management at an exit conference at the end of fieldwork to review drafts of the financial statements and management letter.

Once management has had a chance to thoroughly review the financial statement drafts and BMSS has performed its quality control process, we will prepare the annual financial statements with all required note disclosures, including all statements and supplemental information required, and express an opinion on the fair representation of the financial statements in conformity with GAAP. We will issue a management letter to make recommendations related to financial statements, internal controls, management controls, operations, accounting systems, compliance issues including material weaknesses and significant deficiencies and identifying possible noncompliance with legal provisions as well as any other areas in which we may have seen any opportunities for improvement.

We will prepare a Single Audit report on the financial statements, internal controls and compliance in accordance with GAS and OMB A-133.

At completion, BMSS will provide the requested 10 quantities of the bound audit reports, including management letters, as well as making the high quality PDF file reports available to you in electronic format via our secure client portal.

If requested, BMSS will make a formal presentation of the report to the Board.

Workpaper Review & Access We will be happy to make our workpapers available as requested.

Because our audit workpapers are maintained in a paperless environment, the easiest way for someone to review our workpapers is electronically. We are glad to provide hard copies of workpapers requested. Workpapers will be retained for a minimum of five years from the date of the written audit.

20

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS Solutions: Approach & Plan (continued) Use of Advanced Technology At BMSS, we are an early adopter of industry-leading software, processes and programs.

Use of Advanced Technology:

We place significance on utilizing state-of-the-art technology including a high-speed fiber network in our office and VoIP system for faster and more efficient communications.



Early adopter of industry-leading software, processes, and programs

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High-speed fiber network

An automated workflow management system allows our staff to know the exact status of every project and allows us to easily provide clients with project updates. With our employees having secure remote connections, they can quickly access data and software from their current location.

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VoIP

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Workflow management system for quick status updates

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Paperless documentation

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Paperless processing

Paperless and electronic documentation, along with online bank confirmations, saves time and costs.

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Online bank confirmations

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Robust online research databases

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Commitment to maintaining data security & privacy

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Secure online client portal with free access 24/7

BMSS has used paperless documentation and processing since 2003 and received the Practical Accountant “Practice Innovation Award” for our early, successful paperless adoption. We have helped clients implement paperless processes in their offices as well.

Robust online research databases and industry-leading software allow us to handle more complex and technical accounting engagements.

Our sister company, Abacus IT Solutions, is available for data mining, reporting consultation and business intelligence, as well as consulting on your current hardware, software and IT infrastructure.

Your private data is critical to protect. Laptops are secured with two-factor identification password protection. Secure networking of our computers and servers allows us to share information without having to use higher risk removable storage devices. We destroy any electronic or hard copy information we obtain other than what is necessary to maintain.

BMSS offers a secure client portal which you can access 24/7 at no additional cost. In your portal, you can access electronic copies going back 10 years (if applicable) and upload your own files for secure recordkeeping.

Our investment in technology allows us to focus on providing quality technical services and adding value to our clients.

21

OUR PROPOSED REQUEST TO SOLVE YOUR AUDIT NEEDS What Makes BMSS Different & Why Should You Select Us? Top 10 Reasons Why BMSS is Your Best Decision: Service & Responsiveness 1. Commitment to your success and helping you achieve your needs and goals 2. Staff continuity on your BMSS engagement team from year to year 3. On-going, open communication and close coordination with your staff Efficient & Effective 4. Forward-thinking processes utilizing advanced technology 5. Timely input regarding operational and financial issues 6. Client retention and satisfaction is a testament to our effectiveness and results Depth of Experience & Understanding of Your Needs 7. Strength and depth of not-for-profit and governmental industry knowledge 8. Significant technical auditing skills and experience 9. Quality and quantity of similar clients Value 10. Value of services received based on notable factors listed above

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Professional Services Proposal City of Anniston, Alabama

December 7, 2012

Professional Services Proposal

Page Letter of Transmittal .........................................................................................................................................1 Section One Profile of Jackson Thornton ...........................................................................................................................2 - 3 Section Two Qualifications and Experience .....................................................................................................................3 - 5 Section Three Scope of Services and Proposed Project Schedule .................................................................................5 - 7 Section Four Fees and Compensation ..............................................................................................................................7 - 9 Section Five Summary ..........................................................................................................................................................9 Attachments References and Similar Engagements .................................................................................................... Attachment A Peer Review Report .................................................................................................................................... Attachment B

LETTER OF TRANSMITTAL

City of Anniston Anniston, Alabama Please accept this proposal for audit services relating to the City of Anniston, Alabama’s Financial and Single Audit Report for the years ending September 30, 2012, 2013, and 2014.

These engagements will be conducted out of the Montgomery, Alabama office located at 200 Commerce Street. Our team of municipal auditors will include the following Principals of the Firm: Diane L. Steinhilber, (334) 351-0436 Chris A. Neuenschwander, (334) 240-3644 Additional staffing may be utilized from our team of municipality auditors as listed in Section Two. Diane L. Steinhilber is your primary contact for this proposal.

JACKSON THORNTON & CO., P.C.

Diane L. Steinhilber, CPA Principal

Professional Services Proposal

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Municipalities, Government Finance Officers Association of Alabama, and the Association of Government Accountants.

Profile of Jackson Thornton

Although we are proud to be locally grounded, we are equally proud to have been chosen by the national accounting firm of McGladrey to be their Alliance affiliate in central and south Alabama.

McGladrey is the sixth largest accounting and consulting firm in the world. As a McGladrey Alliance member, we have access to all resources and services McGladrey provides in its own offices. Jackson Thornton & Co., P.C., through the McGladrey Alliance, has an expanded menu of specialized services and expertise it can offer.

Mission Statement We at Jackson Thornton provide assurance, advisory, consulting, and tax services to a wide range of individuals, business, and industry. Our service is an integration of people, experience, processes, and technologies which are constantly evolving with the needs of our clients. Our foundation is integrity and our standard is accountability. We commit our resources, our intelligence, and strength believing our work makes a difference.

Our professionals work with clients in the general services areas related to accounting, auditing, taxation, systems design, and IT evaluations. We have specialized departments that offer a variety of industry-specific professional business consulting services. Our objectives are to provide for each client the highest quality of professional service at a reasonable price and on a timely basis. In order to achieve these objectives, each business client is assigned to a team of professionals that matches the needs of that client. This team approach also provides continuity for the ongoing needs of that client by providing more than one professional who is familiar with each client.

Jackson Thornton was founded in 1919. Our regional Firm has 33 principals and employs more than 165 professional staff and support personnel in five offices in Alabama and one office in central Tennessee. The Montgomery office will service the City’s account. Our professional staff includes 36 accountants qualified for governmental audit engagements.

We have nine dedicated professionals in the Jackson Thornton Governmental work group.

This specialization provides auditors and consultants who are knowledgeable of your business. Our specialization also gives you a ready resource for questions and concerns that may come up during the year. See Section Two for a listing of professional staff to be assigned to this engagement on a full–time basis.

License and Professional Memberships The Firm is licensed for public practice as a certified public accounting firm in the State of Alabama. Our license number issued by the Alabama State Board of Public Accountancy is 496. The Firm is in good standing with the Alabama State Board of Public Accountancy.

Jackson Thornton is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants.

Jackson Thornton provides auditing, accounting, internal control evaluation services, and other industry-specific business consulting to organizations like the City for over 50 years. Our industry concentration allows us to stay abreast of the changes in the industry through continuing education and our work with multiple industry associations like the Alabama League of

2

Professional Services Proposal

Independence

Certified Public Accountants and the Alabama Society of Certified Public Accountants. Diane holds a Bachelor's Degree in Accounting from Auburn University and is a certified public accountant licensed in Alabama.

Jackson Thornton is independent of the City of Anniston, Alabama (primary government) as defined by Governmental Auditing Standards.

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Chris A. Neuenschwander, CPA, CFE, Principal, has over 15 years of experience in public accounting and specializes in services to the Firm’s governmental and not for profit clients. He will be the Principal responsible for services to the City. Chris has served governmental clients for the past 10 years.

He has participated in extensive formal continuing professional education related to governmental organizations. In addition, he served as a national instructor of the risk based auditing approach for McGladrey and Pullen, LLP. He is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, the Association of Certified Fraud Examiners, the Association of Government Accountants, and the Government Finance Officers Association of Alabama. Chris holds a Bachelors Degree in Accounting from Harding University.

He is a certified fraud examiner and a certified public accountant licensed in Alabama.

Qualifications and Experience

Should we be selected to assist the City, our proposed team for this engagement would utilize individuals with experience in municipal accounting, auditing, and management consulting functions. These professionals include two Principals with combined years of experience in working with municipalities that exceeds 40 years.

This team's expertise, combined with Jackson Thornton's commitment to quality and timely delivery of services, will ensure that your engagement objectives are attained.

Similar Engagements with Other Municipalities We offer a schedule of similar municipal engagements as a demonstration of our experience. Please see Attachment A for current references.

Joseph A. Vickery, CPA, Manager, has over 10 years of audit and accounting experience, during which he has served governmental clients.

He will be the manager responsible for services to the City.

He has participated in numerous continuing education programs related to governmental entities. His area of specialization is audits of not for profit and governmental organizations. He is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants. Joseph holds a Bachelors and Masters Degree in Accounting from Auburn University and is a certified public accountant licensed in Alabama.

A brief resume of members of our team that will be assigned to your engagement is as follows: Diane L. Steinhilber, CPA, Principal, has 29 years of experience with Jackson Thornton & Co., P.C., serving governmental clients throughout her tenure. She has participated in extensive formal continuing professional education related to governmental organizations. Diane has provided financial accounting, audit, and consulting services to numerous governmental entities. In addition, she has served as a consultant to underwriters in public financings for various municipalities throughout the State of Alabama.

She is also a member of the American Institute of

3

Professional Services Proposal

Cassie M. Plunkett, CPA, Senior Associate, has four years of audit and accounting experience serving governmental clients.

She has participated in extensive formal continuing professional education related to governmental organizations. Her area of specialization is audits of governmental and not for profit entities. She will provide Single Audit services to the City. She is a member of the American Institute of Certified Public Accountants and the Alabama Society of Certified Public Accountants. Cassie holds a Bachelors Degree in Accounting from Auburn University Montgomery and is a certified public accountant licensed in Alabama.

She has participated in extensive formal continuing professional education related to governmental organizations. Her area of specialization is audits of state and local government municipalities. She is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, and the Government Finance Officers Association of Alabama. She is the current year chair of the Government Accounting and Auditing Forum. Gina holds a Bachelors Degree in Accounting from Auburn University Montgomery.

She is a Certified Governmental Financial Manager (CGFM). She is a certified public accountant licensed in Alabama.

For your reference, we have provided a listing of individuals within our municipal team who are available for consultation:

Engagement Team The aforementioned members are independent of the City of Anniston, Alabama as defined by Governmental Auditing Standards. We will notify the City should key personnel assigned to the engagement change.

Lucinda S. Bollinger, CPA, Principal, has over 30 years of experience in public accounting and specializes in services to the Firm’s not for profit and governmental clients. Lucinda has served governmental clients for the past 25 years. She will be the principal responsible for the technical review of the engagement in accordance with the Firm's quality control policies and procedures.

She has participated in extensive formal continuing professional education related to governmental organizations. She serves as a Firm Accounting and Auditing Specialist. She is the former chair of the Governmental Accounting and Auditing Forum and the Alabama State Board of Public Accountancy. She is a member of the American Institute of Certified Public Accountants, the Alabama Society of Certified Public Accountants, and the Association of Government Accountants.

Lucinda holds a Bachelors Degree in Accounting from Huntingdon College and is a certified public accountant licensed in Alabama.

We would expect to provide two additional staff members with one to five years of experience, in addition to the aforementioned team.

Continuing Professional Education Requirements Jackson Thornton requires all professionals assigned to governmental engagements to meet the CPE requirements as indicated by the Government Auditing Standards. This requires that they complete a minimum of 24 hours of CPE related to governmental auditing every two years. Our municipal group employees have all met this requirement and have done so for the preceding three years.

Peer Review Program As a member of the American Institute of Certified Public Accountants, the Firm is subject to independent peer review of its accounting and audit practice every three years. This review

Gina T. Williams, CPA, CGFM, Senior Manager, has over 18 years of audit and accounting experience, during which she has served governmental clients for the past seven years.

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Professional Services Proposal

includes an assessment of our system of quality controls.

Upon completion of our documentation and review of internal controls, which are performed to gain an understanding of the entity and its environment and to design our audit procedures, we will meet with the Director of Finance to report on the results of the internal control review and clearly identify each weakness noted.

Following the meeting, we will provide a written memorandum which summarizes the meeting to the Finance Director within ten working days.

Should any other material internal control weaknesses be noted during the audit process, these will also be reported to the Finance Director within ten working days of the date of the discovery of the internal control weakness.

Please refer to Attachment B for a copy of our most recent peer review report. The report states that the Firm received an unqualified opinion on our accounting and auditing practice’s quality control system. No letter of comments was issued.

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Scope of Services and Proposed Project Schedule

Description of Services At the conclusion of our audits, we will issue the following reports:

The audits will be conducted in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America and The Single Audit Act of 1996 with Amendments and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (when applicable).

An audit of financial statements includes obtaining an understanding of the entity and its environment, including its internal control, sufficient to assess the risk of material misstatement of the financial statements whether due to error or fraud and to design the nature, timing, and extent of further audit procedures.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. As a result, an audit is not designed to detect errors or fraud that is immaterial to the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

•

Draft financial statements and notes to the financial statements including all six discreetly-presented component units and the one blended component unit.

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Independent auditor’s report.

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Independent auditor’s report on compliance with the requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133.

•

Independent auditor’s report on internal control over financial reporting and compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards.

The independent auditors’ reports would provide opinions on the fairness of the financial statement presentations in conformity with accounting principles generally accepted in the United States of America. Our reports will conform to AICPA Audit Guides, Government Accounting Standards Board reporting requirements, and the requirements of The Single Audit Act of 1996 with

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Professional Services Proposal

Amendments and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations (when applicable).

Audit Approach Jackson Thornton applies the risk-based auditing approach for financial statement audits.

In developing an audit plan, our engagement team performs risk assessment procedures to gather information and gain an understanding of the entity and its environment. We gain that understanding through inquiries, observation, inspection, and analytical procedures.

The purpose of obtaining that understanding is to identify and assess the risk of material misstatement, which includes both control risk and inherent risk, and design and perform further audit procedures responsive to the assessed risk.

In addition to the reports included with the audited financial statements, we would issue written communications required by professional standards (SAS 115 letter) or that would provide suggestions for management’s consideration.

Such communications would include auditor’s comments, observations, and recommendations on internal accounting controls, operational controls, policies, and procedures, planning and budgeting considerations, or any other areas where improvements might result in savings, efficiencies, or strengthened internal controls.

These communications would also include a discussion of deficiencies noted that were not considered significant enough to be reportable under the applicable auditing standards.

Our audit emphasis will be placed on areas that are significant in both volume of transactions and dollars. We feel that in addition to the substantive tests that we perform in an audit, heavy emphasis will be placed on analytical review procedures to help corroborate financial statement balances.

We would schedule an exit conference with management at the conclusion of the audit to discuss any issues related to the audit.

If circumstances dictated the need for a conference regarding issues related to the audit prior to an audit’s conclusion, we would schedule such a conference. We will arrange for the presentation of the audit and related reports to the City Council.

Jackson Thornton reviews and assesses information systems used in the client’s financial reporting and compliance functions in sufficient depth to plan and perform the audit. Jackson Thornton utilizes a paperless document management system as well as data analysis software that enables the engagement team to read, display, analyze, manipulate, sample, or extract data files from almost any source, contributing to an efficient and effective audit and review process.

Also, we would issue letters to the Mayor and members of the City Council (SAS 114 letter) about significant matters related to the conduct of the annual audit so that they could appropriately discharge their oversight responsibility, and that we comply with our professional responsibilities to the City Council.

This information would include significant audit adjustments, disagreements with management, and any difficulties encountered in performing the audits.

A tentative copy of the letter communicating this information would be discussed with management during the exit conference at the conclusion of the audit.

Timing of Services We agree to the required milestone dates for completion of the reports required by you assuming there are no delays caused by City staff. Our ability to meet these deadlines is dependent on the City’s timely assistance.

Provided there are no internal delays, Jackson Thornton would deliver completed reports by March 31 to meet the continuing disclosure covenants.

6

Professional Services Proposal

Work Plan and Client Assistance

Our proposed all-inclusive, maximum fees are as follows:

As part of the detailed work plan that will describe the individual tasks to be performed and the relative scheduling of those tasks, we will provide the City a list of confirmations, anticipated schedules, reports, and detailed support that will be needed to efficiently perform our audit procedures. We will provide this list timely to allow your staff to compile the information before the field work of the audit begins. We will arrange a pre-fieldwork check of your records to ensure that the records are ready for audit and give your staff time to correct or compile any additional information.

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SERVICE

GASB 34 Compliant Financial Statement and Single Audit of the City September 30, 2012 September 30, 2013 September 30, 2014

$63,000 $58,000 $58,000

Exit Conference September 30, 2012 September 30, 2013 September 30, 2014

no additional charge no additional charge no additional charge

City Council Presentation

Fees and Compensation

September 30, 2012 September 30, 2013 September 30, 2014

We recognize that engaging an accounting firm is an important investment. You can expect this investment with Jackson Thornton to add value to your business.

no additional charge no additional charge no additional charge

Out-of-Pocket Costs September 30, 2012 September 30, 2013 September 30, 2014

Our goal is to provide high quality, reliable service at reasonable fees. We have provided our estimated fees based on providing audit services.

no additional charge no additional charge no additional charge

With any new engagement, there are fees associated with first time audit procedures, developing an understanding of the City’s business, and the initial planning process. We have included the first time fees in the 2012 amount.

Hourly Rate by Staff Classification Our fee proposal is based on hourly rates, determined by each professional’s level of experience. Our standard billing rates are as follows:

Frequency and Timing of the Billing Process

HOURLY RATE Principal Manager Senior associate Associate

FEES

Our fees for these services will be billed monthly as the work progresses. Such bills are payable on presentation and a late charge of 1½% per month will be imposed for any portion of the billed amount not paid within 30 days of the bill date. We reserve the right to suspend our work and/or to terminate our engagement if any bill is

$250 170 120 105

7

Professional Services Proposal

not paid in full within 30 days of the bill date. In the event of suspension of our work or termination of our engagement, such work shall not be resumed and such engagement shall not be reinstated, as the case may be, until the account balance and all late charges are paid in full.

•

Providing copies of City documents and other documents of ongoing matters in an electronic format.

•

Providing the Schedule of Expenditures of Federal Awards in electronic format.

•

Providing information needed to update the City’s notes to the basic financial statements.

•

Providing support of the City’s analysis and implementation of GASB standards as the standards become effective.

•

Overseeing the draft of the financial statements and trial balance adjustments.

Assumptions The proposal assumes the City’s accounting staff will be available to answer inquiries and provide additional information during the engagements.

The proposal is based to a large extent on the quality, timeliness, and accuracy of the workpapers that the City’s staff prepares. The proposal assumes the following staff participation: •

Providing a closed trial balance with supporting ledgers or statements in an electronic format.

•

Preparation of required adjustments and account groupings for financial presentation in compliance with generally accepted accounting principles.

•

Providing analysis of transactions and accounts, including reconciliations in an electronic format.

•

Providing assistance such as pulling selected invoices and receipts.

•

Preparing confirmation requests.

•

Providing copies of significant contracts and agreements.

•

Our fees are based on hourly rates, determined by each professional’s level of experience and actual time spent on the engagement.

Significant changes in the nature and scope will result in fee increases. This proposal also assumes there will be no:

Providing in writing the City’s policies and procedures related to the accounting system.

8

•

Significant change in the City’s operations, or the accounting systems.

•

Significant changes in the regulatory, audit, or accounting standards.

•

Significant changes in key financial personnel positions.

•

More than five significant audit adjusting journal entries as a result of our procedures.

•

More than two major programs and no compliance findings.

•

Change in the reporting unit.

•

Maintenance of schedule by us.

the

depreciation

Professional Services Proposal

•

Other factors that would significantly affect the scope of the audits.

5

Our proposal does not include accounting assistance, such as the calculation of accounts receivable, the estimated allowance for uncollectible accounts receivable, deferred charges and debt issue costs, capitalizeable capital assets, accounts payable and deferred revenue, which is outside the scope of the financial statement audit and could impair independence.

Summary

We appreciate the opportunity to present this proposal. We would be happy to meet with you and/or the Mayor to discuss the proposed services.

Please call Diane Steinhilber at (334) 351-0436 if you have any questions or need any additional information.

Statement of Confidentiality

Brief oral consultations on audit and accounting matters are included in the proposed fees.

Because the nature and extent of periodic technical questions cannot be anticipated, we choose not to include those when we are proposing a fee for audit services.

Special projects and consultations requiring research and preparation of written correspondence can be priced on a project basis or at our hourly rates, depending on your needs.

We will clearly communicate a fee expectation for non-routine services prior to beginning our work.

The description of services offered by Jackson Thornton is designed as a response to the request of the City.

We respectfully request that information in this proposal not be disclosed outside the City and not be duplicated, used, or disclosed in whole or in part, for any purpose other than for the City to evaluate our proposal.

Engagement Acceptance Auditing standards require that an auditor communicate with the predecessor auditor before accepting an engagement. Thus, the awarding of any audit engagements will be subject to our communication with the predecessor auditor and our evaluation of such communications.

We believe that our fee structure is competitive and appropriate. We do, however, recognize the economics of a competitive proposal process. If fees become the determining factor in your decision process, we request an opportunity to discuss any significant difference in fees with you prior to your final decision.

The proposal assumes access to the prior auditor and their workpapers for the year ended September 30, 2011.

Ready for the Future Jackson Thornton assists many municipalities with their participation in the Certificate of Achievement for Excellence in Financial Reporting Program (CAFR Program) of the Government Finance Officers Association. We would be happy to discuss with you how to participate in this program and take your financial reporting to the next level.

9

Professional Services Proposal

REFERENCES AND SIMILAR ENGAGEMENTS Last Fiscal Client

Engagement

Engagement

Year

Scope of Work for Most

Engagement

Principal

Manager

Engagement

Previous Engagement

Hours

Phone Contact

Number

City of Montgomery

Neuenschwander

Vickery

2011

Financial Statement Audit; Single Audit

2500

Lloyd Faulkner

(334) 241-2025

City of Wetumpka

Neuenschwander

Vickery

2012

Financial Statement Audit

410

Janice Whorton

(334) 567-5147

City of Prattville and its component units

Steinhilber

Williams

2012

Financial Statement Audit; Single Audit

740

Doug Moseley

(334) 358-3224

City of Millbrook

Steinhilber

Williams

2012

Financial Statement Audit; Single Audit

580

Mac Champion

(334) 285-6428

Mark Wilkerson

(334) 265-1500

Wendell Carley

(334) 956-7700

Reid Cavnar

(334) 834-5100

Burton Benkwith, CFO

(256) 362-4180

Roger Bates

(205) 324-4400

Other Firm References: Wilkerson & Bryan, P.C. Montgomery, Alabama Bradley Arant Boult Cummings LLP Montgomery, Alabama Merchant Capital, LLC Montgomery, Alabama Coosa Valley Electric Cooperative Talladega, Alabama Hand Arendall, LLC Birmingham, Alabama

ATTACHMENT A

ATTACHMENT B

PROPOSAL TO SERVE THE CITY OF ANNISTON, ALABAMA

December 6, 2012

Mr. Danny A. McCullars, Director of Finance The City of Anniston, Alabama 1128 Gurnee Avenue Anniston, AL 36201 Dear Mr. McCullars, Thank you very much for the opportunity to offer this proposal for audit services.

Our mission statement reveals that we strive to serve clients who share our commitment to excellence, and to maintain a professional team that is trustworthy, self-motivated, and highly skilled. Our clients express the importance of experience, continuity, teamwork, communication, technology, timeliness and availability. We are committed to be ready and responsive to what you express is important to your organization.

We will work closely with your management team and audit committee to be a business advisory partner and use our knowledge and experience to add value to the relationship. Devoting our resources and our energy, we will strive to identify ways to help the City of Anniston maximize operational and reporting efficiency. We believe this makes our firm different.

We understand your priority is to obtain high quality audit services, on a timely basis, for a reasonable fee, and we are committed to those objectives. We believe our firm can meet those objectives due to: 1) 2) 3) 4) 5)

Our experience obtained from serving Governmental entities for over 55 years.

The continuity of a highly skilled and trained professional team that will service your needs.

The overall staff size that we have to assure that work is completed timely.

Our risk-based audit approach applied to produce an effective and efficient audit.

Our desire to develop and maintain a mutually beneficial, long-term relationship with the City of Anniston.

We have prepared a proposal which provides you with information needed to make a decision that is in the best interest of The City of Anniston. If you should need additional information or clarification of any part of our proposal, please give us a call.

Sincerely,

Melissa W. Motley, CPA

PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

TABLE OF CONTENTS Page Our Firm ........................................................................................................................................................ 4 Our Experience .......................................................................................................................................... 5-6 Client Service Team Approach ..................................................................................................................... 7 Engagement Team ..................................................................................................................................... 8-9 Audit Process............................................................................................................................................... 10 In Summary ................................................................................................................................................. 11 Our Value Based Fees ................................................................................................................................. 12 Attachment A: Proposed Fees .............................................................................................................. 13-14 Attachment B: Peer Review Report ........................................................................................................... 15

Statement of Confidentiality The information in this document is considered by Machen, McChesney & Chastain, LLP to be confidential. We request that it be treated as such and in turn, assure you that any and all information provided us to produce this proposal will be treated in the same fashion.

4

PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR FIRM Machen, McChesney & Chastain, LLP is committed, as it has been since 1954, to providing high quality professional services. Our firm currently employs 32 individuals, 20 of which are Certified Public Accountants. Our governmental audit staff is comprised of 12 of these Certified Public Accountants.

Serving as our clients' advocate and advisor, we have become a leading provider of accounting, audit, tax and consulting services in East Alabama.

Machen, McChesney & Chastain, LLP consistently earns exemplary marks from the American Institute of Certified Public Accountants, the independent peer review body that evaluates all CPA firm's adherence to the our industry's prescribed standards.

We believe our commitment to our clients, our professionals, and our community makes Machen, McChesney & Chastain, LLP different.

Our commitment to you, our client, means being ready and responsive to your specialized needs and providing a consistent engagement team to help you grow and prosper. Our commitment to our professionals means maintaining a positive work environment and providing them with resources to perform and add value to you the client. Our commitment to serve others and give back to the community builds character and fosters relationships. We encourage our professionals to be involved in community and family activities.

Our desire is to build a close working relationship with you. We want you to look at us as your partner, advocate and advisor. We will work to keep you abreast of your entity's progress, opportunities and/or weaknesses and make ourselves accessible and responsive to you throughout the year, not just during the audit.

It is that type of relationship that we enjoy with hundreds of clients throughout the region and would very much like to have with the City of Anniston.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR EXPERIENCE Machen, McChesney and Chastain, LLP (MM&C) has been providing high quality, governmental and not-for-profit audit services to various entities in Alabama for over fifty-five years. Our experience also includes a variety of additional services that complement audits of general-purpose financial statements, such as internal control studies, agreed-upon procedures related to the operation of municipal courts, and Single Audits. Some of the clients we have served are listed below as references: The City of Auburn, Alabama – audit of general purpose financial statements and Single Audit Finance Director – Penny Smith, (334) 501-7223 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 850 Auburn City Board of Education - audit of general purpose financial statements and Single Audit Chief Financial Officer – Dennis Veronese, (334) 887-2100 Engagement partner – Mike Machen Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 450 The Water Works Board of the City of Auburn – audit of general purpose financial statements Finance Director – Penny Smith, (334) 501-7223 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 235 The Industrial Development Board of the City of Auburn – audit of general purpose financial statements Secretary/Treasurer of IDB – Phillip Dunlap, (334) 501-7270 Engagement partner – Melissa Motley Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 250 The City of Sylacauga, Alabama – audit of primary government financial statements and Single Audit City Clerk – Patricia Carden, (256) 401-2405 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 550

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR EXPERIENCE (Continued) Parks and Recreation Board of the City of Sylacauga – audit of general purpose financial statements Director – Jim Armstrong, (256) 249-8561 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 100 B.B. Comer Memorial Library – audit of general purpose financial statements Director – Shirley Spears, (256) 249-0961 Engagement partner – Aaron Waller Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 75 Sylacauga City Board of Education – audit of general purpose financial statements and Single Audit Chief Financial Officer – Lisa Dickerson, (256) 245-5256 Engagement partner – Mike Machen Most recent engagement – Fiscal year ending September 30, 2012 Budgeted engagement hours – 400

Many of MM&C’s governmental and not-for-profit clients receive federal and state grant funds. In the past few years, Single Audits have been prepared for City of Auburn, Auburn Board of Education, City of Sylacauga, and Sylacauga Board of Education. Some of the programs audited are:      

U.S. Department of Housing and Urban Development - Community Development Block Grants U.S. Department of Transportation - Highway Planning and Construction, Airport Improvement Program U.S. Department of Education – Title I, VIB Special Education, IDEA U.S. Department of Agriculture – Child Nutrition Cluster U.S. Department of Justice – Edward Byrne Memorial Justice Assistance Grant Program U.S. Department of Energy – Energy Efficiency and Conservation Block Grant Program

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

CLIENT SERVICE TEAM APPROACH We have assembled a team of professionals with governmental audit experience, and we give them the training and experience necessary to provide excellent service to our clients. MM&C partners and associates are actively involved with client services. We will work closely on a day-to-day basis with your management team to ensure that they are fully informed and benefit from our knowledge and experience regarding governmental entities. You can expect professional audit services from the MM&C team.

In addition to MM&C’s extensive experience with its governmental audit clients, several members of the engagement team have a broad variety of experience with other industries. MM&C enjoys low personnel turnover and very high levels of employee satisfaction. Our reputation has enabled us to attract top-notch accounting professionals who want to be part of our team. For you, our client, it means you can depend on the same highly qualified accounting specialists to work with you day in and day out.

What sets us apart from other firms is our audit approach, the MM&C team and our affiliation with BDO USA, LLP, which is one of the nation’s leading accounting and consulting firms. This alliance provides the “best of both worlds” approach, if needed, to meeting your needs by combining the personal touch of a local firm with the accessibility of the many services and resources that are available through a large international accounting and consulting firm such as BDO USA, LLP.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

ENGAGEMENT TEAM The following members of our team would be assigned to serve the City of Anniston. Each member of the engagement team is registered as a certified public accountant in the State of Alabama and each has received all required continuing professional education in governmental accounting and auditing within the preceding two years.

Melissa W. Motley, CPA – Engagement Partner Melissa has over 25 years of public accounting experience, and has been a partner with Machen, McChesney and Chastain, LLP since January 1997. As engagement partner, it is Melissa’s responsibility to oversee all facets of service to the City of Anniston and to be your primary contact. Governmental auditing experience - current clients: The Industrial Development Board of the City of Auburn, City of Auburn, The Water Works Board of the City of Auburn, Auburn City Board of Education, City of Sylacauga, Sylacauga City Board of Education, Parks & Recreation Board of the City of Sylacauga, B.B. Comer Memorial Library. Prior experience: City of Lafayette, City of Opelika, Opelika City Board of Education.

Michael D. Machen, CPA, CVA – Audit and Assurance Partner Mike has over 22 years of public accounting experience, and has been a partner with Machen, McChesney and Chastain, LLP since January 1997. As audit and assurance partner, it is Mike’s responsibility to oversee all audit and assurance engagements of the firm. Governmental auditing experience: Auburn City Board of Education, Sylacauga City Board of Education, City of Auburn, The Water Works Board of the City of Auburn.

Amelia Blessing, CPA – Audit Supervisor Amelia has over 6 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2008. Amelia will serve as audit in-charge for the City of Anniston. She will be the primary contact for audit planning, field work and financial statement preparation. Governmental auditing experience: City of Auburn, City of Sylacauga, The Water Works Board of the City of Auburn, B.B. Comer Memorial Library.

Allison Moore, CPA – Audit Supervisor Allison has over 8 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2004. Allison will serve as an additional audit in-charge for the City of Anniston to help with audit planning, field work and financial statement preparation. Governmental auditing experience: City of Auburn, City of Sylacauga, The Water Works Board of the City of Auburn, Parks & Recreation Board of the City of Sylacauga.

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Liz Springer, CPA – Audit Staff Liz has over 4 years of public accounting experience, and has been with Machen, McChesney and Chastain, LLP since 2011. Liz will perform key audit procedures for the team. Governmental auditing experience- current clients: City of Auburn, City of Sylacauga, Auburn City Board of Education, Sylacauga City Board of Education, Parks & Recreation Board of the City of Sylacauga, B.B. Comer Memorial Library. Prior experience: City of Valley, City of Lafayette.

Laura L. Taber, CPA – Audit Staff Laura has been with Machen, McChesney and Chastain, LLP since August, 2012. Laura will perform key audit procedures for the team. Governmental auditing experience: City of Auburn, Sylacauga City Board of Education.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

AUDIT PROCESS Machen, McChesney & Chastain, LLP prides itself on a long history of providing quality audit services.

We are licensed to practice in the State of Alabama and our firm is a member in good standing of the Alabama State Board of Public Accountancy. Our most recent peer review resulted in an unqualified opinion with no letter of comment. A copy of the report is included in this proposal as Attachment B. As part of our commitment to quality control, we have written policies regarding the independence of our employees with respect to our clients. These policies require quarterly and annual monitoring, as well as specific assertions signed by all employees assigned to our governmental audit engagements. Machen, McChesney & Chastain, LLP is independent (as defined by Government Auditing Standards, issued by the Comptroller General of the United States) with respect to the City of Anniston and has no conflict of interest with regard to any other work performed by the firm for the City of Anniston.

As mentioned previously, our firm currently employs 32 individuals, including 20 certified public accountants. Our governmental audit staff is comprised of 12 of these individuals, all of which are CPAs. Each member of the governmental audit team is required to obtain 24 hours of continuing professional education directly related to governmental accounting and auditing every two years in accordance with Government Auditing Standards. For the past three years, MM&C employees assigned to governmental audit engagements have exceeded these continuing education requirements.

Our audit plan/strategy includes a five-step approach to providing audit services:     

Planning based on a risk-based audit approach (fully implemented SAS risk standards).

Ongoing communication with Management and those charged with governance (as needed).

Close coordination with your accounting staff during field work.

Utilizing technology to perform audit techniques and procedures.

Providing timely reports to those charged with governance.

We will gain an understanding of your operational and accounting efficiencies and examine the adequacy of your internal accounting controls. To the extent possible, we prefer to perform the maximum amount of our audit work in the client’s office. We do, however, prefer to have trial balance amounts and certain other information supplied to us before we arrive at the client’s office in order that we may begin work immediately upon arrival at your office. We will provide the administrative staff of the City a schedule of items to be prepared by them and we will monitor their completion of these items by the agreed upon dates. We will maximize the ability to perform audit procedures at an interim period close to, but before, year end to ensure timeliness of report delivery dates. To the extent possible, we will perform work paper review and draft reports before we leave the client’s office.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

IN SUMMARY Our objective is to provide the City of Anniston with the highest quality audit and accounting services at a fair and reasonable cost. We will also provide high quality advice and recommendations as we work with management to help the City continue to grow and provide the best service to its citizens.

We are available throughout the year to serve as a resource for city personnel and to offer our expertise when requested.

Our firm has been richly blessed with being able to attract high quality people. The ability of an accounting firm to be successful in providing excellent service to its clients depends on the quality of each member of the firm. We are committed to provide the training and technology to enable our team to deliver excellent client service.

The professionals of our firm work together as a team to provide the best solutions for our clients in accounting, audit, and business related issues. We are proud of our professionals and feel we have some of the best in the accounting business. We have an extremely low turnover rate, which means you will be working with the same professional each year. We value our professionals and provide them with the best technology and training available to us. Our goal is to provide value added service to every client we serve. We would certainly appreciate the opportunity to serve as independent auditors for the City of Anniston.

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PROPOSAL TO SERVE

THE CITY OF ANNISTON, ALABAMA

OUR VALUE BASED FEES Our fees are based primarily on the complexity of the work undertaken and on the amount of time and expense required to perform each engagement.

They are minimized by effective planning, communication and our desire to understand your entity.

We consider it an important responsibility to control the costs of services we provide to your entity. The MM&C team is committed to a long-term, mutually beneficial service relationship with you. It is our policy to bill each month based upon our production incurred during the respective month.

In the first year, due to the necessity of establishing our permanent file, and reviewing and documenting procedures, we are likely to have more costs in the engagement than in future years. You would not be billed for these “first time through” procedures. If selected, we would work with you to make the transition to us from your then predecessor audit firm as smooth as possible. We would discuss with them the most effective way to facilitate a review of items we deem necessary, and they may invoice you for this. We will not bill you for our transition-related services.

We will not bill you for telephone calls where we are able to provide an appropriate response to your question without spending time on research or analysis. Should additional time be required, we will be happy to provide you with an estimate before starting the extra work. Additional time would typically be invoiced at our standard hourly rates.

Our fee quote is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. Any issues that might require additional audit time would be identified during the planning phase, and we would work with management to determine a fair and reasonable fee adjustment prior to performing additional procedures.

Our proposal was prepared using the City of Anniston’s audited financial statements for September 30, 2011, and assumes that future years will include a similar number of federal grant programs that require testing, and a similar number of major funds that are required to be reported. Significant increases in grant testing or major fund testing are not covered in the scope of our proposal, and would require a fee negotiation with management prior to performing the work. Additional unusual circumstances, such as a large debt refunding, are also not covered in our proposal.

Unless specifically named otherwise in our proposal, our proposal incorporates all requirements of the City of Anniston’s Request For Proposal dated November 19, 2012.

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ATTACHMENT A PROPOSED FEES

The services covered in this proposal are as follows: SERVICES

FEES

1. Audit of the City of Anniston general purpose financial statements for the year ended September 30, 2012, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements

$65,000

2. Audit of the City of Anniston general purpose financial statements for the year ended September 30, 2013, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements.

$65,000

3. Audit of the City of Anniston general purpose financial statements for the year ended September 30, 2014, including issuance of an audit report, single audit reports, and required communications to management and the governing body, and providing a high quality PDF copy of the financial statements and up to ten bound copies of the financial statements

$65,000

Unless there are mitigating circumstances to which the administrative staff of the City is responsible, we agree to meet the reporting requirements by June 30 each year as required by the request for proposal.

Should the City of Anniston NOT agree to a three-year engagement, our proposal for the year ended September 30, 2012 would be $79,000.

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ATTACHMENT B PEER REVIEW REPORT